SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported) OCTOBER 10, 1997
CONTIMORTGAGE HOME EQUITY LOAN TRUST 1997-4
(Exact name of registrant as specified in its charter)
NEW YORK 333-19427 APPLICATION PENDING
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) ID Number)
277 PARK AVENUE, NEW YORK, NEW YORK 10172
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (212) 207-2800
N/A
(Former name or former address, if changed since last report)
<PAGE>
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
Description of the Certificates and the Mortgage Loans
ContiSecurities Asset Funding Corp. registered issuance of up to
$1,525,000,000 principal amount of Asset Backed Certificates on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1993, as
amended (the "Act"), by a Registration Statement on Form S-3 (Registration File
No. 333-19427) (as amended, the "Registration Statement"). Pursuant to the
Registration Statement, ContiMortgage Home Equity Loan Trust 1997-3 (the
"Registrant" or the "Trust") issued $1,525,000,000 in aggregate principal amount
of its Home Equity Pass- Through Certificates, Series 1997-4 (the
"Certificates"), on September 25, 1997. This Current Report on Form 8-K is being
filed to satisfy an undertaking to file copies of certain agreements executed in
connection with the issuance of the Certificates, the forms of which were filed
as Exhibits to the Registration Statement.
The Certificates were issued pursuant to a Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") attached hereto as Exhibit
4.2, dated as of September 1, 1997, among ContiSecurities Asset Funding Corp.
(the "Depositor"), ContiMortgage Corporation (the "Company"), as seller and
servicer (the "Servicer") and Manufacturers and Traders Trust Company, in its
capacity as trustee (the "Trustee"). The Certificates consist of the following
classes: the Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6,
Class A-7, Class A-7 IO, Class A-8, Class A-9 Certificates (the "Class A
Certificates"), the Class B Certificates (the "Class B Certificates"), the Class
C Certificates (the "Class C Certificates") and the Class R Certificates, Class
R-I Certificates and Class R-II Certificates (the "Class R Certificates, Class
R-I Certificates and Class R-II Certificates" and together with the Class A
Certificates, the Class B Certificates, and the Class C Certificates, the
"Certificates"). Only the Class A and Class B Certificates were offered pursuant
to the Registration Statement. The Certificates evidence, in the aggregate, 100%
of the undivided beneficial ownership interests in the Trust.
The assets of the Trust initially include a pool of closed-and home
equity loans (the "Home Equity Loans") secured by mortgages or deeds of trust
primarily on one-to-four family residential properties. Interest distributions
on the Class A Certificates are based on the Certificate Principal Balance (or,
in the case of the Class A-7 IO Certificates, the Notional Principal Amount)
thereof and the applicable Pass-Through Rate thereof. The Pass-Through rates for
the Class A Certificates are as follows: Class A-1, 6.37%; Class A-2, 6.27%;
Class A-3, 6.26%; Class A-4, 6.30%; Class A-5, 6.44%, Class A-6, 6.51%; Class
A-7, 6.63%; Class A-7 IO, 8.5%; Class A-8 and Class A-9, as defined in the
Pooling and Servicing Agreement. The Pass-Through Rate for the Class B
Certificate is 7.33%. The Class A Certificates have initial aggregate principal
amount as follows: Class A-1, $235,000,000; Class A-2, $166,000,000; Class A-3,
$307,000,000; Class A- 4, $100,000,000; Class A-5, $132,000,000; Class A-6,
$39,000,000; Class A-7, $92,250,000; Class A-8, $137,500,000; Class A-9,
$267,500,000; Class B, $45,750,000. The Class A-7 IO Certificate is interest
only and has no Certificate Principal Balance.
As of the Cut-Off Date, the Home Equity Loans possessed the
characteristics described in the Prospectus dated September 18, 1997 and the
Prospectus Supplement dated September 18, 1997 filed pursuant to Rule 424(b)(5)
of the Act on September 24, 1997.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits:
4.1 Underwriting Agreement dated September 18, 1997 among
ContiSecurities Asset Funding Corp., Merrill, Lynch, Pierce,
Fenner & Smith Incorporated, ContiMortgage Corporation and
ContiWest Corporation.
4.2 Pooling and Servicing Agreement dated as of September 1, 1997,
among ContiSecurities Asset Funding Corp., as the depositor,
ContiMortgage Corporation, as a seller and servicer, ContiWest
Corporation, as a seller and Manufacturers and Traders Trust
Company, as a Trustee.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONTISECURITIES ASSET FUNDING CORP.
By: /S/ JAMES R. MOORE
Name: James R. Moore
Title: President
By: /S/ JEROME M. PERELSON
Name: Jerome M. Perelson
Title: Vice President
Dated: October 10, 1997
<PAGE>
EXHIBIT INDEX
EXHIBIT PAGE
4.1 Underwriting Agreement dated September 18, 1997 among ContiSecurities
Asset Funding Corp., Merrill, Lynch, Pierce, Fenner & Smith
Incorporated, ContiMortgage Corporation and ContiWest Corporation.
4.2 Pooling and Servicing Agreement dated as of September 1, 1997, among
ContiSecurities Asset Funding Corp., as the depositor, ContiMortgage
Corporation, as a seller and servicer, ContiWest Corporation, as a
seller and Manufacturers and Traders Trust Company, as a Trustee.
Exhibit 4.1
$1,525,000,000
CONTIMORTGAGE HOME EQUITY LOAN TRUST 1997-4
Home Equity Loan Pass-Through Certificates,
Series 1997-4
UNDERWRITING AGREEMENT
September 18, 1997
Merrill Lynch, Pierce, Fenner & Smith Incorporated
As Representative of the Several Underwriters
World Financial Center
North Tower
250 Vesey Street
New York, New York 10281
Dear Ladies and Gentlemen:
ContiSecurities Asset Funding Corp. (the "Depositor"), a Delaware
corporation, has authorized the issuance and sale of Home Equity Loan
Pass-Through Certificates, Series 1997-4, Class A-1, Class A-2, Class A-3, Class
A-4, Class A-5, Class A-6, Class A-7, Class A-8, Class A-9, and Class A-7IO,
(the "Class A Certificates") and Class B (the "Subordinate Certificates"). The
Class A Certificates and the Subordinate Certificates are collectively the
"Offered Certificates". Also issued are the Class C and the Class R Certificates
(the "Retained Certificates"). The Offered Certificates and the Retained
Certificates (collectively the "Certificates" ) evidence interests in a pool of
fixed and adjustable rate home equity loans (the "Home Equity Loans"). The Home
Equity Loans are secured primarily by first and second deeds of trust or
mortgages on one- to four-family residential properties.
Only the Offered Certificates are being purchased by the Underwriters named
in Schedule A hereto, and the Underwriters are purchasing, severally, only the
Offered Certificates set forth opposite their names in Schedule A, except that
the amounts purchased by the Underwriters may change in accordance with Section
X of this Agreement. Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") is acting as representative of the several Underwriters and in
such capacity is hereinafter referred to as the "Representative."
The Certificates will be issued under a pooling and servicing agreement
(the "Pooling and Servicing Agreement"), to be dated as of September 1, 1997
among the Depositor, ContiMortgage Corporation ("ContiMortgage"), as the
servicer and a seller (in such capacity, the "Servicer" or a "Seller," as the
case may be), ContiWest Corporation ("ContiWest"), as a seller (a "Seller," and
collectively with ContiMortgage, the "Sellers") and Manufacturers and Traders
Trust Company, as.the trustee (the "Trustee"). Each of the Depositor, Conti
Mortgage and ContiWest is a subsidiary of ContiFinancial Corporation
("ContiFinancial").
The Certificates will evidence fractional undivided interests in the trust
(the "Trust") formed pursuant to the Pooling and Servicing Agreement. The assets
of the Trust will initially include, among other things, a pool of f~xed and
adjustable rate home equity loans having a Cut-Off Date (as defined herein) as
of the close of business on September 12, 1997 (the "Home Equity Loans"), and
such amounts as may be held by the Trustee in any accounts held by the Trustee
for the Trust. A form of the Pooling and Servicing Agreement has been filed as
an exhibit to the Registration Statement (hereinafter defined).
The Certificates are more fully described in a Registration Statement which
the Depositor has furnished to the Underwriters. Capitalized terms used but not
defined herein shall have the meanings given to them in the Pooling and
Servicing Agreement.
The Class A Certificates will be entitled to the benefits of a certificate
guaranty insurance policy (the "Policy") issued by MBIA Insurance Corporation
("MBIA"). The Depositor, ContiMortgage and ContiWest will also enter into an
Indentification Agreement (the "Indemnification Agreement") dated as of
September 1, 1997 among the Underwriters, the Depositor, ContiMortgage,
ContiWest and MBIA, governing the liability of the several parties with respect
to the losses resulting from material misstatements or omissions contained in
the Prospectus Supplement.
Pursuant to Section 3.05 of the Pooling and Servicing Agreement and
concurrently with the execution thereof, ContiMortgage and ContiWest will
transfer to the Depositor all of their right, title and interest in and to the
unpaid principal balances of the Home Equity Loans as of the Cut-Off Date and
interest due after the Cut-Off Date and the collateral securing each Home Equity
Loan.
SECTION I. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR. The Depositor
represents and warrants to, and agrees with the Underwriters that:
A.__ A Registration Statement on Form S-3 (No. 333-19427), has (i) been
prepared by the Depositor in conformity with the requirements of the Securities
Act of 1933, as amended (the "Securities Act") and the rules and regulations
(the "Rules and Regulations") of the United States Securities and Exchange
Commission (the "Commission") thereunder, (ii) been filed with the Commission
under the Securities Act and (iii) become effective and is still effective as of
the date hereof under the Securities Act; Copies of such Registration Statement
have been delivered by the Depositor to the Underwriters. As used in this
Agreement, "Effective Time" means the date and the time as of which such
Registration Statement, or the most recent post-effective amendment thereto, if
any, was declared effective by the Commission; "Effective Date" means the date
of the Effective Time; "Registration Statement" means such registration
statement, at the Effective Time, including any documents incorporated by
reference therein at such time; "Basic Prospectus" means such final prospectus
dated February 19, 1997; and "Prospectus Supplement" means the final prospectus
supplement relating to the Offered Certificates, to be filed with the Commission
pursuant to paragraphs (2), (3) or (5) of Rule 424(b) of the Rules and
Regulations. "Prospectus" means the Basic Prospectus together with the
Prospectus Supplement. Reference made herein to the Prospectus shall be deemed
to refer to and include any documents incorporated by reference therein pursuant
to Item 12 of Form S-3 under the Securities Act, as of the date of the
Prospectus and any reference to any amendment or supplement to the Prospectus
shall be deemed to refer to and include any document filed under the Securities
Exchange Act of 1934 (the "Exchange Act") after the date of the Prospectus, and
incorporated by reference in the Prospectus and any reference to any amendment
to the Registration Statement shall be deemed to include any report of the
Depositor filed with the Commission pursuant to Section 13(a) or 15(d) of the
Exchange Act after the Effective Time that is incorporated by reference in the
Registration Statement. The Commission has not issued any order preventing or
suspending the use of the Prospectus or the effectiveness of the Registration
Statement and no proceedings for such purpose are pending or, to the Depositor's
knowledge, threatened by the Commission. There are no contracts or documents of
the Depositor which are required to be filed as exhibits to the Registration
Statement pursuant to the Securities Act or the Rules and Regulations which have
not been so filed or incorporated by reference therein on or prior to the
Effective Date of the Registration Statement other than such documents or
materials, if any, as any Underwriter delivers to the Depositor pursuant to
Section VIII D hereof for filing on Form 8-K. The conditions for use of Form
S-3, as set forth in the General Instructions thereto, have been satisfied.
To the extent that any Underwriter has provided to the Depositor
Computational Materials that such Underwriter has provided to a prospective
investor, the Depositor will file or cause to be filed with the Commission a
report on Form 8-K containing such Computational Materials, as soon as
reasonably practicable after the date of this Agreement, but in any event, not
later than 11:00 a.m. New York time the date on which the Prospectus is made
available to the Underwriter and is filed with the Commission pursuant to Rule
424 of the Rules and Regulations.
B.__ The Registration Statement and the Prospectus conform, and any further
amendments or supplements to the Registration Statement or the Prospectus will
conform, when they become effective or are filed with the Commission, as the
case may be, in all respects to the requirements of the Securities Act and the
Rules and Regulations. The Registration Statement, as of the Effective Date
thereof and of any amendment thereto, did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. The Prospectus as of
its date, and as amended or supplemented as of the Closing Date does not and
will not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided that no
representation or warranty is made as to information contained in or omitted
from the Registration Statement or the Prospectus in reliance upon and in
conformity with written information furnished to the Depositor in writing by any
Underwriters through the Representative expressly for use therein.
C.__ The documents incorporated by reference in the Prospectus, when they
became effective or were filed with the Commission, as the case may be,
conformed in all material respects to the requirements of the Securities Act or
the Exchange Act, as applicable, and the rules and regulations of the Commission
thereunder, and none of such documents contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading; and any further
documents so filed and incorporated by reference in the Prospectus, when such
documents become effective or are filed with the Commission, as the case may be,
will conform in all material respects to the requirements of the Securities Act
or the Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder and will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; provided that no representation
is made as to documents deemed to be incorporated by reference in the Prospectus
as the result of filing a Form 8-K at the request of the Underwriters except to
the extent such documents reflect information furnished by the Depositor to the
Underwriters for the purpose of preparing such documents.
D.__ Since the respective dates as of which information is given in the
Prospectus, there has not been any material adverse change in the general
affairs, management, financial condition, or results of operations of the
Depositor, otherwise than as set forth or contemplated in the Prospectus as
supplemented or amended as of the Closing Date.
E.__ The Depositor has been duly incorporated and is validly existing as a
corporation in good standing under the laws of its 3urisdiction of incorporation
and is in good standing as a foreign corporation in each jurisdiction in which
its ownership or lease of property or the conduct of its business so requires
such standing. The Depositor has all power and authority necessary to own or
hold its properties, to conduct the business in which it is engaged and to enter
into and perform its obligations under this Agreement and the Pooling and
Servicing Agreement and to cause the Certificates to be issued.
F.__ There are no actions, proceedings or investigations pending with
respect to which the Depositor has received service of process before or
threatened by any court, administrative agency or other tribunal to which the
Depositor is a party or of which any of its properties is the subject (a) which
if determined adversely to the Depositor would have a material adverse effect on
the business or financial condition of the Depositor, (b) asserting the
invalidity of this Agreement, the Pooling and Servicing Agreement or the
Certificates (c) seeking to prevent the issuance of the Certificates or the
consummation by the Depositor of any of the transactions contemplated by the
Pooling and Servicing Agreement or this Agreement, as the case may be, or (d)
which might materially and adversely affect the performance by the Depositor of
its obligations under, or the validity or enforceability of, the Pooling and
Servicing Agreement, this Agreement or the Certificates.
G.__ This Agreement has been, and the Pooling and Servicing Agreement when
executed and delivered as contemplated hereby and thereby will have been, duly
authorized, executed and delivered by the Depositor, and this Agreement
constitutes, and the Pooling and Servicing Agreement when executed and delivered
as contemplated herein will constitute, legal, valid and binding instruments
enforceable against the Depositor in accordance with their respective terms,
subject as to enforceability to (x) applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws affecting creditors' rights
generally, (y) general principles of equity (regardless of whether enforcement
is sought in a proceeding in equity or at law), and (z) with respect to rights
of indemnity under this Agreement and limitations of public policy under
applicable securities laws.
H.__ The execution, delivery and performance of this Agreement and the
Pooling and Servicing Agreement by the Depositor and the consummation of the
transactions contemplated hereby and thereby, and the issuance and delivery of
the Certificates do not and will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Depositor is a party, by which the Depositor is bound or
to which any of the properties or assets of the Depositor or any of its
subsidiaries is subject, which breach or violation would have a material adverse
effect on the business, operations or financial condition of the Depositor or
its ability to perform its obligations under this Agreement and the Pooling and
Servicing Agreement, nor will such actions result in any violation of the
provisions of the articles of incorporation or by-laws of the Depositor or any
statute or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Depositor or any of its properties or assets,
which breach or violation would have a material adverse effect on the business,
operations or financial condition of the Depositor or its ability to perform its
obligations under this Agreement and the Pooling and Servicing Agreement.
I.__ The Depositor has no reason to know that Arthur Andersen & Co. are not
independent public accountants with respect to the Depositor as required by the
Securities Act and the Rules and Regulations.
J.__ The execution of the Certificates by the Depositor and the direction
by the Depositor to the Trustee to authenticate, issue and deliver the
Certificates have been duly authorized by the Depositor, and, assuming the
Trustee has been duly authorized to do so, when executed by the Depositor, and
authenticated, issued and delivered by the Trustee in accordance with the
Pooling and Servicing Agreement, the Certificates will be validly issued and
outstanding and the holders of the Certificates will be entitled to the rights
and benefits of the Certificates as provided by the Pooling and Servicing
Agreement.
K.__ No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body of the United
States is required for the issuance of the Certificates and the sale of the
Offered Certificates to the Underwriters, or the consummation by the Depositor
of the other transactions contemplated by this Agreement and the Pooling and
Servicing Agreement except such consents, approvals, authorizations,
registrations or qualifications as may be required under State securities or
Blue Sky laws in connection with the purchase and distribution of the Offered
Certificates by the Underwriters or as have been obtained.
L.__ The Depositor possesses all material licenses, certificates,
authorities or permits issued by the appropriate State, Federal or foreign
regulatory agencies or bodies necessary to conduct the business now conducted by
it and as described in the Prospectus, and the Depositor has not received notice
of any proceedings relating to the revocation or modification of any such
license, certificate, authority or permit which if decided adversely to the
Depositor would, singly or in the aggregate, materially and adversely affect the
conduct of its business, operations or financial condition.
M.__ At the time of execution and delivery of the Pooling and Servicing
Agreement, the Depositor will: (i) have good title to the Home Equity Loans
conveyed by the Sellers, free and clear of any lien, mortgage, pledge, charge,
encumbrance, adverse claim or other security interest (collectively, "Liens");
(ii) not have assigned to any person any of its right or title in the Home
Equity Loans contemplated in the Pooling and Servicing Agreement or in the
Certificates being issued pursuant thereto; and (iii) have the power and
authority to sell its interest in the Home Equity Loans to the Trustee and to
sell the Offered Certificates to the Underwriters. Upon execution and delivery
of the Pooling and Servicing Agreement by the Trustee, the Trustee will have
acquired beneficial ownership of all of the Depositor's right, title and
interest in and to the Home Equity Loans. Upon delivery to the~Underwriters of
the Offered Certificates, the Underwriters will have good title to the Offered
Certificates, free of any Liens.
N.__ Reserved.
O.__ As of the Statistical Calculation Date, each of the Home Equity Loans
will meet the eligibility criteria described in the Prospectus and will conform
to the descriptions thereof contained in the Prospectus.
P.__ Reserved.
Q.__ Neither the Depositor nor the Trust created by the Pooling and
Servicing Agreement is an "investment company" within the meaning of such term
under the Investment Company Act of 1940 (the "1940 Act") and the rules and
regulations of the Commission thereunder.
R.__ At the Closing Date, the Offered Certificates and the Pooling and
Servicing Agreement will conform in all material respects to the descriptions
thereof contained in the Prospectus.
S.__ At the Closing Date, the Class A Certificates shall have been rated in
the highest rating category by Moody's Investors Service, Inc. ("Moody's"),
Standard & Poor's Ratings Services, a division of the McGraw-Hill Companies
("Standard & Poor's") and Fitch Investors Service, L.P. ("Fitch"), and the
Subordinate Certificates shall receive ratings of "Baa3" by Moody's, "BBB-" by
Standard & Poor's and "BBB" from Fitch.
T.__ Any taxes, fees and other governmental charges in connection with the
execution, delivery and issuance of this Agreement, the Pooling and Servicing
Agreement and the Certificates have been paid or will be paid at or prior to the
Closing Date.
U.__ At the Closing Date, each of the representations and warranties of the
Depositor set forth in the Pooling and Servicing Agreement will be true and
correct in all material respects.
V.__ Any certificate signed by an officer of the Depositor and delivered to
the Representative or counsel for the Representative in connection with an
offering of the Offered Certificates shall be deemed, and shall state that it
is, a representation and warranty as to the matters covered thereby to each
person to whom the representations and warranties in this Section I are made.
SECTION II. PURCHASE AND SALE. The commitment of the Underwriters to
purchase the Offered Certificates pursuant to this Agreement shall be deemed to
have been made on the basis of the representations and warranties herein
contained and shall be subject to the terms and conditions herein set forth. The
Depositor agrees to instruct the Trustee to issue the Offered Certificates and
agrees to sell to the Underwriters, and the Underwriters agree (except as
provided in Sections X and XI hereof) severally and not jointly to purchase from
the Depositor, the aggregate initial principal amounts or percentage interests
of the Offered Certificates of each Class, as set forth opposite their names on
Schedule A, at the purchase price or prices set forth on Schedule A.
SECTION III. DELIVERY AND PAVMENT. Delivery of and payment for the Offered
Certificates shall be made at the offices of Stroock & Stroock & Lavan, 180
Maiden Lane, New York, New York 10038, or at such other place as shall be agreed
upon by the Representative and the Depositor at 10:00 A.M. New York City time on
September 25, 1997 or at such other time or date as shall be agreed upon in
writing by the Representative and the Depositor (such date being referred to as
the "Closing Date"). Payment shall be made to the Depositor by wire transfer of
same day funds payable to the account of the Depositor. Delivery of the Offered
Certificates shall be made to the Representative for the accounts of the
Underwriters against payment of the purchase price thereof. The Certificates
shall be in such authorized denominations and registered in such names as the
Representative may request in writing at least two business days prior to the
Closing Date. The Offered Certificates will be made available for examination by
the Representative no later than 2:00 p.m. New York City time on the first
business day prior to the Closing Date.
SECTION IV. OFFERING BV THE UNDERWRITERS. It is understood that, subject to
the terms and conditions hereof, the Underwriters propose to offer the Offered
Certificates for sale to the public as set forth in the Prospectus.
SECTION V. COVENANTS OF THE DEPOSITOR. The Depositor and, to the extent the
provisions of Sections H. and I. below relate to ContiMortgage and ContiWest,
respectively, ContiMortgage and ContiWest agree as follows:
A.__ To prepare the Prospectus in a form approved by the Underwriters and
to file such Prospectus pursuant to Rule 424(b) under the Securities Act not
later than the Commission's close of business on the second business day
following the availability of the Prospectus to the Underwriters; to make no
further amendment or any supplement to the Registration Statement or to the
Prospectus prior to the Closing Date except as permitted herein; to advise the
Underwriters, promptly after it receives notice thereof, of the time when any
amendment to the Registration Statement has been filed or becomes effective
prior to the Closing Date or any supplement to the Prospectus or any amended
Prospectus has been filed prior to the Closing Date and to furnish the
Underwriters with copies thereof without charge; to file promptly all reports
and any definitive proxy or information statements required to be filed by the
Depositor with the Commission pursuant to Section 13(a), 13(c), 14 or lS(d) of
the Exchange Act subsequent to the date of the Prospectus and, for so long as
the delivery of a prospectus is required in connection with the offering or sale
of the Offered Certificates; to promptly advise the Underwriters of its receipt
of notice of the issuance by the Commission of any stop order or the institution
of or, to the knowledge of the Depositor, the threatening of any proceeding for
such purpose, or of: (i) any order preventing or suspending the use of the
Prospectus; (ii) the suspension of the qualification of the Offered Certificates
for offering or sale in any jurisdiction; (iii) the initiation of or threat of
any proceeding for any such purpose; or (iv) any request by the Commission for
the amending or supplementing of the Registration Statement or the Prospectus or
for additional information. In the event of the issuance of any stop order or of
any order preventing or suspending the use of the Prospectus or suspending any
such qualification, the Depositor promptly shall use its best efforts to obtain
the withdrawal of such order by the Commission.
B.__ To furnish promptly to the Underwriters and to counsel for the
Underwriters a signed copy of the Registration Statement as originally filed
with the Commission, and of each amendment thereto filed with the Commission,
including all consents and exhibits filed therewith.
C.__ To deliver promptly to the Underwriters without charge such number of
the following documents as the Underwriters shall reasonably request: (i)
conformed copies of the Registration Statement as originally filed with the
Commission and each amendment thereto (in each case including exhibits); (ii)
the Prospectus and any amended or supplemented Prospectus; and (iii) any
document incorporated by reference in the Prospectus (including exhibits
thereto). If the delivery of a prospectus is required at any time prior to the
expiration of nine months after the Closing Date in connection with the offering
or sale of the Offered Certificates, and if at such time any events shall have
occurred as a result of which the Prospectus as then amended or supplemented
would include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made when such Prospectus is delivered,
not misleading, or, if for any other reason it shall be necessary during such
same period to amend or supplement the Prospectus or to file under the Exchange
Act any document incorporated by reference in the Prospectus in order to comply
with the Securities Act or the Exchange Act, the Depositor shall notify the
Underwriters and, upon any Underwriters' request, shall file such document and
prepare and furnish without charge to the Underwriters and to any dealer in
securities as many copies as the Underwriters may from time to time reasonably
request of an amended Prospectus or a supplement to the Prospectus which
corrects such statement or omission or effects such compliance, and in case the
Underwriters are required to deliver a Prospectus in connection with sales of
any of the Offered Certificates at any time nine months or more after the
Effective Time, upon the request of the Underwriters but at their expense, the
Depositor shall prepare and deliver to the Underwriters as many copies as the
Underwriters may reasonably request of an amended or supplemented Prospectus
complying with Section 10(a)(3) of the Securities Act.
D.__ To file promptly with the Commission any amendment to the Registration
Statement or the Prospectus or any supplement to the Prospectus that may, in the
judgment of the Depositor or the Underwriters, be required by the Securities Act
or requested by the Commission. Neither the Underwriters' consent to nor their
distribution of any amendment or supplement shall constitute a waiver of any of
the conditions set forth in Section VI.
E.__ To furnish the Underwriters and counsel for the Underwriters, prior to
filing with the Commission, and to obtain the consent of the Underwriters for
the filing of the following documents relating to the Certificates: (i) any
Post-Effective Amendment to the Registration Statement or supplement to the
Prospectus, or document incorporated by reference in the Prospectus, or (ii)
Prospectus pursuant to Rule 424 of the Rules and Regulations.
F.__ To make generally available to holders of the Offered Certificates as
soon as practicable, but in any event not later than 90 days after the close of
the period covered thereby, a statement of earnings of the Trust (which need not
be audited) complying with Section 1 l(a) of the Securities Act and the Rules
and Regulations (including, at the option of the Depositor, Rule 158) and
covering a period of at least twelve consecutive months beginning not later than
the first day of the first fiscal quarter following the Closing Date.
G.__ To use its best efforts, in cooperation with the Underwriters, to
qualify the Offered Certificates for offering and sale under the applicable
securities laws of such states and other jurisdictions of the United States or
elsewhere as the Underwriters may designate, and maintain or cause to be
maintained such qualifications in effect for as long as may be required for the
distribution of the Offered Certificates. The Depositor will file or cause the
filing of such statements and reports as may be required by the laws of each
jurisdiction in which the Offered Certificates have been so qualified.
H.__ Unless the Underwriters shall otherwise have given their written
consent, no collateralized mortgage obligations or other similar securities
representing interests in or secured by other mortgage-related assets originated
or owned by ContiMortgage shall be publicly offered or sold, nor shall
ContiMortgage enter into any contractual arrangements that contemplate the
public offering or sale of such securities, until the earlier to occur of the
termination of the syndicate or the Closing Date.
I.__ Unless the Underwriters shall otherwise have given their written
consent, no collateralized mortgage obligations or other similar securities
representing interests in or secured by other mortgage-related assets originated
or owned by ContiWest shall be publicly offered or sold, nor shall ContiWest
enter into any contractual arrangements that contemplate the public offering or
sale of such securities, until the earlier to occur of the termination of the
syndicate or the Closing Date.
J.__ Unless the Underwriters shall otherwise have given their written
consent (such consent not to be unreasonably withheld), no collateralized
mortgage obligations or other similar securities representing interests in or
secured by other mortgage-related assets that are similar to the Home Equity
Loans originated or owned by the Depositor shall be publicly offered or sold
until the earlier to occur of the termination of the syndicate or the Closing
Date.
K.__ So long as the Offered Certificates shall be outstanding the Depositor
shall cause the Trustee, pursuant to the Pooling and Servicing Agreement, to
deliver to the Underwriters as soon as such statements are furnished to the
Trustee: (i) the annual statement as to compliance delivered to the Trustee
pursuant to Section 8.16 of the Pooling and Servicing Agreement; (ii) the annual
statement of a firm of independent public accountants furnished to the Trustee
pursuant to Section 8.17 of the Pooling and Servicing Agreement; (iii) the
monthly servicing report furnished to the Trustee pursuant to Section 7.08 of
the Pooling and Servicing Agreement; and (iv) the monthly reports furnished to
the Certifcateholders pursuant to Section 7.09 of the Pooling and Servicing
Agreement.
L.__ To apply the net proceeds from the sale of the Offered Certificates in
the manner set forth in the Prospectus.
SECTION VI. CONDITIONS TO THE UNDERWRITERS' OBLIGATION. The obligations of
the Underwriters hereunder to purchase the Offered Certificates pursuant to the
Agreement are subject to: (i) the accuracy on and as of the Closing Date of the
representations and warranties on the part of the Depositor herein contained;
(ii) the performance by the Depositor of all of its obligations hereunder; and
(iii) the following conditions as of the Closing Date:
A.__ The Underwriters shall have received confirmation of the effectiveness
of the Registration Statement. No stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
Commission. Any request of the Commission for inclusion of additional
information in the Registration Statement or the Prospectus shall have been
complied with.
B.__ The Underwriters shall not have discovered and disclosed to the
Depositor on or prior to the Closing Date that the Registration Statement or the
Prospectus or any amendment or supplement thereto contains an untrue statement
of a fact or omits to state a fact which, in the opinion of Dewey Ballantine,
counsel for the Underwriters, is material and is required to be stated therein
or is necessary to make the statements therein not misleading.
C.__ All corporate proceedings and other legal matters relating to the
authorization, form and validity of this Agreement, the Pooling and Servicing
Agreement, the Certificates, the Registration Statement and the Prospectus, and
all other legal matters relating to this Agreement and the transactions
contemplated hereby shall be satisfactory in all respects to counsel for the
Underwriters, and the Depositor shall have furnished to such counsel all
documents and information that they may reasonably request to enable them to
pass upon such matters.
D.__ Stroock & Stroock & Lavan shall have furnished to the Underwriters
their written opinion, as counsel to the Depositor, addressed to the
Underwriters and dated the Closing Date, in form and substance satisfactory to
the Underwriters, to the effect that:
(i) The conditions to the use by the Depositor of a registration
statement on Form S-3 under the Securities Act, as set forth in the General
Instructions to Form S-3, have been satisfied with respect to the
Registration Statement and the Prospectus.
(ii) The Registration Statement and any amendments thereto have become
effective under the 1933 Act; to the best of such counsel's knowledge, no
stop order suspending the effectiveness of the Registration Statement has
been issued and not withdrawn and no proceedings for that purpose have been
instituted or threatened and not terminated; and the Registration
Statement, the Prospectus and each amendment or supplement thereto, as of
their respective effective or issue dates (other than the financial and
statistical information contained therein, as to which such counsel need
express no opinion), complied as to form in all material respects with the
applicable requirements of the 1933 Act and the rules and regulations
thereunder.
(iii) To the best of such counsel's knowledge, there are no material
contracts, indentures or other documents of a character required to be
described or referred to in the Registration Statement or the Prospectus or
to be filed as exhibits to the Registration Statement other than those
described or referred to therein or filed or incorporated by reference as
exhibits thereto.
(iv) The statements set forth in the Basic Prospectus under the
captions "Summary of Prospectus," "Description of The Certificates," "The
Trusts" and "The Pooling and Servicing Agreement" and in the Prospectus
Supplement under the captions "Description of The Offered Certificates" and
"The Pooling and Servicing Agreement," to the extent such statements
purport to summarize certain provisions of the Certificates or of the
Pooling and Servicing Agreement, are fair and accurate in all material
respects.
(v) The statements set forth in the Prospectus and the Prospectus
Supplement under the captions "ERISA Considerations," "Certain Legal
Aspects of the Mortgage Assets" and "Certain Federal Income Tax
Considerations" to the extent that they constitute matters of federal law,
provide a fair and accurate summary of such law or conclusions.
(vi) The Pooling and Servicing Agreement conforms in all material
respects to the description thereof contained in the Prospectus and is not
required to be qualified under the Trust Indenture Act of 1939, as amended,
and the Trust is not required to be registered under the Investment Company
Act of 1940, as amended.
(vii) Neither the Depositor nor the Trust is an "investment company"
or under the "control" of an "investment company" as such terms are defined
in the 1940 Act.
(viii) Assuming that (a) the Trustee causes certain assets of the
Trust Estate, as the Trustee has covenanted to do in the Pooling and
Servicing Agreement, to be treated as a "real estate mortgage investment
conduit" ("REMIC"), as such term is defined in the Internal Revenue Code of
1986, as amended (the "Code"), and (b) the parties to the Pooling and
Servicing Agreement comply with the terms thereof, the Lower-Tier REMIC and
the Upper-Tier REMIC will each be treated as a REMIC, each Class of the
Class A Certificates, the Subordinate Certificates and the Class C
Certificates will be treated as "regular interests" in the Upper-Tier REMIC
and the Upper-Tier REMIC Residual Class will be treated as the sole
"residual interest" in the Upper-Tier REMIC. The Lower-Tier Interests A-1,
A-2, A-3, A-4, A-5, A-6, A-7, A-8, A-9, and B will be treated as the
"regular interests" in the Lower-Tier REMIC and the Class R Certificates
will be treated as the sole "residual interest" in the Lower-Tier REMIC.
The Trust is not subject to tax upon its income or assets by any taxing
authority of the State of New York.
(ix) To the best of such counsel's knowledge, there are no actions,
proceedings or investigations pending that would adversely affect the
status of the Lower-Tier REMIC or the Upper-Tier REMIC as a REMIC.
(x) As a consequence of the qualification of the Lower-Tier REMIC and
the UpperTier REMIC as a REMIC, the Offered Certificates will be treated as
"regular . . . interest(s) in a REMIC" under Section 7701(a)(19)(C) of the
Code and "real estate assets" under Section 856(c) of the Code in the same
proportion that the assets in the Trust consist of qualifying assets under
such Sections. In addition, as a consequence of the qualification of the
Lower-Tier REMIC and the Upper-Tier REMIC as a REMIC, interest on the
Offered Certificates will be treated as "interest on obligations secured by
mortgages on real property" under Section 856(c) of the Code to the extent
that such Offered Certificates are treated as "real estate assets" under
Section 856(c) of the Code.
(xi) The Class A-9 Certificates do not involve any "separate security"
not registered under the Registration Statement.
(xii) The Certificates have been duly executed and delivered by the
Depositor to the Trustee for authentication.
Such counsel shall also have furnished to the Underwriters a written statement,
addressed to the Underwriters and dated the Closing Date, in form and substance
satisfactory to the Underwriters to the effect that nothing has come to the
attention of such counsel which lead them to believe that: (a) the Registration
Statement, at the time such Registration Statement became effective, contained
an untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading (except as to financial or statistical data contained in the
Registration Statement); (b) the Prospectus, as of its date and as of the
Closing Date, contained or contains an untrue statement of a material fact or
omitted or omits to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; or (c) any document
incorporated by reference in the Prospectus or any further amendment or
supplement to any such incorporated document made by the Depositor prior to the
Closing Date (other than any document filed at the request of an Underwriter to
the extent such document relates to Computational Materials) contained, as of
the time it became effective or was filed with the Commission, as the case may
be, an untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
E.__ The Underwriters shall have received the favorable opinion, dated the
Closing Date, of Stroock & Stroock & Lavan, special counsel to the Depositor,
addressed to the Depositor and satisfactory to Moody's, Standard & Poor's, Fitch
and the Underwriters, with respect to certain matters relating to the transfer
of the Home Equity Loans to the Depositor and from the Depositor to the Trust,
and such counsel shall have consented to reliance on such opinion by Moody's,
Standard & Poor's, Fitch and the Underwriters as though such opinion had been
addressed to each such party.
F.__ Stroock & Stroock & Lavan, counsel for ContiMortgage in its capacity
as both a Seller and the Servicer and ContiWest in its capacity as a Seller,
shall have furnished to the Underwriters their written opinion, as counsel to
ContiMortgage and ContiWest, addressed to the Underwriters and the Depositor and
dated the Closing Date, in form and substance satisfactory to the Underwriters,
to the effect that:
(i) ContiMortgage is duly organized, validly existing in good~standing
as a corporation under the laws of the State of Delaware.
(ii) ContiMortgage has full corporate power and authority to serve in
the capacity of a seller and the servicer of the Home Equity Loans as
contemplated in the Pooling and Servicing Agreement and to transfer the
Home Equity Loans to the Depositor as contemplated in the Pooling and
Servicing Agreement.
(iii) The Pooling and Servicing Agreement and this Agreement have been
duly authorized, executed and delivered by ContiMortgage, and, assuming the
due authorization, execution and delivery of such agreements by the other
parties thereto, constitute the legal, valid and binding agreements of
ContiMortgage, enforceable against ContiMortgage in accordance with their
respective terms, subject as to enforceability to (x) bankruptcy,
insolvency, reorganization, moratorium, receivership or other similar laws
now or hereafter in effect relating to creditors' rights generally and (y)
the qualification that the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to equitable defenses
and to the discretion, with respect to such remedies, of the court before
which any proceedings with respect thereto may be brought.
(iv) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body having
jurisdiction over ContiMortgage is required for the consummation by
ContiMortgage of the transactions contemplated by the Pooling and Servicing
Agreement except such consents, approvals, authorizations, registrations
and qualifications as have been obtained.
(v) Neither the sale and transfer of the Home Equity Loans by
ContiMortgage to the Depositor, nor the execution, delivery or performance
by ContiMortgage of the Pooling and Servicing Agreement and the
transactions contemplated thereby (A) conflict with or result in a breach
of, or constitute a default under, (i) any term or provision of the
Certificate of Incorporation or By-Laws of ContiMortgage; (ii) any term or
provision of any material agreement, deed of trust, mortgage loan
agreement, contract, instrument or indenture, or other agreement to which
ContiMortgage is a party or is bound or to which any of the property or
assets of ContiMortgage or any of its subsidiaries is subject; (iii) to the
best of such firm's knowledge without independent investigation any order,
judgment, writ, injunction or decree of any court or governmental authority
having jurisdiction over ContiMortgage; or (iv) any law, rule or
regulation, applicable to ContiMortgage; or (B) to the best of such firm's
knowledge without independent investigation, results in the creation or
imposition of any lien, charge or encumbrance upon the Trust Estate or upon
the Certificates.
(vi) The execution of the Pooling and Servicing Agreement is
sufficient to convey all of ContiMortgage's, ContiWest's and the
Depositor's right, title and interest in the Home Equity Loans to the Trust
(except as otherwise specifically set forth in the Pooling and Servicing
Agreement) and following the consummation of the transaction contemplated
by Section 3.05 of the Pooling and Servicing Agreement, the transfers of
the Home Equity Loans by ContiMortgage and ContiWest to the Depositor and
by the Depositor to the Trust are sufficient to vest in the Trust all of
ContiMortgage's, ContiWest's and the Depositor's right, title and interest
in the Home Equity Loans (except as otherwise specifically set forth in the
Pooling and Servicing Agreement).
(vii) There are, to the best of such counsel's knowledge without
independent investigation, no actions, proceedings or investigations
pending with respect to which ContiMortgage has received service of process
or threatened against ContiMortgage before any court, administrative agency
or other tribunal (a) asserting the invalidity of the Pooling and Servicing
Agreement, the Underwriting Agreement or the Certificates, (b) seeking to
prevent the consummation of any of the transactions contemplated by the
Pooling and Servicing Agreement or (c) which would materially and adversely
affect the performance by ContiMortgage of its obligations under, or the
validity or enforceability of, the Pooling and Servicing Agreement or the
Underwriting Agreement.
G.__ Michael R. Mayberry, Esq., Counsel for ContiWest, in its capacity as a
Seller, shall have furnished to the Underwriters his written opinion, addressed
to the Underwriters and dated as of the Closing Date, in form and substance
satisfactory to the Underwriters, to the effect that:
(i) ContiWest is duly organized, validly existing in good standing as
a corporation under the laws of the State of Nevada.
(ii) ContiWest has full corporate power and authority to serve in the
capacity of a seller of the Home Equity Loans as contemplated in the
Pooling and Servicing Agreement and to transfer the Home Equity Loans to
the Depositor as contemplated in the Pooling and Servicing Agreement.
(iii) The Pooling and Servicing Agreement has been duly authorized,
executed and delivered by ContiWest, and, assuming the due authorization,
execution and delivery of such agreement by the other parties thereto,
constitute the legal, valid and binding agreements of ContiWest,
enforceable against ContiWest in accordance with its terms, subject as to
enforceability to (x) bankruptcy, insolvency, reorganization, moratorium,
receivership or other similar laws now or hereafter in effect relating to
creditors' rights generally and (y) the qualification that the remedy of
specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion, with respect to
such remedies, of the court before which any proceedings with respect
thereto may be brought.
(iv) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body having
jurisdiction over ContiWest is required for the consummation by ContiWest
of the transactions contemplated by the Pooling and Servicing Agreement
except such consents, approvals, authorizations, registrations and
qualifications as have been obtained.
(v) Neither the sale and transfer of the Home Equity Loans by
ContiWest to the Depositor, nor the execution, delivery or performance by
ContiWest of the Pooling and Servicing Agreement and the transactions
contemplated thereby (A) conflict with or result in a breach of, or
constitute a default under, (i) any term or provision of the Articles of
Incorporation or By-Laws of ContiWest; (ii) any term or provision of any
material agreement, deed of trust, mortgage loan agreement, contract,
instrument or indenture, or other agreement to which ContiWest is a party
or is bound or to which any of the property or assets of ContiWest or any
of its subsidiaries is subject; (iii) to the best of such counsel's
knowledge without independent investigation any order, judgment, writ,
injunction or decree of any court or governmental authority having
jurisdiction over ContiWest; or (iv) any law, rule or regulation,
applicable to ContiWest; or (B) to the best of such counsel's knowledge
without independent investigation, results in the creation or imposition of
any lien, charge or encumbrance upon the Trust Estate or upon the
Certificates.
(vi) There are, to the best of such counsel's knowledge without
independent investigation, no actions, proceedings or investigations
pending with respect to which ContiWest has received service of process or
threatened against ContiWest before any court, administrative agency or
other tribunal (a) asserting the invalidity of the Pooling and Servicing
Agreement, the Underwriting Agreement or the Certificates, (b) seeking to
prevent the consummation of any of the transactions contemplated by the
Pooling and Servicing Agreement or (c) which would materially and adversely
affect the performance by ContiWest of its obligations under, or the
validity or enforceability of, the Pooling and Servicing Agreement or the
Underwriting Agreement.
H.__ Michael R. Mayberry, Esq., Counsel for the Depositor, shall have
furnished to the Underwriters his written opinion, addressed to the Underwriters
and dated the Closing Date, in form and substance satisfactory to the
Underwriters, to the effect that:
(i) The Depositor has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware and is
in good standing as a foreign corporation in each jurisdiction in which its
ownership or lease of property or the conduct of its business so requires
such standing except where the failure to be in good standing would not
result in a material adverse change in the condition of the Depositor,
whether or not arising in the ordinary course of business. The Depositor
has all power and authority necessary to own or hold its properties and to
conduct the business in which it is engaged and to enter into and perform
its obligations under this Agreement and the Pooling and Servicing
Agreement and to cause the Certificates to be issued.
(ii) The Depositor is not in violation of its articles of
incorporation or by-laws or in default in the performance or observance of
any material obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note, lease or other
instrument to which the Depositor is a party or by which it or its
properties may be bound, which default might result in any material adverse
changes in the financial condition, earnings, affairs or business of the
Depositor or which might materially and adversely affect the properties or
assets, taken as a whole, of the Depositor.
(iii) This Agreement and the Pooling and Servicing Agreement have been
duly authorized, executed and delivered by the Depositor and, assuming the
due authorization, execution and delivery of such agreements by the other
parties thereto, such agreements constitute valid and binding obligations,
enforceable against the Depositor in accordance with their respective
terms, subject as to enforceability to (x) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, (y) general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or
at law) and (z) with respect to rights of indemnity under this Agreement,
limitations of public policy under applicable securities laws.
(iv) The execution, delivery and performance of this Agreement and the
Pooling and Servicing Agreement by the Depositor, the consummation of the
transactions contemplated hereby and thereby, and the issuance and delivery
of the Certificates do not and will not conflict with or result in a breach
or violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Depositor is a party or by which the
Depositor is bound or to which any of the property or assets of the
Depositor or any of its subsidiaries is subject, which breach or violation
would have a material adverse effect on the business, operations or
financial condition of the Depositor or its ability to perform its
obligations under this Agreement and the Pooling and Servicing Agreement
nor will such actions result in a violation of the provisions of the
articles of incorporation or by-laws of the Depositor or any statute or any
order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Depositor or any of its properties or assets,
which breach or violation would have a material adverse effect on the
business, operations or financial condition of the Depositor or its ability
to perform its obligations under this Agreement and the Pooling and
Servicing Agreement.
(v) The execution of the Certificates by the Depositor and the
direction by the Depositor to the Trustee to issue, authenticate and
deliver the Certificates has been duly authorized by the Depositor and,
assuming that the Trustee has been duly authorized to do so, when executed
by the Depositor and authenticated and delivered by the Trustee in
accordance with the Pooling and Servicing Agreement, the Certificates will
be validly issued and outstanding and will be entitled to the benefits of
the Pooling and Servicing Agreement.
(vi) No consent, approval, authorization, order, registration or
qualification of or with any court or goverrunental agency or body is
required for the issuance of the Certificates, and the sale of the Offered
Certificates to the Underwriters, or the consummation by the Depositor of
the other transactions contemplated by this Agreement and the Pooling and
Servicing Agreement, except such consents, approvals, authorizations,
registrations or qualifications as may be required under the 1933 Act or
State securities or Blue Sky laws in connection with the purchase and
distribution of the Offered Certificates by the Underwriters or as have
been previously obtained.
(vii) There are not, to the best of his knowledge without independent
investigation, any actions, proceedings or investigations pending with
respect to which the Depositor has received service of process before or
threatened by any court, administrative agency or other tribunal to which
the Depositor is a party or of which any of its properties is the subject:
(a) which if determined adversely to the Depositor would have a material
adverse effect on the business, results of operations or financial
condition of the Depositor; (b) asserting the invalidity of the Pooling and
Servicing Agreement or the Certificates; (c) seeking to prevent the
issuance of the Certificates or the consummation by the Depositor of any of
the transactions contemplated by the Pooling and Servicing Agreement or
this Agreement, as the case may be; or (d) which might materially and
adversely affect the performance by the Depositor of its obligations under,
or the validity or enforceability of, the Pooling and Servicing Agreement,
this Agreement or the Certificates.
(viii) The Certificates have been duly and validly authorized and
issued and, immediately prior to the sale of the Offered Certificates to
the Underwriters, such Certificates are owned by the Depositor, free and
clear of all Liens.
I.__ The Underwriters shall have received the favorable opinion of counsel
to the Trustee, dated the Closing Date, addressed to the Underwriters and in
form and scope satisfactory to counsel to the Underwriters, to the effect that:
(i) The Trustee is a banking corporation duly incorporated and validly
existing under the law of the State of New York.
(ii) The Trustee has the full corporate trust power to execute,
deliver and perform its obligations under the Pooling and Servicing
Agreement.
(iii) The execution and delivery by the Trustee of the Pooling and
Servicing Agreement and the performance by the Trustee of its obligations
under the Pooling and Servicing Agreement have been duly authorized by all
necessary corporate action of the Trustee.
(iv) The Pooling and Servicing Agreement is a valid and legally
binding obligation of the Trustee enforceable against the Trustee.
(v) 5. The execution and delivery by the Trustee of the Pooling and
Servicing Agreement do not (a) violate the Organization Certificate of the
Trustee or the By-laws of the Trustee, (b) to such counsel's knowledge,
violate any judgment, decree or order of any New York or United States
federal court or other New York or United States federal governmental
authority by which the Trustee is bound or (c) assuming the non-existence
of any judgment, decree or order of any court or other governmental
authority that would be violated by such execution and delivery, violate
any New York or United States federal statute, rule or regulation or
require any consent, approval or authorization of any New York or United
States federal court or other New York or United States federal
governmental authority.
(vi) The Certificates have been duly authenticated and delivered by
the Trustee.
(vii) If the Trustee were acting as Servicer under the Pooling and
Servicing Agreement as of the date of such opinion, the Trustee would have
the full corporate trust power to perform the obligations of the Servicer
under the Pooling and Servicing Agreement; and
(viii) To the best of such counsel's knowledge, there are no actions,
proceedings or investigations pending or threatened against or affecting
the Trustee before or by any court, arbitrator, administrative agency or
other governmental authority which, if decided adversely to the Trustee,
would materially and adversely affect the ability of the Trustee to carry
out the transactions contemplated in the Pooling and Servicing Agreement.
J.__ The Underwriters shall have received the favorable opinion or
opinions, dated the Closing Date, of counsel for the Underwriters, with respect
to the issue and sale of the Offered Certificates, the Registration Statement,
this Agreement, the Prospectus and such other related matters as the
Underwriters may reasonably require.
K.__ The Underwriters shall have received executed copies of the
Broker-Dealer Agreement and the Auction Agent's Agreement with respect to the
Class A-9 Certificates.
L.__ The Depositor, ContiMortgage, ContiWest and ContiFinancial shall each
have furnished to the Underwriters a certificate, dated the Closing Date and
signed by the Chairman of the Board, the President or a Vice President of the
Depositor, ContiMortgage and ContiWest, respectively, stating as it relates to
each, as of the Closing Date:
(i) The representations and warranties of the Depositor, ContiMortgage
and ContiWest in this Agreement are true and correct as of the Closing
Date; and the Depositor, ContiMortgage and ContiWest have complied with
each of their respective agreements contained herein which are to have been
complied with on or prior to the Closing Date;
(ii) The information contained in the Prospectus relating to the
Depositor, ContiMortgage, ContiWest and the Home Equity Loans is true and
accurate in all material respects and nothing has come to his or her
attention that would lead such officer to believe that the Registration
Statement or the Prospectus includes any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
therein not misleading;
(iii) There has been no amendment or other document filed affecting
the Certificate of Incorporation or bylaws of the Depositor since May 18,
1995 or the Certificate of Incorporation or bylaws of ContiMortgage since
October 19, 1990 or the Articles of Incorporation or bylaws of ContiWest
since January 1, 1997 and no such amendment has been authorized. No event
has occurred since June 30, 1997 which has affected the good standing of
the Depositor, ContiMortgage or ContiWest under the laws of the States of
Delaware and Nevada, as applicable; and
(iv) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, ftnancial or otherwise, or in the earnings, business or
operations of the Depositor, ContiMortgage, ContiWest or ContiFinancial
from June 30, 1997. No publicly-held debt of ContiFinancial shall have been
downgraded or put on credit watch for possible downgrade since June 30,
1997; there has been no suspension of trading in ContiFinancial's
publicly-held common stock since June 30, 1997.
M.__ The Trustee shall have furnished to the Underwriters a certificate of
the Trustee, signed by one or more duly authorized officers of the Trustee,
dated the Closing Date, as to the due authorization, execution and delivery of
the Pooling and Servicing Agreement by the Trustee and the acceptance by the
Trustee of the trusts created thereby and the due execution, authentication and
delivery of the Certificates by the Trustee thereunder and such other matters as
the Representative shall reasonably request.
N.__ [Reserved]
O.__ The Class A Certificates shall have been rated "Aaa" by Moody's and
"AAA" by Standard & Poor's and Fitch, and the Subordinate Certificates shall
have been rated "Baa3" by Moody's, "BBB-" by Standard & Poor's and "BBB" by
Fitch; no Class of Offered Certificates shall have been put on credit watch for
possible downgrade.
P.__ The Depositor shall have furnished to the Underwriters such further
information, certificates and documents as the Underwriters may reasonably have
requested not less than three full business days prior to the Closing Date.
Q.__ Prior to the Closing Date, counsel for the Underwriters shall have
been furnished with such documents and opinions as they may reasonably require
for the purpose of enabling them to pass upon the issuance and sale of the
Certificates as herein contemplated and related proceedings or in order to
evidence the accuracy and completeness of any of the representations and
warranties, or the fulfillment of any of the conditions, herein contained, and
all proceedings taken by the Depositor in connection with the issuance and sale
of the Certificates as herein contemplated shall be satisfactory in form and
substance to the Underwriters and counsel for the Underwriters.
R.__ Subsequent to the execution and delivery of this Agreement none of the
following shall have occurred: (i) trading in securities generally on the New
York Stock Exchange, the American Stock Exchange or the over-the counter market
shall have been suspended or minimum prices shall have been established on
either of such exchanges or such market by the Commission, by such exchange or
by any other regulatory body or goverurnental authority having jurisdiction;
(ii) a banking moratorium shall have been declared by Federal or state
authorities; (iii) the United States shall have become engaged in hostilities,
there shall have been an escalation of hostilities involving the United States
or there shall have been a declaration of a national emergency or war by the
United States; or (iv) there shall have occurred such a material adverse change
in general economic, political or f~nancial conditions (or the effect of
international conditions on the financial markets of the United States shall be
such) as to make it in each of the instances set forth in clauses (i), (ii),
(iii) and (iv) herein, in the reasonable judgment of the Underwriters,
impractical or inadvisable to proceed with the public offering or delivery of
the Certificates on the terms and in the manner contemplated in the Prospectus.
S.__ The Representative shall have received letters, including bring-down
letters, from Arthur Andersen LLP, dated on or before the Closing Date, in form
and substance satisfactory to the Representative and counsel for the
Underwriters, to the effect that they have performed certain specified
procedures requested by the Representative with respect to the information set
forth in the Prospectus and certain matters relating to ContiMortgage and
ContiWest.
T.__ The Underwriters shall have received any other opinions delivered to
the Ratings Agencies.
U.__ The Policy shall have been duly executed and issued at or prior to the
Closing Date and shall conform in all material respects to the description
thereof in the Prospectus. The Insurance Agreement and the Indemnification
Agreement shall each have been duly executed and delivered by MBIA and the other
parties thereto at or prior to the Closing Date.
V.__ The Underwriters shall have received a favorable opinion of Kutak
Rock, counsel to MBIA, dated the Closing Date and in form and substance
satisfactory to counsel for the Underwriters, to the effect that:
(i) MBIA is a stock insurance corporation, duly incorporated and
validly existing under the laws of the State of New York. MBIA is validly
licensed to do business in New York and is authorized to issue the Policy
and perform its obligations under the Policy in accordance with the terms
thereof.
(ii) The execution and delivery by MBIA of the Policy and the
Indemnification Agreement are within the corporate power of MBIA and have
been authorized by all necessary corporate action on the part of MBIA; the
Policy has been duly executed and is the valid and binding obligation of
the Insurer enforceable in accordance with its terms except that the
enforcement of the Policy may be limited by laws relating to bankruptcy,
insolvency, reorganization, moratorium, receivership and other similar laws
affecting creditors' rights generally and by general principles of equity.
(iii) MBIA is authorized to deliver the Indemnification Agreement, and
such agreement has been duly executed and delivered and constitute the
legal, valid and binding obligations of MBIA enforceable in accordance with
its terms except that the enforcement of the Indemnification Agreement may
be limited by laws relating to bankruptcy, insolvency, reorganization,
moratorium, receivership and other similar laws affecting creditors' rights
generally and by general principles of equity and by public policy
considerations relating to indemnification for securities law violations.
(iv) No consent, approval, authorization or order of any state or
federal court or governmental agency or body is required on the part of
MBIA, the lack of which would adversely affect the validity or
enforceability of the Policy; to the extent required by applicable legal
requirements that would adversely affect validity or enforceability of the
Policy, the form of the Policy has been filed with, and approved by, all
governmental authorities having jurisdiction over the Insurer in connection
with the Policy.
(v) The Policy is not required to be registered under the Securities
Act.
(vi) The information set forth in the Prospectus Supplement under the
caption "DESCRIPTION OF THE OFFERED CERTIFICATES - The Certificate
Insurance Policy," insofar as such statements constitute a description of
the Policy, accurately summarizes the Policy.
In rendering this opinion, such counsel may rely, as to matters of fact, on
certificates of responsible officers of MBIA and public officials. Such opinion
may assume the due authorization, execution and delivery of the instruments and
documents referred to therein by the parties thereto other than MBIA.
W.__ The Underwriters shall have received from MBIA a certificate, signed
by the president, a senior vice president or a vice president of MBIA, dated the
Closing Date, to the effect that the signer of such certificate has carefully
examined the Policy, the Indemnification Agreement and the related documents and
that, to the best of his or her knowledge based on reasonable investigation:
(i) There are no actions, suits or proceedings pending or threatened
against or affecting MBIA which, if adversely determined, individually or
in the aggregate, would adversely affect the Insurer's performance under
the Policy or the Indemnification Agreement;
(ii) Each person who as an officer or representative of MBIA, signed
or signs the Policy, the Indemnification Agreement or any other document
delivered pursuant hereto, on the date thereof, or on the Closing Date, in
connection with the transactions described in this Agreement was, at the
respective times of such signing and delivery, and is now, duly elected or
appointed, qualified and acting as such officer or representative, and the
signatures of such persons appearing on such documents are their genuine
signatures;
(iii) The information contained in the Prospectus Supplement under the
captions "DESCRIPTION OF THE OFFERED CERTIFICATES - The Certificate
Insurance Policy" and "THE CERTIFICATE INSURER" is true and correct in all
material respects and does not omit to state a material fact with respect
to the description of the Policy or the ability of MBIA to meet its payment
obligations under the Policy;
(iv) The tables regarding MBIA's capitalization set forth under the
caption "THE CERTIFICATE INSURER" presents fairly the capitalization of the
Insurer as of June 30, 1997;
(v) On or prior to the Closing Date, there has been no downgrading,
nor has any notice been given of (A) any intended or potential downgrading
or (B) any review or possible changes in rating the direction of which has
not been indicated, in the rating accorded the claims paying ability of
MBIA by any "nationally recognized statistical rating organization," as
such term is defined for purposes of the 1933 Act;
(vi) The audited balance sheet of MBIA as of December 31, 1996 and the
related statement of income and retained earnings for the fiscal year then
ended, and the accompanying footnotes, together with the related opinion of
an independent certificated public accountant, copies of which are
incorporated by reference in the Prospectus Supplement, fairly present in
all material respects the financial condition of MBIA as of such date and
for the period covered by such statements in accordance with generally
accepted accounting principles consistently applied; the unaudited balance
sheet of MBIA as of June 30, 1997 and the related statement of income and
retained earnings for the three-month period then ended, copies of which
are included in the Prospectus Supplement, fairly present in all material
respects the financial condition of MBIA as of such date and for the period
covered by such statements in accordance with generally accepted accounting
principles applied consistently with those principles applied in preparing
the December 31, 1996 audited statements.
(vii) to the best knowledge of such officer, since June 30, 1997, no
material adverse change has occurred in the financial position of MBIA
other than as set forth in the Prospectus Supplement.
The officer of MBIA certifying to items 5-7 shall be an officer in charge
of a principal financial function.
MBIA shall attach to such certificate a true and correct copy of its
certificate or articles of incorporation, as appropriate, and its bylaws, all of
which are in full force and effect on the date of such certificate.
If any condition specified in this Section VI shall not have been fulfilled
when and as required to be fulfilled, this Agreement may be terminated by the
Underwriters by notice to the Depositor at any time at or prior to the Closing
Date, and such termination shall be without liability of any party to any other
party except as provided in Section VII.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Underwriters.
