<PAGE> 1
- - --------------------------------------------------------------------------------
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)
November 26, 1997
IMC Home Equity Loan Trust 1997-7
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 333-24455-03 Being Applied For
- - ----------------------------- ---------------- --------------------
(State or Other Jurisdiction) (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
c/o The Chase Manhattan Bank, as Trustee
450 West 33rd Street, 15th Floor
New York, New York 10001
-------------------------------- ----------
(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code (212) 946-8600
--------------
No Change
----------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Description of the Certificates and the Mortgage Loans
IMC Securities, Inc. registered issuances of up to $3,000,000,000
principal amount of Home Equity Loan Asset Backed Certificates on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, as
amended (the "Act"), by a Registration Statement on Form S-3 (Registration File
No 333-24455) (as amended, the "Registration Statement"). Pursuant to the
Registration Statement, IMC Home Equity Loan Trust 1997-7 (the "Registrant" or
the "Trust") issued $775,000,000 in aggregate principal amount of its Home
Equity Loan Pass-Through Certificates, Series 1997-7 (the "Certificates"), on
November 26, 1997 (the "Closing Date"). 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
4.1, dated as of November 1, 1997, among IMC Securities, Inc. (the Depositor"),
IMC Mortgage Company, as seller and servicer (the "Servicer") and The Chase
Manhattan Bank, 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-8 and Class A-9IO (the "Class A
Certificates") and Class R Certificates (the "Class R Certificates" and,
together with the Class A Certificates, the "Certificates"). Only the Class A
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-end home
equity loans (the "Home Equity Loans") secured by mortgage 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
thereof and the applicable Pass-Through Rate thereof. The Pass-Through Rates
for the Class A Certificates are as follows: Class A-1, a variable rate as
determined in the Pooling and Servicing Agreement; Class A-2, 6.53%; Class A-3,
6.54%; Class A-4, 6.72%; Class A-5, 6.76%; Class A-6, 6.84%; Class A-7, 7.02%;
Class A-8, 6.65%; and, Class A-9IO, 5.00%. The Class A Certificates have the
initial aggregate principal amounts as follows: Class A-1, $255,140,000; Class
A-2, $112,820,000; Class A-3, $120,840,000; Class A-4, $44,310,000; Class A-5,
$71,100,000; Class A-6, $61,770,000; Class A-7, $54,775,000; and, Class A-8,
$54,245,000.
As of the Closing Date, the Home Equity Loans possessed the
characteristics described in the Prospectus dated June 6, 1997 and the
Prospectus Supplement dated November 20, 1997 filed pursuant to Rule 424(b)(5)
of the Act on November 25, 1997. In such Prospectus Supplement, a commitment
was made to provide a description of the pool of Home Equity Loans, including
loans acquired between the Cut-off Date (November 1, 1997) and the Closing
Date, in a current report on Form 8-K. Such description is attached hereto as
Exhibit 99.1
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) Not applicable
(b) Not applicable
(c) Exhibits:
1.1 Underwriting Agreement dated as of November 20, 1997,
among IMC Securities, Inc., IMC Mortgage Company and
PaineWebber Incorporated, acting on its own behalf
and as representative of Bear, Stearns & Co., Inc.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated
and Morgan Stanley & Co. Incorporated.
4.1 Pooling and Servicing Agreement dated as of November
1, 1997, among IMC Securities, Inc. as Depositor, IMC
Mortgage Company, as Seller and Servicer, and The
Chase Manhattan Bank, as Trustee.
99.1 Description of the Home Equity Loans as of the
Closing Date (November 26, 1997).
<PAGE> 4
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 hereunto duly authorized.
IMC HOME EQUITY LOAN TRUST 1997-7
By: IMC SECURITIES, INC., as Depositor
By: /s/ Thomas Middleton
----------------------------------------------
Name: Thomas Middleton
Title: President and Chief Operating Officer
December 8, 1997
<PAGE> 5
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
<S> <C>
1.1 Underwriting Agreement dated as of November 20, 1997, among
IMC Securities, Inc., IMC Mortgage Company and PaineWebber
Incorporated, acting on its own behalf and as representative
of Bear, Stearns & Co., Inc., Merrill Lynch, Pierce, Fenner
& Smith Incorporated and Morgan Stanley & Co. Incorporated.
4.1 Pooling and Servicing Agreement dated as of November 1,
1997, among IMC Securities, Inc. as Depositor, IMC Mortgage
Company, as Seller and Servicer, and The Chase Manhattan
Bank, as Trustee.
99.1 Description of the Home Equity Loans as of the Closing Date
(November 26, 1997).
</TABLE>
<PAGE> 1
11/20/97
$775,000,000
IMC HOME EQUITY LOAN TRUST 1997-7
IMC Home Equity Loan Pass-Through Certificates,
Series 1997-7
UNDERWRITING AGREEMENT
----------------------
November 20, 1997
PAINE WEBBER INCORPORATED
As representative of the several underwriters
245 Park Avenue
New York, New York 10167
Dear Sirs:
IMC Securities, Inc. (the "Depositor"), a Delaware corporation, has
authorized the issuance and sale of IMC Home Equity Loan Pass-Through
Certificates, Series 1997-7 consisting of (a) 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-8 Certificate and the Class A-9IO Certificates
(collectively, the "Class A Certificates") and (b) a residual class of
Certificates with respect to each REMIC held by the Trust. Only the Class A
Certificates (collectively, the "Offered Certificates") are offered hereby.
The Certificates represent an undivided ownership interest in a pool
of fixed rate home equity loans (the "Home Equity Loans") held by IMC Home
Equity Loan Trust 1997-7 (the "Trust"). The Certificates will represent
undivided ownership interests in the Home Equity Loans, which are secured by
first and second lien mortgages or deeds of trust primarily on one- to
four-family residential properties.
Only the Offered Certificates are being purchased by the Underwriters
named in Schedule A hereto (the "Underwriters"), 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 10 of this Agreement. PaineWebber
Incorporated ("the Representative") is acting for itself and as representative
of the other Underwriters.
The Certificates will be issued under a pooling and servicing
agreement (the "Pooling and Servicing Agreement"), dated as of November 1, 1997
among the Depositor, IMC Mortgage Company ("IMC"), as seller and as servicer
(in such capacity, the "Servicer" or the "Seller," as the case may be), and The
Chase Manhattan Bank, as trustee (the "Trustee"). The Offered Certificates
will evidence fractional undivided interests in the trust (the
<PAGE> 2
"Trust"). The Trust assets (not all of which will be included in the REMIC
elections), will initially include among other things, a pool of fixed rate
Home Equity Loans (the "Initial Home Equity Loans"), and such amounts as may be
held by the Trustee in the Pre-Funding Account (the "Pre-Funding Account"), the
Capitalized Interest Account (the "Capitalized Interest Account") and any other
accounts held by the Trustee for the Trust. On the Closing Date, approximately
$193,000,000 will be deposited in the name of the Trustee in the Pre-Funding
Account. It is intended that additional Home Equity Loans satisfying the
criteria specified in the Pooling and Servicing Agreement (the "Subsequent Home
Equity Loans") will be purchased by the Trust for inclusion in the Trust from
the Depositor from time to time on or before February 15, 1998 from funds on
deposit in the Pre-Funding Account. Funds in the Capitalized Interest Account
will be applied by the Trustee to cover shortfalls in interest during the
Funding Period (as described herein under "Pre-Funding Account") on the Offered
Certificates attributable to the provisions allowing for purchase of Subsequent
Home Equity Loans after the Cut-Off date. The Offered Certificates will
initially represent an undivided ownership interest in the sum of the Initial
Home Equity Loans in an amount of $828,448,840.24 as of the close of business
on November 1, 1997 (the "Cut-Off Date") and (ii) the amount on deposit in the
Pre-Funding Account. Each Class of Offered Certificates will also have the
benefit of an insurance policy (the "Insurance Policy") issued by Financial
Security Assurances, Inc., a monoline insurance company (the "Certificate
Insurer"). The Insurance Policy will be issued pursuant to the insurance and
indemnity agreement (the "Insurance Agreement") among the Certificate Insurer,
the Depositor and IMC. The Certificate Insurer, IMC and the Underwriters also
will enter into an Indemnification Agreement, dated as of November 25, 1997
(the "Indemnification Agreement"). 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.
Pursuant to Section 3.05 of the Pooling and Servicing Agreement and
concurrently with the execution thereof, IMC will transfer to the Depositor and
the Depositor will transfer to the Trust all of its right, title and interest
in and to the unpaid principal balances of the Initial Home Equity Loans as of
the Cut-Off Date and the collateral securing each Initial Home Equity Loan.
SECTION 1 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. 333-24455) has (i)
been prepared by the Depositor in conformity with the requirements of
the Securities Act of 1933 (the "Securities Act") and the rules and
regulations (the "Rules and Regulations") of the United States
Securities and Exchange Commission (the "Commission")
-2-
<PAGE> 3
thereunder, (ii) been filed with the Commission under the Securities
Act and (iii) become effective 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; and "Basic Prospectus" means such
final prospectus dated June 6, 1997; and "Prospectus Supplement" means
the final prospectus supplement relating to the Offered Certificates,
to be filed with the Commission pursuant to paragraph (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. 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
8(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.
B. The Registration Statement conforms, and the Prospectus and
any further amendments or supplements to the Registration Statement or
the Prospectus will, when they become effective or are filed with the
Commission, as the case may be, conform 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
-3-
<PAGE> 4
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 the Underwriters
expressly for use therein. The only information furnished by the
Underwriters or on behalf of the Underwriters for use in connection
with the preparation of the Registration Statement or the Prospectus
is described in Section 8(I) hereof.
C. The documents incorporated by reference to 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 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 requires such qualification, and 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, the Pooling and Servicing Agreement,
the Insurance Agreement or any Subsequent Transfer 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
-4-
<PAGE> 5
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, the Certificates, the
Insurance Agreement or any Subsequent Transfer Agreement, (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. This Agreement, the Insurance Agreement or any
Subsequent Transfer 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, the Certificates, the
Insurance Agreement or any Subsequent Transfer Agreement.
G. This Agreement has been, and the Pooling and Servicing Agreement,
the Insurance Agreement and each Subsequent Transfer 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
and the Insurance 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 or the Insurance Agreement limitations of public policy
under applicable securities laws.
H. The execution, delivery and performance of this Agreement, the
Pooling and Servicing Agreement, the Insurance Agreement and any
Subsequent Transfer 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, 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.
I. The Depositor has no reason to believe that Coopers & Lybrand
L.L.P. are not independent public accountants with respect to the
Depositor as required by the Securities Act and the Rules and
Regulations.
-5-
<PAGE> 6
J. The direction by the Depositor to the Trustee to execute,
authenticate, issue and deliver the Certificates has been duly
authorized by the Depositor, and assuming the Trustee has been duly
authorized to do so, when executed, authenticated, issued 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 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, the Pooling and Servicing Agreement, the Insurance
Agreement and any Subsequent Transfer 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
Initial Home Equity Loans conveyed by the Seller, 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 Initial Home
Equity Loans, 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 Initial 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. At the time of execution and delivery of any Subsequent Transfer
Agreement, the Depositor will: (i) have good title in the Subsequent
Home Equity Loans conveyed by the Seller, free and clear of any Liens;
(ii) not have assigned to any person any of its right or title in the
Subsequent Home Equity Loans, in the Pooling
-6-
<PAGE> 7
and Servicing Agreement or in the Certificates being issued pursuant
thereto; and (iii) have the power and authority to sell the Subsequent
Home Equity Loans to the Trustee. Upon execution and delivery of the
Subsequent Transfer 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 Subsequent Home Equity Loans.
O. As of the Cut-Off Date, each of the Initial Home Equity Loans
will meet the eligibility criteria described in the Prospectus and
will conform to the descriptions thereof contained in the Prospectus.
P. As of any Subsequent Transfer Date, each of the Subsequent
Home Equity Loans will meet the eligibility criteria described in the
prospectus and will conform to the descriptions thereof contained in
the Prospectus.
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 Offered Certificates shall have been
rated in the respective rating categories by the nationally recognized
rating agencies, as described in the Prospectus Supplement under
"Ratings".
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 and the Insurance Agreement will be true and correct in all
material respects.
Any certificate signed by an officer of the Depositor and delivered to
an Underwriter or counsel for the Underwriters 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 1 are made.
SECTION 2 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
-7-
<PAGE> 8
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
each Underwriter, and each Underwriter agrees (except as provided in Sections
10 and 11 hereof) severally and not jointly to purchase from the Depositor the
aggregate initial principal amounts or percentage interests of the respective
Class or Classes of Offered Certificates set forth opposite their names on
Schedule A, at the purchase price or prices set forth in Schedule A. The
Underwriters may offer the Offered Certificates to certain dealers at such
prices less a concession not in excess of the respective amounts set forth in
Schedule A. The Underwriters may allow and such dealers may reallow a discount
to certain dealers not in excess of the respective amounts set forth in
Schedule A.
SECTION 3 Delivery and Payment. Delivery of and payment for the
Offered Certificates to be purchased by the Underwriters shall be made at the
offices of Stroock & Stroock & Lavan LLP, 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 November 26, 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 applicable 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 4 Offering by 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 5 Covenants of the Depositor and IMC. The Depositor and, to
the extent the provisions of Section I. below relate to IMC, IMC each agrees 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; to
file promptly all reports and any
-8-
<PAGE> 9
definitive proxy or information statements required to be filed by the
Depositor with the Commission pursuant to Section 13(a), 13(c), 14 or
15(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 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; (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 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 Effective Time 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 the 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
-9-
<PAGE> 10
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.
E. The Depositor will cause any Computational Materials (as defined
below) with respect to the Offered Certificates which are delivered by
any Underwriter to the Depositor to be filed with the Commission on a
Current Report on Form 8-K (the "Form 8-K -- Computational Materials")
at or before the time of filing of the Prospectus pursuant to Rule
424(b) under the 1933 Act; provided, however, that the Depositor shall
have no obligation to file any materials which, in the reasonable
determination of the Depositor after consultation with such
Underwriter, (i) are not required to be filed pursuant to the Kidder
Letters (as defined below) or (ii) contain any erroneous information
or 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; it being understood, however, that the
Depositor shall have no obligation to review or pass upon the accuracy
or adequacy of, or to correct, any Computational Materials provided by
any Underwriter to the Depositor as aforesaid. For purposes hereof,
as to each Underwriter, the term "Computational Materials" shall mean
those materials delivered by an Underwriter to the Depositor within
the meaning of the no-action letter dated May 20, 1994 issued by the
Division of Corporation Finance of the Commission to Kidder, Peabody
Acceptance Corporation I and certain affiliates and the no-action
letters dated May 27, 1994 and February 17, 1995, each issued by the
Division of Corporation Finance of the Commission to the Public
Securities Association (all three of such letters, the "Kidder
Letters") for which the filing of such material is a condition of the
relief granted in such letters.
F. 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) 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.
G. 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 11(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
-10-
<PAGE> 11
quarter following the Closing Date.
H. 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.
I. Unless the Underwriters shall otherwise have given their written
consent, no pass-through certificates backed by home equity loans or
other similar securities representing interest in or secured by other
mortgage-related assets originated or owned by the Depositor or IMC
shall be publicly offered, sold nor shall the Depositor or IMC enter
into any contractual arrangements that contemplate the public offering
or sale of such securities for a period of seven (7) business days
following the commencement of the offering of the Offered Certificates
to the public.
J. 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 Owners: (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 Certificateholders pursuant to Section 7.09 of the
Pooling and Servicing Agreement.
K. To apply the net proceeds from the sale of the Offered
Certificates in the manner set forth in the Prospectus.
SECTION 6 Conditions to the Underwriters' Obligations. The
obligations of the Underwriters to purchase the Offered Certificates pursuant
to this 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 and IMC
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
-11-
<PAGE> 12
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 Stroock & Stroock & Lavan LLP, 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 Insurance Agreement, the Indemnification
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 the Underwriters and their counsel, 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. Arter & Hadden 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:
1. 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.
2. 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.
3. 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.
-12-
<PAGE> 13
4. The statements set forth in the Basic Prospectus
under the captions "Description of The Certificates" and
"Administration" 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.
5. The statements set forth in the Prospectus and the
Prospectus Supplement under the captions "ERISA
Considerations" and "Federal Income Tax Consequences" to the
extent that they constitute matters of federal law, provide a
fair and accurate summary of such law or conclusions.
6. 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.
7. 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.
8. Assuming that (a) the Trustee causes each of the
Upper-Tier REMIC and the Lower-Tier REMIC (other than the
Non-REMIC Accounts), as the Trustee has covenanted to do in
the Pooling and Servicing Agreement, to be treated as a "real
estate mortgage investment conduit" (the "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 Offered
Certificates will be treated as "regular interests" in the
Upper-Tier REMIC and the Class R Certificates will constitute
the sole class of "residual interest" in the Upper-Tier REMIC.
The Trust is not subject to tax upon its income or assets by
any taxing authority of the State of New York.
9. To the best of such counsel's knowledge, there are no
actions, proceedings or investigations pending that would
adversely affect the status of either the Upper-Tier REMIC or
the Lower-Tier REMIC (other than the Non-REMIC Accounts) as a
REMIC.
10. As a consequence of the qualification of each of the
Upper-Tier REMIC and the Lower-Tier REMIC (other than the
Non-REMIC Accounts) 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
-13-
<PAGE> 14
Trust consist of qualifying assets under such Sections. In
addition, as a consequence of the qualification of each of the
Upper-Tier REMIC and the Lower-Tier REMIC (other than the
Non-REMIC Accounts) 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.
11. The Offered Certificates will, when issued, conform
to the descriptions thereof contained in the Prospectus.
12. The Offered Certificates, when duly and validly
executed, authenticated and delivered in accordance with the
Pooling and Servicing Agreement and delivered to the
Underwriters and paid for in accordance with the Underwriting
Agreement, will be entitled to the benefits of the Pooling and
Servicing Agreement.
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 no facts have 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
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 Arter & Hadden, special counsel to the
Depositor, addressed to the Depositor and satisfactory to Standard &
Poor's Rating Services, a division of the McGraw-Hill Companies,
Moody's Investors Service, Inc. and the Underwriters, with respect to
certain matters relating to the transfer of the Initial Home Equity
Loans to the Depositor and from the Depositor to the Trust, and such
counsel shall have consented to the reliance on such opinion by
Standard & Poor's Rating Services, a division of the McGraw-Hill
Companies, Moody's Investors Service, Inc. and the
-14-
<PAGE> 15
Underwriters as though such opinion had been addressed to each such
party.
F. Mitchell W. Legler, P.A., special counsel to IMC, in IMC's
capacity as both Seller and Servicer under the Pooling and Servicing
Agreement, and/or Arter & Hadden shall have furnished to the
Underwriters their written opinion or opinions, addressed to the
Underwriters and the Depositor and dated the Closing Date, in form and
substance satisfactory to the Underwriters, to the effect that:
1. IMC has been duly organized and is validly existing
as a corporation in good standing under the laws of the State
of Florida and has duly authorized all actions contemplated
hereby.
2. IMC has full power and authority to serve in the
capacity of seller and 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.
3. This Agreement, the Insurance Agreement, the
Indemnification Agreement and the Pooling and Servicing
Agreement have been duly authorized, executed and delivered by
IMC and, assuming the due authorization, execution and
delivery of such agreements by the other parties thereto,
constitute the legal, valid and binding agreements of IMC,
enforceable against IMC in accordance with their 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.
4. No consent, approval, authorization, order,
registration or qualification of or with any court or
governmental agency or body having jurisdiction over IMC is
required for the consummation by the Servicer of the
transactions contemplated by the Pooling and Servicing
Agreement, except such consents, approvals, authorizations,
registrations and qualifications as have been obtained.
5. Neither the transfer of the Initial Home Equity Loans
by IMC to the Depositor, nor the execution, delivery or
performance by IMC 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 formation documents of IMC, as
applicable; (ii) any term or provision of any material
agreement, deed of trust, mortgage loan agreement, contract,
instrument or indenture, or other agreement to which
-15-
<PAGE> 16
IMC is a party or is bound or to which any of the property or
assets of IMC 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 IMC; or (iv) any law, rule or regulations applicable to
IMC; 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.
6. The execution of the Pooling and Servicing Agreement
is sufficient to convey all of IMC's right, title and interest
in the Initial Home Equity Loans to the Depositor and
following the consummation of the transaction contemplated by
section 3.05 of the Pooling and Servicing Agreement, the
transfer of the Initial Home Equity Loans by IMC to the
Depositor is a sale thereof.
7. Each Subsequent Transfer Agreement at the time of
its execution and delivery will be sufficient to convey all of
IMC's right, title and interest in the Subsequent Home Equity
Loans to the Depositor and following the consummation of the
transaction contemplated by each Subsequent Transfer
Agreement, the transfer of the Subsequent Home Equity Loans by
IMC to the Depositor will be a sale thereof.
8. There are, to the best of such counsel's knowledge
without independent investigation, no actions, proceedings or
investigations pending with respect to which IMC has received
service of process or threatened against IMC before any court,
administrative agency or other tribunal (a) asserting the
validity of the Pooling and Servicing Agreement, the
Underwriting Agreement, the Insurance Agreement, the
Indemnification 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
IMC of its obligations under, or the validity or
enforceability of, the Pooling and Servicing Agreement, the
Insurance Agreement, the Indemnification Agreement or the
Underwriting Agreement.
Such opinion may rely on the opinion of Florida
counsel as to matters governed by Florida law to the extent
such Florida opinion is satisfactory, in form and substance,
to the Underwriters.
G. Arter & Hadden, special counsel for the Depositor, shall have
furnished to the Underwriters their written opinion, addressed to the
Underwriters and dated the Closing Date, in form and substance
satisfactory to the Underwriters, to the effect that:
-16-
<PAGE> 17
1. 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.
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, the Insurance Agreement and the Pooling and
Servicing Agreement and to cause the Certificates to be
issued.
2. The Depositor has the requisite power and authority
and legal right to own the Class R Certificates.
3. The Depositor is not in violation of its certificate
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.
4. This Agreement, the Pooling and Servicing Agreement,
the Insurance Agreement and the Purchase Agreement relating to
the purchase of the Class R Certificates (the "Purchase
Agreement") have been duly authorized, and when duly 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 and the
Insurance Agreement, limitations of public policy under
applicable securities laws.
5. The execution, delivery and performance of this
Agreement, the Pooling and Servicing Agreement, the Insurance
Agreement and each Subsequent Transfer 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
-17-
<PAGE> 18
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,
nor will such actions result in a violation of the provisions
of the certificate 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.
6. The direction by the Depositor to the Trustee to
execute, 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,
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.
7. 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, the Insurance Agreement and the Pooling and
Servicing Agreement, except such consents, approvals,
authorizations, registrations or qualifications as may be
required 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.
8. There are not, to the best of such counsel's
knowledge, after reasonable 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, this Agreement, the
Insurance 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, the Insurance 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
-18-
<PAGE> 19
Agreement, the Insurance Agreement or the Certificates.
H. 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:
1. The Trustee is a banking corporation duly
incorporated and validly existing under the laws of the State
of New York.
2. The Trustee has the full corporate trust power to
execute, deliver and perform its obligations under the Pooling
and Servicing Agreement.
3. 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.
4. The Pooling and Servicing Agreement is a valid and
legally binding obligation of the Trustee enforceable against
the Trustee.
5. The execution and delivery by the Trustee of the
Pooling and Servicing Agreement does not (a) violate the
Organization Certificate of the Trustee or the Bylaws 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.
6. The Certificates have been duly authenticated,
executed and delivered by the Trustee.
7. 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
8. 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
-19-
<PAGE> 20
materially and adversely affect the ability of the Trustee to
carry out the transactions contemplated in the Pooling and
Servicing Agreement.
I. The Underwriters shall have received the favorable opinion or
opinions, dated the date of 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.
J. The Underwriters shall have received the favorable opinion dated
the Closing Date, from in-house counsel to the Certificate Insurer, in form and
scope satisfactory to counsel for the Underwriters, substantially to the effect
that:
1. The Certificate Insurer is a monoline insurance
company duly incorporated, validly existing, and in good
standing under the laws of the State of New York. The
Certificate Insurer is validly licensed and authorized to
issue the Insurance Policy and perform its obligations under
the Insurance Agreement in accordance with the terms thereof,
under the laws of the State of New York.
2. The Certificate Insurer has the corporate power to
execute and deliver, and to take all action required of it
under the Insurance Agreement and the Insurance Policy.
3. The execution, delivery and performance by the
Certificate Insurer of the Insurance Policy, the
Indemnification Agreement and the Insurance Agreement does not
require the consent or approval of, the giving of notice to,
the prior registration with, or the taking of any other action
in respect of any state or other governmental agency or
authority which has not previously been obtained or effected.
4. The Insurance Policy, the Indemnification Agreement
and the Insurance Agreement have been duly authorized,
executed and delivered by the Certificate Insurer and
constitute the legal, valid and binding agreement of the
Certificate Insurer, enforceable against the Certificate
Insurer in accordance with its terms subject, as to
enforcement, to (x) bankruptcy, reorganization, insolvency,
moratorium and other similar laws relating to or affecting the
enforcement of creditors' rights generally, including, without
limitation, laws relating to fraudulent transfers or
conveyances, preferential transfers and equitable
subordination, presently or from time to time in effect and
general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at
law), as such laws may be applied in any such proceeding with
respect to the Certificate Insurer and (y) the qualification
that the remedy of specific performance and other forms of
-20-
<PAGE> 21
equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceedings with
respect thereto may be brought.
5. To the extent the Insurance Policy constitutes a
security within the meaning of Section 2(1) of the Securities
Act, it is a security that is exempt from the registration
requirements of the Act.
6. The information set forth under the caption, "The
Certificate Insurer" in the Prospectus Supplement, insofar as
such information constitutes a description of the Insurance
Policy, accurately summarizes such Insurance Policy.
K. The Depositor and IMC 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 and IMC,
respectively, stating as it relates to each such entity:
1. The representations and warranties made by such
entity in this Agreement and in the Pooling and Servicing
Agreement are true and correct as of the Closing Date; and
such entity has complied with all agreements contained herein
which are to have been complied with on or prior to the
Closing Date.
2. The information contained in the Prospectus relating
to such entity 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.
3. There has been no amendment or other document filed
affecting the Certificate of Incorporation or bylaws of the
Depositor since November 10, 1994 or the formation documents
of IMC since June 19, 1990 and no such amendment has been
authorized. No event has occurred since September 15, 1997
which has affected the good standing of the Depositor under
the laws of the State of Delaware or since September 18, 1997
which has affected the good standing of IMC under the laws of
the state of Florida.
4. There has not occurred any material adverse change,
or any development involving a prospective material adverse
change, in the condition, financial or otherwise, or in the
earnings, business or operations of such entity from September
30, 1997.
-21-
<PAGE> 22
In addition to the foregoing, the IMC certificate shall state that the
representations and warranties set forth in Sections 1 D, E, F, G, H,
L, M, P and Q of this Agreement are made by IMC instead of the
Depositor and are true as to IMC as though such representations and
warranties were fully set forth in such certificate.
L. 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.
M. The Insurance Policy and the Insurance Agreement shall have
been issued by the Certificate Insurer and shall have been duly
authenticated by an authorized agent of the Certificate Insurer, if so
required under applicable state law or regulations.
N. Each Class of the Offered Certificates shall have been rated
in the respective rating categories and by the nationally recognized
statistical rating organizations described in the Prospectus
Supplement under "Ratings."
O. 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.
P. 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.
Q. 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 governmental 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
-22-
<PAGE> 23
national emergency or war by the United States; or (iv) there shall
have occurred such a material adverse change in general economic,
political or financial 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.
R. The Underwriters shall have received from Coopers & Lybrand
L.L.P., certified public accountants, a letter dated the date of the
Prospectus Supplement and a letter dated the date hereof and
satisfactory in form and substance to the Underwriters and their
counsel, to the effect that they have performed certain specified
procedures, all of which have been agreed to by the Underwriters, as a
result of which they determined that certain information of an
accounting, financial or statistical nature set forth in the
Prospectus Supplement on the cover page thereof and under the captions
"Summary of Terms - The Home Equity Loans", "Risk Factors - Nature of
the Collateral; Junior Liens", "Risk Factors - Risk of Higher Default
Rates for Home Equity Loans with Balloon Payments", "The Seller and
Servicer - General", "The Seller and Servicer - Delinquency, Loan Loss
and Foreclosure Information" and "The Home Equity Loan Pool -
General," agrees with the records of the Depositor excluding any
questions of legal interpretation.
If any condition specified in this Section 6 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 7.
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 the Underwriters and their counsel.
SECTION 7 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 qualifying the Certificates under the
securities laws of the several jurisdictions designated by the Underwriters as
provided in Section 5(H) 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 Underwriters); (f) any fees charged by securities
rating services for rating
-23-
<PAGE> 24
the Offered Certificates; (g) the costs of the accountant's letters referred to
in Section 6(P) hereof; and (h) all other costs and expenses incident to the
performance of the obligations of the Depositor (including costs and expenses
of your counsel); provided that, except as provided in this Section 7, 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 letters relating to any Computational Materials (as defined
in Section 5(E) hereof).
If this Agreement is terminated by the Underwriters in accordance with
the provisions of Section 6 or Section 11, the Depositor shall cause the
Underwriters to be reimbursed for all reasonable out-of-pocket expenses,
including fees and disbursements of Stroock & Stroock & Lavan LLP, counsel for
the Underwriters.
SECTION 8 Indemnification and Contribution. A. The Depositor agrees
to indemnify and hold harmless each Underwriter 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 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 controlling
person of any of such Underwriter. The only information furnished by the
Underwriters or on behalf of the Underwriters for use
-24-
<PAGE> 25
in connection with the preparation of the Registration Statement or the
Prospectus is described in Section 8(I) hereof.
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 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, 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, officer 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. The only information furnished by the
Underwriters or on behalf of the Underwriters for use in connection with the
preparation of the Registration Statement or the Prospectus is described in
Section 8(I) hereof.
C. Promptly after receipt by any indemnified party under this
Section 8 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 8, 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 8 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 8.
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
-25-
<PAGE> 26
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 liable to the indemnified party under this Section 8 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 indemnified 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, 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 8 consist of one or
more Underwriters or any of its or their controlling persons, or the Depositor,
if the indemnified parties under this Section 8 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 8(A) and (B), shall use its 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.
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
-26-
<PAGE> 27
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 Rule 424 with a copy of any Computational
Materials (as defined in Section 5(E) hereof) produced by such Underwriter for
filing with the Commission on Form 8-K.
E. Each Underwriter severally agrees, assuming 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, joint or several, 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 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. The
obligations of an Underwriter under this Section 8(E) shall be in addition to
any liability which such Underwriter may otherwise have.
The procedures set forth in Section 8(C) shall be equally applicable
to this Section 8(E).
F. If the indemnification provided for in this Section 8 shall
for any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 8(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 related Underwriter on the
other from the offering of the related 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 8(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 the Depositor and an Underwriter shall be
deemed to be in such proportion as the total net proceeds from the offering
(before deducting expenses) received by the Depositor bear to the total
underwriting discounts and commissions as set forth on the cover page of the
Prospectus Supplement received by such Underwriter.
-27-
<PAGE> 28
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 8(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 8(F)
shall be deemed to include, for purposes of this Section 8(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 8, in no case shall any Underwriter be
responsible for any amount in excess of the amount of the underwriting
discounts and commissions received by such Underwriter in connection with its
purchase of the Offered Certificates. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
G. For purposes of this Section 8, 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 8(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 through a Form 8-K --
Computational Materials; and
(ii) does not constitute Seller-Provided Information.
"Seller-Provided Information" means any computer tape (or other information)
furnished to any Underwriter by or on behalf of the Seller and Servicer
concerning the assets comprising the Trust.
H. The Seller and Servicer agrees to indemnify each indemnified
party referred to in Section 8(A) hereof with respect to Seller Provided
Information to the same extent as the indemnity granted under such section.
The procedures set forth in Section 8(C) shall be equally applicable to this
Section 8(H).
I. Each Underwriter confirms that the information regarding such
Underwriter
-28-
<PAGE> 29
set forth in the last paragraph on the cover page of the Prospectus Supplement,
the information regarding such Underwriter set forth under the caption
"Underwriting" in the Prospectus Supplement and the Computational Materials
(other than to the extent such information is based on Seller Provided
Information) furnished by such Underwriter is correct, and the parties hereto
acknowledge that such information constitutes the only information furnished in
writing by or on behalf of any Underwriter for use in connection with the
preparation of the Registration Statement or the Prospectus.
