EXECUTION COPY
_________________________________________________________________
NOVASTAR MORTGAGE FUNDING CORPORATION
as Company
and
WILMINGTON TRUST COMPANY
as Owner Trustee
_________________________________________
AMENDED AND RESTATED
TRUST AGREEMENT
Dated as of August 19, 1998
__________________________________________
NOVASTAR MORTGAGE FUNDING TRUST, SERIES 1998-2
HOME EQUITY LOAN ASSET-BACKED BONDS
_________________________________________________________________
TABLE OF CONTENTS
Page
ARTICLE I Definitions . . . . . . . . . . . . . . . . . . . .1
1.01. Definitions . . . . . . . . . . . . . . . . . . . .1
1.02. Other Definitional Provisions . . . . . . . . . . .1
ARTICLE II Organization. . . . . . . . . . . . . . . . . . . .2
2.01. Name. . . . . . . . . . . . . . . . . . . . . . . .2
2.02. Office. . . . . . . . . . . . . . . . . . . . . . .2
2.03. Purposes and Powers . . . . . . . . . . . . . . . .2
2.04. Appointment of Owner Trustee. . . . . . . . . . . .3
2.05. Initial Capital Contribution of Owner Trust Estate.3
2.06. Declaration of Trust. . . . . . . . . . . . . . . .3
2.07. Liability of the Holders of the Certificates. . . .4
2.08. Title to Trust Property . . . . . . . . . . . . . .4
2.09. Situs of Trust. . . . . . . . . . . . . . . . . . .4
2.10. Representations and Warranties of the Company . . .4
2.11. Payment of Trust Fees . . . . . . . . . . . . . . .5
2.12. Investment Company. . . . . . . . . . . . . . . . .5
ARTICLE III Conveyance of the Mortgage Loans; Certificates. . .5
3.01. Conveyance of the Initial Mortgage Loans. . . . . .5
3.02. Initial Ownership . . . . . . . . . . . . . . . . .6
3.03. The Certificates. . . . . . . . . . . . . . . . . .6
3.04. Authentication of Certificates. . . . . . . . . . .7
3.05. Registration of and Limitations on Transfer and
Exchange of Certificates. . . . . . . . . . . . . .7
3.06. Mutilated, Destroyed, Lost or Stolen Certificates 10
3.07. Persons Deemed Certificateholders . . . . . . . . 10
3.08. Access to List of Certificateholders' Names and
Addresses . . . . . . . . . . . . . . . . . . . . 10
3.09. Maintenance of Office or Agency . . . . . . . . . 10
3.10. Certificate Paying Agent. . . . . . . . . . . . . 11
3.11. Pre-Funding Amount and Interest Coverage Amount . 12
3.12. Purchase of Subsequent Mortgage Loans . . . . . . 12
ARTICLE IV Authority and Duties of Owner Trustee . . . . . . 12
4.01. General Authority . . . . . . . . . . . . . . . . 12
4.02. General Duties. . . . . . . . . . . . . . . . . . 13
4.03. Action upon Instruction . . . . . . . . . . . . . 13
4.04. No Duties Except as Specified under Specified
Documents or in Instructions. . . . . . . . . . . 13
4.05. Restrictions. . . . . . . . . . . . . . . . . . . 14
4.06. Prior Notice to Certificateholders with Respect to
Certain Matters . . . . . . . . . . . . . . . . . 14
4.07. Action by Certificateholders with Respect to Certain
Matters . . . . . . . . . . . . . . . . . . . . . 16
4.08. Action by Certificateholders with Respect to
Bankruptcy. . . . . . . . . . . . . . . . . . . . 16
4.09. Restrictions on Certificateholders' Power . . . . 16
4.10. Majority Control. . . . . . . . . . . . . . . . . 17
4.11. Optional Redemption . . . . . . . . . . . . . . . 17
ARTICLE V Application of Trust Funds. . . . . . . . . . . . 17
5.01. Distributions . . . . . . . . . . . . . . . . . . 17
5.02. Method of Payment . . . . . . . . . . . . . . . . 18
5.03. Tax Returns . . . . . . . . . . . . . . . . . . . 18
5.04. Statements to Certificateholders. . . . . . . . . 18
ARTICLE VI Concerning the Owner Trustee. . . . . . . . . . . 18
6.01. Acceptance of Trusts and Duties . . . . . . . . . 18
6.02. Furnishing of Documents . . . . . . . . . . . . . 19
6.03. Representations and Warranties. . . . . . . . . . 19
6.04. Reliance; Advice of Counsel . . . . . . . . . . . 20
6.05. Not Acting in Individual Capacity . . . . . . . . 21
6.06. Owner Trustee Not Liable for Certificates or Related
Documents . . . . . . . . . . . . . . . . . . . . 21
6.07. Owner Trustee May Own Certificates and Bonds. . . 21
6.08. Payments from Owner Trust Estate. . . . . . . . . 21
6.09. Doing Business in Other Jurisdictions . . . . . . 22
6.10. Liability of Certificate Registrar and Certificate
Paying Agent. . . . . . . . . . . . . . . . . . . 22
ARTICLE VII Compensation of Owner Trustee . . . . . . . . . . 22
7.01. Owner Trustee's Fees and Expenses . . . . . . . . 22
7.02. Indemnification . . . . . . . . . . . . . . . . . 22
ARTICLE VIII Termination of Trust Agreement. . . . . . . . . . 23
8.01. Termination of Trust Agreement. . . . . . . . . . 23
ARTICLE IX Successor Owner Trustees and Additional Owner
Trustees. . . . . . . . . . . . . . . . . . . . . 24
9.01. Eligibility Requirements for Owner Trustee. . . . 24
9.02. Replacement of Owner Trustee. . . . . . . . . . . 25
9.03. Successor Owner Trustee . . . . . . . . . . . . . 25
9.04. Merger or Consolidation of Owner Trustee. . . . . 26
9.05. Appointment of Co-Trustee or Separate Trustee . . 26
ARTICLE X Miscellaneous . . . . . . . . . . . . . . . . . . 27
10.01. Amendments. . . . . . . . . . . . . . . . . . . . 27
10.02. No Legal Title to Owner Trust Estate. . . . . . . 29
10.03. Limitations on Rights of Others . . . . . . . . . 29
10.04. Notices . . . . . . . . . . . . . . . . . . . . . 29
10.05. Severability. . . . . . . . . . . . . . . . . . . 30
10.06. Separate Counterparts . . . . . . . . . . . . . . 30
10.07. Successors and Assigns. . . . . . . . . . . . . . 30
10.08. No Petition . . . . . . . . . . . . . . . . . . . 30
10.09. No Recourse . . . . . . . . . . . . . . . . . . . 30
10.10. Headings. . . . . . . . . . . . . . . . . . . . . 30
10.11. Governing Law . . . . . . . . . . . . . . . . . . 30
10.12. Integration . . . . . . . . . . . . . . . . . . . 30
10.13. Third Party Beneficiary . . . . . . . . . . . . . 31
EXHIBITS
Exhibit A - Form of Certificate. . . . . . . . . . . . . . . .A-1
Exhibit B - Certificate of Trust of NovaStar Mortgage Funding
Trust . . . . . . . . . . . . . . . . . . . . .B-1
Exhibit C - Form of Rule 144A Investment Representation. . . .C-1
Exhibit D - Form of Investor Representation Letter . . . . . .D-1
Exhibit E - Form of Transferor Representation Letter . . . . .E-1
Exhibit F - Form of Certificate of Non-Foreign Status. . . . .F-1
Exhibit G - Form of ERISA Representation Letter. . . . . . . .G-1
Exhibit H - Form of Representation Letter. . . . . . . . . . .H-1
Exhibit I - Initial Trust Agreement. . . . . . . . . . . . . .I-1
This Amended and Restated Trust Agreement (which amends and
restates the Trust Agreement, dated August 1, 1998, between
NovaStar Mortgage Funding Corporation, as company (the
"Company"), and Wilmington Trust Company, a Delaware banking
corporation, as owner trustee (the "Owner Trustee"), which is
attached hereto as Exhibit I), dated as of August 19, 1998 (as
amended from time to time, this "Trust Agreement"), between the
Company and the Owner Trustee,
WITNESSETH THAT:
In consideration of the mutual agreements herein contained,
the Company and the Owner Trustee agree as follows:
ARTICLE I
Definitions
Section 1.01. Definitions. For all purposes of this Trust
Agreement, except as otherwise expressly provided herein or
unless the context otherwise requires, capitalized terms not
otherwise defined herein shall have the meanings assigned to such
terms in Appendix A to the Indenture, dated as of August 1,
1998, between NovaStar Mortgage Funding Trust, Series 1998-2, as
Issuer, and First Union National Bank, as Indenture Trustee,
which is incorporated by referenced herein. All other
capitalized terms used herein shall have the meanings specified
herein.
Section 1.02. Other Definitional Provisions.
(a) All terms defined in this Trust Agreement shall have
the defined meanings when used in any certificate or other docu-
ment made or delivered pursuant hereto unless otherwise defined
therein.
(b) As used in this Trust Agreement and in any certificate
or other document made or delivered pursuant hereto or thereto,
accounting terms not defined in this Trust Agreement or in any
such certificate or other document, and accounting terms partly
defined in this Trust Agreement or in any such certificate or
other document to the extent not defined, shall have the respec-
tive meanings given to them under generally accepted accounting
principles. To the extent that the definitions of accounting
terms in this Trust Agreement or in any such certificate or other
document are inconsistent with the meanings of such terms under
generally accepted accounting principles, the definitions con-
tained in this Trust Agreement or in any such certificate or
other document shall control.
(c) The words "hereof," "herein," "hereunder" and words of
similar import when used in this Trust Agreement shall refer to
this Trust Agreement as a whole and not to any particular pro-
vision of this Trust Agreement; Article, Section and Exhibit
references contained in this Trust Agreement are references to
Articles, Sections and Exhibits in or to this Trust Agreement
unless otherwise specified; and the term "including" shall mean
"including without limitation".
(d) The definitions contained in this Trust Agreement are
applicable to the singular as well as the plural forms of such
terms and to the masculine as well as to the feminine and neuter
genders of such terms.
(e) 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 incorpo-
rated therein; references to a Person are also to its permitted
successors and assigns.
ARTICLE II
Organization
Section 2.01. Name. The trust created hereby (the "Trust")
shall be known as "NovaStar Mortgage Funding Trust, Series 1998-2",
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 sue and be sued.
s
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 Delaware as the Owner Trustee may designate
by written notice to the Certificateholders and the Company.
Section 2.03. Purposes and Powers. The purpose of the
Trust is to engage in the following activities:
(i) to issue the Bonds pursuant to the Indenture and
the Certificates pursuant to this Trust Agreement and to
sell the Bonds and the Certificates;
(ii) to pay the organizational, start-up and
transactional expenses of the Trust;
(iii) to hold, assign, grant, transfer, pledge and
convey the Mortgage Loans pursuant to the Indenture and to
hold, manage and distribute to the Certificateholders pur-
suant to Section 5.01 any portion of the Mortgage Loans
released from the Lien of, and remitted to the Trust
pursuant to the Indenture;
(iv) to purchase and hold the Initial Mortgage Loans
pursuant to this Trust Agreement and to purchase and hold
the Subsequent Mortgage Loans pursuant to the Mortgage Loan
Purchase Agreement;
(v) to enter into and perform its obligations under
the Basic Documents to which it is to be a party;
(vi) to enter into and perform its obligations under
the CAP Agreements;
(vii) to acquire and perform its obligations under the
PMI Policies;
(viii) to purchase and hold the NCFC Demand Note;
(ix) if directed by holders of Certificates
representing more than 50% of the beneficial interests in
the Trust, sell the Trust Estate subsequent to the discharge
of the Indenture, all for the benefit of the holders of the
Certificates;
(x) 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; and
(xi) 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 to the Certificateholders and
the Bondholders.
The Trust is hereby authorized to engage in the foregoing activi-
ties. The Trust shall not engage in any activity other than in
connection with the foregoing or other than as required or autho-
rized by the terms of this Trust Agreement or the Basic Docu-
ments.
Section 2.04. Appointment of Owner Trustee. The Company
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.
Section 2.05. Initial Capital Contribution of Owner Trust
Estate. The Company hereby sells, assigns, transfers, conveys
and sets over to the Trust, as of the date hereof, the sum of $1.
The Owner Trustee hereby acknowledges receipt in trust from the
Company, as of the date hereof, of the foregoing contribution,
which shall constitute the initial corpus of the Trust and shall
be deposited in the Certificate Distribution Account. The Owner
Trustee also acknowledges on behalf of the Trust the receipt in
trust of the Mortgage Loans, the rights with respect to the
representations and warranties made by the Seller under the
Mortgage Loan Purchase Agreement, the CAP Agreements, the PMI
Policies, the NCFC Demand Note and all other amounts constituting
part of the Trust Estate (such items plus all other amounts or
items included in the Trust Estate from time to time, the "Owner
Trust Estate").
Section 2.06. Declaration of Trust. The Owner Trustee
hereby declares that it shall hold the Owner Trust Estate in
trust upon and subject to the conditions set forth herein for the
use and benefit of the Certificateholders, subject to the
obligations of the Trust under the Basic Documents. It is the
intention of the parties hereto that the Trust constitute a
"business trust" under the Business Trust Statute and that this
Trust Agreement constitute the governing instrument of such
business trust. It is the intention of the parties hereto that,
for federal and state income and state and local franchise tax
purposes, the Trust shall not be treated as (i) an association
subject separately to taxation as a corporation, (ii) a "publicly
traded partnership" as defined in Treasury Regulation Section
1.7704-1 or (iii) a "taxable mortgage pool" as defined in Section
7701(i) of the Code, and that the Bonds shall be debt, and the
provisions of this Trust Agreement shall be interpreted to
further this intention. Except as otherwise provided in this
Trust Agreement, the rights of the Certificateholders will be
those of equity owners of the Trust. 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.
Section 2.07. Liability of the Holders of the Certificates.
The holders of the Certificates shall be jointly and severally
liable directly to and shall indemnify the Trust and the Owner
Trustee for all losses, claims, damages, liabilities and expenses
of the Trust and the Owner Trustee (including Expenses, to the
extent not paid by the Servicer pursuant to Section 2.11 or out
of the Owner Trust Estate); provided, however, that the holders
of the Certificates shall not be liable for payments required to
be made on the Bonds or the Certificates, or for any losses
incurred by a Certificateholder in the capacity of an investor in
the Certificates or a Bondholder in the capacity of an investor
in the Bonds. The holders of the Certificates shall be liable
for and shall promptly pay any entity level taxes imposed on the
Trust. In addition, any third party creditors of the Trust,
including the Bond Insurer (other than in connection with the
obligations described in the second preceding sentence for which
the holders of the Certificates shall not be liable) shall be
deemed third party beneficiaries of this paragraph. The
obligations of the holders of the Certificates under this
paragraph shall be evidenced by the Certificates.
Section 2.08. Title to Trust Property. Except with respect
to the Mortgage Loans, which will be assigned of record to the
Indenture Trustee pursuant to the Indenture, legal title to the
Owner Trust Estate shall be vested at all times in the Trust as a
separate legal entity except where applicable law in any juris-
diction requires title to any part of the Owner Trust Estate to
be vested in a trustee or trustees, in which case title shall be
deemed to be vested in the Owner Trustee, a co-trustee and/or a
separate trustee, as the case may be.
Section 2.09. Situs of Trust. The Trust will be located
and administered in the State of Delaware. All bank accounts
maintained by the Owner Trustee on behalf of the Trust shall be
located in the State of Delaware. The Trust shall not have any
employees in any state other than Delaware; provided, however,
that nothing herein shall restrict or prohibit the Owner Trustee
from having employees within or without the State of Delaware or
taking actions outside the State of Delaware in order to comply
with Section 2.03. Payments will be received by the Trust only
in Delaware or New York, and payments will be made by the Trust
only from Delaware or New York. The only office of the Trust
will be at the Corporate Trust Office in Delaware.