SECTION VII. PAYMENT OF EXPENSES. The Depositor agrees to pay:
A.__ the costs incident to the authorization, issuance, sale and delivery
of the Certificates and any taxes payable in connection therewith; (b) the costs
incident to the preparation, printing and filing under the Securities Act of the
Registration Statement and any amendments and exhibits thereto; (c) the costs of
distributing the Registration Statement as originally filed and each amendment
thereto and any post-effective amendments thereof (including, in each case,
exhibits), the Prospectus and any amendment or supplement to the Prospectus or
any document incorporated by reference therein, all as provided in this
Agreement; (d) the costs of reproducing and distributing this Agreement; (e) the
fees and expenses of Dewey Ballantine in qualifying the Certificates under the
securities laws of the several jurisdictions as provided in Section V(G) hereof
and of preparing, printing and distributing a Blue Sky Memorandum and a Legal
Investment Survey (including related fees and expenses of counsel to the
Representative); (f) any fees charged by securities rating services for rating
the Offered Certificates; (g) the cost of the accountants comfort letter
relating to the Prospectus; and (h) all other costs and expenses incidental to
the performance of the obligations of the Depositor (including costs and
expenses of counsel to the Depositor); provided that, except as provided in this
Section VII, the Underwriters shall pay their own costs and expenses, including
the costs and expenses of their counsel, any transfer taxes on the Offered
Certificates which they may sell and the expenses of advertising any offering of
the Offered Certificates made by the Underwriters, and the Underwriters shall
pay the cost of any accountant's comfort letters relating to any Computational
Materials (as defined herein).
If this Agreement is terminated by the Underwriters in accordance with the
provisions of Section VI or Section XI, the Depositor shall cause the
Underwriters to be reimbursed for all reasonable out-of-pocket expenses,
including fees and disbursements of Dewey Ballantine, counsel for the
Underwriters.
SECTION VIII. INDEMNIFICATION AND CONTRIBUTION.
A.__ The Depositor agrees to indemnify and hold harmless each Underwriter,
each Underwriter's respective officers and directors and each person, if any,
who controls such Underwriter within the meaning of Section 15 of the Securities
Act from and against any and all loss, claim, damage or liability, joint or
several, or any action in respect thereof (including, but not limited to, any
loss, claim, damage, liability or action relating to purchases and sales of the
Offered Certificates), to which such Underwriter or any such controlling person
may become subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (i) any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement, or any amendment thereof or supplement thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, (iii)
any untrue statement or alleged untrue statement of a material fact contained in
the Prospectus, or any amendment thereof or supplement thereto, or (iv) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading and shall reimburse
such Underwriter and each such controlling person promptly upon demand for any
legal or other expenses reasonably incurred by such Underwriter or such
controlling person in connection with investigating or defending or preparing to
defend against any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that the Depositor shall not be liable
in any such case to the extent that any such loss, claim, damage, liability or
action arises out of, or is based upon, any untrue statement or alleged untrue
statement or omission or alleged omission made in the Prospectus, or any
amendment thereof or supplement thereto, or the Registration Statement, or any
amendment thereof or supplement thereto, in reliance upon and in conformity with
written information furnished to the Depositor by or on behalf of such
Underwriter through the Representative, specifically for inclusion therein. The
foregoing indemnity agreement is in addition to any liability which the
Depositor may otherwise have to any Underwriter or any such officer or director
or any controlling person of any such Underwriter.
B.__ Each Underwriter severally agrees to indemnify and hold harmless the
Depositor, each of its directors, each of its officers who signed the
Registration Statement, and each person, if any, who controls the Depositor
within the meaning of Section 15 of the Securities Act against any and all loss,
claim, damage or liability, or any action in respect thereof, to which the
Depositor or any such director, officer or controlling person may become
subject, under the Securities Act or otherwise, insofar as such loss, claim,
damage, liability or action arises out of, or is based upon, (i) any untrue
statement or alleged untn~e statement of a material &ct contained in the
Registration Statement, or any amendment thereof or supplement thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, (iii)
any untrue statement or alleged untrue statement of a material fact contained in
the Prospectus, or any amendment thereof or supplement thereto, or (iv) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, but in each case only
to the extent that the untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with written
information furnished to the Depositor by or on behalf of such Underwriter
specifically for inclusion therein, and shall reimburse the Depositor and any
such director, off~cer or controlling person for any legal or other expenses
reasonably incurred by the Depositor or any director, officer or controlling
person in connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as such expenses are
incurred. The foregoing indemnity agreement is in addition to any liability
which any Underwriter may otherwise have to the Depositor or any such director,
officer or controlling person.
C.__ Promptly after receipt by any indemnified party under this Section
VIII of notice of any claim or the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against any
indemnifying party under this Section VIII, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section VIII except to the extent it has
been materially prejudiced by such failure and, provided further, that the
failure to notify any indemnifying party shall not relieve it from any liability
which it may have to any indemnified party otherwise than under this Section
VIII.
If any such claim or action shall be brought against an indemnified party,
and it shall notify the indemnifying party thereof, the indemnifying party shall
be entitled to participate therein and, to the extent that it wishes, jointly
with any other similarly notified indemnifying party, to assume the defense
thereof with counsel reasonably satisfactory to the indemnified party. After
notice from the indemnifying party to the indemnified party of its election to
assume the defense of such claim or action, except to the extent provided in the
next following paragraph, the indemnifying party shall not be iable to the
indemnified party under this Section VII for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation.
Any indemnified party shall have the right to employ separate counsel in
any such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless: (i) the employment thereof has been specifically authorized by the
indemnifying party in writing; (ii) such inderonified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party and in the reasonable judgment of such counsel it is
advisable for such indemnified party to employ separate counsel; or (iii) the
indemnifying party has failed to assume the defense of such action and employ
counsel reasonably satisfactory to the indemnified party, in which case, if such
indemnified party notifies the indemnifying party in writing that it elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party, it being understood, however that the
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to one local counsel per jurisdiction) at any time for all such
indemnified parties, which firm shall be designated in writing by the related
Underwriter, if the indemnified parties under this Section VIII consist of one
or more Underwriters or any of its or their controlling persons, or the
Depositor, if the indemnified parties under this Section VIII consist of the
Depositor or any of the Depositor's directors, officers or controlling persons.
Each indemnified party, as a condition of the indemnity agreements
contained in Section VIII(A) and (B), shall use its reasonable best efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall be liable for any settlement of any such
action effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if there be a
final judgment for the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment. No indemnifying
party shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on any claims
that are the subject of such action.
Notwithstanding the foregoing paragraph, if at any time an indemnified
party shall have requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement.
D.__ Each Underwriter agrees to provide the Depositor no later than two
Business Days prior to the day on which the Prospectus Supplement is required to
be filed pursuant to Section I.A. hereof with a copy of any Computational
Materials (defined below) produced by such Underwriter for filing with the
Commission on Form 8-K.
E.__ Each Underwriter severally agrees, to the extent that all Seller
Provided Information is accurate and complete in all material respects, to
indemnify and hold harmless the Depositor, each of the Depositor's officers and
directors and each person who controls the Depositor within the meaning of
Section 15 of the Securities Act against any and all losses, claims, damages or
liabilities, to which they may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement of a
material fact contained in the Computational Materials provided by such
Underwriter, or arise out of or are based upon the omission or alleged omission
to state therein a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading when
read in conjunction with the Prospectus, and agrees to reimburse each such
indemnified party for any legal or other expenses reasonably incurred by him,
her or it in connection with investigating or defending or preparing to defend
any such loss, claim, damage, liability or action as such expenses are incurred;
PROVIDED, HOWEVER, that in no event shall an Underwriter be liable to the
Depositor under this paragraph E in an amount in excess of the fees received by
such Underwriter in connection with the offering of the Offered Certificates.
The obligations of an Underwriter under this Section VII(E) shall be in addition
to any liability which such Underwriter may otherwise have.
The procedures set forth in Section VIII (C) shall be equally applicable to
this Section VII(E).
F.__ If the indemnification provided for in this Section VII shall for any
reason be unavailable to or insufficient to hold harmless an indemnified party
under Section VIII(A), (B) or (E) in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Depositor on the one hand and the Underwriters on the other from
the offering of the relevant class of Offered Certificates or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law or if
the indemnified party failed to give the notice required under Section VIII (C),
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Depositor on
the one hand and the related Underwriter on the other with respect to the
statements or omissions which resulted in such loss, claim, damage or liability,
or action in respect thereof, as well as any other relevant equitable
considerations.
The relative benefits of an Underwriter and the Depositor shall be deemed
to be in such proportion as the sum of the original principal amount of the
offering, plus the total proceeds to the Depositor from the sale of the Class
A-7IO Certificates (before deducting expenses) bears to the total underwriting
discounts and commissions received by the related Underwriter from time to time
in negotiated sales of the related Offered Certificates.
The relative fault of an Underwriter and the Depositor shall be determined
by reference to whether the untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by the Depositor or by such Underwriter, the intent of the
parties and their relative knowledge, access to information and opportunity to
correct or prevent such statement or omission and other equitable
considerations.
The Depositor and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section VIII(F) were to be
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purposes) or by any other method of allocation which does not
take into account the equitable considerations referred to herein. The amount
paid or payable by an indemnified party as a result of the loss, claim, damage
or liability, or action in respect thereof, referred to above in this Section
VIIIshall be deemed to include, for purposes of this Section VIII (F), any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim.
For purposes of this Section VIII, in no case shall any Underwriter (except
with respect to any document (other than the Computational Materials)
incorporated by reference into the Registration Statement or Prospectus at the
request of such Underwriter through the Representative and except as may be
provided in any agreement among the Underwriters relating to the offering of the
Offered Certificates) be responsible for any amount in excess of the amount by
which (x) the amount received by such Underwriter in connection with its sale of
the Offered Certificates exceeds (y) the amount paid by such Underwriter to the
Depositor for the Offered Certificates hereunder. No person guilty of fraudulent
misrepresentation (within the meaning of Section 1 l(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of
fraudulent misrepresentation.
G.__ For purposes of this Section vm, as to each Underwriter the term
"Computational Materials" means such portion, if any, of the information
delivered to the Depositor by such Underwriter pursuant to Section VIII(D) for
filing with the Commission on Form 8-K as:
(i) is not contained in the Prospectus without taking into account
information incorporated therein by reference; and
(ii) does not constitute Seller Provided Information.
"Seller Provided Information" means any computer tape (or other information)
furnished to any Underwriter by the Sellers concerning the assets comprising the
Trust.
H.__ The Underwriters confirm that the information set forth in the last
paragraph on the cover page of the Prospectus Supplement and the Computational
Materials are correct and constitute the only information furnished in writing
to the Depositor by or on behalf of any Underwriter specifically for inclusion
in the Registration Statement and the Prospectus.
SECTION IX. REPRESENTATIONS. WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERV.
All representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Depositor submitted pursuant hereto
shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of the Underwriters or controlling persons
thereof, or by or on behalf of the Depositor, and shall survive delivery of any
Offered Certificates to the Underwriters.
SECTION X. DEFAULT BY ONE OR MORE OF THE UNDERWRITERS. If one or more of
the Underwriters participating in the public offering of the Offered
Certificates shall fail at the Closing Date to purchase the Offered Certificates
which it is (or they are) obligated to purchase hereunder (the "Defaulted
Certificates"), then the non-defaulting Underwriters shall have the right,
within 24 hours thereafter, to make arrangements for one or more of the
non~efaulting Underwriters, or any other underwriters, to purchase all, but not
less than all, of the Defaulted Certificates in such amounts as may be agreed
upon and upon the terms herein set forth. If, however, the Underwriters have not
completed such arrangements within such 24-hour period, then
(i) if the aggregate principal amount of Defaulted Certificates does
not exceed 10% of the aggregate principal amount of the Offered
Certificates to be purchased pursuant to this Agreement, the non-defaulting
Underwriters named in this Agreement shall be obligated to purchase the
full amount thereof in the proportions that their respective underwriting
obligations hereunder bear to the underwriting obligations of all such
non-defaulting Underwriters, or
(ii) if the aggregate principal amount of Defaulted Certificates
exceeds 10% of the aggregate principal amount of the Offered Certificates
to be purchased pursuant to this Agreement, this Agreement shall terminate,
without any liability on the part of any non-defaulting Underwriters.
No action taken pursuant to this Section X shall relieve any defaulting
Underwriter from the liability with respect to any default of such Underwriter
under this Agreement.
In the event of a default by any Underwriter as set forth in this Section
X, each of the Underwriters and the Depositors shall have the right to postpone
the Closing Date for a period not exceeding five Business Days in order that any
required changes in the Registration Statement or Prospectus or in any other
documents or arrangements may be effected.
SECTION XI. TERMINATION OF AGREEMENT. The Underwriters may terminate this
Agreement immediately upon notice to the Depositor, at any time at or prior to
the Closing Date if any of the events or conditions described in Section VI (R)
of this Agreement shall occur and be continuing, or if any other closing
condition set forth in Section VI shall not have been fulfilled when required to
be fulfilled. In the event of any such termination, the covenant set forth in
Section V(H), the provisions of Section VII, the indemnity and contribution
agreements set forth in Section VIII, and the provisions of Sections IX, XIV and
XVI shall remain in effect.
SECTION XII. NOTICES. All statements, requests, notices and agreements
hereunder shall be in writing, and:
A.__ if to the Underwriters, shall be delivered or sent by mail, telex or
facsimile transmission to Merrill Lynch & Co., World Financial Center, North
Tower, 250 Vesey Street, New York, New York 10281, Attention: Asset Finance
Group (Fax: 212-449-9015); and
B.__ if to the Depositor, shall be delivered or sent by mail, telex or
facsimile transmission to care of ContiSecurities Asset Funding Corporation, 277
Park Avenue, New York, New York 10172, Attention: Chief Counsel (Fax:
212-207-2937).
SECTION XIII. PERSONS ENTITLED TO THE BENEFIT OF THIS AGREEMENT. This
Agreement shall inure to the benefit of and be binding upon the Underwriters and
the Depositor, and their respective successors. This Agreement and the terms and
provisions hereof are for the sole benefit of only those persons, except that
the representations, warranties, indemnities and agreements contained in this
Agreement shall also be deemed to be for the benefit of the person or persons,
if any, who control any of the Underwriters within the meaning of Section 15 of
~e Securities Act, and for the benefit of each Underwriter's respective
offficers and directors and for the benefit of directors of the Depositor,
officers of the Depositor who have signed the Registration Statement and any
person controlling the Depositor within the meaning of Section 15 of the
Securities Act. Nothing in this Agreement is intended or shall be construed to
give any person, other than the persons referred to in this Section xm, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision contained herein.
SECTION XIV. SURVIVAL. The respective indemnities, representations,
warranties and agreements of the Depositor and the Underwriters contained in
this Agreement, or made by or on behalf of them, respectively, pursuant to this
Agreement, shall survive the delivery of and payment for the Certificates and
shall remain in full force and effect, regardless of any investigation made by
or on behalf of any of them or any person controlling any of them.
SECTION XV. DEFINITION OF THE TERM "BUSINESS DAY". For purposes of this
Agreement, "Business Day" means any day on which the New York Stock Exchange,
Inc. is open for trading.
SECTION XVI. GOVERNING LAW: SUBMISSION TO JURISDICTION; WAIVER OF JURV
TRIAL. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York without giving effect to the principles of
conflicts of law thereof.
The parties hereto hereby submit to the jurisdiction of the United States
District Court for the Southern District of New York and any court in the State
of New York located in the City and County of New York, and appellate court from
any thereof, in any action, suit or proceeding brought against it or in
connection with this Agreement or any of the related documents or the
transactions contemplated hereunder or for recognition or enforcement of any
judgment, and the parties hereto hereby agree that all claims in respect of any
such action or proceeding may be heard or determined in New York State court or,
to the extent permitted by law, in such federal court.
The parties hereto hereby irrevocably waive, to the fullest extent
permitted by law, any and all rights to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby.
SECTION XVII. COUNTERPARTS. This Agreement may be executed in counterparts
and, if executed in more than one counterpart, the executed counterparts shall
each be deemed to be an original but all such counterparts shall together
constitute one and the same instrument.
SECTION XVIII. HEADINGS. The headings herein are inserted for convenience
of reference only and are not intended to be part of, or to affect the meaning
or interpretation of, this Agreement.
<PAGE>
If the foregoing correctly sets forth the agreement between the Depositor
and the Underwriters, please indicate your acceptance in the space provided for
the purpose below.
Very truly yours,
CONTISECURITIES ASSET FUNDING CORP.
By:.......................................
Name:.....................................
Title:....................................
By:.......................................
Name:.....................................
Title:....................................
CONFIRMED AND ACCEPTED, as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
Acting on its own behalf and as
Representative of the Several Underwriters
referred to in the foregoing Agreement
By:....................................................
Name:..................................................
Title:.................................................
CONTIMORTGAGE CORPORATION CONTIWEST CORPORATION
Accepts and hereby agrees solely to the Accepts and hereby agrees solely
provisions of Section V.H. to the provisions of Section V.I.
By:.......................................... By:.............................
Name:........................................ Name:...........................
Title:....................................... Title:..........................
By:.......................................... By:.............................
Name:........................................ Name:...........................
Title:.........................................Title:..........................
<PAGE>
SCHEDULE A
Name of Class of Certificates Initial Principal Dollar PRICE TO PUBLIC**
UNDERWRITER Purchased by the Amount of Certificates
UNDERWRITERS PURCHASED BY UNDERWRITERS
A-1
A-2
A-3
A-4
A-5
A-6
A-7
A-8
A-9
A-7IO
B-1F
TOTAL:
Bear Stearns & Co. Inc. A-1
A-2
A-3
A-4
A-5
A-6
A-7
A-8
A-9
A-7IO
B-1F
TOTAL:
ContiFinancial Services Corporation
TOTAL:
Credit Suisse First Boston A-1
A-2
A-3
A-4
A-5
A-6
A-7
A-8
A-9
A-7IO
B-1F
TOTAL:
Greenwich Capital Markets, Inc. A-1
A-2
A-3
A-4
A-5
A-6
A-7
A-8
A-9
A-7IO
B-1F
TOTAL:
Lehman Brothers, Inc. A-1
A-2
A-3
A-4
A-5
A-6
A-7
A-8
A-9
A-7IO
B-1F
TOTAL:
Morgan Stanley A-1
A-2
A-3
A-4
A-5
A-6
A-7
A-8
A-9
A-7IO
B-1F
TOTAL:
TOTAL:
- --------------------
* = Notional Principal Balance
**= Plus accrued interest
<PAGE>
SCHEDULE A
Class A-1 Certificates
<TABLE>
<CAPTION>
UNDERWRITERS PRINCIPAL AMOUNT PRICE TO PUBLIC* UNDERWRITING
PLUS ACCRUED DISCOUNT
INTEREST.
<S> <C> <C> <C>
Merrill Lynch, Pierce, Fenner & $39,166,670 99.999976% .12%
Smith Incorporated
Bear, Stearns & Co. Inc. $39,166,666 99.999976% .12%
Credit Suisse First Boston $39,166,666 99.999976% .12%
Greenwich Capital Markets, Inc. $39,166,666 99.999976% .12%
Lehman Brothers Inc. $39,166,666 99.999976% .12%
Morgan Stanley & Co. Incorporated $39,166,666 99.999976% .12%
</TABLE>
Class A-2 Certificates
<TABLE>
<CAPTION>
UNDERWRITERS PRINCIPAL AMOUNT PRICE TO PUBLIC* UNDERWRITING
DISCOUNT
<S> <C> <C> <C>
Merrill Lynch, Pierce, Fenner & $27,666,670 99.990406% .155%
Smith Incorporated
Bear, Stearns & Co. Inc. $27,666,666 99.990406% .155%
Credit Suisse First Boston $27,666,666 99.990406% .155%
Greenwich Capital Markets, Inc. $27,666,666 99.990406% .155%
Lehman Brothers Inc. $27,666,666 99.990406% .155%
Morgan Stanley & Co. Incorporated $27,666,666 99.990406% .155%
</TABLE>
Class A-3 Certificates
<TABLE>
<CAPTION>
UNDERWRITERS PRINCIPAL AMOUNT PRICE TO PUBLIC* UNDERWRITING
DISCOUNT
<S> <C> <C> <C>
Merrill Lynch, Pierce, Fenner & $51,166,670 99.997032% .185%
Smith Incorporated
Bear, Stearns & Co. Inc. $51,166,666 99.997032% .185%
Credit Suisse First Boston $51,166,666 99.997032% .185%
Greenwich Capital Markets, Inc. $51,166,666 99.997032% .185%
Lehman Brothers Inc. $51,166,666 99.997032% .185%
Morgan Stanley & Co. Incorporated $51,166,666 99.997032% .185%
</TABLE>
Class A-4 Certificates
<TABLE>
<CAPTION>
UNDERWRITERS PRINCIPAL AMOUNT PRICE TO PUBLIC* UNDERWRITING
DISCOUNT
<S> <C> <C> <C>
Merrill Lynch, Pierce, Fenner & $16,666,670 99.976871% .25%
Smith Incorporated
Bear, Stearns & Co. Inc. $16,666,666 99.976871% .25%
Credit Suisse First Boston $16,666,666 99.976871% .25%
Greenwich Capital Markets, Inc. $16,666,666 99.976871% .25%
Lehman Brothers Inc. $16,666,666 99.976871% .25%
Morgan Stanley & Co. Incorporated $16,666,666 99.976871% .25%
</TABLE>
<PAGE>
Class A-5 Certificates
<TABLE>
<CAPTION>
UNDERWRITERS PRINCIPAL AMOUNT PRICE TO PUBLIC* UNDERWRITING
DISCOUNT
<S> <C> <C> <C>
Merrill Lynch, Pierce, Fenner & $20,333,335 99.992328% .3%
Smith Incorporated
Bear, Stearns & Co. Inc. $20,333,333 99.992328% .3%
ContiFinancial Services Corporation $10,000,000 99.992328% .3%
Credit Suisse First Boston $20,333,333 99.992328% .3%
Greenwich Capital Markets, Inc. $20,333,333 99.992328% .3%
Lehman Brothers Inc. $20,333,333 99.992328% .3%
Morgan Stanley & Co. Incorporated $20,333,333 99.992328% .3%
</TABLE>
Class A-6 Certificates
<TABLE>
<CAPTION>
UNDERWRITERS PRINCIPAL AMOUNT PRICE TO PUBLIC* UNDERWRITING
DISCOUNT
<S> <C> <C> <C>
Merrill Lynch, Pierce, Fenner & $6,500,000 99.966035% .325%
Smith Incorporated
Bear, Stearns & Co. Inc. $6,500,000 99.966035% .325%
Credit Suisse First Boston $6,500,000 99.966035% .325%
Greenwich Capital Markets, Inc. $6,500,000 99.966035% .325%
Lehman Brothers Inc. $6,500,000 99.966035% .325%
Morgan Stanley & Co. Incorporated $6,500,000 99.966035% .325%
</TABLE>
Class A-7 Certificates
<TABLE>
<CAPTION>
UNDERWRITERS PRINCIPAL AMOUNT PRICE TO PUBLIC* UNDERWRITING
DISCOUNT
<S> <C> <C> <C>
Merrill Lynch, Pierce, Fenner & $15,875,000 99.959332% .35%
Smith Incorporated
Bear, Stearns & Co. Inc. $15,875,000 99.959332% .35%
Credit Suisse First Boston $15,875,000 99.959332% .35%
Greenwich Capital Markets, Inc. $15,875,000 99.959332% .35%
Lehman Brothers Inc. $15,875,000 99.959332% .35%
Morgan Stanley & Co. Incorporated $15,875,000 99.959332% .35%
</TABLE>
Class A-7 IO Certificates
<TABLE>
<CAPTION>
UNDERWRITERS PRINCIPAL AMOUNT PRICE TO PUBLIC* UNDERWRITING
DISCOUNT
<S> <C> <C> <C>
Merrill Lynch, Pierce, Fenner & N/A 18.996566% .096588%
Smith Incorporated
</TABLE>
<PAGE>
Class A-8 Certificates
<TABLE>
<CAPTION>
UNDERWRITERS PRINCIPAL AMOUNT PRICE TO PUBLIC* UNDERWRITING
DISCOUNT
<S> <C> <C> <C>
Merrill Lynch, Pierce, Fenner & $22,916,670 100% .2%
Smith Incorporated
Bear, Stearns & Co. Inc. $22,916,666 100% .2%
Credit Suisse First Boston $22,916,666 100% .2%
Greenwich Capital Markets, Inc. $22,916,666 100% .2%
Lehman Brothers Inc. $22,916,666 100% .2%
Morgan Stanley & Co. Incorporated $22,916,666 100% .2%
</TABLE>
Class A-9 Certificates
<TABLE>
<CAPTION>
UNDERWRITERS PRINCIPAL AMOUNT PRICE TO PUBLIC* UNDERWRITING
DISCOUNT
<S> <C> <C> <C>
Merrill Lynch, Pierce, Fenner & $160,500,000 100% .25%
Smith Incorporated
Lehman Brothers Inc. $107,000,000 100% .25%
</TABLE>
Class B Certificates
<TABLE>
<CAPTION>
UNDERWRITERS PRINCIPAL AMOUNT PRICE TO PUBLIC* UNDERWRITING
DISCOUNT
<S> <C> <C> <C>
Merrill Lynch, Pierce, Fenner & $7,625,000 99.984071% .6%
Smith Incorporated
Bear, Stearns & Co. Inc. $7,625,000 99.984071% .6%
Credit Suisse First Boston $7,625,000 99.984071% .6%
Greenwich Capital Markets, Inc. $7,625,000 99.984071% .6%
Lehman Brothers Inc. $7,625,000 99.984071% .6%
Morgan Stanley & Co. Incorporated $7,625,000 99.984071% .6%
</TABLE>
<PAGE>
EXHIBIT A
[Letterhead of theCONTIFINANCIAL CORPORATION]
September 18, 1997
Merrill Lynch, Pierce, Fenner & Smith, Incorporated
As Representative of the Several Underwriters
World Financial Center
North Tower
250 Vesey Street
New York, New York 10281
Ladies and Gentlemen:
This Guaranty is made by ContiFinancial Corporation, a Delaware corporation
with its principal office at 277 Park Avenue, New York, New York 10172 ("CFC"),
in favor of Merrill Lynch, Pierce, Fenner & Smith, Incorporated, as
Representative of the Several Underwriters, with its principal office at World
Financial Center, North Tower, 250 Vesey Street, New York, New York 10281.
As an inducement to you and in consideration of your entering into the
Underwriting Agreement referred to below, CFC hereby absolutely, unconditionally
and irrevocably guarantees the prompt performance of the obligations, including
any payment obligations, of ContiSecurities Asset Funding Corp., ("Depositor"),
a Delaware corporation with its principal office at 277 Park Avenue, New York,
New York 10172, under Section VIII of the Underwriting Agreement, dated
September 18, 1997, between Depositor and Merrill Lynch, Pierce, Fenner & Smith,
Incorporated, as Representative of the Several Underwriters. This Guaranty is a
guaranty of performance and payment and not of collection. The obligations of
CFC hereunder shall not be impaired by failure of Depositor to provide notice to
CFC of any modification or amendment of said contract agreed to by the parties
thereto. This Guaranty may be amended only by an instrument in writing executed
by the undersigned.
This Guaranty shall be governed by the laws of the State of New York
applicable to agreements made and to be performed in the State of New York
without giving effect to the conflict of law rules thereof.
<PAGE>
IN WITNESS WHEREOF, CFC has caused this Guaranty to be executed by duly
authorized corporate officers the day and year first above written.
CONTIFINANCIAL CORPORATION
By:
Name:
Title:
By:
Name:
Title:
ACCEPTED
as of September 18, 1997
MERRILL LYNCH, PIERCE, FENNER &
SMITH, INCORPORATED
as representative of the Several Underwriters
BY
Name:
Title:
Exhibit 4.2
- -------------------------------------------------------------------
TABLE OF CONTENTS
- -------------------------------------------------------------------
Page
ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION......................3
Section 1.01 Definitions.......................................3
Section 1.02 Use of Words and Phrases.........................31
Section 1.03 Captions; Table of Contents......................31
Section 1.04 Opinions.........................................31
ARTICLE II ESTABLISHMENT AND ORGANIZATION OF THE TRUST...........33
Section 2.01 Establishment of the Trust.......................33
Section 2.02 Office...........................................33
Section 2.03 Purposes and Powers..............................33
Section 2.04 Appointment of the Trustee; Declaration of
Trust............................................33
Section 2.05 Expenses of the Trust............................33
Section 2.06 Ownership of the Trust...........................34
Section 2.07 Situs of the Trust...............................34
Section 2.08 Miscellaneous REMIC Provisions...................34
ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
DEPOSITOR, THE SERVICER AND THE SELLERS; COVENANT
OF SELLERS TO CONVEY HOME EQUITY LOANS...............38
Section 3.01 Representations and Warranties of the
Depositor........................................38
Section 3.02 Representations and Warranties of the
Servicer.........................................40
Section 3.03 Representations and Warranties of the Sellers....42
Section 3.04 Covenants of the Sellers to Take Certain
Actions with Respect to the Home Equity Loans
In Certain Situations............................47
Section 3.05 Conveyance of the Home Equity Loans and
Qualified Replacement Mortgages..................55
Section 3.06 Acceptance by Trustee; Certain Substitutions
of Home Equity Loans; Certification by
Trustee..........................................58
ARTICLE IV ISSUANCE AND SALE OF CERTIFICATES.....................60
Section 4.01 Issuance of Certificates.........................60
Section 4.02 Sale of Certificates.............................60
ARTICLE V CERTIFICATES AND TRANSFER OF INTERESTS.................61
Section 5.01 Terms............................................61
Section 5.02 Forms............................................61
Section 5.03 Execution, Authentication and Delivery...........61
Section 5.04 Registration and Transfer of Certificates........62
Section 5.05 Mutilated, Destroyed, Lost or Stolen
Certificates.....................................64
Section 5.06 Persons Deemed Owners............................65
Section 5.07 Cancellation.....................................65
Section 5.08 Limitation on Transfer of Ownership Rights.......65
Section 5.09 Assignment of Rights.............................66
ARTICLE VI COVENANTS.............................................67
Section 6.01 Distributions....................................67
Section 6.02 Money for Distributions to be Held in Trust;
Withholding......................................67
Section 6.03 Protection of Trust Estate.......................68
Section 6.04 Performance of Obligations.......................69
Section 6.05 Negative Covenants...............................69
Section 6.06 No Other Powers..................................69
Section 6.07 Limitation of Suits..............................69
Section 6.08 Unconditional Rights of Owners to Receive
Distributions....................................70
Section 6.09 Rights and Remedies Cumulative...................71
Section 6.10 Delay or Omission Not Waiver.....................71
Section 6.11 Control by Owners................................71
Section 6.12 Indemnification..................................71
Section 6.13 Access to Owners of Certificates' Names and
Addresses........................................72
ARTICLE VII ACCOUNTS, DISBURSEMENTS AND RELEASES.................73
Section 7.01 Collection of Money..............................73
Section 7.02 Establishment of Accounts........................73
Section 7.03 Flow of Funds....................................73
Section 7.04 Auction Rate Certificates........................77
Section 7.05 Investment of Accounts...........................77
Section 7.06 Payment of Trust Expenses........................78
Section 7.07 Eligible Investments.............................78
Section 7.08 Accounting and Directions by Trustee.............80
Section 7.09 Reports by Trustee to Owners and the
Certificate Insurer..............................81
Section 7.10 Reports by Trustee...............................84
Section 7.11 Preference Payments..............................84
ARTICLE VIII SERVICING AND ADMINISTRATION OF HOME EQUITY
LOANS................................................85
Section 8.01 Servicer and Sub-Servicers.......................85
Section 8.02 Collection of Certain Home Equity Loan
Payments.........................................86
Section 8.03 Sub-Servicing Agreements Between Servicer and
Sub-Servicers....................................86
Section 8.04 Successor Sub-Servicers..........................86
Section 8.05 Liability of Servicer; Indemnification...........87
Section 8.06 No Contractual Relationship Between
Sub-Servicer, Trustee or the Owners.............87
Section 8.07 Assumption or Termination of Sub-Servicing
Agreement by Trustee.............................87
Section 8.08 Principal and Interest Account...................88
Section 8.09 Delinquency Advances and Servicing Advances......89
Section 8.10 Compensating Interest; Repurchase of Home
Equity Loans.....................................90
Section 8.11 Maintenance of Insurance.........................91
Section 8.12 Due-on-Sale Clauses; Assumption and
Substitution Agreements..........................92
Section 8.13 Realization Upon Defaulted Home Equity Loans;
Modification.....................................92
Section 8.14 Trustee to Cooperate; Release of Files...........94
Section 8.15 Servicing Compensation...........................95
Section 8.16 Annual Statement as to Compliance................95
Section 8.17 Annual Independent Certified Public
Accountants' Reports.............................95
Section 8.18 Access to Certain Documentation and
Information Regarding the Home Equity Loans......95
Section 8.19 Assignment of Agreement..........................96
Section 8.20 Removal of Servicer; Resignation of Servicer.....96
Section 8.21 Inspections by Certificate Insurer; Errors
and Omissions Insurance.........................100
ARTICLE IX TERMINATION OF TRUST.................................102
Section 9.01 Termination of Trust............................102
Section 9.02 Termination Upon Option of Owners of Class
R-I Certificates................................102
Section 9.03 Termination Upon Loss of REMIC Status...........103
Section 9.04 Disposition of Proceeds.........................105
ARTICLE X THE TRUSTEE...........................................106
Section 10.01 Certain Duties and Responsibilities............106
Section 10.02 Removal of Trustee for Cause...................107
Section 10.03 Certain Rights of the Trustee..................108
Section 10.04 Not Responsible for Recitals or Issuance of
Certificates....................................110
Section 10.05 May Hold Certificates..........................110
Section 10.06 Money Held in Trust............................110
Section 10.07 Compensation and Reimbursement; No Lien for
Fees............................................110
Section 10.08 Corporate Trustee Required; Eligibility........110
Section 10.09 Resignation and Removal; Appointment of
Successor.......................................111
Section 10.10 Acceptance of Appointment by Successor
Trustee.........................................112
Section 10.11 Merger, Conversion, Consolidation or
Succession to Business of the Trustee...........113
Section 10.12 Reporting; Withholding.........................113
Section 10.13 Liability of the Trustee.......................113
Section 10.14 Appointment of Co-Trustee or Separate
Trustee.........................................114
ARTICLE XI MISCELLANEOUS........................................116
Section 11.01 Compliance Certificates and Opinions...........116
Section 11.02 Form of Documents Delivered to the Trustee.....116
Section 11.03 Acts of Owners.................................117
Section 11.04 Notices, etc. to Trustee.......................117
Section 11.05 Notices and Reports to Owners; Waiver of
Notices.........................................118
Section 11.06 Rules by Trustee...............................118
Section 11.07 Successors and Assigns.........................118
Section 11.08 Severability...................................118
Section 11.09 Benefits of Agreement..........................118
Section 11.10 Legal Holidays.................................119
Section 11.11 Governing Law; Submission to Jurisdiction......119
Section 11.12 Counterparts...................................120
Section 11.13 Usury..........................................120
Section 11.14 Amendment......................................120
Section 11.15 Paying Agent; Appointment and Acceptance of
Duties..........................................121
Section 11.16 REMIC Status...................................121
Section 11.17 Additional Limitation on Action and
Imposition of Tax...............................123
Section 11.18 Appointment of Tax Matters Person..............123
Section 11.19 The Certificate Insurer........................124
Section 11.20 Reserved.......................................124
Section 11.21 Third Party Rights.............................124
Section 11.22 Notices........................................124
POOLING AND SERVICING AGREEMENT, relating to CONTIMORTGAGE HOME EQUITY
LOAN TRUST 1997-4, dated as of September 1, 1997 by and among CONTISECURITIES
ASSET FUNDING CORP., a Delaware corporation, in its capacity as Depositor (the
"Depositor"), CONTIMORTGAGE CORPORATION, a Delaware corporation in its
capacities as a Seller (in such capacity, a "Seller") and as Servicer (in such
capacity, the "Servicer"), CONTIWEST CORPORATION, a Nevada corporation, in its
capacity as a Seller (a "Seller" and together with ContiMortgage Corporation,
the "Sellers") and MANUFACTURERS AND TRADERS TRUST COMPANY, a New York banking
corporation, in its capacity as the trustee (the "Trustee").
WHEREAS, the Depositor wishes to establish the Trust and two subtrusts
and provide for the allocation and sale of the beneficial interests therein and
the maintenance and distribution thereof;
WHEREAS, the Servicer has agreed to service the Home Equity Loans,
which constitute the principal assets of the Trust Estate;
WHEREAS, all things necessary to make the Certificates, when executed
by the Depositor and authenticated by the Trustee, valid instruments, and to
make this Agreement a valid agreement, in accordance with their and its terms,
have been done;
WHEREAS, Manufacturers and Traders Trust Company is willing to serve
in the capacity of Trustee hereunder;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Sellers, the Servicer, and the Trustee hereby
agree as follows:
CONVEYANCE
To provide for the distribution of the interest on and/or principal of
the Certificates in accordance with their terms, all of the sums distributable
under this Agreement with respect to the Certificates and the performance of the
covenants contained in this Agreement, each Seller hereby bargains, sells,
conveys, assigns and transfers to the Depositor and the Depositor hereby
bargains, sells, conveys, assigns and transfers to the Trust, without recourse
and for the exclusive benefit of the Owners of the Certificates and the
Certificate Insurer, all of its respective right, title and interest in and to
any and all benefits accruing to it from (a) the Home Equity Loans (other than
any principal and interest payments received thereon on or prior to the Cut-Off
Date) listed in Schedule I-A and I-B to this Agreement which the Sellers are
causing to be delivered to the Depositor and the Depositor is causing to be
delivered to the Trustee herewith (and all substitutions therefor as provided by
Sections 3.03, 3.04 and 3.06), together with the related Home Equity Loan
documents and each Seller's interest in any Property which secured a Home Equity
Loan but which has been acquired by foreclosure or deed in lieu of foreclosure,
and all payments thereon and proceeds of the conversion, voluntary or
involuntary, of the foregoing; (b) such amounts as may be held by the Trustee in
the Certificate Account together with investment earnings on such amounts and
such amounts as may be held in the name of the Trustee in the Principal and
Interest Account, if any, exclusive of investment earnings thereon (except as
otherwise provided herein), whether in the form of cash, instruments, securities
or other properties (including any Eligible Investments held by the Servicer);
(c) the Insurance Agreement; (d) the Certificate Insurance Policy; and
(e) proceeds of all the foregoing (including, but not by way of limitation, all
proceeds of any mortgage insurance, hazard insurance and title insurance policy
relating to the Home Equity Loans, cash proceeds, accounts, accounts receivable,
notes, drafts, acceptances, chattel paper, checks, deposit accounts, rights to
payment of any and every kind, and other forms of obligations and receivables
which at any time constitute all or part of or are included in the proceeds of
any of the foregoing) to pay the Certificates as specified herein ((a)-(e) above
shall be collectively referred to herein as the "Trust Estate").
The Trustee acknowledges such sale, accepts the Trust hereunder in
accordance with the provisions hereof and agrees to perform the duties herein to
the best of its ability to the end that the interests of the Owners may be
adequately and effectively protected.
ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION
Section 1.01 Definitions.
For all purposes of this Agreement, the following terms shall have the
meanings set forth below, unless the context clearly indicates otherwise:
"Account": Any account established in accordance with Section 7.02 or
8.08 hereof.
"Accrual Period": With respect to the Fixed Rate Certificates and any
Payment Date, the calendar month immediately preceding the month in which the
Payment Date occurs. A "calendar month" shall be deemed to be 30 days. With
respect to the Adjustable Rate Certificates and any Payment Date, the period
commencing on the immediately preceding Payment Date (or the Closing Date in the
case of the first Payment Date) to and including the day prior to the current
Payment Date. All calculations of interest on the Fixed Rate Certificates will
be made on the basis of a 360-day year assumed to consist of twelve 30-day
months and calculations of interest on the Adjustable Rate Certificates will be
made on the basis of the actual number of days elapsed in the related Accrual
Period and in a year of 360 days.
"Adjustable Rate Certificates": The Class A-8 and Class A-9
Certificates.
"Adjusted Rate Home Equity Loans": The Home Equity Loans identified in
the related Schedule of Home Equity Loans as having adjustable Coupon Rates in
Schedule I-B hereto, including any Qualified Replacement Mortgages delivered in
replacement thereof.
"Aggregate Certificate Principal Balance": As of any date of
determination thereof, the sum of the then outstanding Certificate Principal
Balance of the Class A Certificates and the Class B Certificates.
"Agreement": This Pooling and Servicing Agreement, as it may be
amended from time to time, including the Exhibits and Schedules hereto.
"Amount Held for Future Distribution": As of any date of
determination, amounts on deposit in the Auction Remainder Account for future
distribution on the Auction Rate Certificates pursuant to Section 7.04.
"Applied Realized Loss Amount": As of any Payment Date, the excess of
(x) the aggregate Certificate Principal Balance of the Offered Certificates on
such Payment Date, after taking into account the distribution of the Principal
Distribution Amount on such Payment Date but prior to the application of the
Applied Realized Loss Amount, if any, on such Payment Date over (y) the
aggregate outstanding Loan Balance of the Home Equity Loans as of the last day
of the related Remittance Period.
"Appraised Value": The appraised value of any Property based upon the
appraisal or other valuation made at the time of the origination of the related
Home Equity Loan, or, in the case of a Home Equity Loan which is a purchase
money mortgage, the sales price of the Property at such time of origination, if
such sales price is less than such appraised value.
"Auction Agent": The meaning set forth in the Auction Procedures.
"Auction Agent Agreement": The meaning set forth in the Auction
Procedures.
"Auction Agent Fee": The meaning set forth in the Auction Agent
Agreement. The Auction Agent Fee includes the Broker-Dealer Fee payable to the
Broker-Dealer (each as defined in the Auction Procedures).
"Auction Procedures": The procedures set forth in Schedule II hereof
by which the Auction Rate is determined.
"Auction Rate": The rate of interest per annum that results from
implementation of the Auction Procedures and is determined as described in
Section 2.3 thereof.
"Auction Rate Certificates": The Class A-9 Certificates.
"Auction Remainder Account": The account established to hold deposits
of the Amount Held for Future Distribution.
"Auction Reporting Date": That day of each month which is the fifth
Business Day prior to the Payment Date occurring in such month.
"Authorized Officer": With respect to any Person, any officer of such
Person who is authorized to act for such Person in matters relating to the
Agreement, and whose action is binding upon such Person; with respect to the
Depositor, the Sellers and the Servicer, initially including those individuals
whose names appear on the lists of Authorized Officers delivered at the Closing;
with respect to the Trustee, any Vice President, Assistant Vice President, Trust
Officer or any Officer of the Trustee located at the Corporate Trust Office.
"Available Funds Cap": With respect to any payment Date, the weighted
average Coupon Rate of the Home Equity Loans, as of the opening of business on
the first day of the Related Remittance Period, less the sum of (i) an amount,
as an annual percentage rate of the outstanding aggregate Loan Balance of the
Home Equity Loans as of the opening of business on the first day of the related
Remittance Period, equal to the sum of (A) the Servicing Fee, (B) the Trustee
Fee, (C) the Premium Amount (expressed as a per annum rate), (D) the Auction
Agent Fee and (ii) 0.50% per annum and (iii) for the first 30 Payment Dates, the
product of (A) 8.5% per annum and (B) the Notional Amount of the Class A-7 IO
Certificates7divided by the outstanding aggregate Loan Balance of the Home
Equity Loans as of the opening of business on the first day of the related
Remittance Period.
"Business Day": Any day that is not a Saturday, Sunday or other day on
which commercial banking institutions in The City of New York, or in the city in
which the principal corporate trust office of the Trustee or the principal
corporate office of the Certificate Insurer is located, are authorized or
obligated by law or executive order to be closed.
"Certificate": Any one of the Class A Certificates, Class B
Certificates, Class C Certificates or Class R Certificates, each representing
the interests and the rights described in this Agreement.
"Certificate Account": The certificate account established in
accordance with Section 7.02(a) hereof and maintained in the corporate trust
department of the Trustee; provided that the funds in such account shall not be
commingled with other funds held by the Trustee.
"Certificate Insurance Policy": The certificate guaranty insurance
policy (number 24874) dated September 25, 1997 issued by the Certificate Insurer
for the benefit of the Owners of the Class A Certificates pursuant to which the
Certificate Insurer guarantees Insured Payments.
"Certificate Insurer": MBIA Insurance Corporation, a New York
insurance company, or any successor thereto, as issuer of the Certificate
Insurance Policy.
"Certificate Insurer Default": The existence and continuance of any of
the following:
(a) the Certificate Insurer fails to make a payment required under the
Certificate Insurance Policy in accordance with its terms; or
(b)(i) the entry by a court having jurisdiction in the premises of (A)
a final and nonappealable decree or order for relief in respect of the
Certificate Insurer in an involuntary case or proceeding under any applicable
United States federal or state bankruptcy, insolvency, rehabilitation,
reorganization or other similar law or (B) a final and nonappealable decree or
order adjudging the Certificate Insurer as bankrupt or insolvent, or approving
as properly filed a petition seeking reorganizing, rehabilitation, arrangement,
adjustment or composition of or in respect of the Certificate Insurer under any
applicable United States federal or state law, or appointing a custodian,
receiver, liquidator, rehabilitator, assignee, trustee, sequestrator or other
similar official of the Certificate Insurer or of any substantial part of its
property, or ordering the winding-up or liquidation of its affairs, and the
continuance of any such decree or order for relief or any such other decree or
order unstayed and in effect for a period of 60 consecutive days; or
(ii) the commencement by the Certificate Insurer of a voluntary case
or proceeding under any applicable United States federal or state bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated as bankrupt or insolvent, or the consent of the
Certificate Insurer to the entry of a decree or order for relief in respect of
the Certificate Insurer in an involuntary case or proceeding under any
applicable United States federal or state bankruptcy, insolvency case or
proceeding against the Certificate Insurer, or the acquiescence by the
Certificate Insurer to the filing of such petition or to the appointment of or
the taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or similar official of the Certificate Insurer or of any
substantial part of its property, or the failure of the Certificate Insurer to
pay debts generally as they become due, or the admission by the Certificate
Insurer in writing of its inability to pay its debts generally as they become
due, or the taking of corporate action by the Certificate Insurer in furtherance
of any such action.
"Certificate Principal Balance": As of the Startup Day as to each of
the following Classes of Certificates, the Certificate Principal Balances
thereof, as follows:
Class A-1 Certificates - $235,000,000
Class A-2 Certificates - $166,000,000
Class A-3 Certificates - $307,000,000
Class A-4 Certificates - $100,000,000
Class A-5 Certificates - $132,000,000
Class A-6 Certificates - $ 39,000,000
Class A-7 Certificates - $ 95,250,000
Class A-8 Certificates - $137,500,000
Class A-9 Certificates - $267,500,000
Class B Certificates - $ 45,750,000
The Class A-7 IO Certificates, Class C Certificates and the Class R
Certificates do not have a Certificate Principal Balance.
"Class": Any Class of the Class A Certificates, the Class B
Certificates, the Class C Certificates or the Class R Certificates.
"Class A Certificate": Any one of the Class A-1 Certificates, Class
A-2 Certificates, Class A-3 Certificates, Class A-4 Certificates, Class A-5
Certificates, Class A-6 Certificates, Class A-7 Certificates, Class A-7 IO
Certificates, Class A-8 Certificates, or Class A-9 Certificates.
"Class A Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A Certificates less any amounts actually distributed on such Class A
Certificates with respect to the Class A Principal Distribution Amount pursuant
to Section 7.03(d) hereof with respect to principal thereon on all prior Payment
Dates (except for purposes of effecting the Certificate Insurer's subrogation
rights, that portion of Insured Payments made in respect of principal).
"Class A Distribution Amount": The sum of the Class A-1 Distribution
Amount, the Class A-2 Distribution Amount, the Class A-3 Distribution Amount,
the Class A-4 Distribution Amount, the Class A-5 Distribution Amount, the Class
A-6 Distribution Amount, the Class A-7 Distribution Amount, the Class A-7 IO
Distribution Amount, the Class A-8 Distribution Amount and the Class A-9
Distribution Amount.
"Class A Principal Distribution Amount": As of any Payment Date (a)
prior to the Stepdown Date, the lesser of (i) 100% of the Principal Distribution
Amount plus the principal component of any Insured Payment and (ii) the
aggregate Certificate Principal Balance of the Class A Certificates and (b) on
or after the Stepdown Date, the lesser of (i) 100% of the Principal Distribution
Amount plus the principal component of any Insured Payment and (ii) the excess,
if any, of (x) the aggregate Certificate Principal Balance of the Class A
Certificates immediately prior to such Payment Date over (y) the Senior Optimal
Balance applicable to such Payment Date.
"Class A Termination Date": The Payment Date on which the Certificate
Principal Balance of each Class A Certificate has been reduced to zero.
"Class A-1 Certificate": Any one of the Certificates designated on the
face thereof as a Class A-1 Certificate, substantially in the form annexed
hereto as Exhibit A-1, authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein.
"Class A-1 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-1 Certificates less any amounts actually distributed with respect to the
Class A Principal Distribution Amount pursuant to Section 7.03(d) hereof with
respect to principal thereon on all prior Payment Dates (except for purposes of
effecting the Certificate Insurer's subrogation rights, that portion of Insured
Payments made in respect of principal).
"Class A-1 Certificate Termination Date": The Payment Date on which
the Class A-1 Certificate Principal Balance is reduced to zero.
"Class A-1 Current Interest": With respect to any Payment Date, the
amount of interest accrued on the Class A-1 Certificate Principal Balance
immediately prior to such Payment Date during the related Accrual Period at the
Class A-1 Pass-Through Rate plus the Preference Amount owed to the Owners of the
Class A-1 Certificates as it relates to interest previously paid on the Class
A-1 Certificates.
"Class A-1 Distribution Amount": With respect to any Payment Date, the
sum of (x) the Class A-1 Current Interest, (y) the Class A-1 Interest Carry
Forward Amount and (z) the Class A Principal Distribution Amount payable to the
Owners of the Class A-1 Certificates pursuant to Section 7.03(d) hereof.
"Class A-1 Interest Carry Forward Amount": With respect to any Payment
Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the Class
A-1 Current Interest as of the immediately preceding Payment Date and (B) any
unpaid Class A-1 Interest Carry Forward Amount from all previous Payment Dates
exceeds (ii) the amount of the actual distribution with respect to interest made
to the Owners of the Class A-1 Certificates on such immediately preceding
Payment Date and (y) 30 days' interest on such amount at the Class A-1
Pass-Through Rate.
"Class A-1 Pass-Through Rate": 6.37% per annum.
"Class A-2 Certificate": Any one of the Certificates designated on the
face thereof as a Class A-2 Certificate, substantially in the form annexed
hereto as Exhibit A-2, authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein.
"Class A-2 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-2 Certificates less any amounts actually distributed with respect to the
Class A Principal Distribution Amount pursuant to Section 7.03(d) hereof with
respect to principal thereon on all prior Payment Dates (except for purposes of
effecting the Certificate Insurer's subrogation rights, that portion of Insured
Payments made in respect of principal).
"Class A-2 Certificate Termination Date": The Payment Date on which
the Class A-2 Certificate Principal Balance is reduced to zero.
"Class A-2 Current Interest": With respect to any Payment Date, the
amount of interest accrued on the Class A-2 Certificate Principal Balance
immediately prior to such Payment Date during the related Accrual Period at the
Class A-2 Pass-Through Rate plus the Preference Amount owed to the Owners of the
Class A-2 Certificates as it relates to interest previously paid on the Class
A-2 Certificates.
"Class A-2 Distribution Amount": With respect to any Payment Date, the
sum of (x) the Class A-2 Current Interest, (y) the Class A-2 Interest Carry
Forward Amount and (z) the Class A Principal Distribution Amount payable to the
Owners of Class A-2 Certificates pursuant to Section 7.03(d) hereof.
"Class A-2 Interest Carry Forward Amount": With respect to any Payment
Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the Class
A-2 Current Interest as of the immediately preceding Payment Date and (B) any
unpaid Class A-2 Interest Carry Forward Amount from all previous Payment Dates
exceeds (ii) the amount of the actual distribution with respect to interest made
to the Owners of the Class A-2 Certificates on such immediately preceding
Payment Date and (y) 30 days' interest on such amount at the Class A-2
Pass-Through Rate.
"Class A-2 Pass-Through Rate": 6.27% per annum.
"Class A-3 Certificate": Any one of the Certificates designated on the
face thereof as a Class A-3 Certificate, substantially in the form annexed
hereto as Exhibit A-3, authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein.
"Class A-3 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-3 Certificates less any amounts actually distributed with respect to the
Class A Principal Distribution Amount pursuant to Section 7.03(d) hereof with
respect to principal thereon on all prior Payment Dates (except for purposes of
effecting the Certificate Insurer's subrogation rights, that portion of Insured
Payments made in respect of principal).
"Class A-3 Certificate Termination Date": The Payment Date on which
the Class A-3 Certificate Principal Balance is reduced to zero.
"Class A-3 Current Interest": With respect to any Payment Date, the
amount of interest accrued on the Class A-3 Certificate Principal Balance
immediately prior to such Payment Date during the related Accrual Period at the
Class A-3 Pass-Through Rate plus the Preference Amount owed to the Owners of the
Class A-3 Certificates as it relates to interest previously paid on the Class
A-3 Certificates.
"Class A-3 Distribution Amount": With respect to any Payment Date, the
sum of (x) the Class A-3 Current Interest, (y) the Class A-3 Interest Carry
Forward Amount and (z) the Class A Principal Distribution Amount payable to the
Owners of the Class A-3 Certificates pursuant to Section 7.03(d) hereof.
"Class A-3 Interest Carry Forward Amount": With respect to any Payment
Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the Class
A-3 Current Interest as of the immediately preceding Payment Date and (B) any
unpaid Class A-3 Interest Carry Forward Amount from all previous Payment Dates
exceeds (ii) the amount of the actual distribution with respect to interest made
to the Owners of the Class A-3 Certificates on such immediately preceding
Payment Date and (y) 30 days' interest on such amount at the Class A-3
Pass-Through Rate.
"Class A-3 Pass-Through Rate": 6.26% per annum.
"Class A-4 Certificate": Any one of the Certificates designated on the
face thereof as a Class A-4 Certificate, substantially in the form annexed
hereto as Exhibit A-4, authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein.
"Class A-4 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-4 Certificates less any amounts actually distributed with respect to the
Class A Principal Distribution Amount pursuant to Section 7.03(d) hereof with
respect to principal thereon on all prior Payment Dates (except for purposes of
effecting the Certificate Insurer's subrogation rights, that portion of Insured
Payments made in respect of principal).
"Class A-4 Certificate Termination Date": The Payment Date on which
the Class A-4 Certificate Principal Balance is reduced to zero.
"Class A-4 Current Interest": With respect to any Payment Date, the
amount of interest accrued on the Class A-4 Certificate Principal Balance
immediately prior to such Payment Date during the related Accrual Period at the
Class A-4 Pass-Through Rate plus the Preference Amount owed to the Owners of the
Class A-4 Certificates as it relates to interest previously paid on the Class
A-4 Certificates.
"Class A-4 Distribution Amount": With respect to any Payment Date, the
sum of (x) the Class A-4 Current Interest, (y) the Class A-4 Interest Carry
Forward Amount and (z) the Class A Principal Distribution Amount payable to the
Owners of the Class A-4 Certificates pursuant to Section 7.03(d) hereof.
"Class A-4 Interest Carry Forward Amount": With respect to any Payment
Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the Class
A-4 Current Interest as of the immediately preceding Payment Date and (B) any
unpaid Class A-4 Interest Carry Forward Amount from all previous Payment Dates
exceeds (ii) the amount of the actual distribution with respect to interest made
to the Owners of the Class A-4 Certificates on such immediately preceding
Payment Date and (y) 30 days' interest on such amount at the Class A-4
Pass-Through Rate.
"Class A-4 Pass-Through Rate": The lesser of (i) 6.30% per annum and
(ii) the Available Funds Cap.
"Class A-5 Certificate": Any one of the Certificates designated on the
face thereof as a Class A-5 Certificate, substantially in the form annexed
hereto as Exhibit A-5, authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein.
"Class A-5 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-5 Certificates less any amounts actually distributed with respect to the
Class A Principal Distribution Amount pursuant to Section 7.03(d) hereof with
respect to principal thereon on all prior Payment Dates (except for purposes of
effecting the Certificate Insurer's subrogation rights, that portion of Insured
Payments made in respect of principal).
"Class A-5 Certificate Termination Date": The Payment Date on which
the Class A-5 Certificate Principal Balance is reduced to zero.
"Class A-5 Current Interest": With respect to any Payment Date, the
amount of interest accrued on the Class A-5 Certificate Principal Balance
immediately prior to such Payment Date during the related Accrual Period at the
Class A-5 Pass-Through Rate plus the Preference Amount owed to the Owners of the
Class A-5 Certificates as it relates to interest previously paid on the Class
A-5 Certificates.
"Class A-5 Distribution Amount": With respect to any Payment Date, the
sum of (x) the Class A-5 Current Interest, (y) the Class A-5 Interest Carry
Forward Amount and (z) the Class A Principal Distribution Amount payable to the
Owners of the Class A-5 Certificates pursuant to Section 7.03(d) hereof.
"Class A-5 Interest Carry Forward Amount": With respect to any Payment
Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the Class
A-5 Current Interest as of the immediately preceding Payment Date and (B) any
unpaid Class A-5 Interest Carry Forward Amount from all previous Payment Dates
exceeds (ii) the amount of the actual distribution with respect to interest made
to the Owners of the Class A-5 Certificates on such immediately preceding
Payment Date and (y) 30 days' interest on such amount at the Class A-5
Pass-Through Rate.
"Class A-5 Pass-Through Rate": The lesser of (i) 6.44% per annum and
(ii) the Available Funds Cap.
"Class A-6 Certificate": Any one of the Certificates designated on the
face thereof as a Class A-6 Certificate, substantially in the form annexed
hereto as Exhibit A-6, authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein.
"Class A-6 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-6 Certificates less any amounts actually distributed with respect to the
Class A Principal Distribution Amount pursuant to Section 7.03(d) hereof with
respect to principal thereon on all prior Payment Dates (except for purposes of
effecting the Certificate Insurer's subrogation rights, that portion of Insured
Payments made in respect of principal).
"Class A-6 Certificate Termination Date": The Payment Date on which
the Class A-6 Certificate Principal Balance is reduced to zero.
"Class A-6 Current Interest": With respect to any Payment Date, the
amount of interest accrued on the Class A-6 Certificate Principal Balance
immediately prior to such Payment Date during the related Accrual Period at the
Class A-6 Pass-Through Rate plus the Preference Amount owed to the Owners of the
Class A-6 Certificates as it relates to interest previously paid on the Class
A-6 Certificates.
"Class A-6 Distribution Amount": With respect to any Payment Date, the
sum of (x) the Class A-6 Current Interest, (y) the Class A-6 Interest Carry
Forward Amount and (z) the Class A Principal Distribution Amount payable to the
Owners of the Class A-6 Certificates pursuant to Section 7.03(d) hereof.
"Class A-6 Interest Carry Forward Amount": With respect to any Payment
Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the Class
A-6 Current Interest as of the immediately preceding Payment Date and (B) any
unpaid Class A-6 Interest Carry Forward Amount from all previous Payment Dates
exceeds (ii) the amount of the actual distribution with respect to interest made
to the Owners of the Class A-6 Certificates on such immediately preceding
Payment Date and (y) 30 days' interest on such amount at the Class A-6
Pass-Through Rate.