SECTION 9 Representations, Warranties and Agreements to Survive
Delivery. 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 10 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-defaulting 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 10 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 10, each of the Underwriters and the Depositor 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
-29-
<PAGE> 30
effected.
SECTION 11 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 6(P) of this Agreement shall occur and be continuing. In the event of
any such termination, the covenant set forth in Section 5(G), the provisions of
Section 7, the indemnity agreement set forth in Section 8, and the provisions
of Sections 9 and 15 shall remain in effect.
SECTION 12 Obligations of IMC. IMC agrees with the Underwriters, for
the sole and exclusive benefit of each such Underwriter and each person
controlling such Underwriter within the meaning of the Securities Act and not
for the benefit of any assignee thereof or any other person or persons dealing
with such Underwriter, in consideration of and as an inducement to their
agreement to purchase the Offered Certificates from the Depositor, to indemnify
and hold harmless each Underwriter against any failure by the Depositor to
perform its obligations to the Underwriters hereunder, including, without
limitation, any failure by the Depositor to honor any obligation to any
Underwriter pursuant to Section 8 hereof.
SECTION 13 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 PaineWebber Incorporated,
______________ New York, New York Attention: __________________ (Fax:
212-272-7294) ;and
B. if to the Depositor, shall be delivered or sent by mail, telex
or facsimile transmission to care of IMC Securities, Inc., 5901 East
Fowler Avenue, Tampa, Florida 33617-2362 Attention: Thomas Middleton
(Fax: (813) 984-2593).
SECTION 14 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 the Securities Act, 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 14, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein.
SECTION 15 Survival. The respective indemnities, representations,
warranties and
-30-
<PAGE> 31
agreements of the Depositor and the Underwriters contained in this Agreement,
or made by or on behalf of them, respectively, pursuant to the 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 16 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 17 Governing Law; Submission to Jurisdiction. This Agreement
shall be governed by and construed in accordance with the laws of the State of
New York without giving effect to the conflict of law rules 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.
SECTION 18 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 19 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.
-31-
<PAGE> 32
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,
IMC SECURITIES, INC.
By: /s/ Laurie Williams
---------------------------
Name: Laurie Williams
Title: Vice President
IMC MORTGAGE COMPANY
By: /s/ Laurie Williams
---------------------------
Name: Laurie Williams
Title: Vice President
CONFIRMED AND ACCEPTED, as
of the date first above written:
PAINEWEBBER INCORPORATED
Acting on its own behalf and as
Representative of the several Underwriters
By: /s/ Chris Connelly
---------------------------------
Name: Chris Connelly
Title: Vice President
-32-
<PAGE> 33
SCHEDULE A
Class A-7 Certificates
<TABLE>
<CAPTION>
Underwriters Principal Amount
------------ ----------------
<S> <C>
PaineWebber Incorporated $ 76,542,000
Bear, Stearns & Co., Inc. $ 76,542,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated $ 51,028,000
Morgan Stanley & Co. Incorporated $ 51,028,000
----------
Total $255,140,000
</TABLE>
Class A-2 Certificates
<TABLE>
<CAPTION>
Underwriters Principal Amount
------------ ----------------
<S> <C>
PaineWebber Incorporated $33,846,000
Bear, Stearns & Co., Inc. 33,846,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated 22,564,000
----------
Total $112,820,000
</TABLE>
-33-
<PAGE> 34
Class A-3 Certificates
<TABLE>
<CAPTION>
Underwriters Principal Amount
------------ ----------------
<S> <C>
PaineWebber Incorporated. $36,252,000
Bear, Stearns & Co., Inc. 36,252,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated 24,168,000
Morgan Stanley & Co. Incorporated 24,168,000
Total $120,840,000
</TABLE>
Class A-4 Certificates
<TABLE>
<CAPTION>
Underwriters Principal Amount
------------ ----------------
<S> <C>
PaineWebber Incorporated $13,293,000
Bear, Stearns & Co. Inc. 13,293,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated 8,862,000
Morgan Stanley & Co. Incorporated 8,862,000
---------
Total $44,310,000
</TABLE>
Class A-5 Certificates
<TABLE>
<CAPTION>
Underwriters Principal Amount
------------ ----------------
<S> <C>
PaineWebber Incorporated $21,330,000
Bear ,Stearns & Co. Inc. 21,330,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated 14,220,000
Morgan Stanley & Co. Incorporated 14,220,000
----------
Total $71,100,000
</TABLE>
Class A-6 Certificates
<TABLE>
<CAPTION>
Underwriters Principal Amount
------------ ----------------
<S> <C>
PaineWebber Incorporated $18,531,000
Bear, Stearns & Co. Inc. $18,531,000
</TABLE>
-34-
<PAGE> 35
<TABLE>
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith Incorporated 12,354,000
Morgan Stanley & Co. Incorporated 12,354,000
----------
Total $61,770,000
</TABLE>
Class A-7 Certificates
<TABLE>
<CAPTION>
Underwriters Principal Amount
------------ ----------------
<S> <C>
PaineWebber Incorporated $16,432,500
Bear, Stearns & Co. Inc. 16,432,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated 10,955,000
Morgan Stanley & Co. Incorporated 10,955,000
----------
Total $54,775,000
</TABLE>
Class A-8 Certificates
<TABLE>
<CAPTION>
Underwriters Principal Amount
------------ ----------------
<S> <C>
PaineWebber Incorporated $16,273,500
Bear, Stearns & Co. Inc. 16,273,500
Merrill Lynch, Pierce, Fenner & Smith Incorporated 10,849,000
Morgan Stanley & Co. Incorporated 10,849,000
----------
Total $54,245,000
</TABLE>
Class A-9IO Certificates
<TABLE>
<CAPTION>
Underwriters Percentage Interest
------------ -------------------
<S> <C>
PaineWebber Incorporated 30%
Bear, Stearns & Co. Inc. 30%
Merrill Lynch, Pierce, Fenner & Smith Incorporated 20%
Morgan Stanley & Co. Incorporated 20%
---
Total 100%
</TABLE>
-35-
<PAGE> 36
<TABLE>
<CAPTION>
Selling Reallowance
Class Concession Discount
----- ---------- --------
<S> <C> <C>
A-1 0.09375% .075%
A-2 0.11250% .075%
A-3 0.13125% .0750%
A-4 0.15000% .100%
A-5 0.18750% .125%
A-6 0.22500% .125%
A-7 0.33750% .250%
A-8 0.18750% .125%
A-9IO 0.02294% .020%
</TABLE>
-36-
<PAGE> 1
POOLING AND SERVICING AGREEMENT
Relating to
IMC HOME EQUITY LOAN TRUST 1997-7
Among
IMC SECURITIES, INC.
as Depositor,
IMC MORTGAGE COMPANY,
as Seller,
IMC MORTGAGE COMPANY,
as Servicer
and
THE CHASE MANHATTAN BANK
as Trustee
Dated as of November 1, 1997
<PAGE> 2
CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
CONVEYANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-----------
Section 1.02 Use of Words and Phrases . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
------------------------
Section 1.03 Captions; Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
---------------------------
Section 1.04 Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
--------
ARTICLE II
ESTABLISHMENT AND ORGANIZATION OF THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 2.01 Establishment of the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
--------------------------
Section 2.02 Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
------
Section 2.03 Purposes and Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
-------------------
Section 2.04 Appointment of the Trustee; Declaration of Trust . . . . . . . . . . . . . . . . 35
------------------------------------------------
Section 2.05 Expenses of the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
---------------------
Section 2.06 Ownership of the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
----------------------
Section 2.07 Situs of the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
------------------
Section 2.08 Miscellaneous REMIC Provisions . . . . . . . . . . . . . . . . . . . . . . . . . 36
------------------------------
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE DEPOSITOR, THE SERVICER AND THE SELLER;
COVENANT OF SELLER TO CONVEY HOME EQUITY LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 3.01 Representations and Warranties of the Depositor . . . . . . . . . . . . . . . . 39
-----------------------------------------------
Section 3.02 Representations and Warranties of the Servicer . . . . . . . . . . . . . . . . . 41
----------------------------------------------
Section 3.03 Representations and Warranties of the Seller . . . . . . . . . . . . . . . . . . 43
--------------------------------------------
Section 3.04 Covenants of Seller to Take Certain Actions with Respect to
-----------------------------------------------------------
the Home Equity Loans in Certain Situations . . . . . . . . . . . . . . . . . . . 46
-------------------------------------------
Section 3.05 Conveyance of the Initial Home Equity Loans and Qualified
---------------------------------------------------------
Replacement Mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
---------------------
Section 3.06 Acceptance by Trustee; Certain Substitutions of Home
----------------------------------------------------
Equity Loans; Certification by Trustee . . . . . . . . . . . . . . . . . . . . . 58
--------------------------------------
Section 3.07 Conveyance of the Subsequent Home Equity Loans . . . . . . . . . . . . . . . . . 59
----------------------------------------------
Section 3.08 Custodian. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
---------
Section 3.09 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
-----------------
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE IV
ISSUANCE AND SALE OF CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 4.01 Issuance of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
------------------------
Section 4.02 Sale of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
--------------------
ARTICLE V
CERTIFICATES AND TRANSFER OF INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 5.01 Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
-----
Section 5.02 Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
-----
Section 5.03 Execution, Authentication and Delivery . . . . . . . . . . . . . . . . . . . . . 63
--------------------------------------
Section 5.04 Registration and Transfer of Certificates . . . . . . . . . . . . . . . . . . . . 64
-----------------------------------------
Section 5.05 Mutilated, Destroyed, Lost or Stolen Certificates . . . . . . . . . . . . . . . . 66
-------------------------------------------------
Section 5.06 Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
---------------------
Section 5.07 Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
------------
Section 5.08 Limitation on Transfer of Ownership Rights . . . . . . . . . . . . . . . . . . . 67
------------------------------------------
Section 5.09 Assignment of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
--------------------
ARTICLE VI
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 6.01 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
-------------
Section 6.02 Money for Distributions to be Held in Trust; Withholding . . . . . . . . . . . . 69
--------------------------------------------------------
Section 6.03 Protection of Trust Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
--------------------------
Section 6.04 Performance of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
--------------------------
Section 6.05 Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
------------------
Section 6.06 No Other Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
---------------
Section 6.07 Limitation of Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
-------------------
Section 6.08 Unconditional Rights of Owners to Receive Distributions . . . . . . . . . . . . . 73
-------------------------------------------------------
Section 6.09 Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . 73
------------------------------
Section 6.10 Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 73
----------------------------
Section 6.11 Control by Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
-----------------
Section 6.12 Indemnification by the Seller. . . . . . . . . . . . . . . . . . . . . . . . . . 74
-----------------------------
ARTICLE VII
ACCOUNTS, DISBURSEMENTS AND RELEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 7.01 Collection of Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
-------------------
Section 7.02 Establishment of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
-------------------------
Section 7.03 Flow of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
-------------
Section 7.04 Pre-Funding Account and Capitalized Interest Account . . . . . . . . . . . . . . 78
----------------------------------------------------
Section 7.05 Investment of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
----------------------
Section 7.06 Payment of Trust Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
-------------------------
Section 7.07 Eligible Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
--------------------
Section 7.08 Accounting and Directions by Trustee . . . . . . . . . . . . . . . . . . . . . . 82
------------------------------------
Section 7.09 Reports by Trustee to Owners. . . . . . . . . . . . . . . . . . . . . . . . . . . 83
----------------------------
Section 7.10 Reports by Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
------------------
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE VIII
SERVICING AND ADMINISTRATION
OF HOME EQUITY LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 8.01 Servicer and Sub-Servicers . . . . . . . . . . . . . . . . . . . . . . . . . . 86
--------------------------
Section 8.02 Collection of Certain Home Equity Loan Payments . . . . . . . . . . . . . . . . 87
-----------------------------------------------
Section 8.03 Sub-Servicing Agreements Between Servicer and Sub-Servicers . . . . . . . . . . 87
-----------------------------------------------------------
Section 8.04 Successor Sub-Servicers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
-----------------------
Section 8.05 Liability of Servicer; Indemnification . . . . . . . . . . . . . . . . . . . . 88
--------------------------------------
Section 8.06 No Contractual Relationship Between Sub-Servicer, Trustee
---------------------------------------------------------
or the Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
-------------
Section 8.07 Assumption or Termination of Sub-Servicing Agreement by Trustee . . . . . . . . 89
---------------------------------------------------------------
Section 8.08 Principal and Interest Account . . . . . . . . . . . . . . . . . . . . . . . . 89
------------------------------
Section 8.09 Delinquency Advances and Servicing Advances . . . . . . . . . . . . . . . . . . 91
-------------------------------------------
Section 8.10 Compensating Interest; Repurchase of Home Equity Loans . . . . . . . . . . . . 91
------------------------------------------------------
Section 8.11 Maintenance of Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
------------------------
Section 8.12 Due-on-Sale Clauses; Assumption and Substitution Agreements. . . . . . . . . . 93
-----------------------------------------------------------
Section 8.13 Realization Upon Defaulted Home Equity Loans; Workout
-----------------------------------------------------
of Home Equity Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
--------------------
Section 8.14 Trustee to Cooperate; Release of Files . . . . . . . . . . . . . . . . . . . . 95
--------------------------------------
Section 8.15 Servicing Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
----------------------
Section 8.16 Annual Statement as to Compliance . . . . . . . . . . . . . . . . . . . . . . . 96
---------------------------------
Section 8.17 Annual Independent Certified Public Accountants' Reports . . . . . . . . . . . 96
--------------------------------------------------------
Section 8.18 Access to Certain Documentation and Information Regarding
----------------------------------------------------------
the Home Equity Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
---------------------
Section 8.19 Assignment of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
-----------------------
Section 8.20 Removal of Servicer; Retention of Servicer; Resignation of Servicer . . . . . . 97
-------------------------------------------------------------------
Section 8.21 Inspections; Errors and Omissions Insurance . . . . . . . . . . . . . . . . . . 101
-------------------------------------------
Section 8.22 Additional Servicing Responsibilities for Second Mortgage Loans . . . . . . . . 101
---------------------------------------------------------------
ARTICLE IX
TERMINATION OF TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Section 9.01 Termination of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
--------------------
Section 9.02 Termination Upon Option of Owners of Class R 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 . . . . . . . . . . . . . . . . . . . . . . . . . 108
----------------------------
Section 10.03 Certain Rights of the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 109
-----------------------------
Section 10.04 Not Responsible for Recitals or Issuance of Certificates . . . . . . . . . . . 110
--------------------------------------------------------
Section 10.05 May Hold Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
---------------------
Section 10.06 Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
-------------------
Section 10.07 Compensation and Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . 111
------------------------------
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
Section 10.08 Corporate Trustee Required; Eligibility . . . . . . . . . . . . . . . . . . . . 111
---------------------------------------
Section 10.09 Resignation and Removal; Appointment of Successor . . . . . . . . . . . . . . . 112
-------------------------------------------------
Section 10.10 Acceptance of Appointment by Successor Trustee . . . . . . . . . . . . . . . . 113
----------------------------------------------
Section 10.11 Merger, Conversion, Consolidation or Succession to Business
-----------------------------------------------------------
of the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
--------------
Section 10.12 Reporting; Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
----------------------
Section 10.13 Liability of the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
------------------------
Section 10.14 Appointment of Co-Trustee or Separate Trustee . . . . . . . . . . . . . . . . . 115
---------------------------------------------
ARTICLE XI
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Section 11.01 Compliance Certificates and Opinions . . . . . . . . . . . . . . . . . . . . . 117
------------------------------------
Section 11.02 Form of Documents Delivered to the Trustee . . . . . . . . . . . . . . . . . . 117
------------------------------------------
Section 11.03 Acts of Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
--------------
Section 11.04 Notices, etc. to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
------------------------
Section 11.05 Notices and Reports to Owners; Waiver of Notices . . . . . . . . . . . . . . . 119
------------------------------------------------
Section 11.06 Rules by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
----------------
Section 11.07 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
----------------------
Section 11.08 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
------------
Section 11.09 Benefits of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
---------------------
Section 11.10 Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
--------------
Section 11.11 Governing Law; Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . 120
-----------------------------------------
Section 11.12 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
------------
Section 11.13 Usury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
-----
Section 11.14 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
---------
Section 11.15 Paying Agent; Appointment and Acceptance of Duties . . . . . . . . . . . . . . 122
--------------------------------------------------
Section 11.16 REMIC Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
------------
Section 11.17 Additional Limitation on Action and Imposition of Tax . . . . . . . . . . . . . 125
-----------------------------------------------------
Section 11.18 Appointment of Tax Matters Person . . . . . . . . . . . . . . . . . . . . . . . 125
---------------------------------
Section 11.19 The Certificate Insurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
-----------------------
Section 11.20 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
-------
Section 11.21 Rule 144A Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
---------------------
ARTICLE XII
CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER . . . . . . . . . . . . . . . . . . . . . . . 129
Section 12.01 Trust Estate and Accounts Held for Benefit of the Certificate Insurer . . . . . 129
---------------------------------------------------------------------
Section 12.02 Claims Upon the Policy; Policy Payments Account . . . . . . . . . . . . . . . . 129
-----------------------------------------------
Section 12.03 Effect of Payments by the Certificate Insurer; Subrogation . . . . . . . . . . 130
----------------------------------------------------------
Section 12.04 Notices to the Certificate Insurer . . . . . . . . . . . . . . . . . . . . . . 131
----------------------------------
Section 12.05 Third-Party Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
-----------------------
Section 12.06 Rights to the Certificate Insurer To Exercise Rights of Owners. . . . . . . . . 131
--------------------------------------------------------------
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C>
SCHEDULE I SCHEDULE OF HOME EQUITY LOANS
EXHIBIT A-1 FORM OF CLASS A-1 CERTIFICATE
EXHIBIT A-2 FORM OF CLASS A-2 CERTIFICATE
EXHIBIT A-3 FORM OF CLASS A-3 CERTIFICATE
EXHIBIT A-4 FORM OF CLASS A-4 CERTIFICATE
EXHIBIT A-5 FORM OF CLASS A-5 CERTIFICATE
EXHIBIT A-6 FORM OF CLASS A-6 CERTIFICATE
EXHIBIT A-7 FORM OF CLASS A-7 CERTIFICATE
EXHIBIT A-8 FORM OF CLASS A-8 CERTIFICATE
EXHIBIT A-9 FORM OF CLASS A-9IO CERTIFICATE
EXHIBIT B RESERVED
EXHIBIT C FORM OF CLASS R CERTIFICATE
EXHIBIT D FORM OF SUBSEQUENT TRANSFER AGREEMENT
EXHIBIT E FORM OF CERTIFICATE RE: HOME EQUITY LOANS
PREPAID IN FULL AFTER CUT-OFF DATE
EXHIBIT F-1 FORM OF TRUSTEE'S RECEIPT
EXHIBIT F-2 FORM OF CUSTODIAN'S RECEIPT
EXHIBIT G FORM OF POOL CERTIFICATION
EXHIBIT H FORM OF DELIVERY ORDER
EXHIBIT I FORM OF CLASS R TAX MATTERS TRANSFER CERTIFICATE
EXHIBIT J-1 FORM OF CERTIFICATE REGARDING TRANSFER (ACCREDITED INVESTOR)
EXHIBIT J-2 FORM OF CERTIFICATE REGARDING TRANSFER
(RULE 144A)
EXHIBIT K HOME EQUITY LOANS WITH DOCUMENT
EXCEPTIONS
</TABLE>
v
<PAGE> 7
POOLING AND SERVICING AGREEMENT, relating to IMC HOME EQUITY LOAN
TRUST 1997-7, dated as of November 1, 1997 by and among IMC SECURITIES, INC., a
Delaware corporation, in its capacity as Depositor (the "Depositor"), IMC
MORTGAGE COMPANY, a Florida corporation in its capacities as the Seller (in
such capacity, the "Seller") and as the Servicer (in such capacity, the
"Servicer") and THE CHASE MANHATTAN BANK, a New York banking corporation, in
its capacity as the trustee (the "Trustee").
WHEREAS, the Seller wishes to establish the Trust and provide for the
allocation and sale of the beneficial interests therein and the maintenance and
distribution of the Trust Estate;
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
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, The Chase Manhattan Bank, is willing to serve in the capacity
of Trustee hereunder; and
WHEREAS, Financial Security Assurance Inc. is intended to be a third
party beneficiary of this Agreement and is hereby recognized by the parties
hereto to be a third-party beneficiary of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Depositor, the Seller, the Servicer, and the
Trustee hereby agree as follows:
CONVEYANCE
To provide for the distribution of the principal of and/or interest on
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, the Seller hereby bargains, sells,
conveys, assigns and transfers to the Depositor and the Depositor hereby
bargains, sells, conveys, assigns and transfers to the Trustee, in trust,
without recourse and for the exclusive benefit of the Owners of the
Certificates, all of the Seller's right, title and interest in and to any and
all benefits accruing to the Seller from (a) the Initial Home Equity Loans
(other than any principal and interest payments due thereon on or prior to
November 1, 1997 whether or not received) listed in Schedule I to this
Agreement which the Seller is causing to be delivered to the Depositor and the
Depositor is causing to be delivered to the Trustee herewith and the Subsequent
Home Equity Loans (other than any principal and interest payments due thereon
on or prior to the related Subsequent Cut-Off Date whether or not received)
listed in Schedule I to any Subsequent Transfer Agreement, which the Seller
will cause to be delivered to the Depositor and the Depositor will cause to be
delivered to the Trustee (and all substitutions for such Home Equity Loans as
provided by Sections 3.03, 3.04 and 3.06), together with the related Home
Equity Loan documents and the Seller's interest in any Property, 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, the Upper-Tier Distribution Account, the Pre-Funding
Account and the Capitalized Interest 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) and (c) 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,
<PAGE> 8
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)-(c) above shall be collectively referred
to herein as the "Trust Estate"). In addition to the foregoing, the Seller
shall cause the Certificate Insurer to deliver the Certificate Insurance Policy
to the Trustee for the benefit of the Owners of the Class A Certificates.
The Trustee acknowledges such sale, accepts the Trust hereunder in
accordance with the provisions hereof and the Trustee 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 Class A Certificates (other than
the Class A-1 Certificates) and any Payment Date, the calendar month
immediately preceding the month in which such Payment Date occurs. A "calendar
month" shall be deemed to be 30 days. All calculations of interest on such
Certificates will be made on the basis of a 360-day year assumed to consist of
twelve 30-day months. With respect to the Class A-1 Certificates and any
Payment Date, the period commencing on the immediately preceding Payment Date
(or the Startup Day 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
Class A-1 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.
"Addition Notice": With respect to the transfer of Subsequent Home
Equity Loans to the Trust pursuant to Section 3.07 hereof, notice given not
less than five Business Days prior to the related Subsequent Transfer Date of
the Depositor's designation of Subsequent Home Equity Loans to be sold to the
Trust and the aggregate Loan Balance of such Subsequent Home Equity Loans.
"Affiliate": With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect
to any specified Person means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Aggregate Certificate Principal Balance": As of any date of
determination thereof, the sum of the then outstanding Certificate Principal
Balance of all Classes of the Class A Certificates.
"Agreement": This Pooling and Servicing Agreement, as it may be
amended from time to time, including the Exhibits and Schedules hereto.
2
<PAGE> 9
"Annual Loss Percentage (Rolling Twelve Month)": As of any date of
determination thereof, a fraction, expressed as a percentage, the numerator of
which is the aggregate of the Realized Losses as of the last day of the related
Remittance Period for each of the twelve immediately preceding Remittance
Periods and the denominator of which is the Maximum Collateral Amount.
"Appraised Value": The appraised value of any Property based upon the
appraisal 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.
"Authorized Officer": With respect to any Person, any officer of such
Person who is authorized to act for such Person in matters relating to this
Agreement, and whose action is binding upon, such Person; with respect to the
Depositor, the Seller 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 officer assigned to the Corporate
Trust Division (or any successor thereto), including any Vice President,
Assistant Vice President, Trust Officer, any Assistant Secretary, any trust
officer or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers and having
direct responsibility for the administration of this Agreement.
"Available Funds": As defined in Section 7.02(b) hereof.
"Available Funds Shortfall": As defined in Section 7.03(b)(ii)(A).
"Backup Servicer": The Trustee shall initially serve as Backup
Servicer hereunder in the event of the termination of the Servicer, subject to
the right of the Trustee to assign such duties to a party acceptable to the
Owners of the majority of the Percentage Interests of the Class A Certificates.
"Business Day": Any day other than a Saturday, Sunday or a day on
which commercial banking institutions in The City of New York, Tampa, Florida,
the city in which the Corporate Trust Office is located or the city in which
the Certificate Insurer is located are authorized or obligated by law or
executive order to be closed.
"Capitalized Interest Account": The Capitalized Interest Account
established in accordance with Section 7.02 hereof and maintained by the
Trustee. Funds on deposit in the Capitalized Interest Account shall be
invested in a trust deposit with the Trustee from the day following the Closing
Date until the end of the Funding Period.
"Capitalized Interest Requirement": With respect to each Payment Date
during the Funding Period and the Payment Date immediately after the Funding
Period, the excess, if any, of (x) the interest due on the Class A Certificates
on such Payment Date plus the Premium Amount (such amount expressed as a per
annum percentage of the aggregate Loan Balance of the Home Equity Loans) over
(y) the sum of (i) 30 days' interest on the aggregate Loan Balances of the Home
Equity Loans as of the close of business on the last day of the immediately
preceding Remittance Period calculated at a rate equal to 1/12 of the weighted
average of the Coupon Rates of the Home Equity Loans less the Servicing Fee and
the Trustee Fee as of such Payment Date and (ii) any Pre-Funding Account
Earnings to be transferred to the Capitalized Interest Account on such Payment
Date pursuant to Section 7.04(d) hereof.
3
<PAGE> 10
"Certificate": Any one of the Class A Certificates or the Class R
Certificates, each representing the interests and the rights described in this
Agreement.
"Certificate Account": The segregated certificate account established
in accordance with Section 7.02(a) hereof and maintained at the Corporate Trust
Office entitled "The Chase Manhattan Bank as Trustee on behalf of the Owners of
the IMC Home Equity Loan Trust 1997-7, Home Equity Loan Pass-Through
Certificates."
"Certificate Insurance Policy": The Certificate Guaranty Insurance
Policy (number 50641-N) dated November 25, 1997 issued by the Certificate
Insurer to the Trustee for the benefit of the Owners pursuant to which the
Certificate Insurer guarantees Insured Payments.
"Certificate Insurer": Financial Security Assurance Inc., a New York
insurance company and 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) the Certificate Insurer shall have (i) filed a
petition or commenced any case or proceeding under any provision or chapter of
the United States Bankruptcy Code, the New York State Insurance Law or any
other similar federal or state law relating to insolvency, bankruptcy,
rehabilitation, liquidation, or reorganization, (ii) made a general assignment
for the benefit of its creditors or (iii) had an order for relief entered
against it under the United States Bankruptcy Code, the New York State
Insurance Law or any other similar federal or state law relating to insolvency,
bankruptcy, rehabilitation, liquidation, or reorganization that is final and
nonappealable; or
(c) a court of competent jurisdiction, the New York
Department of Insurance or any other competent regulatory authority shall have
entered a final and nonappealable order, judgment or decree (i) appointing a
custodian, trustee, or agent, or receiver for the Certificate Insurer or for
all or any material portion of its property or (ii) authorizing the taking of
possession by a custodian, trustee, agent, or receiver of the Certificate
Insurer of all or any material portion of its property.
4
<PAGE> 11
"Certificate Principal Balance": As of the Startup Day as to each of
the following Classes of Class A Certificates, the Certificate Principal
Balances thereof, as follows:
<TABLE>
<S> <C>
Class A-1 Certificates - $255,140,000
Class A-2 Certificates - $112,820,000
Class A-3 Certificates - $120,840,000
Class A-4 Certificates - $ 44,310,000
Class A-5 Certificates - $ 71,100,000
Class A-6 Certificates - $ 61,770,000
Class A-7 Certificates - $ 54,775,000
Class A-8 Certificates - $ 54,245,000
</TABLE>
The Class A-9IO Certificates and the Class R Certificates do not have
a Certificate Principal Balance.
"Civil Relief Interest Shortfalls": With respect to any Remittance
Period, for any Home Equity Loans as to which there has been a reduction in the
amount of interest collectible thereon for the most recently ended Remittance
Period as a result of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended, the amount, if any, by which (i) interest collectible on such Home
Equity Loans during the most recently ended Remittance Period is less than (ii)
the sum of (a) one month's interest on the Loan Balance of such Home Equity
Loans at the rate equal to the Weighted Average Pass-Through Rate, plus (b) the
Servicing Fee and the Trust Fees and Expenses for such Remittance Period.
"Class": Any Class of the Class A Certificates or the Class R
Certificates.
"Class A Certificate": Any one of the Class A-1 Certificate, 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-8
Certificates or Class A-9IO Certificates.
"Class A Certificate Principal Balance": As of any time of
determination, the Aggregate Certificate Principal Balance as of the Startup
Day less the aggregate of all amounts actually distributed on the Class A
Certificates with respect to the Class A Principal Distribution Amount pursuant
to Section 7.03(b)(iv) hereof on all prior Payment Dates, provided, however,
that solely for purposes of determining the Certificate Insurer's rights, as
subrogee, the Class A Certificate Principal Balance shall not be reduced by any
principal amount paid to the Owner thereof from Insured Payments.
"Class A Distribution Amount": 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-8
Distribution Amount and the Class A-9IO Current Interest.
"Class A Principal Distribution Amount": With respect to the Class A
Certificates for any Payment Date, the lesser of:
(a) the Total Available Funds plus any Insured Payment minus the
Current Interest and Trust Fees and Expenses for such Payment Date; and
5
<PAGE> 12
(b) the excess, if any, of (i) the sum of (without duplication):
(A) the Preference Amount with respect to principal owed
to the Owners of the Class A Certificates that remains unpaid as of
such Payment Date,
(B) the principal portion of all scheduled monthly
payments on the Home Equity Loans due on or prior to the related Due
Date thereof, to the extent actually received by the Servicer during
the related Remittance Period and any Prepayments made by the
Mortgagors and actually received by the Servicer during the related
Remittance Period,
(C) the Loan Balance of each Home Equity Loan that was
repurchased by the Seller or purchased by the Servicer on or prior to
the related Monthly Remittance Date, to the extent such Loan Balance
is actually received by the Servicer during the related Remittance
Period,
(D) any Substitution Amounts delivered by the Seller on
the related Monthly Remittance Date in connection with a substitution
of a Home Equity Loan (to the extent such Substitution Amounts relate
to principal), to the extent such Substitution Amounts are actually
received by the Servicer on the related Remittance Date,
(E) 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 relate
to principal),
(F) the amount of any Overcollateralization Deficit for
such Payment Date,
(G) the principal portion of the proceeds received by the
Trustee from any termination of the Trust (to the extent such proceeds
related to principal),
(H) on the Payment Date immediately following the end of
the Funding Period, all amounts remaining on deposit in the
Pre-Funding Account to the extent not used to purchase Subsequent Home
Equity Loans during the Funding Period; and
(I) the amount of any Overcollateralization Increase
Amount for such Payment Date, to the extent of any Net Monthly Excess
Cashflow available for such purpose,
over
(ii) the amount of any Overcollateralization Reduction Amount for
such Payment Date.
"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 and each evidencing an interest
designated as a "regular interest" in the Upper-Tier REMIC created hereunder
for purposes of the REMIC Provisions.
"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 the aggregate of all amounts actually
6
<PAGE> 13
distributed thereon with respect to the Class A Principal Distribution Amount
pursuant to Section 7.03(b)(iv) hereof on all prior Payment Dates, provided,
however, that solely for the purposes of determining the Certificate Insurer's
rights, as subrogee, the Class A-1 Certificate Principal Balance shall not be
reduced by any principal amounts paid to the Owners thereof from Insured
Payments.
"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, an
amount equal to the 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; provided, however, such amount will be
reduced by the Class A-1 Certificates' pro rata share of any Civil Relief
Interest Shortfalls.
"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(b)(iv) hereof
for such Payment Date.
"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": For any Payment Date, the rate equal
to the lesser of (x) LIBOR plus 0.14% per annum and (y) the weighted average of
the Coupon Rates on the Home Equity Loans less 0.62375% 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 and each evidencing an interest
designated as a "regular interest" in the Upper-Tier REMIC created hereunder
for purposes of the REMIC provisions.
"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 the aggregate of all amounts actually distributed
thereon with respect to the Class A Principal Distribution Amount pursuant to
Section 7.03(b)(iv) hereof on all prior Payment Dates, provided, however, that
solely for the purposes of determining the Certificate Insurer's rights, as
subrogee, the Class A-2 Certificate Principal Balance shall not be reduced by
any principal amounts paid to the Owners thereof from Insured Payments.