Section 2.10. Representations and Warranties of the
Company. The Company hereby represents and warrants to the Owner
Trustee and the Bond Insurer that:
(i) The Company is duly organized and validly existing
as a corporation in good standing under the laws of the
State of Delaware, with power and authority to own its
properties and to conduct its business as such properties
are currently owned and such business is presently
conducted.
(ii) The Company is duly qualified to do business as a
foreign corporation in good standing and has obtained all
necessary licenses and approvals in all jurisdictions in
which the ownership or lease of its property or the conduct
of its business shall require such qualifications and in
which the failure to so qualify would have a material
adverse effect on the business, properties, assets or
condition (financial or other) of the Company.
(iii) The Company has the power and authority to execute
and deliver this Trust Agreement and to carry out its terms;
the Company has full power and authority to convey and
assign the property to be conveyed and assigned to and
deposited with the Trust as part of the Owner Trust Estate
and the Company has duly authorized such conveyance and
assignment and deposit to the Trust by all necessary
corporate action; and the execution, delivery and
performance of this Trust Agreement have been duly
authorized by the Company by all necessary corporate action.
(iv) The consummation of the transactions contemplated
by this Trust Agreement and the fulfillment of the terms
hereof do not conflict with, result in any breach of any of
the terms and provisions of, or constitute (with or without
notice or lapse of time) a default under, the articles of
incorporation or bylaws of the Company, or any indenture,
agreement or other instrument to which the Company is a
party or by which it is bound; nor result in the creation or
imposition of any Lien upon any of its properties pursuant
to the terms of any such indenture, agreement or other
instrument (other than pursuant to the Basic Documents); nor
violate any law or, to the best of the Company's knowledge,
any order, rule or regulation applicable to the Company of
any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality
having jurisdiction over the Company or its properties.
(v) The Trust is not required to register as an
investment company under the Investment Company Act and is
not under the control of a Person required to so register.
Section 2.11. Payment of Trust Fees. The Servicer shall
pay the Owner Trustee Fee pursuant to Section 3.07 of the
Servicing Agreement and shall pay the Trust's expenses (including
expenses of the Owner Trustee and the Indenture Trustee) incurred
with respect to the performance of the Trust's duties under the
Indenture pursuant to Section 5.06 of the Servicing Agreement,
or, if such amounts are insufficient, the Owner Trustee shall be
paid pursuant to Section 5.01 hereof.
Section 2.12. Investment Company. Neither the Company nor
any holder of a Certificate shall take any action which would
cause the Trust to become an "investment company" which would be
required to register under the Investment Company Act.
ARTICLE III
Conveyance of the Mortgage Loans;
Certificates
Section 3.01. Conveyance of the Initial Mortgage Loans.
The Company, concurrently with the execution and delivery hereof,
does hereby Grant to the Trust, without recourse, all its right,
title and interest in and to the Initial Mortgage Loans (and the
related PMI Policies), including all interest and principal
received on or with respect to the Initial Mortgage Loans after
the Cut-off Date (other than payments of principal and interest
due on the Mortgage Loans on or before the Cut-off Date) the
proceeds thereof and all rights under the Related Documents
(including the related Mortgage Files). In addition, the Company
hereby Grants to the Trust all of its right, title, and interest
in, to, and under the Mortgage Loan Purchase Agreement. Further,
the Company hereby assigns to the Trust all of its right, title
and interest in, to and under the PMI Policies and NCFC Demand
Note.
The conveyance of the Initial Mortgage Loans by the Company
to the Trust hereunder is intended to facilitate the simultaneous
issuance of the Bonds under the Indenture and issuance of the
Certificates hereunder. The parties hereto intend that the
conveyance of the Initial Mortgage Loans by the Company to the
Trust hereunder constitute a sale by the Company to the Trust of
all of the Company's right, title and interest in and to the
Initial Mortgage Loans. However, if the transactions
contemplated by this Trust Agreement are determined to constitute
a financing, the Company hereby Grants to the Trust a security
interest in the Owner Trust Estate and all distributions thereon
and proceeds thereof, and this Trust Agreement shall constitute a
security agreement under applicable law, and in such event, the
parties hereto acknowledge that the Indenture Trustee, in
addition to holding the Initial Mortgage Loans for the benefit of
the Bondholders and the Bond Insurer, holds the Mortgage Loans as
designee of the Trust.
Section 3.02. Initial Ownership. Upon the formation of the
Trust by the contribution by the Company pursuant to Section 2.05
and until the conveyance of the Initial Mortgage Loans pursuant
to Section 3.01 and the issuance of the Certificates, the Company
shall be the sole Certificateholder.
On the Closing Date, (i) the Owner Trustee, acting on behalf
of the Trust, will issue the Certificates to the Company in
exchange for the Initial Mortgage Loans; (ii) the Company will
sell, transfer and convey, without recourse, the Certificates to
NCFC pursuant to the Certificates Sale Agreement, and (iii) NCFC
will pledge and assign the Certificates to MLMCI as collateral
for loans from MLMCI to NCFC pursuant to the Master Assignment
Agreement. In recognition of such transfers of the Certificates
on the Closing Date, and at the request and instruction of the
Company, NCFC and MLMCI, on the Closing Date the Owner Trustee
shall register the Certificates in the name of MLMCI or its
nominee and shall deliver the actual Certificates to MLMCI or its
nominee. All parties acknowledge and agree that the registration
of the Certificates in the name of MLMCI or its nominee is solely
to more fully secure the pledge of such Certificates by NCFC to
MLMCI and to perfect the security interest of MLMCI in such
pledged Certificates, and while MLMCI or its nominee may hold
legal title to such pledged Certificates, equitable title to and
beneficial ownership of such pledged Certificates shall remain in
NCFC, pursuant to the Master Assignment Agreement.
Section 3.03. The Certificates. The Certificates shall be
issued in the form of one or more Certificates each representing
not less than a 10% Certificate Percentage Interest. The
Certificates shall be executed on behalf of the Trust by manual
or facsimile signature of an authorized officer of the Owner
Trustee and authenticated in the manner provided in Section 3.04.
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
validly issued and entitled to the benefit of this Trust Agree-
ment, 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
Person shall become a Certificateholder and shall be entitled to
the rights and subject to the obligations of a Certificateholder
hereunder upon such Person's acceptance of a Certificate duly
registered in such Person's name, pursuant to Section 3.05.
A transferee of a Certificate shall become a Certificate-
holder and shall be entitled to the rights and subject to the
obligations of a Certificateholder hereunder upon such trans-
feree's acceptance of a Certificate duly registered in such
transferee's name pursuant to and upon satisfaction of the
conditions set forth in Section 3.05.
Section 3.04. Authentication of Certificates. The Owner
Trustee shall cause all Certificates issued hereunder to be
executed and authenticated on behalf of the Trust, authenticated
and delivered to or upon the written order of the Company, signed
by its chairman of the board, its president or any vice
president, without further corporate action by the Company, in
authorized denominations. No Certificate shall entitle its
holder to any benefit under this Trust Agreement or 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 Certificate
Registrar by manual 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 3.05. Registration of and Limitations on Transfer
and Exchange of Certificates. The Certificate Registrar shall
keep or cause to be kept, a Certificate Register in which, sub-
ject 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. First Union National Bank shall be the initial
Certificate Registrar. If the Certificate Registrar resigns or
is removed, the Owner Trustee shall appoint a successor
Certificate Registrar.
Subject to satisfaction of the conditions set forth below
with respect to the Certificate, upon surrender for registration
of transfer of any Certificate at the office or agency maintained
pursuant to Section 3.09, the Owner Trustee or the Certificate
Registrar shall execute, authenticate and deliver in the name of
the designated transferee or transferees, one or more new
Certificates in authorized denominations of a like aggregate
amount dated the date of authentication by the Owner Trustee or
the Certificate Registrar. At the option of a Certificateholder,
Certificates may be exchanged for other Certificates of
authorized denominations of a like aggregate amount upon
surrender of the Certificates to be exchanged at the office or
agency maintained pursuant to Section 3.09.
Every Certificate presented or surrendered for registration
of transfer or exchange shall be accompanied by a written instru-
ment of transfer in form satisfactory to the Certificate Regis-
trar duly executed by the Certificateholder or such
Certificateholder's attorney duly authorized in writing. Each
Certificate surrendered for registration of transfer or exchange
shall be canceled and subsequently disposed of by the Certificate
Registrar in accordance with its customary practice.
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.
No Person shall become a Certificateholder until it shall
establish its non-foreign status by submitting to the Certificate
Paying Agent an IRS Form W-9 and the Certificate of Non-Foreign
Status set forth in Exhibit F hereto.
No transfer, sale, pledge or other disposition of a
Certificate shall be made unless such transfer, sale, pledge or
other disposition is exempt from the registration requirements of
the Securities Act and any applicable state securities laws or is
made in accordance with said Act and laws. In the event of any
such transfer, the Certificate Registrar or the Company shall
prior to such transfer require the transferee to execute (a)
either (i) an investment letter in substantially the form
attached hereto as Exhibit C (or in such form and substance
reasonably satisfactory to the Certificate Registrar and the
Company) which investment letter shall not be an expense of the
Trust, the Owner Trustee, the Certificate Registrar, the
Servicer, the Bond Insurer or the Company and which investment
letter states that, among other things, such transferee (A) is a
"qualified institutional buyer" as defined under Rule 144A,
acting for its own account or the accounts of other "qualified
institutional buyers" as defined under Rule 144A and (B) is aware
that the proposed transferor intends to rely on the exemption
from registration requirements under the Securities Act of 1933,
as amended, provided by Rule 144A or (ii) (A) a written Opinion
of Counsel acceptable to and in form and substance satisfactory
to the Certificate Registrar, the Company and the Bond Insurer
that such transfer may be made pursuant to an exemption,
describing the applicable exemption and the basis therefor, from
said Act and laws or is being made pursuant to said Act and laws,
which Opinion of Counsel shall not be an expense of the Trust,
the Owner Trustee, the Certificate Registrar, the Servicer, the
Bond Insurer or the Company and (B) the transferee executes a
representation letter, substantially in the form of Exhibit D
hereto, and the transferor executes a representation letter,
substantially in the form of Exhibit E hereto, each acceptable to
and in form and substance satisfactory to the Certificate
Registrar and the Company certifying the facts surrounding such
transfer, which representation letters shall not be an expense of
the Trust, the Owner Trustee, the Certificate Registrar, the
Servicer, the Bond Insurer or the Company and (b) the Certificate
of Non-Foreign Status (in substantially the form attached hereto
as Exhibit F) acceptable to and in form and substance reasonably
satisfactory to the Certificate Registrar and the Company, which
certificate shall not be an expense of the Trust, the Owner
Trustee, the Certificate Registrar, the Servicer, the Bond
Insurer or the Company. If the Certificateholder is unable to
provide a Certificate of Non-Foreign Status, the
Certificateholder must provide an Opinion of Counsel as described
above in this paragraph. The Certificateholder desiring to
effect such transfer shall, and does hereby agree to, indemnify
the Trust, the Owner Trustee, the Certificate Registrar, the
Servicer, the Bond Insurer and the Company against any liability
that may result if the transfer is not so exempt or is not made
in accordance with such federal and state laws. Neither an
Opinion of Counsel nor a certification set forth in clause (a) of
this paragraph will be required in connection with the initial
transfer of any such Certificate by the Company to NCFC pursuant
to the Certificates Sale Agreement or the pledge of any such
Certificate by NCFC to MLMCI pursuant to the Master Assignment
Agreement, and the certification set forth in clause (b) of this
paragraph will not be required in connection with the pledge of
any such Certificate by NCFC to MLMCI.
No transfer of a Certificate or any interest therein shall
be made to any employee benefit plan or certain other retirement
plans and arrangements, including individual retirement accounts
and annuities, ▇▇▇▇▇ plans and bank collective investment funds
and insurance company general or separate accounts in which such
plans, accounts or arrangements are invested, that are subject to
ERISA, or Section 4975 of the Code (collectively, "Plan"), any
Person acting, directly or indirectly, on behalf of any such Plan
or any Person acquiring such Certificates with "plan assets" of a
Plan within the meaning of the Department of Labor regulation
promulgated at 29 C.F.R. Section 2510.3-101 ("Plan Assets") unless the
Company, the Owner Trustee, the Certificate Registrar and the
Servicer are provided with an Opinion of Counsel which
establishes to the satisfaction of the Company, the Owner
Trustee, the Certificate Registrar and the Servicer that the
purchase of Certificates is permissible under applicable law,
will not constitute or result in any prohibited transaction under
ERISA or Section 4975 of the Code and will not subject the
Company, the Owner Trustee, the Certificate Registrar or the
Servicer to any obligation or liability (including obligations or
liabilities under ERISA or Section 4975 of the Code) in addition
to those undertaken in this Trust Agreement, which Opinion of
Counsel shall not be an expense of the Trust, the Company, the
Owner Trustee, the Certificate Registrar, the Bond Insurer or the
Servicer. In lieu of such Opinion of Counsel, a Plan, any Person
acting, directly or indirectly, on behalf of any such Plan or any
Person acquiring such Certificates with Plan Assets of a Plan may
provide a certification in the form of Exhibit G to this Trust
Agreement, which the Company, the Owner Trustee, the Certificate
Registrar and the Servicer may rely upon without further inquiry
or investigation. Neither an Opinion of Counsel nor a
certification will be required in connection with the initial
transfer of any such Certificate by the Company to NCFC pursuant
to the Certificates Sale Agreement, or the pledge of any such
Certificate by NCFC to MLMCI pursuant to the Master Assignment
Agreement (in which case, the Company shall be deemed to have
represented that neither NCFC nor MLMCI is a Plan or a Person
investing Plan Assets of any Plan), and the Owner Trustee shall
be entitled to conclusively rely upon a representation (which,
upon the request of the Owner Trustee, shall be a written
representation) from the Company regarding the status of such
transferees.
In addition, no transfer, sale, assignment, pledge or other
disposition of a Certificate shall be made unless the proposed
transferee executes a representation letter substantially in the
form of Exhibit D, or substantially in the form of Exhibit H
hereto, that (1) the transferee is acquiring the Certificate for
its own behalf and is not acting as agent or custodian for any
other person or entity in connection with such acquisition and
(2) if the transferee is a partnership, grantor trust or S
corporation for federal income tax purposes, the Certificates are
not more than 50% of the assets of the partnership, grantor trust
or S corporation.
No offer, sale, transfer, pledge, hypothecation or other
disposition (including any pledge, sale or transfer under a
repurchase transaction or securities loan) of any Certificate
shall be made to any transferee unless, prior to such
disposition, the proposed transferor delivers to the Owner
Trustee an Opinion of Counsel, rendered by a law firm generally
recognized to be qualified to opine concerning the tax aspects of
asset securitization, to the effect that such transfer (including
any disposition permitted following any default under any pledge
or repurchase transaction) will not cause the Trust to be (i)
treated as an association taxable as a corporation for federal
income tax purposes, (ii) taxable as a taxable mortgage pool as
defined in Section 7701(i) of the Code or (iii) taxable as a
"publicly traded partnership" as defined in Treasury Regulation
section 1.7704-1. Notwithstanding the foregoing, the provisions
of this paragraph shall not apply to the initial transfer of the
Certificates by the Company to NCFC pursuant to the Certificates
Sale Agreement.
