Exhibit 10.2
EXECUTION COPY
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MBIA INSURANCE CORPORATION,
as Insurer
OCWEN FEDERAL BANK FSB,
as Sub-Servicer
RESOURCE BANCSHARES MORTGAGE GROUP, INC.,
as RBMG and Servicer
RBMG FUNDING CO.,
as Funding Co. and Residual Holder
RBMG FUNDING CO. MORTGAGE LOAN TRUST 1998-2
as Issuer
RBMG ASSET MANAGEMENT COMPANY, INC.,
as Company
RESIDENTIAL ASSET FUNDING CORPORATION,
as Depositor
FIRST UNION CORPORATION
and
THE BANK OF NEW YORK
as Indenture Trustee
INSURANCE AGREEMENT
$170,000,000
RBMG Funding Co. Mortgage Loan Trust 1998-2
Asset-Backed Notes
Series 1998-2, Class A-1 and Class A-2
Dated as of December 1, 1998
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TABLE OF CONTENTS
(This Table of Contents is for convenience of reference only and shall
not be deemed to be a part of this Insurance Agreement. All capitalized terms
used in this Insurance Agreement and not otherwise defined shall have the
meanings set forth in Article I of this Insurance Agreement.)
ARTICLE I........................................................................................................1
DEFINITIONS......................................................................................................1
ARTICLE II.......................................................................................................6
REPRESENTATIONS, WARRANTIES AND COVENANTS........................................................................6
Section 2.01. Representation and Warranties of RBMG, the Servicer, the Company and Funding
Co......................................................................................................6
Section 2.02. Affirmative Covenants of RBMG, the Servicer, the Company and Funding Co..........................10
Section 2.03. Negative Covenants of RBMG, the Servicer, the Company and Funding Co.............................16
Section 2.04. Representation and Warranties of the Sub-Servicer................................................17
Section 2.05. Affirmative Covenants of the Sub-Servicer........................................................20
Section 2.06. Negative Covenants of the Sub-Servicer...........................................................24
Section 2.07. Representations, Warranties and Covenants of Indenture Trustee...................................25
Section 2.08 Representations, Warranties and Covenants of the Issuer..........................................27
Section 2.09. Affirmative Covenants of the Issuer..............................................................29
Section 2.10. Negative Covenants of the Issuer.................................................................30
Section 2.11. Representation and Warranties of the Depositor...................................................31
Section 2.12. Affirmative Covenants of the Depositor...........................................................33
Section 2.13. Negative Covenants of the Depositor..............................................................34
ARTICLE III.....................................................................................................35
THE POLICY; REIMBURSEMENT.......................................................................................35
Section 3.01. Issuance of the Policy...........................................................................35
Section 3.02. Payment of Fees and Bond Insurer Premium.........................................................37
Section 3.03. Reimbursement and Additional Payment Obligation..................................................38
Section 3.04. Indemnification by RBMG, the Servicer, the Company and Funding Co.; Limitation
of Liability...........................................................................................40
Section 3.05. Indemnification by Sub-Servicer; Limitation of Liability.........................................42
Section 3.06. Indemnification by Indenture Trustee; Limitation of Liability....................................43
Section 3.07. Indemnification by First Union; Limitation of Liability..........................................43
Section 3.08. Payment Procedure................................................................................45
ARTICLE IV......................................................................................................45
FURTHER AGREEMENTS..............................................................................................45
Section 4.01. Effective Date; Term of the Insurance Agreement..................................................45
Section 4.02. Further Assurances and Corrective Instruments....................................................45
Section 4.03. Obligations Absolute.............................................................................46
Section 4.04. Assignments; Reinsurance; Third-Party Rights.....................................................47
Section 4.05. Liability of the Insurer.........................................................................48
Section 4.06. Parties Will Not Institute Insolvency Proceedings................................................48
Section 4.07. Parties to Join in Enforcement Action............................................................48
ARTICLE V.......................................................................................................49
DEFAULTS; REMEDIES..............................................................................................49
Section 5.01. Defaults.........................................................................................49
Section 5.02. Remedies; No Remedy Exclusive....................................................................50
Section 5.03. Waivers..........................................................................................51
ARTICLE VI......................................................................................................51
MISCELLANEOUS...................................................................................................51
Section 6.01. Amendments, Etc..................................................................................51
Section 6.02. Notices..........................................................................................51
Section 6.03. Severability.....................................................................................54
Section 6.04. Governing Law....................................................................................54
Section 6.05. Consent to Jurisdiction..........................................................................54
Section 6.06. Consent of the Insurer...........................................................................55
Section 6.07. Counterparts.....................................................................................55
Section 6.08. Headings.........................................................................................55
Section 6.09. Trial by Jury Waived.............................................................................55
Section 6.10. Limited Liability................................................................................56
Section 6.11. Entire Agreement.................................................................................56
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Section 6.12 Covenant of the Residual Holder...................................................................56
iii
INSURANCE AGREEMENT
INSURANCE AGREEMENT (this "Insurance Agreement"), dated as of December
1, 1998 by and among RESOURCE BANCSHARES MORTGAGE GROUP, INC., in its individual
capacity (together with its permitted successors and assigns, "RBMG") and as
Servicer under the Servicing Agreement described below (together with its
permitted successors and assigns, the "Servicer"), OCWEN FEDERAL BANK FSB, in
its capacity as Sub-Servicer under the Sub-Servicing Agreement described below
(together with its permitted successors and assigns, the "Sub-Servicer"), RBMG
FUNDING CO., in its individual capacity ("Funding Co.") and as the Residual
Holder (the "Residual Holder"), MBIA INSURANCE CORPORATION (the "Insurer"), RBMG
FUNDING CO. MORTGAGE LOAN TRUST 1998-2, as the Issuer (the "Issuer"), RBMG ASSET
MANAGEMENT COMPANY, INC., as the Company (the "Company"), RESIDENTIAL ASSET
FUNDING CORPORATION, as the Depositor (the "Depositor"), FIRST UNION CORPORATION
("First Union") THE BANK OF NEW YORK, as Indenture Trustee (together with its
permitted successors and assigns, the "Indenture Trustee").
WHEREAS, the Indenture dated as of December 1, 1998 by and between the
Issuer and the Indenture Trustee (the "Indenture") relating to the RBMG Funding
Co. Mortgage Loan Trust 1998-2 Asset-Backed Notes, Series 1998-2, Class A-1 and
Class A-2 (the "Obligations") provides for, among other things, the issuance of
asset-backed notes, representing non-recourse debt obligations of the Issuer
which are secured by the trust estate established thereby and the Insurer has
issued its financial guaranty insurance policy (the "Policy") that guarantees
certain payments due from the Trust Estate on the Obligations;
WHEREAS, the Insurer shall be paid an insurance premium pursuant to the
Indenture, and the details of such premium are set forth herein; and
WHEREAS, the Servicer, RBMG, Funding Co., the Company, the
Sub-Servicer, the Depositor and the Issuer have undertaken certain obligations
in consideration for the Insurer's issuance of the Policy;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The terms defined in this Article I, in the first paragraph of this
Insurance Agreement and in the Whereas clauses shall have the meanings provided
herein for all purposes of this Insurance Agreement, unless the context clearly
requires otherwise, in both singular and plural form, as appropriate. Unless the
context clearly requires otherwise, all capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to them in the
Indenture. All
words used herein shall be construed to be of such gender or number as the
circumstances require. This "Insurance Agreement" shall mean this Insurance
Agreement as a whole and as the same may, from time to time hereafter, be
amended, supplemented or modified. The words "herein," "hereby," "hereof,"
"hereto," "hereinabove" and "hereinbelow," and words of similar import, refer to
this Insurance Agreement as a whole and not to any particular paragraph, clause
or other subdivision hereof, unless otherwise specifically noted.
"BOND INSURER PREMIUM" means the Bond Insurer Premium payable in
accordance with Section 3.02 hereof.
"BOND INSURER PREMIUM RATE" shall have the meaning ascribed to such
term in Section 3.02 hereof.
"BUSINESS DAY" means any day other than (i) a Saturday or a Sunday or
(ii) a day on which the Insurer is closed or banking institutions in New York
City or Nevada or in the city in which the corporate trust officer of the
Indenture Trustee under the Indenture is located are authorized or obligated by
law or executive order to close.
"CODE" means the Internal Revenue Code of 1986, including, unless the
context otherwise requires, the rules and regulations thereunder, as amended
from time to time.
"COMMISSION" means the Securities and Exchange Commission.
"COMMITMENT" means the letter of commitment from the Insurer to RBMG
dated December 10, 1998.
"COMPANY SALE AGREEMENT" means the Loan Sale Agreement dated as of
December 1, 1998 between Funding Co. and the Company as the same may be amended
and supplemented in accordance with the terms thereof.
"CONTRIBUTION AGREEMENT" means the Loan Contribution Agreement dated as
of December 1, 1998, between RBMG and the Company as the same may be amended or
supplemented from time to time in accordance with the terms thereof.
"DATE OF ISSUANCE" means the date on which the Policy is issued as
specified therein.
"DEFAULT" means any event which results, or which with the giving of
notice or the lapse of time or both would result, in an Event of Default.
"DEPOSITOR INFORMATION" shall have the meaning assigned to such term in
Section 6 of the Indemnification Agreement.
"DEPOSITOR SALE AGREEMENT" means the Loan Sale Agreement dated as of
December 1, 1998 between the Depositor and the Issuer as the same may be amended
and supplemented from time to time in accordance with the terms thereof.
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"EVENT OF DEFAULT" means any event of default specified in Section 5.01
hereof.
"FINANCIAL STATEMENTS" means, with respect to RBMG, the Servicer, the
Company and the Sub-Servicer, the balance sheets and the statements of income,
retained earnings and cash flows and the notes thereto which have been provided
to the Insurer.
"FISCAL AGENT" means the Fiscal Agent, if any, designated pursuant to
the terms of the Policy.
"FUNDING CO. SALE AGREEMENT" means the Loan Sale Agreement dated as of
December 1, 1998 between Funding Co. and the Depositor as the same may be
amended and supplemented from time to time in accordance with the terms thereof.
"INDEMNIFICATION AGREEMENT" means the Indemnification Agreement dated
as of December 1, 1998, between the Insurer, RBMG, the Sub-Servicer, the
Depositor, First Union and the Underwriter as the same may be amended or
supplemented from time to time in accordance with the terms thereof.
"INDENTURE TRUSTEE" means The Bank of New York, a New York banking
corporation, as Indenture Trustee under the Indenture, and any successor to the
Indenture Trustee under the Indenture.
"INSURED PAYMENT" means a payment by the Insurer under the Policy.
"INSURER INFORMATION" means the information set forth in the Offering
Document under the caption "THE INSURANCE POLICY AND THE NOTE INSURER"
(excluding the information under the sub-caption "--CREDIT ENHANCEMENT DOES NOT
APPLY TO PREPAYMENT RISK"), or in the financial statements of the Insurer,
including any information in any amendment or supplement to the Offering
Document furnished by the Insurer in writing expressly for use therein that
amends or supplements such information.
"INVESTMENT COMPANY ACT" means the Investment Company Act of 1940,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended.
"LATE PAYMENT RATE" means, for any date of determination, the rate of
interest as it is publicly announced by Citibank, N.A. at its principal office
in New York, New York as its prime rate (any change in such prime rate of
interest to be effective on the date such change is announced by Citibank, N.A.)
plus 3%. The Late Payment Rate shall be computed on the basis of a year of 365
days calculating the actual number of days elapsed. In no event shall the Late
Payment Rate exceed the maximum rate permissible under any applicable law
limiting interest rates.
"LIABILITIES" shall have the meaning ascribed to such term in Section
3.04(a) hereof.
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"LOSSES" means (i) any actual out-of-pocket loss paid by the Insurer or
its respective parents, subsidiaries and affiliates or any shareholder,
director, officer, employee, agent or any "controlling person" (as such term is
used in the Securities Act) of any of the foregoing, and (ii) any actual
out-of-pocket costs and expenses paid by such party, including reasonable fees
and expenses of its counsel, to the extent not paid, satisfied or reimbursed
from funds provided by any other Person (provided that the foregoing shall not
create or imply any obligation to pursue recourse against any such other
Person).
"MANAGEMENT AGREEMENT" means the Management Agreement dated as of
December 1, 1998 by and among the Issuer, RBMG, as Manager, and the Company, as
Back-up Manager, as the same may be amended and supplemented from time to time
in accordance with the terms thereof.
"MATERIAL ADVERSE CHANGE" means, in respect of any Person, a material
adverse change in (i) the business, financial condition, results of operations
or properties of such Person or (ii) the ability of such Person to perform its
obligations under any of the Transaction Documents.
"MOODY'S" means ▇▇▇▇▇'▇ Investors Service, Inc., a Delaware
corporation, and any successor thereto, and, if such corporation shall for any
reason no longer perform the functions of a securities rating agency, "Moody's"
shall be deemed to refer to any other nationally recognized rating agency
designated by the Insurer.
"OBLIGOR" means the original obligor under each Mortgage Loan,
including any guarantor of such obligor and their respective successors.
"OFFERING DOCUMENT" means the Prospectus dated November 10, 1998 and
the Prospectus Supplement of the Issuer in respect of the Obligations (and any
amendment or supplement thereto) and any other offering document in respect of
the Obligations prepared by the Servicer, RBMG, the Company, the Issuer, the
Sub-Servicer or the Depositor that makes reference to the Policy.
"OPINION FACTS AND ASSUMPTIONS" means the facts and assumptions
contained in the insolvency opinions dated December 11, 1998 by ▇▇▇▇▇▇ & ▇▇▇▇▇
LLP under the heading "Assumptions of Fact" insofar as they relate to RBMG, the
Company and Funding Co. and the facts and assumptions contained in the
insolvency opinion dated December 11, 1998 by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP insofar as
they relate to the Depositor.
"OWNER TRUSTEE" means Wilmington Trust Company, as owner trustee under
the Trust Agreement, and any successor owner trustee thereunder.
"OWNERS" means registered holders of Obligations.
"PERSON" means an individual, joint stock company, trust,
unincorporated association, joint venture, corporation, business or owner trust,
limited liability company, partnership or other organization or entity (whether
governmental or private).
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"PROSPECTUS SUPPLEMENT" means the final Prospectus Supplement dated
December 9, 1998 with respect to the Obligations.
"RBMG INFORMATION" shall have the meaning assigned to such term in
Section 2.01(k) hereof.
"REGISTRATION STATEMENT" means the Registration Statement on Form S-3
of the Depositor (No. 333-64775) relating to the Offered Obligations, and any
pre- and post-effective amendment thereto, including the Prospectus, the
Prospectus Supplement and all exhibits thereto.
"RESIDUAL HOLDER" shall have the meaning ascribed to the term
"Certificateholder" in the Trust Agreement.
"SECURITIES ACT" means the Securities Act of 1933, including, unless
the context otherwise requires, the rules and regulations thereunder, as amended
from time to time.
"SERVICER INFORMATION" shall have the meaning set forth in Section
2.04(k) hereof.
"SERVICING AGREEMENT" means the Servicing Agreement dated as of
December 1, 1998 by and among the Servicer, the Issuer and the Indenture Trustee
as the same may be amended or supplemented from time to time in accordance with
the terms thereof.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"S&P" means Standard & Poor's Ratings Services, a division of The
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., and any successor thereto, and, if such corporation
shall for any reason no longer perform the functions of a securities rating
agency, "S&P" shall be deemed to refer to any other nationally recognized rating
agency designated by the Insurer.
"SUB-SERVICER INFORMATION" shall have the meaning assigned to such term
in Section 2.04(k) hereof.
"SUB-SERVICING AGREEMENT" means the Sub-Servicing Agreement dated as of
December 1, 1998 between the Servicer and the Sub-Servicer as the same may be
amended or supplemented from time to time in accordance with the terms thereof.
"TERM OF THE INSURANCE AGREEMENT" shall be determined as provided in
Section 4.01 hereof.
"TRANSACTION" means the transactions contemplated by the Transaction
Documents, including the transactions described in the Offering Document.
"TRANSACTION DOCUMENTS" means this Insurance Agreement, the Commitment,
the Offering Document, the Obligations, the Indemnification Agreement, the
Indenture, the
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Management Agreement, the Custodial Agreement, the Servicing Agreement, the
Sub-Servicing Agreement, the Contribution Agreement, the Company Sale Agreement,
the Funding Co. Sale Agreement, the Depositor Sale Agreement, the Trust
Agreement and the Underwriting Agreement.
"TRUST AGREEMENT" means the Deposit Trust Agreement dated as of
December 1, 1998 between the Depositor, the Owner Trustee and the Indenture
Trustee, as trust paying agent as the same may be amended and supplemented in
accordance with the terms thereof.
"TRUST ESTATE" means the trust estate created pursuant to the
Indenture.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, including,
unless the context otherwise requires, the rules and regulations thereunder, as
amended from time to time.
"UNDERWRITER" means Wheat First Securities, Inc., acting through First
Union Capital Markets, a division of Wheat First Securities, Inc.
"UNDERWRITER INFORMATION" shall have the meaning ascribed to such term
in Section 3 of the Indemnification Agreement.
"UNDERWRITING AGREEMENT" means the Underwriting Agreement between the
Underwriter and the Depositor with respect to the offer and sale of the
Obligations, as the same may be amended from time to time.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. REPRESENTATION AND WARRANTIES OF RBMG, THE SERVICER, THE
COMPANY AND FUNDING CO. RBMG, the Servicer, the Company and Funding Co.
represent, warrant and covenant as of the Date of Issuance, each as to those
matters relating to itself, as follows:
(a) DUE ORGANIZATION AND QUALIFICATION. RBMG, the Servicer,
the Company and Funding Co. are each a corporation, duly organized,
validly existing and in good standing under the laws of its respective
jurisdiction of incorporation. Each of RBMG, the Servicer, the Company
and Funding Co. is duly qualified to do business, is in good standing
and has obtained all licenses, permits, charters, registrations and
approvals (together, "approvals") necessary for the conduct of its
business as currently conducted and as described in the Offering
Document and the performance of its obligations under the Transaction
Documents, in each jurisdiction in which the failure to be so qualified
or to obtain such approvals would render any Transaction Document
unenforceable in any respect or would have a material adverse effect
upon the Transaction, the Owners or the Insurer.