"Class A-6 Pass-Through Rate": The lesser of (i) 6.51% per annum and
(ii) the Available Funds Cap.
"Class A-7 Certificate": Any one of the Certificates designated on the
face thereof as a Class A-7 Certificate, substantially in the form annexed
hereto as Exhibit A-7, authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein.
"Class A-7 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-7 Certificates less any amounts actually distributed with respect to the
Class A Principal Distribution Amount pursuant to Section 7.03(d) hereof with
respect to principal thereon on all prior Payment Dates (except for purposes of
effecting the Certificate Insurer's subrogation rights, that portion of Insured
Payments made in respect of principal).
"Class A-7 Certificate Termination Date": The Payment Date on which
the Class A-7 Certificate Principal Balance is reduced to zero.
"Class A-7 Current Interest": With respect to any Payment Date, the
amount of interest accrued on the Class A-7 Certificate Principal Balance
immediately prior to such Payment Date during the related Accrual Period at the
Class A-7 Pass-Through Rate plus the Preference Amount owed to the Owners of the
Class A-7 Certificates as it relates to interest previously paid on the Class
A-7 Certificates.
"Class A-7 Distribution Amount": With respect to any Payment Date, the
sum of (x) the Class A-7 Current Interest, (y) the Class A-7 Interest Carry
Forward Amount and (z) the Class A Principal Distribution Amount payable to the
Owners of the Class A-7 Certificates pursuant to Section 7.03(c) hereof.
"Class A-7 Interest Carry Forward Amount": With respect to any Payment
Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the Class
A-7 Current Interest as of the immediately preceding Payment Date and (B) any
unpaid Class A-7 Interest Carry Forward Amount from all previous Payment Dates
exceeds (ii) the amount of the actual distribution with respect to interest made
to the Owners of the Class A-7 Certificates on such immediately preceding
Payment Date and (y) 30 days' interest on such amount at the Class A-7
Pass-Through Rate.
"Class A-7 Pass-Through Rate": The lesser of (i) 6.63% per annum and
(ii) the Available Funds Cap.
"Class A-7 IO Certificate": Any one of the Certificates designated on
the face thereof as a Class A-7 IO Certificate, substantially in the form
annexed hereto as Exhibit 7 IO, authenticated and delivered by the Trustee,
representing the right to distributions as set forth herein.
"Class A-7 IO Certificate Termination Date": The Payment Date on which
the Class A-7 IO Notional Principal Amount is reduced to zero.
"Class A-7 IO Current Interest": With respect to any Payment Date
during the Interest Only Period, the amount of interest accrued on the Class A-7
IO Notional Principal Amount immediately prior to such Payment Date during the
related Accrual Period at the Class A-7 IO Pass-Through Rate plus the Preference
Amount owed to the Owners of the Class A-7 IO Certificates as it relates to
interest previously paid on the Class A-7 IO Certificates plus the Class A-7 IO
Interest Carry Forward Amount.
"Class A-7 IO Interest Carry Forward Amount": With respect to any
Payment Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the
Class A-7 IO Current Interest as of the immediately preceding Payment Date and
(B) any unpaid Class A-7 IO Interest Carry Forward Amount from all previous
Payment Dates exceeds (ii) the amount of the actual distribution made to Owners
of the Class A-7 IO Certificates on such immediately preceding Payment Date and
(y) 30 days' interest on such amount at the Class A-7 IO Pass-Through Rate.
"Class A-7 IO Notional Principal Amount": For each Payment Date during
the Interest Only Period, the Class A-7 Certificate Principal Balance
immediately prior to such Payment Date and thereafter, zero.
"Class A-7 IO Pass-Through Rate": 8.50% per annum.
"Class A-8 Certificate": Any one of the Certificates designated on the
face thereof as a Class A-8 Certificate, substantially in the form annexed
hereto as Exhibit A-8, authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein.
"Class A-8 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-8 Certificates less any amounts actually distributed with respect to the
Class A Principal Distribution Amount pursuant to Section 7.03(d) hereof with
respect to principal thereon on all prior Payment Dates (except for purposes of
effecting the Certificate Insurer's subrogation rights, that portion of Insured
Payments made in respect of principal).
"Class A-8 Certificate Termination Date": The Payment Date on which
the Class A-8 Certificate Principal Balance is reduced to zero.
"Class A-8 Current Interest": With respect to any Payment Date, the
amount of interest accrued on the Class A-8 Certificate Principal Balance
immediately prior to such Payment Date during the related Accrual Period at the
Class A-8 Pass-Through Rate plus the Preference Amount owed to the Owners of the
Class A-8 Certificates as it relates to interest previously paid on the Class
A-8 Certificates.
"Class A-8 Distribution Amount": With respect to any Payment Date, the
sum of (x) the Class A-8 Current Interest, (y) the Class A-8 Interest Carry
Forward Amount and (z) the Class A Principal Distribution Amount payable to the
Owners of the Class A-8 Certificates pursuant to Section 7.03(d) hereof.
"Class A-8 Interest Carry Forward Amount": With respect to any Payment
Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the Class
A-8 Current Interest as of the immediately preceding Payment Date and (B) any
unpaid Class A-8 Interest Carry Forward Amount from all previous Payment Dates
exceeds (ii) the amount of the actual distribution with respect to interest made
to the Owners of the Class A-8 Certificates on such immediately preceding
Payment Date and (y) 30 days' interest on such amount at the Class A-8
Pass-Through Rate.
"Class A-8 Pass-Through Rate": For any Payment Date in any month up to
and including the month in which the Clean-Up Call Date occurs, the lesser of
(i) LIBOR plus 0.18% per annum and (ii) the Available Funds Cap Rate for such
Payment Date and for any month following the month in which the Clean-Up Call
Date occurs, the lesser of (i) LIBOR plus 0.36% per annum and (ii) the Available
Funds Cap.
"Class A-9 Certificate": Any one of the Certificates designated on the
face thereof as a Class A-9 Certificate, substantially in the form annexed
hereto as Exhibit A-9, authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein.
"Class A-9 Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class A-9 Certificates less any amounts actually distributed with respect to the
Class A Distribution Amount pursuant to Section 7.03(d) hereof with respect to
principal thereon on all prior Payment Dates (except for purposes of effecting
the Certificate Insurer's subrogation rights, that portion of Insured Payments
made in respect of principal).
"Class A-9 Certificate Termination Date": The Payment Date on which
the Class A-9 Certificate Principal Balance is reduced to zero.
"Class A-9 Current Interest": With respect to any Payment Date, the
amount of interest accrued on the Class A-9 Certificate Principal Balance
immediately prior to such Payment Date during the related Accrual Period at the
Class A-9 Pass-Through Rate plus the Preference Amount owed to the Owners of the
Class A-9 Certificates as it relates to interest previously paid on the Class
A-9 Certificates.
"Class A-9 Distribution Amount": With respect to any Payment Date, the
sum of (x) the Class A-9 Current Interest, (y) the Class A-9 Interest Carry
Forward Amount, and (z) the Class A Principal Distribution Amount payable to the
Owners of the Class A-9 Certificates pursuant to Section 7.03(d) hereof.
"Class A-9 Interest Carry Forward Amount": With respect to any Payment
Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the Class
A-9 Current Interest as of the immediately preceding Payment Date and (B) any
unpaid Class A-9 Interest Carry Forward Amount from all previous Payment Dates
exceeds (ii) the amount of the actual distribution with respect to interest made
to the Owners of the Class A-9 Certificates on such immediately preceding
Payment Date and (y) 30 days' interest on such amount at the Class A-9
Pass-Through Rate.
"Class A-9 Pass-Through Rate": For the first Payment Date, 5.63% per
annum. For any other Payment Date, the lesser of (x) the rate of interest
determined in accordance with the Auction Procedures and (y) the Available Funds
Cap.
"Class B Applied Realized Loss Amount": As to any Payment Date, the
lesser of (x) the Class B-1A Certificate Principal Balance (after taking into
account the distribution of the Principal Distribution Amount on such Payment
Date, but prior to the application of the Class B Applied Realized Loss Amount,
if any, on such Payment Date) and (y) the Applied Realized Loss Amount as of
such Payment Date.
"Class B Certificate": Any one of the Certificates designated on the
face thereof as a Class B Certificate, substantially in the form annexed hereto
as Exhibit B, authenticated and delivered by the Trustee, representing the right
to distributions as set forth herein.
"Class B Certificate Principal Balance": As of any time of
determination, the Certificate Principal Balance as of the Startup Day of all
Class B Certificates less the sum of (x) any amounts of the Class B Principal
Distribution Amount actually distributed to the Owners of the Class B
Certificates pursuant to Section 7.03(d) hereof on all prior Payment Dates and
(y) the aggregate, cumulative amount of the Class B Applied Realized Loss
Amounts on all prior Payment Dates plus any amount previously distributed with
respect to principal that is recovered as a voidable preference by a trustee in
bankruptcy pursuant to a final, nonappealable order.
"Class B Certificate Termination Date": The Payment Date on which the
Class B Certificate Principal Balance is reduced to zero.
"Class B Current Interest": With respect to any Payment Date, the
amount of interest accrued on the Class B Certificate Principal Balance
immediately prior to such Payment Date during the related Accrual Period at the
Class B Pass-Through Rate plus the Preference Amount owed to the Owners of the
Class B Certificates as it relates to interest previously paid on the Class B
Certificates.
"Class B Distribution Amount": With respect to any Payment Date, the
sum of (w) the Class B Current Interest, (x) the Class B Principal Distribution
Amount, if any, (y) the Class B Interest Carry Forward Amount, if any, and (z)
the Class B Realized Loss Amortization Amount, if any.
"Class B Interest Carry Forward Amount": With respect to any Payment
Date, the sum of (x) the amount, if any, by which (i) the sum of (A) the Class B
Current Interest as of the immediately preceding Payment Date and (B) any unpaid
Class B Interest Carry Forward Amount from all previous Payment Dates exceeds
(ii) the amount of the actual distribution with respect to interest made to the
Owners of the Class B Certificates on such immediately preceding Payment Date
and (y) 30 days' interest on such amount at the Class B Pass-Through Rate.
"Class B Optimal Certificate Balance": As of any Payment Date on and
after the Stepdown Date:
(a) if neither a Delinquency Trigger Event nor a
Cumulative Realized Loss Trigger Event is then in
effect, the lesser of:
(i) the product of (x) 97.85% and (y) the outstanding
aggregate Loan Balance of the Home Equity Loans as of the
last day of the related Remittance Period, and
(ii) the outstanding aggregate Loan Balance of the Home Equity
Loans as of the last day of the related Remittance Period
minus $7,625,000; or
(b) if a Delinquency Trigger Event is then in effect,
but as to which a Cumulative Loss Trigger Event is
not in effect, the lesser of:
(i) the product of (x) 100% minus 50% of the Three-Month
Rolling Average 60+ Delinquency Rate and (y) the
outstanding aggregate Loan Balance of the Home Equity
Loans as of the last day of the related Remittance Period
and
(ii) the outstanding aggregate Loan Balance of the Home Equity
Loans as of the last day of the related Remittance Period,
minus $7,625,000; or
(c) if a Cumulative Realized Loss Trigger Event is in
effect but as to which a Delinquency Trigger Event
is not in effect, the lesser of:
(i) the product of (x) 100% minus the percentage equivalent of
a fraction, the numerator of which is $32,635,000 and the
denominator of which is the outstanding aggregate Loan
Balance of the Home Equity Loans as of the last day of the
related Remittance Period and (y) the outstanding
aggregate Loan Balance of the Home Equity Loans as of the
last day of the related Remittance Period and
(ii) the outstanding aggregate Loan Balance of the Home Equity
Loans of the last day of the related Remittance Period,
minus $7,625,000; or
(d) if both a Delinquency Trigger Event and a
Cumulative Realized Loss Trigger Event are then in
effect, the least of:
(i) the product (x) 100% minus 50% of the Three-Month Rolling
Average 60+ Delinquency Rate and (y) the outstanding
aggregate Loan Balance of the Home Equity Loans as of the
last day of the related Remittance Period,
(ii) the product of (x) 100% minus the percentage equivalent of
a fraction, the numerator of which is $32,635,000 and the
denominator of which is the outstanding aggregate Loan
Balance of the Home Equity Loans as of the last day of the
related Remittance Period, and (y) the outstanding
aggregate Loan Balance of the Home Equity Loans as of the
last day of the related Remittance Period, and
(iii)the outstanding aggregate Loan Balance of the Home Equity
Loans as of the last day of the related Remittance Period,
minus $7,625,000.
"Class B Pass-Through Rate": The lesser of (i) 7.33% per annum and
(ii) the Available Funds Cap.
"Class B Principal Distribution Amount": As of any Payment Date on or
after the Stepdown Date, the excess, if any, of (x) the aggregate Certificate
Principal Balance of the Offered Certificates (after taking into account the
payment of the Class A Principal Distribution Amount), over (y) the Class B
Optimal Certificate Balance, provided that if the Class A Certificate Principal
Balance has been reduced to zero, 100% of the Principal Distribution Amount.
"Class B Realized Loss Amortization Amount": As of any Payment Date,
the lesser of (x) the Class B Unpaid Realized Loss Amount as of such Payment
Date and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the
sum of the Class A Interest Carry Forward Amount, the Reimbursement Amount, the
Extra Principal Distribution Amount and the Class B Interest Carry Forward
Amount, in each case for such Payment Date.
"Class C Certificate": Any one of the Certificates designated on the
face thereof as a Class C Certificate, substantially in the form annexed hereto
as Exhibit C-1, authenticated and delivered by the Trustee, representing the
right to distributions as set forth herein. The Class C Certificates represent a
class of "regular interests" in REMIC III
"Class C Distribution Amount": With respect to any Payment Date, the
excess, if any, of (x) the interest payable at the Available Funds Cap on the
Home Equity Loans for the related Remittance Period over (y) the interest
payable on the Class A Certificates (other than the Class A-7 IO) and the Class
B Certificates.
"Class C Carryforward Amount": With respect to any Payment Date, the
excess, if any, of the Class C Distribution Amount over the Monthly Excess
Cashflow Amount remaining immediately prior to distributions in accordance with
Section 7.03(h)(3).
"Class R Certificate": Any one of the Certificates designated on the
face thereof as a Class R Certificate, substantially in the form annexed hereto
as Exhibit C-2, authenticated and delivered by the Trustee, representing the
right to distributions as set forth herein, and evidencing an interest
designated as the "residual interest" in REMIC III for the purposes of the REMIC
Provisions.
"Clean-Up Call Date": The first Monthly Remittance Date immediately
following the date on which the aggregate Loan Balances of the Home Equity Loans
has declined to $152,500,000 or less.
"Closing": As defined in Section 4.02 hereof.
"Code": The Internal Revenue Code of 1986, as amended.
"Compensating Interest": As defined in Section 8.10(a) hereof.
"ContiMortgage": ContiMortgage Corporation, a Delaware corporation
that is the originator of each Home Equity Loan, one of the Sellers and the
Servicer.
"ContiWest": ContiWest Corporation, a Nevada corporation that is one
of the Sellers.
"Corporate Trust Office": The principal office of the Trustee at One
M&T Plaza, Buffalo, New York 14240.
"Coupon Rate": The rate of interest borne by each Note.
"Cumulative Class C Carryforward Amount": With respect to any Payment
Date, the sum of the Class C Carryforward Amounts for all prior Payment Dates,
less distributions for each prior Payment Date under Section 7.03(h)(3) in
excess of the Class C Distribution Amount for each such prior Payment Date.
"Cumulative Realized Loss Termination Trigger": A Cumulative Realized
Loss Termination Event occurs on any date of determination if the amount of
Cumulative Realized Losses expressed as a percentage of the Original Aggregate
Loan Balance on any date of determination equals or exceeds the percentage for
such date set out below:
Date Percentage
October 1997-September 1999 1.575%
October 1999-September 2000 2.7%
October 2000-September 2001 3.6%
October 2001-September 2002 4.275%
October 2002 and thereafter 4.5%
"Cumulative Realized Loss Trigger Event": A Cumulative Realized Loss
Trigger Event occurs on any date of determination if the amount of Cumulative
Realized Losses expressed as a percentage of the Original Aggregate Loan Balance
on any date of determination equals or exceeds the percentage for such date set
out below:
Date Percentage
October 1997-September 1999 1.05%
October 1999-September 2000 1.8%
October 2000-September 2001 2.40%
October 2001-September 2002 2.85%
October 2002 and thereafter 3.00%
"Cumulative Realized Losses": As of any date of determination, the
aggregate amount of Realized Losses with respect to the Home Equity Loans since
the Startup Day.
"Current Interest": With respect to any Payment Date, the sum of the
Class A-1 Current Interest, the Class A-2 Current Interest, the Class A-3
Current Interest, the Class A-4 Current Interest, the Class A-5 Current
Interest, the Class A-6 Current Interest, the Class A-7 Current Interest, the
Class A-7 IO Current Interest, the Class A-8 Current Interest, the Class A-9
Current Interest, and the Class B Current Interest plus the Preference Amount as
it relates to interest previously paid on such Classes prior to such Payment
Date.
"Cut-Off Date": As of the close of business on September 12, 1997.
"Daily Collections": As defined in Section 8.08(c) hereof.
"Date-of-Payment Loans": Any Home Equity Loan as to which, pursuant to
the Note relating thereto, interest is computed and charged to the Mortgagor at
the Coupon Rate on the outstanding principal balance of such Note based on the
number of days elapsed between receipt of the Mortgagor's last payment through
receipt of the Mortgagor's most current payment.
"Delinquency Advance": As defined in Section 8.09(a) hereof.
"Delinquency Trigger Event": A Delinquency Trigger Event has occurred
with respect to a Payment Date on or after the Stepdown Date if 50% of the
Three-Month Rolling Average of 60+ Day Delinquency Rate equals or exceeds the
Senior Specified Enhancement Percentage.
"Delinquent": A Home Equity Loan is "Delinquent" if any payment due
thereon is not made by the close of business on the day such payment is
scheduled to be due. A Home Equity Loan is "30 days Delinquent" if such payment
has not been received by the close of business on the corresponding day of the
month immediately succeeding the month in which such payment was due, or, if
there is no such corresponding day (e.g., as when a 30-day month follows a
31-day month in which a payment was due on the 31st day of such month) then on
the last day of such immediately succeeding month. Similarly for "60 days
Delinquent," "90 days Delinquent" and so on.
"Delivery Order": Each delivery order in the form set forth as Exhibit
G hereto and delivered by each Seller to the Trustee on the Startup Day pursuant
to Section 4.01 hereof.
"Depositor": ContiSecurities Asset Funding Corp., a Delaware
corporation, or any successor thereto.
"Depository": The Depository Trust Company, 7 Hanover Square, New
York, New York 10004, and any successor Depository hereafter named.
"Designated Depository Institution": With respect to the Principal and
Interest Account, a trust account maintained by the trust department of a
federal or state chartered depository institution acceptable to the Certificate
Insurer acting in its fiduciary capacity, having combined capital and surplus of
at least $50,000,000; provided, however, that if the Principal and Interest
Account is not maintained with the Trustee, (i) such institution shall have a
long-term debt rating of at least "A2" by Moody's, and, if rated by Fitch, at
least "A" by Fitch (ii) a short-term debt rating of at least "A-1" by Standard &
Poor's and (iii) if such Principal and Interest Account is moved to a new
institution, the Servicer shall provide the Trustee, the Certificate Insurer and
the Owners with a statement identifying the location of the Principal and
Interest Account.
"Determination Date": As to each Payment Date, the third Business Day
next preceding such Payment Date.
"Direct Participant" or "DTC Participant": Any broker-dealer, bank or
other financial institution for which the Depository holds Offered Certificates
from time to time as a securities depository.
"Disqualified Organization": The meaning set forth from time to time
in the definition thereof at Section 860E(e)(5) of the Code (or any successor
statute thereto) and applicable to the Trust.
"Eligible Investments": Those investments so designated pursuant to
Section 7.07 hereof.
"Extra Principal Distribution Amount": As of any Payment Date, the
lesser of (x) the Monthly Excess Interest Amount for such Payment Date and (y)
the Overcollateralization Deficiency for such Payment Date.
"FannieMae": FannieMae, a federally-chartered and privately-owned
corporation existing under the Federal National Mortgage Association Charter
Act, as amended, or any successor thereof.
"FannieMae Guide": FannieMae's Servicing Guide, as the same may be
amended by FannieMae from time to time, and the Servicer shall elect to apply
such amendments in accordance with Section 8.01 hereof.
"FDIC": The Federal Deposit Insurance Corporation, a corporate
instrumentality of the United States, or any successor thereto.
"FHLMC": The Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created pursuant to the Emergency Home
Finance Act of 1970, as amended, or any successor thereof.
"File": The documents delivered to the Trustee pursuant to Section
3.05 hereof pertaining to a particular Home Equity Loan and any additional
documents required to be added to the File pursuant to this Agreement.
"Final Determination": As defined in Section 9.03(a) hereof.
"Final Scheduled Payment Date": For each Class of Certificates, as set
out in Section 2.08(k).
"First Mortgage Loan": A Home Equity Loan which constitutes a first
priority mortgage lien with respect to the related Property.
"Fiscal Agent": State Street Bank and Trust Company, N.A., as Fiscal
Agent for the Certificate Insurer under the Certificate Insurer Policy or any
successor thereto appointed by the Certificate Insurer.
"Fitch": Fitch Investors Service, L.P.
"Fixed Rate Certificates": The PAC Certificates and the Class A-7 IO
Certificates.
"Fixed Rate Home Equity Loans": The Home Equity Loans identified in
the related Schedule of Home Equity Loans as having fixed Coupon Rates in
Schedule I-A hereto, including any Qualified Replacement Mortgages delivered in
replacement thereof.
"Floating Rate Certificates": The Class A-8 Certificates.
"Highest Lawful Rate": As defined in Section 11.13.
"Home Equity Loans": Such of the home equity loans transferred and
assigned to the Trust pursuant to Section 3.05(a) hereof, together with any
Qualified Replacement Mortgages substituted therefor in accordance with this
Agreement, as from time to time are held as a part of the Trust Estate, the Home
Equity Loans originally so held being identified in the Schedules of Home Equity
Loans. The term "Home Equity Loan" includes the terms "First Mortgage Loan" and
"Second Mortgage Loan". The term "Home Equity Loan" includes any Home Equity
Loan which is Delinquent, which relates to a foreclosure or which relates to a
Property which is REO Property prior to such Property's disposition by the
Trust. Any home equity loan which, although intended by the parties hereto to
have been, and which purportedly was, transferred and assigned to the Trust by
the Depositor, in fact was not transferred and assigned to the Trust for any
reason whatsoever, including, without limitation, the incorrectness of the
statement set forth in Section 3.04(b)(x) hereof with respect to such home
equity loan, shall nevertheless be considered a "Home Equity Loan" for all
purposes of this Agreement.
"Indirect Participant": Any financial institution for whom any Direct
Participant holds an interest in a Offered Certificate.
"Insurance Agreement": The Insurance Agreement dated as of September
1, 1997, among the Depositor, the Sellers, the Servicer, the Certificate Insurer
and the Trustee, as it may be amended from time to time.
"Insurance Commitment Letter": The letter dated September 24, 1997
from MBIA to Conti Mortgage Corporation.
"Insurance Policy": Any hazard, flood, title or primary mortgage
insurance policy relating to a Home Equity Loan plus any amount remitted under
Section 8.11 hereof.
"Insured Payment": With respect to any Payment Date, without
duplication, (A) the excess, if any, of (i) the sum of the aggregate Current
Interest for the Class A Certificates and the then existing related
Overcollateralization Deficit, if any, over (ii) the Total Available Funds after
taking into account the portion of any Principal Distribution Amount to be
actually distributed on such Payment Date without regard to any related Insured
Payment to be made with respect to such Payment Date plus (B) an amount equal to
the Preference Amount with respect to the Class A Certificates.
"Insurance Proceeds": Payments received with respect to any Insurance
Policy, except the Certificate Insurance Policy.
"Interest Amount Available": As of any Payment Date, the Interest
Remittance Amount less the Trustee Fee, the Premium Amount and the Auction Agent
Fee.
"Interest Only Period": The period from the Startup Day through and
including the Payment Date in March, 2000.
"Interest Remittance Amount": As of any Monthly Remittance Date, the
sum, without duplication, of (i) all interest due during the related Remittance
Period with respect to the Home Equity Loans (less the Servicing Fee with
respect to such Home Equity Loans), (ii) all Compensating Interest paid by the
Servicer on such Monthly Remittance Date with respect to Home Equity Loans,
(iii) the portion of the Substitution Amount relating to interest on the Home
Equity Loans, (iv) the portion of any Loan Purchase Price relating to interest
on any Home Equity Loan repurchased during the related Remittance Period and (v)
the portion of Net Liquidation Proceeds relating to interest on the Home Equity
Loans.
"Late Payment Rate": For any Payment Date, the fluctuating rate of
interest, as it is published from time to time in the New York, New York edition
of The Wall Street Journal under the caption "Money Rates" as the "prime rate,"
to change when and as such published prime rate changes plus 2%. The Late
Payment Rate shall be computed on the basis of a year of 360 days calculating
the actual number of days elapsed. In no event shall the Late Payment Rate
exceed the maximum rate permissible under any applicable law limiting interest
rates.
"LIBOR": (A) With respect to any Accrual Period for the Floating Rate
Certificates, the rate determined by the Trustee on the related LIBOR
Determination Date on the basis of the offered rate for one-month U.S. dollar
deposits as such rate appears on Telerate Page 3750 as of 11:00 a.m. (London
time) on such date; provided that if such rate does not appear on Telerate Page
3750, the rate for such date will be determined on the basis of the rates at
which one-month U.S. dollar deposits are offered by the Reference Banks at
approximately 11:00 a.m. (London time) on such date to prime banks in the London
interbank market. In such event, the Trustee will request the principal London
office of each of the Reference Banks to provide a quotation of its rate. If at
least two such quotations are provided, the rate for that date will be the
arithmetic mean of the quotations (rounded upwards if necessary to the nearest
whole multiple of 1/16%). If fewer than two quotations are provided as
requested, the rate for that date will be the arithmetic mean of the rates
quoted by major banks in New York City, selected by the Servicer, at
approximately 11:00 a.m. (New York City time) on such date for one-month U.S.
dollar loan to leading European banks. (B) With respect to the Auction Rate
Certificates, the rate calculated in accordance with the Auction Rate
Certificates.
"LIBOR Determination Date": With respect to any Accrual Period for the
Floating Rate Certificates or the Auction Rate Certificates, the first London
Business Day preceding the commencement of such Accrual Period.
"Liquidated Loan": As defined in Section 8.13(b) hereof.
"Liquidation Expenses": Expenses, not to exceed Liquidation Proceeds,
which are incurred by the Servicer in connection with the liquidation of any
defaulted Home Equity Loan, such expenses including, without limitation, legal
fees and expenses, and any unreimbursed Servicing Advances expended by the
Servicer pursuant to Section 8.09(b) with respect to the related Home Equity
Loan.
"Liquidation Proceeds": With respect to any Liquidated Loan, any
amounts (including the proceeds of any Insurance Policy) recovered by the
Servicer in connection with such Liquidated Loan, whether through trustee's
sale, foreclosure sale or otherwise.
"Loan Balance": With respect to each Home Equity Loan and as of any
date of determination, the outstanding principal balance thereof on the Cut-Off
Date, less any principal payments relating to such Home Equity Loan included in
previous Monthly Remittance Amounts, provided, however, that the Loan Balance
for any Home Equity Loan that has become a Liquidated Loan shall be zero as of
the first day of the Remittance Period following the Remittance Period in which
such Home Equity Loan becomes a Liquidated Loan, and at all times thereafter.
"Loan Purchase Price": With respect to any Home Equity Loan purchased
from the Trust on a Monthly Remittance Date pursuant to Section 3.03, 3.04,
3.06(b), 8.10(b) or 8.13(a) hereof, an amount equal to the Loan Balance of such
Home Equity Loan as of the date of purchase (assuming that the Monthly
Remittance Amount remitted by the Servicer on such Monthly Remittance Date has
already been remitted), plus one month's interest on the outstanding Loan
Balance thereof as of the beginning of the related Remittance Period computed at
the then applicable Coupon Rate, together with (without duplication) the
aggregate amounts of (i) all unreimbursed Delinquency Advances and Servicing
Advances theretofore made with respect to such Home Equity Loan, (ii) all
Delinquency Advances and Servicing Advances which the Servicer has theretofore
failed to remit with respect to such Home Equity Loan and (iii) all reimbursed
Delinquency Advances to the extent that reimbursement is not made from the
Mortgagor or from Liquidation Proceeds from the respective Home Equity Loan.
"Loan-to-Value Ratio": As of any particular date (i) with respect to
any First Mortgage Loan, the percentage obtained by dividing the Appraised Value
into the original principal balance of the Note relating to such First Mortgage
Loan and (ii) with respect to any Second Mortgage Loan, the percentage obtained
by dividing the Appraised Value as of the date of origination of such Second
Mortgage Loan into an amount equal to the sum of (a) the remaining principal
balance of the Senior Lien note relating to such First Mortgage Loan as of the
date of origination of the related Second Mortgage Loan and (b) the original
principal balance of the Note relating to such Second Mortgage Loan.
"London Business Day": Any day on which dealings in deposits of United
States dollars are transacted in the London interbank market.
"Monthly Excess Cashflow Amount": For any Payment Date, the sum of (x)
the Monthly Excess Interest Amount and (y) the Overcollateralization Release
Amount for such Payment Date.
"Monthly Excess Interest Amount": With respect to any Payment Date,
the excess, if any, of (i) the Interest Amount Available for the related
Remittance Period over (ii) the aggregate Current Interest plus the aggregate
Interest Carry Forward Amount, if any, with respect to the Offered Certificates
on such Payment Date.
"Monthly Remittance Amount": As of any Monthly Remittance Date, the
sum of (i) the Interest Remittance Amount and (ii) the Principal Remittance
Amount for such Monthly Remittance Date.
"Monthly Remittance Date": The 10th day of each month or, if such day
is not a Business Day, the Business Day succeeding such day, commencing in the
month following the Startup Day.
"Moody's": Moody's Investors Service, Inc.
"Mortgage": The mortgage, deed of trust or other instrument creating a
first or second lien on an estate in fee simple interest in real property
securing a Note.
"Mortgagor": The obligor on a Note.
"Net Liquidation Proceeds": As to any Liquidated Loan, Liquidation
Proceeds net of Liquidation Expenses and unreimbursed Delinquency Advances
relating to such Home Equity Loan. In no event shall Net Liquidation Proceeds
with respect to any Liquidated Loan be less than zero.
"Note": The note or other evidence of indebtedness evidencing the
indebtedness of a Mortgagor under a Home Equity Loan.
"Offered Certificates": Collectively, the Class A Certificates and the
Subordinate Certificates.
"Officer's Certificate": A certificate signed by any Authorized
Officer of any Person delivering such certificate and delivered to the Trustee.
"Operative Documents": Collectively, this Agreement, the Underwriting
Agreement, the Certificates, the Certificate Insurance Policy, the Insurance
Agreement and the Auction Agent Agreement.
"Original Aggregate Loan Balance": The aggregate Loan Balances of the
Home Equity Loans as of the Cut-Off Date, i.e., $1,524,998,968.36.
"Outstanding": With respect to all Certificates of a Class, as of any
date of determination, all such Certificates theretofore executed and delivered
hereunder except:
(i) Certificates theretofore canceled by the Registrar
or delivered to the Registrar for cancellation;
(ii) Certificates or portions thereof for which full
and final payment of money in the necessary amount has been
theretofore deposited with the Trustee or any Paying Agent
in trust for the Owners of such Certificates;
(iii)Certificates in exchange for or in lieu of which
other Certificates have been executed and delivered pursuant
to this Agreement, unless proof satisfactory to the Trustee
is presented that any such Certificates are held by a bona
fide purchaser;
(iv) Certificates alleged to have been destroyed, lost
or stolen for which replacement Certificates have been
issued as provided for in Section 5.05 hereof; and
(v) Certificates as to which the Trustee has made the
final distribution thereon, whether or not such Certificate
is ever returned to the Trustee.
"Overcollateralization Amount": As of any Payment Date, the positive
difference, if any, between (x) the outstanding aggregate Loan Balance of the
Home Equity Loans as of the last day of the immediately preceding Remittance
Period and (y) the aggregate Certificate Principal Balance of the Offered
Certificates (after taking into account all distributions of principal on such
Certificates as of such Payment Date).
"Overcollateralization Deficiency": As of any Payment Date, the
excess, if any, of (x) the Targeted Overcollateralization Amount for such
Payment Date over (y) the Targeted Overcollateralization Amount for such Payment
Date, calculated for this purpose after taking into account the reduction on
such Payment Date of the aggregate Certificate Principal Balance of the Offered
Certificates resulting from the distribution of the Principal Remittance Amount
(but not the Extra Principal Distribution Amount or the principal component of
any Insured Payment) on such Payment Date, but prior to taking into account any
Applied Realized Loss Amount on such Payment Date.
"Overcollateralization Deficit": For any Payment Date, the excess of
the aggregate Class A Certificate Principal Balance over the outstanding
aggregate Loan Balance of the Home Equity Loans as of the last day of the
related Remittance Period, calculated after taking into account the reduction on
such Payment Date of the Class A Certificate Principal Balance resulting from
the distribution of the related Principal Remittance Amount on such Payment
Date.
"Overcollateralization Floor": $7,625,000.
"Overcollateralization Release Amount": As of any Payment Date, the
lesser of (x) the Principal Remittance Amount for such Payment Date and (y) the
excess of (i) the Overcollateralization Amount for such Payment Date, assuming
that 100% of the Principal Remittance Amount is applied on such Payment Date to
the payment of principal on the Offered Certificates over (ii) the Targeted
Overcollateralization Amount for such Payment Date.
"Owner": The Person in whose name a Certificate is registered in the
Register and the Certificate Insurer to the extent described in Section 5.06 and
Section 7.03 ( ) hereof, respectively hereof; provided that solely for the
purposes of determining the exercise of any voting rights hereunder, if any
Offered Certificates are beneficially owned by a Seller or any affiliate
thereof, such Seller or such affiliate shall not be considered an Owner
hereunder.
"PAC Certificates": Any of the Class A-1, Class A-2, Class A-3, Class
A-4, Class A-5, Class A-6, or Class A-7 Certificates.
"Paying Agent": Initially, the Trustee, and thereafter, the Trustee or
any other Person that meets the eligibility standards for the Paying Agent
specified in Section 11.15 hereof and is authorized by the Trustee and the
Depositor to make payments on the Certificates on behalf of the Trustee.
"Payment Date": Any date on which the Trustee is required to make
distributions to the Owners, which shall be the 15th day of each month or if
such day is not a Business Day, the next Business Day thereafter, commencing in
the month following the Startup Day.
"Percentage Interest": With respect to a Class of the Offered
Certificates, a fraction, expressed as a percentage, the numerator of which is
the initial Certificate Principal Balance represented by such Certificate and
the denominator of which is the aggregate initial Certificate Principal Balance
represented by all the Certificates in such Class. With respect to the Class A-7
IO Certificates a fraction, expressed as a percentage, the numerator of which is
the initial Class A-7 IO Notional Principal Amount represented by such Class A-7
IO Certificate and the denominator of which is the aggregate initial Class A-7
IO Notional Principal Amount represented by all of the Class A-7 IO
Certificates. With respect to a Class C Certificate or a Class R Certificate,
the portion of the Class evidenced thereby, expressed as a percentage, as stated
on the face of such Certificate, all of which shall total 100% with respect to
the related Class.
"Person": Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Planned Principal Balance": With respect to any Class of PAC
Certificates and any Payment Date, the respective balance for such Class set
forth opposite such Payment Date in the Planned Principal Balance Schedule set
forth as Exhibit VI hereto.
"Preference Amount": With respect to the Offered Certificates, any
amounts of Current Interest and principal included in previous distributions to
the Owners of such Certificates which are recovered from such Owners as a
voidable preference by a trustee in bankruptcy pursuant to the United States
Bankruptcy Code in accordance with a final, nonappealable order of a court
having competent jurisdiction and which have not theretofore been repaid to such
Owners.
"Premium Amount": As defined in the Insurance Commitment Letter.
"Prepaid Installment": With respect to any Home Equity Loan, any
installment of principal thereof and interest thereon received by the Servicer
prior to the scheduled due date for such installment, intended by the Mortgagor
as an early payment thereof and not as a Prepayment with respect to such Home
Equity Loan.
"Prepayment": Any payment of principal of a Home Equity Loan which is
received by the Servicer in advance of the scheduled due date for the payment of
such principal (other than the principal portion of any Prepaid Installment),
Substitution Amounts, the portion of the purchase price of any Home Equity Loan
purchased from the Trust pursuant to Section 3.03, 3.04, 3.06(b), 8.10(b) or
8.13(a) hereof representing principal and the proceeds of any Insurance Policy
which are to be applied as a payment of principal on the related Home Equity
Loan shall be deemed to be Prepayments for all purposes of this Agreement.
"Preservation Expenses": Expenditures made by the Servicer in
connection with a foreclosed Home Equity Loan prior to the liquidation thereof,
including, without limitation, expenditures for real estate property taxes,
hazard insurance premiums, property restoration or preservation.
"Principal and Interest Account": The principal and interest account
created by the Servicer pursuant to Section 8.08(a) hereof.
"Principal Distribution Amount": As of any Payment Date, the sum of
(i) the Principal Remittance Amount (minus, for Payment Dates occurring on and
after the Stepdown Date the Overcollateralization Release Amount, if any) and
(ii) the Extra Principal Distribution Amount, if any.
"Principal Remittance Amount": As of any Monthly Remittance Date, the
sum, without duplication, of (i) the principal actually collected by the
Servicer with respect to Home Equity Loans during the related Remittance Period,
(ii) the Loan Balance of each Home Equity Loan that was purchased from the
Trustee during the related Remittance Period, (iii) any Substitution Amounts
relating to principal delivered by the Seller in connection with a substitution
of a Home Equity Loan during the related Remittance Period (iv) any Insurance
Proceeds, (v) all Net Liquidation Proceeds actually collected by the Servicer
with respect to the Home Equity Loans during the related Remittance Period (to
the extent such Net Liquidation Proceeds related to principal).
"Prohibited Transaction": The meaning set forth from time to time in
the definition thereof at Section 860F(a)(2) of the Code (or any successor
statute thereto) and applicable to the Trust.
"Property": The underlying property (including all building thereon)
securing a Home Equity Loan.
"Prospectus": The Prospectus dated September 18, 1997 constituting
part of the Registration Statement.
"Prospectus Supplement": The ContiMortgage Home Equity Loan Trust
1997-4 Prospectus Supplement dated September 18, 1997 to the Prospectus.
"Purchase Option Period": As defined in Section 9.03(a) hereof.
"Qualified Liquidation": The meaning set forth from time to time in
the definition thereof at Section 860F(a)(4) of the Code (or any successor
statute thereto) and applicable to the Trust.
"Qualified Mortgage": The meaning set forth from time to time in the
definition thereof at Section 860G(a)(3) of the Code (or any successor statute
thereto) and applicable to the Trust.
"Qualified Replacement Mortgage": A Home Equity Loan substituted for
another pursuant to Section 3.03, 3.04 or 3.06(b) hereof, which (i) has a Coupon
Rate at least equal to the Coupon Rate of the Home Equity Loan being replaced,
(ii) is of the same property type or is a single family dwelling and the same
occupancy status or is a primary residence as the replaced Home Equity Loan,
(iii) shall mature no later than September 1, 2027, (iv) has a Loan-to-Value
Ratio as of the Replacement Cut-Off Date no higher than the Loan-to-Value Ratio
of the replaced Home Equity Loan at such time, (v) shall be of the same or
higher credit quality classification (determined in accordance with
ContiMortgage's credit underwriting guidelines set forth in ContiMortgage's
underwriting manual) as the Home Equity Loan which such Qualified Replacement
Mortgage replaces, (vi) has a Loan Balance as of the related Replacement Cut-Off
Date equal to or less than the Loan Balance of the replaced Home Equity Loan as
of such Replacement Cut-Off Date, (vii) shall not provide for a "balloon"
payment if the related Home Equity Loan did not provide for a "balloon" payment
(and if such related Home Equity Loan provided for a "balloon" payment, such
Qualified Replacement Mortgage shall have an original maturity of not less than
the original maturity of such related Home Equity Loan), (viii) shall be a fixed
rate Home Equity Loan if the Home Equity Loan being replaced is a Fixed Rate
Home Equity Loan and shall be a first lien adjustable rate Home Equity Loan if
the Home Equity Loan being replaced is an Adjustable Rate Home Equity Loan and
(ix) satisfies the criteria set forth from time to time in the definition
thereof at Section 860G(a)(3) of the Code (or any successor statute thereto) and
applicable to the Trust.
"Rating Agencies": Collectively, Moody's, Standard & Poor=s and Fitch
or any successors thereto. "Realized Loss": As to any Liquidated Loan, the
amount, if any, by which the Loan Balance thereof as of the date of liquidation
is in excess of Net Liquidation Proceeds realized thereon applied in reduction
of such Loan Balance.
"Record Date": With respect to the Fixed Rate Certificates and any
Payment Date, the last day of the calendar month immediately preceding the
calendar month in which such Payment Date occurs and with respect to the
Floating Rate Certificates and to the Auction Rate Certificates, the day
immediately preceding such Payment Date.
"Reference Banks": Bankers Trust Company, Barclays Bank PLC, The Bank
of Tokyo and National Westminster Bank PLC, provided that if any of the
foregoing banks are not suitable to serve as a Reference Bank, then any leading
banks selected by the Trustee (or the Auction Agent in the case of the Auction
Rate Certificates) which are engaged in transactions in Eurodollar deposits in
the international Eurocurrency market (i) with an established place of business
in London, (ii) not controlling, under the control of or under common control
with either Seller or any affiliate thereof, (iii) whose quotations appear on
Telerate Page 3750 on the relevant LIBOR Determination Date and (iv) which have
been designated as such by the Trustee (or the Auction Agent in the case of the
Auction Rate Certificates).
"Register": The register maintained by the Registrar in accordance
with Section 5.04 hereof, in which the names of the Owners are set forth.
"Registrar": The Trustee, acting in its capacity as Registrar
appointed pursuant to Section 5.04 hereof, or any duly appointed and eligible
successor thereto.
"Registration Statement": The Registration Statement filed by the
Depositor with the Securities and Exchange Commission (Registration Number
333-19427), including all amendments thereto and including the Prospectus
relating to the Offered Certificates constituting a part thereof.
"Reimbursement Amount": As of any Payment Date, the sum of (x)(i) all
Insured Payments previously paid to the Trustee by the Certificate Insurer and
not previously repaid to the Certificate Insurer pursuant to Section 7.03(b)(d)
and (f) hereof plus (ii) interest accrued on each such Insured Payment not
previously repaid calculated at the Reimbursement Late Payment Rate and (y)(i)
any amounts then due and owing to the Certificate Insurer under the Insurance
Agreement plus (ii) interest on such amounts at the Late Payment Rate. The
Certificate Insurer shall notify the Trustee, the Depositor and the Sellers of
the amount of any Reimbursement Amount.
"Reimbursement Late Payment Rate": Means for any Payment Date, the
rate of interest as it is publicly announced by Citibank, N.A. at its principal
office in New York, New York as its prime rate (any change in such prime rate of
interest to be effective on the date such change is announced by Citibank, N.A.)
plus 3%. The Late Payment Rate shall be computed on the basis of a year of 365
days elapsed. In no event shall the Late Payment Rate exceed the maximum rate
permissible under any applicable law limiting interest rates.
"REMIC": A "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code.
"REMIC I": A REMIC established pursuant to Section 2.08 hereof.
"REMIC II": A REMIC established pursuant to Section 2.08 hereof.
"REMIC III": A REMIC established pursuant to Section 2.08 hereof.
"REMIC Opinion": As defined in Section 3.03 hereof.
"REMIC Provisions": Provisions of the federal income tax law relating
to real estate mortgage investment conduits, which appear at Section 860A
through 860G of Subchapter M of Chapter 1 of the Code, and related provisions,
and regulations and revenue rulings promulgated thereunder, as the foregoing may
be in effect from time to time.
"Remittance Period": The calendar month immediately preceding the
month in which a Monthly Remittance Date occurs.
"REO Property": A Property acquired by the Servicer on behalf of the
Trust through foreclosure or deed-in-lieu of foreclosure in connection with a
defaulted Home Equity Loan.
"Replacement Cut-Off Date": With respect to any Qualified Replacement
Mortgage, the first day of the calendar month in which such Qualified
Replacement Mortgage is conveyed to the Trust.
"Representation Letter": Letters to, or agreements with, the
Depository to effectuate a book entry system with respect to the Offered
Certificates registered in the Register under the nominee name of the
Depository.
"Retained Certificates": Collectively, the Class C Certificates and
the Class R-I, Class R-II and Class R Certificates.
"Schedule of Home Equity Loans": Each of the schedules of Home Equity
Loans, segregated by Fixed Rate Home Equity Loans and Adjustable Rate Home
Equity Loans, listing each Home Equity Loan in such category to be conveyed on
the Startup Day. Such Schedules of Home Equity Loans shall identify each Home
Equity Loan by the Servicer's loan number and the borrower's name and address
(including the state) of the Property and shall set forth as to each Home Equity
Loan the lien status thereof (and with respect to Adjustable Rate Home Equity
Loans, the margin), the Loan-to-Value Ratio and the Loan Balance as of the
Cut-Off Date, the Coupon Rate thereof, the current scheduled monthly payment of
principal and interest and the maturity of the related Note, the property type,
occupancy status, Appraised Value and original term-to-maturity thereof, whether
or not such Home Equity Loan (including the related Note) has been modified and
the aggregate Loan Balances of all Home Equity Loans. Such Schedules shall also
identify the Seller of each Home Equity Loan.
"Scheduled Payment": As of any date of calculation, with respect to a
Home Equity Loan, the then stated scheduled monthly installment of principal and
interest payable thereunder which, if timely paid, would result in the full
amortization of principal over the term thereof (or, in the case of a "balloon"
Note, the term to the nominal maturity date for amortization purposes, without
regard to the actual maturity date).
"Second Mortgage Loan": A Home Equity Loan which constitutes a second
priority mortgage lien with respect to the related Property.
"Securities Act": The Securities Act of 1933, as amended.
"Sellers": ContiMortgage and ContiWest.
"Senior Enhancement Percentage": For any Payment Date, the percentage
obtained by dividing (x) the sum of (i) the aggregate Certificate Principal
Balance of the Subordinate Certificates and (ii) the Overcollateralization
Amount, in each case after taking into account the distribution of the Principal
Distribution Amount on such Payment Date by (y) the outstanding aggregate Loan
Balance of the Home Equity Loans as of the last day of the related Remittance
Period.
"Senior Lien": With respect to any Second Mortgage Loan, the mortgage
loan relating to the corresponding Property having a first priority lien.
"Senior Optimal Balance": As of any Payment Date on and after the
Stepdown Date:
(a) if neither a Delinquency Trigger Event nor a
Cumulative Realized Loss Trigger Event is then in
effect, the lesser of
(i) the product of (x) 91.4% and (y) the outstanding aggregate
Loan Balance of the Home Equity Loans as of the last day
of the related Remittance Period, and
(ii) the outstanding aggregate Loan Balance of the Home Equity
Loans as of the last day of the related Remittance Period
minus $7,625,000; or
(b) a Delinquency Trigger Event is then in effect, but
as to which a Cumulative Realized Loss Trigger
Event is not in effect, the lesser of:
(i) the product of (x) 100% minus 50% of the Three-Month
Rolling Average 60+ Delinquency Rate and (y) the
outstanding aggregate Loan Balance of the Home Equity
Loans as of the last day of the related Remittance Period,
and
(ii) the outstanding aggregate Loan Balance of the Home Equity
Loans as of the last day of the related Remittance Period
minus $7,625,000; or
(c) if a Cumulative Realized Loss Trigger Event is in
effect but as to which a Delinquency Trigger Event
is not in effect, the lesser of:
(i) the product of (x) 93.55% minus the percentage equivalent
of a fraction, the numerator of which is $32,635,000 and
the denominator of which is the outstanding aggregate Loan
Balance of the Home Equity Loans as of the last day of the
related Remittance Period and (y) the outstanding
aggregate Loan Balance of the Home Equity Loans as of the
last day of the related Remittance Period, and
(ii) the outstanding aggregate Loan Balance of the
Home Equity Loans of the last day of the
related Remittance Period, minus $7,625,000;
or
(d) if both a Delinquency Trigger Event and a
Cumulative Realized Loss Trigger Event are then in
effect, the least of:
(i) the product (x) 100% minus 50% of the Three-Month Rolling
Average 60+ Delinquency Rate and (y) the outstanding
aggregate Loan Balance of the Home Equity Loans as of the
last day of the related Remittance Period,
(ii) the product of (x) 93.55% minus the percentage equivalent
of a fraction, the numerator of which is $32,635,000 and
the denominator of which is the outstanding aggregate Loan
Balance of the Home Equity Loans as of the last day of the
related Remittance Period, and (y) the outstanding
aggregate Loan Balance of the Home Equity Loans as of the
last day of the related Remittance Period and
(iii)the outstanding aggregate Loan Balance of the Home Equity
Loans as of the last day of the related Remittance Period,
minus $7,625,000.
"Senior Specified Enhancement Percentage": On any date of
determination thereof means 8.6%.
"Servicer": ContiMortgage Corporation, a Delaware corporation, and its
permitted successors and assigns.
"Servicer Affiliate": A Person (i) controlling, controlled by or under
common control with the Servicer and (ii) which is qualified to service
residential mortgage loans.
"Servicing Advance": As defined in Section 8.09(b) and Section 8.13(a)
hereof.
"Servicing Fee": With respect to any Home Equity Loan, an amount
retained by the Servicer as compensation for servicing and administration duties
relating to such Home Equity Loan pursuant to Section 8.15 and equal to the
Servicing Fee Rate times the then outstanding principal amount of such Home
Equity Loan as of the first day of each calendar month payable on a monthly
basis.
"Servicing Fee Rate": 0.50% per annum.
"60+ Day Delinquent Loan": With respect to any Determination Date, all
REO Properties, each Home Equity Loan with respect to which any portion of a
Monthly Payment is, as of the last day of the prior Remittance Period, two
months or more past due (without giving effect to any grace period), each Home
Equity Loan in Foreclosure and each Home Equity Loan for which the mortgagor has
filed for bankruptcy.
"Standard & Poor's": Standard & Poor's Ratings Services, a division of
the McGraw-Hill Companies, Inc.
"Startup Day": September 25, 1997.
"Stepdown Date": The later to occur of (x) the Payment Date in October
2000 and (y) the first Payment Date on which the Senior Enhancement Percentage
(after taking into account distributions of principal on such Payment Date) is
equal to or greater than the Senior Specified Enhancement Percentage.
"Subordinate Certificates": The Class B Certificates.
"Sub-Servicer": Any Person with whom the Servicer has entered into a
Sub-Servicing Agreement and who satisfies any requirements set forth in Section
8.03 hereof in respect of the qualification of a Sub-Servicer.
"Sub-Servicing Agreement": The written contract between the Servicer
and any Sub-Servicer relating to servicing and/or administration of certain Home
Equity Loans as permitted by Section 8.03.
"Substitution Amount": As defined in Section 3.03 hereof.
"Targeted Overcollateralization Amount": On any Payment Date (w) prior
to the sixth Payment Date, zero, (x) on and after the sixth Payment Date but
prior to the Stepdown Date, $15,250,000 and (y) on or after the Stepdown Date
(A) if neither a Delinquency Trigger Event nor a Cumulative Realized Loss
Trigger Event is in effect, the greater of (x) 2.15% of the aggregate
outstanding Loan Balance of the Home Equity Loans as of the last day of the
related Remittance Period and (y) the Overcollateralization Floor or (B) if a
Delinquency Trigger Event is in effect but a Cumulative Realized Loss Trigger
Event is not in effect, the Targeted Overcollateralization Amount will be equal
to the Targeted Overcollateralization Amount for the immediately preceding
Payment Date or (C) if a Cumulative Realized Loss Trigger Event is in effect
(whether or not a Delinquency Trigger Event is in effect), the product of (i)
2.14% and (ii) the Original Aggregate Loan Balance.
"Tax Matters Certificate": Each of the Class R-I, Class R-II and Class
R Certificates initially issued to ContiFunding Corporation as the initial Tax
Matters Person.
"Tax Matters Person": The Person appointed for the Trust pursuant to
Section 11.18 hereof to act as the Tax Matters Person under the Code.
"Tax Matters Person Residual Interest": The 0.001% interest in the
Class R Certificates and the Class R-I and Class R-II Certificates, each of
which shall be issued to and held by ContiFunding Corporation throughout the
term hereof unless another Person shall accept an assignment of such interest
and the designation of Tax Matters Person pursuant to Section 11.18 hereof.
"Telerate Page 3750": The display designated as page "3750" on the Dow
Jones Telerate Capital Markets Report (or such other page as may replace page
3750 on that report for the purpose of displaying London interbank offered rates
of major banks).
"Termination Date Pass-Through Rate": A rate equal to the sum of (a)
Weighted Average Pass-Through Rate, (b) any portion of the Trustee Fee
(calculated as a percentage of the outstanding principal amount of the Offered
Certificates) then accrued and outstanding and (c) the Premium Amount
(calculated as a percentage of the outstanding principal amount of the Class A
Certificates) then accrued and outstanding.
"Termination Notice": As defined in Section 9.03(a) hereof.
"Three-Month Rolling Average 60+ Day Delinquency Rate": With respect
to a Payment Date, the fraction, expressed as a percentage (A) the numerator of
which is the sum of the following three percentages for each of the past three
Remittance Periods (x) the principal amount of 60+ Day Delinquent Loans by (y)
the aggregate outstanding Loan Balance as of the last day of the related
Remittance Period for each of the past three Remittance Periods and (B) the
denominator of which is 3.
"Total Available Funds": As of any Payment Date, the sum of (a) the
Interest Amount Available and (b) the Principal Remittance Amount, less any such
amount that cannot be distributed to the Owners of the Class A Certificates as a
result of proceedings under the United States Bankruptcy Code.
"Trust": ContiMortgage Home Equity Loan Trust 1997-4, the trust
created under this Agreement.
"Trust Estate": As defined in the conveyance clause under this
Agreement.
"Trustee": Manufacturers and Traders Trust Company, a New York banking
corporation, the Corporate Trust Department of which is located on the date of
execution of this Agreement at One M&T Plaza, Buffalo, New York 14240, not in
its individual capacity but solely as Trustee under this Agreement, and any
successor hereunder.
"Trustee Fee": The fee payable monthly on each Payment Date in an
amount equal to one-twelfth of the sum of (i) 0.001% multiplied by the
then-outstanding Aggregate Certificate Principal Balance and (ii) $4,750.
"Trustee Fee Rate": A fraction expressed as a percentage, the
numerator of which is the product of (x) 12 and (y) the Trustee Fee and the
denominator of which is the Aggregate Certificate Principal Balance.
"Underwriters": Merrill Lynch, Pierce, Fenner & Smith, Inc., Bear,
Stearns & Co., ContiFinancial Services Corporation, Credit Suisse First Boston,
Greenwich Capital Markets, Inc., Lehman Brothers Inc. and Morgan Stanley & Co.
Incorporated.
"Unpaid Realized Loss Amount": With respect to any Payment Date, the
excess of (x) the aggregate cumulative amount of Class B Applied Realized Loss
Amounts for all prior Payment Dates over (y) the aggregate, cumulative amount of
Class B Realized Loss Amortization Amounts for all prior Payment Dates.
Section 1.02 Use of Words and Phrases.
"Herein", "hereby", "hereunder", "hereof", "hereinbefore",
"hereinafter" and other equivalent words refer to this Agreement as a whole and
not solely to the particular section of this Agreement in which any such word is
used. The definitions set forth in Section 1.01 hereof include both the singular
and the plural. Whenever used in this Agreement, any pronoun shall be deemed to
include both singular and plural and to cover all genders.
Section 1.03 Captions; Table of Contents.
The captions or headings in this Agreement and the Table of Contents
are for convenience only and in no way define, limit or describe the scope and
intent of any provisions of this Agreement.
Section 1.04 Opinions.
Each opinion with respect to the validity, binding nature and
enforceability of documents or Certificates may be qualified to the extent that
the same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity (whether considered in a
proceeding or action in equity or at law) and may state that no opinion is
expressed on the availability of the remedy of specific enforcement, injunctive
relief or any other equitable remedy. Any opinion required to be furnished by
any Person hereunder must be delivered by counsel upon whose opinion the
addressee of such opinion may reasonably rely, and such opinion may state that
it is given in reasonable reliance upon an opinion of another, a copy of which
must be attached, concerning the laws of a foreign jurisdiction.
END OF ARTICLE I
ARTICLE II ESTABLISHMENT AND ORGANIZATION OF THE TRUST
Section 2.01 Establishment of the Trust.
The parties hereto do hereby create and establish, pursuant to the
laws of the State of New York and this Agreement, the Trust, which, for
convenience, shall be known as "ContiMortgage Home Equity Loan Trust 1997-4".
Section 2.02 Office.
The office of the Trust shall be in care of the Trustee, addressed to
One M&T Plaza, Buffalo, New York 14240, Attention Corporate Trust
Administration, or at such other address as the Trustee may designate by notice
to the Depositor, the Seller, the Certificate Insurer and the Servicer.
Section 2.03 Purposes and Powers.
The purpose of the Trust is to engage in the following activities and
only such activities: (i) the issuance of the Certificates and the acquiring,
owning and holding of Home Equity Loans and the Trust Estate in connection
therewith; (ii) activities that are necessary, suitable or convenient to
accomplish the foregoing or are incidental thereto or connected therewith,
including the investment of moneys in accordance with this Agreement; and (iii)
such other activities as may be required in connection with conservation of the
Trust Estate and distributions to the Owners; provided, however, that nothing
contained herein shall permit the Trustee to take any action which would
adversely affect any of the REMIC I's, REMIC II's or REMIC III's status as a
REMIC.
Section 2.04 Appointment of the Trustee; Declaration of Trust.
The Depositor hereby appoints the Trustee as trustee of the Trust
effective as of the Startup Day, to have all the rights, powers and duties set
forth herein. The Trustee hereby acknowledges and accepts such appointment,
represents and warrants its eligibility as of the Startup Day to serve as
Trustee pursuant to Section 10.08 hereof and declares that it will hold the
Trust Estate in trust upon and subject to the conditions set forth herein for
the benefit of the Owners.
Section 2.05 Expenses of the Trust.
The expenses of the Trust, including (i) the fees of the Trustee
(including any portion of the Trustee Fee not paid pursuant to Section 7.03(b)
hereof), (ii) any reasonable expenses of the Trustee, and (iii) any other
expenses of the Trust that have been reviewed by ContiMortgage, which review
shall not be required in connection with the enforcement of a remedy by the
Trustee resulting from a default under this Agreement, shall be paid directly by
ContiMortgage. ContiMortgage shall pay directly the reasonable fees and expenses
of counsel to the Trustee. The reasonable fees and expenses of the Trustee's
counsel in connection with the review and delivery of this Agreement and related
documentation shall be paid by ContiMortgage on the Startup Day.
Section 2.06 Ownership of the Trust.
On the Startup Day the ownership interests in the Trust shall be
transferred as set forth in Section 4.02 hereof, such transfer to be evidenced
by sale of the Certificates as described therein. Thereafter, transfer of any
ownership interest shall be governed by Sections 5.04 and 5.08 hereof.
Section 2.07 Situs of the Trust.