"Class A-2 Certificate Termination Date": The Payment Date on which
the Class A-2 Certificate Principal Balance is reduced to zero.
7
<PAGE> 14
"Class A-2 Current Interest": With respect to any Payment Date, an
amount equal to 30 days' 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; provided, however, such amount
will be reduced by the Class A-2 Certificates' pro rata share of any Civil
Relief Interest Shortfalls.
"Class A-2 Distribution Amount": With respect to any Payment Date,
the sum of (x) 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 the Class A-2 Certificates pursuant to Section 7.03(b)(iv) hereof for
such Payment Date.
"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) interest on such amount during the
immediately preceding Accrual Period at the Class A-2 Pass-Through Rate.
"Class A-2 Pass-Through Rate": 6.53% 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 and each evidencing an interest
designated as a "regular interest" in the Upper-Tier REMIC created hereunder
for purposes of the REMIC provisions.
"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 the aggregate of all amounts actually distributed
thereon with respect to the Class A Principal Distribution Amount pursuant to
Section 7.03(b)(iv) hereof on all prior Payment Dates, provided, however, that
solely for the purposes of determining the Certificate Insurer's rights, as
subrogee, the Class A-3 Certificate Principal Balance shall not be reduced by
any principal amounts paid to the Owners thereof from Insured Payments.
"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, an
amount equal to 30 days' 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; provided, however, such amount
will be reduced by the Class A-3 Certificates' pro rata share of any Civil
Relief Interest Shortfalls.
"Class A-3 Distribution Amount": With respect to any Payment Date,
the sum of (x) 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(b)(iv) hereof
for such Payment Date.
8
<PAGE> 15
"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": 6.54% 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 and each evidencing an interest
designated as a "regular interest" in the Upper-Tier REMIC created hereunder
for purposes of the REMIC provisions.
"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 the aggregate of all amounts actually distributed
thereon with respect to the Class A Principal Distribution Amount pursuant to
Section 7.03(b)(iv) hereof on all prior Payment Dates, provided, however, that
solely for the purposes of determining the Certificate Insurer's rights, as
subrogee, the Class A-4 Certificate Principal Balance shall not be reduced by
any principal amounts paid to the Owners thereof from Insured Payments.
"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, an
amount equal to 30 days' 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; provided, however, such amount
will be reduced by the Class A-4 Certificates' pro rata share of any Civil
Relief Interest Shortfalls.
"Class A-4 Distribution Amount": With respect to any Payment Date,
the sum of (x) 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(b)(iv) hereof
for such Payment Date.
"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": 6.72% per annum.
"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
9
<PAGE> 16
Trustee, representing the right to distributions as set forth herein and each
evidencing an interest designated as a "regular interest" in the Upper-Tier
REMIC created hereunder for purposes of the REMIC provisions.
"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 the aggregate of all amounts actually distributed
thereon with respect to the Class A Principal Distribution Amount pursuant to
Section 7.03(b)(iv) hereof on all prior Payment Dates, provided, however, that
solely for the purposes of determining the Certificate Insurer's rights, as
subrogee, the Class A-5 Certificate Principal Balance shall not be reduced by
any principal amounts paid to the Owners thereof from Insured Payments.
"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, an
amount equal to 30 days' 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; provided, however, such amount
will be reduced by the Class A-5 Certificates' pro rata share of any Civil
Relief Interest Shortfalls.
"Class A-5 Distribution Amount": With respect to any Payment Date,
the sum of (x) 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(b)(iv) hereof
for such Payment Date.
"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": 6.76% per annum.
"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 and each evidencing an interest
designated as a "regular interest" in the Upper-Tier REMIC created hereunder
for purposes of the REMIC provisions.
"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 the aggregate of all amounts actually distributed
thereon with respect to the Class A Principal Distribution Amount pursuant to
Section 7.03(b)(iv) hereof on all prior Payment Dates, provided, however, that
solely for the purposes of determining the Certificate Insurer's rights, as
subrogee, the Class A-6 Certificate Principal Balance shall not be reduced by
any principal amounts paid to the Owners thereof from Insured Payments.
10
<PAGE> 17
"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, an
amount equal to 30 days' 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; provided, however, such amount
will be reduced by the Class A-6 Certificates' pro rata share of any Civil
Relief Interest Shortfalls.
"Class A-6 Distribution Amount": With respect to any Payment Date,
the sum of (x) 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(b)(iv) hereof
for such Payment Date.
"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": On any Payment Date the lesser of (x)
if such Payment Date is on or prior to the Clean-Up Call Date, 6.84% per annum
and if such Payment Date is after the Clean-Up Call Date, 7.34% per annum, and
(y) the weighted average of the Coupon Rates of the Home Equity Loans less the
sum of (A) 0.62375% per annum and (B) the Class A-9IO Interest Allocation Rate
for such Payment Date.
"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 and each evidencing an interest
designated as a "regular interest" in the Upper-Tier REMIC created hereunder
for purposes of the REMIC provisions.
"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 the aggregate of all amounts actually distributed
thereon with respect to the Class A Principal Distribution Amount pursuant to
Section 7.03(b)(iv) hereof on all prior Payment Dates, provided, however, that
solely for the purposes of determining the Certificate Insurer's rights, as
subrogee, the Class A-7 Certificate Principal Balance shall not be reduced by
any principal amounts paid to the Owners thereof from Insured Payments.
"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, an
amount equal to 30 days' 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;
11
<PAGE> 18
provided, however, such amount will be reduced by the Class A-7 Certificates'
pro rata share of any Civil Relief Interest Shortfalls.
"Class A-7 Distribution Amount": With respect to any Payment Date,
the sum of (x) 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(b)(iv) hereof for
such Payment Date.
"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": On any Payment Date, the lesser of (x)
if such Payment Date is on or prior to the Clean-Up Call Date, 7.02% per annum
and if such Payment Date is after the Clean-Up Call Date, 7.52% per annum and
(y) the weighted average of the Coupon Rates of the Home Equity Loans less the
sum of (A) 0.62375% per annum and (B) the Class A-9IO Interest Allocation Rate
for such Payment Date.
"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 and each evidencing an interest
designated as a "regular interest" in the Upper-Tier REMIC created hereunder
for purposes of the REMIC provisions.
"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 the aggregate of all amounts actually distributed
thereon with respect to the Class A Principal Distribution Amount pursuant to
Section 7.03(b)(iv) hereof on all prior Payment Dates, provided, however, that
solely for the purposes of determining the Certificate Insurer's rights, as
subrogee, the Class A-8 Certificate Principal Balance shall not be reduced by
any principal amounts paid to the Owners thereof from Insured Payments.
"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, an
amount equal to 30 days' 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; provided, however, such amount
will be reduced by the Class A-8 Certificates' pro rata share of any Civil
Relief Interest Shortfalls.
"Class A-8 Distribution Amount": With respect to any Payment Date,
the sum of (x) 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(b)(iv) for
such Payment Date; provided, however, that the Class A-8 Distribution Amount
shall in no event be greater than
12
<PAGE> 19
the sum of the Class A-8 Current Interest, the Class A-8 Interest Carry Forward
Amount, and the Class A Principal Distribution Amount for such Payment Date.
"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 Lockout Distribution Amount": For any Payment Date, the
product of (i) the applicable Class A-8 Lockout Percentage for such Payment
Date and (ii) the Class A-8 Lockout Pro Rata Distribution Amount for such
Payment Date; provided, that the Class A-8 Lockout Distribution Amount shall
not exceed the Class A-8 Certificate Principal Balance.
"Class A-8 Lockout Percentage": For each Payment Date, the percentage
set forth below:
<TABLE>
<CAPTION>
Class A-8
---------
Payment Dates Lockout Percentage
-------------- ------------------
<S> <C>
December 1997 - November 2000 0%
December 2000 - November 2002 45%
December 2002 - November 2003 80%
December 2003 - November 2004 100%
December 2004 and thereafter 300%
</TABLE>
"Class A-8 Lockout Pro Rata Distribution Amount": For any Payment
Date, an amount equal to the product of (x) a fraction, the numerator of which
is the Class A-8 Certificate Principal Balance immediately prior to such
Payment Date and the denominator of which is the aggregate Certificate
Principal Balance of the Class A Certificates immediately prior to such Payment
Date and (y) the Class A Principal Distribution Amount for such Payment Date.
"Class A-8 Pass-Through Rate": On any Payment Date, the lesser of (x)
if such Payment Date is on or prior to the Clean-Up Call Date, 6.65% per annum
and if such Payment Date is after the Clean-Up Call Date, 7.15% per annum, and
(y) the weighted average Coupon Rate of the Home Equity Loans less the sum of
(A) 0.6235% per annum and (B) the Class A-9IO Interest Allocation Rate for such
Payment Date.
"Class A-9IO Certificate": Any one of the Certificates designated on
the face thereof as a Class A-9IO 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 and each evidencing
an interest designated as a "regular interest" in the Upper-Tier REMIC created
hereunder for purposes of the REMIC provisions.
"Class A-9IO Certificate Termination Date": The Payment Date in
November 2000.
"Class A-9IO Current Interest": With respect to any Payment Date, the
amount of interest accrued on the Class A-9IO Notional Principal Amount
immediately prior to such Payment Date during the related Accrual Period at the
Class A-9IO Pass-Through Rate plus the Preference Amount owed to the Owners of
the Class A-9IO Certificates as it relates to interest previously paid on the
Class A-9IO Certificates;
13
<PAGE> 20
provided, however, such amount will be reduced by the Class A-9IO Certificates'
pro rata share of any Civil Relief Interest Shortfalls.
"Class A-9IO Interest Allocation Rate": For any Payment Date during
the Interest Only Period, (A) the product of (x) 5.00% per annum and (y) the
Class A-9IO Notional Principal Amount divided by (B) the Loan Balance of the
Home Equity Loans.
"Class A-9IO 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-9IO Current Interest as of the immediately preceding Payment Date
and (B) any unpaid Class A-9IO Interest Carry Forward Amount from all previous
Payment Dates exceeds (ii) the amount of the actual distribution made to Owners
of the Class A-9IO Certificates on such immediately preceding Payment Date and
(y) 30 days' interest on such amount at the Class A-9IO Pass-Through Rate.
"Class A-9IO Notional Principal Amount": For Payment Dates during the
Interest Only Period, the Lower-Tier Balance of the Lower-Tier Interest A-8 and
thereafter, zero.
"Class A-9IO Pass-Through Rate": 5.00% per annum.
"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, 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 the Upper-Tier REMIC created hereunder
for the purposes of the REMIC Provisions.
"Clean-Up Call Date": The first Monthly Remittance Date on which the
aggregate Loan Balance of the Home Equity Loans has declined to $77,500,000 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.
"Corporate Trust Office": The principal office of the Trustee at The
Chase Manhattan Bank, 450 W. 33rd Street, 15th Floor, New York, NY 10001,
Attention: Advanced Structured Products Group or the principal office of any
successor Trustee hereunder.
"Coupon Rate": The rate of interest borne by each Note from time to
time.
"Cram Down Loss": With respect to a Home Equity Loan, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an order
reducing the Loan Balance or the Coupon Rate of such Home Equity Loan, the
amount of the reduction to such Loan Balance or the amount of the reduction in
interest due on such Home Equity Loan. A "Cram Down Loss" shall be deemed to
have occurred on the date of issuance of such order.
"Cumulative Loss Percentage": As of any date of determination
thereof, the aggregate of Realized Losses since the Closing Date as a
percentage of the Maximum Collateral Amount; provided that Realized
14
<PAGE> 21
Losses resulting solely from Cram Down Losses shall not be included in the
definition of Realized Losses for purposes of calculating the Cumulative Loss
Percentage.
"Cumulative Loss Test": The Cumulative Loss Test for each period
indicated below is satisfied if the Cumulative Loss Percentage does not exceed
the percentage set out for such period below:
<TABLE>
<CAPTION>
Cumulative Loss
Period Percentage
------ ----------------
<S> <C>
December 2, 1997 - December 1, 1999 1.25%
December 2, 1999 - December 1, 2000 1.50%
December 2, 2000 - December 1, 2001 1.75%
December 2, 2001 - and thereafter 2.25%
</TABLE>
"Current Interest": With respect to any Payment Date, the sum of (a)
the Class A-1 Current Interest, (b) the Class A-2 Current Interest, (c) the
Class A-3 Current Interest, (d) the Class A-4 Current Interest, (e) the Class
A-5 Current Interest, (f) the Class A-6 Current Interest, (g) the Class A-7
Current Interest, (h) the Class A-8 Current Interest and (i) the Class A-9IO
Current Interest for such Payment Date.
"Custodial Agreement": The Custodial Agreement dated as of November
1, 1997 among the Custodian, the Trustee, the Depositor, the Seller and the
Servicer.
"Custodian": The BankBoston, N.A., as Custodian on behalf of the
Trustee pursuant to the Custodial Agreement.
"Cut-Off Date": As of the close of business on November 1, 1997.
"Daily Collections": As defined in Section 8.08(c) hereof.
"Delinquency Advance": As defined in Section 8.09(a) hereof.
"Delinquent": A Home Equity Loan is "Delinquent" if any payment due
thereon is not made by the Mortgagor by the close of business on the related
Due Date. 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": The delivery order in the form set forth as Exhibit
H hereto and delivered by the Depositor to the Trustee on the Startup Day
pursuant to Section 4.01 hereof.
"Depositor": IMC Securities, Inc., a Delaware corporation, or any
successor thereto.
"Depository": The Depository Trust Company, 55 Water Street, New
York, New York, 10004, and any successor Depository named herein.
15
<PAGE> 22
"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 "A" by Standard & Poor's and "A2" by Moody's,
(ii) a short-term debt rating of at least "A-1" by Standard & Poor's and (iii)
the Servicer shall provide the Trustee and the Certificate Insurer with a
statement, which the Trustee will send to the Owners, identifying the location
and account information of the Principal and Interest Account upon a change in
the location of such account.
"Determination Date": The 15th day of each month, or if such day is
not a Business Day, on the preceding Business Day, commencing in December 1997.
"Direct Participant" or "DTC Participant": Any broker-dealer, bank or
other financial institution for which the Depository holds Class A 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.
"Due Date": With respect to any Home Equity Loan, the date on which
the Monthly Payment with respect to such Home Equity Loan is required to be
paid pursuant to the related Note exclusive of any days of grace.
"Eligible Investments": Those investments so designated pursuant to
Section 7.07 hereof.
"Excess Overcollateralization Amount": With respect to any Payment
Date, the excess, if any, of (x) the Overcollateralization Amount that would
apply on such Payment Date after taking into account the payment of the Class A
Principal Distribution Amount on such Payment Date (except for any
distributions of Overcollateralization Reduction Amounts on such Payment Date),
over (y) the Specified Overcollateralization Amount 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.
16
<PAGE> 23
"File": The documents delivered to the Trustee pursuant to Section
3.05(b) hereof pertaining to a particular Home Equity Loan and any additional
documents required to be added to the File pursuant to this Agreement.
"Final Certification": As defined in Section 3.06(c) hereof.
"Final Determination": As defined in Section 9.03(a) hereof.
"Final Recovery Determination": With respect to any defaulted Home
Equity Loan or REO Property (other than a Home Equity Loan purchased by the
Seller, the Depositor or the Servicer), a determination made by the Servicer
that all Liquidation Proceeds which the Servicer, in its reasonable business
judgment expects to be finally recoverable in respect thereof have been so
recovered or that the Servicer believes in its reasonable business judgment the
cost of obtaining any additional recoveries therefrom would exceed the amount
of such recoveries. The Servicer shall maintain records of each Final Recovery
Determination.
"Final Scheduled Payment Date": For each Class of Certificates, as
set out in Section 2.08(k) hereof.
"First Mortgage Loan": A Home Equity Loan which constitutes a first
priority mortgage lien with respect to any Property.
"Funding Period": The period commencing on the Startup Day and ending
on the earliest to occur of (i) the date on which the amount on deposit in the
Pre-Funding Account (exclusive of any investment earnings) is less than
$100,000, (ii) the date on which the Servicer may be removed pursuant to
Section 8.20(a) hereof and (iii) February 15, 1998.
"Highest Lawful Rate": As defined in Section 11.13 hereof.
"Home Equity Loans": Such home equity loans (including Initial Home
Equity Loans and Subsequent Home Equity Loans) transferred and assigned to the
Trust pursuant to Section 3.05(a) and 3.07(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.
"Indemnification Agreement": The Indemnification Agreement dated as
of November 25, 1997, between the Depositor, the Seller, the Certificate
Insurer and the Underwriters.
"Indirect Participant": Any financial institution for whom any Direct
Participant holds an interest in an Class A Certificate.
17
<PAGE> 24
"Initial Home Equity Loans": The Home Equity Loans to be conveyed to
the Trust by the Depositor on the Startup Day.
"Insurance Agreement": The Insurance and Indemnity Agreement dated as
of November 1, 1997, among the Depositor, the Seller and the Certificate
Insurer, as such agreement may be amended from time to time.
"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": As to any Payment Date, the excess, if any, of
(i) the sum (without duplication) of (a) the Current Interest, (b) the
Overcollateralization Deficit, if any, and (c) the Preference Amount over (ii)
the Total Available Funds (after any deduction for Trust Fees and Expenses) and
after taking into account the portion of the Class A Principal Distribution
Amount to be actually distributed on such Payment Date without regard to any
Insured Payment to be made with respect to such Payment Date.
"Interest Only Period": The period from the Startup Day through and
including November 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, (ii) all Compensating Interest
paid by the Servicer on such Monthly Remittance Date, (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.
"Late Payment Rate": For any Monthly Remittance 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 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": With respect to any Accrual Period for the Class A-1
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.
18
<PAGE> 25
"LIBOR Determination Date": With respect to any Accrual Period for
the Class A-1 Certificates, the second London Business Day preceding the
commencement of such Accrual Period (or, in the case of the first Accrual
Period, the second London Business Day preceding the Startup Day).
"Liquidated Loan": A Home Equity Loan as to which a Final Recovery
Determination has been made.
"Liquidation Proceeds": With respect to any Liquidated Loan, all
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 actual outstanding principal balance thereof on the
Cut-Off Date with respect to the Initial Home Equity Loans or relevant
Subsequent Cut-Off Date with respect to the Subsequent Home Equity Loans
excluding payments of principal due on or prior to the Cut-Off Date or
Subsequent Cut-Off Date, as the case may be, whether or not received, 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 or prior to a Monthly Remittance Date pursuant to Section
3.03, 3.04, 3.06(b) or 8.10(b) 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 all accrued and unpaid interest on such Home
Equity Loan at the Coupon Rate to but not including the date of such purchase
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 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.
"Lower-Tier A-1 Monthly Interest": With respect to any Payment Date,
the amount of interest accrued on the Lower-Tier Balance of the Lower-Tier
Interest A-1 immediately prior to such Payment Date during the related Accrual
Period at the Lower-Tier A-1 Pass-Through Rate.
19
<PAGE> 26
"Lower-Tier A-1 Pass-Through Rate": For any Payment Date, the Net
Weighted Average Coupon Rate.
"Lower-Tier A-2 Monthly Interest": With respect to any Payment Date,
the amount of interest accrued on the Lower-Tier Balance of the Lower-Tier
Interest A-2 immediately prior to such Payment Date during the related Accrual
Period at the Lower-Tier A-2 Pass-Through Rate.
"Lower-Tier A-2 Pass-Through Rate": For any Payment Date, the Net
Weighted Average Coupon Rate.
"Lower-Tier A-3 Monthly Interest": With respect to any Payment Date,
the amount of interest accrued on the Lower-Tier Balance of the Lower-Tier
Interest A-3 immediately prior to such Payment Date during the related Accrual
Period at the Lower-Tier A-3 Pass-Through Rate.
"Lower-Tier A-3 Pass-Through Rate": For any Payment Date, the Net
Weighted Average Coupon Rate.
"Lower-Tier A-4 Monthly Interest": With respect to any Payment Date,
the amount of interest accrued on the Lower-Tier Balance of the Lower-Tier
Interest A-4 immediately prior to such Payment Date during the related Accrual
Period at the Lower-Tier A-4 Pass-Through Rate.
"Lower-Tier A-4 Pass-Through Rate": For any Payment Date, the Net
Weighted Average Coupon Rate.
"Lower-Tier A-5 Monthly Interest": With respect to any Payment Date,
the amount of interest accrued on the Lower-Tier Balance of the Lower-Tier
Interest A-5 immediately prior to such Payment Date during the related Accrual
Period at the Lower-Tier A-5 Pass-Through Rate.
"Lower-Tier A-5 Pass-Through Rate": For any Payment Date, the Net
Weighted Average Coupon Rate.
"Lower-Tier A-6 Monthly Interest": With respect to any Payment Date,
the amount of interest accrued on the Lower-Tier Balance of the Lower-Tier
Interest A-6 immediately prior to such Payment Date during the related Accrual
Period at the Lower-Tier A-6 Pass-Through Rate.
"Lower-Tier A-6 Pass-Through Rate": For any Payment Date, the Net
Weighted Average Coupon Rate.
"Lower-Tier A-7 Monthly Interest": With respect to any Payment Date,
the amount of interest accrued on the Lower-Tier Balance of the Lower-Tier
Interest A-7 immediately prior to such Payment Date during the related Accrual
Period at the Lower-Tier A-7 Pass-Through Rate.
"Lower-Tier A-7 Pass-Through Rate": For any Payment Date, the Net
Weighted Average Coupon Rate.
20
<PAGE> 27
"Lower-Tier A-8 Monthly Interest": With respect to any Payment Date,
the amount of interest accrued on the Lower-Tier Balance of the Lower-Tier
Interest A-8 immediately prior to such Payment Date during the related Accrual
Period at the Lower-Tier A-8 Pass-Through Rate.
"Lower-Tier A-8 Pass-Through Rate": For any Payment Date, the Net
Weighted Average Coupon Rate.
"Lower-Tier Balance": As to each of the Lower-Tier Interests and any
Payment Date, the Initial Lower-Tier Balance as set forth in Section 2.08(a)
minus all amounts distributed as principal of such Class on previous Payment
Dates included in the Lower-Tier Distribution Amount pursuant to Section
7.03(a)(ii).
"Lower-Tier Distribution Amount": With respect to any Payment Date,
the sum of the Lower-Tier A-1 Monthly Interest, the Lower-Tier A-2 Monthly
Interest, the Lower-Tier A-3 Monthly Interest, the Lower-Tier A-4 Monthly
Interest, the Lower-Tier A-5 Monthly Interest, the Lower-Tier A-6 Monthly
Interest, the Lower-Tier A-7 Monthly Interest, the Lower-Tier A-8 Monthly
Interest and the Class A Principal Distribution Amount. Such Class A Principal
Distribution Amount is allocated as follows: (a) to the Lower-Tier Interest
A-8 an amount equal to the Class A-8 Lockout Distribution Amount and (b) to the
Lower-Tier Interest A-1 an amount equal to the amount necessary to reduce the
Class A-1 Certificate Principal Balance to the Targeted Amount for such Payment
Date and then; as a distribution on the Lower-Tier Interest A-2 until the
Lower-Tier Interest A-2 Termination Date, the Class A-2 Distribution Amount; as
a distribution on the Lower-Tier Interest A-3 until the Lower-Tier Interest A-3
Termination Date, the Class A-3 Distribution Amount; as a distribution on the
Lower-Tier Interest A-4 until the Lower-Tier Interest A-4 Termination Date, the
Class A-4 Distribution Amount; as a distribution on the Lower-Tier Interest A-5
until the Lower-Tier Interest A-5 Termination Date, the Class A-5 Distribution
Amount; as a distribution on the Lower-Tier Interest A-6 until the Lower-Tier
Interest A-6 Termination Date, the Class A-6 Distribution Amount; and, as a
distribution on the Lower-Tier Interest A-7 until the Lower-Tier Interest A-7
Termination Date, the Class A-7 Distribution Amount; as a distribution on the
Lower-Tier Interest A-8 until the Lower-Tier Interest A-8 Termination Date.
"Lower-Tier Interest A-1": The interest of that name established
pursuant to Section 2.08(a) hereof.
"Lower-Tier Interest A-2": The interest of that name established
pursuant to Section 2.08(a) hereof.
"Lower-Tier Interest A-3": The interest of that name established
pursuant to Section 2.08(a) hereof.
"Lower-Tier Interest A-4": The interest of that name established
pursuant to Section 2.08(a) hereof.
"Lower-Tier Interest A-5": The interest of that name established
pursuant to Section 2.08(a) hereof.
"Lower-Tier Interest A-6": The interest of that name established
pursuant to Section 2.08(a) hereof.
"Lower-Tier Interest A-7": The interest of that name established
pursuant to Section 2.08(a) hereof.
"Lower-Tier Interest A-8": The interest of that name established
pursuant to Section 2.08(a) hereof.
21
<PAGE> 28
"Lower-Tier Interest A-1 Termination Date": The Payment Date on which
the Lower-Tier Balance of Lower-Tier Interest A-1 is reduced to zero through
the distribution made in respect of Lower-Tier Interest A-1 on such Payment
Date.
"Lower-Tier Interest A-2 Termination Date": The Payment Date on which
the Lower-Tier Balance of Lower-Tier Interest A-2 is reduced to zero through
the distribution made in respect of Lower-Tier Interest A-2 on such Payment
Date.
"Lower-Tier Interest A-3 Termination Date": The Payment Date on which
the Lower-Tier Balance of Lower-Tier Interest A-3 is reduced to zero through
the distribution made in respect of Lower-Tier Interest A-3 on such Payment
Date.
"Lower-Tier Interest A-4 Termination Date": The Payment Date on which
the Lower-Tier Balance of Lower-Tier Interest A-4 is reduced to zero through
the distribution made in respect of Lower-Tier Interest A-4 on such Payment
Date.
"Lower-Tier Interest A-5 Termination Date": The Payment Date on which
the Lower-Tier Balance of Lower-Tier Interest A-5 is reduced to zero through
the distribution made in respect of Lower-Tier Interest A-5 on such Payment
Date.
"Lower-Tier Interest A-6 Termination Date": The Payment Date on which
the Lower-Tier Balance of Lower-Tier Interest A-6 is reduced to zero through
the distribution made in respect of Lower-Tier Interest A-6 on such Payment
Date.
"Lower-Tier Interest A-7 Termination Date": The Payment Date on which
the Lower-Tier Balance of Lower-Tier Interest A-7 is reduced to zero through
the distribution made in respect of Lower-Tier Interest A-7 on such Payment
Date.
"Lower-Tier Interest A-8 Termination Date": The Payment Date on which
the Lower-Tier Balance of Lower-Tier Interest A-8 is reduced to zero through
the distribution made in respect of Lower-Tier Interest A-8 on such Payment
Date.
"Lower-Tier Pass-Through Rate": As to each of the respective
Lower-Tier Interests, the applicable "Lower-Tier Pass-Through Rate" set forth
in Section 2.08 hereof.
"Lower-Tier REMIC": The segregated pool of assets referred to as the
Trust Estate, other than the Upper-Tier Distribution Account which is an asset
of the Upper-Tier REMIC.
"Lower-Tier REMIC Residual Class": With respect to the Lower-Tier
REMIC, the interest therein designated as the "residual interest" therein for
purposes of the REMIC Provisions. The Lower-Tier REMIC Residual Class shall be
uncertificated, and shall be issuable only in Percentage Interests of 99.999%
to IMC Mortgage Company and 0.001% to The Chase Manhattan Bank, as Tax Matters
Person. Such interests shall be non-transferrable, except that The Chase
Manhattan Bank may assign such interest to another person who accepts such
assignment and the designation as Tax Matters Person pursuant to Section 11.18
hereof. The Lower-Tier REMIC Residual Class is entitled only to any amounts at
any time held in the Certificate Account and not required to be paid to the
Upper-Tier REMIC, which is expected to be zero at all times during the term of
this Agreement.
22
<PAGE> 29
"Maximum Collateral Amount": $775,000,000.
"Monthly Payment": With respect to any Home Equity Loan and any
Remittance Period, the payment of principal, if any, and interest due on the
Due Date in such Remittance Period pursuant to the related Note.
"Monthly Remittance Amount": As of any Monthly Remittance Date, the
sum of (i) the Interest Remittance Amount for such Monthly Remittance Date and
(ii) the Principal Remittance Amount for such Monthly Remittance Date.
"Monthly Remittance Date": The 18th day of each month, or if such day
is not a Business Day, on the preceding Business Day, commencing in December
1997.
"Monthly Reporting Date": The Determination Date.
"Moody's": Moody's Investors Service Inc. or any successor thereto.
"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.
"Mortgage Portfolio Performance Test": The Mortgage Portfolio
Performance Test is satisfied for any date of determination thereof if (x) the
60+ Delinquency Percentage (Rolling Six Month) is less than 13.5%, (y) the O/C
Loss Test is satisfied and (z) the Annual Loss Percentage (Rolling Twelve
Month) for the twelve month period immediately preceding the date of
determination thereof is not greater than or equal to 1.25%.
"Mortgagor": The obligor on a Note.
"Net Liquidation Proceeds": As to any Liquidated Loan, Liquidation
Proceeds net of expenses incurred by the Servicer (including unreimbursed
Servicing Advances) in connection with the liquidation of any defaulted Home
Equity Loan 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.
"Net Monthly Excess Cashflow": As defined in Section 7.03(b)(iii)
hereof.
" Net Weighted Average Coupon Rate": With respect to any Payment
Date, the weighted average of the Coupon Rates of the Home Equity Loans
(weighted by the Loan Balances of the Home Equity Loans), less the sum of (A)
0.50% per annum and (B) the Trust Fees and Expenses.
"Note": The note or other evidence of indebtedness evidencing the
indebtedness of a Mortgagor under a Home Equity Loan.
"O/C Loss Test": The O/C Loss Test for any period set out below is
satisfied if the Cumulative Loss Percentage does not exceed the percentage set
out for such period below:
23
<PAGE> 30
<TABLE>
<CAPTION>
Cumulative Loss
Period Percentage
------ ---------------
<S> <C>
December 2, 1997 - December 1, 1998 0.75%
December 2, 1998 - December 1, 1999 1.25%
December 2, 1999 - December 1, 2000 1.90%
December 2, 2000 - December 1, 2001 2.40%
December 2, 2001 - and thereafter 3.00%
</TABLE>
"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 Custodial Agreement, the Indemnification Agreement, the
Certificate Insurance Policy, the Insurance Agreement, any Subsequent Transfer
Agreement and the Certificates.
"Original Aggregate Loan Balance": The aggregate Loan Balances of all
Initial Home Equity Loans as of the Cut-Off Date, which is $582,740,900.
Original Capitalized Interest Amount: $2,094,043.90.
"Original Pre-Funded Amount": The amount deposited in the Pre-Funding
Account on the Startup Day from the proceeds of the sale of the Certificates,
which amount is equal to $192,259,100.
"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 excess,
if any, of (x) the sum of (i) the aggregate Loan Balances of the Home Equity
Loans as of the close of business on the last day of
24
<PAGE> 31
the immediately proceeding Remittance Period and (ii) any amount on deposit in
the Pre-Funding Account at such time exclusive of Pre-Funding Account Earnings
over (y) the Aggregate Certificate Principal Balance for such Payment Date
(after taking into account the payment of the Class A Principal Distribution
Amount thereon (except for any Overcollateralization Deficit and
Overcollateralization Increase Amount) on such Payment Date).
"Overcollateralization Deficiency Amount": With respect to any
Payment Date, the excess, if any, of (i) the Specified Overcollateralization
Amount applicable to such Payment Date over (ii) the Overcollateralization
Amount applicable to such Payment Date prior to taking into account the payment
of any Overcollateralization Increase Amounts on such Payment Date.
"Overcollateralization Deficit": With respect to any Payment Date,
the amount, if any, by which (x) the Aggregate Certificate Principal Balance
after taking into account the payment of the Class A Distribution Amount on
such Payment Date (without regard to any Insured Payment to be made on such
Payment Date and except for any Overcollateralization Deficit), exceeds (y) the
sum of (i) the aggregate Loan Balances of the Home Equity Loans as of the close
of business on the last day of the related Remittance Period and (ii) any
amount on deposit in the Pre-Funding Account at such time exclusive of the
Pre-Funding Account Earnings.