6
(b) POWER AND AUTHORITY. Each of RBMG, the Servicer, the
Company and Funding Co. has all necessary corporate power and authority
to conduct its business as currently conducted and, as described in the
Offering Document, to execute, deliver and perform its obligations
under the Transaction Documents and to consummate the Transaction.
(c) DUE AUTHORIZATION. The execution, delivery and
performance of the Transaction Documents by RBMG, the Servicer, the
Company and Funding Co. have been duly authorized by all necessary
corporate action and do not require any additional approvals or
consents, or other action by or any notice to or filing with any
Person, including, without limitation, any governmental entity or
RBMG's, the Servicer's, the Company's or Funding Co.'s stockholders,
which have not previously been obtained or given by RBMG, the Servicer,
the Company or Funding Co.
(d) NONCONTRAVENTION. Neither the execution and delivery of
the Transaction Documents by RBMG, the Servicer, the Company or Funding
Co., the consummation of the transactions contemplated thereby nor the
satisfaction of the terms and conditions of the Transaction Documents:
(i) conflicts with or results in any breach or
violation of any provision of the certificate of incorporation
or bylaws of RBMG, the Servicer, the Company or Funding Co. or
any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award currently in effect having
applicability to RBMG, the Servicer, the Company or Funding
Co. or any of their material properties, including regulations
issued by an administrative agency or other governmental
authority having supervisory powers over RBMG, the Servicer,
the Company or Funding Co.;
(ii) constitutes a default by RBMG, the Servicer, the
Company or Funding Co. under or a breach of any material
provision of any loan agreement, mortgage, indenture or other
agreement or instrument to which RBMG, the Servicer, the
Company or Funding Co. is a party or by which any of its or
their respective properties, which are individually or in the
aggregate material to RBMG, the Servicer, the Company or
Funding Co., is or may be bound or affected; or
(iii) results in or requires the creation of any lien
upon or in respect of any assets of RBMG, the Servicer, the
Company or Funding Co., except as contemplated by the
Transaction Documents.
(e) LEGAL PROCEEDINGS. There is no action, proceeding or
investigation by or before any court, governmental or administrative
agency or arbitrator against or affecting RBMG, the Servicer, the
Company, Funding Co. or any of its or their subsidiaries, or any
properties or rights of RBMG, the Servicer, the Company, Funding Co. or
any of its or their subsidiaries, pending or, to RBMG's, the
Servicer's, the Company's or Funding
7
Co.'s knowledge after reasonable inquiry, threatened, which, in any
case, could reasonably be expected to result in a Material Adverse
Change with respect to RBMG, the Servicer, the Company or Depositor.
(f) VALID AND BINDING OBLIGATIONS. The Obligations, when
executed, authenticated and issued in accordance with the Indenture,
and the Transaction Documents (other than the Obligations), when
executed and delivered by RBMG, the Servicer, the Company and Funding
Co., will constitute the legal, valid and binding obligations of RBMG,
the Servicer, Funding Co. and the Issuer, as applicable, enforceable in
accordance with their respective terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally and general
equitable principles and public policy considerations as to rights of
indemnification for violations of federal securities laws. None of
RBMG, the Servicer, the Company or Funding Co. will at any time in the
future deny that the Transaction Documents constitute the legal, valid
and binding obligations of RBMG, the Servicer, Funding Co., the Company
or the Issuer, as applicable.
(g) FINANCIAL STATEMENTS. The Financial Statements of RBMG,
the Servicer and Funding Co., copies of which have been furnished to
the Insurer, (i) are, as of the dates and for the periods referred to
therein, complete and correct in all material respects, (ii) present
fairly the financial condition and results of operations of RBMG, the
Servicer and Funding Co. as of the dates and for the periods indicated
and (iii) have been prepared in accordance with generally accepted
accounting principles consistently applied, except as noted therein
(subject as to interim statements to normal year-end adjustments).
Since the date of the most recent Financial Statements, there has been
no Material Adverse Change in respect of RBMG, the Servicer or Funding
Co. Except as disclosed in the Financial Statements, none of RBMG, the
Servicer or Funding Co. are subject to any contingent liabilities or
commitments that, individually or in the aggregate, have a material
possibility of causing a Material Adverse Change in respect of RBMG,
the Servicer or Funding Co.
(h) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy
employed, or proposed to be employed, by RBMG, the Servicer, the
Company or Funding Co. in the conduct of its business violates any law,
regulation, judgment, agreement, order or decree applicable to any of
them that, if enforced, could reasonably be expected to result in a
Material Adverse Change with respect to RBMG, the Servicer, the Company
or Funding Co. None of RBMG, the Servicer, the Company or Funding Co.
are in breach of or in default under any applicable law or
administrative regulation of its respective jurisdiction of
incorporation, or any department, division, agency or instrumentality
thereof or of the United States or any applicable judgment or decree or
any loan agreement, note, resolution, certificate, agreement or other
instrument to which RBMG, the Servicer, the Company or Funding Co. is a
party or is otherwise subject which, if enforced, would have a material
adverse effect on the ability of RBMG, the Servicer, the Company or
8
Funding Co., as the case maybe, to perform its respective obligations
under the Transaction Documents.
(i) TAXES. RBMG, the Servicer, the Company, Funding Co. and
RBMG's, the Servicer's, the Company's and Funding Co.'s parent company
or companies have filed prior to the date hereof all federal and state
tax returns that are required to be filed and paid all taxes, including
any assessments received by them that are not being contested in good
faith, to the extent that such taxes have become due, except for any
failures to file or pay that, individually or in the aggregate, would
not result in a Material Adverse Change with respect to RBMG, the
Servicer, the Company or Depositor.
(j) ACCURACY OF INFORMATION. Neither the Transaction
Documents, nor other information relating to the Mortgage Loans, the
operations of RBMG, the Servicer, the Company or Funding Co. (including
servicing or origination of loans) or the financial condition of RBMG,
the Servicer, the Company or Funding Co. (collectively, the
"Documents"), as amended, supplemented or superseded, furnished to the
Insurer by RBMG, the Servicer, the Company or Funding Co. contain any
statement of a material fact by RBMG, the Servicer, the Company or
Depositor which was untrue or misleading in any material adverse
respect when made. None of RBMG, the Servicer, the Company or Funding
Co. has any knowledge of circumstances that could reasonably be
expected to cause a Material Adverse Change with respect to RBMG, the
Servicer, the Company or Funding Co. Since the furnishing of the
Documents, there has been no change nor any development or event
involving a prospective change known to RBMG, the Servicer, the Company
or Funding Co. that would render any of the Documents untrue or
misleading in a material respect.
(k) COMPLIANCE WITH SECURITIES LAWS. The information in the
Offering Document, under the headings "SUMMARY--PARTIES--RBMG or
Resource Bancshares Mortgage Group, Inc.," "SUMMARY--MORTGAGE LOAN
POOL," "DESCRIPTION OF THE MORTGAGE POOL," "RBMG," "RBMG FUNDING CO."
and "SERVICING OF THE MORTGAGE LOANS" (other than information under the
sub-heading "--THE SUB-SERVICER") (collectively, the "RBMG
Information") is true and correct in all material respects and does not
contain any untrue statement of a fact that is material or omit to
state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(l) TRANSACTION DOCUMENTS. Each of the representations and
warranties of RBMG, the Servicer, the Company and Funding Co. contained
in the Transaction Documents is true and correct in all material
respects, and RBMG, the Servicer, the Company and Funding Co. hereby
make each such representation and warranty to, and for the benefit of,
the Insurer as if the same were set forth in full herein.
(m) SOLVENCY. RBMG, the Servicer, the Company and Funding Co.
are solvent and will not be rendered insolvent by the Transaction and,
after giving effect to
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the Transaction, none of RBMG, the Servicer, the Company or Funding Co.
will be left with an unreasonably small amount of capital with which to
engage in its business, nor does RBMG, the Servicer, the Company or
Funding Co. intend to incur, or believe that it has incurred, debts
beyond its ability to pay as they mature. None of RBMG, the Servicer,
the Company or Funding Co. contemplates the commencement of insolvency,
bankruptcy, liquidation or consolidation proceedings or the appointment
of a receiver, liquidator, conservator, trustee or similar official in
respect of RBMG, the Servicer, the Company or Funding Co. or any of
their assets.
(n) PRINCIPAL PLACE OF BUSINESS. The principal place of
business of RBMG is located in Columbia, South Carolina, the principal
place of business of the Servicer is located in Columbia, South
Carolina, the principal place of business of Funding Co. is located in
Las Vegas, Nevada and the principal place of business of the Company is
located in Las Vegas, Nevada.
(o) OPINION FACTS AND ASSUMPTIONS. The Opinion Facts and
Assumptions insofar as they relate to RBMG, the Company and Funding Co.
are true and correct as of the Date of Issuance.
Section 2.02. AFFIRMATIVE COVENANTS OF RBMG, THE SERVICER, THE COMPANY
AND FUNDING CO. RBMG, the Servicer, the Company and Funding Co. hereby agree
that during the Term of the Insurance Agreement, unless the Insurer shall
otherwise expressly consent in writing:
(a) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. RBMG, the
Servicer, the Company and Funding Co. shall not be in default under the
Transaction Documents and shall comply with all material requirements
of any law, rule or regulation applicable to it. None of RBMG, the
Servicer, the Company or Funding Co. shall agree to any amendment to or
modification of the terms of any Transaction Documents unless the
Insurer shall have given its prior written consent, which consent will
not be unreasonably withheld.
(b) CORPORATE EXISTENCE. RBMG, its successors and assigns, the
Servicer, its successors and assigns, the Company, its successors and
assigns and Funding Co., its successors and assigns, shall maintain
their corporate existence and shall at all times continue to be duly
organized under the laws of its respective jurisdiction of
incorporation and duly qualified and duly authorized (as described in
subsections 2.01(a), (b) and (c) hereof) and shall conduct its business
in accordance with the terms of its certificate or articles of
incorporation and bylaws.
(c) FINANCIAL STATEMENTS; ACCOUNTANTS' REPORTS; OTHER
INFORMATION. RBMG, the Servicer, the Company and Funding Co. shall keep
or cause to be kept in reasonable detail books and records of account
of their assets and business, including, but not limited to, books and
records relating to the Transaction. The Servicer, RBMG and the Company
shall furnish or cause to be furnished to the Insurer:
10
(i) ANNUAL FINANCIAL STATEMENTS. As soon as
available, and in any event within 120 days after the close of
each fiscal year of the Servicer and RBMG (and the Company in
the event that the Company prepares financial statements which
are not consolidated with RBMG), the audited consolidated
balance sheets of the Servicer and RBMG (and the Company in
the event that the Company prepares financial statements which
are not consolidated with RBMG) and their subsidiaries as of
the end of such fiscal year and the related audited
consolidated statements of income, changes in shareholders'
equity and cash flows for such fiscal year, all in reasonable
detail and stating in comparative form the respective figures
for the corresponding date and period in the preceding fiscal
year, prepared in accordance with generally accepted
accounting principles, consistently applied, and accompanied
by the audit opinion of the Servicer's and RBMG's (and the
Company's, in the event that the Company prepares financial
statements which are not consolidated with RBMG) independent
accountants (which shall be a nationally recognized
independent public accounting firm) and by the certificate
specified in Section 2.02(e) hereof.
(ii) QUARTERLY FINANCIAL STATEMENTS. As soon as
available, and in any event within 90 days after each of the
first three fiscal quarters of each fiscal year of the
Servicer and RBMG (and the Company in the event that the
Company prepares financial statements which are not
consolidated with RBMG), the unaudited consolidated balance
sheets of the Servicer and RBMG (and the Company in the event
that the Company prepares financial statements which are not
consolidated with RBMG) and their subsidiaries as of the end
of such fiscal quarter and the related unaudited consolidated
statements of income, changes in shareholders' equity and cash
flows for such fiscal quarter, all in reasonable detail and
stating in comparative form the respective figures for the
corresponding date and period in the preceding fiscal year,
prepared in accordance with generally accepted accounting
principles, consistently applied, and accompanied by the
certificate specified in Section 2.02(e) hereof.
(iii) INITIAL AND CONTINUING REPORTS. On or before
the Closing Date, the Servicer will deliver or cause to be
delivered to the Insurer a copy of the magnetic tape to be
delivered to the Indenture Trustee on the Closing Date setting
forth as to each Mortgage Loan, the information required under
the definition of "Mortgage Loan Schedule" in Section 1.01 of
the Indenture. On each Additional Transfer Date the Servicer
will deliver or cause to be delivered to the Insurer a copy of
the magnetic tape to be delivered to the Indenture Trustee on
such date pursuant to Section 2.14 of the Indenture. After the
Closing Date, the Servicer shall deliver, or shall cause the
Sub-Servicer to deliver, to the Insurer not later than 12:00
noon, New York City time, on the Business Day following each
Determination Date the report required by Section 3.01 of the
Servicing Agreement.
11
(iv) COMPUTER DISKETTE. Beginning in March 1999, the
Servicer shall deliver, or cause the Sub-Servicer to deliver,
to the Insurer on a quarterly basis, a computer diskette
containing a quarterly summary of the information provided to
the Insurer pursuant to clause (iii) of this subsection
2.02(c) and also containing information similar to the
information provided in the Mortgage Loan Schedule delivered
to the Indenture Trustee pursuant to the Indenture and
described in Schedule I of the Indenture.
(v) CERTAIN INFORMATION. Upon the reasonable request
of the Insurer, RBMG, the Servicer, the Company and Funding
Co. shall promptly provide copies of any requested proxy
statements, financial statements, reports and registration
statements which RBMG, the Servicer, the Company or Funding
Co. files with, or delivers to, the Commission or any national
securities exchange.
(vi) OTHER INFORMATION. Promptly upon receipt
thereof, copies of all schedules, financial statements or
other similar reports delivered to or by RBMG, the Servicer,
the Company or Funding Co. pursuant to the terms of the
Indenture or the Servicing Agreement and, promptly upon
request, such other data as the Insurer may reasonably
request.
All financial statements specified in clause (i) of this
subsection 2.02(c) shall be furnished in consolidated form for RBMG and
its subsidiaries in the event RBMG shall consolidate its financial
statements with its subsidiaries, and for the Servicer and its
subsidiaries in the event the Servicer shall consolidate its financial
statements with its subsidiaries unless the Servicer's financial
statements are consolidated with those of RBMG.
The Insurer agrees that it and its agents, accountants and
attorneys shall keep confidential all financial statements, reports and
other information delivered by RBMG, the Servicer, the Company or
Funding Co. pursuant to this subsection 2.02(c) to the extent provided
in subsection 2.02(f) hereof.
(d) [RESERVED]
(e) COMPLIANCE CERTIFICATE. The Servicer, RBMG and the Company
shall deliver to the Insurer, concurrently with the delivery of the
financial statements required pursuant to subsection 2.02(c)(i) and
(ii) hereof, one or more certificates signed by an officer of the
Servicer, an officer of RBMG and an officer of the Company authorized
to execute such certificates on behalf of the Servicer, RBMG and the
Company stating that:
(i) in the event that the Sub-Servicing Agreement has
been terminated, a review of the Servicer's performance under
the Transaction Documents during such period has been made
under such officer's supervision;
12
(ii) to the best of such individual's knowledge
following reasonable inquiry, no Default or Event of Default
has occurred, or if a Default or Event of Default has
occurred, specifying the nature thereof and the steps, if any,
being taken to cure such Default or Event of Default or to
otherwise comply with the terms of the agreement to which such
Default or Event of Default relates;
(iii) the attached financial statements submitted in
accordance with subsection 2.02(c)(i) or (ii) hereof, as the
case may be, are complete and correct in all material respects
and present fairly the financial condition and results of
operations of the Servicer, RBMG and the Company as of the
dates and for the periods indicated, in accordance with
generally accepted accounting principles consistently applied;
and
(iv) in the event that the Sub-Servicing Agreement
has been terminated, the Servicer has in full force and effect
a blanket fidelity bond (or direct surety bond) and an errors
and omissions insurance policy in accordance with the terms
and requirements of Section 2.13 of the Servicing Agreement.
(f) ACCESS TO RECORDS; DISCUSSIONS WITH OFFICERS AND
ACCOUNTANTS. On an annual basis, or upon the occurrence of a Material
Adverse Change, the Servicer, RBMG and the Company shall, upon the
reasonable request of the Insurer, permit the Insurer or its authorized
agents:
(i) to inspect the books and records of the Servicer,
RBMG and the Company as they may relate to the Obligations,
the obligations of the Servicer, RBMG and the Company under
the Transaction Documents, and the Transaction;
(ii) to discuss the affairs, finances and accounts of
the Servicer, RBMG or of the Company with the chief operating
officer and the chief financial officer of the Servicer, RBMG
or of the Company; and
(iii) with the Servicer's, RBMG's or the Company's
consent, as applicable, which consent shall not be
unreasonably withheld, to discuss the affairs, finances and
accounts of the Servicer, RBMG or of the Company with the
Servicer's, RBMG's or the Company's independent accountants,
provided that an officer of the Servicer, RBMG or the Company
shall have the right to be present during such discussions.
Such inspections and discussions shall be conducted during
normal business hours and shall not unreasonably disrupt the business
of RBMG or the Servicer. The books and records of RBMG and the Servicer
shall be maintained at the address of RBMG or the Servicer, as
applicable, designated herein for receipt of notices, unless RBMG or
the Servicer shall otherwise advise the parties hereto in writing.
13
The Insurer agrees that it and its shareholders, directors,
agents, accountants and attorneys shall keep confidential any matter of
which it becomes aware through such inspections or discussions (unless
readily available from public sources), except as may be otherwise
required by regulation, law or court order or requested by appropriate
governmental authorities or as necessary to preserve its rights or
security under or to enforce the Transaction Documents, provided that
the foregoing shall not limit the right of the Insurer to make such
information available to its regulators, securities rating agencies,
reinsurers, credit and liquidity providers, counsel and accountants.