It is the intention of the parties hereto that the Trust constitute a
trust under the laws of the State of New York. The Trust will be created and
administered in, and all Accounts maintained by the Trustee on behalf of the
Trust will be located in, the State of New York. The Trust will not have any
employees and will not have any real or personal property (other than property
acquired pursuant to Section 8.13 hereof) located in any state other than in the
State of New York and payments will be received by the Trustee only in the State
of New York and payments from the Trustee will be made only from the State of
New York. The Trust's only office will be at the office of the Trustee as set
forth in Section 2.02 hereof.
Section 2.08 Miscellaneous REMIC Provisions.
(a) The Trustee shall elect that each of REMIC I, REMIC II and REMIC
III shall be treated as a REMIC under Section 860D of the Code. Any
inconsistencies or ambiguities in this Agreement or in the administration of
this Agreement shall be resolved in a manner that preserves the validity of such
REMIC elections.
(b) The REMIC I will be evidenced by the Class IA and Class IB
Certificates (the "REMIC I Regular Interests"), which will be uncertificated and
non-transferable and are hereby designated as the "regular interests" in the
REMIC I and (y) the Class R-I Certificates, which are hereby designated as the
single "residual interest" in the REMIC I (the REMIC I Regular Certificates,
together with the Class R-I Certificates, the "REMIC I Certificates"). The REMIC
I Regular Interests shall be recorded on the records of the REMIC I as being
issued to and held by the Trustee on behalf of REMIC II.
The Class IA Certificates shall have an initial principal balance
equal to the initial principal balance of the Class A-7 Certificates (that is,
$95,250,000). The Class IB shall have an initial principal balance equal to the
excess of the Original Aggregate Loan Balance over the initial principal balance
of the Class IA Certificate (that is, $1,429,748,968.36). On each Payment Date,
principal collections on the Home Equity Loans shall be allocated as follows: an
amount equal to the principal payable on the Class A-7 Certificates shall be
payable on the Class IA Certificates and the remaining principal collections
shall be payable to the Class IB Certificates. On each Payment Date, to the
extent that the Monthly Excess Interest Amount is paid to the Class A-7
Certificates as an Extra Principal Distribution Amount, an amount of interest
otherwise payable on the Class IB Certificates shall instead be paid as
principal on the Class IA Certificates (and will be accrued and added to
principal on the Class IB Certificates). Realized Losses on the Home Equity
Loans shall be allocated as follows: an amount equal to the Realized Losses
allocable to the Class A-7 Certificates shall be allocable to the Class IA
Certificates and the remaining Realized Losses shall be allocable to the Class
IB Certificates. The Class IA and Class IB Certificates shall each have
Pass-Through Rates equal to the weighted average Coupon Rate of the Home Equity
Loans net of the Servicing Fee, Trustee Fee, the Premium Amount (expressed as a
per annum rate), and the Auction Agent Fee (including the Broker-Dealer Fee).
The Class R-I Certificates shall have no principal balance and no Pass-Through
Rate and shall be entitled to only those distributable assets, if any, remaining
in the REMIC I on each Distribution Date after all amount required to be
distributed to the Class IA and Class IB Certificates and applicable Trust
expenses have been paid.
(c) The REMIC II will be evidenced by (x) the Class II-A, Class
II-A-1, Class II-A-2, Class II-A-3, Class II-A-4, Class II-A-5, Class II-A-6,
Class II-A-7, Class II-A-8, Class II-A-9, Class II-B, Class II-A-IO
Certificates, and Class II-M Certificates (the "REMIC II Regular Certificates"),
which will be uncertificated and non-transferable and are hereby designated as
the "regular interests" in the REMIC II and (y) the Class R-II Certificates,
which are hereby designated as the single "residual interest" in the REMIC II
(the REMIC II Regular Certificates, together with the Class R-II Certificates,
the "REMIC II Certificates"). The REMIC II Regular Interests shall be recorded
on the records of the REMIC II as being issued to and held by the Trustee on
behalf of REMIC III.
Any Monthly Excess Cashflow applied pursuant to Section 7.03(f)(3)
(the "Turbo Amount") that is payable from interest on the Home Equity Loans will
not be paid to the REMIC II Regular Interests, but a portion of the interest
payable with respect to the Class II-M Certificate which equals 1% of the Turbo
Amount will be payable as a reduction of the principal balances of the Class
II-A-1, Class II-A-2, Class II-A-3, Class II-A-4, Class II-A-5, Class II-A-6,
Class II-A-7, Class II-A-8, Class II-A-9, and Class II-B Certificates in the
same manner in which the Turbo Amount is allocated among the Class A-1, Class
A-2, Class A-3, Class A-4, Class A-5, Class A-6, Class A-7, Class A-8, Class
A-9, and Class B Certificates, respectively (and will be accrued and added to
principal on the Class II-M Certificate). Principal payments on the Home Equity
Loans shall be allocated 98% to the Class II-A Certificate, 1% to the Class II-M
Certificate, and 1% to the Class II-A-1, Class II-A-2, Class II-A-3, Class
II-A-4, Class II-A-5, Class II-A-6, Class II-A-7, Class II-A-8, Class II-A-9,
and Class II-B Certificates until paid in full. The aggregate amount of
principal allocated to the Class II-A-1, Class II-A-2, Class II-A-3, Class
II-A-4, Class II-A-5, Class II-A-6, Class II-A-7, Class II-A-8, Class II-A-9,
and Class II-B Certificates shall be apportioned among such Classes in the same
manner in which principal is payable with respect to the Class A-1, Class A-2,
Class A-3, Class A-4, Class A-5, Class A-6, Class A-7, Class A-8, Class A-9, and
Class B Certificates, respectively. Notwithstanding the above, 98% and 2% of any
principal payments on the Home Equity Loans that are attributable to an
Overcollateralization Release Amount shall be allocated to the Class II-A and
Class II-M Certificates, respectively, until paid in full. Realized Losses shall
be applied such that after all distribution have been made on such Payment Date
the principal balance of the Class II-A Certificates is 98% of the aggregate
Loan Balances of the Home Equity Loans, the principal balances of the Class
II-A-1, Class II-A-2, Class II-A-3, Class II-A-4, Class II-A-5, Class II-A-6,
Class II-A-7, Class II-A-8, Class II-A-9, and Class II-B Certificates are each
1% of the Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6,
Class A-7, Class A-8, Class A-9, and Class B Certificates, respectively, and the
principal balance of the Class II-M Certificate is equal to the aggregate Loan
Balances of the Home Equity Loans less an amount equal to the sum of the
principal balances of the Class II-A, Class II-A-1, Class II-A-2, Class II-A-3,
Class II-A-4, Class II-A-5, Class II-A-6, Class II-A-7, Class II-A-8, Class
II-A-9, and Class II-B Certificates. The REMIC II Certificates will have the
following designations and Pass-Through Rates, and distributions of principal
and interest thereon shall be allocated to the Certificates in the following
manner:
Pass- Allocation Allocation
REMIC II Initial Through of of
Certificates Balance Rate Principal Interest
II-A $1,494,498,988.99 (1) (2) (3),(4)
II-A-1 $2,350,000 (1) (2) (3),(4)
II-A-2 $1,660,000 (1) (2) (3),(4)
II-A-3 $3,070,000 (1) (2) (3),(4)
II-A-4 $1,000,000 (1) (2) (3),(4)
II-A-5 $1,320,000 (1) (2) (3),(4)
II-A-6 $390,000 (1) (2) (3),(4)
II-A-7 $952,500 (1) (2) (3),(4)
II-A-8 $1,375,000 (1) (2) (3),(4)
II-A-9 $2,675,000 (1) (2) (3),(4)
II-B $457,500 (1) (2) (3),(4)
II-M $15,249,979.37 (1) (2) (3),(4)
II-A-IO $0 (1) N/A Class A-7 IO
R-II $0 0% N/A N/A (5)
_________________
(1) The Pass-Through Rate on these REMIC II Regular Interests
shall at any time of determination equal the weighted
average of the Class IB Pass-Through Rate and the excess of
the Class IA Pass-Through Rate over (a) 8.5% for the first
30 Payment Dates and (b) 0.0% thereafter. Interest on the
Class II-A-IO will equal 8.5% per annum of the principal
balance of the Class IA Certificate for the first 30 Payment
Dates and 0.0% thereafter.
(2) Principal will be allocated to and apportioned among the
Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class
A-6, Class A-7, Class A-8, Class A-9, and Class B
Certificates in the same proportion as principal is payable
with respect to such Certificates, except that a portion of
such principal in an amount equal to the
Overcollateralization Release Amount shall first be
allocated as a payment of interest to the Class C
Certificates, and all principal will be allocated as a
payment of interest to the Class C Certificates after the
principal balance of the Class A and Class B Certificates
have been reduced to zero.
(3) Except as provided in footnote (4), interest will be
allocated among the Class A-1, Class A-2, Class A-3, Class
A-4, Class A-5, Class A-6, Class A-7, Class A-8, Class A-9,
and Class B Certificates in the same proportion as interest
is payable on such Certificates.
(4) Any interest with respect to this REMIC II Certificate in
excess of the product of (i) two times the weighted average
coupon of the Class II-A-1, Class II-A-2, Class II-A-3,
Class II-A-4, Class II-A-5, Class II-A-6, Class II-A-7,
Class II-A-8, Class II-A-9, Class II-B and Class II-M
Certificates, where each of such Classes, other than the
Class II-M Certificate, is first subject to a cap and floor
equal to the Class A-1, Class A-2, Class A-3, Class A-4,
Class A-5, Class A-6, Class A-7, Class A-8, Class A-9 and
Class B Pass-Through Rate, respectively, and the Class II-M
Certificate is subject to a cap equal to 0%, and (ii) the
principal balance of this REMIC II Certificate, shall not be
allocated to the Class A and Class B Certificates but will
be allocated to the Class C Certificates as a separate
component. However, the Class C Certificates shall be
subordinated to the extent provided in Section 7.03.
(5) On each Distribution Date, available funds, if any,
remaining in the REMIC II after payments of interest and
principal, as designated above, will be distributed to the
Class R-II Certificate.
(d) The Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class
A-6, Class A-7, Class A-7 IO, Class A-8, Class A-9, Class B and Class C
Certificates are hereby designated as "regular interests" with respect to the
REMIC III and the Class R Certificate is hereby designated as the single
"residual interest" with respect to the REMIC III.
END OF ARTICLE II
ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
DEPOSITOR, THE SERVICER AND THE SELLERS; COVENANT OF SELLERS TO CONVEY HOME
EQUITY LOANS
Section 3.01 Representations and Warranties of the Depositor.
The Depositor hereby represents, warrants and covenants to the
Trustee, the Certificate Insurer and the Owners that as of the Startup Day:
(a) The Depositor is a corporation duly organized, validly existing
and in good standing under the laws governing its creation and existence and is
in good standing as a foreign corporation in each jurisdiction in which the
nature of its business, or the properties owned or leased by it make such
qualification necessary. The Depositor has all requisite corporate power and
authority to own and operate its properties, to carry out its business as
presently conducted and as proposed to be conducted and to enter into and
discharge its obligations under this Agreement and the other Operative Documents
to which it is a party.
(b) The execution and delivery of this Agreement by the Depositor and
its performance and compliance with the terms of this Agreement and the other
Operative Documents to which it is a party have been duly authorized by all
necessary corporate action on the part of the Depositor and will not violate the
Depositor's Certificate of Incorporation or Bylaws or constitute a default (or
an event which, with notice or lapse of time, or both, would constitute a
default) under, or result in a breach of, any material contract, agreement or
other instrument to which the Depositor is a party or by which the Depositor is
bound or violate any statute or any order, rule or regulation of any court,
governmental agency or body or other tribunal having jurisdiction over the
Depositor or any of its properties.
(c) This Agreement and the other Operative Documents to which the
Depositor is a party, assuming due authorization, execution and delivery by the
other parties hereto and thereto, each constitutes a valid, legal and binding
obligation of the Depositor, enforceable against it in accordance with the terms
hereof and thereof, except as the enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law).
(d) The Depositor is not in default with respect to any order or
decree of any court or any order, regulation or demand of any federal, state,
municipal or governmental agency, which default would materially and adversely
affect the condition (financial or other) or operations of the Depositor or its
properties or the consequences of which would materially and adversely affect
its performance hereunder or under the other Operative Documents to which the
Depositor is a party.
(e) No litigation is pending with respect to which the Depositor has
received service of process or, to the best of the Depositor's knowledge,
threatened against the Depositor which litigation might have consequences that
would prohibit its entering into this Agreement or any other Operative Documents
to which it is a party or that would materially and adversely affect the
condition (financial or otherwise) or operations of the Depositor or its
properties or might have consequences that would materially and adversely affect
its performance hereunder and under the other Operative Documents to which the
Depositor is a party.
(f) No certificate of an officer, statement furnished in writing or
report delivered pursuant to the terms hereof by the Depositor contains any
untrue statement of a material fact or omits to state any material fact
necessary to make the certificate, statement or report not misleading.
(g) The statements contained in the Registration Statement which
describe the Depositor or matters or activities for which the Depositor is
responsible in accordance with the Operative Documents or which are attributable
to the Depositor therein are true and correct in all material respects, and the
Registration Statement does not contain any untrue statement of a material fact
with respect to the Depositor required to be stated therein or necessary to make
the statements contained therein with respect to the Depositor, in light of the
circumstances under which they were made, not misleading. The Registration
Statement does not contain any untrue statement of a material fact required to
be stated therein or omit to state any material fact necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading. There is no fact known to the Depositor that
materially adversely affects or in the future may (so far as the Depositor can
now reasonably foresee) materially adversely affect the Depositor or the Home
Equity Loans or the ownership interests therein represented by the Certificates
that has not been set forth in the Registration Statement.
(h) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required to be
taken, given or obtained, as the case may be, by or from any federal, state or
other governmental authority or agency (other than any such actions, approvals,
etc. under any state securities laws, real estate syndication or "Blue Sky"
statutes, as to which the Depositor makes no such representation or warranty),
that are necessary or advisable in connection with the purchase and sale of the
Certificates and the execution and delivery by the Depositor of the Operative
Documents to which it is a party, have been duly taken, given or obtained, as
the case may be, are in full force and effect on the date hereof, are not
subject to any pending proceedings or appeals (administrative, judicial or
otherwise) and either the time within which any appeal therefrom may be taken or
review thereof may be obtained has expired or no review thereof may be obtained
or appeal therefrom taken, and are adequate to authorize the consummation of the
transactions contemplated by this Agreement and the other Operative Documents on
the part of the Depositor and the performance by the Depositor of its
obligations under this Agreement and such of the other Operative Documents to
which it is a party.
(i) The transactions contemplated by this Agreement are in the
ordinary course of business of the Depositor.
(j) The Depositor is not insolvent, nor will it be made insolvent by
the transfer of the Home Equity Loans, nor is the Depositor aware of any pending
insolvency.
(k) The transfer, assignment and conveyance of the Notes and the
Mortgages by the Depositor hereunder are not subject to the bulk transfer laws
or any similar statutory provisions in effect in any applicable jurisdiction.
(l) The Depositor is not transferring the Home Equity Loans to the
Trustee with any intent to hinder, delay or defraud its creditors.
It is understood and agreed that the representations and warranties
set forth in this Section 3.01 shall survive delivery of the respective Home
Equity Loans to the Trustee.
Section 3.02 Representations and Warranties of the Servicer.
The Servicer hereby represents, warrants and covenants to the Trustee,
the Certificate Insurer and the Owners that as of the Startup Day:
(a) The Servicer is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, is, and each
Sub-Servicer is, in compliance with the laws of each state in which any Property
is located to the extent necessary to enable it to perform its obligations
hereunder and is in good standing as a foreign corporation in each jurisdiction
in which the nature of its business, or the properties owned or leased by it
make such qualification necessary. The Servicer and each Sub-Servicer has all
requisite corporate power and authority to own and operate its properties, to
carry out its business as presently conducted and as proposed to be conducted
and to enter into and discharge its obligations under this Agreement and the
other Operative Documents to which it is a party. The Servicer is designated as
an approved seller-servicer by FannieMae for first and second mortgage loans and
has combined equity and subordinated debt of at least $1,500,000, as determined
in accordance with generally accepted accounting principles.
(b) The execution and delivery of this Agreement by the Servicer and
its performance and compliance with the terms of this Agreement have been duly
authorized by all necessary corporate action on the part of the Servicer and
will not violate the Servicer's Certificate of Incorporation or Bylaws or
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, or result in the breach of, any material
contract, agreement or other instrument to which the Servicer is a party or by
which the Servicer is bound or violate any statute or any order, rule or
regulation of any court, governmental agency or body or other tribunal having
jurisdiction over the Servicer or any of its properties.
(c) This Agreement and the Operative Documents to which the Servicer
is a party, assuming due authorization, execution and delivery by the other
parties hereto and thereto, each constitutes a valid, legal and binding
obligation of the Servicer, enforceable against it in accordance with the terms
hereof and thereof, except as the enforcement hereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law).
(d) The Servicer is not in default with respect to any order or decree
of any court or any order, regulation or demand of any federal, state, municipal
or governmental agency, which default might have consequences that would
materially and adversely affect the condition (financial or otherwise) or
operations of the Servicer or its properties or might have consequences that
would materially and adversely affect its performance hereunder or under the
other Operative Documents to which the Servicer is a party. (e) No litigation is
pending with respect to which the Servicer has received service of process or,
to the best of the Servicer's knowledge, threatened against the Servicer which
litigation might have consequences that would prohibit its entering into this
Agreement or any other Operative Documents to which the Servicer is a party or
that would materially and adversely affect the condition (financial or
otherwise) or operations of the Servicer or its properties or might have
consequences that would materially and adversely affect its performance
hereunder and the other Operative Documents to which the Servicer is a party.
(f) No certificate of an officer, statement furnished in writing or
report delivered pursuant to the terms hereof by the Servicer contains any
untrue statement of a material fact or omits to state any material fact
necessary to make the certificate, statement or report not misleading.
(g) The statements contained in the Registration Statement which
describe the Servicer or matters or activities for which the Servicer is
responsible in accordance with the Operative Document or which are attributed to
the Servicer therein are true and correct in all material respects, and the
Registration Statement does not contain any untrue statement of a material fact
with respect to the Servicer or omit to state a material fact required to be
stated therein or necessary to make the statements contained therein with
respect to the Servicer, in light of the circumstances under which they were
made, not misleading.
(h) The Servicing Fee is a "current (normal) servicing fee rate" as
that term is used in Statement of Financial Accounting Standards No. 65 issued
by the Financial Accounting Standards Board. Neither the Servicer nor any
affiliate thereof will report on any financial statements any part of the
Servicing Fee as an adjustment to the sales price of the Home Equity Loans.
(i) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required to be
taken, given or obtained, as the case may be, by or from any federal, state or
other governmental authority or agency (other than any such actions, approvals,
etc. under any state securities laws, real estate syndication or "Blue Sky"
statutes, as to which the Servicer makes no such representation or warranty),
that are necessary or advisable in connection with the execution and delivery by
the Servicer of the Operative Documents to which it is a party, have been duly
taken, given or obtained, as the case may be, are in full force and effect on
the date hereof, are not subject to any pending proceedings or appeals
(administrative, judicial or otherwise) and either the time within which any
appeal therefrom may be taken or review thereof may be obtained has expired or
no review thereof may be obtained or appeal therefrom taken, and are adequate to
authorize the consummation of the transactions contemplated by this Agreement
and the other Operative Documents on the part of the Servicer and the
performance by the Servicer of its obligations under this Agreement and such of
the other Operative Documents to which it is a party.
(j) The collection practices used by the Servicer with respect to the
Home Equity Loans have been, in all material respects, legal, proper, prudent
and customary in the mortgage servicing business and in conformity with relevant
FannieMae guidelines.
(k) The transactions contemplated by this Agreement are in the
ordinary course of business of the Servicer.
It is understood and agreed that the representations and warranties
set forth in this Section 3.02 shall survive delivery of the Home Equity Loans
to the Trustee.
Upon discovery by any of either Seller, the Servicer, any
Sub-Servicer, any Owner, the Certificate Insurer or the Trustee (each, for
purposes of this paragraph, a party) of a breach of any of the representations
and warranties set forth in this Section 3.02 which materially and adversely
affects the interests of the Owners or of the Certificate Insurer, the party
discovering such breach shall give prompt written notice to the other parties.
Within 60 days of its discovery or its receipt of notice of breach, the Servicer
shall cure such breach in all material respects and, upon the Servicer's
continued failure to cure such breach, may thereafter be removed by the Trustee
pursuant to Section 8.20 hereof; provided, however, that if any party can
establish to the reasonable satisfaction of the Certificate Insurer that it is
diligently pursuing remedial action, then the cure period may be extended with
the written approval of the Certificate Insurer.
Section 3.03 Representations and Warranties of the Sellers.
(1) ContiMortgage hereby represents, warrants and covenants to the
Trustee, the Certificate Insurer and the Owners that as of the Startup Day:
(a) ContiMortgage is a corporation duly organized, validly existing
and in good standing under the laws governing its creation and existence and is
in good standing as a foreign corporation in each jurisdiction in which the
nature of its business, or the properties owned or leased by it, make such
qualification necessary. ContiMortgage has all requisite corporate power and
authority to own and operate its properties, to carry out its business as
presently conducted and as proposed to be conducted and to enter into and
discharge its obligations under this Agreement and the other Operative Documents
to which it is a party.
(b) The execution and delivery of this Agreement by ContiMortgage and
its performance and compliance with the terms of this Agreement and the other
Operative Documents to which it is a party have been duly authorized by all
necessary corporate action on the part of ContiMortgage and will not violate
ContiMortgage's Certificate of Incorporation or Bylaws or constitute a default
(or an event which, with notice or lapse of time, or both, would constitute a
default) under, or result in a breach of, any material contract, agreement or
other instrument to which ContiMortgage is a party or by which ContiMortgage is
bound or violate any statute or any order, rule or regulation of any court,
governmental agency or body or other tribunal having jurisdiction over
ContiMortgage or any of its properties.
(c) This Agreement and the other Operative Documents to which
ContiMortgage is a party, assuming due authorization, execution and delivery by
the other parties hereto and thereto, each constitutes a valid, legal and
binding obligation of ContiMortgage, enforceable against it in accordance with
the terms hereof and thereof, except as the enforcement thereof may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally and by general principles of
equity (whether considered in a proceeding or action in equity or at law).
(d) ContiMortgage is not in default with respect to any order or
decree of any court or any order, regulation or demand of any federal, state,
municipal or governmental agency, which default would materially and adversely
affect the condition (financial or other) or operations of ContiMortgage or its
properties or the consequences of which would materially and adversely affect
its performance hereunder and under the other Operative Documents to which
ContiMortgage is a party.
(e) No litigation is pending with respect to which ContiMortgage has
received service of process or, to the best of ContiMortgage's knowledge,
threatened against ContiMortgage which litigation might have consequences that
would prohibit its entering into this Agreement or any other Operative Documents
to which it is a party or that would materially and adversely affect the
condition (financial or otherwise) or operations of ContiMortgage or its
properties or might have consequences that would materially and adversely affect
its performance hereunder and under the other Operative Documents to which
ContiMortgage is a party.
(f) No certificate of an officer, statement furnished in writing or
report delivered pursuant to the terms hereof by ContiMortgage contains any
untrue statement of a material fact or omits to state any material fact
necessary to make the certificate, statement or report not misleading.
(g) The statements contained in the Registration Statement which
describe ContiMortgage or matters or activities for which ContiMortgage is
responsible in accordance with the Operative Documents or which are attributable
to ContiMortgage therein are true and correct in all material respects, and the
Registration Statement does not contain any untrue statement of a material fact
with respect to ContiMortgage required to be stated therein or necessary to make
the statements contained therein with respect to ContiMortgage, in light of the
circumstances under which they were made, not misleading. The Registration
Statement does not contain any untrue statement of a material fact required to
be stated therein or omit to state any material fact necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading. There is no fact known to ContiMortgage that
materially adversely affects or in the future may (so far as ContiMortgage can
now reasonably foresee) materially adversely affect ContiMortgage or the Home
Equity Loans or the ownership interests therein represented by the Certificates
that has not been set forth in the Registration Statement.
(h) Upon the receipt of each Home Equity Loan (including the related
Note) and other items of the Trust Estate delivered by ContiMortgage to the
Depositor and by the Depositor to the Trustee under this Agreement, the Trust
will have good title to such Home Equity Loan (including the related Note) and
such other items of the Trust Estate free and clear of any lien, charge,
mortgage, encumbrance or rights of others, except as set forth in Section 3.04
(b) (ix) (other than liens which will be simultaneously released).
(i) Neither ContiMortgage nor any affiliate thereof will report on any
financial statement any part of the Servicing Fee as an adjustment to the sales
price of the Home Equity Loans.
(j) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required to be
taken, given or obtained, as the case may be, by or from any federal, state or
other governmental authority or agency (other than any such actions, approvals,
etc. under any state securities laws, real estate syndication or "Blue Sky"
statutes, as to which ContiMortgage makes no such representation or warranty),
that are necessary or advisable in connection with the purchase and sale of the
Certificates and the execution and delivery by ContiMortgage of the Operative
Documents to which it is a party, have been duly taken, given or obtained, as
the case may be, are in full force and effect on the date hereof, are not
subject to any pending proceedings or appeals (administrative, judicial or
otherwise) and either the time within which any appeal therefrom may be taken or
review thereof may be obtained has expired or no review thereof may be obtained
or appeal therefrom taken, and are adequate to authorize the consummation of the
transactions contemplated by this Agreement and the other Operative Documents on
the part of ContiMortgage and the performance by ContiMortgage of its
obligations under this Agreement and such of the other Operative Documents to
which it is a party.
(k) The origination practices used by ContiMortgage with respect to
the Home Equity Loans have been, in all material respects, legal, proper,
prudent and customary in the mortgage lending business.
(l) The transactions contemplated by this Agreement are in the
ordinary course of business of ContiMortgage.
(m) ContiMortgage is not insolvent, nor will it be made insolvent by
the transfer of the Home Equity Loans, nor is ContiMortgage aware of any pending
insolvency.
(n) The transfer, assignment and conveyance of the Notes and the
Mortgages by ContiMortgage hereunder are not subject to the bulk transfer laws
or any similar statutory provisions in effect in any applicable jurisdiction.
(o) ContiMortgage is not transferring the Home Equity Loans to the
Depositor with any intent to hinder, delay or defraud its creditors.
It is understood and agreed that the representations and warranties
set forth in this Section 3.03(1) shall survive delivery of the respective Home
Equity Loans to the Trustee.
Upon discovery by any of the Servicer, any Sub-Servicer, either
Seller, the Certificate Insurer or the Trustee (each, for purposes of this
paragraph, a "party") of a breach of any of the representations and warranties
set forth in this Section 3.03 which materially and adversely affects the
interests of the Owners or of the Certificate Insurer, the party discovering
such breach shall give prompt written notice to the other parties. ContiMortgage
hereby covenants and agrees that within 60 days of its discovery or its receipt
of notice of breach, it shall cure such breach in all material respects or, with
respect to a breach of clause (h) above, ContiMortgage may (or may cause an
affiliate of ContiMortgage to) on the Monthly Remittance Date next succeeding
such discovery or receipt of notice (i) substitute in lieu of any Home Equity
Loan not in compliance with clause (h) a Qualified Replacement Mortgage and, if
the outstanding principal amount of such Qualified Replacement Mortgage as of
the applicable Replacement Cut-Off Date is less than the Loan Balance of such
Home Equity Loan as of such Replacement Cut-Off Date, deliver an amount equal to
such difference together with the aggregate amount of (A) all Delinquency
Advances and Servicing Advances theretofore made with respect to such Home
Equity Loan and (B) all Delinquency Advances and Servicing Advances which the
Servicer has theretofore failed to remit with respect to such Home Equity Loan
(a "Substitution Amount") to the Servicer for deposit in the Principal and
Interest Account or (ii) purchase such Home Equity Loan from the Trust at the
Loan Purchase Price, which purchase price shall be delivered to the Servicer for
deposit in the Principal and Interest Account. Notwithstanding any provision of
this Agreement to the contrary, with respect to any Home Equity Loan which is
not in default or as to which no default is imminent, no repurchase or
substitution pursuant to Section 3.03, 3.04 or 3.06 shall be made unless
ContiMortgage obtains for the Trustee and the Certificate Insurer an opinion of
counsel experienced in federal income tax matters to the effect that such a
repurchase or substitution would not constitute a Prohibited Transaction for the
Trust or any REMIC therein or otherwise subject the Trust or any REMIC therein
to tax and would not jeopardize the status of either of any REMIC therein as a
REMIC (a "REMIC Opinion") addressed to the Trustee and the Certificate Insurer
and acceptable to the Trustee and the Certificate Insurer. Any Home Equity Loan
as to which repurchase or substitution was delayed pursuant to this Section
shall be repurchased or substituted for (subject to compliance with Sections
3.03, 3.04 or 3.06, as the case may be) upon the earlier of (a) the occurrence
of a default or imminent default with respect to such Home Equity Loan and (b)
receipt by the Trustee and the Certificate Insurer of a REMIC Opinion.
(2) ContiWest hereby represents, warrants and covenants to the
Trustee, the Certificate Insurer and the Owners that as of the Startup Day:
(a) ContiWest is a corporation duly organized, validly existing and in
good standing under the laws governing its creation and existence and is in good
standing as a foreign corporation in each jurisdiction in which the nature of
its business, or the properties owned or leased by it, make such qualification
necessary. ContiWest has all requisite corporate power and authority to own and
operate its properties, to carry out its business as presently conducted and as
proposed to be conducted and to enter into and discharge its obligations under
this Agreement and the other Operative Documents to which it is a party.
(b) The execution and delivery of this Agreement by ContiWest and its
performance and compliance with the terms of this Agreement and the other
Operative Documents to which it is a party have been duly authorized by all
necessary corporate action on the part of ContiWest and will not violate
ContiWest's Certificate of Incorporation or Bylaws or constitute a default (or
an event which, with notice or lapse of time, or both, would constitute a
default) under, or result in a breach of, any material contract, agreement or
other instrument to which ContiWest is a party or by which ContiWest is bound or
violate any statute or any order, rule or regulation of any court, governmental
agency or body or other tribunal having jurisdiction over ContiWest or any of
its properties.
(c) This Agreement and the other Operative Documents to which
ContiWest is a party, assuming due authorization, execution and delivery by the
other parties hereto and thereto, each constitutes a valid, legal and binding
obligation of ContiWest, enforceable against it in accordance with the terms
hereof and thereof, except as the enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law).
(d) ContiWest is not in default with respect to any order or decree of
any court or any order, regulation or demand of any federal, state, municipal or
governmental agency, which default would materially and adversely affect the
condition (financial or other) or operations of ContiWest or its properties or
the consequences of which would materially and adversely affect its performance
hereunder and under the other Operative Documents to which ContiWest is a party.
(e) No litigation is pending with respect to which ContiWest has
received service of process or, to the best of ContiWest's knowledge, threatened
against ContiWest which litigation might have consequences that would prohibit
its entering into this Agreement or any other Operative Documents to which it is
a party or that would materially and adversely affect the condition (financial
or otherwise) or operations of ContiWest or its properties or might have
consequences that would materially and adversely affect its performance
hereunder and under the other Operative Documents to which ContiWest is a party.
(f) No certificate of an officer, statement furnished in writing or
report delivered pursuant to the terms hereof by ContiWest contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the certificate, statement or report not misleading.
(g) The statements contained in the Registration Statement which
describe ContiWest or matters or activities for which ContiWest is responsible
in accordance with the Operative Documents or which are attributable to
ContiWest therein are true and correct in all material respects, and the
Registration Statement does not contain any untrue statement of a material fact
with respect to ContiWest required to be stated therein or necessary to make the
statements contained therein with respect to ContiWest, in light of the
circumstances under which they were made, not misleading. The Registration
Statement does not contain any untrue statement of a material fact required to
be stated therein or omit to state any material fact necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading. There is no fact known to ContiWest that materially
adversely affects or in the future may (so far as ContiWest can now reasonably
foresee) materially adversely affect ContiWest or the Home Equity Loans or the
ownership interests therein represented by the Certificates that has not been
set forth in the Registration Statement.
(h) Upon the receipt of each Home Equity Loan (including the related
Note) and other items of the Trust Estate delivered by ContiWest to the
Depositor and by the Depositor to the Trustee under this Agreement, the Trust
will have good title to such Home Equity Loan (including the related Note) and
such other items of the Trust Estate free and clear of any lien, charge,
mortgage, encumbrance or rights of others, except as set forth in Section 3.04
(b) (ix) (other than liens which will be simultaneously released).
(i) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required to be
taken, given or obtained, as the case may be, by or from any federal, state or
other governmental authority or agency (other than any such actions, approvals,
etc. under any state securities laws, real estate syndication or "Blue Sky"
statutes, as to which ContiWest makes no such representation or warranty), that
are necessary or advisable in connection with the purchase and sale of the
Certificates and the execution and delivery by ContiWest of the Operative
Documents to which it is a party, have been duly taken, given or obtained, as
the case may be, are in full force and effect on the date hereof, are not
subject to any pending proceedings or appeals (administrative, judicial or
otherwise) and either the time within which any appeal therefrom may be taken or
review thereof may be obtained has expired or no review thereof may be obtained
or appeal therefrom taken, and are adequate to authorize the consummation of the
transactions contemplated by this Agreement and the other Operative Documents on
the part of ContiWest and the performance by ContiWest of its obligations under
this Agreement and such of the other Operative Documents to which it is a party.
(j) The transactions contemplated by this Agreement are in the
ordinary course of business of ContiWest.
(k) ContiWest is not insolvent, nor will it be made insolvent by the
transfer of the Home Equity Loans, nor is ContiWest aware of any pending
insolvency.
(l) The transfer, assignment and conveyance of the Notes and the
Mortgages by ContiWest hereunder are not subject to the bulk transfer laws or
any similar statutory provisions in effect in any applicable jurisdiction.
(m) ContiWest is not transferring the Home Equity Loans to the
Depositor with any intent to hinder, delay or defraud its creditors.
It is understood and agreed that the representations and warranties
set forth in this Section 3.03(2) shall survive delivery of the respective Home
Equity Loans to the Trustee.
Upon discovery by any of the Servicer, any Sub-Servicer, either
Seller, the Certificate Insurer or the Trustee (each, for purposes of this
paragraph, a "party") of a breach of any of the representations and warranties
set forth in this Section 3.03 which materially and adversely affects the
interests of the Owners or of the Certificate Insurer, the party discovering
such breach shall give prompt written notice to the other parties. ContiWest
hereby covenants and agrees that within 60 days of its discovery or its receipt
of notice of breach, it shall cure such breach in all material respects or, with
respect to a breach of clause (h) above, ContiWest may (or may cause an
affiliate of ContiWest to) on the Monthly Remittance Date next succeeding such
discovery or receipt of notice (i) substitute in lieu of any Home Equity Loan
not in compliance with clause (h) a Qualified Replacement Mortgage and, if the
outstanding principal amount of such Qualified Replacement Mortgage as of the
applicable Replacement Cut-Off Date is less than the Loan Balance of such Home
Equity Loan as of such Replacement Cut-Off Date, deliver an amount equal to such
difference together with the aggregate amount of (A) all Delinquency Advances
and Servicing Advances theretofore made with respect to such Home Equity Loan
and (B) all Delinquency Advances and Servicing Advances which the Servicer has
theretofore failed to remit with respect to such Home Equity Loan (a
"Substitution Amount") to the Servicer for deposit in the Principal and Interest
Account or (ii) purchase such Home Equity Loan from the Trust at the Loan
Purchase Price, which purchase price shall be delivered to the Servicer for
deposit in the Principal and Interest Account. Notwithstanding any provision of
this Agreement to the contrary, with respect to any Home Equity Loan which is
not in default or as to which no default is imminent, no repurchase or
substitution pursuant to Section 3.03, 3.04 or 3.06 shall be made unless
ContiWest obtains for the Trustee and the Certificate Insurer an opinion of
counsel experienced in federal income tax matters to the effect that such a
repurchase or substitution would not constitute a Prohibited Transaction for the
Trust or any REMIC therein or otherwise subject the Trust or any REMIC therein
to tax and would not jeopardize the status of any REMIC therein as a REMIC (a
"REMIC Opinion") addressed to the Trustee and the Certificate Insurer and
acceptable to the Trustee and the Certificate Insurer. Any Home Equity Loan as
to which repurchase or substitution was delayed pursuant to this Section shall
be repurchased or substituted for (subject to compliance with Sections 3.03,
3.04 or 3.06, as the case may be) upon the earlier of (a) the occurrence of a
default or imminent default with respect to such Home Equity Loan and (b)
receipt by the Trustee and the Certificate Insurer of a REMIC Opinion.
Section 3.04 Covenants of the Sellers to Take Certain Actions with
Respect to the Home Equity Loans In Certain Situations.
(a) Upon the discovery by either Seller, the Servicer, any
Sub-Servicer, the Certificate Insurer or the Trustee (i) that any of the
statements set forth in subsection (b) below were untrue as of the Startup Day
with the result that the interests of the Owners or the Certificate Insurer are
materially and adversely affected or (ii) that statements set forth in Clauses
(ix), (x), (xiii), (xxxvi), (xl), or (xli) of subsection (b) below were untrue
in any material respect as of the Startup Day, the party discovering such breach
shall give prompt written notice to the other parties. Upon the earliest to
occur of such Seller's discovery, its receipt of notice of breach from any one
of the other parties or such time as a situation resulting from an existing
statement which is untrue materially and adversely affects the interests of the
Owners or of the Certificate Insurer, such Seller hereby covenants and warrants
that it shall promptly cure such breach in all material respects or subject to
the last two sentences of Section 3.03 it shall on the second Monthly Remittance
Date next succeeding such discovery, receipt of notice or such time (i)
substitute in lieu of each Home Equity Loan which has given rise to the
requirement for action by such Seller a Qualified Replacement Mortgage and
deliver the Substitution Amount to the Servicer for deposit in the Principal and
Interest Account or (ii) purchase such Home Equity Loan from the Trust at a
purchase price equal to the Loan Purchase Price thereof, which purchase price
shall be delivered to the Servicer for deposit in the Principal and Interest
Account. Other than as specified in Section 6.12 hereof, it is understood and
agreed that the obligation of a Seller so to substitute or purchase any Home
Equity Loan as to which such a statement set forth below is untrue in any
material respect and has not been remedied shall constitute the sole remedy
under this Agreement respecting a discovery of any such statement which is
untrue in any material respect in this Section 3.04 available to the Owners, the
Certificate Insurer and the Trustee, the Certificate Insurer.
(b) Unless otherwise specified, the information set out below
specifies as of the Startup Day:
(ii) The information with respect to each Home Equity Loan and the
aggregate Loan Balance of all Home Equity Loans set forth in the related
Schedule of Home Equity Loans is true and correct as of the Cut-Off Date;
(iii)All the original or certified documentation set forth in
Section 3.05 (including all material documents related thereto) with
respect to each Home Equity Loan has been or will be delivered to the
Trustee on the Startup Day or as otherwise provided in Section 3.05;
(iv) Each Home Equity Loan being transferred to the Trust is a
Qualified Mortgage;
(v) Each Property is improved by a single (one-to-four) family
residential dwelling, which may include condominiums and townhouses,
manufactured housing or small multifamily or mixed-use property but shall
not include co-operatives or mobile homes; provided, however, that not more
than 0.05% and 0.06% of the aggregate Loan Balance of the Fixed Rate Home
Equity Loans and the Adjustable Rate Home Equity Loans, respectively, are
secured by condominiums with more than 4 stories and no more than 0.56% and
1.32% of the Loan Balance of the Fixed Rate Home Equity Loans and the
Adjustable Rate Home Equity Loans respectively, are secured by condominiums
of less than 4 stories;
(vi) No Fixed Rate Home Equity Loan has a Loan-to-Value Ratio in
excess of 85%, except 14.45% of such Home Equity Loans which have a
Loan-to-Value Ratio not greater than 100%; and no Adjustable Rate Home
Equity Loan has a Loan-to-Value Ratio in excess of 85%, except 18.05% of
such Home Equity Loans which have a Loan-to-Value Ratio not greater than
100%;
(vii)Each Home Equity Loan is being serviced by the Servicer;
(viii) The Note related to each Fixed Rate Home Equity Loan bears a
fixed Coupon Rate of at least 5.875% per annum, and the Note related to
each Adjustable Rate Home Equity Loan bears a current Coupon Rate of at
least 6.250% per annum. The weighted average Coupon Rate of the Fixed Rate
Home Equity Loans is at least 11.355% and the weighted average Coupon Rate
of the Adjustable Home Equity Loans is at least 10.346%;
(ix) Each Note with respect to the Home Equity Loans will provide
for a schedule of substantially level and equal monthly Scheduled Payments
which are sufficient to amortize fully the principal balance of such Note
on or before its maturity date (other than Notes representing not more than
52.21% of the aggregate Loan Balance of the Initial Fixed Rate Home Equity
Loans, which may provide for a "balloon" payment due at the end of the 15th
year, which maturity date is not more than 15 years from the date of
origination);
(x) As of the Startup Day, each Mortgage is a valid and subsisting
first or second lien of record on the Property subject in the case of any
Second Mortgage Loan only to a Senior Lien on such Property and subject in
all cases to the exceptions to title set forth in the title insurance
policy or attorney's opinion of title with respect to the related Home
Equity Loan, which exceptions are generally acceptable to banking
institutions in connection with their regular mortgage lending activities,
and such other exceptions to which similar properties are commonly subject
and which do not individually, or in the aggregate, materially and
adversely affect the benefits of the security intended to be provided by
such Mortgage;
(xi) Immediately prior to the transfer and assignment of the Home
Equity Loans by the related Seller to the Depositor and by the Depositor to
the Trust herein contemplated, such Seller and the Depositor, as the case
may be, held good and indefeasible title to, and was the sole owner of,
each Home Equity Loan (including the related Note) conveyed by such Seller
subject to no liens, charges, mortgages, encumbrances or rights of others
except as set forth in clause (ix) or other liens which will be released
simultaneously with such transfer and assignment; and immediately upon the
transfer and assignment herein contemplated, the Trustee will hold good and
indefeasible title to, and be the sole owner of, each Home Equity Loan
subject to no liens, charges, mortgages, encumbrances or rights of others
except as set forth in paragraph (ix) or other liens which will be released
simultaneously with such transfer and assignment;
(xii)As of the Startup Day, (a) no more than 2.35% and 2.40% of the
Fixed Rate Home Equity Loans and the Adjustable Rate Home Equity Loans,
respectively, as a percentage of the outstanding aggregate Loan Balance of
such Home Equity Loans are 30-59 days Delinquent, (b) no more than 0.38%
and 0.27% of the Fixed Rate Home Equity Loans and the Adjustable Rate Home
Equity Loans, respectively, as a percentage of the outstanding aggregate
Loan Balance of such Home Equity Loans, are 60-89 days Delinquent, (c) none
of the Home Equity Loans, is 90 or more days Delinquent, (d) no Mortgagor
of any Home Equity Loan has been 30 days or more Delinquent more than once
during the 12 months immediately preceding the Startup Day except as
indicated on Schedule III attached hereto and (e) no Mortgagor of any Home
Equity Loan has been 90 or more days Delinquent during the 12 months
immediately preceding the Startup Day except as indicated on Schedule III
attached hereto;
(xiii) There is no delinquent tax or assessment lien on any
Property, and each Property is free of substantial damage and is in good
repair;
(xiv) There is no valid and enforceable offset, defense or
counterclaim to any Note or Mortgage, including the obligation of the
related Mortgagor to pay the unpaid principal of or interest on such Note;
(xv) There is no mechanics' lien or claim for work, labor or
material affecting any Property which is or may be a lien prior to, or
equal with, the lien of the related Mortgage except those which are insured
against by any title insurance policy referred to in paragraph (xvi) below;
(xvi)Each Home Equity Loan at the time it was made complied in all
material respects with applicable state and federal laws and regulations,
including, without limitation, the federal Truth-in-Lending Act and other
consumer protection laws, usury, equal credit opportunity, disclosure and
recording laws;
(xvii) With respect to each Home Equity Loan either (a) an
attorney's opinion of title has been obtained but no title policy has been
obtained (provided that no title policy has been obtained with respect to
not more than 1.0% of the Original Aggregate Loan Balance of the Home
Equity Loans), or (b) a lender's title insurance policy, issued in standard
American Land Title Association form by a title insurance company
authorized to transact business in the state in which the related Property
is situated, in an amount at least equal to the original balance of such
Home Equity Loan together, in the case of a Second Mortgage Loan, with the
then-current principal balance of the mortgage note relating to the Senior
Lien, insuring the mortgagee's interest under the related Home Equity Loan
as the holder of a valid first or second mortgage lien of record on the
real property described in the related Mortgage, as the case may be,
subject only to exceptions of the character referred to in paragraph (ix)
above, was effective on the date of the origination of such Home Equity
Loan, and, as of the Startup Day, such policy is valid and thereafter such
policy shall continue in full force and effect;
(xviii) Each Sub-Servicer, if any, is a qualified servicer as
defined in Section 8.03 with respect to the Home Equity Loans serviced by
it;
(xix) The improvements upon each Property are covered by a valid and
existing hazard insurance policy with a generally acceptable carrier that
provides for fire and extended coverage representing coverage not less than
the least of (A) the outstanding principal balance of the related Home
Equity Loan (together, in the case of a Second Mortgage Loan, with the
outstanding principal balance of the Senior Lien), (B) the minimum amount
required to compensate for damage or loss on a replacement cost basis or
(C) the full insurable value of the Property;
(xx) If any Property is in an area identified in the Federal
Register by the Federal Emergency Management Agency as having special flood
hazards, a flood insurance policy in a form meeting the requirements of the
current guidelines of the Flood Insurance Administration is in effect with
respect to such Property with a generally acceptable carrier in an amount
representing coverage not less than the least of (A) the outstanding
principal balance of the related Home Equity Loan (together, in the case of
a Second Mortgage Loan, with the outstanding principal balance of the
Senior Lien), (B) the minimum amount required to compensate for damage or
loss on a replacement cost basis or (C) the maximum amount of insurance
that is available under the Flood Disaster Protection Act of 1973;
(xxi)Each Mortgage and Note is the legal, valid and binding
obligation of the maker thereof and is enforceable in accordance with its
terms, except only as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of
equity (whether considered in a proceeding or action in equity or at law),
and all parties to each Home Equity Loan had full legal capacity to execute
all documents relating to such Home Equity Loan and convey the estate
therein purported to be conveyed;
(xxii) Each Seller has caused and will cause to be performed any and
all acts required to be performed to preserve the rights and remedies of
the Trustee in any Insurance Policies applicable to any Home Equity Loans
delivered by such Seller including, without limitation, any necessary
notifications of insurers, assignments of policies or interests therein,
and establishments of co-insured, joint loss payee and mortgagee rights in
favor of the Trustee;
(xxiii) As of the Startup Day, no more than 0.32% and 0.32% of the
aggregate Loan Balance of the Fixed Rate Home Equity Loans and the
Adjustable Rate Home Equity Loans, respectively, will be secured by
Properties located within any single zip code area;
(xxiv) Each original Mortgage was recorded or is in the process of
being recorded, and all subsequent assignments of the original Mortgage
have been delivered for recordation or have been recorded in the
appropriate jurisdictions wherein such recordation is necessary to perfect
the lien thereof as against creditors of or purchasers from the Seller
delivering the related Home Equity Loan (or, subject to Section 3.05
hereof, are in the process of being recorded);
(xxv) The terms of each Note and each Mortgage have not been
impaired, altered or modified in any respect, except by a written
instrument which has been recorded, if necessary, to protect the interest
of the Owners and the Certificate Insurer and which has been delivered to
the Trustee. The substance of any such alteration or modification is
reflected on the related Schedule of Home Equity Loans;
(xxvi) The proceeds of each Home Equity Loan have been fully
disbursed, and there is no obligation on the part of the mortgagee to make
future advances thereunder. Any and all requirements as to completion of
any on-site or off-site improvements and as to disbursements of any escrow
funds therefor have been complied with. All costs, fees and expenses
incurred in making or closing or recording such Home Equity Loans were
paid;
(xxvii) The related Note is not and has not been secured by any
collateral, pledged account or other security except the lien of the
corresponding Mortgage;
(xxviii) No Home Equity Loan was originated under a buydown plan;
(xxix) No Home Equity Loan has a shared appreciation feature, or
other contingent interest feature;
(xxx) Each Property is located in the state identified in the
respective Schedule of Home Equity Loans and consists of one or more
parcels of real property with a residential dwelling erected thereon;
(xxxi) Each Mortgage contains a provision for the acceleration of
the payment of the unpaid principal balance of the related Home Equity Loan
in the event the related Property is sold without the prior consent of the
mortgagee thereunder;
(xxxii) Any advances made after the date of origination of a Home
Equity Loan but prior to the Cut-Off Date have been consolidated with the
outstanding principal amount secured by the related Mortgage, and the
secured principal amount, as consolidated, bears a single interest rate and
single repayment term reflected on the respective Schedule of Home Equity
Loans. The consolidated principal amount does not exceed the original
principal amount of the related Home Equity Loan. No Note permits or
obligates the Servicer to make future advances to the related Mortgagor at
the option of the Mortgagor;
(xxxiii) There is no proceeding pending or threatened for the total
or partial condemnation of any Property, nor is such a proceeding currently
occurring, and each Property is undamaged by waste, fire, water, flood,
earthquake or earth movement;
(xxxiv) All of the improvements which were included for the purposes
of determining the Appraised Value of any Property lie wholly within the
boundaries and building restriction lines of such Property, and no
improvements on adjoining properties encroach upon such Property, and are
stated in the title insurance policy and affirmatively insured;
(xxxv) No improvement located on or being part of any Property is in
violation of any applicable zoning law or regulation. All inspections,
licenses and certificates required to be made or issued with respect to all
occupied portions of each Property and, with respect to the use and
occupancy of the same, including but not limited to certificates of
occupancy and fire underwriting certificates, have been made or obtained
from the appropriate authorities and such Property is lawfully occupied
under the applicable law;
(xxxvi) With respect to each Mortgage constituting a deed of trust,
a trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in such Mortgage,
and no fees or expenses are or will become payable by the Owners or the
Trust to the trustee under the deed of trust, except in connection with a
trustee's sale after default by the related Mortgagor;
(xxxvii) Each Mortgage contains customary and enforceable provisions
which render the rights and remedies of the holder thereof adequate for the
realization against the related Property of the benefits of the security,
including (A) in the case of a Mortgage designated as a deed of trust, by
trustee's sale and (B) otherwise by judicial foreclosure. There is no
homestead or other exemption available to the related Mortgagor which would
materially interfere with the right to sell the related Property at a
trustee's sale or the right to foreclose the related Mortgage;
(xxxviii) There is no default, breach, violation or event of
acceleration existing under any Mortgage or the related Note and no event
which, with the passage of time or with notice and the expiration of any
grace or cure period, would constitute a default, breach, violation or
event of acceleration; and neither the Servicer nor the related Seller has
waived any default, breach, violation or event of acceleration;
(xxxix) No instrument of release or waiver has been executed in
connection with any Home Equity Loan, and no Mortgagor has been released,
in whole or in part, except in connection with an assumption agreement
which has been approved by the primary mortgage guaranty insurer, if any,
and which has been delivered to the Trustee;
(xl) The maturity date of each Home Equity Loan is at least twelve
months prior to the maturity date of the related first mortgage loan if
such first mortgage loan provides for a balloon payment;
(xli)Each Home Equity Loan conforms, and all such Home Equity Loans
in the aggregate conform, in all material respects to the description
thereof set forth in the Prospectus Supplement;
(xlii) The credit underwriting guidelines applicable to each Home
Equity Loan conform in all material respects to the description thereof set
forth in the Prospectus Supplement;
(xliii) Each Home Equity Loan was originated based upon a full
appraisal, which included an interior inspection of the subject property;
(xliv) The Home Equity Loans were not selected for inclusion in the
Trust by the Sellers on any basis intended to adversely affect the Trust;
(xlv)No more than 3.87% and 4.61% of the aggregate Loan Balance of
the Fixed Rate Home Equity Loans and the Adjustable Rate Home Equity Loans,
respectively, are secured by Properties that are non-owner occupied
Properties (i.e., investor-owned and vacation);
(xlvi) No more than 6.46% and 9.69% of the aggregate Loan Balance of
the Fixed Rate Home Equity Loans and the Adjustable Rate Home Equity Loans,
respectively, are secured by Home Equity Loans which were originated under
ContiMortgage's non-income verification program;
(xlvii) Neither Seller has any actual knowledge that there exist any
hazardous substances, hazardous wastes or solid wastes, as such terms are
defined in the Comprehensive Environmental Response Compensation and
Liability Act, the Resource Conservation and Recovery Act of 1976, or other
federal, state or local environmental legislation on any Property;
(xlviii) Both Sellers were properly licensed or otherwise
authorized, to the extent required by applicable law, to originate or
purchase each Home Equity Loan; and the consummation of the transactions
herein contemplated, including, without limitation, the receipt of interest
by the Owners and the ownership of the Home Equity Loans by the Trustee as
trustee of the Trust will not involve the violation of such laws;
(xlix) With respect to each Property subject to a ground lease (i)
the current ground lessor has been identified and all ground rents which
have previously become due and owing have been paid; (ii) the ground lease
term extends, or is automatically renewable, for at least five years beyond
the maturity date of the related Home Equity Loan; (iii) the ground lease
has been duly executed and recorded; (iv) the amount of the ground rent and
any increases therein are clearly identified in the lease and are for
predetermined amounts at predetermined times; (v) the ground rent payment
is included in the borrower's monthly payment as an expense item; (vi) the
Trust has the right to cure defaults on the ground lease; and (vii) the
terms and conditions of the leasehold do not prevent the free and absolute
marketability of the Property. As of the Cut-Off Date, the Loan Balance of
the Home Equity Loans with related Properties subject to ground leases does
not exceed 1% of the Original Aggregate Loan Balance;
(l) All taxes, governmental assessments, insurance premiums, water,
sewer and municipal charges, leasehold payments or ground rents which
previously became due and owing have been paid, or an escrow of funds has
been established in an amount sufficient to pay for every such item which
remains unpaid and which has been assessed but is not yet due and payable;
(li) As of the Startup Day, neither Seller has received a notice of
default of any first mortgage loan secured by any Property which has not
been cured by a party other than such Seller;
(lii) All of the Adjustable Rate Home Equity Loans are in a first
lien position;
(liii) As of the Cut-off Date, each Home Equity Loan has an
outstanding balance of less than $450,000;
(liv) Each Home Equity Loan is secured by a mortgage on property
which, at the time of origination of each Home Equity Loan, has an
appraised value of not more than $1,275,000;
(lv) No more than 6.25% of the Fixed Rate Home Equity Loans and none
of the Adjustable Rate Home Equity Loans are in a second priority position;
and
(lvi)The weighted average margin of the Adjustable Rate Home Equity
Loans is 6.223%.
(c) In the event that any such repurchase results in a prohibited
transaction tax, the Trustee shall immediately notify the related Seller in
writing thereof and such Seller will, within 10 days of receiving notice thereof
from the Trustee, deposit the amount due from the Trust with the Trustee for the
payment thereof, including any interest and penalties, in immediately available
funds. In the event that any Qualified Replacement Mortgage is delivered by
either Seller to the Trust pursuant to Section 3.03, Section 3.04 or Section
3.06 hereof, such Seller shall be obligated to take the actions described in
Section 3.04(a) with respect to such Qualified Replacement Mortgage upon the
discovery by any of the Owners, the other Seller, the Servicer, any
Sub-Servicer, the Certificate Insurer or the Trustee that the statements set
forth in clause (ix), (x), (xiii), (xxxvi), (xl) or (xli) of subsection (b)
above are untrue in any material respect on the date such Qualified Replacement
Mortgage is conveyed to the Trust or that any of the other statements set forth
in subsection (b) above are untrue on the date such Qualified Replacement
Mortgage is conveyed to the Trust such that the interests of the Owners or the
Certificate Insurer in the related Qualified Replacement Mortgage are materially
and adversely affected; provided, however, that for the purposes of this
subsection (c) the statements in subsection (b) above referring to items "as of
the Cut-Off Date" or "as of the Startup Day" shall be deemed to refer to such
items as of the date such Qualified Replacement Mortgage is conveyed to the
Trust. Notwithstanding the fact that a representation contained in subsection
(b) above may be limited to a Seller's knowledge, such limitation shall not
relieve a Seller of its repurchase obligation under this Section and Section
3.05 hereof.
(d) It is understood and agreed that the covenants set forth in this
Section 3.04 shall survive delivery of the respective Home Equity Loans
(including Qualified Replacement Mortgages) to the Trustee.
(e) The Trustee shall have no duty to conduct any affirmative
investigation other than as specifically set forth in this Agreement as to the
occurrence of any condition requiring the repurchase or substitution of any Home
Equity Loan pursuant to this Article III or the eligibility of any Home Equity
Loan for the purpose of this Agreement.
Section 3.05 Conveyance of the Home Equity Loans and Qualified
Replacement Mortgages.
(a) On the Startup Day each Seller, concurrently with the execution
and delivery hereof, hereby transfers, assigns, sets over and otherwise conveys
to the Depositor and the Depositor, concurrently with the execution and delivery
hereof, transfers, assigns, sets over and otherwise conveys, without recourse,
to the Trust all of their respective right, title and interest in and to the
Trust Estate; provided, however, that each Seller reserves and retains all of
its right, title and interest in and to principal (including Prepayments)
collected and interest accrued on each Home Equity Loan on or prior to the
Cut-Off Date. The transfer by the Depositor of the Home Equity Loans set forth
on the Schedule of Home Equity Loans to the Trustee is absolute and is intended
by the Owners and all parties hereto to be treated as a sale by the Depositor.
It is intended that the sale, transfer, assignment and conveyance
herein contemplated constitute a sale of the Home Equity Loans conveying good
title thereto free and clear of any liens and encumbrances from each Seller to
the Depositor and from the Depositor to the Trust and that the Home Equity Loans
not be part of the Depositor's or either Seller's estate in the event of
insolvency. In the event that such conveyance is deemed to be a loan, the
parties intend that each Seller shall be deemed to have granted to the Depositor
and the Depositor shall be deemed to have granted to the Trustee a first
priority perfected security interest in the Trust Estate, and that this
Agreement shall constitute a security agreement under applicable law.
In connection with such sale, transfer, assignment, and conveyance
from the Sellers to the Depositor, each Seller has filed, in the appropriate
office or offices in the States of Delaware, Pennsylvania and Nevada, as the
case may be, a UCC-1 financing statement executed by such Seller as debtor,
naming the Depositor as secured party and listing the Home Equity Loans and the
other property described above as collateral. The characterization of a Seller
as debtor and the Depositor as secured party on such financing statements is
solely for protective purposes and shall in no way be construed as being
contrary to the intent of the parties that this transaction be treated as a sale
of such Seller's entire right, title and interest in and to the Trust Estate. In
connection with such filing, each Seller agrees that it shall cause to be filed
all necessary continuation statements thereof and to take or cause to be taken
such actions and execute such documents as are necessary to perfect and protect
the Trustee's, the Certificate Insurer's and the Owners' interest in the Trust
Estate.
In connection with such sale, transfer, assignment, and conveyance
from the Depositor to the Trustee, the Depositor has filed, in the appropriate
office or offices in the States of New York and Delaware, a UCC-1 financing
statement executed by the Depositor as debtor, naming the Trustee as secured
party and listing the Home Equity Loans and the other property described above
as collateral. The characterization of the Depositor as debtor and the Trustee
as secured party in such financing statements is solely for protective purposes
and shall in no way be construed as being contrary to the intent of the parties
that this transaction be treated as a sale of the Depositor's entire right,
title and interest in and to the Trust Estate. In connection with such filing,
the Depositor agrees that it shall cause to be filed all necessary continuation
statements thereof and to take or cause to be taken such actions and execute
such documents as are necessary to perfect and protect the Trustee's, the
Certificate Insurer's and the Owners= interest in the Trust Estate.