"Overcollateralization Increase Amount": With respect to any Payment
Date, the lesser of (i) the Overcollateralization Deficiency Amount as of such
Payment Date (after taking into account the payment of the Class A Principal
Distribution Amount on such Payment Date (except for any Overcollateralization
Increase Amount)) and (ii) the aggregate amount of Net Monthly Excess Cashflow
to be applied pursuant to Section 7.03(b)(iii)(A) on such Payment Date.
"Overcollateralization Reduction Amount": With respect to any Payment
Date, an amount equal to the lesser of (x) the Excess Overcollateralization
Amount for such Payment Date and (y) the Principal Remittance Amount for the
related Remittance Period.
"Overfunded Interest Amount": With respect to each Subsequent
Transfer Date, the sum, if any, of the excess of (a) interest that would accrue
from the Subsequent Cut-Off Date to February 15, 1998 on the aggregate Loan
Balances of the Subsequent Home Equity Loans acquired by the Trust on such
Subsequent Transfer Date, calculated at a rate equal to the sum of (I) the
Weighted Average Pass-Through Rate, (II) the Class A-9IO Current Interest
(expressed as a per annum rate on such Loan Balances), (III) the Trustee Fee
and (IV) the rate at which the Premium Amount is determined over (b) interest
that would accrue from the Subsequent Cut-Off Date to February 15, 1998 on the
aggregate Loan Balances of the Subsequent Home Equity Loans acquired by the
Trust on such Subsequent Transfer Date, calculated at the rate at which
Pre-Funded Amounts are invested as of such Subsequent Transfer Date.
"Owner": The Person in whose name a Certificate is registered in the
Register, to the extent described in Section 5.06 hereof.
"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.
25
<PAGE> 32
"Payment Date": Any date on which the Trustee is required to make
distributions to the Owners, which shall be the 20th 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. The first Payment Date will be December
22, 1997.
"Percentage Interest": With respect to a Certificate of any Class of
Class A Certificates (other than the Class A-9IO Certificates), a fraction,
expressed as a decimal, 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 of such Class. With respect to a Certificate of the Class A-9IO
Certificates a fraction, expressed as a percentage, the numerator of which is
the initial Class A-9IO Notional Principal Amount represented by such Class
A-9IO Certificate and the denominator of which is the aggregate initial Class
A-9IO Notional Principal Amount represented by all of the Class A-9IO
Certificates. With respect to the Class R Certificates, 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, limited partnership,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Policy Payments Account": The policy payments account maintained by
the Trustee pursuant to Section 12.02(b) hereof.
"Preference Amount": With respect to the Class A Certificates means
any amounts of interest and principal included in previous distributions of the
Class A Distribution Amount to the Owners of such Certificates which are
recoverable and sought to be recovered as a voidable preference by a trustee in
bankruptcy pursuant to the United States Bankruptcy Code (11 U.S.C.) as amended
from time to time in accordance with a final, nonappealable order of a court
having competent jurisdiction. Such amount will be paid in accordance with the
Certificate Insurance Policy.
"Preference Claim": As defined in Section 7.02(d) hereof.
"Pre-Funded Amount": With respect to any Determination Date, the
amount remaining on deposit in the Pre-Funding Account.
"Pre-Funding Account": The Pre-Funding Account established in
accordance with Section 7.02 hereof and maintained by the Trustee.
"Pre-Funding Account Earnings": With respect to the December 22, 1997
Payment Date, the actual investment earnings earned during the period from the
Closing Date through December 15, 1997 (inclusive) on the portion of the
Pre-Funded Amount remaining during such period as calculated by the Trustee
pursuant to Section 2.07(d) hereof; with respect to the January 20, 1997
Payment Date, the actual investment earnings earned during the period from
December 15, 1997 through January 15, 1998 (inclusive) on the portion of the
Pre-Funded Amount, remaining during such period as calculated by the Trustee
pursuant to Section 2.07(d) hereof; and, with respect to the February 20, 1998
Payment Date, the actual investment earnings earned during the period from
December 16, 1997 through February 15, 1998
26
<PAGE> 33
(inclusive) on the portion of the Pre-Funded Amount remaining during such
period as calculated by the Trustee pursuant to Section 2.07(d) hereof.
"Premium Amount": The amount payable monthly to the Certificate
Insurer on each Payment Date in an amount equal to 0.12% per annum on the
Aggregate Certificate Principal Balance as of the related Determination Date.
"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 and which is not accompanied by an amount of interest
representing the full amount of scheduled interest due on any Due Date in any
month or months subsequent to the month of prepayment, 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) or 8.10(b) 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 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 such Home Equity Loan that was purchased
from the Trustee on or prior to such Monthly Remittance Date, to the extent
such Loan Balance was actually deposited in the Principal and Interest Account,
(iii) any Substitution Amounts relating to principal delivered by the Seller in
connection with a substitution of a Home Equity Loan, to the extent such
Substitution Amounts were actually deposited in the Principal and Interest
Account on or prior to such Monthly Remittance Date, (iv) the principal portion
of all Net Liquidation Proceeds actually collected by the Servicer with respect
to such Home Equity Loans during the related Remittance Period (to the extent
such Net Liquidation Proceeds related to principal) and (v) the amount of
investment losses required to be deposited pursuant to Sections 7.05(e) and
8.08(b).
"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 securing a Home Equity Loan.
"Prospectus": The Depositor's Prospectus dated June 6, 1997
constituting part of the Registration Statement.
"Prospectus Supplement": The IMC Home Equity Loan Trust 1997-7
Prospectus Supplement dated November 20, 1997 to the Prospectus.
"Purchase Option Period": As defined in Section 9.03(a) hereof.
27
<PAGE> 34
"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 and 3.06(b) hereof, which (i) has a
Coupon Rate at least equal to the Coupon Rate of the Home Equity Loan being
replaced; provided, however, that if the Home Equity Loan being replaced is an
Underwater Loan, such Qualified Replacement Mortgage will not have a Coupon
Rate less than 7.375%, (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 Home
Equity Loan being replaced, (iii) shall mature no later than November 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 the Seller's credit underwriting guidelines set forth in the
Seller's underwriting manual) as the Home Equity Loan which such Qualified
Replacement Mortgage replaces, (vi) shall be a First Mortgage Loan if the Home
Equity Loan which such Qualified Replacement Mortgage replaces was a First
Mortgage Loan, (vii) 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, (viii) 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) and (ix) satisfies the
criteria set forth from time to time in the definition thereof at Section
860G(a)(4) of the Code (or any successor statute thereto) and applicable to the
Trust. In the event that one or more home equity loans are proposed to be
substituted for one or more Home Equity Loans, the foregoing tests may be met
on a weighted average basis or other aggregate basis acceptable to the Trustee,
except that the requirements of clauses (i), (iv) and (ix) hereof must be
satisfied as to each Qualified Replacement Mortgage.
"Rating Agencies": Collectively, Moody's and Standard & Poor's or any
successors thereto.
"Realized Loss": As to any Liquidated Loan (or, in the case of a Cram
Down Loss a Home Equity Loan that is not a Liquidated Loan), the amount (not
less than zero), if any, by which (A) the sum of (x) the Loan Balance thereof
as of the date of liquidation, (y) the amount of accrued but unpaid interest
thereon (to the extent that there are no outstanding advances for such interest
by the Servicer) and (z) the amount of any Cram Down Loss with respect thereto
is in excess of (B) the Net Liquidation Proceeds realized thereon applied in
reduction of such Loan Balance.
"Record Date": With respect to the Class A Certificates (other than
the Class A-1 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 Class A-1 Certificates and any Payment Date, 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 which are engaged in transactions in Eurodollar
deposits in the international Eurocurrency market (i) with an established place
of business in London, (ii)
28
<PAGE> 35
not controlling, under the control of or under common control with the 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.
"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
333-24455), including all amendments thereto and including the Prospectus
relating to the Class A Certificates.
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)(ii) hereof plus (ii) interest accrued on each such Insured Payment not
previously repaid calculated at the Late Payment Rate and (y)(i) any amounts
then due and owing to the Certificate Insurer under the Insurance Agreement
(including, without limitation, any unpaid Premium Amount relating to such
Payment Date or an earlier Payment Date) plus (ii) interest on such amounts at
the Late Payment Rate. The Certificate Insurer shall notify the Trustee, the
Depositor and the Seller of the amount of any Reimbursement Amount.
"REMIC": A "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code.
"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": With respect to each Monthly Remittance Date,
the period commencing the second day of the calendar month immediately
preceding such Monthly Remittance Date and ending the first day of the calendar
month in which such 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.
"Residual Net Monthly Excess Cashflow": With respect to any Payment
Date, the aggregate Net Monthly Excess Cashflow, if any, remaining after the
making of all applications, transfers and disbursements described in Sections
7.03(b)(i), (ii), (iii) and (iv) hereof.
29
<PAGE> 36
"Representation Letter": Letters to, or agreements with, the
Depository to effectuate a book entry system with respect to the Class A
Certificates registered in the Register under the nominee name of the
Depository.
"Schedule of Home Equity Loans": The schedules of Home Equity Loans
with respect to the Initial Home Equity Loans listing each Initial Home Equity
Loan to be conveyed on the Startup Day and with respect to Subsequent Home
Equity Loans listing each Subsequent Home Equity Loan conveyed to the Trust as
of each Subsequent Transfer Date. Such Schedules of Home Equity Loans shall
identify each Home Equity Loan by the Servicer's loan number, borrower's name
and address (including the state and zip code) of the Property and shall set
forth as to each Home Equity Loan the lien status thereof, the Loan-to-Value
Ratio and the Loan Balance as of the Cut-Off Date, the Coupon Rate thereof, the
original Loan Balance thereof, the current scheduled monthly payment of
principal and interest and the maturity date of the related Note, the property
type, occupancy status, Appraised Value and the original term-to-maturity
thereof, whether or not such Home Equity Loan (including related Note) has been
modified and a code as to whether the loan is a date of payment loan.
"Scheduled Principal Payment": As of any date of calculation, with
respect to a Home Equity Loan, the then stated scheduled monthly installment of
principal 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), without taking into account any Prepayment
made on such Home Equity Loan during the then-current Remittance Period.
"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.
"Seller": IMC Mortgage Company, a Florida corporation.
"Senior Lien": With respect to any Second Mortgage Loan, the home
equity loan relating to the corresponding Property having a first priority
lien.
"Servicer": IMC Mortgage Company, a Florida 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 home equity loans.
"Servicer Loss Test": The Servicer Loss Test for any period set out
below is satisfied, if the Cumulative Loss Percentage does not exceed the
percentage set out for such period below:
<TABLE>
<CAPTION>
Cumulative Loss
Period Percentage
------ ---------------
<S> <C>
December 2, 1997 - December 1, 1998 1.00%
December 2, 1998 - December 1, 1999 1.75%
</TABLE>
30
<PAGE> 37
<TABLE>
<S> <C>
December 2, 1999 - December 1, 2000 2.50%
December 2, 2000 - December 1, 2001 3.25%
December 2, 2001 - and thereafter 4.00%
</TABLE>
"Servicer Termination Event": As defined in Section 8.20(a) hereof.
"Servicer Termination Test": The Servicer Termination Test is
satisfied for any date of determination thereof, if (x) the 60+ Delinquency
Percentage (Rolling Six Month) is less than 15.75%, (y) the Servicer Loss Test
is satisfied and (z) the Annual Loss Percentage (Rolling Twelve Month) for the
twelve month period immediately preceding the date of determination thereof is
not greater than 1.75%.
"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
one month's interest at 0.50% per annum of the then outstanding principal
balance of such Home Equity Loan as of the first day of each Remittance Period
payable on a monthly basis; provided, however, that with respect to any
Underwater Loan, as of any Payment Date (i) the sum of (x) the Weighted Average
Pass-Through Rate (y) the Class A-9IO Current Interest (expressed as a per anum
percentage) and (z) 0.62375% exceeds (ii) the weighted average Coupon Rate of
the Underwater Loans for the related Remittance Period, then the Servicing Fee
for such Payment Date shall be reduced by an amount equal to the product of (a)
one-twelfth of such excess (not to exceed 30 basis points on a per annum basis)
and (b) the aggregate Loan Balance of the Underwater Loans as of the opening of
business of the first day of such Remittance Period divided by the aggregate
Loan Balance of the Home Equity Loans; provided, however, that if a successor
Servicer is appointed pursuant to Section 8.20 hereof, the Servicing Fee shall
be the amount as agreed upon by the Certificate Insurer, the Trustee, the
successor Servicer and the Owners of a majority of the Percentage Interests of
the Class R Certificates, such amount not to exceed 0.50% per annum.
"60-Day Delinquent Loan": With respect to any date of determination
thereof, means (without duplication) all REO Properties, Home Equity Loans in
foreclosure and each Home Equity Loan whether or not liquidated, with respect
to which any portion of a Monthly Payment is, as of the last day of the prior
Remittance Period, two months (calculated from Due Date with respect to such
Home Equity Loan to Due Date) or more past due (without giving effect to any
grace period).
"60+ Delinquency Percentage (Rolling Six Month)": With respect to any
date of determination thereof, the average of the percentage equivalents of the
fractions determined for each of the six immediately preceding Remittance
Periods the numerator of each of which is equal to the aggregate Loan Balance
of 60-Day Delinquent Loans as of the end of such Remittance Period and the
denominator of which is the Loan Balance of all of the Home Equity Loans as of
the end of such Remittance Period.
"Specified Overcollateralization Amount": With respect to a Payment
Date (x) prior to the Stepdown Date, the amount which is equal to 2.0% of the
Maximum Collateral Amount and (y) after the Stepdown Date (i) if the Stepdown
Requirement is satisfied, the lesser of (A) the greater of (i) an amount equal
to 4.0% of the then outstanding aggregate Loan Balance of the Home Equity Loans
and (ii) 0.50% of the Maximum Collateral Amount and (B) an amount equal to 2.0%
of the Maximum Collateral Amount or (ii) if the Stepdown Requirement is not
satisfied, the amount which is equal to 2.0% of the Maximum Collateral Amount;
provided, however, that if on any Payment Date the Mortgage Portfolio
Performance
31
<PAGE> 38
Test is not satisfied, then the Specified Overcollateralization Amount will be
unlimited during the period that such Mortgage Portfolio Performance Test is
not satisfied.
"Standard & Poor's": Standard & Poor's Rating Services, a division of
the McGraw-Hill Companies.
"Startup Day": November 26, 1997.
"Stepdown Date": The Determination Date in December 1999.
"Stepdown Requirement": The Stepdown Requirement is satisfied on any
date of determination thereof if, as of such date of determination, (x) the 60+
Delinquency Percentage (Rolling Six Month) is less than 11.25%, (y) the
Cumulative Loss Test is satisfied and (z) the Annual Loss Percentage (Rolling
Twelve Month) for the twelve month period immediately preceding the date of
determination thereof is not greater than or equal to 0.75%.
"Subsequent Cut-Off Date": The beginning of business on the date
specified in a Subsequent Transfer Agreement with respect to those Subsequent
Home Equity Loans which are transferred and assigned to the Trust pursuant to
the related Subsequent Transfer Agreement.
"Subsequent Home Equity Loans": The Home Equity Loans sold to the
Trust pursuant to Section 3.07 hereof, which shall be listed on the Schedule of
Home Equity Loans attached to a Subsequent Transfer Agreement.
"Subsequent Transfer Agreement": Each Subsequent Transfer Agreement
dated as of a Subsequent Transfer Date executed by the Trustee, the Depositor
and the Seller substantially in the form of Exhibit D hereto, by which
Subsequent Home Equity Loans are sold and assigned to the Trust.
"Subsequent Transfer Date": The date specified in each Subsequent
Transfer Agreement.
"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.
"Tax Matters Person": The Person designated 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 Lower-Tier REMIC Residual Class, each of which
shall be issued to and held by The Chase Manhattan Bank throughout the term
hereof unless another person shall accept an assignment of either such interest
and the designation of Tax Matters Person pursuant to Section 11.18 hereof.
32
<PAGE> 39
"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": As of any date of determination
thereof, a rate equal to the sum of (a) the Weighted Average Pass-Through Rate
and (b) any portion of the Premium Amount and the Trustee Fee (calculated as a
percentage of the outstanding principal amount of the Certificates) then
accrued and outstanding.
"Termination Notice": As defined in Section 9.03(a) hereof.
"Total Available Funds": As defined in Section 7.02(b) hereof.
"Total Monthly Excess Cashflow": As defined in Section 7.03(b)(ii)
hereof.
"Total Monthly Excess Spread": With respect to any Payment Date, the
excess of (i) the aggregate of all interest which is collected on the Home
Equity Loans during the related Remittance Period (net of the Servicing Fee,
the Trustee Fee and the Trustee Reimbursable Expenses) plus (x) any Delinquency
Advances and (y) Compensating Interest paid by the Servicer for such Remittance
Period over (ii) the sum of the Current Interest and the Premium Amount for
such Payment Date.
"Trust": IMC Home Equity Loan Trust 1997-7, the trust created under
this Agreement.
"Trust Estate": As defined in the conveyance clause under this
Agreement.
"Trust Fees and Expenses": As of each Payment Date, an amount equal
to the Premium Amount, the Trustee Fee and any Trustee Reimbursable Expenses.
"Trustee": The Chase Manhattan Bank, a New York banking corporation,
the Corporate Trust Department of which is located on the date of execution of
this Agreement at 450 W. 33rd Street, 15th Floor, New York, NY 10001, not in
its individual capacity but solely as Trustee under this Agreement, and any
successor hereunder.
"Trustee Fee": The fee payable monthly to the Trustee on each Payment
Date in an amount equal to 0.00375% per annum, on the outstanding aggregate
Loan Balances of the Home Equity Loans as of the related Determination Date.
"Trustee Reimbursable Expenses": Any amounts payable pursuant to
Section 11.16(a)(v) and Section 11.16(g) and pursuant to the second sentence of
Section 10.07, provided that the aggregate amounts payable as Trustee
Reimbursable Expenses shall not exceed $50,000.
"Underwater Loans": Any Home Equity Loan having a Coupon Rate as of
the Startup Day that is less than 7.375% per annum.
"Underwriters": PaineWebber Incorporated, Bear, Stearns & Co. Inc.,
Merrill Lynch, Pierce, Fenner and Smith Incorporated and Morgan Stanley Dean
Witter.
33
<PAGE> 40
"Upper-Tier Distribution Account": The Upper-Tier Distribution
Account established pursuant to Section 7.02 hereof.
"Upper-Tier REMIC": The REMIC established pursuant to Section 2.08
hereof with respect to the Certificates. The assets of the Upper-Tier REMIC
shall include the Upper-Tier Distribution Account and the right to receive the
distributions deposited therein with respect to each Lower-Tier Interest.
"Weighted Average Pass-Through Rate": As to the Class A Certificates
and any Payment Date, the weighted average of the Class A-1 Pass-Through Rate,
the Class A-2 Pass-Through Rate, the Class A-3 Pass-Through Rate, the Class A-4
Pass-Through Rate, the Class A-5 Pass-Through Rate and the Class A-6
Pass-Through Rate, the Class A-7 Pass-Through Rate and the Class A-8
Pass-Through Rate weighted by, respectively, the Class A-1 Certificate
Principal Balance, the Class A-2 Certificate Principal Balance, the Class A-3
Certificate Principal Balance, the Class A-4 Certificate Principal Balance, the
Class A-5 Certificate Principal Balance, the Class A-6 Certificate Principal
Balance, the Class A-7 Certificate Principal Balance and the Class A-8
Certificate Principal Balance as of such Payment Date prior to taking into
account any distributions to be made on such Payment Date.
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. Any opinion
delivered hereunder shall be addressed to the Certificate Insurer, the Rating
Agencies and the Trustee.
END OF ARTICLE I
34
<PAGE> 41
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 "IMC Home Equity Loan Trust 1997-7".
Section 2.02 Office.
The office of the Trust shall be in care of the Trustee, addressed to
The Chase Manhattan Bank, 450 W. 33rd Street, 15th Floor, New York, NY 10001,
Attention: Advanced Structured Products Group, or at such other address as the
Trustee may designate by notice to the Depositor, the Seller, the Servicer, the
Owners and the Certificate Insurer.
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 the status of either the Lower-Tier REMIC's or the Upper-Tier
REMIC's status as a REMIC.
Section 2.04 Appointment of the Trustee; Declaration of Trust.
The Seller and the Depositor hereby appoint 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 and the Certificate Insurer, as their
interests may appear.
Section 2.05 Expenses of the Trust.
All 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)(i) hereof) and (ii) to the extent not paid pursuant to Section 10.07,
any other expenses of the Trustee that have been reviewed and approved by the
Seller, 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 the Seller. Failure by the Seller to pay any such fees or
other expenses shall not relieve the Trustee of its obligations hereunder.
35
<PAGE> 42
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 (except that certain agents of
the Trustee may be located in the State of Texas). 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 and Home Equity Loan Files and certain
other documents) located in any state other than in the State of New York.
Payments will be received by the Trust only in the State of New York and
payments from the Trust 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 beneficial ownership interests in the Lower-Tier REMIC
shall be evidenced by the interests having the characteristics and terms as
follows:
<TABLE>
<CAPTION>
Initial Lower- Lower-Tier Final Scheduled
Class Designation Tier Balance Pass-Through Rate Payment Dates
----------------- ------------ ----------------- -------------
<S> <C> <C> <C>
Lower-Tier Interest A-1 255,140,000 (1) May 2012
Lower-Tier Interest A-2 112,820,000 (1) August 2012
Lower-Tier Interest A-3 120,840,000 (1) November 2012
Lower-Tier Interest A-4 44,310,000 (1) May 2015
Lower-Tier Interest A-5 71,100,000 (1) October 2020
Lower-Tier Interest A-6 61,770,000 (1) December 2024
Lower-Tier Interest A-7 54,775,000 (1) February 2029
Lower-Tier Interest A-8 54,245,000 (1) February 2029
Lower-Tier REMIC Residual Class (2) (2)
</TABLE>
- - -------------------
(1) On any Payment Date, the Net Weighted Average Coupon Rate.
(2) The Lower-Tier REMIC Residual Class is not issued with a Lower-Tier
Balance or a Lower-Tier Pass-Through Rate.
(b) The Lower-Tier Interests A-1, A-2, A-3, A-4, A-5, A-6, A-7 and
A-8 Certificates shall be issued as non-certificated interests. The Lower-Tier
REMIC Residual Class shall be issued from the Lower-Tier REMIC as a
non-certificated interest.
(c) The Depositor hereby designates Lower-Tier Interest A-1,
Lower-Tier Interest A-2, Lower-Tier Interest A-3, Lower-Tier Interest A-4,
Lower-Tier Interest A-5, Lower-Tier Interest A-6, Lower-Tier Interest A-7 and
Lower-Tier Interest A-8 as "regular interests" and the Lower-Tier REMIC
Residual Class as the single class of "residual interests" in the Lower-Tier
REMIC for purposes of the REMIC Provisions.
36
<PAGE> 43
(d) The Depositor hereby designates 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 and Class
A-9IO as "regular interests," and the Class R Certificates as the single class
of "residual interests" in the Upper-Tier REMIC for purposes of the REMIC
Provisions. The Depositor hereby designates the Lower-Tier Interest A-1, the
Lower-Tier Interest A-2, the Lower-Tier Interest A-3, the Lower-Tier Interest
A-4, the Lower-Tier Interest A-5, the Lower-Tier Interest A-6, the Lower-Tier
Interest A-7 and the Lower-Tier Interest A-8 and the Upper-Tier Distribution
Account as the only assets of the Upper-Tier REMIC.
(e) The Startup Day is hereby designated as the "startup day" of
the Upper-Tier REMIC and the Lower-Tier REMIC within the meaning of Section
860G(a)(9) of the Code.
(f) The Owner of the Tax Matters Person Residual Interest in the
Upper-Tier REMIC and the Lower-Tier REMIC is hereby designated as "tax matters
person" as defined in the REMIC Provisions with respect to each such REMIC.
(g) The Trust and each REMIC included therein shall, for federal
income tax purposes, maintain books on a calendar year basis and report income
on an accrual basis.
(h) The Trustee shall cause the Upper-Tier REMIC and the
Lower-Tier REMIC each to elect to be treated as a REMIC under Section 860D of
the Code. Any inconsistencies or ambiguities in this Agreement or in the
administration of the Trust shall be resolved in a manner that preserves the
validity of such election to be treated as a REMIC. The Trustee shall report
all expenses of the Trust Estate to the Lower-Tier REMIC.
(i) For all Federal tax law purposes amounts transferred by the
Trustee to the Owners of the Class R Certificates shall be treated as
distributions by the Upper-Tier REMIC and amounts, if any, distributed on the
Lower-Tier REMIC Residual Class shall be treated as distributions by the
Lower-Tier REMIC. It is expected that there shall not be any distributions to
the Lower-Tier REMIC Residual Class.
(j) The Trustee shall provide to the Internal Revenue Service and
to the person described in Section 860(E)(e)(3) and (6) of the Code the
information described in Treasury Regulation Section 1.860D-1(b)(5)(ii), or any
successor regulation thereto with respect to both the Lower-Tier REMIC and the
Upper-Tier REMIC. Such information will be provided in the manner described in
Treasury Regulation Section 1.860E-2(a)(5), or any successor regulation
thereto.
37
<PAGE> 44
(k) For federal income tax purposes, the Final Scheduled Payment
Date for each Class of the Class A Certificates is hereby set to be the Payment
Date indicated below:
<TABLE>
<CAPTION>
Final Scheduled
Class Payment Date
----- ------------
<S> <C>
Class A-1 Certificates May 2012
Class A-2 Certificates August 2012
Class A-3 Certificates November 2012
Class A-4 Certificates May 2015
Class A-5 Certificates October 2020
Class A-6 Certificates December 2024
Class A-7 Certificates February 2029
Class A-8 Certificates February 2029
Class A-9IO Certificates November 2000
</TABLE>
END OF ARTICLE II
38
<PAGE> 45
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE DEPOSITOR, THE SERVICER AND THE SELLER;
COVENANT OF SELLER 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 Seller, 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 and the other
Operative Documents to which it is a party 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 and 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.
39
<PAGE> 46
(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) Neither the Trustee nor the Depositor has any obligation to
register the Trust as an investment company under the Investment Company Act of
1940, as amended.
(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 or federal 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.
(j) The transactions contemplated by this Agreement are in the
ordinary course of business of the Depositor.
(k) The Depositor has received fair consideration and reasonably
equivalent value in exchange for the sale of its interest in the Home Equity
Loans.
(l) The Depositor did not sell any interest in any Home Equity
Loan with an intent to hinder, delay or defraud any of its creditors.
(m) The Depositor is not insolvent, nor will it be made insolvent
by the sale of the Home Equity Loans, nor is the Depositor aware of any pending
insolvency.
(n) On the Startup Day, the Trustee will have good title on behalf
of the Trust to each Initial Home Equity Loan and such other items comprising
the Trust Estate free and clear of any lien.
40
<PAGE> 47
(o) No material adverse change affecting any security for the
Class A Certificates has occurred prior to delivery of and payment for the
Class A Certificates.
(p) The Depositor is not in default under any agreement involving
financial obligations or on any outstanding obligation which would materially
adversely impact the financial condition or operations of the Depositor or
legal documents associated with the transaction contemplated by this Agreement.
(q) To the best knowledge of the Depositor, there has been no
material adverse change in any information submitted by the Depositor in
writing to the Certificate Insurer with respect to the transactions
contemplated by this Agreement (unless such information was subsequently
supplemented in writing).
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.
Upon discovery by any of the Depositor, the Seller, the Servicer, the
Certificate Insurer, the Custodian, any Sub-Servicer, any Owner 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 3.01 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. As promptly as practicable, but in any event, within 60
days of its discovery or its receipt of notice of breach, the Depositor shall
cure such breach in all material respects; provided, however, that if the
Depositor can establish to the reasonable satisfaction of the Certificate
Insurer that it is diligently pursuing remedial action, then the cure period
may be extended for an additional 90 days with the written approval of the
Certificate Insurer.
Section 3.02 Representations and Warranties of the Servicer.
The Servicer hereby represents, warrants and covenants to the
Depositor, the Trustee and the Owners that as of the Startup Day:
(a) The Servicer is a corporation duly organized and validly
existing and in good standing under the laws of the State of Florida, 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 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 have all requisite
partnership or corporate, as the case may be, power and authority to own and
operate its or their properties, to carry out its or their business as
presently conducted and as proposed to be conducted and to enter into and
discharge its or their obligations under this Agreement and the other Operative
Documents to which the Servicer is a party.
(b) The execution and delivery of this Agreement and any other
Operative Document to which it is a party by the Servicer and its performance
and compliance with the terms hereof and thereof have been duly authorized by
all necessary action on the part of the Servicer and will not violate the
Servicer's Articles 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.
41
<PAGE> 48
(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 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 Document
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 the validity or the
enforceability of the Home Equity Loans or 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 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
42
<PAGE> 49
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.
(l) No material adverse change affecting any security for the
Class A Certificates has occurred prior to delivery of and payment for the
Class A Certificates.
(m) The Servicer is not in default under any agreement involving
financial obligations or on any outstanding obligation which would materially
adversely impact the financial condition or operations of the Servicer or legal
documents associated with the transaction contemplated by this Agreement.
(n) To the best knowledge of the Servicer, there has been no
material adverse change in any information submitted by the Servicer in writing
to the Certificate Insurer with respect to the transactions contemplated by
this Agreement (unless such information was subsequently supplemented in
writing).
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 the Depositor, the Seller, the Servicer, the
Custodian, any Sub-Servicer, the Certificate Insurer, any Owner 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. As promptly as practicable, but in any event, 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 Certificate
Insurer or by the Trustee with the written consent of the Certificate Insurer
pursuant to Section 8.20 hereof; provided, however, that if the Servicer can
establish to the reasonable satisfaction of the Certificate Insurer that it is
diligently pursuing remedial action, then the cure period may be extended for
an additional 90 days with the written approval of the Certificate Insurer.
Section 3.03 Representations and Warranties of the Seller.
The Seller hereby represents, warrants and covenants to the Depositor,
the Trustee, the Certificate Insurer and the Owners that as of the Startup Day:
(a) The Seller is a corporation duly organized, validly existing
and in good standing under the laws governing its creation and existence and is
in good standing in each jurisdiction in which the nature of its business, or
the properties owned or leased by it make such qualification necessary. The
Seller has all requisite 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.
43
<PAGE> 50
(b) The execution and delivery of this Agreement and the other
Operative Documents to which it is a party by the Seller 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 Seller and will not violate the Seller's
Articles 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 Seller is a party or by which the Seller 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 Seller or any of its
properties.
(c) This Agreement and the other Operative Documents to which the
Seller 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 Seller, 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 Seller 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 Seller or its
properties or the consequences of which would materially and adversely affect
its performance hereunder and under the other Operative Documents to which the
Seller is a party.
(e) No litigation is pending with respect to which the Seller has
received service of process or, to the best of the Seller's knowledge,
threatened against the Seller 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 Seller 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 Seller is a party.
(f) No certificate of an officer, statement furnished in writing
or report delivered pursuant to the terms hereof by the Seller 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 Seller or matters or activities for which the Seller is
responsible in accordance with the Operative Documents or which are
attributable to the Seller 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 Seller required to be stated therein or
necessary to make the statements contained therein with respect to the Seller,
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 Seller
that materially adversely affects or in the future may (so far as the Seller
can now reasonably foresee) materially adversely affect the Seller or the Home
Equity Loans or the ownership interests therein represented by the Certificates
that has not been set forth in the Registration Statement.
44
<PAGE> 51
(h) Upon the receipt of each Home Equity Loan (including the
related Note) and other items of the Trust Estate by 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 the Seller 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 the Seller 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
Seller 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 Seller and the performance by the Seller
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 the Seller 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 the Seller.
(m) Neither the Trustee nor the Seller has any obligation to
register the Trust as an investment company under the Investment Company Act of
1940, as amended.
(n) The Seller is not insolvent, nor will it be made insolvent by
the transfer of the Home Equity Loans, nor is the Seller aware of any pending
insolvency.
(o) The Seller received fair consideration and reasonably
equivalent value in exchange for the sale of the interests in the Home Equity
Loans.
(p) The Seller did not sell any interest in any Home Equity Loan
with any intent to hinder, delay or defraud any of its creditors.
(q) No material adverse change affecting any security for the
Class A Certificates has occurred prior to delivery of and payment for the
Class A Certificates.
(r) The Seller is not in default under any agreement involving
financial obligations or on any outstanding obligation which would materially
adversely impact the financial condition or operations of the Seller or legal
documents associated with the transaction contemplated by this Agreement.