(g) NOTICE OF MATERIAL EVENTS. RBMG, the Servicer, the Company
and Funding Co. shall be obligated (which obligation shall be satisfied
as to each if performed by RBMG, the Servicer, the Company or Funding
Co.) promptly to inform the Insurer in writing of the occurrence of any
of the following to the extent any of the following relate to it:
(i) the submission of any claim or the initiation or
threat of any legal process, litigation or administrative or
judicial investigation, or rule making or disciplinary
proceeding by or against RBMG, the Servicer, the Company or
Funding Co. that (A) could be required to be disclosed to the
Commission or to RBMG's, the Servicer's, the Company's or
Funding Co.'s shareholders or (B) could result in a Material
Adverse Change with respect to RBMG, the Servicer, the Company
or Funding Co., or the promulgation of any proceeding or any
proposed or final rule which would result in a Material
Adverse Change with respect to RBMG, the Servicer, the Company
or Funding Co.;
(ii) the submission of any claim or the initiation or
threat of any legal process, litigation or administrative or
judicial investigation in any federal, state or local court or
before any arbitration board, or any such proceeding
threatened by any government agency, which, if adversely
determined, would have a material adverse effect on the
Issuer, the Owners or the Insurer;
(iii) any change in the location of RBMG's, the
Servicer's, the Company's or Funding Co.'s principal offices
or any change in the location of RBMG's, the Company's or
Funding Co.'s books and records;
(iv) the occurrence of any Default or Event of
Default or of any Material Adverse Change;
(v) the commencement of any proceedings by or against
RBMG, the Servicer, the Company or Funding Co. under any
applicable bankruptcy, reorganization, liquidation,
rehabilitation, insolvency or other similar law now or
hereafter in effect or of any proceeding in which a receiver,
liquidator, conservator, trustee or similar official shall
have been, or may be, appointed or requested for RBMG, the
Servicer, the Company or Funding Co. or any of its or their
assets; or
14
(vi) the receipt of notice that (A) RBMG, the
Servicer, the Company or Funding Co. is being placed under
regulatory supervision, (B) any license, permit, charter,
registration or approval necessary for the conduct of RBMG's,
the Servicer's, the Company's or Funding Co.'s business is to
be, or may be suspended or revoked, or (C) RBMG, the Servicer,
the Company or Funding Co. is to cease and desist any
practice, procedure or policy employed by RBMG, the Servicer,
the Company or Funding Co. in the conduct of its business, and
such cessation may result in a Material Adverse Change with
respect to RBMG, the Servicer, the Company or Funding Co.
(h) FINANCING STATEMENTS AND FURTHER ASSURANCES. RBMG will
cause to be filed all necessary financing statements or other
instruments, and any amendments or continuation statements relating
thereto, necessary to be kept and filed in such manner and in such
places as may be required by law to preserve and protect fully the
interest of the Indenture Trustee in the Trust Estate. RBMG, the
Servicer, the Company and Funding Co. shall, upon the request of the
Insurer, from time to time, execute, acknowledge and deliver, or cause
to be executed, acknowledged and delivered, within ten days of such
request, such amendments hereto and such further instruments and take
such further action as may be reasonably necessary to effectuate the
intention, performance and provisions of the Transaction Documents. In
addition, each of RBMG, the Servicer, the Company and Funding Co. agree
to cooperate with S&P and ▇▇▇▇▇'▇ in connection with any review of the
Transaction that may be undertaken by S&P and ▇▇▇▇▇'▇ after the date
hereof and to provide all information reasonably requested by S&P or
▇▇▇▇▇'▇.
(i) MAINTENANCE OF LICENSES. RBMG, the Servicer, the Company
and Funding Co., respectively, or any successors thereof shall maintain
or cause to be maintained all licenses, permits, charters and
registrations which are material to the conduct of its business.
(j) REDEMPTION OF OBLIGATIONS. RBMG, the Servicer, the Company
and Funding Co. shall instruct the Indenture Trustee, upon redemption
or payment of all of the Obligations pursuant to the Indenture or
otherwise, to furnish to the Insurer a notice of such redemption and,
upon a redemption or payment of all of the Obligations, to surrender
the Policy to the Insurer for cancellation.
(k) DISCLOSURE DOCUMENT. Each Offering Document delivered with
respect to the Obligations shall clearly disclose that the Policy is
not covered by the property/casualty insurance security fund specified
in Article 76 of the New York Insurance Law.
(l) SERVICING OF MORTGAGE LOANS; ADMINISTRATION. The Servicer,
the Company and RBMG shall perform such actions with respect to the
Mortgage Loans and note administration as are required by or provided
in the Indenture, the Contribution
15
Agreement or the Management Agreement. The Servicer and RBMG will
provide the Insurer with written notice of any change or amendment to
any Transaction Document as currently in effect.
(m) MAINTENANCE OF TRUST. On or before each December 1
beginning in 1999, so long as any of the Obligations are outstanding,
RBMG shall furnish to the Insurer and the Indenture Trustee an
officers' certificate either stating that such action has been taken
with respect to the recording, filing, rerecording and refiling of any
financing statements and continuation statements as is necessary to
maintain the interest of the Indenture Trustee created by the Indenture
with respect to the Trust Estate and reciting the details of such
action or stating that no such action is necessary to maintain such
interests. Such officers' certificate shall also describe the
recording, filing, rerecording and refiling of any financing statements
and continuation statements that will be required to maintain the
interest of the Indenture Trustee in the Trust Estate until the date
such next officers' certificate is due.
(n) CLOSING DOCUMENTS. RBMG and Funding Co. shall provide or
cause to be provided to the Insurer a bound volume or volumes of the
Transaction Documents and an executed original copy of each document
executed in connection with the Transaction within 60 days after the
date of closing. Upon the request of the Insurer, RBMG and Funding Co.
shall use reasonable efforts to provide or cause to be provided to the
Insurer a copy of each of the Transaction Documents on computer
diskette in a format acceptable to the Insurer.
(o) PREFERENCE PAYMENTS. With respect to any Preference Amount
(as defined in the Policy), the Servicer shall provide to the Insurer
upon the request of the Insurer:
(i) a certified copy of the final nonappealable order
of a court having competent jurisdiction ordering the recovery
by a trustee in bankruptcy as voidable preference amounts
included in previous distributions under Section 8.02(c) or
Section 5.07 of the Indenture to any Owner pursuant to the
United States Bankruptcy Code, 11 U.S.C. ▇▇.▇▇. 101 et seq.,
as amended (the "Bankruptcy Code");
(ii) an opinion of counsel reasonably satisfactory to
the Insurer, and upon which the Insurer shall be entitled to
rely, stating that such order is final and is not subject to
appeal; and
(iii) an assignment in such form as reasonably
required by the Insurer, irrevocably assigning to the Insurer
all rights and claims of the Servicer, the Sub-Servicer, the
Indenture Trustee and any Owner relating to or arising under
the Mortgage Loan against the debtor which made such
preference payment or otherwise with respect to such
preference amount; and
16
(iv) appropriate instruments to effect (when executed
by the affected party) the appointment of the Insurer as agent
for the Indenture Trustee and any owner in any legal
proceeding relating to such preference payment being in a form
satisfactory to the Insurer.
(p) YEAR 2000 PROGRAM. In the event that the Sub-Servicing
Agreement has been terminated, the Servicer has taken, or will by
January 1, 1999 have taken, all steps necessary and appropriate to
prevent any problems in its computer and information systems arising
from or in connection with the information processing challenges
associated with the Year 2000, and will provide to the Insurer such
information and reports as the Insurer may reasonably request from time
to time with respect to such steps as have or will be taken with
respect thereto.
Section 2.03. NEGATIVE COVENANTS OF RBMG, THE SERVICER, THE COMPANY AND
FUNDING CO. RBMG, the Servicer, the Company and Funding Co. hereby agree that
during the Term of the Insurance Agreement, unless the Insurer shall otherwise
expressly consent in writing:
(a) IMPAIRMENT OF RIGHTS. None of RBMG, the Servicer, the
Company or Funding Co. shall take any action, or fail to take any
action, if such action or failure to take action may result in a
material adverse change as described in clause (ii) of the definition
of Material Adverse Change with respect to RBMG, the Servicer, the
Company or Funding Co., or may interfere with the enforcement of any
rights of the Insurer under or with respect to the Transaction
Documents. RBMG, the Servicer, the Company or Funding Co. shall give
the Insurer written notice of any such action or failure to act on the
earlier of: (i) the date upon which any publicly available filing or
release is made with respect to such action or failure to act or (ii)
promptly prior to the date of consummation of such action or failure to
act. RBMG, the Servicer, the Company and Funding Co. shall furnish to
the Insurer all information requested by it that is reasonably
necessary to determine compliance with this subsection (a).
(b) ADVERSE SELECTION PROCEDURE. RBMG, the Servicer, the
Company and Funding Co. have not and shall not use any adverse
selection procedure in selecting Mortgage Loans to be transferred to
the Indenture Trustee from the outstanding mortgage loans that qualify
under the Indenture for inclusion in the Trust.
(c) WAIVER, AMENDMENTS, ETC. None of RBMG, the Servicer, the
Company or Funding Co. shall waive, modify or amend, or consent to any
waiver, modification or amendment of, any of the terms, provisions or
conditions of any of the Transaction Documents without the prior
written consent of the Insurer.
(d) MORTGAGE LOAN AGREEMENTS; CHARGE-OFF POLICY. Except as
otherwise permitted in the Indenture and the Servicing Agreement, RBMG,
the Servicer, the Company and Funding Co. shall not alter or amend any
Mortgage Loan, their respective
17
collection policies or their respective charge-off policies in a manner
that materially adversely affects the Insurer unless the Insurer shall
have previously given its consent, which consent shall not be withheld
unreasonably.
Section 2.04. REPRESENTATION AND WARRANTIES OF THE SUB-SERVICER. The
Sub-Servicer represents, warrants and covenants as of the Date of Issuance as
follows:
(a) DUE ORGANIZATION AND QUALIFICATION. The Sub-Servicer is
duly organized, validly existing and in good standing as a federal
savings bank under the laws of the United States. The Sub-Servicer is
duly qualified to do business, is in good standing and has obtained all
licenses, permits, charters, registrations and approvals (together,
"approvals") necessary for the conduct of its business as currently
conducted and as described in the Offering Document and the performance
of its obligations under the Transaction Documents, in each
jurisdiction in which the failure to be so qualified or to obtain such
approvals would render any Transaction Document unenforceable in any
respect or would have a material adverse effect upon the Transaction,
the Owners or the Insurer.
(b) POWER AND AUTHORITY. The Sub-Servicer has all necessary
corporate power and authority to conduct its business as currently
conducted and, as described in the Offering Document, to execute,
deliver and perform its obligations under the Transaction Documents and
to consummate the Transaction.
(c) DUE AUTHORIZATION. The execution, delivery and performance
of the Transaction Documents by the Sub-Servicer have been duly
authorized by all necessary corporate action and does not require any
additional approvals or consents, or other action by or any notice to
or filing with any Person, including, without limitation, any
governmental entity or the Sub-Servicer's stockholders, which have not
previously been obtained or given by the Sub-Servicer.
(d) NONCONTRAVENTION. Neither the execution and delivery of
the Transaction Documents by the Sub-Servicer, the consummation of the
transactions contemplated thereby nor the satisfaction of the terms and
conditions of the Transaction Documents:
(i) conflicts with or results in any breach or
violation of any provision of the charter or bylaws of the
Sub-Servicer or any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award currently
in effect having applicability to the Sub-Servicer or any of
its material properties, including regulations issued by an
administrative agency or other governmental authority having
supervisory powers over the Sub-Servicer;
(ii) constitutes a default by the Sub-Servicer under
or a breach of any provision of any loan agreement, mortgage,
indenture or other agreement or instrument to which the
Sub-Servicer is a party or by which any of its properties,
18
which are individually or in the aggregate material to the
Sub-Servicer, is or may be bound or affected; or
(iii) results in or requires the creation of any lien
upon or in respect of any assets of the Sub-Servicer, except
as contemplated by the Transaction Documents.
(e) LEGAL PROCEEDINGS. There is no action, proceeding or
investigation by or before any court, governmental or administrative
agency or arbitrator against or affecting the Sub-Servicer or any of
its subsidiaries, or any properties or rights of the Sub-Servicer or
any of its subsidiaries, pending or, to the Sub-Servicer's knowledge
after reasonable inquiry, threatened, which, in any case, could
reasonably be expected to result in a Material Adverse Change with
respect to the Sub-Servicer.
(f) VALID AND BINDING OBLIGATIONS. The Transaction Documents
(other than the Obligations), when executed and delivered by the
Sub-Servicer, will constitute the legal, valid and binding obligations
of the Sub-Servicer, enforceable in accordance with their respective
terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and general equitable principles and public
policy considerations as to rights of indemnification for violations of
federal securities laws. The Sub-Servicer will not at any time in the
future deny that the Transaction Documents constitute the legal, valid
and binding obligations of the Sub-Servicer.
(g) FINANCIAL STATEMENTS. The Financial Statements of the
Sub-Servicer, copies of which have been furnished to the Insurer, (i)
are, as of the dates and for the periods referred to therein, complete
and correct in all material respects, (ii) present fairly the financial
condition and results of operations of the Sub-Servicer as of the dates
and for the periods indicated and (iii) have been prepared in
accordance with generally accepted accounting principles consistently
applied, except as noted therein (subject as to interim statements to
normal year-end adjustments). Since the date of the most recent
Financial Statements, there has been no Material Adverse Change in
respect of the Sub-Servicer. Except as disclosed in the Financial
Statements, the Sub-Servicer is not subject to any contingent
liabilities or commitments that, individually or in the aggregate, have
a material possibility of causing a Material Adverse Change in respect
of the Sub-Servicer.
(h) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy
employed, or proposed to be employed, by the Sub-Servicer in the
conduct of its business violates any law, regulation, judgment,
agreement, order or decree applicable to it that, if enforced, could
reasonably be expected to result in a Material Adverse Change with
respect to the Sub-Servicer. The Sub-Servicer is not in breach of or in
default under any applicable law or administrative regulation of any
department, division, agency or instrumentality of the United States or
of any state, or any applicable judgment or decree or any loan
agreement,
19
note, resolution, certificate, agreement or other instrument to which
the Sub-Servicer is a party or is otherwise subject which, if enforced,
would have a material adverse effect on the ability of the Sub-Servicer
to perform its respective obligations under the Transaction Documents.
(i) TAXES. The Sub-Servicer and the Sub-Servicer's parent
company or companies have filed prior to the date hereof all federal
and state tax returns that are required to be filed and paid all taxes,
including any assessments received by them that are not being contested
in good faith, to the extent that such taxes have become due, except
for any failures to file or pay that, individually or in the aggregate,
would not result in a Material Adverse Change with respect to the
Sub-Servicer.
(j) ACCURACY OF INFORMATION. Neither the Transaction
Documents, nor other information relating to the Mortgage Loans, the
operations of the Sub-Servicer (including servicing or origination of
loans) or the financial condition of the Sub-Servicer (collectively,
the "Documents"), as amended, supplemented or superseded, furnished to
the Insurer by the Sub-Servicer contain any statement of a material
fact by the Sub-Servicer which was untrue or misleading in any material
adverse respect when made. The Sub-Servicer has no knowledge of
circumstances that could reasonably be expected to cause a Material
Adverse Change with respect to the Sub-Servicer. Since the furnishing
of the Documents, there has been no change nor any development or event
involving a prospective change known to the Sub-Servicer that would
render any of the Documents untrue or misleading in a material respect.
.(k) COMPLIANCE WITH SECURITIES LAWS. The information in the
Offering Document set forth under the heading "SERVICING OF THE
MORTGAGE LOANS--THE SUB-SERVICER" (the "Sub-Servicer Information") does
not contain any untrue statement of a material fact and does not omit
to state a material fact necessary to make the statements made therein,
in light of the circumstances under which they were made, not
misleading.
(l) TRANSACTION DOCUMENTS. Each of the representations and
warranties of the Sub-Servicer contained in the Transaction Documents
is true and correct in all material respects, and the Sub-Servicer
hereby makes each such representation and warranty to, and for the
benefit of, the Insurer as if the same were set forth in full herein.
(m) SOLVENCY. The Sub-Servicer is solvent and will not be
rendered insolvent by the Transaction and, after giving effect to the
Transaction, the Sub-Servicer will not be left with an unreasonably
small amount of capital with which to engage in its business, nor does
the Sub-Servicer intend to incur, or believe that it has incurred,
debts beyond its ability to pay as they mature. The Sub-Servicer does
not contemplate the commencement of insolvency, bankruptcy, liquidation
or consolidation proceedings or the appointment of a receiver,
liquidator, conservator, trustee or similar official in respect of the
Sub-Servicer or any of its assets.
20
(n) PRINCIPAL PLACE OF BUSINESS. The principal place of
business of the Sub-Servicer is located in ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇.
Section 2.05. AFFIRMATIVE COVENANTS OF THE SUB-SERVICER. The
Sub-Servicer hereby agrees that during the Term of the Insurance Agreement,
unless the Insurer shall otherwise expressly consent in writing:
(a) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. The
Sub-Servicer shall not be in default under the Transaction Documents
and shall comply with all material requirements of any law, rule or
regulation applicable to it. The Sub-Servicer shall not agree to any
amendment to or modification of the terms of any Transaction Documents
unless the Insurer shall have given its prior written consent.
(b) MAINTENANCE OF EXISTENCE. The Sub-Servicer and its
successors and assigns shall maintain its existence and shall at all
times continue to be duly organized under the laws of the United States
and duly qualified and duly authorized (as described in subsections
2.04(a), (b) and (c) hereof) and shall conduct its business in
accordance with the terms of its charter or bylaws.
(c) FINANCIAL STATEMENTS; ACCOUNTANTS' REPORTS; OTHER
INFORMATION. The Sub-Servicer shall keep or cause to be kept in
reasonable detail books and records of account of their assets and
business, including, but not limited to, books and records relating to
the Transaction. The Sub-Servicer shall furnish to the Insurer, within
30 days of receipt of written request of the Insurer:
(i) ANNUAL FINANCIAL STATEMENTS. The audited
consolidated balance sheets of the Sub-Servicer and its
subsidiaries as of the end of a fiscal year and the related
audited consolidated statements of income, changes in
shareholders' equity and cash flows for such fiscal year, all
in reasonable detail and stating in comparative form the
respective figures for the corresponding date and period in
the preceding fiscal year, prepared in accordance with
generally accepted accounting principles, consistently
applied, and accompanied by the audit opinion of the
Sub-Servicer's independent accountants (which shall be a
nationally recognized independent public accounting firm) and
by a certificate signed by an officer of the Sub-Servicer
authorized to execute such certificate on behalf of the
Sub-Servicer stating that the attached financial statements
are complete and correct in all material respects and present
fairly the financial condition and results of operations of
the Sub-Servicer as of the dates and for the periods
indicated, in accordance with generally accepted accounting
principles consistently applied..