(b) In connection with the transfer and assignment of the Home Equity
Loans, the Depositor agrees to:
(i) deliver without recourse to the Trustee on the Startup Day with
respect to each Home Equity Loan (A) the original Notes endorsed in blank
or to the order of the Trustee, (B) the original title insurance policy or
a copy certified by the issuer of the title insurance policy, or the
attorney's opinion of title, (C) originals or certified copies of all
intervening assignments, showing a complete chain of title from origination
to the Trustee, if any, including warehousing assignments, with evidence of
recording thereon, (D) originals of all assumption and modification
agreements, if any and (E) either: (1) the original Mortgage, with evidence
of recording thereon (if such original Mortgage has been returned to the
related Seller from the applicable recording office or a certified copy
thereof if such original Mortgage has not been returned to the related
Seller from the applicable recording office), or (2) a copy of the Mortgage
certified by the public recording office in those instances where the
original recorded Mortgage has been lost;
(ii) cause, within 15 days following the receipt from the relevant
state authorities, assignments of the Mortgages to "Manufacturers and
Traders Trust Company, as Trustee of ContiMortgage Home Equity Loan Trust
1997-4 under the Pooling and Servicing Agreement dated as of June 1, 1997"
to be submitted for recording in the appropriate jurisdictions; provided,
however, that the Depositor shall not be required to record an assignment
of a Mortgage if the Depositor furnishes to the Trustee and the Certificate
Insurer, on or before the Startup Day, at the Depositor's expense an
opinion of counsel with respect to the relevant jurisdiction that such
recording is not necessary to perfect the Trustee's interest in the related
Home Equity Loans (in form and substance and from counsel satisfactory to
the Rating Agencies and the Certificate Insurer); notwithstanding the
furnishing of such opinion of counsel, however, the Certificate Insurer
may, in its reasonable discretion after consultation with the Depositor
prior to the date on which all assignments of Mortgages are required to be
filed hereunder, require the filing of assignments of Mortgages in any
state that is the subject of such opinions; and
(iii)deliver the title insurance policy or title searches, the
original Mortgages and such recorded assignments, together with originals
or duly certified copies of any and all prior assignments, to the Trustee
within 15 days of receipt thereof by the Depositor (but in any event, with
respect to any Mortgage as to which original recording information has been
made available to the Depositor, within one year after the Startup Day).
Notwithstanding the delivery of opinions specified in clause (iii)
above the Trustee shall cause to be recorded each assignment of a Mortgage upon
the earliest to occur of (a) the reasonable direction of the Certificate
Insurer, (b) the removal of the Servicer pursuant to Section 8.20 hereof or (c)
notification to the Trustee of the occurrence of a bankruptcy or insolvency
relating to the Mortgagor.
Notwithstanding anything to the contrary contained in this Section
3.05, in those instances where the public recording office retains the original
Mortgage, the assignment of a Mortgage or the intervening assignments of the
Mortgage after it has been recorded, the Depositor shall be deemed to have
satisfied its obligations hereunder upon delivery to the Trustee of a copy of
such Mortgage, such assignment or assignments of Mortgage certified by the
public recording office to be a true copy of the recorded original thereof.
Not later than ten days following the end of the 60-day period
referred in clause (ii) of the second preceding paragraph, each Seller shall
deliver to the Trustee a list of all Mortgages with respect to Home Equity Loans
delivered by such Seller for which no Mortgage assignment has yet been submitted
for recording by such Seller, which list shall state the reason why such Seller
has not yet submitted such Mortgage assignments for recording. With respect to
any Mortgage assignment disclosed on such list as not yet submitted for
recording for a reason other than a lack of original recording information, the
Trustee shall make an immediate demand on such Seller to prepare such Mortgage
assignments, and shall inform the Certificate Insurer of such Seller's failure
to prepare such Mortgage assignments. Thereafter, the Trustee shall cooperate in
executing any documents prepared by the Certificate Insurer and submitted to the
Trustee in connection with this provision. Following the expiration of the
60-day period referred to in clause (ii) of the second preceding paragraph, each
Seller shall promptly prepare a Mortgage assignment for any Mortgage with
respect to Home Equity Loans delivered by such Seller for which original
recording information is subsequently received by such Seller, and shall
promptly deliver a copy of such Mortgage assignment to the Trustee. Each Seller
agrees that it will follow its normal servicing procedures and attempt to obtain
the original recording information necessary to complete a Mortgage assignment
with respect to Home Equity Loans delivered by such Seller. In the event that a
Seller is unable to obtain such recording information with respect to any
Mortgage prior to the end of the 18th calendar month following the Startup Day
and has not provided to the Trustee a Mortgage assignment with evidence of
recording thereon relating to the assignment of such Mortgage to the Trustee,
the Trustee shall notify such Seller of such Seller's obligation to provide a
completed assignment (with evidence of recording thereon) on or before the end
of the 20th calendar month following the Startup Day with respect to the Home
Equity Loans. A copy of such notice shall be sent by the Trustee to the
Certificate Insurer. If no such completed assignment (with evidence of recording
thereon) is provided before the end of such 20th calendar month, the related
Home Equity Loan shall be deemed to have breached the representation contained
in clause (xxiii) of Section 3.04(b) hereof; provided, however, that if as of
the end of such 20th calendar month either Seller then required to deliver such
a completed assignment demonstrates to the satisfaction of the Certificate
Insurer that it is exercising its best efforts to obtain such completed
assignment and, during each month thereafter until such completed assignment is
delivered to the Trustee, such Seller continues to demonstrate to the
satisfaction of the Certificate Insurer that it is exercising its best efforts
to obtain such completed assignment, the related Home Equity Loan will not be
deemed to have breached such representation. The requirement to deliver a
completed assignment with evidence of recording thereon will be deemed satisfied
upon delivery of a copy of the completed assignment certified by the applicable
public recording office.
Copies of all Mortgage assignments received by the Trustee shall be
retained in the related File.
All recording required pursuant to this Section 3.05 with respect to
one or more Home Equity Loans shall be accomplished at the expense of the Seller
delivering such Home Equity Loan.
(c) In the case of Home Equity Loans which have been prepaid in full
after the Cut-Off Date and prior to the Startup Day, the Depositor, in lieu of
the foregoing, will deliver within six (6) days after the Startup Day to the
Trustee a certification of an Authorized Officer in the form set forth in
Exhibit D.
(d) Each Seller shall transfer, assign, set over and otherwise convey,
without recourse, to the Trustee all right, title and interest of such Seller in
and to any Qualified Replacement Mortgage delivered to the Trustee on behalf of
the Trust by such Seller pursuant to Section 3.03, 3.04 or 3.06 hereof and all
its right, title and interest to principal and interest due on such Qualified
Replacement Mortgage after the applicable Replacement Cut-Off Date; provided,
however, that such Seller shall reserve and retain all right, title and interest
in and to payments of principal and interest due on such Qualified Replacement
Mortgage on or prior to the applicable Replacement Cut-Off Date.
(e) As to each Home Equity Loan released from the Trust in connection
with the conveyance of a Qualified Replacement Mortgage therefor, the Trustee
will transfer, assign, set over and otherwise convey without recourse or
representation, on the order of the Seller delivering such Home Equity Loan, all
of its right, title and interest in and to such released Home Equity Loan and
all the Trust's right, title and interest to principal and interest due on such
released Home Equity Loan after the applicable Replacement Cut-Off Date;
provided, however, that the Trust shall reserve and retain all right, title and
interest in and to payments of principal and interest due on such released Home
Equity Loan on or prior to the applicable Replacement Cut-Off Date.
(f) In connection with any transfer and assignment of a Qualified
Replacement Mortgage to the Trustee on behalf of the Trust, each Seller agrees
to (i) deliver without recourse to the Trustee on the date of delivery of such
Qualified Replacement Mortgage the original Note relating thereto, endorsed in
blank or to the order of the Trustee, (ii) cause promptly to be recorded an
assignment in the appropriate jurisdictions, (iii) deliver the original
Qualified Replacement Mortgage and such recorded assignment, together with
original or duly certified copies of any and all prior assignments, to the
Trustee within 15 days of receipt thereof by such Seller (but in any event
within 120 days after the date of conveyance of such Qualified Replacement
Mortgage) and (iv) deliver the title insurance policy, or where no such policy
is required to be provided under Section 3.05(b)(i)(B), the other evidence of
title in the same manner required in Section 3.05(b)(i)(B).
(g) As to each Home Equity Loan released from the Trust in connection
with the conveyance of a Qualified Replacement Mortgage the Trustee shall
deliver on the date of conveyance of such Qualified Replacement Mortgage and on
the order of the Seller delivering such Qualified Replacement Mortgage (i) the
original Note relating thereto, endorsed without recourse or representation, to
such Seller, (ii) the original Mortgage so released and all assignments relating
thereto and (iii) such other documents as constituted the File with respect
thereto.
(h) If a Mortgage assignment is lost during the process of recording,
or is returned from the recorder's office unrecorded due to a defect therein,
the Seller that delivered the corresponding Home Equity Loan shall prepare a
substitute assignment or cure such defect, as the case may be, and thereafter
cause each such assignment to be duly recorded.
Section 3.06 Acceptance by Trustee; Certain Substitutions of Home
Equity Loans; Certification by Trustee.
(a) The Trustee agrees to execute and deliver on the Startup Day an
acknowledgment of receipt of the items delivered by each of the Sellers and the
Depositor in the form attached as Exhibit E hereto, and declares that it will
hold such documents and any amendments, replacement or supplements thereto, as
well as any other assets included in the definitions of Trust Estate and
delivered to the Trustee, as Trustee in trust upon and subject to the conditions
set forth herein for the benefit of the Owners. The Trustee agrees, for the
benefit of the Owners, to review such items within 45 days after the Startup Day
(or, with respect to any document delivered after the Startup Day, within 45
days of receipt and with respect to any Qualified Replacement Mortgage, within
45 days after the assignment thereof) and to deliver to the Depositor, each of
the Sellers, the Certificate Insurer and the Servicer a certification in the
form attached hereto as Exhibit F (a "Pool Certification") to the effect that,
as to each Home Equity Loan listed in the Schedule of Home Equity Loans (other
than any Home Equity Loan paid in full or any Home Equity Loan specifically
identified in such Pool Certification as not covered by such Pool
Certification), (i) all documents required to be delivered to it pursuant to
Section 3.05(b)(i) of this Agreement are in its possession, (ii) such documents
have been reviewed by it and have not been mutilated, damaged or torn and relate
to such Home Equity Loan and (iii) based on its examination and only as to the
foregoing documents, the information set forth on the Schedule of Home Equity
Loans accurately reflects the information set forth in the File. The Trustee
shall have no responsibility for reviewing any File except as expressly provided
in this subsection 3.06(a). Without limiting the effect of the preceding
sentence, in reviewing any File, the Trustee shall have no responsibility for
determining whether any document is valid and binding, whether the text of any
assignment is in proper form (except to determine if the Trustee is the
assignee), whether any document has been recorded in accordance with the
requirements of any applicable jurisdiction or whether a blanket assignment is
permitted in any applicable jurisdiction, but shall only be required to
determine whether a document has been executed, that it appears to be what it
purports to be, and, where applicable, that it purports to be recorded. The
Trustee shall be under no duty or obligation to inspect, review or examine any
such documents, instruments, certificates or other papers to determine that they
are genuine, enforceable, or appropriate for the represented purpose or that
they are other than what they purport to be on their face, nor shall the Trustee
be under any duty to determine independently whether there are any intervening
assignments or assumption or modification agreements with respect to any Home
Equity Loan.
(b) If the Trustee during such 45-day period finds any document
constituting a part of a File which is not executed, has not been received, or
is unrelated to the Home Equity Loans identified in the Schedule of Home Equity
Loans, or that any Home Equity Loan does not conform to the description thereof
as set forth in the Schedule of Home Equity Loans, the Trustee shall promptly so
notify the Depositor, each of the Sellers, the Certificate Insurer and the
Owners. In performing any such review, the Trustee may conclusively rely as to
the purported genuineness of any such document and any signature thereon. It is
understood that the scope of the Trustee's review of the items delivered by each
of the Sellers pursuant to Section 3.05(b)(i) is limited solely to confirming
that the documents listed in Section 3.05(b)(i) have been executed and received,
relate to the Files identified in the Schedule of Home Equity Loans and conform
to the description thereof in the Schedule of Home Equity Loans. Each Seller
agrees to use reasonable efforts to remedy a material defect in a document
constituting part of a File delivered by such Seller of which it is so notified
by the Trustee. If, however, within 60 days after the Trustee's notice to it
respecting such defect the related Seller has not remedied the defect and the
defect materially and adversely affects the interest of the Owners or the
Certificate Insurer in the related Home Equity Loan such Seller will (or will
cause an affiliate of such Seller to) on the next succeeding Monthly Remittance
Date (i) substitute in lieu of such Home Equity Loan a Qualified Replacement
Mortgage and deliver the Substitution Amount to the Servicer for deposit in the
Principal and Interest Account or (ii) purchase such Home Equity Loan at a
purchase price equal to the Loan Purchase Price thereof, which purchase price
shall be delivered to the Servicer for deposit in the Principal and Interest
Account.
(c) In addition to the foregoing, the Trustee also agrees to make a
review during the 12th month after the Startup Day indicating the current status
of the exceptions previously indicated on the Pool Certification (the "Final
Certification"). After delivery of the Final Certification, the Trustee and the
Servicer shall monitor and upon request from the Certificate Insurer provide no
less frequently than monthly, updated certifications indicating the then current
status of exceptions, until all such exceptions have been eliminated.
END OF ARTICLE III
ARTICLE IV ISSUANCE AND SALE OF CERTIFICATES
Section 4.01 Issuance of Certificates.
On the Startup Day, upon the Trustee's receipt from the Depositor of
an executed Delivery Order in the form set forth as Exhibit G hereto, the
Trustee shall authenticate and deliver the Certificates on behalf of the Trust.
Section 4.02 Sale of Certificates.
At 11 a.m. New York City time on the Startup Day (the "Closing"), at
the offices of Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New
York (or at such other location acceptable to the Seller), the Sellers will sell
and convey the Home Equity Loans and the money, instruments and other property
related thereto to the Depositor and the Depositor will sell and convey the Home
Equity Loans and the money, instruments and other property related thereto to
the Trustee, and the Trustee will deliver (i) to the Underwriters the Offered
Certificates with an aggregate Percentage Interest in each Class equal to 100%,
registered in the name of Cede & Co., or in such other names as the Underwriters
shall direct, against payment of the purchase price thereof by wire transfer of
immediately available funds to the Trustee and (ii) to the respective registered
Owners thereof, a Class C Certificate with a Percentage Interest equal to 100%,
registered in the name of ContiSecurities Holding Corporation, a Class R-I, a
Class R-II and a Class R Certificate each with a Percentage Interest equal to
99.999%, registered in the name of ContiSecurities Holding Corporation and a
Class R-I, a Class R-II and a Class R Certificate each with a Percentage
Interest equal to .001%, registered in the name of ContiFunding Corporation.
Upon the Trustee's receipt of the entire net proceeds of the sale of
the Certificates, the Trustee shall remit the entire balance of such net
proceeds to the Depositor in accordance with instructions delivered by the
Depositor.
END OF ARTICLE IV
ARTICLE V CERTIFICATES AND TRANSFER OF INTERESTS
Section 5.01 Terms.
(a) The Certificates are pass-through securities having the rights
described therein and herein. Notwithstanding references herein or therein with
respect to the Certificates to "principal" and "interest" no debt of any Person
is represented thereby, nor are the Certificates or the underlying Notes
guaranteed by any Person (except that the Notes may be recourse to the
Mortgagors thereof to the extent permitted by law) and except for the rights of
the Trustee on behalf of the Owners of the Class A Certificates with respect to
the Certificate Insurance Policy. The Certificates are payable solely from
payments received on or with respect to the Home Equity Loans (other than the
Servicing Fees), moneys in the Principal and Interest Account, earnings on
moneys and the proceeds of property held as a part of the Trust Estate. Each
Certificate entitles the Owner thereof to receive monthly on each Payment Date,
in order of priority of distributions with respect to such Class of Certificates
as set forth in Section 7.03, a specified portion of such payments with respect
to the Home Equity Loans, pro rata in accordance with such Owner's Percentage
Interest.
(b) Each Owner is required, and hereby agrees, to return to the
Trustee any Certificate with respect to which the Trustee has made the final
distribution due thereon. Any such Certificate as to which the Trustee has made
the final distribution thereon shall be deemed canceled and shall no longer be
Outstanding for any purpose of this Agreement, whether or not such Certificate
is ever returned to the Trustee.
Section 5.02 Forms.
The Class A-1 Certificates, the Class A-2 Certificates, the Class A-3
Certificates, the Class A-4 Certificates, the Class A-5 Certificates, the
Class A-6 Certificates, the Class A-7 Certificates, the Class A-7 IO
Certificates, the Class A-8 Certificates, the Class A-9 Certificates, the Class
B Certificates, the Class C Certificates and the Class R-I, Class R-II and Class
R Certificates shall be in substantially the forms set forth in Exhibits A-1,
A-2, A-3, A-4, A-5, A-6, A-7, A-7 IO, A-8, A-9, B, C, R-I, R-II and R hereof,
respectively, with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Agreement or as may in the
Depositor's judgment be necessary, appropriate or convenient to comply, or
facilitate compliance, with applicable laws, and may have such letters, numbers
or other marks of identification and such legends or endorsements placed thereon
as may be required to comply with the rules of any applicable securities laws or
as may, consistently herewith, be determined by the Authorized Officer of the
Depositor executing such Certificates, as evidenced by his execution thereof.
Section 5.03 Execution, Authentication and Delivery.
Each Certificate shall be executed on behalf of the Trust, by the
manual or facsimile signature of one of the Depositor's Authorized Officers and
shall be authenticated by the manual or facsimile signature of one of the
Trustee's Authorized Officers.
Certificates bearing the manual signature of individuals who were at
any time the proper officers of the Depositor shall, upon proper authentication
by the Trustee, bind the Trust, notwithstanding that such individuals or any of
them have ceased to hold such offices prior to the execution and delivery of
such Certificates or did not hold such offices at the date of authentication of
such Certificates.
The initial Certificates shall be dated as of the Startup Day and
delivered at the Closing to the parties specified in Section 4.02 hereof.
Subsequently issued Certificates will be dated as of the issuance of the
Certificate.
No Certificate shall be valid until executed and authenticated as set
forth above.
Section 5.04 Registration and Transfer of Certificates.
(b) The Trustee shall cause to be kept a register (the "Register") in
which, subject to such reasonable regulations as it may prescribe, the Trustee
shall provide for the registration of Certificates and the registration of
transfer of Certificates. The Trustee is hereby initially appointed Registrar
for the purpose of registering Certificates and transfers of Certificates as
herein provided. The Owners, the Certificate Insurer and the Trustee shall have
the right to inspect the Register during the Trustee's normal hours and to
obtain copies thereof, and the Trustee shall have the right to rely upon a
certificate executed on behalf of the Registrar by an Authorized Officer thereof
as to the names and addresses of the Owners of the Certificates and the
principal amounts and numbers of such Certificates.
If a Person other than the Trustee is appointed as Registrar by the
Owners of a majority of the aggregate Percentage Interests represented by the
Class A Certificates then Outstanding with the consent of the Certificate
Insurer, or if there are no longer any Offered Certificates then Outstanding, by
such majority of the Percentage Interests represented by the Class R-I
Certificates, the Trustee will give the Owners and the Certificate Insurer
prompt written notice of the appointment of such Registrar and of the location,
and any change in the location, of the Register. In connection with any such
appointment the annual fees of the bank then serving as Trustee and Registrar
shall thenceforth be reduced by the amount to be agreed upon by the Trustee and
the Depositor at such time and the reasonable fees of the Registrar shall be
paid, as expenses of the Trust, pursuant to Section 7.05 hereof.
(c) Subject to the provisions of Section 5.08 hereof, upon surrender
for registration of transfer of any Certificate at the office designated as the
location of the Register, upon the direction of the Registrar the Depositor
shall execute and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Certificates of a like
Class and in the aggregate principal amount or percentage interest of the
Certificate so surrendered.
(d) At the option of any Owner, Certificates of any Class owned by
such Owner may be exchanged for other Certificates authorized of like Class and
tenor and a like aggregate original principal amount or percentage interest and
bearing numbers not contemporaneously outstanding, upon surrender of the
Certificates to be exchanged at the office designated as the location of the
Register. Whenever any Certificate is so surrendered for exchange, upon the
direction of the Registrar, the Depositor and the Trustee shall execute,
authenticate and deliver the Certificate or Certificates which the Owner making
the exchange is entitled to receive.
(e) All Certificates issued upon any registration of transfer or
exchange of Certificates shall be valid evidence of the same ownership interests
in the Trust and entitled to the same benefits under this Agreement as the
Certificates surrendered upon such registration of transfer or exchange.
(f) Every Certificate presented or surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Registrar duly executed by
the Owner thereof or his attorney duly authorized in writing.
(g) No service charge shall be made to an Owner for any registration
of transfer or exchange of Certificates, but the Registrar or Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Certificates; any other expenses in connection with such transfer or
exchange shall be an expense of the Trust.
(h) It is intended that the Offered Certificates be registered so as
to participate in a global book-entry system with the Depository, as set forth
herein. Each Class of Offered Certificates shall, except as otherwise provided
in Subsection (h), be initially issued in the form of a single fully registered
Certificate of such Class. Upon initial issuance, the ownership of each such
Certificate shall be registered in the Register in the name of Cede & Co., or
any successor thereto, as nominee for the Depository.
On the Startup Day, the Offered Certificates (other than the Auction
Rate Certificates and the Class A-7 IO Certificates) shall be issued in
denominations of no less than $1,000 and integral multiples thereof. On the
Startup Day, the Class A-7 IO Certificates shall be issued in denominations of
no less than $1,000 (based on the Class A-7 IO Notional Principal Amount
thereof) and integral multiples thereof and the Auction Rate Certificates shall
be issued in denominations of $25,000 and in integral multiples thereof.
The Depositor and the Trustee are hereby authorized to execute and
deliver the Representation Letter with the Depository.
With respect to the Offered Certificates registered in the Register in
the name of Cede & Co., as nominee of the Depository, the Depositor, the
Servicer, the Sellers, the Certificate Insurer and the Trustee shall have no
responsibility or obligation to Direct or Indirect Participants or beneficial
owners for which the Depository holds Offered Certificates from time to time as
a Depository. Without limiting the immediately preceding sentence, the
Depositor, the Servicer, the Sellers, the Certificate Insurer and the Trustee
shall have no responsibility or obligation with respect to (i) the accuracy of
the records of the Depository, Cede & Co., or any Direct or Indirect Participant
with respect to the ownership interest in the Offered Certificates, (ii) the
delivery to any Direct or Indirect Participant or any other Person, other than a
registered Owner of an Offered Certificate as shown in the Register, of any
notice with respect to the Offered Certificates or (iii) the payment to any
Direct or Indirect Participant or any other Person, other than a registered
Owner of a Offered Certificate as shown in the Register, of any amount with
respect to any distribution of principal or interest on the Offered
Certificates. No Person other than a registered Owner of a Offered Certificate
as shown in the Register shall receive a certificate evidencing such Offered
Certificate.
Upon delivery by the Depository to the Trustee of written notice to
the effect that the Depository has determined to substitute a new nominee in
place of Cede & Co., and subject to the provisions hereof with respect to the
payment of interest by the mailing of checks or drafts to the registered Owners
of Offered Certificates appearing as registered Owners in the registration books
maintained by the Trustee at the close of business on a Record Date, the name
"Cede & Co." in this Agreement shall refer to such new nominee of the
Depository.
(i) In the event that (i) the Depository or the Depositor advises the
Trustee in writing that the Depository is no longer willing or able to discharge
properly its responsibilities as nominee and depository with respect to the
Offered Certificates and the Depositor or the Trustee is unable to locate a
qualified successor or (ii) the Depositor at its sole option elects to terminate
the book-entry system through the Depository, the Offered Certificates shall no
longer be restricted to being registered in the Register in the name of Cede &
Co. (or a successor nominee) as nominee of the Depository. At that time, the
Depositor may determine that the Offered Certificates shall be registered in the
name of and deposited with a successor depository operating a global book-entry
system, as may be acceptable to the Depositor and at the Depositor's expense, or
such depository's agent or designee but, if the Depositor does not select such
alternative global book-entry system, then the Offered Certificates may be
registered in whatever name or names registered Owners of Offered Certificates
transferring the Offered Certificates shall designate, in accordance with the
provisions hereof.
(j) Notwithstanding any other provision of this Agreement to the
contrary, so long as any of the Offered Certificates is registered in the name
of Cede & Co., as nominee of the Depository, all distributions of principal or
interest on such Offered Certificates and all notices with respect to such
Offered Certificates shall be made and given, respectively, in the manner
provided in the Representation Letter.
Section 5.05 Mutilated, Destroyed, Lost or Stolen Certificates.
If (i) any mutilated Certificate is surrendered to the Trustee, or the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Certificate, and (ii) in the case of any mutilated Certificate, such
mutilated Certificate shall first be surrendered to the Trustee, and in the case
of any destroyed, lost or stolen Certificate, there shall be first delivered to
the Trustee such security or indemnity as may be reasonably required by it to
hold the Trustee and the Certificate Insurer harmless, then, in the absence of
notice to the Trustee or the Registrar that such Certificate has been acquired
by a bona fide purchaser, the Depositor shall execute and the 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 aggregate principal amount, bearing a number not contemporaneously
outstanding.
Upon the issuance of any new Certificate under this Section, the
Registrar or Trustee may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto; any
other expenses in connection with such issuance shall be an expense of the
Trust.
Every new Certificate issued pursuant to this Section in exchange for
or in lieu of any mutilated, destroyed, lost or stolen Certificate shall
constitute evidence of a substitute interest in the Trust, and shall be entitled
to all the benefits of this Agreement equally and proportionately with any and
all other Certificates of the same Class duly issued hereunder and such
mutilated, destroyed, lost or stolen Certificate shall not be valid for any
purpose.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Certificates.
Section 5.06 Persons Deemed Owners.
The Trustee and the Certificate Insurer and any agent of the Trustee
may treat the Person in whose name any Certificate is registered as the Owner of
such Certificate for the purpose of receiving distributions with respect to such
Certificate and for all other purposes whatsoever and the Trustee and the
Certificate Insurer or any agent of the Trustee shall not be affected by notice
to the contrary.
Section 5.07 Cancellation.
All Certificates surrendered for registration of transfer or exchange
shall, if surrendered to any Person other than the Trustee, be delivered to the
Trustee and shall be promptly canceled by it. No Certificate shall be
authenticated in lieu of or in exchange for any Certificate canceled as provided
in this Section, except as expressly permitted by this Agreement. All canceled
Certificates may be held by the Trustee in accordance with its standard
retention policy.
Section 5.08 Limitation on Transfer of Ownership Rights.
(b) No sale or other transfer of record or beneficial ownership of a
Class R-I, Class R-II or Class R Certificate (whether pursuant to a purchase, a
transfer resulting from a default under a secured lending agreement or
otherwise) shall be made to a Disqualified Organization or an agent of a
Disqualified Organization. The transfer, sale or other disposition of a Class
R-I, Class R-II or Class R Certificate (whether pursuant to a purchase, a
transfer resulting from a default under a secured lending agreement or
otherwise) to a Disqualified Organization shall be deemed to be of no legal
force or effect whatsoever and such transferee shall not be deemed to be an
Owner for any purpose hereunder, including, but not limited to, the receipt of
distributions on such Class R-I, Class R-II or Class R Certificate. Furthermore,
in no event shall the Trustee accept surrender for transfer, registration of
transfer, or register the transfer, of any Class R-I, Class R-II or Class R
Certificate nor authenticate and make available any new Class R-I, Class R-II or
Class R Certificate unless the Trustee has received an affidavit from the
proposed transferee in the form attached hereto as Exhibit I. Each holder of a
Class R-I, Class R-II or Class R Certificate by his acceptance thereof, shall be
deemed for all purposes to have consented to the provisions of this Section
5.08(a). The Class R-I and Class R-II certificates are not transferable except
that the Owner of the Tax Matters Person Residual Interest in the REMIC I or
REMIC II may assign its interest to another Person who accepts such assignment
and the designation as Tax Matters Person pursuant to Section 11.18 hereof.
(c) No other sale or other transfer of record or beneficial ownership
of a Class C Certificate or a Class R-I, Class R-II or Class R Certificate shall
be made unless such transfer is exempt from the registration requirements of the
Securities Act and any applicable state securities laws or is made in accordance
with said Act and laws. In the event such a transfer is to be made within three
years from the Startup Day, (i) the Trustee or the Depositor shall require a
written opinion of counsel acceptable to and in form and substance satisfactory
to the Depositor and the Certificate Insurer in the event that such transfer may
be made pursuant to an exemption, describing the applicable exemption and the
basis therefor, from said Act and laws or is being made pursuant to said Act and
laws, which opinion of counsel shall not be an expense of the Trustee, the
Certificate Insurer or the Trust Estate, and (ii) the Trustee shall require the
Transferee to execute an investment letter acceptable to and in form and
substance satisfactory to each of the Sellers certifying to the Trustee, the
Certificate Insurer and each of the Sellers and the Certificate Insurer the
facts surrounding such transfer, which investment letter shall not be an expense
of the Trustee, the Trust Estate, the Certificate Insurer or either of the
Sellers. The Owner of a Class C Certificate or a Class R-I, Class R-II or Class
R Certificate desiring to effect such transfer shall, and does hereby agree to,
indemnify the Trustee, the Depositor, the Certificate Insurer and each of the
Sellers 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.
(d) No transfer of a, Class B Certificate, Class C Certificate or
Class R-I, Class R-II or Class R Certificate shall be made unless the Trustee
shall have received a representation letter from the transferee of such, Class B
Certificate, Class C Certificate or Class R-I,Class R-II or Class R Certificate,
acceptable to and in form and substance satisfactory to the Trustee, to the
effect that such transferee is not an employee benefit plan subject to Section
406 of ERISA nor a plan or other arrangement subject to Section 406 of ERISA nor
a plan or other arrangement subject to Section 4975 of the Code (collectively, a
"Plan"), nor is acting on behalf of any Plan nor using the assets of any Plan to
effect such transfer. Notwithstanding anything else to the contrary herein, any
purported transfer of a Certificate to or on behalf of any Plan without the
delivery to the Trustee a representation letter as described above shall be null
and void and of no effect.
(e) No sale or other transfer of any Offered Certificate may be made
to the Depositor, the Sellers or the Servicer. No sale or other transfer of any
Offered Certificate may be made to an affiliate of either Seller unless the
Trustee and the Certificate Insurer shall have been furnished with an opinion of
counsel acceptable to the Trustee and the Certificate Insurer experienced in
federal bankruptcy matters to the effect that such sale or transfer would not
adversely affect the character of the conveyance of the Home Equity Loans to the
Trust as a sale. No sale or other transfer of the Class R-I, Class R-II or Class
R Certificate issued to ContiFunding Corporation on the Startup Day may be
transferred or sold to any Person, except to a person who accepts the
appointment of Tax Matters Person pursuant to Section 11.18 hereof.
Section 5.09 Assignment of Rights.
An Owner may pledge, encumber, hypothecate or assign all or any part
of its right to receive distributions hereunder, but such pledge, encumbrance,
hypothecation or assignment shall not constitute a transfer of an ownership
interest sufficient to render the transferee an Owner of the Trust without
compliance with the provisions of Section 5.04 and Section 5.08 hereof.
END OF ARTICLE V
ARTICLE VI COVENANTS
Section 6.01 Distributions.
On each Payment Date, the Trustee will withdraw amounts from the
related Account(s) and make the distributions with respect to the Certificates
in accordance with the terms of the Certificates and this Agreement. Such
distributions shall be made (i) by check or draft mailed on each Payment Date or
(ii) if requested by any Owner of (A) an Offered Certificate (other than the
Class A-7 IO Certificates) having an original principal balance of not less than
$1,000,000, (B) a Class A-7 IO Certificate having an original Notional Principal
Amount of not less than $1,000,000 or (C) a Class C Certificate or Class R
Certificate having a Percentage Interest of not less than 10% in writing not
later than one Business Day prior to the applicable Record Date (which request
does not have to be repeated unless it has been withdrawn), to such Owner by
wire transfer to an account within the United States designated no later than
five Business Days prior to the related Record Date, made on each Payment Date,
in each case to each Owner of record on the immediately preceding Record Date.
Section 6.02 Money for Distributions to be Held in Trust; Withholding.
(b) All payments of amounts due and payable with respect to any
Certificate that are to be made from amounts withdrawn from the Certificate
Account, shall be made by and on behalf of the Trustee, and no amounts so
withdrawn from the Certificate Account, for payments of Certificates except as
provided in this Section.
(c) Whenever the Depositor has appointed one or more Paying Agents
pursuant to Section 11.15 hereof, the Trustee will, on the Business Day
immediately preceding each Payment Date, deposit with such Paying Agents in
immediately available funds an aggregate sum sufficient to pay the amounts then
becoming due (to the extent funds are then available for such purpose in the
Certificate Account for the Class to which such amounts are due) such sum to be
held in trust for the benefit of the Owners entitled thereto.
(d) The Depositor may at any time direct any Paying Agent to pay to
the Trustee all sums held in trust by such Paying Agent, such sums to be held by
the Trustee upon the same trusts as those upon which the sums were held by such
Paying Agent; and upon such payment by any Paying Agent to the Trustee, such
Paying Agent shall be released from all further liability with respect to such
money.
(e) The Depositor shall require each Paying Agent, including the
Trustee on behalf of the Trust to comply with all requirements of the Code and
applicable state and local law with respect to the withholding from any
distributions made by it to any Owner of any applicable withholding taxes
imposed thereon and with respect to any applicable reporting requirements in
connection therewith.
(f) Any money held by the Trustee or any Paying Agent in trust for the
payment of any amount due with respect to any Offered Certificate and remaining
unclaimed by the Owner of such Certificate for the period then specified in the
escheat laws of the State of New York after such amount has become due and
payable shall be discharged from such trust and be paid to the Owners of the
Class R Certificates; and the Owner of such Offered Certificate shall
thereafter, as an unsecured general creditor, look only to the Owners of the
Class R Certificates for payment thereof (but only to the extent of the amounts
so paid to the Owners of the Class R Certificates) and all liability of the
Trustee or such Paying Agent with respect to such trust money shall thereupon
cease; provided, however, that the Trustee or such Paying Agent before being
required to make any such payment, may, at the expense of the Trust, cause to be
published once, in the eastern edition of The Wall Street Journal, notice that
such money remains unclaimed and that, after a date specified therein, which
shall be not fewer than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be paid to the Owners of the Class R
Certificates. The Trustee shall, at the direction of the Depositor, also adopt
and employ, at the expense of the Trust, any other reasonable means of
notification of such payment (including but not limited to mailing notice of
such payment to Owners whose right to or interest in moneys due and payable but
not claimed is determinable from the records of the Registrar, the Trustee or
any Paying Agent, at the last address of record for each such Owner).
Section 6.03 Protection of Trust Estate.
(a) The Trustee will hold the Trust Estate in trust for the benefit of
the Owners and the Certificate Insurer and, upon request of the Certificate
Insurer or, with the consent of the Certificate Insurer at the request of the
Depositor, will from time to time execute and deliver all such supplements and
amendments hereto pursuant to Section 11.14 hereof and all instruments of
further assurance and other instruments, and will take such other action upon
such request from the Depositor or the Certificate Insurer, to:
(i) more effectively hold in trust all or any portion
of the Trust Estate;
(ii) perfect, publish notice of, or protect the
validity of any grant made or to be made by this Agreement;
(iii)enforce any of the Home Equity Loans; or
(iv) preserve and defend title to the Trust Estate and
the rights of the Trustee, and the ownership interests of
the Owners represented thereby, in such Trust Estate against
the claims of all Persons and parties.
The Trustee shall send copies of any request received from the
Depositor or the Certificate Insurer to take any action pursuant to this
Section 6.03 to the other parties hereto.
(b) The Trustee shall have the power to enforce, and shall enforce the
obligations and rights of the other parties to this Agreement and the
obligations of the Certificate Insurer under the Certificate Insurance Policy;
in addition, the Certificate Insurer or the Owners, by action, suit or
proceeding at law or equity and shall also have the power to enjoin, by action
or suit in equity, and acts or occurrences which may be unlawful or in violation
of the rights of the Certificate Insurer and/or the Owners as such rights are
set forth in this Agreement, provided, however, that nothing in this Section
shall require any action by the Trustee unless the Trustee shall first (i) have
been furnished indemnity satisfactory to it and (ii) when required by this
Agreement, have been requested by the Certificate Insurer or Owners of a
majority of the Percentage Interests represented by the Offered Certificates
then Outstanding with the consent of the Certificate Insurer or, if there are no
longer any Offered Certificates then outstanding, by such majority of the
Percentage Interests represented by the Class R Certificates; provided, further,
however, that if there is a dispute with respect to payments under a Certificate
Insurance Policy the Trustee's sole responsibility is to the Owners.
(c) The Trustee shall execute any instrument required pursuant to this
Section so long as such instrument does not conflict with this Agreement or with
the Trustee's fiduciary duties, or adversely affect its rights and immunities
hereunder.
Section 6.04 Performance of Obligations.
The Trustee will not take any action that would release any Person
from any of such Person's covenants or obligations under any instrument or
document relating to the Certificates or which would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or document, except as
expressly provided in this Agreement or such other instrument or document.
The Trustee may contract with other Persons to assist it in performing
its duties hereunder pursuant to Section 10.03(g).
Section 6.05 Negative Covenants.
The Trustee will not permit the Trust to:
(i) sell, transfer, exchange or otherwise dispose of
any of the Trust Estate except as expressly permitted by
this Agreement;
(ii) claim any credit on or make any deduction from the
distributions payable in respect of, the Certificates (other
than amounts properly withheld from such payments under the
Code) or assert any claim against any present or former
Owner by reason of the payment of any taxes levied or
assessed upon any of the Trust Estate;
(iii) incur, assume or guaranty any indebtedness of any
Person except pursuant to this Agreement;
(iv) dissolve or liquidate in whole or in part, except
pursuant to Article IX hereof; or
(v) (A) permit the validity or effectiveness of this
Agreement to be impaired, or permit any Person to be
released from any covenants or obligations with respect to
the Trust or to the Certificates under this Agreement,
except as may be expressly permitted hereby or (B) permit
any lien, charge, adverse claim, security interest, mortgage
or other encumbrance to be created on or extend to or
otherwise arise upon or burden the Trust Estate or any part
thereof or any interest therein or the proceeds thereof.
Section 6.06 No Other Powers.
The Trustee will not permit the Trust to engage in any business
activity or transaction other than those activities permitted by Section 2.03
hereof.
Section 6.07 Limitation of Suits.
No Owner shall have any right to institute any proceeding, judicial or
otherwise, with respect to this Agreement, the Insurance Agreement, the
Indemnification Agreement or the Certificate Insurance Policies or for the
appointment of a receiver or trustee of the Trust, or for any other remedy with
respect to an event of default hereunder, unless:
(1) such Owner has previously given written notice to the
Depositor, the Certificate Insurer and the Trustee of
such Owner's intention to institute such proceeding;
(2) the Owners of not less than 25% of the Percentage
Interests represented by the Offered Certificates then
Outstanding or, if there are no Offered Certificates
then Outstanding, by such percentage of the Percentage
Interests represented by the Class C Certificates and
the Class R Certificates, shall have made written
request to the Trustee to institute such proceeding in
its own name as Trustee establishing the Trust;
(3) such Owner or Owners have offered to the Trustee
reasonable indemnity against the costs, expenses and
liabilities to be incurred in compliance with such
request;
(4) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to
institute such proceeding;
(5) as long as any Class A Certificates are Outstanding or
any Reimbursement Amount remains unpaid, the
Certificate Insurer consented in writing thereto
(unless the Certificate Insurer is the party against
whom the proceeding is directed); and
(6) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by
the Owners of a majority of the Percentage Interests
represented by the Offered Certificates or, if there
are no Offered Certificates then Outstanding, by such
majority of the Percentage Interests represented by the
Class C Certificates and the Class R Certificates;
it being understood and intended that no one or more Owners shall have
any right in any manner whatever by virtue of, or by availing themselves of, any
provision of this Agreement to affect, disturb or prejudice the rights of any
other Owner of the same Class or to obtain or to seek to obtain priority or
preference over any other Owner of the same Class or to enforce any right under
this Agreement, except in the manner herein provided and for the equal and
ratable benefit of all the Owners of the same Class.
In the event the Trustee shall receive conflicting or inconsistent
requests and indemnity from two or more groups of Owners, each representing less
than a majority of the applicable Class of Certificates and each conforming to
paragraphs (1)-(5) of this Section 6.07, the Certificate Insurer in its sole
discretion may determine what action, if any, shall be taken, notwithstanding
any other provision of this Agreement (unless the Certificate Insurer is the
party against whom the proceeding is directed).
Section 6.08 Unconditional Rights of Owners to Receive Distributions.
Notwithstanding any other provision in this Agreement, the Owner of
any Certificate shall have the right, which is absolute and unconditional, to
receive distributions to the extent provided herein and therein with respect to
such Certificate or to institute suit for the enforcement of any such
distribution, and such right shall not be impaired without the consent of such
Owner.
Section 6.09 Rights and Remedies Cumulative.
Except as otherwise provided herein, no right or remedy herein
conferred upon or reserved to the Trustee, the Certificate Insurer or the Owners
is intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. Except as otherwise provided herein, the assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
Section 6.10 Delay or Omission Not Waiver.
No delay of the Trustee, the Certificate Insurer or any Owner of any
Certificate to exercise any right or remedy under this Agreement with respect to
any event described in Section 8.20(a) or (b) shall impair any such right or
remedy or constitute a waiver of any such event or an acquiescence therein.
Every right and remedy given by this Article VI or by law to the Trustee, the
Certificate Insurer or the Owners may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee, the Certificate Insurer or the
Owners, as the case may be.
Section 6.11 Control by Owners.
The Certificate Insurer or the Owners of a majority of the Percentage
Interests represented by the Offered Certificates then Outstanding with the
consent of the Certificate Insurer or, if there are no longer any Offered
Certificates then Outstanding, by such majority of the Percentage Interests
represented by the Class R Certificates then Outstanding may direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee with respect to the Certificates or exercising any trust or power
conferred on the Trustee with respect to the Certificates or the Trust Estate,
including, but not limited to, those powers set forth in Section 6.03 and
Section 8.20 hereof, provided that:
(1) such direction shall not be in conflict with any rule
of law or with this Agreement;
(2) the Trustee shall have been provided with indemnity
satisfactory to it; and
(3) the Trustee may take any other action deemed proper by
the Trustee, as the case may be, which is not
inconsistent with such direction; provided, however,
that neither of the Sellers nor the Trustee, as the
case may be, need take any action which it determines
might involve it in liability or may be unjustly
prejudicial to the Owners not so directing.
Section 6.12 Indemnification.
The Depositor agrees to indemnify and hold the Trustee, the
Certificate Insurer and each Owner harmless against any and all claims, losses,
penalties, fines, forfeitures, legal fees and related costs, judgments, and any
other costs, fees and expenses that the Trustee, the Certificate Insurer and any
Owner may sustain in any way related to the failure of the Depositor to perform
its duties in compliance with the terms of this Agreement. The Depositor shall
immediately notify the Trustee, the Certificate Insurer and each Owner if such a
claim is made by a third party with respect to this Agreement, and the Depositor
shall assume (with the consent of the Trustee) the defense of any such claim and
pay all expenses in connection therewith, including reasonable counsel fees, and
promptly pay, discharge and satisfy any judgment or decree which may be entered
against the Servicer, either of the Sellers, the Trustee, the Certificate
Insurer and/or any Owner in respect of such claim. The Trustee may, if
necessary, reimburse the Depositor from amounts otherwise distributable on the
Class C or Class R Certificates for all amounts advanced by it pursuant to the
preceding sentence, except when the claim relates directly to the failure of the
Depositor to perform its duties in compliance with the terms of this Agreement.
In addition to the foregoing, ContiMortgage agrees to indemnify and hold the
Trustee, the Certificate Insurer and each Owner harmless against any and all
claims, losses, penalties, fines, forfeitures, legal fees and related costs,
judgments, and other costs, fees and expenses that the Trustee, the Certificate
Insurer and any Owner may sustain in any way related to the breach by
ContiMortgage of its representations and warranties set forth in Section
3.04(b)(xiii) or (xv) hereof with respect to a Home Equity Loan if such Home
Equity Loan qualifies as a "high cost mortgage" pursuant to Section 226.32 of
the Truth-in-Lending Act, as amended. The provisions of this Section 6.12 shall
survive the termination of this Agreement and the payment of the outstanding
Certificates.
Section 6.13 Access to Owners of Certificates' Names and Addresses.
(a) If any Owner (for purposes of this Section 6.13, an "Applicant")
applies in writing to the Trustee, and such application states that the
Applicant desires to communicate with other Owners with respect to their rights
under this Agreement or under the Certificates and is accompanied by a copy of
the communication which such Applicant proposes to transmit, then the Trustee
shall, at the expense of such Applicant, within ten (10) Business Days after the
receipt of such application, furnish or cause to be furnished to such Applicant
a list of the names and addresses of the Owners of record as of the most recent
Payment Date.
(b) Every Owner, by receiving and holding such list, agrees with the
Trustee that the Trustee shall not be held accountable in any way by reason of
the disclosure of any information as to the names and addresses of the Owners
hereunder, regardless of the source from which such information was derived.
END OF ARTICLE VI
ARTICLE VII ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 7.01 Collection of Money.
Except as otherwise expressly provided herein, the Trustee shall
demand payment or delivery of all money and other property payable to or
receivable by the Trustee pursuant to this Agreement or the Certificate
Insurance Policy, including all payments due on the Home Equity Loans in
accordance with the respective terms and conditions of such Home Equity Loans
and required to be paid over to the Trustee by the Servicer or by any
Sub-Servicer. The Trustee shall hold all such money and property received by it,
other than pursuant to or as contemplated by Section 6.02(e) hereof, as part of
the Trust Estate and shall apply it as provided in this Agreement.
Section 7.02 Establishment of Accounts.
The Depositor shall cause to be established on the Startup Day, and
the Trustee shall maintain, at the Corporate Trust Office, the Certificate
Account and the Auction Remainder Account, which is to be held by the Trustee on
behalf of the Owners of the Certificates, the Certificate Insurer and the
Trustee.
Section 7.03 Flow of Funds.
(a) The Trustee shall deposit to the Certificate Account, without
duplication, upon receipt, any Insured Payments, the proceeds of any liquidation
of the assets of the Trust, all remittances made to the Trustee pursuant to
Section 8.08(d)(ii) and the Monthly Remittance Amount remitted by the Servicer.
(b) On each Payment Date, the Trustee shall make the following
disbursements from the Interest Remittance Amount (including the interest
component of any Insured Payments which is available only for the payment of the
amount described in Second below), in the following order of priority, and each
such disbursement shall be treated as having occurred only after all preceding
disbursements have occurred:
(i) First, concurrently, (a) to the Trustee, the Trustee
Fee, (b) to the Certificate Insurer, the Premium Amount
and (c) to the Auction Agent, the Auction Agent Fee;
(ii) Second, to the Owners of the Class A Certificates
(including the Class A-7 IO Certificates), the related
Class A Current Interest plus the related Class A
Interest Carry Forward Amount with respect to each such
Class of Class A Certificates without any priority
among such Class A Certificates; provided, that if the
Interest Amount Available plus the interest component
of any Insured Payment is not sufficient to make a full
distribution of interest with respect to all Classes of
the Class A Certificates, such amount will be
distributed among the outstanding Classes of Class A
Certificates pro rata based on the aggregate amount of
interest due on each such Class, and the amount of the
shortfall will be carried forward as the Class A
Interest Carry Forward Amount;
(iii)Third, to the extent of the Interest Amount Available
then remaining, to the Owners of the Class B
Certificates, the Class B Current Interest; and
(iv) Fourth, the Monthly Excess Interest Amount shall be
applied or distributed as provided in subsection (f) of
this Section 7.03.
(c) [reserved]:
(d) On each Payment Date, the Trustee shall make the following
disbursements from amounts relating to principal (including the principal
component of any Insured Payments) in the following order of priority and each
such disbursement shall be treated as having occurred only after all preceding
disbursements have occurred:
(i) On each Payment Date before the Stepdown Date the
Owners of the Class A Certificates (other than the
Class A-7 IO Certificates) will be entitled to receive
payment of 100% of the Principal Distribution Amount,
together with the principal component of any Insured
Payment, as follows: (I) sequentially, to the Owners
of the Class A-1, Class A-2, Class A-3, Class A-4,
Class A-5, Class A-6 and Class A-7 Certificates, in
that order, an amount up to the amount necessary to
reduce the Certificate Principal Balances thereof to
their respective Planned Principal Balances for such
Payment Date, (II) sequentially, to the Owners of the
Class A-8 and Class A-9 (in the case of the Class A-9
Certificate, distributions of principal shall include
any amounts in deposit in the Auction Remainder
Account) Certificates, in that order, until their
respective Certificate Principal Balances are reduced
to zero and (III) sequentially, to the Owners of the
Class A-1, Class A-2, Class A-3, Class A-4, Class A-5,
Class A-6 and Class A-7 Certificates, in that order,
without regard to their respective Planned Principal
Balances and until the Certificate Principal Balances
thereof are reduced to zero. Notwithstanding the
foregoing, on any Payment Date on which the Class B
Certificate Principal Balance and the
Overcollateralization Amount is zero and a Certificate
Insurer Default has occurred exists; any amounts of
principal payable to the Owners of the Class A
Certificates on such Payment Date shall be distributed
pro rata without regard to any Planned Principal
Balances or other order of priority. If on any Payment
Date the Class A Certificate Principal Balance has been
reduced to zero, 100% of the Principal Distribution
Amount shall be distributed to the Class B Certificates
until the Certificate Principal Balances thereof have
been reduced to zero.
(ii) On each Payment Date on or after the Stepdown Date the
Owners of the Offered Certificates (other than the
Class A-7 IO Certificates) will be entitled to receive
payments of principal, in the order of priority, in the
amounts set forth below and to the extent of the
Principal Distribution Amount (together, in the case of
the Class A Certificates, the principal component of
any Insured Payment) as follows:
(A) First, the lesser of (x) the Principal
Distribution Amount together with the principal
component if any Insured Payment and (y) the Class
A Principal Distribution Amount shall be
distributed (I) sequentially, to the Owners of the
Class A-1, Class A-2, Class A-3, Class A-4, Class
A-5, Class A-6 and Class A-7 Certificates, in that
order, an amount up to the amount necessary to
reduce the Certificate Principal Balances thereof
to their respective Planned Principal Balances for
such Payment Date, (II) sequentially, to the
Owners of the Class A-8 and Class A-9 Certificates
(in the case of the Class A-9 Certificate,
distributions of principal shall include any
amounts in deposit in the Auction Remainder
Account), in that order, until their respective
Certificate Principal Balances are reduced to zero
and (III) sequentially, to the Owners of the Class
A-1, Class A-2, Class A-3, Class A-4, Class A-5,
Class A-6 and Class A-7 Certificates, in that
order, without regard to their respective Planned
Principal Balances and until the Certificate
Principal Balances thereof are reduced to zero.
Notwithstanding the foregoing, on any Payment Date
on which the Class B Certificate Principal Balance
and the Overcollateralization Amount is zero and a
Certificate Insurer Default exists; any amounts of
principal payable to the Owners of the Class A
Certificates on such Payment Date shall be
distributed pro rata;
(B) Second, the lesser of (x) the excess of (i) the
Principal Distribution Amount over (ii) the amount
distributed to the Owners of the Class A
Certificates in clause (A) above and (y) the Class
B Principal Distribution Amount shall be
distributed to the Owners of the Class B
Certificates, until the Class B Certificate
Principal Balance has been reduced to zero; and
(C) Third, any portion of the Principal Remittance
Amount remaining after making all of the
distributions in clauses (A) and (B) above shall
be distributed as provided in subsection (f) of
this Section 7.03.
(e) [reserved]:
(f) On any Payment Date, the Monthly Excess Cashflow Amount is
required to be applied in the following order of priority on such Payment Date:
(1) to pay the Class A Interest Carry Forward Amount from
prior periods, if any;
(2) to pay the Certificate Insurer any Reimbursement Amount
for such Payment Date;
(3) to pay the Extra Principal Distribution Amount for such
Payment Date;
(4) to pay the Class B Interest Carry Forward Amount, if
any;
(5) to pay the Class B Realized Loss Amortization Amount
for such Payment Date; and
(6) as provided in Section 7.03(h) hereof.
(g) [reserved]:
(h) On any Payment Date, any Monthly Excess Cashflow Amount remaining
after the application of Section 7.03(f)(1)-(6) shall be distributed as follows:
(1) to the Servicer to the extent of any unreimbursed
Delinquency Advances or Servicing Advances;
(2) to pay any expenses or other amounts due under the
Auction Agent Agreement (other than the Auction Agent
Fee);
(3) to fund a distribution to Owners of the Class C
Certificates, the lesser of (x) the amount of the
Monthly Excess Cashflow Amount then remaining and (y)
the Class C Distribution Amount plus the Cumulative
Class C Carryforward Amount; and
(4) to fund a distribution to the Owners of the Class R
Certificates, the remainder.
(i) [reserved];
(j) [reserved];
(k) Notwithstanding anything above, the aggregate amounts distributed
on all Payment Dates to the Owners of the Certificates on account of principal
pursuant to clause (d) shall not exceed the original Certificate Principal
Balance of the related Certificates.
(l) On any Payment Date during the continuance of any Certificate
Insurer Default any amounts otherwise payable to the Certificate Insurer as
Premium Amounts shall be retained in the Certificate Account.
(m) Upon receipt of Insured Payments from the Certificate Insurer on
behalf of the Owners of the Class A Certificates, the Trustee shall deposit such
Insured Payments in the Certificate Account and shall distribute such Insured
Payments, or the proceeds thereof as provided in paragraphs (d)(i) and (d)(ii)
above.
(n) Anything herein to the contrary notwithstanding, any payment with
respect to principal of or interest on any of the Class A Certificates which is
made with moneys received pursuant to the terms of the Certificate Insurance
Policy shall not be considered payment of such Certificates from the Trust and
shall not result in the payment of or the provision for the payment of the
principal of or interest on such Certificates within the meaning of Section
7.03. The Depositor, the Servicer and the Trustee acknowledge, and each Owner by
its acceptance of a Certificate agrees, that without the need for any further
action on the part of the Certificate Insurer, the Depositor, the Servicer, the
Trustee or the Registrar (a) to the extent the Certificate Insurer makes
payments, directly or indirectly, on account of principal of or interest on any
Class A Certificates to the Owners of such Certificates, the Certificate Insurer
will be fully subrogated to the rights of such Owners to receive such principal
and interest together with any interest thereon of the applicable Pass-Through
Rate from the Trust and (b) the Certificate Insurer shall be paid such principal
and interest only from the sources and in the manner provided herein for the
payment of such principal and interest.
It is understood and agreed that the intention of the parties is that
the Certificate Insurer shall not be entitled to reimbursement on any Payment
Date for amounts previously paid by it unless on such Payment Date the Owners of
the Class A Certificates shall also have received the full amount of the Class A
Distribution Amount for such Payment Date.
The Trustee or Paying Agent shall (i) receive as attorney-in-fact of
each Owner of Class A Certificates any Insured Payment from the Certificate
Insurer and (ii) disburse the same to the Owners of the related Class A
Certificates as set forth in Section 7.03(d). Insured Payments disbursed by the
Trustee or Paying Agent from proceeds of a Certificate Insurance Policy shall
not be considered payment by the Trust, nor shall such payments discharge the
obligation of the Trust with respect to such Class A Certificates and the
Certificate Insurer shall be entitled to receive the related Reimbursement
Amount pursuant to Section 7.03(f)(2) hereof.
The rights of the Owners to receive distributions from the proceeds of
the Trust Estate and all ownership interests of the Owners in such
distributions, shall be as set forth in this Agreement. In this regard, all
rights of the Owners of the Class C Certificates and the Class R Certificates to
receive distributions in respect of the Class C Certificates and the Class R
Certificates, and all ownership interests of the Owners of the Class C
Certificates and the Class R Certificates in and to such distributions, shall be
subject and subordinate to the preferential rights of the holders of the Offered
Certificates to receive distributions thereon and the ownership interests of
such Owners in such distributions, as described herein. In accordance with the
foregoing, the ownership interests of the Owners of the Class C Certificates and
the Class R Certificates in amounts deposited in the Accounts from time to time
shall not vest unless and until such amounts are distributed in respect of the
Class C Certificates and the Class R Certificates in accordance with the terms
of this Agreement. Notwithstanding anything contained in this Agreement to the
contrary, the Owners of the Class C Certificates and the Class R Certificates
shall not be required to refund any amount properly distributed on the Class C
Certificates and the Class R Certificates pursuant to this Section 7.03.
Section 7.04 Auction Rate Certificates.
Principal payments will be made to the Auction Rate Certificates only
in amounts equal to $25,000 and integral multiples in excess thereof. If the
amount in the Certificate Account otherwise required to be applied as a payment
of principal on the Auction Rate Certificates either (i) is less than $25,000 or
(ii) exceeds an integral multiple of $25,000, then, in the case of (i), such
entire amount or, in the case of (ii), such excess amount, will not be paid as
principal on the upcoming Payment Date, but will be retained in the Auction
Remainder Account as Amount held for Future Distribution until the amount
therein available for payment of principal on the Auction Rate Certificates
equals $25,000 or any integral multiple thereof. In no event, however, shall
amounts remain in the Auction Remainder Account as Amounts held for Future
Distribution more than 13 months after the related payments are deposited into
the Trust. The amount being distributed to the Auction Rate Certificates as
principal will be allocated to the specific Certificates of such Class selected
no later than 5 Business Days prior to the related Payment Date by lot or such
other manner as may be determined, which allocations will be made only in
amounts equal to $25,000 and integral multiples of $25,000 in excess thereof.
Section 7.05 Investment of Accounts.
(a) Consistent with any requirements of the Code, all or a portion of
any Account held by the Trustee for the benefit of the Owners shall be invested
and reinvested by the Trustee in the name of the Trustee for the benefit of the
Owners, as directed in writing by the Depositor, in one or more Eligible
Investments bearing interest or sold at a discount. The bank serving as Trustee
or any affiliate thereof may be the obligor on any investment which otherwise
qualifies as an Eligible Investment. No investment in any Account shall mature
later than the Business Day immediately preceding the next Payment Date.
(b) If any amounts are needed for disbursement from any Account held
by the Trustee and sufficient uninvested funds are not available to make such
disbursement, the Trustee shall cause to be sold or otherwise converted to cash
a sufficient amount of the investments in such Account. No investments will be
liquidated prior to maturity unless the proceeds thereof are needed for
disbursement.
(c) Subject to Section 10.01 hereof, the Trustee shall not in any way
be held liable by reason of any insufficiency in any Account held by the Trustee
resulting from any loss on any Eligible Investment included therein (except to
the extent that the bank serving as Trustee is the obligor thereon).
(d) The Trustee shall invest and reinvest funds in the Accounts held
by the Trustee, in accordance with the written instructions delivered to the
Trustee on the Startup Day, but only in one or more Eligible Investments bearing
interest or sold at a discount.
If the Depositor shall have failed to give investment directions to
the Trustee then the Trustee shall invest in money market funds described in
Section 7.07(h); to be redeemable without penalty no later than the Business Day
immediately preceding the next Payment Date.
(e) All income or other gain from investments in any Account held by
the Trustee shall be deposited in such Account immediately on receipt, and any
loss resulting from such investments shall be charged to such Account, as
appropriate, subject to the requirement of Section 8.08(b) that the Servicer
contribute funds in an amount equal to such loss in the case of the Principal
and Interest Account.
