EXHIBIT 4.2
EXECUTION COPY
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TRUST AGREEMENT
between
HEADLANDS MORTGAGE SECURITIES INC.
Sponsor
and
WILMINGTON TRUST COMPANY
Owner Trustee
Dated as of September 1, 1999
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TABLE OF CONTENTS
Page
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ARTICLE I Definitions.............................................................................................1
SECTION 1.1. Defined Terms.................................................................................1
SECTION 1.2. Other Definitional Provisions.................................................................2
SECTION 1.3. Action by or Consent of Noteholders and Certificateholders....................................3
ARTICLE II Organization...........................................................................................3
SECTION 2.1. Name..........................................................................................3
SECTION 2.2. Office........................................................................................3
SECTION 2.3. Purposes and Powers...........................................................................3
SECTION 2.4. Appointment of Owner Trustee..................................................................4
SECTION 2.5. Initial Capital Contribution of Trust Estate..................................................4
SECTION 2.6. Declaration of Trust..........................................................................4
SECTION 2.7. Liability.....................................................................................4
SECTION 2.8. Title to Trust Property.......................................................................5
SECTION 2.9. Situs of Trust................................................................................5
SECTION 2.10. Representations and Warranties of the Sponsor.................................................5
SECTION 2.11. Federal Income Tax Allocations................................................................6
SECTION 2.12. Covenants of the Sponsor......................................................................7
SECTION 2.13. Covenants of the Certificateholders...........................................................7
ARTICLE III Certificates and Transfer of Interests................................................................8
SECTION 3.1. Initial Ownership.............................................................................8
SECTION 3.2. The Certificates..............................................................................8
SECTION 3.3. Authentication of Certificates................................................................9
SECTION 3.4. Registration of Transfer and Exchange of Certificates.........................................9
SECTION 3.5. Mutilated, Destroyed, Lost or Stolen Certificates............................................10
SECTION 3.6. Persons Deemed Certificateholders............................................................10
SECTION 3.7. Access to List of Certificateholders' Names and Addresses....................................10
SECTION 3.8. Maintenance of Office or Agency..............................................................10
SECTION 3.9. ERISA Restrictions...........................................................................11
SECTION 3.10. Restrictions on Transfer of Certificates.....................................................11
SECTION 3.11. Acceptance of Obligations....................................................................12
SECTION 3.12. Distributions on Certificates................................................................12
ARTICLE IV Voting Rights and Other Actions.......................................................................12
SECTION 4.1. Prior Notice to Holders with Respect to Certain Matters......................................12
SECTION 4.2. Action by Certificateholders with Respect to Certain Matters.................................13
SECTION 4.3. Action by Certificateholders with Respect to Bankruptcy......................................13
SECTION 4.4. Restrictions on Certificateholders' Power....................................................14
SECTION 4.5. Majority Control.............................................................................14
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SECTION 4.6. Rights of Insurer............................................................................15
ARTICLE V Certain Duties.........................................................................................15
SECTION 5.1. Accounting and Records to the Noteholders, Certificateholders, the Internal
Revenue Service and Others...................................................................15
SECTION 5.2. Signature on Returns; Tax Matters Partner....................................................15
SECTION 5.3. Underwriting Agreement.......................................................................16
ARTICLE VI Authority and Duties of Owner Trustee.................................................................16
SECTION 6.1. General Authority............................................................................16
SECTION 6.2. General Duties...............................................................................16
SECTION 6.3. Action upon Instruction......................................................................16
SECTION 6.4. No Duties Except as Specified in this Agreement or in Instructions...........................17
SECTION 6.5. No Action Except under Specified Documents or Instructions...................................18
SECTION 6.6. Restrictions.................................................................................18
ARTICLE VII Concerning the Owner Trustee.........................................................................18
SECTION 7.1. Acceptance of Trust and Duties...............................................................18
SECTION 7.2. Furnishing of Documents......................................................................19
SECTION 7.3. Representations and Warranties...............................................................19
SECTION 7.4. Reliance; Advice of Counsel..................................................................20
SECTION 7.5. Not Acting in Individual Capacity............................................................20
SECTION 7.6. Owner Trustee Not Liable for Certificates or Mortgage Loans..................................20
SECTION 7.7. Owner Trustee May Own Certificates and Notes.................................................21
SECTION 7.8. Payments from Owner Trust Estate.............................................................21
SECTION 7.9. Doing Business in Other Jurisdictions........................................................21
ARTICLE VIII Compensation of Owner Trustee.......................................................................21
SECTION 8.1. Owner Trustee's Fees and Expenses............................................................21
SECTION 8.2. Indemnification..............................................................................22
SECTION 8.3. Payments to the Owner Trustee................................................................22
SECTION 8.4. Non-recourse Obligations.....................................................................22
ARTICLE IX Termination of Trust Agreement........................................................................22
SECTION 9.1. Termination of Trust Agreement...............................................................22
ARTICLE X Successor Owner Trustees and Additional Owner Trustees.................................................24
SECTION 10.1. Eligibility Requirements for Owner Trustee...................................................24
SECTION 10.2. Resignation or Removal of Owner Trustee......................................................24
SECTION 10.3. Successor Owner Trustee......................................................................25
SECTION 10.4. Merger or Consolidation of Owner Trustee.....................................................25
SECTION 10.5. Appointment of Co-Owner Trustee or Separate Owner Trustee....................................26
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ARTICLE XI Miscellaneous.........................................................................................27
SECTION 11.1. Supplements and Amendments...................................................................27
SECTION 11.2. No Legal Title to Owner Trust Estate in Certificateholders...................................28
SECTION 11.3. Limitations on Rights of Others..............................................................28
SECTION 11.4. Notices......................................................................................28
SECTION 11.5. Severability.................................................................................29
SECTION 11.6. Separate Counterparts........................................................................29
SECTION 11.7. Assignments; Insurer.........................................................................29
SECTION 11.8. No Petition..................................................................................29
SECTION 11.9. No Recourse..................................................................................30
SECTION 11.10. Headings.....................................................................................30
SECTION 11.11. GOVERNING LAW................................................................................30
SECTION 11.12. Servicer.....................................................................................30
EXHIBITS
Exhibit A Form of Certificate
Exhibit B Form of Certificate of Trust
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TRUST AGREEMENT dated as of September 1, 1999 (the "Agreement") between
HEADLANDS MORTGAGE SECURITIES INC., a Delaware corporation (the "Sponsor"), and
WILMINGTON TRUST COMPANY, a Delaware banking corporation as Owner Trustee.
ARTICLE I
Definitions
SECTION 1.1. Defined Terms. For the purposes of this Agreement, the
following terms shall have the meanings set forth below. All other capitalized
terms used herein but not defined shall have the meanings set forth in Annex A
to the Indenture dated as of September 1, 1999, between the Issuer and the
Indenture Trustee, as the same may be amended and supplemented from time to
time.
"Affiliate" shall mean with respect to any specified Person, a Person
that directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, or owns, directly or indirectly,
50% or more of, the Person specified.
"Agreement" shall mean this Trust Agreement, as the same may be amended
and supplemented from time to time. "Benefit Plan" shall have the meaning
assigned to such term in Section 3.9.
"Business Trust Statute" shall mean Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code Section 3801 et seq. as the same may be amended from
time to time.
"Certificate" shall mean a trust certificate evidencing the beneficial
ownership interest of a Certificateholder in the Trust, substantially in the
form of Exhibit A attached hereto.
"Certificate of Trust" shall mean the Certificate of Trust in the form
of Exhibit B to be filed for the Trust pursuant to Section 3810(a) of the
Business Trust Statute.
"Certificate Register" and "Certificate Registrar" shall mean the
register maintained and the registrar respectively appointed pursuant to Section
3.4.
"Definitive Certificates" shall mean Certificates issued in
certificated, fully registered form.
"ERISA" shall have the meaning assigned to such term in Section 3.9.
"Expenses" shall have the meaning assigned to such term in Section 8.2.
"Holder" or "Certificateholder" shall mean the Person in whose name a
Certificate is registered on the Certificate Register.
"Indemnified Parties" shall have the meaning assigned to such term in
Section 8.2.
"Instructing Party" shall have the meaning assigned to such term in
Section 6.3.
"Owner Trust Estate" shall mean all right, title and interest of the
Trust in and to the property and rights assigned to the Trust pursuant to
Article II of the Sale and Servicing Agreement, all funds on deposit from time
to time in the Collection Account and all other property of the Trust from time
to time, including any rights of the Issuer pursuant to the Sale and Servicing
Agreement.
"Proposer" shall have the meaning ascribed to it in Section 4.2(b)
herein.
"Secretary of State" shall mean the Secretary of State of the State of
Delaware.
"Security Majority" means a majority by principal amount of the
Noteholders so long as the Notes are outstanding and a majority by principal
amount of the Certificateholders thereafter.
"Treasury Regulations" shall mean regulations, including proposed or
temporary regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
SECTION 1.2. Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(b) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Agreement or in any such certificate or other document, and accounting
terms partly defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective meanings given to
them under generally accepted accounting principles as in effect on the date of
this Agreement or any such certificate or other document, as applicable. To the
extent that the definitions of accounting terms in this Agreement or in any such
certificate or other document are inconsistent with the meanings of such terms
under generally accepted accounting principles, the definitions contained in
this Agreement or in any such certificate or other document shall control.
(c) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; Section and Exhibit
references contained in this Agreement are references to Sections and Exhibits
in or to this Agreement unless otherwise specified; and the term "including"
shall mean "including without limitation."
(d) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
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SECTION 1.3. Action by or Consent of Noteholders and
Certificateholders. Whenever any provision of this Agreement refers to action to
be taken, or consented to, by Noteholders or Certificateholders, such provision
shall be deemed to refer to the Certificateholder or Noteholder, as the case may
be, of record as of the Record Date immediately preceding the date on which such
action is to be taken, or consent given, by Noteholders or Certificateholders.
Solely for the purposes of any action to be taken, or consented to, by
Noteholders or Certificateholders, any Note or Certificate registered in the
name of the Sponsor or any Affiliate thereof shall be deemed not to be
outstanding; provided, however, that, solely for the purpose of determining
whether the Indenture Trustee is entitled to rely upon any such action or
consent, only Notes or Certificates which the Owner Trustee, or the Indenture
Trustee, respectively, knows to be so owned shall be so disregarded.
ARTICLE II
Organization
SECTION 2.1. Name. There is hereby formed a trust to be known as
"Headlands Home Equity Loan Trust 1999-1", in which name the Owner Trustee may
conduct the business of the Trust, make and execute contracts and other
instruments on behalf of the Trust and ▇▇▇ and be sued.
SECTION 2.2. Office. The office of the Trust shall be in the care of
the Owner Trustee at the Corporate Trust Office or at such other address as the
Owner Trustee may designate by written notice to the Certificateholders and the
Sponsor.
SECTION 2.3. Purposes and Powers.
(a) The purpose of the Trust is, and the Trust shall have the power and
authority, to engage in the following activities:
(i) to issue the Notes pursuant to the Indenture and the
Certificates pursuant to this Agreement, and to sell the Notes;
(ii) to assign, grant, transfer, pledge, mortgage and convey the
Owner Trust Estate to the Indenture Trustee on behalf of the
Noteholders and for the benefit of the Insurer and to hold, manage and
distribute to the Certificateholders pursuant to the terms of the Sale
and Servicing Agreement any portion of the Owner Trust Estate released
from the Lien of, and remitted to the Trust pursuant to, the Indenture;
(iii) with the proceeds of the sale of the Notes, to pay the
organizational, start-up and transactional expenses of the Trust and to
pay the balance to the Sponsor pursuant to the Sale and Servicing
Agreement;
(iv) to enter into and perform its obligations under the Basic
Documents to which it is a party;
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(v) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish
the foregoing or are incidental thereto or connected therewith; and
(vi) subject to compliance with the Basic Documents, to engage in
such other activities as may be required in connection with
conservation of the Owner Trust Estate and the making of distributions
to the Certificateholders and the Noteholders.
The Trust is hereby authorized to engage in the foregoing activities. The Trust
shall not engage in any activity other than in connection with the foregoing or
other than as required or authorized by the terms of this Agreement or the Basic
Documents.
SECTION 2.4. Appointment of Owner Trustee. The Sponsor hereby appoints
the Owner Trustee as trustee of the Trust effective as of the date hereof, to
have all the rights, powers and duties set forth herein.
SECTION 2.5. Initial Capital Contribution of Trust Estate. The Sponsor
hereby sells, assigns, transfers, conveys and sets over to the Owner Trustee, as
of the date hereof, the sum of $1. The Owner Trustee hereby acknowledges receipt
in trust from the Sponsor, as of the date hereof, of the foregoing contribution,
which shall constitute the initial Owner Trust Estate and shall be deposited in
the Collection Account. On or prior to the Closing Date, the Owner Trustee will
also, upon receipt thereof, acknowledge on behalf of the Trust receipt of the
Mortgage Loans pursuant to the Mortgage Loan Purchase Agreement. The Sponsor
shall pay organizational expenses of the Trust as they may arise or shall, upon
the request of the Owner Trustee, promptly reimburse the Owner Trustee for any
such expenses paid by the Owner Trustee.