(ii) QUARTERLY FINANCIAL STATEMENTS. The unaudited
consolidated balance sheets of the Sub-Servicer and its
subsidiaries as of the end of a fiscal quarter and the related
unaudited consolidated statements of income, changes in
21
shareholders' equity and cash flows for such fiscal quarter,
all in reasonable detail and stating in comparative form the
respective figures for the corresponding date and period in
the preceding fiscal year, prepared in accordance with
generally accepted accounting principles, consistently
applied, and accompanied by a certificate signed by an officer
of the Sub-Servicer authorized to execute such certificate on
behalf of the Sub-Servicer stating that the attached financial
statements are complete and correct in all material respects
and present fairly the financial condition and results of
operations of the Sub-Servicer as of the dates and for the
periods indicated, in accordance with generally accepted
accounting principles consistently applied.
(iii) INITIAL AND CONTINUING REPORTS. The
Sub-Servicer shall deliver to the Insurer not later than 12:00
noon, New York City time, on the Business Day following each
Determination Date the report required by Section 3.01 of the
Servicing Agreement.
(iv) COMPUTER DISKETTE. Beginning in March 1999, the
Sub-Servicer will deliver to the Insurer on a quarterly basis,
a computer diskette containing a quarterly summary of the
information provided to the Insurer pursuant to clause (iii)
of this subsection 2.05(c) and also containing information
similar to the information provided in the Mortgage Loan
Schedule delivered to the Indenture Trustee pursuant to the
Indenture and described in Schedule I of the Indenture.
(v) CERTAIN INFORMATION. Upon the reasonable request
of the Insurer, the Sub-Servicer shall promptly provide copies
of any requested proxy statements, financial statements,
reports and registration statements which the Sub-Servicer
files with, or delivers to, the Commission or any national
securities exchange.
(vi) OTHER INFORMATION. Promptly upon receipt
thereof, copies of all schedules, financial statements or
other similar reports delivered to or by the Sub-Servicer
pursuant to the terms of the Sub-Servicing Agreement and,
promptly upon request, such other data as the Insurer may
reasonably request.
All financial statements specified in clause (i) of this
subsection 2.05(c) shall be furnished in consolidated form for the
Sub-Servicer and all its subsidiaries in the event the Sub-Servicer
shall consolidate its financial statements with its subsidiaries.
The Insurer agrees that it and its agents, accountants and
attorneys shall keep confidential all financial statements, reports and
other information delivered by the Sub-Servicer pursuant to this
subsection 2.05(c) to the extent provided in subsection 2.05(e) hereof.
(d) COMPLIANCE CERTIFICATE. The Sub-Servicer shall deliver to
the Insurer the officer's certificate of compliance pursuant to the
terms of Section 3.9 of the
22
Sub-Servicing Agreement and Section 2.19 of the Servicing Agreement;
provided, however, in the event that S&P changes or withdraws the
Sub-Servicer's designation as a special servicer for residential
mortgages, the Sub-Servicer shall deliver to the Insurer such officer's
certificates within 30 days after the end of each calendar quarter.
(e) ACCESS TO RECORDS; DISCUSSIONS WITH OFFICERS AND
ACCOUNTANTS. On an annual basis, or upon the occurrence of a Material
Adverse Change, the Sub-Servicer shall, upon the reasonable request of
the Insurer, permit the Insurer or its authorized agents:
(i) to inspect the books and records of the
Sub-Servicer as they may relate to the Obligations, the
obligations of the Sub-Servicer under the Transaction
Documents, and the Transaction;
(ii) to discuss the affairs, finances and accounts of
the Sub-Servicer with the chief operating officer and the
chief financial officer of the Sub-Servicer; and
(iii) with the Sub-Servicer's consent, which consent
shall not be unreasonably withheld, to discuss the affairs,
finances and accounts of the Sub-Servicer with the
Sub-Servicer's independent accountants, provided that an
officer of the Sub-Servicer shall have the right to be present
during such discussions.
Such inspections and discussions shall be conducted upon
reasonable notice and during normal business hours and shall not
unreasonably disrupt the business of the Sub-Servicer. The books and
records of the Sub-Servicer shall be maintained at the address of the
Sub-Servicer designated herein for receipt of notices, unless the
Sub-Servicer shall otherwise advise the parties hereto in writing.
The Insurer agrees that it and its shareholders, directors,
agents, accountants and attorneys shall keep confidential any matter of
which it becomes aware through such inspections or discussions (unless
readily available from public sources), except as may be otherwise
required by regulation, law or court order or requested by appropriate
governmental authorities or as necessary to preserve its rights or
security under or to enforce the Transaction Documents, provided that
the foregoing shall not limit the right of the Insurer to make such
information available to its regulators, securities rating agencies,
reinsurers, credit and liquidity providers, counsel and accountants.
(f) NOTICE OF MATERIAL EVENTS. The Sub-Servicer shall be
obligated promptly to inform the Insurer in writing of the occurrence
of any of the following to the extent any of the following relate to
it:
(i) the submission of any claim or the initiation or
threat of any legal process, litigation or administrative or
judicial investigation, or rule making or
23
disciplinary proceeding by or against the Sub-Servicer that
(A) is required to be disclosed to the Commission or to the
Sub-Servicer's shareholders or (B) is likely to result in a
Material Adverse Change with respect to the Sub-Servicer, or
the promulgation of any proceeding or any proposed or final
rule which would result in a Material Adverse Change with
respect to the Sub-Servicer;
(ii) the submission of any claim or the initiation or
threat of any legal process, litigation or administrative or
judicial investigation in any federal, state or local court or
before any arbitration board, or any such proceeding
threatened by any government agency, which, if adversely
determined, would have a material adverse effect on the
Issuer, the Owners or the Insurer;
(iii) any change in the location of the
Sub-Servicer's principal offices or any change in the location
of the Sub-Servicer's books and records;
(iv) the occurrence of any Default or Event of
Default or of any Material Adverse Change;
(v) the commencement of any proceedings by or against
the Sub-Servicer under any applicable bankruptcy,
reorganization, liquidation, rehabilitation, insolvency or
other similar law now or hereafter in effect or of any
proceeding in which a receiver, liquidator, conservator,
trustee or similar official shall have been, or may be,
appointed or requested for the Sub-Servicer or any of its
assets; or
(vi) the receipt of notice that (A) the Sub-Servicer
is being placed under regulatory supervision, (B) any license,
permit, charter, registration or approval necessary for the
conduct of the Sub-Servicer's business is to be, or may be,
suspended or revoked, or (C) the Sub-Servicer is to cease and
desist any practice, procedure or policy employed by the
Sub-Servicer in the conduct of its business, and such
cessation may result in a Material Adverse Change with respect
to the Sub-Servicer.
(h) [RESERVED]
(i) MAINTENANCE OF LICENSES. The Sub-Servicer or any
successors thereof shall maintain or cause to be maintained all
licenses, permits, charters and registrations which are material to the
conduct of its business.
(j) [RESERVED]
(k) SERVICING OF MORTGAGE LOANS. The Sub-Servicer shall
perform such actions with respect to the Mortgage Loans as are required
by or provided in the Sub-Servicing Agreement. The Sub-Servicer will
provide the Insurer with written notice
24
of any change or amendment to any Transaction Document to which it is a
party as currently in effect.
(l) [RESERVED]
(m) [RESERVED]
(n) YEAR 2000 PROGRAM. On the basis of a comprehensive review
and assessment of the Sub-Servicer's systems and equipment and inquiry
made of Sub-Servicer's material suppliers, vendors and customers, the
Sub-Servicer reasonaby believes that the "Year 2000 Problem" (that is,
the inability of computers, as well as embedded microchips in
non-computing devices, to perform properly, including performance of
date-sensitive functions with respect to certain dates prior to and
after December 31, 1999), including costs of remediation, could not
reasonably be expected to result in an Event of Default. The
Sub-Servicer has developed feasible contingency plans adequately to
ensure uninterrupted and unimpaired business operation in the event of
failure of its own or a third party's systems or equipment due to the
Year 2000 problem, including those of vendors, customers and suppliers,
as well as a general failure of or interruption in its communications
and delivery infrastructure. Except for any reprogramming referred to
above, the computer systems of the Sub-Servicer are and, with ordinary
course upgrading and maintenance, will continue for the term of this
Agreement to be, sufficient for the conduct of their business as
currently conducted. The Sub-Servicer will provide to the Insurer such
information and reports as the Insurer may reasonably request from time
to time with respect to such steps as have or will be taken with
respect thereto.
Section 2.06. NEGATIVE COVENANTS OF THE SUB-SERVICER. The Sub-Servicer
hereby agrees that during the Term of the Insurance Agreement, unless the
Insurer shall otherwise expressly consent in writing:
(a) IMPAIRMENT OF RIGHTS. The Sub-Servicer shall not take any
action, or fail to take any action, if such action or failure to take
action may result in a material adverse change as described in clause
(ii) of the definition of Material Adverse Change with respect to the
Sub-Servicer or may interfere with the enforcement of any rights of the
Insurer under or with respect to the Transaction Documents. The
Sub-Servicer shall give the Insurer written notice of any such action
or failure to act on the earlier of: (i) the date upon which any
publicly available filing or release is made with respect to such
action or failure to act or (ii) promptly prior to the date of
consummation of such action or failure to act. The Sub-Servicer shall
furnish to the Insurer all information requested by it that is
reasonably necessary to determine compliance with this subsection (a).
(b) WAIVER, AMENDMENTS, ETC. The Sub-Servicer shall not waive,
modify or amend, or consent to any waiver, modification or amendment
of, any of the terms, provisions or conditions of any of the
Transaction Documents without the prior written consent of the Insurer.
25
(d) MORTGAGE LOAN AGREEMENTS; CHARGE-OFF POLICY. Except as
otherwise permitted in the Sub-Servicing Agreement, the Sub-Servicer
shall not alter or amend any Mortgage Loan, its collection policies or
its charge-off policies in a manner that materially adversely affects
the Insurer unless the Insurer shall have previously given its consent,
which consent shall not be withheld unreasonably.
Section 2.07. REPRESENTATIONS, WARRANTIES AND COVENANTS OF INDENTURE
TRUSTEE. The Indenture Trustee represents and warrants to, as of the Date of
Issuance, and covenants with the other parties hereto as follows:
(a) DUE ORGANIZATION AND QUALIFICATION. The Indenture Trustee
is a corporation, duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation. The Indenture
Trustee is duly qualified to do business, is in good standing and has
obtained all licenses, permits, charters, registrations and approvals
(together, "approvals") necessary for the conduct of its business as
currently conducted and as described in the Offering Document and the
performance of its obligations under the Transaction Documents, in each
jurisdiction in which the failure to be so qualified or to obtain such
approvals would render any Transaction Document unenforceable in any
respect or would have a material adverse effect upon the Transaction,
the Owners or the Insurer.
(b) DUE AUTHORIZATION. The execution, delivery and performance
of the Transaction Documents by the Indenture Trustee have been duly
authorized by all necessary corporate action and do not require any
additional approvals or consents, or other action by or any notice to
or filing with any Person, including, without limitation, any
governmental entity or the Indenture Trustee's stockholders, which have
not previously been obtained or given by the Indenture Trustee.
(c) VALID AND BINDING OBLIGATIONS. The Indenture, the
Servicing Agreement, the Custodial Agreement, the Trust Agreement and
this Insurance Agreement, when executed and delivered by the Indenture
Trustee, will constitute the legal, valid and binding obligations of
the Indenture Trustee, enforceable in accordance with their respective
terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and general equitable principles. The
Indenture Trustee will not at any time in the future deny that the
Transaction Documents to which it is a party constitute the legal,
valid and binding obligations of the Indenture Trustee.
Section 2.08 REPRESENTATIONS AND WARRANTIES OF THE ISSUER. As of the
date hereof or such other date specified below, the Issuer represents, warrants
and covenants as follows:
(a) DUE ORGANIZATION AND QUALIFICATION. The Issuer is a
Delaware business trust, duly organized, validly existing and in good
standing under the laws of its jurisdiction. The Issuer is duly
qualified to do business, is in good standing and has obtained all
necessary licenses, permits, charters, registrations and approvals
(together,
26
"approvals") necessary for the conduct of its business as currently
conducted and as described in the Offering Document and the performance
of its obligations under the Transaction Documents to which it is a
party, in each jurisdiction in which the failure to be so qualified or
to obtain such approvals would render any Transaction Document to which
it is a party unenforceable in any respect or would have a material
adverse effect upon the Transaction.
(b) POWER AND AUTHORITY. The Issuer has all necessary power
and authority to conduct its business as currently conducted and, as
described in the Offering Document, to execute, deliver and perform its
obligations under the Transaction Documents to which it is a party and
to consummate the Transaction.
(c) DUE AUTHORIZATION. The execution, delivery and performance
of the Transaction Documents to which it is a party by the Issuer has
been duly authorized by all necessary action and does not require any
additional approvals or consents, or other action by or any notice to
or filing with any Person, including, without limitation, any
governmental entity, which have not previously been obtained or given
by the Issuer.
(d) NONCONTRAVENTION. Neither the execution and delivery of
the Transaction Documents to which it is a party by the Issuer, the
consummation of the transactions contemplated thereby nor the
satisfaction of the terms and conditions of the Transaction Documents
to which it is a party:
(i) conflicts with or results in any breach or
violation of any provision of the Trust Agreement or its
Certificate of Trust or any law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award
currently in effect having applicability to the Issuer or any
of its material properties, including regulations issued by an
administrative agency or other governmental authority having
supervisory powers over the Issuer;
(ii) constitutes a default by the Issuer under or a
breach of any provision of any loan agreement, mortgage,
indenture or other agreement or instrument to which the Issuer
is a party or by which any of its properties, which are
individually or in the aggregate material to the Issuer, is or
may be bound or affected; or
(iii) results in or requires the creation of any lien
upon or in respect of any assets of the Issuer except as
contemplated by the Transaction Documents.
(e) LEGAL PROCEEDINGS. There is no action, proceeding or
investigation by or before any court, governmental or administrative
agency or arbitrator against or affecting the Issuer or any properties
or rights of the Issuer pending or, to the Issuer's knowledge after
reasonable inquiry, threatened, which, in any case, could reasonably be
expected to result in a Material Adverse Change with respect to the
Issuer.
27
(f) VALID AND BINDING OBLIGATIONS. The Obligations, when
executed, authenticated and issued in accordance with the Indenture and
the Trust Agreement, and the Transaction Documents (other than the
Obligations), when executed and delivered by the Issuer, will
constitute the legal, valid and binding obligations of the Issuer
enforceable in accordance with their respective terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and general equitable principles and public policy
considerations as to rights of indemnification for violations of
federal securities laws. The Issuer will not at any time in the future
deny that the Transaction Documents or the Obligations constitute the
legal, valid and binding obligations of the Issuer.
(g) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy
employed, or proposed to be employed, by the Issuer in the conduct of
its business violates any law, regulation, judgment, agreement, order
or decree applicable to any of them that, if enforced, could reasonably
be expected to result in a Material Adverse Change with respect to the
Issuer.
(h) TAXES. The Issuer has filed prior to the date hereof all
federal and state tax returns that are required to be filed and paid
all taxes, including any assessments received by it that are not being
contested in good faith, to the extent that such taxes have become due,
except for any failures to file or pay that, individually or in the
aggregate, would not result in a Material Adverse Change with respect
to the Issuer.
(i) TRANSACTION DOCUMENTS. Each of the representations and
warranties of the Issuer contained in the Transaction Documents is true
and correct in all material respects, and the Issuer hereby makes each
such representation and warranty to, and for the benefit of, the
Insurer as if the same were set forth in full herein; provided that the
remedy for any breach of this paragraph shall be limited to the
remedies specified in the related Transaction Document.
(j) SOLVENCY. The Issuer is solvent and will not be rendered
insolvent by the Transaction and, after giving effect to the
Transaction, the Issuer will not be left with an unreasonably small
amount of capital with which to engage in its business, nor does the
Issuer intend to incur, or believe that it has incurred, debts beyond
its ability to pay as they mature. The Issuer does not contemplate the
commencement of insolvency, bankruptcy, liquidation or consolidation
proceedings or the appointment of a receiver, liquidator, conservator,
trustee or similar official in respect of the Issuer or any of its
assets.
(k) PRINCIPAL PLACE OF BUSINESS. The principal place of
business of the Issuer is located in Wilmington, Delaware, and the
principal place of business of the Owner Trustee is located in
Wilmington, Delaware.
28
Section 2.09. AFFIRMATIVE COVENANTS OF THE ISSUER. The Issuer
hereby agrees that during the Term of the Insurance Agreement, unless the
Insurer shall otherwise expressly consent in writing:
(a) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. The Issuer
shall not be in default under the Transaction Documents and shall
comply with all material requirements of any law, rule or regulation
applicable to it. The Issuer shall not agree to any material amendment
to or modification of the terms of any Transaction Documents unless the
Insurer shall have otherwise consented.
(b) MAINTAIN EXISTENCE. The Issuer, its successors and
assigns, shall maintain its existence and shall at all times continue
to be duly organized under the laws of its respective jurisdiction and
duly qualified and duly authorized and shall conduct its business in
accordance with the terms of its organizational documents.
(c) NOTICE OF MATERIAL EVENTS. The Issuer shall be obligated
promptly to inform the Insurer in writing of the occurrence of any of
the following to the extent any of the following relate to it and to
the extent that it receives actual notice of the occurrence of any of
the following events:
(i) the submission of any claim or the initiation or
threat of any legal process, litigation or administrative or
judicial investigation, or rule making or disciplinary
proceeding by or against the Issuer that (A) could be required
to be disclosed to the Commission or to the Owners or (B)
could result in a Material Adverse Change with respect to the
Issuer, or the promulgation of any proceeding or any proposed
or final rule which would result in a Material Adverse Change
with respect to the Issuer;
(ii) any change in the location of the Issuer's or
the Owner Trustee's principal offices or any change in the
location of the Issuer's books and records;
(iii) the occurrence of any Default or Event of
Default or of any Material Adverse Change;
(iv) the commencement of any proceedings by or
against the Issuer under any applicable bankruptcy,
reorganization, liquidation, rehabilitation, insolvency or
other similar law now or hereafter in effect or of any
proceeding in which a receiver, liquidator, conservator,
trustee or similar official shall have been, or may be,
appointed or requested for the Issuer or any of its assets; or
(v) the receipt of notice that (A) the Issuer is
being placed under regulatory supervision, (B) any license,
permit, charter, registration or approval necessary for the
conduct of the Issuer's business is to be, or may be suspended
or revoked, or (C) the Issuer is to cease and desist any
practice, procedure or policy
29
employed by the Issuer in the conduct of its business, and
such cessation may result in a Material Adverse Change with
respect to the Issuer.