Section 7.06 Payment of Trust Expenses.
(a) The Trustee shall make demand on ContiMortgage to pay the amount
of the expenses of the Trust (other than payments of premiums to the Certificate
Insurer) (including Trustee's fees and expenses not covered by Section
7.03(b)(i)) and ContiMortgage shall promptly pay such expenses directly to the
Persons to whom such amounts are due.
(b) The Depositor shall pay directly the reasonable fees and expenses
of counsel to the Trustee.
Section 7.07 Eligible Investments.
The following are Eligible Investments:
(a) direct general obligations of, or obligations fully and
unconditionally guaranteed as to the timely payment of principal and interest
by, the United States or any agency or instrumentality thereof, provided such
obligations are backed by the full faith and credit of the United States;
(b) Federal Housing Administration debentures; FHLMC senior debt
obligations, and FannieMae senior debt obligations, but excluding any of such
securities whose terms do not provide for payment of a fixed dollar amount upon
maturity or call for redemption; and consolidated senior debt obligations of any
Federal Home Loan Banks; provided, that any such investment shall be rated in
one of the two highest ratings categories by each Rating Agency;
(c) Federal funds, certificates of deposit, time deposits, and
bankers' acceptances (having original maturities of not more than 365 days) of
any domestic bank, the short-term debt obligations of which have been rated F-1+
or better by Fitch, A-1+ or better by Standard & Poor's and P-1 by Moody's;
(d) Deposits of any bank or savings and loan association (the
long-term deposit rating of which is Baa3 or better by Moody's and BBB by each
of Standard & Poor's and Fitch) which has combined capital, surplus and
undivided profits of at least $50,000,000 which deposits are insured by the FDIC
and held up to the limits insured by the FDIC;
(e) Investment agreements approved by the Certificate Insurer,
provided:
1. The agreement is with a bank or insurance company
which has unsecured, uninsured and unguaranteed senior
debt obligations rated Aa2 or better by Moody's and AA
or better by each of Standard & Poor's and Fitch, and
2. Moneys invested thereunder may be withdrawn without
any penalty, premium or charge upon not more than one
day's notice (provided such notice may be amended or
canceled at any time prior to the withdrawal date), and
3. The agreement is not subordinated to any other
obligations of such insurance company or bank, and
4. The same guaranteed interest rate will be paid on any
future deposits made pursuant to such agreement, and
5. The Trustee receives an opinion of counsel that such
agreement is an enforceable obligation of such
insurance company or bank;
(f) Repurchase agreements collateralized by securities described in
(a) above with any registered broker/dealer subject to the Securities Investors
Protection Corporation's jurisdiction and subject to applicable limits therein
promulgated by Securities Investors Protection Corporation or any commercial
bank, if such broker/dealer or bank has an uninsured, unsecured and unguaranteed
short-term or long-term obligation rated P-1 or Aa2, respectively, or better by
Moody's A-1+ or AA, respectively or better by Standard & Poor's and F-1+ or AA,
respectively, or better by Fitch, provided:
a. A master repurchase agreement or specific written
repurchase agreement governs the transaction, and
b. The securities are held free and clear of any
lien by the Trustee or an independent third party
acting solely as agent for the Trustee, and such
third party is (a) a Federal Reserve Bank or (b) a
bank which is a member of the FDIC and which has
combined capital, surplus and undivided profits of
not less than $125 million, or (c) a bank approved
in writing for such purpose by the Certificate
Insurer and the Trustee shall have received
written confirmation from such third party that it
holds such securities, free and clear of any lien,
as agent for the Trustee, and
c. A perfected first security interest under the
Uniform Commercial Code, or book entry procedures
prescribed at 31 CFR 306.1 et seq. or 31 CFR 350.0
et seq., in such securities is created for the
benefit of the Trustee, and
d. The repurchase agreement has a term of thirty
days or less and the Trustee will value the
collateral securities no less frequently than
weekly and will liquidate the collateral
securities if any deficiency in the required
collateral percentage is not restored within two
business days of such valuation, and
e. The fair market value of the collateral
securities in relation to the amount of the
repurchase obligation, including principal and
interest, is equal to at least 106% and such
collateral securities must be valued weekly and
market-to-market at current market price plus
accrued interest.
(g) Commercial paper (having original maturities of not more than 270
days) rated in the highest short-term rating categories of each Rating Agency;
and
(h) Investments in no load money market funds registered under the
Investment Company Act of 1940 whose shares are registered under the Securities
Act and rated AAAm or AAAm-G by Standard & Poor's, Aaa by Moody's, and AAA, if
rated by Fitch;
provided that no instrument described above shall evidence either the
right to receive (a) only interest with respect to the obligations underlying
such instrument or (b) both principal and interest payments derived from
obligations underlying such instrument and the interest and principal payments
with respect to such instrument provided a yield to maturity at par greater than
120% of the yield to maturity at par of the underlying obligations; and
provided, further, that all instruments described hereunder shall mature at par
on or prior to the next succeeding Payment Date unless otherwise provided in
this Agreement and that no instrument described hereunder may be purchased at a
price greater than par if such instrument may be prepaid or called at a price
less than its purchase price prior to stated maturity.
Section 7.08 Accounting and Directions by Trustee.
(a) The Trustee shall determine whether an Insured Payment will be
required to be made by the Certificate Insurer on the following Payment Date and
if so then no later than 12:00 noon on the second Business Day immediately
preceding the related Payment Date the Trustee shall furnish the Certificate
Insurer and the Depositor with a completed Notice in the form set forth as
Exhibit A to the Insurance Agreement. The Notice shall specify the amount of
Insured Payment and shall constitute a claim for an Insured Payment pursuant to
the Certificate Insurance Policy.
Each month for so long as a Class of Auction Rate Certificates is
Outstanding, not later than 12:00 noon New York time on the Auction Reporting
Date, the Servicer shall deliver to the Certificate Insurer and the Trustee, by
telecopy, the receipt and legibility of which shall be confirmed telephonically,
with hard copy thereof to be delivered on the Business Day following the
Determination Date, a certificate signed by a Servicing Officer stating the date
(day, month and year), the Series number of the Certificates, the date of this
Agreement, and the amount to be distributed on the upcoming Remittance Date to
each Class of Auction Rate Certificates as a payment of principal.
(b) By 12:00 noon New York time, on the Business Day preceding each
Payment Date (or such earlier period as shall be agreed by the Depositor and the
Trustee), the Trustee shall notify (subject to the terms of Section 10.03(j)
hereof, based solely on information provided to the Trustee by the Servicer) the
Depositor, each of the Sellers, the Certificate Insurer and each Owner of the
following information with respect to the next Payment Date (which notification
may be given by facsimile or by telephone promptly confirmed in writing):
(1) The aggregate amount then on deposit in the
Certificate Account;
(2) The Class A Distribution Amount, with respect to each
Class individually and all Classes of the Class A
Certificates in the aggregate, on the next Payment Date
and the related Class B Distribution Amount;
(3) The amount of any Insured Payment to be made by the
Certificate Insurer on such Payment Date;
(4) The application of the amounts described in clause (1)
preceding to the allocation and distribution of the
related Class A Distribution Amount, and the related
Class B Distribution Amount, on such Payment Date in
accordance with Section 7.03 hereof;
(5) The Certificate Principal Balance of each Class of the
Offered Certificates, the Class A-7 IO Notional
Principal Amount, the aggregate amount of the principal
of each Class of Certificates to be paid on such
Payment Date and the remaining Certificate Principal
Balance (or Class A-7 IO Notional Principal Amount) of
each Class of Certificates following any such payment;
(6) The amount, if any, of any Realized Losses for the
related Remittance Period and the amount of Cumulative
Realized Losses as of the last day of the related
Remittance Period; and
(7) The amount of 60+ Day Delinquent Loans and the
Three-Month Rolling Average 60+ Day Delinquency Rate.
Section 7.09 Reports by Trustee to Owners and the Certificate Insurer.
(a) On each Payment Date the Trustee shall report in writing to the
Depositor, each Owner, the Certificate Insurer, the Underwriters and the Rating
Agencies:
(i) the amount of the distribution with respect to such
Owners' Certificates (based on a Certificate in the
original principal amount of $1,000 or, in the case of
the Class A-9 Certificates, the original principal
amount of $25,000);
(ii) the amount of such Owner's distributions allocable to
principal, separately identifying the aggregate amount
of any Prepayments or other recoveries of principal
included therein and any Extra Principal Distribution
Amount;
(iii) the amount of such Owner's distributions allocable to
interest (based on a Certificate in the original
principal amount of $1,000 or, in the case of the
Auction Rate Certificates, in the original principal
amount of $25,000);
(iv) the Interest Carry Forward Amount for each Class;
(v) the principal amount (or notional principal amount)
and the Planned Principal Balance, if any, of each
Class of Offered Certificates (based on a Certificate
in the original principal amount of $1,000 or, in the
case of the Auction Rate Certificates, per $25,000)
which will be Outstanding after giving effect to any
payment of principal on such Payment Date;
(vi) the aggregate Loan Balance of all Home Equity Loans,
the Fixed-Rate Loans and the Adjustable-Rate Loans
after giving effect to any payment of principal on such
Payment Date;
(vii) based upon information furnished by the Depositor,
such information as may be required by Section
6049(d)(7)(C) of the Code and the regulations
promulgated thereunder to assist the Owners in
computing their market discount;
(viii) the total of any Substitution Amounts and any
Loan Purchase Price amounts included in such
distribution with respect to each Group;
(ix) the weighted average Coupon Rate of the Home Equity
Loans, the Fixed-Rate Loans and the Adjustable-Rate
Loans;
(x) whether a Delinquency Trigger Event has occurred, a
Cumulative Realized Loss Trigger Event has occurred;
(xi) the Senior Enhancement Percentage;
(xii) the Overcollateralization Amount and the Certificate
Principal Balance of each Class of the Offered
Certificates then outstanding after giving effect to
any payment of principal on such Payment Date;
(xiii) the amount of any Applied Realized Loss Amount,
Class B Realized Loss Amortization Amount and Class B
Unpaid Realized Loss Amount for each Class as of the
close of such Payment Date;
(xiv) the Pass-Through Rate for the Floating Rate
Certificates and the Auction Rate Certificates
applicable to the related Accrual Period and if either
such Pass-Through Rate was based on the Available Funds
Cap, that such Pass-Through Rate would have been in the
absence thereof;
(xv) the Available Funds Cap for such Payment Date;
(xvi) the amount of any Insured Payment included in the
distribution to Owners of Class A Certificates; and
(xvii) any Reimbursement Amount paid on such Payment
Date and any Reimbursement Amount remaining unpaid.
(xviii) such other information as the Certificate Insurer
may reasonably request with respect to Delinquent Home
Equity Loans;
(xix) the largest Home Equity Loan balance outstanding; and
(xx) any amount remaining in the Auction Remainder Account
pursuant to Section 7.04.
The Servicer shall provide to the Trustee the information described in
Section 8.08(d)(iii) and in clause (b) below to enable the Trustee to perform
its reporting obligations under this Section, and such obligations of the
Trustee under this Section are conditioned upon such information being received
and the information provided in clauses (ii), (vii), (viii), (ix), (xi), (xii),
(xiii) and (xiv) shall be based solely upon information contained in the monthly
servicing report provided by the Servicer to the Trustee pursuant to Section
8.01 hereof.
(b) In addition, on each Payment Date the Trustee will distribute to
the Depositor, the Certificate Insurer, each Owner, the Underwriters and the
Rating Agencies, together with the information described in Subsection (a)
preceding, the following information with respect to the Home Equity Loans which
is hereby required to be prepared by the Servicer and furnished to the Trustee
for such purpose on or prior to the related Monthly Remittance Date:
(i) the related Class A Certificate Principal Balance, as
of such Payment Date;
(ii) the number and aggregate Loan Balances of all Home
Equity Loans; the Fixed Rate Loans and the Adjustable
Rate Loans (a) 30-59 days Delinquent, (b) 60-89 days
Delinquent and (c) 90 or more days Delinquent, as of
the close of business on the last Business Day of the
calendar month next preceding such Payment Date and the
number and aggregate Loan Balances of such Loans;
(iii) the status and the number and dollar amounts of all
Home Equity Loans, the Fixed Rate Loans and the
Adjustable Rate Loans in foreclosure proceedings as of
the close of business on the last Business Day of the
calendar month next preceding such Payment Date,
separately stating, for this purpose, all Home Equity
Loans with respect to which foreclosure proceedings
were commenced in the immediately preceding calendar
month;
(iv) the number of Mortgagors and the Loan Balances of Home
Equity Loans, the Fixed Rate Loans and the Adjustable
Rate Loans (a) the related Mortgages involved in
bankruptcy proceedings as of the close of business on
the last Business Day of the calendar month next
preceding such Payment Date and (b) Home Equity Loans
in each Group that are "balloon" loans;
(v) the existence and status of any REO Properties for all
Home Equity Loans, the Fixed Rate Loans and the
Adjustable Rate Loans as of the close of business of
the last Business Day of the month next preceding the
Payment Date;
(vi) the book value of any REO Property for all Home Equity
Loans, the Fixed Rate Loans and the Adjustable Rate
Loans as of the close of business on the last Business
Day of the calendar month next preceding the Payment
Date;
(vii) the amount of Cumulative Realized Losses for all Home
Equity Loans, the Fixed Rate Loans and the Adjustable
Rate Loans;
(viii) the aggregate Loan Balance of 60+ Day Delinquent
Loans for all Home Equity Loans, the Fixed Rate Loans
and the Adjustable Rate Loans; and
(ix) the Three-Month Rolling Average 60+ Day Delinquency
Rate for all Home Equity Loans, the Fixed Rate Loans
and the Adjustable Rate Loans and whether a Delinquency
Trigger Event or a Cumulative Realized Loss Trigger
Event is in effect.
(c) The Servicer shall furnish to the Trustee and to the Certificate
Insurer during the term of this Agreement, such periodic, special, or other
reports or information not specifically provided for herein, as may be
necessary, reasonable, or appropriate with respect to the Trustee or the
Certificate Insurer, as the case may be, or otherwise with respect to the
purposes of this Agreement, all such reports or information to be provided by
and in accordance with such applicable instructions and directions as the
Trustee or the Certificate Insurer may reasonably require; provided, that the
Servicer shall be entitled to be reimbursed by the requesting party for the fees
and actual expenses associated with providing such reports, if such reports are
not generally produced in the ordinary course of business.
Section 7.10 Reports by Trustee.
(a) The Trustee shall report to the Depositor, each of the Sellers,
the Underwriters, the Certificate Insurer and each Owner, with respect to the
amount on deposit in the Certificate Account and the identity of the investments
included therein, as the Depositor, the Certificate Insurer or the Seller may
from time to time request. Without limiting the generality of the foregoing, the
Trustee shall, at the request of the Depositor, the Certificate Insurer or
either of the Sellers transmit promptly to the Depositor, the Certificate
Insurer and each of the Sellers copies of all accounting of receipts in respect
of the Home Equity Loans furnished to it by the Servicer and shall notify the
Certificate Insurer and each of the Sellers if any Monthly Remittance Amount has
not been received by the Trustee when due.
(b) The Trustee shall report to the Certificate Insurer and each Owner
with respect to any written notices it may from time to time receive which
provide an Authorized Officer with actual knowledge that any of the statements
set forth in Section 3.04(b) hereof are inaccurate.
Section 7.11 Preference Payments.
The Certificate Insurer will pay any Insured Payment that is a
Preference Amount on the Business Day following receipt on a Business Day by the
Fiscal Agent of (i) a certified copy of the order requiring the return of such
Preference Amount, (ii) an opinion of counsel satisfactory to the Certificate
Insurer that such order is final and not subject to appeal, (iii) an assignment
in such form as is reasonably required by the Certificate Insurer, irrevocably
assigning to the Certificate Insurer all rights and claims of the Owners
relating to or arising under the Class A Certificates against the debtor which
made such preference payment or otherwise with respect to such preference
payment and (iv) appropriate instruments to effect the appointment of the
Certificate Insurer as agent for such Owner in any legal proceeding related to
such preference payment, such instruments being in a form satisfactory to the
Certificate Insurer, provided that if such documents are received after 12:00
noon New York City time on such Business Day, they will be deemed to be received
on the following Business Day. Such payment shall be disbursed to the receiver
or trustee in bankruptcy named in the final court order of the court exercising
jurisdiction on behalf of the Owner and not to any Owner directly unless such
Owner has returned principal or interest paid on the Class A Certificates to
such receiver or trustee in bankruptcy in which case payment will be disbursed
to the Owner.
Each Owner of a Class A Certificate, by its purchase of Class A
Certificates, the Servicer and the Trustee hereby agree that the Certificate
Insurer may at any time during the continuation of any proceeding relating to a
preference claim direct all matters relating to such preference claim,
including, without limitation, the direction of any appeal of any order relating
to such preference claim and the posting of any surety or performance bond
pending any such appeal. In addition and without limitation of the foregoing,
the Certificate Insurer shall be subrogated to the rights of the Servicer, the
Trustee and the Owner of each Class A Certificate in the conduct of any such
preference claim, including, without limitation, all rights of any party to an
adversary proceeding action with respect to any court order issued in connection
with any such preference claim.
END OF ARTICLE VII
ARTICLE VIII SERVICING AND ADMINISTRATION
OF HOME EQUITY LOANS
Section 8.01 Servicer and Sub-Servicers.
Acting directly or through one or more Sub-Servicers as provided in
Section 8.03, the Servicer shall service and administer the Home Equity Loans in
accordance with this Agreement and the servicing standards set forth in the
FannieMae Guide and shall have full power and authority, acting alone, to do or
cause to be done any and all things in connection with such servicing and
administration which it may deem necessary or desirable. It is the intent of the
parties hereto that the Servicer shall have all of the servicing obligations
hereunder which a lender would have under the FannieMae Guide (as such
provisions relate to second lien mortgages); provided, however, that to the
extent that such standards, such obligations or the FannieMae Guide are amended
by FannieMae after the date hereof and the effect of such amendment would be to
impose upon the Servicer any material additional costs or other burdens relating
to such servicing obligations, the Servicer may, at its option, determine not to
comply with such amendment.
Subject to Section 8.03 hereof, the Servicer may, and is hereby
authorized to, perform any of its servicing responsibilities with respect to all
or certain of the Home Equity Loans through a Sub-Servicer as it may from time
to time designate, but no such designation of a Sub-Servicer shall serve to
release the Servicer from any of its obligations under this Agreement. Such
Sub-Servicer shall have all the rights and powers of the Servicer with respect
to such Home Equity Loans under this Agreement.
Without limiting the generality of the foregoing, but subject to
Sections 8.13 and 8.14, the Servicer in its own name or in the name of a
Sub-Servicer may be authorized and empowered pursuant to a power of attorney
executed and delivered by the Trustee to execute and deliver, and may be
authorized and empowered by the Trustee, to execute and deliver, on behalf of
itself, the Owners and the Trustee or any of them, (i) any and all instruments
of satisfaction or cancellation or of partial or full release or discharge and
all other comparable instruments with respect to the Home Equity Loans and with
respect to the Properties, (ii) to institute foreclosure proceedings or obtain a
deed in lieu of foreclosure so as to effect ownership of any Property in the
name of the Servicer on behalf of the Trustee, and (iii) to hold title to any
Property upon such foreclosure or deed in lieu of foreclosure on behalf of the
Trustee; provided, however, that to the extent any instrument described in
clause (i) preceding would be delivered by the Servicer outside of its usual
procedures for mortgage loans held in its own portfolio the Servicer shall,
prior to executing and delivering such instrument, obtain the prior written
consent of the Certificate Insurer, and provided further, however, that Section
8.14(a) shall constitute an authorization from the Trustee to the Servicer to
execute an instrument of satisfaction (or assignment of mortgage without
recourse) with respect to any Home Equity Loan paid in full (or with respect to
which payment in full has been escrowed). The Trustee shall execute any
documentation furnished to it by the Servicer for recordation by the Servicer in
the appropriate jurisdictions as shall be necessary to effectuate the foregoing.
Subject to Sections 8.13 and 8.14, the Trustee shall execute any authorizations
and other documents as the Servicer or such Sub-Servicer shall reasonably
request that are furnished to the Trustee to enable the Servicer and such
Sub-Servicer to carry out their respective servicing and administrative duties
hereunder.
The Servicer shall give prompt notice to the Trustee and the
Certificate Insurer of any action, of which the Servicer has actual knowledge,
to (i) assert a claim against the Trust or (ii) assert jurisdiction over the
Trust.
Servicing Advances incurred by the Servicer or any Sub-Servicer in
connection with the servicing of the Home Equity Loans (including any penalties
in connection with the payment of any taxes and assessments or other charges) on
any Property shall be recoverable by the Servicer or such Sub-Servicer to the
extent described in Section 8.09(b) hereof.
Section 8.02 Collection of Certain Home Equity Loan Payments.
The Servicer shall make reasonable efforts to collect all payments
called for under the terms and provisions of the Home Equity Loans, and shall,
to the extent such procedures shall be consistent with this Agreement and the
terms and provisions of any applicable Insurance Policy, follow collection
procedures for all Home Equity Loans at least as rigorous as those described in
the FannieMae Guide. Consistent with the foregoing, the Servicer may in its
discretion waive or permit to be waived any late payment charge, prepayment
charge, assumption fee or any penalty interest in connection with the prepayment
of a Home Equity Loan or any other fee or charge which the Servicer would be
entitled to retain hereunder as servicing compensation. In the event the
Servicer shall consent to the deferment of the due dates for payments due on a
Note, the Servicer shall nonetheless make payment of any required Delinquency
Advance with respect to the payments so extended to the same extent as if such
installment were due, owing and Delinquent and had not been deferred, and shall
be entitled to reimbursement therefor in accordance with Section 8.09(a) hereof.
Section 8.03 Sub-Servicing Agreements Between Servicer and
Sub-Servicers.
The Servicer may enter into Sub-Servicing Agreements for any servicing
and administration of Home Equity Loans with any institution that is acceptable
to the Certificate Insurer and that is in compliance with the laws of each state
necessary to enable it to perform its obligations under such Sub-Servicing
Agreement and (x) has (i) been designated an approved seller-servicer by FHLMC
or FannieMae for second mortgage loans and (ii) has equity of at least
$5,000,000, as determined in accordance with generally accepted accounting
principles or (y) is a Servicer Affiliate. The Servicer shall give notice to the
Trustee, the Certificate Insurer and the Rating Agencies of the appointment of
any Sub-Servicer. For purposes of this Agreement, the Servicer shall be deemed
to have received payments on Home Equity Loans when any Sub-Servicer has
received such payments. Each Sub-Servicer shall be required to service the Home
Equity Loans in accordance with this Agreement and any such Sub-Servicing
Agreement shall be consistent with and not violate the provisions of this
Agreement. Each Sub-Servicing Agreement shall provide that a successor Servicer
shall have the option to terminate such agreement without payment of any fees if
the original Servicer is terminated or resigns.
Section 8.04 Successor Sub-Servicers.
The Servicer shall be entitled to terminate any Sub-Servicing
Agreement in accordance with the terms and conditions of such Sub-Servicing
Agreement and to either itself directly service the related Home Equity Loans or
enter into a Sub-Servicing Agreement with a successor Sub-Servicer which
qualifies under Section 8.03.
Section 8.05 Liability of Servicer; Indemnification.
(a) The Servicer shall not be relieved of its obligations under this
Agreement notwithstanding any Sub-Servicing Agreement or any of the provisions
of this Agreement relating to agreements or arrangements between the Servicer
and a Sub-Servicer and the Servicer shall be obligated to the same extent and
under the same terms and conditions as if it alone were servicing and
administering the Home Equity Loans. The Servicer shall be entitled to enter
into any agreement with a Sub-Servicer for indemnification of the Servicer by
such Sub-Servicer and nothing contained in such Sub-Servicing Agreement shall be
deemed to limit or modify this Agreement.
(b) The Servicer (except Manufacturers and Traders Trust Company if it
is required to succeed the Servicer hereunder) agrees to indemnify and hold the
Trustee, the Certificate Insurer and each Owner harmless against any and all
claims, losses, penalties, fines, forfeitures, legal fees and related costs,
judgments, and any other costs, fees and expenses that the Trustee, the
Certificate Insurer and any Owner may sustain in any way related to the failure
of the Servicer to perform its duties and service the Home Equity Loans in
compliance with the terms of this Agreement. The Servicer shall immediately
notify the Trustee, the Certificate Insurer and each Owner if a claim is made by
a third party with respect to this Agreement, and the Servicer shall assume
(with the consent of the Trustee and the Certificate Insurer) the defense of any
such claim and pay all expenses in connection therewith, including reasonable
counsel fees, and promptly pay, discharge and satisfy any judgment or decree
which may be entered against the Servicer, the Trustee, the Certificate Insurer
and/or Owner in respect of such claim. The Trustee may, if necessary, reimburse
the Servicer from amounts otherwise distributable on the Class R Certificates
for all amounts advanced by it pursuant to the preceding sentence except when
the claim relates directly to the failure of the Servicer to service and
administer the Home Equity Loans in compliance with the terms of this Agreement.
The provisions of this Section 8.05 shall survive the termination of this
Agreement and the payment of the outstanding Certificates.
Section 8.06 No Contractual Relationship Between Sub-Servicer, Trustee
or the Owners.
Any Sub-Servicing Agreement and any other transactions or services
relating to the Home Equity Loans involving a Sub-Servicer shall be deemed to be
between the Sub-Servicer and the Servicer alone and the Trustee, the Certificate
Insurer and the Owners shall not be deemed parties thereto and shall have no
claims, rights, obligations, duties or liabilities with respect to any
Sub-Servicer except as set forth in Section 8.07.
Section 8.07 Assumption or Termination of Sub-Servicing Agreement by
Trustee.
In connection with the assumption of the responsibilities, duties and
liabilities and of the authority, power and rights of the Servicer hereunder by
the Trustee pursuant to Section 8.20, it is understood and agreed that the
Servicer's rights and obligations under any Sub-Servicing Agreement then in
force between the Servicer and a Sub-Servicer shall be assumed simultaneously by
the Trustee without act or deed on the part of the Trustee; provided, however,
that the successor Servicer may terminate the Sub-Servicer as provided in
Section 8.03.
The Servicer shall, upon the reasonable request of the Trustee, but at
the expense of the Servicer, deliver to the assuming party documents and records
relating to each Sub-Servicing Agreement and an accounting of amounts collected
and held by it and otherwise use its best reasonable efforts to effect the
orderly and efficient transfer of the Sub-Servicing Agreements to the assuming
party.
Section 8.08 Principal and Interest Account.
(a) The Servicer shall establish and maintain at one or more
Designated Depository Institutions the Principal and Interest Account to be held
as a trust account. Each Principal and Interest Account shall be identified on
the records of the Designated Depository Institution as follows: Manufacturers
and Traders Trust Company, as Trustee under the Pooling and Servicing Agreement
dated as of June 1, 1997. If the institution at any time holding the Principal
and Interest Account ceases to be eligible as a Designated Depository
Institution hereunder, then the Servicer shall, within 30 days, be required to
name a successor institution meeting the requirements for a Designated
Depository Institution hereunder. If the Servicer fails to name such a successor
institution, then the Principal and Interest Account shall thenceforth be held
as a trust account with a qualifying Designated Depository Institution. The
Servicer shall notify the Trustee, the Certificate Insurer and the Owners if
there is a change in the name, account number or institution holding the
Principal and Interest Account.
Subject to Subsection (c) below, the Servicer shall deposit all
receipts required pursuant to Subsection (c) below and related to the Home
Equity Loans to the Principal and Interest Account on a daily basis (but no
later than the first Business Day after receipt).
(b) All funds in the Principal and Interest Account shall be held (i)
uninvested (up to the limits insured by the FDIC) or (ii) invested in Eligible
Investments. Any investments of funds in the Principal and Interest Account
shall mature or be withdrawable at par on or prior to the immediately succeeding
Monthly Remittance Date. The Principal and Interest Account shall be held in
trust in the name of the Trustee for the benefit of the Owners. Any investment
earnings on funds held in the Principal and Interest Account shall be for the
account of the Servicer and may only be withdrawn from the Principal and
Interest Account by the Servicer immediately following the remittance of the
Monthly Remittance Amount (and the Monthly Excess Interest Amount included
therein) by the Servicer. Any investment losses on funds held in the Principal
and Interest Account shall be for the account of the Servicer and promptly upon
the realization of such loss shall be contributed by the Servicer to the
Principal and Interest Account. Any references herein to amounts on deposit in
the Principal and Interest Account shall refer to amounts net of such investment
earnings.
(c) The Servicer shall deposit to the Principal and Interest Account
on the Business Day after receipt all principal collections on the Home Equity
Loans received, and interest collections on the Home Equity Loans accrued after
the Cut-Off Date including any Prepayments and Net Liquidation Proceeds, other
recoveries or amounts related to the Home Equity Loans received by the Servicer
and any income from REO Properties, but net of (i) the Servicing Fee with
respect to each Home Equity Loan and other servicing compensation to the
Servicer as permitted by Section 8.15 hereof, (ii) principal collected and
interest accrued on any Home Equity Loan on or prior to the Cut-Off Date, (iii)
Net Liquidation Proceeds to the extent such Net Liquidation Proceeds exceed the
sum of (I) the Loan Balance of the related Home Equity Loan immediately prior to
liquidation, (II) accrued and unpaid interest on such Home Equity Loan (net of
the Servicing Fee) to the date of such liquidation, and (III) any Realized
Losses incurred during the related Remittance Period, (iv) reimbursements for
Delinquency Advances and (v) reimbursements for amounts deposited in the
Principal and Interest Account representing payments of principal and/or
interest on a Note by a Mortgagor which are subsequently returned by a
depository institution as unpaid (all such net amount herein referred to as
"Daily Collections").
(d) (i) The Servicer may make withdrawals for its own account from the
amounts on deposit in the Principal and Interest Account, with respect to the
Home Equity Loans, only in the following priority and for the following
purposes:
(A) to withdraw interest paid with respect to any Home
Equity Loans that had accrued for periods prior to
the Cut-Off Date;
(B) to withdraw investment earnings on amounts on
deposit in the Principal and Interest Account;
(C) to reimburse itself pursuant to Section 8.09(a)
for unrecovered Delinquency Advances and Servicing
Advances;
(D) to withdraw amounts that have been deposited to
the Principal and Interest Account in error; and
(E) to clear and terminate the Principal and Interest
Account following the termination of the Trust
pursuant to Article IX.
(ii) The Servicer shall (a) remit to the Trustee for deposit
in the Certificate Account by wire transfer, or
otherwise make funds available in immediately available
funds, without duplication, the Daily Collections
allocable to a Remittance Period not later than the
related Monthly Remittance Date and Loan Purchase
Prices and Substitution Amounts two Business Days
following the related purchase or substitution, and (b)
on each Monthly Remittance Date, deliver to the Trustee
and the Certificate Insurer a monthly servicing report,
with respect to the Home Equity Loans, containing the
following information: principal and interest
collected, scheduled interest, Liquidated Loans,
summary and detailed delinquency reports, Liquidation
Proceeds and other similar information concerning the
servicing of the Home Equity Loans. In addition, the
Servicer shall inform the Trustee and the Certificate
Insurer on each Monthly Remittance Date with respect to
the Home Equity Loans of the amounts of any Loan
Purchase Prices or Substitution Amounts so remitted
during the related Remittance Period.
(iii)The Servicer shall provide to the Trustee the
information described in Section 8.08(d)(ii)(b) and in
Section 7.09(c) to enable the Trustee to perform its
reporting requirements under Section 7.09 and the
Trustee shall forward such information to the
Underwriters within five Business Days of receipt
thereof.
Section 8.09 Delinquency Advances and Servicing Advances.
(a) If the amount on deposit in the Certificate Account as of any
Monthly Remittance Date is less than the sum of (I) the Interest Remittance
Amount on such Monthly Remittance Date and (II) the Principal Remittance Amount
on such Monthly Remittance Date, the Servicer shall remit to the Trustee for
deposit into the Certificate Account a sufficient amount of its own funds to
make the total amount remitted to the Trustee equal to such sum. Such amounts of
the Servicer's own funds so deposited are "Delinquency Advances", including but
not limited to any amount advanced due to the invocation by a Mortgagor of the
relief provisions provided by the Soldiers' and Sailors' Civil Relief Act of
1940.
The Servicer shall be permitted to fund its payment of Delinquency
Advances on any Business Day and to reimburse itself for any Delinquency
Advances paid from the Servicer's own funds from collections on any Home Equity
Loan deposited to the Principal and Interest Account subsequent to the related
Remittance Period and shall deposit into the Principal and Interest Account with
respect thereto (i) collections from the Mortgagor whose Delinquency gave rise
to the shortfall which resulted in such Delinquency Advance and (ii) Net
Liquidation Proceeds recovered on account of the related Mortgage Loan to the
extent of the amount of aggregate Delinquency Advances related thereto. If not
recovered from the related Mortgagor or the related Net Liquidation Proceeds,
the Servicer shall recover Delinquency Advances pursuant to Section 7.03(h).
Notwithstanding the foregoing, in the event that the Servicer
determines that the aggregate unreimbursed Delinquency Advances exceed the
aggregate remaining Scheduled Payments due on the Home Equity Loans, the
Servicer shall not be required to make any future Delinquency Advances, and
shall be entitled to reimbursement for such aggregate unreimbursed Delinquency
Advances as provided above. The Servicer shall give written notice of such
determination to the Trustee and the Certificate Insurer; and the Trustee shall
promptly furnish a copy of such notice to the Owners of the Class R
Certificates; provided, that the Servicer shall be entitled to recover any
unreimbursed Delinquency Advances from the aforesaid Liquidation Proceeds prior
to the payment of the Liquidation Proceeds to any other party to this Agreement.
(b) The Servicer will pay all "out-of-pocket" costs and expenses
incurred in the performance of its servicing obligations, including, but not
limited to, the cost of (i) Preservation Expenses, (ii) any enforcement or
judicial proceedings, including foreclosures, (iii) the management and
liquidation of REO Property and (iv) advances required by Section 8.13(a), but
the Servicer is only required to pay such costs and expenses to the extent the
Servicer reasonably believes such costs and expenses will be recoverable from
the related Home Equity Loan. Each such expenditure will constitute a "Servicing
Advance". The Servicer may recover Servicing Advances (x) from the Mortgagors to
the extent permitted by the Home Equity Loans or, if not recovered from the
Mortgagor on whose behalf such Servicing Advance was made, from Liquidation
Proceeds realized upon the liquidation of the related Home Equity Loan and (y)
as provided in Section 7.03(h). The Servicer shall be entitled to recover the
Servicing Advances from the aforesaid Liquidation Proceeds prior to the payment
of the Liquidation Proceeds to any other party to this Agreement. Except as
provided in the previous sentence, in no case may the Servicer recover Servicing
Advances from the principal and interest payments on any Home Equity Loan or
from any amounts relating to any other Home Equity Loan except as provided in
Section 7.03(h).
Section 8.10 Compensating Interest; Repurchase of Home Equity Loans.
(a) If a Prepayment of a Home Equity Loan occurs during any calendar
month or if the amount received with respect to a date-of-payment or simple
interest Home Equity Loan represents less than a full month's interest, any
difference between the interest collected from the Mortgagor and the full
month's interest at the Coupon Rate less the Servicing Fee ("Compensating
Interest") that is due shall be deposited by the Servicer (but not in excess of
the aggregate Servicing Fee for the related Remittance Period) to the Principal
and Interest Account on the next succeeding Monthly Remittance Date and shall be
included in the Monthly Remittance to be made available to the Trustee on such
Monthly Remittance Date. The Servicer shall not be entitled to reimbursement for
amounts paid as Compensating Interest.
(b) The Servicer, and in the absence of exercise thereof by the
Servicer, the Certificate Insurer, has the right and the option, but not the
obligation, for administrative convenience, to purchase for its own account any
Home Equity Loan which becomes Delinquent, in whole or in part, as to four
consecutive monthly installments or any Home Equity Loan as to which enforcement
proceedings have been brought by the Servicer pursuant to Section 8.13;
provided, however, that the Servicer or the Certificate Insurer, as the case may
be, may not purchase any such Home Equity Loan unless the Servicer or the
Certificate Insurer, as the case may be, has delivered to the Trustee an opinion
of counsel experienced in federal income tax matters acceptable to the Trustee
and the Certificate Insurer to the effect that such a purchase would not
constitute a Prohibited Transaction for the Trust or otherwise subject the Trust
to tax and would not jeopardize the status any REMIC therein as a REMIC. Any
such Loan so purchased shall be purchased by the Servicer or the Certificate
Insurer, as the case may be, on a Monthly Remittance Date at a purchase price
equal to the Loan Purchase Price thereof, which purchase price shall be
deposited in the Principal and Interest Account.
(c) The Net Liquidation Proceeds from the disposition of any REO
Property shall be deposited in the Principal and Interest Account and remitted
to the Trustee as part of the Daily Collections remitted by the Servicer to the
Trustee.
Section 8.11 Maintenance of Insurance.
(a) The Servicer shall cause to be maintained with respect to each
Home Equity Loan a hazard insurance policy with a generally acceptable carrier
that provides for fire and extended coverage, and which provides for a recovery
by the Trust of insurance proceeds relating to such Home Equity Loan in an
amount not less than the least of (i) the outstanding principal balance of the
Home Equity Loan (plus the related senior lien loan, if any), (ii) the minimum
amount required to compensate for damage or loss on a replacement cost basis and
(iii) the full insurable value of the premises. The Servicer shall maintain the
insurance policies required hereunder in the name of the mortgagee, its
successors and assigns, as loss payee. The policies shall require the insurer to
provide the mortgagee with 30 days' notice prior to any cancellation or as
otherwise required by law. The Servicer may also maintain a blanket hazard
insurance policy or policies if the insurer or insurers of such policies are
rated investment grade by each Rating Agency. Upon the request of the Trustee or
the Certificate Insurer, the Servicer will cause to be delivered to such
requesting Person a certified true copy of such blanket policy.
(b) If the Home Equity Loan at the time of origination relates to a
Property in an area identified in the Federal Register by the Federal Emergency
Management Agency as having special flood hazards, the Servicer will cause to be
maintained with respect thereto a flood insurance policy in a form meeting the
requirements of the current guidelines of the Federal Insurance Administration
with a generally acceptable carrier in an amount representing coverage, and
which provides for a recovery by the Trust of insurance proceeds relating to
such Home Equity Loan of not less than the least of (i) the outstanding
principal balance of the Home Equity Loan (plus the related senior lien loan, if
any), (ii) the minimum amount required to compensate for damage or loss on a
replacement cost basis and (iii) the maximum amount of insurance that is
available under the Flood Disaster Protection Act of 1973. The Servicer shall
indemnify the Trust out of the Servicer's own funds for any loss to the Trust
resulting from the Servicer's failure to maintain premiums for such insurance
required by this Section when so permitted by the terms of the Mortgage as to
which such loss relates.
Section 8.12 Due-on-Sale Clauses; Assumption and Substitution
Agreements.
When a Property has been or is about to be conveyed by the Mortgagor,
the Servicer shall, to the extent it has knowledge of such conveyance or
prospective conveyance, exercise its rights to accelerate the maturity of the
related Home Equity Loan under any "due-on-sale" clause contained in the related
Mortgage or Note; provided, however, that the Servicer shall not exercise any
such right if the "due-on-sale" clause, in the reasonable belief of the
Servicer, is not enforceable under applicable law. An opinion of counsel to the
foregoing effect shall conclusively establish the reasonableness of such belief.
In such event, the Servicer shall enter into an assumption and modification
agreement with the person to whom such property has been or is about to be
conveyed, pursuant to which such person becomes liable under the Note and,
unless prohibited by applicable law or the Mortgage Documents, the Mortgagor
remains liable thereon. If the foregoing is not permitted under applicable law,
the Servicer is authorized to enter into a substitution of liability agreement
with such person, pursuant to which the original Mortgagor is released from
liability and such person is substituted as Mortgagor and becomes liable under
the Note; provided, however, that to the extent any such substitution of
liability agreement would be delivered by the Servicer outside of its usual
procedures for mortgage loans held in its own portfolio the Servicer shall,
prior to executing and delivering such agreement, obtain the prior written
consent of the Certificate Insurer. The Home Equity Loan, as assumed, shall
conform in all respects to the requirements, representations and warranties of
this Agreement. The Servicer shall notify the Trustee that any such assumption
or substitution agreement has been completed by forwarding to the Trustee the
original copy of such assumption or substitution agreement (indicating the File
to which it relates) which copy shall be added by the Trustee to the related
File and which shall, for all purposes, be considered a part of such File to the
same extent as all other documents and instruments constituting a part thereof.
The Servicer shall be responsible for recording any such assumption or
substitution agreements. In connection with any such assumption or substitution
agreement, the required monthly payment on the related Home Equity Loan shall
not be changed but shall remain as in effect immediately prior to the assumption
or substitution, the stated maturity or outstanding principal amount of such
Home Equity Loan shall not be changed nor shall any required monthly payments of
principal or interest be deferred or forgiven. Any fee collected by the Servicer
or the Sub-Servicer for consenting to any such conveyance or entering into an
assumption or substitution agreement shall be retained by or paid to the
Servicer as additional servicing compensation.
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Home Equity Loan by operation of law or any assumption which the Servicer may be
restricted by law from preventing, for any reason whatsoever.
Section 8.13 Realization Upon Defaulted Home Equity Loans;
Modification.
(a) The Servicer shall foreclose upon or otherwise comparably effect
the ownership in the name of the Servicer on behalf of the Trust of Properties
relating to defaulted Home Equity Loans as to which no satisfactory arrangements
can be made for collection of Delinquent payments and which the Servicer has not
purchased pursuant to Section 8.10(b). In connection with such foreclosure or
other conversion, the Servicer shall exercise such of the rights and powers
vested in it hereunder, and use the same degree of care and skill in their
exercise or use, as prudent mortgage lenders would exercise or use under the
circumstances in the conduct of their own affairs and consistent with the
servicing standards set forth in the FannieMae Guide, including, but not limited
to, advancing funds for the payment of taxes, amounts due with respect to Senior
Liens, and insurance premiums. Any amounts so advanced shall constitute
"Servicing Advances" within the meaning of Section 8.09(b) hereof. The Servicer
shall sell any REO Property within 23 months of its acquisition by the Trust, at
such price as the Servicer deems necessary to comply with this covenant unless
the Seller which delivered the related Home Equity Loan obtains for the Trustee,
the Certificate Insurer and the Servicer an opinion of counsel experienced in
federal income tax matters acceptable to the Trustee and the Certificate
Insurer, addressed to the Trustee, the Certificate Insurer, and the Servicer, to
the effect that the holding by the Trust of such REO Property for any greater
period will not result in the imposition of taxes on "Prohibited Transactions"
of the Trust or any REMIC therein as defined in Section 860F of the Code or
cause any REMIC therein to fail to qualify as a REMIC under the REMIC Provisions
at any time that any Certificates are outstanding. Notwithstanding the
generality of the foregoing provisions, the Servicer shall manage, conserve,
protect and operate each REO Property for the Owners solely for the purpose of
its prompt disposition and sale in a manner which does not cause such REO
Property to fail to qualify as "foreclosure property" within the meaning of
Section 860G(a)(8) of the Code or result in the receipt by any REMIC of any
"income from non-permitted assets" within the meaning of Section 860F(a)(2)(B)
of the Code or any "net income from foreclosure property" which is subject to
taxation under the REMIC Provisions. Pursuant to its efforts to sell such REO
Property, the Servicer shall either itself or through an agent selected by the
Servicer protect and conserve such REO Property in the same manner and to such
extent as is customary in the locality where such REO Property is located and
may, incident to its conservation and protection of the interests of the Owners,
rent the same, or any part thereof, as the Servicer deems to be in the best
interest of the Owners for the period prior to the sale of such REO Property.
The Servicer shall take into account the existence of any hazardous substances,
hazardous wastes or solid wastes, as such terms are defined in the Comprehensive
Environmental Response Compensation and Liability Act, the Resource Conservation
and Recovery Act of 1976, or other federal, state or local environmental
legislation, on a Property in determining whether to foreclose upon or otherwise
comparably convert the ownership of such Property. The Servicer shall not take
any such action with respect to any Property known by the Servicer to contain
such wastes or substances, without the prior written consent of the Certificate
Insurer. With respect to any Home Equity Loan secured by a mixed use Property,
the Servicer shall, prior to foreclosing upon or otherwise comparably effecting
the ownership in the name of the Servicer on behalf of the Trust, either (x)
perform a "phase one environmental study" of such Property or (y) repurchase
such Property at the Loan Purchase Price.
(b) The Servicer shall determine, with respect to each defaulted Home
Equity Loan and in accordance with the procedures set forth in the FannieMae
Guide, when it has recovered, whether through trustee's sale, foreclosure sale
or otherwise, all amounts it expects to recover from or on account of such
defaulted Home Equity Loan, whereupon such Home Equity Loan shall become a
"Liquidated Loan". After a Home Equity Loan has become a Liquidated Loan, the
Servicer shall promptly prepare and forward to the Depositor, the Certificate
Insurer and the Trustee a report detailing the Liquidation Proceeds received
from the Liquidated Loan, expenses incurred with respect thereto, and any loss
incurred in connection therewith.
(c) The Servicer shall not agree to any modification, waiver or
amendment of any provision of any Home Equity Loan unless, in the Servicer's
good faith judgment, such modification, waiver or amendment would minimize the
loss that might otherwise be experienced with respect to such Home Equity Loan
and only in the event of a payment default with respect to such Home Equity Loan
or in the event that a payment default with respect to such Home Equity Loan is
reasonably foreseeable by the Servicer; provided, however, that no such
modification, waiver or amendment shall extend the maturity date of such Home
Equity Loan beyond the Remittance Period related to the Final Scheduled Payment
Date of the latest Class of Certificates remaining in the Trust. Notwithstanding
anything set out in this Section 8.13(c) or elsewhere in this Agreement to the
contrary, the Servicer shall be permitted to modify, waive or amend any
provision of a Home Equity Loan if required by statute or a court of competent
jurisdiction to do so.
(d) The Servicer shall deliver to the Trustee for deposit in the
related File, an original counterpart of any agreement relating to such
modification, waiver or amendment, promptly following the execution thereof.
Section 8.14 Trustee to Cooperate; Release of Files.
Section 8.14 Trustee to Cooperate; Release of Files.
(a) Upon the payment in full of any Home Equity Loan (including any
liquidation of such Home Equity Loan through foreclosure or otherwise), or the
receipt by the Servicer of a notification that payment in full will be escrowed
in a manner customary for such purposes, the Servicer shall deliver to the
Trustee the FannieMae "Request for Release of Documents" (FannieMae Form 2009).
Upon receipt of such Request for Release of Documents, the Trustee shall
promptly release the related File, in trust, in its reasonable discretion to (i)
the Servicer, (ii) an escrow agent or (iii) any employee, agent or attorney of
the Trustee. Upon any such payment in full, or the receipt of such notification
that such funds have been placed in escrow, the Servicer is authorized to give,
as attorney-in-fact for the Trustee and the mortgagee under the Mortgage which
secured the Note, an instrument of satisfaction (or assignment of Mortgage
without recourse) regarding the Property relating to such Mortgage, which
instrument of satisfaction or assignment, as the case may be, shall be delivered
to the Person or Persons entitled thereto against receipt therefor of payment in
full, it being understood and agreed that no expense incurred in connection with
such instrument of satisfaction or assignment, as the case may be, shall be
chargeable to the Principal and Interest Account. In lieu of executing any such
satisfaction or assignment, as the case may be, the Servicer may prepare and
submit to the Trustee a satisfaction (or assignment without recourse, if
requested by the Person or Persons entitled thereto) in form for execution by
the Trustee with all requisite information completed by the Servicer; in such
event, the Trustee shall execute and acknowledge such satisfaction or
assignment, as the case may be, and deliver the same with the related File, as
aforesaid.
(b) From time to time and as appropriate in the servicing of any Home
Equity Loan, including, without limitation, foreclosure or other comparable
conversion of a Home Equity Loan or collection under any applicable Insurance
Policy, the Trustee shall (except in the case of the payment or liquidation
pursuant to which the related File is released to an escrow agent or an
employee, agent or attorney of the Trustee), upon request of the Servicer and
delivery to the Trustee of a receipt signed by an Authorized Officer of the
Servicer, release the related File to the Servicer and shall execute such
documents as shall be necessary to the prosecution of any such proceedings,
including, without limitation, an assignment without recourse of the related
Mortgage to the Servicer; provided that there shall not be released and
unreturned at any one time more than 10% of the entire number of Files. Such
receipt shall obligate the Servicer to return the File to the Trustee when the
need therefor by the Servicer no longer exists unless the Home Equity Loan shall
be liquidated, in which case, upon receipt of the FannieMae "Liquidation
Schedule" relating to such liquidation, the receipt shall be released by the
Trustee to the Servicer.
(c) The Servicer shall have the right to accept applications of
Mortgagors for consent to (i) partial releases of Mortgages, (ii) alterations
and (iii) removal, demolition or division of properties subject to Mortgages. No
application for approval shall be considered by the Servicer unless: (x) the
provisions of the related Note and Mortgage have been complied with; (y) the
Loan-to-Value Ratio after any release does not exceed the Loan-to-Value Ratio of
such Home Equity Loan as of the date of origination thereof and any increase in
the Loan-to-Value Ratio shall not exceed 15% unless approved in writing by the
Certificate Insurer; and (z) the lien priority of the related Mortgage is not
affected. Upon receipt by the Trustee of an Officer's Certificate executed on
behalf of the Servicer setting forth the action proposed to be taken in respect
of a particular Home Equity Loan and certifying that the criteria set forth in
the immediately preceding sentence have been satisfied, the Trustee shall
execute and deliver to the Servicer the consent or partial release so requested
by the Servicer. A proposed form of consent or partial release, as the case may
be, shall accompany any Officer's Certificate delivered by the Servicer pursuant
to this paragraph. The Servicer shall notify the Certificate Insurer and the
Rating Agencies if an application is approved under clause (y) above without
approval in writing by the Certificate Insurer.
Section 8.15 Servicing Compensation.
As compensation for its activities hereunder, the Servicer shall be
entitled to retain the amount of the Servicing Fee with respect to each Home
Equity Loan. Additional servicing compensation in the form of prepayment
charges, release fees, bad check charges, assumption fees, late payment charges,
prepayment penalties, or any other servicing-related fees, Net Liquidation
Proceeds not required to be deposited in the Principal and Interest Account
pursuant to Section 8.08(c)(ii) and similar items may, to the extent collected
from Mortgagors, be retained by the Servicer.
Section 8.16 Annual Statement as to Compliance.
The Servicer, at its own expense, will deliver to the Trustee, the
Depositor, the Certificate Insurer and the Rating Agencies, on or before March
31 of each year, commencing in 1998, an Officer's Certificate stating, as to
each signer thereof, that (i) a review of the activities of the Servicer during
such preceding calendar year and of performance under this Agreement has been
made under such officers' supervision, and (ii) to the best of such officers'
knowledge, based on such review, the Servicer has fulfilled all its obligations
under this Agreement for such year, or, if there has been a default in the
fulfillment of all such obligations, specifying each such default known to such
officers and the nature and status thereof including the steps being taken by
the Servicer to remedy such default.
Section 8.17 Annual Independent Certified Public Accountants' Reports.
On or before June 30 of any year, commencing in 1998, the Servicer, at
its own expense (or if the Trustee is then acting as Servicer, at the expense of
the Depositor, which in no event shall exceed $1,000 per annum), shall cause to
be delivered to the Trustee, the Certificate Insurer and the Rating Agencies a
letter or letters of a firm of independent, nationally recognized certified
public accountants reasonably acceptable to the Certificate Insurer, dated as of
the date of the Servicer's fiscal audit for subsequent letters, stating that
such firm has examined the Servicer's overall servicing operations in accordance
with the requirements of the Uniform Single Attestation Program for Mortgage
Bankers, and stating such firm's conclusions relating thereto.
Section 8.18 Access to Certain Documentation and Information Regarding
the Home Equity Loans.
The Servicer shall provide to the Trustee, the Certificate Insurer,
the FDIC and the supervisory agents and examiners of each of the foregoing
(which, in the case of supervisory agents and examiners, may be required by
applicable state and federal regulations) access to the documentation regarding
the Home Equity Loans, such access being afforded without charge but only upon
reasonable request and during normal business hours at the offices of the
Servicer designated by it.
Section 8.19 Assignment of Agreement.
The Servicer may not assign its obligations under this Agreement, in
whole or in part, unless it shall have first obtained the written consent of the
Trustee and the Certificate Insurer, which consent shall not be unreasonably
withheld; provided, however, that any assignee must meet the eligibility
requirements set forth in Section 8.20(i) hereof for a successor servicer.
Section 8.20 Removal of Servicer; Resignation of Servicer.
(a) The Certificate Insurer (or Trustee with the consent of the
Certificate Insurer and acting upon the request of a majority of the Percentage
Interests of the Offered Certificates then Outstanding), may remove the Servicer
upon the occurrence of any of the following events:
(i) The Servicer shall (I) apply for or consent to
the appointment of a receiver, trustee, liquidator
or custodian or similar entity with respect to
itself or its property, (II) admit in writing its
inability to pay its debts generally as they
become due, (III) make a general assignment for
the benefit of creditors, (IV) be adjudicated a
bankrupt or insolvent, (V) commence a voluntary
case under the federal bankruptcy laws of the
United States of America or file a voluntary
petition or answer seeking reorganization, an
arrangement with creditors or an order for relief
or seeking to take advantage of any insolvency law
or file an answer admitting the material
allegations of a petition filed against it in any
bankruptcy, reorganization or insolvency
proceeding or (VI) take corporate action for the
purpose of effecting any of the foregoing; or
(ii) If without the application, approval or consent
of the Servicer, a proceeding shall be instituted
in any court of competent jurisdiction, under any
law relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking in
respect of the Servicer an order for relief or an
adjudication in bankruptcy, reorganization,
dissolution, winding up, liquidation, a
composition or arrangement with creditors, a
readjustment of debts, the appointment of a
trustee, receiver, liquidator or custodian or
similar entity with respect to the Servicer or of
all or any substantial part of its assets, or
other like relief in respect thereof under any
bankruptcy or insolvency law, and, if such
proceeding is being contested by the Servicer in
good faith, the same shall (A) result in the entry
of an order for relief or any such adjudication or
appointment or (B) continue undismissed or pending
and unstayed for any period of seventy-five (75)
consecutive days; or
(iii) The Servicer shall fail to perform any one or
more of its obligations hereunder and shall
continue in default thereof for a period of thirty
(30) days (one (1) Business Day in the case of a
delay in making a required payment to the Trustee
under Section 8.08(d)(ii)(a)) after the earlier of
(a) actual knowledge of an officer of the Servicer
or (b) receipt of notice from the Trustee or the
Certificate Insurer of said failure; provided,
however, that if the Servicer can demonstrate to
the reasonable satisfaction of the Certificate
Insurer that it is diligently pursuing remedial
action, then the cure period may be extended with
the written approval of the Certificate Insurer; or
(iv) The Servicer shall fail to cure any breach of any
of its representations and warranties set forth in
Section 3.02 which materially and adversely
affects the interests of the Owners or the
Certificate Insurer for a period of sixty (60)
days after the earlier of the Servicer's discovery
or receipt of notice thereof; provided however,
that if the Servicer can demonstrate to the
reasonable satisfaction of the Certificate Insurer
that it is diligently pursuing remedial action,
then the cure period may be extended with the
written approval of the Certificate Insurer; or
(v) The merger, consolidation or other combination of
the Servicer with or into any other entity, unless
(1) the Servicer is the surviving entity of such
combination or (2) the surviving entity is a
corporation or a state-chartered or national bank
acceptable to the Certificate Insurer (acceptable
to the Owners of the Class R Certificates as
provided below but if such Owners and the
Certificate Insurer cannot agree, the Certificate
Insurer shall control) organized and doing
business under the laws of any state or the United
States; or
(vi) The occurrence of a Cumulative Realized Loss
Termination Trigger.
(b) The Certificate Insurer may remove the Servicer upon the
occurrence of any of the following events:
(i) an Insured Payment is made by the Certificate
Insuer, provided, however, that in the event that the
Trustee shall become the Servicer hereunder, if the Servicer
can demonstrate to the reasonable satisfaction of the
Certificate Insurer that such event was due to circumstances
beyond the control of the Servicer, the right of removal
hereunder shall not be considered a default by the Servicer;
(ii) the failure by the Servicer to make any
required Servicing Advance when due;
(iii) Cumulative Realized Losses has exceeded
7% of the Original Aggregate Loan Balance; provided,
however, that in the event that the Trustee shall become the
Servicer hereunder, if the Servicer can demonstrate to the
reasonable satisfaction of the Certificate Insurer that such
event was due to circumstances beyond the control of the
Servicer, the right of removal hereunder shall not be
considered a default by the Servicer; or
(iv) the failure by the Servicer to make any
required Delinquency Advance or to pay any Compensating
Interest when due;
provided, however, that (x) prior to any removal of the Servicer by
the Certificate Insurer pursuant to clause (iii) of this Section 8.20(b), the
Servicer and the Trustee shall first have been given by the Certificate Insurer
and by registered or certified mail, notice of the occurrence of one or more of
the events set forth in clause (iii) above and the Servicer shall not have
remedied, or shall not have taken actions satisfactory to the Certificate
Insurer to remedy, such event or events within 60 days after the Servicer's
receipt of such notice and (y) upon the Trustee's determination that a required
Delinquency Advance or payment of Compensating Interest has not been made by the
Servicer, the Trustee shall so notify an Authorized Officer of the Servicer, the
Owners, if any, and the Certificate Insurer as soon as is reasonably practical.
(c) If any event described in subsection (b)(iii) above occurs and is
continuing, during the thirty (30) day period following receipt of notice, the
Trustee, the Owners of the Class R Certificates and the Certificate Insurer
shall cooperate with each other to determine if the occurrence of such event is
more likely than not the result of the acts or omissions of the Servicer or more
likely than not the result of events beyond the control of the Servicer. If the
Trustee, the Owners of the Class R Certificates and the Certificate Insurer
conclude that the event is the result of the latter, the Servicer may not be
terminated, unless and until some other event set forth in subsection (b) (i),
(ii) or (iv) has occurred and is continuing. If the Trustee, the Owners of the
Class R Certificates and the Certificate Insurer conclude that the event is the
result of the former, the Certificate Insurer may terminate the Servicer in
accordance with this Section and the Trustee shall act as successor Servicer,
provided that the Trustee shall have until the 30th day following the date of
receipt of notice of the event to become the successor Servicer or to appoint a
successor Servicer pursuant to this Section.
If the Trustee, the Owners of the Class R Certificates and the
Certificate Insurer cannot agree, and the basis for such disagreement is not
arbitrary or unreasonable, as to the cause of the event, the decision of the
Certificate Insurer shall control; provided, however, that if the Certificate
Insurer decides to terminate the Servicer, the Trustee shall be relieved of its
obligation to assume the servicing or to appoint a successor, which shall be the
exclusive obligation of the Certificate Insurer.
The Certificate Insurer agrees to use its best efforts to inform the
Trustee of any materially adverse information regarding the Servicer's servicing
activities that comes to the attention of the Certificate Insurer from time to
time.