Notwithstanding any other provisions of this Section 3.05 to
the contrary, on the Closing Date, (i) the Company may transfer
the Certificates to NCFC pursuant to the Certificates Sale
Agreement and (ii) NCFC may pledge the Certificates to MLMCI
pursuant to the Master Assignment Agreement, in each case without
complying with the foregoing provisions of this Section 3.05, as
applicable.
Section 3.06. Mutilated, Destroyed, Lost or Stolen Certif-
icates. 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 harm-
less, then in the absence of notice to the Certificate Registrar
or the Owner Trustee that such Certificate has been acquired by a
bona fide purchaser, the Owner Trustee shall execute on behalf of
the Trust and the Owner Trustee or the Certificate Registrar,
shall authenticate and deliver, in exchange for or in lieu of any
such mutilated, destroyed, lost or stolen Certificate, a new
Certificate of like tenor and denomination. In connection with
the issuance of any new Certificate under this Section 3.06, the
Owner Trustee or the Certificate Registrar may require the
payment of a sum sufficient to cover any expenses of the Owner
Trustee or the Certificate Registrar (including fees and expenses
of counsel) and any tax or other governmental charge that may be
imposed in connection therewith. Any duplicate Certificate
issued pursuant to this Section 3.06 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 3.07. Persons Deemed Certificateholders. Prior to
due presentation of a Certificate for registration of transfer,
the Owner Trustee, the Certificate Registrar or any Certificate
Paying Agent may treat the Person in whose name any Certificate
is registered in the Certificate Register as the owner of such
Certificate for the purpose of receiving distributions pursuant
to Section 5.02 and for all other purposes whatsoever, and none
of the Trust, the Owner Trustee, the Certificate Registrar or any
Paying Agent shall be bound by any notice to the contrary.
Section 3.08. Access to List of Certificateholders' Names
and Addresses. The Certificate Registrar shall furnish or cause
to be furnished to the Company or the Owner Trustee, within
15 days after receipt by the Certificate Registrar of a written
request therefor from the Company or the Owner Trustee, a list,
in such form as the Company or the Owner Trustee, as the case may
be, may reasonably require, of the names and addresses of the
Certificateholders as of the most recent Record Date. Each
Certificateholder, by receiving and holding a Certificate, shall
be deemed to have agreed not to hold any of the Trust, the
Company, 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 3.09. Maintenance of Office or Agency. The Owner
Trustee on behalf of the Trust, shall maintain in Wilmington,
Delaware, an office or offices or agency or agencies where
Certificates may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Owner
Trustee in respect of the Certificates and the Basic Documents
may be served. The Owner Trustee initially designates the
Corporate Trust Office as its office for such purposes. The
Owner Trustee shall give prompt written notice to the Company and
the Certificateholders of any change in the location of the
Certificate Register or any such office or agency.
Section 3.10. Certificate Paying Agent. (a) The
Certificate Paying Agent shall make distributions to
Certificateholders from the Certificate Distribution Account on
behalf of the Trust in accordance with the provisions of the
Certificates and Section 5.01 hereof from payments remitted to
the Certificate Paying Agent by the Indenture Trustee pursuant to
Section 3.05 of the Indenture. The Trust hereby appoints First
Union National Bank as Certificate Paying Agent and First Union
National Bank hereby accepts such appointment and further agrees
that it will be bound by the provisions of this Trust Agreement
relating to the Certificate Paying Agent and shall:
(i hold all sums held by it for the payment of
amounts due with respect to the Certificates in trust for
the benefit of the Persons entitled thereto until such sums
shall be paid to such Persons or otherwise disposed of as
herein provided;
(ii give the Owner Trustee notice of any default by
the Trust of which it has actual knowledge in the making of
any payment required to be made with respect to the
Certificates;
(iii at any time during the continuance of any such
default, upon the written request of the Owner Trustee
forthwith pay to the Owner Trustee on behalf of the Trust
all sums so held in Trust by such Certificate Paying Agent;
(iv immediately resign as Certificate Paying Agent
and forthwith pay to the Owner Trustee on behalf of the
Trust all sums held by it in trust for the payment of
Certificates if at any time it ceases to meet the standards
under this Section 3.10 required to be met by the
Certificate Paying Agent at the time of its appointment;
(v comply with all requirements of the Code with
respect to the withholding from any payments made by it on
any Certificates of any applicable withholding taxes imposed
thereon and with respect to any applicable reporting
requirements in connection therewith;
(vi deliver to the Owner Trustee a copy of the
report to Certificateholders prepared with respect to each
Payment Date by the Servicer pursuant to Section 4.01 of the
Servicing Agreement; and
(vii not institute bankruptcy proceedings against the
Issuer in connection with this Trust Agreement.
(b) The Trust may revoke such power and remove the
Certificate Paying Agent if it determines in its sole discretion
that the Certificate Paying Agent shall have failed to perform
its obligations under this Trust Agreement in any material
respect. First Union National Bank shall be permitted to resign
as Certificate Paying Agent upon 30 days written notice to the
Owner Trustee and the Bond Insurer; provided First Union National
Bank is also resigning as Paying Agent under the Indenture at
such time. In the event that First Union National Bank shall no
longer be the Certificate Paying Agent under this Trust Agreement
and Paying Agent under the Indenture, the Owner Trustee shall
appoint a successor to act as Certificate Paying Agent (which
shall be a bank or trust company) and which shall also be the
successor Paying Agent under the Indenture. The Owner Trustee
shall cause such successor Certificate Paying Agent or any
additional Certificate Paying Agent appointed by the Owner
Trustee to execute and deliver to the Owner Trustee an instrument
accepting the terms of this Section 3.10 as it relates to the
Certificate Paying Agent. The Certificate Paying Agent shall
return all unclaimed funds to the Trust and upon removal of a
Certificate Paying Agent such Certificate Paying Agent shall also
return all funds in its possession to the Trust. The provisions
of Sections 6.01, 6.03, 6.04 and 7.01 shall apply to the
Certificate Paying Agent to the extent applicable. Any reference
in this Trust Agreement to the Certificate Paying Agent shall
include any co-paying agent unless the context requires
otherwise.
(c) The Certificate Paying Agent shall establish and main-
tain with itself a trust account (the "Certificate Distribution
Account") in which the Certificate Paying Agent shall deposit, on
the same day as it is received from the Indenture Trustee, each
remittance received by the Certificate Paying Agent with respect
to payments made pursuant to the Indenture. The Certificate
Paying Agent shall make all distributions to Certificateholders,
from moneys on deposit in the Certificate Distribution Account.
(d) The Certificate Paying Agent shall be paid by the
Indenture Trustee from sources other than the Trust Estate.
Section 3.11. Pre-Funding Amount and Interest Coverage
Amount. On the Closing Date, (i) proceeds of the offering of the
Bonds in an amount equal to the Original Pre-Funded Amount shall
be deposited into the Pre-Funding Account as contemplated by
Section 8.08 of the Indenture; (ii) proceeds of the offering of
the Bonds in an amount equal to the Interest Coverage Amount
shall be deposited into the Interest Coverage Account as
contemplated by Section 8.09 of the Indenture; (iii) the Original
Pre-Funded Amount and the Interest Coverage Amount shall become
part of the Owner Trust Estate under this Trust Agreement; and
(iv) the Original Pre-Funded Amount and the Interest Coverage
Amount shall become part of the Trust Estate and the Collateral
under the Indenture.
Section 3.12. Purchase of Subsequent Mortgage Loans. On
each Subsequent Transfer Date, (i) the Seller shall sell, and the
Company shall purchase, the Subsequent Mortgage Loans, and the
Company shall resell, and the Trust shall purchase, the
Subsequent Mortgage Loans, as contemplated by and subject to the
conditions set forth in Section 2.2 of the Mortgage Loan Purchase
Agreement; (ii) in consideration for the Purchase of the
Subsequent Mortgage Loans, the Trust shall instruct the Indenture
Trustee to transfer funds in the Pre-Funding Account to the
Company, who shall in turn transfer such funds to the Seller as
contemplated by and subject to the conditions set forth in
Section 8.08 of the Indenture, (iii) the Subsequent Mortgage Loan
shall become part of the Owner Trust Estate under this Trust
Agreement and (iv) the Subsequent Mortgage Loans shall become
part of the Trust Estate and the Collateral under the Indenture.
ARTICLE IV
Authority and Duties of Owner Trustee
Section 4.01. General Authority. The Owner Trustee is
authorized and directed to execute and deliver the Basic Docu-
ments 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 herein, as
evidenced conclusively by the Owner Trustee's execution thereof.
In addition to the foregoing, the Owner Trustee is authorized,
but shall not be obligated, except as otherwise provided in this
Trust Agreement, to take all actions required of the Trust
pursuant to the Basic Documents.
Section 4.02. General Duties. It shall be the duty of the
Owner Trustee to discharge (or cause to be discharged) all of its
responsibilities pursuant to the terms of this Trust 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 pro-
visions of this Trust Agreement.
Section 4.03. Action upon Instruction. (a) Subject to
this Article IV 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. Such
direction may be exercised at any time by written instruction of
the Certificateholders pursuant to this Article IV.
(b) Notwithstanding the foregoing, the Owner Trustee shall
not be required to take any action hereunder or under any Basic
Document if the Owner Trustee shall have reasonably determined,
or shall have been advised by counsel, that such action is likely
to result in liability on the part of the Owner Trustee or is
contrary to the terms hereof or of any Basic Document or is
otherwise contrary to law.
(c) Whenever the Owner Trustee is required to decide
between alternative courses of action permitted or required by
the terms of this Trust Agreement or under any Basic Document, or
in the event that the Owner Trustee is unsure as to the
application of any provision of this Trust Agreement or any Basic
Document or any such provision is ambiguous as to its applica-
tion, or is, or appears to be, in conflict with any other appli-
cable provision, or in the event that this Trust 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 shall promptly give notice (in such form as shall
be appropriate under the circumstances) to the Certificateholders
(with a copy to the Bond Insurer) requesting instruction 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 (with the consent of the
Bond Insurer), 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 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 Trust
Agreement or the Basic Documents, as it shall deem to be in the
best interests of the Certificateholders, the Bondholders and the
Bond Insurer, and the Owner Trustee shall have no liability to
any Person for such action or inaction.
Section 4.04. No Duties Except as Specified under Specified
Documents or in 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, any document
contemplated hereby to which the Owner Trustee is a party, except
as expressly provided (a) in accordance with the powers granted
to and the authority conferred upon the Owner Trustee pursuant to
this Trust Agreement, (b) in accordance with the Basic Documents
and (c) in accordance with any document or instruction delivered
to the Owner Trustee pursuant to Section 4.03; and no implied
duties or obligations shall be read into this Trust Agreement or
any Basic Document against the Owner Trustee. The Owner Trustee
shall have no responsibility (i) to file any financing or
continuation statement in any public office at any time, (ii) to
otherwise perfect or maintain the perfection of any security
interest or lien granted to it hereunder, (iii) to record this
Trust Agreement or any Basic Document or (iv) to prepare or file
any Securities and Exchange Commission filing for the Trust. 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 that
are not related to the ownership or the administration of the
Owner Trust Estate.
Section 4.05. Restrictions. (a) The Owner Trustee or the
Company (or an Affiliate thereof) shall not take any action
(i) that is inconsistent with the purposes of the Trust set forth
in Section 2.03 or (ii) that, to the actual knowledge of the
Owner Trustee based on an Opinion of Counsel rendered by a law
firm generally recognized to be qualified to opine concerning the
tax aspects of asset securitization, would result in the Trust
becoming taxable as a corporation for federal income tax purposes
or (iii) would result in the amendment or modification of the
Basic Documents or this Trust Agreement without the prior written
consent of the Bond Insurer. The Certificateholders shall not
direct the Owner Trustee to take action that would violate the
provisions of this Section 4.05.
(b) The Owner Trustee shall not convey or transfer any of
the Trust's properties or assets, including those included in the
Trust Estate, to any person unless (i) it shall have received an
Opinion of Counsel rendered by a law firm generally recognized to
be qualified to opine concerning the tax aspects of asset
securitization to the effect that such transaction will not have
any material adverse tax consequence to the Trust or any
Certificateholder and (ii) such conveyance or transfer shall not
violate the provisions of Section 3.16(b) of the Indenture.
(c) 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
Trust shall maintain appropriate minutes or other records of all
appropriate actions and shall maintain its office separate from
the offices of the Company.
Section 4.06. Prior Notice to Certificateholders with
Respect to Certain Matters. With respect to the following
matters, the Owner Trustee shall not take action unless at least
30 days before the taking of such action, the Owner Trustee shall
have notified the Certificateholders and the Bond Insurer in
writing of the proposed action and the Certificateholders and the
Bond Insurer shall not have notified the Owner Trustee in writing
prior to the 30th day after such notice is given that such
certificateholders and the Bond Insurer have withheld consent or
provided alternative direction (provided, however, that any
direction by the Certificateholders shall require the prior
consent of the Bond Insurer):
(a) the initiation of any claim or lawsuit by the Trust
(except claims or lawsuits brought in connection with the collec-
tion of cash distributions due and owing under 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 cash
distributions due and owing under 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 Trust Agreement
or any Basic Document in circumstances where the consent of any
Bondholder or the Bond Insurer is required;
(d) the amendment or other change to this Trust Agreement
or any Basic Document in circumstances where the consent of any
Bondholder or the Bond Insurer is not required and such amendment
materially adversely affects the interest of the
Certificateholders;
(e) the appointment pursuant to the Indenture of a succes-
sor Bond Registrar, Paying Agent or Indenture Trustee or,
pursuant to this Trust Agreement, of a successor Certificate
Registrar or Certificate Paying Agent or the consent to the
assignment by the Bond Registrar, Paying Agent, Indenture
Trustee, Certificate Registrar or Certificate Paying Agent of its
obligations under the Indenture or this Trust Agreement, as
applicable;
(f) the consent to the calling or waiver of any default
under any Basic Document;
(g) the consent to the assignment by the Indenture Trustee
or Servicer of their respective obligations under any Basic
Document;
(h) except as provided in Article VIII 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;
(j) cause the Trust to incur, assume or guaranty any
indebtedness other than as set forth in this Trust Agreement;
(k) perform any act that conflicts with any other Basic
Document;
(l) perform any act which would make it impossible to carry
on the ordinary business of the Trust as described in Section
2.03 hereof;
(m) confess a judgment against the Trust;
(n) possess Trust assets or assign the Trust's right to
property for other than a Trust purpose;
(o) cause the Trust to lend any funds to any entity; or
(p) change the Trust's purpose and powers from those
enumerated in this Trust Agreement.
Section 4.07. Action by Certificateholders with Respect to
Certain Matters. The Owner Trustee shall not have the power,
except upon the direction of the Certificateholders, and with the
consent of the Bond Insurer, to (a) remove or replace the
Servicer under the Servicing Agreement pursuant to Sections 6.01
and 6.02 thereof or to remove or replace the Indenture Trustee
under the Indenture pursuant to Section 6.08 thereof, (b) except
as expressly provided in the Basic Documents, sell the Mortgage
Loans after the termination of the Indenture, (c) institute
proceedings to have the Trust declared or adjudicated to be
bankrupt or insolvent, (d) consent to the institution of
bankruptcy or insolvency proceedings against the Trust, (e) 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, (f) 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, (g) make any assignment for the
benefit of the Trust's creditors, (h) cause the Trust to admit in
writing its inability to pay its debts generally as they become
due, (i) take any action or cause the Trust to take any action,
in furtherance of any of the foregoing clauses (c) through (i)
(any of such clauses, a "Bankruptcy Action"). So long as the
Indenture and the Insurance Agreement remain in effect and no
Bond Insurer Default exists, no Certificateholder shall have the
power to take, and shall not take, any Bankruptcy Action with
respect to the Trust or the Company or direct the Owner Trustee
to take any Bankruptcy Action with respect to the Trust or the
Company. The Owner Trustee shall take the actions referred to in
the preceding sentence only upon written instructions signed by
the Certificateholders and with the consent of the Bond Insurer.