(d) FINANCING STATEMENTS AND FURTHER ASSURANCES. To the extent
provided in the Indenture and the Servicing Agreement, the Issuer will
cause to be filed all necessary financing statements or other
instruments, and any amendments or continuation statements relating
thereto, necessary to be kept and filed in such manner and in such
places as may be required by law to preserve and protect fully the
interest of the Indenture Trustee in the Trust Estate. The Issuer
shall, upon the request of the Insurer, from time to time, execute,
acknowledge and deliver, or cause to be executed, acknowledged and
delivered, within 15 days of such request, such amendments hereto and
such further instruments and take such further action as may be
reasonably necessary to effectuate the intention, performance and
provisions of the Transaction Documents to which it is a party. In
addition, the Issuer agrees to cooperate with S&P and ▇▇▇▇▇'▇ in
connection with any review of the Transaction that may be undertaken by
S&P and ▇▇▇▇▇'▇ after the date hereof.
(e) MAINTENANCE OF LICENSES. The Issuer, or any successors
thereof, shall maintain all licenses, permits, charters and
registrations which are material to the conduct of its business.
Section 2.10. NEGATIVE COVENANTS OF THE ISSUER. The Issuer
hereby agrees that during the Term of the Insurance Agreement, unless
the Insurer shall otherwise expressly consent in writing:
(a) IMPAIRMENT OF RIGHTS. The Issuer shall not take any
action, or fail to take any action, if such action or failure to take
action may result in a material adverse change as described in clause
(ii) of the definition of Material Adverse Change with respect to the
Issuer, or may interfere with the enforcement of any rights of the
Insurer under or with respect to the Transaction Documents. The Issuer
shall give the Insurer written notice of any such action or failure to
act on the earlier of: (i) the date upon which any publicly available
filing or release is made with respect to such action or failure to act
or (ii) promptly prior to the date of consummation of such action or
failure to act. The Issuer shall furnish to the Insurer all information
requested by it that is reasonably necessary to determine compliance
with this paragraph.
(b) WAIVER, AMENDMENTS, ETC. The Issuer shall not waive,
modify or amend, or consent to any waiver, modification or amendment
of, any of the material terms, provisions or conditions of the
Transaction Documents without the consent of the Insurer which consent
shall not unreasonably be withheld. Except upon the prior written
consent of the Insurer which consent shall not unreasonably be
withheld, the Issuer shall not allow the transfer, modification or
amendment, nor consent to any transfer, modification or amendment of
the Certificate of Trust issued pursuant to the Trust Agreement.
30
Section 2.11. REPRESENTATION AND WARRANTIES OF THE DEPOSITOR. The
Depositor represents, warrants and covenants as follows:
(a) DUE ORGANIZATION AND QUALIFICATION. The Depositor is a
corporation, duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation. The Depositor is
duly qualified to do business, is in good standing and has obtained all
necessary licenses, permits, charters, registrations and approvals
(together, "approvals") necessary for the conduct of its business as
currently conducted and as described in the Offering Document and the
performance of its obligations under the Transaction Documents, in each
jurisdiction in which the failure to be so qualified or to obtain such
approvals would render any Transaction Document unenforceable in any
respect or would have a material adverse effect upon the Transaction.
(b) POWER AND AUTHORITY. The Depositor has all necessary
corporate power and authority to conduct its business as currently
conducted and, as described in the Offering Document, to execute,
deliver and perform its obligations under the Transaction Documents to
which it is a party and to consummate the Transaction.
(c) DUE AUTHORIZATION. The execution, delivery and performance
of the Transaction Documents by the Depositor have been duly authorized
by all necessary corporate action and do not require any additional
approvals or consents, or other action by or any notice to or filing
with any Person, including, without limitation, any governmental entity
or the Depositor's stockholders, which have not previously been
obtained or given by the Depositor.
(d) NONCONTRAVENTION. Neither the execution and delivery of
the Transaction Documents to which it is a party by the Depositor the
consummation of the transactions contemplated thereby nor the
satisfaction of the terms and conditions of the Transaction Documents:
(i) conflicts with or results in any breach or
violation of any provision of the certificate of incorporation
or bylaws of the Depositor or any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or
award currently in effect having applicability to the
Depositor or any of their material properties, including
regulations issued by an administrative agency or other
governmental authority having supervisory powers over the
Depositor;
(ii) constitutes a default by the Depositor or a
breach of any provision of any material loan agreement,
mortgage, indenture or other material agreement or instrument
to which the Depositor is a party or by which any of its or
their respective properties, which are individually or in the
aggregate material to the Depositor, is or may be bound or
affected; or
31
(iii) results in or requires the creation of any lien
upon or in respect of any assets of the Depositor, except as
contemplated by the Transaction Documents.
(e) LEGAL PROCEEDINGS. There is no action, proceeding or
investigation by or before any court, governmental or administrative
agency or arbitrator against or affecting the Depositor, or any of its
subsidiaries, or any properties or rights of the Depositor, or any of
its subsidiaries, pending or, to the Depositor's knowledge after
reasonable inquiry, threatened, which, in any case, could reasonably be
expected to result in a Material Adverse Change with respect to the
Depositor.
(f) VALID AND BINDING OBLIGATIONS. The Transaction Documents
to which the Depositor is a party, when executed and delivered by the
Depositor, will constitute the legal, valid and binding obligations of
the Depositor, enforceable in accordance with their respective terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and general equitable principles and public policy
considerations as to rights of indemnification for violations of
federal securities laws. The Depositor will not at any time in the
future deny that the Transaction Documents constitute the legal, valid
and binding obligations of the Depositor.
(g) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy
employed, or proposed to be employed, by the Depositor in the conduct
of its business violates any law, regulation, judgment, agreement,
order or decree applicable to it that, if enforced, could reasonably be
expected to result in a Material Adverse Change with respect to the
Depositor. The Depositor is not in breach of or in default under any
applicable law or administrative regulation of its jurisdiction of
incorporation, or any department, division, agency or instrumentality
thereof or of the United States or any applicable judgment or decree or
any loan agreement, note, resolution, certificate, agreement or other
instrument to which the Depositor is a party or is otherwise subject
which, if enforced, would have a material adverse effect on the ability
of the Depositor to perform its respective obligations under the
Transaction Documents.
(h) TAXES. The Depositor and the Depositor's parent company
have filed prior to the date hereof all federal and state tax returns
that are required to be filed and paid all taxes, including any
assessments received by it that are not being contested in good faith,
to the extent that such taxes have become due, except for any failures
to file or pay that, individually or in the aggregate, would not result
in a Material Adverse Change with respect to the Depositor.
(i) [RESERVED]
(j) COMPLIANCE WITH SECURITIES LAWS. The offer and sale of the
Obligations comply in all material respects with all requirements of
law, including all registration requirements of applicable securities
laws. Without limitation of the foregoing, the
32
Offering Document does not contain any untrue statement of a material
fact and does not omit to state a material fact necessary to make the
statements made therein, in light of the circumstances under which they
were made, not misleading; provided, however, that no representation is
made with respect to the Insurer Information, to the Underwriter
Information, to the RBMG Information or to the Sub-Servicer
Information. Neither the offer nor the sale of the Obligations has been
or will be in violation of the Securities Act or any other federal or
state securities laws. The Issuer is not required to be registered as
an "investment company" under the Investment Company Act.
(k) TRANSACTION DOCUMENTS. Each of the representations and
warranties of the tepositor contained in the Transaction Documents is
true and correct in all material respects, and the Depositor hereby
makes each such representation and warranty to, and for the benefit of,
the Insurer as if the same were set forth in full herein.
(l) SOLVENCY. The Depositor is solvent and will not be
rendered insolvent by the Transaction and, after giving effect to the
Transaction, the Depositor will not be left with an unreasonably small
amount of capital with which to engage in its business, nor does the
Depositor intend to incur, or believe that it has incurred, debts
beyond its ability to pay as they mature. The Depositor does not
contemplate the commencement of insolvency, bankruptcy, liquidation or
consolidation proceedings or the appointment of a receiver, liquidator,
conservator, trustee or similar official in respect of the Depositor or
any of its assets.
(m) PRINCIPAL PLACE OF BUSINESS. The principal place of
business of the Depositor is located in Charlotte, North Carolina.
(n) OPINION FACTS AND ASSUMPTIONS. The Opinion Facts and
Assumptions insofar as they relate to the Depositor are true and
correct as of the Date of Issuance.
Section 2.12. AFFIRMATIVE COVENANTS OF THE DEPOSITOR. The Depositor
hereby agrees that during the Term of the Insurance Agreement, unless the
Insurer shall otherwise expressly consent in writing:
(a) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. The
Depositor shall not be in default under the Transaction Documents and
shall comply with all material requirements of any law, rule or
regulation applicable to it. The Depositor shall not agree to any
amendment to or modification of the terms of any Transaction Documents
unless the Insurer shall have given its prior written consent, which
consent will not be unreasonably withheld.
(b) CORPORATE EXISTENCE. The Depositor, and its successors and
assigns, shall maintain its corporate existence and shall at all times
continue to be duly organized under the laws of its jurisdiction of
incorporation and duly qualified and duly authorized (as described in
subsections 2.11(a), (b) and (c) hereof) and shall conduct its business
in accordance with the terms of its certificate or articles of
incorporation and bylaws.
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(c) FINANCIAL STATEMENTS. The Depositor shall keep or cause to
be kept in reasonable detail books and records of account of its assets
and business, including, but not limited to, books and records relating
to the Transaction.
(d) THE DEPOSITOR SHAREHOLDER MEETINGS. The Depositor shall
have annual shareholder meetings and at least annual board of director
meetings and shall prepare income and franchise tax returns as
appropriate. The Depositor shall deliver to the Insurer copies of the
minutes of such meetings no later than April 30 of each year and such
tax returns promptly upon filing but in no event later than August 31
of each year, beginning in 1999.
(e) DISCLOSURE DOCUMENT. Each Offering Document delivered with
respect to the Obligations shall clearly disclose that the Policy is
not covered by the property/casualty insurance security fund specified
in Article 76 of the New York Insurance Law.
(f) MAINTENANCE OF LICENSES. The Depositor, or any of its
successors shall maintain or cause to be maintained all licenses,
permits, charters and registrations which are material to the conduct
of its business.
Section 2.13. NEGATIVE COVENANTS OF THE DEPOSITOR. The Depositor hereby
agrees that during the Term of the Insurance Agreement, unless the Insurer shall
otherwise expressly consent in writing:
(a) IMPAIRMENT OF RIGHTS. The Depositor shall not take any
action, or fail to take any action, if such action or failure to take
action may result in a material adverse change as described in clause
(ii) of the definition of Material Adverse Change with respect to the
Depositor, or may interfere with the enforcement of any rights of the
Insurer under or with respect to the Transaction Documents. The
Depositor shall give the Insurer written notice of any such action or
failure to act on the earlier of: (i) the date upon which any publicly
available filing or release is made with respect to such action or
failure to act or (ii) promptly prior to the date of consummation of
such action or failure to act. The Depositor shall furnish to the
Insurer all information requested by it that is reasonably necessary to
determine compliance with this subsection (a).
(b) ADVERSE SELECTION PROCEDURE. The Depositor has not and
shall not use any adverse selection procedure in selecting Mortgage
Loans to be transferred to the Indenture Trustee from the outstanding
mortgage loans that qualify under the Indenture for inclusion in the
Trust.
(c) WAIVER, AMENDMENTS, ETC. The Depositor shall not waive,
modify or amend, or consent to any waiver, modification or amendment
of, any of the terms, provisions or conditions of any of the
Transaction Documents without the prior written consent of the Insurer.
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(d) AMENDMENT OF DEPOSITOR'S CERTIFICATE OF INCORPORATION. The
Depositor shall not amend its certificate of incorporation if such
amendment would have an adverse impact on the Transaction without the
Insurer's prior written consent.
ARTICLE III
THE POLICY; REIMBURSEMENT
Section 3.01. ISSUANCE OF THE POLICY. The Insurer agrees to issue the
Policy on the Closing Date subject to satisfaction of the conditions precedent
set forth below:
(a) PAYMENT OF INITIAL BOND INSURER PREMIUM AND EXPENSES. The
Insurer shall have been paid, by RBMG and the Depositor, that portion
of a nonrefundable Bond Insurer Premium payable on the Date of Issuance
and RBMG shall agree to reimburse or pay directly other fees and
expenses identified in Section 3.02 hereof as payable.
(b) TRANSACTION DOCUMENTS. The Insurer shall have received a
fully executed copy of the Commitment and a copy of each of the
Transaction Documents, in form and substance satisfactory to the
Insurer, duly authorized, executed and delivered by each party thereto.
(c) CERTIFIED DOCUMENTS AND RESOLUTIONS. The Insurer shall
have received a copy of (i) the certificate or articles of
incorporation and bylaws of the Servicer, RBMG, the Sub-Servicer, the
Company, Funding Co. and the Depositor and (ii) the resolutions of
RBMG's, the Company's, Funding Co.'s and the Depositor's Board of
Directors authorizing the sale of the Mortgage Loans and (iii) the
execution, delivery and performance by the Servicer, the Issuer, RBMG,
the Sub-Servicer, the Company, Funding Co. and the Depositor of the
Transaction Documents and the transactions contemplated thereby,
certified by the Secretary or an Assistant Secretary of the Servicer,
RBMG, the Sub-Servicer, the Company, Funding Co. and the Depositor
(which certificate shall state that such certificate or articles of
incorporation, bylaws and resolutions are in full force and effect
without modification on the Date of Issuance).
(d) THE CERTIFICATE OF TRUST OF THE ISSUER. The Insurer shall
have received a copy of the Certificate of Trust of the Issuer.
(e) INCUMBENCY CERTIFICATE. The Insurer shall have received a
certificate of the Secretary or an Assistant Secretary of the Servicer,
RBMG, the Sub-Servicer, the Company, Funding Co., the Indenture Trustee
and the Depositor certifying the names and signatures of the officers
of the Servicer, RBMG, the Sub-Servicer, the Company, Funding Co., the
Indenture Trustee and the Depositor authorized to execute and deliver
the Transaction Documents and that shareholder consent to the execution
and delivery of such documents is not necessary.
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(f) REPRESENTATIONS AND WARRANTIES; CERTIFICATE. The
representations and warranties of the Servicer, RBMG, the Sub-Servicer,
the Company, Funding Co., the Indenture Trustee and the Depositor set
forth or incorporated by reference in this Insurance Agreement shall be
true and correct as of the Date of Issuance as if made on the Date of
Issuance and the Insurer shall have received a certificate of
appropriate officers of the Servicer, RBMG, the Sub-Servicer, the
Company, Funding Co., the Indenture Trustee and the Depositor to that
effect.
(g) OPINIONS OF COUNSEL.
(i) The general counsel of RBMG and the Servicer
shall have issued its favorable opinion, in form and substance
acceptable to the Insurer and its counsel, regarding the
corporate existence and authority of RBMG and the Servicer and
the validity and enforceability of the Transaction Documents
against RBMG and the Servicer. The general counsel of RBMG
shall have issued its favorable opinion, in form and substance
acceptable to the Insurer and its counsel, regarding the
corporate existence and authority of Funding Co. and the
Company and the validity and enforceability of the Transaction
Documents against Funding Co. and the Company. The law firm of
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP shall have issued its favorable opinion,
in form and substance acceptable to the Insurer and its
counsel, regarding the corporate existence and authority of
the Depositor, First Union and the validity and enforceability
of the Transaction Documents against the Depositor.
(ii) The law firm of ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP shall have
furnished its opinions, in form and substance acceptable to
the Insurer and its counsel, regarding the sale of the
Mortgage Loans
(iii) The law firm of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP shall have
furnished its opinions in form and substance acceptable to the
Insurer and its counsel regarding the sale of Mortgage Loans
and the tax treatment of payments on the Obligations under
federal and New York tax laws.
(iv) The Insurer shall have received such other
opinions of counsel, in form and substance reasonably
acceptable to the Insurer and its counsel, addressing such
other matters as the Insurer may reasonably request. Each
opinion of counsel delivered in connection with the
Transaction shall be addressed to and delivered to the
Insurer.
(h) APPROVALS, ETC. The Insurer shall have received true and
correct copies of all approvals, licenses and consents, if any,
including, without limitation, any required approval of the
shareholders of the Servicer, RBMG, the Sub-Servicer the Company,
Funding Co. and the Depositor, required in connection with the
Transaction.
36
(i) NO LITIGATION, ETC. No suit, action or other proceeding,
investigation or injunction, or final judgment relating thereto, shall
be pending or threatened before any court or governmental agency in
which it is sought to restrain or prohibit or to obtain damages or
other relief in connection with the Transaction Documents or the
consummation of the Transaction.
(j) LEGALITY. No statute, rule, regulation or order shall have
been enacted, entered or deemed applicable by any government or
governmental or administrative agency or court that would make the
transactions contemplated by any of the Transaction Documents illegal
or otherwise prevent the consummation thereof.
(k) ISSUANCE OF RATINGS. The Insurer shall have received
confirmation that the risk secured by the Policy constitutes an
investment grade risk by S&P and ▇▇▇▇▇'▇, and that the Obligations,
when issued, will be rated "AAA" by S&P and "Aaa" by ▇▇▇▇▇'▇.
(l) NO DEFAULT. No Default or Event of Default shall have
occurred.
(m) ADDITIONAL ITEMS. The Insurer shall have received such
other documents, instruments, approvals or opinions requested by the
Insurer or its counsel as may be reasonably necessary to effect the
Transaction, including, but not limited to, evidence satisfactory to
the Insurer and its counsel that the conditions precedent, if any, in
the Transaction Documents have been satisfied.
(n) CONFORM TO DOCUMENTS. The Insurer and its counsel shall
have determined that all documents, certificates and opinions to be
delivered in connection with the Obligations conform to the terms of
the Transaction Documents.