SECTION 2.6. Declaration of Trust. The Owner Trustee hereby declares
that it will hold the Owner Trust Estate in trust upon and subject to the
conditions set forth herein for the use and benefit of the Certificateholders,
subject to the obligations of the Trust under the Basic Documents. It is the
intention of the parties hereto that the Trust constitute a business trust under
the Business Trust Statute and that this Agreement constitute the governing
instrument of such business trust. It is the intention of the parties hereto
that, solely for income tax purposes, the Trust shall be treated as a branch;
provided, however, that in the event Certificates are owned by more than one
Certificateholder, it is the intention of the parties hereto that, solely for
income and franchise tax purposes, the Trust shall then be treated as a
partnership and that, unless otherwise required by appropriate tax authorities,
only after such time the Trust will file or cause to be filed annual or other
necessary returns, reports and other forms consistent with the characterization
of the Trust as a partnership for such tax purposes. Effective as of the date
hereof, the Owner Trustee shall have all rights, powers and duties set forth
herein and to the extent not inconsistent herewith, in the Business Trust
Statute with respect to accomplishing the purposes of the Trust. The Owner
Trustee shall file the Certificate of Trust with the Secretary of State.
SECTION 2.7. Liability. No Holder shall have any personal liability for
any liability or obligation of the Trust.
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SECTION 2.8. Title to Trust Property.
(a) Legal title to all the Owner Trust Estate shall be vested at all
times in the Trust as a separate legal entity except where applicable law in any
jurisdiction requires title to any part of the Owner Trust Estate to be vested
in a trustee or trustees, in which case title shall be deemed to be vested in
the Owner Trustee, a co-trustee and/or a separate trustee, as the case may be.
(b) The Holders shall not have legal title to any part of the Trust
Property. The Holders shall be entitled to receive distributions with respect to
their undivided ownership interest therein only in accordance with Article IX.
No transfer, by operation of law or otherwise, of any right, title or interest
by any Certificateholder of its ownership interest in the Owner Trust Estate
shall operate to terminate this Agreement or the trusts hereunder or entitle any
transferee to an accounting or to the transfer to it of legal title to any part
of the Trust Property.
SECTION 2.9. Situs of Trust. The Trust will be located and administered
in the State of Delaware. All bank accounts maintained by the Owner Trustee on
behalf of the Trust shall be located in the State of Delaware or the State of
New York. Payments will be received by the Trust only in Delaware or New York
and payments will be made by the Trust only from Delaware or New York. The Trust
shall not have any employees in any state other than Delaware; provided,
however, that nothing herein shall restrict or prohibit the Owner Trustee, the
Servicer or any agent of the Trust from having employees within or without the
State of Delaware. The only office of the Trust will be at the Corporate Trust
Office in Delaware.
SECTION 2.10. Representations and Warranties of the Sponsor. The
Sponsor makes the following representations and warranties on which the Owner
Trustee relies in accepting the Owner Trust Estate in trust and issuing the
Certificates and upon which the Insurer relies in issuing the Policies.
(a) The Sponsor is duly organized and validly existing as a Delaware
corporation with power and authority to own its properties and to conduct its
business as such properties are currently owned and such business is presently
conducted and is proposed to be conducted pursuant to this Agreement and the
Basic Documents;
(b) It is duly qualified to do business as a foreign corporation in
good standing, and has obtained all necessary licenses and approvals, in all
jurisdictions in which the ownership or lease of its property, the conduct of
its business and the performance of its obligations under this Agreement and the
Basic Documents requires such qualification;
(c) The Sponsor has the corporate power and authority to execute and
deliver this Agreement and to carry out its terms; the Sponsor has full power
and authority to sell and assign the property to be sold and assigned to and
deposited with the Trust and the Sponsor has duly authorized such sale and
assignment and deposit to the Trust by all necessary corporate action; and the
execution, delivery and performance of this Agreement has been duly authorized
by the Sponsor by all necessary corporate action;
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(d) No consent, license, approval or authorization or registration or
declaration with, any Person or with any governmental authority, bureau or
agency is required in connection with the execution, delivery or performance of
this Agreement and the Basic Documents, except for such as have been obtained,
effected or made;
(e) The consummation of the transactions contemplated by this Agreement
and the fulfillment of the terms hereof do not conflict with, result in any
breach of any of the terms and provisions of, or constitute (with or without
notice or lapse of time) a default under, the certificate of incorporation or
by-laws of the Sponsor, or any material indenture, agreement or other instrument
to which the Sponsor is a party or by which it is bound; nor result in the
creation or imposition of any Lien upon any of its properties pursuant to the
terms of any such indenture, agreement or other instrument (other than pursuant
to the Basic Documents); nor violate any law or, to the best of the Sponsor's
knowledge, any order, rule or regulation applicable to the Sponsor of any court
or of any Federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Sponsor or its
properties; and
(f) There are no proceedings or investigations pending or, to its
knowledge threatened against it before any court, regulatory body,
administrative agency or other tribunal or governmental instrumentality having
jurisdiction over it or its properties (A) asserting the invalidity of this
Agreement or any of the Basic Documents, (B) seeking to prevent the issuance of
the Certificates or the Notes or the consummation of any of the transactions
contemplated by this Agreement or any of the Basic Documents, (C) seeking any
determination or ruling that might materially and adversely affect its
performance of its obligations under, or the validity or enforceability of, this
Agreement or any of the Basic Documents, or (D) seeking to adversely affect the
federal income tax or other federal, state or local tax attributes of the Notes
or the Certificates.
SECTION 2.11. Federal Income Tax Allocations. In the event that the
Trust is treated as a partnership for Federal income tax purposes, net income of
the Trust for any month as determined for Federal income tax purposes (and each
item of income, gain, loss, credit and deduction entering into the computation
thereof) shall be allocated:
(a) to the extent of available net income, among the Certificateholders
as of the first Record Date following the end of such month, in proportion to
their ownership of principal amount of Certificates on such date; and
(b) to the Sponsor, to the extent of any remaining net income.
If the net income of the Trust for any month is insufficient for the allocations
described in clause (a) above, subsequent net income shall first be allocated to
make up such shortfall before being allocated as provided in clause (b). Net
losses of the Trust, if any, for any month as determined for Federal income tax
purposes (and each item of income, gain, loss, credit and deduction entering
into the computation thereof) shall be allocated among the Certificateholders as
of the Record Date in proportion to their ownership percentage of principal
amount of Certificates on such Record Date until the principal balance of the
Certificates is reduced to zero. The Sponsor is authorized to modify the
allocations in this paragraph if necessary or appropriate, in its sole
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discretion, for the allocations to fairly reflect the economic income, gain or
loss to the Certificateholders, or as otherwise required by the Code.
SECTION 2.12. Covenants of the Sponsor. The Sponsor agrees and
covenants for the benefit of each Certificateholder, the Insurer and the Owner
Trustee, during the term of this Agreement, and to the fullest extent permitted
by applicable law, that:
(a) it shall not create, incur or suffer to exist any indebtedness or
engage in any business, except, in each case, as permitted by its certificate of
incorporation and the Basic Documents;
(b) it shall not, for any reason, institute proceedings for the Trust
to be adjudicated a bankrupt or insolvent, or consent to the institution of
bankruptcy or insolvency proceedings against the Trust, or file a petition
seeking or consenting to reorganization or relief under any applicable federal
or state law relating to the bankruptcy of the Trust, or consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Trust or a substantial part of the property of the
Trust or cause or permit the Trust to make any assignment for the benefit of
creditors, or admit in writing the inability of the Trust to pay its debts
generally as they become due, or declare or effect a moratorium on the debt of
the Trust or take any action in furtherance of any such action;
(c) it shall obtain from each counterparty to each Basic Document to
which it or the Trust is a party and each other agreement entered into on or
after the date hereof to which it or the Trust is a party, an agreement by each
such counterparty that prior to the occurrence of the event specified in Section
9.1(e) such counterparty shall not institute against, or join any other Person
in instituting against, it or the Trust, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceedings
under the laws of the United States or any state of the United States; and
(d) it shall not, for any reason, withdraw or attempt to withdraw from
this Agreement, dissolve, institute proceedings for it to be adjudicated a
bankrupt or insolvent, or consent to the institution of bankruptcy or insolvency
proceedings against it, or file a petition seeking or consenting to
reorganization or relief under any applicable federal or state law relating to
bankruptcy, or consent to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of it or a substantial part of
its property, or make any assignment for the benefit of creditors, or admit in
writing its inability to pay its debts generally as they become due, or declare
or effect a moratorium on its debt or take any action in furtherance of any such
action.
SECTION 2.13. Covenants of the Certificateholders. Each
Certificateholder agrees:
(a) to be bound by the terms and conditions of the Certificates and of
this Agreement, including any supplements or amendments hereto and to perform
the obligations of a Certificateholder as set forth therein or herein, in all
respects as if it were a signatory hereto. This undertaking is made for the
benefit of the Trust, the Owner Trustee, the Insurer and all other
Certificateholders present and future;
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(b) to hereby appoint the Sponsor as such Certificateholder's agent and
attorney-in-fact to sign any federal income tax information return filed on
behalf of the Trust, if any, and agree that, if requested by the Trust, it will
sign such federal income tax information return in its capacity as holder of an
interest in the Trust. Each Certificateholder also hereby agrees that in its tax
returns it will not take any position inconsistent with those taken in any tax
returns that may be filed by the Trust;
(c) if such Certificateholder is other than an individual or other
entity holding its Certificate through a broker who reports securities sales on
Form 1099-B, to notify the Owner Trustee of any transfer by it of a Certificate
in a taxable sale or exchange, within 30 days of the date of the transfer; and
(d) until the completion of the events specified in Section 9.1(e), not
to, for any reason, institute proceedings for the Trust or the Sponsor to be
adjudicated a bankrupt or insolvent, or consent to the institution of bankruptcy
or insolvency proceedings against the Trust, or file a petition seeking or
consenting to reorganization or relief under any applicable federal or state law
relating to bankruptcy, or consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the Sponsor or
the Trust or a substantial part of its property, or cause or permit the Sponsor
or the Trust to make any assignment for the benefit of its creditors, or admit
in writing its inability to pay its debts generally as they become due, or
declare or effect a moratorium on its debt or take any action in furtherance of
any such action.
Except as provided in Section 2.13, and notwithstanding any other
provision to the contrary in this Agreement, no Certificateholder other than the
Sponsor in its capacity as the "Sponsor" shall be deemed to have adopted, be
bound by, or succeed in any way to any representation by, or duty of
indemnification by or any other duty of, the Sponsor, including those contained
in Sections 2.10, 2.12, 3.6, 8.2 or elsewhere herein.
ARTICLE III
Certificates and Transfer of Interests
SECTION 3.1. Initial Ownership. Upon the formation of the Trust by the
contribution by the Sponsor pursuant to Section 2.5, the Owner Trustee,
contemporaneously therewith, having full power, authority, and authorization to
do so, has executed, authenticated, dated, issued, and delivered, in the name
and on behalf of the Trust, to the Sponsor, one (1) or more Certificates
representing in the aggregate a 100% interest in the Trust, and has registered
such Certificate(s) on the Certificate Register in the name of the Sponsor. The
Sponsor shall be the sole beneficiary of the Trust. Such Certificate(s) are duly
authorized, validly issued, and entitled to the benefits of this Agreement. For
so long as the Sponsor shall own such 100% interest in the Trust, the Sponsor
shall be the sole beneficial owner of the Trust. The Sponsor shall at all times
keep and own a Certificate or Certificates representing no less than 1%
interest, and at no time will the Sponsor sell or alienate its interest
represented by Certificate(s) in such a way as to reduce its aggregate
beneficial ownership in the Trust to less than 1%.
SECTION 3.2. The Certificates. The Certificates shall be issued in
denominations of $1,000 and integral multiples of $1000 in excess thereof. The
Certificates
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shall be executed on behalf of the Trust by manual or facsimile signature of an
authorized officer of the Owner Trustee. Certificates bearing the manual or
facsimile signatures of individuals who were, at the time when such signatures
shall have been affixed, authorized to sign on behalf of the Trust, shall be
validly issued and entitled to the benefit of this Agreement, notwithstanding
that such individuals or any of them shall have ceased to be so authorized prior
to the authentication and delivery of such Certificates or did not hold such
offices at the date of authentication and delivery of such Certificates. A
transferee of a Certificate shall become a Certificateholder, and shall be
entitled to the rights and subject to the obligations of a Certificateholder
hereunder, upon due registration of such Certificate in such transferee's name
pursuant to Section 3.4.