Section 4.08. 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 approval of all Certificate-
holders and the consent of the Bond Insurer, the Bondholders and
the Owner Trustee and the delivery to the Owner Trustee by each
such Certificateholder of a certificate certifying that such
Certificateholder reasonably believes that the Trust is
insolvent. This paragraph shall survive for one year and one day
following termination of this Trust Agreement.
Section 4.09. Restrictions on Certificateholders' Power.
The Certificateholders shall not direct the Owner Trustee to take
or to 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 Trust Agreement or any of the 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 4.10. Majority Control. Except as expressly pro-
vided herein, any action that may be taken by the Certificate-
holders under this Trust Agreement may be taken by the holders of
Certificates evidencing not less than a majority of the outstand-
ing Certificate Percentage Interests of the Certificates. Except
as expressly provided herein, any written notice of the
Certificateholders delivered pursuant to this Trust Agreement
shall be effective if signed by holders of Certificates
evidencing not less than a majority of the outstanding
Certificate Principal Balance of the Certificates at the time of
the delivery of such notice.
Section 4.11. Optional Redemption. Upon receipt of written
instructions provided to the Owner Trustee by the holder or
holders of 100% of the Certificates, the Owner Trustee shall
cause the Issuer to redeem the Bonds in accordance with Section
8.07 of the Indenture and shall provide all necessary notices on
behalf of the Issuer to effect the foregoing, provided that such
holder or holders shall deposit with the Indenture Trustee an
amount equal to the aggregate redemption price specified under
Section 8.07 of the Indenture, which shall be applied by the
Indenture Trustee solely to make such redemption payments. The
Owner Trustee shall not have the power to exercise the right of
the Issuer to redeem the Bonds pursuant to Section 8.07 of the
Indenture, except as provided above.
ARTICLE V
Application of Trust Funds
Section 5.01. Distributions. (a) On each Payment Date,
the Certificate Paying Agent shall distribute to the
Certificateholders, on a pro rata basis based on the Certificate
Percentage Interests thereof, all funds on deposit in the
Certificate Distribution Account and available therefor (as
provided in Section 3.05 of the Indenture) for such Payment Date
as reduced by any amount owing to the Owner Trustee hereunder and
any Expenses of the Trust remaining unpaid.
(b) In the event that any withholding tax is imposed on the
distributions (or allocations of income) to a Certificateholder,
such tax shall reduce the amount otherwise distributable to such
Certificateholder in accordance with this Section 5.01. The
Certificate Paying Agent is hereby authorized and directed to
retain or cause to be retained 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 Owner 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 amount of any withholding tax imposed with
respect to a Certificateholder shall be treated as cash distrib-
uted to such Certificateholder at the time it is withheld by the
Certificate Paying Agent and remitted to the appropriate taxing
authority. If there is a possibility that withholding tax is
payable with respect to a distribution (such as a distribution to
a non-U.S. Certificateholder), the Certificate Paying Agent may
in its sole discretion withhold such amounts in accordance with
this paragraph (b).
(c) Distributions to Certificateholders shall be
subordinated to the creditors of the Trust, including the
Bondholders and the Bond Insurer.
Section 5.02. Method of Payment. Subject to Section
8.01(c), distributions required to be made to Certificateholders
on any Payment Date as provided in Section 5.01 shall be made to
each Certificateholder of record on the preceding Record Date
either by, in the case of any Certificateholder owning
Certificates having a Certificate Percentage Interest of 100%,
wire transfer, in immediately available funds, to the account of
such holder at a bank or other entity having appropriate
facilities therefor, if such Certificateholder shall have
provided to the Certificate Registrar appropriate written
instructions at least five Business Days prior to such Record
Date or, if not, by check mailed to such Certificateholder at the
address of such holder appearing in the Certificate Register.
Section 5.03. Tax Returns. The Indenture Trustee shall (a)
maintain (or cause to be maintained) the books of the Trust on a
calendar year basis using the accrual method of accounting, (b)
deliver (or cause to be delivered) to each Certificateholder as
may be required by the Code and applicable Treasury Regulations,
such information as may be required to enable each
Certificateholder to prepare its federal and state income tax
returns, (c) prepare and file or cause to be prepared and filed
such tax returns relating to the Trust as may be required by the
Code and applicable Treasury Regulations (making such elections
as may from time to time be required or appropriate under any
applicable state or federal statutes, rules or regulations) and
(d) collect or cause to be collected any withholding tax as
described in and in accordance with Section 5.01 of this Trust
Agreement with respect to income or distributions to
Certificateholders and prepare or cause to be prepared the
appropriate forms relating thereto.
Section 5.04. Statements to Certificateholders. On each
Payment Date, the Certificate Paying Agent shall send to each
Certificateholder the statement or statements provided to the
Owner Trustee and the Certificate Paying Agent by the Indenture
Trustee pursuant to Section 7.05 of the Indenture with respect to
such Payment Date.
ARTICLE VI
Concerning the Owner Trustee
Section 6.01. Acceptance of Trusts and Duties. The Owner
Trustee accepts the trusts ▇▇▇▇▇▇ created and agrees to perform
its duties hereunder with respect to such trusts but only upon
the terms of this Trust Agreement. Each of the Owner Trustee and
the Certificate Paying Agent also agrees to disburse all moneys
actually received by it constituting part of the Owner Trust
Estate upon the terms of the Basic Documents and this Trust
Agreement. The Owner Trustee shall not be answerable or
accountable hereunder or under any Basic Document under any
circumstances, except (i) for its own willful misconduct, gross
negligence or bad faith or grossly negligent failure to act or
(ii) in the case of the inaccuracy of any representation or
warranty contained in Section 6.03 expressly made by the Owner
Trustee. 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 with respect to
any action taken or omitted to be taken by it in accordance with
the instructions of the Certificateholders permitted under this
Trust Agreement;
(b) No provision of this Trust Agreement or any Basic Docu-
ment shall require the Owner Trustee to expend or risk funds or
otherwise incur any financial liability in the performance of any
of its rights, duties or powers hereunder or under any 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;
(c) 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
Bonds;
(d) The Owner Trustee shall not be responsible for or in
respect of the validity or sufficiency of this Trust Agreement or
for the due execution hereof by the Company 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, the Bonds, the Certificates,
other than the certificate of authentication on the Certificates,
if executed by the Owner Trustee and the Owner Trustee shall in
no event assume or incur any liability, duty, or obligation to
any Bondholder or to any Certificateholder, other than as
expressly provided for herein or expressly agreed to in the Basic
Documents;
(e) The Owner Trustee shall not be liable for the default
or misconduct of the Company, Indenture Trustee, Certificate
Registrar or the 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
Trust Agreement or the Basic Documents that are required to be
performed by the Indenture Trustee under the Indenture or the
Seller under the Mortgage Loan Purchase Agreement; and
(f) The Owner Trustee shall be under no obligation to exer-
cise any of the rights or powers vested in it or duties imposed
by this Trust Agreement, or to institute, conduct or defend any
litigation under this Trust Agreement or otherwise or in relation
to this Trust Agreement or any Basic Document, at the request,
order or direction of any of the Certificateholders, unless such
Certificateholders have offered to the Owner Trustee security or
indemnity 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 discre-
tionary act enumerated in this Trust Agreement or in any Basic
Document shall not be construed as a duty.
Section 6.02. Furnishing of Documents. The Owner Trustee
shall furnish to the Securityholders promptly upon receipt of a
written reasonable request therefor, duplicates or copies of all
reports, notices, requests, demands, certificates, financial
statements and any other instruments furnished to the Trust under
the Basic Documents.
Section 6.03. Representations and Warranties. The Owner
Trustee, in its individual capacity, hereby represents and
warrants to the Company, for the benefit of the
Certificateholders and the Bond Insurer that:
(a) It is a banking corporation duly organized and validly
existing in good standing under the laws of the State of
Delaware. It has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Trust
Agreement;
(b) It has taken all corporate action necessary to autho-
rize the execution and delivery by it of this Trust Agreement,
and this Trust Agreement will be executed and delivered by one of
its officers who is duly authorized to execute and deliver this
Trust Agreement on its behalf;
(c) The execution, delivery, authentication and performance
by it of this Trust Agreement will not require the authorization,
consent or approval of, the giving of notice to, the filing or
registration with, or the taking of any other action with respect
to, any governmental authority or agency;
(d) Neither the execution nor the delivery by it of this
Trust Agreement, nor the consummation by it of the transactions
contemplated hereby nor compliance by it with any of the terms or
provisions hereof will contravene any federal or Delaware 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
bylaws or any indenture, mortgage, contract, agreement or instru-
ment to which it is a party or by which any of its properties may
be bound;
(e) This Trust Agreement, assuming due authorization,
execution and delivery by the Company, 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;
(f) 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;
and
(g) 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 Trust Agreement or
performing its obligations under this Trust Agreement.
Section 6.04. 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, Bond, 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 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 reli-
ance thereon.
(b) In the exercise or administration of the Trust here-
under and in the performance of its duties and obligations under
this Trust Agreement or the Basic Documents, the Owner Trustee
(i) may act directly or through its agents, attorneys, custodians
or nominees (including persons acting under a power of attorney)
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, attorneys, custodians or nominees (including
persons acting under a power of attorney) if such persons have
been selected by the Owner Trustee with reasonable care and
(ii) may 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 Trust Agreement or any Basic
Document.
Section 6.05. Not Acting in Individual Capacity. Except as
provided in this Article VI, in accepting the trusts hereby
created Wilmington Trust Company acts solely as Owner Trustee
hereunder and not in its individual capacity, and all Persons
having any claim against the Owner Trustee by reason of the
transactions contemplated by this Trust Agreement or any Basic
Document shall look only to the Owner Trust Estate for payment or
satisfaction thereof.
Section 6.06. Owner Trustee Not Liable for Certificates or
Related Documents. The recitals contained herein and in the
Certificates (other than the signatures of the Owner Trustee on
the Certificates) shall be taken as the statements of the
Company, 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 Trust Agreement, of any
Basic Document or of the Certificates (other than the signatures
of the Owner Trustee on the Certificates) or the Bonds, or of any
Related Documents. The Owner Trustee shall at no time have any
responsibility or liability with respect to the sufficiency of
the Owner Trust Estate or its ability to generate the payments to
be distributed to Certificateholders under this Trust Agreement
or the Bondholders under the Indenture, including compliance by
the Company or the Seller with any warranty or representation
made under any Basic Document or in any related document or the
accuracy of any such warranty or representation, or any action of
the Certificate Paying Agent, the Certificate Registrar or the
Indenture Trustee taken in the name of the Owner Trustee.
Section 6.07. Owner Trustee May Own Certificates and Bonds.
The Owner Trustee in its individual or any other capacity may,
subject to Section 3.05, become the owner or pledgee of
Certificates or Bonds and may deal with the Company, the Seller,
the Certificate Paying Agent, the Certificate Registrar and the
Indenture Trustee in transactions with the same rights as it
would have if it were not Owner Trustee.
Section 6.08. Payments from Owner Trust Estate. All
payments to be made by the Owner Trustee under this Trust
Agreement or any of the Basic Documents to which the Owner
Trustee is a party shall be made only from the income and
proceeds of the Owner Trust Estate or from other amounts required
to be provided by the Certificateholders and only to the extent
that the Owner Trustee shall have received income or proceeds
from the Owner Trust Estate or the Certificateholders to make
such payments in accordance with the terms hereof. Wilmington
Trust Company, in its individual capacity, shall not be liable
for any amounts payable under this Trust Agreement or any of the
Basic Documents to which the Owner Trustee is a party.
Section 6.09. Doing Business in Other Jurisdictions.
Notwithstanding anything contained herein to the contrary,
neither Wilmington Trust Company nor the 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, even after
the appointment of a co-trustee or separate trustee in accordance
with Section 9.05 hereof, (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 the State
of Delaware becoming payable by Wilmington Trust Company; or
(iii) subject Wilmington Trust Company to personal jurisdiction
in any jurisdiction other than the State of Delaware for causes
of action arising from acts unrelated to the consummation of the
transactions by Wilmington Trust Company or the Owner Trustee, as
the case may be, contemplated hereby.
Section 6.10. Liability of Certificate Registrar and
Certificate Paying Agent. All provisions affording protection to
or limiting the liability of the Owner Trustee shall inure as
well to the Certificate Registrar and Certificate Paying Agent.
ARTICLE VII
Compensation of Owner Trustee
Section 7.01. 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 and as set forth in Appendix A to the Indenture, and the
Owner Trustee shall be reimbursed by the Company or the Servicer
for its reasonable expenses hereunder and under the Basic
Documents, including the reasonable compensation, expenses and
disbursements of such agents, representatives, experts and
counsel as the Owner Trustee may reasonably employ in connection
with the exercise and performance of its rights and its duties
hereunder and under the Basic Documents. The amount of the Owner
Trustee Fee shall be paid by the Servicer to the Owner Trustee
pursuant to Section 3.07(a)(viii) of the Servicing Agreement.
Section 7.02. Indemnification. The Company shall
indemnify, defend and hold harmless the Owner Trustee 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 the Owner
Trustee or any Indemnified Party in any way relating to or
arising out of this Trust Agreement, the Basic Documents, the
Owner Trust Estate, the administration of the Owner Trust Estate
or the action or inaction of the Owner Trustee hereunder,
provided, that:
(i the Company shall not be liable for or required
to indemnify an Indemnified Party from and against Expenses
arising or resulting from the Owner Trustee's willful
misconduct, gross negligence or bad faith or as a result of
any inaccuracy of a representation or warranty contained in
Section 6.03 expressly made by the Owner Trustee;
(ii with respect to any such claim, the Indemnified
Party shall have given the Company written notice thereof
promptly after the Indemnified Party shall have actual
knowledge thereof;
(iii while maintaining control over its own defense,
the Company shall consult with the Indemnified Party in
preparing such defense; and
(iv notwithstanding anything in this Trust Agreement
to the contrary, the Company shall not be liable for
settlement of any claim by an Indemnified Party entered into
without the prior consent of the Company which consent shall
not be unreasonably withheld.
The indemnities contained in this Section shall survive the
resignation or termination of the Owner Trustee or the termina-
tion of this Trust Agreement. In the event of any claim, action
or proceeding for which indemnity will be sought pursuant to this
Section 7.02, the Owner Trustee's choice of legal counsel, if
other than the legal counsel retained by the Owner Trustee in
connection with the execution and delivery of this Trust
Agreement, shall be subject to the approval of the Company, which
approval shall not be unreasonably withheld. In addition, upon
written notice to the Owner Trustee and with the consent of the
Owner Trustee which consent shall not be unreasonably withheld,
the Company has the right to assume the defense of any claim,
action or proceeding against the Owner Trustee.
ARTICLE VIII
Termination of Trust Agreement
Section 8.01. Termination of Trust Agreement. (a) This
Trust Agreement (other than Article VII) and the Trust shall
terminate and be of no further force or effect upon the earliest
of (i) the final distribution of all moneys or other property or
proceeds of the Owner Trust Estate in accordance with the terms
of the Indenture and this Trust Agreement, (ii) the Payment Date
in August 2028, or (iii) the distribution of all of the assets of
the Owner Trust Estate, in accordance with written instructions
provided to the Owner Trustee by holders of a majority of the
Certificates, following the optional redemption of the Bonds by
the Issuer pursuant to Section 8.07 of the Indenture; provided in
each case that all amounts owing to the Bondholders and the Bond
Insurer to the extent payable from the Owner Trust Estate or
proceeds thereof have been paid in full and that all obligations
under the Indenture have been discharged. The bankruptcy,
liquidation, dissolution, death or incapacity of any Certifi-
cateholder shall not (x) operate to terminate this Trust
Agreement or the Trust or (y) entitle such Certificateholder'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 the Owner Trust Estate or
(z) otherwise affect the rights, obligations and liabilities of
the parties hereto.