(o) COMPLIANCE WITH COMMITMENT. All other terms, conditions
and requirements of the Commitment shall have been satisfied.
(p) SATISFACTION OF CONDITIONS OF THE UNDERWRITER AGREEMENT.
All conditions in the Underwriter Agreement relating to the
Underwriter's obligation to purchase the Obligations shall have been
satisfied.
(q) UNDERWRITER AGREEMENT. The Insurer shall have received
copies of each of the documents, and shall be entitled to rely on each
of the documents, required to be delivered to the Underwriter pursuant
to the Underwriter Agreement.
Section 3.02. PAYMENT OF FEES AND BOND INSURER PREMIUM.
(a) LEGAL AND ACCOUNTING FEES. RBMG, the Servicer, the
Company, Funding Co. and the Depositor shall pay or cause to be paid,
on the Date of Issuance, legal fees and disbursements incurred by the
Insurer in connection with the issuance of the Policy and any fees of
the Insurer's auditors in accordance with the terms of the Commitment.
Any fees of the Insurer's auditors payable in respect of any amendment
or supplement to
37
the Offering Document or any other Offering Document incurred after the
Date of Issuance shall be paid by RBMG, the Company, Funding Co. and
the Depositor on demand.
(b) BOND INSURER PREMIUM. In consideration of the issuance by
the Insurer of the Policy, the Insurer shall be entitled to receive the
Bond Insurer Premium as and when due in accordance with the terms of
the Commitment (i) in the case of Bond Insurer Premium due on or before
the Date of Issuance, directly from RBMG, the Servicer, the Company,
Funding Co. and the Depositor and (ii) in the case of Bond Insurer
Premium due after the Date of Issuance, FIRST, pursuant to the
Indenture, and SECOND, to the extent the amounts in subclause FIRST are
not sufficient, directly from RBMG. For purposes of the Indenture, the
term "Bond Insurer Premium Rate" shall be based upon the "Premium
Percentage" set forth in paragraph 1(a) of the Commitment. The Bond
Insurer Premium shall be calculated according to paragraph 1(a) of the
Commitment for the amount due on or before the Date of Issuance and
paragraph 1(b) of the Commitment for the amount due on each Payment
Date. The Bond Insurer Premium paid hereunder or under the Indenture
shall be nonrefundable without regard to whether the Insurer makes any
payment under the Policy or any other circumstances relating to the
Obligations or provision being made for payment of the Obligations
prior to maturity. RBMG, the Servicer, the Company, Funding Co., the
Depositor and the Indenture Trustee shall make all payments of Bond
Insurer Premium to be made by them by wire transfer to an account
designated from time to time by the Insurer by written notice to RBMG,
the Servicer, the Company, Funding Co., the Depositor and the Indenture
Trustee.
Section 3.03. REIMBURSEMENT AND ADDITIONAL PAYMENT OBLIGATION. (a) In
accordance with the priorities established in Section 8.02(c) or Section 5.07,
as applicable, of the Indenture, the Insurer shall be entitled to reimbursement
for any payment made by the Insurer under the Policy, which reimbursement shall
be due and payable on the date that any amount is to be paid pursuant to a
Notice (as defined in the Policy), in an amount equal to the amount to be so
paid and all amounts previously paid that remain unreimbursed, together with
interest on any and all amounts remaining unreimbursed (to the extent permitted
by law, if in respect of any unreimbursed amounts representing interest) from
the date such amounts became due until paid in full (after as well as before
judgment), at a rate of interest equal to the Late Payment Rate.
(b) Notwithstanding anything in subsection 3.03(a) to the contrary, (i)
RBMG and the Company agree to reimburse the Insurer for payments made under the
Policy arising as a result of RBMG's or the Company's failure to repurchase any
Mortgage Loan required to be repurchased pursuant to Section 7 of the
Contribution Agreement, together with interest on any and all amounts remaining
unreimbursed (to the extent permitted by law, if in respect of any unreimbursed
amounts representing interest) from the date such amounts became due until paid
in full (after as well as before judgment), at a rate of interest equal to the
Late Payment Rate, (ii) in the event that the Sub-Servicing Agreement is
terminated, the Servicer agrees to reimburse the Bond Insurer for payments made
under the Policy, arising as a result of the Servicer's failure to deposit into
the Collection Account or the Note Account any amount required to be so
38
deposited pursuant to the Servicing Agreement together with interest on any and
all amounts remaining unreimbursed (to the extent permitted by law, if in
respect to any unreimbursed amounts representing interest) from the date such
amounts became due until paid in full (after as well as before judgment), at a
rate of interest equal to the Late Payment Rate and (iii) the Sub-Servicer
agrees to reimburse the Bond Insurer for payments made under the Policy, arising
as a result of the Sub-Servicer's failure to deposit into the Collection Account
(or any similar account established pursuant to the Sub-Servicing Agreement) or
the Note Account any amount required to be so deposited pursuant to the
Sub-Servicing Agreement together with interest on any and all amounts remaining
unreimbursed (to the extent permitted by law, if in respect to any unreimbursed
amounts representing interest) from the date such amounts became due until paid
in full (after as well as before judgment), at a rate of interest equal to the
Late Payment Rate.
(c) RBMG, the Servicer and the Company agree to pay to the Insurer as
follows: any and all charges, fees, costs and expenses that the Insurer may
reasonably pay or incur, including, but not limited to, attorneys' and
accountants' fees and expenses, in connection with (i) any accounts established
to facilitate payments under the Policy to the extent the Insurer has not been
immediately reimbursed on the date that any amount is paid by the Insurer under
the Policy, (ii) the enforcement, defense or preservation of any rights in
respect of any of the Transaction Documents, including defending, monitoring or
participating in any litigation or proceeding (including any insolvency or
bankruptcy proceeding in respect of any Transaction participant or any affiliate
thereof) relating to any of the Transaction Documents, any party to any of the
Transaction Documents, in its capacity as such a party, or the Transaction,
(iii) any amendment, waiver or other action with respect to, or related to, any
Transaction Document, whether or not executed or completed, or (iv) preparation
of bound volumes of the Transaction documents; costs and expenses shall include
a reasonable allocation of compensation and overhead attributable to the time of
employees of the Insurer spent in connection with the actions described in
clause (ii) above, and the Insurer reserves the right to charge a reasonable fee
as a condition to executing any waiver or consent proposed in respect of any of
the Transaction Documents.
(d) The Sub-Servicer agrees to pay to the Insurer as follows: any and
all charges, fees, costs and expenses that the Insurer may reasonably pay or
incur, including, but not limited to, attorneys' and accountants' fees and
expenses in connection with an Event of Default by the Sub-Servicer.
(e) RBMG, the Servicer, the Company, Funding Co. and the Depositor
severally but not jointly, to the extent liable, agree to pay to the Insurer as
follows: interest on any and all amounts described in subsections (b), (c), (f)
and (g) of this Section 3.03 from the date payable or paid by such party until
payment thereof in full, and interest on any and all amounts described in
Section 3.02 hereof from the date due until payment thereof in full, in each
case, payable to the Insurer at the Late Payment Rate per annum. The
Sub-Servicer agrees to pay to the Insurer as follows: interest on any and all
amounts described in subsections (b)(iii), (d), (f)(ii) and (g)(ii) of this
Section 3.03 from the date payable or paid by such party until payment thereof
in full, payable to the Insurer at the Late Payment Rate per annum.
39
(f) (i) RBMG, the Servicer, the Company, Funding Co. and the Depositor
severally but not jointly, to the extent liable, agree to pay to the Insurer as
follows: any payments made by the Insurer on behalf of, or advanced to, RBMG,
the Servicer, the Company, Funding Co. or the Depositor, respectively,
including, without limitation, any amounts payable by RBMG, the Servicer, the
Company, Funding Co. or the Depositor pursuant to the Obligations or any other
Transaction Documents.
(ii) The Sub-Servicer agrees to pay to the Insurer as follows:
any payments made by the Insurer on behalf of, or advanced to, the Sub-Servicer,
including, without limitation, any amounts payable by the Sub-Servicer pursuant
to the Transaction Documents to the extent such amounts were required to be paid
or advanced by the Sub-Servicer pursuant to the Transaction Documents.
(g) (i) Following termination of the Indenture pursuant to Section
10.01 or Section 4.01 thereof, RBMG agrees to reimburse the Insurer for any
Insured Payments required to be made pursuant to the Policy subsequent to the
date of such termination.
(ii) Following termination of the Indenture pursuant to
Section 10.01 or Section 5.02 thereof, the Sub-Servicer agrees to reimburse the
Insurer for any Insured Payments required to be made pursuant to the Policy
subsequent to the date of such termination attributable to an Event of Default
by the Sub-Servicer.
All such amounts are to be immediately due and payable without demand.
Section 3.04. INDEMNIFICATION BY RBMG, THE SERVICER, THE COMPANY AND
FUNDING CO.; LIMITATION OF LIABILITY. (a) In addition to any and all rights of
indemnification or any other rights of the Insurer pursuant hereto or under law
or equity, RBMG, the Servicer, the Company, Funding Co. and any successors
thereto agree to pay, and to protect, indemnify and save harmless, the Insurer
and its officers, directors, shareholders, employees, agents, and each person,
if any, who controls the Insurer within the meaning of either Section 15 of the
Securities Act or Section 20 of the Securities Exchange Act from and against any
and all claims, Losses, liabilities (including penalties), actions, suits,
judgments, demands, damages, costs or reasonable expenses (including, without
limitation, reasonable fees and expenses of attorneys, consultants and auditors
and reasonable costs of investigations) or obligations whatsoever paid by the
Insurer (herein collectively referred to as "Liabilities") of any nature arising
out of or relating to the transactions contemplated by the Transaction Documents
by reason of:
(i) any untrue statement or alleged untrue statement of a
material fact contained in the RBMG Information and the Depositor
Information with respect to information in the Prospectus Supplement
under the headings "SUMMARY--DESCRIPTION OF THE NOTES," "RISK FACTORS"
(other than information under the sub-headings "--Book-Entry
Registration May Reduce the Liquidity of the Notes," "--An Investment
in the Notes May Be an Illiquid Investment," and "--Year 2000 Issue May
Adversely Affect The Distribution to Noteholders"), "DESCRIPTION OF THE
NOTES" (other than information under the sub-heading "--BOOK-ENTRY
40
REGISTRATION AND DEFINITIVE NOTES") and "CERTAIN PREPAYMENT AND YIELD
CONSIDERATIONS" (other than information under the sub-heading
"--WEIGHTED AVERAGE LIFE OF THE NOTES") or in any amendment or
supplement thereto or in any preliminary offering document, or arising
out of or based upon any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading;
(ii) to the extent not covered by clause (i) above, any act or
omission of RBMG, the Servicer, the Company or Funding Co., or the
allegation thereof, in connection with the offering, issuance, sale or
delivery of the Obligations other than by reason of false or misleading
information provided by the Insurer in writing for inclusion in the
Offering Document as specified in clause (i) above;
(iii) the misfeasance or malfeasance of, or negligence or
theft committed by, any director, officer, employee or agent of RBMG,
the Servicer, the Company or Funding Co.;
(iv) the violation by the Company, Funding Co., the Servicer
or RBMG of any federal or state securities, banking or antitrust laws,
rules or regulations in connection with the issuance, offer and sale of
the Obligations or the transactions contemplated by the Transaction
Documents;
(v) the violation by the Company, Funding Co., the Servicer or
RBMG of any federal or state laws, rules or regulations relating to the
Transaction, including without limitation the maximum amount of
interest permitted to be received on account of any loan of money or
with respect to the Mortgage Loans;
(vi) the breach by the Company, Funding Co., the Servicer or
RBMG of any of its obligations under this Insurance Agreement or any of
the other Transaction Documents; and
(vii) the breach by RBMG, the Servicer, the Company or Funding
Co. of any representation or warranty on the part of RBMG, the
Servicer, the Company or Funding Co. contained in the Transaction
Documents or in any certificate or report furnished or delivered to the
Insurer thereunder.
This indemnity provision shall survive the termination of this Insurance
Agreement and shall survive until the statute of limitations has run on any
causes of action which arise from one of these reasons and until all suits filed
as a result thereof have been finally concluded.
(b) RBMG agrees to indemnify the Trust and the Insurer for any and all
Liabilities incurred by the Issuer and the Insurer due to any claim,
counterclaim, rescission, setoff or defense asserted by an Obligor under any
Mortgage Loan subject to the Federal Trade Commission regulations provided in 16
C.F.R. Part 433 and under any Mortgage Loan which is a "mortgage" as such term
is defined in 15 U.S.C. ss.1602(aa).
41
(c) Any party which proposes to assert the right to be indemnified
under this Section 3.04 will, promptly after receipt of notice of commencement
of any action, suit or proceeding against such party in respect of which a claim
is to be made against RBMG, the Servicer, the Company or Funding Co. under this
Section 3.04, notify RBMG, the Servicer, the Company or Funding Co. of the
commencement of such action, suit or proceeding, enclosing a copy of all papers
served. In case any action, suit or proceeding shall be brought against any
indemnified party and it shall notify RBMG, the Servicer, the Company or Funding
Co. of the commencement thereof, RBMG, the Servicer, the Company or Funding Co.
shall be entitled to participate in, and, to the extent that it shall wish, to
assume the defense thereof, with counsel satisfactory to such indemnified party,
and after notice from RBMG, the Servicer, the Company or Funding Co. to such
indemnified party of its election so to assume the defense thereof, RBMG, the
Servicer, the Company or Funding Co. shall not be liable to such indemnified
party for any legal or other expenses other than reasonable costs of
investigation subsequently incurred by such indemnified party in connection with
the defense thereof. The indemnified party shall have the right to employ its
counsel in any such action the defense of which is assumed by RBMG, the
Servicer, the Company or Funding Co. in accordance with the terms of this
subsection (c), but the fees and expenses of such counsel shall be at the
expense of such indemnified party unless the employment of counsel by such
indemnified party has been authorized by RBMG, the Servicer, the Company or
Funding Co. RBMG, the Servicer, the Company or Funding Co. shall not be liable
for any settlement of any action or claim effected without its consent.
Section 3.05. INDEMNIFICATION BY SUB-SERVICER; LIMITATION OF LIABILITY.
(a) In addition to any and all rights of indemnification or any other rights of
the Insurer pursuant hereto or under law or equity, the Sub-Servicer and any
successors thereto agree to pay, and to protect, indemnify and save harmless,
the Insurer and its officers, directors, shareholders, employees, agents, and
each person, if any, who controls the Insurer within the meaning of either
Section 15 of the Securities Act or Section 20 of the Securities Exchange Act
from and against any and all claims, Losses, liabilities (including penalties),
actions, suits, judgments, demands, damages, costs or reasonable expenses
(including, without limitation, reasonable fees and expenses of attorneys,
consultants and auditors and reasonable costs of investigations) or obligations
whatsoever paid by the Insurer (herein collectively referred to as
"Liabilities") of any nature arising out of or relating to the transactions
contemplated by the Transaction Documents by reason of:
(i) any untrue statement or alleged untrue statement of a
material fact contained in the Sub-Servicer Information or in any
amendment or supplement thereto or in any preliminary offering
document, or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading;
(ii) the misfeasance or malfeasance of, or negligence or theft
committed by, any director, officer, employee or agent of the
Sub-Servicer;
42
(iii) the violation by the Sub-Servicer of any federal or
state securities, banking or antitrust laws, rules or regulations in
connection with the transactions contemplated by the Transaction
Documents;
(iv) the violation by the Sub-Servicer of any federal or state
laws, rules or regulations relating to the Transaction;
(v) the breach by the Sub-Servicer of any of its obligations
under this Insurance Agreement or any of the other Transaction
Documents; and
(vi) the breach by the Sub-Servicer of any representation or
warranty on the part of the Sub-Servicer contained in the Transaction
Documents or in any certificate or report furnished or delivered to the
Insurer thereunder.
This indemnity provision shall survive the termination of this Insurance
Agreement and shall survive until the statute of limitations has run on any
causes of action which arise from one of these reasons and until all suits filed
as a result thereof have been finally concluded.
(b) Any party which proposes to assert the right to be indemnified
under this Section 3.05 will, promptly after receipt of notice of commencement
of any action, suit or proceeding against such party in respect of which a claim
is to be made against the Sub-Servicer under this Section 3.05, notify the
Sub-Servicer of the commencement of such action, suit or proceeding, enclosing a
copy of all papers served. In case any action, suit or proceeding shall be
brought against any indemnified party and it shall notify the Sub-Servicer of
the commencement thereof, the Sub-Servicer shall be entitled to participate in,
and, to the extent that it shall wish, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the Sub-Servicer to such indemnified party of its election so to assume the
defense thereof, the Sub-Servicer shall not be liable to such indemnified party
for any legal or other expenses other than reasonable costs of investigation
subsequently incurred by such indemnified party in connection with the defense
thereof. The indemnified party shall have the right to employ its counsel in any
such action the defense of which is assumed by the Sub-Servicer in accordance
with the terms of this subsection (b), but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless the employment of
counsel by such indemnified party has been authorized by the Sub-Servicer. The
Sub-Servicer shall not be liable for any settlement of any action or claim
effected without its consent.
Section 3.06. [RESERVED]
Section 3.07. INDEMNIFICATION BY FIRST UNION; LIMITATION OF LIABILITY.