SECTION 3.3. Authentication of Certificates. Concurrently with the
initial sale of the Mortgage Loans to the Trust pursuant to the Sale and
Servicing Agreement, the Owner Trustee shall cause the Certificates to be
executed on behalf of the Trust, authenticated and delivered to or upon the
written order of the Sponsor, signed by its chairman of the board, its president
or any vice president, its treasurer or any assistant treasurer without further
corporate action by the Sponsor, in authorized denominations. No Certificate
shall entitle its holder to any benefit under this Agreement, or shall be valid
for any purpose, unless there shall appear on such Certificate a certificate of
authentication substantially in the form set forth in Exhibit A, executed by the
Owner Trustee, by manual signature; such authentication shall constitute
conclusive evidence that such Certificate shall have been duly authenticated and
delivered hereunder. All Certificates shall be dated the date of their
authentication.
SECTION 3.4. Registration of Transfer and Exchange of Certificates. The
Certificate Registrar shall keep or cause to be kept, at the office or agency
maintained pursuant to Section 3.8, a Certificate Register in which, subject to
such reasonable regulations as it may prescribe, the Owner Trustee shall provide
for the registration of Certificates and of transfers and exchanges of
Certificates as herein provided. The Owner Trustee shall be the initial
Certificate Registrar.
In furtherance of and not in limitation of the foregoing, each
Certificateholder, by acceptance of its Certificate, specifically acknowledges
that it has no right to or interest in any monies at any time held in the
Reserve Fund prior to the release of such monies pursuant to Section 8.6(d)(ix)
of the Indenture, such monies being held in trust for the benefit of the
Noteholders and the Insurer. Notwithstanding the foregoing, in the event that it
is ever determined that the monies held in the Reserve Fund constitute a pledge
of collateral, then the provisions of the Sale and Servicing Agreement shall be
considered to constitute a security agreement and the Sponsor and the
Certificateholders hereby grant to the Indenture Trustee and the Insurer a first
priority perfected security interest in such amounts. In addition, each
Certificateholder, by acceptance of its Certificate, hereby appoints the Sponsor
as its agent to pledge a first priority perfected security interest in the
Reserve Fund, and any amounts held therein from time to time to the Indenture
Trustee and the Insurer and agrees to execute and deliver such instruments of
conveyance, assignment, grant, confirmation, etc., as well as any financing
statements, in each case as the Insurer shall consider reasonably necessary in
order to perfect the Indenture Trustee's security interest in the Mortgage
Loans.
9
SECTION 3.5. Mutilated, Destroyed, Lost or Stolen Certificates. If (a)
any mutilated Certificate shall be surrendered to the Certificate Registrar, or
if the Certificate Registrar shall receive evidence to its satisfaction of the
destruction, loss or theft of any Certificate and (b) there shall be delivered
to the Certificate Registrar, the Owner Trustee and the Insurer such security or
indemnity as may be required by them to save each of them harmless, then in the
absence of notice that such Certificate shall have been acquired by a bona fide
purchaser, the Owner Trustee on behalf of the Trust shall execute and the Owner
Trustee shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
class, tenor and denomination. In connection with the issuance of any new
Certificate under this Section, the Owner Trustee or the Certificate Registrar
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith. Any duplicate
Certificate issued pursuant to this Section shall constitute conclusive evidence
of an ownership interest in the Trust, as if originally issued, whether or not
the lost, stolen or destroyed Certificate shall be found at any time.
SECTION 3.6. Persons Deemed Certificateholders. Every Person by virtue
of becoming a Certificateholder in accordance with this Agreement and the rules
and regulations of the Certificate Registrar shall be deemed to be bound by the
terms of this Agreement. Prior to due presentation of a Certificate for
registration of transfer, the Owner Trustee, the Certificate Registrar and the
Insurer and any agent of the Owner Trustee, the Certificate Registrar and the
Insurer, may treat the Person in whose name any Certificate shall be registered
in the Certificate Register as the owner of such Certificate for the purpose of
receiving distributions pursuant to the Sale and Servicing Agreement and the
Indenture and for all other purposes whatsoever, and none of the Owner Trustee,
the Certificate Registrar or the Insurer nor any agent of the Owner Trustee, the
Certificate Registrar or the Insurer shall be bound by any notice to the
contrary.
SECTION 3.7. Access to List of Certificateholders' Names and Addresses.
The Owner Trustee shall furnish or cause to be furnished to the Servicer, the
Sponsor or the Insurer, within 15 days after receipt by the Owner Trustee of a
request therefor from such Person in writing, a list, of the names and addresses
of the Certificateholders as of the most recent Record Date. If three or more
Holders of Certificates or one or more Holders of Certificates evidencing not
less than 25% by Percentage Interest apply in writing to the Owner Trustee, and
such application states that the applicants desire to communicate with other
Certificateholders with respect to their rights under this Agreement or under
the Certificates and such application is accompanied by a copy of the
communication that such applicants propose to transmit, then the Owner Trustee
shall, within five Business Days after the receipt of such application, afford
such applicants access during normal business hours to the current list of
Certificateholders. Each Holder, by receiving and holding a Certificate, shall
be deemed to have agreed not to hold any of the Sponsor, the Servicer, the Owner
Trustee or the Insurer or any agent thereof accountable by reason of the
disclosure of its name and address, regardless of the source from which such
information was derived.
SECTION 3.8. Maintenance of Office or Agency. The Owner Trustee shall
maintain in Wilmington, Delaware an office or offices or agency or agencies
where Certificates may be surrendered for registration of transfer or exchange
and where notices and demands to or upon the Owner Trustee in respect of the
Certificates and the Basic Documents may be served. The Owner Trustee initially
designates its Corporate Trust Office for such purposes. The Owner
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Trustee shall give prompt written notice to the Sponsor, the Certificateholders
and the Insurer of any change in the location of the Certificate Register or any
such office or agency.
SECTION 3.9. ERISA Restrictions. The Certificates may not be acquired
by or for the account of (i) an employee benefit plan (as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) that is subject to the provisions of Title I of ERISA, (ii) a plan
described in Section 4975(e)(1) of the Internal Revenue Code of 1986, as
amended, or (iii) any entity whose underlying assets include plan assets by
reason of a plan's investment in the entity (each, a "Benefit Plan"). By
accepting and holding its beneficial ownership interest in its Certificate, the
Holder thereof shall be deemed to have represented and warranted that it is not
a Benefit Plan.
SECTION 3.10. Restrictions on Transfer of Certificates.
(a) The Certificates shall be assigned, transferred, exchanged,
pledged, financed, hypothecated or otherwise conveyed (collectively, for
purposes of this Section 3.10 and any other Section referring to the
Certificates, "transferred" or a "transfer") only in accordance with this
Section 3.10.
(b) No transfer of a Certificate shall be made unless such transfer is
exempt from the registration requirements of the Securities Act of 1933, as
amended, and any applicable state securities laws or is made in accordance with
said Act and laws. Except for the initial issuance of the Certificate to the
Sponsor, the Indenture Trustee shall require (i) the transferee to execute an
investment letter acceptable to and in form and substance satisfactory to the
Indenture Trustee and the Insurer certifying to the Indenture Trustee and the
Insurer the facts surrounding such transfer, which investment letter shall not
be an expense of the Indenture Trustee or the Insurer or (ii) if the investment
letter is not delivered, a written Opinion of Counsel acceptable to and in form
and substance satisfactory to the Indenture Trustee, the Insurer and the Sponsor
that such transfer may be made pursuant to an exemption, describing the
applicable exemption and the basis therefor from said Act or is being made
pursuant to said Act, which Opinion of Counsel shall not be an expense of the
Indenture Trustee, the Insurer or the Sponsor. The Holder of a Certificate
desiring to effect such transfer shall, and does hereby agree to, indemnify the
Sponsor and the Insurer against any liability that may result if the transfer is
not so exempt or is not made in accordance with such federal and state laws.
(c) The Certificate and any interest therein shall not be transferred
except upon satisfaction of the following conditions precedent: (i) the Person
that acquires a Certificate shall (A) be organized and existing under the laws
of the United States of America or any state thereof or the District of
Columbia; (B) expressly assume, by an agreement supplemental hereto, executed
and delivered to the Indenture Trustee and the Insurer, the performance of every
covenant and obligation of the Sponsor hereunder and (C) as part of its
acquisition of a Certificate, acquire all rights of the Sponsor or any
transferee under this Section 3.10(c) to amounts payable to such Sponsor or such
transferee under Section 8.6(d)(xiii) of the Indenture; (ii) the Holder of the
Certificates shall deliver to the Indenture Trustee and the Insurer an Officer's
Certificate stating that such transfer and such supplemental agreement comply
with this Section 3.10(c) and that all conditions precedent provided by this
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Section 3.10(c) have been complied with and an Opinion of Counsel stating that
all conditions precedent provided by this Section 3.10(c) have been complied
with, and the Indenture Trustee may conclusively rely on such Officer's
Certificate, shall have no duty to make inquiries with regard to the matters set
forth therein and shall incur no liability in so relying; (iii) the Holder of
the Certificates shall deliver to the Indenture Trustee and the Insurer a letter
from each Rating Agency confirming that its rating of the Notes, after giving
effect to such transfer, will not be reduced or withdrawn without regard to the
Policies; (iv) the transferee of the Certificates shall deliver to the Indenture
Trustee and the Insurer an Opinion of Counsel to the effect that (a) such
transfer will not adversely affect the treatment of the Notes after such
transfer as debt for federal and applicable state income tax purposes, (b) such
transfer will not result in the Trust being subject to tax at the entity level
for federal or applicable state tax purposes, (c) such transfer will not have
any material adverse impact on the federal or applicable state income taxation
of a Noteholder or any Certificateholder and (d) such transfer will not result
in the arrangement created by this Agreement or any "portion" of the Trust,
being treated as a taxable mortgage pool as defined in Section 7701(i) of the
Code; (v) all filings and other actions necessary to continue the perfection of
the interest of the Trust in the Mortgage Loans and the other property conveyed
hereunder shall have been taken or made and (vi) the Insurer shall have
consented to such transfer. Notwithstanding the foregoing, the requirement set
forth in subclause (i)(A) of this Section 3.10(c) shall not apply in the event
the Indenture Trustee shall have received a letter from each Rating Agency
confirming that its rating of the Notes, after giving effect to a proposed
transfer to a Person that does not meet the requirement set forth in subclause
(i)(A), shall not be reduced or withdrawn without regard to the Policies.
Notwithstanding the foregoing, the requirements set forth in this paragraph (c)
shall not apply to the initial issuance of the Certificates to the Sponsor.
Except for the initial issuance of the Certificate to the Sponsor, no
transfer of a Certificate shall be made unless the Indenture Trustee and the
Insurer shall have received a representation letter from the transferee of such
Certificate, acceptable to and in form and substance satisfactory to the
Indenture Trustee and the Insurer, to the effect that such transferee is not a
Benefit Plan, nor a Person acting on behalf of or using the assets of a Benefit
Plan, which representation letter shall not be an expense of the Indenture
Trustee or the Insurer.
(d) No transfer or pledge of the Certificates shall result in more than
98 other holders of Certificates.
SECTION 3.11. Acceptance of Obligations. The Sponsor, by its acceptance
of the Certificates, agrees to be bound by and to perform all the duties of the
Sponsor set forth in this Agreement.
SECTION 3.12. Distributions on Certificates. The Holders of the
Certificates will be entitled to distributions on each Payment Date, as provided
in the Sale and Servicing Agreement and the Indenture.
ARTICLE IV
Voting Rights and Other Actions
SECTION 4.1. Prior Notice to Holders with Respect to Certain Matters.
With respect to the following matters, the Owner Trustee shall not take action
unless at least 30 days
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before the taking of such action, the Owner Trustee shall have notified the
Certificateholders in writing of the proposed action and the Certificateholders
shall not have notified the Owner Trustee in writing prior to the 30th day after
such notice is given that such Certificateholders have withheld consent or
provided alternative direction:
(a) the election by the Trust to file an amendment to the Certificate
of Trust (unless such amendment is required to be filed under the Business Trust
Statute or unless such amendment would not materially and adversely affect the
interests of the Holders);
(b) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is required;
(c) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is not required and such
amendment materially adversely affects the interest of the Certificateholders;
or
(d) except pursuant to Section 9.01 of the Sale and Servicing
Agreement, the amendment, change or modification of the Sale and Servicing
Agreement, except to cure any ambiguity or defect or to amend or supplement any
provision in a manner that would not materially adversely affect the interests
of the Certificateholders.
The Owner Trustee shall notify the Certificateholders in writing of any
appointment of a successor Note Registrar, or Certificate Registrar within five
Business Days thereof.
SECTION 4.2. Action by Certificateholders with Respect to Certain
Matters.
(a) The Owner Trustee shall not have the power, except upon the
direction of the Insurer, to (i) remove the Servicer under the Sale and
Servicing Agreement or (ii) except as expressly provided in the Basic Documents,
sell the Mortgage Loans after the termination of the Indenture. The Owner
Trustee shall take the actions referred to in the preceding sentence only upon
written instructions signed by the Insurer or the Securityholders, and the
furnishing of indemnification satisfactory to the Owner Trustee by the
Certificateholders.