45
<PAGE> 52
(s) To the best knowledge of the Seller, there has been no
material adverse change in any information submitted by the Seller in writing
to the Certificate Insurer with respect to the transactions contemplated by
this Agreement (unless such information was subsequently supplemented in
writing).
It is understood and agreed that the representations and warranties
set forth in this Section 3.03 shall survive delivery of the respective Home
Equity Loans to the Trustee.
Upon discovery by any of the Depositor, the Servicer, the Custodian,
any Sub-Servicer, any Owner, the 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. The Seller 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, the
Seller may (or may cause an affiliate of the Seller to) on or prior to the
second 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 (a "Substitution 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 which the Servicer has theretofore
failed to remit with respect to such Home Equity Loan 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 the Seller obtains for the Trustee and the Certificate
Insurer at the Seller's expense 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 the Lower-Tier REMIC or the Upper-Tier REMIC as
a REMIC (a "REMIC Opinion") addressed to and acceptable to the Trustee and the
Certificate Insurer. The Seller shall also deliver an Officer's Certificate to
the Trustee and the Certificate Insurer concurrently with the delivery of a
Qualified Replacement Mortgage pursuant to Sections 3.03, 3.04 and 3.06 stating
that such Home Equity Loan meets the requirements of the definition of a
Qualified Replacement Mortgage and that all other conditions to the
substitution thereof have been satisfied. 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 Section 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 Seller to Take Certain Actions with
Respect to the Home Equity Loans in Certain Situations.
(a) Upon the discovery by the Depositor, the Seller, the Servicer,
any Sub-Servicer, the Certificate Insurer, any Owner, the Custodian or the
Trustee that the representations and warranties set forth in clause (b) below
were untrue in any material respect as of the Startup Day (or in the case of
the Subsequent Home Equity Loans, as of the respective Subsequent Transfer
Date) with the result that the interests of the Owners
46
<PAGE> 53
or of the Certificate Insurer are materially and adversely affected, the party
discovering such breach shall give prompt written notice to the other parties.
Upon the earliest to occur of the 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, the Seller hereby
covenants and warrants that it shall promptly cure such breach in all material
respects or subject to the last three sentences of Section 3.03 it shall on or
before 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 the 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; provided, however, that if the Seller can
establish to the reasonable satisfaction of the Certificate Insurer that it is
diligently pursuing remedial action, the period of time in which the Seller
must substitute a Qualified Replacement Mortgage or purchase such Home Equity
Loan may be extended for an additional 30 days with the written approval of the
Certificate Insurer. It is understood and agreed that the obligation of the
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 respecting a discovery of any such
statement which is untrue in any material respect in this Section 3.04
available to the Owners and the Trustee.
(b) The Seller hereby represents, warrants and covenants to the
Trustee, the Depositor, the Servicer, the Certificate Insurer and the Owners
that as of the Startup Day (with respect to the Initial Home Equity Loans) and
as of the respective Subsequent Transfer Date (with respect to the Subsequent
Home Equity Loans):
(i) The information with respect to each Initial
Home Equity Loan and Subsequent Home Equity Loan set forth in
the related Schedule of Home Equity Loans is true and correct
as of the Cut-Off Date (or in the case of the Subsequent Home
Equity Loans, as of the related Subsequent Transfer Date);
(ii) All the original or certified documentation
set forth in Section 3.05 (including all material documents
related thereto) with respect to each Initial Home Equity Loan
has been or will be delivered to the Trustee on the Startup
Day (or in the case of the Subsequent Home Equity Loans, on
the related Subsequent Transfer Date) or as otherwise provided
in Section 3.05;
(iii) Each Home Equity Loan being transferred to
the Trust is a Qualified Mortgage and is a Mortgage;
(iv) Each Property is improved by a single
(one-to-four) family residential dwelling (except for 266
Initial Home Equity Loans in the amount of $13,800,000), that
are condominiums, planned unit developments, townhouses,
manufactured housing, mixed use properties, multifamily
residential, or cooperative, provided that no more than 0.25%,
respectively, of the Properties are secured by manufactured
homes, each of which is considered to be real property under
the applicable local law;
47
<PAGE> 54
(v) As of the Cut-Off Date, no Initial Home
Equity Loan has a Loan-to-Value Ratio in excess of 90%, except
for 731 Home Equity Loans in the amount of $25,705,359 that
had a Loan-to-Value Ratio not greater than 100%;
(vi) Each Home Equity Loan is being serviced by
the Servicer in accordance with the terms of this Agreement;
(vii) The Note related to each Initial Home Equity
Loan bears a current Coupon Rate of at least 7.375% per annum;
(viii) Each Note with respect to the Initial Home
Equity Loans will provide for a schedule of substantially
level and equal Monthly Payments which are sufficient to
amortize fully the principal balance of such Note on or before
its maturity date, except for 3,601 Initial Home Equity Loans,
in the amount of $242,523,463, representing 41.63% of the
aggregate Loan Balance of the Initial Home Equity Loans, as of
the Cut-Off Date which may provide for a "balloon" payment due
at the end of the 15th year (except for 39 Initial Home Equity
Loans in the amount of $2,443,585 which provide for "balloon"
payments due within 60 months to 120 months) and 1 Initial
Home Equity Loan in the amount of $35,988 which provides for a
balloon payment at month 240;
(ix) As of the Startup Day (with respect to the
Initial Home Equity Loans) and any Subsequent Transfer Date
(with respect to the Subsequent Home Equity Loans), each
Mortgage is a valid and subsisting first or second lien of
record (or is in the process of being recorded) 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;
(x) Immediately prior to the transfer and
assignment of the Home Equity Loans by the Seller to the
Depositor and by the Depositor to the Trust herein
contemplated, the 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 the 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;
(xi) As of the beginning of business on the
Cut-Off Date, no Initial Home Equity Loan is 30 days or more
Delinquent except that there are 419 Initial Home Equity Loans
with an outstanding aggregate Loan Balance of $23,150,490 that
are 30 or more days Delinquent but not more than 59 days
Delinquent and there are 10 Initial Home Equity Loans with an
outstanding
48
<PAGE> 55
aggregate Loan Balance of $471,040 that are 60 or more days
Delinquent but not more than 89 days Delinquent;
(xii) There is no delinquent tax or assessment lien
on any Property, and each Property is free of substantial
damage and is in good repair;
(xiii) 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;
(xiv) 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;
(xv) 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 (as amended by the Riegle
Community Development and Regulatory Improvement Act of 1994)
and other consumer protection laws, usury, equal credit
opportunity, disclosure and recording laws;
(xvi) With respect to each Home Equity Loan either
(a) an attorney's opinion of title has been obtained but no
lender's title insurance policy has been obtained, 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-original
principal amount 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
(provided that an attorney's opinion of title without a
lender's title insurance policy has been obtained with respect
to no more than 2% of the Original Aggregate Loan Balance);
(xvii) The improvements upon each Property are
covered by a valid and existing hazard insurance policy with a
carrier generally acceptable to the Servicer 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;
(xviii) 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 carrier generally
acceptable to the Servicer in an amount representing coverage
not less than the least of (A) the outstanding principal
balance of
49
<PAGE> 56
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;
(xix) Each Mortgage and Note are the legal, valid
and binding obligation of the maker thereof and are
enforceable in accordance with their 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;
(xx) The 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 the 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;
(xxi) As of the Startup Day, no more than 0.35% of
the aggregate Loan Balance of the Home Equity Loans will be
secured by Properties located within any single zip code area;
(xxii) 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 (or,
subject to Section 3.05 hereof, are in the process of being
recorded); each Mortgage and assignment of Mortgage is in
recordable form and is acceptable for recording under the laws
of the jurisdiction in which the property securing such
Mortgage is located;
(xxiii) 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;
(xxiv) 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;
(xxv) 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;
(xxvi) No Home Equity Loan has a shared appreciation
feature, or other contingent interest feature;
50
<PAGE> 57
(xxvii) 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;
(xxviii) 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;
(xxix) Any advances made after the date of
origination of a Home Equity Loan but prior to the Cut-Off
Date with respect to the Initial Home Equity Loans (or the
relevant Subsequent Transfer Date with respect to the
Subsequent Home Equity Loans) 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;
(xxx) 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;
(xxxi) 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;
(xxxii) 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;
(xxxiii) 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;
(xxxiv) 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 other than any
applicable Mortgagor redemption rights 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;
51
<PAGE> 58
(xxxv) Other than with respect to Delinquencies
noted in item (xi) hereof, 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 Seller has
waived any default, breach, violation or event of
acceleration;
(xxxvi) 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 Custodian;
(xxxvii) The maturity date of each Home Equity Loan is
at least twelve months prior to the maturity date of the
related first home equity loan if such first home equity loan
provides for a balloon payment;
(xxxviii) Each Home Equity Loan was underwritten in
accordance with the credit underwriting guidelines of the
Seller as set forth in the Seller's Policies and Procedures
Manual, as in effect on the date hereof and such Manual
conforms in all material respects to the description thereof
set forth in the Prospectus Supplement;
(xxxix) Each Home Equity Loan was originated based
upon a full appraisal, which included an interior inspection
of the subject property;
(xl) The Home Equity Loans were not selected for
inclusion in the Trust by the Seller on any basis intended to
adversely affect the Trust;
(xli) No more than 7.45% of the aggregate Loan
Balance of the Initial Home Equity Loans are secured by
Properties that are non-owner occupied Properties (i.e.,
investor-owned and vacation);
(xlii) The Seller has no actual knowledge that there
exist any hazardous substances, hazard 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;
(xliii) The Seller was 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;
(xliv) 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
52
<PAGE> 59
rent payment is included in the borrower's monthly payment as
an expense item in determining the qualification of the
borrower for such Home Equity Loan; (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 Initial Home Equity Loans with
related Properties subject to ground leases does not exceed 1%
of the Original Aggregate Loan Balance;
(xlv) As of the Startup Day, the Seller has not
received a notice of default of any First Mortgage Loan
secured by any Property which has not been cured by a party
other than the Seller;
(xlvi) No Home Equity Loan is subject to a temporary
rate reduction pursuant to a buydown program;
(xlvii) No more than 1.43% of the aggregate Loan
Balance of the Home Equity Loans was originated under the
Seller's non-income verification program;
(xlviii) The Coupon Rate on each Home Equity Loan is
calculated on the basis of a year of 360 days with twelve
30-day months;
(xlix) As of the Startup Day, each Subsequent Home
Equity Loan to be transferred to the Trust during the Funding
Period has been originated or purchased and identified by the
Seller;
(l) Neither the operation of any of the terms of
each Note and each Mortgage nor the exercise of any right
thereunder will render either the Note or the Mortgage
unenforceable, in whole or in part, nor subject it to any
right of rescission, set-off, counterclaim or defense,
including, without limitation, the defense of usury;
(li) As of the Cut-Off Date (or the Subsequent
Cut-Off Date with respect to the Subsequent Home Equity
Loans), the FTC holder regulation provided in 16 C.F.R. Part
433 applies to none of the Home Equity Loans.
(c) In the event that any such repurchase pursuant to this Section
results in a prohibited transaction tax as specified in the REMIC Opinion
delivered pursuant to Section 3.03, the Trustee shall immediately notify the
Seller in writing thereof and the 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 the Seller to the Trust pursuant to Section 3.03,
Section 3.04 or Section 3.06 hereof, the 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 Seller, the Servicer, any
Sub-Servicer, the Certificate Insurer, the Custodian or the Trustee that the
statements set forth in subsection (b) above are untrue in any material respect
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
53
<PAGE> 60
the Seller's knowledge, such limitation shall not relieve the 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 Mortgage) to the Trustee or the Custodian.
(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 Initial Home Equity Loans and
Qualified Replacement Mortgages.
(a) On the Startup Day the 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 Trustee for the benefit of the Owners and the Certificate
Insurer, all of their respective right, title and interest in and to the
Initial Home Equity Loans (other than payments of principal and interest due on
the Home Equity Loans on or before the Cut-Off Date). The transfer by the
Seller to the Depositor, and the transfer by the Depositor to the Trust, of the
Initial Home Equity Loans set forth on the Schedule of Home Equity Loans is
absolute and is intended by the Owners and all parties hereto to be treated as
a sale by the Seller to the Depositor and a sale by the Depositor to the Trust.
In the event that either such conveyance or a conveyance pursuant to
Section 3.07 and any Subsequent Transfer Agreement is deemed to be a loan, the
parties intend that the Seller shall be deemed to have granted to the Depositor
and the Depositor shall be deemed to have granted to the Trustee a security
interest in the Trust Estate, and that this Agreement shall constitute a
security agreement under applicable law.
In connection with the sale, transfer, assignment, and conveyance from
the Seller to the Depositor, the Seller has filed, in the appropriate office or
offices in the State of Florida, a UCC-1 financing statement executed by the
Seller as debtor, naming the Depositor as secured party and listing the Initial
Home Equity Loans, the Subsequent Home Equity Loans and the other property
described above as collateral. The characterization of the Seller as the
debtor and the Depositor as the 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 Seller's entire right, title and interest in the Trust Estate. In
connection with such filing, the 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 Depositor's interest in the Trust Estate.
In connection with the 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 Delaware and Florida a UCC-1 financing
statement executed by the Depositor as debtor, naming the Trustee as secured
party and listing the Initial Home Equity Loans, the Subsequent Home Equity
Loans and the other property described above as collateral. The
characterization of the Depositor as a debtor and the Trustee as the secured
party in such
54
<PAGE> 61
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 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 Owner's and the Certificate
Insurer's interest in the Trust Estate.
(b) In connection with the transfer and assignment of the Initial
Home Equity Loans, or on each Subsequent Transfer Date with respect to the
Subsequent Home Equity Loan, the Seller agrees to:
(i) deliver without recourse to the Custodian, on behalf
of the Trustee, on the Startup Day with respect to each Initial Home
Equity Loan or on each Subsequent Transfer Date with respect to the
Subsequent Home Equity Loans, (A) the original Notes (or in the case
of not more than 0.50% of the aggregate Loan Balance of the Initial
Home Equity Loans, a lost note affidavit executed by an Authorized
Officer of the Seller) endorsed in blank or to the order of the
Trustee, (B) (I) the original title insurance commitment or a copy
thereof certified as a true copy by the closing agent or the Seller,
and when available, the original title insurance policy or a copy
certified by the issuer of the title insurance policy or (II) the
attorney's opinion of title, (C) originals or copies of all
intervening assignments certified as true copies by the closing agent
or the Seller, showing a complete chain of title from origination to
the Trustee, if any, including warehousing assignments, if recorded,
(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 Seller
from the applicable recording office) or a copy of the Mortgage
certified as a true copy by the closing agent or the Seller, or (2) a
copy of the Mortgage certified by the public recording office in those
instances where the original recorded Mortgage has been lost or
retained by the recording office;
(ii) cause, within 60 days following the Startup Day with
respect to the Initial Home Equity Loans or on each Subsequent
Transfer Date with respect to the Subsequent Home Equity Loans,
assignments of the Mortgages to "The Chase Manhattan Bank, as Trustee
of IMC Home Equity Loan Trust 1997-7 under the Pooling and Servicing
Agreement dated as of November 1, 1997" to be submitted for recording
in the appropriate jurisdictions; provided, however, that the Seller
shall not be required to prepare an assignment for any Mortgage
described in subsection (b)(i)(E)(2) above with respect to which the
original recording information has not yet been received from the
recording office until such information is received; provided,
further, that the Seller shall not be required to record an assignment
of a Mortgage if the Seller furnishes to the Trustee and the
Certificate Insurer on or before the Startup Day, with respect to the
Initial Home Equity Loans or on each Subsequent Transfer Date with
respect to the Subsequent Home Equity Loans, at the Seller'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 satisfactory to
the Rating Agencies and the Certificate Insurer); provided further,
however, notwithstanding the delivery of any legal opinions, each
assignment of Mortgage shall be recorded upon the earliest to occur
of: (i) reasonable direction by the Certificate Insurer and (ii)
occurrence of a Servicer Termination Event;
(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
55
<PAGE> 62
assignments (other than unrecorded warehouse assignments), to the
Custodian, on behalf of the Trustee, within 15 days of receipt thereof
by the Seller (but in any event, with respect to any Mortgage as to
which original recording information has been made available to the
Seller, within one year after the Startup Day with respect to the
Initial Home Equity Loans or on each Subsequent Transfer Date with
respect to the Subsequent Home Equity Loans); and
(iv) furnish to the Trustee, the Certificate Insurer and
the Rating Agencies at the Seller's expense, an opinion of counsel
with respect to the sale and perfection of the Subsequent Home Equity
Loans delivered to the Trust in form and substance satisfactory to the
Certificate Insurer.
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 Seller and the Depositor shall be
deemed to have satisfied their obligations hereunder upon delivery to the
Custodian, on behalf of 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 preceding paragraph, the Seller shall deliver to
the Custodian, on behalf of the Trustee a list of all Mortgages for which no
Mortgage assignment has yet been submitted for recording by the Seller, which
list shall state the reason why the 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 Custodian, on behalf of the Trustee
shall make an immediate demand on the Seller to prepare such Mortgage
assignments and shall inform the Certificate Insurer, in writing, of the
Seller's failure to prepare such Mortgage assignments. Thereafter, the
Custodian, on behalf of the Trustee shall cooperate in executing any documents
prepared by the Certificate Insurer and submitted to the Custodian, on behalf
of the Trustee in connection with this provision. Following the expiration of
the 60-day period referred to in clause (ii) of the preceding paragraph, the
Seller shall promptly prepare a Mortgage assignment for any Mortgage for which
original recording information is subsequently received by the Seller, and
shall promptly deliver a copy of such Mortgage assignment to the Custodian, on
behalf of the Trustee. The Seller agrees that it will follow its normal
servicing procedures and attempt to obtain the original recording information
necessary to complete a Mortgage assignment. In the event that the 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 with respect to
the Initial Home Equity Loans and the relevant Subsequent Transfer Date with
respect to Subsequent Home Equity Loans and has not provided to the Custodian,
on behalf of the Trustee a Mortgage assignment with evidence of recording
thereon relating to the assignment of such Mortgage to the Trustee, the
Custodian, on behalf of the Trustee shall notify the Seller of the 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 Initial Home Equity Loans and the relevant Subsequent
Transfer Date with respect to Subsequent Home Equity Loans. A copy of such
notice shall be sent by the Custodian, on behalf of the Trustee to the
Certificate Insurer and the Rating Agencies. 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 (xxii) of Section 3.04(b) hereof;
provided, however, that if as of the end of such 20th calendar month the Seller
demonstrates to the reasonable 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
Custodian, on behalf of the Trustee, the Seller continues to
56
<PAGE> 63
demonstrate to the reasonable 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 or by the
closing agent or the Seller.
Copies of all Mortgage assignments received by the Custodian, on
behalf of the Trustee shall be retained in the related File.
All recording required pursuant to this Section 3.05 shall be
accomplished at the expense of the Seller.
(c) In the case of Initial Home Equity Loans which have been prepaid
in full on or after the Cut-Off Date and prior to the Startup Day, the Seller,
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 E.
(d) The Seller shall transfer, assign, set over and otherwise convey
without recourse, to the Depositor, and the Depositor shall transfer, assign,
set over and otherwise convey without recourse to the Trustee all right, title
and interest of the Seller in and to any Qualified Replacement Mortgage
delivered to the Custodian, on behalf of the Trustee on behalf of the Trust by
the 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
the 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 Seller's order, 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, the Seller agrees
to (i) deliver without recourse to the Custodian, on behalf of 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 Custodian, on behalf of the Trustee within 15 days of
receipt thereof by the 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 same 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
Custodian, on behalf of the Trustee shall deliver on the date of conveyance of
such Qualified Replacement Mortgage and on the order of the Seller (i) the
original Note
57
<PAGE> 64
relating thereto, endorsed without recourse or representation, to the 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 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 and to cause the
Custodian to execute and deliver on the Startup Day an acknowledgment of
receipt of the items delivered by the Seller or the Depositor in the forms
attached as Exhibit F-1 and Exhibit F-2 hereto, and declares through the
Custodian that it will hold such documents and any amendments, replacement or
supplements thereto, as well as any other assets included in the definition of
Trust Estate and delivered to the Custodian, on behalf of 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
cause the Custodian 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 Subsequent Home Equity Loan or
Qualified Replacement Mortgage, within 45 days after the assignment thereof)
and to deliver to the Depositor, the Seller, the Servicer and the Certificate
Insurer a certification in the form attached hereto as Exhibit G (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. Neither the Custodian on behalf of the Trustee, nor the
Trustee shall have any 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 Custodian or 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. Neither the Custodian on behalf of the Trustee, nor
the Trustee shall be under any 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 Custodian, on behalf of 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 Custodian, on behalf of the
58
<PAGE> 65
Trustee shall promptly so notify the Depositor, the Seller, the Owners and the
Certificate Insurer. In performing any such review, the Custodian, on behalf
of the Trustee may conclusively rely on the Seller as to the purported
genuineness of any such document and any signature thereon. It is understood
that the scope of the review of the items delivered by the Seller 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. The Seller agrees to use
reasonable efforts to remedy a material defect in a document constituting part
of a File of which it is so notified by the Custodian, on behalf of the
Trustee. If, however, within 90 days after such notice to it respecting such
defect the Seller has not remedied the defect and the defect materially and
adversely affects the interest in the related Home Equity Loan of the Owners,
or the Certificate Insurer, the Seller will (or will cause an affiliate of the
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 Custodian, on behalf of 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 Custodian, on behalf of the Trustee and the Servicer shall
provide to the Certificate Insurer no less frequently than monthly updated
certifications indicating the then current status of exceptions, until all such
exceptions have been eliminated.
Section 3.07 Conveyance of the Subsequent Home Equity Loans.
(a) Subject to the satisfaction of the conditions set forth in
Section 3.05 and paragraphs (b), (c) and (d) below (based on the Custodian's
review of such conditions) in consideration of the Trustee's delivery on the
relevant Subsequent Transfer Dates to or upon the order of the Depositor of all
or a portion of the balance of funds in the Pre-Funding Account, the Depositor
shall on any Subsequent Transfer Date sell, transfer, assign, set over and
otherwise convey without recourse, to the Trustee, and the Trustee shall
purchase on behalf of the Trust all of the Depositor's right, title and
interest in and to any and all benefits accruing to the Depositor from the
Subsequent Home Equity Loans (other than any principal and interest due on or
prior to the relevant Subsequent Cut-Off Date) which the Depositor is causing
to be delivered to the Custodian, on behalf of the Trustee herewith (and all
substitutions therefor as provided by Section 3.03, 3.04 and 3.06), together
with the related Subsequent Home Equity Loan documents and the Depositor's
interest in any Property which secured a Subsequent 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 and 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 Subsequent 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). Notwithstanding
anything to the contrary herein, there shall be no more than three Subsequent
Transfer Dates during the Funding Period.
The transfer of the Subsequent Home Equity Loans set forth on the
related Schedule of Home Equity Loans by the Seller to the Depositor and by the
Depositor to the Trustee shall be absolute and shall be
59
<PAGE> 66
intended by the Owners and all parties hereto to be treated as a sale by the
Seller to the Depositor and by the Depositor to the Trustee. The amount
released from the Pre-Funding Account shall be one-hundred percent (100%) of
the aggregate principal balances of the Subsequent Home Equity Loans so
transferred. Upon the transfer by the Depositor of the Subsequent Home Equity
Loans hereunder, such Subsequent Home Equity Loans (and all principal and
interest due thereon subsequent to the Subsequent Cut-Off Date) and all other
rights and interests with respect to such Subsequent Home Equity Loans
transferred pursuant to a Subsequent Transfer Agreement shall be deemed for all
purposes hereunder to be part of the Trust Estate.
(b) The obligation of the Trustee to accept the transfer of the
Subsequent Home Equity Loans and the other property and rights related thereto
described in paragraph (a) above is subject to the satisfaction of each of the
following conditions on or prior to the related Subsequent Transfer Date:
(i) the Depositor shall have provided the Trustee and the
Certificate Insurer with an Addition Notice and shall have provided
any information reasonably requested by any of the foregoing with
respect to the Subsequent Home Equity Loans;
(ii) the Depositor shall have delivered to the Trustee a
duly executed written Subsequent Transfer Agreement (including an
acceptance by the Trustee) in substantially the form of Exhibit D
hereto, which shall include a Schedule of Home Equity Loans, listing
the Subsequent Home Equity Loans and any other exhibits listed
thereon;
(iii) the Depositor shall have delivered to the Servicer
for deposit in the Principal and Interest Account all principal and
interest due in respect of such Subsequent Home Equity Loans after the
related Subsequent Cut-Off Date;
(iv) as of each Subsequent Transfer Date, neither the
Seller nor the Depositor was insolvent, nor will either of them be
made insolvent by such transfer, nor is either of them aware of any
pending insolvency;
(v) the Funding Period shall not have ended; and
(vi) the Seller and the Depositor each shall have
delivered to the Trustee and the Certificate Insurer an Officer's
Certificate confirming the satisfaction of each condition precedent
specified in this paragraph (b) and in the related Subsequent Transfer
Agreement and the Certificate Insurer shall have consented to such
transfer (such consent not to be unreasonably withheld).
(c) The obligation of the Trust to purchase a Subsequent Home
Equity Loan on any Subsequent Transfer Date is subject to the following
requirements: (i) the ratings on the Class A Certificates shall not have been
downgraded by any Rating Agency; (ii) such Subsequent Home Equity Loan will not
be 30 days or more contractually Delinquent as of the Subsequent Cut-Off Date
(except that Subsequent Home Equity Loans representing not more than 1% of the
aggregate Loan Balance of the Subsequent Home Equity Loans may not be more than
60 days Delinquent as of the related Subsequent Cut-Off Date); (iii) such
Subsequent Home Equity Loan will be a fixed-rate Home Equity Loan; (iv) the
original term to maturity of such Subsequent Home Equity Loan may not exceed 30
years; (v) such Subsequent Home Equity Loan will have a Coupon Rate of not less
than 7.375%; and (vi) following the purchase of such Subsequent Home Equity
Loan by the Trust, the Home Equity Loans (including the Subsequent Home Equity
Loans) (a) will have a weighted average Coupon Rate of at least 11.42%; (b)
will have a weighted average combined Loan-to-
60
<PAGE> 67
Value Ratio of not more than 75.99%; (c) will not have Balloon Loans
representing more than 42.04% by aggregate principal balance; and (d) will have
no Subsequent Home Equity Loan with a Loan Balance in excess of $500,000.
(d) In connection with each Subsequent Transfer Date and, if
applicable, on the Payment Dates occurring during the Funding Period and the
Payment Date immediately after the Funding Period, the Trustee shall determine:
(i) the amount and correct dispositions of the Capitalized Interest
Requirement, Overfunded Interest Amount, Pre-Funding Account Earnings and the
Pre-Funded Amount and (ii) any other necessary matters in connection with the
administration of the Pre-Funding Account and of the Capitalized Interest
Account. In the event that any amounts are released as a result of an error in
calculation to the Owners or Depositor from the Pre-Funding Account or from the
Capitalized Interest Account, such Owners or the Depositor shall immediately
repay such amounts to the Trustee or the Trustee shall have the right to
withhold such amounts from future distributions on such Certificates.
Section 3.08 Custodian.
Notwithstanding anything to the contrary in this Agreement, the
parties hereto acknowledge that the functions of the Trustee with respect to
the custody, acceptance, inspection and release of the Files pursuant to
Sections 3.05, 3.06, 3.07 and 8.14 and the related Pool Certification and Final
Certification shall be performed by the Custodian pursuant to the Custodial
Agreement. The fees and expenses of the Custodian will be paid by the Seller.
Section 3.09 Books and Records.
The sale of each Home Equity Loan shall be reflected in the
Depositor's balance sheets and other financial statements as a sale of assets
by the Depositor under generally accepted accounting principles.
END OF ARTICLE III
61
<PAGE> 68
ARTICLE IV
ISSUANCE AND SALE OF CERTIFICATES
Section 4.01 Issuance of Certificates.
On the Startup Day, upon the Trustee's receipt from the Seller of an
executed Delivery Order in the form set forth as Exhibit H 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, at the offices of
Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York 10038-4982
(or at such other location acceptable to the Seller), the Seller will sell and
convey the Initial Home Equity Loans and the money, instruments and other
property related thereto to the Depositor and the Depositor will sell and
convey the Initial 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 Class A 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, Class R
Certificates with a Percentage Interest equal to 99.999%, registered in the
name of the initial purchasers thereof and a Class R Certificate with a
Percentage Interest equal to 0.001%, registered in the name of the Tax Matters
Person (all such events shall be referred to herein as the "Closing").
Upon the Trustee's receipt of the entire net proceeds of the sale of
the Class A Certificates, the Seller shall instruct the Trustee to deposit an
amount equal to the Original Aggregate Pre-Funded Amount in the Pre-Funding
Account and an amount equal to the Original Capitalized Interest Amount in the
Capitalized Interest Account contributed out of such proceeds or otherwise.
The Trustee shall then remit the entire balance of such net proceeds in
accordance with instructions delivered by the Seller.
END OF ARTICLE IV
62
<PAGE> 69
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 as to "principal" and "interest" thereof, 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 the terms
of the related Note). The Class A Certificates are payable solely from
payments received on or with respect to the Home Equity Loans (net of the
Servicing Fees and the Trust Fees and Expenses), moneys in the Principal and
Interest Account, except as otherwise provided herein, moneys in the
Pre-Funding Account and the Capitalized Interest Account, from earnings on
moneys and the proceeds of property held as a part of the Trust Estate and,
upon the occurrence of certain events, from Insured Payments. 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, certain Insured Payments pro rata in accordance with such
Owner's Percentage Interest and certain amounts payable from the Capitalized
Interest Account and from the Pre-Funding Account.
(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 cancelled 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-8 Certificates, the
Class A-9IO Certificates and the 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-8, A-9 and
B hereof, respectively.
Section 5.03 Execution, Authentication and Delivery.
Each Certificate shall be executed on behalf of the Trust, by the
manual signature of one of the Trustee's Authorized Officers. In addition,
each Certificate shall be authenticated by the manual 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 Trustee 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.
63
<PAGE> 70
No Certificate shall be valid until executed and authenticated as set
forth above.
Section 5.04 Registration and Transfer of Certificates.
(a) 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 Certificate Insurer, the Owners 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 Class A Certificates then outstanding, by
such majority of the Percentage Interests represented by the Class R
Certificates, such Owners shall give the Certificate Insurer, the Trustee and
the Owners 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 reasonable fees of the Registrar shall be paid,
as expenses of the Trust, pursuant to Section 7.06 hereof.
(b) 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 Trustee shall execute, 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.
(c) 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 Trustee shall execute, authenticate and deliver
the Certificate or Certificates which the Owner making the exchange is entitled
to receive.
(d) 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.
(e) 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.
(f) 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
64
<PAGE> 71
Certificates; any other expenses in connection with such transfer or exchange
shall be an expense of the Trust.
(g) It is intended that the Class A Certificates be registered so
as to participate in a global book-entry system with the Depository, as set
forth herein. Each Class of Class A Certificates shall, except as otherwise
provided in Subsection (h), be initially issued in the form of a single fully
registered Class A Certificate of such Class (other than the Class A-1
Certificates for which there will be two fully registered Certificates). Upon
initial issuance, the ownership of each such Class A 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, no Class A Certificates (other than the Class
A-9IO Certificates shall be issued in denominations of less than $25,000 and
integral multiples of $1,000 in excess thereof. On the Startup Day, the Class
A-9IO Certificates shall be issued in denominations of no less than $25,000
(based on the Class A-9IO Notional Principal Amount thereof) and integral
multiples of $1,000 in excess thereof.
The Depositor and the Trustee are hereby authorized to execute and
deliver the Representation Letter with the Depository in the form provided to
the Trustee by the Depositor.
With respect to the Class A Certificates registered in the Register in
the name of Cede & Co., as nominee of the Depository, the Depositor, the
Servicer, the Seller, 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 Class A Certificates from time to time as
a Depository. Without limiting the immediately preceding sentence, the
Depositor, the Servicer, the Seller, 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 Class A Certificates,
(ii) the delivery to any Direct or Indirect Participant or any other Person,
other than a registered Owner of a Class A Certificate as shown in the
Register, of any notice with respect to the Class A Certificates or (iii) the
payment to any Direct or Indirect Participant or any other Person, other than a
registered Owner of a Class A Certificate as shown in the Register, of any
amount with respect to any distribution of principal or interest on the Class A
Certificates. No Person other than a registered Owner of a Class A Certificate
as shown in the Register shall receive a certificate evidencing such Class A
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 Class A 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.