(b) Except as provided in Section 8.01(a), neither the
Company nor any Certificateholder shall be entitled to revoke or
terminate the Trust.
(c) Notice of any termination of the Trust, specifying the
Payment Date upon which Certificateholders shall surrender their
Certificates to the Certificate Paying Agent for payment of the
final distribution and cancellation, shall be given by the
Certificate Paying Agent by letter to Certificateholders and the
Bond Insurer mailed within five Business Days of receipt of
notice of the final payment on the Bonds from the Indenture
Trustee, stating (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 Certificate Paying Agent 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 Certificate Payment Agent
therein specified. The Certificate Paying Agent shall give such
notice to the Owner Trustee and the Certificate Registrar at the
time such notice is given to Certificateholders. Upon
presentation and surrender of the Certificates, the Certificate
Paying Agent shall cause to be distributed to Certificateholders
amounts distributable on such Payment Date pursuant to
Section 5.01.
In the event that all of the Certificateholders shall not
surrender their Certificates for cancellation within six months
after the date specified in the above mentioned written notice,
the Certificate Paying Agent shall give a second written notice
to the remaining Certificateholders to surrender their Certifi-
▇▇▇▇▇ for cancellation and receive the final distribution with
respect thereto. Subject to applicable laws with respect to
escheat of funds, if within one year following the Payment Date
on which final payment of the Certificates was to have been made
pursuant to Section 3.05 of the Indenture, all the Certificates
shall not have been surrendered for cancellation, the Certificate
Paying Agent may take appropriate steps, or may appoint an agent
to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates,
and the cost thereof shall be paid out of the funds and other
assets that shall remain subject to this Trust Agreement. Any
funds remaining in the Certificate Distribution Account after
exhaustion of such remedies shall be distributed by the
Certificate Paying Agent to the holder of the Certificate.
(d) Upon the winding up of the Trust 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(d) of the Business Trust Statute.
ARTICLE IX
Successor Owner Trustees and Additional Owner Trustees
Section 9.01. Eligibility Requirements for Owner Trustee.
The Owner Trustee shall at all times be a corporation reasonably
acceptable to the Bond Insurer and satisfying the provisions of
Section 3807(a) of the Business Trust Statute; authorized to
exercise corporate 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 or is
otherwise acceptable to the Bond Insurer, ▇▇▇▇▇'▇ and Standard &
Poor's. If such corporation 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, the combined capital and surplus of such
corporation 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
9.01, the Owner Trustee shall resign immediately in the manner
and with the effect specified in Section 9.02.
Section 9.02. Replacement of Owner Trustee. The Owner
Trustee may at any time resign and be discharged from the trusts
hereby created by giving 30 days prior written notice thereof to
the Bond Insurer and the Company. Upon receiving such notice of
resignation, the Company shall promptly appoint a successor Owner
Trustee with the consent of the Bond Insurer which will not be
unreasonably withheld, by written instrument, in duplicate, one
copy of which instrument shall be delivered to the resigning
Owner Trustee and to the successor Owner Trustee. If no
successor Owner Trustee shall have been so appointed and have
accepted appointment within 30 days after the giving of such
notice of resignation, the resigning Owner Trustee may petition
any court of competent jurisdiction for the appointment of a
successor Owner Trustee reasonably acceptable to the
Certificateholders and the Bond Insurer.
If at any time the Owner Trustee shall cease to be eligible
in accordance with the provisions of Section 9.01 and shall fail
to resign after written request therefor by the Company or the
Bond Insurer, 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 Company may remove the Owner Trustee with the consent of the
Bond Insurer and shall remove the Owner Trustee at the direction
of the Bond Insurer.
Any resignation or removal of the Owner Trustee and appoint-
ment of a successor Owner Trustee pursuant to any of the pro-
visions of this Section shall not become effective until accep-
tance of appointment by the successor Owner Trustee pursuant to
Section 9.03 and payment of all fees and expenses owed to the
outgoing Owner Trustee. The Servicer shall provide notice of
such resignation or removal of the Owner Trustee to each of the
Rating Agencies and the Bond Insurer.
Section 9.03. Successor Owner Trustee. Any successor Owner
Trustee appointed pursuant to Section 9.02 shall execute,
acknowledge and deliver to the Indenture Trustee and to its
predecessor Owner Trustee an instrument accepting such
appointment under this Trust Agreement, and thereupon the
resignation or removal of the predecessor Owner Trustee shall
become effective, and such successor Owner Trustee, without any
further act, deed or conveyance, shall become fully vested with
all the rights, powers, duties and obligations of its predecessor
under this Trust 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 monies held by it under
this Trust Agreement; 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 9.03 unless at the time of such accep-
tance such successor Owner Trustee shall be eligible pursuant to
Section 9.01.
Upon acceptance of appointment by a successor Owner Trustee
pursuant to this Section 9.03, the Owner Trustee shall mail
notice thereof to all Certificateholders, the Indenture Trustee,
the Bondholders, the Bond Insurer and the Rating Agencies.
Section 9.04. Merger or Consolidation of Owner Trustee.
Any Person into which the Owner Trustee may be merged or convert-
ed or with which it may be consolidated, or any Person resulting
from any merger, conversion or consolidation to which the Owner
Trustee shall be a party, or any Person succeeding to all or
substantially all of the corporate trust business of the Owner
Trustee, shall be the successor of the Owner Trustee hereunder,
without the execution or filing of any instrument or any further
act on the part of any of the parties hereto, anything herein to
the contrary notwithstanding; provided, that such Person shall be
eligible pursuant to Section 9.01 and, provided, further, that
the Owner Trustee shall mail notice of such merger or consolida-
tion to the Rating Agencies and the Bond Insurer.
Section 9.05. Appointment of Co-Trustee or Separate
Trustee. Notwithstanding any other provisions of this Trust
Agreement, at any time, for the purpose of meeting any legal
requirements of any jurisdiction in which any part of the Owner
Trust Estate may at the time be located, the Owner Trustee shall
have the power and shall execute and deliver all instruments to
appoint one or more Persons to act as co-trustee, jointly with
the Owner Trustee, or as separate trustee or 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, such
powers, duties, obligations, rights and trusts as the Owner
Trustee or the Bond Insurer may consider necessary or desirable.
No co-trustee or separate trustee under this Trust Agreement
shall be required to meet the terms of eligibility as a successor
Owner Trustee pursuant to Section 9.01 and no notice of the
appointment of any co-trustee or separate trustee shall be
required pursuant to Section 9.03, except that notice to, and the
consent of, the Bond Insurer shall be required for appointment of
a co-trustee.
Each separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following
provisions and conditions:
(a) All rights, powers, duties and obligations conferred or
imposed upon the Owner Trustee shall be conferred upon and exer-
cised 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 Owner Trust Estate or any portion thereof in any
such jurisdiction) shall be exercised and performed singly by
such separate trustee or co-trustee, but solely at the direction
of the Owner Trustee;
(b) No trustee under this Trust Agreement shall be
personally liable by reason of any act or omission of any other
trustee under this Trust Agreement; and
(c) The Owner Trustee may at any time accept the
resignation of or remove any separate trustee or co-trustee.
Any notice, request or other writing given to the Owner
Trustee shall be deemed to have been given to each of the then
separate trustees and co-trustees, as effectively as if given to
each of them. Every instrument appointing any separate trustee
or co-trustee shall refer to this Trust Agreement and the condi-
tions of this Article IX. Each separate trustee and co-trustee,
upon its acceptance of the trusts conferred, shall be vested with
the estates or property specified in its instrument of appoint-
ment, either jointly with the Owner Trustee or separately, as may
be provided therein, subject to all the provisions of this Trust
Agreement, specifically including every provision of this Trust
Agreement relating to the conduct of, affecting the liability of,
or affording protection to, the Owner Trustee. Each such instru-
ment shall be filed with the Owner Trustee.
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 Trust 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
co-trustee or separate trustee.
ARTICLE X
Miscellaneous
Section 10.01. Amendments. (a) This Trust Agreement
may be amended from time to time by the parties hereto (with the
prior written consent of the Bond Insurer and with prior notice
to the Rating Agencies) as specified in this Section, provided
that any amendment, except as provided in subparagraph (e) below,
shall be accompanied by an Opinion of Counsel addressed to the
Owner Trustee and obtained by the Servicer to the effect that
such amendment (i) complies with the provisions of this Section
and (ii) would not cause the Trust (if NCFC was not the holder of
100% of the Certificates or if the Bond Insurance Policy is
outstanding) to be subject to an entity level tax for federal
income tax purposes.
(b) If the purpose of the amendment (as detailed therein)
is to correct any mistake, eliminate any inconsistency, cure any
ambiguity or deal with any matter not covered (i.e. to give
effect to the intent of the parties and, if applicable, to the
expectations of the Certificateholders), it shall not be
necessary to obtain the consent of any Certificateholders, but
the Owner Trustee shall be furnished with (i) a letter from each
of the Rating Agencies that the amendment will not result in the
downgrading or withdrawal of the rating then assigned to any Bond
or the rating then assigned to any Bond without taking into
account the Bond Insurance Policy or (ii) an Opinion of Counsel
obtained by the Servicer to the effect that such action will not
adversely affect in any material respect the interests of any
Certificateholders or the Bond Insurer, and the consent of the
Bond Insurer shall be obtained.
(c) If the purpose of the amendment is to prevent the
imposition of any federal or state taxes at any time that any
Security is outstanding, it shall not be necessary to obtain the
consent of any Certificateholder, but the Owner Trustee and the
Bond Insurer shall be furnished with an Opinion of Counsel
obtained by the Servicer that such amendment is necessary or
helpful to prevent the imposition of such taxes and is not
materially adverse to any Certificateholder or the Bond Insurer
and the consent of the Bond Insurer shall be obtained.
(d) If the purpose of the amendment is to add or eliminate
or change any provision of the Trust Agreement other than as
contemplated in (b) and (c) above, the amendment shall require
(i) an Opinion of Counsel obtained by the Servicer to the effect
that such action will not adversely affect in any material
respect the interests of any Certificateholders or the Bond
Insurer, (ii) the consent of the Bond Insurer and (iii) either
(A) a letter from each of the Rating Agencies that the amendment
will not result in the downgrading or withdrawal of the rating
then assigned to any Bond or the rating then assigned to any Bond
without taking into account the Bond Insurance Policy or (B) the
consent of the Indenture Trustee and the holders of Certificates
evidencing a majority of the Certificate Principal Balance of the
Certificates; provided, however, that no such amendment shall (1)
reduce in any manner the amount of, or delay the timing of,
payments received that are required to be distributed on any
Certificate without the consent of the related Certificateholder
and the Bond Insurer, or (2) reduce the aforesaid percentage of
Certificates the holders of which are required to consent to any
such amendment, without the consent of the holders of all such
Certificates then outstanding.
(e) If the purpose of the amendment is to provide for the
holding of any of the Certificates in book-entry form, it shall
require the consent of holders of all such Certificates then
outstanding; provided, that the Opinion of Counsel specified in
subparagraph (a) above shall not be required.
(f) If the purpose of the amendment is to provide for the
issuance of additional certificates representing an interest in
the Trust, it shall not be necessary to obtain the consent of any
Certificateholder, but the Owner Trustee shall be furnished with
(i) an Opinion of Counsel obtained by the Servicer to the effect
that such action will not adversely affect in any material
respect the interests of any Certificateholders or the Bond
Insurer or (ii) a letter from each of the Rating Agencies that
the amendment will not result in the downgrading or withdrawal of
the rating then assigned to any Bonds or the rating then assigned
to the Bonds without taking into account the Bond Insurance
Policy and the consent of the Bond Insurer shall be obtained.
(g) Promptly after the execution of any such amendment or
consent, the Servicer shall furnish written notification of the
substance of such amendment or consent to each Certificateholder,
the Indenture Trustee, the Bond Insurer and each of the Rating
Agencies. It shall not be necessary for the consent of
Certificateholders or the Indenture Trustee pursuant to this
Section 10.01 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 pro-
vided for in this Trust Agreement or in any other Basic Document)
and of evidencing the authorization of the execution thereof by
Certificateholders shall be subject to such reasonable require-
ments as the Owner Trustee may prescribe.
(h) In connection with the execution of any amendment to
any agreement to which the Trust is a party, other than this
Trust Agreement, the Owner Trustee shall be entitled to receive
and conclusively rely upon an Opinion of Counsel to the effect
that such amendment is authorized or permitted by the documents
subject to such amendment and that all conditions precedent in
the Basic Documents for the execution and delivery thereof by the
Trust or the Owner Trustee, as the case may be, have been
satisfied.
Promptly after the execution of any amendment to the Certif-
icate of Trust, the Owner Trustee shall cause the filing of such
amendment with the Secretary of State of the State of Delaware.
Section 10.02. No Legal Title to Owner Trust Estate.
The Certificateholders shall not have legal title to any part of
the Owner Trust Estate solely by virtue of their status as
Certificateholders. The Certificateholders shall be entitled to
receive distributions with respect to their undivided beneficial
interests therein only in accordance with Articles V and VIII.
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 Trust 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 10.03. Limitations on Rights of Others. Except
for Section 2.07, the provisions of this Trust Agreement are
solely for the benefit of the Owner Trustee, the Company, the
Certificateholders, the Bond Insurer and, to the extent expressly
provided herein, the Indenture Trustee and the Bondholders, and
nothing in this Trust Agreement (other than Section 2.07),
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 Trust Agreement
or any covenants, conditions or provisions contained herein.
Section 10.04. Notices. (a) Unless otherwise
expressly specified or permitted by the terms hereof, all notices
shall be in writing and shall be deemed given upon receipt, to
the Owner Trustee at: Wilmington Trust Company, ▇▇▇▇▇▇ Square
North, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇'
Attention: Corporate Trust Administration; to the Company at:
NovaStar Mortgage Funding Corporation, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇▇▇; to the
Indenture Trustee at: First Union National Bank, ▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇,
Attention: Corporate Trust Department - NovaStar Mortgage Funding
Trust, Series 1998-2; to the Bond Insurer at: MBIA Insurance
Corporation, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention:
Insured Portfolio Mgmt - SF (NovaStar Mortgage Funding Trust,
Series 1998-2) (telecopy number (▇▇▇) ▇▇▇-▇▇▇▇); to ▇▇▇▇▇'▇ at:
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention:
Residential Mortgage Monitoring Unit; to Standard & Poor's at ▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Asset
Backed Surveillance Group or, as to each 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 Trust Agreement shall be conclusively presumed
to have been duly given, whether or not the Certificateholder
receives such notice.
(c) A copy of any notice delivered to the Owner Trustee or
the Trust shall also be delivered to the Company.
Section 10.05. Severability. Any provision of this
Trust 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 10.06. Separate Counterparts. This Trust
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 10.07. Successors and Assigns. All representa-
tions, warranties, covenants and agreements contained herein
shall be binding upon, and inure to the benefit of, each of the
Company, the Bond 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 10.08. No Petition. The Owner Trustee, by
entering into this Trust Agreement and each Certificateholder, by
accepting a Certificate, hereby covenant and agree that they will
not at any time institute against the Company or the Trust, or
join in any institution against the Company or the Trust of, any
bankruptcy proceedings under any United States federal or state
bankruptcy or similar law in connection with any obligations to
the Certificates, the Bonds, this Trust Agreement or any of the
Basic Documents. This Section shall survive for one year
following the termination of this Trust Agreement.