(d) If any event described in sections (a) and (b) above (other than
(b)(iii) for which Section 8.20(c) controls) occurs and is continuing, the
Certificate Insurer shall notify the Owners of the Class R Certificates in
writing if the Certificate Insurer intends to terminate the Servicer in its
capacity as Servicer under this Agreement. During the 30 day period following
receipt of such notice by the Owners of the Class R Certificates, such Owners
and the Certificate Insurer shall cooperate with each other to determine if the
occurrence of such event is more likely than not the result of the acts or
omissions of the Servicer or more likely than not the result of events beyond
the control of the Servicer. If the Owners of the Class R Certificates and the
Certificate Insurer conclude that the event is the result of the latter, the
Servicer may not be terminated. If the Owners of the Class R Certificates and
the Certificate Insurer conclude that the event is the result of the former, the
Certificate Insurer may terminate the Servicer in accordance with this Section
and the Trustee shall act as successor Servicer, provided that the Trustee shall
have until the 30th day following the date of receipt of notice of the event to
become the successor Servicer or to appoint a successor Servicer pursuant to
this Section. If the Owners of the Class R Certificates and the Certificate
Insurer cannot agree as to the cause of the event, the decision of the
Certificate Insurer shall control.
(e) The Servicer shall not resign from the obligations and duties
hereby imposed on it, except upon determination that its duties hereunder are no
longer permissible under applicable law or are in material conflict by reason of
applicable law with any other activities carried on by it, the other activities
of the Servicer so causing such a conflict being of a type and nature carried on
by the Servicer at the date of this Agreement. Any such determination permitting
the resignation of the Servicer shall be evidenced by an opinion of counsel to
such effect which shall be delivered to the Trustee and the Certificate Insurer,
which opinion shall be at the Servicer's expense.
(f) No removal or resignation of the Servicer shall become effective
until the Trustee or a successor Servicer shall have assumed the Servicer's
responsibilities and obligations in accordance with this Section.
(g) Upon removal or resignation of the Servicer, the Servicer at its
own expense also shall promptly deliver or cause to be delivered to a successor
servicer or the Trustee all the books and records (including, without
limitation, records kept in electronic form) that the Servicer has maintained
for the Home Equity Loans, including all tax bills, assessment notices,
insurance premium notices and all other documents as well as all original
documents then in the Servicer's possession.
(h) Any collections then being held by the Servicer prior to its
removal and any collections received by the Servicer after removal or
resignation shall be endorsed by it to the Trustee and remitted directly and
immediately to the Trustee or the successor Servicer.
(i) Upon removal or resignation of the Servicer, the Trustee (x) may
solicit bids for a successor servicer as described below, and (y) pending the
appointment of a successor servicer as a result of soliciting such bids, shall
serve as Servicer. The Trustee shall, if it is unable to obtain a qualifying bid
and is prevented by law from acting as Servicer, appoint, or petition a court of
competent jurisdiction to appoint, any housing and home finance institution,
bank or mortgage servicing institution which has been designated as an approved
seller-servicer by FannieMae or FHLMC for first and second mortgage loans and
having equity of not less than $10,000,000 (or such lower level as may be
acceptable to the Certificate Insurer), as determined in accordance with
generally accepted accounting principles and acceptable to the Certificate
Insurer and the Owners of the Class R Certificates (provided that if the
Certificate Insurer and such Owners cannot agree as to the acceptability of such
successor Servicer, the decision of the Certificate Insurer shall control) as
the successor to the Servicer hereunder in the assumption of all or any part of
the responsibilities, duties or liabilities of the Servicer hereunder. The
compensation of any successor Servicer (including, without limitation, the
Trustee) so appointed shall be the aggregate Servicing Fee, together with the
other servicing compensation in the form of assumption fees, late payment
charges or otherwise as provided in Sections 8.08 and 8.15; provided, however,
that if the Trustee acts as successor Servicer then ContiMortgage agrees to pay
to the Trustee at such time that the Trustee becomes such successor Servicer a
set-up fee of twenty-five dollars ($25.00) for each Home Equity Loan then
included in the Trust Estate. The Trustee shall be obligated to serve as
successor Servicer whether or not the fee described in the preceding sentence is
paid by ContiMortgage, but shall in any event be entitled to receive, and to
enforce payment of, such fee from ContiMortgage.
(j) In the event the Trustee solicits bids as provided above, the
Trustee shall solicit, by public announcement, bids from housing and home
finance institutions, banks and mortgage servicing institutions meeting the
qualifications set forth above. Such public announcement shall specify that the
successor Servicer shall be entitled to the full amount of the aggregate
Servicing Fees as servicing compensation, together with the other servicing
compensation in the form of assumption fees, late payment charges or otherwise
as provided in Sections 8.08 and 8.15. Within thirty days after any such public
announcement, the Trustee shall negotiate and effect the sale, transfer and
assignment of the servicing rights and responsibilities hereunder to the
qualified party submitting the highest satisfactory bid as to the price they
will pay to obtain servicing. The Trustee shall deduct from any sum received by
the Trustee from the successor Servicer in respect of such sale, transfer and
assignment all costs and expenses of any public announcement and of any sale,
transfer and assignment of the servicing rights and responsibilities hereunder.
After such deductions, the remainder of such sum less any amounts due the
Trustee or the Trust from the Servicer shall be paid by the Trustee to the
Servicer at the time of such sale, transfer and assignment to the successor
Servicer.
(k) The Trustee and such successor shall take such action, consistent
with this Agreement, as shall be necessary to effectuate any such succession,
including the notification to all Mortgagors of the transfer of servicing. The
Servicer agrees to cooperate with the Trustee and any successor Servicer in
effecting the termination of the Servicer's servicing responsibilities and
rights hereunder and shall promptly provide the Trustee or such successor
Servicer, as applicable, all documents and records reasonably requested by it to
enable it to assume the Servicer's functions hereunder and shall promptly also
transfer to the Trustee or such successor Servicer, as applicable, all amounts
which then have been or should have been deposited in the Principal and Interest
Account by the Servicer or which are thereafter received with respect to the
Home Equity Loans. Neither the Trustee nor any other successor Servicer shall be
held liable by reason of any failure to make, or any delay in making, any
distribution hereunder or any portion thereof caused by (i) the failure of the
Servicer to deliver, or any delay in delivering, cash, documents or records to
it, or (ii) restrictions imposed by any regulatory authority having jurisdiction
over the Servicer. If the Servicer resigns or is replaced hereunder, the Seller
agrees to reimburse the Trust, the Certificate Insurer and the Owners for the
costs and expenses associated with the transfer of servicing to the replacement
Servicer, but subject to a maximum reimbursement to all such parties in the
amount of twenty-five dollars ($25.00) for each Home Equity Loan then included
in the Trust Estate.
(l) The Trustee or any other successor Servicer, upon assuming the
duties of Servicer hereunder, shall immediately make all Delinquency Advances
and deposit them to the Principal and Interest Account which the Servicer has
theretofore failed to remit with respect to the Home Equity Loans; provided,
however, that if the Trustee is acting as successor Servicer, the Trustee shall
only be required to make Delinquency Advances (including the Delinquency
Advances described in this clause (l)) if, in the Trustee's reasonable good
faith judgment, such Delinquency Advances will ultimately be recoverable from
the Home Equity Loans.
(m) The Servicer which is being removed or is resigning shall give
notice to the Mortgagors, the Certificate Insurer and the Rating Agencies of the
transfer of the servicing to the successor Servicer.
(n) The Trustee shall give notice to the Owners, the Trustee, the
Seller, the Certificate Insurer and the Rating Agencies of the occurrence of any
event described in paragraphs (a) or (b) above of which the Trustee is aware.
Section 8.21 Inspections by Certificate Insurer; Errors and Omissions
Insurance.
(a) At any reasonable time and from time to time upon reasonable
notice, the Trustee, the Certificate Insurer or any agents thereof may inspect
the Servicer's servicing operations and discuss the servicing operations of the
Servicer during the Servicer's normal business hours with any of its officers or
directors; provided, however, that the costs and expenses incurred by the
Servicer or its agents or representatives in connection with any such
examinations or discussions shall be paid by the Servicer;
(b) The Servicer agrees to maintain errors and omissions coverage and
a fidelity bond, each at least to the extent required by Section 305 of Part I
of the FannieMae Guide or any successor provision thereof; provided, however,
that if the Trustee shall become the Servicer, any customary insurance coverage
that the Trustee maintains shall be deemed sufficient hereunder; provided,
further, that in the event that the fidelity bond or the errors and omissions
coverage is no longer in effect, the Trustee shall promptly give such notice to
the Certificate Insurer and the Owners. Upon the request of the Trustee or the
Certificate Insurer, the Servicer shall cause to be delivered to such requesting
Person a certified true copy of such fidelity bond or errors and omission
policy.
END OF ARTICLE VIII
ARTICLE IX TERMINATION OF TRUST
Section 9.01 Termination of Trust.
The Trust created hereunder and all obligations created by this
Agreement will terminate upon the payment to the Owners of all Certificates,
from amounts other than those available under the Certificate Insurance Policy,
of all amounts held by the Trustee and required to be paid to such Owners
pursuant to this Agreement upon the latest to occur of (a) the final payment or
other liquidation (or any advance made with respect thereto) of the last Home
Equity Loan in the Trust Estate, (b) the disposition of all property acquired in
respect of any Home Equity Loan remaining in the Trust Estate, (c) at any time
when a Qualified Liquidation of the Home Equity Loans included within the Trust
is effected as described below and (d) the final payment to the Certificate
Insurer of all amounts then owing to it. To effect a termination of this
Agreement pursuant to clause (c) above, the Owners of all Certificates then
Outstanding shall (i) unanimously direct the Trustee on behalf of the each REMIC
to adopt a plan of complete liquidation for the of the Home Equity Loans as
contemplated by Section 860F(a)(4) of the Code and (ii) provide to the Trustee
an opinion of counsel experienced in federal income tax matters acceptable to
the Certificate Insurer and the Trustee to the effect that each such liquidation
constitutes a Qualified Liquidation, and the Trustee either shall sell the Home
Equity Loans and distribute the proceeds of the liquidation of the Trust Estate,
or shall distribute equitably in kind all of the assets of the Trust Estate to
the remaining Owners of the Certificates each in accordance with such plan, so
that the liquidation or distribution of the Trust Estate, the distribution of
any proceeds of the liquidation and the termination of this Agreement occur no
later than the close of the 90th day after the date of adoption of the plan of
liquidation and such liquidation qualifies as a Qualified Liquidation. In no
event, however, will the Trust created by this Agreement continue beyond the
expiration of twenty-one (21) years from the death of the last survivor of the
descendants of Joseph P. Kennedy, the late Ambassador of the United States to
the Court of Saint James, living on the date hereof. The Trustee shall give
written notice of termination of the Agreement to each Owner in the manner set
forth in Section 11.05.
Section 9.02 Termination Upon Option of Owners of Class R-I
Certificates.
(a) On any Monthly Remittance Date on or after the Clean-Up Call Date,
the Owners of a majority of the Percentage Interests represented by the Class
R-I Certificates then outstanding or, in the absence of a determination by such
Owners, the Certificate Insurer may determine to purchase and may cause the
purchase from the Trust of all (but not fewer than all) Home Equity Loans and
all property theretofore acquired in respect of any Home Equity Loan by
foreclosure, deed in lieu of foreclosure, or otherwise then remaining in the
Trust Estate (i) on terms agreed upon between the Certificate Insurer and the
Owners of such Class R-I Certificates, or (ii) in the absence of such an
agreement, at a price equal to 100% of the aggregate Loan Balances of the
related Home Equity Loans as of the day of purchase minus amounts remitted from
the Principal and Interest Account to the Certificate Account representing
collections of principal on the Home Equity Loans during the current Remittance
Period, plus one month's interest on such amount computed at the Termination
Date Pass-Through Rate, plus all accrued and unpaid Servicing Fees plus the
aggregate amount of any unreimbursed Delinquency Advances and Servicing Advances
and any Delinquency Advances which the Servicer has theretofore failed to remit
plus any amounts due and owing to the Certificate Insurer under the Insurance
Agreement, provided that any such purchase price pursuant to clause (i) or (ii)
shall be sufficient to pay the Outstanding Certificate Principal Balance of and
accrued and unpaid interest on all Classes of outstanding Offered Certificates
plus any amounts due and owing the Certificate Insurer under the Insurance
Agreement. In connection with such purchase, the Servicer shall remit to the
Trustee all amounts then on deposit in the Principal and Interest Account for
deposit to the Certificate Account, which deposit shall be deemed to have
occurred immediately preceding such purchase.
(b) In connection with any such purchase, such Owners of the Class R-I
Certificates shall unanimously direct the Trustee to adopt and the Trustee shall
adopt, as to each REMIC, a plan of complete liquidation of all Home Equity as
contemplated by Section 860F(a)(4) of the Code and shall provide to the Trustee
and the Certificate Insurer an opinion of counsel experienced in federal income
tax matters acceptable to the Trustee and the Certificate Insurer to the effect
that such purchase and liquidations constitutes, as to the REMIC, a Qualified
Liquidation. In addition, such Owners of the Class R-I Certificates shall
provide to the Trustee and the Certificate Insurer an opinion of counsel
acceptable to the Trustee and the Certificate Insurer to the effect that such
purchase and liquidation does not constitute a preference payment pursuant to
the United States Bankruptcy Code.
(c) The purchase option reserved to the Owners of a majority of the
Percentage Interests represented by the Class R-I Certificates may be exercised
by the Certificate Insurer if (i) not exercised by such owners and (ii) the
Servicer as of the Closing Date is no longer the Servicer hereunder.
(d) Promptly following any purchase described in this Section 9.02,
the Trustee will release the Files to the Owners of such Class R-I Certificates
or the Certificate Insurers, as the case may be, or otherwise upon their order,
in a manner similar to that described in Section 8.14 hereof.
Section 9.03 Termination Upon Loss of REMIC Status.
(a) Following a final determination by the Internal Revenue Service or
by a court of competent jurisdiction, in either case from which no appeal is
taken within the permitted time for such appeal or, if any appeal is taken,
following a final determination of such appeal from which no further appeal can
be taken, to the effect that any REMIC in the Trust does not and will no longer
qualify as a REMIC pursuant to Section 860D of the Code (the "Final
Determination"), at any time on or after the date which is 30 calendar days
following such Final Determination (i) the Certificate Insurer or the Owners of
a majority in Percentage Interests represented by the Offered Certificates then
Outstanding may direct the Trustee on behalf of the Trust to adopt a plan of
complete liquidation, as contemplated by Section 860F(a)(4) of the Code and (ii)
the Certificate Insurer may notify the Trustee of the Certificate Insurer's
determination to purchase from the Trust all (but not fewer than all) Home
Equity Loans and all property theretofore acquired by foreclosure, deed in lieu
of foreclosure, or otherwise then remaining in the Trust Estate at a price equal
to the sum of (x) the greater of (i) 100% of the aggregate Loan Balances of the
Home Equity Loans as of the day of purchase minus amounts remitted from the
Principal and Interest Account representing collections of principal on the Home
Equity Loans during the current Remittance Period, and (ii) the fair market
value of such Home Equity Loans (disregarding accrued interest), (y) one month's
interest on such amount computed at the Adjusted Pass-Through Rate and (z) the
aggregate amount of any unreimbursed Delinquency Advances and Servicing Advances
and any Delinquency Advances which the Servicer has theretofore failed to remit.
Upon receipt of such direction from the Certificate Insurer, the
Trustee shall notify the Owners of the Class R-I, Class R-II or Class R
Certificates of such election to liquidate or such determination to purchase, as
the case may be (the "Termination Notice"). The Owners of a majority of the
Percentage Interests of the Class R-I Certificates then Outstanding may, within
60 days from the date of receipt of the Termination Notice (the "Purchase Option
Period"), at their option, purchase from the Trust all (but not fewer than all)
Home Equity Loans and all property theretofore acquired by foreclosure, deed in
lieu of foreclosure, or otherwise then remaining in the Trust Estate at a
purchase price equal to the aggregate Loan Balances of all Home Equity Loans as
of the date of such purchase, plus (a) one month's interest on such amount at
the Termination Date Pass-Through Rate, (b) the aggregate amount of any
unreimbursed Delinquency Advances and Servicing Advances and (c) any Delinquency
Advances which the Servicer has theretofore failed to remit. If, during the
Purchase Option Period, the Owners of the Class R-I Certificates have not
exercised the option described in the immediately preceding paragraph, then upon
the expiration of the Purchase Option Period in the event that the Certificate
Insurer or the Owners of the Class A Certificates with the consent of the
Certificate Insurer have given the Trustee the direction described in clause
(a)(i) above, the Trustee shall sell the Home Equity Loans and distribute the
proceeds of the liquidation of the Trust Estate, each in accordance with the
plan of complete liquidation, such that, if so directed, the liquidation of the
Trust Estate, the distribution of the proceeds of the liquidation and the
termination of this Agreement occur no later than the close of the 60th day, or
such later day as the Certificate Insurer or the Owners of the Class A
Certificates with the consent of the Certificate Insurer shall permit or direct
in writing, after the expiration of the Purchase Option Period and (ii) in the
event that the Certificate Insurer has given the Trustee notice of the
Certificate Insurer's determination to purchase the Trust Estate described in
clause (a)(ii) above the Certificate Insurer shall, within 60 days, purchase all
(but not fewer than all) Home Equity Loans and all property theretofore acquired
by foreclosure, deed in lieu of foreclosure or otherwise then remaining in the
Trust Estate. In connection with such purchase, the Servicer shall remit to the
Trustee all amounts then on deposit in the Principal and Interest Account for
deposit to the Certificate Account, which deposit shall be deemed to have
occurred immediately preceding such purchase.
(b) Following a Final Determination, the Owners of a majority of the
Percentage Interests of the Class R-I Certificates then Outstanding may, at
their option and upon delivery to the Certificate Insurer of an opinion of
counsel experienced in federal income tax matters acceptable to the Certificate
Insurer selected by the Owners of the Class R-I Certificates, which opinion
shall be reasonably satisfactory in form and substance to the Certificate
Insurer, to the effect that the effect of the Final Determination is to increase
substantially the probability that the gross income of the Trust will be subject
to federal taxation, purchase from the Trust all (but not fewer than all) Home
Equity Loans and all property theretofore acquired by foreclosure, deed in lieu
of foreclosure, or otherwise then remaining in the Trust Estate at a purchase
price equal to the aggregate Loan Balances of all Home Equity Loans as of the
date of such purchase, plus (a) one month's interest on such amount computed at
the Termination Date Pass-Through Rate, (b) the aggregate amount of unreimbursed
Delinquency Advances and (c) any Delinquency Advances which the Servicer has
theretofore failed to remit. In connection with such purchase, the Servicer
shall remit to the Trustee all amounts then on deposit in the Principal and
Interest Account for deposit to the Certificate Account, which deposit shall be
deemed to have occurred immediately preceding such purchase. The foregoing
opinion shall be deemed satisfactory unless the Certificate Insurer gives the
Owners of a majority of the Percentage Interests of the Class R-I Certificates
notice that such opinion is not satisfactory within thirty days after receipt of
such opinion. In connection with any such purchase, such Owners shall direct the
Trustee to adopt a plan of complete liquidation as contemplated by Section
860F(a)(4) of the Code and shall provide to the Trustee an opinion of counsel
experienced in federal income tax matters to the effect that such purchase
constitutes a Qualified Liquidation.
Section 9.04 Disposition of Proceeds.
The Trustee shall, upon receipt thereof, deposit the proceeds of any
liquidation of the Trust Estate pursuant to this Article IX to the Certificate
Account; provided, however, that any amounts representing unreimbursed
Delinquency Advances and Servicing Advances theretofore funded by the Servicer
from the Servicer's own funds shall be paid by the Trustee to the Servicer from
the proceeds of the Trust Estate.
END OF ARTICLE IX
ARTICLE X THE TRUSTEE
Section 10.01 Certain Duties and Responsibilities.
(a) The Trustee (i) (A) undertakes to perform such duties and only
such duties as are specifically set forth in this Agreement, and no implied
covenants or obligations shall be read into this Agreement against the Trustee
and (B) the banking institution that is the Trustee shall serve as the Trustee
at all times under this Agreement, and (ii) in the absence of bad faith on its
part, may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or opinions
furnished pursuant to and conforming to the requirements of this Agreement; but
in the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, shall be under a duty
to examine the same to determine whether or not they conform to the requirements
of this Agreement.
(b) Notwithstanding the appointment of the Servicer hereunder, the
Trustee is hereby empowered to perform the duties of the Servicer it being
expressly understood, however, that the foregoing describes a power and not an
obligation of the Trustee, and that all parties hereto agree that, prior to any
termination of the Servicer, the Servicer and, thereafter, the Trustee or any
other successor servicer shall perform such duties. Specifically, and not in
limitation of the foregoing, the Trustee shall upon termination or resignation
of the Servicer, and pending the appointment of any other Person as successor
Servicer, have the power and duty during its performance as successor Servicer:
(1) to collect Mortgagor payments;
(2) to foreclose on defaulted Home Equity Loans;
(3) to enforce due-on-sale clauses and to enter into
assumption and substitution agreements as
permitted by Section 8.12 hereof;
(4) to deliver instruments of satisfaction pursuant
to Section 8.14;
(5) to enforce the Home Equity Loans; and
(6) to make Delinquency Advances and Servicing
Advances and to pay Compensating Interest.
(c) No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct, except that:
(1) this subsection shall not be construed to limit
the effect of subsection (a) of this Section;
(2) the Trustee shall not be personally liable for
any error of judgment made in good faith by an
Authorized Officer, unless it shall be proved that
the Trustee was negligent in ascertaining the
pertinent facts; and
(3) the Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in
good faith in accordance with the direction of the
Certificate Insurer or the Owners of a majority in
Percentage Interest of the Certificates of the
affected Class or Classes and the Certificate
Insurer relating to the time, method and place of
conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power
conferred upon the Trustee, under this Agreement
relating to such Certificates.
(d) Whether or not therein expressly so provided, every provision of
this Agreement relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
(e) No provision of this Agreement shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it. None of the provisions contained in this Agreement
shall in any event require the Trustee to perform, or be responsible for the
manner of performance of, any of the obligations of the Servicer under this
Agreement, except during such time, if any, as the Trustee shall be the
successor to, and be vested with the rights, duties, powers and privileges of,
the Servicer in accordance with the terms of this Agreement.
(f) The permissive right of the Trustee to take actions enumerated in
this Agreement shall not be construed as a duty and the Trustee shall not be
answerable for other than its own negligence or willful misconduct.
(g) The Trustee shall be under no obligation to institute any suit, or
to take any remedial proceeding under this Agreement, or to take any steps in
the execution of the trusts hereby created or in the enforcement of any rights
and powers hereunder until it shall be indemnified to its satisfaction against
any and all costs and expenses, outlays and counsel fees and other reasonable
disbursements and against all liability, except liability which is adjudicated
to have resulted from its negligence or willful misconduct, in connection with
any action so taken.
Section 10.02 Removal of Trustee for Cause.
(a) The Trustee may be removed pursuant to paragraph (b) hereof upon
the occurrence of any of the following events (whatever the reason for such
event and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) the Trustee shall fail to distribute to the
Owners entitled hereto on any Payment Date amounts
available for distribution in accordance with the
terms hereof; (provided, however, that any such
failure which is due to circumstances beyond the
control of the Trustee shall not be a cause for
removal hereunder); or
(2) the Trustee shall fail in the performance of, or
breach, any covenant or agreement of the Trustee
in this Agreement, or if any representation or
warranty of the Trustee made in this Agreement or
in any certificate or other writing delivered
pursuant hereto or in connection herewith shall
prove to be incorrect in any material respect as
of the time when the same shall have been made,
and such failure or breach shall continue or not
be cured for a period of 30 days after there shall
have been given, by registered or certified mail,
to the Trustee by the Sellers, the Certificate
Insurer or by the Owners of at least 25% of the
aggregate Percentage Interests in the Trust Estate
represented by the Offered Certificates then
Outstanding, or, if there are no Offered
Certificates then Outstanding, by such Percentage
Interests represented by the Class R Certificates,
a written notice specifying such failure or breach
and requiring it to be remedied; or
(3) a decree or order of a court or agency or
supervisory authority having jurisdiction for the
appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of
debt, marshaling of assets and liabilities or
similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been
entered against the Trustee, and such decree or
order shall have remained in force undischarged or
unstayed for a period of 75 days; or
(4) a conservator or receiver or liquidator or
sequestrator or custodian of the property of the
Trustee is appointed in any insolvency,
readjustment of debt, marshaling of assets and
liabilities or similar proceedings of or relating
to the Trustee or relating to all or substantially
all of its property; or
(5) the Trustee shall become insolvent (however
insolvency is evidenced), generally fail to pay
its debts as they come due, file or consent to the
filing of a petition to take advantage of any
applicable insolvency or reorganization statute,
make an assignment for the benefit of its
creditors, voluntarily suspend payment of its
obligations, or take corporate action for the
purpose of any of the foregoing.
The Depositor shall give notice to the Certificate Insurer and the
Rating Agencies of the occurrence of any such event of which the Depositor is
aware.
(b) If any event described in paragraph (a) occurs and is continuing,
then and in every such case (i) the Certificate Insurer or (ii) with the prior
written consent (which shall not be unreasonably withheld) of the Certificate
Insurer, the Depositor and the Owners of a majority of the Percentage Interests
represented by the Offered Certificates or if there are no Offered Certificates
then outstanding by such majority of the Percentage Interests represented by the
Retained Certificates, may, whether or not the Trustee resigns pursuant to
Section 10.09(b) hereof, immediately, concurrently with the giving of notice to
the Trustee, and without delaying the 30 days required for notice therein,
appoint a successor Trustee pursuant to the terms of Section 10.09 hereof.
(c) The Servicer shall not be liable for any costs relating to the
removal of the Trustee or the appointment of a new Trustee.
Section 10.03 Certain Rights of the Trustee.
Except as otherwise provided in Section 10.01 hereof:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, note or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request or direction of the Depositor, either of the Sellers,
the Certificate Insurer or the Owners of any Class of Certificates mentioned
herein shall be sufficiently evidenced in writing;
(c) whenever in the administration of this Agreement the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officer's Certificate;
(d) the Trustee may consult with counsel, and the written advice of
such counsel (selected in good faith by the Trustee) shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reasonable reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement at the request or direction of
any of the Owners pursuant to this Agreement, unless such Owners shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, note or other
paper or document, but the Trustee in its discretion may make such further
inquiry or investigation into such facts or matters as it may see fit;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents, attorneys
or custodians;
(h) the Trustee shall not be liable for any action it takes or omits
to take in good faith which it reasonably believes to be authorized by the
Authorized Officer of any Person or within its rights or powers under this
Agreement other than as to validity and sufficiency of its authentication of the
Certificates;
(i) the right of the Trustee to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty, and the Trustee
shall not be answerable for other than its negligence or willful misconduct in
the performance of such act;
(j) pursuant to the terms of this Agreement, the Servicer is required
to furnish to the Trustee from time to time certain information and to make
various calculations which are relevant to the performance of the Trustee's
duties under this Agreement. The Trustee shall be entitled to rely in good faith
on any such information and calculations in the performance of its duties
hereunder, (i) unless and until an Authorized Officer of the Trustee has actual
knowledge, or is advised by any Owner of a Certificate (either in writing or
orally with prompt written or telecopies confirmation), that such information or
calculations is or are incorrect, or (ii) unless there is a manifest error in
any such information; and
(k) the Trustee shall not be required to give any bond or surety in
respect of the execution of the Trust Estate created hereby or the powers
granted hereunder.
Section 10.04 Not Responsible for Recitals or Issuance of
Certificates.
The recitals and representations contained herein and in the
Certificates, except any such recitals and representations relating to the
Trustee, shall be taken as the statements of the Depositor and the Trustee
assumes no responsibility for their correctness. The Trustee makes no
representation as to the validity or sufficiency of this Agreement, of the
Certificates, or any Home Equity Loan or document related thereto other than as
to validity and sufficiency of its authentication of the Certificates. The
Trustee shall not be accountable for the use or application by the Depositor of
any of the Certificates or of the proceeds of such Certificates, or for the use
or application of any funds paid to the Depositor, either of the Sellers or the
Servicer in respect of the Home Equity Loans or deposited into or withdrawn from
the Principal and Interest Account or the Certificate Account by the Depositor,
the Servicer or either of the Sellers, and shall have no responsibility for
filing any financing or continuation statement in any public office at any time
or otherwise to perfect or maintain the perfection of any security interest or
lien or to prepare or file any tax returns or Securities and Exchange Commission
filings for the Trust or to record this Agreement. The Trustee shall not be
required to take notice or be deemed to have notice or knowledge of any default
unless an Authorized Officer of the Trustee shall have received written notice
thereof or an Authorized Officer has actual knowledge thereof. In the absence of
receipt of such notice, the Trustee may conclusively assume that no default has
occurred.
Section 10.05 May Hold Certificates.
The Trustee, any Paying Agent, Registrar or any other agent of the
Trust, in its individual or any other capacity, may become an Owner or pledgee
of Certificates and may otherwise deal with the Trust with the same rights it
would have if it were not Trustee, any Paying Agent, Registrar or such other
agent.
Section 10.06 Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other trust funds except to the extent required herein or required by law.
The Trustee shall be under no liability for interest on any money received by it
hereunder except as otherwise agreed with the Seller and except to the extent of
income or other gain on investments which are deposits in or certificates of
deposit of the Trustee in its commercial capacity.
Section 10.07 Compensation and Reimbursement; No Lien for Fees.
The Trustee shall receive compensation for fees and reimbursement for
expenses pursuant to Section 2.05, Section 7.03(b)(i) and Section 7.06 hereof.
The Trustee shall have no lien on the Trust Estate for the payment of such fees
and expenses.
Section 10.08 Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a
corporation or association organized and doing business under the laws of the
United States of America or of any State authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least
$50,000,000 subject to supervision or examination by the United States of
America, acceptable to the Certificate Insurer and having a deposit rating of at
least A2 by Moody's (or such lower rating as may be acceptable to Moody's), and
deposit rating of A- by Standard & Poor's (or such lower rating as may be
acceptable to Standard & Poor's) and, if rated by Fitch, having a rating of at
least A- from Fitch (or such lower rating as may be acceptable to Fitch). If
such Trustee publishes reports of condition at least annually, pursuant to law
or to the requirements of the aforesaid supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
corporation or association shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall, upon the request of ContiMortgage with the
consent of the Certificate Insurer (which consent shall not be unreasonably
withheld) or of the Certificate Insurer, resign immediately in the manner and
with the effect hereinafter specified in this Article X.
Section 10.09 Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor trustee pursuant to this Article X shall become effective until the
acceptance of appointment by the successor trustee under Section 10.10 hereof.
(b) The Trustee, or any trustee or trustees hereafter appointed, may
resign at any time by giving written notice of resignation to the Depositor and
by mailing notice of resignation by first-class mail, postage prepaid, to the
Certificate Insurer and the Owners at their addresses appearing on the Register;
provided, that the Trustee cannot resign solely for the failure to receive the
Trustee Fee. A copy of such notice shall be sent by the resigning Trustee to the
Rating Agencies. Upon receiving notice of resignation, the Depositor shall
promptly appoint a successor trustee or trustees acceptable to the Certificate
Insurer by written instrument, in duplicate, executed on behalf of the Trust by
an Authorized Officer of ContiMortgage, one copy of which instrument shall be
delivered to the Trustee so resigning and one copy to the successor trustee or
trustees. If no successor trustee shall have been appointed and have accepted
appointment within 30 days after the giving of such notice of resignation, the
resigning trustee may petition any court of competent jurisdiction for the
appointment of a successor trustee, or any Owner may, on behalf of himself and
all others similarly situated, petition any such court for the appointment of a
successor trustee. Such court may thereupon, after such notice, if any, as it
may deem proper and appropriate, appoint a successor trustee.
(c) If at any time the Trustee shall cease to be eligible under
Section 10.08 hereof and shall fail to resign after written request therefor by
the Depositor or the Certificate Insurer, the Certificate Insurer or the
Depositor with the consent of the Certificate Insurer may remove the Trustee and
appoint a successor trustee acceptable to the Certificate Insurer by written
instrument, in duplicate, executed on behalf of the Trust by an Authorized
Officer of the Depositor, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor trustee.
(d) The Owners of a majority of the Percentage Interests represented
by the Class A Certificates with the consent of the Certificate Insurer or, if
there are no Class A Certificates then Outstanding, by such majority of the
Percentage Interests represented by the Class R Certificates, may at any time
remove the Trustee and appoint a successor trustee acceptable to the Certificate
Insurer by delivering to the Trustee to be removed, to the successor trustee so
appointed, to the Depositor, to the Certificate Insurer and to the Servicer
copies of the record of the act taken by the Owners, as provided for in Section
11.03 hereof.
(e) If the Trustee fails to perform its duties in accordance with the
terms of this Agreement, or becomes ineligible pursuant to Section 10.08 to
serve as Trustee, the Certificate Insurer may remove the Trustee and appoint a
successor trustee by written instrument, in triplicate, signed by the
Certificate Insurer duly authorized, one complete set of which instruments shall
be delivered to the Depositor, one complete set to the Trustee so removed and
one complete set to the successor Trustee so appointed.
(f) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of the Trustee for any cause,
ContiMortgage shall promptly appoint a successor trustee acceptable to the
Certificate Insurer. If within one year after such resignation, removal or
incapability or the occurrence of such vacancy, a successor trustee shall be
appointed by act of the Certificate Insurer or the Owners of a majority of the
Percentage Interests represented by the Class A Certificates then Outstanding
with the consent of the Certificate Insurer, the successor trustee so appointed
shall forthwith upon its acceptance of such appointment become the successor
trustee and supersede the successor trustee appointed by the Depositor. If no
successor trustee shall have been so appointed by the Depositor or the Owners
and shall have accepted appointment in the manner hereinafter provided, any
Owner may, on behalf of himself and all others similarly situated, petition any
court of competent jurisdiction for the appointment of a successor trustee. Such
court may thereupon, after such notice, if any, as it may deem proper and
prescribe, appoint a successor trustee.
(g) The Depositor shall give notice of any removal of the Trustee by
mailing notice of such event by first-class mail, postage prepaid, to the
Certificate Insurer, the Rating Agencies and to the Owners as their names and
addresses appear in the Register. Each notice shall include the name of the
successor Trustee and the address of its corporate trust office.
Section 10.10 Acceptance of Appointment by Successor Trustee.
Every successor trustee appointed hereunder shall execute, acknowledge
and deliver to the Depositor on behalf of the Trust and to its predecessor
Trustee an instrument accepting such appointment hereunder and stating its
eligibility to serve as Trustee hereunder, and thereupon the resignation or
removal of the predecessor Trustee shall become effective and such successor
trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts, duties and obligations of its predecessor
hereunder; but, on request of the Depositor or the successor Trustee, such
predecessor Trustee shall, upon payment of its charges then unpaid, execute and
deliver an instrument transferring to such successor trustee all of the rights,
powers and trusts of the Trustee so ceasing to act, and shall duly assign,
transfer and deliver to such successor trustee all property and money held by
such Trustee so ceasing to act hereunder. Upon request of any such successor
trustee, the Depositor on behalf of the Trust shall execute any and all
instruments for more fully and certainly vesting in and confirming to such
successor trustee all such rights, powers and trusts.
Upon acceptance of appointment by a successor Trustee as provided in
this Section, the Depositor shall mail notice thereof by first-class mail,
postage prepaid, to the Owners at their last addresses appearing upon the
Register. The Depositor shall send a copy of such notice to the Rating Agencies.
If the Depositor fails to mail such notice within ten days after acceptance of
appointment by the successor Trustee, the successor trustee shall cause such
notice to be mailed at the expense of the Trust.
No successor trustee shall accept its appointment unless at the time
of such acceptance such successor shall be qualified and eligible under this
Article X.
Section 10.11 Merger, Conversion, Consolidation or Succession to
Business of the Trustee.
Any corporation or association into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation or
association resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation or association succeeding to all or
substantially all of the corporate trust business of the Trustee, shall be the
successor of the Trustee hereunder, without the execution or filing of any paper
or any further act on the part of any of the parties hereto; provided, however,
that such corporation or association shall be otherwise qualified and eligible
under this Article X. In case any Certificates have been executed, but not
delivered, by the Trustee then in office, any successor by merger, conversion or
consolidation to such Trustee may adopt such execution and deliver the
Certificates so executed with the same effect as if such successor Trustee had
itself executed such Certificates.
Section 10.12 Reporting; Withholding.
(a) The Trustee shall timely provide to the Owners the Internal
Revenue Service's Form 1099 and any other statement required by applicable
Treasury regulations as determined by the Tax Matters Person, and shall
withhold, as required by applicable law, federal, state or local taxes, if any,
applicable to distributions to the Owners, including but not limited to backup
withholding under Section 3406 of the Code and the withholding tax on
distributions to foreign investors under Sections 1441 and 1442 of the Code.
(b) As required by law or upon request of the Tax Matters Person and
except as otherwise specifically set forth in subsection (a) above, the Trustee
shall timely file all reports prepared by the Depositor and required to be filed
by the Trust with any federal, state or local governmental authority having
jurisdiction over the Trust, including other reports that must be filed with the
Owners, such as the Internal Revenue Service's Form 1066 and Schedule Q and the
form required under Section 6050K of the Code, if applicable to REMICs.
Furthermore, the Trustee shall report to Owners, if required, with respect to
the allocation of expenses pursuant to Section 212 of the Code in accordance
with the specific instructions to the Trustee by the Depositor with respect to
such allocation of expenses. The Trustee shall, upon request of the Depositor,
collect any forms or reports from the Owners determined by the Depositor to be
required under applicable federal, state and local tax laws.
(c) The Depositor covenants and agrees that it shall provide to the
Trustee any information necessary to enable the Trustee to meet its obligations
under subsections (a) and (b) above.
(d) Except as otherwise provided, the Depositor shall have the
responsibility for preparation of all returns, forms, reports and other
documents referred to in this Section and the Trustee's responsibility shall be
to execute such documents.
Section 10.13 Liability of the Trustee.
The Trustee shall be liable in accordance herewith only to the extent
of the obligations specifically imposed upon and undertaken by the Trustee
herein. Neither the Trustee nor any of the directors, officers, employees or
agents of the Trustee shall be under any liability on any Certificate or
otherwise to the Depositor, either of the Sellers, the Servicer, the Certificate
Insurer or any Owner for any action taken or for refraining from the taking of
any action in good faith pursuant to this Agreement, or for errors in judgment;
provided, however, that this provision shall not protect the Trustee, its
directors, officers, employees or agents or any such Person against any
liability which would otherwise be imposed by reason of negligent action,
negligent failure to act or willful misconduct in the performance of duties or
by reason of reckless disregard of obligations and duties hereunder. Subject to
the foregoing sentence, the Trustee shall not be liable for losses on
investments of amounts in the Certificate Account (except for any losses on
obligations on which the bank serving as Trustee is the obligor). In addition,
the Depositor, each of the Sellers and Servicer covenant and agree to indemnify
the Trustee, and when the Trustee is acting as Servicer, the Servicer, from, and
hold it harmless against, any and all losses, liabilities, damages, claims or
expenses (including legal fees and expenses) of whatsoever kind arising out of
or in connection with the performance of its duties hereunder other than those
resulting from the negligence or bad faith of the Trustee, and the Depositor
shall pay all amounts not otherwise paid pursuant to Sections 2.05 and 7.06
hereof. The Trustee and any director, officer, employee or agent of the Trustee
may rely and shall be protected in acting or refraining from acting in good
faith on any certificate, notice or other document of any kind prima facie
properly executed and submitted by the Authorized Officer of any Person
respecting any matters arising hereunder. The provisions of this Section 10.13
shall survive the termination of this Agreement and the payment of the
outstanding Certificates.
Section 10.14 Appointment of Co-Trustee or Separate 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 Trust Estate or Property may at the time be located, the
Servicer and the Trustee acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the
Trustee and reasonably acceptable to the Certificate Insurer to act as
co-Trustee or co-Trustees, jointly with the Trustee, of all or any part of the
Trust Estate or separate Trustee or separate Trustees of any part of the Trust
Estate, and to vest in such Person or Persons, in such capacity and for the
benefit of the Owners, such title to the Trust Estate, or any part thereof, and,
subject to the other provisions of this Section 10.14, such powers, duties,
obligations, rights and trusts as the Servicer and the 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, or in
the case any event indicated in Section 8.20(a) shall have occurred and be
continuing, the Trustee subject to reasonable approval of the Certificate
Insurer alone shall have the power to make such appointment. No co-Trustee or
separate Trustee hereunder shall be required to meet the terms of eligibility as
a successor trustee under Section 10.08 and no notice to Owners of the
appointment of any co-Trustee or separate Trustee shall be required under
Section 10.09.
Every separate Trustee and co-Trustee shall, to the extent permitted,
be appointed and act subject to the following provisions and conditions:
(i) All rights, powers, duties and obligations conferred
or imposed upon the Trustee shall be conferred or
imposed upon and exercised or performed by the 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 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 (whether as
Trustee hereunder or as successor to the Servicer
hereunder), the Trustee shall be incompetent or
unqualified to perform such act or acts, in which event
such rights, powers, duties and obligations (including
the holding of title to the Trust Estate or any portion
thereof in any such jurisdiction) shall be exercised
and performed singly by such separate Trustee or
co-Trustee, but solely at the direction of the Trustee;
(ii) No co-Trustee hereunder shall be held personally
liable by reason of any act or omission of any other
co-Trustee hereunder; and
(iii) The Servicer, the Certificate Insurer and the 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 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 Section 10.14. 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 Trustee or separately,
as may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Servicer.
Any separate Trustee or co-Trustee may, at any time, constitute the
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
Trustee, to the extent permitted by law, without the appointment of a new or
successor Trustee.
The Servicer and the Trustee hereby appoint First Union National Bank
(the "Initial Co-Trustee") as co-trustee with respect to the Mortgage Loans
secured by Mortgaged Properties situated in New Jersey and any other part of the
Trust Estate or property securing the same that at any time may be situated in
New Jersey.
END OF ARTICLE X
<PAGE>
ARTICLE XI MISCELLANEOUS
Section 11.01 Compliance Certificates and Opinions.
Upon any application or request by the Depositor, the Seller, the
Certificate Insurer or the Owners to the Trustee to take any action under any
provision of this Agreement, the Depositor, either of the Sellers, the
Certificate Insurer or the Owners, as the case may be, shall furnish to the
Trustee a certificate stating that all conditions precedent, if any, provided
for in this Agreement relating to the proposed action have been complied with,
except that in the case of any such application or request as to which the
furnishing of such documents is specifically required by any provision of this
Agreement relating to such particular application or request, no additional
certificate need be furnished.
Except as otherwise specifically provided herein, each certificate or
opinion with respect to compliance with a condition or covenant provided for in
this Agreement (including one furnished pursuant to specific requirements of
this Agreement relating to a particular application or request) shall include:
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein relating
thereto;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based; and
(c) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
Section 11.02 Form of Documents Delivered to the Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Trustee may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such Authorized Officer knows, or in
the exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate or opinion of an Authorized
Officer of the Trustee or any opinion of counsel may be based, insofar as it
relates to factual matters upon a certificate or opinion of, or representations
by, one or more Authorized Officers of the Depositor, either of the Sellers or
the Servicer, stating that the information with respect to such factual matters
is in the possession of the Depositor, such Seller or the Servicer, unless such
Authorized Officer or counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous. Any opinion of counsel may also be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an Authorized Officer of the Trustee, stating that the
information with respect to such matters is in the possession of the Trustee,
unless such counsel knows, or in the exercise of reasonable care should know,
that the certificate or opinion or representations with respect to such matters
are erroneous. Any opinion of counsel may be based on the written opinion of
other counsel, in which event such opinion of counsel shall be accompanied by a
copy of such other counsel's opinion and shall include a statement to the effect
that such counsel believes that such counsel and the Trustee may reasonably rely
upon the opinion of such other counsel.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Agreement, they may, but need not, be consolidated and
form one instrument.
Section 11.03 Acts of Owners.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be given or taken by the
Owners may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Owners in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee, and, where it is hereby expressly required, to one or both of
the Sellers. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "act" of the Owners
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Agreement and conclusive in favor of the Trustee and the Trust,
if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Whenever
such execution is by an officer of a corporation or a member of a partnership on
behalf of such corporation or partnership, such certificate or affidavit shall
also constitute sufficient proof of his authority.
(c) The ownership of Certificates shall be proved by the Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Owner of any Certificate shall bind the Owner of
every Certificate issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof, in respect of anything done, omitted or
suffered to be done by the Trustee or the Trust in reliance thereon, whether or
not notation of such action is made upon such Certificates.
Section 11.04 Notices, etc. to Trustee.
Any request, demand, authorization, direction, notice, consent, waiver
or act of the Owners or other documents provided or permitted by this Agreement
to be made upon, given or furnished to, or filed with the Trustee by any Owner,
the Depositor, the Certificate Insurer or either of the Sellers shall be
sufficient for every purpose hereunder if made, given, furnished or filed in
writing to or with and received by the Trustee at the Corporate Trust Office.
Section 11.05 Notices and Reports to Owners; Waiver of Notices.
Where this Agreement provides for notice to Owners of any event or the
mailing of any report to Owners, such notice or report shall be sufficiently
given (unless otherwise herein expressly provided) if mailed, first-class
postage prepaid, to each Owner affected by such event or to whom such report is
required to be mailed, at the address of such Owner as it appears on the
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice or the mailing of such report. In
any case where a notice or report to Owners is mailed in the manner provided
above, neither the failure to mail such notice or report nor any defect in any
notice or report so mailed to any particular Owner shall affect the sufficiency
of such notice or report with respect to other Owners, and any notice or report
which is mailed in the manner herein provided shall be conclusively presumed to
have been duly given or provided. Notwithstanding the foregoing, if the Servicer
is removed or resigns or the Trust is terminated, notice of any such events
shall be made by overnight courier, registered mail or telecopy followed by a
telephone call.
Where this Agreement provides for notice in any manner, such notice
may be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Owners shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Owners when such notice is required to be given
pursuant to any provision of this Agreement, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Agreement provides for notice to any rating agency that
rated any Certificates, failure to give such notice shall not affect any other
rights or obligations created hereunder.
Section 11.06 Rules by Trustee.
The Trustee may make reasonable rules for any meeting of Owners.
Section 11.07 Successors and Assigns.
All covenants and agreements in this Agreement by any party hereto
shall bind its successors and assigns, whether so expressed or not.
Section 11.08 Severability.
In case any provision in this Agreement or in the Certificates shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
Section 11.09 Benefits of Agreement.
Nothing in this Agreement or in the Certificates, expressed or
implied, shall give to any Person, other than the Owners, the Certificate
Insurer and the parties hereto and their successors hereunder, any benefit or
any legal or equitable right, remedy or claim under this Agreement.
Section 11.10 Legal Holidays.
In any case where the date of any Monthly Remittance Date, any Payment
Date, any other date on which any distribution to any Owner is proposed to be
paid, or any date on which a notice is required to be sent to any Person
pursuant to the terms of this Agreement shall not be a Business Day, then
(notwithstanding any other provision of the Certificates or this Agreement)
payment or mailing need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made or mailed on
the nominal date of any such Monthly Remittance Date, such Payment Date, or such
other date for the payment of any distribution to any Owner or the mailing of
such notice, as the case may be, and no interest shall accrue for the period
from and after any such nominal date, provided such payment is made in full on
such next succeeding Business Day.
Section 11.11 Governing Law; Submission to Jurisdiction.
(a) In view of the fact that Owners are expected to reside in many
states and outside the United States and the desire to establish with certainty
that this Agreement will be governed by and construed and interpreted in
accordance with the law of a state having a well-developed body of commercial
and financial law relevant to transactions of the type contemplated herein, this
Agreement and each Certificate shall be construed in accordance with and
governed by the laws of the State of New York applicable to agreements made and
to be performed therein, without giving effect to the conflicts of law
principles thereof.
(b) The parties hereto hereby irrevocably submit to the jurisdiction
of the United States District Court for the Southern District of New York and
any court in the State of New York located in the City and County of New York,
and any appellate court from any thereof, in any action, suit or proceeding
brought against it or in connection with this Agreement or any of the related
documents or the transactions contemplated hereunder or for recognition or
enforcement of any judgment, and the parties hereto hereby irrevocably and
unconditionally agree that all claims in respect of any such action or
proceeding may be heard or determined in such New York State court or, to the
extent permitted by law, in such federal court. The parties hereto agree that a
final judgment in any such action, suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. To the extent permitted by applicable law, the parties
hereto hereby waive and agree not to assert by way of motion, as a defense or
otherwise in any such suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of such courts, that the suit, action or
proceeding is brought in an inconvenient forum, that the venue of the suit,
action or proceeding is improper or that the related documents or the subject
matter thereof may not be litigated in or by such courts.
(c) Each of the Depositor, the Sellers and the Servicer hereby
irrevocably appoints and designates the Trustee as its true and lawful attorney
and duly authorized agent for acceptance of service of legal process with
respect to any action, suit or proceeding set forth in paragraph (b) hereof.
Each of the Sellers and the Servicer agrees that service of such process upon
the Trustee shall constitute personal service of such process upon it.
(d) Nothing contained in this Agreement shall limit or affect the
right of the Depositor, the Seller, the Certificate Insurer or the Servicer or
any third-party beneficiary hereunder, as the case may be, to serve process in
any other manner permitted by law or to start legal proceedings relating to any
of the Home Equity Loans against any Mortgagor in the courts of any
jurisdiction.
Section 11.12 Counterparts.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
Section 11.13 Usury.
The amount of interest payable or paid on any Certificate under the
terms of this Agreement shall be limited to an amount which shall not exceed the
maximum nonusurious rate of interest allowed by the applicable laws of the State
of New York or any applicable law of the United States permitting a higher
maximum nonusurious rate that preempts such applicable New York laws, which
could lawfully be contracted for, charged or received (the "Highest Lawful
Rate"). In the event any payment of interest on any Certificate exceeds the
Highest Lawful Rate, the Trust stipulates that such excess amount will be deemed
to have been paid to the Owner of such Certificate as a result of an error on
the part of the Trustee acting on behalf of the Trust and the Owner receiving
such excess payment shall promptly, upon discovery of such error or upon notice
thereof from the Trustee on behalf of the Trust, refund the amount of such
excess or, at the option of such Owner, apply the excess to the payment of
principal of such Certificate, if any, remaining unpaid. In addition, all sums
paid or agreed to be paid to the Trustee for the benefit of Owners of
Certificates for the use, forbearance or detention of money shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of such Certificates.
Section 11.14 Amendment.
(a) The Trustee, the Depositor, either of the Sellers and the Servicer
may, at any time and from time to time, and without notice to or the consent of
the Owners but with the consent of the Certificate Insurer amend this Agreement,
subject to the provisions of Section 11.16 and 11.17 and the Trustee shall
consent to such amendment, for the purpose of (i) curing any ambiguity,
correcting or supplementing any provision hereof which may be inconsistent with
any other provision hereof, or adding provisions hereto which are not
inconsistent with the provisions hereof; (ii) upon receipt of an opinion of
counsel experienced in federal income tax matters to the effect that no
entity-level tax will be imposed on the Trust or upon the transferor of a Class
R-I, Class R-II or Class R Certificate as a result of the ownership of any Class
R-I, Class R-II or Class R Certificate by a Disqualified Organization, removing
the restriction on transfer set forth in Section 5.08(b) hereof or (iii)
complying with the requirements of the Code and the regulations proposed or
promulgated thereunder including any amendments necessary to maintain REMIC
status or (iv) for any other purpose, provided that in the case of this clause
(iv) such amendment shall not adversely affect in any material respect any
Owner. Any such amendment shall be deemed not to adversely affect in any
material respect any Owner if there is delivered to the Trustee written
notification from each Rating Agency that such amendment will not cause such
Rating Agency to reduce its then current rating assigned to the Class A
Certificates without regard to the Certificate Insurance Policy. Notwithstanding
anything to the contrary herein, no such amendment shall (a) change in any
manner the amount of, or change the timing of, payments which are required to be
distributed to any Owner without the consent of the Owner of such Certificate,
or (b) which affects in any manner the terms or provisions of the Certificate
Insurance Policy.
(b) Promptly after the execution of any such amendment, the Trustee
shall furnish written notification of the substance of such amendment to the
Certificate Insurer and each Owner in the manner set forth in Section 11.05, and
to the Rating Agencies.
(c) The Rating Agencies shall be provided with copies of any
amendments to this Agreement, together with copies of any opinions or other
documents or instruments executed in connection therewith.
Section 11.15 Paying Agent; Appointment and Acceptance of Duties.
The Trustee is hereby appointed Paying Agent. The Depositor may,
subject to the eligibility requirements for the Trustee set forth in Section
10.08 hereof, appoint one or more other Paying Agents or successor Paying
Agents.
Each Paying Agent, immediately upon such appointment, shall signify
its acceptance of the duties and obligations imposed upon it by this Agreement
by written instrument of acceptance deposited with the Trustee.
Each such Paying Agent other than the Trustee shall execute and
deliver to the Trustee an instrument in which such Paying Agent shall agree with
the Trustee, subject to the provisions of Section 6.02, that such Paying Agent
will:
(a) allocate all sums received for distribution to the Owners of
Certificates of each Class for which it is acting as Paying Agent on each
Payment Date among such Owners in the proportion specified by the Trustee; and
(b) hold all sums held by it for the distribution of amounts due with
respect to the Certificates in trust for the benefit of the Owners entitled
thereto until such sums shall be paid to such Owners or otherwise disposed of as
herein provided and pay such sums to such Persons as herein provided.
Any Paying Agent other than the Trustee may at any time resign and be
discharged of the duties and obligations created by this Agreement by giving at
least sixty (60) days written notice to the Trustee. Any such Paying Agent may
be removed at any time by an instrument filed with such Paying Agent and signed
by the Trustee.
In the event of the resignation or removal of any Paying Agent other
than the Trustee such Paying Agent shall pay over, assign and deliver any moneys
held by it as Paying Agent to its successor, or if there be no successor, to the
Trustee.
Upon the appointment, removal or notice of resignation of any Paying
Agent, the Trustee shall notify the Certificate Insurer and the Owners by
mailing notice thereof at their addresses appearing on the Register.
Section 11.16 REMIC Status.
(a) The parties hereto intend that each REMIC shall constitute, and
that the affairs of each REMIC shall be conducted so as to qualify it as a REMIC
in accordance with the REMIC Provisions. In furtherance of such intention,
ContiFunding Corporation or such other person designated pursuant to Section
11.18 hereof shall act as agent for the Trust and as "tax matters person" (as
defined in the REMIC Provisions) for the Trust and in such capacity it shall:
(i) prepare or cause to be prepared and filed, in a timely manner, annual tax
returns and any other tax return required to be filed by each REMIC established
hereunder using a calendar year as the taxable year for each REMIC established
hereunder; (ii) in the related first such tax return, make (or cause to be made)
an election satisfying the requirements of the REMIC Provisions, on behalf of
each REMIC, for it to be treated as a REMIC; (iii) prepare and forward, or cause
to be prepared and forwarded, to the Owners all information, reports or tax
returns required with respect to each REMIC as, when and in the form required to
be provided to the Owners, and to the Internal Revenue Service and any other
relevant governmental taxing authority in accordance with the REMIC Provisions
and any other applicable federal, state or local laws, including without
limitation information reports relating to "original issue discount" as defined
in the Code based upon the prepayment assumption and calculated by using the
"Issue Price" (within the meaning of Section 1273 of the Code) of the
Certificates of the related Class; (iv) not take any action or omit to take any
action that would cause the termination of the REMIC status of a REMIC, except
as provided under this Agreement; (v) represent the Trust of a REMIC in any
administrative or judicial proceedings relating to an examination or audit by
any governmental taxing authority, request an administrative adjustment as to a
taxable year of the Trust or the REMIC, enter into settlement agreements with
any governmental taxing agency, extend any statute of limitations relating to
any tax item of the Trust or the REMIC, and otherwise act on behalf of the Trust
or the REMIC therein in relation to any tax matter involving the Trust or the
REMIC therein; (vi) comply with all statutory or regulatory requirements with
regard to its conduct of activities pursuant to the foregoing clauses of this
Section 11.16, including, without limitation, providing all notices and other
information to the Internal Revenue Service and Owners of Class R-I, Class R-II
or Class R Certificates required of a "tax matters person" pursuant to subtitle
F of the Code and the Treasury Regulations thereunder; (vii) make available
information necessary for the computation of any tax imposed (A) on transferors
of residual interests to certain Disqualified Organizations or (B) on
pass-through entities, any interest in which is held by a Disqualified
Organization; and (viii) acquire and hold the Tax Matters Person Residual
Interest. The obligations of ContiFunding Corporation or such other designated
Tax Matters Person pursuant to this Section 11.16 shall survive the termination
or discharge of this Agreement.
(b) Each of the Sellers, the Depositor, the Trustee and the Servicer
covenant and agree for the benefit of the Owners and the Certificate Insurer (i)
to take no action which would result in the termination of "REMIC" status for a
REMIC, (ii) not to engage in any "prohibited transaction", as such term is
defined in Section 860F(a)(2) of the Code, (iii) not to engage in any other
action which may result in the imposition on the Trust of any other taxes under
the Code and (iv) to cause the Servicer not to take or engage in any such
action, to the extent the Sellers are aware of any such proposed action by the
Servicer.
(c) Each REMIC shall, for federal income tax purposes, maintain books
on a calendar year basis and report income on an accrual basis.
(d) Except as otherwise permitted by Section 7.05(b), no Eligible
Investment shall be sold prior to its stated maturity (unless sold pursuant to a
plan of liquidation in accordance with Article IX hereof).
(e) Neither the Depositor, either of the Sellers nor the Trustee shall
enter into any arrangement by which the Trustee will receive a fee or other
compensation for services rendered pursuant to this Agreement, other than as
expressly contemplated by this Agreement.
(f) Notwithstanding the foregoing clauses (d) and (e), neither the
Trustee nor either of the Sellers may engage in any of the transactions
prohibited by such clauses, unless the Trustee shall have received an opinion of
counsel experienced in federal income tax matters acceptable to the Certificate
Insurer and the Trustee to the effect that such transaction does not result in a
tax imposed on the Trustee or cause a termination of REMIC status for a REMIC;
provided, however, that such transaction is otherwise permitted under this
Agreement.
(g) The Servicer and Tax Matters Person agree to indemnify the Trust
for any tax imposed on the Trust or a REMIC as a result of their negligence.
Section 11.17 Additional Limitation on Action and Imposition of Tax.
Any provision of this Agreement to the contrary notwithstanding, the
Trustee shall not, without having obtained an opinion of counsel experienced in
federal income tax matters acceptable to the Certificate Insurer to the effect
that such transaction does not result in a tax imposed on the Trust or a REMIC
or cause a termination of REMIC status for a REMIC, (i) sell any assets in the
Trust Estate, (ii) accept any contribution of assets after the Startup Day or
(iii) agree to any modification of this Agreement. To the extent that sufficient
amounts cannot be so retained to pay or provide for the payment of such tax, the
Trustee is hereby authorized to and shall segregate, into a separate
non-interest bearing account, the net income from any such Prohibited
Transactions of a REMIC and use such income, to the extent necessary, to pay
such tax; provided that, to the extent that any such income is paid to the
Internal Revenue Service, the Trustee shall retain an equal amount from future
amounts otherwise distributable to the Owners of Class R Certificates and shall
distribute such retained amounts to the Owners of Offered Certificates to the
extent they are fully reimbursed and then to the Owners of the Class R
Certificates. If any tax, including interest penalties or assessments,
additional amounts or additions to tax, is imposed on the Trust, such tax shall
be charged against amounts otherwise distributable to the owners of the Class R
Certificates on a pro rata basis. The Trustee is hereby authorized to and shall
retain from amounts otherwise distributable to the Owners of the Class R
Certificates sufficient funds to pay or provide for the payment of, and to
actually pay, such tax as is legally owed by the Trust (but such authorization
shall not prevent the Trustee from contesting any such tax in appropriate
proceedings, and withholding payment of such tax, if permitted by law, pending
the outcome of such proceedings).
Section 11.18 Appointment of Tax Matters Person.