(b) Upon the written request of any Certificateholder (a "Proposer"),
the Owner Trustee shall distribute promptly to all Certificateholders any
request for action or consent of Certificateholders submitted by such Proposer,
with a copy to the Manager. The Owner Trustee shall provide a reasonable method
for collecting responses to such request and shall tabulate and report the
results thereof to the Certificateholders and the Manager. The Owner Trustee
shall have no responsibility or duty to determine if any such proposed action or
consent is permitted under the terms of this Agreement or applicable law.
SECTION 4.3. Action by Certificateholders with Respect to Bankruptcy.
Until one year and one day following the day on which the Notes have been paid
in full, the Owner Trustee shall not have the power to, and shall not, commence
any proceeding or other actions contemplated by Section 2.12(b) relating to the
Trust without the prior written consent of the Insurer. Until one year and one
day following the day on which the Notes have been paid in full, all amounts due
to the Insurer under the Insurance Agreement have been paid in full, the
Policies have terminated and the Indenture Trustee has surrendered the Policies
to the Insurer,
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the Owner Trustee shall not have the power to, and shall not, commence any
proceeding or other actions contemplated by Section 2.12(b) relating to the
Trust without the prior written consent of all of the Certificateholders and the
delivery to the Owner Trustee by each such Certificateholder of a certificate
certifying that such Certificateholder reasonably believes that the Trust is
insolvent.
SECTION 4.4. Restrictions on Certificateholders' Power.
(a) The Certificateholders shall not direct the Owner Trustee to take
or refrain from taking any action if such action or inaction would be contrary
to any obligation of the Trust or the Owner Trustee under this Agreement or any
of the Basic Documents or would be contrary to Section 2.3 or otherwise contrary
to law nor shall the Owner Trustee be obligated to follow any such direction, if
given.
(b) No Certificateholder (other than the Sponsor as sole
Certificateholder) shall have any right by virtue or by availing itself of any
provisions of this Agreement to institute any suit, action, or proceeding in
equity or at law upon or under or with respect to this Agreement or any Basic
Document, unless the Certificateholders are the Instructing Party pursuant to
Section 6.3 and unless a Certificateholder previously shall have given to the
Owner Trustee a written notice of default and of the continuance thereof, as
provided in this Agreement, and also unless Certificateholders evidencing not
less than 25% by Percentage Interest shall have made written request upon the
Owner Trustee to institute such action, suit or proceeding in its own name as
Owner Trustee under this Agreement and shall have offered to the Owner Trustee
such reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Owner Trustee, for 30
days after its receipt of such notice, request, and offer of indemnity, shall
have neglected or refused to institute any such action, suit, or proceeding, and
during such 30-day period no request or waiver inconsistent with such written
request has been given to the Owner Trustee pursuant to and in compliance with
this Section or Section 6.3; it being understood and intended, and being
expressly covenanted by each Certificateholder with every other
Certificateholder and the Owner Trustee, that no one or more Holders of
Certificates shall have any right in any manner whatever by virtue or by
availing itself or themselves of any provisions of this Agreement to affect,
disturb, or prejudice the rights of the Holders of any other of the
Certificates, or to obtain or seek to obtain priority over or preference to any
other such Holder, or to enforce any right under this Agreement, except in the
manner provided in this Agreement and for the equal, ratable, and common benefit
of all Certificateholders. For the protection and enforcement of the provisions
of this Section 4.4, each and every Certificateholder and the Owner Trustee
shall be entitled to such relief as can be given either at law or in equity.
SECTION 4.5. Majority Control. No Certificateholder shall have any
right to vote or in any manner otherwise control the operation and management of
the Trust except as expressly provided in this Agreement. Except as expressly
provided herein, any action that may be taken by the Certificateholders under
this Agreement may be taken by the Holders of Certificates evidencing not less
than a majority interest in the Trust. Except as expressly provided herein, any
written notice of the Certificateholders delivered pursuant to this Agreement
shall be effective if signed by Certificateholders evidencing not less than a
majority interest in the Trust at the time of the delivery of such notice.
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SECTION 4.6. Rights of Insurer. Notwithstanding anything to the
contrary in the Basic Documents, without the prior written consent of the
Insurer the Owner Trustee shall not (i) remove the Servicer, (ii) initiate any
claim, suit or proceeding by the Trust or compromise any claim, suit or
proceeding brought by or against the Trust, other than with respect to the
enforcement of any Mortgage Loan or any rights of the Trust thereunder, (iii)
authorize the merger or consolidation of the Trust with or into any other
business trust or other entity, (iv) amend the Certificate of Trust or (v) amend
this Agreement in accordance with Section 11.1 of this Agreement.
ARTICLE V
Certain Duties
SECTION 5.1. Accounting and Records to the Noteholders,
Certificateholders, the Internal Revenue Service and Others. Subject to Sections
8.01(b)(iii) and 8.01(c) of the Sale and Servicing Agreement, the Sponsor shall
(a) maintain (or cause to be maintained) the books of the Trust on a calendar
year basis on the accrual method of accounting, including, without limitation,
the allocations of net income under Section 2.11 hereof, (b) deliver (or cause
to be delivered) to each Certificateholder, as may be required by the Code and
applicable Treasury Regulations, such information as may be required (including
Schedule K-1, if applicable) to enable each Certificateholder to prepare its
Federal and state income tax returns, (c) file or cause to be filed, if
necessary, such tax returns relating to the Trust (including a partnership
information return, Form 1065), and direct the Owner Trustee or the Servicer, as
the case may be, to make such elections as may from time to time be required or
appropriate under any applicable state or Federal statute or rule or regulation
thereunder so as to maintain the Trust's characterization as a branch, or if
applicable, as a partnership, for Federal income tax purposes and (d) collect or
cause to be collected any withholding tax as described in and in accordance with
Section 8.01(b)(ii) of the Sale and Servicing Agreement with respect to income
or distributions to Certificateholders and the appropriate forms relating
thereto. The Owner Trustee or the Servicer, as the case may be, shall make all
elections pursuant to this Section as directed in writing by the Sponsor. The
Owner Trustee shall sign all tax information returns, if any, filed pursuant to
this Section 5.1 and any other returns as may be required by law, and in doing
so shall rely entirely upon, and shall have no liability for information
provided by, or calculations provided by, the Sponsor or the Servicer. The
Sponsor will direct the Owner Trustee and the Owner Trustee shall elect under
Section 1278 of the Code to include in income currently any market discount that
accrues with respect to the Mortgage Loans. The Sponsor shall not direct the
Owner Trustee and the Owner Trustee shall not make the election provided under
Section 754 of the Code.
SECTION 5.2. Signature on Returns; Tax Matters Partner.
(a) Notwithstanding the provisions of Section 5.1 and in the event that
the Trust is characterized as a partnership, the Owner Trustee shall sign on
behalf of the Trust the tax returns of the Trust, unless applicable law requires
a Certificateholder to sign such documents, in which case such documents shall
be signed by the Sponsor.
15
(b) In the event that the Trust is characterized as a partnership, the
Sponsor shall be the "tax matters partner" of the Trust pursuant to the Code.
SECTION 5.3. Underwriting Agreement. The Servicer is hereby authorized
to execute and deliver the Underwriting Agreement with respect to the Notes.
ARTICLE VI
Authority and Duties of Owner Trustee
SECTION 6.1. General Authority. The Owner Trustee is authorized and
directed to execute and deliver the Basic Documents to which the Trust is named
as a party and each certificate or other document attached as an exhibit to or
contemplated by the Basic Documents to which the Trust is named as a party and
any amendment thereto, in each case, in such form as the Sponsor shall approve
as evidenced conclusively by the Owner Trustee's execution thereof, and on
behalf of the Trust, to direct the Indenture Trustee to authenticate and deliver
Class A-1 Notes in the aggregate principal amount of $211,693,000 and Class A-2
Notes in the aggregate principal amount of $57,042,000. In addition to the
foregoing, the Owner Trustee is authorized, but shall not be obligated, to take
all actions required of the Trust pursuant to the Basic Documents. The Owner
Trustee is further authorized from time to time to take such action as the
Instructing Party recommends with respect to the Basic Documents so long as such
activities are consistent with the terms of the Basic Documents. The Owner
Trustee may rely on the Manager to carry out any action that the Owner Trustee
is authorized or directed to perform hereunder, to the extent permitted by the
Management Agreement.
SECTION 6.2. General Duties. It shall be the duty of the Owner Trustee
to discharge (or cause to be discharged) all of its responsibilities pursuant to
the terms of this Agreement and to administer the Trust in the interest of the
Holders, subject to the Basic Documents and in accordance with the provisions of
this Agreement. Notwithstanding the foregoing, the Owner Trustee shall be deemed
to have discharged its duties and responsibilities hereunder and under the Basic
Documents to the extent the Servicer has agreed in the Sale and Servicing
Agreement to perform any act or to discharge any duty of the Trust or the Owner
Trustee hereunder or under any Basic Document, and the Owner Trustee shall not
be liable for the default or failure of the Servicer to carry out its
obligations under the Sale and Servicing Agreement or the failure of the Manager
to carry out its obligations under the Management Agreement.
SECTION 6.3. Action upon Instruction.
(a) Subject to Article IV, the Insurer (the "Instructing Party") shall
have the exclusive right to direct the actions of the Owner Trustee in the
management of the Trust, so long as such instructions are not inconsistent with
the express terms set forth herein or in any Basic Document. The Instructing
Party shall not instruct the Owner Trustee in a manner inconsistent with this
Agreement or the Basic Documents. In acting in accordance with the direction of
the Insurer pursuant to this Section or pursuant to Article IV, the Owner
Trustee shall not be deemed to (i) owe any fiduciary obligation to the Insurer
or (ii) have violated any fiduciary responsibility to the Certificateholders.
16
(b) The Owner Trustee shall not be required to take any action
hereunder or under any Basic Document if the Owner Trustee shall have reasonably
determined, or shall have been advised by counsel, that such action is likely to
result in liability on the part of the Owner Trustee or is contrary to the terms
hereof or of any Basic Document or is otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Agreement or any
Basic Document, the Owner Trustee shall promptly give notice (in such form as
shall be appropriate under the circumstances) to the Instructing Party
requesting instruction as to the course of action to be adopted, and to the
extent the Owner Trustee acts in good faith in accordance with any written
instruction of the Instructing Party received, the Owner Trustee shall not be
liable on account of such action to any Person. If the Owner Trustee shall not
have received appropriate instruction within ten days of such notice (or within
such shorter period of time as reasonably may be specified in such notice or may
be necessary under the circumstances) it may, but shall be under no duty to,
notwithstanding any other provision of this Agreement, take or refrain from
taking such action, not inconsistent with this Agreement or the Basic Documents,
as it shall deem to be in the best interests of the Certificateholders, and
shall have no liability to any Person for such action or inaction.
(d) In the event that the Owner Trustee is unsure as to the application
of any provision of this Agreement or any Basic Document or any such provision
is ambiguous as to its application, or is, or appears to be, in conflict with
any other applicable provision, or in the event that this Agreement permits any
determination by the Owner Trustee or is silent or is incomplete as to the
course of action that the Owner Trustee is required to take with respect to a
particular set of facts, the Owner Trustee may give notice (in such form as
shall be appropriate under the circumstances) to the Instructing Party
requesting instruction and, notwithstanding any other provision of this
Agreement, to the extent that the Owner Trustee acts or refrains from acting in
good faith in accordance with any such instruction received, the Owner Trustee
shall not be liable, on account of such action or inaction, to any Person. If
the Owner Trustee shall not have received appropriate instruction within 10 days
of such notice (or within such shorter period of time as reasonably may be
specified in such notice or may be necessary under the circumstances) it may,
but shall be under no duty to, take or refrain from taking such action, not
inconsistent with this Agreement or the Basic Documents, as it shall deem to be
in the best interests of the Certificateholders, and shall have no liability to
any Person for such action or inaction.
SECTION 6.4. No Duties Except as Specified in this Agreement or in
Instructions. The Owner Trustee shall not have any duty or obligation to manage,
make any payment with respect to, register, record, sell, dispose of, or
otherwise deal with the Owner Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Owner Trustee is a party, except as expressly provided by the terms
of this Agreement or in any document or written instruction received by the
Owner Trustee pursuant to Section 6.3; and no implied duties or obligations
shall be read into this Agreement or any Basic Document against the Owner
Trustee. The Owner Trustee shall have no responsibility for filing any financing
or continuation statement in any public office at any time or to otherwise
perfect or maintain the perfection of any security interest or lien granted to
it hereunder or to prepare or file any Commission filing for the Trust or to
record this
17
Agreement or any Basic Document. The Owner Trustee nevertheless agrees that it
will, at its own cost and expense, promptly take all action as may be necessary
to discharge any Liens on any part of the Owner Trust Estate that result from
actions by, or claims against, the Owner Trustee (solely in its individual
capacity) and that are not related to the ownership or the administration of the
Owner Trust Estate.