Section 10.09. No Recourse. Each Certificateholder by
accepting a Certificate acknowledges that such Certificate-
holder's Certificates represent beneficial interests in the Trust
only and do not represent interests in or obligations of the
Company, the Seller, the Owner Trustee, the Indenture 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 Trust Agreement, the Certificates or the
Basic Documents.
Section 10.10. 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 10.11. Governing Law. THIS TRUST 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 10.12. Integration. This Trust Agreement consti-
tutes the entire agreement among the parties hereto pertaining to
the subject matter hereof and supersedes all prior agreements and
understanding pertaining thereto.
Section 10.13. Third Party Beneficiary. The Bond Insurer
shall be a third party beneficiary hereof and shall be entitled
to enforce the provisions hereof as if a party hereto. This
provision shall not be construed to limit or modify in any way
the fiduciary obligation of the Owner Trustee to the beneficial
owners of the Trust.
IN WITNESS WHEREOF, the Company and the Owner Trustee have
caused their names to be signed hereto by their respective
officers thereunto duly authorized, all as of the day and year
first above written.
NOVASTAR MORTGAGE FUNDING CORPORATION, as Company,
By:
Name:
Title:
WILMINGTON TRUST COMPANY, as Owner Trustee,
By:
Name:
Title:
Acknowledged and Agreed:
FIRST UNION NATIONAL BANK,
as Certificate Registrar
and Certificate Paying Agent
By:
Name:
Title:
EXHIBIT A
[Form of Certificate]
[Face]
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
ANY STATE AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS
REGISTERED PURSUANT TO SUCH ACT AND LAWS OR IS SOLD OR TRANS-
FERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM REGISTRATION UNDER
SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN
ACCORDANCE WITH THE PROVISIONS OF SECTION 3.05 OF THE TRUST
AGREEMENT REFERRED TO HEREIN.
NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE CERTIFI-
CATE REGISTRAR SHALL HAVE RECEIVED EITHER (i) A REPRESENTATION
LETTER FROM THE TRANSFEREE OF THIS CERTIFICATE TO THE EFFECT THAT
SUCH TRANSFEREE IS NOT AN EMPLOYEE BENEFIT PLAN SUBJECT TO THE
FIDUCIARY RESPONSIBILITY PROVISIONS OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION
4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE"), OR A PERSON ACTING ON BEHALF OF ANY SUCH PLAN OR USING
THE ASSETS OF ANY SUCH PLAN, OR (ii) IF THIS CERTIFICATE IS
PRESENTED FOR REGISTRATION IN THE NAME OF A PLAN SUBJECT TO THE
FIDUCIARY RESPONSIBILITY PROVISIONS OF ERISA, OR SECTION 4975 OF
THE CODE (OR COMPARABLE PROVISIONS OF ANY SUBSEQUENT ENACTMENTS),
OR A TRUSTEE OF ANY SUCH PLAN, OR ANY OTHER PERSON WHO IS USING
THE ASSETS OF ANY SUCH PLAN TO EFFECT SUCH ACQUISITION, AN
OPINION OF COUNSEL TO THE EFFECT THAT THE PURCHASE OR HOLDING OF
THIS CERTIFICATE WILL NOT RESULT IN THE ASSETS OF THE OWNER TRUST
ESTATE BEING DEEMED TO BE "PLAN ASSETS" AND SUBJECT TO THE
FIDUCIARY RESPONSIBILITY PROVISIONS OF ERISA OR THE PROHIBITED
TRANSACTION PROVISIONS OF THE CODE, WILL NOT CONSTITUTE OR RESULT
IN A PROHIBITED TRANSACTION WITHIN THE MEANING OF SECTION 406 OR
SECTION 407 OF ERISA OR SECTION 4975 OF THE CODE, AND WILL NOT
SUBJECT THE OWNER TRUSTEE OR THE COMPANY TO ANY OBLIGATION OR
LIABILITY.
NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE CERTIFI-
CATE REGISTRAR SHALL HAVE RECEIVED A CERTIFICATE OF NON-FOREIGN
STATUS CERTIFYING AS TO THE TRANSFEREE'S STATUS AS A U.S. PERSON
OR CORPORATION UNDER U.S. LAW.
THIS CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION
OF THE SELLER, THE COMPANY, THE SERVICER, THE INDENTURE TRUSTEE,
OR THE OWNER TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES,
EXCEPT AS EXPRESSLY PROVIDED IN THE TRUST AGREEMENT OR THE BASIC
DOCUMENTS.
Certificate No. ______________________
Certificate Percentage Interest of this Certificate: _______%
Cut-off Date: __________________
First Payment Date
________________
NOVASTAR MORTGAGE FUNDING TRUST, SERIES 1998-2
HOME EQUITY LOAN ASSET-BACKED CERTIFICATES
Evidencing a fractional undivided equity interest in the
Owner Trust Estate, the property of which consists primarily of
the Mortgage Loans in NovaStar Mortgage Funding Trust, Series
1998-2 (the "Trust"), a Delaware business trust formed by
NOVASTAR MORTGAGE FUNDING CORPORATION, as Company, pursuant to
the Trust Agreement referred to below.
This certifies that [name of holder] is the registered owner
of the Certificate Percentage Interest represented hereby.
The Trust was created pursuant to a Trust Agreement, dated
as of August 1, 1998, as amended and restated by the Amended and
Restated Trust Agreement, dated as of August 19, 1998 (as amended
and supplemented from time to time, the "Trust Agreement"),
between the Company and Wilmington Trust Company, as owner
trustee (as amended and supplemented from time to time, the
"Owner Trustee", which term includes any successor entity under
the Trust Agreement), a summary of certain of the pertinent
provisions of which is set forth hereinafter. This Certificate
is issued under and is subject to the terms, provisions and con-
ditions of the Trust Agreement, to which Trust Agreement the
holder of this Certificate by virtue of the acceptance hereof
assents and by which such holder is bound.
This Certificate is one of a duly authorized issue of
NovaStar Mortgage Funding Trust, Series 1998-2 Home Equity Loan
Asset-Backed Certificates (herein called the "Certificates")
issued under the Trust Agreement to which reference is hereby
made for a statement of the respective rights thereunder of the
Company, the Owner Trustee and the holders of the Certificates
and the terms upon which the Certificates are executed and
delivered. All terms used in this Certificate which are defined
in the Trust Agreement shall have the meanings assigned to them
in the Trust Agreement. The Owner Trust Estate consists of the
Mortgage Loans in the NovaStar Mortgage Funding Trust, Series
1998-2, the CAP Agreements and the other assets referred to in
Section 2.05 of the Trust Agreement. The rights of the holders
of the Certificates are subordinated to the rights of the holders
of the Bonds, as set forth in the Indenture.
There will be distributed on the 25th day of each month or,
if such 25th day is not a Business Day, the next Business Day
(each, a "Payment Date"), commencing in September 1998, to the
Person in whose name this Certificate is registered (i) with
respect to the first Payment Date, on the Closing Date and (ii)
with respect to every other Payment Date, at the close of
business on the last Business Day of the month preceding the
month of such Payment Date (the "Record Date"), such Certif-
icateholder's Certificate Percentage Interest in the amount to be
distributed to Certificateholders on such Payment Date.
The Certificateholder, by its acceptance of this Certifi-
cate, agrees that it will look solely to the funds on deposit in
the Payment Account that have been released from the Lien of the
Indenture for payment hereunder and that neither the Owner
Trustee in its individual capacity nor the Company is personally
liable to the Certificateholders for any amount payable under
this Certificate or the Trust Agreement or, except as expressly
provided in the Trust Agreement, subject to any liability under
the Trust Agreement.
The Holder of this Certificate acknowledges and agrees that
its rights to receive distributions in respect of this Certifi-
cate are subordinated to the rights of the Bondholders as
described in the Indenture, dated as of August 1, 1998, between
the Trust and First Union National Bank, as Indenture Trustee
(the "Indenture").
The Company and each Certificateholder, by acceptance of a
Certificate, agree to treat, and to take no action inconsistent
with the treatment of, the Certificates for federal, state and
local income tax purposes as an equity interest in the Trust.
Each Certificateholder, by its acceptance of a Certificate,
covenants and agrees that such Certificateholder will not at any
time institute against the Company, or join in any institution
against the Company or the Trust of, any bankruptcy, reorgani-
zation, arrangement, insolvency or liquidation proceedings, or
other proceedings under any United States federal or state
bankruptcy or similar law in connection with any obligations
relating to the Certificates, the Bonds, the Trust Agreement or
any of the Basic Documents.
Distributions on this Certificate will be made as provided
in the Trust Agreement by the Certificate Paying Agent by wire
transfer or check mailed to the Certificateholder of record in
the Certificate Register without the presentation or surrender of
this Certificate or the making of any notation hereon. Except as
otherwise provided in the Trust Agreement and notwithstanding the
above, the final distribution on this Certificate will be made
after due notice by the Certificate Paying Agent of the pendency
of such distribution and only upon presentation and surrender of
this Certificate at the office or agency maintained by the
Certificate Registrar for that purpose by the Trust in the
Borough of Manhattan, The City of New York.
Reference is hereby made to the further provisions of this
Certificate set forth on the reverse hereof, which further
provisions shall for all purposes have the same effect as if set
forth at this place.
Unless the certificate of authentication hereon shall have
been executed by an authorized officer of the Owner Trustee, or
an authenticating agent by manual signature, this Certificate
shall not entitle the holder hereof to any benefit under the
Trust Agreement or be valid for any purpose.
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT
OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the
Trust and not in its individual capacity, has caused this
Certificate to be duly executed.
WILMINGTON TRUST COMPANY, not in its individual
capacity but solely as Owner Trustee
Dated: By:
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Trust Agreement.
WILMINGTON TRUST COMPANY, not in its individual
capacity but solely as Owner Trustee
By:
Authorized Signatory
or
As Authenticating Agent of the Trustee
By:
Authorized Signatory
[REVERSE OF CERTIFICATE]
The Certificates do not represent an obligation of, or an
interest in, the Company, the Seller, the Servicer, the Indenture
Trustee, the Owner Trustee, the Bond Insurer or any Affiliates of
any of them and no recourse may be had against such parties or
their assets, except as expressly set forth or contemplated
herein or in the Trust Agreement or the Basic Documents. In
addition, this Certificate is not guaranteed by any governmental
agency or instrumentality and is limited in right of payment to
certain collections and recoveries with respect to the Mortgage
Loans, all as more specifically set forth herein and in the Trust
Agreement. A copy of the Trust Agreement may be examined by any
Certificateholder upon written request during normal business
hours at the principal office of the Company and at such other
places, if any, designated by the Company.
The Trust Agreement permits the amendment thereof as speci-
fied below, provided that any amendment be accompanied by the
consent of the Bond Insurer and an Opinion of Counsel to the
Owner Trustee to the effect that such amendment complies with the
provisions of the Trust Agreement and, if NovaStar Certificates
Financing Corporation was not the holder of 100% of the
Certificates, would not cause the Trust to be subject to an
entity level tax. If the purpose of the amendment is to correct
any mistake, eliminate any inconsistency, cure any ambiguity or
deal with any matter not covered, it shall not be necessary to
obtain the consent of any Certificateholder, but the Owner
Trustee shall be furnished with (A) a letter from each of the
Rating Agencies that the amendment will not result in the
downgrading or withdrawal of the rating then assigned to any Bond
or the rating then assigned to any Bond without taking into
account the Bond Insurance Policy or (B) an Opinion of Counsel to
the effect that such action will not adversely affect in any
material respect the interests of any Certificateholders, and the
consent of the Bond Insurer shall be obtained. If the purpose of
the amendment is to prevent the imposition of any federal or
state taxes at any time that any Security is outstanding, it
shall not be necessary to obtain the consent of the any
Certificateholder, but the Owner Trustee shall be furnished with
an Opinion of Counsel that such amendment is necessary or helpful
to prevent the imposition of such taxes and is not materially
adverse to any Certificateholder and the consent of the Bond
Insurer shall be obtained. If the purpose of the amendment is to
add or eliminate or change any provision of the Trust Agreement,
other than as specified in the preceding two sentences, the
amendment shall require (A) an Opinion of Counsel to the effect
that such action will not adversely affect in any material
respect the interests of any Certificateholders, (B) the consent
of the Bond Insurer and (C) either (a) a letter from each of the
Rating Agencies that the amendment will not result in the
downgrading or withdrawal of the rating then assigned to any Bond
or the rating then assigned to any Bond without taking into
account the Bond Insurance Policy or (b) the consent of the
Indenture Trustee and the holders of the Certificates evidencing
a majority of the Certificate Principal Balance of the
Certificates; provided, however, that no such amendment shall (i)
reduce in any manner the amount of, or delay the timing of, pay-
ments received that are required to be distributed on any Certif-
icate without the consent of the related Certificateholder and
the Bond Insurer, or (ii) reduce the aforesaid percentage of
Certificates the holders of which are required to consent to any
such amendment without the consent of the holders of all such
Certificates then outstanding.
As provided in the Trust Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate
is registerable in the Certificate Register upon surrender of
this Certificate for registration of transfer at the offices or
agencies of the Certificate Registrar maintained by the Trust,
accompanied by a written instrument of transfer in form
satisfactory to the Certificate Registrar duly executed by the
holder hereof or such holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of authorized
denominations evidencing the same aggregate interest in the Trust
will be issued to the designated transferee. The initial
Certificate Registrar appointed under the Trust Agreement is
First Union National Bank.
Except as provided in the Trust Agreement, the Certificates
are issuable only in a minimum Certificate Percentage Interest of
10%. As provided in the Trust Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for
new Certificates of authorized denominations evidencing the same
aggregate denomination, as requested by the Certificateholder
surrendering the same. No service charge will be made for any
such registration of transfer or exchange, but the Owner Trustee
or the Certificate Registrar may require payment of a sum
sufficient to cover any tax or governmental charge payable in
connection therewith.
The Owner Trustee, the Certificate Paying Agent, the Certif-
icate Registrar and any agent of the Owner Trustee, the Certifi-
cate Paying Agent, or the Certificate Registrar may treat the
Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Owner Trustee, the
Certificate Paying Agent, the Certificate Registrar or any such
agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Trust
Agreement and the Trust created thereby shall terminate as and
when provided in accordance with the terms of the Trust
Agreement.
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
_________________________________________________________________
(Please print or type name and address, including postal zip
code, of assignee)
_________________________________________________________________
the within Certificate, and all rights thereunder, hereby
irrevocably constituting and appointing
_________________________________________________________________
to transfer said Certificate on the books of the Certificate
Registrar, with full power of substitution in the premises.
Dated:
___________________________________________*/
Signature Guaranteed:
____________________________*/
_________________
*/ NOTICE: The signature to this assignment must correspond
with the name as it appears upon the face of the within
Certificate in every particular, without alteration, enlargement
or any change whatever. Such signature must be guaranteed by a
member firm of the New York Stock Exchange or a commercial bank
or trust company.
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for the infor-
mation of the Certificate Paying Agent:
Distribution shall be made by wire transfer in immediately
available funds to ______________________________________________
_________________________________________________________________
for the account of ________________________________________,
account number ______________, or, if mailed by check, to
______________.
Applicable statements should be mailed to__________________.
______________________________
Signature of assignee or agent
(for authorization of wire
transfer only)
EXHIBIT B
TO THE TRUST AGREEMENT
CERTIFICATE OF TRUST OF
NovaStar Mortgage Funding Trust, Series 1998-2
THIS Certificate of Trust of NovaStar Mortgage Funding
Trust, Series 1998-2 (the "Trust"), dated August __, 1998, is
being duly executed and filed by ______________________, a
Delaware banking corporation, as trustee, to form a business
trust under the Delaware Business Trust Act (12 Del. Code, Section 3801
et seq.).