(h) In the event that (i) the Depository or the Seller 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 Class A Certificates and the Seller or the Trustee is unable to locate a
qualified successor, or (ii) the Seller at its sole option elects to terminate
the book-entry system through the Depository, the Class A 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
Seller may determine that the Class A 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 Seller and at the Seller's expense, or such
depository's agent
65
<PAGE> 72
or designee but, if the Seller does not select such alternative global
book-entry system, then the Class A Certificates may be registered in whatever
name or names registered Owners of Class A Certificates transferring Class A
Certificates shall designate, in accordance with the provisions hereof.
(i) Notwithstanding any other provision of this Agreement to the
contrary, so long as any Class A Certificate is registered in the name of Cede
& Co., as nominee of the Depository, all distributions of principal or interest
on such Class A Certificates and all notices with respect to such Class A
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
(provided, that with respect to an Owner which is an institutional investor, a
letter of indemnity furnished by it shall be sufficient for this purpose),
then, in the absence of notice to the Trustee or the Registrar that such
Certificate has been acquired by a bona fide purchaser, the Seller 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 from the transferor or transferee
of the related Certificate 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.
Prior to due presentment for registration of transfer of any
Certificate, the Trustee, 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 neither the
Trustee, the Certificate Insurer nor any agent of the Trustee shall be affected
by notice to the contrary.
66
<PAGE> 73
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.
(a) No sale or other transfer of record or beneficial ownership of
a Class R Certificate or assignment of an interest in the Lower-Tier REMIC
Residual Class (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 Certificate or assignment of
an interest in the Lower-Tier REMIC Residual Class (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 Certificate or Lower-Tier REMIC Residual Class.
Furthermore, in no event shall the Trustee accept surrender for transfer,
registration of transfer, or register the transfer, of any Class R Certificate
nor authenticate and make available any new 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 Certificate by his
acceptance thereof, shall be deemed for all purposes to have consented to the
provisions of this Section 5.08(a). The Lower-Tier REMIC Residual Class is not
transferable except that the Owner of the Tax Matters Person Residual Interest
in the Lower-Tier REMIC may assign its interest to another Person who accepts
such assignment and the designation as Tax Matters Person pursuant to Section
11.18 hereof.
(b) No other sale or other transfer of record or beneficial
ownership of a 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) in the case of transfers for which an investment letter in the
form of Exhibit J-1 is provided by the transferee, the Trustee or the Seller
shall require a written opinion of counsel acceptable to and in form and
substance satisfactory to the Seller, the Trustee 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 Seller, the Depositor, the Trustee or the Trust
Estate; and (ii) in the form of Exhibit J-1 or J-2, which investment letter
shall not be an expense of the Seller, the Depositor, the Trustee, the Trust
Estate or the Certificate Insurer. The Owner of a Class R Certificate desiring
to effect such transfer shall, and does hereby agree to, indemnify the Trustee,
the Depositor, the Certificate Insurer and the Seller against any liability
that may result if the transfer is not so exempt or is not made in accordance
with such federal and state laws.
(c) No transfer of a Class R Certificate shall be made unless the
Trustee shall have received a representation letter from the transferee of such
Class R Certificate, acceptable to and in form and substance satisfactory to
the Trustee (which may be combined with the investment letter required by
subsection (b) above), to the effect that such transferee is not an employee
benefit plan subject to Section 406 of ERISA
67
<PAGE> 74
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. In the event that any Class R Certificate is purchased by a
Plan, or by a person or entity acting on behalf of any Plan or using the assets
of any Plan to effect such transfer (including the assets of any Plan held in
an insurance company separate or general account), any representations
necessary to invoke exemptive relief shall be deemed to be made to the Trustee
by the transferee's acceptance of the Class R Certificates. If the necessary
representations are not met, the Trustee must receive an opinion of counsel,
acceptable to and in form and substance satisfactory to the Trustee, which
opinion of counsel shall not be at the expense of either the Trustee or the
Trust, to the effect that the purchase or holding of any Class R Certificates
will not result in the assets of the Trust being deemed to be "plan assets,"
will not cause the Trust to be subject to the fiduciary requirements and
prohibited transaction provisions of ERISA and the Code, and will not subject
the Trustee to any obligation or liability in addition to those expressly
undertaken under this Agreement. Notwithstanding anything else to the contrary
herein, any purported transfer of a Certificate to or on behalf of any Plan not
qualified for exemptive relief without the delivery to the Trustee of an
opinion of counsel as described above shall be null and void and of no effect.
(d) No sale or other transfer of any Class A Certificate may be
made to the Depositor, the Seller, the Servicer or any of their respective
Affiliates.
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
68
<PAGE> 75
ARTICLE VI
COVENANTS
Section 6.01 Distributions.
On each Payment Date, the Trustee will withdraw amounts from the
Certificate Account 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) in the case of the Class A Certificates
registered in the name of the Depository, by wire transfer to the Depository or
(ii) by check or draft mailed on each Payment Date or (iii) if requested by any
Owner (other than the Depository) of (A) a Class A Certificate (other than the
Class A-9IO Certificates) having an original principal balance of not less than
$1,000,000, (B) a Class A-9IO Certificate having an original Notional Principal
Amount of not less than $1,000,000 or (C) a 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.
(a) All payments of amounts due and payable with respect to any
Certificate that are to be made from amounts withdrawn from the Certificate
Account or from Insured Payments shall be made by and on behalf of the Trustee
or by a Paying Agent, and no amounts so withdrawn from the Certificate Account
and no Insured Payment shall be paid over to the Trustee for payments of
Certificates except as provided in this Section.
(b) If the Seller has appointed a Paying Agent pursuant to Section
11.15 hereof, the Trustee will, on the Business Day immediately preceding each
Payment Date, deposit with such Paying Agent 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.
(c) The Seller 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.
(d) The Seller shall require the 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.
(e) Any money held by the Trustee or a Paying Agent in trust for
the payment of any amount due with respect to any Class A Certificate 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 first to the
Certificate Insurer on account of any Reimbursement Amounts and second to the
Owners of the Class R Certificates; and the Owner of such Class
69
<PAGE> 76
A 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 Certificate Insurer on account of any Reimbursement Amount or to the Owners
of the Class R Certificates. The Trustee shall, at the direction of the
Seller, also adopt and employ, at the expense of the Seller, 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) Subject to Sections 10.01(e) and 10.01(g), the Trustee will
hold the Trust Estate in trust for the benefit of the Owners and the
Certificate Insurer and, upon the 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 (with the consent of the Certificate Insurer) or the
Certificate Insurer.
(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.
To the extent not covered by the indemnity or other security
contemplated by 10.01(e) and 10.01(g), the Trustee shall be reimbursed for any
costs or expenses associated with this section pursuant to Section
7.03(b)(iv)(D) hereof.
(b) The Trustee shall have the power to enforce, and shall enforce
the obligations and rights of the other parties to this Agreement, and of 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,
any acts or occurrences which may be unlawful or in violation of the rights of
the Certificate Insurer 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 the Owners of a majority of the
Percentage Interests represented by the Class A Certificates then Outstanding
with the consent of the Certificate Insurer or, if there are no longer any
Class A Certificates then outstanding, by such majority
70
<PAGE> 77
of the Percentage Interests represented by the Class R Certificates; provided,
further, however, that if there is a dispute with respect to payments under the
Certificate Insurance Policy the Trustee's first 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); provided, that the Trustee
shall remain liable for the performance of any such duties notwithstanding any
such contractual arrangement.
Section 6.05 Negative Covenants.
The Trustee will not:
(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, on behalf of the Trust,
any indebtedness of any Person except pursuant to this Agreement;
(iv) dissolve or liquidate the Trust 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
covenant or obligation 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.
71
<PAGE> 78
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 or the Certificate Insurance Policy,
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 Seller
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 Class A Certificates then Outstanding or,
if there are no Class A Certificates then Outstanding, by a
majority of the Percentage Interests represented by 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, the
Certificate Insurer has 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
Class A Certificates or, if there are no Class A Certificates
then Outstanding, by such majority of the Percentage Interests
represented by 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)-(6) 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 and in such case
the Servicer shall determine what action if any shall be taken)..
72
<PAGE> 79
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 to 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 shall impair
any such right or remedy or constitute a waiver of such right or remedy. Every
right and remedy given by this Article VI or by law to the Trustee, the
Certificate Insurer or to the Owners may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee, the Certificate Insurer or by
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 Class A Certificates then Outstanding with the
consent of the Certificate Insurer or if there are no longer any Class A
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 (and which does not require Certificate Insurer
consent or direction pursuant to the terms of the Agreement);
provided, however, that the Trustee need not take any action
which it determines might involve it in liability or may be
unjustly prejudicial to the Owners not so directing.
73
<PAGE> 80
Section 6.12 Indemnification by the Seller.
The Seller agrees to indemnify and hold the Trustee, the Depositor,
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 sustain in any way related to the failure of Seller to
perform its duties in compliance with the terms of this Agreement. The Seller
shall immediately notify the Trustee, the Depositor, the Certificate Insurer
and each Owner if a claim is made by a third party that the Servicer has failed
to perform its obligations to service and administer the Home Equity Loans in
compliance with the terms of this Agreement, and the Seller 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
Depositor, the Servicer, the Seller, the Trustee, the Certificate Insurer
and/or Owner in respect of such claim. The Trustee shall, in accordance with
instructions received from the Seller, reimburse the Seller only from amounts
otherwise distributable on the Class R Certificates for all amounts advanced by
it pursuant to the preceding sentence, except when a final nonappealable
adjudication determines that the claim relates directly to the failure of the
Seller to perform its duties in compliance with the terms of this Agreement.
The provisions of this Section 6.12 shall survive the termination of this
Agreement and the payment of the outstanding Certificates.
END OF ARTICLE VI
74
<PAGE> 81
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 (a) 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 and (b) Insured Payments. 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.
(a) The Depositor shall cause to be established on the Startup
Day, and the Trustee shall maintain, at the Corporate Trust Office, the
Certificate Account, the Upper-Tier Distribution Account, the Pre-Funding
Account and the Capitalized Interest Account each to be held by the Trustee in
the name of the Trust for the benefit of the Owners of the Certificates and the
Certificate Insurer, as their interests may appear. The Pre-Funding Account
and the Capitalized Interest Account are not assets of either of the REMICs.
(b) On each Determination Date the Trustee shall determine (based
solely on information provided to it by the Servicer) with respect to the
immediately following Payment Date, the amounts that are expected to be on
deposit in the Certificate Account (exclusive of any deposits from the
Pre-Funding Account and Capitalized Interest Account expected to be made and
inclusive of any investment earnings on Eligible Investments held in the
Certificate Account) as of such date on such Payment Date (disregarding the
amounts of any Insured Payments) and equal to the sum of (x) such amounts
excluding the amount of any Total Monthly Excess Cashflow included in such
amounts plus (y) the Total Monthly Excess Cashflow to be applied on such
Payment Date plus (z) any deposits to the Certificate Account from the
Pre-Funding Account and the Capitalized Interest Account expected to be made.
The amount described in clause (x) of the preceding sentence with respect to
each Payment Date is the "Available Funds" and the sum of the amounts described
in clauses (x), (y) and (z) of the preceding sentence with respect to each
Payment Date is the "Total Available Funds."
Section 7.03 Flow of Funds.
(a) (i) The Trustee shall deposit in the Certificate Account
without duplication, (i) any Insured Payments received from the Policy Payments
Account pursuant to Section 12.02(b) hereof, (ii) upon receipt, 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, (iii) on the Payment Dates during and immediately following the
Funding Period, the Capitalized Interest Requirement to be transferred on such
Payment Date from the Capitalized Interest Account, pursuant to Section 7.04(e)
hereof and (iv) on the Payment Date immediately following the Funding Period,
the portion of the amount, if any, to be transferred on such Payment Date from
the Pre-Funding Account pursuant to Section 7.04(c) hereof.
75
<PAGE> 82
(ii) On each Payment Date, the Trustee shall transfer the
Lower-Tier Distribution Amount from the Certificate Account to the Upper-Tier
Distribution Account.
(iii) On each Payment Date, the Trustee shall transfer from
the Certificate Account to the Upper-Tier Distribution Account, an amount equal
to the Trust Fees and Expenses for such Payment Date.
(b) Subject to any superseding provisions of clause (c) below
during the continuance of a Certificate Insurer Default, with respect to funds
on deposit in the Upper-Tier Distribution Account, on each Payment Date, the
Trustee shall make the following allocations, disbursements and transfers from
amounts deposited therein pursuant to subsection (a) in the following order of
priority, and each such allocation, transfer and disbursement shall be treated
as having occurred only after all preceding allocations, transfers and
disbursements have occurred:
(i) first, on each Payment Date from amounts then on deposit in
the Upper-Tier Distribution Account, (A) to itself, the
Trustee Fee and the Trustee Reimbursable Expenses, and (B)
provided that no Certificate Insurer Default has occurred and
is continuing the Premium Amount for such Payment Date shall
be paid to the Certificate Insurer;
(ii) second, on each Payment Date, the Trustee shall allocate an
amount equal to the sum of (x) the Total Monthly Excess Spread
with respect to such Payment Date plus (y) any
Overcollateralization Reduction Amount with respect to such
Payment Date (such sum being the "Total Monthly Excess
Cashflow" with respect to such Payment Date) in the following
order of priority:
(A) first, such Total Monthly Excess Cashflow shall be
allocated to the payment of the Class A Principal
Distribution Amount pursuant to clause (b)(iv) below
(excluding any Overcollateralization Increase Amount)
in an amount equal to the amount, if any, by which
(x) the Class A Principal Distribution Amount
(excluding any Overcollateralization Increase Amount)
exceeds (y) the sum of Available Funds and any
amounts deposited in the Certificate Account from the
Pre-Funding Account or the Capitalized Interest
Account (net of the Current Interest and the Trust
Fees and Expenses) and shall be paid as part of the
Class A Principal Distribution Amount pursuant to
clause (iv)(C) below (the amount of such difference
being the "Available Funds Shortfall"); and
(B) second, any portion of the Total Monthly Excess
Cashflow remaining after the allocations described in
clause (A) above shall be allocated to the payment to
the Certificate Insurer in respect of amounts owed on
account of any Reimbursement Amount pursuant to
clause (b)(iv)(A)(I).
(iii) third, the amount, if any, of the Total Monthly Excess
Cashflow on a Payment Date remaining after the allocations and
payments described in clause (ii) above (the "Net Monthly
Excess Cashflow" for such Payment Date) is required to be
applied in the following order or priority:
76
<PAGE> 83
(A) first, such Net Monthly Excess Cashflow shall be used
to reduce to zero, through the payment to the Owners
of the Class A Certificates of an
Overcollateralization Increase Amount included in the
Class A Principal Distribution Amount, which shall be
distributed pursuant to clause (iv)(C) below, any
Overcollateralization Deficiency Amount as of such
Payment Date; and
(B) second, any Net Monthly Excess Cashflow remaining
after the application described in clause (A) above
shall be allocated to the payment to the Servicer
pursuant to clause (iv)(A)(II) below to the extent of
any unreimbursed Delinquency Advances and
unreimbursed Servicing Advances;
(iv) fourth, following the making by the Trustee of all
allocations, transfers and disbursements described above from
amounts (including any related Insured Payment) then on
deposit in the Upper-Tier Distribution Account, the Trustee
shall distribute:
(A) (I) to the Certificate Insurer the amounts described
in clause (ii)(B) above and (II) to the Servicer the
amounts described in clause (iii)(B) above;
(B) to the Owners of each Class of the Class A
Certificates, the related Current Interest for each
Class (including the proceeds of any Insured Payments
made by the Certificate Insurer) on a pro rata basis
based on each such Class A Certificate's Current
Interest without priority among the Class A
Certificates;
(C) the Class A Principal Distribution Amount shall be
distributed as follows:
(I) to the Owners of the Class A-8 Certificates an
amount equal to the Class A-8 Lockout Distribution
Amount and (II) the remainder of the Class A
Principal Distribution Amount as follows: first, to
the Owners of the Class A-1 Certificates until the
Class A-1 Certificate Principal Balance is reduced to
zero; second, to the Owners of the Class A-2
Certificates until the Class A-2 Certificate
Principal Balance is reduced to zero; third, to the
Owners of the Class A-3 Certificates until the Class
A-3 Certificate Principal Balance is reduced to zero;
fourth, to the Owners of the Class A-4 Certificates
until the Class A-4 Certificate Principal Balance is
reduced to zero; fifth, to the Owners of the Class
A-5 Certificates until the Class A-5 Certificate
Principal Balance is reduced to zero; sixth, to the
Owners of the Class A-6 Certificates until the Class
A-6 Certificate Principal Balance is reduced to zero;
seventh, to the Owners of the Class A-7 Certificates
until the Class A-7 Certificate Principal Balance is
reduced to zero; and, eighth, to the Owners of the
Class A-8 Certificates until the Class A-8
Certificate Principal Balance is reduced to zero;
(D) to itself, for the reimbursement of expenses of the
Trustee not reimbursed pursuant to clause (b)(i)
above which expenses were incurred in connection with
its duties and obligations hereunder; and
77
<PAGE> 84
(v) fifth, following the making by the Trustee of all
allocations, transfers and disbursements described above, the
Trustee shall distribute to the Owners of the Class R
Certificates, the Residual Net Monthly Excess Cashflow, if
any, for such Payment Date.
(c) On any Payment Date during the continuance of any Certificate
Insurer Default, if there is an Overcollateralization Deficit, then the Class A
Principal Distribution Amount for such Payment Date shall be distributed pro
rata to the Owners of any Outstanding Class A Certificates on such Payment
Date.
(d) Notwithstanding anything above, the aggregate amounts
distributed on all Payment Dates to the Owners of the Class A Certificates on
account of principal pursuant to clause (b)(iv)(C) shall not exceed the
original Certificate Principal Balance of the related Class A Certificates.
(e) Upon receipt of Insured Payments from the Certificate Insurer
on behalf of Owners of the Class A Certificates, the Trustee shall deposit such
Insured Payments in the Policy Payments Account. On each Payment Date,
pursuant to Section 12.02(b) hereof, such amounts will be transferred from the
Policy Payment Account to the Certificate Account and the Trustee shall
distribute such Insured Payments, or the proceeds thereof in accordance with
Section 7.03(b), to the Owners of such Certificates.
(f) The Trustee or Paying Agent shall (i) receive for each Owner
of the 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(b). Insured Payments disbursed by the Trustee or
Paying Agent from proceeds of the 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 Reimbursement Amount
pursuant to Section 7.03(b)(ii)(B) hereof. Nothing contained in this paragraph
shall be construed so as to impose duties or obligations on the Trustee that
are different from or in addition to those expressly set forth in this
Agreement.
(g) 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 R Certificates to receive distributions in
respect of the Class R Certificates shall be subject and subordinate to the
preferential rights of the holders of the Class A 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 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 R Certificates in
accordance with the terms of this Agreement. Notwithstanding anything
contained in this Agreement to the contrary, and the Owners of the Class R
Certificate shall not be required to refund any amount properly distributed on
the Class R Certificates pursuant to this Section 7.03.
Section 7.04 Pre-Funding Account and Capitalized Interest Account.
(a) On the Startup Day, the Trustee will deposit, on behalf of the
Owners of the Class A Certificates and the Certificate Insurer in the
Pre-Funding Account the Original Pre-Funded Amount from the proceeds of the
sale of the Class A Certificates.
(b) On any Subsequent Transfer Date, the Depositor shall instruct
the Trustee to withdraw from the Pre-Funding Account an amount equal to 100% of
the aggregate Loan Balances of the Subsequent Home
78
<PAGE> 85
Equity Loans sold to the Trust on such Subsequent Transfer Date and pay such
amount to or upon the order of the Depositor upon satisfaction of the
conditions set forth in Sections 3.05 and 3.07 hereof with respect to such
transfer. In no event shall the Depositor be permitted to instruct the Trustee
to release from the Pre-Funding Account to the Certificate Account an amount in
excess of the Original Pre-Funded Amount.
(c) If the Pre-Funded Amount has been reduced to $100,000 or less
on or before November 30, 1997 or December 31, 1997, the Depositor shall
instruct the Trustee to withdraw from the Pre-Funding Account the amount
(exclusive of any related Pre-Funding Account Earnings still on deposit
therein) remaining in the Pre-Funding Account and deposit such amount to the
Certificate Account on the December 1997 or January 1998 Monthly Remittance
Date, respectively. If the Pre-Funded Amount has not been reduced to $100,000
or less by December 31, 1998, then the Trustee shall withdraw on the February
1998 Determination Date from the Pre-Funding Account the amount (exclusive of
any related Pre-Funding Account Earnings still on deposit therein) remaining in
the Pre-Funding Account and deposit on such date such amount to the Certificate
Account, which will be distributed to the related Owners of the Class A
Certificates on the February 1998 Payment Date.
(d) On the Payment Dates during and immediately following the
Funding Period, the Trustee shall transfer from the Pre-Funding Account to the
Capitalized Interest Account the Pre-Funding Account Earnings, if any,
applicable to such Payment Date.
(e) On each Payment Date during and immediately following the
Funding Period, the Trustee shall transfer from the Capitalized Interest
Account to the Certificate Account, the Capitalized Interest Requirement.
(f) On each Subsequent Transfer Date the Trustee shall distribute
the Overfunded Interest Amount, if any (calculated by the Trustee on the day
prior to such Subsequent Transfer Date) from the Capitalized Interest Account
to the Seller and on the Payment Date immediately following the end of the
Funding Period the Trustee shall distribute to the Seller any amounts remaining
in the Capitalized Interest Account after taking into account the transfers on
such Payment Date described above to the Seller. The Capitalized Interest
Account shall be closed at the end of the Funding Period. All amounts, if any,
remaining in the Capitalized Interest Account on such day shall be transferred
to the Seller.
(g) The Pre-Funding Account and the Capitalized Interest Account
shall not be an asset of either the Lower-Tier REMIC or the Upper-Tier REMIC.
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 and the
Certificate Insurer shall be invested and reinvested by the Trustee in the name
of the Trust for the benefit of the Owners and the Certificate Insurer, as
directed in writing by the Seller, 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
79
<PAGE> 86
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 Seller shall have failed to give investment directions to the
Trustee then the Trustee shall invest in money market funds described in
Section 7.07(j) 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 (other
than the Pre-Funding 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. For federal income
tax purposes, the earnings on the Capitalized Interest Account and Pre-Funding
Account shall be treated as income of the Seller.
Section 7.06 Payment of Trust Expenses.
(a) The Trustee shall make demand on the Seller to pay and the
Seller shall pay the amount of the expenses of the Trust referred to in Section
2.05 (other than payments of the Premium Amount) (including Trustee's fees and
expenses not covered by Section 7.03(b)(i) and 7.03(b)(iv)(D)), and the Seller
shall promptly pay such expenses directly to the Persons to whom such amounts
are due.
(b) The Seller shall pay directly on the Startup Day 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, 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;
(b) Federal Housing Administration debentures;
(c) FHLMC participation certificates which guaranty timely payment
of principal and interest and senior debt obligations;
80
<PAGE> 87
(d) Consolidated senior debt obligations of any Federal Home Loan
Banks;
(e) FannieMae mortgage-backed securities (other than stripped
mortgage securities which are valued greater than par on the portion of unpaid
principal) and senior debt obligations;
(f) 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
A-1+ or better by Standard & Poor's and P-1 by Moody's;
(g) 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 each of
Standard & Poor's) 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;
(h) Repurchase agreements collateralized by securities described
in (a), (c), or (e) 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, 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, (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 C.F.R.
306.1 et seq. or 31 C.F.R. 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%.
(i) Commercial paper (having original maturities of not more than
270 days) rated in the highest short-term rating categories of each Rating
Agency;
81
<PAGE> 88
(j) 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, and Aaa by Moody's; and
(k) Any other investment permitted by each of the Rating Agencies
and the Certificate Insurer.
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.
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 Seller 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 and
upon which the Trustee may rely) the Seller, the Depositor, 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 on deposit in the Certificate
Account as of the related Determination Date;
(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;
(3) The amount of any Overcollateralization Increase Amount;
(4) The amount of any Insured Payment to be made by the
Certificate Insurer on such Payment Date;
(5) The application of the amounts described in clauses (1),
(3) and (4) above in respect of the distribution of the Class A
Distribution Amount on such Payment Date in accordance with Section
7.03 hereof;
(6) The Certificate Principal Balance of each Class of the
Class A Certificates, the Class A-9IO Notional Principal Amount and
the remaining Certificate Principal Balance (or Class A-9IO Notional
Principal Amount) of each Class of Certificates following any such
payment;
(7) The amount, if any, of any Realized Losses for the
related Remittance Period;
(8) The amount of any Overcollateralization Reduction Amount;
82
<PAGE> 89
(9) For each of the Payment Dates during and immediately
after the Funding Period, (A) the Pre-Funded Amount previously used to
purchase Subsequent Home Equity Loans, (B) the Pre-Funded Amount
distributed as principal, (C) the Pre-Funding Account Earnings
transferred to the Capitalized Interest Account and (D) the amounts
transferred from the Capitalized Interest Account to the Certificate
Account and the amount transferred to the Seller, if any; and
(10) The amount by which the Servicing Fee is reduced because
of the Underwater Loans.
Section 7.09 Reports by Trustee to Owners.
(a) On the Business Day preceding each Payment Date the Trustee
shall transmit a report in writing to each Owner, the Certificate Insurer 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);
(ii) the amount of such Owner's distributions allocable to
principal, separately identifying the aggregate amount of any
Prepayments in full or other Prepayments or other recoveries of
principal included therein and any Pre-Funded Amounts distributed as a
prepayment and any related Overcollateralization Increase Amount;
(iii) the amount of such Owner's distributions allocable to
interest (based on a Certificate in the original principal amount of
$1,000);
(iv) if the distribution (net of any Insured Payment) to
the Owners of any Class of the Class A Certificates on such Payment
Date was less than the related Class A Distribution Amount on such
Payment Date, the related Interest Carry Forward Amount and the
allocation thereof to the related Classes of Class A Certificates
resulting therefrom;
(v) the amount of any Insured Payment included in the
amounts distributed to the Owners of Class A Certificates on such
Payment Date;
(vi) the principal amount (or notional principal amount)
of each Class of Certificate (based on a Certificate in the original
principal amount of $1,000) which will be Outstanding and the
aggregate Loan Balance after giving effect to any payment of principal
on such Payment Date;
(vii) the Overcollateralization Amount and
Overcollateralization Deficit, if any, remaining after giving effect
to all distributions and transfers on such Payment Date;
(viii) the aggregate Loan Balance of all Home Equity Loans
after giving effect to any payment of principal on such Payment Date.
(ix) based upon information furnished by the Servicer,
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;
83
<PAGE> 90
(x) the total of any Substitution Amounts and any Loan
Purchase Price amounts included in such distribution;
(xi) the weighted average Coupon Rate of the Home Equity
Loans;
(xii) such other information as the Certificate Insurer may
reasonably request with respect to Delinquent Home Equity Loans;
(xiii) the Loan Balance of the largest Home Equity Loans
outstanding;
(xiii) for each Payment Date prior to the end of the Funding
Period, the total remaining Pre-Funded Amount in the Pre-Funding
Account; and
(xiv) whether the Servicer Termination Test is failed.
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), (ix) and (x) shall be based
solely upon information contained in the monthly servicing report provided by
the Servicer to the Trustee pursuant to Section 8.08 hereof.
(b) In addition, on the Business Day preceding each Payment Date the
Trustee will distribute to each Owner, the Certificate Insurer, the Rating
Agencies, together with the information described in Subsection (a) preceding,
the following information 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 Reporting Date:
(i) the number and aggregate principal balances
of Home Equity 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 immediately
preceding the Payment Date, (d) the numbers and aggregate Loan
Balances of all Home Equity Loans as of such Payment Date and (e) the
percentage that each of the amounts represented by clauses (a), (b)
and (c) represent as a percentage of the respective amounts in clause
(d);
(ii) the status and the number and dollar amounts
of all Home Equity Loans in foreclosure proceedings as of the close of
business on the last Business Day of the calendar month immediately
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;
(iii) the number of Mortgagors and the Loan
Balances of (a) the related Mortgages involved in bankruptcy
proceedings as of the close of business on the last Business Day of
the calendar month immediately preceding such Payment Date and (b)
Home Equity Loans that are "balloon" loans;
(iv) the existence and status of any REO
Properties, as of the close of business of the last Business Day of
the month immediately preceding the Payment Date;
84
<PAGE> 91
(v) the book value of any REO Property as of the
close of business on the last Business Day of the month immediately
preceding the Payment Date;
(vi) the Cumulative Loss Percentage, the amount of
cumulative Realized Losses, the current period Realized Losses, and
the Annual Loss Percentage (Rolling Twelve Month); and
(vii) 60+ Delinquency Percentage (Rolling Six
Month) and the amount of 60+ Day Delinquent Loans.
Section 7.10 Reports by Trustee.
(a) The Trustee shall report to the Depositor, the Seller, 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 Seller, the Certificate Insurer or any Owner may from
time to time reasonably request. Without limiting the generality of the
foregoing, the Trustee shall, at the reasonable request of the Depositor, the
Seller or any Owner transmit promptly to the Depositor, the Seller, the
Certificate Insurer and any Owner copies of all accountings of receipts in
respect of the Home Equity Loans furnished to it by the Servicer and shall
notify the Seller if any Monthly Remittance Amount has not been received by the
Trustee when due.
(b) The Trustee shall report to each Owner and the Certificate
Insurer 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.
END OF ARTICLE VII
85
<PAGE> 92
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, the terms of the respective Home Equity
Loans, 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 but without regard to: (i) any relationship that
the Servicer, any Sub-Servicer or any Affiliate of the Servicer or any
Sub-Servicer may have with the related Mortgagor; (ii) the ownership of any
Certificate by the Servicer or any Affiliate of the Servicer; (iii) the
Servicer's obligation to make Delinquency Advances or Servicing Advances; or
(iv) the Servicer's or any Sub-Servicer's right to receive compensation for its
services hereunder or with respect to any particular transaction. 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, in accordance with the servicing standards set forth herein, 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 the rights and powers of the Servicer which have been
delegated to such Sub-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 home equity 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
8.13(a) and Section 8.14(a) shall each constitute a revocable power of attorney
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
held by the Trustee hereunder paid in full or foreclosed (or with respect to
which payment in full has been escrowed). Revocation of the power of attorney
created by
86
<PAGE> 93
the final proviso of the preceding sentence shall take effect upon (i) the
receipt by the Servicer of written notice thereof from the Trustee, (ii) a
Servicer Termination Event or (iii) the termination of the Trust. 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 a power of attorney to the Servicer or any Sub-Servicer and furnish
them with any other documents as the Servicer or such Sub-Servicer shall
reasonably request to enable the Servicer and such Sub-Servicer to carry out
their respective servicing and administrative duties hereunder.
Upon the request of the Trustee, the Servicer shall send to the
Trustee, the details concerning the servicing of the Home Equity Loans on
computer generated tape, diskette or other machine readable format.
The Servicer shall give prompt notice to the Trustee 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, with the prior written consent of the Certificate
Insurer, enter into Sub-Servicing Agreements for any servicing and
administration of Home Equity Loans with any institution which is acceptable to
the Certificate Insurer and which, (x) is in compliance with the laws of each
state necessary to enable it to perform its obligations under such
Sub-Servicing Agreement, (y) has experience servicing home equity loans that
are similar to the Home Equity Loans and (z) has equity of not less than
$5,000,000 (as determined in accordance with generally accepted accounting
principles). The Servicer shall give notice to the Trustee, the Owners, the
Certificate Insurer and the Rating Agencies of the appointment of any
Sub-Servicer (and shall receive the confirmation of the Rating Agencies that
such Sub-Servicer shall not result in a withdrawal or downgrading by any Rating
Agency of the rating of the Class A Certificates or the shadow rating of the
Class A Certificates). 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
87
<PAGE> 94
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 the Trustee (if acting as successor Servicer) or
any other successor Servicer shall have the option to terminate such agreement
without payment of any fees if the original Servicer is terminated or resigns.
The Servicer shall deliver to the Trustee and the Certificate Insurer copies of
all Sub-Servicing Agreements, and any amendments or modifications thereof
promptly upon the Servicer's execution and delivery of such instrument.
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; provided, however, that nothing contained in such
Sub-Servicing Agreement shall be deemed to limit or modify this Agreement.