SECTION 6.5. No Action Except under Specified Documents or
Instructions. The Owner Trustee shall not manage, control, use, sell, dispose of
or otherwise deal with any part of the Owner Trust Estate except (i) in
accordance with the powers granted to and the authority conferred upon the Owner
Trustee pursuant to this Agreement, (ii) in accordance with the Basic Documents
and (iii) in accordance with any document or instruction delivered to the Owner
Trustee pursuant to Section 6.3.
SECTION 6.6. Restrictions. The Owner Trustee shall not take any action
(a) that is inconsistent with the purposes of the Trust set forth in Section 2.3
or (b) that, to the actual knowledge of the Owner Trustee, would result in the
Trust's becoming taxable as a corporation or a publicly traded partnership for
Federal income tax purposes. The Certificateholders shall not direct the Owner
Trustee to take action that would violate the provisions of this Section.
ARTICLE VII
Concerning the Owner Trustee
SECTION 7.1. Acceptance of Trust and Duties. The Owner Trustee accepts
the trust hereby created and agrees to perform its duties hereunder with respect
to such trust but only upon the terms of this Agreement. The Owner Trustee also
agrees to disburse all monies actually received by it constituting part of the
Owner Trust Estate upon the terms of the Basic Documents and this Agreement. The
Owner Trustee shall not be answerable or accountable hereunder or under any
Basic Document under any circumstances, except (i) for its own willful
misconduct, bad faith or gross negligence, (ii) in the case of the inaccuracy of
any representation or warranty contained in Section 7.3 expressly made by the
Owner Trustee in its individual capacity, (iii) for liabilities arising from the
failure of the Owner Trustee to perform obligations expressly undertaken by it
in the last sentence of Section 6.4 hereof, or (iv) for taxes, fees or other
charges on, based on or measured by, any fees, commissions or compensation
received by the Owner Trustee. In particular, but not by way of limitation (and
subject to the exceptions set forth in the preceding sentence):
(a) the Owner Trustee shall not be liable for any error of judgment,
not constituting gross negligence, made by a Responsible Officer of the Owner
Trustee;
(b) the Owner Trustee shall not be liable with respect to any action
taken or omitted to be taken by it if such action or omission is in accordance
with the instructions of the Instructing Party, the Sponsor, the Servicer or any
Certificateholder pursuant to the terms hereof;
(c) or risk funds or otherwise incur any financial liability in the
performance of any of its rights or powers hereunder or under any Basic Document
if the Owner Trustee shall
18
have reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured or provided
to it;
(d) by or arising under any of the Basic Documents, including the
principal of and interest on the Notes;
(e) the Owner Trustee shall not be responsible for or in respect of the
validity or sufficiency of this Agreement or for the due execution hereof by the
Sponsor or for the form, character, genuineness, sufficiency, value or validity
of any of the Owner Trust Estate or for or in respect of the validity or
sufficiency of the Basic Documents, other than the certificate of authentication
on the Certificates, and the Owner Trustee shall in no event assume or incur any
liability, duty or obligation to the Sponsor, the Insurer, Indenture Trustee,
any Certificateholder, other than as expressly provided for herein and in the
Basic Documents;
(f) the Owner Trustee shall not be liable for the default or misconduct
of the Sponsor, the Insurer, the Indenture Trustee, or the Servicer under any of
the Basic Documents or otherwise and the Owner Trustee shall have no obligation
or liability to perform the obligations under this Agreement or the Basic
Documents that are required to be performed by the Sponsor under this Agreement,
by the Indenture Trustee under the Indenture or the Servicer under the Sale and
Servicing Agreement; and
(g) the Owner Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement, or to institute, conduct or
defend any litigation under this Agreement or otherwise or in relation to this
Agreement or any Basic Document, at the request, order or direction of the
Instructing Party or any of the Certificateholders, unless such Instructing
Party or Certificateholders have offered to the Owner Trustee security or
indemnity satisfactory to it against the costs, expenses and liabilities that
may be incurred by the Owner Trustee therein or thereby. The right of the Owner
Trustee to perform any discretionary act enumerated in this Agreement or in any
Basic Document shall not be construed as a duty, and the Owner Trustee shall not
be answerable for other than its gross negligence, bad faith or willful
misconduct in the performance of any such act.
SECTION 7.2. Furnishing of Documents. The Owner Trustee shall furnish
to the Certificateholders promptly upon receipt of a written request therefor,
duplicates or copies of all reports, notices, requests, demands, certificates,
financial statements and any other instruments furnished to the Owner Trustee
under the Basic Documents.
SECTION 7.3. Representations and Warranties. The Owner Trustee hereby
represents and warrants, in its individual capacity, to the Sponsor and the
Holders that:
(a) It is a Delaware banking corporation, duly organized and validly
existing in good standing under the laws of the State of Delaware. It has all
requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement.
(b) It has taken all corporate action necessary to authorize the
execution and delivery by it of this Agreement, and this Agreement will be
executed and delivered by one of its officers who is duly authorized to execute
and deliver this Agreement on its behalf.
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(c) Neither the execution nor the delivery by it of this Agreement, nor
the consummation by it of the transactions contemplated hereby nor compliance by
it with any of the terms or provisions hereof will contravene any federal or
Delaware state law, governmental rule or regulation governing the banking or
trust powers of the Owner Trustee or any judgment or order binding on it, or
constitute any default under its charter documents or by-laws or any indenture,
mortgage, contract, agreement or instrument to which it is a party or by which
any of its properties may be bound.
SECTION 7.4. Reliance; Advice of Counsel.
(a) The Owner Trustee shall incur no liability to anyone in acting upon
any signature, instrument, notice, resolution, request, consent, order,
certificate, report, opinion, bond or other document or paper believed by it to
be genuine and believed by it to be signed by the proper party or parties. The
Owner Trustee may accept a certified copy of a resolution of the board of
directors or other governing body of any corporate party as conclusive evidence
that such resolution has been duly adopted by such body and that the same is in
full force and effect. As to any fact or matter the method of the determination
of which is not specifically prescribed herein, the Owner Trustee may for all
purposes hereof rely on a certificate, signed by the president or any vice
president or by the treasurer, secretary or other authorized officers of the
relevant party, as to such fact or matter, and such certificate shall constitute
full protection to the Owner Trustee for any action taken or omitted to be taken
by it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in
the performance of its duties and obligations under this Agreement or the Basic
Documents, the Owner Trustee (i) may act directly or through its agents or
attorneys pursuant to agreements entered into with any of them, and (ii) may
consult with counsel, accountants and other skilled persons to be selected with
reasonable care and employed by it. The Owner Trustee shall not be liable for
anything done, suffered or omitted in good faith by it in accordance with the
written opinion or advice of any such counsel, accountants or other such persons
and according to such opinion not contrary to this Agreement or any Basic
Document.
SECTION 7.5. Not Acting in Individual Capacity. Except as provided in
this Article VII, in accepting the trusts hereby created Wilmington Trust
Company acts solely as Owner Trustee hereunder and not in its individual
capacity and all Persons having any claim against the Owner Trustee by reason of
the transactions contemplated by this Agreement or any Basic Document shall look
only to the Owner Trust Estate for payment or satisfaction thereof.
SECTION 7.6. Owner Trustee Not Liable for Certificates or Mortgage
Loans. The recitals contained herein and in the Certificates (other than the
signature and countersignature of the Owner Trustee on the Certificates) shall
be taken as the statements of the Sponsor and the Owner Trustee assumes no
responsibility for the correctness thereof. The Owner Trustee makes no
representations as to the validity or sufficiency of this Agreement, of any
Basic Document or of the Certificates (other than the signature and
countersignature of the Owner Trustee on the Certificates) or the Notes, or of
any Mortgage Loan or related documents. The Owner Trustee shall at no time have
any responsibility or liability for or with respect to the legality, validity
and enforceability of any Mortgage Loan, or the perfection and priority of any
security interest created by any Mortgage Loan or the maintenance of any such
perfection and
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priority, or for or with respect to the sufficiency of the Owner Trust Estate or
its ability to generate the payments to be distributed to Certificateholders
under this Agreement or the Noteholders under the Indenture, including, without
limitation: the existence, condition and ownership of any Mortgage Loan; the
existence and enforceability of any insurance thereon; the existence and
contents of any Mortgage Loan on any computer or other record thereof; the
validity of the assignment of any Mortgage Loan to the Trust or of any
intervening assignment; the completeness of any Mortgage Loan; the performance
or enforcement of any Mortgage Loan; the compliance by the Sponsor, the Servicer
or any other Person with any warranty or representation made under any Basic
Document or in any related document or the accuracy of any such warranty or
representation or any action of the Indenture Trustee or the Servicer or any
subservicer taken in the name of the Owner Trustee.
SECTION 7.7. Owner Trustee May Own Certificates and Notes. The Owner
Trustee in its individual or any other capacity may become the owner or pledgee
of Certificates or Notes and may deal with the Sponsor, the Indenture Trustee
and the Servicer in banking transactions with the same rights as it would have
if it were not Owner Trustee.
SECTION 7.8. Payments from Owner Trust Estate. All payments to be made
by the Owner Trustee under this Agreement or any of the Basic Documents to which
the Trust or the Owner Trustee is a party shall be made only from the income and
proceeds of the Owner Trust Estate and only to the extent that the Owner Trust
shall have received income or proceeds from the Owner Trust Estate to make such
payments in accordance with the terms hereof. Wilmington Trust Company, or any
successor thereto, in its individual capacity, shall not be liable for any
amounts payable under this Agreement or any of the Basic Documents to which the
Trust or the Owner Trustee is a party.
SECTION 7.9. Doing Business in Other Jurisdictions. Notwithstanding
anything contained to the contrary, neither Wilmington Trust Company or any
successor thereto, nor the Owner Trustee shall be required to take any action in
any jurisdiction other than in the State of Delaware if the taking of such
action will, even after the appointment of a co-trustee or separate trustee in
accordance with Section 10.5 hereof, (i) require the consent or approval or
authorization or order of or the giving of notice to, or the registration with
or the taking of any other action in respect of, any state or other governmental
authority or agency of any jurisdiction other than the State of Delaware ; (ii)
result in any fee, tax or other governmental charge under the laws of the State
of Delaware becoming payable by Wilmington Trust Company (or any successor
thereto); or (iii) subject Wilmington Trust Company (or any successor thereto)
to personal jurisdiction in any jurisdiction other than the State of Delaware
for causes of action arising from acts unrelated to the consummation of the
transactions by Wilmington Trust Company (or any successor thereto) or the Owner
Trustee, as the case may be, contemplated hereby.
ARTICLE VIII
Compensation of Owner Trustee
SECTION 8.1. Owner Trustee's Fees and Expenses. The Owner Trustee shall
receive as compensation for its services hereunder such fees as have been
separately agreed upon
21
between the Company and the Owner Trustee, and the Owner Trustee shall be
entitled to be reimbursed by the Sponsor for its other reasonable expenses
hereunder, including the reasonable compensation, expenses and disbursements of
such agents, representatives, experts and counsel as the Owner Trustee may
employ in connection with the exercise and performance of its rights and its
duties hereunder and under the Basic Documents.
SECTION 8.2. Indemnification. The Sponsor shall be liable as primary
obligor for, and shall indemnify the Owner Trustee (in its individual and trust
capacities) and its officers, directors, successors, assigns, agents and
servants (collectively, the "Indemnified Parties") from and against, any and all
liabilities, obligations, losses, damages, taxes, claims, actions and suits, and
any and all reasonable costs, expenses and disbursements (including reasonable
legal fees and expenses) of any kind and nature whatsoever (collectively,
"Expenses") which may (in its trust or individual capacities) at any time be
imposed on, incurred by, or asserted against the Owner Trustee or any
Indemnified Party in any way relating to or arising out of this Agreement, the
Basic Documents, the Owner Trust Estate, the administration of the Owner Trust
Estate or the action or inaction of the Owner Trustee hereunder, except only
that the Sponsor shall not be liable for or required to indemnify the Owner
Trustee from and against Expenses arising or resulting from any of the matters
described in the third sentence of Section 7.1. The indemnities contained in
this Section and the rights under Section 8.1 shall survive the resignation or
termination of the Owner Trustee or the termination of this Agreement. In any
event of any claim, action or proceeding for which indemnity will be sought
pursuant to this Section, the Owner Trustee's choice of legal counsel shall be
subject to the approval of the Sponsor which approval shall not be unreasonably
withheld.
SECTION 8.3. Payments to the Owner Trustee. Any amounts paid to the
Owner Trustee pursuant to this Article VIII shall be deemed not to be a part of
the Owner Trust Estate immediately after such payment.
SECTION 8.4. Non-recourse Obligations. Notwithstanding anything in this
Agreement or any Basic Document, the Owner Trustee agrees in its individual
capacity and in its capacity as Owner Trustee for the Trust that all obligations
of the Trust to the Owner Trustee individually or as Owner Trustee for the Trust
shall be recourse to the Owner Trust Estate only and specifically shall not be
recourse to the assets of any Certificateholder.