1. Name. The name of the business trust formed
hereby is NovaStar Mortgage Funding Trust, Series 1998-2.
2. Delaware Trustee. The name and business address
of the trustee of the Trust in the State of Delaware is
______________________, __________________, __________,
______________, Attention: ______________________________.
IN WITNESS WHEREOF, the undersigned, being the sole
trustee of the Trust, has executed this Certificate of Trust as
of the date first above written.
______________________,
not in its individual capacity but solely
as owner trustee under a Trust Agreement
dated as of August 1, 1998
By:
_______________________________
Name:
Title:
EXHIBIT C
[FORM OF RULE 144A INVESTMENT REPRESENTATION]
Description of Rule 144A Securities, including numbers:
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
The undersigned seller, as registered holder (the
"Seller"), intends to transfer the Rule 144A Securities described
above to the undersigned buyer (the "Buyer").
1. In connection with such transfer and in accordance
with the agreements pursuant to which the Rule 144A Securities
were issued, the Seller hereby certifies the following facts:
Neither the Seller nor anyone acting on its behalf has offered,
transferred, pledged, sold or otherwise disposed of the Rule 144A
Securities, any interest in the Rule 144A Securities or any other
similar security to, or solicited any offer to buy or accept a
transfer, pledge or other disposition of the Rule 144A Securi-
ties, any interest in the Rule 144A Securities or any other
similar security from, or otherwise approached or negotiated with
respect to the Rule 144A Securities, any interest in the Rule
144A Securities or any other similar security with, any person in
any manner, or made any general solicitation by means of general
advertising or in any other manner, or taken any other action,
that would constitute a distribution of the Rule 144A Securities
under the Securities Act of 1933, as amended (the "1933 Act"), or
that would render the disposition of the Rule 144A Securities a
violation of Section 5 of the 1933 Act or require registration
pursuant thereto, and that the Seller has not offered the Rule
144A Securities to any person other than the Buyer or another
"qualified institutional buyer" as defined in Rule 144A under the
1933 Act.
2. The Buyer warrants and represents to, and covenants
with, the Owner Trustee and the Company (each as defined in the
Amended and Restated Trust Agreement (the "Agreement"), dated as
of August 19, 1998, between NovaStar Mortgage Funding
Corporation, as Company, and Wilmington Trust Company, as Owner
Trustee) pursuant to Section 3.05 of the Agreement and
__________________________________ as indenture trustee, as
follows:
a. The Buyer understands that the Rule 144A
Securities have not been registered under the 1933 Act or
the securities laws of any state.
b. The Buyer considers itself a substantial,
sophisticated institutional investor having such knowledge
and experience in financial and business matters that it is
capable of evaluating the merits and risks of investment in
the Rule 144A Securities.
c. The Buyer has been furnished with all informa-
tion regarding the Rule 144A Securities that it has request-
ed from the Seller, the Indenture Trustee, the Owner Trustee
or the Servicer.
d. Neither the Buyer nor anyone acting on its
behalf has offered, transferred, pledged, sold or otherwise
disposed of the Rule 144A Securities, any interest in the
Rule 144A Securities or any other similar security to, or
solicited any offer to buy or accept a transfer, pledge or
other disposition of the Rule 144A Securities, any interest
in the Rule 144A Securities or any other similar security
from, or otherwise approached or negotiated with respect to
the Rule 144A Securities, any interest in the Rule 144A
Securities or any other similar security with, any person in
any manner, or made any general solicitation by means of
general advertising or in any other manner, or taken any
other action, that would constitute a distribution of the
Rule 144A Securities under the 1933 Act or that would render
the disposition of the Rule 144A Securities a violation of
Section 5 of the 1933 Act or require registration pursuant
thereto, nor will it act, nor has it authorized or will it
authorize any person to act, in such manner with respect to
the Rule 144A Securities.
e. The Buyer is a "qualified institutional buyer"
as that term is defined in Rule 144A under the 1933 Act and
has completed either of the forms of certification to that
effect attached hereto as Annex 1 or Annex 2. The Buyer is
aware that the sale to it is being made in reliance on Rule
144A. The Buyer is acquiring the Rule 144A Securities for
its own account or the accounts of other qualified institu-
tional buyers, understands that such Rule 144A Securities
may be resold, pledged or transferred only (i) to a person
reasonably believed to be a qualified institutional buyer
that purchases for its own account or for the account of a
qualified institutional buyer to whom notice is given that
the resale, pledge or transfer is being made in reliance on
Rule 144A, or (ii) pursuant to another exemption from regis-
tration under the 1933 Act.
[3. The Buyer warrants and represents to, and
covenants with, the Seller, the Indenture Trustee, Owner Trustee,
Servicer and the Company that either (1) the Buyer is (A) not an
employee benefit plan (within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA")), or a plan (within the meaning of Section 4975(e)(1)
of the Internal Revenue Code of 1986 ("Code")), which (in either
case) is subject to ERISA or Section 4975 of the Code (both a
"Plan"), and (B) is not directly or indirectly purchasing the
Rule 144A Securities on behalf of, as investment manager of, as
named fiduciary of, as trustee of, or with "plan assets" of a
Plan, or (2) the Buyer understands that registration of transfer
of any Rule 144A Securities to any Plan, or to any Person acting
on behalf of any Plan, will not be made unless such Plan delivers
an opinion of its counsel, addressed and satisfactory to the
Certificate Registrar and the Company, to the effect that the
purchase and holding of the Rule 144A Securities by, on behalf of
or with "plan assets" of any Plan would not constitute or result
in a prohibited transaction under Section 406 of ERISA or Section
4975 of the Code, and would not subject the Company, the
Servicer, the Indenture Trustee or the Trust to any obligation or
liability (including liabilities under ERISA or Section 4975 of
the Code) in addition to those undertaken in the Agreement or any
other liability.]
4. This document may be executed in one or more
counterparts and by the different parties hereto on separate
counterparts, each of which, when so executed, shall be deemed to
be an original; such counterparts, together, shall constitute one
and the same document.
Capitalized terms used herein and not otherwise defined
herein have the meanings assigned to them in the Agreement.
IN WITNESS WHEREOF, each of the parties has executed
this document as of the date set forth below.
___________________________ _____________________________
Print Name of Seller Print Name of Buyer
By: _______________________ By:__________________________
Name: Name:
Title: Title:
Taxpayer Identification: Taxpayer Identification:
No. ________________________ No. __________________________
Date: _____________________ Date: ________________________
ANNEX 1 TO EXHIBIT C
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Buyers Other Than Registered Investment Companies]
The undersigned hereby certifies as follows in connection with
the Rule 144A Investment Representation to which this
Certification is attached:
1. As indicated below, the undersigned is the President,
Chief Financial Officer, Senior Vice President or other executive
officer of the Buyer.
2. In connection with purchases by the Buyer, the Buyer
is a "qualified institutional buyer" as that term is defined in
Rule 144A under the Securities Act of 1933 ("Rule 144A") because
(i) the Buyer owned and/or invested on a discretionary basis
$______________________ 1/ in securities (except for the excluded
securities referred to below) as of the end of the Buyer's most
recent fiscal year (such amount being calculated in accordance
with Rule 144A) and (ii) the Buyer satisfies the criteria in the
category marked below.
___ Corporation, etc. The Buyer is a corporation (other than
a bank, savings and loan association or similar
institution), Massachusetts or similar business trust,
partnership, or charitable organization described in
Section 501(c)(3) of the Internal Revenue Code.
___ Bank. The Buyer (a) is a national bank or banking
institution organized under the laws of any State,
territory or the District of Columbia, the business of
which is substantially confined to banking and is
supervised by the State or territorial banking commission
or similar official or is a foreign bank or equivalent
institution, and (b) has an audited net worth of at least
$25,000,000 as demonstrated in its latest annual
financial statements, a copy of which is attached hereto.
1/ Buyer must own and/or invest on a discretionary basis at least
$100,000,000 in securities unless Buyer is a dealer, and, in that
case, Buyer must own and/or invest on a discretionary basis at least
$10,000,000 in securities.
___ Savings and Loan. The Buyer (a) is a savings and loan
association, building and loan association, cooperative
bank, homestead association or similar institution, which
is supervised and examined by a State or Federal
authority having supervision over any such institutions
or is a foreign savings and loan association or
equivalent institution and (b) has an audited net worth
of at least $25,000,000 as demonstrated in its latest
annual financial statements.
___ Broker-Dealer. The Buyer is a dealer registered pursuant
to Section 15 of the Securities Exchange Act of 1934.
___ Insurance Company. The Buyer is an insurance company
whose primary and predominant business activity is the
writing of insurance or the reinsuring of risks
underwritten by insurance companies and which is subject
to supervision by the insurance commissioner or a similar
official or agency of a State or territory or the
District of Columbia.
___ State or Local Plan. The Buyer is a plan established and
maintained by a State, its political subdivisions, or any
agency or instrumentality of the State or its political
subdivisions, for the benefit of its employees.
___ ERISA Plan. The Buyer is an employee benefit plan within
the meaning of Title I of the Employee Retirement Income
Security Act of 1974.
___ Investment Adviser. The Buyer is an investment adviser
registered under the Investment Advisers Act of 1940.
___ SBIC. The Buyer is a Small Business Investment Company
licensed by the U.S. Small Business Administration under
Section 301(c) or (d) of the Small Business Investment
Act of 1958.
___ Business Development Company. The Buyer is a business
development company as defined in Section 202(a)(22) of
the Investment Advisers Act of 1940.
___ Trust Fund. The Buyer is a trust fund whose trustee is a
bank or trust company and whose participants are
exclusively (a) plans established and maintained by a
State, its political subdivisions, or any agency or
instrumentality of the State or its political
subdivisions, for the benefit of its employees, or
(b) employee benefit plans within the meaning of Title I
of the Employee Retirement Income Security Act of 1974,
but is not a trust fund that includes as participants
individual retirement accounts or H.R. 10 plans.
3. The term "securities" as used herein does not
include (i) securities of issuers that are affiliated with the
Buyer, (ii) securities that are part of an unsold allotment to or
subscription by the Buyer, if the Buyer is a dealer, (iii) bank
deposit notes and certificates of deposit, (iv) loan
participations, (v) repurchase agreements, (vi) securities owned
but subject to a repurchase agreement and (vii) currency,
interest rate and commodity swaps.
4. For purposes of determining the aggregate amount
of securities owned and/or invested on a discretionary basis by
the Buyer, the Buyer used the cost of such securities to the
Buyer and did not include any of the securities referred to in
the preceding paragraph. Further, in determining such aggregate
amount, the Buyer may have included securities owned by
subsidiaries of the Buyer, but only if such subsidiaries are
consolidated with the Buyer in its financial statements prepared
in accordance with generally accepted accounting principles and
if the investments of such subsidiaries are managed under the
Buyer's direction. However, such securities were not included if
the Buyer is a majority-owned, consolidated subsidiary of another
enterprise and the Buyer is not itself a reporting company under
the Securities Exchange Act of 1934.
5. The Buyer acknowledges that it is familiar with
Rule 144A and understands that the seller to it and other parties
related to the Certificates are relying and will continue to rely
on the statements made herein because one or more sales to the
Buyer may be in reliance on Rule 144A.
___ ___ Will the Buyer be purchasing the Rule 144A
Yes No Securities only for the Buyer's own account?
6. If the answer to the foregoing question is "no",
the Buyer agrees that, in connection with any purchase of
securities sold to the Buyer for the account of a third party
(including any separate account) in reliance on Rule 144A, the
Buyer will only purchase for the account of a third party that at
the time is a "qualified institutional buyer" within the meaning
of Rule 144A. In addition, the Buyer agrees that the Buyer will
not purchase securities for a third party unless the Buyer has
obtained a current representation letter from such third party or
taken other appropriate steps contemplated by Rule 144A to
conclude that such third party independently meets the definition
of "qualified institutional buyer" set forth in Rule 144A.
7. The Buyer will notify each of the parties to which
this certification is made of any changes in the information and
conclusions herein. Until such notice is given, the Buyer's
purchase of Rule 144A Securities will constitute a reaffirmation
of this certification as of the date of such purchase.
________________________________________
Print Name of Buyer
By: ____________________________________
Name:
Title:
Date: _____________________
ANNEX 2 TO EXHIBIT C
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Buyers That Are Registered Investment Companies]
The undersigned hereby certifies as follows in
connection with the Rule 144A Investment Representation to which
this Certification is attached:
1. As indicated below, the undersigned is the
President, Chief Financial Officer or Senior Vice President of
the Buyer or, if the Buyer is a "qualified institutional buyer"
as that term is defined in Rule 144A under the Securities Act of
1933 ("Rule 144A") because Buyer is part of a Family of
Investment Companies (as defined below), is such an officer of
the Adviser.
2. In connection with purchases by Buyer, the Buyer is
a "qualified institutional buyer" as defined in SEC Rule 144A
because (i) the Buyer is an investment company registered under
the Investment Company Act of 1940, and (ii) as marked below, the
Buyer alone, or the Buyer's Family of Investment Companies, owned
at least $100,000,000 in securities (other than the excluded
securities referred to below) as of the end of the Buyer's most
recent fiscal year. For purposes of determining the amount of
securities owned by the Buyer or the Buyer's Family of
Investment Companies, the cost of such securities was used.
____ The Buyer owned $___________________ in securities
(other than the excluded securities referred to below)
as of the end of the Buyer's most recent fiscal year
(such amount being calculated in accordance with
Rule 144A).
____ The Buyer is part of a Family of Investment Companies
which owned in the aggregate $______________ in
securities (other than the excluded securities referred
to below) as of the end of the Buyer's most recent
fiscal year (such amount being calculated in accordance
with Rule 144A).
3. The term "Family of Investment Companies" as used
herein means two or more registered investment companies (or
series thereof) that have the same investment adviser or
investment advisers that are affiliated (by virtue of being
majority owned subsidiaries of the same parent or because one
investment adviser is a majority owned subsidiary of the other).
4. The term "securities" as used herein does not
include (i) securities of issuers that are affiliated with the
Buyer or are part of the Buyer's Family of Investment Companies,
(ii) bank deposit notes and certificates of deposit, (iii) loan
participations, (iv) repurchase agreements, (v) securities owned
but subject to a repurchase agreement and (vi) currency, interest
rate and commodity swaps.
5. The Buyer is familiar with Rule 144A and
understands that each of the parties to which this certification
is made are relying and will continue to rely on the statements
made herein because one or more sales to the Buyer will be in
reliance on Rule 144A. In addition, the Buyer will only purchase
for the Buyer's own account.
6. The undersigned will notify each of the parties to
which this certification is made of any changes in the
information and conclusions herein. Until such notice, the
Buyer's purchase of Rule 144A Securities will constitute a
reaffirmation of this certification by the undersigned as of the
date of such purchase.
_________________________________
Print Name of Buyer
By: ____________________________
Name:
Title:
IF AN ADVISER:
_________________________________
Print Name of Buyer
Date: ____________________
EXHIBIT D
FORM OF INVESTOR REPRESENTATION LETTER
, 19
NovaStar Mortgage Funding Corporation
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First Union National Bank
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-1179
Attention: Corporate Trust Administration
Re: NovaStar Mortgage Funding Trust, Series 1998-2
Home Equity Loan Asset-Backed Certificates (the
"Certificates")
Ladies and Gentlemen:
___________________ (the "Purchaser") intends to
purchase from _____________________ (the "Seller") $___________
of the above -captioned Certificates, issued pursuant to the
Amended and Restated Trust Agreement (the "Trust Agreement"),
dated as of August 19, 1998, between NovaStar Mortgage Funding
Corporation, as company (the "Company"), and Wilmington Trust
Company, as owner trustee (the "Owner Trustee"), as acknowledged
and agreed by First Union National Bank as Certificate Registrar.