(b) The Servicer (except The Chase Manhattan Bank 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 Depositor, 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 Depositor, 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
Depositor, the Certificate Insurer and/or Owner in respect of such claim. The
Trustee shall, in accordance with instructions received from the Servicer,
reimburse the Servicer only from amounts otherwise distributable on the Class R
Certificates for all amounts advanced by it pursuant to the preceding sentence,
except when a final nonpayable adjudication determines that the claim relates
directly to the failure of the Servicer to perform its duties in compliance
with the Agreement. The provisions of this Section 8.05(b) 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
88
<PAGE> 95
the Trustee 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 part of the Trustee; provided, however,
that the Trustee (if acting as successor Servicer) or any other 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:
The Chase Manhattan Bank, as Trustee on behalf of the Owners of the IMC Home
Equity Loan Trust 1997-7 Home Equity Loan Pass-Through Certificates. 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 immediately 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 selected by the Trustee. 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 amount 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 Trust 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 Total Monthly Excess Spread 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.
89
<PAGE> 96
(c) The Servicer shall deposit to the Principal and Interest
Account on the Business Day after receipt all principal and interest
collections on the Home Equity Loans due 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) 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, plus (II) accrued and unpaid
interest on such Home Equity Loan (net of the related Servicing Fee) to the
date of such liquidation and (III) any Realized Losses incurred during the
related Remittance Period, (ii) principal and interest due (and Prepayments
collected) on the Home Equity Loans on or prior to the Cut-Off Date or related
Subsequent Cut-Off Date, as the case may be, (iii) reimbursements for
Delinquency Advances and (iv) 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 Principal and Interest Account, only in the following priority and for
the following purposes:
(A) on each Monthly Remittance Date, to pay itself the Servicing
Fee;
(B) to withdraw investment earnings on amounts on deposit in the
Principal and Interest Account;
(C) to withdraw amounts that have been deposited to the Principal
and Interest Account in error;
(D) to reimburse itself pursuant to Section 8.09(a) for
unrecovered Delinquency Advances and for any excess
Compensating Interest received by it pursuant to Section
8.10(a); 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
Reporting Date, deliver to the Trustee and the Certificate Insurer, a monthly
servicing report, containing (without limitation) the following information:
principal and interest collected in respect of the Home Equity Loans, scheduled
principal and interest that was due on the Home Equity Loans, relevant
information with respect to Liquidated Loans, if any, 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 Reporting
Date of the amounts of any Loan Purchase Prices or Substitution Amounts so
remitted during the related Remittance Period and of the Loan Balance of the
Home Equity Loan having the largest Loan Balance of such date.
(iii) The Servicer shall provide to the Trustee the information
described in Section 8.08(d)(ii)(b) and in Section 7.09(b) to enable the
Trustee to perform its reporting requirements under Section 7.09.
90
<PAGE> 97
Section 8.09 Delinquency Advances and Servicing Advances.
(a) On each Monthly Remittance Date, the Servicer shall be required
to remit to the Trustee for deposit to the Certificate Account out of the
Servicer's own funds any Delinquent payment of interest with respect to each
Delinquent Home Equity Loan, which payment was not received on or prior to the
related Remittance Date and was not theretofore advanced by the Servicer. Such
amounts of the Servicer's own funds so deposited are "Delinquency Advances".
The Servicer shall be permitted to reimburse itself on any Business
Day for any Delinquency Advances paid from the Servicer's own funds, from
collections on any Home Equity Loans that are not required to be distributed on
the Payment Date occurring during the month in which such reimbursement is made
(all or any portion of such amount to be replaced on future Monthly Remittance
Dates to the extent required for distribution) or as provided in Section
7.03(b)(iii)(B).
Notwithstanding the foregoing, in the event that the Servicer
determines in its reasonable business judgment in accordance with the servicing
standards set out herein that any proposed Delinquency Advance would not be
recoverable, the Servicer shall not be required to make Delinquency Advances
with respect to such Home Equity Loan. To the extent that the Servicer
previously has made Delinquency Advances with respect to a Home Equity Loan
that the Servicer subsequently determines will be nonrecoverable, the Servicer
shall be entitled to reimbursement for such aggregate unreimbursed Delinquency
Advances as provided in the prior paragraph. The Servicer shall give written
notice of such determination as to why such amount would not be recoverable to
the Trustee and the Certificate Insurer; the Trustee shall promptly furnish a
copy of such notice to the Owners of the Class R Certificates; provided,
further, that the Servicer shall be entitled to recover any unreimbursed
Delinquency Advances from Liquidation Proceeds for the related Home Equity
Loan.
(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, (i) Preservation Expenses, (ii) the cost of any enforcement or
judicial proceedings, including foreclosures, (iii) the cost of the management
and liquidation of REO Property, (iv) advances required by Section 8.13(a),
except to the extent that such amounts are determined by the Servicer in its
reasonable business judgment not to be recoverable and (v) expenses incurred
pursuant to Section 8.22. Such costs will constitute "Servicing Advances".
The Servicer may recover a Servicing Advance (x) from the Mortgagors to the
extent permitted by the Home Equity Loans or, if not theretofore 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(b)(iv). 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
other Home Equity Loan except as provided in Section 7.03(b)(iv).
Section 8.10 Compensating Interest; Repurchase of Home Equity
Loans.
(a) If a Prepayment in full of a Home Equity Loan or a Prepayment
of at least six times a Mortgagor's Monthly Payment occurs during any calendar
month, any difference between (x) the interest collected from the Mortgagor in
connection with such payoff, and (y) the full month's interest at the Coupon
Rate that would be due on the related Due Date for such Home Equity Loan
("Compensating Interest") (but
91
<PAGE> 98
not in excess of the aggregate Servicing Fee for the related Remittance Period)
shall be deposited by the Servicer to the Principal and Interest Account (or
if such difference is an excess, the Servicer shall retain such excess) on the
next succeeding Monthly Remittance Date and shall be included in the Monthly
Remittance Amount to be made available to the Trustee on such Monthly
Remittance Date.
(b) Subject to the clause (c) below, the Servicer has the right
and the option, but not the obligation, to purchase for its own account any
Home Equity Loan which becomes Delinquent, in whole or in part, as to at least
three 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 may not purchase any such Home
Equity Loan unless the Servicer has delivered to the Trustee at the Servicer's
expense, an opinion of counsel acceptable to the Trustee 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 of
either the Upper-Tier REMIC or the Lower-Tier REMIC (other than the Pre-Funding
Account and the Capitalized Interest Account) as a REMIC. Any such Home Equity
Loan so purchased shall be purchased by the Servicer on or prior to 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) If a Home Equity Loan to be repurchased by the Servicer
pursuant to clause (b) above, is the greatest number of days Delinquent of all
then Delinquent Home Equity Loans, the Servicer may repurchase such Home Equity
Loans without having first notified the Certificate Insurer of such repurchase.
In all other cases, the Servicer must notify the Certificate Insurer, in
writing, of its intent to repurchase a Home Equity Loan and the Servicer may
not repurchase such Home Equity Loan without the written consent of the Trustee
and the Certificate Insurer; provided, that the Certificate Insurer shall be
deemed to have consented to such repurchase unless it notifies the Servicer, in
writing, of its objection to such repurchase within 5 days after its receipt of
the notice of proposed repurchase.
(d) 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 carrier generally acceptable
to the Servicer 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.
(b) If the Home Equity Loan at the time of origination (or if
required by federal law, at any time thereafter) relates to a Property in an
area identified in the Federal Register by the Federal Emergency
92
<PAGE> 99
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 then current guidelines of the Federal Insurance
Administration with a carrier generally acceptable to the Servicer 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
advance 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, provided at the expense of the Servicer, 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 home equity 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 material 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 or to
the Custodian on the Trustee's behalf the original copy of such assumption or
substitution agreement (indicating the File to which it relates) which copy
shall be added by the Trustee or by the Custodian on the Trustee's behalf 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, no material term of the Home Equity Loan
(including, without limitation, the required monthly payment on the related
Home Equity Loan, the stated maturity, the outstanding principal amount or the
Coupon Rate) shall 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.
93
<PAGE> 100
Section 8.13 Realization Upon Defaulted Home Equity Loans; Workout
of Home Equity Loans.
(a) The Servicer shall foreclose upon or otherwise comparably
effect the ownership in the name of the Trustee 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 in good faith deems necessary to
comply with this covenant unless the Servicer obtains for the Certificate
Insurer and the Trustee, an opinion of counsel (the expense of which opinion
shall be a Servicing Advance) experienced in federal income tax matters
acceptable to the Certificate Insurer and the Trustee, addressed to the
Certificate Insurer and the Trustee 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 either the
Lower-Tier REMIC or the Upper-Tier REMIC 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 the
Lower-Tier REMIC or the Upper-Tier 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 or to be within one mile of
the site of such wastes or substances, without the prior written consent of the
Trustee and the Certificate Insurer.
(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."
(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
94
<PAGE> 101
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 Class A 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 provide written notice to the Trustee and
the Certificate Insurer prior to the execution of any modification, waiver or
amendment of any provision of any Home Equity Loan; provided, that if the
Certificate Insurer does not object in writing to the modification, waiver or
amendment specified in such notice five (5) Business Days after its receipt
thereof, the Servicer may effectuate such modification, waiver or amendment and
shall deliver to the Custodian, on behalf of the Trustee for deposit in the
related File, an original counterpart of the agreement relating to such
modification, waiver or amendment, promptly following the execution thereof.
(e) The Servicer has no intent to foreclose on any Mortgage based
on the delinquency characteristics as of the Startup Day; provided, that the
foregoing does not prevent the Servicer from initiating foreclosure proceedings
on any date hereafter if the facts and circumstances of such Mortgage including
delinquency characteristics in the Servicer's discretion so warrant such
action.
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
Custodian, on behalf of the Trustee the FannieMae "Request for Release of
Documents" (FannieMae Form 2009). Upon receipt of such Request for Release of
Documents, the Custodian, on behalf of 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 or to the
Trustee. In lieu of executing any such satisfaction or assignment, as the case
may be, the Servicer may prepare and submit to the Custodian, on behalf of 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
Custodian, on behalf of 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) The Servicer (upon receiving the prior written consent of the
Certificate Insurer) 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
95
<PAGE> 102
complied with; (y) the Loan-to-Value Ratio and debt-to-income ratio after any
release does not exceed the Loan-to-Value Ratio and debt-to-income ratio of
such Note on the Cut-Off Date, or Subsequent Cut-Off Date, as applicable and
any increase in the Loan-to-Value Ratio shall not exceed 5% 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 Rating Agencies if an application is approved under clause (y) above
without approval in writing of 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 related 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, unless a successor
Servicer is appointed pursuant to Section 8.20 hereof, in which case the
successor Servicer shall be entitled to such fees as are agreed upon by the
Trustee, the Certificate Insurer, the successor Servicer and the majority of
the Percentage Interests of the Class R Certificates.
The right to receive the Servicing Fee may not be transferred in whole
or in part except in connection with the transfer of all of the Servicer's
responsibilities and obligations under this Agreement.
Section 8.16 Annual Statement as to Compliance.
The Servicer, at its own expense, will deliver to the Trustee, the
Certificate Insurer, the Depositor, and the Rating Agencies, on or before April
30 of each year, commencing in 1999, 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.
The Servicer shall deliver to the Trustee, the Certificate Insurer and
the Rating Agencies, promptly after having obtained knowledge thereof but in no
event later than five Business Days thereafter written notice by means of an
Officer's Certificate of any event which with the giving of notice or the lapse
of time would become a Service Termination Event.
Section 8.17 Annual Independent Certified Public Accountants'
Reports.
On or before April 30 of each year, commencing in 1999, the Servicer,
at its own expense (or if the Trustee is then acting as Servicer, at the
expense of the Seller, which in no event shall exceed $1,000 per
96
<PAGE> 103
annum), shall cause to be delivered to the Trustee, the Depositor, 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 stating that such firm has examined the
Servicer's overall servicing operations in accordance with the requirements of
the Uniform Single Audit Procedure 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 Office of Thrift Supervision (the "OTS"), the FDIC and the supervisory
agents and examiners of each of the FDIC and the OTS (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.
Other than with respect to entering into Sub-Servicing Agreements
pursuant to Section 8.03 hereof, 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(h) hereof for a
successor servicer.
Section 8.20 Removal of Servicer; Retention of Servicer;
Resignation of Servicer.
(a) The Certificate Insurer or the Trustee (with the prior written
consent of the Certificate Insurer) (or, except in the case of item (vi) below,
the Owners, with the consent of the Certificate Insurer pursuant to Section
6.11 hereof) may remove the Servicer upon the occurrence of any of the
following events (each a "Servicer Termination Event"):
(i) The Servicer shall (A) apply for or consent
to the appointment of a receiver, trustee, liquidator or custodian or
similar entity with respect to itself or its property, (B) admit in
writing its inability to pay its debts generally as they become due,
(C) make a general assignment for the benefit of creditors, (D) be
adjudicated a bankrupt or insolvent, (E) 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 (F) 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,
97
<PAGE> 104
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 payment required of the Servicer under
this Agreement) 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 from
the Trustee or Owners of 25% of the Percentage Interests of any Class
then Outstanding; 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 (A)
the Servicer or an Affiliate of the Servicer is the surviving entity
of such combination, (B) the surviving entity (1) is servicing at
least $300,000,000 of home equity loans that are similar to the Home
Equity Loans and (2) has equity of not less than $10,000,000 (as
determined in accordance with generally acceptable accounting
principles) or (C) is consented to by the Certificate Insurer (such
consent not to be unreasonably withheld) and such resulting entity
agrees to assume the Servicer's obligations thereunder; or
(vi) The failure of the Servicer (except for the
Trustee in its capacity as successor Servicer) to satisfy the Servicer
Termination Test.
(b) Upon the occurrence of a Servicer Termination Event, the
Servicer shall act as servicer under this Agreement, subject to the right of
removal set forth in subsection (a) hereof, for an initial period commencing on
the date on which such Servicer Termination Event occurred and ending on the
last day of the calendar quarter in which such Servicer Termination Event
occurred, which period may be extended by the Certificate Insurer in its sole
discretion for a succeeding quarterly period on December 31, March 31, June 30
and September 30 of each year (each such quarterly period for which the
Servicer shall be designated to act as servicer hereunder, a "Term of
Service"); provided that nothing in this Section 8.20(b) shall prohibit the
Certificate Insurer or the Trustee from removing the Servicer pursuant to
Section 8.20(a). Notwithstanding the foregoing, the Certificate Insurer may,
in its sole discretion, extend the period for which the Servicer is to act as
such for a period in excess of one quarter (provided such extension shall be an
additional one or more quarters), but any such extension shall be revocable at
any time by the Certificate Insurer upon written notice delivered to the
Trustee and the Servicer at least fifteen days prior to the expiration of the
related quarterly period.
98
<PAGE> 105
(c) 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 such party from
time to time.
(d) 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 acceptable to the Trustee and the Certificate Insurer at
the expense of the Servicer to such effect which shall be delivered to the
Trustee and the Certificate Insurer.
(e) 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.
(f) 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.
(g) 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.
(h) Upon removal or resignation of the Servicer, the Trustee may
(A) solicit bids for a successor servicer as described below or (B) shall
appoint the Backup Servicer as Servicer. If the Trustee elects to solicit bids
for a successor Servicer, the Trustee agrees to act as Backup Servicer during
the solicitation process and shall assume all duties of the Servicer (except as
otherwise provided in this Agreement). 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 home equity loans and having equity of not less than $5,000,000 (or
such lower level as may be acceptable to the Certificate Insurer), as
determined in accordance with generally accepted accounting principles 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 (other than the Trustee in its capacity
as successor Servicer) so appointed shall be the amount agreed to between the
successor Servicer, the Certificate Insurer and the majority of the Percentage
Interests of the Class R Certificates, (up to a maximum of 0.50% per annum on
each Home Equity Loan) 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 becomes the
successor Servicer it shall receive as its compensation the same compensation
paid to the Servicer immediately prior to the Servicer's removal or
resignation; provided, further, however, that if the Trustee acts as successor
Servicer then the Servicer 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
amount payable in excess of twenty-five dollars ($25.00) per Home
99
<PAGE> 106
Equity Loan, if any, shall be payable to the successor Servicer and
reimbursable pursuant to Section 7.03(b)(iv)(D) hereof. The Trustee shall be
obligated to serve as successor Servicer whether or not the fee described in
this section is paid by the Servicer, but shall in any event be entitled to
receive, and to enforce payment of, such fee from the Servicer.
(i) In the event the Trustee elects to solicit 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 servicing compensation in
accordance with clause (h) above, 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 it will
pay to obtain servicing. The Trustee shall deduct from any sum received by the
Trustee from the successor to the 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
Servicer's successor.
(j) 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 Servicer agrees to reimburse the
Trust, the Owners and the Certificate Insurer 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. The amount payable in excess of twenty-five dollars ($25.00) per
Home Equity Loan, if any, shall be payable to the successor Servicer and
reimbursable pursuant to Section 7.03(b)(iv)(D) hereof.
(k) The Trustee or any other successor Servicer, upon assuming the
duties of Servicer hereunder, shall immediately (i) record all assignments of
Home Equity Loans not previously recorded in the name of the Trustee pursuant
to Section 3.05(b)(ii) as a result of an opinion of counsel and (ii) make all
Delinquency Advances and Compensating Interest payments 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 (k)) if, in the Trustee's reasonable good faith judgment, such
Delinquency Advances will ultimately be recoverable from the Home Equity Loans.
100
<PAGE> 107
(l) The Servicer which is being removed or is resigning shall give
notice to the Mortgagors, to Moody's and to Fitch of the transfer of the
servicing to the successor.
(m) The Trustee shall give notice to the Owners, the Trustee, the
Certificate Insurer, the Seller and the Rating Agencies of the occurrence of
any event described in paragraphs (a) above of which the Trustee is aware.
Section 8.21 Inspections; Errors and Omissions Insurance.
(a) At any reasonable time and from time to time upon reasonable
notice, the Trustee, the Certificate Insurer, any Owner of a Class R
Certificate, 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 (including the Trustee if it shall become the
Servicer hereunder) 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
FannieMae Guide or any successor provision thereof; provided, however, that in
any 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 Owners and
the Certificate Insurer.
Section 8.22 Additional Servicing Responsibilities for Second
Mortgage Loans.
The Servicer must notify any superior lienholder in writing of the
existence of the Second Mortgage Loan and request notification of any action
(as described below) to be taken against the Mortgagor or the Mortgaged
Property by the superior lienholder.
If the Servicer is notified that any superior lienholder has
accelerated or intends to accelerate the obligations under a First Mortgage
Loan, or has declared or intends to declare a default under the mortgage or the
promissory note secured thereby, or has filed or intends to file an election to
have the Mortgaged Property sold or foreclosed, the Servicer shall take, on
behalf of the Trust, whatever actions are necessary to protect the interests of
the Owners and the Certificate Insurer, and/or to preserve the security of the
related Home Equity Loan, subject to the application of the REMIC Provisions.
The Servicer shall advance the necessary funds to cure the default or reinstate
the lien securing a First Mortgage Loan, if such advance is in the best
interests of the Certificate Insurer and the Owners; provided, however, that no
such additional advance need be made if such advance would be nonrecoverable.
The Servicer shall thereafter take such action as is necessary to recover the
amount so advanced. Any expenses incurred by the Servicer pursuant to this
Section 8.22 shall be Servicing Advances.
END OF ARTICLE VIII
101
<PAGE> 108
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 later 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 and (c) at any
time when a Qualified Liquidation is effected as described in Section 9.02. 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 Lower-Tier REMIC and the Upper-Tier REMIC to adopt a plan of
complete liquidation as contemplated by Section 860F(a)(4) of the Code and (ii)
provide to the Trustee, at their expense, 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 Servicer either shall sell the Home Equity Loans and the
Trustee shall distribute the proceeds of the liquidation of the Trust Estate,
or the Servicer shall distribute equitably in kind all of the assets of the
Trust Estate to the remaining Owners of the Certificates to the effect that
each such liquidation constitutes 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 United Kingdom, 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
Certificates.
(a) On any Monthly Remittance Date after the Clean-Up Call Date,
the Owners of a majority of the Percentage Interests represented by the Class R
Certificates then outstanding may determine to purchase, in whole only, 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 such
Owners of Class R Certificates, or (ii) in the absence of such an agreement at
a price equal to (x) in the case of Home Equity Loans 100% of the aggregate
Loan Balances of the related Home Equity Loans and (y) in the case of REO
Properties, the appraised value of such properties (such appraisal to be
conducted by an appraiser mutually agreed upon by the Servicer and the Trustee)
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 Delinquency Advances which the Servicer has theretofore failed to
remit plus all amounts owed to the Certificate Insurer pursuant to the
Insurance Agreement; provided, that in any case such price shall not be less
than the then outstanding Class A Certificate Principal Balance plus all
amounts owed to the Certificate Insurer pursuant to 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.
102
<PAGE> 109
(b) In the event that the Owners of the Class R Certificates
purchase all Home Equity Loans and each REO Property remaining in the Trust
Estate pursuant to Section 9.02(a), the Trust Estate shall be terminated in
accordance with the following additional requirements:
(i) The Trustee shall specify the first day in the 90-day
liquidation period in a statement attached to the final Tax Return of
the Lower-Tier REMIC and the Upper-Tier REMIC created hereunder
pursuant to Treasury regulation Section 1.860F-1 and shall satisfy all
requirements of a qualified liquidation under Section 860F of the Code
and any regulations thereunder,
(ii) During such 90-day liquidation period, and at or
prior to the time of making the final payment on the Certificates, the
Trustee shall sell all of the assets of the Trust Estate to the Owners
of the Class R Certificates for cash; and
(iii) At the time of the making of the final payment on the
Certificates, the Trustee shall distribute or credit, or cause to be
distributed or credited, to the Owners of the Class R Certificates all
cash on hand in the Trust Estate (other than cash retained to meet
claims), and the Trust Estate shall terminate at that time.
(c) By their acceptance of the Certificates, the Owners thereof
hereby agree to authorize the Trustee to specify the first day in the 90-day
liquidation period in a statement attached to the Trust Estate's final Tax
Return, which shall be binding upon all successor Owners.
(d) In connection with any such purchase, such Owners of the Class
R Certificates shall provide to the Trustee and the Certificate Insurer an
opinion of counsel at the expense of such Owners experienced in federal income
tax matters acceptable to the Trustee and the Certificate Insurer to the effect
that such purchase and liquidation constitutes a Qualified Liquidation of the
Lower-Tier REMIC and the Upper-Tier REMIC.
(e) Promptly following any purchase described in this Section
9.02, the Trustee will release the Files to the Owners of such Class R
Certificates or the Certificate Insurer, as the case may be, or otherwise upon
their order, in a manner similar to that described in Section 8.14 hereof.
(f) If the Owners of the Class R Certificates decline to exercise
the option to purchase the Home Equity Loans and REO Properties remaining in
the Trust Estate pursuant to Section 9.02(a), then, provided that IMC Mortgage
Company is not then the Servicer, the Certificate Insurer may do so subject to
terms set out in Section 9.02.
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 either the Lower-Tier REMIC or the
Upper-Tier REMIC 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 Class A Certificates then Outstanding with the consent of
the Certificate Insurer may direct the Trustee on behalf of the Trust to adopt
a plan of complete
103
<PAGE> 110
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 in respect of any Home Equity Loan 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 Termination Date 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 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 Interest of
the Class R 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 in respect of any Home Equity Loan 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, (c) all amounts owed to the Certificate Insurer pursuant to the
Insurance Agreement and (d) any Delinquency Advances which the Servicer has
theretofore failed to remit. If, during the Purchase Option Period, the Owners
of the Class R Certificates have not exercised the option described in the
immediately preceding paragraph, then upon the expiration of the Purchase
Option Period (i) 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 Servicer 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)
preceding 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 in respect of any Home
Equity Loan 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 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 and selected by the Owners of the Class R Certificates,
which opinion shall be reasonably satisfactory in form and substance to the
Trustee, 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
104
<PAGE> 111
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
in respect of any Home Equity Loan 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, (c) all amounts owed to the Certificate
Insurer pursuant to the Insurance Agreement and (d) 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 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
105
<PAGE> 112
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 or
any other resolutions, statements, reports, documents, orders or other
instruments furnished pursuant to and conforming to the requirements of this
Agreement; but in the case of any such certificates or opinions or any other
resolutions, statements, reports, documents, orders or other instruments 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; provided, however, that the
Trustee shall not be responsible for the accuracy or content of any resolution,
certificate, statement, opinion, report, document, order or other instrument
furnished by the Servicer, the Seller, the Certificate Insurer or the Depositor
hereunder. If any such instrument is found not to conform in any material
respect to the requirements of this Agreement, the Trustee shall notify the
Owners of the Certificates of such instrument in the event that the Trustee,
after so requesting, does not receive a satisfactorily corrected instrument.
Notwithstanding the foregoing, if a Servicer Termination Event of which a
responsible officer of the Trustee shall have actual knowledge has occurred and
has not been cured or waived, the Trustee shall exercise such of the rights and
powers vested in it by this Agreement, and use the same degree of care and
skill in their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(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 (unless the Servicer shall have resigned or been
terminated and a successor Servicer shall not have been appointed pursuant to
the terms of this Agreement), 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:
(i) to collect Mortgagor payments;
(ii) to foreclose on defaulted Home Equity Loans;
(iii) to enforce due-on-sale clauses and to enter into assumption
and substitution agreements as permitted by Section 8.12
hereof;
(iv) to deliver instruments of satisfaction pursuant to Section
8.14;
106
<PAGE> 113
(v) to enforce the Home Equity Loans; and
(vi) 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:
(i) this subsection shall not be construed to limit the effect of
subsection (a) of this Section;
(ii) 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;
(iii) 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 of 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;
(iv) 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 shall have actual
knowledge thereof. In the absence of receipt of such notice,
the Trustee may conclusively assume that there is no default;
and
(v) Subject to the other provisions of this Agreement and without
limiting the generality of this Section 10.01, the Trustee
shall have no duty (A) to see to any recording, filing, or
depositing of this Agreement or any agreement referred to
herein or any financing statement or continuation statement
evidencing a security interest, or to see to the maintenance
of any such recording or filing or depositing or to any
rerecording, refiling or redepositing of any thereof, (B) to
see to any insurance or (C) to see to the payment or discharge
of any tax, assessment, or other governmental charge or any
lien or encumbrance of any kind owing with respect to,
assessed or levied against, any part of the Trust Estate from
funds available in the Certificate Account.
(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.
107
<PAGE> 114
(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 any amounts available for
distribution that it has received 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 Seller, the Certificate Insurer or by the
Owners of at least 25% of the aggregate Percentage Interests in the
Trust Estate represented by the Class A Certificates then Outstanding,
or, if there are no Class A 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,
marshalling 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, marshalling 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
108
<PAGE> 115
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 to the Rating Agencies and the Certificate
Insurer notice 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 Class A Certificates or if there are no Class A Certificates
then outstanding by such majority of the Percentage Interests represented by
the Class R 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 (acting as Trustee or Tax Matters Person) may
request and 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, the Seller, 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 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,
109
<PAGE> 116
bond, note or other paper or document, unless requested in writing to do so by
the Owners; provided, however, that if the payment within a reasonable time to
the Trustee of the costs, expenses or liabilities likely to be incurred by it
in the making of such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to it by the terms
of this Agreement, the Trustee may require reasonable indemnity against such
cost, expense or liability as a condition to taking any such action;
(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 custodian;
(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 make
various calculations which are relevant to the performance of the Trustee's
duties under the 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 or the Certificate
Insurer (either in writing or orally with prompt written or telecopy
confirmations), 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 the execution and authentication of the Certificates,
shall be taken as the statements of the Depositor, and the Trustee assumes no
responsibility for their correctness (other than with respect to such execution
and authentication). 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, the Seller 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 the Seller, 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.
110
<PAGE> 117
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 Depositor 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.
The Trustee shall receive compensation for fees and reimbursement for
expenses pursuant to Section 2.05, Section 6.12, Section 7.03(b)(i), Section
7.03(b)(iv)(D), Section 7.06 and Section 10.13 hereof. Except as otherwise
provided in this Agreement, the Trustee and any director, officer, employee or
agent of the Trustee shall be indemnified by the Trust and held harmless
against any loss, liability, or "unanticipated out-of-pocket" expense incurred
or paid to third parties (which expenses shall not include salaries paid to
employees, or allocable overhead, of the Trustee) in connection with the
acceptance or administration of its trusts hereunder or the Certificates, other
than any loss, liability or expense incurred by reason of willful misfeasance,
bad faith or negligence in the performance of duties hereunder or by reason of
reckless disregard of obligations and duties hereunder. All such amounts
described in the preceding sentence shall be payable as provided in (A) Section
7.03(b)(i) with respect to such amounts that are Trustee Reimbursable Expenses
and (B) Section 7.03(b)(iv)(D) with respect to the remainder of such amounts,
subject in the case of clause (B), to Sections 10.01(e) and 10.01(g). The
Trustee and any director, officer, employee or agent of the Trustee shall be
indemnified by the Seller and held harmless against any loss, liability or
reasonable expenses incurred by the Trustee in performing its duties as Tax
Matters Person for the REMIC created under this Agreement, other than any loss,
liability or expense incurred by reason of willful misfeasance, bad faith or
negligence in the performance of its duties as Tax Matters Person for the REMIC
created hereunder. The provisions of this Section 10.07 shall survive the
termination of this Agreement.
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 the Owners of a majority of
the Percentage Interests of the Class A Certificates and having a deposit
rating of at least A- from Fitch and Standard & Poor's and A2 by Moody's. 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 the Seller with the
consent of the Certificate Insurer (which
111
<PAGE> 118
consent shall not be unreasonably withheld) or 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. 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 the Seller, 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 by the Certificate Insurer, the Certificate Insurer or the
Depositor with the written 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 by
delivering to the Trustee to be removed, to the successor Trustee so appointed,
to the Depositor, to the Servicer and to the Certificate Insurer, 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,
the Seller shall promptly appoint a successor trustee acceptable to the
Certificate Insurer and the Owners of the majority of Percentage Interests of
the Class A Certificates then Outstanding. If within one year after such
resignation, removal or incapability or the
112
<PAGE> 119
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 Servicer 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 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
113
<PAGE> 120
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 (a) preceding, the Trustee
shall timely file all reports prepared by the Seller 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 Seller with respect to
such allocation of expenses. The Trustee shall, upon request of the Seller,
collect any forms or reports from the Owners determined by the Seller to be
required under applicable federal, state and local tax laws.
(c) Except as otherwise provided, the Trustee shall have the
responsibility for preparation and execution of those returns, forms, reports
and other documents referred to in this Section.
(d) The Seller covenants and agrees that it shall provide to the
Trustee any information necessary to enable the Trustee to meet its obligations
under subsections (a), (b) and (c) above.
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 Certificate Account, the Depositor, the Seller, the Servicer
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, the Seller and Servicer covenant and agree to indemnify the
Trustee and the Servicer (if the Servicer is also the Trustee) 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 Seller shall
pay all amounts
114
<PAGE> 121
not otherwise paid or reimbursed pursuant to Sections 2.05, 6.12 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 and the Certificate Insurer, 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 the 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 Owner 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
115
<PAGE> 122
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 and the Certificate Insurer.
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.
END OF ARTICLE X
116
<PAGE> 123
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, the Seller, 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 matter upon a certificate or opinion of, or
representations by, one or more Authorized Officers of the Depositor, the
Seller or the Servicer, stating that the information with respect to such
factual matters is in the possession of the Depositor, the 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
117
<PAGE> 124
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 the Seller.
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, the Seller shall be sufficient for
every purpose hereunder if made, given, furnished or filed in writing to or
with and received by the Trustee at its Corporate Trust Office as set forth in
Section 2.02 hereof.
118
<PAGE> 125
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 resigned 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.
119
<PAGE> 126
Section 11.10 Legal Holidays.
In any case where the date of 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 (with the exception of any Monthly Remittance Date or any
Monthly Reporting Date) 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 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. In any case
where the date of any Monthly Remittance Date or any Monthly Reporting Date
shall not be a Business Day, then payment or mailing need not be made on such
date, but must be made on the preceding 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, Seller and 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
Seller and 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 Servicer, or the Certificate Insurer or
third-party beneficiary hereunder, as the case may be, to
120
<PAGE> 127
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, the Seller and the Servicer, may
at any time and from time to time with the prior approval of the Certificate
Insurer, without the giving of notice to or the receipt of the consent of the
Owners, amend this Agreement, and the Trustee shall consent to the amendment
for the purposes of (i) if accompanied by an approving opinion of counsel which
shall not be at the expense of the Trustee experienced in federal income tax
matters, removing the restriction against the transfer of a Class R Certificate
to a Disqualified Organization (as such term is defined in the Code), (ii)
complying with the requirements of the Code including any amendments necessary
to maintain REMIC status of the Upper-Tier REMIC and Lower-Tier REMIC (other
than the Pre-Funding Account and the Capitalized Interest Account), (iii)
curing any ambiguity, (iv) correcting or supplementing any provisions of this
Agreement which are inconsistent with any other provisions of this Agreement,
or adding provisions to this Agreement which are not inconsistent with the
provisions of this Agreement or (v) for any other purpose, provided that in the
case of clause (v), 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 any Class of
Certificates without regard to the Certificate Insurance Policy.