ARTICLE IX
Termination of Trust Agreement
SECTION 9.1. Termination of Trust Agreement.
(a) This Agreement and the Trust shall terminate and be of no further
force or effect upon the later of (i) the maturity or other liquidation of the
last Mortgage Loan (including the redemption by the Sponsor at its option of the
Notes as described in Section 7.01(b) of the Sale and Servicing Agreement) and
the subsequent distribution of amounts in respect of such Mortgage Loans as
provided in the Basic Documents or (ii) the payment to Certificateholders of all
amounts required to be paid to them pursuant to this Agreement and the payment
to the Insurer of all amounts payable or reimbursable to it pursuant to the Sale
and Servicing Agreement and the Insurance Agreement; provided, however, that the
rights to indemnification
22
under Section 8.2 and the rights under Section 8.1 shall survive the termination
of the Trust. The Servicer shall promptly notify the Owner Trustee and the
Insurer of any prospective termination pursuant to this Section 9.1. The
bankruptcy, liquidation, dissolution, death or incapacity of any
Certificateholder shall not (x) operate to terminate this Agreement or the
Trust, nor (y) entitle such Certificateholder's legal representatives or heirs
to claim an accounting or to take any action or proceeding in any court for a
partition or winding up of all or any part of the Trust or Owner Trust Estate
nor (z) otherwise affect the rights, obligations and liabilities of the parties
hereto.
(b) Except as provided in clause (a), neither the Sponsor nor any other
Certificateholder shall be entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the Payment Date
upon which the Certificateholders shall surrender their Certificates to the
Indenture Trustee for payment of the final distribution and cancellation, shall
be given by the Owner Trustee by letter to Certificateholders mailed within five
Business Days of receipt of notice of such termination from the Servicer given
pursuant to Section 7.01(c) of the Sale and Servicing Agreement, stating (i) the
Payment Date upon or with respect to which final payment of the Certificates
shall be made upon presentation and surrender of the Certificates at the office
of the Indenture Trustee therein designated, (ii) the amount of any such final
payment and (iii) that the Record Date otherwise applicable to such Payment Date
is not applicable, payments being made only upon presentation and surrender of
the Certificates at the office of the Indenture Trustee therein specified. The
Owner Trustee shall give such notice to the Certificate Registrar (if other than
the Owner Trustee) and the Indenture Trustee at the time such notice is given to
Certificateholders. Upon presentation and surrender of the Certificates, the
Indenture Trustee shall cause to be distributed to Certificateholders amounts
distributable on such Payment Date pursuant to Section 8.6(d)(xiii) of the
Indenture.
In the event that all of the Certificateholders shall not surrender
their Certificates for cancellation within six months after the date specified
in the above-mentioned written notice, the Owner Trustee shall give a second
written notice to the remaining Certificateholders to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. If within one year after the second notice all the Certificates shall
not have been surrendered for cancellation, the Owner Trustee may take
appropriate steps, or may appoint an agent to take appropriate steps, to contact
the remaining Certificateholders concerning surrender of their Certificates, and
the cost thereof shall be paid out of the funds and other assets that shall
remain subject to this Agreement. Any funds remaining in the Trust after
exhaustion of such remedies shall be distributed, subject to applicable escheat
laws, by the Owner Trustee to the Sponsor and Holders shall look solely to the
Sponsor for payment.
(d) Any funds remaining in the Trust after funds for final distribution
have been distributed or set aside for distribution shall be distributed by the
Owner Trustee to the Sponsor.
(e) Upon the winding up of the Trust and its termination, the Owner
Trustee shall cause the Certificate of Trust to be canceled by filing a
certificate of cancellation with the Secretary of State in accordance with the
provisions of Section 3810 of the Business Trust Statute.
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ARTICLE X
Successor Owner Trustees and Additional Owner Trustees
SECTION 10.1. Eligibility Requirements for Owner Trustee. The Owner
Trustee shall at all times be a corporation (i) satisfying the provisions of
Section 3807(a) of the Business Trust Statute; (ii) authorized to exercise
corporate trust powers; (iii) having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by Federal or State
authorities; (iv) having (or having a parent which has) a rating of at least
Baa3 by ▇▇▇▇▇'▇ or A-1 by Standard & Poor's; and (v) acceptable to the Insurer
in its sole discretion. If such corporation shall publish reports of condition
at least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purpose of this Section, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. In case at any time the Owner Trustee shall cease to be eligible
in accordance with the provisions of this Section, the Owner Trustee shall
resign immediately in the manner and with the effect specified in Section 10.2.
SECTION 10.2. Resignation or Removal of Owner Trustee. The Owner
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to the Sponsor (or in the event that the
Sponsor is not the sole Certificateholder, the Holders of Certificates
evidencing not less than a majority in interest in the Trust), the Insurer and
the Servicer. Upon receiving such notice of resignation, the Sponsor shall
promptly appoint a successor Owner Trustee, meeting the qualifications set forth
in Section 10.1 herein, by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning Owner Trustee and one copy to the
successor Owner Trustee, provided that the Sponsor shall have received written
confirmation from each of the Rating Agencies that the proposed appointment will
not result in an increased capital charge to the Insurer by either of the Rating
Agencies. If no successor Owner Trustee shall have been so appointed and have
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Owner Trustee or the Insurer may petition any court
of competent jurisdiction for the appointment of a successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 10.1 and shall fail to resign after
written request therefor by the Sponsor, or if at any time the Owner Trustee
shall be legally unable to act, or shall be adjudged bankrupt or insolvent, or a
receiver of the Owner Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Owner Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Certificateholder with the consent of the Insurer may
remove the Owner Trustee. If the Certificateholder shall remove the Owner
Trustee under the authority of the immediately preceding sentence, the Sponsor
shall promptly appoint a successor Owner Trustee, meeting the qualifications set
forth in Section 10.1 herein, by written instrument, in duplicate, one copy of
which instrument shall be delivered to the outgoing Owner Trustee so removed,
one copy to the Insurer and one copy to the successor Owner Trustee and the
Sponsor shall pay all fees owed to the outgoing Owner Trustee, if not previously
paid by the Trust.
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Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor Owner
Trustee pursuant to Section 10.3 and payment of all fees and expenses owed to
the outgoing Owner Trustee. The Sponsor shall provide notice of such resignation
or removal of the Owner Trustee to each of the Rating Agencies.
Notwithstanding any other provision of this Agreement, and in addition
to any other method of removal of the Owner Trustee contained herein, upon a
proposal made pursuant to Section 4.2(b) and the subsequent consent of
Certificateholders representing no less than a 66-2/3% interest in the Trust,
the Owner Trustee may be removed as Owner Trustee , subject to the consent of
the Insurer, which consent is not to be unreasonably withheld. In the event the
Owner Trustee is removed pursuant to this paragraph, the provisions of this
Agreement, including Article X herein, shall apply as if the Owner Trustee had
resigned hereunder.
SECTION 10.3. Successor Owner Trustee. Any successor Owner Trustee
appointed pursuant to Section 10.2 shall execute, acknowledge and deliver to the
Sponsor, the Servicer, the Insurer and to its predecessor Owner Trustee an
instrument accepting such appointment under this Agreement, and thereupon the
resignation or removal of the predecessor Owner Trustee shall become effective
and such successor Owner Trustee, without any further act, deed or conveyance,
shall become fully vested with all the rights, powers, duties and obligations of
its predecessor under this Agreement, with like effect as if originally named as
Owner Trustee. The predecessor Owner Trustee shall upon payment of its fees and
expenses deliver to the successor Owner Trustee all documents and statements and
monies held by it under this Agreement; and the Sponsor and the predecessor
Owner Trustee shall execute and deliver such instruments and do such other
things as may reasonably be required for fully and certainly vesting and
confirming in the successor Owner Trustee all such rights, powers, duties and
obligations.
No successor Owner Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Owner Trustee shall
be eligible pursuant to Section 10.1.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Servicer shall mail notice of the successor of such Owner
Trustee to all Certificateholders, the Indenture Trustee, the Noteholders and
the Rating Agencies. If the Servicer shall fail to mail such notice within 10
days after acceptance of appointment by the successor Owner Trustee, the
successor Owner Trustee shall cause such notice to be mailed at the expense of
the Servicer.
SECTION 10.4. Merger or Consolidation of Owner Trustee. Any corporation
into which the Owner Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Owner Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Owner Trustee, shall be the successor of the Owner Trustee hereunder, provided
such corporation shall be eligible pursuant to Section 10.1, without the
execution or filing of any instrument or any further act on the part of any of
the parties hereto, anything herein
25
to the contrary notwithstanding; provided, further, that the Owner Trustee shall
mail notice of such merger or consolidation to the Rating Agencies.
SECTION 10.5. Appointment of Co-Owner Trustee or Separate Owner
Trustee. Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Owner Trust Estate or any Mortgaged Property may at the time be
located, the Servicer and the Owner Trustee acting jointly shall have the power
and shall execute and deliver all instruments to appoint one or more Persons
approved by the Owner Trustee and the Insurer to act as co-trustee, jointly with
the Owner Trustee, or separate trustee or separate trustees, of all or any part
of the Owner Trust Estate, and to vest in such Person, in such capacity, such
title to the Trust, or any part thereof, and, subject to the other provisions of
this Section, such powers, duties, obligations, rights and trusts as the
Servicer and the Owner Trustee may consider necessary or desirable. If the
Servicer shall not have joined in such appointment within 15 days after the
receipt by it of a request so to do, the Owner Trustee subject to the approval
of the Insurer (which approval shall not be unreasonably withheld) shall have
the power to make such appointment. No co-trustee or separate trustee under this
Agreement shall be required to meet the terms of eligibility as a successor
trustee pursuant to Section 10.1 and no notice of the appointment of any
co-trustee or separate trustee shall be required pursuant to Section 10.3.
Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Owner Trustee shall be conferred upon and exercised or
performed by the Owner Trustee and such separate trustee or co-trustee
jointly (it being understood that such separate trustee or co-trustee
is not authorized to act separately without the Owner Trustee joining
in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed,
the Owner Trustee shall be incompetent or unqualified to perform such
act or acts, in which event such rights, powers, duties and obligations
(including the holding of title to the Trust or any portion thereof in
any such jurisdiction) shall be exercised and performed singly by such
separate trustee or co-trustee, but solely at the direction of the
Owner Trustee;
(ii) no trustee under this Agreement shall be personally liable by
reason of any act or omission of any other trustee under this
Agreement; and
(iii) the Servicer and the Owner Trustee acting jointly may at any
time accept the resignation of or remove any separate trustee or
co-trustee.
Any notice, request or other writing given to the Owner Trustee shall
be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or property
specified in its instrument of appointment, either jointly with the Owner
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every
26
provision of this Agreement relating to the conduct of, affecting the liability
of, or affording protection to, the Owner Trustee. Each such instrument shall be
filed with the Owner Trustee and a copy thereof given to the Servicer and the
Insurer.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Owner Trustee, to the extent permitted by law, without the appointment of a new
or successor trustee.
ARTICLE XI
Miscellaneous
SECTION 11.1. Supplements and Amendments.
(a) This Agreement may be amended by the Sponsor and the Owner Trustee,
with the prior written consent of the Insurer and with prior written notice to
the Rating Agencies, without the consent of any of the Noteholders or, in the
event that the Sponsor is not the sole Certificateholder, the
Certificateholders, (i) to cure any ambiguity or defect or (ii) to correct,
supplement or modify any provisions in this Agreement; provided, however, that
such action shall not, as evidenced by an Opinion of Counsel which may be based
upon a certificate of the Servicer, adversely affect in any material respect the
interests of any Noteholder or Certificateholder.
(b) This Agreement may also be amended from time to time, with the
prior written consent of the Insurer by the Sponsor and the Owner Trustee, with
prior written notice to the Rating Agencies, and, to the extent such amendment
materially and adversely affects the interests of the Noteholders, with the
consent of the Noteholders evidencing not less than a majority of the
Outstanding Amount of the Notes and, the consent of the Certificateholders
evidencing not less than a majority interest in the Trust (which consent of any
Holder of a Certificate or Note given pursuant to this Section or pursuant to
any other provision of this Agreement shall be conclusive and binding on such
Holder and on all future Holders of such Certificate or Note and of any
Certificate or Note issued upon the transfer thereof or in exchange thereof or
in lieu thereof whether or not notation of such consent is made upon the
Certificate or Note) for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Noteholders or the Certificateholders;
provided, however, that, subject to the express rights of the Insurer under the
Basic Documents, no such amendment shall (a) increase or reduce in any manner
the amount of, or accelerate or delay the timing of, collections of payments on
Mortgage Loans or distributions that shall be required to be made for the
benefit of the Noteholders or the Certificateholders or (b) reduce the aforesaid
percentage of the Outstanding Amount of the Notes and the Certificates, the
Holders of which are required to consent to any such amendment, without the
consent of the Holders of all the outstanding Notes and Holders of all
outstanding Certificates.