A Tax Matters Person will be appointed for each REMIC for all purposes
of the Code and such Tax Matters Person will perform, or cause to be performed,
such duties and take, or cause to be taken, such actions as are required to be
performed or taken by the Tax Matters Person under the Code. The Tax Matters
Person for each REMIC shall be ContiFunding Corporation as long as it owns a
Class R-I, Class R-II or Class R Certificate. If ContiFunding Corporation does
not own a Class R-I, Class R-II or Class R Certificate, as the case may be, the
Tax Matters Person may be any other entity that owns such a Class R-I, Class
R-II or Class R Certificate and accepts a designation hereunder as Tax Matters
person by delivering an affidavit in the form of Exhibit I. ContiFunding
Corporation shall notify the Trustee in writing of the name and address of
another person who accepts a designation as Tax Matters Person hereunder.
Section 11.19 The Certificate Insurer.
Any right conferred to the Certificate Insurer hereunder shall be
suspended and shall run to the benefit of the Owners during any period in which
the Certificate Insurer is in default in its payment obligations under the
Certificate Insurance Policy. At such time as the Class A Certificates and any
Reimbursement Amounts are no longer Outstanding hereunder, the Certificate
Insurer's rights hereunder shall terminate.
Section 11.20 Reserved.
Section 11.21 Third Party Rights.
The Trustee, each of the Sellers, the Depositor and the Owners agree
that the Certificate Insurer shall be deemed a third-party beneficiary of this
Agreement as if it were a party hereto.
Section 11.22 Notices.
All notices hereunder shall be given as follows, until any superseding
instructions are given to all other Persons listed below:
The Trustee: Manufacturers and Traders Trust
Company
One M&T Plaza
Buffalo, New York 14203-2399
Tel: (716) 842-5589
Fax: (716) 842-4474
Attention: Corporate Trust
Administration
The Depositor: ContiSecurities Asset Funding Corp.
277 Park Avenue, 38th Floor
New York, New York 10172
Attention: Chief Counsel
Tel: (212) 207-2822
Fax: (212) 207-5251
The Sellers: ContiMortgage Corporation
500 Enterprise Road
Horsham, PA 19044
Attention: President and Chief
Counsel
Tel: (215) 957-3700
Fax: (215) 957-2897
ContiWest Corporation
3811 West Charleston Boulevard
Suite 104
Las Vegas, Nevada 89102
Tel: (702) 822-5836
Fax: (702) 822-5839
The Servicer: ContiMortgage Corporation
500 Enterprise Road
Horsham, PA 19044
Attention: Senior Vice President
and Chief Counsel
Tel: (215) 957-3700
Fax: (215) 957-2897
The Certificate
Insurer: MBIA Insurance Corporation
113 King St.
Armonk, NY 10504
Attention: Insured Portfolio
Management - SF (ContiMortgage Home
Equity Loan Trust 1997-4)
Tel: (914) 273-4545
Fax: (914) 765-3810
Moody's: Moody's Investors Service
99 Church Street
New York, New York 10007
Attention: The Home Equity
Monitoring Department
Tel: (212) 553-0300
Fax: (212) 553-4773
Fitch: Fitch Investors Service, L.P.
One State Street Plaza
New York, New York 10004
Tel: (800) 753-4824
Fax: (212) 376-6964
Standard & Poor's: Standard & Poor's
20 Broadway, 15th Floor
New York, New York 10004
Tel: (212) 208-8000
Fax: (212) 412-0224
Underwriters: Merrill Lynch, Pierce, Fenner &
Smith, Inc.
26th Floor
World Financial Center, North Tower
New York, New York 10281-1326
Tel: (212) 449-1000
Fax: (212) 449-9015
Bear, Stearns & Co.
245 Park Avenue, 4th Floor
New York, New York 10167
Tel: (212) 272-3311
Fax: (212) 272-7294
ContiFinancial Services Corporation
277 Park Avenue, 38th Floor
New York, New York 10172
Attention: Chief Counsel, Chief
Financial Officer
and Chief Operating Officer
Tel: (212) 207-2822
Fax: (212) 207-5251
Credit Suisse First Boston
11 Madison Avenue
New York, New York 10010
Attention: Asset Finance
Tel: (212) 325-2000
Fax: (212) 325-8261
Greenwich Capital Markets, Inc.
600 Steamboat Rd.
Greenwich, CT 06830
Tel: (203) 622-5693
Fax: (203) 622-3650
Lehman Brothers Inc.
Three World Financial Center
New York, New York 10283
Tel: (212) 526-7000
Fax: (212) 528-6049
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Tel: (212) 761-4000
Fax: (212) 761-0782
Owners: As set forth in the Register.
Others: Any notice to the Depositor, either
Seller or the Servicer shall also
be furnished to:
ContiTrade Services L.L.C.
Chief Counsel
277 Park Avenue, 38th Floor
New York, New York 10172
Tel: (212) 207-2822
Fax: (212) 207-5251
END OF ARTICLE XI
<PAGE>
IN WITNESS WHEREOF, the Depositor, the Seller, the Servicer and the
Trustee have caused this Agreement to be duly executed by their respective
officers thereunto duly authorized, all as of the day and year first above
written.
CONTISECURITIES ASSET FUNDING CORP.,
as Depositor
By:/s/ A. John Banu
Title:Authorized Signatory
By: /s/ Susan C. Valenti
Title:Authorized Signatory
CONTIMORTGAGE CORPORATION, as Seller
By: /s/ Robert J. Babjak
Title:Executive Vice President & COO
By: /s/ Daniel J. Egan
Title: Senior Vice President and CFO
CONTIWEST CORPORATION, as Seller
By: /s/ Peter Abeles
Title: President
By: /s/ Robert E. Riedl
Title: Secretary
CONTIMORTGAGE CORPORATION, as
Servicer
By: /s/ Robert J. Babjak
Title:Executive Vice President & COO
By: /s/ Daniel J. Egan
Title: Senior Vice President and CFO
MANUFACTURERS AND TRADERS TRUST
COMPANY, as Trustee
By: /s/ Neil B. Witoff
Title: Assistant Vice President
<PAGE>
DRAFT 10/8/97
SCHEDULE II
AUCTION PROCEDURES
ARTICLE I.
Except as otherwise specified herein, or as the context may require,
capitalized terms used but not defined herein are defined in the Pooling and
Servicing Agreement dated as of September 1, 1997 (the "Pooling and Servicing
Agreement") among the Manufacturers and Traders Trust Company, as Trustee,
ContiSecurities Asset Funders Corp., as Depositor, ContiMortgage Corporation,
Servicer and the Sellers listed therein.
SECTION 1.1. DEFINITIONS.
"ALL HOLD RATE" means the lesser of (i) ninety percent (90%) of LIBOR
and (ii) the Available Funds Cap.
"AUCTION" means the implementation of the Auction Procedures on an
Auction Date.
"AUCTION AGENT" means the Initial Auction Agent under the Initial
Auction Agent Agreement unless and until a Substitute Auction Agent Agreement
acceptable to the Certificate Insurer becomes effective, after which "Auction
Agent" shall mean the Substitute Auction Agent.
"AUCTION AGENT AGREEMENT" means the Initial Auction Agent Agreement
unless and until a Substitute Auction Agent Agreement is entered into, after
which "Auction Agent Agreement" shall mean such Substitute Auction Agent
Agreement.
"AUCTION AGENT FEE" has the meaning set forth in the Auction Agent
Agreement.
"AUCTION AGENT FEE RATE" has the meaning set forth in the Auction
Agent Agreement.
"AUCTION DATE" means, with respect to each Auction Period following
the Initial Period, the Business Day immediately preceding the first day of each
such Auction Period for the Class of Auction Rate Certificates, other than:
a. each Auction Period commencing after the ownership of
such Class of Auction Rate Certificates is no longer
maintained in Book-Entry Form by the Depository;
b. each Auction Period commencing after and during
the continuance of a Certificate Insurer
Default; or
c. each Auction Period commencing less than two
Business Days after the cure or waiver of a
Certificate Insurer Default.
If the 15th day of a month (i.e., the scheduled first day of an Auction Period)
is not a Business Day, with the result that the first day of such Auction Period
is delayed to the next succeeding Business Day, the Auction Date will be the
Business Day immediately preceding such delayed first day of such Auction
Period.
"AUCTION PERIOD" means, with respect to each Class of Auction Rate
Certificates, the Interest Period applicable to such Class of Certificates
during which time the related Class Remittance Rate is determined pursuant to
Section 2.1.1 hereof, which Auction Period (after the Initial Period for such
Class) initially shall commence on each Payment Date and shall continue through
the day immediately preceding the next Payment Date.
"AUCTION PROCEDURES" means the procedures set forth in Section 2.1.1
hereof by which the Auction Rate is determined.
"AUCTION RATE" means the rate of interest per annum that results from
implementation of the Auction Procedures and is determined as described in
Section 2.1.1(c)(ii) hereof.
"AUCTION RATE CERTIFICATES" means the Class A-9 Certificates.
"AUTHORIZED DENOMINATIONS" means, with respect to the Auction Rate
Certificates, $25,000 and integral multiples of $25,000 in excess thereof.
"AVAILABLE AUCTION RATE CERTIFICATES" has the meaning set forth in
Section 2.1.1(c)(i)(A) hereof.
"BID" has the meaning set forth in Section 2.1.1(a)(i) hereof.
"BID AUCTION RATE" has the meaning set forth in Section 2.1.1(c)(i)
hereof.
"BIDDER" has the meaning set forth in Section 2.1.1(a)(i) hereof.
"BOOK-ENTRY FORM" or "BOOK-ENTRY SYSTEM" means a form or system under
which (i) the beneficial right to principal and interest may be transferred only
through a book entry, (ii) physical securities in registered form are issued
only to a Depository or its nominee as registered owner, with the securities
"immobilized" to the custody of the Depository, and (iii) the book entry is the
record that identifies the owners of beneficial interests in that principal and
interest.
"BROKER-DEALER" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch"), Lehman Brothers Inc. ("Lehman") or any other
broker or dealer (each as defined in the Securities Exchange Act of 1934, as
amended), commercial bank or other entity permitted by law to perform the
functions required of a Broker-Dealer set forth in the Auction Procedures that
(a) is a Participant (or an affiliate of a Participant), (b) has been appointed
as such by the Representative pursuant to Section 2.1.6 hereof, (c) is
acceptable to the Certificate Insuer and (d) has entered into a Broker-Dealer
Agreement that is in effect on the date of reference.
"BROKER-DEALER AGREEMENT" means each agreement between the Auction
Agent and a Broker-Dealer, and approved by the Representative, pursuant to which
the Broker-Dealer agrees to participate in Auctions as set forth in the Auction
Procedures, as from time to time amended or supplemented. Each Broker-Dealer
Agreement shall be in substantially the form of the Broker-Dealer Agreement
dated as of September 1, 1997 between Bankers Trust Company, as Auction Agent,
and Merrill Lynch , as Broker-Dealer.
"BROKER-DEALER FEE" has the meaning set forth in the Auction Agent
Agreement.
"BROKER-DEALER FEE RATE" has the meaning set forth in the Auction
Agent Agreement.
"CERTIFICATE INSURER DEFAULT" means a payment default by the
Certificate Insurer under the Certificate Insurance Policy relating to the
Auction Rate Certificates.
"CLASS INITIAL RATE" means 5.63% per annum.
"CLASS INITIAL RATE ADJUSTMENT DATE" means, with respect to the
Auction Rate Certificates, October 15, 1997.
"CLASS RATE ADJUSTMENT DATE" means the date on which a Class
Remittance Rate is effective, and means, with respect to the Auction Rate
Certificates, the date of commencement of each related Auction Period.
"CLASS RATE DETERMINATION DATE" means, with respect to any Class of
Auction Rate Certificates, the related Auction Date, or if no Auction Date is
applicable to such Auction Rate Certificates, the Business Day immediately
preceding the date of commencement of the related Auction Period.
"CLASS REMITTANCE RATE" means, with respect to the Initial Period, the
Class Initial Rate, and thereafter, each variable rate of interest per annum
borne by a Class of Auction Rate Certificates for each Interest Period and
determined in accordance with the provisions of Sections 1.2 and 2.1 hereof;
provided, however, that in the event of a Certificate Insurer Default, the Class
Remittance Rate shall equal the Non-Payment Rate.
"EXISTING CERTIFICATEHOLDER" means (i) with respect to and for the
purpose of dealing with the Auction Agent in connection with an Auction, a
Person who is a Broker-Dealer listed in the Existing Certificateholder Registry
at the close of business on the Business Day immediately preceding such Auction
and (ii) with respect to and for the purpose of dealing with the Broker-Dealer
in connection with an Auction, a Person who is a beneficial owner of any Class
of Auction Rate Certificates.
"EXISTING CERTIFICATEHOLDER REGISTRY" means the registry of Persons
who are beneficial owners of the Auction Rate Certificates, maintained by the
Auction Agent as provided in the Auction Agent Agreement.
"FINAL MATURITY DATE" means October 15, 2028 with respect to the
Auction Rate Certificates.
"HOLD ORDER" has the meaning set forth in Section 2.1.1(a)(i) hereof.
"INITIAL AUCTION AGENT" means Bankers Trust Company, a New York
banking corporation, its successors and assigns.
"INITIAL AUCTION AGENT AGREEMENT" means the Auction Agent Agreement
dated as of September 1, 1997, by and among the Trustee and the Initial Auction
Agent, including any amendment thereof or supplement thereto.
"INITIAL PERIOD" means, with respect to any Class of Auction Rate
Certificates, the period commencing on the Closing Date and continuing through
the day immediately preceding the Class Initial Rate Adjustment Date.
"INTEREST PERIOD" means, with respect to a Class of Auction Rate
Certificates, the applicable Initial Period and each period commencing on a
Class Rate Adjustment Date for such Class and ending on the day before (i) the
next Class Rate Adjustment Date for such Class or (ii) the Final Maturity Date
of such Class, as applicable.
"LIBOR" means the London interbank offered rate for deposits in U.S.
dollars having a maturity of one month commencing on the related LIBOR
Determination Date (the "Index Maturity") which appears on Telerate Page 3750 as
of 11:00 a.m., London time, on such LIBOR Determination Date. If such rate does
not appear on Telerate Page 3750, the rate for that day will be determined on
the basis of the rates at which deposits in U.S. dollars, having the Index
Maturity and in a principal amount of not less than U.S. $1,000,000, are offered
at approximately 11:00 a.m., London time, on such LIBOR Determination Date to
prime banks in the London interbank market by the Reference Banks. The Auction
Agent will request the principal London office of each of such Reference Banks
to provide a quotation of its rate. If at least two such quotations are
provided, the rate for that day will be the arithmetic mean of the quotations.
If fewer than two quotations are provided, the rate for that day will be the
arithmetic mean of the rates quoted by major banks in New York City, selected by
the Auction Agent, at approximately 11:00 a.m., New York City time, on such
LIBOR Determination Date for loans in U.S. dollars to leading European banks
having the Index Maturity and in a principal amount equal to an amount of not
less than U.S. $1,000,000; provided that if the banks selected as aforesaid are
not quoting as mentioned in this sentence, LIBOR in effect for the applicable
Interest Period will be LIBOR in effect for the previous Interest Period.
"LIBOR DETERMINATION DATE" means, with respect to a Class of Auction
Rate Certificates, the date which is both a Business Day and a London Banking
Day prior to the commencement of each related Interest Period.
"LONDON BANKING DAY" means any Business Day on which dealings in
deposits in United States dollars are transacted in the London interbank market.
"MARKET AGENT" means Merrill Lynch, in such capacity hereunder, or any
successor to it in such capacity hereunder.
"MAXIMUM AUCTION RATE" means, with respect to the Auction Rate
Certificates, either (A) LIBOR plus 0.60% (if all ratings assigned by the Rating
Agencies to the Auction Rate Certificates are A- or better) or (B) LIBOR plus
1.00% (if any one of the ratings assigned by the Rating Agencies to the Auction
Rate Certificates is less than A-). For purposes of the Auction Agent and the
Auction Procedures, the ratings referred to in this definition shall be the last
ratings of which the Auction Agent has been given notice pursuant to the Auction
Agent Agreement.
"NON-PAYMENT RATE" means LIBOR plus 0.60%.
"NOTICE OF FEE RATE CHANGE" means a notice of a change in the Auction
Agent Fee Rate or the Broker-Dealer Fee Rate substantially in the form of
Exhibit E to the Auction Agent Agreement.
"ORDER" has the meaning set forth in Section 2.1.1(a)(i) hereof.
"OUTSTANDING" has the meaning assigned to such term in the Pooling and
Servicing Agreement:
"PARTICIPANT" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time the Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
"PAYMENT DATE" means the 15th day of each calendar month, commencing
October 15, 1997, or if such day is not a Business Day, the next succeeding
Business Day.
"POTENTIAL CERTIFICATEHOLDER" means any Person (including an Existing
Certificateholder that is (i) a Broker-Dealer when dealing with the Auction
Agent and (ii) a beneficial owner when dealing with a Broker-Dealer) who may be
interested in acquiring Auction Rate Certificates (or, in the case of an
Existing Certificateholder thereof, an additional principal amount of Auction
Rate Certificates).
"REFERENCE BANKS" means leading banks selected by the Auction Agent
and engaged in transactions in Eurodollar deposits in the international
Eurocurrency market.
"REPRESENTATIVE" has the meaning assigned to such term in the
Broker-Dealer Agreement.
"SELL ORDER" has the meaning set forth in Section 2.1.1(a)(i) hereof.
"SUBMISSION DEADLINE" means 12:30 p.m., eastern time, on any Auction
Date or such other time on any Auction Date by which Broker-Dealers are required
to submit Orders to the Auction Agent as specified by the Auction Agent from
time to time.
"SUBMITTED BID" has the meaning set forth in Section 2.1.1(c)(i)
hereof.
"SUBMITTED HOLD ORDER" has the meaning set forth in Section
2.1.1(c)(i) hereof.
"SUBMITTED ORDER" has the meaning set forth in Section 2.1.1(c)(i)
hereof.
"SUBMITTED SELL ORDER" has the meaning set forth in Section
2.1.1(c)(i) hereof.
"SUBSTITUTE AUCTION AGENT" means the Person with whom the Trustee
enters into a Substitute Auction Agent Agreement.
"SUBSTITUTE AUCTION AGENT AGREEMENT" means an auction agent agreement
containing terms substantially similar to the terms of the Initial Auction Agent
Agreement, whereby a Person having the qualifications required by Section 2.1.5
of these Auction Procedures agrees with the Trustee and the Representative to
perform the duties of the Auction Agent under this Agreement.
"SUFFICIENT BIDS" has the meaning set forth in Section 2.1.1(c)(i)
hereof.
"TELERATE PAGE 3750" means the display page so designated on the Dow
Jones Telerate Service (or such other page as may replace that page on that
service for the purpose of displaying comparable rates or prices).
SECTION 1.2. GENERAL PROVISIONS.
During the Initial Period, the Auction Rate Certificates shall bear
interest at the Class Initial Rate. Thereafter, the Auction Rate Certificates
shall bear interest at a Class Remittance Rate, as determined pursuant to this
Section 1.2 and Section 2.1 hereof.
For the Initial Period and each Auction Period thereafter, interest at
the Class Remittance Rate shall accrue daily and shall be computed for the
actual number of days elapsed on the basis of a year consisting of 360 days.
The Class Remittance Rate to be borne by the Auction Rate Certificates
after such Initial Period for each Auction Period shall be determined as herein
described. Each such Auction Period shall commence on and include the first day
following the expiration of the immediately preceding Auction Period and
terminate on and include the day immediately preceding the next Payment Day;
provided, however, that in the case of the Auction Period that immediately
follows the Initial Period for the Certificates, such Auction Period shall
commence on and include the Initial Rate Adjustment Date. The Class Remittance
Rate for each Auction Period shall be the Auction Rate in effect for such
Auction Period as determined in accordance with Section 2.1.1 hereof; provided
that if, on any Class Rate Determination Date, an Auction is not held for any
reason, then the Class Remittance Rate on the Auction Rate Certificates for the
next succeeding Auction Period shall be the Maximum Auction Rate.
Notwithstanding the foregoing:
if the ownership of the Auction Rate Certificates is no longer
maintained in Book-Entry Form, the Class Remittance Rate for any Interest Period
commencing after the delivery of certificates representing such Certificates
shall equal the Maximum Auction Rate; or
if a Certificate Insurer Default shall have occurred, the Class
Remittance Rate on the Auction Rate Certificates for the Interest Period
commencing on or immediately after such Certificate Insurer Default, and for the
Interest Period thereafter, to and including the Interest Period, if any, during
which, or commencing less than two Business Days after, such Certificate Insurer
Default is cured, shall equal the Non-Payment Rate on the first day of each such
Interest Period.
The Auction Agent shall promptly determine and give written notice to
the Trustee, the Representative and the Certificate Insurer of the Maximum
Auction Rate, the All Hold Rate and LIBOR on each Auction Date. The Trustee
shall notify the Owners of the Class Remittance Rate applicable to the Auction
Rate Certificates for each Auction Period on the second Business Day of such
Auction Period.
In the event that the Auction Agent no longer determines, or fails to
determine, when required, the Class Remittance Rate with respect to the Auction
Rate Certificates, or, if for any reason such manner of determination shall be
held to be invalid or unenforceable, the Class Remittance Rate for the next
succeeding Interest Period for the Auction Rate Notes shall be the applicable
Class Remittance Rate in effect for the prior Auction Period.
ARTICLE II.
AUCTION PROCEDURES
SECTION 2.1. CLASS REMITTANCE RATE.
SECTION 2.1.1. DETERMINING THE CLASS REMITTANCE RATE FOR THE AUCTION
RATE CERTIFICATES.
By purchasing Auction Rate Certificates, whether in an Auction or
otherwise, each purchaser of the Auction Rate Certificates, or its
Broker-Dealer, must agree and shall be deemed by such purchase to have agreed
(i) to participate in Auctions on the terms described herein, (ii) to have its
beneficial ownership of the Auction Rate Certificates maintained at all times in
Book-Entry Form for the account of its Participant, which in turn will maintain
records of such beneficial ownership and (iii) to authorize such Participant to
disclose to the Auction Agent such information with respect to such beneficial
ownership as the Auction Agent may request.
So long as the ownership of the Class of Auction Rate Certificates is
maintained in Book- Entry Form, an Existing Certificateholder may sell, transfer
or otherwise dispose of Auction Rate Certificates only (i) pursuant to a Bid or
Sell Order placed in an Auction or (ii) otherwise sell, transfer or dispose of
Auction Rate Certificates through a Broker-Dealer, provided that, in the case of
all transfers other than pursuant to Auctions, such Existing Certificateholder,
its Broker-Dealer or its Participant advises the Auction Agent of such transfer.
Auctions shall be conducted on each Auction Date, if there is an Auction Agent
on such Auction Date, in the following manner:
(a) (i) Prior to the Submission Deadline on each Auction Date relating
to a Class of the Auction Rate Certificates:
(A) each Existing Certificateholder of the Class of
Auction Rate Certificates may submit to a Broker-Dealer by telephone or
otherwise any information as to:
(1) the principal amount of Outstanding
Auction Rate Certificates of such Class, if any, owned by such
Existing Certificateholder which such Existing
Certificateholder desires to continue to own without regard to
the Class Remittance Rate for the next succeeding Auction
Period;
(2) the principal amount of Outstanding
Auction Rate Certificates of such Class, if any, which such
Existing Certificateholder offers to sell if the Class
Remittance Rate for the next succeeding Auction Period shall
be less than the rate per annum specified by such Existing
Certificateholder; and/or
(3) the principal amount of Outstanding
Auction Rate Certificates of such Class, if any, owned by such
Existing Certificateholder which such Existing
Certificateholder offers to sell without regard to the Class
Remittance Rate for the next succeeding Auction Period;
and
(B) one or more Broker-Dealers may contact Potential
Certificateholders to determine the principal amount of Auction Rate
Certificates of such Class which each Potential Certificateholder
offers to purchase, if the Class Remittance Rate for the next
succeeding Auction Period shall not be less than the rate per annum
specified by such Potential Certificateholder.
The statement of an Existing Certificateholder or a Potential
Certificateholder referred to in (A) or (B) of this paragraph (i) is herein
referred to as an "Order," and each Existing Certificateholder and each
Potential Certificateholder placing an Order is herein referred to as a
"Bidder"; an Order described in clause (A)(1) is herein referred to as a "Hold
Order"; an Order described in clauses (A)(2) and (B) is herein referred to as a
"Bid"; and an Order described in clause (A)(3) is herein referred to as a "Sell
Order."
(ii) (A) Subject to the provisions of Section
2.1.1(b) hereof, a Bid by an Existing Certificateholder shall
constitute an irrevocable offer to sell:
(1) the principal amount of Outstanding
Auction Rate Certificates specified in such Bid if the Class
Remittance Rate determined as provided in this Section 2.1.1
shall be less than the rate specified therein; or
(2) such principal amount, or a lesser
principal amount of Outstanding Auction Rate Certificates to
be determined as set forth in Section 2.1.1(d)(i)(D) hereof,
if the Class Remittance Rate determined as provided in this
Section 2.1.1 shall be equal to the rate specified therein; or
(3) such principal amount, or a lesser
principal amount of outstanding Auction Rate Certificates to
be determined as set forth in Section 2.1.1(d)(ii)(C) hereof,
if the rate specified therein shall be higher than the Class
Remittance Rate and Sufficient Bids have not been made.
(B) Subject to the provisions of Section 2.1.1(b)
hereof, a Sell Order by an Existing Certificateholder shall constitute
an irrevocable offer to sell:
(1) the principal amount of Outstanding
Auction Rate Certificates specified in such Sell Order; or
(2) such principal amount, or a lesser
principal amount of Outstanding Auction Rate Certificates set
forth in Section 2.1.1(d)(ii)(C) hereof, if Sufficient Bids
have not been made.
(C) Subject to the provisions of Section 2.1.1(b)
hereof, a Bid by a Potential Certificateholder shall constitute an
irrevocable offer to purchase:
(1) the principal amount of Outstanding
Auction Rate Certificates specified in such Bid if the Class
Remittance Rate determined as provided in this Section 2.1.1
shall be higher than the rate specified in such Bid; or
(2) such principal amount, or a lesser
principal amount of Outstanding Auction Rate Certificates set
forth in Section 2.1.1(d)(i)(E) hereof, if the Class
Remittance Rate determined as provided in this Section 2.1.1
shall be equal to the
rate specified in such Bid.
(b) (i) Each Broker-Dealer shall submit in writing to the Auction
Agent prior to the Submission Deadline on each Auction Date all Orders obtained
by such Broker-Dealer and shall specify with respect to each such Order:
(A) the name of the Bidder placing such Order;
(B) the aggregate principal amount and Class of
Auction Rate Certificates that are the subject of such Order;
(C) to the extent that such Bidder is an Existing
Certificateholder:
(1) the principal amount and Class of
Auction Rate Certificates, if any, subject to any Hold Order
placed by such Existing Certificateholder;
(2) the principal amount and Class of
Auction Rate Certificates, if any, subject to any Bid placed
by such Existing Certificateholder and the rate specified in
such Bid; and
(3) the principal amount and Class of
Auction Rate Certificates, if any, subject to any Sell Order
placed by such Existing Certificateholder;
and
(D) to the extent such Bidder is a Potential
Certificateholder, the rate specified in such Potential
Certificateholder's Bid.
(ii) If any rate specified in any Bid contains more than three figures
to the right of the decimal point, the Auction Agent shall truncate such rate up
to one thousandth (.001) of one percent.
(iii) If an Order or Orders covering all Outstanding Auction
Rate Certificates of the applicable Class owned by an Existing Certificateholder
is not submitted to the Auction Agent prior to the Submission Deadline, the
Auction Agent shall deem a Hold Order to have been submitted on behalf of such
Existing Certificateholder covering the principal amount of Outstanding Auction
Rate Certificates of such Class owned by such Existing Certificateholder and not
subject to an Order submitted to the Auction Agent.
(iv) Neither the Representative, the Trustee nor the Auction Agent
shall be responsible for any failure of a Broker-Dealer to submit an Order to
the Auction Agent on behalf of any Existing Certificateholder or Potential
Certificateholder.
(v) If any Existing Certificateholder submits through a Broker-Dealer
to the Auction Agent one or more Orders covering in the aggregate more than the
principal amount of the Class of Outstanding Auction Rate Certificates owned by
such Existing Certificateholder, such Orders shall be considered valid as
follows and in the following order of priority:
(A) All Hold Orders shall be considered valid, but
only up to the aggregate principal amount of the Class of Outstanding
Auction Rate Certificates owned by such Existing Certificateholder, and
if the aggregate principal amount of the Class of Auction Rate
Certificates subject to such Hold Orders exceeds the aggregate
principal amount of the Class of Auction Rate Certificates owned by
such Existing Certificateholder, the aggregate principal amount of the
Class of Auction Rate Certificates subject to each such Hold Order
shall be reduced pro rata so that the aggregate principal amount of the
Class of Auction Rate Certificates subject to such Hold Order equals
the aggregate principal amount of the Class of Outstanding Auction Rate
Certificates owned by such Existing Certificateholder.
(B) (1) any Bid shall be considered valid up to an
amount equal to the excess of the principal amount of the Class of
Outstanding Auction Rate Certificates owned by such Existing
Certificateholder over the aggregate principal amount of the Class of
Auction Rate Certificates subject to any Hold Order referred to in
clause (A) of this paragraph (v);
(2) subject to subclause (1) of this clause
(B), if more than one Bid with the same rate is submitted on
behalf of such Existing Certificateholder and the aggregate
principal amount of the Class of Outstanding Auction Rate
Certificates subject to such Bids is greater than such excess,
such Bids shall be considered valid up to an amount equal to
such excess;
(3) subject to subclauses (1) and (2) of
this clause (B), if more than one Bid with different rates are
submitted on behalf of such Existing Certificateholder, such
Bids shall be considered valid first in the ascending order of
their respective rates until the highest rate is reached at
which such excess exists and then at such rate up to the
amount of such excess; and
(4) in any such event, the amount of the
Class of Outstanding Auction Rate Certificates, if any,
subject to Bids not valid under this clause (B) shall be
treated as the subject of a Bid by a Potential
Certificateholder at the rate therein specified; and
(C) All Sell Orders shall be considered valid up to
an amount equal to the excess of the principal amount of the Class of
Outstanding Auction Rate Certificates owned
by such Existing Certificateholder over the aggregate principal amount
of the Class of Auction Rate Certificates subject to Hold Orders
referred to in clause (A) of this paragraph (v) and valid Bids referred
to in clause (B) of this paragraph (v).
(vi) If more than one Bid for a Class of Auction Rate Certificates is
submitted on behalf of any Potential Certificateholder, each Bid submitted shall
be a separate Bid with the rate and principal amount therein specified.
(vii) An Existing Certificateholder of a Class of Auction Rate
Certificates that offers to purchase additional Auction Rate Certificates is,
for purposes of such offer, treated as a Potential Certificateholder.
(viii) Any Bid or Sell Order submitted by an Existing
Certificateholder covering an aggregate principal amount of a Class of Auction
Rate Certificates not equal to an Authorized Denomination shall be deemed a Hold
Order and shall not be executed. Any Bid submitted by a Potential
Certificateholder covering an aggregate principal amount of a Class of Auction
Rate Certificates not equal to an Authorized Denomination shall not be executed.
(ix) Any Bid specifying a rate higher than the Maximum Auction Rate
will (a) be treated as a Sell Order if submitted by an Existing
Certificateholder and (b) not be executed if submitted by a Potential
Certificateholder.
(x) Any Order submitted in an Auction by a Broker-Dealer to the
Auction Agent by the Submission Deadline on any Auction Date shall be
irrevocable.
(c) (i) Not earlier than the Submission Deadline on each Auction Date,
the Auction Agent shall assemble all valid Orders submitted or deemed submitted
to it by the Broker-Dealers (each such Order as submitted or deemed submitted by
a Broker-Dealer being herein referred to individually as a "Submitted Hold
Order," a "Submitted Bid" or a "Submitted Sell Order," as the case may be, or as
a "Submitted Order," and collectively as "Submitted Hold Orders," "Submitted
Bids" or "Submitted Sell Orders," as the case may be, or as "Submitted Orders")
and shall determine for the applicable Class of Auction Rate Certificates:
(A) the excess of the total principal amount of
Outstanding Auction Rate Certificates of such Class over the sum of the
aggregate principal amount of Outstanding Auction Rate Certificates of
such Class subject to Submitted Hold Orders (such excess being herein
referred to as the "Available Auction Rate Certificates" of such
Class), and
(B) from the Submitted Orders whether:
(1) the aggregate principal amount of
Outstanding Auction Rate Certificates of such Class subject to
Submitted Bids by Potential Certificateholders specifying one
or more rates equal to or lower than the Maximum Auction Rate;
exceeds or is equal to the sum of:
(2) the aggregate principal amount of
Outstanding Auction Rate Certificates of such Class subject to
Submitted Bids by Existing Certificateholders specifying one
or more rates higher than the Maximum Auction Rate; and
(3) the aggregate principal amount of
Outstanding Auction Rate Certificates of such Class
subject to submitted Sell Orders;
(in the event such excess or such equality exists, other than because
all of the Outstanding Auction Rate Certificates of such Class are
subject to Submitted Hold Orders, such Submitted Bids described in
subclause (1) above shall be referred to collectively as "Sufficient
Bids"); and
(C) if Sufficient Bids exist, the "Bid Auction Rate",
which shall be the lowest rate specified in such Submitted Bids such
that if:
(1) (x) each Submitted Bid from Existing
Certificateholders specifying such lowest rate and (y) all
other Submitted Bids from Existing Certificateholders
specifying lower rates were not executed, thus entitling such
Existing Certificateholders to continue to own the principal
amount of Auction Rate Certificates of such Class subject to
such Submitted Bids; and
(2) (x) each such Submitted Bid from
Potential Certificateholders specifying such lowest rate and
(y) all other Submitted Bids from Potential Certificateholders
specifying lower rates were executed;
the result would be that such Existing Certificateholders described in
subclause (1) above would continue to own an aggregate principal amount
of Outstanding Auction Rate Certificates of the applicable Class which,
when added to the aggregate principal amount of Outstanding Auction
Rate Certificates of such Class to be purchased by such Potential
Certificateholders described in subclause (2) above, would equal not
less than the Available Auction Rate Certificates of such Class.
(ii) Promptly after the Auction Agent has made the determinations
pursuant to Section 2.1.1(c)(i) hereof, the Auction Agent shall advise the
Trustee of the Available Funds Cap (as provided by the Servicer pursuant to
Section 2.1.3 hereof), the Maximum Auction Rate and the All Hold Rate and the
components thereof on the Auction Date and, based on such determinations, the
Auction Rate for the next succeeding Interest Period for such Class of Auction
Rate Certificates as follows:
(A) if Sufficient Bids exist, that the Auction Rate
for the next succeeding Interest Period for such Class shall be equal
to the Bid Auction Rate so determined;
(B) if Sufficient Bids do not exist (other than
because all of the Outstanding Auction Rate Certificates of such Class
are subject to Submitted Hold Orders), that the Auction Rate for the
next succeeding Interest Period shall be equal to the Maximum Auction
Rate; or
(C) if all Outstanding Auction Rate Certificates of
such Class are subject to Submitted Hold Orders, that the Auction Rate
for the next succeeding Interest Period shall be equal to the All Hold
Rate.
(iii) Promptly after the Auction Agent has determined the Auction
Rate, the Auction Agent shall determine and advise the Trustee of the applicable
Class Remittance Rate, which rate shall be the lesser of (a) the Auction Rate
and (b) the Available Funds Cap.
(d) Existing Certificateholders shall continue to own the principal
amount of Auction Rate Certificates of such Class that are subject to Submitted
Hold Orders. If the applicable Available Funds Cap is equal to or greater than
the Bid Auction Rate and if Sufficient Bids have been received by the Auction
Agent, the Bid Auction Rate will be the Class Remittance Rate, and Submitted
Bids and Submitted Sell Orders will be executed, or will not be executed and the
Auction Agent will take such other action as described below in subparagraph
(i).
If the applicable Available Funds Cap is less than the Auction Rate,
the Available Funds Cap will be the Class Remittance Rate. If the Auction Agent
has not received Sufficient Bids (other than because all of the Outstanding
Auction Rate Certificates of such Class are subject to Submitted Hold Orders),
the Class Remittance Rate will be the Maximum Auction Rate. In any of the cases
described above, Submitted Orders will be executed, or will not be executed, and
the Auction Agent will take such other action as described below in subparagraph
(ii).
(i) if Sufficient Bids have been made and the Maximum Auction Rate is
equal to or greater than the Bid Auction Rate (in which case the Class
Remittance Rate shall be the Bid Auction Rate), all Submitted Sell Orders shall
be accepted and, subject to the provisions of paragraphs (iv) and (v) of this
Section 2.1.1(d), Submitted Bids shall be will be executed, or will not be
executed, as follows in the following order of priority, and all other Submitted
Bids shall be rejected:
(A) Existing Certificateholders' Submitted Bids
specifying any rate that is higher than the Class Remittance Rate shall
be executed, thus requiring each such Existing Certificateholder to
sell the aggregate principal amount of Auction Rate Certificates
subject to such Submitted Bids;
(B) Existing Certificateholders' Submitted Bids
specifying any rate that is lower than the Class Remittance Rate shall
be executed, thus entitling each such Existing Certificateholder to
continue to own the aggregate principal amount of Auction Rate
Certificates subject to such Submitted Bids;
(C) Potential Certificateholders' Submitted Bids
specifying any rate that is lower than the Class Remittance Rate shall
be executed, except in the case of an All Hold Rate, thus entitling
such Potential Certificateholder to purchase such Certificates;
(D) Each Existing Certificateholders' Submitted Bid
specifying a rate that is equal to the Class Remittance Rate shall be
executed, in whole or in part, up to the aggregate principal amount, if
any, of Certificates remaining unallocated, thus entitling such
Existing Certificateholder (i) if such Existing Certificateholder's
submitted Bid Order is executed in whole to continue to own the
aggregate principal amount of Auction Rate Certificates subject to such
Submitted Bid, or (ii) the aggregate principal amount of Outstanding
Auction Rate Certificates subject to all such Submitted Bids would be
greater than the principal amount of Auction Rate Certificates of the
applicable Class (the "remaining principal amount") equal to the excess
of the Available Auction Rate Certificates of such Class over the
aggregate principal amount of Auction Rate Certificates of such Class
subject to Submitted Bids described in clauses (B) and (C) of this
Section 2.1.1(d)(i), in which event such Submitted Bid of such Existing
Certificateholder shall be executed in part, and such Existing
Certificateholder shall be entitled to continue to own the principal
amount of such Class of Auction Rate Certificates subject to such
Submitted Bid, but only in an amount equal to the aggregate principal
amount of Auction Rate Certificates of such Class obtained by
multiplying the remaining principal amount by a fraction, the numerator
of which shall be the principal amount of Outstanding Auction Rate
Certificates of such Class owned by such Existing Certificateholder
subject to such Submitted Bid and the denominator of which shall be the
sum of the principal amount of Outstanding Auction Rate Certificates of
such Class subject to such Submitted Bids made by all such Existing
Certificateholders that specified a rate equal to the Class Remittance
Rate, with the result that a Sell Order will be deemed to apply up to
the balance of such Existing Certificateholder's Certificates; and
(E) Each Potential Certificateholder's Submitted Bid
specifying a rate that is equal to the Class Remittance Rate shall be
executed, but only in an amount equal to the principal amount of
Auction Rate Certificates of the applicable Class obtained by
multiplying the excess of the aggregate principal amount of Available
Auction Rate Certificates of such Class over the aggregate principal
amount of Auction Rate Certificates of such Class subject to Submitted
Bids described in clauses (B), (C) and (D) of this Section 2.1.1(d)(i)
by a fraction the numerator of which shall be the aggregate principal
amount of Outstanding Auction Rate Certificates of such Class subject
to such Submitted Bid and the denominator of which shall be the sum of
the principal amount of Outstanding Auction Rate Certificates of such
Class subject to Submitted Bids made by all such Potential
Certificateholders that specified a rate equal to the Class Remittance
Rate.
(ii) If Sufficient Bids have not been made (other than because all of
the Outstanding Auction Rate Certificates of the applicable Class are subject to
submitted Hold Orders), the Class Remittance Rate shall be the Maximum Auction
Rate, and subject to the provisions of Section 2.1.1(d)(iv) hereof, Submitted
Orders shall be will be executed, or will not be executed, as follows in the
following order of priority and all other Submitted Bids shall not be executed:
(A) Existing Certificateholders' Submitted Bids
specifying any rate that is equal to or lower than the Class Remittance
Rate will be executed, or will not be executed, with the result that
such Existing Certificateholders to continue to own the aggregate
principal amount of Auction Rate Certificates subject to such Submitted
Bids;
(B) Potential Certificateholders' Submitted Bids
specifying (1) any rate that is equal to or lower than the Class
Remittance Rate shall be executed and (2) any rate that is higher than
the Class Remittance Rate shall not be executed; and
(C) each Existing Certificateholder's Submitted Bid
specifying any rate that is higher than the Class Remittance Rate and
the Submitted Sell Order of each Existing Certificateholder shall be
(i) executed in whole, thus entitling each Existing Certificateholder
that submitted any such Submitted Bid or Submitted Sell Order to sell
the Auction Rate Certificates subject to such Submitted Bid or
Submitted Sell Order, or (ii) executed in part in an amount equal to
the aggregate principal amount of Auction Rate Certificates of the
applicable Class obtained by multiplying the aggregate principal amount
of Auction Rate Certificates subject to Submitted Bids described in
clause (B) of this Section 2.1.1(d)(ii) by a fraction the numerator of
which shall be the aggregate principal amount of Outstanding Auction
Rate Certificates of such Class owned by such Existing
Certificateholder subject to such submitted Bid or Submitted Sell Order
and the denominator of which shall be the aggregate principal amount of
Outstanding Auction Rate Certificates of such Class subject to all such
Submitted Bids and Submitted Sell Orders.
(iii) If all Outstanding Auction Rate Certificates of such Class are
subject to Submitted Hold Orders, no Potential Certificateholders' Submitted
Bids shall be executed.
(iv) If, as a result of the procedures described in paragraph (i) or
(ii) of this Section 2.1.1(d), any Existing Certificateholder would be entitled
or required to sell, or any Potential Certificateholder would be entitled or
required to purchase, a principal amount of Auction Rate Certificates of the
applicable Class that is not equal to an Authorized Denomination, the Auction
Agent shall, in such manner as in its sole discretion it shall determine, round
up or down the principal amount of Auction Rate Certificates to be purchased or
sold by any Existing Certificateholder or Potential Certificateholder so that
the principal amount of Auction Rate Certificates purchased or sold by each
Existing Certificateholder or Potential Certificateholder shall be equal to an
Authorized Denomination or an integral multiple of $25,000 in excess thereof.
(v) If, as a result of the procedures described in paragraph (ii) of
this Section 2.1.1(d), any Potential Certificateholder would be entitled or
required to purchase less than an Authorized Denomination of Auction Rate
Certificates of the applicable Class, the Auction Agent shall, in such manner as
in its sole discretion it shall determine, allocate Auction Rate Certificates of
such Class for purchase among Potential Certificateholders so that only Auction
Rate Certificates of such Class in Authorized Denominations or integral
multiples of $25,000 in excess thereof are purchased by any Potential
Certificateholder, even if such allocation results in one or more of such
Potential Certificateholders not purchasing any Auction Rate Certificates of
such Class.
(e) Based on the result of each Auction, the Auction Agent shall
determine the aggregate principal amount of Auction Rate Certificates of the
applicable Class to be purchased and the aggregate principal amount of Auction
Rate Certificates of the applicable Class to be sold by Potential
Certificateholders and Existing Certificateholders on whose behalf each
Broker-Dealer submitted Bids or Sell Orders and, with respect to each
Broker-Dealer, to the extent that such aggregate principal amount of Auction
Rate Certificates of the applicable Class to be sold differs from such aggregate
principal amount of Auction Rate Certificates of the applicable Class to be
purchased, determine to which other Broker-Dealer or Broker-Dealers acting for
one or more purchasers such Broker-Dealer shall deliver, or from which other
Broker-Dealer or Broker-Dealers acting for one or more sellers such
Broker-Dealer shall receive, as the case may be, Auction Rate Certificates of
the applicable Class.
(f) Any calculation by the Auction Agent, the Servicer or the Trustee,
as applicable, of the Class Remittance Rate, LIBOR, the Maximum Auction Rate,
the All Hold Rate, the Available Funds Cap and the Non-Payment Rate shall, in
the absence of manifest error, be binding on all other parties.
SECTION 2.1.2. CERTIFICATE INSURER DEFAULT; AUCTION AGENT FEES AND
EXPENSES.
(a) The Trustee shall determine not later than 2:00 p.m., eastern
time, on the Business Day next succeeding a Payment Date, whether a Certificate
Insurer Default has occurred. If a Certificate Insurer Event has occurred, the
Trustee shall, not later than 2:15 p.m., eastern time, on such Business Day,
send a notice thereof in substantially the form of Annex A attached hereto to
the Auction Agent, the Representative and the Certificate Insurer by telecopy or
similar means and, if such Certificate Insurer Default is cured, the Trustee
shall immediately send a notice in substantially the form of Annex B attached
hereto to the Auction Agent, the Representative and the Certificate Insurer by
telecopy or similar means.
(b) Not later than 2:00 p.m., eastern time, on the first Payment Date
for any Class of Certificates occurring in each month, the Trustee shall pay to
the Auction Agent, in immediately available funds pursuant to Section 7.03 of
the Pooling and Servicing Agreement an amount equal to the Auction Agent Fee
(which shall include the Broker-Dealer Fee) as calculated in the Auction Agent
Agreement. The Representative shall from time to time at the request of the
Auction Agent reimburse the Auction Agent for its reasonable expenses as
provided in the Auction Agent Agreement.
SECTION 2.1.3. CALCULATION OF MAXIMUM AUCTION RATE, ALL HOLD RATE,
AVAILABLE FUNDS CAP, LIBOR AND NON-PAYMENT RATE. The Servicer shall calculate
the Available Funds Cap applicable to the Auction Rate Certificates and inform
the Auction Agent thereof in writing no later than the Business Day preceding
each Auction Date. The Auction Agent shall calculate the Maximum Auction Rate,
the All Hold Rate and LIBOR, on each Auction Date and shall notify the Trustee,
the Representative and the Broker-Dealers of the Available Funds Cap, the
Maximum Auction Rate, the All Hold Rate and LIBOR, as provided in the Auction
Agent Agreement. If a Certificate Insurer Default shall have occurred, the
Trustee shall calculate the Non-Payment Rate on the Class Rate Determination
Date for (i) each Interest Period commencing after the occurrence and during the
continuance of such Certificate Insurer Default and (ii) any Interest Period
commencing less than two Business Days after the cure of any Certificate Insurer
Default. The Auction Agent shall determine LIBOR for each Interest Period other
than the first Interest Period; provided, that if the ownership of the Auction
Rate Certificates is no longer maintained in Book-Entry Form, or if a
Certificate Insurer Default has occurred, then the Trustee shall determine LIBOR
for each such Interest Period. The determination by the Trustee or the Auction
Agent, as the case may be, of LIBOR shall (in the absence of manifest error) be
final and binding upon all parties. If calculated or determined by the Auction
Agent, the Auction Agent shall promptly advise the Trustee and the
Representative of LIBOR.
SECTION 2.1.4. NOTIFICATION OF RATES, AMOUNTS AND PAYMENT DATES.
Promptly after the Closing Date and after the beginning of each
subsequent Interest Period relating to each Class of Auction Rate Certificates,
and in any event at least 10 days prior to any Payment Date relating to a Class
of Auction Rate Certificates, the Trustee shall confirm with the Auction Agent,
so long as no Certificate Insurer Default has occurred and is continuing (1) the
date of such next Payment Date relating to a Class of Auction Rate Certificates
and (2) the amount payable to the Auction Agent on the Auction Date pursuant to
Section 2.1.2(b) hereof.
If any day scheduled to be a Payment Date shall be changed after the
Trustee shall have given the notice or confirmation referred to in the preceding
sentence, the Trustee shall, not later than 9:15 a.m., eastern time, on the
Business Day next preceding the earlier of the new Payment Date or the old
Payment Date, by such means as the Trustee deems practicable, give notice of
such change to the Auction Agent, so long as no Certificate Insurer Default has
occurred.
SECTION 2.1.5. AUCTION AGENT.
Bankers Trust Company is hereby appointed as Initial Auction Agent to
serve as agent for the Representative in connection with Auctions. The Trustee
will, and the Trustee is hereby directed to, enter into the Initial Auction
Agent Agreement with Bankers Trust Company, as the Initial Auction Agent. Any
Substitute Auction Agent shall be (i) a bank, national banking association or
trust company duly organized under the laws of the United States of America or
any state or territory thereof having its principal place of business in the
Borough of Manhattan, New York, or such other location as approved by the
Trustee and the Market Agent in writing and having a combined capital stock or
surplus of at least $50,000,000, or (ii) a member of the National Association of
Securities Dealers, Inc., having a capitalization of at least $50,000,000, and,
in either case, authorized by law to perform all the duties imposed upon it
hereunder and under the Auction Agent Agreement and approved by the Certificate
Insurer in writing. The Auction Agent may at any time resign and be discharged
of the duties and obligations created by these Auction Procedures by giving at
least 90 days' notice to the Trustee, the Representative, the Certificate
Insurer and the Market Agent. The Auction Agent may be removed at any time by
the Trustee upon the written direction of the Certificate Insurer, or with the
consent of the Certificate Insurer, the Certificateholders of 66-2/3% of the
aggregate principal amount of the Auction Rate Certificates then Outstanding,
and if by such Certificateholders, by an instrument signed by the Certificate
Insurer or such Certificateholders or their attorneys and filed with the Auction
Agent, the Representative, the Market Agent and the Trustee upon at least 90
days' notice. Neither resignation nor removal of the Auction Agent pursuant to
the preceding two sentences shall be effective until and unless a Substitute
Auction Agent has been appointed and has accepted such appointment. If required
by the Certificate Insurer, the Certificateholders of 66-2/3% of the aggregate
principal amount of the Auction Rate Certificates then outstanding or by the
Market Agent, a Substitute Auction Agent Agreement shall be entered into with a
Substitute Auction Agent. Notwithstanding the foregoing, the Auction Agent may
terminate the Auction Agent Agreement if, within 25 days after notifying the
Trustee, the Representative, the Certificate Insurer and the Market Agent in
writing that it has not received payment of any Auction Agent Fee due it in
accordance with the terms of the Auction Agent Agreement, the Auction Agent does
not receive such payment.
If the Auction Agent shall resign or be removed or be dissolved, or if
the property or affairs of the Auction Agent shall be taken under the control of
any state or federal court or administrative body because of bankruptcy or
insolvency, or for any other reason, the Trustee, at the direction of the
Representative and the Certificate Insurer (after receipt of a certificate from
the Market Agent confirming that any proposed Substitute Auction Agent meets the
requirements described in the immediately preceding paragraph), shall use its
best efforts to appoint a Substitute Auction Agent.
1The Auction Agent is acting as agent for the Representative in
connection with Auctions. In the absence of bad faith or negligence on its part,
the Auction Agent shall not be liable for any action taken, suffered or omitted
in good faith or for any error of judgment made by it in the performance of its
duties under the Auction Agent Agreement. The Auction Agent shall not be liable
for any error of judgment made in good faith unless the Auction Agent shall have
been negligent in ascertaining the pertinent facts.
In the event of a change in the Auction Agent Fee Rate pursuant to
Section 6.4(b) of the Auction Agent Agreement, the Auction Agent shall give a
Notice of Fee Rate Change to the Trustee, the Certificate Insurer and the
Representative in accordance with the Auction Agent Agreement.
SECTION 2.1.6. BROKER-DEALERS.
The Auction Agent will enter into a Broker-Dealer Agreement with each
of Merrill Lynch and Lehman as the initial Broker-Dealers. A Responsible Officer
of the Representative may, from time to time, with the written consent of the
Certificate Insurer, approve one or more additional persons to serve as
Broker-Dealers under Broker-Dealer Agreements and shall be responsible for
providing such Broker-Dealer Agreements to the Trustee, the Certificate Insurer
and the Auction Agent, provided, however that while Merrill Lynch is serving as
Broker-Dealer, Merrill Lynch shall have the right to consent to the approval of
any additional Broker-Dealers, which consent will not be unreasonably withheld.
The Auction Agent shall have entered into a Broker-Dealer Agreement with each
Broker-Dealer prior to the participation of any such Broker-Dealer in any
Auction.
Any Broker-Dealer may be removed at any time, at the request of a
Responsible Officer of the Representative, but there shall, at all times, be at
least one Broker-Dealer appointed and acting as such.
SECTION 2.1.7. CHANGES IN THE AUCTION DATE. The Market Agent, with the
written consent of a Responsible Officer of the Representative, and the written
consent of the Certificate Insurer, may specify an earlier or later Auction Date
(but in no event more than five Business Days earlier or later) than the Auction
Date that would otherwise be determined in accordance with the definition of
"Auction Date" in Article I of these Auction Procedures with respect to one or
more specified Auction Periods in order to conform with then current market
practice with respect to similar securities or to accommodate economic and
financial factors that may affect or be relevant to the day of the week
constituting an Auction Date and the Class Remittance Rate borne on a Class of
Auction Rate Certificates. The Market Agent shall deliver a written request for
consent to such change in the Auction Date to the Representative and the
Certificate Insurer not less than three days nor more than 20 days prior to the
effective date of such change together with a certificate demonstrating the need
for change in reliance on such factors. The Market Agent shall provide notice of
its determination to specify an earlier Auction Date for one or more Auction
Periods by means of a written notice delivered at least 10 days prior to the
proposed changed Auction Date to the Trustee, the Auction Agent, the
Representative, the Rating Agencies, the Certificate Insurer and the Depository.
Such notice shall be substantially in the form of, or contain substantially the
information contained in, Annex C to these Auction Procedures.
In connection with any change described in this Section 2.1.7, the
Auction Agent shall provide such further notice to such parties as is specified
in Section 2.5 of the Auction Agent Agreement.
SECTION 2.2. ADDITIONAL PROVISIONS REGARDING THE CLASS REMITTANCE RATES ON THE
AUCTION RATE CERTIFICATES. The determination of a Class Remittance Rate by the
Auction Agent, the Trustee or any other Person pursuant to the provisions of the
applicable Section of this Article II shall be conclusive and binding on the
Certificateholders of the Class of Auction Rate Certificates to which such Class
Remittance Rate applies, and the Representative and the Trustee may rely thereon
for all purposes.
In no event shall the cumulative amount of interest paid or payable on
a Class of Auction Rate Certificates (including interest calculated as provided
herein, plus any other amounts that constitute interest on the Auction Rate
Certificates of such Class under applicable law, which are contracted for,
charged, reserved, taken or received pursuant to the Auction Rate Certificates
of such Class or related documents) calculated from the date of issuance of the
Auction Rate Certificates of such Class through any subsequent day during the
term of the Auction Rate of such Class or otherwise prior to payment in full of
the Auction Rate Certificates of such Class exceed the amount permitted by
applicable law. If the applicable law is ever judicially interpreted so as to
render usurious any amount called for under the Auction Rate Certificates of
such Class or related documents or otherwise contracted for, charged, reserved,
taken or received in connection with the Auction Rate Certificates of such
Class, or if the acceleration of the maturity of the Auction Rate Certificates
of such Class results in payment to or receipt by the Certificateholder or any
former Certificateholder of the Auction Rate Certificates of such Class of any
interest in excess of that permitted by applicable law, then, notwithstanding
any provision of the Auction Rate Certificates of such Class or related
documents to the contrary, all excess amounts theretofore paid or received with
respect to the Auction Rate Certificates of such Class shall be credited on the
principal balance of the Auction Rate Certificates of such Class (or, if the
Auction Rate Certificates of such Class have been paid or would thereby be paid
in full, refunded by the recipient thereof), and the provisions of the Auction
Rate Certificates of such Class and related documents shall automatically and
immediately be deemed reformed and the amounts thereafter collectible hereunder
and thereunder reduced, without the necessity of the execution of any new
document, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for under the Auction Rate
Certificates of such Class and under the related documents.
SECTION 2.3. QUALIFICATIONS OF MARKET AGENT. The Market Agent shall be a member
of the National Association of Securities Dealers, Inc., have a capitalization
of at least $50,000,000 and be authorized by law to perform all the duties
imposed upon it by these Auction Procedures. The Market Agent may resign and be
discharged of the duties and obligations created by these Auction Procedures by
giving at least 30 days' notice to the Representative and the Trustee, provided
that such resignation shall not be effective until the appointment of a
successor market agent by the Representative and the acceptance of such
appointment by such successor market agent. The Market Agent may be replaced at
the direction of the Representative, by an instrument signed by an officer of
the Representative, filed with the Market Agent and the Trustee at least 30 days
before the effective date of such replacement, provided that such replacement
shall not be effective until the appointment of a successor market agent by the
Representative and the acceptance of such appointment by such successor market
agent.
In the event that the Market Agent shall be removed or be dissolved,
or if the property or affairs of the Market Agent shall be taken under the
control of any state or federal court or administrative body because of
bankruptcy or insolvency, or for any other reason, and there is no Market Agent
and the Representative shall not have appointed its successor as Market Agent,
the Trustee, notwithstanding the provisions of the first paragraph of this
Section, shall be deemed to be the Market Agent for all purposes of these
Auction Procedures until the appointment by the Representative of the successor
Market Agent. Nothing in this Section shall be construed as conferring on the
Trustee additional duties other than as set forth herein.
<PAGE>
ANNEX A
CONTIMORTGAGE HOME EQUITY LOAN PASS-THROUGH CERTIFICATES
SERIES 1997-4, CLASS A-9
NOTICE OF CERTIFICATE INSURER DEFAULT
NOTICE IS HEREBY GIVEN that a Certificate Insurer Default has occurred
and is continuing with respect to the Certificates identified above. The next
Auction for the Series 1997-4, Class A-9 Certificates will not be held. The
Auction Rate for the Series 1997-4, Class A-9 Certificates for the next
succeeding Interest Period shall be the Non-Payment Rate.
MANUFACTURERS AND
TRADERS TRUST COMPANY,
as Trustee
Dated: By:
Name:
Title:
<PAGE>
ANNEX B
CONTIMORTGAGE HOME EQUITY LOAN PASS-THROUGH CERTIFICATES
SERIES 1997-4, CLASS A-9
NOTICE OF CURE OF CERTIFICATE INSURER DEFAULT
NOTICE IS HEREBY GIVEN that an Certificate Insurer Default with
respect to the Certificates identified above has been waived or cured. The next
Payment Date is
MANUFACTURERS AND
TRADERS TRUST COMPANY,
as Trustee
Dated: By:
Name:
Title:
<PAGE>
ANNEX C
CONTIMORTGAGE HOME EQUITY LOAN PASS-THROUGHCERTIFICATES
SERIES 1997-4, CLASS A-9
NOTICE OF CHANGE IN AUCTION DATE
Notice is hereby given by Merrill Lynch, as Market Agent for the
captioned Certificates, that with respect to the captioned Certificates, the
Auction Date is hereby changed as follows:
1. With respect to the captioned Certificates, the definition of
"Auction Date" shall be deemed amended by substituting "_________________
(number) Business Day" in the second line thereof.
2. This change shall take effect on ______________ which shall be the
Auction Date for the Auction Period commencing on --------------.
3. The Auction Date for the captioned Certificates shall be subject to
further change hereafter as provided in the Auction Procedures.
4. Terms not defined in this Notice shall have the meanings set forth
in the Auction Procedures relating to the captioned Certificates.
MERRILL LYNCH, PIERCE,
FENNER & SMITH
INCORPORATED
as Market Agent
Dated: By:
Name:
Title:
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