All terms used herein and not otherwise defined shall have the
meanings set forth in the Trust Agreement. The Purchaser hereby
certifies, represents and warrants to, and covenants with, the
Company and the Certificate Registrar that:
1. The Purchaser understands that (a) the
Certificates have not been and will not be registered
or qualified under the Securities Act of 1933, as
amended (the "Act") or any state securities law, (b)
the Company is not required to so register or qualify
the Certificates, (c) the Certificates may be resold
only if registered and qualified pursuant to the
provisions of the Act or any state securities law, or
if an exemption from such registration and
qualification is available, (d) the Trust Agreement
contains restrictions regarding the transfer of the
Certificates and (e) the Certificates will bear a
legend to the foregoing effect.
2. The Purchaser is acquiring the Certificates
for its own account for investment only and not with a
view to or for sale in connection with any distribution
thereof in any manner that would violate the Act or any
applicable state securities laws.
3. The Purchaser is (a) a substantial,
sophisticated institutional investor having such
knowledge and experience in financial and business
matters, and, in particular, in such matters related to
securities similar to the Certificates, such that it is
capable of evaluating the merits and risks of
investment in the Certificates, (b) able to bear the
economic risks of such an investment and (c) an
"accredited investor" within the meaning of Rule 501(a)
promulgated pursuant to the Act.
4. The Purchaser has been furnished with, and
has had an opportunity to review (a) a copy of the
Trust Agreement and (b) such other information
concerning the Certificates, the Mortgage Loans and the
Company as has been requested by the Purchaser from the
Company or the Seller and is relevant to the
Purchaser's decision to purchase the Certificates. The
Purchaser has had any questions arising from such
review answered by the Company or the Seller to the
satisfaction of the Purchaser.
5. The Purchaser has not and will not nor has it
authorized or will it authorize any person to (a)
offer, pledge, sell, dispose of or otherwise transfer
any Certificate, any interest in any Certificate or any
other similar security to any person in any manner, (b)
solicit any offer to buy or to accept a pledge,
disposition of other transfer of any Certificate, any
interest in any Certificate or any other similar
security from any person in any manner, (c) otherwise
approach or negotiate with respect to any Certificate,
any interest in any Certificate or any other similar
security with any person in any manner, (d) make any
general solicitation by means of general advertising or
in any other manner or (e) take any other action, that
(as to any of (a) through (e) above) would constitute a
distribution of any Certificate under the Act, that
would render the disposition of any Certificate a
violation of Section 5 of the Act or any state
securities law, or that would require registration or
qualification pursuant thereto. The Purchaser will not
sell or otherwise transfer any of the Certificates,
except in compliance with the provisions of the Trust
Agreement.
6. The Purchaser represents:
(i) that either (a) or (b) is satisfied, as marked below:
____ a. The Purchaser is not any employee
benefit plan subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or the Internal
Revenue Code of 1986 (the "Code"), a Person acting, directly
or indirectly, on behalf of any such plan or any Person
acquiring such Certificates with "plan assets" of a Plan
within the meaning of the Department of Labor regulation
promulgated at 29 C.F.R. Section 2510.3-101; or
____ b. The Purchaser will provide the Company,
the Owner Trustee, the Certificate Registrar and the
Servicer with either: (x) an opinion of counsel,
satisfactory to the Company, the Owner Trustee, the
Certificate Registrar and the Servicer, to the effect that
the purchase and holding of a Certificate by or on behalf of
the Purchaser is permissible under applicable law, will not
constitute or result in a prohibited transaction under
Section 406 of ERISA or Section 4975 of the Code (or
comparable provisions of any subsequent enactments) and will
not subject the Company, the Owner Trustee, the Trust, the
Certificate Registrar or the Servicer to any obligation or
liability (including liabilities under ERISA or Section 4975
of the Code) in addition to those undertaken in the Trust
Agreement, which opinion of counsel shall not be an expense
of the Company, the Owner Trustee, the Trust, the
Certificate Registrar or the Servicer; or (y) in lieu of
such opinion of counsel, a certification in the form of
Exhibit G to the Trust Agreement; and
(ii) the Purchaser is familiar with the prohibited
transaction restrictions and fiduciary responsibility
requirements of Sections 406 and 407 of ERISA and Section
4975 of the Code and understands that each of the parties to
which this certification is made is relying and will
continue to rely on the statements made in this paragraph 6.
7. The Purchaser is not a non-United States
person.
Very truly yours,
By:
Name:
Title:
EXHIBIT E
FORM OF TRANSFEROR REPRESENTATION LETTER
______________, 19___
NovaStar Mortgage Funding Corporation
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First Union National Bank
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-1179
Attention: Corporate Trust Administration
Re: NovaStar Mortgage Funding Trust, Series 1998-2
Home Equity Loan Asset-Backed Certificates (the
"Certificates")
Ladies and Gentlemen:
________________________________ (the "Purchaser")
intends to purchase from ______________________(the "Seller") a
___% Certificate Percentage Interest of NovaStar Mortgage Funding
Trust, Series 1998-2 Home Equity Loan Asset-Backed Certificates
(the "Certificates"), issued pursuant to the Amended and Restated
Trust Agreement (the "Trust Agreement"), dated as of August 19,
1998 between NovaStar Mortgage Funding Corporation, as company
(the "Company"), and Wilmington Trust Company, as owner trustee
(the "Owner Trustee"), as acknowledged and agreed by First Union
National Bank, as Certificate Registrar. All terms used herein
and not otherwise defined shall have the meanings set forth in
the Trust Agreement. The Seller hereby certifies, represents and
warrants to, and covenants with, the Company and the Certificate
Registrar that:
Neither the Seller nor anyone acting on its behalf has
(a) offered, pledged, sold, disposed of or otherwise transferred
any Certificate, any interest in any Certificate or any other
similar security to any person in any manner, (b) has solicited
any offer to buy or to accept a pledge, disposition or other
transfer of any Certificate, any interest in any Certificate or
any other similar security from any person in any manner, (c) has
otherwise approached or negotiated with respect to any
Certificate, any interest in any Certificate or any other similar
security with any person in any manner, (d) has made any general
solicitation by means of general advertising or in any other
manner, or (e) has taken any other action, that (as to any of (a)
through (e) above) would constitute a distribution of the
Certificates under the Securities Act of 1933 (the "Act"), that
would render the disposition of any Certificate a violation of
Section 5 of the Act or any state securities law, or that would
require registration or qualification pursuant thereto. The
Seller will not act, in any manner set forth in the foregoing
sentence with respect to any Certificate. The Seller has not and
will not sell or otherwise transfer any of the Certificates,
except in compliance with the provisions of the Trust Agreement.
Very truly yours,
(Seller)
By:
Name:
Title:
EXHIBIT F
CERTIFICATE OF NON-FOREIGN STATUS
This Certificate of Non-Foreign Status ("certificate") is
delivered pursuant to Section 3.05 of the Amended and Restated
Trust Agreement, dated as of August 19, 1998 (the "Trust
Agreement"), between NovaStar Mortgage Funding Corporation, as
Company, and Wilmington Trust Company, as Owner Trustee, in
connection with the acquisition of, transfer to or possession by
the undersigned, whether as beneficial owner (the "Beneficial
Owner"), or nominee on behalf of the Beneficial Owner of the
NovaStar Mortgage Funding Trust, Series 1998-2 Home Equity Loan
Asset-Backed Certificates (the "Certificate"). Capitalized terms
used but not defined in this certificate have the respective
meanings given them in the Trust Agreement.
Each holder must complete Part I, Part II (if the holder is a
nominee), and in all cases sign and otherwise complete Part III.
In addition, each holder shall submit with the Certificate an IRS
Form W-9 relating to such holder.
To confirm to the Trust that the provisions of Sections 871, 881
or 1446 of the Internal Revenue Code (relating to withholding tax
on foreign partners) do not apply in respect of the Certificate
held by the undersigned, the undersigned hereby certifies:
Part I - Complete Either A or B
A. Individual as Beneficial Owner
1. I am (The Beneficial Owner is ) not a non-
resident alien for purposes of U.S. income
taxation;
2. My (The Beneficial Owner's) name and home
address are:
; and
3. My (The Beneficial Owner's) U.S. taxpayer
identification number (Social Security
Number) is .
B. Corporate, Partnership or Other Entity as
Beneficial Owner
1. (Name of the
Beneficial Owner) is not a foreign
corporation, foreign partnership, foreign
trust or foreign estate (as those terms are
defined in the Code and Treasury Regulations;
2. The Beneficial Owner's office address and
place of incorporation (if applicable) is
; and
3. The Beneficial Owner's U.S. employer
identification number is .
Part II - Nominees
If the undersigned is the nominee for the Beneficial Owner,
the undersigned certifies that this certificate has been made in
reliance upon information contained in:
an IRS Form W-9
a form such as this or substantially similar
provided to the undersigned by an appropriate person and (i) the
undersigned agrees to notify the Trust at least thirty (30) days
prior to the date that the form relied upon becomes obsolete, and
(ii) in connection with change in Beneficial Owners, the
undersigned agrees to submit a new Certificate of Non-Foreign
Status to the Trust promptly after such change.
Part III - Declaration
The undersigned, as the Beneficial Owner or a nominee
▇▇▇▇▇▇▇, agrees to notify the Trust within sixty (60) days of the
date that the Beneficial Owner becomes a foreign person. The
undersigned understands that this certificate may be disclosed to
the Internal Revenue Service by the Trust and any false statement
contained therein could be punishable by fines, imprisonment or
both.
Under penalties of perjury, I declare that I have examined
this certificate and to the best of my knowledge and belief it is
true, correct and complete and will further declare that I will
inform the Trust of any change in the information provided above,
and, if applicable, I further declare that I have the authority*
to sign this document.
Name
Title (if applicable)
Signature and Date
*NOTE: If signed pursuant to a power of attorney, the power of
attorney must accompany this certificate.
EXHIBIT G
FORM OF ERISA REPRESENTATION LETTER
_____________, 199__
NovaStar Mortgage Funding Corporation
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Wilmington Trust Company, as Owner Trustee
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First Union National Bank, as Certificate Registrar
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▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Re: NovaStar Mortgage Funding Trust, Series 1998-2
Home Equity Loan Asset-Backed Certificates
Dear Sirs:
__________________________________ (the "Transferee")
intends to acquire from _____________________ (the "Transferor")
a ____% Certificate Percentage Interest of NovaStar Mortgage
Funding Trust, Series 1998-2 Home Equity Loan Asset-Backed
Certificates (the "Certificates"), issued pursuant to an Amended
and Restated Trust Agreement (the "Trust Agreement"), dated as of
August 19, 1998, between NovaStar Mortgage Funding Corporation,
as company (the "Company"), and Wilmington Trust Company, as
owner trustee (the "Owner Trustee"). Capitalized terms used
herein and not otherwise defined shall have the meanings assigned
thereto in the Trust Agreement.
The Transferee hereby certifies, represents and warrants to,
and covenants with, the Company, the Owner Trustee, the
Certificate Registrar and the Servicer that either:
(1) The Certificates (i) are not being acquired by,
and will not be transferred to, any employee benefit plan
within the meaning of section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")
or other retirement arrangement, including individual
retirement accounts and annuities, ▇▇▇▇▇ plans and bank
collective investment funds and insurance company general or
separate accounts in which such plans, accounts or
arrangements are invested, that is subject to Section 406 of
ERISA or Section 4975 of the Internal Revenue Code of 1986
(the "Code") (any of the foregoing, a "Plan"), (ii) are not
being acquired with "plan assets" of a Plan within the
meaning of the Department of Labor ("DOL") regulation, 29
C.F.R. Section 2510.3-101, and (iii) will not be transferred to
any entity that is deemed to be investing in plan assets
within the meaning of the DOL regulation, 29 C.F.R. Section
2510.3-101; or
(2) The purchase of the Certificates is permissible
under applicable law, will not constitute or result in any
prohibited transaction under ERISA or Section 4975 of the
Code, will not subject the Company, the Owner Trustee, the
Certificate Registrar or the Servicer to any obligation in
addition to those undertaken in the Trust Agreement and,
with respect to each source of funds being used by the
Transferee to acquire the Certificates (each being referred
to as a "Source") and the following statements in either (a)
or (b):
(a) the Transferee is an insurance company and
(i) the Source is assets of its "general account," (ii)
the conditions set forth in PTCE 95-60 issued by the
DOL have been satisfied and the purchase and holding of
Certificates by or on behalf of the Transferee are
exempt under PTCE 95-60 and (iii) the amount of
reserves and liabilities for such general account
contracts held by or on behalf of any Plan do not
exceed 10% of the total reserves and liabilities of
such general account plus surplus as of the date hereof
(for purposes of this clause, all Plans maintained by
the same employer (or affiliate thereof) or employee
organization are deemed to be a single Plan) in
connection with its purchase and holding of such
Certificates; or
(b) the Transferee is an insurance company and
(i) the Source is assets of its "general account," (ii)
the requirements of Section 401(c) of ERISA and the DOL
regulations to be promulgated thereunder ("401(c)
Regulations") have been satisfied and will continue to
be satisfied and (iii) the Transferee represents that
it understands that the operation of the general
account after December 31, 1998 may affect its ability
to continue to hold the Certificates after the date
which is 18 months after the 401(c) Regulations become
final and unless a class exemption issued by the DOL or
an exception under Section 401(c) of ERISA is then
available for the continued holding of Certificates, if
the assets of the general account constitute Plan
Assets, it will dispose of the Certificates prior to
the date which is 18 months after the 401(c)
Regulations become final.
(3) The Transferee is familiar with the prohibited
transaction restrictions and fiduciary responsibility
requirements of Sections 406 and 407 of ERISA and Section
4975 of the Code and understands that each of the parties to
which this certification is made is relying and will
continue to rely on the statements made herein.
Very truly yours,
By:
Name:
Title:
EXHIBIT H
FORM OF REPRESENTATION LETTER
_____________, 199__
NovaStar Mortgage Funding Corporation
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Wilmington Trust Company, as Owner Trustee
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First Union National Bank, as Certificate Registrar
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Re: NovaStar Mortgage Funding Trust, Series 1998-2
Home Equity Loan Asset-Backed Certificates
Dear Sirs:
__________________________________ (the "Transferee")
intends to acquire from _____________________ (the "Transferor")
a ___% Certificate Percentage Interest of NovaStar Mortgage
Funding Trust, Series 1998-2 Home Equity Loan Asset-Backed
Certificates (the "Certificates"), issued pursuant to an Amended
and Restated Trust Agreement (the "Trust Agreement"), dated as of
August 19, 1998 among NovaStar Mortgage Funding Corporation, as
company (the "Company"), and Wilmington Trust Company, as owner
trustee (the "Owner Trustee"). Capitalized terms used herein and
not otherwise defined shall have the meanings assigned thereto in
the Trust Agreement.
The Transferee hereby certifies, represents and
warrants to, and covenants with, the Company, the Owner Trustee,
the Certificate Registrar and the Servicer that:
(1) the Transferee is acquiring the Certificate for
its own behalf and is not acting as agent or custodian for
any other person or entity in connection with such
acquisition; and
(2) the Transferee is not a partnership, grantor
trust or S corporation for federal income tax purposes, or,
if the Transferee is a partnership, grantor trust or S
corporation for federal income tax purposes, the
Certificates are not more than 50% of the assets of the
partnership, grantor trust or S corporation.
Very truly yours,
By:
Name:
Title:
EXHIBIT I
INITIAL TRUST AGREEMENT