27
Promptly after the execution of any such amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder, the Indenture Trustee and each
of the Rating Agencies.
It shall not be necessary for the consent of Certificateholders, the
Noteholders or the Indenture Trustee pursuant to this Section to approve the
particular form of any proposed amendment or consent, but it shall be sufficient
if such consent shall approve the substance thereof. The manner of obtaining
such consents (and any other consents of Certificateholders provided for in this
Agreement or in any other Basic Document) and of evidencing the authorization of
the execution thereof by Certificateholders shall be subject to such reasonable
requirements as the Owner Trustee may prescribe. Promptly after the execution of
any amendment to the Certificate of Trust, the Owner Trustee shall cause the
filing of such amendment with the Secretary of State.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and that all conditions precedent to
the execution and delivery of such amendment have been satisfied. The Owner
Trustee may, but shall not be obligated to, enter into any such amendment which
affects the Owner Trustee's own rights, duties or immunities under this
Agreement or otherwise.
SECTION 11.2. No Legal Title to Owner Trust Estate in
Certificateholders. The Certificateholders shall not have legal title to any
part of the Owner Trust Estate. The Certificateholders shall be entitled to
receive distributions with respect to their undivided ownership interest therein
only in accordance with Article IX. No transfer, by operation of law or
otherwise, of any right, title or interest of the Certificateholders to and in
their ownership interest in the Owner Trust Estate shall operate to terminate
this Agreement or the trusts hereunder or entitle any transferee to an
accounting or to the transfer to it of legal title to any part of the Owner
Trust Estate.
SECTION 11.3. Limitations on Rights of Others. Except for Section 2.7,
the provisions of this Agreement are solely for the benefit of the Owner
Trustee, the Sponsor, the Certificateholders, the Servicer and, to the extent
expressly provided herein, the Insurer, the Indenture Trustee and the
Noteholders, and nothing in this Agreement, whether express or implied, shall be
construed to give to any other Person any legal or equitable right, remedy or
claim in the Owner Trust Estate or under or in respect of this Agreement or any
covenants, conditions or provisions contained herein.
SECTION 11.4. Notices.
(a) Unless otherwise expressly specified or permitted by the terms
hereof, all notices shall be in writing and shall be deemed given upon receipt
personally delivered, delivered by overnight courier or mailed first class mail
or certified mail, in each case return receipt requested, and shall be deemed to
have been duly given upon receipt, if to the Owner Trustee, addressed to the
Corporate Trust Office; if to the Sponsor, addressed to Headlands Mortgage
Securities Inc., ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇; if to the Insurer, addressed to Insurer, Ambac Assurance Corporation, ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Surveillance Department, Telecopy No.:
(▇▇▇) ▇▇▇-▇▇▇▇; or, as to each party, at such other address as shall be
designated by such party in a written notice to each other party.
(b) Any notice required or permitted to be given to a Certificateholder
shall be given by first-class mail, postage prepaid, at the address of such
Holder as shown in the Certificate Register. Any notice so mailed within the
time prescribed in this Agreement shall be conclusively presumed to have been
duly given, whether or not the Certificateholder receives such notice.
SECTION 11.5. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 11.6. Separate Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 11.7. Assignments; Insurer.
(a) This Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and permitted assigns. This
Agreement shall also inure to the benefit of the Insurer. Without limiting the
generality of the foregoing, all covenants and agreements in this Agreement
which confer rights upon the Insurer shall be for the benefit of and run
directly to the Insurer, and the Insurer shall be entitled to rely on and
enforce such covenants, subject, however, to the limitations on such rights
provided in this Agreement and the Basic Documents. The Insurer may disclaim any
of its rights and powers under this Agreement (but not its duties and
obligations under the Policies) upon delivery of a written notice to the Owner
Trustee.
(b) In accepting instructions from the Insurer pursuant to Article IV
or Section 6.3 of this Agreement, and with respect to any other obligations of
the Owner Trustee to the Insurer under this Agreement, the Owner Trustee
undertakes to perform or observe only its express obligations under this
Agreement, and no implied obligations with respect to the Insurer shall be read
into this Agreement against the Owner Trustee. The Owner Trustee shall not be
deemed to owe any fiduciary duty to the Insurer and it is expressly understood
and agreed by the Insurer that the Owner Trustee shall not be personally liable
or responsible for the payment of any amount owing on or with respect to the
Basic Documents or for the failure of the Trust to perform its obligations under
the Basic Documents or any other agreement with respect thereto.
SECTION 11.8. No Petition. The Owner Trustee (not in its individual
capacity but solely as Owner Trustee), by entering into this Agreement, each
Certificateholder, by accepting a Certificate, and the Indenture Trustee and
each Noteholder by accepting the benefits of this Agreement, hereby covenants
and agrees that they will not at any time institute against the Sponsor, or join
in any institution against the
29
Sponsor of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any United States Federal or
state bankruptcy or similar law in connection with any obligations relating to
the Certificates, the Notes, this Agreement or any of the Basic Documents.
SECTION 11.9. No Recourse. Each Certificateholder by accepting a
Certificate acknowledges that such Certificateholder's Certificates represent
beneficial interests in the Trust only and do not represent interests in or
obligations of the Servicer, the Sponsor, the Owner Trustee, the Indenture
Trustee, the Insurer or any Affiliate thereof and no recourse may be had against
such parties or their assets, except as may be expressly set forth or
contemplated in this Agreement, the Certificates or the Basic Documents.
SECTION 11.10. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 11.11. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.12. Servicer. The Servicer is authorized to prepare, or
cause to be prepared, execute and deliver on behalf of the Trust all such
documents, reports, filings, instruments, certificates and opinions as it shall
be the duty of the Trust or Owner Trustee to prepare, file or deliver pursuant
to the Basic Documents. Upon written request, the Owner Trustee shall execute
and deliver to the Servicer a limited power of attorney appointing the Servicer
the Trust's agent and attorney-in-fact to prepare, or cause to be prepared,
execute and deliver all such documents, reports, filings, instruments,
certificates and opinions.
30
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement
to be duly executed by their respective officers hereunto duly authorized as of
the day and year first above written.
WILMINGTON TRUST COMPANY,
Owner Trustee
By: /s/ W. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Name: W. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Assistant Vice President
HEADLANDS MORTGAGE SECURITIES INC.,
Sponsor
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Vice President
Acknowledged and Agreed:
HEADLANDS MORTGAGE COMPANY,
Servicer
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Executive Vice President
AMBAC ASSURANCE CORPORATION,
Insurer
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President
31
EXHIBIT A
CERTIFICATE
THIS CERTIFICATE REPRESENTS CERTAIN RESIDUAL RIGHTS TO PAYMENT TO THE EXTENT
DESCRIBED HEREIN AND IN THE TRUST AGREEMENT REFERRED TO HEREIN.
THIS CERTIFICATE MAY NOT BE HELD BY OR TRANSFERRED TO A NON-UNITED STATES
PERSON.
THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE. ANY RESALE, TRANSFER
OR OTHER DISPOSITION OF THIS CERTIFICATE WITHOUT SUCH REGISTRATION OR
QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION WHICH DOES NOT REQUIRE SUCH
REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH THE PROVISIONS OF SECTION
3.10 OF THE TRUST AGREEMENT REFERRED TO HEREIN.
NO TRANSFER OF THIS CERTIFICATE MAY BE MADE UNLESS THE TRANSFEREE PROVIDES A
REPRESENTATION LETTER FROM THE TRANSFEREE OF SUCH CERTIFICATE, ACCEPTABLE TO AND
IN FORM AND SUBSTANCE SATISFACTORY TO THE INDENTURE TRUSTEE AND THE INSURER, TO
THE EFFECT THAT SUCH TRANSFEREE IS NOT AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN
SECTION 3(3) OF ERISA) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, A
PLAN DESCRIBED IN SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE, NOR A PERSON
ACTING ON BEHALF OF OR USING THE ASSETS OF ANY SUCH PLAN, WHICH REPRESENTATION
LETTER SHALL NOT BE AN EXPENSE OF THE INDENTURE TRUSTEE OR THE INSURER.
NO TRANSFER OF A CERTIFICATE SHALL BE MADE UNLESS SUCH TRANSFER IS EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY
APPLICABLE STATE SECURITIES LAWS OR IS MADE IN ACCORDANCE WITH SAID ACT AND
LAWS. EXCEPT FOR THE INITIAL ISSUANCE OF THE CERTIFICATE TO THE SPONSOR, THE
INDENTURE TRUSTEE SHALL REQUIRE (i) THE TRANSFEREE TO EXECUTE AN INVESTMENT
LETTER ACCEPTABLE TO AND IN FORM AND SUBSTANCE SATISFACTORY TO THE INDENTURE
TRUSTEE AND THE INSURER CERTIFYING TO THE INDENTURE TRUSTEE AND THE INSURER THE
FACTS SURROUNDING SUCH TRANSFER, WHICH INVESTMENT LETTER SHALL NOT BE AN EXPENSE
OF THE INDENTURE TRUSTEE OR THE INSURER OR (ii) IF THE INVESTMENT LETTER IS NOT
DELIVERED, A WRITTEN OPINION OF COUNSEL ACCEPTABLE TO AND IN FORM AND SUBSTANCE
SATISFACTORY TO THE INDENTURE TRUSTEE, THE INSURER AND THE SPONSOR
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THAT SUCH TRANSFER MAY BE MADE PURSUANT TO AN EXEMPTION, DESCRIBING THE
APPLICABLE EXEMPTION AND THE BASIS THEREFOR, FROM SAID ACT OR IS BEING MADE
PURSUANT TO SAID ACT, WHICH OPINION OF COUNSEL SHALL NOT BE AN EXPENSE OF THE
INDENTURE TRUSTEE, THE INSURER OR THE SPONSOR. THE HOLDER OF A CERTIFICATE
DESIRING TO EFFECT SUCH TRANSFER SHALL, AND DOES HEREBY AGREE TO, INDEMNIFY THE
SPONSOR AND THE INSURER AGAINST ANY LIABILITY THAT MAY RESULT IF THE TRANSFER IS
NOT SO EXEMPT OR IS NOT MADE IN ACCORDANCE WITH SUCH FEDERAL AND STATE LAWS.
THE CERTIFICATES AND ANY INTEREST THEREIN SHALL NOT BE TRANSFERRED EXCEPT UPON
SATISFACTION OF THE FOLLOWING CONDITIONS PRECEDENT: (I) THE PERSON THAT ACQUIRES
A CERTIFICATE SHALL (A) BE ORGANIZED AND EXISTING UNDER THE LAWS OF THE UNITED
STATES OF AMERICA OR ANY STATE OR THE DISTRICT OF COLUMBIA THEREOF, (B)
EXPRESSLY ASSUME, BY AN AGREEMENT SUPPLEMENTAL HERETO, EXECUTED AND DELIVERED TO
THE INDENTURE TRUSTEE AND THE INSURER, THE PERFORMANCE OF EVERY COVENANT AND
OBLIGATION OF THE SPONSOR UNDER THE TRUST AGREEMENT AND (C) AS PART OF ITS
ACQUISITION OF A CERTIFICATE, ACQUIRE ALL RIGHTS OF THE SPONSOR OR ANY
TRANSFEREE UNDER SECTION 3.10 OF THE TRUST AGREEMENT TO AMOUNTS PAYABLE TO THE
CERTIFICATE OR SUCH TRANSFEREE UNDER SECTIONS 8.6(D)(XIII) AND 8.5(C) OF THE
INDENTURE; (II) THE HOLDER OF THE CERTIFICATES SHALL DELIVER TO THE INDENTURE
TRUSTEE AND THE INSURER AN OFFICER'S CERTIFICATE STATING THAT SUCH TRANSFER AND
SUCH SUPPLEMENTAL AGREEMENT COMPLY WITH SECTION 3.10(C) OF THE TRUST AGREEMENT
AND THAT ALL CONDITIONS PRECEDENT PROVIDED BY SECTION 3.10(C) OF THE TRUST
AGREEMENT HAVE BEEN COMPLIED WITH AND AN OPINION OF COUNSEL STATING THAT ALL
CONDITIONS PRECEDENT PROVIDED BY SECTION 3.10(C) OF THE TRUST AGREEMENT HAVE
BEEN COMPLIED WITH, AND THE INDENTURE TRUSTEE MAY CONCLUSIVELY RELY ON SUCH
OFFICER'S CERTIFICATE, SHALL HAVE NO DUTY TO MAKE INQUIRIES WITH REGARD TO THE
MATTERS SET FORTH THEREIN AND SHALL INCUR NO LIABILITY IN SO RELYING; (III) THE
HOLDER OF THE CERTIFICATES SHALL DELIVER TO THE INDENTURE TRUSTEE AND THE
INSURER A LETTER FROM EACH RATING AGENCY CONFIRMING THAT ITS RATING OF THE
NOTES, AFTER GIVING EFFECT TO SUCH TRANSFER, WILL NOT BE REDUCED OR WITHDRAWN
WITHOUT REGARD TO THE POLICIES; (IV) THE TRANSFEREE OF THE CERTIFICATES SHALL
DELIVER TO THE INDENTURE TRUSTEE AND THE INSURER AN OPINION OF COUNSEL TO THE
EFFECT THAT (A) SUCH TRANSFER WILL NOT ADVERSELY AFFECT THE TREATMENT OF THE
NOTES AFTER SUCH TRANSFER AS DEBT FOR FEDERAL AND APPLICABLE STATE INCOME TAX
PURPOSES, (B) SUCH TRANSFER WILL NOT RESULT IN THE TRUST BEING SUBJECT TO TAX AT
THE ENTITY LEVEL FOR FEDERAL OR APPLICABLE STATE TAX PURPOSES, (C) SUCH TRANSFER
WILL NOT HAVE ANY MATERIAL ADVERSE IMPACT ON THE FEDERAL OR APPLICABLE STATE
INCOME TAXATION OF A NOTEHOLDER OR ANY NOTE OWNER AND (D) SUCH TRANSFER WILL NOT
RESULT IN THE ARRANGEMENT CREATED BY THE TRUST AGREEMENT OR ANY "PORTION" OF THE
TRUST, BEING
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TREATED AS A TAXABLE MORTGAGE POOL AS DEFINED IN SECTION 7701(I) OF THE CODE;
(V) ALL FILINGS AND OTHER ACTIONS NECESSARY TO CONTINUE THE PERFECTION OF THE
INTEREST OF THE TRUST IN THE MORTGAGE LOANS AND THE OTHER PROPERTY CONVEYED
UNDER THE TRUST AGREEMENT SHALL HAVE BEEN TAKEN OR MADE AND (VI) THE INSURER
SHALL HAVE CONSENTED TO SUCH TRANSFER.