Notwithstanding anything to the contrary, no such amendment shall (a) change in
any manner the amount of, or delay the timing of, payments which are required
to be distributed to any Owner without the consent of the Owner of such
Certificate, (b) change the percentages of Percentage Interest which are
required to consent to any such amendments, without the consent of the Owners
of all Certificates of the Class or Classes affected then outstanding or (c)
which affects in any manner the terms or provisions of the Certificate
Insurance Policy.
121
<PAGE> 128
(b) This Agreement may also be amended from time to time by the
Seller, the Servicer, the Depositor and the Trustee by written agreement, with
the prior written consent of the Owners of the majority of the Percentage
Interests in the Class A Certificate and the Certificate Insurer, for the
purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Agreement, or of modifying in any manner the
rights of the Owners; provided, however, that no such amendment shall (i)
reduce in any manner the amount of, or delay the timing of, collections of
payments on Home Equity Loans or distributions which are required to be made on
any Certificate, without the consent of the holders of 100% of the
Certificates, (ii) adversely affect in any material respect the interests of
the holders of the Certificates in any manner other than as described in (i),
without the consent of the holders of 100% of the Certificates, or (iii) reduce
the percentage of Certificates, the holders of which are required to consent to
any such amendment, without the consent of the holders of 100% of the
Certificates.
(c) The Certificate Insurer and the Rating Agencies shall be
provided by the Seller with copies of any amendments to this Agreement,
together with copies of any opinions or other documents or instruments executed
in connection therewith.
(d) Notwithstanding any contrary provisions of this Agreement, the
Trustee shall not consent to any amendment to this Agreement unless it shall
have first received an opinion of counsel (provided by the Person requesting
such amendment) to the effect that such amendment will not result in the
imposition of any tax on the Trust pursuant to the REMIC Provisions or cause
either the Upper-Tier REMIC or the Lower-Tier REMIC to fail to qualify as a
REMIC at any time that any of the Certificates are outstanding.
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, including, without limitation, the written consent of the
Certificate Insurer 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
122
<PAGE> 129
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 the Lower-Tier REMIC and the
Upper-Tier REMIC shall each constitute, and that the affairs of the Lower-Tier
REMIC and the Upper-Tier REMIC shall each be conducted so as to qualify it as a
REMIC in accordance with the REMIC Provisions. In furtherance of such
intention, The Chase Manhattan Bank or such other person designated pursuant to
Section 11.18 hereof shall act as agent for the Trust and as Tax Matters Person
for the Trust and that in such capacity it shall: (i) prepare or cause to be
prepared and filed, at its own expense, in a timely manner, annual tax returns
and any other tax return required to be filed by the Lower-Tier REMIC and the
Upper-Tier REMIC created hereunder using a calendar year as the taxable year
for the Lower-Tier REMIC and the Upper-Tier REMIC; (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 the Lower-Tier REMIC and the
Upper-Tier REMIC created hereunder, for it to be treated as a REMIC; (iii) at
the Tax Matters Person's expense, prepare and forward, or cause to be prepared
and forwarded, to the Owners all information, reports or tax returns required
with respect to the Lower-Tier REMIC and the Upper-Tier REMIC created
hereunder, including Schedule Q to Form 1066, 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; provided that the tax return filed on
Schedule Q to Form 1066 shall be prepared and forwarded to the Owners of the
Class R Certificates no later than 50 days after the end of the period to which
such tax return related; (iv) not take any action or omit to take any action
that would cause the termination of the REMIC status of the Lower-Tier REMIC or
the Upper-Tier REMIC created hereunder, except as provided under this
Agreement; (v) represent, the Trust or the Lower-Tier REMIC or the Upper-Tier
REMIC created hereunder 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 Lower-Tier
REMIC or the Upper-Tier REMIC created hereunder, enter into settlement
agreements with any governmental taxing agency, extend any statute of
limitations relating to any tax item of the Trust or the Lower-Tier REMIC or
the Upper-Tier REMIC created hereunder, and otherwise act on behalf of the
Trust or the Lower-Tier REMIC or the Upper-Tier REMIC created hereunder in
relation to any tax matter involving the Trust or the Lower-Tier REMIC or the
Upper-Tier REMIC created hereunder (the legal expenses and costs of any such
action described in this subsection (v) and any liability resulting therefrom
shall constitute expenses of the Trust and the Trustee shall be entitled to
reimbursement therefor as provided in Section 7.03(b)(i) unless such legal
expenses and costs are incurred by reason of the Trustee's willful misfeasance,
bad faith or negligence); (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
123
<PAGE> 130
the Internal Revenue Service and Owners of 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 transferor 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 the
Trustee or such other designated Tax Matters Person pursuant to this Section
11.16 shall survive the termination or discharge of this Agreement.
In addition to the foregoing, the Tax Matters Person shall prepare and
forward, or cause to be prepared and forwarded, to the Seller as long as it is
an Owner of a Class R Certificate each year, beginning in December 1997, on or
before the twenty-seventh day (or if such day is not a business day, on the
next succeeding business day) of the month of (1) March (beginning in 1998),
with respect to the period January 1 to March 31, (2) May, with respect to the
period April 1 to May 31, (3) August, with respect to the period June 1 to
August 31 and (4) December, with respect to the period September 1 to December
31, an estimate of such Owner's allocable portion of taxable income or net
loss, excess inclusions and investment expenses for the related period to the
extent such amounts are required to be furnished on Schedule Q to Form 1066.
Such estimates shall be made to the extent of and based upon information
provided to the Tax Matters Person by the Servicer (which information may
consist of actual information related to payments received on the Home Equity
Loans, except that the estimate with respect to any month for which actual
information is not available may be based on the payment history for prior
months and an assumption of prepayments of the Home Equity Loans as provided by
the Servicer). The legal expenses and costs of any action or proceeding
resulting from or relating to the estimates provided by the Tax Matters Person
pursuant to this Section 11.16(a) and any liability resulting therefrom shall
constitute expenses of the Servicer and the Trustee shall be entitled to
reimbursement therefor from the Servicer unless such legal expenses, costs or
liability are incurred by reason of the Trustee willful misfeasance, bad faith
or gross negligence.
(b) The Seller, 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
the Lower-Tier REMIC or the Upper-Tier REMIC created hereunder, (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 Seller is aware of any such proposed action by the Servicer.
(c) The Lower-Tier REMIC and the Upper-Tier REMIC created
hereunder 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) None of the Depositor, the Seller or 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), the Trustee
or the Seller may engage in any of the transactions prohibited by such clauses,
provided that the Trustee shall have received an opinion of counsel experienced
in federal income tax matters acceptable to the Certificate Insurer to the
effect that
124
<PAGE> 131
such transaction does not result in a tax imposed on the Trustee or cause a
termination of REMIC status for the Lower-Tier REMIC or the Upper-Tier REMIC
created hereunder; provided, however, that such transaction is otherwise
permitted under this Agreement.
(g) In the event that any tax is imposed on "prohibited
transactions" of the Trust created hereunder as defined in Section 860F(a)(2)
of the Code, on "net income from foreclosure property" of the Trust as defined
in Section 860G(c) of the Code, on any contributions to the Trust after the
Startup Date therefor pursuant to Section 860G(d) of the Code, or any other tax
is imposed on the Trust or the Lower-Tier REMIC or the Upper-Tier REMIC by the
Code or any applicable provisions of state or local tax laws, such tax shall be
charged (i) to the Trustee if such tax arises out of or results from the
willful misfeasance, bad faith or negligence in performance by the Trustee of
any of its obligations under Article X, (ii) to the Servicer if such tax arises
out of or results from a breach by the Servicer of any of its obligations under
Article VIII or otherwise (iii) against amounts on deposit in the Certificate
Account in the manner provided in Article VII.
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 at the expense
of the party seeking to take such action but in no event at the expense of the
Trust to the effect that such transaction does not result in a tax imposed on
the Trust or the Lower-Tier REMIC or the Upper-Tier REMIC or cause a
termination of REMIC status for the Lower-Tier or the Upper-Tier REMIC, (i)
sell any assets in the Trust Estate, (ii) accept any contribution of assets
after the Startup Day (other than Subsequent Home Equity Loans), (iii) allow
the Servicer to foreclose upon any Home Equity Loan if such foreclosure would
result in a tax on the Trust or the Lower-Tier REMIC or the Upper-Tier REMIC or
cause termination of the REMIC status for the Lower-Tier REMIC or the
Upper-Tier REMIC or (iv) 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 the Lower-Tier REMIC or the Upper-Tier 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 the Class A 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 the Lower-Tier REMIC and
the Upper-Tier 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
125
<PAGE> 132
Person under the Code. The Tax Matters Person for the Lower-Tier REMIC and the
Upper-Tier REMIC shall be the Trustee as long as it owns a Class R Certificate.
If the Trustee does not own a Class R Certificate, the Tax Matters Person may
be any other entity that owns a Class R Certificate and accepts a designation
hereunder as Tax Matters person by delivering an affidavit in the form of
Exhibit I.
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
there exists a Certificate Insurer Default; provided, that the right of the
Certificate Insurer to receive the Premium Amount shall not be suspended if
such Certificate Insurer Default was a default other than a default under
clause (a) of the definition thereof. At such time as the Class A Certificates
are no longer Outstanding hereunder and the Certificate Insurer has received
all Reimbursement Amounts, the Certificate Insurer's rights hereunder shall
terminate.
Section 11.20 Notices.
All notices hereunder shall be given as follows, until any superseding
instructions are given to all other Persons listed below:
The Trustee: The Chase Manhattan Bank
450 W. 33rd Street, 15th Floor
New York, NY 10001
Attention: Advanced Structured Products Group
(212) 946-8600
(212) 946-3240 - Fax
The Depositor: IMC Securities, Inc.
5901 East Fowler Avenue
Tampa, FL 33617-2362
(813) 984-8801
(813) 984-2595 - Fax
The Seller: IMC Mortgage Company
5901 East Fowler Avenue
Tampa, FL 33617-2362
(813) 984-8801
(813) 984-2595 - Fax
The Servicer: IMC Mortgage Company
5901 East Fowler Avenue
Tampa, FL 33617-2362
(813) 984-8801
(813) 984-2595 - Fax
126
<PAGE> 133
The Underwriters PaineWebber Incorporated
1285 Avenue of the Americas
11th Floor
New York, New York 10019
Attention: Barbara Dawson (cc: John Fearey)
Tel: (212) 713-8601
Fax: (212) 713-7999
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Attention: Asset-Backed Securities
Tel: (212) 272-2000
Fax: (212) 272-7294
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
World Financial Center, North Tower
250 Vesey Street, 10th Floor
New York, New York 10281-1310
Attention:
Tel: (212) _____________________________
Fax: (212) _____________________________
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Tel: (212) 761-4000
Fax: (212) 761-0260
Moody's: Moody's Investors Service, Inc.
99 Church Street
New York, New York 10007
Attention: The Residential Mortgage
Monitoring Department
Tel: (212) 553-0300
Fax: (212) 553-0355
Standard & Poor's: Standard & Poor's Rating Service
20 Broadway, 15th Floor
New York, New York 10004
Tel: (212) 208-8000
Fax: (212) 412-0224
127
<PAGE> 134
The Certificate
Insurer: Financial Security Assurance Inc.
350 Park Avenue
New York, New York 10022
Attention: Surveillance Department
Re: IMC Home Equity Loan Trust 1997-7
Tel: (212) 339-3436
Fax: (212) 339-3529
Section 11.21 Rule 144A Information. For so long as any of the
Class R Certificates are "restricted securities" within the meaning of Rule
144A under the Securities Act, the Servicer agrees to provide to any Owner of
the Class R Certificate and to any prospective purchaser of Class R
Certificates designated by such an Owner, upon the request of such Owner or
prospective purchaser, the information specified below which is intended to
satisfy the condition set forth in Rule 144A(d)(4) under the Securities Act;
provided that this Section 11.21 shall require, as to the Trustee or the
Servicer, only that the Servicer provide publicly available information
regarding it or the Trustee in response to any such request; and provided
further that the Servicer shall be obligated to provide only such basic,
material information concerning the structure of the Class R Certificates and
distributions thereon, the nature, performance and servicing of the Home Equity
Loans supporting the Certificates, and any credit enhancement mechanism, if
any, associated with the Certificates. Any recipient of information provided
pursuant to this Section 11.21 shall agree that such information shall not be
disclosed or used for any purpose other than the evaluation of the Class R
Certificates by the prospective purchaser. The Trustee shall have no
responsibility for the sufficiency under Rule 144A of any information so
provided by the Servicer to any Owner or prospective purchaser of Class R
Certificates.
END OF ARTICLE XI
128
<PAGE> 135
ARTICLE XII
CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER
Section 12.01 Trust Estate and Accounts Held for Benefit of the
Certificate Insurer.
The Trustee shall hold the Trust Estate for the benefit of the related
Owners and the Certificate Insurer and all references in this Agreement and in
the Certificates to the benefit of Owners of the Certificates shall be deemed
to include the Certificate Insurer. The Trustee shall cooperate in all
reasonable respects with any reasonable request by the Certificate Insurer for
action to preserve or enforce the Certificate Insurer's rights or interests
under this Agreement and the Certificates.
The Servicer hereby acknowledges and agrees that it shall service and
administer the Home Equity Loans and any REO Properties, and shall maintain the
Principal and Interest Account, for the benefit of the Owners and for the
benefit of the Certificate Insurer, and all references in this Agreement to the
benefit of or actions on behalf of the Owners shall be deemed to include the
Certificate Insurer. Unless a Certificate Insurer Default exists, the Servicer
shall not terminate any Sub-Servicing Agreements without cause without the
prior consent of the Certificate Insurer.
Section 12.02 Claims Upon the Policy; Policy Payments Account.
(a) If on the Determination Date, the funds then on
deposit in the Certificate Account, are insufficient to pay the Insured
Payments on such Payment Date, the Trustee shall give notice to the Certificate
Insurer by telephone or telecopy of the amount of such deficiency, confirmed in
writing in the form set forth as Exhibit A to the Endorsement of the
Certificate Insurance Policy, to the Certificate Insurer and the Fiscal Agent
(as defined in the Certificate Insurance Policy), if any, at or before 9:00
a.m., New York City time, on the second Business Day prior to such Payment
Date. In addition, on any Payment Date, the Certificate Insurer shall have the
right, in its sole discretion, to pay the amount of any Realized Losses
incurred during the related Remittance Period to the Trustee for deposit into
the Certificate Account.
(b) The Trustee shall establish a separate special purpose
trust account for the benefit of the Owners of the Class A Certificates and the
Certificate Insurer referred to herein as the "Policy Payments Account" over
which the Trust shall have exclusive control and sole right of withdrawal. The
Trustee shall deposit any amount paid under the Certificate Insurance Policy in
the Policy Payments Account and distribute such amount only for purposes of
payment to the Owners of the related Class A Certificates of the Insured
Payments for which a claim was made and such amount may not be applied to
satisfy any costs, expenses or liabilities of the Servicer, the Seller, the
Depositor, the Custodian, the Trustee or the Trust. Amounts paid under the
Certificate Insurance Policy shall be transferred to the Certificate Account in
accordance with the next succeeding paragraph and disbursed by the Trustee to
Owners of the Class A Certificates in accordance with Section 7.03. It shall
not be necessary for such payments to be made by checks or wire transfers
separate from the checks or wire transfers used to pay the Insured Payments
with other funds available to make such payment. However, the amount of any
payment of principal of or interest on the related Class A Certificates to be
paid from funds transferred from the Policy Payments Account shall be noted as
provided in paragraph (c) below in the Register and in the statement to be
furnished to Owners of the Class A Certificates pursuant to Section 7.08.
Funds held in the Policy Payments Account shall not be invested by the Trustee.
129
<PAGE> 136
On any Payment Date with respect to which a claim has been
made under the Certificate Insurance Policy, the amount of funds received by
the Trustee as a result of any claim under the Certificate Insurance Policy, to
the extent required to make the Insured Payment on such Payment Date shall be
withdrawn from the Policy Payments Account and deposited in the Certificate
Account and applied by the Trustee, together with the other funds to be
withdrawn from the Certificate Account, directly to the payment in full of the
Insured Payment due on the related Class of Class A Certificates. Funds
received by the Trustee as a result of any claim under the Certificate
Insurance Policies shall be deposited by the Trustee in the Policy Payments
Account and used solely for payment to the Owners of the Class A Certificates
may not be applied to satisfy any costs, expenses or liabilities of the
Servicer, the Seller, the Depositor, the Custodian, the Trustee or the Trust.
Any funds remaining in the Policy Payments Account on the first Business Day
following a Payment Date shall be remitted to the Certificate Insurer, pursuant
to the instructions of the Certificate Insurer, by the end of such Business
Day.
(c) The Trustee shall keep a complete and accurate record
of the amount of interest and principal paid in respect of any Class A
Certificate from moneys received under the Certificate Insurance Policies. The
Certificate Insurer shall have the right to inspect such records at reasonable
times during normal business hours upon one Business Day's prior notice to the
Trustee.
(d) The Trustee shall promptly notify the Certificate
Insurer and Fiscal Agent (as defined in the Certificate Insurance Policies) of
any proceeding or the institution of any action, of which an Authorized Officer
of the Trustee has actual knowledge, seeking the avoidance as a preferential
transfer under applicable bankruptcy, insolvency, receivership or similar law
(a "Preference Claim") of any distribution made with respect to the Class A
Certificates. Each Owner of a Class A Certificate by its purchase of such
Certificate, the Servicer and the Trustee hereby agree that, the Certificate
Insurer (so long as no Certificate Insurer Default exists) 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,
(i) the direction of any appeal of any order relating to such Preference Claim
and (ii) the posting of any surety, supersedeas 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 Owner of 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.
Section 12.03 Effect of Payments by the Certificate Insurer;
Subrogation.
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 either of the
Certificate Insurance Policies 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 Holders to receive such principal and interest from the Trust
and (b) the Certificate Insurer shall be paid such principal and interest but
only from the sources and in the manner provided herein for the payment of such
principal and interest.
130
<PAGE> 137
The Trustee, the Seller, the Depositor and the Servicer shall
cooperate in all respects with any reasonable request by the Certificate
Insurer for action to preserve or enforce the Certificate Insurer's rights or
interests under this Agreement without limiting the rights or affecting the
interests of the Owners as otherwise set forth therein.
Section 12.04 Notices to the Certificate Insurer.
All notices, statements, reports, certificates or opinions
required by this Agreement to be sent to any other party hereto or to any of
the Owners shall also be sent to the Certificate Insurer.
Section 12.05 Third-Party Beneficiary.
The Certificate Insurer shall be a third-party beneficiary of
this Agreement, entitled to enforce the provisions hereof as if a party hereto.
Section 12.06 Rights to the Certificate Insurer To Exercise Rights
of Owners.
By accepting its Certificate, each Owner of a Class A
Certificate agrees that unless a Certificate Insurer Default exists, the
Certificate Insurer shall have the right to exercise all rights of the Owners
of the Class A Certificates as specified under this Agreement without any
further consent of the Owners of the Class A Certificates.
END OF ARTICLE XII
131
<PAGE> 138
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.
IMC SECURITIES, INC.,
as Depositor
By: /s/ Thomas G. Middleton
----------------------------------------------
Title: Thomas G. Middleton, President
-------------------------------------------
IMC MORTGAGE COMPANY,
as Seller
By: /s/ Thomas G. Middleton
----------------------------------------------
Title: Thomas G. Middleton, President
-------------------------------------------
IMC MORTGAGE COMPANY,
as Servicer
By: /s/ Thomas G. Middleton
----------------------------------------------
Title: Thomas G. Middleton, President
-------------------------------------------
THE CHASE MANHATTAN BANK
as Trustee
By: /s/ Ann Marie Jose
----------------------------------------------
Title: Ann Marie Jose, Trust Officer
-------------------------------------------
<PAGE> 139
STATE OF FLORIDA )
: ss.:
COUNTY OF HILLSBOROUGH )
On the 26th day of November, 1997, before me personally came Thomas G.
Middleton to me known, who, being by me duly sworn, did depose and say that he
resides at 11508 Orilla del Rio Place, Tampa, FL 33617; that he is President
of IMC Securities, Inc., a Delaware corporation; and that he signed his name
thereto by order of the respective Boards of Directors of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
NOTARIAL SEAL
/s/ Jennifer L. Ellis
-------------------------
Notary Public
<PAGE> 140
STATE OF FLORIDA )
: ss.:
COUNTY OF HILLSBOROUGH )
On the 26th day of November, 1997, before me personally came Thomas G.
Middleton to me known, who, being by me duly sworn, did depose and say that he
resides at 11508 Orilla del Rio Place, Tampa, FL 33617; that he is President
of IMC Mortgage Company, a Delaware corporation; and that he signed his name
thereto by order of the respective Boards of Directors of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
NOTARIAL SEAL
/s/ Jennifer L. Ellis
-------------------------
Notary Public
<PAGE> 141
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the 26th day of November 1997, before me personally came Ann Marie
Jose, to me known, who, being by me duly sworn did depose and say that she
resides at 208 Roosevelt Ave.; that she is a Trust Officer of The Chase
Manhattan Bank, the New York banking corporation described in and that executed
the above instrument as Trustee; and that she signed her name thereto by order
of the Board of Directors of said New York banking corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
NOTARIAL SEAL
/s/ James A. Nash
------------------------
Notary Public
<PAGE> 142
SCHEDULE I
SCHEDULE OF HOME EQUITY LOANS
A copy of this Schedule is maintained by the Trustee at the Corporate
Trust Office and by the Servicer.
<PAGE> 1
Exhibit 99.1
GEOGRAPHIC DISTRIBUTION OF PROPERTIES
The geographic distribution of the Home Equity Loans by state, as of
the Closing Date, was as follows:
<TABLE>
<CAPTION>
STATE NUMBER OF AGGREGATE % OF AGGREGATE
----- HOME EQUITY LOANS LOAN BALANCE LOAN BALANCE
----------------- ------------ ------------
<S> <C> <C> <C>
Alabama 111 $ 6,146,780 1.05%
Arizona 116 7,319,125 1.26
Arkansas 14 634,332 0.11
California 119 9,213,982 1.58
Colorado 154 9,664,043 1.66
Connecticut 136 8,708,926 1.49
Delaware 57 3,213,543 0.55
District of Columbia 60 4,558,719 0.78
Florida 1,135 59,721,514 10.25
Georgia 499 25,668,206 4.40
Hawaii 3 193,028 0.03
Idaho 33 1,421,180 0.24
Illinois 592 33,021,745 5.67
Indiana 314 13,635,516 2.34
Iowa 47 2,123,567 0.36
Kansas 34 1,403,463 0.24
Kentucky 77 3,703,387 0.64
Louisiana 49 2,034,360 0.35
Maine 18 886,331 0.15
Maryland 665 37,234,652 6.39
Massachusetts 194 11,076,370 1.90
Michigan 497 25,898,967 4.44
Minnesota 66 3,478,388 0.60
Mississippi 84 4,001,249 0.69
Missouri 158 7,080,618 1.22
Montana 10 383,229 0.07
Nebraska 46 2,067,440 0.35
Nevada 36 2,183,848 0.37
New Hampshire 19 816,170 0.14
New Jersey 414 29,204,671 5.01
New Mexico 84 4,830,592 0.83
New York 1,156 84,654,399 14.53
North Carolina 535 28,732,886 4.93
North Dakota 3 164,440 0.03
Ohio 496 28,845,697 4.95
Oklahoma 49 1,591,364 0.27
Oregon 52 3,038,224 0.52
Pennsylvania 683 33,801,087 5.80
Rhode Island 40 2,658,867 0.46
South Carolina 275 14,063,750 2.41
South Dakota 3 111,905 0.02
Tennessee 559 29,193,989 5.01
Texas 90 5,692,909 0.98
Utah 86 5,157,261 0.89
Vermont 7 261,180 0.04
Virginia 245 12,953,214 2.22
Washington 99 5,886,407 1.01
West Virginia 36 1,525,465 0.26
Wisconsin 59 2,785,771 0.48
Wyoming 2 94,144 0.02
- ------ ----
Total 10,316 $582,740,900 100.00%
====== =========== ======
</TABLE>
1
<PAGE> 2
COMBINED LOAN-TO-VALUE RATIOS
The original combined loan-to-value ratios as of the origination dates
of the Home Equity Loans (based upon appraisals made at the time of origination
thereof) (the "Combined Loan-to-Value Ratios") as of the Closing Date were
distributed as follows:
<TABLE>
<CAPTION>
RANGE OF NUMBER OF AGGREGATE % OF AGGREGATE
ORIGINAL CLTV'S HOME EQUITY LOANS LOAN BALANCE LOAN BALANCE
--------------- ----------------- ------------ ------------
<S> <C> <C> <C>
Up to 5.00% 1 $ 29,890 0.01%
5.01 to 10.00 16 524,273 0.09
10.01 to 15.00 32 745,899 0.13
15.01 to 20.00 58 1,578,875 0.27
20.01 to 25.00 65 1,677,550 0.29
25.01 to 30.00 93 2,936,746 0.50
30.01 to 35.00 98 3,345,137 0.57
35.01 to 40.00 114 3,983,328 0.68
40.01 to 45.00 131 5,201,757 0.89
45.01 to 50.00 244 10,000,754 1.72
50.01 to 55.00 255 11,935,734 2.05
55.01 to 60.00 409 19,608,595 3.36
60.01 to 65.00 682 36,285,092 6.23
65.01 to 70.00 1,022 54,103,462 9.28
70.01 to 75.00 1,437 84,159,736 14.44
75.01 to 80.00 2,665 173,282,852 29.74
80.01 to 85.00 1,264 78,410,400 13.46
85.01 to 90.00 1,000 69,241,746 11.88
90.01 to 95.00 189 6,988,033 1.20
95.01 to 100.00 541 18,701,043 3.21
--- ---------- ----
Total 10,316 $582,740,900 100.00%
====== =========== ======
</TABLE>
STATISTICAL CALCULATION DATE COUPON RATES
The Coupon Rates borne by the Notes relating to the Home Equity Loans
as of the Closing Date were distributed as follows as of the Closing Date:
<TABLE>
<CAPTION>
RANGE OF NUMBER OF AGGREGATE % OF AGGREGATE
COUPON RATES HOME EQUITY LOANS LOAN BALANCE LOAN BALANCE
------------ ----------------- ------------ ------------
<S> <C> <C> <C>
7.001% to 8.000% 24 $ 2,388,856 0.41%
8.001 to 9.000 262 21,570,153 3.70
9.001 to 10.000 1,279 92,121,666 15.81
10.001 to 11.000 2,375 155,844,893 26.74
11.001 to 12.000 2,511 141,387,461 24.26
12.001 to 13.000 2,041 98,958,138 16.98
13.001 to 14.000 1,120 46,430,880 7.97
14.001 to 15.000 516 18,388,970 3.16
15.001 to 16.000 138 4,542,270 0.78
16.001 to 17.000 39 965,751 0.17
17.001 to 18.000 8 114,917 0.02
18.001 to 19.000 1 15,999 0.00
22.001 to 23.000 1 5,013 0.00
23.001 to 24.000 1 5,932 0.00
- ----- ----
Total 10,316 $582,740,900 100.00%
====== =========== ======
</TABLE>
2
<PAGE> 3
STATISTICAL CALCULATION DATE LOAN BALANCES
The distribution of the outstanding principal amounts of the Home
Equity Loans as of the Closing Date was as follows:
<TABLE>
<CAPTION>
STATISTICAL CALCULATION NUMBER OF AGGREGATE % OF TOTAL AGGREGATE
DATE LOAN BALANCES HOME EQUITY LOANS LOAN BALANCE LOAN BALANCE
------------------ ----------------- ------------ ------------
<S> <C> <C> <C>
Up to $ 25,000.00 2,018 $ 36,681,081 6.29%
25,000.01 to 50,000.00 3,598 134,818,819 23.14
50,000.01 to 75,000.00 2,324 142,803,647 24.51
75,000.01 to 100,000.00 1,085 94,577,855 16.23
100,000.01 to 125,000.00 608 67,779,362 11.63
125,000.01 to 150,000.00 353 48,190,419 8.27
150,000.01 to 175,000.00 180 29,057,264 4.99
175,000.01 to 200,000.00 108 20,108,328 3.45
200,000.01 to 250,000.00 42 8,724,123 1.50
-- --------- ----
Total 10,316 $582,740,900 100.00%
====== =========== ======
</TABLE>
TYPES OF MORTGAGED PROPERTIES
The Properties securing the Home Equity Loans as of the
Closing Date were of the property types as follows:
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE % OF AGGREGATE
PROPERTY TYPES HOME EQUITY LOANS LOAN BALANCE LOAN BALANCE
-------------- ----------------- ------------ ------------
<S> <C> <C> <C>
Single Family Detached 9,423 $526,900,463 90.42%
Two- to Four-Family 586 40,350,677 6.92
Condominium 121 6,086,233 1.04
Townhouse 65 2,628,640 0.45
Single Family Attached 41 1,689,497 0.29
Manufactured Housing 33 1,428,889 0.25
Multi-Family 25 1,994,689 0.34
Planned Unit Development 18 1,094,883 0.19
Mixed Use 4 566,930 0.10
- ------- ----
Total 10,316 $582,740,900 100.00%
====== =========== ======
</TABLE>
DISTRIBUTION OF MONTHS SINCE ORIGINATION
The distribution of the number of months since the date of origination
of the Home Equity Loans as of the Closing Date was as follows:
<TABLE>
<CAPTION>
NUMBER OF MONTHS NUMBER OF AGGREGATE % OF AGGREGATE
SINCE ORIGINATION HOME EQUITY LOANS LOAN BALANCE LOAN BALANCE
----------------- ----------------- ------------ ------------
<S> <C> <C> <C>
0 to 1 5,005 $276,284,895 47.41%
2 to 12 5,234 303,573,501 52.09
13 to 24 62 2,277,706 0.39
25 or more 15 604,799 0.10
-- ------- ----
Total 10,316 $582,740,900 100.00%
====== =========== ======
</TABLE>
3
<PAGE> 4
DISTRIBUTION OF REMAINING TERM TO MATURITY
The distribution of the number of months remaining to maturity of the
Home Equity Loans as of the Closing Date was as follows:
<TABLE>
<CAPTION>
MONTHS REMAINING NUMBER OF AGGREGATE % OF AGGREGATE
TO MATURITY HOME EQUITY LOANS LOAN BALANCE LOAN BALANCE
----------- ----------------- ------------ ------------
<S> <C> <C> <C>
Up to 120 507 $ 14,890,156 2.56%
121 to 180 6,436 344,815,622 59.17
181 to 240 1,334 70,362,588 12.07
241 to 300 31 2,484,872 0.43
301 to 360 2,005 149,815,259 25.71
360 or more 3 372,402 0.06
-- ------- ----
Total 10,316 $582,740,900 100.00%
====== =========== ======
</TABLE>
OCCUPANCY STATUS
The occupancy status of the Properties securing the Home Equity Loans
as of the Closing Date was as follows:
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE % OF AGGREGATE
OCCUPANCY STATUS HOME EQUITY LOANS LOAN BALANCE LOAN BALANCE
---------------- ----------------- ------------ ------------
<S> <C> <C> <C>
Owner Occupied 9,515 $539,304,594 92.55%
Investor Owned 770 41,468,555 7.12
Vacation/Second Home 31 1,967,751 0.34
-- --------- ----
Total 10,316 $582,740,900 100.00%
====== =========== ======
</TABLE>
DISTRIBUTION BY LIEN POSITION
The lien position of the Home Equity Loans as of the Closing Date was
as follows:
<TABLE>
<CAPTION>
NUMBER OF INITIAL AGGREGATE % OF AGGREGATE
LIEN POSITION HOME EQUITY LOANS LOAN BALANCE LOAN BALANCE
------------- ----------------- ------------ ------------
<S> <C> <C> <C>
First Lien 8,098 $520,539,817 89.33%
Second Lien 2,218 62,201,083 10.67
----- ---------- -----
Total 10,316 $582,740,900 100.00%
====== =========== ======
</TABLE>
4