(a) In addition to any and all rights of indemnification or any other rights of
the Insurer pursuant hereto or under law or equity, First Union and any
successors thereto agree to pay, and to protect, indemnify and save harmless,
the Insurer and its officers, directors, shareholders, employees, agents, and
each person, if any, who controls the Insurer within the meaning of either
Section 15 of the Securities Act of 1933, as amended, or Section 20 of the
Securities and Exchange Act of 1934, as amended, from and against any and all
claims, losses, liabilities (including penalties), actions, suits,
43
judgments, demands, damages, costs or reasonable expenses (including, without
limitation, reasonable fees and expenses of attorneys, consultants and auditors
and reasonable costs of investigations) or obligations whatsoever paid by the
Insurer (herein collectively referred to as "Liabilities") of any nature arising
out of or relating to the transactions contemplated by the Transaction Documents
by reason of:
(i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or Offering
Document, or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except
insofar as such Liabilities arise out of or are based upon any such
untrue statement or omission or allegation thereof based upon the
Insurer Information, RBMG Information, the Underwriter Information or
the Sub-Servicer Information, or as such Liabilities arise out of or
are based upon any such untrue statement or omission or allegation
thereof based upon the Depositor Information for which RBMG, the
Servicer, the Company and Funding Co. have agreed to indemnify the
Insurer pursuant to Section 3.04 hereof;
(ii) to the extent not covered by clause (i) above, any act or
omission of the Depositor in connection with the offering, issuance,
sale or delivery of the Obligations other than by reason of false or
misleading information provided by the Insurer, the Underwriter, the
Servicer, RBMG, Funding Co., the Company or the Sub-Servicer in writing
for inclusion in the Offering Document or as specified in clause (i)
above or the allegation thereof;
(iii) the misfeasance or malfeasance of, or negligence or
theft committed by, any director, officer, employee or agent of the
Depositor;
(iv) the violation by the Depositor of any federal or state
securities, banking or antitrust laws, rules or regulations in
connection with the issuance, offer and sale of the Obligations or the
transactions contemplated by the Transaction Documents;
(v) the breach by the Depositor of any of its obligations
under this Insurance Agreement or any of the Transaction Documents to
which the Depositor is a party; and
(vi) the breach by the Depositor of any representation or
warranty on the part of the Depositor contained in the Transaction
Documents to which the Depositor is a party or in any certificate or
report furnished or delivered to the Insurer thereunder.
This indemnity provision shall survive the termination of this Agreement and
shall survive until the statute of limitations has run on any causes of action
which arise from one of these reasons and until all suits filed as a result
thereof have been finally concluded.
(b) Any party which proposes to assert the right to be indemnified
under this Section 3.07 will, promptly after receipt of notice of commencement
of any action, suit or proceeding against such party in respect of which a claim
is to be made against First Union under
44
this Section 3.07, notify First Union of the commencement of such action, suit
or proceeding, enclosing a copy of all papers served. In case any action, suit
or proceeding shall be brought against any indemnified party and it shall notify
First Union of the commencement thereof, First Union shall be entitled to
participate in, and, to the extent that it shall wish, to assume the defense
thereof, with counsel satisfactory to such indemnified party, and after notice
from First Union to such indemnified party of its election so to assume the
defense thereof, First Union shall not be liable to such indemnified party for
any legal or other expenses other than reasonable costs of investigation
subsequently incurred by such indemnified party in connection with the defense
thereof. The indemnified party shall have the right to employ its counsel in any
such action the defense of which is assumed by First Union in accordance with
the terms of this subsection (b), but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless the employment of
counsel by such indemnified party has been authorized by First Union. First
Union shall not be liable for any settlement of any action or claim effected
without its consent.
Section 3.08. PAYMENT PROCEDURE. In the event of any payment by the
Insurer, the Indenture Trustee, RBMG, the Servicer, the Company, Funding Co.,
First Union, the Sub-Servicer and the Depositor agree to accept objective
evidence of payment as prima facie evidence of the propriety thereof and the
liability therefor to the Insurer. All payments to be made to the Insurer under
this Insurance Agreement shall be made to the Insurer in lawful currency of the
United States of America in immediately available funds at the notice address
for the Insurer as specified in Section 6.02 hereof on the date when due or as
the Insurer shall otherwise direct by written notice to the other parties
hereto. In the event that the date of any payment to the Insurer or the
expiration of any time period hereunder occurs on a day which is not a Business
Day, then such payment or expiration of time period shall be made or occur on
the next succeeding Business Day with the same force and effect as if such
payment was made or time period expired on the scheduled date of payment or
expiration date. Payments to be made to the Insurer under this Insurance
Agreement shall bear interest at the Late Payment Rate from the date when due to
the date paid.
ARTICLE IV
FURTHER AGREEMENTS
Section 4.01. EFFECTIVE DATE; TERM OF THE INSURANCE AGREEMENT. This
Insurance Agreement shall take effect on the Date of Issuance and shall remain
in effect until the later of (a) such time as the Insurer is no longer subject
to a claim under the Policy and the Policy shall have been surrendered to the
Insurer for cancellation and (b) all amounts payable to the Insurer by the
Servicer, the Indenture Trustee, RBMG, the Sub-Servicer, the Issuer, the
Company, Funding Co. First Union or the Depositor or from any other source under
the Transaction Documents and all amounts payable under the Obligations have
been paid in full; provided, however, that the provisions of Sections 3.02,
3.03, 3.04, 3.05, 3.06, 3.07 and 4.06 hereof shall survive any termination of
this Insurance Agreement.
45
Section 4.02. FURTHER ASSURANCES AND CORRECTIVE INSTRUMENTS. (a)
Excepting at such times as a default in payment under the Policy shall exist or
shall have occurred, none of the Servicer, the Indenture Trustee, RBMG, the
Sub-Servicer, the Issuer, the Company, Funding Co. or the Depositor shall grant
any waiver of rights under any of the Transaction Documents to which any of them
is a party without the prior written consent of the Insurer, and any such waiver
without the prior written consent of the Insurer shall be null and void and of
no force or effect.
(b) To the extent permitted by law, the Servicer, the Indenture
Trustee, RBMG, the Sub-Servicer, the Issuer, the Company, Funding Co., First
Union and the Depositor agree that they will, from time to time, execute,
acknowledge and deliver, or cause to be executed, acknowledged and delivered,
such supplements hereto and such further instruments as the Insurer may request
and as may be required in the Insurer's judgment to effectuate the intention of
or facilitate the performance of this Insurance Agreement.
Section 4.03. OBLIGATIONS ABSOLUTE. (a) The obligations of the
Servicer, the Indenture Trustee, RBMG, the Sub-Servicer, the Issuer, the
Company, Funding Co., First Union and the Depositor hereunder shall be absolute
and unconditional and shall be paid or performed strictly in accordance with
this Insurance Agreement under all circumstances irrespective of:
(i) any lack of validity or enforceability of, or any
amendment or other modifications of, or waiver, with respect to any of
the Transaction Documents, the Obligations or the Policy;
(ii) any exchange or release of any other obligations
hereunder;
(iii) the existence of any claim, setoff, defense, reduction,
abatement or other right that the Servicer, the Indenture Trustee,
RBMG, the Sub-Servicer, the Issuer, the Company, Funding Co., First
Union or the Depositor may have at any time against the Insurer or any
other Person;
(iv) any document presented in connection with the Policy
proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any
respect;
(v) any payment by the Insurer under the Policy against
presentation of a certificate or other document that does not strictly
comply with terms of the Policy;
(vi) any failure of the Servicer, the Indenture Trustee, RBMG,
the Sub-Servicer, the Issuer, the Company, Funding Co., First Union or
the Depositor to receive the proceeds from the sale of the Obligations;
or
(vii) any breach by the Servicer, the Indenture Trustee, RBMG,
the Sub-Servicer, the Issuer, the Company, Funding Co. or the Depositor
of any representation, warranty or covenant contained in any of the
Transaction Documents.
46
(b) The Servicer, the Indenture Trustee, RBMG, the Sub-Servicer, the
Depositor, First Union, the Issuer, the Company, Funding Co. and any and all
others who are now or may become liable for all or part of the obligations of
the Servicer, the Indenture Trustee, RBMG, the Sub-Servicer, the Issuer, the
Company, Funding Co., First Union or the Depositor under this Insurance
Agreement agree to be bound by this Insurance Agreement and (i) to the extent
permitted by law, waive and renounce any and all redemption (other than as
expressly provided for in the Transaction Documents) and exemption rights and
the benefit of all valuation and appraisement privileges against the
indebtedness and obligations evidenced by any Transaction Document or by any
extension or renewal thereof; (ii) waive presentment and demand for payment,
notices of nonpayment and of dishonor, protest of dishonor and notice of
protest; (iii) waive all notices in connection with the delivery and acceptance
hereof and all other notices in connection with the performance, default or
enforcement of any payment hereunder, except as required by the Transaction
Documents; (iv) waive all rights of abatement, diminution, postponement or
deduction, or any defense other than payment, or to any right of setoff or
recoupment arising out of any breach under any of the Transaction Documents, by
any party thereto or any beneficiary thereof, or out of any obligation at any
time owing to the Servicer, the Indenture Trustee, RBMG, the Sub-Servicer, the
Issuer, the Company, Funding Co., First Union or the Depositor; (v) agree that
its liabilities hereunder shall, except as otherwise expressly provided in this
Section 4.03, be unconditional and without regard to any setoff, counterclaim or
the liability of any other Person for the payment hereof; (vi) agree that any
consent, waiver or forbearance hereunder with respect to an event shall operate
only for such event and not for any subsequent event; (vii) consent to any and
all extensions of time that may be granted by the Insurer with respect to any
payment hereunder or other provisions hereof and to the release of any security
at any time given for any payment hereunder, or any part thereof, with or
without substitution, and to the release of any Person or entity liable for any
such payment; and (viii) consent to the addition of any and all other makers,
endorsers, guarantors and other obligors for any payment hereunder, and to the
acceptance of any and all other security for any payment hereunder, and agree
that the addition of any such obligors or security shall not affect the
liability of the parties hereto for any payment hereunder.
(c) Nothing herein shall be construed as prohibiting the Servicer, the
Indenture Trustee, RBMG, the Sub-Servicer, the Issuer, the Company, Funding Co.,
First Union or the Depositor from pursuing any rights or remedies it may have
against any other Person in a separate legal proceeding.
Section 4.04. ASSIGNMENTS; REINSURANCE; THIRD-PARTY RIGHTS. (a) This
Insurance Agreement shall be a continuing obligation of the parties hereto and
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. None of the Servicer, the Indenture
Trustee, RBMG, the Sub-Servicer, the Issuer, the Company, Funding Co., First
Union or the Depositor may assign its rights under this Insurance Agreement, or
delegate any of its duties hereunder, without the prior written consent of the
Insurer. Any assignment made in violation of this Insurance Agreement shall be
null and void.
47
(b) The Insurer shall have the right to give participations in its
rights under this Insurance Agreement and to enter into contracts of reinsurance
with respect to the Policy upon such terms and conditions as the Insurer may in
its discretion determine; provided, however, that no such participation or
reinsurance agreement or arrangement shall relieve the Insurer of any of its
obligations hereunder or under the Policy.
(c) In addition, the Insurer shall be entitled to assign or pledge to
any bank or other lender providing liquidity or credit with respect to the
Transaction or the obligations of the Insurer in connection therewith any rights
of the Insurer under the Transaction Documents or with respect to any real or
personal property or other interests pledged to the Insurer, or in which the
Insurer has a security interest, in connection with the Transaction.
(d) Except as provided herein with respect to participants and
reinsurers, nothing in this Insurance Agreement shall confer any right, remedy
or claim, express or implied, upon any Person, including, particularly, any
Owner, other than the Insurer against the Servicer, the Indenture Trustee, RBMG,
the Sub-Servicer, the Issuer, the Company, Funding Co., First Union or the
Depositor, and all the terms, covenants, conditions, promises and agreements
contained herein shall be for the sole and exclusive benefit of the parties
hereto and their successors and permitted assigns. Neither the Indenture Trustee
nor any Owner shall have any right to payment from any Bond Insurer Premiums
paid or payable hereunder or under the Indenture or from any other amounts paid
by the Servicer, the Indenture Trustee, RBMG, the Sub-Servicer, the Issuer, the
Company, Funding Co., First Union or the Depositor pursuant to Section 3.02,
3.03, 3.04, 3.05, 3.06 or 3.07 hereof.
(e) The Servicer, the Company, Funding Co., RBMG, the Sub-Servicer, the
Depositor, the Issuer and the Indenture Trustee agree that the Insurer shall
have all rights of a third-party beneficiary in respect of the Indenture, the
Servicing Agreement, the Sub-Servicing Agreement, the Trust Agreement and each
other Transaction Document to which it is not a signing party and hereby
incorporate and restate their representations, warranties and covenants as set
forth therein for the benefit of the Insurer.
Section 4.05. LIABILITY OF THE INSURER. Neither the Insurer nor any of
its officers, directors or employees shall be liable or responsible for: (a) the
use that may be made of the Policy by the Indenture Trustee or for any acts or
omissions of the Indenture Trustee in connection therewith; or (b) the validity,
sufficiency, accuracy or genuineness of documents delivered to the Insurer (or
its Fiscal Agent) in connection with any claim under the Policy, or of any
signatures thereon, even if such documents or signatures should in fact prove to
be in any or all respects invalid, insufficient, fraudulent or forged (unless
the Insurer shall have actual knowledge thereof). In furtherance and not in
limitation of the foregoing, the Insurer (or its Fiscal Agent) may accept
documents that appear on their face to be in order, without responsibility for
further investigation.
Section 4.06. PARTIES WILL NOT INSTITUTE INSOLVENCY PROCEEDINGS. So
long as this Agreement is in effect, and for one year following its termination,
none of the parties hereto will
48
file any involuntary petition or otherwise institute any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceeding or other
proceedings under any federal or state bankruptcy or similar law against the
Company, Funding Co., the Depositor, the Issuer or the Residual Holder.
Section 4.07. PARTIES TO JOIN IN ENFORCEMENT ACTION. To the extent
necessary to enforce any right of the Insurer in or remedy of the Insurer under
any Mortgage Loan, the Indenture Trustee, the Depositor, RBMG, the Sub-Servicer,
the Issuer, the Company, Funding Co., First Union and the Servicer agree to join
in any action initiated by the Trust or the Insurer for the protection of such
right or exercise of such remedy.
ARTICLE V
DEFAULTS; REMEDIES
Section 5.01. DEFAULTS. The occurrence of any of the following events
shall constitute an Event of Default hereunder:
(a) Any representation or warranty made by the Servicer, the
Indenture Trustee, RBMG, the Sub-Servicer, the Issuer, the Company,
Funding Co. or the Depositor hereunder or under the Transaction
Documents, or in any certificate furnished hereunder or under the
Transaction Documents, shall prove to be untrue or incomplete in any
material respect;
(b)(i) The Servicer, , RBMG, the Sub-Servicer, the Issuer, the
Company, Funding Co., First Union or the Depositor shall fail to pay
when due any amount payable by the Servicer, RBMG, the Sub-Servicer,
the Issuer, the Company, Funding Co., First Union or the Depositor
hereunder or (ii) a legislative body has enacted any law that declares
or a court of competent jurisdiction shall find or rule that any
Transaction Document is not valid and binding on the Servicer, the
Indenture Trustee, RBMG, the Sub-Servicer, the Issuer, the Company,
Funding Co., First Union or the Depositor;
(c) The occurrence and continuance of a "Servicer Event of
Default" under the Servicing Agreement (as defined therein);
(d) Any failure on the part of the Servicer, the Indenture
Trustee, RBMG, the Sub-Servicer, the Issuer, the Company, Funding Co.
or the Depositor duly to observe or perform in any material respect any
other of the covenants or agreements on the part of the Servicer, the
Indenture Trustee, RBMG, the Sub-Servicer, the Issuer, the Company,
Funding Co. or the Depositor contained in this Insurance Agreement or
in any other Transaction Document which continues unremedied for a
period of 30 days with respect to this Insurance Agreement, or, with
respect to any other Transaction Document, beyond any cure period
provided for therein, after the date on which written notice of such
failure, requiring the same to be remedied, shall have been given to
the Indenture Trustee, the Servicer, RBMG, the Sub-Servicer, the
Issuer, the Company, Funding Co. or the
49
Depositor, as applicable, by the Insurer (with a copy to the Indenture
Trustee) or by the Indenture Trustee (with a copy to the Insurer);
(e) A decree or order of a court or agency or supervisory
authority having jurisdiction in the premises in an involuntary case
under any present or future federal or state bankruptcy, insolvency or
similar law or the appointment of a conservator or receiver or
liquidator or other similar official in any insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings, or
for the winding-up or liquidation of its affairs, shall have been
entered against the Servicer, RBMG, the Sub-Servicer, the Issuer, the
Company, Funding Co., First Union or the Depositor and such decree or
order shall have remained in force undischarged or unstayed for a
period of 90 consecutive days;
(f) The Servicer, RBMG, the Sub-Servicer, the Issuer, the
Company, Funding Co., First Union or the Depositor shall consent to the
appointment of a conservator or receiver or liquidator or other similar
official in any insolvency, readjustment of debt, marshalling of assets
and liabilities or similar proceedings of or relating to the Servicer,
RBMG, the Sub-Servicer, the Issuer, the Company, Funding Co., First
Union or the Depositor or of or relating to all or substantially all of
the property of either;
(g) The Servicer, RBMG, the Sub-Servicer, the Issuer, the
Company, Funding Co., First Union or the Depositor shall admit in
writing its inability to pay its debts generally as they become due,
file a petition to take advantage of or otherwise voluntarily commence
a case or proceeding under any applicable bankruptcy, insolvency,
reorganization or other similar statute, make an assignment for the
benefit of its creditors or voluntarily suspend payment of its
obligations; or
(h) The occurrence and continuance of an "Event of Default"
under the Indenture (as defined therein);
(i) The occurrence and continuance of a "Event of Default"
under the Sub-Servicing Agreement (as defined therein);
(j) the failure of RBMG, the Company, Funding Co. or the
Depositor to comply with, or maintain the accuracy of, the Opinion
Facts and Assumptions.
Section 5.02. REMEDIES; NO REMEDY EXCLUSIVE. (a) Upon the occurrence of
an Event of Default, the Insurer may exercise any one or more of the rights and
remedies set forth below:
(i) declare all indebtedness of every type or description then
owed by the Servicer, the Indenture Trustee, RBMG, the Sub-Servicer,
the Issuer, the Company, Funding Co., First Union or the Depositor to
the Insurer to be immediately due and payable, and the same shall
thereupon be immediately due and payable;
50
(ii) exercise any rights and remedies under the Transaction
Documents in accordance with the terms of the Transaction Documents or
direct the Indenture Trustee or the Issuer to exercise such remedies in
accordance with the terms of the Transaction Documents; or
(iii) take whatever action at law or in equity as may appear
necessary or desirable in its judgment to collect the amounts then due
under the Transaction Documents or to enforce performance and
observance of any obligation, agreement or covenant of the Servicer,
the Indenture Trustee, RBMG, the Sub-Servicer, the Issuer, the Company,
Funding Co., First Union or the Depositor under the Transaction
Documents.
(b) Unless otherwise expressly provided, no remedy herein conferred
upon or reserved is intended to be exclusive of any other available remedy, but
each remedy shall be cumulative and shall be in addition to other remedies given
under the Transaction Documents or existing at law or in equity. No delay or
omission to exercise any right or power accruing under the Transaction Documents
upon the happening of any event set forth in Section 5.01 hereof shall impair
any such right or power or shall be construed to be a waiver thereof, but any
such right and power may be exercised from time to time and as often as may be
deemed expedient. In order to entitle the Insurer to exercise any remedy
reserved to the Insurer in this Article, it shall not be necessary to give any
notice, other than such notice as may be required in this Article V.
Section 5.03. WAIVERS. (a) No failure by the Insurer to exercise, and
no delay by the Insurer in exercising, any right hereunder shall operate as a
waiver thereof. The exercise by the Insurer of any right hereunder shall not
preclude the exercise of any other right, and the remedies provided herein to
the Insurer are declared in every case to be cumulative and not exclusive of any
remedies provided by law or equity.
(b) The Insurer shall have the right, to be exercised in its complete
discretion, to waive any Event of Default hereunder, by a writing setting forth
the terms, conditions and extent of such waiver signed by the Insurer and
delivered to the Servicer, the Indenture Trustee, RBMG, the Sub-Servicer, the
Issuer, the Company, Funding Co., First Union and the Depositor. Unless such
writing expressly provides to the contrary, any waiver so granted shall extend
only to the specific event or occurrence which gave rise to the Event of Default
so waived and not to any other similar event or occurrence which occurs
subsequent to the date of such waiver.
ARTICLE VI
MISCELLANEOUS
Section 6.01. AMENDMENTS, ETC. This Insurance Agreement may be amended,
modified or terminated only by written instrument or written instruments signed
by the parties hereto. The Servicer agrees to promptly provide a copy of any
amendment to this Insurance Agreement to the Indenture Trustee, S&P and ▇▇▇▇▇'▇.
No act or course of dealing shall be deemed to constitute an amendment,
modification or termination hereof.
51
Section 6.02. NOTICES. All demands, notices and other communications to
be given hereunder shall be in writing (except as otherwise specifically
provided herein) and shall be mailed by registered mail or personally delivered
or telecopied to the recipient as follows:
(a) To the Insurer:
MBIA Insurance Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Insured Portfolio Management-Structured
Finance (IPM-SF)
(RBMG Funding Co. Mortgage Loan Trust
1998-2 Asset-Backed Notes, Series 1998-2)
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation: (▇▇▇) ▇▇▇-▇▇▇▇
(in each case in which notice or other communication
to the Insurer refers to an Event of Default, a claim
on the Policy or with respect to which failure on the
part of the Insurer to respond shall be deemed to
constitute consent or acceptance, then a copy of such
notice or other communication should also be sent to
the attention of each of the general counsel and the
Insurer and shall be marked to indicate "URGENT
MATERIAL ENCLOSED.")
(b) To RBMG:
Resource Bancshares Mortgage Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation: (▇▇▇) ▇▇▇-▇▇▇▇
(c) To the Sub-Servicer:
Ocwen Federal Bank FSB
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Secretary
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
Confirmation: ▇▇▇-▇▇▇-▇▇▇▇
. with copy to:
52
Ocwen Federal Bank FSB
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Senior V.P., Law Dept.
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
Confirmation: ▇▇▇-▇▇▇-▇▇▇▇
(d) To the Indenture Trustee:
The Bank of New York
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇-- ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Corporate Trust
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation No. (▇▇▇) ▇▇▇-▇▇▇▇
(e) To Funding Co.:
RBMG Funding Co.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation: (▇▇▇) ▇▇▇-▇▇▇▇
(f) To the Residual Holder:
RBMG Funding Co.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation: (▇▇▇) ▇▇▇-▇▇▇▇
(g) To the Issuer:
RBMG Funding Co. Mortgage Loan Trust 1998-2
c/o Wilmington Trust Company
▇▇▇▇▇▇ Square North
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Corporate Trust Administration
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
53
(h) To the Company:
RBMG Asset Management Company, Inc.:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation: (▇▇▇) ▇▇▇-▇▇▇▇
(i) To the Depositor:
Residential Asset Funding Corporation
c/o First Union Capital Markets
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
(j) To First Union:
First Union Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
A party may specify an additional or different address or addresses by
writing mailed or delivered to the other parties as aforesaid. All such notices
and other communications shall be effective upon receipt.
Section 6.03. SEVERABILITY. In the event that any provision of this
Insurance Agreement shall be held invalid or unenforceable by any court of
competent jurisdiction, the parties hereto agree that such holding shall not
invalidate or render unenforceable any other provision hereof. The parties
hereto further agree that the holding by any court of competent jurisdiction
that any remedy pursued by any party hereto is unavailable or unenforceable
shall not affect in any way the ability of such party to pursue any other remedy
available to it.
Section 6.04. GOVERNING LAW. THIS INSURANCE AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO CHOICE OF LAW PROVISIONS.
54
Section 6.05. CONSENT TO JURISDICTION. (a) The parties hereto hereby
irrevocably submit to the jurisdiction of the United States District Court for
the Southern District of New York and any court in the State of New York located
in the City and County of New York, and any appellate court from any thereof, in
any action, suit or proceeding brought against it and to or in connection with
any of the Transaction Documents or the transactions contemplated thereunder or
for recognition or enforcement of any judgment, and the parties hereto hereby
irrevocably and unconditionally agree that all claims in respect of any such
action or proceeding may be heard or determined in such New York state court or,
to the extent permitted by law, in such federal court. The parties hereto agree
that a final judgment in any such action, suit or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on the judgment or in any
other manner provided by law. To the extent permitted by applicable law, the
parties hereto hereby waive and agree not to assert by way of motion, as a
defense or otherwise in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of such courts, that the suit,
action or proceeding is brought in an inconvenient forum, that the venue of the
suit, action or proceeding is improper or that the related documents or the
subject matter thereof may not be litigated in or by such courts.
(b) To the extent permitted by applicable law, the parties hereto shall
not seek and hereby waive the right to any review of the judgment of any such
court by any court of any other nation or jurisdiction which may be called upon
to grant an enforcement of such judgment.
(c) Except as provided in Section 4.06 herein, nothing contained in
this Insurance Agreement shall limit or affect the Insurer's right to serve
process in any other manner permitted by law or to start legal proceedings
relating to any of the Transaction Documents against any party hereto or its or
their property in the courts of any jurisdiction.
Section 6.06. CONSENT OF THE INSURER. In the event that the consent of
the Insurer is required under any of the Transaction Documents, the
determination whether to grant or withhold such consent shall be made by the
Insurer in its sole discretion without any implied duty towards any other
Person.
Section 6.07. COUNTERPARTS. This Insurance Agreement may be executed in
counterparts by the parties hereto, and all such counterparts shall constitute
one and the same instrument.
Section 6.08. HEADINGS. The headings of Articles and Sections and the
Table of Contents contained in this Insurance Agreement are provided for
convenience only. They form no part of this Insurance Agreement and shall not
affect its construction or interpretation. Unless otherwise indicated, all
references to Articles and Sections in this Insurance Agreement refer to the
corresponding Articles and Sections of this Insurance Agreement.
Section 6.09. TRIAL BY JURY WAIVED. Each party hereto hereby waives, to
the fullest extent permitted by law, any right to a trial by jury in respect of
any litigation arising directly or indirectly out of, under or in connection
with any of the Transaction Documents or any of the transactions contemplated
thereunder. Each party hereto (A) certifies that no representative, agent or
attorney of any party hereto has represented, expressly or otherwise, that it
would not, in
55
the event of litigation, seek to enforce the foregoing waiver and (B)
acknowledges that it has been induced to enter into the Transaction Documents to
which it is a party by, among other things, this waiver.
Section 6.10. LIMITED LIABILITY. No recourse under any Transaction
Document shall be had against, and no personal liability shall attach to, any
trustee, officer, employee, director, affiliate or shareholder of any party
hereto, as such, by the enforcement of any assessment or by any legal or
equitable proceeding, by virtue of any statute or otherwise in respect of any of
the Transaction Documents, the Obligations or the Policy, it being expressly
agreed and understood that each Transaction Document is solely a corporate
obligation of each party hereto, or, in the case of the Issuer, as a separate
legal entity, and not of the Owner Trustee and that any and all personal
liability, either at common law or in equity, or by statute or constitution, of
every such officer, employee, director, affiliate or shareholder for breaches by
any party hereto of any obligations under any Transaction Document is hereby
expressly waived as a condition of and in consideration for the execution and
delivery of this Insurance Agreement.
Section 6.11. ENTIRE AGREEMENT. The Transaction Documents and the
Policy set forth the entire agreement between the parties with respect to the
subject matter thereof, and this Insurance Agreement supersedes and replaces any
agreement or understanding that may have existed between the parties prior to
the date hereof in respect of such subject matter.
Section 6.12 COVENANT OF THE RESIDUAL HOLDER. During the Term of this
Insurance Agreement, the Residual Holder hereby covenants and agrees that it
shall not amend its Articles of Incorporation without the prior consent of the
Insurer.
[REMAINDER OF PAGE INTENTIONALLY BLANK;
SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have executed this Insurance Agreement,
all as of the day and year first above mentioned.
MBIA INSURANCE CORPORATION, as Insurer
By /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
Title ASSISTANT SECRETARY
------------------------------------
RBMG ASSET MANAGEMENT COMPANY, INC., as
Company
By /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
---------------------------------------
Title PRESIDENT
------------------------------------
OCWEN FEDERAL BANK FSB, as Sub-Servicer
By /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------
Title VICE PRESIDENT
------------------------------------
RBMG FUNDING CO. MORTGAGE LOAN TRUST
1998-2, as Issuer
By Wilmington Trust Company, not in its
individual capacity, but solely as
Owner Trustee
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
Title VICE PRESIDENT
------------------------------------
RBMG FUNDING CO., in its individual
capacity and as Residual Holder
By /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
---------------------------------------
Title PRESIDENT
------------------------------------
RESIDENTIAL ASSET FUNDING
CORPORATION,
as Depositor
By /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------------
Title SENIOR VICE PRESIDENT
------------------------------------
RESOURCE BANCSHARES MORTGAGE
GROUP, INC., in its individual capacity
and as Servicer
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------------------
Title EXECUTIVE VICE PRESIDENT
------------------------------------
THE BANK OF NEW YORK, as Indenture Trustee
By /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
Title Assistant Vice President
------------------------------------
FIRST UNION CORPORATION
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------
Title SENIOR VICE PRESIDENT
------------------------------------
56
differing interpretations, which could apply retroactively. The opinion of
special tax counsel is not binding on the courts or the Internal Revenue Service
(the "IRS").
In general, whether a transaction constitutes the issuance of
indebtedness for federal income tax purposes is a question of fact, the
resolution of which is based primarily upon the economic substance of the
instruments and the transaction pursuant to which they are issued rather than
the form of the transaction or the manner in which the instruments are labeled.
The IRS and the courts have set forth various factors to be taken into account
in determining whether or not a transaction constitutes the issuance of
indebtedness for federal income tax purposes, which we have reviewed as they
apply to this transaction.
Based on the foregoing, and such legal and factual investigations as
we have deemed appropriate, while no transaction closely comparable to that
contemplated in the Operative Documents has been the subject of any Treasury
regulation, revenue ruling or judicial decision, and therefore the matter is
subject to interpretation, we are of the opinion that for federal income tax
purposes:
(1) The Notes will properly be treated as indebtedness for federal
income tax purposes;
(2) The Trust will not constitute an association (or a publicly
traded partnership) taxable as a corporation or a taxable mortgage pool.
We express no opinion on any matter not discussed in this letter.
This opinion is rendered as of the Closing Date, for the sole benefit of the
addressees hereof and it may not be relied on by any other party or quoted
without our express consent in writing.
Very truly yours,
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP
Noteholders of the related Class of Notes or the Note Insurer, the Custodian, or
the Indenture Trustee if there is no Custodian, shall promptly notify RBMG, the
Company, Funding Co., the Depositor, the Servicer, or the Indenture Trustee, if
there is no Custodian, and the Note Insurer and direct the party breaching such
representation, warranty or covenant to either (i) within 30 days after Funding
Co., the Company, the Depositor, or RBMG (each a "Transferor") receives actual
knowledge of such incorrectness, eliminate or otherwise cure the circumstance or
condition in respect of which such representation or warranty was incorrect as
of the time made, (ii) withdraw such Defective Mortgage Loan from the lien of
this Indenture following the expiration of such 30-day period by depositing to
the related Note Account an amount equal to the Purchase Price, plus the amount
of any related Realized Loss resulting from a Deficiency Valuation, for such
Mortgage Loan or (iii) substitute a Qualified Replacement Mortgage Loan for such
Defective Mortgage Loan and deposit any Purchase Price, plus the amount of any
Realized Loss resulting from a Deficiency Valuation, required to be paid in
connection with such substitution pursuant to Section 7 of the Funding Co. Sale
Agreement, Section 7 of the Depositor Sale Agreement, Section 7 of the Company
Sale Agreement or Section 7 of the Loan Contribution Agreement. Upon any
purchase of or substitution for a Defective Mortgage Loan by either Funding Co.,
the Depositor, the Company, or RBMG as set forth above, the Indenture Trustee
shall deliver or cause the Custodian to deliver, the Mortgage File relating to
such Defective Mortgage Loan to Funding Co., the Depositor, the Company or RBMG,
as the case may be, and the Issuer and the Indenture Trustee shall execute such
instruments of transfer as are necessary to convey title to such Defective
Mortgage Loan to Funding Co., the Depositor, the Company, or RBMG, as the case
may be, from the lien of this Indenture.
(b) Upon substitution of a Qualified Replacement Mortgage Loan, the
Indenture Trustee or a Custodian on its behalf, shall acknowledge receipt of
such Qualified Replacement Mortgage Loan or Loans and, (i) within ten Business
Days thereafter, review such documents as specified in Section 6.15(c) and
deliver to the Issuer, RBMG, the Company, Funding Co., the Depositor, the Note
Insurer and the Servicer a certification substantially in the form of the
Initial Certification described in Section 6.15(a) with respect to such
Qualified Replacement Mortgage Loan or Loans and, (ii) within 270 days after
such substitution, review such documents as specified in Section 6.15(c) and
deliver to the parties set forth in clause (i) a certification substantially in
the form of the Final Certification described in Section 6.15(b) with respect to
such Qualified Replacement Mortgage Loan or Loans.
(c) Monthly Payments due with respect to Qualified Replacement
Mortgage Loans in the month of substitution shall be retained by the Transferor.
For the month of substitution, the Indenture Trustee on behalf of the
Noteholders and the Note Insurer shall be entitled to receive the Monthly
Payment due on such Deleted Mortgage Loan, and the Transferor shall thereafter
be entitled to retain all amounts subsequently received in respect of such
Deleted Mortgage Loan. Upon such substitution, such Qualified Replacement
Mortgage Loan or Loans shall be subject in all respects to the terms of this
Indenture, including, all applicable representations and warranties included
herein in each case as of the date of substitution.
Issuer's right, title and interest in and to (i) the Additional Mortgage Loans
identified on the related Mortgage Loan Schedule attached to the related
Additional Transfer Instrument, (and allocated to Group I or Group II) delivered
by the Issuer on such Additional Transfer Date, (ii) principal and interest due
on the Additional Mortgage Loans after the related Additional Cut-off Date and
all other proceeds received in respect of such Additional Mortgage Loans after
the applicable Cut-off Date for each such Additional Mortgage Loan and (iii) all
items with respect to such Additional Mortgage Loans to be delivered pursuant to
Section 3(b) of the Depositor Sale Agreement and the other items in the related
Mortgage Files; provided, however, that the Issuer reserves and retains all
right, title and interest in and to principal (including Principal Prepayments)
and interest due on the Additional Mortgage Loans on or prior to the related
Additional Cut-off Date.
The Indenture Trustee shall release from the related Pre-Funding Account an
amount equal to one-hundred percent (100%) of the aggregate principal balances
as of the applicable Additional Cut-off Date of the Additional Mortgage Loans so
Granted; provided, however, that if the aggregate principal balance as of the
applicable additional cut-off date is greater than the amount on deposit in the
applicable pre-funding account, the indenture trustee shall release an amount
not greater than the amount on deposit in such pre-funding account.
(b) The Issuer shall Grant to the Indenture Trustee the Additional
Mortgage Loans and the other property and rights related thereto described in
Section 3(b) of the Depositor Sale Agreement and the Indenture Trustee shall
release funds from the related Pre-Funding Account, only upon the satisfaction
of each of the following conditions on or prior to the related Additional
Transfer Date:
(A) the Issuer shall have provided the Indenture Trustee and
the Note Insurer with a timely Addition Notice and shall have provided any
information reasonably requested by the Indenture Trustee or the Note
Insurer with respect to the Additional Mortgage Loans;
(B) the Issuer shall have delivered to the Indenture Trustee a
duly executed Additional Transfer Instrument, which shall include a
Mortgage Loan Schedule, listing the Additional Mortgage Loans and
allocated to Group I or Group II;
(C) as of each Additional Transfer Date, the Issuer shall not
be insolvent nor shall it have been made insolvent by such Grant nor shall
it be aware of any pending insolvency;
(D) the Issuer shall have delivered to the Indenture Trustee
an Opinion of Counsel confirming that such Grant shall not result in a
material adverse tax consequence to the Trust Estate or the Noteholders;
(E) the Funding Period shall not have terminated;
(F) the Issuer shall have delivered to the Indenture Trustee
an Officer's Certificate, confirming the satisfaction of each condition
precedent and the representations specified in this Section 2.14(b) and
Section 2.14(c) and in the related Additional Transfer Instrument;
(G) the Servicer has deposited into the Collection Account all
collections on the Additional Mortgage Loans since the Additional Cut-off
Date;
If the foregoing is in accordance with your understanding, please
sign and return to us two counterparts hereof, and upon acceptance hereof by
you, this letter and such acceptance hereof, including the provisions of the
Standard Provisions incorporated herein by reference, shall constitute a binding
agreement between the Underwriter and the Depositor.
Yours truly,
RESIDENTIAL ASSET FUNDING CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Senior Vice President
Accepted as of the date hereof:
WHEAT FIRST SECURITIES, INC.
acting through FIRST UNION CAPITAL MARKETS,
a division of Wheat First Securities, Inc.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Vice President
[Signature Page to Underwriting Agreement]