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
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HEADLANDS HOME EQUITY LOAN TRUST 1999-1 CERTIFICATE
Percentage Interest: 100% Cut-Off Date: September 15, 1999
First Payment Date: October 15, 1999 Issue Date: September 29, 1999
No. 1
Headlands Mortgage Securities Inc.
Certificateholder
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned
Trust Agreement.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner Trustee
By: _________________________________________
Authenticating Agent
The Trust was created pursuant to a Trust Agreement dated as of
September 1, 1999 (the "Trust Agreement"), between the Sponsor and Wilmington
Trust Company, as owner trustee (the "Owner Trustee"), a summary of certain of
the pertinent provisions of which is set forth below. To the extent not
otherwise defined herein, the capitalized terms used herein have the meanings
assigned to them in the Trust Agreement.
This Certificate is one of the duly authorized Certificates designated
as Headlands Home Equity Loan "Asset Backed Certificates" (herein called the
"Certificates"). Also issued under the Indenture dated as of September 1, 1999,
among the Trust and Bank One, National Association, as indenture trustee (the
"Indenture Trustee") are two classes of Notes designated as Class A-1 Notes and
Class A-2 Notes (collectively referred to herein as the "Notes"). These
Certificates are issued under and are subject to the terms, provisions and
conditions of the Trust Agreement, to which Trust Agreement the holder of this
Certificate by virtue of the acceptance hereof assents and by which such holder
is bound. The property of the Trust includes (A) a pool of certain adjustable
rate home equity revolving credit line loans (the "HELOC Mortgage Loans")
(including any Additional Balances related thereto) and certain second lien
closed-end loans (the "Closed End Mortgage Loans") in each case which
substantially conform to the loan origination standards with respect to loan
balances as of the date of origination set form by the Federal National Mortgage
Association and (B) a pool of certain HELOC Mortgage Loans (including any
Additional Balances related thereto) and certain Closed End Mortgage Loans which
do not so conform.
A-4
Under the Trust Agreement, there will be distributed on the 15th day of
each month or, if such 15th day is not a Business Day, the next Business Day
(the "Payment Date"), commencing on October 15, 1999, to the Person in whose
name this Certificate is registered at the close of business on the Business Day
preceding such Payment Date (the "Record Date") such Certificateholder's
Percentage Interest in the amount to be distributed to Certificateholders on
such Payment Date.
The holder of this Certificate acknowledges and agrees that its rights
to receive distributions in respect of this Certificate are subordinated to the
rights of the Noteholders as described in the Sale and Servicing Agreement, the
Indenture and the Trust Agreement, as applicable.
The holder of this Certificate, by acceptance of this Certificate,
specifically acknowledges that it has no right to or interest in any monies at
any time held pursuant to the Reserve Fund or prior to the release of such
monies pursuant to Sections 8.6(d)(xiii) and 8.5(c) of the Indenture, such
monies being held in trust for the benefit of the Noteholders and the Insurer.
Notwithstanding the foregoing, in the event that it is ever determined that the
monies held in the Reserve Fund constitute a pledge of collateral, then the
provisions of the Sale and Servicing Agreement shall be considered to constitute
a security agreement and the holder of this Certificate hereby grants to the
Indenture Trustee and the Insurer a first priority perfected security interest
in such amounts. In addition, each Certificateholder, by acceptance of its
Certificate, hereby appoints the Sponsor as its agent to pledge a first priority
perfected security interest in the Reserve Fund and agrees to execute and
deliver such instruments of conveyance, assignment, grant, confirmation, etc.,
as well as any financing statements, in each case as the Insurer shall consider
reasonably necessary in order to perfect the Indenture Trustee's security
interest in the Trust Property.
It is the intent of the Sponsor, the Servicer, and the
Certificateholders that, for purposes of Federal income taxes, the Trust will be
treated as a branch. In the event that the Certificates are held by more than
one Holder, it is the intent of the Sponsor, the Servicer, and the
Certificateholders that, for purposes of Federal income taxes, the Trust will be
treated as a partnership and the Certificateholders will be treated as partners
in that partnership. The Sponsor and any other Certificateholders, by acceptance
of a Certificate, agree to treat, and to take no action inconsistent with the
treatment of, the Certificates for such tax purposes as partnership interests in
the Trust. Each Certificateholder, by its acceptance of a Certificate, covenants
and agrees that such Certificateholder will not at any time institute against
the Trust or the Sponsor, or join in any institution against the Trust or the
Sponsor of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any United States Federal or
state bankruptcy or similar law in connection with any obligations relating to
the Certificates, the Notes, the Trust Agreement or any of the Basic Documents.
Distributions on this Certificate will be made as provided in the Sale
and Servicing Agreement and the Indenture by the Indenture Trustee by wire
transfer or check mailed to the Certificateholder of record in the Certificate
Register without the presentation or surrender of this Certificate or the making
of any notation hereon. Except as otherwise provided in the Trust Agreement and
notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Owner Trustee of the pendency of such distribution
and only
A-5
upon presentation and surrender of this Certificate at the office or agency
maintained for the purpose by the Owner Trustee in the Corporate Trust Office.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee, by manual signature,
this Certificate shall not entitle the holder hereof to any benefit under the
Trust Agreement or the Sale and Servicing Agreement or be valid for any purpose.
The Certificates do not represent an obligation of, or an interest in,
the Company, the Sponsor, the Servicer, the Insurer, the Owner Trustee or any
Affiliates of any of them and no recourse may be had against such parties or
their assets, except as may be expressly set forth or contemplated herein or in
the Trust Agreement, the Indenture or the Basic Documents. In addition, this
Certificate is not guaranteed by any governmental agency or instrumentality and
is limited in right of payment to certain collections with respect to the
Mortgage Loans, as more specifically set forth herein, in the Sale and Servicing
Agreement and in the Indenture. A copy of each of the Sale and Servicing
Agreement and the Trust Agreement may be examined during normal business hours
at the principal office of the Sponsor, and at such other places, if any,
designated by the Sponsor, by any Certificateholder upon written request.
The Trust Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
Sponsor and the rights of the Certificateholders under the Trust Agreement at
any time by the Sponsor and the Owner Trustee with the prior written consent of
the Insurer and with the consent of the holders of the Notes and the
Certificates evidencing not less than a majority of the outstanding Notes and
the Certificates. Any such consent by the holder of this Certificate shall be
conclusive and binding on such holder and on all future holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange hereof or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Trust Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the holders of
any of the Certificates (other than the Sponsor or the Insurer).
As provided in the Trust Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies of the Certificate Registrar maintained by
the Owner Trustee in the Corporate Trust Office, accompanied by a written
instrument of transfer in form satisfactory to the Owner Trustee and the
Certificate Registrar duly executed by the holder hereof or such holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
in authorized denominations evidencing the same aggregate interest in the Trust
will be issued to the designated transferee. The initial Certificate Registrar
appointed under the Trust Agreement is Wilmington Trust Company.
Except for Certificates issued to the Sponsor, the Certificates are
issuable only as registered Certificates without coupons in denominations of
$1,000 or integral multiples of
A-6
$1,000 in excess thereof. As provided in the Trust Agreement and subject to
certain limitations therein set forth, Certificates are exchangeable for new
Certificates in authorized denominations evidencing the same aggregate
denomination, as requested by the holder surrendering the same. No service
charge will be made for any such registration of transfer or exchange, but the
Owner Trustee or the Certificate Registrar may require payment of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Owner Trustee, the Certificate Registrar, the Insurer and any agent
of the Owner Trustee, the Certificate Registrar, the Insurer or the Insurer may
treat the person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Owner Trustee, the Certificate
Registrar, the Insurer nor any such agent shall be affected by any notice to the
contrary.
The obligations and responsibilities created by the Trust Agreement and
the Trust created thereby shall terminate upon the payment to Certificateholders
of all amounts required to be paid to them pursuant to the Trust Agreement, the
Indenture and the Sale and Servicing Agreement and the disposition of all
property held as part of the Trust. The Sponsor may at its option redeem the
Notes at a price and upon the satisfaction of certain conditions specified in
Section 7.01(b) of the Sale and Servicing Agreement, and if all of the Notes are
redeemed, such redemption may result in termination of the Trust which may
effect a transfer of the Certificates; however, such right of purchase is
exercisable, subject to certain restrictions, only on any Payment Date on or
after the Payment Date immediately prior to which the related Note Principal
Balance for a Class of Notes is less than 10% of the related Original Note
Principal Balance for such Class of Notes and all amounts due and owing to the
Insurer for unpaid premiums and unreimbursed draws on the related Policy and all
other amounts due and owing to the Insurer pursuant to the Insurance Agreement,
together with interest thereon as provided under the Insurance Agreement, have
been paid.
The recitals contained herein shall be taken as the statements of the
Sponsor or the Servicer, as the case may be, and the Owner Trustee assumes no
responsibility for the correctness thereof. The Owner Trustee makes no
representations as to the validity or sufficiency of this Certificate or of any
Mortgage Loan or related document.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee, by manual or facsimile
signature, this Certificate shall not entitle the holder hereof to any benefit
under the Trust Agreement or the Sale and Servicing Agreement or be valid for
any purpose.
A-7
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not
in its individual capacity, has caused this Certificate to be duly executed.
HEADLANDS HOME EQUITY LOAN TRUST 1999-1
By:WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner Trustee
By:
----------------------------------------
Name:
Title:
Dated: September 29, 1999
A-8
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
________________________________________________________________________________
(Please print or type name and address, including postal zip code, of assignee)
________________________________________________________________________________
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
____________________________________Attorney to transfer said Certificate on the
books of the Certificate Registrar, with full power of substitution in the
premises.
Dated:
----------------------------------*
Signature Guaranteed:
----------------------------------*
----------
* NOTICE: The signature to this assignment must correspond with the name
of the registered owner as it appears on the face of the within
Certificate in every particular, without alteration, enlargement or any
change whatever. Such signature must be guaranteed by an "eligible
guarantor institution" meeting the requirements of the Certificate
Registrar, which requirements include membership or participation in
STAMP or such other "signature guarantee program" as may be determined
by the Certificate Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended.
EXHIBIT B
CERTIFICATE OF TRUST OF
HEADLANDS HOME EQUITY LOAN TRUST 1999-1
This Certificate of Trust of Headlands Home Equity Loan Trust 1999-1
(the "Trust"), dated as of September __, 1999, is being duly executed and filed
by Wilmington Trust Company, a Delaware banking corporation, as trustee, to form
a business trust under the Delaware Business Trust Act (12 Del. Code, Section
3801 et seq.).
1. Name. The name of the business trust formed hereby is Headlands Home
Equity Loan Trust 1999-1.
2. Delaware Trust. The name and business address of the Owner Trustee
of the Trust in the State of Delaware is Wilmington Trust Company, ▇▇▇▇▇▇ Square
North, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇. Attn:
Corporate Trust Administration.
3. This Certificate of Trust will be effective September 29, 1999.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.
WILMINGTON TRUST COMPANY,
not in its individual capacity but solely as Owner
Trustee of the Trust.
By:
----------------------------------------
Name:
Title: