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: October 9, 1998
(Date of earliest event reported)
Commission File No. 333-48053
EQCC Receivables Corporation
EQCC Asset Backed Corporation
- --------------------------------------------------------------------------------
59-3170055
Delaware 59-3170052
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(State of Incorporation) (I.R.S. Employer Identification No.)
10401 Deerwood Park Boulevard
Jacksonville, Florida 32256
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Address of principal executive offices (Zip Code)
(904) 987-5000
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Registrant's Telephone Number, including area code
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
<PAGE>
Item 5. Other Events
On September 25, 1998, EQCC Receivables Corporation and EQCC Asset Backed
Corporation (collectively, the "Registrant"), sold EQCC Home Equity Loan Asset
Backed Certificates, Series 1998-3, Class A-1F and Class A-1A (the "Offered
Certificates"), having an aggregate original principal balance of
$745,850,848.00. The Offered Certificates were issued pursuant to a Pooling and
Servicing Agreement, dated as of September 1, 1998, among the Registrant,
Equicredit Corporation of America, as representative and servicer (the
"Servicer") and U.S. Bank National Association, as trustee (the "Agreement"), a
copy of which is filed as an exhibit hereto. EQCC Home Equity Loan Asset Backed
Certificates, Series 1998-3, Class X and Class R Certificates (the "Private
Certificates" and, together with the Offered Certificates, the "Certificates"),
were also issued pursuant to the Agreement.
The Servicer obtained from Ambac Assurance Corporation (the "Insurer) a
securities guaranty surety bond in favor of the Trustee for the benefit of the
Certificateholders of the Offered Certificates (the "Securities Insurance
Policy").
As of the date of initial issuance, the Offered Certificates evidenced an
interest in a trust fund (the "Trust Estate"), consisting primarily of (i) a
pool of fixed- and adjustable-rate, mortgage loans, secured by mortgages, deeds
of trust or other instruments creating a first or second lien on one- to
four-family dwellings, (ii) all monies received on the Mortgage Loans on and
after the Cut-Off Date (other than the Representative's Yield, as described in
the Agreement), (iii) the Securities Insurance Policy, (iv) a yield supplement
agreement and (v) certain other property. The remaining undivided interests in
the Trust Estate are evidenced by the Class X and Class R Certificates.
Interest on the Offered Certificates will be distributed on each Payment
Date (as defined in the Agreement). Monthly distributions in reduction of the
principal balance of the Offered Certificates will be allocated to the Offered
Certificates in accordance with the priorities set forth in the Agreement.
An election will be made to treat certain assets in the Trust Fund as a
REMIC for federal income tax purposes (the "REMIC"). The Class A and Class X
Certificates will represent beneficial ownership interests in the "regular
interests" in the REMIC and the Class R Certificates will be treated as the
"residual interests" in the REMIC.
<PAGE>
Item 7. Financial Statements and Exhibits
Item 601(a)
of Regulation S-K
Exhibit No. Description
- ----------- -----------
(EX-4) Pooling and Servicing Agreement, dated as of
September 1, 1998, among EQCC Receivables
Corporation and EQCC Asset Backed
Corporation, Equicredit Corporation of
America and U.S. Bank National Association,
as trustee.
(EX-99.1) Securities Guaranty Surety Bond issued by
Ambac Assurance Corporation
(EX-99.2) Yield Supplement Agreement between
NationsBanc Financial Products, Inc. and the
Trust
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned hereunto duly authorized.
EQCC RECEIVABLES CORPORATION
October 9, 1998
By: /s/ Lenore Hanapel
------------------
Name: Lenore Hanapel
Title: Senior Vice President
EQCC ASSET BACKED CORPORATION
October 9, 1998
By: /s/ Lenore Hanapel
------------------
Name: Lenore Hanapel
Title: Senior Vice President
<PAGE>
INDEX TO EXHIBITS
Paper (P) or
Exhibit No. Description Electronic (E)
- ----------- ----------- --------------
(EX-4) Pooling and Servicing Agreement, dated as of E
September 1, 1998, among EQCC Receivables
Corporation and EQCC Asset Backed
Corporation, Equicredit Corporation of
America and U.S. Bank National Association,
as trustee
(EX-99.1) Securities Guaranty Surety Bond issued by E
Ambac Assurance Corporation
(EX-99.2) Yield Supplement Agreement between E
NationsBanc Financial Products, Inc. and the
Trust
================================================================================
POOLING AND SERVICING AGREEMENT
Dated as of September 1, 1998
EQCC RECEIVABLES CORPORATION
EQCC ASSET BACKED CORPORATION
(Depositors)
and
EQUICREDIT CORPORATION OF AMERICA
(Representative and Servicer)
and
U.S. BANK NATIONAL ASSOCIATION
(Trustee)
EQCC HOME EQUITY LOAN ASSET BACKED CERTIFICATES,
Series 1998-3
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Account.........................................................................
Accrual Period..................................................................
Act.............................................................................
Actual Loss Severity............................................................
Adjustable Rate Group...........................................................
Adjustable Rate Group Weighted Average Mortgage Interest Rate...................
Advance.........................................................................
Affiliate.......................................................................
Agreement.......................................................................
Assignment of Beneficial Interest...............................................
Assignment of Mortgage..........................................................
Authorized Denominations........................................................
Available Payment Amount........................................................
Bankruptcy Loan.................................................................
Base Spread Account Requirement.................................................
Basic Documents.................................................................
Basic Principal Amount..........................................................
Book-Entry Certificates.........................................................
Business Day....................................................................
Certificate.....................................................................
Certificate Custodian ..........................................................
Certificate Depository Agreement................................................
Certificate Insurance Policy....................................................
Certificate Insurer.............................................................
Certificate Owner...............................................................
Certificate Register............................................................
Certificateholder or Holder.....................................................
Class...........................................................................
Class A Certificateholder.......................................................
Class A Certificates............................................................
Class A Remittance Amount.......................................................
Class A-1A Carry-Forward Amount.................................................
Class A-1A Certificate..........................................................
Class A-1A Certificateholder....................................................
Class A-1A Interest Remittance Amount...........................................
Class A-1A LIBOR Rate...........................................................
Class A-1A Pass-Through Rate....................................................
Class A-1A Principal Balance....................................................
Class A-1A Principal Remittance Amount..........................................
Class A-1A Remittance Amount....................................................
Class A-1F Carry-Forward Amount.................................................
Class A-1F Certificate..........................................................
Class A-1F Certificateholder....................................................
Class A-1F Insured Interest Remittance Amount...................................
Class A-1F Interest Remittance Amount...........................................
Class A-1F Pass-Through Rate....................................................
Class A-1F Principal Balance....................................................
Class A-1F Principal Remittance Amount..........................................
Class A-1F Remittance Amount....................................................
Class Principal Balance.........................................................
Class R Certificate.............................................................
Class R Certificateholder.......................................................
Class X Certificate.............................................................
Class X Certificateholder.......................................................
Class X-A Component Remittance Amount...........................................
Class X-F Component Remittance Amount...........................................
Class X Remittance Amount.......................................................
Closing Date....................................................................
Code............................................................................
Collections.....................................................................
Collection Account..............................................................
Combined Loan-To-Value Ratio or CLTV............................................
Commission......................................................................
Corporate Trust Office..........................................................
Cross-over Date.................................................................
Cumulative Excess Spread Receipts...............................................
Cumulative Losses...............................................................
Current CLTV....................................................................
Curtailment.....................................................................
Custodial Agreement.............................................................
Custodian.......................................................................
Cut-off Date....................................................................
Default.........................................................................
Definitive Certificates.........................................................
Deleted Mortgage Loan...........................................................
Depositor.......................................................................
Depository......................................................................
Depository Participant..........................................................
Destroyed Mortgage Note.........................................................
Destroyed Mortgage Note Affidavit...............................................
Determination Date..............................................................
Disqualified Non-U.S. Person....................................................
Disqualified Organization.......................................................
Due Date........................................................................
Due Period......................................................................
Eligible Account................................................................
EquiCredit......................................................................
Event of Nonpayment.............................................................
Excess Proceeds.................................................................
Excess Spread...................................................................
Exchange Act....................................................................
FDIC............................................................................
FHLMC...........................................................................
Fidelity Bond...................................................................
Final Scheduled Payment Date....................................................
First Lien......................................................................
Fixed Rate Group................................................................
Fixed Rate Group Weighted Average Mortgage Interest Rate........................
FNMA............................................................................
Holder..........................................................................
Illinois Land Trust.............................................................
Independent.....................................................................
Initial LIBOR Rate..............................................................
Initial Premium Fee Recovery Amount.............................................
Insurance Account...............................................................
Insurance Proceeds..............................................................
Insured Class A Remittance Amount...............................................
Insured Class A-1F Remittance Amount............................................
Insured Pass-Through Rate.......................................................
Insured Payment.................................................................
Latest Maturity Date............................................................
LIBOR...........................................................................
LIBOR Determination Date........................................................
LIBOR Interest Carryover........................................................
Lien............................................................................
Liquidated Mortgage Loan........................................................
Liquidation Proceeds............................................................
Loss Coverage Ratio.............................................................
Loss Coverage Requirement.......................................................
Loss Trigger Date...............................................................
Majority in Aggregate Voting Interest...........................................
Monthly Excess Spread Amount....................................................
Monthly Payment.................................................................
Monthly Premium.................................................................
Moody's.........................................................................
Mortgage........................................................................
Mortgage File...................................................................
Mortgage Impairment Insurance Policy............................................
Mortgage Interest Rate..........................................................
Mortgage Loan...................................................................
Mortgage Loan Group.............................................................
Mortgage Loan Losses............................................................
Mortgage Loan Schedule..........................................................
Mortgage Note...................................................................
Mortgage Pool...................................................................
Mortgaged Property..............................................................
Mortgaged Property State........................................................
Mortgagor.......................................................................
Net Adjustable Rate Group Weighted Average Mortgage Interest Rate...............
Net Fixed Rate Group Weighted Average Mortgage Interest Rate....................
Net Funds Cap Rate..............................................................
Net Liquidation Proceeds........................................................
Nondisqualification Opinion.....................................................
Nonrecoverable Advances.........................................................
Non-United States Person........................................................
Officer's Certificate...........................................................
Opinion of Counsel..............................................................
Optional Purchase Date..........................................................
Original Class A-1A Principal Balance...........................................
Original Class A-1F Principal Balance...........................................
Original Pool Principal Balance.................................................
Original Loss Severity..........................................................
Originator......................................................................
Owner-Occupied Mortgaged Property...............................................
Ownership Interest..............................................................
Pass-Through Rate...............................................................
Payment Date....................................................................
Percentage Interest.............................................................
Performance Default.............................................................
Permitted Instruments...........................................................
Permitted Transferee............................................................
Person..........................................................................
Plan............................................................................
Pool Factor.....................................................................
Pool Principal Balance..........................................................
Pre-Plan Interest...............................................................
Pre-Plan Interest Payments......................................................
Principal and Interest Account..................................................
Principal Balance...............................................................
Principal Prepayment............................................................
Proceeding......................................................................
Projected Excess Spread.........................................................
Prospectus......................................................................
Qualified Substitute Mortgage Loan..............................................
Rating Agencies.................................................................
Reassignment of Assignment of Beneficial Interest...............................
Record Date.....................................................................
Recordation Trigger.............................................................
Reference Banks.................................................................
Registered Holder...............................................................
Regular Interests...............................................................
Reimbursable Amounts............................................................
Released Mortgaged Property Proceeds............................................
Remainder Excess Spread Amount..................................................
REMIC...........................................................................
REMIC Provisions................................................................
Remittance Report...............................................................
REO Disposition.................................................................
REO Property....................................................................
Representative..................................................................
Representative's Yield..........................................................
Residential Dwelling............................................................
Residual Certificate............................................................
Responsible Officer.............................................................
Series..........................................................................
Servicer........................................................................
Servicer Default................................................................
Servicer Employees..............................................................
Servicing Advances..............................................................
Servicing Compensation..........................................................
Servicing Fee...................................................................
Servicing Officer...............................................................
Specified Spread Account Requirement............................................
Spread Account..................................................................
Spread Account Amount...........................................................
Spread Account Excess...........................................................
S&P.............................................................................
Startup Day.....................................................................
Subordinated Amount.............................................................
Subservicer.....................................................................
Subservicing Agreement..........................................................
Substitution Adjustment.........................................................
Tax Matters Person..............................................................
Termination Price...............................................................
Transfer........................................................................
Transfer Agreement..............................................................
Transfer Affidavit and Agreement................................................
Transferee......................................................................
Transferor......................................................................
Trust...........................................................................
Trust Fund......................................................................
Trustee.........................................................................
Trust REMIC.....................................................................
UCC.............................................................................
United States Person............................................................
Voting Interest.................................................................
Yield Supplement Agreement......................................................
Yield Supplement Agreement Event of Default.....................................
Yield Supplement Agreement Termination Event....................................
Yield Supplement Amount.........................................................
Yield Supplement Carryover......................................................
Yield Supplement Counterparty...................................................
Yield Supplement Sub-Account....................................................
ARTICLE II
CONVEYANCE OF THE TRUST ASSETS
Section 2.01 Sale and Conveyance of Trust Assets; Priority and Subordination
of Ownership Interests ...........................................
Section 2.02 Possession of Mortgage Files......................................
Section 2.03 Books and Records.................................................
Section 2.04 Delivery of Mortgage Loan Documents...............................
Section 2.05 [Reserved]........................................................
Section 2.06 Acceptance by Trustee of the Trust Fund; Certain Substitutions;
Certification by Trustee .........................................
Section 2.07 REMIC Administration..............................................
Section 2.08 Execution of Certificates.........................................
Section 2.09 Application of Principal and Interest.............................
Section 2.10 Grantor Trust Administration......................................
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations of the Servicer and the Depositors................
Section 3.02 Assignment of Transfer Agreement; Representations and
Warranties as to the Individual Mortgage Loans and
the Mortgage Pool ................................................
Section 3.03 Purchase and Substitution.........................................
ARTICLE IV
THE CERTIFICATES
Section 4.01 The Certificates..................................................
Section 4.02 Registration of Transfer and Exchange of Certificates.............
Section 4.03 Mutilated, Destroyed, Lost or Stolen Certificates.................
Section 4.04 Persons Deemed Owners.............................................
Section 4.05 Determination of LIBOR............................................
ARTICLE V
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 5.01 Duties of the Servicer............................................
Section 5.02 Liquidation of Mortgage Loans.....................................
Section 5.03 Establishment of Principal and Interest Account; Deposits
in Principal and Interest Account ................................
Section 5.04 Permitted Withdrawals from the Principal and Interest Account.....
Section 5.05 Payment of Taxes, Insurance and Other Charges.....................
Section 5.06 Transfer of Accounts; Monthly Statements..........................
Section 5.07 Maintenance of Hazard Insurance...................................
Section 5.08 Maintenance of Mortgage Impairment Insurance Policy...............
Section 5.09 Fidelity Bond.....................................................
Section 5.10 Title, Management and Disposition of REO Property.................
Section 5.11 Collection of Certain Mortgage Loan Payments......................
Section 5.12 Access to Certain Documentation and Information
Regarding the Mortgage Loans .....................................
Section 5.13 Superior Liens....................................................
ARTICLE VI
PAYMENTS TO THE CERTIFICATEHOLDERS
Section 6.01 Establishment of Collection Account and Yield
Supplement Sub-Account; Deposit in Accounts ......................
Section 6.02 Permitted Withdrawals from Collection Account.....................
Section 6.03 Establishment of Insurance Account: Deposits in
Insurance Account: Permitted Withdrawals
from Insurance Account ...........................................
Section 6.04 Investment of Accounts............................................
Section 6.05 Priority and Subordination of Distributions.......................
Section 6.06 [RESERVED]........................................................
Section 6.07 Statements........................................................
Section 6.08 Advances by the Servicer..........................................
Section 6.09 Establishment of Spread Account; Deposits in Spread
Account; Permitted Withdrawals from Spread Account ...............
Section 6.10 Yield Supplement Agreement........................................
ARTICLE VII
GENERAL SERVICING PROCEDURES
Section 7.01 Assumption Agreements.............................................
Section 7.02 Satisfaction of Mortgages and Release of Mortgage Files...........
Section 7.03 Servicing Compensation............................................
Section 7.04 Annual Statement as to Compliance.................................
Section 7.05 Annual Independent Public Accountants' Servicing Report...........
Section 7.06 Right to Examine Servicer Records.................................
Section 7.07 Reports to the Trustee; Principal and Interest Account Statements.
ARTICLE VIII
REPORTS TO BE PROVIDED BY SERVICER
Section 8.01 Financial Statements..............................................
ARTICLE IX
THE SERVICER
Section 9.01 Indemnification; Third Party Claims...............................
Section 9.02 Merger or Consolidation of the Servicer...........................
Section 9.03 Limitation on Liability of the Servicer and Others................
Section 9.04 Servicer Not to Resign............................................
Section 9.05 Removal of Servicer...............................................
ARTICLE X
SERVICER DEFAULT
Section 10.01 Servicer Default.................................................
Section 10.02 Trustee to Act; Appointment of Successor Servicer................
Section 10.03 Waiver of Defaults...............................................
Section 10.04 Control by Majority in Aggregate Voting Interest.................
ARTICLE XI
TERMINATION
Section 11.01 Termination......................................................
Section 11.02 Additional Termination Requirements..............................
Section 11.03 Accounting Upon Termination of Servicer..........................
Section 11.04 Representative's Right to Representative's Yield Absolute........
Section 11.05 Termination Upon Loss of REMIC Status............................
ARTICLE XII
THE TRUSTEE
Section 12.01 Duties of Trustee................................................
Section 12.02 Certain Matters Affecting the Trustee............................
Section 12.03 Trustee Not Liable for Certificates or Mortgage Loans............
Section 12.04 Trustee May Own Certificates.....................................
Section 12.05 Servicer to Pay Trustee's Fees and Expenses......................
Section 12.06 Eligibility Requirements for Trustee.............................
Section 12.07 Resignation and Removal of the Trustee...........................
Section 12.08 Successor Trustee................................................
Section 12.09 Merger or Consolidation of Trustee...............................
Section 12.10 Appointment of Co-Trustee or Separate Trustee....................
Section 12.11 Appointment of Custodians........................................
Section 12.12 Protection of Trust Fund.........................................
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.01 The Certificate Insurer..........................................
Section 13.02 Amendment........................................................
Section 13.03 Recordation of Agreement.........................................
Section 13.04 Duration of Agreement............................................
Section 13.05 Governing Law....................................................
Section 13.06 Notices..........................................................
Section 13.07 Severability of Provisions.......................................
Section 13.08 No Partnership...................................................
Section 13.09 Counterparts.....................................................
Section 13.10 Successors and Assigns...........................................
Section 13.11 Headings.........................................................
Section 13.12 Limitation of Liability of Trustee...............................
Section 13.13 Limitations on Rights of Others..................................
Section 13.14 No Petition......................................................
Section 13.15 Third Party Beneficiary..........................................
<PAGE>
EXHIBITS
EXHIBIT A - Contents of Mortgage File
EXHIBIT B-1 - Form of Class A-1F Certificate
EXHIBIT B-2 - Form of Class A-1A Certificate
EXHIBIT B-3 - Form of Class X Certificate
EXHIBIT B-4 - Form of Class R Certificate
EXHIBIT B-5 - Form of Reverse of Certificate
EXHIBIT C - DTC Letter of Representations
EXHIBIT D - Mortgage Loan Schedules
EXHIBIT E - Form of Trustee Initial Certification
EXHIBIT F-1 - Form of Trustee Interim Certification
EXHIBIT F-2 - Form of Trustee Final Certification
EXHIBIT G - List of Bankruptcy Loans
EXHIBIT H - Form of Delinquency Report
EXHIBIT I - Certificate Insurance Policy
EXHIBIT J - Form of Transferor Certificate
EXHIBIT K - List of Originators
EXHIBIT L - [Reserved]
EXHIBIT M-1 - Form of Transfer Affidavit and Agreement
EXHIBIT M-2 - Form of Investor Representation Letter
EXHIBIT M-3 - Form of Transferor Representation Letter
EXHIBIT M-4 - Form of Rule 144A Investment Representation
EXHIBIT N - Form of Custodial Agreement
EXHIBIT O - Form of Liquidation Report
EXHIBIT P - Principal and Interest Account Letter Agreement
EXHIBIT Q - Form of Notice of Event of Nonpayment
EXHIBIT R - Monthly Information Delivered by Servicer
EXHIBIT S - List of Delinquent Loans
EXHIBIT T - Schedule of Mortgage Loans subject to the Home
Ownership and Equity Protection Act of 1994
EXHIBIT U - Destroyed Mortgage Note Affidavit
EXHIBIT V - Schedule of Mortgage Loans that do not have Title
Insurance Policies
EXHIBIT W - Yield Supplement Agreement
EXHIBIT X - Yield Supplement Counterparty Notification Form
<PAGE>
POOLING AND SERVICING AGREEMENT
This Pooling and Servicing Agreement, dated as of September 1, 1998 (the
"Agreement"), is by and among EQUICREDIT CORPORATION OF AMERICA, as
representative (the "Representative") and as servicer (the "Servicer"), EQCC
RECEIVABLES CORPORATION and EQCC ASSET BACKED CORPORATION (collectively, the
"Depositors") and U.S. BANK NATIONAL ASSOCIATION, as trustee (the "Trustee"):
PRELIMINARY STATEMENT
In order to transfer certain Mortgage Loans from the Depositors to the
Trustee for the benefit of the Certificateholders and the Certificate Insurer,
as their interests may appear, and to facilitate the servicing of certain
Mortgage Loans by the Servicer, the Representative, the Servicer and the
Depositors are entering into this Agreement with the Trustee. The Depositors are
transferring the Mortgage Loans to the Trustee for the benefit of the
Certificateholders and the Certificate Insurer, as their interests may appear,
under this Agreement, pursuant to which four classes of Certificates are being
issued, denominated on the face thereof as EQCC Home Equity Loan Asset Backed
Certificates, Series 1998-3, Class A-1F, Class A-1A, Class X and Class R,
respectively, representing in the aggregate a 100% ownership interest in the
Mortgage Loans and all payments and other collections thereon received on or
after September 1, 1998 (the "Cut-off Date") (exclusive of the Representative's
Yield and amounts received after the Cut-off Date in respect of interest accrued
prior to the Cut-off Date). As of the Cut-off Date, the Mortgage Loans have an
aggregate outstanding principal balance of $745,850,848.91, the Mortgage Loans
in the Adjustable Rate Group have an aggregate outstanding principal balance of
$39,251,140.34, and the Mortgage Loans in the Fixed Rate Group have an aggregate
outstanding principal balance of $706,599,708.57, in each case after application
of payments received by the Depositors on or before such date.
As provided herein, the Trustee will make an election to treat the assets
of the Trust Fund other than the Spread Account, the Yield Supplement
Sub-Account and the Yield Supplement Agreement as a REMIC (as defined herein)
for federal income tax purposes. For federal income tax purposes the Class A
Certificates represent a beneficial interest in, and the Class X Certificates
represent, the "regular interests" in the Trust REMIC, the Class A-1F
Certificates represent a beneficial ownership interest in the Yield Supplement
Agreement and the rights to receive payments in respect of Yield Supplement
Carryovers from the Spread Account, the Class A-1A Certificates represent the
rights to receive payments in respect of LIBOR Interest Carryovers from the
Spread Account and the Class R Certificates represent the sole class of
"residual interest" in the Trust REMIC for purposes of the REMIC Provisions. The
Class X Certificates also represent beneficial interests in the Spread Account,
subject to the obligation to make payments to the Class A-1F Certificates in
respect of Yield Supplement Carryovers and to the Class A-1A Certificates in
respect of LIBOR Interest Carryovers.
The following table sets forth the designation, type, aggregate Original
Principal Balance and Final Scheduled Payment Date for each Class of
Certificates comprising the interests in the Trust Fund.
<TABLE>
<CAPTION>
Aggregate Original Principal Final Scheduled
Designation Type Balance Payment Date
----------- ---- ------- ------------
<S> <C> <C> <C>
Class A-1F Senior $706,599,708.00 November 15, 2028
Class A-1A Senior $39,251,140.00 November 15, 2028
Class X Subordinate N/A November 15, 2028
Class R Residual N/A N/A
</TABLE>
Unless otherwise noted, references in this Agreement to percentages of
Mortgage Loans refer in each case to the percentage of the aggregate principal
balance of the Mortgage Loans as of the Cut-off Date, based on the outstanding
principal balances of the Mortgage Loans as of the Cut-off Date, and giving
effect to principal payments received prior to the Cut-off Date.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Whenever used herein, the following words and phrases, unless the context
otherwise requires, shall have the following meanings.
Account: The Principal and Interest Account, the Collection Account, the
Yield Supplement Sub-Account (a sub-account of the Collection Account), the
Spread Account or the Insurance Account.
Accrual Period: With respect to each Payment Date, the period from and
including the immediately preceding Payment Date or, in the case of the initial
Accrual Period, September 25, 1998, up to but excluding such Payment Date.
Act: As defined in Section 4.02.
Actual Loss Severity: With respect to any Payment Date, a fraction,
expressed as a percentage, (a) the numerator of which equals the sum of all
Mortgage Loan Losses incurred with respect to Liquidated Mortgage Loans as of
the last day of the immediately preceding calendar month and (b) the denominator
of which equals the sum as of such Payment Date of the Principal Balances of all
Liquidated Mortgage Loans, the amount of such Principal Balances to be
determined in each case as of the last day of the calendar month immediately
preceding the month in which such Mortgage Loan became a Liquidated Mortgage
Loan.
Adjustable Rate Group: The group of Mortgage Loans indicated on the
Mortgage Loan Schedule as belonging to the Adjustable Rate Group.
Adjustable Rate Group Weighted Average Mortgage Interest Rate: As of any
date, the weighted average of the Mortgage Interest Rates on the Mortgage Loans
in the Adjustable Rate Group.
Advance: An advance made by the Servicer pursuant to Section 6.08 hereof.
Affiliate: With respect to any specified Person, any other Person
controlling, 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.
Agreement: This Pooling and Servicing Agreement and all amendments hereof
and supplements hereto.
Assignment of Beneficial Interest: With respect to each Mortgage Loan
secured by an interest in an Illinois Land Trust, an instrument executed by all
of the beneficiaries of such Illinois Land Trust and by any Person having any
interest in such Illinois Land Trust or the power to direct the trustee under
such Illinois Land Trust, which assigns and transfers to the respective
Depositor as a secured party, all of the beneficiaries' rights, powers,
privileges and beneficial interest in such Illinois Land Trust.
Assignment of Mortgage: An assignment of the Mortgage, notice of transfer
or equivalent instrument sufficient, upon proper recordation thereof, under the
laws of the jurisdiction wherein the related Mortgaged Property is located to
reflect of record the transfer of the Mortgage to the party named as assignee
therein.
Authorized Denominations: The authorized denominations of the Certificates,
as set forth in Section 4.01 of this Agreement.
Available Payment Amount: With respect to any Payment Date and each
Mortgage Loan Group, an amount equal to (i) the sum of all amounts described in
clauses (i) through (vii), inclusive, of Section 5.03 received by the Servicer
or any Subservicer (including any amounts paid by the Servicer and the
Representative and excluding any amounts not required to be deposited in the
Principal and Interest Account pursuant to Section 5.03 and excluding any
amounts withdrawn by the Servicer pursuant to Section 5.04(ii), (iii), (v),
(vi), (vii) and (x) as of the related Determination Date) during the related Due
Period with respect to the Mortgage Loans in such Mortgage Loan Group and on
deposit in the Collection Account on such Payment Date, plus (ii) the amount of
any Advances remitted pursuant to Section 6.08 for such Payment Date with
respect to the Mortgage Loans in such Mortgage Loan Group and on deposit in the
Collection Account on such Payment Date, less (iii) the Excess Spread with
respect to such Payment Date and such Mortgage Loan Group. No amount included in
the Available Payment Amount by virtue of being described by any component of
the definition thereof shall be included more than once by virtue of also being
described by any other component or otherwise.
Bankruptcy Loan: Each Mortgage Loan set forth on Exhibit G hereto.
Base Spread Account Requirement: (x) $16,781,644.10, provided, however,
that the Certificate Insurer may, in its sole discretion, reduce the Base Spread
Account Requirement to such amount as is specified in a notice delivered to the
Trustee, the Representative and each Rating Agency; provided, further, that such
reduction shall not affect the rating assigned to the Certificates.
Basic Documents: The Transfer Agreement, this Pooling and Servicing
Agreement, the Custodial Agreement, the Certificate Depository Agreement, the
Yield Supplement Agreement and the other documents and certificates delivered in
connection therewith.
Basic Principal Amount: With respect to the Mortgage Loans in a Mortgage
Loan Group and any Payment Date and related Due Period, the sum (without
duplication) of (i) the principal portion of all Monthly Payments received by
the Servicer or any Subservicer in the related Due Period, (ii) all Curtailments
and all Principal Prepayments received during such related Due Period, (iii) the
principal portion of all Insurance Proceeds, Released Mortgaged Property
Proceeds and Net Liquidation Proceeds received during the related Due Period,
(iv) (A) that portion of the purchase price (as set forth in Section 2.06(b)) of
any purchased Mortgage Loans which represents principal and (B) the principal
portion of any Substitution Adjustments deposited into the Principal and
Interest Account as of the related Determination Date and (v) the Principal
Balance of each Mortgage Loan as of the beginning of the related Due Period
which became a Liquidated Mortgage Loan during the related Due Period (exclusive
of any principal payments in respect thereof included in clauses (i) through
(iv) above).
Book-Entry Certificates: A beneficial interest in the Certificates, the
ownership and transfer of which shall be made through book entries by the
Depository as described in Section 4.01 hereof.
Business Day: Any day other than (i) a Saturday or Sunday or (ii) a day on
which banking institutions in the States of Illinois, New York or Florida are
authorized or obligated by law or executive order to be closed; provided,
however, that on the Closing Date the Servicer shall provide the Trustee and the
Certificate Insurer with an Officer's Certificate listing the dates on which
banking institutions in the States of Illinois, Florida and New York are
authorized or obligated by law or executive order to be closed and the Servicer
shall deliver a new Officer's Certificate annually thereafter to the Trustee and
the Certificate Insurer prior to the expiration of the most recent list
provided. Failure to provide such an Officer's Certificate shall not constitute
an Event of Default; provided that the Trustee and the Certificate Insurer may
rely on the most recently delivered list without further investigation.
Certificate: Any Class A-1F Certificate, Class A-1A Certificate, Class X
Certificate or Class R Certificate executed by the Trustee on behalf of the
Trust Fund and authenticated by the Trustee or its authenticating agent,
substantially in the form annexed hereto as Exhibits B-1, B-2, B-3 or B-4,
respectively.
Certificate Custodian: Initially, U.S. Bank National Association;
thereafter any other Certificate Custodian acceptable to the Depository and
selected by the Trustee.
Certificate Depository Agreement: The agreement, dated as of the Closing
Date, among the Depositors and the initial Depository, relating to the Class A
Certificates.
Certificate Insurance Policy: The certificate guaranty surety bond, policy
number AB0197BE, in the name of the Trustee, dated the Closing Date, issued by
the Certificate Insurer for the benefit of the Class A Certificateholders,
pursuant to which the Certificate Insurer guarantees Insured Payments, a copy of
which is attached hereto as Exhibit I.
Certificate Insurer: Ambac Assurance Corporation, a Wisconsin stock
insurance company, or any successor thereof, as issuer of the Certificate
Insurance Policy.
Certificate Owner: With respect to a Book-Entry Certificate, the Person who
is the beneficial owner of such Certificate as reflected on the books of the
Depository or on the books of a Depository Participant.
Certificate Register: As described in Section 4.02 hereof.
Certificateholder or Holder: Each Person in whose name a Certificate is
registered in the Certificate Register; provided, however, that, solely for the
purposes of giving any consent (except any consent required to be obtained
pursuant to Section 10.02), waiver, request or demand pursuant to this
Agreement, any Certificate registered in the name of the Representative, the
Servicer, any Originator or either Depositor, or any Affiliate of any of them,
shall be deemed not to be outstanding and the undivided Percentage Interest
evidenced thereby shall not be taken into account in determining whether the
requisite percentage of Certificates necessary to effect any such consent,
waiver, request or demand has been obtained. For purposes of any consent,
waiver, request or demand of Certificateholders pursuant to this Agreement, upon
the Trustee's or the Certificate Insurer's request, the Servicer, the
Representative, any Originator and either Depositor shall provide to the Trustee
and the Certificate Insurer a notice identifying any of their respective
Affiliates that is a Certificateholder as of the date(s) specified by the
Trustee or the Certificate Insurer in such request.
Class: Collectively, Certificates bearing the same alphabetical designation
(A-1F, A-1A, X or R).
Class A Certificateholder: A Holder of a Class A Certificate.
Class A Certificates: The Class A-1F Certificates and Class A-1A
Certificates.
Class A Remittance Amount: As to any Payment Date, the sum of (i) the Class
A-1F Remittance Amount and (ii) the Class A-1A Remittance Amount.
Class A-1A Carry-Forward Amount: As of any Payment Date, the sum of (i) the
amount, if any, by which (x) the Class A-1A Remittance Amount as of the
immediately preceding Payment Date exceeded (y) the amount of the actual
distribution made to the Class A-1A Certificateholders pursuant to Section 6.05
hereof, exclusive of any portion of such amount attributable to any Insured
Payment, on such immediately preceding Payment Date and (ii) if any portion of
the amount in clause (i) represents Insured Payments made by the Certificate
Insurer, interest on such portion, if any, described in clause (i) above, at the
Class A-1A Pass-Through Rate (for the related Accrual Period) from such
immediately preceding Payment Date.
Class A-1A Certificate: A Certificate designated as an EQCC Home Equity
Loan Asset Backed Certificate, Series 1998-3, Class A-1A Certificate, and
evidencing (i) a beneficial interest in a "regular interest" in the Trust REMIC
for purposes of the REMIC Provisions and (ii) the right to receive payments in
respect of LIBOR Interest Carryovers from the Spread Account.
Class A-1A Certificateholder: A Holder of a Class A-1A Certificate.
Class A-1A Interest Remittance Amount: For any Payment Date, the aggregate
interest accrued during the related Accrual Period at the Class A-1A
Pass-Through Rate on the Class A-1A Principal Balance from time to time
outstanding during such Accrual Period (after giving effect to payments of
principal made on the preceding Payment Date), calculated on the basis of actual
number of days over a 360-day year.
Class A-1A LIBOR Rate: For any Accrual Period, LIBOR as of the related
LIBOR Determination Date plus (i) 0.24% per annum on each Payment Date on or
prior to the Optional Purchase Date and (ii) 0.48% per annum on each Payment
Date following the Optional Purchase Date.
Class A-1A Pass-Through Rate: For the initial Accrual Period, 5.83375% and
for any Accrual Period thereafter, the lesser of the Class A-1A LIBOR Rate for
such Accrual Period and the Net Funds Cap Rate for such Accrual Period.
Class A-1A Principal Balance: As of any date of determination, the Original
Class A-1A Principal Balance, reduced by the sum of all amounts (including,
except for purposes of effecting the Certificate Insurer's subrogation rights,
that portion of Insured Payments, if any, made in respect of principal)
previously distributed to Class A-1A Certificateholders in respect of principal.
Class A-1A Principal Remittance Amount: As to any Payment Date, the lesser
of (A) the Class A-1A Principal Balance as of such Payment Date and (B) the sum
of (a) the Basic Principal Amount for the Adjustable Rate Group for such Payment
Date and (b) the Class A-1A Carry-Forward Amount.
Class A-1A Remittance Amount: As to any Payment Date, the sum of (i) the
Class A-1A Principal Remittance Amount and (ii) the Class A-1A Interest
Remittance Amount.
Class A-1F Carry-Forward Amount: As of any Payment Date, the sum of (i) the
amount, if any, by which (x) the Insured Class A-1F Remittance Amount as of the
immediately preceding Payment Date exceeded (y) the amount of the actual
distribution made to the Class A-1F Certificateholders pursuant to Section 6.05
hereof, exclusive of any portion of such amount attributable to any Insured
Payment, on such immediately preceding Payment Date and (ii) if any portion of
the amount in clause (i) represents Insured Payments made by the Certificate
Insurer, interest on such portion, if any, described in clause (i) above, at the
Insured Pass-Through Rate from such immediately preceding Payment Date.
Class A-1F Certificate: A Certificate designated as an EQCC Home Equity
Loan Asset Backed Certificate, Series 1998-3, Class A-1F Certificate, and
evidencing (i) a beneficial interest in a "regular interest" in the Trust REMIC
for purposes of the REMIC Provisions, (ii) the right to receive payments in
respect of Yield Supplement Carryovers from the Spread Account and (iii) the
right to receive Yield Supplement Amounts pursuant to the Yield Supplement
Agreement.
Class A-1F Certificateholder: A Holder of a Class A-1F Certificate.
Class A-1F Insured Interest Remittance Amount: For any Payment Date, the
aggregate interest accrued during the related Accrual Period at the Insured
Pass-Through Rate, on the Class A-1F Principal Balance outstanding during such
Accrual Period (after giving effect to payments of principal made on the
preceding Payment Date) calculated on the basis of actual days over a 360 day
year.
Class A-1F Interest Remittance Amount: For any Payment Date, the aggregate
interest accrued during the related Accrual Period at the Class A-1F
Pass-Through Rate, on the Class A-1F Principal Balance outstanding during such
Accrual Period (after giving effect to payments of principal made on the
preceding Payment Date) calculated on the basis of actual days over a 360 day
year.
Class A-1F Pass-Through Rate: For the initial Accrual Period, 5.82375%, and
for any Accrual Period thereafter, LIBOR as of the related LIBOR Determination
Date plus (i) 0.23% per annum on each Payment Date on or prior to the Optional
Purchase Date and (ii) 0.46% per annum on each Payment Date following the
Optional Purchase Date.
Class A-1F Principal Balance: As of any date of determination, the Original
Class A-1F Principal Balance, reduced by the sum of all amounts (including,
except for purposes of effecting the Certificate Insurer's subrogation rights,
that portion of Insured Payments, if any, made in respect of principal)
previously distributed to Class A-1F Certificateholders in respect of principal.
Class A-1F Principal Remittance Amount: As to any Payment Date, the lesser
of (A) the Class A-1F Principal Balance as of such Payment Date and (B) the sum
of (a) the Basic Principal Amount for the Fixed Rate Group for such Payment Date
and (b) the Class A-1F Carry-Forward Amount.
Class A-1F Remittance Amount: As to any Payment Date, the sum of (i) the
Class A-1F Principal Remittance Amount and (ii) the Class A-1F Interest
Remittance Amount.
Class Principal Balance: As of any date of determination, each of the Class
A-1F Principal Balance and the Class A-1A Principal Balance.
Class R Certificate: A Certificate designated as an EQCC Home Equity Loan
Asset Backed Certificate, Series 1998-3, Class R Certificate, and evidencing an
interest designated as the "residual interest" in the Trust REMIC for purposes
of the REMIC Provisions.
Class R Certificateholder: A Holder of a Class R Certificate.
Class X Certificate: A Certificate designated as an EQCC Home Equity Loan
Asset Backed Certificate, Series 1998-3, Class X Certificate evidencing (i) a
"regular interest" in the Trust REMIC for purposes of the REMIC Provisions and
(ii) rights under the Spread Account as described herein.
Class X Certificateholder: A Holder of a Class X Certificate.
Class X-A Component Remittance Amount: For any Payment Date, the product of
(i) the excess of (a) the Net Adjustable Rate Group Weighted Average Mortgage
Interest Rate over (b) the Class A-1A Pass-Through Rate for the related Accrual
Period and (ii) the Class A-1A Principal Balance for such Payment Date (before
giving effect to any principal distributions on such Payment Date).
Class X-F Component Remittance Amount: For any Payment Date, the product of
(i) the excess of (a) the Net Fixed Rate Group Weighted Average Mortgage
Interest Rate over (b) the Class A-1F Insured Pass-Through Rate and (ii) the
Class A-1F Principal Balance for such Payment Date (before giving effect to any
principal distributions on such Payment Date).
Class X Remittance Amount: An amount equal to the sum of the Class X-A
Component Remittance Amount and the Class X-F Component Remittance Amount less
amounts withdrawn from the Spread Account in accordance with Section 6.09
herein.
Closing Date: September 25, 1998.
Code: The Internal Revenue Code of 1986, as amended from time to time.
Collections: For any Due Period, the amounts collected by the Servicer with
respect to the Mortgage Loans set forth in Section 5.03(a), clauses (i)-(viii)
that are required to be deposited to the Collection Account pursuant to Section
5.04 with respect to the related Payment Date (and not including amounts that
are permitted to be withdrawn from the Principal and Interest Account pursuant
to Section 5.04).
Collection Account: The collection account established and maintained by
the Trustee pursuant to Section 6.01 hereof.
Combined Loan-To-Value Ratio or CLTV: With respect to any Mortgage Loan,
the ratio (expressed as a percentage) of (a) the sum of the original principal
balance of such Mortgage Loan and the outstanding principal balance of any
related First Lien as of the date of origination of the Mortgage Loan, divided
by (b) (i) the lesser of (1) the value of the related Mortgaged Property, based
upon the appraisal made at the time such Mortgage Loan was originated, or (2)
the purchase price of the Mortgaged Property if the Mortgage Loan proceeds were
used to purchase the Mortgaged Property or (ii) in the case of a Mortgage Loan
that has been deemed reissued for purposes of Section 1001 of the Code as a
result of modifications thereto, the value of the Mortgaged Property based upon
the appraisal made at the date of the most recent deemed reissuance.
Commission: The Securities and Exchange Commission.
Corporate Trust Office: With respect to the Trustee, the principal office
at which at any particular time the corporate trust business of the Trustee
shall be principally administered, which offices at the Closing Date are located
at U.S. Bank National Association, 111 East Wacker Drive, Suite 3000, Chicago,
Illinois 60601.
Cross-over Date: The date on which the Subordinated Amount is reduced to
zero.
Cumulative Excess Spread Receipts: As of any date of determination, the
aggregate amount of Excess Spread from and after the Closing Date paid to the
Class A Certificateholders pursuant to Section 6.09(b)(ii), to the extent
attributable to Mortgage Loan Losses.
Cumulative Losses: As of any date of determination, the aggregate Mortgage
Loan Losses for all Due Periods since the Cut-off Date.
Current CLTV: With respect to any Bankruptcy Loan, the ratio (expressed as
a percentage) of (a) the sum of (i) the outstanding principal balance as of the
Cut-off Date of such Mortgage Loan and (ii) the outstanding principal balance of
any related First Lien as of the Cut-off Date divided by (b) the current
appraised value of the related Mortgaged Property, as determined by an
independent fee appraiser acceptable to the Certificate Insurer within 60 days
of the Closing Date.
Curtailment: With respect to a Mortgage Loan, any payment of principal
received in any month during a Due Period as part of a payment which is neither
intended to satisfy the Mortgage Loan in full nor to cure a delinquency.
Custodial Agreement: The agreement for the retention of the Mortgage Files
initially in the form attached hereto as Exhibit N.
Custodian: Initially, with respect to all Mortgage Loans, Bank One Trust
Company, N.A., and thereafter, any successor custodian approved by the
Certificate Insurer appointed pursuant to either Custodial Agreement which is
not affiliated with the Servicer, the Representative, the Depositors or the
Originators.
Cut-off Date: September 1, 1998.
Default: Any occurrence that is, or with notice or the lapse of time or
both would become, a Servicer Default under Section 10.01 hereof.
Definitive Certificates: As set forth in Section 4.01 hereof.
Deleted Mortgage Loan: A Mortgage Loan replaced by or to be replaced by a
Qualified Substitute Mortgage Loan.
Depositor: Either EQCC Asset Backed Corporation or EQCC Receivables
Corporation, each of which is a direct or an indirect wholly-owned subsidiary of
the Representative.
Depository: Initially, The Depository Trust Company, the nominee of which
is Cede & Co., as the registered Holder of the Book Entry Certificates. The
Depository shall at all times constitute a "clearing corporation" as defined in
Section 8-102(3) of the Uniform Commercial Code of the State of New York.
Depository Participant: A broker, dealer, bank or other financial
institution or other Person for whom from time to time a Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
Destroyed Mortgage Note: A Mortgage Note the original of which was
permanently lost or destroyed and has not been replaced.
Destroyed Mortgage Note Affidavit: An affidavit in the form of Exhibit U
delivered pursuant to Section 2.04(a)(i)(B) with respect to a Destroyed Mortgage
Note.
Determination Date: With respect to each Payment Date, the seventh Business
Day of the month in which such Payment Date occurs.
Disqualified Non-United States Person: A transferee of a Class R
Certificate other than a person that (i) is a United States Person or (ii) is a
Non-United States Person that holds a Class R Certificate in connection with the
conduct of a trade or business within the United States and has furnished the
transferor and the Trustee with an effective Internal Revenue Service Form 4224
or (iii) is a Non-United States Person that has delivered to both the transferor
and the Trustee an opinion of a nationally recognized tax counsel to the effect
that the transfer of such Class R Certificate to it is in accordance with the
requirements of the Code and the regulations promulgated thereunder and that
such transfer of a Class R Certificate will not be disregarded for federal
income tax purposes.
Disqualified Organization: Either (i) the United States, (ii) any state or
political subdivision thereof, (iii) any foreign government, (iv) any
international organization, (v) any agency or instrumentality of any of the
foregoing, (vi) any tax-exempt organization (other than a cooperative described
in Section 521 of the Code) which is exempt from the tax imposed by Chapter 1 of
the Code unless such organization is subject to the tax imposed by Section 511
of the Code, (vii) any organization described in Section 1381(a)(2)(C) of the
Code, or (viii) any other entity designated as a Disqualified Organization by
relevant legislation amending the REMIC Provisions and in effect at or proposed
to be effective as of the time of the determination. Notwithstanding the
foregoing, a corporation will not be treated as an instrumentality of the United
States or of any state or political subdivision thereof if all of its activities
are subject to tax and a majority of its board of directors is not selected by
such governmental unit. The terms "United States" and "international
organization" shall have the meanings set forth in Section 7701 of the Code.
Due Date: The day of the month on which the Monthly Payment is due from the
Mortgagor on a Mortgage Loan.
Due Period: With respect to any Payment Date, the calendar month
immediately preceding the calendar month in which such Payment Date occurs.
Eligible Account: Either (A) a segregated account or segregated accounts
maintained with an institution whose deposits are insured by the Bank Insurance
Fund or the Savings Association Insurance Fund of the FDIC, (x) the unsecured
and uncollateralized debt obligations of which shall be rated "A" or better by
S&P or have the highest short-term rating by S&P and (y) the unsecured and
uncollateralized debt obligations of which shall be rated A1 or better by
Moody's and have the highest short-term rating by Moody's and which is either
(i) a federal savings and loan association duly organized, validly existing and
in good standing under the federal banking laws, (ii) an institution duly
organized, validly existing and in good standing under the applicable banking
laws of any state, (iii) a national banking association duly organized, validly
existing and in good standing under the federal banking laws, (iv) a principal
subsidiary of a bank holding company, or (v) approved in writing by the
Certificate Insurer, S&P and Moody's or (B) a segregated trust account or
accounts maintained with the corporate trust department of a federal or state
chartered depository institution or trust company, having capital and surplus of
not less than $50,000,000, acting in its fiduciary capacity, and has a rating
from Moody's for long-term deposits of at least Baa3; provided, that any
Eligible Account maintained with any Affiliate of NationsBank Corporation must
be consented to by the Certificate Insurer. Any Eligible Accounts maintained
with the Trustee shall conform to the preceding clause (B).
EquiCredit: EquiCredit Corporation of America.
Event of Nonpayment: An event of nonpayment shall occur with respect to any
Payment Date if the amount remitted by the Servicer pursuant to Sections
5.04(i), 6.04(e) and 6.08 and on deposit in the Collection Account for such
Payment Date, plus any amounts withdrawn from the Spread Account pursuant to
Section 6.09(b)(ii) and on deposit in the Collection Account, that are not
subject to any automatic stay under Section 362 of the United States Bankruptcy
Code pursuant to an order of a United States bankruptcy court of competent
jurisdiction, will not, taken together, be sufficient to pay the sum of (X) the
Insured Class A Remittance Amount (exclusive of the portion of the Class A-1F
Carry-Forward Amount and the Class A-1A Carry-Forward Amount representing
amounts previously paid to the Class A-1F Certificateholders and the Class A-1A
Certificateholders, respectively, as Insured Payments) and (Y) the amount to be
withdrawn from the Collection Account for deposit into the Insurance Account
pursuant to Section 6.02(i) in respect of such Payment Date, unless such
insufficiency results from a failure by the Certificate Insurer to perform in
accordance with the terms of this Agreement or the Certificate Insurance Policy
or a failure by the Trustee to perform in accordance with this Agreement.
Excess Proceeds: With respect to any Liquidated Mortgage Loan, the excess,
if any, of (a) the Net Liquidation Proceeds received in respect thereof over (b)
the Principal Balance of such Mortgage Loan as of the date such Mortgage Loan
became a Liquidated Mortgage Loan plus accrued but unpaid interest thereon at
the Mortgage Interest Rate.
Excess Spread: With respect to any Payment Date, the excess (if any) of the
aggregate interest accrued for the related Due Period on the Mortgage Loans at
their respective Mortgage Interest Rates over the sum of (i) interest accrued on
the Class A-1F Certificates (calculated using the Insured Pass-Through Rate) and
Class A-1A Certificates since the immediately prior Payment Date and (ii) the
product of (a) 1/12th of 0.69% and (b) the aggregate of the principal balances
of the Mortgage Loans on which interest for such Due Period was calculated.
Exchange Act: The Securities Exchange Act of 1934, as amended.
FDIC: The Federal Deposit Insurance Corporation and any successor thereto.
FHLMC: The Federal Home Loan Mortgage Corporation and any successor
thereto.
Fidelity Bond: As described in Section 5.09.
Final Scheduled Payment Date: With respect to each Class of Certificates,
as specified in the table under the Preliminary Statement.
First Lien: With respect to any Mortgage Loan secured by a second priority
lien, the mortgage loan relating to the corresponding Mortgaged Property secured
by a first priority lien.
Fixed Rate Group: The group of Mortgage Loans indicated on the Mortgage
Loan Schedule as belonging to the Fixed Rate Group.
Fixed Rate Group Weighted Average Mortgage Interest Rate: As of any date,
the weighted average of the Mortgage Interest Rates on the Mortgage Loans in the
Fixed Rate Group.
FNMA: Fannie Mae and any successor thereto.
Holder: A Certificateholder.
Illinois Land Trust: A trust formed under a trust agreement between the
trustee and one or more beneficiaries named therein, pursuant to which such
trustee holds legal and equitable title to a Mortgaged Property located in the
State of Illinois and such beneficiaries are the owners of the beneficial
interest in such trust.
Independent: When used with respect to any specified Person, that the
Person (i) does not have any direct financial interest or any material indirect
financial interest in the Depositors, the Representative, the Servicer, the
Originators or any Affiliate of any of the foregoing Persons and (ii) is not
connected with the Representative, the Servicer, the Originators or any
Affiliate of any of the foregoing Persons as an officer, employee, promoter,
underwriter, trustee, partner, director or person performing similar functions.
Initial LIBOR Rate: 5.59375% per annum.
Initial Premium Fee Recovery Amount: With respect to any Payment Date, the
product of (i) 0.09% and (ii) the excess of (A) the sum of the Class A-1F
Principal Balance and the Class A-1A Principal Balance immediately prior to
giving effect to distributions of principal and interest on the Certificates
over (B) the sum of the Class A-1F Principal Balance and the Class A-1A
Principal Balance immediately after giving effect to distributions of principal
and interest on the Certificates.
Insurance Account: The insurance account established and maintained by the
Trustee in accordance with Section 6.03 hereof.
Insurance Proceeds: Proceeds paid to the Trustee or the Servicer by any
insurer (except the Certificate Insurer) or by the Servicer pursuant to a
deductible clause under a blanket policy insuring against fire and hazards of
extended coverage on all of the Mortgage Loans pursuant to Section 5.08, in
either event pursuant to any insurance policy covering a Mortgage Loan,
Mortgaged Property, or REO Property or any other insurance policy net of any
expenses which are incurred by the Servicer or the Trustee in connection with
the collection of such proceeds and not otherwise reimbursed to the Servicer,
other than proceeds to be applied to the restoration or repair of the Mortgaged
Property or released to the Mortgagor in accordance with customary second
mortgage servicing procedures.
Insured Class A Remittance Amount: As to any Payment Date, the sum of (a)
the Class A-1A Remittance Amount and (b) the Insured Class A-1F Remittance
Amount.
Insured Class A-1F Remittance Amount: As to any Payment Date, the sum of
(i) the Class A-1F Principal Remittance Amount and (ii) the Class A-1F Insured
Interest Remittance Amount.
Insured Pass-Through Rate: As to any Payment Date, the lesser of (i) the
Class A-1F Pass-Through Rate and (ii) the Class A-1F Pass-Through Rate,
calculated using the Initial LIBOR Rate instead of LIBOR.
Insured Payment: As of each Payment Date, the amount, if any, by which (A)
the Insured Class A Remittance Amount (excluding from such amounts any amount
thereof attributable to clause (iv) of the definition of "Basic Principal
Amount," to the extent such amount is due but not paid by the Representative,
the Depositors, or the Originators) exceeds (B) the sum of (x) the Available
Payment Amounts for each Mortgage Loan Group (minus the amount withdrawable from
the Collection Account pursuant to Sections 6.02(i), (ii) and (iii)) plus any
amount transferred from the Spread Account to the Collection Account pursuant to
Section 6.09(b)(ii) and (y) the aggregate amount of any previous Insured
Payments for which the Certificate Insurer has not been reimbursed pursuant to
Section 6.05(c); provided, however, that the determination of Insured Payments
shall not be affected in any way by any recharacterization of the transactions
contemplated by this Agreement as a financing in any bankruptcy, insolvency or
similar proceeding to which the Depositors or the Originators may be subject,
and the Available Payment Amount shall for the purpose of this definition be
deemed to be decreased by the amount thereof that has been deposited in the
Collection Account but may not be withdrawn therefrom pursuant to an order of a
United States bankruptcy court of competent jurisdiction imposing a stay
pursuant to Section 362 of the United States Bankruptcy Code.
Latest Maturity Date: With respect to any Class of Certificates, its Final
Scheduled Payment Date.
LIBOR: For any Accrual Period and the Class A Certificates, the London
interbank offered rate for one-month United States dollar deposits determined by
the Trustee for each Accrual Period in accordance with the provisions of Section
4.05.
LIBOR Determination Date: With respect to any Accrual Period, the second
business day preceding such Accrual Period (which for the initial Accrual Period
shall be September 23, 1998).
LIBOR Interest Carryover: An amount, calculated on any Payment Date on
which the Class A-1A Pass-Through Rate is equal to the Net Funds Cap Rate, equal
to (i) the difference between (a) the amount of interest the Class A-1A
Certificates would be entitled to receive on such Payment Date without regard to
the Net Funds Cap Rate and (b) the amount of interest actually distributed to
the Class A-1A Certificates on such Payment Date, plus (ii) any portion of the
amount calculated pursuant to clause (i) remaining unpaid from prior Payment
Dates and interest accrued thereon at the then-applicable Class A-1A LIBOR Rate.
Lien: Any security interest, lien, charge, pledge, equity or encumbrance of
any kind other than tax liens, mechanics' liens and any liens that attach by
operation of law.
Liquidated Mortgage Loan: Any defaulted Mortgage Loan or REO Property as to
which the Servicer has determined that all amounts which it reasonably and in
good faith expects to recover have been recovered from or on account of such
Mortgage Loan.
Liquidation Proceeds: Cash, including Insurance Proceeds, proceeds of any
REO Disposition, amounts required to be deposited in the Principal and Interest
Account pursuant to Section 5.10 hereof, and any other amounts received in
connection with the liquidation of defaulted Mortgage Loans, whether through
trustee's sale, foreclosure sale or otherwise.
Loss Coverage Ratio: With respect to any Payment Date, a fraction,
expressed as a percentage, (a) the numerator of which equals the sum of (i) the
product of (A) the sum of (I) 25% of the aggregate Principal Balance of all
Mortgage Loans that are 30-59 days delinquent, plus (II) 50% of the aggregate
Principal Balance of all Mortgage Loans that are 60-89 days delinquent, plus
(III) 100% of the aggregate Principal Balance of all Mortgage Loans that are 90
or more days delinquent, in each case as of the close of business on the last
day of the immediately preceding calendar month and including Mortgage Loans
that are in foreclosure or that have been converted to REO Properties, and (B)
the greater of (I) the Original Loss Severity and (II) prior to the Loss Trigger
Date, zero, and on or after the Loss Trigger Date, the Actual Loss Severity,
plus (ii) the Cumulative Losses, and (b) the denominator of which equals the
product of (I) the Loss Coverage Requirement and (II) the Original Pool
Principal Balance.
Loss Coverage Requirement: 10.75%.
Loss Trigger Date: The date that is the earlier of (i) the 30th Payment
Date and (ii) the first Payment Date after which the Trust has incurred Mortgage
Loan Losses with respect to at least 20 Liquidated Mortgage Loans.
Majority in Aggregate Voting Interest: Class A and Class X
Certificateholders representing Class A and Class X Certificates voting together
as a single class evidencing an aggregate Voting Interest of at least 51% when
expressed as a percentage rounded to four decimal places.
Monthly Excess Spread Amount: On any Payment Date, the amount equal to the
product of 100% and the amount of the Excess Spread as of such Payment Date;
provided, however, that the percentage set forth above may be reduced at any
time, solely at the discretion of the Certificate Insurer, at which time written
notice shall be sent to the Representative, the Trustee, S&P and Moody's.
Monthly Payment: The scheduled monthly payment of principal and/or interest
required to be made by a Mortgagor on the related Mortgage Loan, as set forth in
the related Mortgage Note.
Monthly Premium: The monthly premium payable to the Certificate Insurer
pursuant to the Certificate Insurance Policy and the letter agreement dated as
of the Closing Date, among the Certificate Insurer and the Depositors.
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 the Mortgaged Property.
Mortgage File: As described in Exhibit A.
Mortgage Impairment Insurance Policy: As defined in Section 5.08.
Mortgage Interest Rate: With respect to a Mortgage Loan in the Fixed Rate
Group, the fixed per annum rate of interest borne by a Mortgage Note, as shown
on the Mortgage Loan Schedule, and with respect to a Mortgage Loan in the
Adjustable Rate Group and any date of determination, the per annum rate of
interest for the related Due Period computed in accordance with the related
Mortgage Note, subject to any minimum rate, maximum rate and periodic cap on
such rate applicable from time to time to the calculation of interest thereon as
set forth in the related Mortgage Note.
Mortgage Loan: An individual mortgage loan which is assigned and
transferred to the Trustee pursuant to this Agreement, together with the rights
and obligations of a holder thereof and payments thereon and proceeds therefrom,
the Mortgage Loans originally subject to this Agreement being identified on the
Mortgage Loan Schedules annexed hereto as Exhibit D. Any mortgage loan which,
although intended by the parties hereto to have been, and which purportedly was,
transferred and assigned to the Trustee by the applicable Depositor, in fact was
not transferred and assigned to the Trustee for any reason whatsoever,
including, without limitation, the incorrectness of the statement set forth in
Section 3.02(g) hereof with respect to such mortgage loan, shall nevertheless be
considered a "Mortgage Loan" for all purposes of this Agreement. As applicable,
Mortgage Loan shall be deemed to refer to the related REO Property.
Mortgage Loan Group: Either the Fixed Rate Group or the Adjustable Rate
Group.
Mortgage Loan Losses: With respect to any Payment Date, the sum of the
following amounts for each Mortgage Loan that became a Liquidated Mortgage Loan
during the related Due Period: the amount, if any, by which (i) the sum of (A)
the Principal Balance of such Mortgage Loan (determined immediately before such
Mortgage Loan became a Liquidated Mortgage Loan) and (B) accrued and unpaid
interest thereon at the Mortgage Interest Rate to the date on which such
Mortgage Loan became a Liquidated Mortgage Loan exceeds (ii) the Net Liquidation
Proceeds received during such Due Period in connection with the liquidation of
such Mortgage Loan which have not theretofore been used to reduce the Principal
Balance of such Mortgage Loan. For purposes of this definition, a Mortgage Loan
as to which the related Mortgaged Property is held by the Trust Fund shall be
deemed to have continued to accrue interest at the related Mortgage Interest
Rate.
Mortgage Loan Schedule: The schedule of Fixed Rate Group Mortgage Loans and
the schedule of Adjustable Rate Group Mortgage Loans, each attached hereto as
Exhibit D as each may be amended to reflect Qualified Substitute Mortgage Loans,
such schedule identifying each applicable Mortgage Loan by address of the
Mortgaged Property and the name of the Mortgagor and setting forth as to each
such Mortgage Loan the following information: (i) the Principal Balance as of
the Cut-off Date, (ii) the account number, (iii) the original principal amount,
(iv) the CLTV as of the date of the origination of the related Mortgage Loan,
(v) the Due Date, (vi) the Mortgage Interest Rate, (vii) the first date on which
a Monthly Payment is due under the Mortgage Note, (viii) the Monthly Payment,
(ix) the original stated maturity date of the Mortgage Note, (x) the remaining
number of months to maturity as of the Cut-off Date and (xi) the Mortgaged
Property State.
Mortgage Note: The note or other evidence of indebtedness evidencing the
indebtedness of a Mortgagor under a Mortgage Loan.
Mortgage Pool: The Mortgage Loans indicated on the Mortgage Loan Schedule.
Mortgaged Property: The underlying property securing a Mortgage Loan,
consisting of a fee simple estate or, with respect to certain properties located
in Maryland, a leasehold estate, in a single parcel of land improved by a
Residential Dwelling.
Mortgaged Property State: The state in which the Mortgaged Property related
to a Mortgage Loan is located, as set forth on the Mortgage Loan Schedule.
Mortgagor: The obligor on a Mortgage Note.
Net Adjustable Rate Group Weighted Average Mortgage Interest Rate: With
respect to any Accrual Period, a rate equal to the Adjustable Group Weighted
Average Mortgage Interest Rate less 0.69%.
Net Fixed Rate Group Weighted Average Mortgage Interest Rate: With respect
to any Accrual Period, a rate equal to the Fixed Rate Group Weighted Average
Mortgage Interest Rate less 0.69%.
Net Funds Cap Rate: With respect to any Accrual Period, a rate equal to the
Adjustable Rate Group Weighted Average Mortgage Interest Rate as of the first
day of the related Due Period less either (i) 0.69% per annum, with respect to
the first twelve Accrual Periods or (ii) 1.19% per annum, with respect to each
subsequent Accrual Period.
Net Liquidation Proceeds: Liquidation Proceeds net of any reimbursements to
the Servicer made therefrom pursuant to Section 5.04(ii).
Nondisqualification Opinion: An Independent Opinion of Counsel addressed to
the Trustee that a contemplated action will neither cause the Trust REMIC to
fail to qualify as a REMIC at any time the Class A Certificates are outstanding
nor cause an unindemnified "prohibited transaction" or a "prohibited
contribution" tax to be imposed on the Trust REMIC.
Nonrecoverable Advances: With respect to any Mortgage Loan, (i) any
Servicing Advance or Advance previously made and not reimbursed pursuant to
Section 5.04(ii), or (ii) a Servicing Advance proposed to be made, in respect of
any Mortgage Loan or REO Property which, in the good faith business judgment of
the Servicer would not be ultimately recoverable from late collections,
Insurance Proceeds or Liquidation Proceeds on such Mortgage Loan or REO Property
or otherwise.
Non-United States Person: Any Person other than a United States Person.
Officer's Certificate: A certificate delivered hereunder or under any other
Basic Document signed by the President or a Vice President or an Assistant Vice
President of the Representative, a Depositor, the Trustee or the Servicer, as
required hereunder or thereunder.
Opinion of Counsel: A written opinion of counsel delivered hereunder or
under any Basic Document, reasonably acceptable to the Trustee, and experienced
in matters relating to the subject of such opinion; except that any opinion of
counsel relating to (a) the qualification of the Trust REMIC as a REMIC or (b)
compliance with the REMIC Provisions must be an opinion of counsel who (i) is in
fact Independent of the Representative and the Servicer, (ii) does not have any
direct financial interest or any material indirect financial interest in the
Representative or the Servicer or in an affiliate thereof and (iii) is not
connected with the Representative or Servicer as an officer, employee, director
or person performing similar functions.
Optional Purchase Date: As defined in Section 11.01.
Original Class A-1F Principal Balance: $706,599,708.00.
Original Class A-1A Principal Balance: $39,251,140.00.
Original Pool Principal Balance: The Pool Principal Balance as of the
Cut-off Date, which amount is equal to $745,850,858.91.
Original Loss Severity: 50.75%.
Originator: Any of the entities listed on Exhibit K hereto, each of which
is an "Originator" pursuant to the Transfer Agreement and, other than
EquiCredit, is (i) a direct wholly-owned subsidiary of the Representative, and
(ii) a Subservicer as of the date hereof with respect to the Mortgage Loans sold
by it to either Depositor pursuant to the Transfer Agreement.
Owner-Occupied Mortgaged Property: A Residential Dwelling that the related
Mortgagor represented an intent to occupy as such Mortgagor's primary or
secondary residence at the origination of the Mortgage Loan.
Ownership Interest: As to any Certificate, any ownership or security
interest in such Certificate, including any interest in such Certificate as the
Holder thereof and any other interest therein, whether direct or indirect, legal
or beneficial, as owner or as pledgee.
Pass-Through Rate: Any one of the Class A-1F Pass-Through Rate or the Class
A-1A Pass-Through Rate.
Payment Date: The 15th day of any month, or if such 15th day is not a
Business Day, the first Business Day immediately following, commencing on
October 15, 1998.
Percentage Interest: With respect to a Class A-1F or Class A-1A
Certificate, the portion of the Certificates evidenced by such Class A-1F or
Class A-1A Certificate, respectively, expressed as a percentage rounded to four
decimal places, equal to a fraction the numerator of which is the denomination
represented by such Class A-1F or Class A-1A Certificate, respectively, and the
denominator of which is the Original Class A-1F Principal Balance or Original
Class A-1A Principal Balance, respectively. With respect to a Class X
Certificate or Class R Certificate, the portion of the Class evidenced thereby
as stated on the face of such Certificate.
Performance Default: The Servicing Default described in clause (vii) of
Section 10.01(a).
Permitted Instruments: As used herein, Permitted Instruments shall include
the following:
(i) (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, and (B) Federal Housing Administration debentures, FHLMC
senior debt obligations, and FNMA senior debt obligations assigned ratings
in at least one of the top two long-term rating categories by S&P and
Moody's, but excluding any of such securities described in clauses (A) and
(B) whose terms do not provide for payment of a fixed dollar amount upon
maturity or call for redemption;
(ii) federal funds, certificates of deposit, time and demand deposits
and banker's acceptances (in each case having maturities of not more than
365 days) of any bank or trust company incorporated under the laws of the
United States or any state thereof, provided that (A) the short-term debt
obligations of such bank or trust company at the date of acquisition
thereof have been rated "A-1+" or better by S&P (or, if so consented to by
the Certificate Insurer, "A-1" or better by S&P) and (B) the short-term and
long-term debt obligations of such bank or trust company at the date of
acquisition thereof have been rated Prime-1 and A1 or better, respectively,
by Moody's;
(iii) deposits of any bank or savings and loan association which has
combined capital, surplus and undivided profits of at least $3,000,000,
which deposits are not in excess of the applicable limits insured by the
Bank Insurance Fund or the Savings Association Insurance Fund of the FDIC,
provided that the long-term deposits of such bank or savings and loan
association are rated at least "BBB" by S&P and Baa3 by Moody's;
(iv) commercial paper (having original maturities of not more than 180
days) rated "A-1+" or better by S&P and Prime-1 by Moody's;
(v) investments in money market funds rated "AAAm" or "AAAm-G" by S&P
and Aaa by Moody's;
(vi) investments in Permitted Instruments on an overnight basis in
investment accounts maintained at the Trustee; provided, however, that any
such account shall be an Eligible Account; and
(vii) any other obligation or security acceptable to the Rating
Agencies and the Certificate Insurer (as certified by a letter from each
Rating Agency and the Certificate Insurer to the Trustee); provided, that
no instrument described hereunder 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 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; and provided, further that no instrument shall be a Permitted
Instrument unless such instrument is a "permitted investment" within the
meaning of Section 860G(a)(5) of the Code.
Permitted Transferee: Any Person other than a Disqualified Organization or
a Disqualified Non-United States Person, or an agent or nominee acting on behalf
of a Disqualified Organization or a Disqualified Non-United States Person.
Person: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, national banking association,
unincorporated organization or government or any agency or political subdivision
thereof.
Plan: A Plan filed by a Mortgagor pursuant to the Bankruptcy Code (11
U.S.C. Section 1321) and either confirmed or pending confirmation by a court of
competent jurisdiction pursuant to the Bankruptcy Code (11 U.S.C. Section 1325),
providing for, among other things, the payment of defaulted Mortgage Loan
payments all of which were due prior to, but in no event after, the
effectiveness of the Plan.
Pool Factor: As of any date of determination, the Pool Principal Balance as
of such date divided by the Original Pool Principal Balance.
Pool Principal Balance: With respect to either or both Mortgage Loan
Groups, the aggregate Principal Balances of the related Mortgage Loans, as of
any date of determination.
Pre-Plan Interest: With respect to a Bankruptcy Loan, accrued but unpaid
interest relating to the period prior to the filing of the related Plan.
Pre-Plan Interest Payments: With respect to a Bankruptcy Loan, payments
made by a Mortgagor on account of Pre-Plan Interest.
Principal and Interest Account: The principal and interest account
established and maintained by the Servicer pursuant to Section 5.03 hereof.
References herein to any amounts on deposit in the Principal and Interest
Account shall refer only to amounts pertaining to this Agreement.
Principal Balance: With respect to any Mortgage Loan or related REO
Property, at any date of determination, the principal balance of the Mortgage
Loan outstanding as of such date. The Principal Balance of any REO Property as
of the date on which such REO Property became an REO Property shall be the
Principal Balance of the related Mortgage Loan as of the date referred to in the
preceding sentence, and the Principal Balance of a Mortgage Loan at the time it
becomes a Liquidated Mortgage Loan shall be zero.
Principal Prepayment: Any payment or other recovery of principal on a
Mortgage Loan equal to the outstanding principal balance thereof, received in
advance of the final scheduled Due Date, that is intended to satisfy a Mortgage
Loan in full.
Proceeding: Any suit in equity, action at law or other judicial or
administrative proceeding.
Projected Excess Spread: With respect to any Payment Date, five (5) times
the amount of the Monthly Excess Spread Amount deposited in the Spread Account
pursuant to Section 6.09(a) hereof as of such Payment Date.
Prospectus: The prospectus (including the prospectus supplement) prepared
by the Representative and the Depositors in connection with the initial issuance
and sale of the Class A Certificates.
Qualified Substitute Mortgage Loan: A mortgage loan or mortgage loans
substituted for a Deleted Mortgage Loan pursuant to Section 2.06 or 3.03 hereof,
which (i) has or have a mortgage interest rate or rates of not less than (and
not more than two percentage points more than) the Mortgage Interest Rate for
the Deleted Mortgage Loan (which, in the case of a Mortgage Loan in the
Adjustable Rate Group, shall mean a Mortgage Loan having the same interest rate
index, and a margin over such index and a maximum interest rate at least equal
to (and in each case not more than two percentage points more than) those
applicable to the related Deleted Mortgage Loan), (ii) relates or relate to the
same type of Residential Dwelling as the Deleted Mortgage Loan, or relates to a
one- to four-family dwelling, and has or have a lien priority that is no more
junior or subordinate than that of the Deleted Mortgage Loan, (iii) matures or
mature no later than (and not more than one year earlier than) the Deleted
Mortgage Loan, (iv) has or have a Combined Loan-to-Value Ratio or Combined
Loan-to-Value Ratios at the time of such substitution no higher than the
Combined Loan-to-Value Ratio of the Deleted Mortgage Loan, (v) has or have a
principal balance or principal balances (after application of all payments
received on or prior to the date of substitution) equal to or less than the
Principal Balance of the Deleted Mortgage Loan as of such date, (vi) is of equal
or better underwriting program class quality (as described in the Prospectus) as
the Deleted Mortgage Loan, (vii) complies or comply as of the date of
substitution with each representation and warranty set forth in Sections 3.01(b)
and 3.02, (viii) is of the same type, either a balloon loan or fully-amortizing
Mortgage Loan, as the Deleted Mortgage Loan and (ix) would be in the same
Mortgage Loan Group (the Fixed Rate Group or Adjustable Rate Group) as the
related Deleted Mortgage Loan.
Rating Agencies: Collectively, Moody's and S&P.
Reassignment of Assignment of Beneficial Interest: With respect to each
Mortgage Loan secured by an interest in an Illinois Land Trust, an assignment of
the Assignment of Beneficial Interest, sufficient under the laws of the
jurisdiction wherein the related Mortgaged Property is located to effect the
transfer of the entire beneficial interest in such Illinois Land Trust to the
Depositors and the sale of such beneficial interest to the Trustee for the
benefit of the Certificateholders.
Record Date: The last day of the calendar month preceding the month in
which each such Payment Date occurs.
Recordation Trigger: The date on which (i) the long-term senior unsecured
debt of NationsBank Corporation or its successor in interest is reduced below
"A-" by S&P or below A3 by Moody's or is withdrawn.
Reference Banks: Barclay's Bank PLC, Chase Manhattan Bank, Citibank, N.A.
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) not controlling, under the control of or under common control with
any Depositor or any affiliate thereof, (iii) whose quotations appear on the
Telerate LIBOR Page on the relevant Interest Determination Date and (iv) which
have been designated as such by the Trustee.
Registered Holder: The Person in whose name a Certificate is registered on
the Certificate Register.
Regular Interests: The Class A Certificates and the Class X Certificates.
Reimbursable Amounts: As of any date of determination, an amount payable to
the Servicer, the Representative or the Depositors with respect to (i) the
Servicing Advances and Advances reimbursable pursuant to Section 5.04(ii) not
previously reimbursed, (ii) any advances reimbursable pursuant to Section 9.01
and not previously reimbursed pursuant to Section 6.05(d)(vi), and (iii) any
other amounts expressly reimbursable to the Servicer or the Depositors pursuant
to this Agreement.
Released Mortgaged Property Proceeds: As to any Mortgage Loan, proceeds
received by the Servicer in connection with (a) a taking of an entire Mortgaged
Property by exercise of the power of eminent domain or condemnation or (b) any
release of part of the Mortgaged Property from the lien of the related Mortgage,
whether by partial condemnation, sale or otherwise, which are not released to
the Mortgagor in accordance with applicable law, customary mortgage servicing
procedures and this Agreement.
Remainder Excess Spread Amount: As of any Payment Date, the amount equal to
the excess of the aggregate Excess Spread over the Monthly Excess Spread Amount.
REMIC: A "real estate mortgage investment conduit" within the meaning of
Section 860D of the Code.
REMIC Provisions: Provisions of the federal income tax law relating to real
estate mortgage investment conduits, which appear at Sections 860A through 860G
of the Code, and related provisions, and temporary and final Treasury
regulations promulgated thereunder, as the foregoing may be in effect from time
to time (or proposed, if proposed to be retroactive).
Remittance Report: As defined in Section 6.07.
REO Disposition: The final sale by the Servicer of a Mortgaged Property
acquired by the Servicer in foreclosure or by deed in lieu of foreclosure. The
proceeds of any REO Disposition constitute part of the definition of Liquidation
Proceeds.
REO Property: As described in Section 5.10.
Representative: EquiCredit Corporation of America, or its successor in
interest.
Representative's Yield: For each Mortgage Loan, the sum of (i) prepayment
penalties and premiums collected on the Mortgage Loans and (ii) the Servicing
Compensation exclusive of Servicing Fees. The Representative's Yield is retained
by the Representative and is not part of the assets of the Trust Fund.
Residential Dwelling: Any of the following: (i) a one- to four-family
dwelling, (ii) a unit in a planned unit development, (iii) a unit in a
condominium development, or (iv) a permanently affixed mobile home or a
permanently affixed manufactured housing unit, as defined in the FNMA Selling
Guide, which does not constitute other than real property under state law
provided that such home or housing would qualify as a single family residence
under Section 25(c)(10) of the Code.
Residual Certificate: The Class R Certificates.
Responsible Officer: When used with respect to the Trustee, any officer
assigned to the Corporate Trust Division (or any successor thereto) with direct
responsibility for the administration of this Agreement, including any Vice
President, Assistant Vice President, Senior Trust Officer, Trust Officer,
Assistant Trust Officer, any Assistant Secretary, any trust officer or any other
officer of such Trustee customarily performing functions similar to those
performed by any of the above designated officers and to whom, with respect to a
particular matter, such matter is referred because of such officer's knowledge
of and familiarity with the particular subject. When used with respect to the
Representative, a Depositor, an Originator or the Servicer, the President or any
Vice President, Assistant Vice President, or any Secretary or Assistant
Secretary authorized to perform the actions required, including, without
limitation, each Person whose name appears on a list of Responsible Officers
furnished to the Trustee and the Certificate Insurer on the Closing Date, as
such list may be amended from time to time.
Series: 1998-3.
Servicer: EquiCredit Corporation of America or any successor appointed as
herein provided.
Servicer Default: As specified in Section 10.01(a).
Servicer Employees: As defined in Section 5.09.
Servicing Advances: All reasonable and customary "out-of-pocket" costs and
expenses incurred in the performance by the Servicer of its servicing
obligations which are "unanticipated," within the meaning of Treasury
Regulations Section 1.860G-1(b)(3)(iii), including, but not limited to, the cost
of (i) the preservation, restoration and protection of the Mortgaged Property,
including, without limitation, advances in respect of real estate taxes and
assessments and insurance premiums on fire, hazard and flood insurance policies
and leasehold payments, (ii) any enforcement or judicial proceedings, including
foreclosures, (iii) the management and liquidation of the REO Property, (iv)
compliance with the obligations under Sections 5.02, 5.05 and 5.07, which
Servicing Advances are reimbursable to the Servicer to the extent provided in
Section 5.04(ii), and (v) in connection with the liquidation of a Mortgage Loan,
expenditures relating to the purchase or maintenance of the First Lien pursuant
to Section 5.13, for all of which costs and expenses the Servicer is entitled to
reimbursement in accordance with this Agreement. Notwithstanding anything herein
to the contrary, no Servicing Advance shall be required to be made hereunder if
such Servicing Advance would, if made, constitute a Nonrecoverable Advance. The
determination by the Servicer that it has made a Nonrecoverable Advance or that
any proposed Servicing Advance, if made, would constitute a Nonrecoverable
Advance, shall be evidenced by an Officer's Certificate delivered to the
Certificate Insurer, the Depositors and the Trustee no later than the Business
Day following such determination.
Servicing Compensation: The Servicing Fee and other amounts to which the
Servicer is entitled pursuant to Section 7.03.
Servicing Fee: With respect to any Accrual Period, the amount equal to one
month's interest at the Servicing Fee Rate on the aggregate of the Principal
Balances of the Mortgage Loans (calculated on the basis of 30 days over a 360
day year). The Servicing Fee is payable solely from the interest portion of (i)
Monthly Payments, (ii) Liquidation Proceeds or (iii) Released Mortgaged Property
Proceeds collected by the Servicer or as otherwise provided in Section 5.04. The
Servicing Fee with respect to each Mortgage Loan shall accrue on the same
principal balance on which interest accrues on such Mortgage Loan. The Servicing
Fee includes any Servicing Fees owed or payable to any Subservicer.
Servicing Fee Rate: With respect to any Accrual Period, a rate equal to
0.60% per annum.
Servicing Officer: Any officer of the Servicer involved in, or responsible
for, the administration and servicing of the Mortgage Loans whose name and
specimen signature appear on a list of servicing officers furnished to the
Trustee by the Servicer on the Closing Date, as such list may from time to time
be amended.
Specified Spread Account Requirement: As of:
(x) any date on or prior to the thirtieth Payment Date (occurring in March
2001), the greatest of (a) the Base Spread Account Requirement as of such date;
(b) the sum of the Principal Balances of the three largest Mortgage Loans as of
such date; and (c) two times the excess of (i) one-half of the aggregate
Principal Balance of the Mortgage Loans which are 90 or more days delinquent
(including REO Properties) over (ii) the Projected Excess Spread as of such
date;
(y) any date after the thirtieth Payment Date (occurring in March 2001),
the greatest of (a) the lesser of (A) the Base Spread Account Requirement as of
such date and (B) the product of (x) 4.50% and (y) the Pool Principal Balance as
of such date; (b) the sum of the Principal Balances of the three largest
Mortgage Loans as of such date; and (c) two times the excess of (i) one-half of
the aggregate Principal Balance of the Mortgage Loans which are 90 or more days
delinquent (including REO Properties) over (ii) the Projected Excess Spread as
of such date. Notwithstanding the foregoing, however, the Specified Spread
Account Requirement for any date shall in no event be greater than the
Subordinated Amount as of such date and may be reduced by the Certificate
Insurer at any time after the amount in the Spread Account is equal to the Base
Spread Account Requirement; provided that such reductions shall not affect the
rating assigned by S&P or Moody's to the Class A Certificates.
Spread Account: The account maintained pursuant to Section 6.09, which
shall not be an asset of the Trust REMIC.
Spread Account Amount: As defined in Section 6.09(b)(ii) hereof.
Spread Account Excess: As defined in Section 6.09(b)(iv) hereof.
S&P: Standard & Poor's, or any successor thereto.
Startup Day: The day designated as such pursuant to Section 2.07 hereof.
Subordinated Amount: (a) The Subordinated Amount as of the Cut-off Date
shall be 10.75% of the Original Pool Principal Balance (which is initially equal
to $80,178,966.26).
(b) As of any Payment Date, the Subordinated Amount shall equal the
Subordinated Amount as of the preceding September 1, minus Cumulative Excess
Spread Receipts since such preceding September 1, through the last day of the
month preceding such Payment Date. After giving effect to such adjustment, the
Subordinated Amount may be further adjusted on each respective September 1 as
follows to equal:
(i) on each September 1 up to but not including September 1, 2003 the
amount, if any, by which (A) 10.75% of the Original Pool Principal Balance
exceeds (B) Cumulative Excess Spread Receipts since the Cut-off Date
through the last day of August preceding such September 1;
(ii) on September 1, 2003, the lesser of (A) the Subordinated Amount
as of the preceding Payment Date, and (B) the sum of (x) 10.75% of the Pool
Principal Balance at the close of business on September 1, 2003, and (y)
80% of the amount, if any, by which the amount set forth under (A) exceeds
the amount computed under clause (B)(x) of this paragraph (ii);
(iii) on September 1, 2004, the lesser of (A) the Subordinated Amount
as of the preceding Payment Date, and (B) the sum of (x) 10.75% of the Pool
Principal Balance at the close of business on September 1, 2004, and (y)
75% of the amount, if any, by which the amount set forth under (A) exceeds
the amount computed under clause (B)(x) of this paragraph (iii);
(iv) on September 1, 2005, the lesser of (A) the Subordinated Amount
as of the preceding Payment Date, and (B) the sum of (x) 10.75% of the Pool
Principal Balance at the close of business on September 1, 2005, and (y)
66-2/3% of the amount, if any, by which the amount set forth under (A)
exceeds the amount computed under clause (B)(x) of this paragraph (iv);
(v) on September 1, 2006, the lesser of (A) the Subordinated Amount as
of the preceding Payment Date, and (B) the sum of (x) 10.75% of the Pool
Principal Balance at the close of business on September 1, 2006, and (y)
50% of the amount, if any, by which the amount set forth under (A) exceeds
the amount computed under clause (B)(x) of this paragraph (v); and
(vi) on September 1, 2007, and on each September 1, thereafter, the
lesser of (A) the applicable Subordinated Amount on the preceding September
1, minus Cumulative Excess Spread Receipts since such preceding September
1, through the last day of the preceding September 1, as appropriate, and
(B) 10.75% of the Pool Principal Balance at the close of business on such
current September 1;
provided, however, that the amount determined for part (B) of clauses (ii)
through (vi) above shall not be less than the sum of the Principal Balances of
the three largest Mortgage Loans at the beginning of each such period. Subject
to the preceding sentence, the Subordinated Amount as of any date other than a
Payment Date shall be equal to the Subordinated Amount as of the immediately
preceding Payment Date; and provided, further, however, that in no event shall
the Subordinated Amount be less than zero.
Notwithstanding anything to the contrary herein contained, no reduction to
the Subordinated Amount described in clauses (ii) through (vi) hereof shall be
permitted to take effect if (x) as of September 1, 2003, the amount equal to
aggregate Cumulative Excess Spread Receipts exceeds 1% of the Original Pool
Principal Balance or (y) as of any September 1 after September 1, 2003, (I) the
amount equal to aggregate Cumulative Excess Spread Receipts exceeds 5% of the
Subordinated Amount in effect on the preceding September 1, or (II) on any
Payment Date occurring within the annual period immediately preceding such
September 1, the aggregate principal balance of all Mortgage Loans which were 60
or more days delinquent on such Payment Date equaled or exceeded 2.5% of the
aggregate principal balance of all Mortgage Loans outstanding on such Payment
Date. If, by reason of the application of the provisions of clause (y) of the
immediately preceding sentence, reduction of the Subordinated Amount pursuant to
the provisions of any one of clauses (ii) through (vi) shall not have taken
effect, and, if as of any subsequent September 1, no event shall have occurred
the effect of which would be to prohibit a reduction in the Subordinated Amount
as of such September 1, then the Subordinated Amount shall be reduced on such
September 1, to the amount permitted by the clause which would have otherwise
taken effect had the provisions of the immediately preceding sentence not been
applied.
Subservicer: Any Person with whom the Servicer has entered into a
Subservicing Agreement and who satisfies any requirements set forth in Section
5.01(b) hereof in respect of the qualification of a Subservicer. As of the
Closing Date, the only Subservicers are the Originators (other than EquiCredit
Corporation of America).
Subservicing Agreement: Any agreement between the Servicer and any
Subservicer relating to subservicing and/or administration of certain Mortgage
Loans as provided in Section 5.01(b), a copy of which shall be delivered, along
with any modifications thereto, to the Certificate Insurer and the Trustee.
Substitution Adjustment: As to any date on which a substitution occurs
pursuant to Section 2.06 or 3.03, the amount (if any) by which the aggregate
Principal Balances of any Qualified Substitute Mortgage Loans as of the date of
substitution, together with accrued and unpaid interest thereon (but only to the
extent deposited in the Principal and Interest Account and transferred to the
Collection Account), are less than the aggregate of the Principal Balances
(after application of principal payments received on or before the date of
substitution and deposited into the Principal and Interest Account), together
with accrued and unpaid interest thereon to the date of substitution, of the
related Deleted Mortgage Loans plus any unreimbursed Servicing Advances.
Tax Matters Person: The Person or Persons appointed from time to time to
act as the "tax matters person" (within the meaning of the REMIC Provisions) of
the Trust REMIC.
Termination Price: As defined in Section 11.01.
Testing Date: As defined in Section 3.02(fff).
Transfer: Any direct or indirect transfer, sale, pledge, hypothecation or
other form of assignment of any Ownership Interest in a Certificate.
Transfer Agreement: The agreement, dated as of September 1, 1998, among the
Originators and the Depositors, pursuant to which the Originators transferred
the Mortgage Loans to the Depositors.
Transfer Affidavit and Agreement: As defined in Section 4.02(j).
Transferee: Any Person who is acquiring by Transfer any Ownership Interest
in a Certificate.
Transferor: Any Person who is disposing by Transfer any Ownership Interest
in a Certificate.
Trust: EQCC Home Equity Loan Trust 1998-3.
Trust Fund: The segregated pool of assets subject hereto, constituting the
trust created hereby and to be administered hereunder, consisting of: (i) such
Mortgage Loans as from time to time are subject to this Agreement, together with
the Mortgage Files relating thereto and all proceeds thereof, (ii) such assets
as from time to time are identified as REO Property or are deposited in the
Collection Account, Yield Supplement Sub-Account, Principal and Interest
Account, Spread Account and Insurance Account, including amounts on deposit in
the foregoing accounts and invested in Permitted Instruments, (iii) the
Trustee's rights under all insurance policies with respect to the Mortgage Loans
required to be maintained pursuant to this Agreement and any Insurance Proceeds,
(iv) the Certificate Insurance Policy, (v) Liquidation Proceeds, (vi) the Yield
Supplement Agreement and (vii) Released Mortgaged Property Proceeds. The
Representative's Yield and amounts received on and after the Cut-off Date in
respect of interest accrued on the Mortgage Loans prior to the Cut-off Date do
not constitute part of the Trust Fund.
Trustee: U.S. Bank National Association, not in its individual capacity but
solely as trustee under this Agreement, or its successor in interest, or any
successor trustee appointed pursuant to this Agreement.
Trust REMIC: As defined in Section 2.07(a)(1).
UCC: The Uniform Commercial Code as in effect in the relevant jurisdiction.
United States Person: (i) A citizen or resident of the United States, (ii)
a corporation, partnership (except to the extent provided in applicable Treasury
regulations) or other entity created or organized in, or under the laws of, the
United States or any political subdivision thereof, (iii) an estate the income
of which is includible in gross income for United States federal income tax
purposes, regardless of its source or (iv) a trust if a court within the United
States is able to exercise primary supervision over the administration of such
trust and one or more United States Persons have the authority to control all
substantial decisions of such trust (or, to the extent provided in applicable
Treasury regulations, certain trusts in existence on August 20, 1996 which are
eligible to elect to be treated as United States persons).
Voting Interest: The aggregate Voting Interests of each Class of Class A
Certificates on any date will be equal to a percentage, expressed as a fraction,
the numerator of which is the principal balance of such Class and the
denominator of which is 95% of the sum of the Class A-1F Principal Balance and
the Class A-1A Principal Balance. The aggregate Voting Interests of the Class X
Certificates will be equal to a percentage, expressed as a fraction, the
numerator of which is 5% of the sum of the Class A-1F Principal Balance and the
Class A-1A Principal Balance and the denominator of which is the sum of the
Class A-1F Principal Balance and the Class A-1A Principal Balance. Each
Certificateholder of a Class will have a Voting Interest equal to the product of
the Voting Interest to which such Class is collectively entitled and the
Percentage Interest in such Class represented by such Holder's Certificates.
Yield Supplement Agreement: That certain yield supplement agreement
consisting of the ISDA Master Agreement dated September 15, 1998, the Schedule
to the Master Agreement and the Confirmation for U.S. Dollar Rate Cap
Transaction, in each case the between the Trust, on behalf of the Class A-1F
Certificateholders, and the Yield Supplement Counterparty, attached hereto as
Exhibit W, or any successor yield supplement agreement relating to the Class
A-1F Certificates entered into pursuant to Section 6.10.
Yield Supplement Agreement Event of Default: With respect to the Yield
Supplement Agreement, any event of default as described therein.
Yield Supplement Agreement Termination Event: With respect to the Yield
Supplement Agreement, any termination event as described therein.
Yield Supplement Amount: With respect to each Payment Date, an amount equal
to (i) the product of (a) the excess of LIBOR for such Payment Date over the
Initial LIBOR Rate and (b) the Class A-1F Principal Balance for such Payment
Date (before giving effect to distributions on such Payment Date) and (c) the
number of days in the related Accrual Period divided by (ii) 360.
Yield Supplement Carryover: An amount, calculated on any Payment Date on
which LIBOR for such Payment Date is greater than the Initial LIBOR Rate, equal
to (i) the difference between (a) the Yield Supplement Amount due to holder of
the Class A-1F Certificates on such Payment Date and (b) the portion, if any, of
the Yield Supplement Amount actually distributed to the holders of the Class
A-1F Certificates on such Payment Date, plus (ii) any portion of the amount
calculated pursuant to clause (i) remaining unpaid from prior Payment Dates and
interest accrued thereon at the then-applicable Class A-1F Pass-Through Rate.
Yield Supplement Counterparty: NationsBanc Financial Products, Inc., or any
successor or assignee appointed pursuant to Section 6.10.
Yield Supplement Sub-Account: The sub-account of the Collection Account
established and maintained by the Trustee pursuant to Section 6.01 hereof.
<PAGE>
ARTICLE II
CONVEYANCE OF THE TRUST ASSETS
Section 2.01 Sale and Conveyance of Trust Assets; Priority and
Subordination of Ownership Interests.
(a) The Depositors do hereby sell, transfer, assign, set over and convey to
the Trustee (for the benefit of the Certificateholders and the Certificate
Insurer, as their interests may appear) without recourse, all of the right,
title and interest of the Depositors in and to (i) the Mortgage Loans (excepting
the Representative's Yield and amounts received on and after the Cut-off Date in
respect of interest accrued on the Mortgage Loans prior to the Cut-off Date),
(ii) the Mortgage Files relating to the Mortgage Loans, (iii) the related
Mortgaged Properties, (iv) the Depositors' rights under all insurance policies
with respect to the Mortgage Loans required to be maintained by it, (v) all
right, title and interest of the Depositors in, to and under the Transfer
Agreement, including the right to cause the Originators to repurchase the
Mortgage Loans under certain circumstances, (vi) all right, title and interest
of the Depositors in each of the Accounts established and maintained pursuant to
Articles V and VI and (vii) the interest of the Depositors in any proceeds of
the property described in clauses (i), (ii), (iii), (iv), (v) and (vi),
including all proceeds of the conversion, voluntary or involuntary, of the
foregoing into cash, instruments, securities or other property, including
without limitation, all amounts from time to time held or invested in the
Accounts.
(b) The rights of the Holders to receive payments with respect to the
Mortgage Loans in respect of the Certificates, and all ownership interests of
the Certificateholders in such payments, shall be as set forth in this
Agreement.
(c) It is the intention of this Agreement that the transfer of the
Depositors' right, title and interest in and to the assets of the Trust pursuant
to this Agreement shall constitute an absolute sale by the Depositors to the
Trustee of the Mortgage Loans for the benefit of the Certificateholders and the
Certificate Insurer and not a loan. If a transfer of Mortgage Loans from an
Originator to a Depositor pursuant to the Transfer Agreement is characterized as
a pledge and not an absolute sale, then such Depositor shall be deemed to have
transferred to the Trustee for the benefit of the Certificateholders and the
Certificate Insurer, as their interests may appear, all of such Depositor's
right, title and interest in, to and under the obligations of such Originator
deemed to be secured by said pledge; and it is the intention of this Agreement
that the Depositors shall also be deemed to have granted and for such purposes
the Depositors hereby grant, to the Trustee for the benefit of the
Certificateholders and the Certificate Insurer, as their interests may appear, a
first priority security interest in all of the Depositors' right, title, and
interest in, to and under the obligations of the Originators to the Depositors
deemed to be secured by said pledge and that the Trustee shall be deemed to be
an independent custodian for purposes of perfection of the security interest
granted to the Depositors. If the transfer of the Mortgage Loans and the other
assets of the Trust from the Depositors to the Trustee for the benefit of the
Certificateholders is characterized as a pledge, it is the intention of this
Agreement that this Agreement shall constitute a security agreement under
applicable law, and that the Depositors shall be deemed to have granted and for
such purposes the Depositors hereby grant, to the Trustee for the benefit of the
Certificateholders and the Certificate Insurer, as their interests may appear, a
first priority security interest in all of the Depositors' right, title and
interest in, to and under the Mortgage Loans, all payments of principal of or
interest on such Mortgage Loans, all other rights relating to and payments made
in respect of the assets of the Trust, and all proceeds of any thereof,
including all proceeds of the conversion, voluntary or involuntary, of the
foregoing into cash, instruments, securities or other property, including
without limitation all amounts from time to time held or invested in the
Accounts. If the trust created by this Agreement terminates prior to the
satisfaction of the claims of any Person in any Certificates, the security
interest created hereby shall continue in full force and effect and the Trustee
shall be deemed to be the collateral agent for the benefit of such Person.
Section 2.02 Possession of Mortgage Files.
(a) Upon the issuance of the Certificates, the ownership of each Mortgage
Note, the Mortgage and the contents of the related Mortgage File is vested in
the Trustee for the benefit of the Certificateholders.
(b) Pursuant to Section 2.04, the Depositors have delivered or caused to be
delivered each Mortgage File to the Custodian.
Section 2.03 Books and Records.
The sale of each Mortgage Loan shall be reflected on the applicable
Depositor's balance sheets and other financial statements prepared in accordance
with generally accepted accounting principles as a sale of assets by each
Depositor. The applicable Depositor shall be responsible for maintaining, and
shall maintain, a complete set of books and records for each Mortgage Loan which
shall be clearly marked to reflect the ownership of each Mortgage Loan by the
Trustee for the benefit of the Certificateholders.
Section 2.04 Delivery of Mortgage Loan Documents.
Contemporaneously with the delivery of this Agreement, the Depositors
delivered or caused to be delivered hereunder to the Trustee the Certificate
Insurance Policy and the Yield Supplement Agreement, and each Depositor has
delivered to the Trustee (which may be by delivery to the Custodian on behalf of
the Trustee) each of the following documents for each Mortgage Loan:
(a) (i) (A) The original Mortgage Note, with any intervening endorsements,
endorsed "Pay to the order of U.S. Bank National Association, as Trustee under
the Pooling and Servicing Agreement dated as of September 1, 1998, without
recourse" and signed, by facsimile or manual signature, in the name of the
Originator that transferred such Mortgage Loan to the applicable Depositor
pursuant to the Transfer Agreement by a Responsible Officer, with all prior and
intervening endorsements showing a complete chain of endorsement from the
originator to such Originator, if the Originator from whom the Depositor
acquired such Mortgage Loan was not the originator or (B) if such Mortgage Note
is a Destroyed Mortgage Note, an original Destroyed Mortgage Note Affidavit
together with a copy of such Mortgage Note attached thereto and, (ii) with
respect to manufactured housing units, the certificate of title, if any;
(b) Either: (i) the original Mortgage, with evidence of recording thereon
(and, in the case of a Mortgage Loan secured by a Mortgaged Property held in an
Illinois Land Trust, signed by the trustee of such Illinois Land Trust), (ii) a
copy of the Mortgage certified as a true copy by a Responsible Officer of the
Originator that transferred such Mortgage Loan to the applicable Depositor
pursuant to the Transfer Agreement (provided, however, that such Responsible
Officer may complete one or more blanket certificates attaching copies of one or
more Mortgages relating thereto) or by the closing attorney, or by an officer of
the title insurer or agent of the title insurer which issued the related title
insurance policy, or commitment therefor, if the original has been transmitted
for recording until such time as the original is returned by the public
recording office or (iii) a copy of the Mortgage certified by the public
recording office in those instances where the original recorded Mortgage has
been lost or not yet returned;
(c) The original Assignment of Mortgage from the Originator that
transferred such Mortgage Loan to the applicable Depositor pursuant to the
Transfer Agreement to "U.S. Bank National Association, as Trustee under the
Pooling and Servicing Agreement dated as of September 1, 1998, without recourse"
or in blank; any such Assignments of Mortgage may be made by blanket assignments
for Mortgage Loans secured by the Mortgaged Properties located in the same
county if permitted by applicable local law;
(d) Except with respect to any Mortgage Loan secured by a second priority
lien and having a Principal Balance not in excess of $50,000 and listed in
Exhibit V, the original policy of title insurance or a true copy thereof or, if
such policy has not yet been delivered by the insurer, the commitment or binder
to issue same, or original documents of assurance of title;
(e) All intervening assignments, if any, showing a complete chain of
assignment from the originator to the applicable Originator, including any
recorded warehousing assignments, with evidence of recording thereon, certified
by a Responsible Officer of the applicable Originator as a true copy of the
original of such intervening assignments;
(f) A copy of all assumption and modification agreements, if any, certified
as a true copy by a Responsible Officer of the applicable Originator;
(g) If the Mortgaged Property is held in an Illinois Land Trust, the
original Assignment of Beneficial Interest, or, if the trustee of such Illinois
Land Trust retains such original Assignment of Beneficial Interest, a certified
true copy of such Assignment of Beneficial Interest so certified by such
trustee;
(h) If the Mortgaged Property is held in an Illinois Land Trust, an
original Reassignment of Assignment of Beneficial Interest from the applicable
Originator to "U.S. Bank National Association, as Trustee under the Pooling and
Servicing Agreement dated as of September 1, 1998, Series 1998-3" or in blank.
In the event that the Mortgage Loan was acquired by the applicable Originator in
a merger, the Reassignment of the Assignment of Beneficial Interest must be by
"Originator, successor by merger to [name of predecessor]"; and in the event
that the Mortgage Loan was acquired or originated by the applicable Originator
while doing business under another name, the Reassignment of Assignment of
Beneficial Interest must be by "Originator, formerly known as [previous name]";
(i) If the Mortgaged Property is held in an Illinois Land Trust, originals
of all intervening Reassignments of Assignment of Beneficial Interest, showing a
complete chain of assignment from the beneficiaries of such Illinois Land Trust
to the applicable Originator of all of such beneficiaries' right, title, and
interest in, to, and under the trust agreement with respect to such Illinois
Land Trust; and
(j) If the Mortgaged Property is held in an Illinois Land Trust, (A) a
certified copy of the instrument creating the Illinois Land Trust, (B) a copy of
the UCC-1 Financing Statement evidencing the assignment of the Mortgagor's
beneficial interest in the Illinois Land Trust, with evidence of filing thereon,
and (C) the original personal guaranty of the Mortgage Note, executed by each
beneficiary of the Illinois Land Trust.
The applicable Depositor shall use its reasonable efforts to promptly
deliver or cause to be delivered to the Trustee or the Custodian: (a) the
original recorded Mortgage in those instances where a copy thereof was delivered
hereunder; (b) the original recorded Assignment of Mortgage to the applicable
Originator, which, together with any intervening assignments of Mortgage,
evidences a complete chain of assignment from the originator to the applicable
Originator in those instances where copies of such Assignments were delivered;
and (c) the title insurance policy or assurance required in paragraph (d) above.
The applicable Depositor shall, within five (5) Business Days after the receipt
thereof, and in any event, within twelve months after the Closing Date, deliver
or cause to be delivered to the Trustee or the Custodian each document described
in any of the preceding clauses (a), (b) and (c); provided, however, that if a
document described in the preceding clause (a) or clause (b) has not been
returned from the appropriate public recording office, the applicable Depositor
shall deliver a certified copy of the Mortgage and a receipted copy of the
Assignment from the appropriate recording office prior to the expiration of such
twelve-month period. Notwithstanding anything to the contrary contained in this
Section 2.04, the applicable Depositor shall be deemed to have satisfied its
obligations to deliver a Mortgage or Assignment of Mortgage upon delivery to the
Trustee or the Custodian a copy of such Mortgage or Assignment of Mortgage, as
applicable, certified by the public recording office to be a true copy of the
recorded original thereof. From time to time the applicable Depositor may
forward or cause to be forwarded to the Trustee or the Custodian additional
original documents evidencing an assumption or modification of a Mortgage Loan.
All Mortgage Loan documents held by the Trustee or the Custodian as to each
Mortgage Loan are referred to herein as the "Mortgage File".
The Servicer covenants and agrees to take all action necessary or desirable
under applicable state law to transfer the benefits of the lien and security
interest in each manufactured or mobile home and the related Mortgaged Property
to the Trustee, including, without limitation, the filing of UCC-3 assignments,
notations on the certificates of title and recordation of the Assignment of
Mortgage within the time periods required by this Section 2.04.
As promptly as practicable following the occurrence of the Recordation
Trigger, but in no event more than 90 days following the occurrence of the
Recordation Trigger, the Servicer shall at its own expense either (i) record in
favor of the Trustee each Assignment of Mortgage and each Reassignment of
Assignment of Beneficial Interest referred to in paragraphs (c) and (h) of this
Section 2.04 with respect to all of the Mortgage Loans in the appropriate real
property or other records, or (ii) deliver to the Trustee an Opinion of Counsel
satisfactory to the Rating Agencies and the Certificate Insurer to the effect
that recording is not required and no other action on the part of such Depositor
is required (other than such actions as have been taken) to protect the
Trustee's right, title and interest in and to the related Mortgage and Note.
All recording required pursuant to this Section 2.04 shall be accomplished
by and at the expense of the Servicer. For purposes of determining whether a
signature is made on an instrument or document, stapling of an attachment shall
be a sufficient affixation to cause the attachment to constitute part of the
instrument or document.
Section 2.05 [Reserved].
Section 2.06 Acceptance by Trustee of the Trust Fund; Certain
Substitutions; Certification by Trustee.
(a) The Trustee hereby acknowledges receipt of, for each Mortgage Loan, the
items listed in Section 2.04 (a), (b), (c), (g) and (h) and declares that it
will hold such documents and any amendments, replacements or supplements
thereto, as well as any other assets delivered to it in trust, upon and subject
to the conditions set forth in this Agreement for the benefit of the
Certificateholders and the Certificate Insurer, as their interests may appear.
The Trustee shall execute and deliver on the Closing Date an initial
certification of receipt by it or by the Custodian on its behalf, for each
Mortgage Loan of the items listed in Section 2.04(a), (b), (c), (g) and (h), in
the form attached as Exhibit E hereto, and declares that it will hold such
documents and any amendments, replacements or supplements thereto, as well as
any other assets delivered to it in trust, to the extent set forth herein, for
the benefit of the Certificateholders and the Certificate Insurer, as their
interests may appear. The Trustee agrees to review (or cause to be reviewed)
each Mortgage File within 45 days after the Closing Date (or, with respect to
any Qualified Substitute Mortgage Loan, within 45 days after the receipt thereof
by the Custodian) and to deliver to the Representative, the Depositors, the
Servicer and the Certificate Insurer an interim certification in the form
attached hereto as Exhibit F-1 on or before such date to the effect that, as to
each Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage
Loan paid in full or any Mortgage Loan specifically identified in such
certification as not covered by such certification), (i) all documents required
to be delivered to it pursuant to this Agreement are in its possession (other
than those described in Section 2.04(a)(ii) and 2.04(f)), (ii) such documents
have been reviewed by it and have not been mutilated, damaged, torn or otherwise
physically altered (handwritten additions, changes or corrections shall not
constitute physical alteration if properly initialed by the Mortgagor) and
relate to such Mortgage Loan, and (iii) based on its examination and only as to
the foregoing documents, the information set forth on the Mortgage Loan Schedule
(other than items (i), (iv) and (x) of the definition of Mortgage Loan Schedule)
accurately reflects the information set forth in the Mortgage File. The Trustee
shall be under no duty or obligation to inspect, review or examine any such
documents, instruments, certificates or other papers to determine that they are
genuine, enforceable, or appropriate for the represented purpose or that they
are other than what they purport to be on their face. Within 375 days after the
Closing Date, the Trustee shall deliver (or cause to be delivered) to the
Servicer, the Depositors and the Certificate Insurer a final certification in
the form attached hereto as Exhibit F-2 evidencing the completeness of the
Mortgage Files.
(b) If the Certificate Insurer or the Trustee during the process of
reviewing the Mortgage Files finds any document constituting a part of a
Mortgage File which is not executed, has not been received, is unrelated to the
Mortgage Loan identified in the Mortgage Loan Schedule, or does not conform to
the requirements of Section 2.04 or substantively to the description thereof as
set forth in the Mortgage Loan Schedule, the Trustee, or the Certificate
Insurer, as applicable, shall promptly so notify the Servicer, the Trustee, the
Representative, the Depositors and the Certificate Insurer. In performing any
such review, such Person may conclusively rely on the related Originator as to
the purported genuineness of any such document and any signature thereon. It is
understood that the scope of such Person's review of the Mortgage Files is
limited solely to confirming that the documents listed in Section 2.04 (other
than those described in Section 2.04(f)) have been executed and received and
relate to the Mortgage Files identified in the Mortgage Loan Schedule. The
Servicer agrees to use reasonable efforts to cause to be remedied a material
defect in a document constituting part of a Mortgage File of which it is so
notified by the Certificate Insurer or the Trustee. If, however, within 60 days
after receipt by it of the final certification referred to in paragraph (a) of
this Section 2.06, the Servicer has not caused to be remedied any defect
described in such final certification and such defect materially and adversely
affects the interest of the Certificateholders in the related Mortgage Loan or
the interests of the Certificate Insurer, the Servicer will on the third
Business Day preceding the Payment Date immediately succeeding the end of such
60 day period (i) if within 2 years of the Closing Date, substitute, or cause
the Depositors or the applicable Originator to substitute, in lieu of such
Mortgage Loan a Qualified Substitute Mortgage Loan in the manner and subject to
the conditions set forth in Section 3.03 or (ii) purchase, or cause the
Depositors or the applicable Originators to purchase, such Mortgage Loan at a
purchase price equal to the Principal Balance of such Mortgage Loan as of the
date of purchase, plus all accrued and unpaid interest on such Principal
Balance, computed at the Mortgage Interest Rate, net of the Servicing Fee
(computed in the manner described in paragraph (i) or (ii), as applicable, of
the definition thereof) if the Representative is the Servicer, plus the amount
of any unreimbursed Servicing Advances made by the Servicer with respect to such
Mortgage Loan out of funds on deposit in the Principal and Interest Account
pursuant to Section 5.01(f), which purchase price shall be deposited in the
Principal and Interest Account on the next succeeding Determination Date (after
deducting therefrom any amounts received in respect of such purchased Mortgage
Loan or Loans and being held in the Principal and Interest Account for future
distribution); provided that if such defect caused such Mortgage Loan not to be
a "qualified mortgage" within the meaning of Code Section 860G(a)(3), such
repurchase or, if applicable, substitution shall occur within 90 days of the
earlier of the delivery of the Trustee's interim certification or Servicer's
discovery of such defect.
(c) Upon receipt by the Trustee of a certification of a Servicing Officer
of the Servicer of such substitution or acceptance and the deposit of the
amounts described above in the Principal and Interest Account (which
certification shall be in the form of Exhibit B to the Custodial Agreement) the
Trustee shall release to the Servicer for release to the Depositors or the
Originators, as appropriate, the related Mortgage File and shall execute,
without recourse, and deliver such instruments of transfer necessary to transfer
such Mortgage Loan to the Representative or the respective Depositor.
(d) If recordation of any Assignment of Mortgage or Reassignment of
Assignment of Beneficial Interest is required hereunder after the occurrence of
a Recordation Trigger, the original of each such recorded Assignment of Mortgage
and Reassignment of Assignment of Beneficial Interest shall be delivered to the
Trustee or the Custodian within 10 days following the date on which it is
returned to the related Depositor or the Servicer by the office with which such
Assignment of Mortgage or Reassignment of Assignment of Beneficial Interest was
filed for recordation and, within 10 days following receipt by the Trustee or
Custodian, as applicable, of the recorded Assignment of Mortgage or Reassignment
of Assignment of Beneficial Interest, the Trustee shall review or shall cause
the Custodian to review such Assignment of Mortgage or Reassignment of
Assignment of Beneficial Interest to confirm that such Assignment of Mortgage or
Reassignment of Assignment of Beneficial Interest has been recorded. Upon
receipt by the Trustee or the Custodian, as applicable, of the recorded
Assignment of Mortgage or Reassignment of Assignment of Beneficial Interest,
such recorded Assignment of Mortgage or Reassignment of Assignment of Beneficial
Interest shall become part of the Mortgage File. The Trustee shall notify the
related Depositor, the Servicer and the Certificate Insurer of any defect in
such Assignment of Mortgage or Reassignment of Assignment of Beneficial Interest
if it shall have actual knowledge of any such defect based on such review. The
Servicer or the related Depositor shall have a period of 30 days following such
notice to correct or cure such defect. In the event that the Servicer or the
related Depositor fails to record an Assignment of Mortgage or Reassignment of
Assignment of Beneficial Interest as herein provided (which Assignment of
Mortgage or Reassignment of Assignment of Beneficial Interest was required to be
recorded) and the Trustee shall have actual knowledge of such failure, the
Trustee shall prepare and file or shall cause the Custodian to prepare and file
such Assignment of Mortgage or Reassignment of Assignment of Beneficial Interest
for recordation in the appropriate real property or other records, and the
Servicer and the related Depositor hereby appoints the Trustee and the Custodian
as its attorney-in-fact with full power and authority acting in its stead for
the purpose of such preparation, execution and recordation. Any expense incurred
by the Trustee or the Custodian not otherwise paid for by the related Depositor
or the Servicer as required hereunder in connection with the preparation and
recordation of such Assignment of Mortgage and Reassignment of Assignment of
Beneficial Interest shall be reimbursed to the Trustee or Custodian, as
applicable, pursuant to Section 12.05.
Section 2.07 REMIC Administration.
(a) Tax Administration
(1) An election will be made by the Trustee on behalf of the Trust Fund to
treat the assets of the Trust Fund, excluding the Spread Account, the Yield
Supplement Sub-Account, (which for the purpose of this Section 2.07 is
understood to include amounts on deposit therein invested in Permitted
Instruments and the proceeds of such investments), the Yield Supplement
Agreement and the rights of the Class A-1F Certificates and the Class A-1A
Certificates to receive payments in respect of Yield Supplement Carryovers and
LIBOR Interest Carryovers, respectively, as a REMIC under the Code (the "Trust
REMIC"). Such election will be made on Form 1066 or other appropriate federal
tax or information return for the taxable year ending on the last day of the
calendar year in which the Certificates are issued. The Trust REMIC will issue
the Class A Certificates which will represent beneficial interests in, and the
Class X Certificates which will represent, the "regular interests" in, the Trust
REMIC, and the Class R Certificates, which will be the sole class of "residual
interests" in the Trust REMIC. The regular interests in the Trust REMIC
represented by the Class A-1F Certificates and the Class A-1A Certificates shall
bear interest at the Insured Pass-Through Rate and the Class A-1A Pass-Through
Rate, respectively. The Owner of the Class R Certificates, representing at any
time the largest Percentage Interest in such Class shall be the Tax Matters
Person with respect to the Trust REMIC. Each holder of a Class R Certificate, as
a condition of ownership thereof, irrevocably appoints the Trustee to act as its
agent and attorney-in-fact to perform all duties of the Tax Matters Person. The
"latest possible maturity date" within the meaning of Treasury Regulation
Section 1.860G-1(a)(4) of the Class A Certificates and the Class X Certificates
shall be the Final Scheduled Payment Date.
(2) The Closing Date is hereby designated as the "Startup Day" of the Trust
REMIC within the meaning of Section 860G(a)(9) of the Code.
(3) Except as provided in Section 12.05, the Trustee shall pay (and shall
be entitled to reimbursement thereof by the Servicer or otherwise in accordance
with the terms of this Agreement) the ordinary and usual expenses in connection
with the preparation, filing and mailing of tax information reports and returns
that are incurred by it in the ordinary course of its administration of its
tax-related duties under this Agreement, but extraordinary or unusual expenses,
costs or liabilities incurred in connection with its tax-related duties under
this Agreement, including without limitation any expenses, costs or liabilities
associated with audits, required independent opinions regarding tax methodology
and related matters or any administrative or judicial proceedings with respect
to the Trust REMIC that involve the Internal Revenue Service or state tax
authorities, shall be expenses of the Trust Fund.
(4) The Trustee shall prepare and file all of the Trust REMIC's federal and
state income or franchise tax and information returns. Except as provided in
Section 12.05, the expenses of preparing and filing such returns shall be borne
by the Trustee. The Servicer and the Depositors shall provide on a timely basis
to the Trustee or its designee such information with respect to the Trust REMIC
as is in their possession, which the Servicer or the Depositors has or have
received or prepared by virtue of its activities as Servicer or Depositors
hereunder and reasonably requested by the Trustee to enable it to perform its
obligations under this subsection, and the Trustee shall be entitled to rely on
such information in the performance of its obligations hereunder.
(5) The Trustee shall perform on behalf of the Trust Fund and the Trust
REMIC all tax reporting duties and other tax compliance duties that are the
responsibility of the Trust REMIC under the Code, the REMIC Provisions, or other
compliance guidance issued by the Internal Revenue Service or any state or local
taxing authority. Among its other duties, the Trustee shall provide (i) to the
Internal Revenue Service or other Persons (including, but not limited to, the
transferor of any Residual Certificate to a Disqualified Organization or to an
agent that has acquired any Residual Certificate on behalf of a Disqualified
Organization) such information as is necessary for the application of any tax
relating to the transfer of any Residual Certificate to any Disqualified
Organization pursuant to Section 860E(e) of the Code and the Treasury
Regulations thereunder and (ii) to the Certificateholders such information or
reports as are required by the Code or REMIC Provisions. Each of the Depositors
and the Servicer shall provide on a timely basis (and in no event later than 30
days after the Trustee's request) to the Trustee or its designee such
information with respect to the Trust REMIC as is in its possession and
reasonably requested in writing by the Trustee to enable it to perform its
obligations under this subsection.
(6) [Reserved]
(7) The Trustee and the Servicer shall perform their obligations under this
Agreement and the REMIC Provisions in a manner consistent with the status of the
Trust REMIC as a REMIC or, as appropriate, shall adopt a plan of complete
liquidation.
(8) The Trustee and the Servicer shall not take any action or cause the
Trust REMIC to take any action, within their respective control and the scope of
their specific respective duties under this Agreement that, under the REMIC
Provisions, could (i) endanger the status of the Trust REMIC as a REMIC or (ii)
result in the imposition of a tax upon the Trust REMIC (including but not
limited to the tax on prohibited transactions as defined in Code Section
860F(a)(2) and the tax on prohibited contributions as defined in Code Section
860G(d)) unless the Trustee has received a Nondisqualification Opinion (at the
expense of the party seeking to take such action) with respect to such action.
(9) To the extent not paid pursuant to paragraph (d) of this Section 2.07,
each Holder of any Residual Certificate shall pay when due its pro rata share of
any and all federal, state and local taxes imposed on the applicable Trust REMIC
or its assets or transactions, including, without limitation, "prohibited
transaction" taxes, as defined in Section 860F of the Code, any tax on
contributions imposed by Section 860G(d) of the Code, and any tax on "net income
from foreclosure property" as defined in Section 860G(c) of the Code. To the
extent that such Trust REMIC taxes are not paid by the applicable Residual
Certificateholders, the Trustee shall pay any remaining Trust REMIC taxes out of
current or future amounts otherwise distributable to the Holders of any Residual
Certificates.
(10) The Trustee shall, for federal income tax purposes, maintain books and
records with respect to the Trust REMIC on a calendar year and on an accrual
basis. Notwithstanding anything to the contrary contained herein, all amounts
collected on the Mortgage Loans shall, for federal income tax purposes, be
allocated first to interest due and payable on the Mortgage Loans (including
interest on overdue interest) (other than additional interest at a penalty rate
payable following a default). The books and records must be sufficient
concerning the nature and amount of the Trust REMIC's investments to show that
the Trust REMIC has complied with the REMIC Provisions.
(11) Neither the Trustee nor the Servicer shall enter into any arrangement
by which the Trust REMIC will receive a fee or other compensation for services.
(12) In order to enable the Trustee to perform its duties as set forth
herein, the Depositors shall provide, or cause to be provided, to the Trustee
within 10 days after the Closing Date all information or data that the Trustee
reasonably determines to be relevant for tax purposes on the valuations and
offering prices of the Certificates, including, without limitation, the yield,
issue prices, pricing prepayment assumption and projected cash flows of the
Class A Certificates, the Class X Certificates and the Residual Certificates, as
applicable, and the projected cash flows on the Mortgage Loans. Thereafter, the
Depositors shall provide to the Trustee, promptly upon request therefor, any
such additional information or data that the Trustee may, from time to time,
reasonably request in order to enable the Trustee to perform its duties as set
forth herein. The Trustee is hereby directed to use any and all such information
or data provided by the Depositors in the preparation of all federal and state
income or franchise tax and information returns and reports for the Trust REMIC
to Certificateholders as required herein. The Depositors hereby indemnify the
Trustee for any losses, liabilities, damages, claims or expenses of the Trustee
arising from any errors or miscalculations of the Trustee pursuant to this
Section that result from any failure of the Depositors to provide, or to cause
to be provided, accurate information or data to the Trustee (but not resulting
from the methodology employed by the Trustee) on a timely basis and such
indemnifications shall survive the termination of this Agreement.
(13) The Servicer shall prepare and file with the Internal Revenue Service,
on behalf of the Trust REMIC, an application for a taxpayer identification
number for the Trust REMIC on IRS Form SS-4. The Trustee, upon receipt from the
Internal Revenue Service of the Notice of Taxpayer Identification Number
Assigned, shall promptly forward a copy of such notice to the Depositors. The
Trustee shall prepare and file Form 8811 on behalf of the Trust REMIC and shall
designate from time to time an appropriate Person to respond to inquiries by or
on behalf of Certificateholders for original issue discount and related
information in accordance with applicable provisions of the Code.
The Trustee agrees that all such information or data so obtained by it are
to be regarded as confidential information and agrees that it shall use its best
reasonable efforts to retain in confidence, and shall ensure that its officers,
employees and representatives retain in confidence, and shall not disclose,
without the prior written consent of the Depositors, any or all of such
information or data, or make any use whatsoever (other than for the purposes
contemplated by this Agreement) of any such information or data without the
prior written consent of the Depositors, unless such information is generally
available to the public (other than as a result of a breach of this Section) or
is required by law or applicable regulations to be disclosed.
(b) Modifications of Mortgage Loans. Notwithstanding anything to the
contrary in this Agreement, neither the Trustee nor the Servicer shall permit
any modification of, or take any action with respect to, the Mortgage Loans
(including the Mortgage Interest Rate or, in the case of a Mortgage Loan in the
Adjustable Rate Group, the method of determining the Mortgage Interest Rate, the
Principal Balance, the amortization schedule, any other term affecting the
amount or timing of payments on the Mortgage Loans), or any other material term
of a Mortgage Loan, that would result in an exchange within the meaning of
Treasury Regulations Section 1.860G-2(b) of the Code unless the Trustee or the
Servicer has received a Nondisqualification Opinion or a ruling from the
Internal Revenue Service (at the expense of the party making the request of the
Servicer or the Trustee to modify the Mortgage Loans) to the same effect as a
Nondisqualification Opinion with respect to such modification.
(c) Prohibited Transactions and Activities. The Trustee shall not permit
the sale, disposition (except in a disposition pursuant to (i) the bankruptcy or
insolvency of the Trust REMIC or (ii) the termination of the Trust REMIC in a
"qualified liquidation" as defined in Section 860F(a)(4) of the Code) or
substitution of the Mortgage Loans (except a substitution pursuant to Sections
2.06(b) or 3.03) or the substitution of a property for a Mortgaged Property, nor
acquire any assets for the Trust REMIC (other than REO Property or a Qualified
Substitute Mortgage Loan pursuant to Sections 2.06(b) or 3.03), nor accept any
contributions to the Trust REMIC (other than a cash contribution during the
3-month period beginning on the Startup Day), unless it has received an Opinion
of Counsel (at the expense of the Person requesting the Trustee to take such
action) to the effect that such disposition, acquisition, substitution, or
acceptance will not (a) affect adversely the status of the Trust REMIC as a
REMIC or of the Class A Certificates and the Class X Certificates as the regular
interests therein, (b) affect the distribution of interest or principal on the
Certificates, (c) result in the encumbrance of the assets transferred or
assigned to the Trust REMIC (except pursuant to the provisions of this
Agreement) or (d) cause the Trust REMIC to be subject to an unindemnified tax on
"prohibited transactions" or "prohibited contributions" pursuant to the REMIC
Provisions.
(d) In the event that any tax is imposed on "prohibited transactions" of
the Trust REMIC as defined in Section 860F(a)(2) of the Code, on the "net income
from foreclosure property" of the Trust REMIC as defined in Section 860G(c) of
the Code, on any contribution to the Trust REMIC after the Startup Day pursuant
to Section 860G(c) of the Code, or any other tax is imposed, such tax shall be
paid by (i) the Trustee, if such tax arises out of or results from a breach by
the Trustee of any of its obligations under this Agreement, which breach
constitutes negligence or willful misconduct of the Trustee or (ii) the Servicer
or the Depositors, if such tax arises out of or results from a breach by the
Servicer or the Depositors of any of their respective obligations under this
Agreement.
(e) Any inconsistencies or ambiguities in this Agreement or in the
administration of the Trust REMIC shall be resolved in a manner that preserves
the validity of the election to be treated as a REMIC.
Section 2.08 Execution of Certificates.
The Trustee acknowledges (i) the assignment to it of Mortgage Loans in
trust for the benefit of the Certificateholders and the Certificate Insurer, as
their interests may appear, and subject to the terms and conditions of this
Agreement and (ii) the delivery of the Mortgage Files as set forth above and,
concurrently with such delivery, in exchange for the Mortgage Loans, the
Mortgage Files and the other assets conveyed by the Depositors pursuant to
Section 2.01 and Section 2.04, the Trustee has executed and caused to be
authenticated and delivered to or upon the order of the Depositors, the
Certificates, each in Authorized Denominations.
Section 2.09 Application of Principal and Interest.
In the event that Net Liquidation Proceeds on a Liquidated Mortgage Loan
are less than the Principal Balance of such Mortgage Loan plus accrued interest
thereon, or any Mortgagor makes a partial payment of any Monthly Payment due on
a Mortgage Loan, such Net Liquidation Proceeds or partial payment shall be
applied to payment of the related Mortgage Note as provided therein, and if not
so provided or if the related Mortgaged Property has become an REO Property,
first to interest accrued at the Mortgage Interest Rate and then to principal;
provided, however, the Net Liquidation Proceeds with respect to a Bankruptcy
Loan shall be applied first, to unpaid accrued interest with respect to the
period after the date of the related Plan, second, to principal and third, to
Pre-Plan Interest.
Section 2.10 Grantor Trust Administration.
(a) The Trustee shall treat the portion of the Trust Fund exclusive of the
Trust REMIC, consisting of the Spread Account, the Yield Supplement Sub-Account,
the Yield Supplement Agreement and the rights of the Class A-1F Certificates and
the Class A-1A Certificates to receive payments in respect of Yield Supplement
Carryovers and LIBOR Interest Carryovers, respectively, as a grantor trust under
Subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A of the Code. The
Class A-1F Certificates represent undivided beneficial interests in the Yield
Supplement Agreement, amounts in the Yield Supplement Sub-Account and the right
to receive payments in respect of Yield Supplement Carryovers. The Class A-1A
Certificates represent undivided beneficial interests in the right to receive
payments in respect of LIBOR Interest Carryovers. The Class X Certificates
represent undivided beneficial interests in the Spread Account, subject to the
obligation to make payments in respect of Yield Supplement Carryovers and LIBOR
Interest Carryovers as provided herein.
(b) The Trustee shall report to the applicable Certificateholders, at the
time or times and in the manner required by the Code, each such
Certificateholder's share of the income or gain and, if applicable, expense or
loss, with respect to its interest in the grantor trust portion of the Trust
Fund on a schedule to IRS Form 1041 (or such other form as may be applicable)
for the portion of the year during which such person was a Certificateholder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations of the Servicer and the Depositors.
(1) The Servicer hereby represents and warrants to the Trustee, the
Certificate Insurer and the Certificateholders as of the Closing Date:
(a) The Servicer is duly organized, validly existing, and in good standing
under the laws of the State of Delaware and has all licenses necessary to carry
on its business as now being conducted and is licensed, qualified and in good
standing in each Mortgaged Property State if the laws of such state require
licensing or qualification in order to conduct business of the type conducted by
the Servicer and perform its obligations as Servicer hereunder; the Servicer has
the power and authority to execute and deliver this Agreement and the Basic
Documents to which it is a party and to perform in accordance herewith; the
execution, delivery and performance of this Agreement and the Basic Documents to
which it is a party (including all instruments of transfer to be delivered
pursuant to this Agreement and the Basic Documents to which it is a party) by
the Servicer and the consummation of the transactions contemplated hereby have
been duly and validly authorized by all necessary action; each of this Agreement
and the Basic Documents to which it is a party is the valid, binding and
enforceable obligation of the Servicer; and all requisite action has been taken
by the Servicer to make this Agreement and the Basic Documents to which it is a
party valid, binding and enforceable upon the Servicer in accordance with its
terms, subject to the effect of bankruptcy, insolvency, reorganization,
moratorium and other, similar laws relating to or affecting creditors' rights
generally or the application of equitable principles in any proceeding, whether
at law or in equity;
(b) 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 in connection with the performance by the Servicer of its
obligations hereunder or under the Basic Documents to which it is a party or the
purchase and sale of the Certificates and the execution and delivery by the
Servicer of the 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, 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 Basic Documents and the
other documents on the part of the Servicer and the performance by the Servicer
of its obligations as the Servicer under this Agreement and such of the other
Basic Documents to which it is a party;
(c) The consummation of the transactions contemplated by this Agreement and
the Basic Documents will not result in the breach of any terms or provisions of
the bylaws of the Servicer or result in the breach of any term or provision of,
or conflict with or constitute a default under or result in the acceleration of
any obligation under, any material agreement, indenture or loan or credit
agreement or other material instrument to which the Servicer or its property is
subject, or result in the violation of any law, rule, regulation, order,
judgment or decree to which the Servicer or its property is subject;
(d) None of this Agreement, any of the Basic Documents to which it is a
party or the Prospectus nor any statement, report or other document prepared by
the Servicer and furnished or to be furnished pursuant to this Agreement or in
connection with the transactions contemplated hereby contains any untrue
statement of material fact or omits to state a material fact necessary to make
the statements contained herein or therein, in light of the circumstances under
which they were made, not misleading;
(e) There is no action, suit, proceeding or investigation pending or, to
the best of the knowledge of the Servicer, threatened against the Servicer
which, either in any one instance or in the aggregate, may result in any
material adverse change in the business, operations, financial condition,
properties or assets of the Servicer or in any material impairment of the right
or ability of the Servicer to carry on its business substantially as now
conducted, or in any material liability on the part of the Servicer or any Basic
Document to which it is a party or which would draw into question the validity
of this Agreement or the Mortgage Loans or of any action taken or to be taken in
connection with the obligations of the Servicer contemplated herein, or which
would be likely to impair materially the ability of the Servicer to perform
under the terms of this Agreement or any Basic Document to which it is a party;
(f) The Servicer is not in default with respect to any order or decree of
any court or any order, regulation or demand of any federal, state, municipal or
governmental agency, which default might have consequences that would materially
and adversely affect the condition (financial or other) or operations of the
Servicer or its properties or might have consequences that would materially and
adversely affect its performance hereunder or under the Basic Documents or under
any Subservicing Agreement;
(g) The collection practices used by the Servicer with respect to each
Mortgage Note and Mortgage have been in and will be all material respects legal,
proper, prudent and customary in the second mortgage origination and servicing
business; and
(h) The Servicer is an approved seller/servicer of first and second
mortgage loans for FNMA and FHLMC in good standing.
(2) Each Depositor hereby represents and warrants to the Trustee, the
Certificate Insurer and the Certificateholders as of the Closing Date:
(a) Such Depositor is duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation and has all
licenses necessary to carry on its business as now being conducted and is
licensed, qualified and in good standing in each Mortgaged Property State if the
laws of such state require licensing or qualification in order to conduct
business of the type conducted by such Depositor and perform its obligations as
a Depositor hereunder; such Depositor has the power and authority to execute and
deliver this Agreement and to perform in accordance herewith; the execution,
delivery and performance of this Agreement and the Basic Documents to which it
is a party (including all instruments of transfer to be delivered pursuant to
this Agreement and the Basic Documents to which it is a party) by such Depositor
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary action; each of this Agreement and the Basic
Documents to which it is a party is the valid, binding and enforceable
obligation of such Depositor; and all requisite action has been taken by such
Depositor to make this Agreement and the Basic Documents to which it is a party
valid, binding and enforceable upon such Depositor in accordance with its terms,
subject to the effect of bankruptcy, insolvency, reorganization, moratorium and
other, similar laws relating to or affecting creditors rights generally or the
application of equitable principles in any proceeding, whether at law or in
equity;
(b) 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 such Depositor makes no such representation or warranty),
that are necessary in connection with the purchase and sale of the Certificates
and the execution and delivery by such Depositor of the Basic 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, 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 Basic Documents on the part of such Depositor and the performance
by such Depositor of its obligations as a Depositor under this Agreement, the
Transfer Agreement and such of the other Basic Documents to which it is a party;
(c) The consummation of the transactions contemplated by this Agreement and
the Basic Documents will not result in the breach of any terms or provisions of
the bylaws of such Depositor or result in the breach of any term or provision
of, or conflict with or constitute a default under or result in the acceleration
of any obligation under, any material agreement, indenture or loan or credit
agreement or other material instrument to which such Depositor or its property
is subject, or result in the violation of any law, rule, regulation, order,
judgment or decree to which the Depositor or its property is subject;
(d) None of this Agreement, any of the Basic Documents to which such
Depositor is a party or the Prospectus nor any statement, report or other
document prepared by the Depositor and furnished or to be furnished pursuant to
this Agreement or the Basic Documents or in connection with the transactions
contemplated hereby contains any untrue statement of material fact or omits to
state a material fact necessary to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading;
(e) There is no action, suit, proceeding or investigation pending or, to
the best of such Depositor's knowledge, threatened against such Depositor which,
either in any one instance or in the aggregate, may result in any material
adverse change in the business, operations, financial condition, properties or
assets of such Depositor or in any material impairment of the right or ability
of such Depositor to carry on its business substantially as now conducted, or in
any material liability on the part of such Depositor or which would draw into
question the validity of this Agreement or the Basic Documents or the Mortgage
Loans or of any action taken or to be taken in connection with the obligations
of such Depositor contemplated herein, or which would be likely to impair
materially the ability of the Depositor to perform under the terms of this
Agreement or the Basic Documents to which it is a party;
(f) Such 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 might have consequences that would materially
and adversely affect the condition (financial or other) or operations of such
Depositor or its properties or might have consequences that would materially and
adversely affect its performance hereunder, under the Basic Documents to which
it is a party or under any Subservicing Agreement;
(g) Upon the receipt of each Mortgage File under this Agreement, the
Trustee will have good and indefeasible title on behalf of the
Certificateholders to each Mortgage Loan (other than the Representative's Yield
and amounts received after the Cut-off Date in respect of interest accrued on or
prior to the Cut-off Date) and such other items conveyed by the Depositors to
the Trustee hereunder free and clear of any lien (other than liens which will be
simultaneously released);
(h) The transfer, assignment and conveyance of the Mortgage Notes and the
Mortgages by such Depositor pursuant to this Agreement are not subject to the
bulk transfer laws or any similar statutory provisions in effect in any
applicable jurisdiction;
(i) Such Depositor did not transfer any interest in any Mortgage Loan with
any intent to hinder, delay or defraud any of its respective creditors;
(j) Such Depositor is solvent and such Depositor will not be rendered
insolvent as a result of the transfer of the Mortgage Loans to the Trust Fund or
the sale of any of the Certificates;
(k) Such Depositor will not amend Articles THIRD, NINTH, TENTH and ELEVENTH
of its Certificate of Incorporation without the prior written consent of the
Certificate Insurer and the Rating Agencies; and
(l) Such Depositor will not engage in any activity which would result in a
downgrading of the Certificates by any Rating Agency or in a downgrading of the
"shadow rating" (that is, the rating without taking into account the Certificate
Insurance Policy) below investment grade by any Rating Agency.
Section 3.02 Assignment of Transfer Agreement; Representations and
Warranties as to the Individual Mortgage Loans and the Mortgage Pool.
Pursuant to Section 2.01, each Depositor assigns to the Trustee (for the
benefit of the Certificateholders and the Certificate Insurer, as their
interests may appear) all of its right, title and interest in, to and under the
Transfer Agreement including, without limitation, the representations and
warranties of the Originators made to the Depositors pursuant to Section 3.01 of
the Transfer Agreement. The Depositors hereby represent and warrant to the
Trustee that the Depositors have taken no action which would cause such
representations and warranties of the Originators to be false in any material
respect as of the Closing Date, and acknowledge that the Trustee relies on the
representations and warranties of the Depositors under this Agreement and of the
Originators under the Transfer Agreement in accepting the Mortgage Loans and
executing and delivering the Certificates. The foregoing representation and
warranty speaks as of the Closing Date, but shall survive the transfer and
assignment of the Mortgage Loans to the Trustee for the benefit of the
Certificateholders and the Certificate Insurer, as their interests may appear.
Each Depositor hereby represents and warrants as follows to the Trustee,
the Certificate Insurer and the Certificateholders, with respect to each
Mortgage Loan as of the Closing Date (except as otherwise indicated); provided,
that all references to percentages of the Mortgage Loans in this Section 3.02
refer in each case to the percentage of the aggregate Principal Balance of the
Mortgage Loans (or of the Mortgage Loans in the Fixed Rate Group or Adjustable
Rate Group, as applicable) as of the Cut-off Date (rounded to two decimal
points):
(a) The information with respect to each Mortgage Loan set forth in the
Mortgage Loan Schedule is true and correct;
(b) All of the original or certified documentation set forth in Section
2.04 (including all material documents related thereto) has been or will be
delivered to the Trustee (or the Custodian on behalf of the Trustee) on the
Closing Date or as otherwise provided in Section 2.04;
(c) (i) Each Mortgage Loan is principally secured by Mortgaged Property.
Each Mortgaged Property is improved by a one- to four-family Residential
Dwelling, which, to the best of such Depositor's knowledge, does not include (A)
cooperatives, (B) mobile homes other than permanently affixed mobile homes which
constitute real property under state law, or (C) except for not more than
approximately 0.59% of the Mortgage Loans in the Fixed Rate Group, manufactured
housing units, as defined in the FNMA Selling Guide, which constitute other than
real property under state law; and
(ii) With respect to each Mortgage Loan involving property improved by a
manufactured or mobile home, the Originator has taken all action necessary to
create a valid and perfected first or second priority (as reflected in the
Mortgage Loan Schedule) lien and security interest in such manufactured or
mobile home and the related Mortgaged Property, including, without limitation,
the filing of UCC financing statements or notations on certificates of title if
necessary, under applicable state law;
(d) Each Mortgage Loan is being serviced by the Servicer or one or more
Subservicers;
(e) The Mortgage Note related to each Mortgage Loan in the Fixed Rate Group
bears a fixed Mortgage Interest Rate; the Mortgage Note related to each Mortgage
Loan in the Adjustable Rate Group bears a Mortgage Interest Rate that adjusts
semi-annually, based on the London interbank offered rate for six-month United
States dollar deposits;
(f) Mortgage Loans constituting approximately 42.41% of the Mortgage Loans
in the Fixed Rate Group, and approximately 88.55% of the Mortgage Loans in the
Adjustable Rate Group, are balloon loans which will provide for a final Monthly
Payment substantially greater than the preceding Monthly Payments. Approximately
0.02%, 4.39%, 28.48%, 9.52% and 0.00% of the Mortgage Loans in the Fixed Rate
Group (and approximately 28.89%, 53.58%, 5.97% and 0.11% of the Mortgage Loans
in the Adjustable Rate Group) are balloon loans based on a 30-year amortization
schedule (except for approximately 0.25% of the Mortgage Loans in the Fixed Rate
Group) and a single payment of the remaining loan balances 5, 7, 10, 15 and 20
years (or 7, 10, 15 and 20 years, with respect to the Mortgage Loans in the
Adjustable Rate Group) after origination, respectively. All of such balloon
loans provide for Monthly Payments based on an amortization schedule specified
in the related Mortgage Note and have a final balloon payment no earlier than 60
months following origination and no later than 240 months following origination.
Each other Mortgage Note will provide for a schedule of substantially equal
Monthly Payments which are, if timely paid, sufficient to fully amortize the
principal balance of such Mortgage Note on or before its maturity date;
(g) Each Mortgage relating to a Mortgage Loan in the Fixed Rate Group is a
valid and subsisting first or more junior lien on the Mortgaged Property
subject, in the case of any second Mortgage Loan, only to a first lien on such
Mortgaged Property, and each Mortgage relating to a Mortgage Loan in the
Adjustable Rate Group is a valid and subsisting First Lien on the Mortgaged
Property, and subject in all cases to the exceptions to title set forth in the
title insurance policy or the other evidence of title enumerated in Section
2.04(d), with respect to the related Mortgage Loan, which exceptions are
generally acceptable to second mortgage lending companies, 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. If the Mortgaged
Property is held in an Illinois Land Trust (a "Land Trust Mortgage"), (i) a
natural person is the beneficiary of such Illinois Land Trust, and either is a
party to the Mortgage Note or is a guarantor thereof, in either case, in an
individual capacity, and not in the capacity of trustee or otherwise, and, if a
party to the Mortgage Note, is jointly and severally liable under the Mortgage
Note; (ii) the Mortgagor is the trustee of such Illinois Land Trust, is a party
to the Mortgage Note and is the mortgagor under the Mortgage in its capacity as
such trustee and not otherwise; (iii) a land trust trustee, duly qualified under
applicable law to serve as such, has been properly designated and currently so
serves and is named as such in the land trust agreement and such trustee is
named in the Land Trust Mortgage as Mortgagor; (iv) all fees and expenses of the
land trust trustee which have previously become due or owing have been paid and
no such fees or expenses are or will become payable by the Certificateholders or
the Trust Fund; (v) the beneficiary is solely obligated to pay any fees and
expenses of the land trust trustee and the priority of the lien of the Land
Trust Mortgage is not and will not be subject or subordinate to any amounts
owing to the land trust trustee; (vi) the Mortgaged Property is occupied by the
beneficiary under the land trust agreement (if indicated to be owner occupied on
the Mortgage Loan Schedule) and, if such land trust agreement terminates, the
beneficiary will become the owner of the Mortgaged Property; (vii) the
beneficiary is obligated to make payments under the related Mortgage Note and
(subject to applicable law) will have personal liability for deficiency
judgments; (viii) the Land Trust Mortgages and assignments of beneficial
interest relating to land trusts in the Mortgage Pool were made in compliance
with their respective land trust agreements, were validly entered into by their
respective land trust trustee or beneficiary and did not, do not currently, and
will not in the future, violate any provision of their respective land trust
agreement; (ix) a UCC financing statement has been filed, continued, and will be
continued, without intervening liens, as the first lien upon the beneficial
interest in the Land Trust Mortgage; (x) each assignment of beneficial interest
with respect to Land Trust Mortgages in the Mortgage Pool was at the time of
respective assignment the only assignment of such beneficial interest in the
land trust, such assignment was accepted by the respective land trust trustee,
to the best of the Depositors' knowledge, subsequent assignments of the
beneficial interest in whole or in part have not been made, and such subsequent
assignments of the beneficial interest or any part thereof are not permitted
pursuant to a written agreement between the respective beneficiary and the
Mortgagee, until the expiration of the Mortgage Note in each respective land
trust; (xi) the Land Trust Mortgages are the first or second liens on the
Mortgaged Properties; no liens are in place against the beneficial interests, or
any part thereof, of any Land Trust Mortgage or collateral assignment of
beneficial interest, which liens are superior to the interest held by the
related Depositor; and the beneficiary or land trust trustee is forbidden,
pursuant to a written agreement between the beneficiary or the land trust
trustee (as applicable) and the Mortgagee, from using the land trust property or
beneficial interest, or any part of either, as security for any other debt of
the same priority as or senior to such Land Trust Mortgage until the expiration
date of its respective Mortgage Note; and (xii) the terms and conditions of the
land trust agreement do not prevent the free and absolute marketability of the
Mortgaged Property. As of the Cut-off Date, approximately 0.053% of the Mortgage
Loans in the Fixed Rate Group and none of the Mortgage Loans in the Adjustable
Rate Group were related to Land Trust Mortgages;
(h) Except with respect to liens released immediately prior to the transfer
herein contemplated, immediately prior to the transfer and assignment herein
contemplated, the applicable Depositor held good and indefeasible title to, and
was the sole owner of, each Mortgage Loan conveyed by such Depositor subject to
no liens, charges, mortgages, encumbrances or rights of others; and immediately
upon the transfer and assignment herein contemplated, the Trustee for the
benefit of the Certificateholders will hold good and indefeasible title, to, and
be the sole owner of, each Mortgage Loan (other than the Representative's Yield
and amounts received on or after the Cut-off Date) in respect of interest
accrued prior to the Cut-off Date subject to no liens, charges, mortgages,
encumbrances or rights of others;
(i) Approximately 0.63% of the Mortgage Loans in the Fixed Rate Group and
approximately 5.89% of the Mortgage Loans in the Adjustable Rate Group
(excluding Bankruptcy Loans) are 30 or more days contractually delinquent; none
of the Mortgage Loans in the Mortgage Pool are 60 to 89 days contractually
delinquent or more than 89 days contractually delinquent; and none of the
Mortgage Loans in the Mortgage Pool (excluding Bankruptcy Loans) have been 30 or
more days contractually delinquent more than once in the 12 months preceding the
Cut-off Date. For purposes of this representation and warranty "30 or more days
contractually delinquent" means that a Monthly Payment due on a Due Date was
unpaid as of the end of the month of the next succeeding Due Date or following
Due Dates. Approximately 0.06% of the Mortgage Loans in the Fixed Rate Group,
and approximately 0.13% of the Mortgage Loans in the Adjustable Rate Group are
Bankruptcy Loans. None of the Mortgage Loans in the Fixed Rate Group and none of
the Mortgage Loans in the Adjustable Rate Group are Bankruptcy Loans which are
30 days or more contractually delinquent. Except for the Mortgage Loans listed
on Exhibit G, to the best of such Depositor's knowledge, none of the Mortgage
Loans is subject to a Plan;
(j) To the best of such Depositor's knowledge, (i) there is no delinquent
tax or assessment lien on any Mortgaged Property and (ii) each Mortgaged
Property is free of material damage and is in average repair;
(k) No Mortgage Loan is subject to any right of rescission, set-off,
counterclaim or defense, including the defense of usury, nor will the operation
of any of the terms of the Mortgage Note or the Mortgage, or the exercise of any
right thereunder, render either the Mortgage Note or the Mortgage unenforceable
in whole or in part, or subject to any right of rescission, set-off,
counterclaim or defense, including the defense of usury, and no such right of
rescission, set-off, counterclaim or defense has been asserted with respect
thereto;
(l) To the best of such Depositor's knowledge, there is no mechanics' lien
or claim for work, labor or material affecting any Mortgaged Property which is
or may be a lien prior to, or equal with, the lien of such Mortgage except those
which are insured against by the title insurance policy referred to in Section
3.02(n) below;
(m) Each Mortgage Loan at the time it was made complied in all material
respects with applicable state and federal laws and regulations, including,
without limitation, usury, equal credit opportunity and disclosure laws;
(n) With respect to each Mortgage Loan, other than any Mortgage Loan
secured by a second priority lien and having a Principal Balance not in excess
of $50,000 and listed on Exhibit V hereto, a written commitment for a lender's
title insurance policy, issued in standard American Land Title Association or
California Land Title Association form, or other form customary and acceptable
in a particular jurisdiction, by a title insurance company acceptable to FNMA
and FHLMC and authorized to transact business in the state in which the related
Mortgaged Property is situated, together with a condominium endorsement, if
applicable, in an amount at least equal to the original Principal Balance of
such Mortgage Loan insuring the mortgagee's interest under the related Mortgage
Loan as the holder of a valid first or second mortgage lien of record on the
real property described in the Mortgage, subject only to exceptions of the
character referred to in Section 3.02(g) above, was effective on the date of the
origination of such Mortgage Loan, and, as of the Closing Date, such commitment
will be valid and thereafter the policy issued pursuant to such commitment shall
continue in full force and effect or, with respect to Mortgage Properties
located in jurisdictions in which it is customary and acceptable to obtain an
assurance of title in lieu of a title insurance policy, such assurance of title
has been obtained;
(o) The improvements upon each Mortgaged Property are covered by a valid
and existing hazard insurance policy with a generally acceptable carrier that
provides for fire and extended coverage representing coverage described in
Sections 5.07 and 5.08;
(p) A flood insurance policy is in effect with respect to each Mortgaged
Property with a generally acceptable carrier in an amount representing coverage
described in Sections 5.07 or 5.08, if and to the extent required by Section
5.07 or 5.08;
(q) Each Mortgage and Mortgage Note is the legal, valid and binding
obligation of the maker thereof and is enforceable in accordance with its terms,
except only as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (whether
considered in a proceeding or action in equity or at law), and all parties to
each Mortgage Loan had full legal capacity to execute all Mortgage Loan
documents and convey the estate therein purported to be conveyed;
(r) The applicable Depositor has directed the Servicer to perform any and
all acts required to be performed to preserve the rights and remedies of the
Trustee in any insurance policies applicable to the Mortgage Loans 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;
(s) No more than approximately 0.12% of the Mortgage Loans in the Fixed
Rate Group, and no more than approximately 0.72% of the Mortgage Loans in the
Adjustable Rate Group, are secured by Mortgaged Properties located within any
single five-digit zip code area within the State of California. No more than
approximately 0.31% of the Mortgage Loans in the Fixed Rate Group, and no more
than approximately 2.03% of the Mortgage Loans in the Adjustable Rate Group, are
secured by Mortgaged Properties located within any single five-digit zip code
area outside the State of California;
(t) At least approximately 95.13% of the Mortgage Loans in the Fixed Rate
Group, and approximately 99.62% of the Mortgage Loans in the Adjustable Rate
Group, are secured by Owner Occupied Mortgaged Property;
(u) The terms of the Mortgage Note and the Mortgage have not been impaired,
altered or modified in any material respect, except by a written instrument
which has been recorded or is in the process of being recorded, if necessary, to
protect the interests of the Trustee and which has been or will be delivered to
the Trustee. The substance of any such alteration or modification is reflected
on the Mortgage Loan Schedule. Each original Mortgage was recorded, and all
subsequent assignments of the original Mortgage (other than the Assignment to
the Trustee) have been recorded in the appropriate jurisdictions wherein such
recordation is necessary to perfect the lien thereof as against creditors of the
Depositors (or, subject to Section 2.04 hereof, are in the process of being
recorded);
(v) No instrument of release or waiver has been executed in connection with
the Mortgage Loan, and no Mortgagor has been released, in whole or in part;
(w) To the best of such Depositor's knowledge, all taxes, governmental
assessments, insurance premiums, water, sewer and municipal charges, leasehold
payments or ground rents which previously became due and owing have been paid,
or an escrow of funds has been established in an amount sufficient to pay for
every such item which remains unpaid and which has been assessed but is not yet
due and payable. Except for payments in the nature of escrow payments, including
without limitation, taxes and insurance payments, the Servicer has not advanced
funds, or induced, solicited or knowingly received any advance of funds by a
party other than the Mortgagor, directly or indirectly, for the payment of any
amount required by the Mortgage, except for interest accruing from the date of
the Mortgage Note or date of disbursement of the Mortgage proceeds, whichever is
greater, to the day which precedes by one month the Due Date of the first
installment of principal and interest. With respect to Mortgaged Properties that
are the subject of a ground lease, to the best of such Depositor's knowledge,
all lease rents, other payments or assessments that have become due have been
paid and the Mortgagor is not in material default under any other provisions of
the lease and the lease is valid, in good standing and in full force and effect;
(x) To the best of such Depositor's knowledge, there is no proceeding
pending or threatened for the total or partial condemnation of the Mortgaged
Property, nor is such a proceeding currently occurring, and such property is
undamaged by waste, fire, earthquake or earth movement, windstorm, flood,
tornado or other casualty, so as to affect adversely the value of the Mortgaged
Property as security for the Mortgage Loan or the use for which the premises
were intended;
(y) To the best of such Depositor's knowledge, all of the improvements
which were included for the purpose of determining the appraised value of the
Mortgaged Property lie wholly within the boundaries and building restriction
lines of such property, and no improvements on adjoining properties encroach
upon the Mortgaged Property;
(z) To the best of such Depositor's knowledge, no improvement located on or
being part of the Mortgaged Property is in violation of any applicable zoning
law or regulation. To the best of such Depositor's knowledge, all inspections,
licenses and certificates required to be made or issued with respect to all
occupied portions of the Mortgaged 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 the Mortgaged Property is lawfully occupied under
applicable law;
(aa) The proceeds of the Mortgage 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 the Mortgage Loans were paid;
(bb) The related Mortgage Note is not and has not been secured by any
collateral, pledged account or other security except the lien of the
corresponding Mortgage;
(cc) No Mortgage Loan was originated under a buydown plan;
(dd) There is no obligation on the part of the applicable Depositor or any
other party to make payments in addition to those made by the Mortgagor;
(ee) 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 Trustee to the trustee under such
deed of trust, except in connection with a trustee's sale after default by the
Mortgagor. If the Mortgaged Property is held in an Illinois Land Trust, the
trustee thereof is duly qualified under applicable law to serve as such, and has
been properly designated and currently so serves, and no fees or expenses are or
will become payable by the Trustee to such trustee;
(ff) No Mortgage Loan has a shared appreciation feature, or other
contingent interest feature;
(gg) With respect to each Mortgage Loan secured by a second priority lien,
the related First Lien requires equal monthly payments, or if it bears an
adjustable interest rate, the monthly payments for the related First Lien may be
adjusted not more frequently than once every six months;
(hh) With respect to each Mortgage Loan secured by a second priority lien,
either (i) no consent for the Mortgage Loan is required by the holder of the
related First Lien or (ii) such consent has been obtained and is contained in
the Mortgage File;
(ii) The maturity date of each Mortgage Loan secured by a second priority
lien is prior to the maturity date of the related First Lien if such First Lien
provides for a balloon payment; and with respect to any First Lien that provides
for negative amortization or deferred interest, the balance of such First Lien
used to calculate the Combined Loan-to-Value Ratio for the Mortgage Loan is
based on the maximum amount of negative amortization possible under such First
Lien;
(jj) All parties which have had any interest in the Mortgage Loan, whether
as mortgagee, assignee, pledgee or otherwise, are (or, during the period in
which they held and disposed of such interest, were) (1) in compliance with any
and all applicable licensing requirements of the laws of the state wherein the
Mortgaged Property is located, and (2)(A) organized under the laws of such
state, or (B) qualified to do business in such state, or (C) federal savings and
loan associations or national banks having principal offices in such state, or
(D) not doing business in such state so as to require qualification or
licensing;
(kk) The Mortgage contains a customary provision for the acceleration of
the payment of the unpaid principal balance of the Mortgage Loan in the event
the related security for the Mortgage Loan is sold without the prior consent of
the mortgagee thereunder;
(ll) Any future advances made prior to (and excluding) the Cut-off Date
have been consolidated with the outstanding principal amount secured by the
Mortgage, and the secured principal amount, as consolidated, bears a single
interest rate and single repayment term reflected on the Mortgage Loan Schedule
(or single method of determining the Mortgage Interest Rate if such Mortgage
Loan is in the Adjustable Rate Group). The consolidated principal amount does
not exceed the original principal amount of the Mortgage Loan. The Mortgage Note
does not permit or obligate the Servicer to make future advances to the
Mortgagor at the option of the Mortgagor;
(mm) The related Mortgage contains customary and enforceable provisions
which render the rights and remedies of the holder thereof adequate for the
realization against the Mortgaged Property of the benefits of the security,
including, (i) in the case of a Mortgage designated as a deed of trust, by
trustee's sale, and (ii) otherwise by judicial or non-judicial foreclosure.
There is no homestead or other exemption available to the Mortgagor which would
materially interfere with the right to sell the Mortgaged Property at a
trustee's sale or the right to foreclose the Mortgage except as set forth in the
Prospectus;
(nn) Except for bankruptcy-related defaults under the Bankruptcy Loans, to
the best of such Depositor's knowledge, there is no default, breach, violation
or event of acceleration existing under the Mortgage or the related Mortgage
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 applicable
Depositor has waived any default, breach, violation or event of acceleration;
(oo) All parties to the Mortgage Note and the Mortgage had legal capacity
to execute the Mortgage Note and the Mortgage and each Mortgage Note and
Mortgage have been duly and properly executed by such parties;
(pp) All amounts received on and after the Cut-off Date with respect to the
Mortgage Loans that are required to be deposited into the Principal and Interest
Account pursuant to Section 5.03 have been so deposited;
(qq) Each Mortgage Loan in the Fixed Rate Group, and each Mortgage Loan in
the Adjustable Rate Group, was originated and underwritten by, or purchased and
re-underwritten by, the Representative or by a wholly-owned subsidiary of the
Representative;
(rr) As of the Cut-off Date, each Mortgage Loan conforms, and all Mortgage
Loans in the aggregate conform, in all material respects, to the description
thereof set forth in the Prospectus dated September 10, 1998, including all
statistical data provided therein in tabular format or otherwise;
(ss) The Mortgage Loans were not selected by the Originators or the
Depositors for transfer to the Trustee (for the benefit of the
Certificateholders) hereunder on any basis intended to adversely affect the
assets of the Trust;
(tt) A full interior inspection appraisal was performed in connection with
each Mortgaged Property;
(uu) The Mortgage Interest Rate for each Mortgage Loan in the Fixed Rate
Group is not less than 6.65% per annum, and the Mortgage Interest Rate for each
Mortgage Loan in the Fixed Rate Group is not more than 17.00% per annum; none of
the Mortgage Loans in the Adjustable Rate Group have current Mortgage Interest
Rates less than 6.74%;
(vv) The gross margin for each Mortgage Loan in the Adjustable Rate Group
is not less than 4.10% per annum and not more than 12.00% per annum. All of
Mortgage Loans in the Adjustable Rate Group have periodic adjustment caps of
1.00%;
(ww) Each hazard insurance policy required to be maintained under Section
5.07 of this Agreement with respect to such Mortgage Loan is a valid, binding,
enforceable and subsisting insurance policy of its respective kind and is in
full force and effect;
(xx) If the Mortgaged Property consists of a leasehold estate, the Mortgage
covers property improvements and the Mortgagor's leasehold interest in the land
upon which such improvements are situated; at origination of the Mortgage Loan
the term of the leasehold estate was scheduled to last for at least ten years
beyond the maturity date of the Mortgage or provided for perpetual renewal
covenants; the leasehold estate is assignable by the Mortgagee; and the lease is
valid and in full force and effect;
(yy) To the best of such Depositors' knowledge, no Mortgaged Property was,
at origination, located within a 1 mile radius of any site with material
environmental or hazardous waste risks;
(zz) With respect to each Bankruptcy Loan, (a) except for the Bankruptcy
Loans specified on Exhibit G, as of the Cut-off Date, the Mortgagor is not
contractually delinquent more than 30 days with respect to any payment due under
the related Plan, (b) the Current CLTV is less than or equal to 85%, and (c)
either (i) if the Current CLTV is between 60% and 85%, as of the Cut-off Date,
the Mortgagor has made at least six consecutive payments under the related Plan
or (ii) if the Current CLTV is less than 60%, as of the Cut-off Date, the
Mortgagor has made at least three consecutive payments under the related Plan;
(aaa) With respect to each Mortgage Loan which was originated in the State
of Alabama (each, an "Alabama Loan"), (i) each such Alabama Loan was (A)
originated and underwritten by EquiCredit Corporation/Ala.& Miss. ("EQCC/Ala.&
Miss.") or (B) purchased and re-underwritten by EQCC/Ala.& Miss. from another
lender (each originating entity, an "Alabama Originator"), (ii) with respect
each such Alabama Loan secured by second mortgages, (A) the total "prepaid
finance charge" (as defined in Regulation Z promulgated under the Federal
Truth-in-Lending Act) paid by the related Mortgagor to the related Alabama
Originator plus (B) any yield spread premium ("rate participation") paid by the
Alabama Originator did not exceed 5% of the original Principal Balance of such
Alabama Loan, (iii) the original Principal Balance of such Alabama Loan exceeded
$2,000, (iv) the aggregate of all points and broker's fees did not exceed 10% of
the original principal balance of the Mortgage Loan, (v) no "referral fee" (as
defined in Regulation X promulgated under the Real Estate Settlement and
Procedures Act) was paid to any third party by the related Alabama Originator
with respect to such Alabama Loan, (vi) such Alabama Loan and the manner in
which it was originated fully complied with Alabama law, and (vii) such Alabama
Loan was not originated in such a manner, and neither the related Mortgage Note
nor Mortgage contain any provisions, that would cause such Alabama Loan to be
deemed unconscionable under Alabama law; the aggregate of all such Alabama
Mortgage Loans does not exceed approximately 0.02% of the Mortgage Loans in the
Fixed Rate Group. None of the Mortgage Loans in the Adjustable Rate Group are
Alabama Mortgage Loans;
(bbb) None of the Mortgage Loans in the Fixed Rate Group and none of the
Mortgage Loans in the Adjustable Rate Group were originated in connection with
the sale of properties acquired by the Originators through foreclosure;
(ccc) With respect to each Mortgage Loan in the Adjustable Rate Group, the
CLTV does not exceed 100% and with respect to each Mortgage Loan in the Fixed
Rate Group, the CLTV does not exceed 100%;
(ddd) Except for the Mortgage Loans listed on Exhibit T, as of the Cut-off
Date none of the Mortgage Loans are subject to the Home Ownership and Equity
Protection Act of 1994; all notices required to be delivered to the related
Mortgagor pursuant to the Home Ownership and Equity Protection Act of 1994 have
been delivered with respect to each Mortgage Loan listed on Exhibit T and all
other requirements of that Act have been complied with for each such Mortgage
Loan;
(eee) Each Mortgage Loan in the Adjustable Rate Group was originated by a
savings and loan association, savings bank, commercial bank, credit union,
insurance company, or similar institution which is supervised and examined by a
Federal or State authority, or by a mortgagee approved by the Secretary of
Housing and Urban Development pursuant to Sections 203 and 211 of the National
Housing Act;
(fff) Each Mortgage Loan constitutes a "qualified mortgage" within the
meaning of Section 860G(a)(3) of the Code. For this purpose, Section 860G(a)(3)
of the Code shall be applied without regard to the rule contained in Treasury
Regulations Section 1.860G-2(f)(2) which treats a defective mortgage loan as a
"qualified mortgage" under certain circumstances. Accordingly, the Transferors
represent and warrant that each Mortgage Loan is directly secured by a Mortgage
on residential real property, and either (1) substantially all of the proceeds
of such Mortgage Loan were used to acquire, improve or protect such residential
real property and such interest in residential real property was the sole
security for such Mortgage Loan as of the Testing Date (as defined below), or
(2) the fair market value of the interest in real property which secures such
Mortgage Loan was at least equal to 80% of the principal amount of the Mortgage
Loan (a) as of the Testing Date or (b) as of the Closing Date. For purposes of
the previous sentence, (1) the fair market value of the referenced interest in
real property shall first be reduced by (a) the amount of any lien on such
interest in real property that is senior to the lien of the Mortgage Loan, and
(b) a proportionate amount of any lien on such interest in real property that is
on a parity with the Mortgage Loan, and (2) the "Testing Date" shall be the date
on which the referenced Mortgage Loan was originated unless (a) such Mortgage
Loan was modified after the date of its origination in a manner that would cause
a "significant modification" of such Mortgage Loan within the meaning of
Treasury Regulations Section 1.1001 - 3(b), and (b) such "significant
modification" did not occur at a time when such Mortgage Loan was in default or
when default with respect to such Mortgage Loan was reasonably foreseeable.
However, if the referenced Mortgage Loan has been subjected to a "significant
modification" after the date of its origination and at a time when such Mortgage
Loan was not in default or when default with respect to such Mortgage Loan was
not reasonably foreseeable, the "Testing Date" shall be the date upon which the
latest such "significant modification" occurred; and
(ggg) The representations and warranties with respect to the Mortgage Loans
and Mortgage Pool set forth in Section 3.02(a) through (fff), inclusive, have
been made to the Depositors by the Originators and the Representative pursuant
to Section 3.02(a) through (fff), inclusive, of the Transfer Agreement with
respect to the Mortgage Loans and the Mortgage Pool, and the Certificate Insurer
is entitled to rely thereon.
Section 3.03 Purchase and Substitution.
It is understood and agreed that the representations and warranties set
forth in Sections 3.01 and 3.02 shall survive transfer of the Mortgage Loans and
delivery of the Certificates hereunder. Upon discovery by any Depositor, the
Servicer, any Subservicer, any Custodian, a Responsible Officer of the Trustee
or the Certificate Insurer of a breach of any of such representations and
warranties which materially and adversely affects the value of Mortgage Loans or
the interest of the Trustee, the Certificateholders or the Certificate Insurer,
or which materially and adversely affects the interests of the Trustee, the
Certificate Insurer, or the Certificateholders in the related Mortgage Loan in
the case of a representation and warranty relating to a particular Mortgage Loan
(notwithstanding that such representation and warranty was made to the
Depositors' best knowledge), the party discovering such breach shall give prompt
written notice to the others. Within 60 days of the earlier of its discovery or
its receipt of notice of any breach of a representation or warranty, the
Servicer shall (a) promptly cure, or cause the applicable Depositor or the
applicable Originator to cure, such breach in all material respects, or (b)
purchase, or cause the applicable Depositor or applicable Originator to
purchase, such Mortgage Loan by depositing in the Principal and Interest
Account, on the next succeeding Determination Date, in the manner and at the
price specified in Section 2.06(b), or by causing the applicable Depositor or
the applicable Originator to substitute, one or more Qualified Substitute
Mortgage Loans, provided such substitution is effected not later than the date
which is two years after the Closing Date. Any such substitution shall be
accompanied by payment of the Substitution Adjustment, if any, to be deposited
in the Principal and Interest Account.
As to any Deleted Mortgage Loan for which a Qualified Substitute Mortgage
Loan or Loans is substituted, the Servicer shall effect such substitution by
delivering to the Trustee or the Custodian on behalf of the Trustee, a
certification in the form of Exhibit B attached to the Custodial Agreement,
executed by a Servicing Officer and delivering to the Trustee (or the Custodian
on behalf of the Trustee, with a copy of such certification to the Trustee) a
copy of such certification, the documents constituting the Mortgage File for
such Qualified Substitute Mortgage Loan or Loans and a trust receipt of the
Custodian as to the Substitute Mortgage Loan or Loans.
The Servicer shall deposit in the Principal and Interest Account all
payments received in connection with such Qualified Substitute Mortgage Loan or
Loans after the date of such substitution; provided, however, that any amounts
received after the date of substitution in respect of interest accrued on or
prior to the date of substitution on such Qualified Substitute Mortgage Loan
will constitute the property of the related Depositor or Originator, as the case
may be. Monthly Payments received with respect to Qualified Substitute Mortgage
Loans on or before the date of substitution will be retained by the Servicer on
behalf of the related Depositor or related Originator, as the case may be. The
Trustee will own, for the benefit of the Certificateholders and the Certificate
Insurer, all payments received on the Deleted Mortgage Loan on or before the
date of substitution, and the Servicer on behalf of the Depositors or
Originator, as the case may be, shall thereafter be entitled to retain all
amounts subsequently received in respect of such Deleted Mortgage Loan. The
Servicer shall give written notice to the Trustee, the Representative and the
Certificate Insurer that such substitution has taken place and shall amend the
Mortgage Loan Schedule to reflect the removal of such Deleted Mortgage Loan from
the terms of this Agreement and the substitution of the Qualified Substitute
Mortgage Loan. Upon such substitution, such Qualified Substitute Mortgage Loan
or Loans shall be subject to the terms of this Agreement in all respects, and
the Depositors shall be deemed to have made with respect to such Qualified
Substitute Mortgage Loan or Loans, as of the date of substitution, the
covenants, representations and warranties set forth in Sections 3.01 and 3.02.
On the date of such substitution, the applicable Depositor or the applicable
Originator, as the case may be, will remit to the Servicer, and the Servicer
will deposit into the Principal and Interest Account, an amount equal to the
Substitution Adjustment, if any.
It is understood and agreed that the obligations of the Servicer set forth
in Sections 2.06 and 3.03 to cure, purchase or substitute or cause to be cured,
purchased or substituted for a defective Mortgage Loan as provided in Sections
2.06 and 3.03 constitute the sole remedies of the Trustee, the Certificate
Insurer and the Certificateholders respecting a breach of the foregoing
representations and warranties.
Any cause of action against either of the Depositors or the Servicer
relating to or arising out of a defect in a Mortgage File as contemplated by
Section 2.06 or the breach of any representations and warranties made in
Sections 3.01 or 3.02 shall arise as to any Mortgage Loan upon the occurrence of
not less than all of the following events: (i) discovery of such defect or
breach by any party and notice thereof to the Servicer or notice thereof by the
Servicer to the Trustee and the Certificate Insurer, (ii) failure by the
Servicer to cure or cause to be cured such defect or breach or purchase or
substitute or cause to be purchased or substituted such Mortgage Loan as
specified above, and (iii) demand upon the Servicer by the Trustee or the
Certificate Insurer for all amounts payable in respect of such Mortgage Loan.
The party delivering such notice shall also deliver a copy thereof to the
Certificate Insurer.
The Trustee shall give prompt written notice to Moody's, S&P, the
Certificate Insurer and to each Certificateholder of any repurchase or
substitution made pursuant to this Section 3.03 or Section 2.06(b).
ARTICLE IV
THE CERTIFICATES
Section 4.01 The Certificates.
(a) The Class A-1F, the Class A-1A, the Class X and the Class R
Certificates shall be substantially in the forms annexed hereto as Exhibits B-1,
B-2, B-3 and B-4, respectively. The Class A Certificates shall be issued in
minimum denominations of $1,000 and in integral multiples of $1 in excess
thereof. The Class X Certificates shall be issued in minimum denominations of
25% Percentage Interest and in integral multiples of 1% Percentage Interest in
excess thereof. The Class R Certificates shall be issued in a minimum
denomination of 100% Percentage Interest. All Certificates shall be executed by
manual or facsimile signature on behalf of the Trustee by at least one
authorized officer and authenticated by the manual signature of an authorized
officer. Certificates bearing the signatures of individuals who were at the time
of the execution of the Certificates the authorized officers of the Trustee
shall bind the Trustee, notwithstanding that such individuals or any of them
have ceased to hold such offices prior to the delivery of such Certificates or
did not hold such offices at the date of such Certificates. All Certificates
issued hereunder shall be dated the date of their authentication.
(b) The Class A Certificates, upon original issuance, shall be issued in
the form of a typewritten Certificate or Certificates representing Book-Entry
Certificates, to be delivered to the Depository or, pursuant to the Depository's
instructions on behalf of the Depository to, and deposited with, the Certificate
Custodian. Such Class A Certificate or Certificates shall initially be
registered on the Certificate Register in the name of Cede & Co., the nominee of
the initial Depository, and no Certificate Owner of a Class A Certificate or
Certificates shall receive a definitive Class A Certificate representing such
Certificate Owner's interest in such Class A Certificate, except as provided in
Section 4.01(c). Unless and until definitive fully registered Class A
Certificates (the "Definitive Certificates") shall have been issued to
Certificate Owners pursuant to Section 4.01(c):
(i) the provisions of this Section 4.01(b) shall be in full force and
effect;
(ii) the Certificate Registrar and the Trustee shall be entitled to
deal with the Depository for all purposes of this Agreement (including the
payment of principal of and interest on the Certificates and the giving of
instructions or directions hereunder) as the sole Holder of the Class A
Certificates, and shall have no obligation to the Certificate Owners with
respect thereto;
(iii) to the extent that the provisions of this Section 4.01(b)
conflict with any other provisions of this Agreement, the provisions of
this Section 4.01(b) shall control;
(iv) the rights of the Certificate Owners with respect to the Class A
Certificates shall be exercised only through the Depository and shall be
limited to those established by law and agreements between such Certificate
Owners and the Depository and/or the Depository Participants. Unless and
until Definitive Certificates are issued pursuant to Section 4.01(c), the
initial Depository will make book-entry transfers among the Depository
Participants and receive and transmit payments of principal of and interest
on the Class A Certificates to such Depository Participants;
(v) whenever this Agreement requires or permits actions to be taken
based upon instructions or directions of Holders of Certificates evidencing
a specified aggregate Percentage Interest, the Depository shall be deemed
to represent such percentage only to the extent that it has received
instructions to such effect from Certificate Owners and/or Depository
Participants owning or representing, respectively, such required aggregate
Percentage Interest of Class A Certificates (taking into account the
proviso contained in the definition of "Certificateholder" contained
herein) and has delivered such instructions to the Trustee; and
(vi) whenever a notice or other communication to the Class A
Certificateholders is required under this Agreement, unless and until
Definitive Certificates shall have been issued to Certificate Owners
pursuant to Section 4.01(c), the Trustee shall give all such notices and
communications specified herein to be given to Class A Certificateholders
to the Depository and shall have no further obligation to the Certificate
Owners of the Class A Certificates.
provided, however, that the provisions of this Section 4.01(b) shall not be
applicable in respect of Class A Certificates issued to the Depositors. The
Depositors or the Trustee may set a record date for the purpose of determining
the identity of Holders of Class A Certificates entitled to vote or to consent
to any action by vote as provided in this Agreement;
(c) The Class X and Class R Certificates shall be issued in the form of
Definitive Certificates. With respect to the Class A Certificates, if (i) the
Servicer advises the Trustee in writing that the Depository is no longer willing
or able to properly discharge its responsibilities with respect to the Class A
Certificates, and the Servicer is unable to locate a qualified successor; (ii)
the Servicer at its option advises the Trustee in writing that it elects to
terminate the book-entry system through the Depository; or (iii) after the
occurrence of a Servicer Default, a Majority in Aggregate Voting Interest advise
the Depository in writing that the continuation of a book-entry system through
the Depository is no longer in the best interests of the Certificate Owners of
the Class A Certificates, then the Depository shall notify all Certificate
Owners and the Trustee of the occurrence of any such event and of the
availability of Definitive Certificates to Certificate Owners requesting the
same. Upon surrender to the Trustee of the typewritten Certificate or
Certificates representing the Book-Entry Certificates by the Depository,
accompanied by registration instructions, the Trustee shall execute and
authenticate the Definitive Certificates in accordance with the instructions of
the Depository. Neither the Certificate Registrar nor the Trustee shall be
liable for any delay in delivery of such instructions and may conclusively rely
on, and shall be protected in relying on, such instructions. Upon the issuance
of Definitive Certificates, the Trustee shall recognize the Holders of the
Definitive Certificates as Certificateholders.
Section 4.02 Registration of Transfer and Exchange of Certificates.
(a) The Trustee shall cause to be kept at its office or agency in Chicago,
Illinois, or at its designated agent, a Certificate Register in which, subject
to such reasonable regulations as it may prescribe, it shall provide for the
registration of Certificates and of transfers and exchanges of Certificates as
herein provided. The Certificate Register shall contain the name, remittance
instructions, Class and Percentage Interest of each Certificateholder, as well
as the Series and the number in the Series.
(b) Except as provided in Section 4.02(c), no transfer, sale, pledge or
other disposition of a Class X or Class R Certificate shall be made unless such
transfer, sale, pledge or other disposition is exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Act"), and any
applicable state securities laws or is made in accordance with said Act and
laws. In the event that a transfer of a Class X or Class R Certificate is to be
made under this Section 4.02(b), the Depositors may direct the Trustee to
require an Opinion of Counsel acceptable to and in form and substance
satisfactory to the Trustee and the Depositors that such transfer shall be made
pursuant to an exemption, describing the applicable exemption and the basis
therefor, from said Act and laws or is being made pursuant to said Act and laws,
which Opinion of Counsel shall not be an expense of the Trustee, the Depositors
or the Servicer and (ii) the Trustee shall require the transferee to execute a
representation letter, substantially in the form of Exhibit M-2 hereto, and the
Trustee shall require the transferor to execute a representation letter,
substantially in the form of Exhibit M-3 hereto, each acceptable to and in form
and substance satisfactory to the Depositors and the Trustee certifying to the
Depositors and the Trustee the facts surrounding such transfer, which
representation letters shall not be an expense of the Trustee, the Depositors or
the Servicer, provided that such representation letter will not be required in
connection with any transfer of any such Certificate by the Depositors to an
affiliate of the Depositors. Any such Certificateholder desiring to effect such
transfer shall, and does hereby agree to, indemnify the Trustee, the Depositors,
the Certificate Insurer and the Servicer against any liability that may result
if the transfer is not so exempt or is not made in accordance with such
applicable federal and state laws.
(c) Transfers of Class X and Class R Certificates may be made in accordance
with this Section 4.02(c) if the prospective transferee of a Certificate
provides the Trustee and the Depositors with an investment letter substantially
in the form of Exhibit M-4 attached hereto, which investment letter shall not be
an expense of the Trustee, the Depositors or the Servicer, and which investment
letter states that, among other things, such transferee is a "qualified
institutional buyer" as defined under Rule 144A. Such transfers shall be deemed
to have complied with the requirements of Section 4.02(b) hereof; provided,
however, that no Transfer of any of the Certificates may be made pursuant to
this Section 4.02(c) by the Depositors. Any such Certificateholder desiring to
effect such transfer shall, and does hereby agree to, indemnify the Trustee, the
Depositors and the Servicer against any liability that may result if the
transfer is not so exempt or is not made in accordance with such applicable
federal and state laws.
(d) Each Person who has or who acquires any Ownership Interest in a
Residual Certificate shall be deemed by the acceptance or acquisition of such
Ownership Interest to have agreed to be bound by the following provisions and to
execute all instruments of transfer and to do all other things necessary in
connection with any such sale, and the rights of each Person acquiring any
Ownership Interest in a Residual Certificate are expressly subject to the
following provisions:
(1) Each Person holding or acquiring any Ownership Interest in a Residual
Certificate shall be a Permitted Transferee and shall promptly notify the
Trustee of any change or impending change in its status as a Permitted
Transferee.
(2) In connection with any proposed Transfer of any Ownership Interest in a
Residual Certificate, the Trustee shall require delivery to it, and shall not
register the Transfer of any such Residual Certificate until its receipt of, an
affidavit and agreement (a "Transfer Affidavit and Agreement") attached hereto
as Exhibit M-1 from the proposed Transferee, in form and substance satisfactory
to the Trustee, representing and warranting, among other things, that such
Transferee is a Permitted Transferee, that it is not acquiring its Ownership
Interest in such Residual Certificate that is the subject of the proposed
Transfer as a nominee, trustee or agent for any Person that is not a Permitted
Transferee, that for so long as it retains its Ownership Interest in such
Residual Certificate, it will endeavor to remain a Permitted Transferee, and
that it has reviewed the provisions of this Section 4.02(d) and agrees to be
bound by them.
(3) Notwithstanding the delivery of a Transfer Affidavit and Agreement by a
proposed Transferee under clause (2) above, if the Trustee has actual knowledge
that the proposed Transferee is not a Permitted Transferee, no Transfer of an
Ownership Interest in a Residual Certificate to such proposed Transferee shall
be effected.
(4) Each Person holding or acquiring any Ownership Interest in a Residual
Certificate shall agree (x) to require a Transfer Affidavit and Agreement from
any other Person to whom such Person attempts to transfer its Ownership Interest
in such Residual Certificate and (y) not to transfer its Ownership Interest
unless it provides a certificate (attached hereto as Exhibit J) to the Trustee
stating that, among other things, it has no actual knowledge that such other
Person is not a Permitted Transferee.
(5) The Trustee will register the Transfer of any Residual Certificate only
if it shall have received the Transfer Affidavit and Agreement and all of such
other documents as shall have been reasonably required by the Trustee as a
condition to such registration. In addition, no Transfer of a Residual
Certificate shall be made unless the Trustee shall have received a
representation letter from the Transferee of such Certificate to the effect that
such Transferee is not a Disqualified Non-United States Person and is not a
Disqualified Organization or an agent of either. Transfers of the Residual
Certificates to Disqualified Non-United States Persons and Disqualified
Organizations or their agents are prohibited.
(6) Any attempted or purported transfer of any Ownership Interest in a
Residual Certificate in violation of the provisions of this Section 4.02 shall
be absolutely null and void and shall vest no rights in the purported
transferee. If any purported transferee shall become a Holder of a Residual
Certificate in violation of the provisions of this Section 4.02, then the last
preceding Permitted Transferee shall be restored to all rights as Holder thereof
retroactive to the date of registration of transfer of such Residual
Certificate. The Trustee shall notify the Depositors upon receipt of written
notice or discovery by a Responsible Officer that the registration of transfer
of a Residual Certificate was not in fact permitted by this Section 4.02.
Knowledge shall not be imputed to the Trustee with respect to an impermissible
transfer in the absence of such a written notice or discovery by a Responsible
Officer. The Trustee shall be under no liability to any Person for any
registration of transfer of a Residual Certificate that is in fact not permitted
by this Section 4.02 or for making any payments due on such Certificate to the
Holder thereof or taking any other action with respect to such Holder under the
provisions of this Agreement so long as the transfer was registered after
receipt of the related Transfer Affidavit and Transfer Certificate. The Trustee
shall be entitled, but not obligated to recover from any Holder of a Residual
Certificate that was in fact not a Permitted Transferee at the time it became a
Holder or, at such subsequent time as it became other than a Permitted
Transferee, all payments made on such Residual Certificate at and after either
such time. Any such payments so recovered by the Trustee shall be paid and
delivered by the Trustee to the last preceding Holder of such Certificate.
(e) The Trustee shall make available to the Internal Revenue Service and
those Persons specified by the REMIC Provisions, all information necessary to
compute any tax imposed as a result of the transfer of an ownership interest in
a Residual Certificate to any Person who is a Disqualified Organization or an
agent thereof, including the information regarding "excess inclusions" of such
Residual Certificates required to be provided to the Internal Revenue Service
and certain Persons as described in Treasury Regulations Sections 1.860D-1(b)(5)
and 1.860E-2(a)(5). The Trustee may charge and shall be entitled to reasonable
compensation for providing such information as may be required from those
Persons which may have had a tax imposed upon them as specified in this
paragraph for providing such information.
(f) No transfer of a Class X or Class R Certificate or any interest therein
shall be made to any employee benefit plan or other retirement arrangement,
including individual retirement accounts and annuities, Keogh plans and
collective investment funds and separate accounts in which such plans, accounts
or arrangements are invested, that is subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or the Code (each, an "ERISA Plan"),
unless the prospective transferee of such Certificate provides the Servicer and
the Trustee with a certification of facts and, at the prospective transferee's
expense, an Opinion of Counsel which establish to the satisfaction of the
Servicer and the Trustee that such transfer will not result in a violation of
Section 406 of ERISA or Section 4975 of the Code or cause the Servicer or the
Trustee to be deemed a fiduciary of such ERISA Plan or result in the imposition
of an excise tax under Section 4975 of the Code. In the absence of their having
received the certification of facts or Opinion of Counsel contemplated by the
preceding sentence, the Trustee and the Servicer shall require the prospective
transferee of any Class X or Class R Certificate to certify in the form of
Exhibit M-2 or Exhibit M-4 that (A) it is neither (i) an ERISA Plan nor (ii) a
Person who is directly or indirectly purchasing such Certificate on behalf of,
as named fiduciary of, as trustee of, or with assets, of an ERISA Plan or (B) in
the case of the Class X Certificates, if the prospective transferee is an
insurance company, all funds used by such transferee to purchase such
Certificates will be funds held by it in an "insurance company general account"
(as such term is defined in Section V(e) of Prohibited Transaction Class
Exemption 95-60 ("PTE 95-60"), 60 Fed. Reg. 35925 (July 12, 1995) and there is
no ERISA Plan with respect to which the amount of such general account's
reserves and liabilities for the contract(s) held by or on behalf of such ERISA
Plan and all other ERISA Plans maintained by the same employer (or affiliate
thereof as defined in Section V(a)(1) of PTE 95-60) or by the same employee
organization exceeds 10% of the total of all reserves and liabilities of such
general account (as such amounts are determined under Section I(a) of PTE 95-60)
at the date of acquisition.
(g) Subject to the restrictions set forth in this Agreement, upon surrender
for registration of transfer of any Certificate at the office or agency of the
Trustee located in New York, New York or Chicago Illinois, the Trustee shall
execute, authenticate and deliver in the name of the designated transferee or
transferees, a new Certificate of the same Class and Percentage Interest and
dated the date of authentication by the Trustee. The Trustee shall notify the
Servicer of any such transfer. At the option of the Certificateholders,
Certificates may be exchanged for other Certificates of Authorized Denominations
of a like aggregate Percentage Interest, upon surrender of the Certificates to
be exchanged at such office. Whenever any Certificates are so surrendered for
exchange, the Trustee shall execute, authenticate and deliver the Certificates
which the Certificateholder making the exchange is entitled to receive. No
service charge shall be made for any transfer or exchange of Certificates, but
the Trustee may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Certificates. All Certificates surrendered for transfer and exchange
shall be canceled by the Trustee.
Section 4.03 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) there is delivered to the Servicer and the Trustee
such security or indemnity, which may include a letter of indemnity delivered by
an insurance company reasonably acceptable to the Trustee and the Servicer, as
may be required by each of them to save each of them harmless, then, in the
absence of notice to the Servicer and the Trustee that such Certificate has been
acquired by a bona fide purchaser, the Trustee shall execute, authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Certificate, a new Certificate of like tenor and Percentage Interest, but
bearing a number not contemporaneously outstanding. Upon the issuance of any new
Certificate under this Section 4.03, the Servicer and the Trustee may require
the payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto and any other expenses connected
therewith. Any duplicate Certificate issued pursuant to this Section 4.03 shall
constitute complete and indefeasible evidence of ownership in the Trust, as if
originally issued, whether or not the mutilated, destroyed, lost or stolen
Certificate shall be found at any time.
Section 4.04 Persons Deemed Owners.
Prior to due presentation of a Certificate for registration of transfer,
the Servicer, the Depositors and the Trustee may treat the Person in whose name
any Certificate is registered as the owner of such Certificate for the purpose
of receiving remittances pursuant to Section 6.05 and for all other purposes
whatsoever, and the Servicer, the Depositors and the Trustee shall not be
affected by notice to the contrary.
Section 4.05 Determination of LIBOR.
(a) On each LIBOR Determination Date, the Trustee shall determine LIBOR on
the basis of the British Bankers' Association "Interest Settlement Rate" for
one-month deposits in U.S. dollars as found on Telerate page 3750 as of 11:00
A.M. London time on such LIBOR Determination Date. As used herein, "Telerate
page 3750" means the display designated as page 3750 on the Dow Jones Telerate
Service. If such rate does not appear on Telerate Page 3750, the rate for that
date will be determined on the basis of the rates at which one-month United
States dollars are offered by the Reference Banks at approximately 11:00 a.m.,
London time, on that day to prime banks in the London interbank market. 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.
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
that day for one-month loans in United States dollars to leading European banks.
(b) The Class A-1F Pass-Through Rate and the Class A-1A Pass-Through Rate
applicable to the then current and the immediately preceding Accrual Period may
be obtained by any Class A-1F Certificateholder or Class A-1A Certificateholder,
respectively, by telephoning the Trustee at its Corporate Trust Office at
1-800-934-6802.
(c) On each LIBOR Determination Date, the Trustee shall send to the
Servicer by facsimile notification of LIBOR for the following Accrual Period.
ARTICLE V
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 5.01 Duties of the Servicer.
(a) It is intended that the Trust REMIC formed hereunder shall constitute,
and that the affairs of the Trust REMIC shall be conducted so as to qualify it
as a REMIC as defined in and in accordance with the REMIC Provisions. In
furtherance of such intention, the Servicer covenants and agrees that it shall
not knowingly or intentionally take any action or omit to take any action that
would cause the termination of the REMIC status of the Trust REMIC.
(b) The Servicer, as independent contract servicer, shall service and
administer the Mortgage Loans and shall have full power and authority, acting
alone, to do any and all things in connection with such servicing and
administration which the Servicer may deem necessary or desirable and consistent
with the terms of this Agreement. The Servicer may enter into Subservicing
Agreements for any servicing and administration of Mortgage Loans with any
entity which is in compliance with the laws of each state necessary to enable it
to perform its obligations under such Subservicing Agreement and (x) has been
designated an approved Seller-Servicer by FHLMC or FNMA for first and second
mortgage loans, or (y) is an affiliate or wholly owned subsidiary of the
Servicer. The Servicer shall give notice to the Depositors, the Trustee and the
Certificate Insurer of the appointment of any Subservicer other than a
Subservicer which is an affiliate or wholly-owned subsidiary of the Servicer.
Any such Subservicing Agreement shall be consistent with and not violate the
provisions of this Agreement. The Servicer shall be entitled to terminate any
Subservicing Agreement in accordance with the terms and conditions of such
Subservicing Agreement and either itself directly service the related Mortgage
Loans or enter into a Subservicing Agreement with a successor subservicer which
qualifies hereunder.
(c) Notwithstanding any Subservicing Agreement, any of the provisions of
this Agreement relating to agreements or arrangements between the Servicer and
Subservicer or reference to actions taken through a Subservicer or otherwise,
the Servicer shall remain obligated and primarily liable to the Depositors, the
Trustee, the Certificate Insurer and the Certificateholders for the servicing
and administering of the Mortgage Loans in accordance with the provisions of
this Agreement without diminution of such obligation or liability by virtue of
such Subservicing Agreements or arrangements or by virtue of indemnification
from the Subservicer and to the same extent and under the same terms and
conditions as if the Servicer alone were servicing and administering the
Mortgage Loans. For purposes of this Agreement, the Servicer shall be deemed to
have received payments on Mortgage Loans when the Subservicer has received such
payments. The Servicer shall be entitled to enter into any agreement with a
Subservicer for indemnification of the Servicer by such Subservicer, and nothing
contained in this Agreement shall be deemed to limit or modify such
indemnification or limit or modify indemnification provided by the Servicer
herein.
(d) Any Subservicing Agreement that may be entered into and any
transactions or services relating to the Mortgage Loans involving a Subservicer
in its capacity as such and not as an Originator shall be deemed to be between
the Subservicer and the Servicer alone, and the Depositors, the Trustee, the
Certificate Insurer and Certificateholders shall not be deemed parties thereto
and shall have no claims, rights, obligations, duties or liabilities with
respect to the Subservicer except as set forth in Section 5.01(e).
(e) In the event the Servicer shall for any reason no longer be the
Servicer (including by reason of a Servicer Default), the Trustee or its
designee shall, subject to Section 10.02 hereof, thereupon assume all of the
rights and obligations of the Servicer under each Subservicing Agreement that
the Servicer may have entered into, unless the Trustee elects to terminate any
Subservicing Agreement. If the Trustee does not terminate a Subservicing
Agreement, the Trustee, its designee or the successor servicer for the Trustee
shall be deemed to have assumed all of the Servicer's interest therein and to
have replaced the Servicer as a party to each Subservicing Agreement to the same
extent as if the Subservicing Agreements had been assigned to the assuming
party, except that the Servicer shall not thereby be relieved of any liability
or obligations under the Subservicing Agreements. The Servicer at its expense
and without right of reimbursement therefor, shall, upon request of the Trustee,
deliver to the assuming party all documents and records relating to each
Subservicing Agreement and the Mortgage Loans then being serviced and an
accounting of amounts collected and held by it and otherwise use its best
efforts to effect the orderly and efficient transfer of the Subservicing
Agreements to the assuming party.
(f) Consistent with the terms of this Agreement, the Servicer may waive,
modify or vary any term of any Mortgage Loan or consent to the postponement of
strict compliance with any such term or in any manner grant indulgence to any
Mortgagor if in the Servicer's determination such waiver, modification,
postponement or indulgence is not materially adverse to the interests of the
Depositors, the Certificateholders and the Certificate Insurer; provided,
however, that (unless (x) the Mortgagor is in default with respect to the
Mortgage Loan, or such default is, in the judgment of the Servicer, reasonably
foreseeable and (y) with respect to any modification lowering the Mortgage
Interest Rate (or, with respect to any Mortgage Loan in the Adjustable Rate
Group, a modification to the method of determination which may result a lower
Mortgage Interest Rate) or effecting the forgiveness of any amount owed under
the Mortgage Note, or extending the final maturity date on such Mortgage Loan,
the Certificate Insurer has consented to such modification and notice of such
modification has been delivered to the Rating Agencies) the Servicer may not
permit any modification with respect to any Mortgage Loan that would change the
Mortgage Interest Rate, defer (except as permitted by Section 5.11) or forgive
the payment of any principal or interest (unless in connection with the
liquidation of the related Mortgage Loan), extend the final maturity date or
modify any other material term of the Mortgage Loan, unless such waiver,
modification, postponement or indulgence would not be considered to constitute
the acquisition by the Trust REMIC of a new mortgage loan under Treasury
Regulations Section 1.860G-2(b). No costs incurred by the Servicer or any
Subservicer in respect of Servicing Advances shall, for the purposes of
distributions to Certificateholders, be added to the Principal Balance of the
related Mortgage Loan for purposes of this Agreement. Without limiting the
generality of the foregoing, and subject to the consent of the Certificate
Insurer, the Servicer shall continue, and is hereby authorized and empowered to
execute and deliver on behalf of the Trustee, all instruments of satisfaction or
cancellation, or of partial or full release, discharge and all other comparable
instruments, with respect to the Mortgage Loans and with respect to the
Mortgaged Properties. If reasonably required by the Servicer (as evidenced by an
Officer's Certificate of the Servicer to such effect delivered to the Trustee),
the Trustee shall furnish the Servicer with any powers of attorney and other
documents necessary or appropriate to enable the Servicer to carry out its
servicing and administrative duties under this Agreement.
Notwithstanding anything to the contrary contained herein, the Servicer, in
servicing and administering the Mortgage Loans, shall employ or cause to be
employed procedures (including collection, foreclosure and REO Property
management procedures) and exercise the same care that it customarily employs
and exercises in servicing and administering mortgage loans for its own account,
in accordance with accepted second mortgage servicing practices of prudent
lending institutions and giving due consideration to the Depositor's, the
Certificate Insurer's and Certificateholders' reliance on the Servicer.
Notwithstanding anything to the contrary contained herein, the Servicer may
reimburse itself for Servicing Advances pursuant to Section 5.04 and may pay all
or a portion of any Servicing Advance out of excess amounts on deposit in the
Principal and Interest Account and held for future distribution on the date such
Servicing Advance is made; any excess amounts so used shall be replaced by the
Servicer by deposit to the Principal and Interest Account on or before the next
succeeding Determination Date.
(g) On and after such time as the Trustee receives the resignation of, or
notice of the removal of, the Servicer from its rights and obligations under
this Agreement, and with respect to any resignation pursuant to Section 9.04,
after receipt of the Opinion of Counsel required pursuant to Section 9.04, the
Trustee or its designee shall assume all of the rights and obligations of the
Servicer, subject to Section 9.02 hereof. The Servicer shall, upon request of
the Trustee but at the expense of the Servicer, deliver to the Trustee all
documents and records relating to the Mortgage Loans and an accounting of
amounts collected and held by the Servicer and otherwise use its best efforts to
effect the orderly and efficient transfer of servicing rights and obligations to
the assuming party.
(h) The Servicer shall take all actions required to be taken under sections
6050H, 6050J and 6050P of Code in respect of the Mortgage Loans, the Mortgaged
Property and the REO Property.
Section 5.02 Liquidation of Mortgage Loans.
In the event that any payment due under any Mortgage Loan and not postponed
pursuant to Section 5.01 is not paid when the same becomes due and payable, or
in the event the Mortgagor fails to perform any other covenant or obligation
under the Mortgage Loan and such failure continues beyond any applicable grace
period, the Servicer shall take such action as it shall deem in its good faith
business judgment to be in the best interest of the Depositors, the Certificate
Insurer and the Certificateholders and otherwise in accordance with the accepted
second mortgage servicing practices of prudent lending institutions. The
Servicer in accordance with the provisions of Section 5.10 shall foreclose upon
or otherwise comparably effect the ownership in the name of the Trustee for the
benefit of the Certificateholders of Mortgaged Properties relating to defaulted
Mortgage Loans as to which no satisfactory arrangements can be made for
collection of delinquent payments; provided, however, that the Servicer shall
not be obligated to foreclose in the event that the Servicer, in its good faith
reasonable business judgment, determines that it would not be in the best
interests of the Depositors, the Certificateholders or the Certificate Insurer,
which judgment shall be evidenced by an Officer's Certificate delivered to the
Trustee and the Certificate Insurer. In connection with such foreclosure or
other conversion, the Servicer shall exercise and use collection and foreclosure
procedures with the same degree of care and skill as it would exercise or use
under the circumstances in the conduct of its own affairs. Any amounts advanced
in connection with such foreclosure or other action shall constitute "Servicing
Advances."
After a Mortgage Loan has become a Liquidated Mortgage Loan, the Servicer
shall promptly prepare and forward to the Depositors, the Trustee and the
Certificate Insurer a Liquidation Report, in the form attached hereto as Exhibit
O, detailing the Liquidation Proceeds received from the Liquidated Mortgage
Loan, expenses incurred with respect thereto, and any loss incurred in
connection therewith.
Section 5.03 Establishment of Principal and Interest Account; Deposits in
Principal and Interest Account.
(a) The Servicer, for the benefit of the Certificateholders and the
Certificate Insurer, as their interests may appear, shall (x) cause to be
established and maintained one or more Principal and Interest Accounts in the
name of the Trustee, which shall be Eligible Accounts, which may be
interest-bearing, titled "EQCC Home Equity Loan Trust 1998-3 Principal and
Interest Account", bearing an additional designation clearly indicating that the
funds deposited therein are held for the benefit of the Certificateholders or
(y) so long as EquiCredit is acting as Servicer and the conditions set forth in
clauses (b)(i), (ii) and (iii) below are met, cause to be maintained an account
for deposit of the amounts set forth below, which account is not required to be
an Eligible Account or invested in Permitted Investments and may be a commingled
account containing other Servicer funds, but which account shall otherwise be a
"Principal and Interest Account" for all purposes of this Agreement to the
extent of funds therein deposited pursuant to the terms of this Agreement. In
the event clause (y) is applicable, (i) the Servicer shall maintain separate
books and records with respect to allotments relating to this Agreement that are
deposited in such Principal and Interest Account and shall separately account
for all amounts relating to this Agreement that are deposited or withdrawn from
such account and (ii) amounts deposited in such Principal and Interest Account
may be used for any purposes, provided, that the Servicer shall cause all
payments required to be made under this Agreement from the Principal and
Interest Account to be paid. The Principal and Interest Accounts referred to in
clause (x) above shall be insured by the Bank Insurance Fund or the Savings
Association Insurance Fund of the FDIC, as the case may be, to the maximum
extent provided by law. The creation of any Principal and Interest Account
referred to in clause (x) shall be evidenced by a letter agreement in the form
of Exhibit P hereto. A copy of such letter agreement shall be furnished by the
Servicer to the Depositors, the Trustee and the Certificate Insurer. The
Servicer shall use reasonable efforts to deposit (without duplication) within
one Business Day, and shall in any event deposit within two Business Days of
receipt thereof, in the Principal and Interest Account and retain therein:
(i) all payments received on or after the Cut-off Date on account of
principal on the Mortgage Loans and all Principal Prepayments and
Curtailments collected on or after the Cut-off Date;
(ii) (a) all payments received on or after the Cut-off Date on account
of interest accrued on the Mortgage Loans on or after the Cut-off Date and
(b) Pre-Plan Interest Payments;
(iii) all Net Liquidation Proceeds;
(iv) all Insurance Proceeds;
(v) all Released Mortgaged Property Proceeds;
(vi) any amounts payable in connection with the purchase of any
Mortgage Loan and the amount of any Substitution Adjustment pursuant to
Sections 2.06 and 3.03;
(vii) any amount required to be deposited in the Principal and
Interest Account pursuant to Section 5.04, 5.07, 5.08 or 5.10; and
(viii) all payments made by the Servicer pursuant to the final
paragraph of Section 5.01(f) to replace any amount withdrawn from the
Principal and Interest Account to make Servicing Advances.
In making the deposits set forth in clauses (i) through (viii) (inclusive)
above, the Servicer shall note in its records the respective amounts deposited
with respect to the Fixed Rate Group and the Adjustable Rate Group. The
foregoing requirements for deposit in the Principal and Interest Account shall
be exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, with respect to each Mortgage Loan, the
Representative's Yield, amounts received on and after the Cut-off Date in
respect of interest accrued on the Mortgage Loans prior to the Cut-off Date
(other than amounts referred to in Section 5.03(ii)(b)), the Servicing Fee, late
payment charges and assumption fees, to the extent permitted by Sections 7.01
and 7.03, Excess Proceeds, and any amounts received after the date of
substitution of a Qualified Substitute Mortgage Loan pursuant to Section 2.06 or
3.03 in respect of interest accrued on such Qualified Substitute Mortgage Loan
on or prior to the date of substitution (except to the extent taken into account
in calculating the Substitution Adjustment with respect thereto), need not be
deposited by the Servicer in the Principal and Interest Account. Except as
permitted in Section 5.03(a) amounts on deposit in the Principal and Interest
Account shall be held uninvested or shall be invested by the Servicer in
Permitted Instruments. Any investment earnings on funds held in the Principal
and Interest Account shall be for the account of the Servicer. Any reference
herein to amounts on deposit in the Principal and Interest Account shall refer
to amounts net of such investment earnings.
(b) Notwithstanding clause (x) of Section 5.03(a), for so long as
EquiCredit is acting as the Servicer, the Servicer shall be permitted to make
deposits into an account of the type described in clause (y) of Section 5.03(a)
if the specific terms and conditions set forth below are satisfied and only for
so long as such terms and conditions are satisfied:
(i) there exists no Servicer Default;
(ii) if EquiCredit does not have a short term debt rating of at least
"A-1" from S&P and "P-1" from Moody's, a guaranty, letter of credit, surety
bond or other similar instrument is issued covering remittance to the
Collection Account of Collections received during any Due Period, which
instrument is acceptable to the Rating Agencies and the Certificate Insurer
and is issued by an entity which has a short-term debt or certificate of
deposit rating, as applicable, of at least "A-1" from S&P and "P-1" from
Moody's; and
(iii) EquiCredit, the Trustee, the Depositors and the Certificate
Insurer shall not have received any notice from S&P or Moody's that such
arrangement will result in a reduction or withdrawal of the then current
rating on the Certificates without regard to the Insurance Policy by either
S&P or Moody's.
(c) In the event that, at any time the conditions set forth in Section
5.03(b) are not satisfied, the Servicer shall forthwith cause to be established
a Principal and Interest Account meeting the requirements of clause (x) of
Section 5.03(a), and the Servicer shall deposit therein all amounts then on
deposit in any account maintained by the Servicer pursuant to clause (y) of
Section 5.03(a) (such account, an "Ineligible Account") which were deposited in
the Ineligible Account pursuant to this Agreement.
Section 5.04 Permitted Withdrawals from the Principal and Interest Account.
The Servicer shall withdraw or cause to be withdrawn funds from the
Principal and Interest Account (or, so long as a Principal and Interest Account
is maintained pursuant to Section 5.03(a)(y), note on its books that such funds
are no longer funds with respect to the Principal and Interest Account), for the
following purposes:
(i) to remit to the Trustee for deposit into the Collection Account on
the third Business Day prior to the Payment Date, the sum of the amounts
set forth in Section 5.03 deposited in the Principal and Interest Account
during the related Due Period (excluding any amounts not required to be
deposited in the Principal and Interest Account pursuant to Section 5.03
and excluding any amounts withdrawn by the Servicer pursuant to clauses
(ii), (iii), (v), (vi), (vii) and (x) below as of the related Determination
Date);
(ii) to reimburse itself for any accrued unpaid Servicing Fees, for
unreimbursed Servicing Advances and, with respect to any Advance made by
the Servicer from its own funds, any unreimbursed Advance; provided, that
any withdrawal of accrued unpaid Servicing Fees pursuant to this Section
5.04(ii) shall be used first by the Servicer to pay any amounts due to the
Trustee pursuant to this Agreement. The Servicer's right to reimbursement
for unpaid Servicing Fees and unreimbursed Servicing Advances shall be
limited to late collections on the related Mortgage Loan, including
Liquidation Proceeds, Released Mortgaged Property Proceeds, Insurance
Proceeds and such other amounts as may be collected by the Servicer from
the related Mortgagor or otherwise relating to the Mortgage Loan in respect
of which such unreimbursed Advances are owed. The Servicer's rights to
reimbursement for any unreimbursed Advances shall be limited to collections
of interest on any Mortgage Loan with respect to which an Advance was made
or from late collections on such Mortgage Loans, including Liquidation
Proceeds, Released Mortgaged Property Proceeds, Insurance Proceeds and such
other amounts as may be collected by the Servicer from the related
Mortgagors or otherwise relating to the Mortgage Loans in respect of which
such unreimbursed amounts are owed. It is understood that the Servicer's
right to reimbursement pursuant hereto shall be prior to the rights of
Certificateholders unless the Representative is the Servicer and the
Servicer or any Depositor or Originator is required to purchase or
substitute (or cause to be purchased or substituted) a Mortgage Loan
pursuant to Sections 2.06 and 3.03, in which case the Servicer's right to
such reimbursement shall be subsequent to the deposit into the Principal
and Interest Account of the purchase price or Substitution Adjustment
pursuant to such Sections 2.06 and 3.03;
(iii) to withdraw any amount received from a Mortgagor that is
recoverable and sought to be recovered as a voidable preference by a
trustee in bankruptcy pursuant to the United States Bankruptcy Code in
accordance with a final, nonappealable order of a court having competent
jurisdiction;
(iv) (a) to make investments in Permitted Instruments and (b) after
effecting the remittance to the Trustee as provided in Section 5.04(i), to
pay to itself interest earned in respect of Permitted Instruments or on
funds deposited in the Principal and Interest Account;
(v) to withdraw any funds deposited in the Principal and Interest
Account that were not required to be deposited therein (such as Servicing
Compensation) or were deposited therein in error;
(vi) to pay itself Servicing Compensation pursuant to Section 7.03
hereof to the extent not retained or paid pursuant to Section 5.03;
(vii) to withdraw funds necessary for the conservation and disposition
of REO Property pursuant to the third paragraph of Section 5.10 hereof to
the extent such funds were deposited in the Principal and Interest Account;
(viii) to utilize any excess funds on deposit to make any Advance
pursuant to Section 6.08 or any Servicing Advance pursuant to the final
paragraph of Section 5.01(f);
(ix) to clear and terminate the Principal and Interest Account upon
the termination of this Agreement and allocate the amounts therein pursuant
to the priority set forth in Section 6.05(d); and
(x) to effect, with respect to a Bankruptcy Loan, the remittance to
the Depositor transferring such Bankruptcy Loan, of an amount equal to the
excess, if any, of (a) Pre-Plan Interest Payments collected in the
preceding Due Period with respect to such Bankruptcy Loan over (b) the
interest accrued in such preceding Due Period, but uncollected as of the
last day of such Due Period, with respect to such Bankruptcy Loan.
In making the withdrawals set forth in clauses (i) through (x) (inclusive)
above, the Servicer shall note (when applicable) in its records the respective
amounts withdrawn with respect to the Fixed Rate Group and the Adjustable Rate
Group. So long as no Servicer Default shall have occurred and be continuing, the
funds held in the Principal and Interest Account may be invested by the Servicer
(to the extent practicable) in Permitted Instruments, as directed in writing to
the Trustee by the Servicer. In either case, funds in the Principal and Interest
Account must be available for withdrawal without penalty, and any Permitted
Instruments must mature not later than the Business Day immediately preceding
the day on which such funds are to be remitted to the Trustee for deposit in the
Collection Account, but in no event later than the Business Day immediately
preceding the Determination Date next following the date of such investment
(except, in each case, that if such Permitted Instrument is an obligation of the
institution that maintains the Principal and Interest Account, then such
Permitted Instrument shall mature not later than such Determination Date) and
shall not be sold or disposed of prior to its maturity. All Permitted
Instruments in which funds in the Principal and Interest Account are invested
must be held by or registered in the name of the Trustee. All interest or other
earnings from funds on deposit in the Principal and Interest Account (or any
Permitted Instruments thereof) shall be the exclusive property of the Servicer,
and may be withdrawn from the Principal and Interest Account pursuant to clause
(iv) above. The amount of any losses incurred in connection with the investment
of funds in the Principal and Interest Account in Permitted Instruments shall be
deposited in the Principal and Interest Account by the Servicer from its own
funds immediately as realized without reimbursement therefor.
Section 5.05 Payment of Taxes, Insurance and Other Charges.
With respect to each Mortgage Loan, the Servicer shall maintain accurate
records reflecting fire and hazard insurance coverage.
With respect to each Mortgage Loan as to which the Servicer maintains
escrow accounts, the Servicer shall maintain accurate records reflecting the
status of ground rents, property taxes and assessments, water rates and other
charges which are or may become a lien upon the Mortgaged Property and the
status of primary mortgage guaranty insurance premiums, if any, and fire and
hazard insurance coverage and shall obtain, from time to time, all bills for the
payment of such charges (including renewal premiums) and shall effect payment
thereof prior to the applicable penalty or termination date and at a time
appropriate for securing maximum discounts allowable, employing for such purpose
deposits of the Mortgagor in any escrow account which shall have been estimated
and accumulated by the Servicer in amounts sufficient for such purposes, as
allowed under the terms of the Mortgage. To the extent that a Mortgage does not
provide for escrow payments, the Servicer shall monitor such payments to
determine if they are made by the Mortgagor at the time they become due and, if
not paid by the Mortgagor, shall advance such amounts as Servicing Advances. To
the extent ground lease payments are not made by the Mortgagor, and the Servicer
has notice of such failure to pay, the Servicer shall advance such delinquent
payments. Any out-of-pocket expenses incurred by the Servicer pursuant to this
Section 5.05 shall constitute Servicing Advances.
Section 5.06 Transfer of Accounts; Monthly Statements.
The Accounts (other than the Principal and Interest Account, which shall be
established pursuant to Section 5.03 hereof) shall be established, as of the
Closing Date, in the name of the Trustee as Eligible Accounts pursuant to clause
(B) of the definition thereof. Any Account may, upon written notice from the
Servicer to the Trustee, be transferred to a different depository institution so
long as (i) such transfer (A) is to an Eligible Account and the Certificate
Insurer receives notice thereof from the Servicer or (B) is approved in writing
by the Certificate Insurer, which approval shall not be unreasonably withheld
and (ii) written notice of such transfer is sent to Moody's. The Trustee shall
provide to the Certificate Insurer a monthly statement of activity in the
Accounts established by it, and the Servicer shall provide to the Trustee and
the Certificate Insurer a monthly statement of activity in the Principal and
Interest Account from the party holding such account.
Section 5.07 Maintenance of Hazard Insurance.
The Servicer shall cause each Mortgagor to maintain, and if the Mortgagor
does not so maintain, shall itself maintain, subject to the provisions of
Section 5.08 hereof, fire and hazard insurance with extended coverage customary
in the area where the Mortgaged Property is located, in an amount which is at
least equal to the least of (a) the outstanding principal balance owing on the
Mortgage Loan (and any prior lien if the related Mortgage Loan is in a junior
lien position), (b) the full insurable value of the Mortgaged Property securing
the Mortgage Loan and (c) the minimum amount required to compensate for damage
or loss on a replacement cost basis. If the Mortgaged Property is in an area
identified in the Federal Register by the Federal Emergency Management Agency as
Flood Zone "A", and such flood insurance has been made available, the Servicer
will cause to be purchased a flood insurance policy with a generally acceptable
insurance carrier, in an amount representing coverage not less than the least of
(i) the outstanding principal balance of the Mortgage Loan (plus the principal
balance of any lien having priority over the Mortgage Loan), (ii) the full
insurable value of the Mortgaged Property, or (iii) the maximum amount of
insurance available under the National Flood Insurance Act of 1968, as amended.
The Servicer shall also maintain on REO Property, to the extent reasonably
available, on REO Property, fire and hazard insurance in the amounts described
above, liability insurance and, to the extent required and available under the
National Flood Insurance Act of 1968, as amended, and the Servicer determines
that such insurance is necessary in accordance with accepted second mortgage
servicing practices of prudent lending institutions, flood insurance in an
amount equal to that required above. Any amounts collected by the Servicer under
any such policies (other than amounts to be applied to the restoration or repair
of the Mortgaged Property, or to be released to the Mortgagor in accordance with
customary second mortgage servicing procedures) shall be deposited in the
Principal and Interest Account, subject to (X) retention by the Servicer to the
extent such amounts constitute Servicing Compensation or (Y) withdrawal pursuant
to Section 5.04. It is understood and agreed that no earthquake or other
additional insurance need be required by the Servicer of any Mortgagor or
maintained on REO Property, other than pursuant to such applicable laws and
regulations as shall at any time be in force and as shall require such
additional insurance. All policies required hereunder shall be endorsed with
standard mortgagee clauses with losses payable to the Servicer. Any
out-of-pocket expenses incurred by the Servicer pursuant to this Section 5.07,
including, without limitation, any advances of premiums on insurance policies
required by this Section 5.07, shall constitute Servicing Advances.
Section 5.08 Maintenance of Mortgage Impairment Insurance Policy.
In the event that the Servicer shall obtain and maintain a blanket policy
insuring against fire and hazards of extended coverage on all of the Mortgage
Loans as to which the Mortgagor does not maintain the insurance described in
Section 5.07, then, to the extent such policy names the Servicer as loss payee
and provides coverage in an amount equal to the aggregate unpaid principal
balance on the Mortgage Loans without co-insurance, and otherwise complies with
the requirements of Section 5.07, the Servicer shall be deemed conclusively to
have satisfied its obligations with respect to fire and hazard insurance
coverage under Section 5.07, it being understood and agreed that such blanket
policy may contain a deductible clause, in which case the Servicer shall, in the
event that there shall not have been maintained on the related Mortgaged
Property a policy complying with Section 5.07, and there shall have been a loss
which would have been covered by such policy, deposit in the Principal and
Interest Account from the Servicer's own funds the difference, if any, between
the amount that would have been payable under a policy complying with Section
5.07 and the amount paid under such blanket policy. Upon the request of the
Certificate Insurer or the Trustee, the Servicer shall cause to be delivered to
such requesting Person a certified true copy of such policy.
Section 5.09 Fidelity Bond.
The Servicer shall maintain with a responsible company, at its own expense,
a blanket fidelity bond and an errors and omissions insurance policy in a
minimum amount acceptable to FNMA or FHLMC or otherwise as is commercially
available at a cost that is not generally regarded as excessive by industry
standards, with broad coverage on all officers, employees or other persons
acting in any capacity requiring such persons to handle funds, money, documents
or papers relating to the Mortgage Loans ("Servicer Employees"). Any such
fidelity bond and errors and omissions insurance shall protect and insure the
Servicer against losses, including losses resulting from forgery, theft,
embezzlement, fraud, errors and omissions and negligent acts of such Servicer
Employees. Such fidelity bond shall also protect and insure the Servicer against
losses in connection with the release or satisfaction of a Mortgage Loan without
having obtained payment in full of the indebtedness secured thereby. No
provision of this Section 5.09 requiring such fidelity bond and errors and
omissions insurance shall diminish or relieve the Servicer from its duties and
obligations as set forth in this Agreement. Upon the request of the Trustee or
the Certificate Insurer, the Servicer shall cause to be delivered to such
requesting Person a certified true copy of such fidelity bond and errors and
omissions insurance policy. On the Closing Date, such fidelity bond and errors
and omissions insurance policy is maintained with certain underwriters at
National Union Fire Insurance Company of Pittsburgh, Pa.
Section 5.10 Title, Management and Disposition of REO Property.
In the event that title to the Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure (an "REO Property"), the deed or
certificate of sale shall be taken in the name of the Trustee for the benefit of
the Certificateholders.
The Servicer shall manage, conserve, protect and operate each REO Property
for the Certificateholders and the Certificate Insurer solely for the purpose of
its prudent and prompt disposition and sale. The Servicer shall, either itself
or through an agent selected by the Servicer, manage, conserve, protect and
operate the REO Property in the same manner that it manages, conserves, protects
and operates for its own account similar property in the same locality as the
REO Property is managed. The Servicer shall attempt to sell the same (and may
temporarily rent the same) on such terms and conditions as the Servicer deems to
be in the best interests of the Certificate Insurer and the Certificateholders.
Any out-of-pocket expenses incurred by the Servicer pursuant to this Section
5.10 shall constitute Servicing Advances. The Servicer shall cause the Trustee
to be named as a beneficiary and loss payee under the REO liability provisions
of the Servicer's general comprehensive liability insurance policy.
The Servicer shall cause to be deposited in the Principal and Interest
Account all revenues received with respect to the conservation and disposition
of the related REO Property and shall retain or withdraw therefrom funds
necessary for the proper operation, management and maintenance of the REO
Property and the fees of any managing agent acting on behalf of the Servicer.
The disposition of REO Property shall be carried out by the Servicer at
such price, and upon such terms and conditions, as the Servicer deems to be in
the best interest of the Certificateholders and the Certificate Insurer and, as
soon as practicable thereafter, the expenses of such sale shall be paid. The
proceeds of sale of the REO Property and other proceeds of any REO Disposition
shall be deposited in the Principal and Interest Account, net of related
liquidation expenses, Excess Proceeds, any related unreimbursed Servicing
Advances, accrued and unpaid Servicing Fees and unreimbursed Advances payable to
the Servicer in accordance with Section 5.04(ii).
In the event any Mortgaged Property is acquired as aforesaid or otherwise
in connection with a default or imminent default on a Mortgage Loan, the
Servicer shall dispose of such Mortgaged Property prior to the close of the
third calender year beginning after the year of its acquisition (the
"Disposition Period") unless (i) the Servicer shall have received an Opinion of
Counsel to the effect that the holding of such Mortgaged Property subsequent to
the Disposition Period will not result in the imposition of taxes on "prohibited
transactions" as defined in Section 860F of the Code or cause the Trust REMIC to
fail to qualify as a REMIC at any time that any Class A or Class X Certificates
are outstanding or (ii) the Servicer shall have applied for, at least 60 days
prior to the expiration of such period, an extension of such period in the
manner contemplated by Section 856(e)(3) of the Code, in which case the original
period shall be extended by the applicable period. Notwithstanding any other
provision of this Agreement, (i) no Mortgaged Property acquired by the Servicer
pursuant to this Section shall be rented (or allowed to continue to be rented)
or otherwise used for the production of income or by or on behalf of the Trust
Fund, and (ii) no construction shall take place on such Mortgaged Property if
such activity as described in the preceding clause (i) or clause (ii) is
conducted or otherwise undertaken in such a manner or pursuant to any terms that
would cause such Mortgaged 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 Trust REMIC of any "net income from foreclosure property" which is subject
to taxation within the meaning of Sections 860G(c) and 857(b)(4)(B) of the Code.
If a period greater than the Disposition Period is permitted under this
Agreement and is necessary to sell any REO Property, the Servicer shall give
appropriate notice to the Trustee, the Certificate Insurer and the
Certificateholders and shall report monthly to the Trustee as to the progress
being made in selling such REO Property.
If the Servicer has actual knowledge that a Mortgaged Property which the
Servicer is contemplating acquiring in foreclosure or by deed in lieu of
foreclosure is located within a 1 mile radius of any site with material
environmental or hazardous waste risks known to the Servicer, the Servicer will
notify the Certificate Insurer and the Trustee prior to acquiring the Mortgaged
Property and shall not take any action without the prior written approval of the
Certificate Insurer and the Trustee.
Nothing in this Section shall affect the Servicer's right to deem certain
advances proposed to be made Nonrecoverable Advances. For the purpose of this
Section 5.10, actual knowledge of the Servicer means actual knowledge of a
Responsible Officer of the Servicer involved in the servicing of the relevant
Mortgage Loan. Actual knowledge of the Servicer does not include knowledge
imputable by virtue of the availability of or accessibility to information
relating to environmental or hazardous waste sites or the locations thereof.
Section 5.11 Collection of Certain Mortgage Loan Payments.
The Servicer shall make reasonable efforts to collect all payments called
for under the terms and provisions of the Mortgage Loans, and shall, to the
extent such procedures shall be consistent with this Agreement, comply with the
terms and provisions of any applicable hazard insurance policy. 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 Mortgage Loan or any other fee
or charge which the Servicer would be entitled to retain hereunder as Servicing
Compensation and extend the due date for payments due on a Mortgage Note for a
period (with respect to each payment as to which the due date is extended) not
greater than 125 days after the initially scheduled due date for such payment,
provided that such extension may only be made once in any twelve month period
without the prior written consent of the Certificate Insurer, which consent
shall not be unreasonably withheld. In the event the Servicer shall consent to
the deferment of the Due Dates for payments due on a Mortgage Note, the Servicer
shall nonetheless remit any required Advance in accordance with Section 6.08
hereof 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.
Section 5.12 Access to Certain Documentation and Information Regarding the
Mortgage Loans.
The Servicer and the Depositors shall provide to the Trustee, the
Certificateholders, the Certificate Insurer, the Federal Reserve and to the
supervisory agents and examiners of each of the foregoing, access to the
documentation regarding the Mortgage Loans (such access in the case of the
supervisory agents and examiners shall be limited to that required by applicable
state and federal regulations), 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 5.13 Superior Liens.
The Servicer shall file (or cause to be filed) of record a request for
notice of any action by a superior lienholder under a First Lien for the
protection of the Depositor's and the Trustee's interest, where permitted by
local law and whenever applicable state law does not require that a junior
lienholder be named as a party defendant in foreclosure proceedings in order to
foreclose such junior lienholder's equity of redemption. The Servicer shall also
notify any superior lienholder in writing of the existence of the 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 secured by the First Lien, 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 advance the necessary
funds to cure the default or reinstate the superior lien, if such advance is in
the best interests of the Depositors, the Certificate Insurer and the
Certificateholders. The Servicer shall not make such an advance except to the
extent that it determines in its reasonable good faith judgment that the advance
would be recoverable from Liquidation Proceeds on the related Mortgage Loan. The
Servicer shall thereafter take such action as is necessary to recover the amount
so advanced.
ARTICLE VI
PAYMENTS TO THE CERTIFICATEHOLDERS
Section 6.01 Establishment of Collection Account and Yield Supplement
Sub-Account; Deposit in Accounts.
(a) No later than the Closing Date, the Trustee, (i) for the benefit of the
Certificateholders and the Certificate Insurer, as their interests may appear,
shall establish and maintain a collection account in the name of the Trustee, in
trust for the benefit of Certificateholders and (ii) shall establish and
maintain an account (the "Yield Supplement Sub-Account") for the deposit of
Yield Supplement Amounts in the name of the Trustee, in trust for the benefit of
the Certificateholders. Notwithstanding the foregoing, however, the Trustee may
establish a single account (the "Collection Account") of which the accounts
referred to in clauses (i) and (ii) above will each be deemed to be a
sub-account, provided that the Trustee shall for all other purposes hereunder
treat the Collection Account and the Yield Supplement Sub-Account as separate
accounts. The Collection Account shall be established and maintained in the name
of the Trustee, in trust for the benefit of Certificateholders and shall be
established and maintained as an Eligible Account and the Trustee shall keep
accurate records with respect thereto.
The Yield Supplement Sub-Account shall not be an asset of the Trust REMIC.
Distributions on the Class A-1F Certificates out of the Yield Supplement
Sub-Account shall not be considered to be distributions from the Trust REMIC.
The parties hereto intend and agree, as a condition to ownership of the Class
A-1F Certificates, and the Trustee agrees to take no action inconsistent
therewith, to treat the Yield Supplement Agreement as part of a grantor trust
under Subpart E of Part 1 of Subchapter J of Chapter 1 of Subtitle A of the
Code, which grantor trust interests are beneficially owned solely for federal,
state and local income tax purposes by the Class A-1F Certificates. The Trustee
shall report all amounts received by Class A-1F Certificateholders from the
Yield Supplement Sub-Account in respect of Yield Supplement Amounts.
The Trustee shall, promptly upon receipt, deposit in the Collection Account
(or, with respect to amounts described in clause (v) below, the Yield Supplement
Sub-Account) and retain therein:
(i) the amounts remitted by the Servicer pursuant to Section 5.04(i);
(ii) the Advances pursuant to Section 6.08 remitted to the Trustee by
the Servicer;
(iii) amounts transferred from the Spread Account pursuant to Section
6.09(b)(ii) and Insured Payments pursuant to Section 6.05(c);
(iv) amounts required to be paid by the Servicer pursuant to Section
6.04(e) in connection with losses on investments of amounts in the
Collection Account; and
(v) all payments made by the Yield Supplement Counterparty pursuant to
the Yield Supplement Agreement.
In making the deposits set forth in clauses (i) through (iv) (inclusive)
above, the Trustee shall note in its records (if applicable) the respective
amounts deposited with respect to the Fixed Rate Group and the Adjustable Rate
Group.
With respect to each Payment Date, on or before such date the Trustee shall
make the withdrawals from the Collection Account, as set forth in Section 6.05
hereof, and shall cause the amount of Available Payment Amounts and any Insured
Payments received to be distributed in respect of the Certificates pursuant to
Section 6.05 hereof on such date.
Section 6.02 Permitted Withdrawals from Collection Account.
The Trustee shall withdraw amounts on deposit in the Collection Account
(and with respect to distributions pursuant to (iii) below in respect of
payments pursuant to Section 6.05(d)(iii)(A), from the Yield Supplement
Sub-Account) on each Payment Date (except as set forth in clause (iv) below) in
the following order of priority:
(i) to make deposits in the Insurance Account established pursuant to
Section 6.03(a) (in accordance with Section 6.05(d)(i));
(ii) to make deposits in the Spread Account pursuant to Section
6.09(a)(i) (which for federal income tax purposes will be treated in the
manner described in Section 6.09);
(iii) to make the distributions pursuant to Section
6.05(d)(iii)-(viii); and
(iv) on any day during the related Accrual Period, and in no
particular order of priority:
(A) to invest amounts on deposit in the Collection Account in
Permitted Instruments or such other instruments as may be approved in
writing by the Certificate Insurer (with written notice to Moody's)
pursuant to Section 6.04;
(B) to pay to the Servicer interest paid and earnings realized on
Permitted Instruments with respect to funds in the Collection Account;
(C) to withdraw any amount deposited in the Collection Account
not required to be deposited therein or deposited therein in error;
(D) to withdraw any amount that constitutes an Advance by
Servicer of its own funds or a Mortgagor payment previously deposited
into the Collection Account that is held to constitute a voidable
preference by a trustee in bankruptcy pursuant to the United States
Bankruptcy Code in accordance with a final, nonappealable order of a
court having competent jurisdiction; and
(E) to clear and terminate the Collection Account and the Yield
Supplement Sub-Account upon the termination of this Agreement and
allocate amounts therein pursuant to Section 6.05(d).
In making the withdrawals set forth in clauses (i) through (iv) (inclusive)
above, the Trustee shall note in its records (if applicable) the respective
amounts withdrawn with respect to the Fixed Rate Group and the Adjustable Rate
Group. In addition, the Trustee shall keep and maintain a separate accounting
for withdrawals from each of the Collection Account and the Yield Supplement
Sub-Account.
Section 6.03 Establishment of Insurance Account: Deposits in Insurance
Account: Permitted Withdrawals from Insurance Account.
(a) No later than the Closing Date, the Trustee, for the benefit of the
Certificateholders and the Certificate Insurer, shall establish and maintain one
or more Eligible Accounts as trust accounts with itself which shall not be
interest-bearing, titled "EQCC Home Equity Loan Trust 1998-3 Insurance Account".
The Insurance Account shall bear an additional designation clearly indicating
that the funds deposited therein are held for the benefit of the
Certificateholders and the Certificate Insurer. On each Payment Date, the
Trustee, upon receipt (and to the extent received), promptly shall deposit into
the Insurance Account in accordance with Section 6.02: an amount equal to the
aggregate Monthly Premium with respect to the Class A-1F Certificates and Class
A-1A Certificates (in each case based on the respective principal balances of
the related Certificates) due on such Payment Date in accordance with Section
6.05(d).
If at any time the amount then on deposit in the Insurance Account shall be
insufficient to pay in full the fees and expenses of the Certificate Insurer
then due, the Trustee shall withdraw such amount from the Spread Account.
(b) The Trustee may make withdrawals from the Insurance Account for
application in the following order:
(i) to pay the Certificate Insurer the aggregate Monthly Premium on
each Payment Date;
(ii) to withdraw amounts not required to be deposited in the Insurance
Account or deposited therein in error; and
(iii) to reimburse the Spread Account for any amounts withdrawn from
it pursuant to the last paragraph of subclause (a) above on any previous
Payment Dates.
Section 6.04 Investment of Accounts.
(a) So long as no Servicer Default shall have occurred and be continuing,
all or a portion of any Account held by the Trustee shall be invested and
reinvested by the Trustee (or remain uninvested), as directed in writing by the
Servicer on its own behalf, in one or more Permitted Instruments (or, in the
case of the Collection Account, in such other instruments approved in writing by
the Certificate Insurer (with written notice to Moody's)) bearing interest or
sold at a discount. If a Servicer Default shall have occurred and be continuing,
the Trustee shall invest all Accounts in Permitted Instruments described in
paragraph (iv) of the definition of Permitted Instruments. At no time shall any
such investment in any Account mature later than the Business Day immediately
preceding the date on which such amounts are required by the terms hereof to be
withdrawn from such Account, which (i) in the case of the Collection Account,
shall be the next Payment Date, (ii) in the case of the Principal and Interest
Account, shall be the third business day preceding the next Payment Date and
(iii) in all other cases, until the day actually withdrawn pursuant to the terms
hereof.
(b) If any amounts are needed for disbursement from any Account held by the
Trustee and sufficient uninvested funds are not available to make such
disbursement, the Trustee shall cause to be sold or otherwise converted to cash
a sufficient amount of the investments in such Account. The Trustee shall not be
liable for any investment loss or other charge resulting therefrom unless the
Trustee's failure to perform in accordance with this Section 6.04 is the cause
of such loss or charge.
(c) Subject to Section 12.01 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 investment loss on any Permitted Instrument (or other
instrument permitted by Section 6.04(a)) included herein (except to the extent
that the Trustee is the obligor and has defaulted thereon).
(d) The Trustee shall invest and reinvest funds in the Accounts held by it,
to the fullest extent practicable, in such manner as the Servicer shall from
time to time direct as set forth in Section 6.04(a), but only in one or more
Permitted Instruments (or other instrument permitted by Section 6.04(a)).
(e) All income or other gain from investments in any Account held by the
Trustee, or from amounts on deposit in such Account and invested in Permitted
Instruments, shall be deposited in such Account, as the case may be, immediately
on receipt, and the Trustee shall notify the Servicer of any loss resulting from
such investments. Upon receipt of such notification, the Servicer shall promptly
remit the amount of any such loss from its own funds, without reimbursement
therefor, to the Trustee for deposit in the Account from which the related funds
were withdrawn for investment.
(f) Any investment earnings on funds held in the Principal and Interest
Account may be reinvested by the Servicer and the proceeds of such reinvestment
are for the account of the Servicer.
(g) Notwithstanding any of the foregoing provisions of this Section 6.04,
at the option of the Class X Certificateholders, exercised by written direction
to the Trustee (such written direction, the "Holder Discretion Notice"), all or
specified percentages (such specified percentage not to exceed the Percentage
Interest of the Class X Certificates of such Holder) of the funds on deposit in
the Spread Account shall be segregated into separate sub-accounts (each, a
"Holder Discretion Account") in a manner designated by such Class X
Certificateholder which does not impair the Class A Certificateholders' or the
Certificate Insurer's interest in distributions from the Spread Account or in
any such separate sub-accounts. Amounts in any Holder Discretion Account shall
be invested in Permitted Instruments at the direction of the Class X
Certificateholder designated in the Holder Discretion Notice (the percentage of
such funds to be invested at the direction of any one Class X Certificateholder
not to exceed the Percentage Interest of the Class X Certificates of such Class
X Certificateholder). The Trustee shall separately report investment income on
such amounts so invested to such Class X Certificateholder. The Class X
Certificateholder directing the investments in any Holder Discretion Account
shall deposit in such Holder Discretion Account, from its own funds, the amount
of any losses incurred in respect of any such investments no later than the
close of business on the Business Day immediately preceding the Payment Date
immediately following such loss. The Trustee shall have no liability or
responsibility with respect to any Holder Discretion Account and the provisions
of Sections 6.04(a), (b), (d) and (e) shall no longer apply thereto.
Section 6.05 Priority and Subordination of Distributions.
(a) The rights of the Certificateholders to receive distributions from the
proceeds of the Trust Fund, and all ownership interests of the
Certificateholders in such distributions, shall be as set forth in this
Agreement. The rights of the Class X Certificateholders to receive distributions
in respect of the Class X Certificates shall be subject and subordinate to the
preferential rights of the Class A Certificateholders to receive distributions
in respect of the Class A Certificates, to the extent set forth herein, and
distributions on the Class X Certificates are subject and subordinate to the
maintenance of the Specified Spread Account Requirement as specified herein. In
accordance with the foregoing, the interests of the Class X Certificateholders
in amounts deposited in the Spread Account from time to time shall not vest
unless and until such amounts are distributed in respect of the Class X
Certificates in accordance with the terms of this Agreement. Notwithstanding
anything contained in this Agreement to the contrary, no Certificateholder shall
be required to refund any amount properly distributed to it pursuant to Section
6.02, 6.05, 6.09(b) or 6.09(d).
(b) [Reserved];
(c) As soon as possible, and in no event later than 10:00 a.m. New York
time on the Business Day immediately preceding each Payment Date, the Trustee
shall furnish the Certificate Insurer and the Servicer with a completed notice
in the form set forth as Exhibit Q hereto (the "Notice") in the event that an
Event of Nonpayment will occur, pursuant to the definition thereof, with respect
to such Payment Date. The Notice shall specify the amount of Insured Payment and
shall constitute a claim for an Insured Payment pursuant to the Certificate
Insurance Policy. Upon receipt of Insured Payments for the benefit of the Class
A Certificateholders under the Certificate Insurance Policy, the Trustee shall
deposit such Insured Payments in the Collection Account.
The Trustee shall receive, as attorney-in-fact of each Holder of a Class A
Certificate, any Insured Payment from the Certificate Insurer and disburse the
same to each Holder of a Class A Certificate, respectively, in accordance with
the provisions of this Section 6.05. Insured Payments disbursed by the Trustee
from proceeds of the Certificate Insurance Policy shall not be considered
payment by the Trust Fund nor shall such payment discharge the obligation of the
Trust Fund with respect to such Class A Certificates, and the Certificate
Insurer shall become the owner of such unpaid amounts due from the Trust Fund in
respect of Class A Certificates. The Trustee hereby agrees on behalf of each
Holder of a Class A Certificate for the benefit of the Certificate Insurer that
it recognizes that to the extent the Certificate Insurer makes Insured Payments,
either directly or indirectly (as by paying through the Trustee), to the Class A
Certificateholders, the Certificate Insurer will be subrogated to the rights of
the Class A Certificateholders, as applicable, with respect to such Insured
Payment and shall be deemed to the extent of the payments so made to be a
registered Class A Certificateholder and shall receive all future Insured Class
A Remittance Amounts, as the case may be, until all such Insured Payments by the
Certificate Insurer have been fully reimbursed together with interest thereon at
the applicable Pass-Through Rate (or, in the case of the Class A-1F
Certificates, the Insured Pass-Through Rate), subject to the following
paragraph. To evidence such subrogation, the Trustee shall note the Certificate
Insurer's rights as subrogee on the registration books maintained by the Trustee
upon receipt from the Certificate Insurer of proof of payment of any Insured
Payment. Except as otherwise described herein, the Certificate Insurer shall not
acquire any voting rights hereunder as a result of such subrogation.
It is understood and agreed that the intention of the parties is that the
Certificate Insurer shall not be entitled to reimbursement on any Payment Date
for amounts previously paid by it unless on such Payment Date the Class A
Certificateholders shall also have received the full amount of the Insured Class
A Remittance Amount for such Payment Date. For purposes of implementing the
Certificate Insurer's rights as subrogee, distributions shall be made to the
Certificate Insurer under priority fourth of subsection (d) of this Section 6.05
after all distributions are made to the Class A Certificateholders on the
applicable Payment Date as aforesaid.
(d) Not later than 12:00 p.m. New York time on each Payment Date, with
respect to the Class A-1F Certificates and the Class A-1A Certificates, the
Trustee shall withdraw from the Collection Account (and, with respect to clause
(iii)(A) of this Section 6.05(d), from the Yield Supplement Sub-Account), from
the amounts available therein as set forth in this Article VI, if any, and
shall, to the extent available, distribute (without duplication) such amount in
the priority indicated:
(i) first, sequentially, (a) for deposit into the Insurance Account
for the benefit of the Certificate Insurer, the Monthly Premium with
respect to such Certificates payable to the Certificate Insurer and (b) for
remittance of the Initial Premium Fee Recovery Amount to the
Representative;
(ii) second, for deposit into the Spread Account, the Excess Spread
with respect to the related Mortgage Loan Group (which for federal income
tax purposes will be treated in the manner described in Section 6.09);
(iii) third, from amounts attributable to the related Mortgage Loan
Group and, subject to Section 6.09(b)(ii), amounts withdrawn from the
Spread Account pursuant to Section 6.09(b)(ii), (A) to the Class A-1F
Certificateholders, the Class A-1F Interest Remittance Amount; and (B) to
the Class A-1A Certificateholders, the Class A-1A Interest Remittance
Amount;
(iv) fourth, to the Class A-1F Certificates and to the Class A-1A
Certificates, the Class A-1F Principal Remittance Amount and the Class A-1A
Principal Remittance Amount, respectively, concurrently as follows:
(1) to the Class A-1F Certificates, until the Principal Balance
of such Class has been reduced to zero, the Class A-1F Principal
Remittance Amount; and
(2) to the Class A-1A Certificates, until the Principal Balance
of such Class has been reduced to zero, the Class A-1A Principal
Remittance Amount;
(v) fifth, to the Trustee, any amounts then due and owing representing
fees of the Trustee (without regard to amounts attributable to either
Mortgage Loan Group); provided, that the Trustee certifies in writing that
such amount is due and owing and has not been paid by the Servicer within
30 days after written demand therefor;
(vi) sixth, to the Servicer and/or the Representative, as applicable,
any Reimbursable Amount (without regard to amounts attributable to either
Mortgage Loan Group);
(vii) seventh, to the Servicer an amount equal to Nonrecoverable
Advances previously made by the Servicer and not previously reimbursed
(without regard to amounts attributable to either Mortgage Loan Group); and
(viii) eighth, to the Class R Certificateholders, the balance if any
of amounts remaining in the Collection Account.
(e) All distributions made to the Class A Certificateholders or the Class X
and Class R Certificateholders as a Class on each Payment Date will be made on a
pro rata basis among the Certificateholders of the respective Class of record on
the next preceding Record Date based on the Percentage Interest represented by
their respective Certificates, and shall be made by wire transfer of immediately
available funds to the account of such Certificateholder at a bank or other
entity having appropriate facilities therefor, if such Certificateholder shall
own of record Class A Certificates which have denominations aggregating at least
$1,000,000 appearing in the Certificate Register, and in all cases with respect
to the Class X and Class R Certificates, and shall have provided complete wiring
instructions at least five Business Days prior to the Record Date, and otherwise
by check mailed to the address of such Certificateholder appearing in the
Certificate Register.
Section 6.06 [RESERVED].
Section 6.07 Statements.
Not later than 12:00 noon Chicago, Illinois time on the Business Day
preceding each Determination Date, the Servicer shall deliver to the Trustee and
the Certificate Insurer a computer tape or written report containing the
information set forth on Exhibit R as to each Mortgage Loan with respect to the
related Due Period and such other information with respect to the Mortgage Loans
in the aggregate as the Trustee shall reasonably require. Not later than 12:00
noon Chicago, Illinois time two Business Days preceding each Payment Date, the
Trustee shall deliver to the Depositors, any Paying Agent, the Servicer, the
Certificate Insurer, Moody's and S&P by telecopy, by request, a statement (the
"Remittance Report") containing the information set forth below with respect to
the succeeding Payment Date, with a hard copy thereof to be delivered on the
immediately succeeding Business Day:
(i) the Available Payment Amount attributable to each Mortgage
Loan Group and any portion of the Available Payment Amount that has
been deposited in the Collection Account but may not be withdrawn
therefrom pursuant to an order of a United States bankruptcy court of
competent jurisdiction imposing a stay pursuant to Section 362 of the
United States Bankruptcy Code;
(ii) the Class A-1F Principal Balance, the Class A-1A Principal
Balance and the Pool Principal Balance with respect to each Mortgage
Loan Group, as reported in the Remittance Report provided pursuant to
subclause (xiii) below for the immediately preceding Payment Date, or,
in the case of the first Determination Date, the Original Class A-1F
Principal Balance, the Original Class A-1A Principal Balance and the
Original Pool Principal Balance with respect to each Mortgage Loan
Group;
(iii) with respect to the Mortgage Pool and each Mortgage Loan
Group, the number and Principal Balances of all Mortgage Loans which
were the subject of Principal Prepayments during the related Due
Period;
(iv) with respect to the Mortgage Pool and each Mortgage Loan
Group, the amount of all Curtailments which were received during the
related Due Period;
(v) with respect to the Mortgage Pool and each Mortgage Loan
Group, the aggregate amount of principal portion of all Monthly
Payments received during the related Due Period;
(vi) with respect to the Mortgage Pool and each Mortgage Loan
Group, the amount of interest received on the Mortgage Loans during
the related Due Period;
(vii) with respect to the Mortgage Pool and each Mortgage Loan
Group, the aggregate amount of the Advances made and recovered with
respect to such Payment Date;
(viii) with respect to the Mortgage Pool and each Mortgage Loan
Group, the delinquency and foreclosure information set forth in the
form attached hereto as Exhibit H and the amount of Mortgage Loan
Losses during the related Due Period;
(ix) the Class A-1F Principal Balance and the Class A-1A
Principal Balance after giving effect to the distribution to be made
on such Payment Date;
(x) with respect to the Mortgage Pool and each Mortgage Loan
Group, the weighted average maturity and the weighted average Mortgage
Interest Rate of the Mortgage Loans in each Mortgage Loan Group as of
the last day of the related Due Period;
(xi) the Servicing Fees paid and Servicing Fees accrued during
the related Due Period;
(xii) the amount of all payments or reimbursements to the
Servicer pursuant to Section 5.04 (ii), (iv), (v), (vi) and (vii) paid
or to be paid since the prior Payment Date (or in the case of the
first Payment Date, since the Closing Date);
(xiii) the Pool Principal Balance and aggregate Principal Balance
for each Mortgage Loan Group as of the last day of the related Due
Period;
(xiv) such other information as the Certificate Insurer and the
Certificateholders may reasonably require;
(xv) the amounts which are reimbursable to the Servicer, the
Representative or the Depositors, as appropriate, pursuant to Section
6.05;
(xvi) with respect to the Mortgage Pool and each Mortgage Loan
Group, the number of Mortgage Loans outstanding at the beginning and
at the end of the related Due Period;
(xvii) the aggregate interest accrued on the Mortgage Loans at
their respective Mortgage Interest Rates for the related Due Period;
(xviii) the Subordinated Amount, the amount on deposit in the
Spread Account, the Cumulative Excess Spread Receipts, in each case
after giving effect to any payments or withdrawals on such Payment
Date, and with respect to the Mortgage Pool and each Mortgage Loan
Group, the Excess Spread with respect to such Payment Date;
(xix) the aggregate Mortgage Loan Losses since the Cut-off Date
as of the end of the related Due Period;
(xx) the LIBOR Interest Carryover with respect to such Payment
Date and, any such unpaid LIBOR Interest Carryover from prior Payment
Date(s), including interest accrued thereon;
(xxi) the Yield Supplement Carryover with respect to such Payment
Date and, any such unpaid Yield Supplement Carryover from prior
Payment Date(s), including interest accrued thereon; and
(xxii) any amounts deposited into and released from the Yield
Supplement Sub-Account. All amounts received by Class A-1F
Certificateholders from the Yield Supplement Sub-Account in respect of
Yield Supplement Amounts.
The Trustee shall forward such report to the Certificateholders on the
Payment Date, by telecopy, with a hard copy to follow (in the case of the
Depository) or by first class mail. The Depositors and the Trustee may fully
rely upon and shall have no liability with respect to information provided by
the Servicer.
To the extent that there are inconsistencies between the telecopy of the
Remittance Report and the hard copy thereof, the Servicer and the Trustee may
rely upon the telecopy.
In the case of information furnished pursuant to subclauses (ii) and (ix)
above, the amounts shall be expressed in a separate section of the report as a
dollar amount for each of the Class A Certificates for each $1,000 original
principal amount as of the Cut-off Date.
(a) Upon reasonable advance notice in writing, the Servicer will provide to
the Trustee access to information and documentation regarding the Mortgage Loans
sufficient to permit any Holder which is a savings and loan association, bank or
insurance company to comply with applicable regulations of the FDIC or other
regulatory authorities with respect to investment in the Certificates, as
applicable.
(b) Not later than 10 days after each Payment Date, the Servicer shall
provide the Loss Coverage Ratio to the Trustee and the Certificate Insurer as of
the most recent Payment Date. In addition, the Servicer shall furnish to the
Trustee and to the Certificate Insurer, during the term of this Agreement, such
periodic, special, or other reports or information not specifically provided for
herein, as may be necessary, reasonable, or appropriate with respect to the
Trustee or the Certificate Insurer, as the case may be, or otherwise with
respect to the purposes of this Agreement, all such reports or information to be
provided by and in accordance with such applicable instructions and directions
as the Trustee or the Certificate Insurer may reasonably require; provided, that
the Servicer shall be entitled to be reimbursed by the requesting party, for the
fees and actual expenses associated with providing such reports, if such reports
are not generally produced in the ordinary course of its business.
(c) Reports and computer tapes furnished by the Servicer pursuant to this
Agreement shall be deemed confidential and of proprietary nature, and shall not
be copied or distributed except in connection with the purposes and requirements
of this Agreement; provided that the Certificate Insurer may copy or distribute
such information (A) pursuant to a subpoena or order issued by a court of
competent jurisdiction or by a judicial or administrative or legislative body or
committee, (B) as may be required in any report, statement or testimony
submitted to any Federal, state, municipal or other regulatory body having
jurisdiction over the Certificate Insurer, (C) in order to comply with any law,
ruling, order or regulation applicable to the Certificate Insurer, or (D) as may
be required by any rating agency or reinsurer. No Person entitled to receive
copies of such reports or tapes shall use the information therein for the
purpose of soliciting the customers of the Originators or for any other purpose
except as set forth in this Agreement.
(d) The Trustee shall promptly send to the Certificate Insurer and, upon
request, to each Certificateholder in writing:
(i) notice of any reduction in the Specified Spread Account
Requirement;
(ii) notice of any reduction of the percentages set forth in the
definition of "Monthly Excess Spread Amount";
(iii) notice of the appointment of any Subservicer;
(iv) notice of any transfer of any Account to a different
depository institution;
(v) a copy of each Officer's Certificate delivered pursuant to
Section 7.04 and any notice received from the Servicer of a change in
the fiscal year of the Servicer;
(vi) a copy of each letter delivered pursuant to Section 7.05;
and
(vii) notice of the receipt by the Trustee of any information
regarding the Servicer's servicing activities pursuant to the last
paragraph of Section 10.01(c);
provided, that in each case the Trustee shall only be required to send such
notices and other items to such Persons to the extent that the Trustee has
itself received the related information.
The Depositors, the Servicer and the Trustee on behalf of
Certificateholders (the "Trust Parties") hereby authorize the Certificate
Insurer to include the information contained in reports provided to the
Certificate Insurer hereunder (the "Information") on The Bloomberg, an on-line
computer based information network maintained by Bloomberg L.P. ("Bloomberg"),
or in other electronic or print information services. The Trust Parties agree
not to commence any actions or proceedings, or otherwise assert any claims,
against the Certificate Insurer or its affiliates or any of the Certificate
Insurer's or its affiliates' respective agents, representatives, directors,
officers or employees (collectively, the "Certificate Insurer Parties"), arising
out of, or related to or in connection with the dissemination and/or use of any
Information by the Certificate Insurer, including, but not limited to, claims
based on allegations of inaccurate, incomplete or erroneous transfer of
information by the Certificate Insurer to Bloomberg or otherwise (other than in
connection with the Certificate Insurer's negligence or willful misconduct). The
Trust Parties waive their rights to assert any such claims against the
Certificate Insurer Parties and fully and finally release the Certificate
Insurer Parties from any and all such claims, demands, obligations, actions and
liabilities (other than in connection with the Certificate Insurer's negligence
or willful misconduct). The Certificate Insurer makes no representations or
warranties, expressed or implied, of any kind whatsoever with respect to the
accuracy, adequacy, timeliness, completeness, merchantability or fitness for any
particular purpose of any Information in any form or manner. The Certificate
Insurer reserves the right at any time to withdraw or suspend the dissemination
of the Information by the Certificate Insurer. The authorizations, covenants and
obligations of the Trust Parties under this section shall be irrevocable and
shall survive the termination of this Agreement.
Section 6.08 Advances by the Servicer.
Not later than the close of business on the third Business Day preceding
each Payment Date, the Servicer shall remit to the Trustee (but solely from and
to the extent of amounts on deposit in the Principal and Interest Account as of
the related Determination Date, after giving effect to withdrawals from the
Principal and Interest Account as of the Determination Date for such Payment
Date pursuant to Section 5.04(i)), an amount (the "Advance") equal to the sum of
(a) the interest accrued in the related Due Period on the Mortgage Loans but
uncollected as of the close of business on the last day of such Due Period (net
of the Servicing Fee) and (b) with respect to each REO Property which was
acquired during or prior to the related Due Period and as to which an REO
Disposition did not occur during the related Due Period, an amount equal to the
excess, if any, of interest on the Principal Balance of such REO Property
computed at the related Mortgage Interest Rate (net of the Servicing Fee
(computed in the manner described in paragraph (i) or (ii), as applicable, of
the definition thereof)) for the most recently ended Due Period over the net
income from the REO Property deposited in the Principal and Interest Account
during such Due Period pursuant to Section 5.10.
Notwithstanding the provisions in the foregoing paragraph of this Section
6.08, with respect to the Payment Dates occurring on or before December 15, 1998
if the amounts on deposit in the Principal and Interest Account are insufficient
to make the full Advance (as defined herein), and as a result thereof an Event
of Nonpayment would occur, the Servicer shall make an Advance from its own funds
equal to such insufficiency to the extent of delinquent payments of interest and
may reimburse itself for such Advances from collections on the related Mortgage
Loans pursuant to Section 5.04(ii).
Section 6.09 Establishment of Spread Account; Deposits in Spread Account;
Permitted Withdrawals from Spread Account.
(a) No later than the Closing Date, the Trustee will establish and maintain
in a non-interest bearing trust account with itself, a Spread Account which
shall be an Eligible Account, titled "EQCC Home Equity Loan Trust 1998-3 Spread
Account". At the time of the issuance of the Certificates, there shall be no
initial deposit required to be made in the Spread Account from the proceeds of
the sale of Class A Certificates. The Spread Account shall be an asset of the
Trust Fund, in the control of the Trustee. No holder of any Certificate shall
have any rights with respect to the assets contained in the Spread Account other
than as specifically set forth in this Agreement, and the assets contained
therein shall not be "property of the estate" of any Certificateholder pursuant
to 11 U.S.C. Section 541, shall not be available to satisfy any obligations of
any Certificateholder, and shall not be available to the creditors of any
Certificateholder. The Spread Account shall be an "outside reserve fund" within
the meaning of Treasury Regulation 1.860G-2(h) and shall not be an asset of the
Trust REMIC. Solely for federal income tax purposes, the Trustee and the Holders
of the Class X Certificates shall treat amounts distributed by the Trust REMIC
to the Spread Account as having been distributed in respect of the Class X
Certificates and held in the Spread Account. Distributions on the Class X
Certificates out of the Spread Account shall not be considered to be
distributions from the Trust REMIC. The parties hereto intend and agree, as a
condition to ownership of the Class X Certificates, and the Trustee agrees to
take no action inconsistent therewith, to treat the Spread Account as an
arrangement described in Treasury Regulations Section 1.61-13(b); provided, that
if the Internal Revenue Service does not permit such treatment, the parties
hereto intend and agree, as a condition of ownership of the Class X
Certificates, and the Trustee agrees to take no action inconsistent therewith,
that solely for federal and, to the extent applicable, state and local tax
purposes, (i) if the Class X Certificates are held by a single Holder, that the
assets and liabilities of the Spread Account be treated solely for federal
income tax purposes as assets and liabilities of the Class X Certificateholder
pursuant to Treasury Regulations Section 301.7701-3(b)(ii), and (ii) if the
Class X Certificates are held by more than one Holder, the Spread Account be
treated solely for federal income tax purposes as a partnership pursuant to
Treasury Regulations Section 301.7701-3(b)(ii), in which event each Class X
Certificateholder, including all successors to the original Class X
Certificateholder, irrevocably elects under Section 761 of the Code to exclude
the Spread Account from the application of Subchapter K of the Code. The Trustee
shall separately report to any Class X Certificateholders amounts deposited
into, paid to Class X Certificateholders from, and released from the Spread
Account, together with reinvestment income thereon. Notwithstanding the
foregoing, the rights of the Class X Certificateholders are subject to and
subordinate to the Class A Certificateholders, the Servicer and the
Representative as described in Section 6.05(a), 6.09(b)(iii) and 6.09(b)(iv).
After the time of the issuance of the Certificates, the Trustee shall,
promptly upon receipt, deposit into the Spread Account as distributions in
respect of the Class X Certificates and retain therein:
(i) on each Payment Date, the Excess Spread remitted by the
Trustee pursuant to Section 6.05(d)(ii) for the related Payment Date;
(ii) upon receipt, amounts required to be withdrawn from the
Insurance Account for deposit in the Spread Account pursuant to
Section 6.03(b)(iii); and
(iii) upon receipt, amounts required to be paid by the Servicer
pursuant to Section 6.04(e) or a Class X Certificateholder pursuant to
Section 6.04(g);
provided, however, that the Trustee shall not accept funds for deposit into the
Spread Account from any Person, other than funds constituting Excess Spread,
without the consent of the Certificate Insurer.
(b) From amounts on deposit in the Spread Account (after giving effect to
the deposits therein pursuant to Section 6.09(a)) the Trustee shall make
withdrawals on each Payment Date in the following order of priority:
(i) to deposit in the Insurance Account the amount of any
insufficiency in such Account which the Servicer failed to advance
pursuant to Section 6.03(a);
(ii) to deposit in the Collection Account, an amount (the "Spread
Account Amount") equal to the excess of (x) the Insured Class A
Remittance Amount over (y) the Available Payment Amount with respect
to both Mortgage Loan Groups, less the amounts withdrawn from the
Collection Account with respect to both Mortgage Loan Groups, pursuant
to Section 6.02(i). Amounts on deposit in the Spread Account shall be
available to all Class A Certificateholders pursuant to this clause
(ii) without regard to whether such Certificates are Class A-1F
Certificates or Class A-1A Certificates; provided however, that
amounts in the Spread Account shall not, except as provided in clause
(iv) below, be available to fund interest accrued on the Class A-1F
Certificates at a rate in excess of the Insured Pass-Through Rate;
(iii) (1) to pay to the Servicer from the Remainder Excess Spread
Amount (net of any such amounts paid pursuant to clauses (b)(i) and
(b)(ii) above) with respect to any Payment Date for any Reimbursable
Amounts and (2) the remainder of such Remainder Excess Spread Amount
to the Class X Certificateholders;
(iv) to the extent that the remaining amount then on deposit in
the Spread Account then exceeds the Specified Spread Account
Requirement as of such Payment Date (such excess, a "Spread Account
Excess"), an amount equal to such Spread Account Excess shall be
distributed to the Servicer and/or the Representative to the extent of
any Reimbursable Amounts; then concurrently (a) to the Holders of the
Class A-1A Certificates in payment of any LIBOR Interest Carryover to
the extent attributable to the Mortgage Loans in the Adjustable Rate
Group and (b) to the Holders of the Class A-1F Certificates in payment
of any Yield Supplement Carryover to the extent attributable to the
Mortgage Loans in the Fixed Rate Group; and last, to the Holders of
the Class X Certificates, the Class X Remittance Amount.
and also, in no particular order of priority:
(v) to invest amounts on deposit in the Spread Account in
Permitted Instruments pursuant to Section 6.04;
(vi) to withdraw any amount not required to be deposited in the
Spread Account or deposited therein in error; and
(vii) to clear and terminate the Spread Account upon the
termination of this Agreement.
(c) Any amounts which are required to be withdrawn from the Spread Account
pursuant to paragraph (b) above shall be withdrawn from the Spread Account in
the following order of priority: (i) first, from any uninvested funds therein
and (ii) second, from the proceeds of the liquidation of any investments therein
pursuant to Section 6.04(b).
(d) Upon the earlier to occur of the Cross-Over Date or the Payment Date on
which all amounts due have been paid to the Class A Certificateholders,
including the Certificate Insurer as subrogee of the Class A Certificateholders,
the Trustee shall:
(A) clear and terminate the Spread Account, liquidate any
investments therein and distribute any uninvested funds therein or the
proceeds of such liquidation to the Servicer and/or the Representative
to the extent of any Reimbursable Amounts and the remainder to the
Class X Certificateholders, the Class X Remittance Amount;
(B) distribute future receipts of the Excess Spread to the
Servicer and/or the Representative to the extent of any Reimbursable
Amounts and the remainder to the Class X Certificateholders, the Class
X Remittance Amount.
Section 6.10 Yield Supplement Agreement.
(a) On or prior to the Closing Date, the Trustee shall enter into the Yield
Supplement Agreement with the Yield Supplement Counterparty for the benefit of
the Certificateholders.
The Trustee shall notify the Yield Supplement Counterparty in writing not
later than two Business Days prior to each related Payment Date, by sending a
notice in the form of Exhibit X attached hereto specifying (i) LIBOR for such
Accrual Period, as determined by the Trustee (ii) the Class A-1F Principal
Balance as of the close of business on the first such day of such Accrual Period
and (iii) the number of days in such Accrual Period.
(b) In the event that any payments are received by the Trustee pursuant to
the Yield Supplement Agreement, the Trustee shall deposit such amounts,
immediately upon receipt, into the Yield Supplement Sub-Account.
(c) Subject to the terms of this Agreement (including without limitation
the protections and benefits of Article XII hereof), the Trustee shall enforce
and comply with its obligations under the Yield Supplement Agreement, including
without limitation enforcement of the Trustee's rights and remedies upon any
Yield Supplement Agreement Event of Default or Yield Supplement Agreement
Termination Event.
(d) Upon the occurrence of a Yield Supplement Agreement Event of Default or
Yield Supplement Agreement Termination Event, if the Servicer in the exercise of
its reasonable judgment determines that such action would be in the best
interest of Certificateholders, the Servicer shall direct the Trustee in writing
to terminate the Yield Supplement Agreement, and the Trustee shall thereupon
proceed promptly to terminate the Yield Supplement Agreement in accordance with
its terms and shall hold all termination payments received by it from the Yield
Supplement Counterparty (collectively, the "Termination Amount") in a segregated
account in trust for the benefit of Certificateholders. In connection with a
termination of the Yield Supplement Agreement, the Servicer shall use reasonable
efforts to identify a suitable successor yield supplement counterparty and to
negotiate a new yield supplement agreement on behalf of the Trust having
substantially similar terms as those set forth in the terminated Yield
Supplement Agreement; provided that the fee payable to the new yield supplement
counterparty shall in no event exceed the Termination Amount. In such event, the
Servicer shall direct the Trustee to enter into the new yield supplement
agreement with the new yield supplement counterparty and to pay the fee of the
new yield supplement counterparty from the Termination Amount, and, upon
execution of such agreement, the new yield supplement agreement and the new
yield supplement counterparty shall be subject to this Agreement and shall be
deemed to be the Yield Supplement Agreement and the Yield Supplement
Counterparty for all purposes of this Agreement. In the event that the
Termination Amount exceeds the fee payable to the new yield supplement
counterparty for entering into the new yield supplement agreement, such excess
amount shall be paid to the Servicer as additional Servicing Compensation.
All costs, expenses (including without limitation attorney's fees and
expenses and other legal costs, fees and expenses of or other professionals and
advisors, and out-of-pocket travel and travel-related expenses), disbursements
and advances made or incurred by the Trustee or the Servicer in connection with
the enforcement of the Trustee's rights or remedies upon any Yield Supplement
Event of Default or Yield Supplement Termination Event, shall be solely payable
from any amounts received in respect of the termination of the Yield Supplement
Agreement remaining after application pursuant to the first paragraph of this
Section 6.10(d).
ARTICLE VII
GENERAL SERVICING PROCEDURES
Section 7.01 Assumption Agreements.
When a Mortgaged 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 Mortgage Loan under any "due-on-sale" clause contained in the related
Mortgage or Mortgage 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. In such event, the
Servicer shall enter into an assumption 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 Mortgage Note and, unless prohibited by applicable law
or the Mortgage Documents, the Mortgagor remains liable thereon. The Servicer is
also authorized with the prior approval of the Certificate Insurer 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 Mortgage Note. The Servicer shall notify
the Depositors, the Trustee and the Certificate Insurer that any such
substitution or assumption agreement has been completed by forwarding to the
Trustee (or to the Custodian on behalf of the Trustee) the original of such
substitution or assumption agreement and a duplicate thereof to the Depositors
and the Certificate Insurer, which original shall be added by the Trustee (or by
the Custodian on behalf of the Trustee) to the related Mortgage File and shall,
for all purposes, be considered a part of such Mortgage File to the same extent
as all other documents and instruments constituting a part thereof. In
connection with any assumption or substitution agreement entered into pursuant
to this Section 7.01, the Servicer shall not change the Mortgage Interest Rate
or the Monthly Payment, defer or forgive the payment of principal or interest,
reduce the outstanding principal amount or extend the final maturity date on
such Mortgage Loan. Any fee collected by the 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
Mortgage Loan by operation of law or any assumption which the Servicer may be
restricted by law from preventing, for any reason whatsoever.
With respect to any mortgage loan secured by an interest in an Illinois
Land Trust, if the Servicer receives notice of the sale of the beneficial
interest in a Illinois Land Trust or the related Mortgaged Property by the
holder of a First Lien secured thereby to a Person other than the Servicer, the
Depositors or the Trustee, then, prior to distribution of any proceeds of such
sale, the Servicer shall demand in writing that such holder of a First Lien pay
the amount necessary to satisfy all indebtedness under the Mortgage Loan from
the proceeds of such sale. If such holder of a First Lien so requests, the
Servicer shall furnish reasonable proof of the Depositor's and Trustee's
interest with respect to such proceeds. Unless and until the Servicer has
received instruction otherwise from the Majority in Aggregate Voting Interest
(with the consent of the Certificate Insurer) or from the Certificate Insurer,
the Servicer shall, with respect to any such First Lien and the related Mortgage
Loan, follow servicing standards consistent with those of prudent lending
institutions in the geographic area where the Mortgaged Property is located,
including the making of any appropriate Servicing Advances with respect thereto.
In any event, the Servicer shall follow any instructions from the Majority in
Aggregate Voting Interest with the consent of the Certificate Insurer or from
the Certificate Insurer as soon as practicable following receipt thereof.
Section 7.02 Satisfaction of Mortgages and Release of Mortgage Files.
The Servicer shall not grant a satisfaction or release of a Mortgage
without having obtained payment in full of the indebtedness secured by the
Mortgage or otherwise prejudice any right the Certificateholders or the
Certificate Insurer may have under the mortgage instruments subject to Section
5.01 hereof. The Servicer shall maintain the Fidelity Bond as provided for in
Section 5.09 insuring the Servicer against any loss it may sustain with respect
to any Mortgage Loan not satisfied in accordance with the procedures set forth
herein.
Upon the payment in full of any Mortgage Loan, 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 will immediately notify the Trustee or
the Custodian on behalf of the Trustee by an Officers' Certificate in the form
of Exhibit B attached to the Custodial Agreement (which certification shall
include a statement to the effect that all amounts received or to be received in
connection with such payment which are required to be deposited in the Principal
and Interest Account pursuant to Section 5.03 have been or will be so deposited)
of a Servicing Officer and shall request delivery to it of the Mortgage File.
Upon receipt of such certification and request, the Trustee or the Custodian on
behalf of the Trustee shall promptly release the related Mortgage File to the
Servicer. Expenses incurred in connection with any instrument of satisfaction or
deed of reconveyance shall be payable by the Servicer and shall not be
reimbursed from the Principal and Interest Account or the Collection Account.
From time to time and as appropriate for the servicing or foreclosure of
any Mortgage Loan, including, for this purpose, collection under any primary
mortgage guaranty insurance policy, the Trustee or the Custodian on behalf of
the Trustee shall, upon request of the Servicer and delivery to the Trustee or
the Custodian on behalf of the Trustee of a certification in the form of Exhibit
B attached to the Custodial Agreement signed, by a Servicing Officer, promptly
release the related Mortgage File to the Servicer, and the Trustee shall execute
such documents as shall be necessary to the prosecution of any such proceedings.
Such servicing receipt shall obligate the Servicer to return the Mortgage File
or any document released therefrom to the Trustee or the Custodian on behalf of
the Trustee when the need therefor by the Servicer no longer exists, unless the
Mortgage Loan has been liquidated and the Net Liquidation Proceeds relating to
the Mortgage Loan have been deposited in the Principal and Interest Account and
remitted to the Trustee for deposit in the Collection Account or the Mortgage
File has been delivered to an attorney, or to a public trustee or other public
official as required by law, for purposes of initiating or pursuing legal action
or other proceedings for the foreclosure of the Mortgaged Property either
judicially or non-judicially, and the Servicer has delivered to the Trustee a
certificate of a Servicing Officer certifying as to the name and address of the
Person to which such Mortgage File or such document was delivered and the
purpose or purposes of such delivery. Upon receipt of a certificate of a
Servicing Officer stating that such Mortgage Loan was liquidated, the servicing
receipt shall be released promptly by the Trustee to the Servicer.
The Trustee shall promptly execute and deliver to the Servicer any legal
notices, court pleadings, requests for trustee's sale in respect of a Mortgaged
Property or any legal action brought to obtain judgment against any Mortgagor on
the Mortgage Note or Mortgage or to obtain a deficiency judgment, or to enforce
any other remedies or rights provided by the Mortgage Note or Mortgage or
otherwise available at law or in equity. Together with such documents or
pleadings, the Servicer shall deliver to the Trustee a certificate of a
Servicing Officer requesting that such pleadings or documents be executed by the
Trustee and certifying as to the reason such documents or pleadings are required
and that the execution and delivery thereof by the Trustee will not invalidate
or otherwise affect the lien of the Mortgage, except for the termination of such
a lien upon completion of the foreclosure or trustee's sale. The Trustee shall,
upon receipt of a written request from a Servicing Officer, execute any document
provided to the Trustee by the Servicer or take any other action requested in
such request that is, in the opinion of the Servicer as evidenced by such
request, required by any state or other jurisdiction to discharge the lien of a
Mortgage upon the satisfaction thereof and the Trustee will promptly sign and
deliver, but will not guarantee receipt of, any such documents to the Servicer,
or such other party as the Servicer may direct, within five Business Days, or
more promptly if needed, of the Trustee's receipt of such certificate or
documents. Such certificate or documents shall establish to the Trustee's
satisfaction that the related Mortgage Loan has been paid in full by or on
behalf of the Mortgagor and that such payment has been deposited in the
Principal and Interest Account.
Section 7.03 Servicing Compensation.
As compensation for its services hereunder, the Servicer shall be entitled
to withdraw from the Principal and Interest Account (or, so long as the
Principal and Interest Account is maintained pursuant to Section 5.03(a)(y),
note on its books that such funds are no longer funds with respect to the
Principal and Interest Account) or to retain from interest payments on the
Mortgage Loans, the Servicer's Servicing Fee. Additional servicing compensation
in the form of assumption and other administrative fees (including bad check
charges, late payment fees and similar fees), interest paid on funds on deposit
in the Principal and Interest Account, amounts remitted pursuant to Section
6.03(b)(iv) and Excess Proceeds shall be retained by or remitted to the
Servicer, to the extent not otherwise required to be remitted to the Trustee for
deposit in the Collection Account and not constituting the Representative's
Yield. The Servicer shall be required to pay all expenses incurred by it in
connection with its servicing activities hereunder and shall not be entitled to
reimbursement therefor except as specifically provided for herein. The
Representative's Yield is the property of the Representative, and not the
property of the Servicer, and such ownership shall not be affected by any
termination of the Servicer.
Section 7.04 Annual Statement as to Compliance.
The Servicer will deliver to the Certificate Insurer, the Trustee and each
Rating Agency, not later than the last day of the fourth month following the end
of the Servicer's fiscal year, which currently ends on December 31, beginning
with the fiscal year ending December 31, 1998, an Officers' Certificate stating
that (i) the Servicer has fully complied with the provisions of Articles V and
VIII, (ii) a review of the activities of the Servicer during the preceding
fiscal year and of performance under this Agreement has been made under such
officers' supervision, and (iii) to the best of such officers' knowledge, based
on such review, the Servicer has fulfilled all its obligations under this
Agreement throughout such year, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officers and the nature and status thereof and the action being taken by the
Servicer to cure such default. The Servicer shall promptly notify the
Certificate Insurer, the Trustee and each Rating Agency promptly upon any change
in the basis on which its fiscal year is determined.
Section 7.05 Annual Independent Public Accountants' Servicing Report.
Not later than the last day of the fourth month following the end of the
Servicer's fiscal year, beginning with the fiscal year ending December 31, 1998,
the Servicer, at its expense, shall cause a firm of independent public
accountants reasonably acceptable to the Trustee and the Certificate Insurer to
furnish a letter or letters to the Certificate Insurer, the Trustee and each
Rating Agency to the effect that such firm has with respect to the Servicer's
overall servicing operations examined such operations in accordance with the
requirements of the Uniform Single Attestation Program for Mortgage Bankers, and
stating such firm's conclusions relating thereto.
Section 7.06 Right to Examine Servicer Records.
The Trustee or the Trustee at the request of a Majority in Aggregate Voting
Interest (or the representatives thereof) and the Certificate Insurer shall have
the right upon reasonable prior notice, during normal business hours and as
often as reasonably required, to examine and audit any and all of the books,
records or other information of the Servicer, whether held by the Servicer or by
another on behalf of the Servicer, which may be relevant to the performance or
observance by the Servicer of the terms, covenants or conditions of this
Agreement.
Section 7.07 Reports to the Trustee; Principal and Interest Account
Statements.
Solely with respect to a Principal and Interest Account maintained pursuant
to Section 5.03(a)(x), if the Principal and Interest Account is not maintained
with the Trustee, then not later than 25 days after each Payment Date, the
Servicer shall forward to the Certificate Insurer and the Trustee a statement,
certified by a Servicing Officer, setting forth the status of the Principal and
Interest Account as of the end of the preceding Due Period and showing, for the
period covered by such statement, the aggregate of deposits into the Principal
and Interest Account for each category of deposit specified in Section 5.03, the
aggregate of withdrawals from the Principal and Interest Account for each
category of withdrawal specified in Section 5.04, the aggregate amount of
permitted withdrawals not made in the related period, and the amount of
Advances, if any, for the related period.
ARTICLE VIII
REPORTS TO BE PROVIDED BY SERVICER
Section 8.01 Financial Statements.
The Servicer will furnish to the Certificate Insurer, the Depositors or the
Trustee on request unaudited financial statements of the Servicer.
The Servicer also agrees to make available on a reasonable basis to the
Certificate Insurer, the Depositor, the Trustee, any Certificateholder or any
prospective Certificateholder a knowledgeable financial or accounting officer
for the purpose of answering reasonable questions respecting recent developments
affecting the Servicer or the financial statements of the Servicer.
ARTICLE IX
THE SERVICER
Section 9.01 Indemnification; Third Party Claims.
The Servicer agrees to indemnify and hold the Depositors, the Custodian,
the Trustee, the Certificate Insurer and each Holder 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
Custodian, the Certificate Insurer and any Holder may sustain in any way related
to the failure of the Servicer to perform its duties and service the Mortgage
Loans in compliance with the terms of this Agreement. The Servicer shall
immediately notify the Depositors, the Trustee, the Custodian, the Certificate
Insurer and each Certificateholder, 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
advance all expenses in connection therewith, including reasonable counsel fees,
and promptly advance funds to pay, discharge and satisfy any judgment or decree
which may be entered against the Servicer, the Trustee, the Certificate Insurer
and/or any Certificateholder in respect of such claim. The Trustee may, if
necessary, reimburse the Servicer from amounts otherwise distributable on the
Class X Certificates for all amounts advanced by it pursuant to the preceding
sentence except when the claim relates directly to the failure of the Servicer
to service and administer the Mortgage Loans in compliance with the terms of
this Agreement. The Servicer shall have no lien on the assets of the Trust with
respect to amounts advanced pursuant to this Section 9.01 directly as a result
of Servicer's failure to service and administer the Mortgage Loans in compliance
with the terms of this Agreement.
Section 9.02 Merger or Consolidation of the Servicer.
The Servicer will each keep in full effect its existence, rights and
franchises as a corporation and will obtain and preserve its qualification to do
business as a foreign corporation, in each jurisdiction necessary to protect the
validity and enforceability of this Agreement or any of the Mortgage Loans and
to perform its duties under this Agreement.
Any Person into which the Servicer may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Servicer or the Representative shall be a party, or any Person succeeding to the
business of the Servicer, shall be an established mortgage loan servicing
institution that has a net worth of at least $15,000,000 and shall be the
successor of the Servicer or the Representative, as applicable hereunder,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, anything herein to the contrary notwithstanding. The
Servicer shall send notice of any such merger or consolidation to the Trustee,
the Certificate Insurer and each Rating Agency.
Section 9.03 Limitation on Liability of the Servicer and Others.
The Servicer and any director, officer, employee or agent of the Servicer
may rely on any document of any kind which it in good faith reasonably believes
to be genuine and to have been adopted or signed by the proper authorities
respecting any matters arising hereunder. Subject to the terms of Section 9.01
herein, the Servicer shall have no obligation to appear with respect to,
prosecute or defend, any legal action which is not incidental to the Servicer's
duty to service the Mortgage Loans in accordance with this Agreement.
Section 9.04 Servicer Not to Resign.
The Servicer shall not assign this Agreement nor resign from the
obligations and duties hereby imposed on it except by mutual consent of the
Servicer, the Representative (if the Representative is not the Servicer), the
Certificate Insurer, the Trustee and the Majority in Aggregate Voting Interest,
or upon the determination that the Servicer's duties hereunder are no longer
permissible under applicable law and such incapacity cannot be cured by the
Servicer. Any such determination permitting the resignation of the Servicer
shall be evidenced by a written Opinion of Counsel (who may be counsel for the
Servicer) to such effect delivered to the Trustee, the Representative (if the
Representative is not the Servicer) and the Certificate Insurer, which Opinion
of Counsel shall be in form and substance acceptable to the Certificate Insurer
and the Trustee. No such resignation shall become effective until a successor
has assumed the Servicer's responsibilities and obligations hereunder in
accordance with Section 9.02. The Servicer shall promptly notify each Rating
Agency promptly of its intention to resign pursuant to this Section 9.04.
Section 9.05 Removal of Servicer.
The Certificate Insurer or the Holders of Certificates representing a
Majority in Aggregate Voting Interest may, with the prior written consent of the
Certificate Insurer, remove the Servicer upon the occurrence of and continuation
of a Servicer Default upon 90 days' prior written notice to the Servicer. No
such removal shall become effective until a successor (other than the Trustee,
unless the Trustee agrees to so act) has assumed the Servicer's responsibilities
and obligations hereunder in accordance with Section 9.02. The Servicer shall
promptly notify each Rating Agency of such removal.
ARTICLE X
SERVICER DEFAULT
Section 10.01 Servicer Default.
(a) In case one or more of the following events (each a "Servicer Default")
by the Servicer shall occur and be continuing:
(i) (A) an Event of Nonpayment (subject to paragraph (c) below);
(B) the failure by the Servicer to make any required Servicing Advance
(other than a Nonrecoverable Advance), to the extent such failure
materially and adversely affects the interests of the Certificate
Insurer or the Certificateholders; (C) the failure by the Servicer to
make a required Advance (other than a Nonrecoverable Advance) pursuant
to the second paragraph of Section 6.08; or (D) any other failure by
the Servicer to remit to the Trustee for the benefit of any Holders,
any payment required to be made under the terms of this Agreement
(other than a Nonrecoverable Advance) which continues unremedied after
the date upon which written notice of such failure, requiring the same
to be remedied, shall have been given to a Servicing Officer of the
Servicer by the Certificate Insurer, the Trustee or to a Servicing
Officer of the Servicer and the Trustee by any Holder; or
(ii) the failure by the Servicer duly to observe or perform, in
any material respect, any other covenants, obligations or agreements
of the Servicer as set forth in this Agreement, which failure
continues unremedied for a period of 30 days after the date on which
written notice of such failure, requiring the same to be remedied,
shall have been given to the Servicer by the Certificate Insurer or
the Trustee or to the Servicer and the Trustee by any Holder or the
Certificate Insurer; or
(iii) a decree or order of a court or agency or supervisory authority
having jurisdiction for the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshaling of assets
and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the Servicer
and such decree or order shall have remained in force, undischarged or
unstayed for a period of 60 days; or
(iv) the Servicer shall consent to the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshaling
of assets and liabilities or similar proceedings of or relating to the
Servicer or of or relating to all or substantially all of the Servicer's
property; or
(v) the Servicer shall admit in writing its inability to pay its debts
as they become due, file a petition to take advantage of any applicable
insolvency or reorganization statute, make an assignment for the benefit of
its creditors, or voluntarily suspend payment of its obligations;
(vi) the Servicer shall fail for 60 days to pay, or bond against, an
unappealable, undischarged, unvacated and unstayed final judgment by a
court of competent jurisdiction in an aggregate amount of $250,000 or more;
(vii) if (a) on the sixth Payment Date or on any Payment Date
thereafter prior to the twelfth Payment Date, the Loss Coverage Ratio is
greater than or equal to 25%, (b) on the twelfth Payment Date or on any
Payment Date thereafter prior to the eighteenth Payment Date, the Loss
Coverage Ratio is greater than or equal to 40%, (c) on the eighteenth
Payment Date or on any Payment Date thereafter prior to the twenty-fourth
Payment Date, the Loss Coverage Ratio is greater than or equal to 55%, (d)
on the twenty-fourth Payment Date or on any Payment Date thereafter prior
to the thirty-sixth Payment Date, the Loss Coverage Ratio is greater than
or equal to 70%, or (e) on the thirty-sixth Payment Date or on any Payment
Date thereafter, the Loss Coverage Ratio is greater than or equal to 80%.
(b) then, and in each and every such case, so long as such Servicer Default
shall not have been remedied, and in the case of clause (i) above (except for
clause (i)(C)), if such Servicer Default shall not have been remedied within
three Business Days after the Servicer has received notice of such Servicer
Default, (x) with respect solely to clause (i)(C) above, if such Advance is not
made by 4:00 p.m. New York time on the second Business Day prior to the
applicable Payment Date, the Certificate Insurer or the Trustee, upon receipt of
written notice or discovery by a Responsible Officer of such failure, shall give
immediate telephonic notice of such failure to a Servicing Officer of the
Servicer, and the Trustee shall notify each Certificateholder and, unless such
failure is cured, either by receipt of payment or receipt of evidence
satisfactory to the Certificate Insurer (e.g., a wire reference number
communicated by the sending bank; the Certificate Insurer shall notify the
Trustee, if the Certificate Insurer receives satisfactory evidence that such
funds have been sent), by 12:00 noon New York time on the following Business
Day, the Trustee, or a successor servicer appointed in accordance with Section
10.02, shall immediately make such Advance (unless such Advance is a
Nonrecoverable Advance) and assume, pursuant to Section 10.02 hereof, the duties
of a successor Servicer; and (y) in the case of clauses (i)(A), (i)(B), (i)(D),
(ii), (iii), (iv), (v), (vi) and (vii) above, the Majority in Aggregate Voting
Interest, subject to the prior written consent of the Certificate Insurer, which
consent may not be unreasonably withheld, or the Certificate Insurer, by notice
in writing to the Servicer and a Responsible Officer of the Trustee may, in
addition to whatever rights they or it may have at law or equity to damages,
including injunctive relief and specific performance, commence termination of
all the rights and obligations of the Servicer under this Agreement and in and
to the Mortgage Loans and the proceeds thereof, as servicer. Upon receipt by the
Servicer of a second written notice (except relative to clause (i)(C) above)
from the Majority in Aggregate Voting Interest, subject to the prior written
consent of the Certificate Insurer, which consent may not be unreasonably
withheld, or the Certificate Insurer stating that they or it intend to terminate
the Servicer as a result of such Servicer Default, all authority and power of
the Servicer under this Agreement, whether with respect to the Mortgage Loans or
otherwise, shall, subject to Section 10.02, pass to and be vested in the Trustee
or its designee and the Trustee is hereby authorized and empowered to execute
and deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, any
and all documents and other instruments and do or cause to be done all other
acts or things necessary or appropriate to effect the purposes of such notice of
termination, including, but not limited to, the transfer and endorsement or
assignment of the Mortgage Loans and related documents to the extent required by
this Agreement. The Servicer agrees to cooperate with the Trustee in effecting
the termination of the Servicer's responsibilities and rights hereunder,
including, without limitation, the transfer to the Trustee, for the benefit of
the Holders of the Certificates, or its designee for administration by it of all
amounts which shall at the time be credited by the Servicer to the Principal and
Interest Account or thereafter received with respect to the Mortgage Loans.
The Trustee shall not be deemed to have knowledge of a Servicer Default
unless a Responsible Officer thereof has received written notice thereof.
(c) Notwithstanding anything to the contrary contained in this Agreement,
upon the occurrence of an Event of Nonpayment or a Performance Default of which
the Certificate Insurer has knowledge, the Certificate Insurer shall promptly
notify the Trustee. During any applicable grace period following receipt of such
notice (or immediately following such notice in the case of a Performance
Default), the Trustee and the Certificate Insurer shall cooperate with each
other to determine if the occurrence of such Event of Nonpayment is in their
reasonable business judgment or Performance Default is in the reasonable
business judgment of the Certificate Insurer (x) the result of the acts or
omissions of the Servicer or (y) the result of events beyond the control of the
Servicer. If the Trustee and the Certificate Insurer conclude that such Event of
Nonpayment or Performance Default is the result of the latter, Section 10.01(b)
above shall not apply, and the Servicer shall not be terminated, unless and
until an Event of Default unrelated to such Event of Nonpayment or Performance
Default has occurred and is continuing, whether or not the Servicer has cured
such Event of Nonpayment or Performance Default. If the Trustee and the
Certificate Insurer conclude that the Event of Nonpayment or Performance Default
is the result of the former, the Certificate Insurer or the Majority in
Aggregate Voting Interest, as the case may be, may terminate the Servicer in
accordance with Section 10.01(b) above, provided that the Trustee shall have
until the 60th day following the date of receipt of notice of the Event of
Nonpayment or Performance Default to either assume the servicing or appoint a
successor servicer pursuant to Section 10.02 hereof.
If the Trustee and the Certificate Insurer cannot agree, and the basis for
such disagreement is not arbitrary or unreasonable, as to the cause of the Event
of Nonpayment or Performance Default, the decision of the Certificate Insurer
shall control; provided, however, that if the Certificate Insurer decides to
terminate the Servicer, the Trustee shall be relieved of its obligation to
assume the servicing or to appoint a successor, which shall be the exclusive
obligation of the Certificate Insurer.
The Trustee shall promptly notify each Rating Agency, the Certificate
Insurer, the Trustee and each Certificateholder, of the occurrence of a Servicer
Default.
Section 10.02 Trustee to Act; Appointment of Successor Servicer.
On and after the time the Servicer receives a notice of termination
pursuant to Section 10.01, or the Trustee receives the resignation of the
Servicer evidenced by an Opinion of Counsel pursuant to Section 9.04, or the
Servicer is removed as servicer pursuant to this Article X (in which event the
Trustee shall promptly notify each Rating Agency), except as otherwise provided
in Section 10.01, the Trustee shall be the successor in all respects to the
Servicer in its capacity as servicer under this Agreement and the transactions
set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Servicer
by the terms and provisions hereof; provided, however, that the Trustee shall
not be liable for any actions of any servicer prior to the Trustee becoming the
Servicer under this Agreement. The Trustee shall be obligated to make advances
pursuant to Sections 5.10, 5.13 and 6.08 unless, and only to the extent the
Trustee determines reasonably and in good faith that, such advances would not be
recoverable pursuant to Section 5.04(ii) or 6.05(d)(vi) and (vii), such
determination to be evidenced by a certification of a Responsible Officer of the
Trustee delivered to the Certificate Insurer; provided that the Trustee shall
not be required to make an advance from its own funds if such advance is
prohibited by law. As compensation therefor, the Trustee, or any successor
servicer appointed pursuant to the following paragraph, shall be entitled to all
funds relating to the Mortgage Loans which the Servicer would have been entitled
to receive from the Principal and Interest Account pursuant to Section 5.04 and
from the Collection Account pursuant to Section 6.05 if the Servicer had
continued to act as servicer hereunder, together with other servicing
compensation in the form of assumption fees, late payment charges or otherwise
as provided in Sections 7.01 and 7.03. In no event shall the assets of the Trust
include, nor the Trustee or any other successor servicer acquire any rights to,
the Representative's Yield.
Notwithstanding the above, the Trustee may, if it shall be unwilling to so
act, and shall, if it is unable to so act or if the Majority in Aggregate Voting
Interest (with the consent of the Certificate Insurer), or the Certificate
Insurer so request in writing to the Trustee, appoint, or petition a court of
competent jurisdiction to appoint, any established mortgage loan servicing
institution acceptable to the Certificate Insurer, which acceptance shall not be
unreasonably withheld, that has a net worth of not less than $15,000,000 and
which is approved as a servicer by FNMA and FHLMC 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. Any collections received by the
Servicer after removal or resignation shall be endorsed by it to the Trustee and
remitted directly to the Trustee or, at the direction of the Trustee, to the
successor servicer. The compensation of any successor servicer (including,
without limitation, the Trustee) so appointed shall be the aggregate Servicing
Fees, together with other Servicing Compensation in the form of assumption fees,
late payment charges or otherwise. In the event the Trustee is required to
solicit bids, the Trustee shall solicit, by public announcement, bids from
housing and home finance institutions, banks and mortgage servicing institutions
meeting the qualifications set forth above. Such public announcement shall
specify that the successor servicer shall be entitled to the full amount of the
aggregate Servicing Fees as servicing compensation, together with the other
servicing compensation in the form of assumption fees, late payment charges or
otherwise. 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 qualifying bid. 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
and the amount of any unreimbursed Servicing Advances and Advances. After such
deductions, the remainder of such sum shall be paid by the Trustee to the
Servicer at the time of such sale, transfer and assignment to the Servicer's
successor. The Trustee and such successor shall take such action, consistent
with this Agreement, as shall be necessary to effectuate any such succession.
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
Mortgage 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 hereunder. No appointment of a successor to the Servicer
hereunder (other than the Trustee) shall be effective until the Trustee and the
Certificate Insurer shall have consented thereto. The Trustee shall not resign
as servicer until a successor servicer reasonably acceptable to the Certificate
Insurer has been appointed.
Pending appointment of a successor to the Servicer hereunder, the Trustee
shall act in such capacity as hereinabove provided. In connection with such
appointment and assumption, the Trustee may make such arrangements for the
compensation of such successor out of payments on Mortgage Loans as it and such
successor shall agree; provided, however, that no such compensation shall be in
excess of that permitted the Servicer pursuant to Section 8.03, together with
other servicing compensation in the form of assumption fees, late payment
charges or otherwise as provided in this Agreement. The Servicer, the Trustee,
any Custodian and such successor shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession.
Section 10.03 Waiver of Defaults.
The Certificate Insurer or a Majority in Aggregate Voting Interest may, on
behalf of all Certificateholders, and subject to the consent of the Certificate
Insurer, which consent may not be unreasonably withheld, waive any events
permitting removal of the Servicer as servicer pursuant to this Article X. Upon
any waiver of a past default, such default shall cease to exist, and any
Servicer Default arising therefrom shall be deemed to have been remedied for
every purpose of this Agreement. No such waiver shall extend to any subsequent
or other default or impair any right consequent thereto except to the extent
expressly so waived. Notice of any such waiver shall be given by the Trustee to
each Rating Agency.
Section 10.04 Control by Majority in Aggregate Voting Interest.
The Certificate Insurer, or the Majority in Aggregate Voting Interest with
the consent of the Certificate Insurer, which consent may not be unreasonably
withheld, may direct the time, method and place of conducting any proceeding
relating to the assets of the Trust or the Certificates or 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
assets of the Trust, provided that:
(i) such direction shall not be in conflict with any rule of law or
with this Agreement;
(ii) the Trustee shall have been provided with indemnity satisfactory
to it; and
(iii) the Trustee may take any other action deemed proper by it which
is not inconsistent with such direction; 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 Holders not so directing.
If inconsistent directions are given, the Certificate Insurer's directions
shall control.
ARTICLE XI
TERMINATION
Section 11.01 Termination.
Subject to Section 11.03, this Agreement shall terminate upon notice to the
Trustee of either: (a) the collection with respect to the last Mortgage Loan (or
Advances of same by the Servicer), or the disposition of all funds with respect
to the last Mortgage Loan and the remittance of all funds due hereunder and the
payment of all amounts due and payable to the Certificate Insurer and the
Trustee or (b) mutual consent of the Servicer, the Certificate Insurer and all
Certificateholders in writing.
Subject to Section 11.03, the Servicer may, at its option, elect to
terminate this Agreement on any Payment Date on or following the first Payment
Date on which the Pool Principal Balance as of the last day of the related Due
Period is less than 10% of the Original Pool Principal Balance (such Payment
Date being the "Optional Purchase Date") by purchasing from the Trust on such
Payment Date, all of the outstanding Mortgage Loans and REO Properties at a
price (the "Termination Price") equal to the fair market value thereof
(determined as provided below); provided, that the Trust shall not sell the
Mortgage Loans and REO Properties if the Termination Price to be received is
less than the sum of (x) 100% of the aggregate Principal Balance of the
outstanding Mortgage Loans and REO Properties and (y) accrued and unpaid
interest on each such Mortgage Loan at a rate equal to its respective Mortgage
Interest Rate and (z) any unpaid LIBOR Interest Carryover and any unpaid Yield
Supplement Carryover. In connection with any such sale, the Servicer shall pay
any outstanding and unpaid fees and expenses of the Trustee and the Certificate
Insurer relating to this Agreement that such parties would otherwise have been
entitled to pursuant to Section 6.05(d).
The fair market value of the outstanding Mortgage Loans and REO Properties
for purposes of this Section 11.01 shall be an amount equal to the average of
the bid prices for such assets taken as a whole, provided to the Servicer by two
Independent, nationally recognized dealers in whole loans substantially similar
to the Mortgage Loans.
Any such sale pursuant to this Section 11.01 shall be accomplished by
depositing into the Collection Account, on the third Business Day immediately
preceding the final Payment Date on which such purchase is to be effected, the
amount of the Termination Price. On the same day that the Termination Price is
deposited into the Collection Account, any other amounts then on deposit in the
Principal and Interest Account shall be transferred to the Collection Account
pursuant to Section 5.04(ii) for payment to Certificateholders pursuant to
Section 6.05(d) on the final Payment Date as specified in the notice to
Certificateholders described below; provided, that the amount of any unpaid
LIBOR Interest Carryover or any unpaid Yield Supplement Carryover shall not be
paid from the Trust REMIC but shall be treated as paid directly from the
purchaser of the Mortgage Loans to the Class A-1A Certificateholders or Class
A-1F Certificateholders, respectively. Any amounts received with respect to the
Mortgage Loans and REO Properties subsequent to the last day of the related Due
Period shall belong to the Person purchasing the Mortgage Loans and REO
Properties. Promptly upon receipt of the Termination Price, the Trustee shall
release (or cause to be released) each related Mortgage File to the Person
purchasing the Mortgage Loans and REO Properties as set forth herein.
Notice of any termination, specifying the Payment Date upon which this
Agreement will terminate shall be given promptly by the Trustee by letter to the
Certificateholders mailed during the month of such final Payment Date before the
Determination Date in such month, specifying (i) the Payment Date upon which
final payment of the Certificates will be made and (ii) the amount of any such
final payment. The obligations of the Certificate Insurer hereunder shall
terminate upon the deposit by the Servicer with the Trustee for deposit into the
Collection Account of a sum sufficient to purchase all of the Mortgage Loans and
REO Properties as set forth above.
Each Holder is required, and hereby agrees, to return to the Trustee any
Certificate with respect to which the Trustee has made the final distribution
due thereon. Any such Certificate as to which the Trustee has made the final
distribution thereon shall be deemed canceled and shall no longer be outstanding
for any purpose of this Agreement, whether or not such Certificate is ever
returned to the Trustee.
In the event that any amount due to any Class A Certificateholder remains
unclaimed, the Servicer shall, at the expense of the Trust REMIC, cause to be
published once, in the eastern edition of The Wall Street Journal, notice that
such money remains unclaimed. If, within the period then specified in the
escheat laws of the State of New York after such publication such amount remains
unclaimed, the Class R Certificateholders shall be entitled to all unclaimed
funds, and other assets which remain subject hereto and the Trustee upon
transfer of such funds shall be discharged of any responsibility for such funds
and the Certificateholders shall look to the Class R Certificateholders for
payment.
Section 11.02 Additional Termination Requirements.
In the event the Servicer exercises its purchase option as provided in
Section 11.01, the Trust Fund shall be terminated in accordance with the
following additional requirements, unless the Trustee has been furnished with an
Opinion of Counsel to the effect that the failure of the Trust Fund to comply
with the requirements of this Section 11.02 will not (i) result in the
imposition of taxes on prohibited transactions" of the Trust REMIC as defined in
Section 860F of the Code, or (ii) cause the Trust REMIC to fail to qualify as a
REMIC at any time that any Certificates are outstanding:
(i) Within 89 days prior to the final Payment Date the Trustee shall
designate a date as the date of adoption of a plan of complete liquidation
of such REMIC under Section 860F of the Code and any regulations thereunder
and shall specify such date in the Trust REMIC's final federal income tax
returns;
(ii) At or after the date of such a plan of complete liquidation and
at or prior to the final Payment Date, the Trustee shall sell all of the
assets of the Trust Fund to the Servicer or the Certificate Insurer for
cash;
(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 (A) to the Class A-1F Certificateholders, the Class
A-1F Principal Balance, plus one month's interest on the Class A-1F
Certificates at the Class A-1F Pass-Through Rate, (B) pro rata with (A), to
the Class A-1A Certificateholders, the Class A-1A Principal Balance, plus
one month's interest on the Class A-1A Certificates at the Class A-1A
Pass-Through Rate, (C) after such payments to the Class A
Certificateholders, to the Class X Certificateholders, the amount if any
accrued but unpaid Excess Spread and (D) to the Class R Certificateholders,
all cash on hand after such payment to the Class A and Class X
Certificateholders (other than cash retained to meet claims), and the Trust
REMIC and the Trust Fund shall terminate at such time; and
(iv) In no event may the final payment on the Certificates (except to
the extent permitted in Section 11.01 with respect to Certificateholders
who fail to surrender their Certificates) be made after the 89th day from
the date of such plan of complete liquidation.
Section 11.03 Accounting Upon Termination of Servicer.
Upon termination of the Servicer under Article X hereof, the Servicer
shall:
(a) deliver to its successor or, if none shall yet have been appointed, to
the Trustee the funds in any Principal and Interest Account;
(b) deliver to its successor or, if none shall yet have been appointed, to
the Trustee, the Mortgage Files and related documents and statements held by it
hereunder and a Mortgage Loan portfolio computer tape;
(c) deliver to its successor or, if none shall yet have been appointed, to
the Trustee and, upon request, to the Certificateholders, a full accounting of
all funds, including a statement showing the Monthly Payments collected by it
and a statement of monies held in trust by it for the payments or charges with
respect to the Mortgage Loans; and
(d) execute and deliver such instruments and perform all acts reasonably
requested in order to effect the orderly and efficient transfer of servicing of
the Mortgage Loans to its successor and to more fully and definitively vest in
such successor all rights, powers, duties, responsibilities, obligations and
liabilities of the Servicer under this Agreement.
Section 11.04 Representative's Right to Representative's Yield Absolute.
The Representative's right to receive the Representative's Yield with
respect to each Mortgage Loan shall be absolute and unconditional, and shall
survive notwithstanding the termination of the rights and obligations of the
Servicer hereunder, the resignation of the Servicer or the termination of this
Agreement. The Representative's right to receive the Representative's Yield
shall not be subject to offset or counterclaim, whether or not such right has
been assigned in whole or in part, notwithstanding any breach of any
representation or warranty of the Representative or any Depositor under this
Agreement or any default by the Representative or any Depositor of any of its
obligations or covenants under this Agreement. The Representative shall have the
right to assign any or all of its rights in and to the Representative's Yield,
without notice to or the consent of any party to this Agreement or any
Certificateholder.
Section 11.05 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 the Trust 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 Majority in Voting Interest may direct the Trustee on
behalf of the Trust REMIC to adopt a "plan of complete liquidation" (within the
meaning of Section 860F(a)(4)(B)(i) of the Code) and (ii) the Certificate
Insurer may notify the Trustee of the Certificate Insurer's determination to
purchase from the Trust Fund all Mortgage Loans and all property theretofore
acquired by foreclosure, deed in lieu of foreclosure, or otherwise in respect of
any Mortgage Loan then remaining in the Trust Fund at a price equal to the
Termination Price. Upon receipt of notice from the Certificate Insurer, the
Trustee shall notify the Class R Certificateholders of such election to
liquidate or such determination to purchase, as the case may be (the
"Termination Notice"). The Holders 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 Mortgage Loans and all property theretofore
acquired by foreclosure, deed in lieu of foreclosure, or otherwise in respect of
any Mortgage Loan then remaining in the Trust Fund at a purchase price equal to
the Termination Price. Any such purchase shall be accomplished in the manner set
forth in Section 11.01.
(b) If, during the Purchase Option Period, the Class R Certificateholders
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
Majority in Aggregate Voting Interest have given the Trustee the direction
described in clause (a)(i) above, the Trustee shall sell the Mortgage Loans and
distribute the proceeds of the liquidation of the Trust Fund, each in accordance
with the plan of complete liquidation, such that, if so directed, the
liquidation of the Trust Fund, 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 Majority in Aggregate Voting Interest
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 Fund
described in clause (a)(ii) preceding, the Certificate Insurer shall so purchase
the Trust Fund within 60 days after the expiration of the Purchase Option
Period.
(c) Following a Final Determination, the Holders of a majority of the
Percentage Interest of the Class R Certificates then outstanding may, at their
option and upon delivery to the Class A and Class X Certificateholders and the
Certificate Insurer of an opinion of nationally recognized tax counsel selected
by the Holders of the Class R Certificates, which opinion shall be reasonably
satisfactory in form and substance to the Majority in Aggregate Voting Interest
and the Certificate Insurer, to the effect that the effect of the Final
Determination is to increase substantially the probability that the gross income
of the Trust REMIC will be subject to federal taxation, purchase from the Trust
Fund all Mortgage Loans and all property theretofore acquired by foreclosure,
deed in lieu of foreclosure, or otherwise in respect of any Mortgage Loan then
remaining in the Trust Fund at a purchase price equal to the Termination Price.
Any such purchase shall be accomplished in the manner set forth in Section
11.01. The foregoing opinion shall be deemed satisfactory unless the Majority in
Aggregate Voting Interest give the Holders of a majority of the Percentage
Interest of the Class R Certificates notice that such opinion is not
satisfactory within thirty days after receipt of such opinion.
ARTICLE XII
THE TRUSTEE
Section 12.01 Duties of Trustee.
The Trustee, prior to the occurrence of a Servicer Default and after the
curing of all Servicer Defaults which may have occurred, undertakes to perform
such duties and only such duties as are specifically set forth in this
Agreement. If a Servicer Default 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 its exercise as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether 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 or either Depositor hereunder. If any such instrument
is found not to conform to the requirements of this Agreement, the Trustee shall
notify the Certificate Insurer and request written instructions as to the action
it deems appropriate to have the instrument corrected, and if the instrument is
not so corrected, the Trustee will provide notice thereof to the Certificate
Insurer who shall then direct the Trustee as to the action, if any, to be taken.
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; provided, however, that:
(i) Prior to the occurrence of a Servicer Default, and after the
curing of all Servicer Defaults which may have occurred, the duties and
obligations of the Trustee shall be determined solely by the express
provisions of this Agreement, the Trustee shall not be liable except for
the performance of such duties and obligations as are specifically set
forth in this Agreement, no implied covenants or obligations shall be read
into this Agreement against the Trustee and, in the absence of bad faith on
the part of the Trustee, the Trustee may conclusively rely, as to the truth
of the statements and the correctness of the opinions expressed therein,
upon any certificates or opinions furnished to the Trustee and conforming
to the requirements of this Agreement;
(ii) The Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible Officer or other officers of
the Trustee, unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts;
(iii) The Trustee shall not be personally liable with respect to any
action taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of the Certificate Insurer or the Class A
Certificateholders, 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;
(iv) The Trustee shall not be required to take notice or be deemed to
have notice or knowledge of any Default or Servicer Default unless a
Responsible Officer of the Trustee shall have received notice thereof. In
the absence of receipt of such notice, the Trustee may conclusively assume
that there is no default or Servicer Default;
(v) The Trustee shall not be required to expend or risk its own funds
or otherwise incur financial liability for the performance of any of its
duties hereunder or the exercise of any of its rights or powers if there is
reasonable ground for believing that the repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured
to it, and 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;
(vi) Subject to the other provisions of this Agreement and without
limiting the generality of this Section, 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, (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 Fund or the Trust REMIC,
(D) to confirm or verify the contents of any reports or certificates of the
Servicer delivered to the Trustee pursuant to this Agreement believed by
the Trustee to be genuine and to have been signed or presented by the
proper party or parties; and
(vii) The Trustee shall not be deemed a fiduciary for the Certificate
Insurer in its capacity as such, except to the extent the Certificate
Insurer has made an Insured Payment and is thereby subrogated to the rights
of the Certificateholders with respect thereto.
Section 12.02 Certain Matters Affecting the Trustee.
(a) Except as otherwise provided in Section 12.01:
(i) The Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officers' Certificate, Opinion
of Counsel, certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, request, consent, order, appraisal,
bond or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;
(ii) The Trustee may consult with counsel and any Opinion of Counsel
shall be full and complete authorization and protection in respect of any
action taken or suffered or omitted by it hereunder in good faith and in
accordance with such Opinion of Counsel;
(iii) The Trustee shall be under no obligation to exercise any of the
trusts or powers vested in it by this Agreement or to institute, conduct or
defend by litigation hereunder or in relation hereto at the request, order
or direction of the Certificate Insurer or any of the Certificateholders,
pursuant to the provisions of this Agreement, unless such
Certificateholders or the Certificate Insurer, as applicable, shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which may be incurred therein or thereby; nothing
contained herein shall, however, relieve the Trustee of the obligation,
upon the occurrence of a Servicer Default (which has not been cured), to
exercise such of the rights and powers vested in it by this Agreement, and
to use the same degree of care and skill in its exercise as a prudent
person would exercise or use under the circumstances in the conduct of such
person's own affairs;
(iv) The Trustee shall not be personally liable for any action taken,
suffered or omitted by it in good faith and believed by it to be authorized
or within the discretion or rights or powers conferred upon it by this
Agreement;
(v) Prior to the occurrence of a Servicer Default hereunder and after
the curing of all Defaults which may have occurred, 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, consent, order, approval, bond or other paper or document, unless
requested in writing to do so by the Certificate Insurer or Holders of
Class A Certificates evidencing not less than 25% of the sum of the Class
A-1F Principal Balance and the Class A-1A Principal Balance; 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
expense or liability as a condition to taking any such action. The
reasonable expense of every such examination shall be paid by the Servicer
or, if paid by the Trustee, shall be repaid by the Servicer upon demand
from the Servicer's own funds;
(vi) 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;
(vii) The Trustee shall not be required to give any bond or surety in
respect of the execution of the Trust created hereby or the powers granted
hereunder; and
(viii) The Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder, including, without limitation, under
Section 2.06 hereof, either directly or by or through agents or attorney.
(b) Following the Startup Day, the Trustee shall not knowingly accept any
contribution of assets, including substitutions, to the Trust Fund or the Trust
REMIC, unless the Trustee shall have received an Opinion of Counsel to the
effect that the inclusion of such assets in the Trust Fund or the Trust REMIC
will not cause the Trust REMIC to fail to qualify as a REMIC at any time that
any Certificates are outstanding or subject the Trust REMIC to any tax under the
REMIC Provisions or other applicable provisions of federal, state and local law
or ordinances.
Section 12.03 Trustee Not Liable for Certificates or Mortgage Loans.
The recitals contained herein and in the Certificates (other than the
certificate of authentication on the Certificates) shall be taken as the
statements of the Depositors, and the Trustee assumes no responsibility for
their correctness. The Trustee makes no representations as to the validity or
sufficiency of this Agreement or of the Certificates or of any Mortgage Loan or
related document. The Trustee shall not be accountable for the use or
application by the Depositors of any of the Certificates or of the proceeds of
such Certificates, or for the use or application of any funds paid to the
Servicer in respect of the Mortgage Loans or deposited in or withdrawn from the
Principal and Interest Account by the Servicer. The Trustee shall not be
responsible for the legality or validity of the Agreement or the validity,
priority, perfection or sufficiency of the security for the Certificates issued
or intended to be issued hereunder.
Section 12.04 Trustee May Own Certificates.
The Trustee in its individual or any other capacity may become the owner or
pledgee of Certificates with the same rights it would have if it were not
Trustee, and may otherwise deal with the parties hereto.
Section 12.05 Servicer to Pay Trustee's Fees and Expenses.
The Servicer covenants and agrees to pay to the Trustee from time to time,
and the Trustee shall be entitled to, reasonable compensation (which shall not
be limited by any provision of law in regard to the compensation of a trustee of
an express trust) for all services rendered by it in the execution of the trusts
hereby created and in the exercise and performance of any of the powers and
duties hereunder of the Trustee, including the powers and duties described in
Section 2.07 hereof, and the Servicer will pay or reimburse the Trustee upon its
request, and, if such amounts are not paid by the Servicer within thirty (30)
days of demand therefor, with interest thereon at the Trustee's prime rate
(which prime rate shall not exceed 10% per annum), for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any of the provisions of this Agreement (including, without limitation, the
reasonable fees, expenses and disbursements of its counsel (including,
reasonable compensation of its in-house counsel on an hourly basis) and of all
persons not regularly in its employ, including any agents, attorneys and
accountants of the Trustee, as described in Section 2.07(a) hereof) and such
out-of-pocket expenses as may be incurred by the Trustee in assuming servicing
responsibilities under Section 10.02 hereof, such reimbursable amounts to
include expenses incurred due to the Servicer's failure to properly discharge
its responsibilities hereunder or to the representations and warranties as to
any Mortgage Loan or Loans being untrue, but not to include general overhead
incurred by the Trustee as a result of becoming successor Servicer (provided
however, prior to incurring such expenses, disbursements and advances ("costs"),
the Trustee will give the Servicer an opportunity to provide such services to
render such costs unnecessary), except any such expense, disbursement or advance
as may arise from its negligence or bad faith, provided that the Trustee shall
have no lien on the Trust Fund or the Trust REMIC for the payment of its fees
and expenses. Failure by the Servicer to pay any such fees or other expenses
shall not relieve the Trustee of its obligation hereunder. The Trustee and any
director, officer, employee or agent of the Trustee shall be indemnified by the
Servicer and held harmless against any loss, liability or expense (i) incurred
in connection with any legal action relating to this Agreement 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, and (ii) resulting from any error in any tax or information return
prepared by the Servicer. The obligations of the Servicer under this Section
12.05 shall survive termination of the Servicer and payment of the Certificates,
and shall extend to any co-trustee appointed pursuant to this Article XII. The
compensation due to the Trustee pursuant to this Section 12.05 shall be paid by
the Servicer from it own funds.
Section 12.06 Eligibility Requirements for Trustee.
The Trustee hereunder shall at all times be (i) a banking association
organized and doing business under the laws of any state or the United State of
America, (ii) authorized under such laws to exercise corporate trust powers,
including taking title to the Trust Fund asset on behalf of the
Certificateholders, (iii) having a combined capital and surplus of at least
$50,000,000, (iv) whose long-term deposits, if any, shall be rated at least
"BBB" by S&P or such lower long-term deposit rating by S&P as may be approved in
writing by the Certificate Insurer and S&P, and with a long-term deposit rating
of at least "Baa2" from Moody's (or such lower rating which would not cause
Moody's to reduce its then current ratings of the Class A Certificates), (v) is
subject to supervision or examination by federal or state authority and (vi) is
reasonably acceptable to the Certificate Insurer as evidenced in writing. If
such banking association 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 12.06 its combined capital and
surplus shall be deemed to be as set forth in it most recent report of condition
so published. In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, the Trustee shall give notice of
such ineligibility to the Certificate Insurer and shall resign, upon the request
of the Certificate Insurer or the Majority in Aggregate Voting Interest, in the
manner and with the effect specified in Section 12.07.
Section 12.07 Resignation and Removal of the Trustee.
The Trustee may at any time resign and be discharged from the trusts hereby
created by giving written notice thereof to the Servicer, the Certificate
Insurer and to all Certificateholders. Upon receiving such notice of
resignation, the Servicer shall, with the consent of the Certificate Insurer,
promptly appoint a successor trustee by written instrument, in duplicate, which
Instrument shall be delivered to the resigning Trustee and to the successor
trustee. A copy of such instrument shall be delivered to the Certificateholders
by the Servicer. Unless a successor trustee shall have been appointed and have
accepted appointment within 60 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.
If at any time the Trustee shall cease to be eligible in accordance with
the provisions of Section 12.06 and shall fail to resign after written request
therefor by the Servicer, the Certificate Insurer or the Majority in Aggregate
Voting Interest, or if at any time the Trustee shall become incapable of acting,
or shall be adjudged bankrupt or insolvent, or a receiver of the Trustee or of
its property shall be appointed, or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then the Servicer may remove the
Trustee and shall, within 30 days after such removal, appoint, subject to the
approval of the Certificate Insurer, which approval shall not be unreasonably
withheld, a successor trustee by written instrument, in duplicate, which
instrument shall be delivered to the Trustee so removed and to the successor
trustee. A copy of such instrument shall be delivered to the Certificateholders
by the Servicer.
The Majority in Aggregate Voting Interest or, if the Trustee fails to
perform in accordance with this Agreement, the Certificate Insurer may remove
the Trustee and appoint a successor trustee by written instrument or
instruments, in triplicate, signed by such Holders or their attorneys-in-fact
duly authorized, or by the Certificate Insurer, as the case may be, one complete
set of which instruments shall be delivered to the Servicer, one complete set to
the Trustee so removed and one complete set to the Successor Trustee so
appointed.
Any resignation or removal of the Trustee and appointment of a successor
trustee pursuant to any of the provisions of this Section shall become effective
upon acceptance of appointment by the successor trustee as provided in Section
12.08.
Section 12.08 Successor Trustee.
Any successor trustee appointed as provided in Section 12.07 shall execute,
acknowledge and deliver to the Servicer and to its predecessor trustee an
instrument accepting such appointment 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 fully vested
with all the rights, powers, duties and obligations of its predecessor
hereunder, with the like effect as if originally named as trustee herein. The
predecessor trustee shall deliver to the successor trustee all Trustee's
Mortgage Files and related documents and statement held by it hereunder, and the
Servicer and the predecessor trustee shall execute and deliver such instruments
and do such other things as may reasonably be required for more fully and
certainly vesting and confirming in the successor trustee all such rights,
powers duties and obligations.
No successor trustee shall accept appointment as provided in this Section
unless at the time of such acceptance such successor trustee shall be eligible
under the provisions of Section 12.06.
Upon acceptance of appointment by a successor trustee as provided in this
Section, the Servicer shall mail notice of the succession of such trustee
hereunder to all Holders of Certificates at their addresses shown in the
Certificate Register and to Moody's and S&P. If the Servicer 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
Servicer.
Section 12.09 Merger or Consolidation of Trustee.
Any Person into which the Trustee may be merged or converted or with which
it may be consolidated or any corporation or national banking association
resulting from any merger, conversion or consolidation to which the Trustee
shall be a party, or any corporation or national banking association succeeding
to the business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation or national banking association shall be eligible
under the provisions of Section 12.06, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding.
Section 12.10 Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions hereof, at any time, for the purpose
of meeting any legal requirements of any jurisdiction in which any part of the
Trust Fund or property securing the same 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 the Certificate Insurer with written notice to Moody's to act as
co-trustee or co-trustees, jointly with the Trustee, or separate trustee or
separate trustees, of all or any part of the Trust Fund, and to vest in such
Person or Persons, in such capacity, such title to the Trust Fund, or any part
thereof, and, subject to the other provisions of this Section 12.10, 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 case a Servicer Default shall have occurred and be continuing, the Trustee
alone (with the consent of the Certificate Insurer with written notice to
Moody's) 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 12.06 hereunder and no notice to Holders of
Certificates of the appointment of co-trustee(s) or separate trustee(s) shall be
required under Section 12.08 hereof.
In the case of any appointment of a co-trustee or separate trustee pursuant
to this Section 12.10, 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, 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 Fund or any portion thereof in any
such jurisdiction) shall be exercised and performed by such separate trustee or
co-trustee at the direction of the Trustee.
Any notice, request or other writing given to the Trustee shall be deemed
to have been given to each of the then separate trustees and co-trustees, as
effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article XII. 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.
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.
Section 12.11 Appointment of Custodians.
The Trustee may, with the consent of the Servicer and the Certificate
Insurer and notice to Moody's, appoint one or more Custodians to hold all or a
portion of the Trustee's Mortgage Files as agent for the Trustee, by entering
into a Custodial Agreement. Bank One Trust Company, N.A. is initially appointed
Custodian with respect to all Mortgage Loans and, for so long as it shall be the
Custodian hereunder, agrees to comply with the terms of the provisions of
Exhibit N hereto applicable to the duties of the Custodian. Subject to this
Article XII, the Trustee agrees to comply with the terms of each Custodial
Agreement and to enforce the terms and provisions thereof against the Custodian
for the benefit of the Certificateholders and the Certificate Insurer. The
Servicer shall be liable for the fees of any Custodian appointed hereunder. Each
Custodian shall be a depository institution subject to supervision by federal or
state authority and shall be qualified to do business in the jurisdiction in
which it holds any Trustee's Mortgage File. Each Custodial Agreement may be
amended only as provided in Section 13.02.
Section 12.12 Protection of Trust Fund.
(a) The Trustee will hold the Trust Fund in trust for the benefit of the
Holders and the Certificate Insurer and, upon request of the Certificate
Insurer, or, with the consent of the Certificate Insurer, at the request of the
Depositors, will from time to time execute and deliver all such supplements and
amendments hereto pursuant to Section 13.02 hereof and all instruments of
further assurance and other instruments, and will take such other action upon
such request to:
(i) more effectively hold in trust all or any portion of the Trust
Fund;
(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 Mortgage Loans; or
(iv) preserve and defend title to the Trust Fund and the rights of the
Trustee, and the ownership Interests of the Holders represented thereby, in
such Trust Fund against the claims of all Persons and parties.
The Trustee shall send copies of any request received from the Certificate
Insurer or the Depositors to take any action pursuant to this Section 12.12 to
the others.
(b) Subject to Article X hereof, the Trustee shall have the power to
enforce, and shall enforce the obligations of the other parties to this
Agreement and of the Certificate Insurer, 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 Holders; provided, however, that nothing in this Section 12.12 shall require
any action by the Trustee unless the Trustee shall first (i) have been furnished
indemnity satisfactory to it and second (ii) when required by this Agreement,
have been requested to take such action by the Majority in Aggregate Voting
Interest, the Certificate Insurer or the Depositors in accordance with the terms
of this Agreement.
(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.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.01 The Certificate Insurer.
Any right conferred to the Certificate Insurer hereunder shall be suspended
during any period in which the Certificate Insurer is in default in its payment
obligations under the Certificate Insurance Policy, and its rights during such
period shall vest in the Majority in Aggregate Voting Interest. At such time as
the Certificates are no longer outstanding, and no amounts owed to the
Certificate Insurer hereunder remain unpaid and the Certificate Insurance Policy
has expired in accordance with its terms, the Certificate Insurer's rights
hereunder shall terminate.
Section 13.02 Amendment.
(a) This Agreement may be amended from time to time by the Depositors, the
Trustee and the Servicer by written agreement, upon the prior written consent of
the Certificate Insurer, without notice to or consent of the Certificateholders,
to cure any ambiguity or mistake, to correct or supplement any provisions
herein, to comply with any changes in the Code, or to make any other provisions
with respect to matters or questions arising under this Agreement which shall
not be inconsistent with the provisions of this Agreement, or any Custodial
Agreement; provided, however, that such action shall not adversely affect the
interests of any Certificateholder or the Certificate Insurer, as evidenced by
an Opinion of Counsel or written notification from each Rating Agency to the
effect that such amendment will not cause such Rating Agency to lower or
withdraw the then current ratings on the Certificates, at the expense of the
party requesting the change, delivered to the Certificate Insurer, the Trustee
and the Depositors; and provided, further, that no such amendment shall reduce
in any manner the amount of, or delay the timing of, payments received on
Mortgage Loans which are required to be distributed on any Certificate without
the consent of the Holder of such Certificate, or change the rights or
obligations of any other party hereto without the consent of such party. The
Trustee shall give prompt written notice to each Rating Agency of any amendment
made pursuant to this Section 13.02(a).
(b) This Agreement may be amended from time to time by the Depositors, the
Trustee and the Servicer, with the consent of the Certificate Insurer, the
Majority in Aggregate Voting Interest of the Class A Certificates and the
Holders of the majority of the Percentage Interest in the Class R Certificates
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 Holders; provided, however, that no such amendment
shall reduce in any manner the amount of, or delay the timing of, any payments
which are required to be distributed on any Class A Certificate without the
consent of the Holder of such Certificate or reduce the percentage for each
Class of Certificates the Holders of which are required to consent to any such
amendment without the consent of the Holders of 100% of each Class of
Certificates affected thereby. Prior notice of any proposed amendment pursuant
to this Section 13.02(b) shall be given to each Rating Agency.
(c) It shall not be necessary for the consent of Holders under this Section
to approve the particular form of any proposed amendment, but it shall be
sufficient if such consent shall approve the substance thereof.
(d) Notwithstanding any contrary provision of this Agreement, the Trustee
shall not consent to any amendment to this Agreement unless it shall have first
received an Opinion of Counsel to the effect that such amendment or the exercise
of any power granted to the Servicer, the Representative, any Depositor, the
Certificate Insurer or the Trustee in accordance with such amendment will not
result in the imposition of a tax on the Trust REMIC, will not cause the Trust
REMIC to fail to qualify as a REMIC or will not cause the portion of the Trust
Fund exclusive of the Trust REMIC to fail to qualify as a grantor trust at any
time that any Certificate is outstanding. No amendment shall have the effect of
varying the latest possible maturity, principal amount or interest rate of the
Trust unless the Trustee shall have received an Opinion of Counsel that the
amendment will not cause the regular interest to lack fixed terms within the
meaning of the REMIC provisions.
(e) An amendment or supplement to the original issue discount legend shall
not be an amendment or supplement for purposes of this Article 13.
Section 13.03 Recordation of Agreement.
To the extent permitted by applicable law, this Agreement, or a memorandum
thereof if permitted under applicable law, is subject to recordation in all
appropriate public offices for real property records in all of the counties or
other comparable jurisdictions in which any or all of the properties subject to
the Mortgages are situated, and in any other appropriate public recording office
or elsewhere, such recordation to be effected by the Servicer at the Holders' or
Certificate Insurer's expense on direction and at the expense of the Majority in
Aggregate Voting Interest or the Certificate Insurer requesting such
recordation, but only when accompanied by an Opinion of Counsel to the effect
that such recordation materially and beneficially affects the interests of the
Certificateholders or the Certificate Insurer or is necessary for the
administration or servicing of the Mortgage Loans.
Section 13.04 Duration of Agreement.
This Agreement shall continue in existence and effect until terminated as
herein provided.
Section 13.05 Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW (BUT WITH REFERENCE TO SECTION 5-1401 OF THE NEW
YORK GENERAL OBLIGATIONS LAW, WHICH BY ITS TERMS APPLIES TO THIS AGREEMENT).
Section 13.06 Notices.
All demands, notices and communications hereunder shall be in writing and
shall be deemed to have been duly given if personally delivered at or mailed by
overnight mail, certified mail or registered mail, postage prepaid, to (i) in
the case of the Servicer and the Representative, EquiCredit Corporation of
America, 10401 Deerwood Park Boulevard, Jacksonville, Florida 32256-0505
Attention: General Counsel, or such other addresses as may hereafter be
furnished to the Trustee in writing by the Representative and the Servicer, (ii)
in the case of each Depositor, c/o EquiCredit Corporation of America, 10401
Deerwood Park Boulevard, Jacksonville, Florida 32256-0505 Attention: General
Counsel, or such other addresses as may hereafter be furnished to the Trustee in
writing by such Depositor, (iii) in the case of the Certificateholders, as set
forth in the Certificate Register, (iv) in the case of the Trustee, U.S. Bank
National Association, 111 East Wacker Drive, Suite 3000, Chicago, Illinois
60601, Attention: Corporate Trust Department, (v) in the case of Moody's, 99
Church Street, New York, New York 10007, Attention: Home Equity Monitoring
Group, (vi) in the case of S&P, 26 Broadway, New York, New York 10004,
Attention: Ms. Nancy Gigante and (vii) in the case of the Certificate Insurer,
Ambac Assurance Corporation, One State Street Plaza, New York, New York 10004,
Attention: Structured Financed MBS (re: EQCC Home Equity Loan Trust 1998-3). Any
such notices shall be deemed to be effective with respect to any party hereto
upon the receipt of such notice by such party, except that notices to the
Certificateholders shall be effective upon mailing or personal delivery.
Section 13.07 Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be held invalid for any reason whatsoever, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other covenants,
agreements, provisions or terms of this Agreement.
Section 13.08 No Partnership.
Except for federal, state and local income, franchise or similar tax
purposes, nothing herein contained shall be deemed or construed to create a
co-partnership or joint venture between the parties hereto and the services of
the Servicer shall be rendered as an independent contractor and not as agent for
the Certificateholders.
Section 13.09 Counterparts.
This Agreement may be executed in one or more counterparts and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same agreement.
Section 13.10 Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
Representative, the Servicer, the Depositors, the Trustee and the
Certificateholders and their respective successors and assigns.
Section 13.11 Headings.
The headings of the various Sections of this Agreement have been inserted
for convenience of reference only and shall not be deemed to be part of this
Agreement.
Section 13.12 Limitation of Liability of Trustee.
Notwithstanding anything contained herein to the contrary, this Agreement
has been executed by U.S. Bank National Association not in its individual
capacity but solely as Trustee and in no event shall U.S. Bank National
Association have any liability for the representations, warranties, covenants,
agreements or other obligations of the Depositors hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Trust Fund.
Section 13.13 Limitations on Rights of Others.
The provisions of this Agreement are solely for the benefit of the
Depositors, the Servicer, the Trustee, the Certificateholders and the
Originators and nothing in this Agreement whether express or implied, shall be
construed to give to any other Person any legal or equitable right, remedy or
claim in the assets of the Trust or under or in respect of this Agreement or any
covenants, conditions or provisions contained herein. The Certificate Insurer is
an intended third party beneficiary of this Agreement.
Section 13.14 No Petition.
The Servicer and the Trustee by entering into this Agreement hereby
covenants and agrees that it shall not, prior to the date which is one year and
one day after the termination of this Agreement pursuant to Article XI hereof,
acquiesce, petition or otherwise invoke or cause the Depositors to invoke the
process of any court or government authority for the purpose of commencing or
sustaining a case against the Depositors under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of each of the
Depositors or any substantial part of its respective property, or ordering the
winding up or liquidation of the affairs of each of the Depositors.
Section 13.15 Third Party Beneficiary .
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and, in addition, shall inure to the benefit of
Certificateholders and, to the extent provided herein, the Certificate Insurer
and their respective successors and permitted assigns. Except as otherwise
provided in this Agreement, no other Person shall have any right or obligation
hereunder.
<PAGE>
IN WITNESS WHEREOF, the Servicer, the Trustee and the Depositors have
caused their names to be signed hereto by their respective officers thereunto
duly authorized as of the day and year first above written.
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
By:_______________________________
Name:
Title:
EQUICREDIT CORPORATION OF AMERICA,
as Representative and Servicer
By:_______________________________
Name:
Title:
THE DEPOSITORS
EQCC RECEIVABLES CORPORATION
By:_______________________________
Name:
Title:
EQCC ASSET BACKED CORPORATION
By:_______________________________
Name:
Title:
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 25th day of September, 1998 before me, a Notary Public in and for
the State of New York, personally appeared James B. Dodd, known to me to be the
Vice President of EQCC Receivables Corporation, the corporation that executed
the within instrument and also known to me to be the person who executed it on
behalf of said corporation, and acknowledged to me that such corporation
executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Notary Public
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 25th day of September, 1998 before me, a Notary Public in and for
the State of New York, personally appeared James B. Dodd, known to me to be the
Vice President of EQCC Asset Backed Corporation, the corporation that executed
the within instrument and also known to me to be the person who executed it on
behalf of said corporation, and acknowledged to me that such corporation
executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Notary Public
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 25th day of September, 1998 before me, a Notary Public in and for
the State of New York, personally appeared James B. Dodd, known to me to be the
Vice President of EquiCredit Corporation of America, a corporation that executed
the within instrument and also known to me to be the person who executed it on
behalf of said corporation, and acknowledged to me that such corporation
executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Notary Public
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 25th day of September, 1998 before me, a Notary Public in and for
the State of New York, personally appeared Melissa A. Rosal, known to me to be
Vice President of U.S. Bank National Association, a national banking association
that executed the within instrument and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Notary Public
<PAGE>
EXHIBIT A
CONTENTS OF MORTGAGE FILE
With respect to each Mortgage Loan, the Mortgage File shall include each of
the following items (copies to the extent the originals have been delivered to
the Depositors pursuant to Section 2.04 of the Pooling and Servicing Agreement),
all of which shall be available for inspection by the Trustee and the Custodian,
to the extent required by applicable laws:
1. The original Mortgage Note, with any intervening endorsements,
endorsed*/ "Pay to the order of U.S. Bank National Association, as
Trustee under the Pooling and Servicing Agreement dated as of
September 1, 1998, Series 1998-3, without recourse" and signed, by
facsimile or manual signature, in the name of the Originator that
transferred such Mortgage Loan to the applicable Depositor pursuant to
the Transfer Agreement by a Responsible Officer, with all prior and
intervening endorsements showing a complete chain of endorsement from
the originator to such Originator, if the Originator from whom the
Depositor acquired such Mortgage Loan was not the originator and, with
respect to manufactured housing units, the certificate of title, if
any;
2. Either: (i) the original Mortgage, with evidence of recording thereon
(and, in the case of a Mortgaged Property held in an Illinois Land
Trust, signed by the trustee of such Illinois Land Trust), (ii) a copy
of the Mortgage certified as a true copy by a Responsible Officer of
the applicable Originator that transferred such Mortgage Loan to the
applicable Depositor pursuant to the Transfer Agreement (provided,
however, that such Responsible Officer may complete one or more
blanket certificates attaching copies of one or more Mortgages
relating thereto) or by the closing attorney, or by an officer of the
title insurer or agent of the title insurer which issued the related
title insurance policy, or commitment therefor, if the original has
been transmitted for recording until such time as the original is
returned by the public recording office or (iii) a copy of the
Mortgage certified by the public recording office in those instances
where the original recorded Mortgage has been lost;
3. Except for a Mortgaged Property held in an Illinois Land Trust, either
(i) the original Assignment of Mortgage from the Originator that
transferred such Mortgage Loan to the applicable Depositor pursuant to
the Transfer Agreement to*/ U.S. Bank National Association, as Trustee
under the Pooling and Servicing Agreement dated as of September 1,
1998: or in blank pursuant to the Transfer Agreement;
4. The original policy of title insurance or a true copy thereof or, if
such policy has not yet been delivered by the insurer, the commitment
or binder to issue same.
5. All intervening assignments, if any, showing a complete chain of
assignment from the originator to the applicable Originator, including
any recorded warehousing assignments, with evidence of recording
thereon, certified by a Responsible Officer of the applicable
Originator as a true copy of the original of such intervening
assignments;
6. Originals of all assumption and modification agreements, if any or a
copy certified as a true copy by a Responsible Officer of the
applicable Originator.
7. Except for a Mortgaged Property held in an Illinois Land Trust,
either: (i) originals of all intervening assignments, if any showing a
complete chain of title from the originator to the applicable
Originator, including any recorded warehousing assignments, with
evidence of recording thereon, or, (ii) if the original intervening
assignments have not yet been returned from the recording office, a
copy of the originals of such intervening assignments together with a
certificate of a Responsible Officer of the Originator or the closing
attorney or an officer of the title insurer which issued the related
title insurance policy, or commitment therefor, or its duly authorized
agent certifying that the copy is a true copy of the original of such
intervening assignments or (iii) a copy of the intervening assignment
certified by the public recording office in those instances where the
original recorded intervening assignment has been lost.
8. If the Mortgaged Property is held in an Illinois Land Trust, the
original Assignment of Beneficial Interest, or, if the trustee of such
Illinois Land Trust retains such original Assignment of Beneficial
Interest, a certified true copy of such Assignment of Beneficial
Interest so certified by such trustee;
9. If the Mortgaged Property is held in an Illinois Land Trust, an
original Reassignment of Assignment of Beneficial Interest from the
Originator to*/ U.S. Bank National Association, as Trustee under the
Pooling and Servicing Agreement dated as of September 1, 1998, Series
1998-3 or in blank. In the event that the Mortgage Loan was acquired
by the applicable Originator in a merger, the Reassignment of the
Assignment of Beneficial Interest must be by "[Originator], successor
by merger to "[name of predecessor]"; and in the event that the
Mortgage Loan was acquired or originated by such Originator while
doing business under another name, the Reassignment of Assignment of
Beneficial Interest must be by "[Originator], formerly known as
[previous name]";
10. If the Mortgaged Property is held in an Illinois Land Trust, originals
of all intervening Reassignments of Assignment of Beneficial Interest,
showing a complete chain of assignment from the beneficiaries of such
Illinois Land Trust to the applicable Originator of all of such
beneficiaries' right, title, and interest in, to, and under the trust
agreement with respect to such Illinois Land Trust; and
11. If the Mortgaged Property is held in an Illinois Land Trust, (A) a
certified copy of the instrument creating the Illinois Land Trust, (B)
a copy of the UCC-1 Financing Statement evidencing the assignment of
the Mortgagor's beneficial interest in the Illinois Land Trust, with
evidence of filing thereon, and (C) the original personal guaranty of
the Mortgage Note, executed by each beneficiary of the Illinois Land
Trust.
12. Mortgage Loan closing statement and any other truth-in-lending or real
estate settlement procedure forms required by law.
13. Residential loan application.
14. Verification of employment and income, and tax returns, if any.
15. Credit report on the mortgagor.
16. The full appraisal made in connection with the origination of the
related Mortgage Loan with photographs of the subject property and of
comparable properties, constituting evidence sufficient to indicate
that the Mortgaged Property relates to a Residential Dwelling.
17. Copy of the First Lien, if in the Servicer's file.
18. All other papers and records developed or originated by the applicable
Depositor or others, required to document the Mortgage Loan or to
service the Mortgage Loan.*/
- --------------------
*/ Upon the occurrence of the Recordation Trigger, the Servicer shall
promptly cause each Assignment of Mortgage to be recorded in the
applicable recording office in the name of the Trustee.
<PAGE>
EXHIBIT B-1
[FORM OF CLASS A-1F CERTIFICATE]
[Form of Face of Certificate]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS
MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.]
EQCC HOME EQUITY LOAN ASSET BACKED CERTIFICATES
<TABLE>
<CAPTION>
<S> <C>
Series 1998-3, Class A-1F Original Class A-1F Principal Balance:
No. A-1F-__ $_________________
Class A-1F Pass-Through Rate: Original Dollar Amount as of the Cut-off Date
Adjustable Represented by this Certificate:
$-----------------
Cut-off Date: September 1, 1998 Percentage Interest of this Certificate:
-----%
First Payment Date: Original Pool Principal Balance of Fixed Rate Group:
October 15, 1998 $____________________
Closing Date: Latest Maturity Date:
September 25, 1998 ____________________
CUSIP:___________ Common Code:_______________
ISIN:_____________
</TABLE>
This certifies that _________________________ is the registered owner of
the percentage interest (the "Percentage Interest") evidenced by this
Certificate in distributions to the Holders of the Class A-1F Certificates with
respect to certain fixed-rate residential first and second mortgage loans (the
"Fixed Rate Group") which comprise part of a Trust Fund consisting primarily of
certain residential fixed-rate and adjustable-rate first and second mortgage
loans (the "Mortgage Loans") master serviced by EquiCredit Corporation of
America (hereinafter called the "Servicer", in its capacity as Servicer, and
"Representative", in its capacity as Representative, which terms include any
successor entity under the Agreement referred to below). The Fixed Rate Group
was originated or acquired by the Representative and certain of its wholly-owned
subsidiaries. The Fixed Rate Group will be serviced by the Servicer pursuant to
the terms and conditions of that certain Pooling and Servicing Agreement dated
as of September 1, 1998 (the "Agreement") by and among the Representative, the
Servicer, EQCC Receivables Corporation, EQCC Asset Backed Corporation and U.S.
Bank National Association, as trustee (the "Trustee"), certain of the pertinent
provisions of which are set forth herein. To the extent not defined herein, the
capitalized terms used herein have the meanings assigned in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the holder of this Certificate
by virtue of the acceptance hereof assents and by which such holder is bound.
On each Payment Date, commencing on October 15, 1998, the Trustee shall
distribute to the Person in whose name this Certificate is registered on the
last calendar day of the month preceding the month in which such Payment Date
occurs (the "Record Date"), an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to Holders of the Class A-1F Certificates on such Payment Date pursuant to
Section 6.05 of the Agreement. The Class A-1F Pass-Through Rate is adjustable in
accordance with the provisions of the Agreement.
This Certificate is issued on September 25, 1998, and based on its issue
price of 99.17500% and a stated redemption price at maturity equal to its
initial principal balance is issued with original issue discount ("OID") for
federal income tax purposes. Assuming (a) that this Certificate pays in
accordance with projected cash flows reflecting the Prepayment Assumption of
100% PSA (as defined in the Prospectus Supplement dated September 10, 1998 with
respect to the offering of the Class A-1A and Class A-1F Certificates) used to
price this Certificate and (b) that the interest rate at which distributions of
interest on this Certificate actually will be made will be determined as though
the pass-through rate on this Certificate applicable to the first Distribution
Date will not change thereafter: (i) the amount of OID as a percentage of the
initial principal balance of this Certificate is approximately 0.82500000%; (ii)
the annual yield to maturity of this Certificate, compounded monthly, is
approximately 6.25%; and (iii) the amount of OID allocable to the short first
accrual period (September 25, 1998 to October 15, 1998) as a percentage of the
initial principal balance of this Certificate, calculated using the exact
method, is approximately 0.02039729%.
Solely for U.S. federal income tax purposes, this Certificate represents
(i) a beneficial interest in a "regular interest" in a "real estate mortgage
investment conduit" as those terms are defined, respectively, in Section 860G
and 860D of the Internal Revenue Code of 1986, as amended, (ii) the right to
receive payments of Yield Supplement Amounts and (iii) the right to receive
payments in respect of Yield Supplement Carryovers from certain amounts
otherwise distributable to the Holders of the Class X Certificates.
<PAGE>
IN WITNESS WHEREOF, the Trustee on behalf of the Trust has caused this
Certificate to be duly executed as of the date set forth below.
EQCC HOME EQUITY LOAN TRUST 1998-3
By: U.S. Bank National Association,
as Trustee
By:___________________________________
Authorized Signatory
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Class A Certificates referred to in the within-mentioned
Agreement.
By: U.S. Bank National Association,
as Trustee
By:___________________________________
Authorized Signatory
<PAGE>
EXHIBIT B-2
[FORM OF CLASS A-1A CERTIFICATE]
[Form of Face of Certificate]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY TO THE TRUST ADMINISTRATOR OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS
MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.]
EQCC HOME EQUITY LOAN ASSET BACKED CERTIFICATES
<TABLE>
<CAPTION>
<S> <C>
Series 1998-3, Class A-1A Original Class A-1A Principal Balance:
No. A-1A-__ $_________________
Class A-1A Pass-Through Rate: Original Dollar Amount as of the Cut-off Date
Adjustable Represented by this Certificate:
$-----------------
Cut-off Date: September 1, 1998 Percentage Interest of this Certificate:
-----%
First Payment Date: Original Pool Principal Balance of Adjustable Rate
October 15, 1998 Group: $____________________
Closing Date: Latest Maturity Date:
September 25, 1998 ____________________
CUSIP:___________ Common Code:_______________
ISIN:_____________
</TABLE>
This certifies that _________________________ is the registered owner of
the percentage interest (the "Percentage Interest") evidenced by this
Certificate in distributions to the Holders of the Class A-1A Certificates with
respect to certain adjustable-rate residential first mortgage loans (the
"Adjustable Rate Group") which comprise part of a Trust Fund consisting
primarily of certain residential fixed-rate and adjustable-rate first and second
mortgage loans (the "Mortgage Loans") master serviced by EquiCredit Corporation
of America (hereinafter called the "Servicer", in its capacity as Servicer, and
"Representative", in its capacity as Representative, which terms include any
successor entity under the Agreement referred to below). The Adjustable Rate
Group was originated or acquired by the Representative and certain of its
wholly-owned subsidiaries. The Adjustable Rate Group will be serviced by the
Servicer pursuant to the terms and conditions of that certain Pooling and
Servicing Agreement dated as of September 1, 1998 (the "Agreement") by and among
the Representative, the Servicer, EQCC Receivables Corporation, EQCC Asset
Backed Corporation and U.S. Bank National Association, as trustee (the
"Trustee"), certain of the pertinent provisions of which are set forth herein.
To the extent not defined herein, the capitalized terms used herein have the
meanings assigned in the Agreement. This Certificate is issued under and is
subject to the terms, provisions and conditions of the Agreement, to which
Agreement the holder of this Certificate by virtue of the acceptance hereof
assents and by which such holder is bound.
On each Payment Date, commencing on October 15, 1998, the Trustee shall
distribute to the Person in whose name this Certificate is registered on the
last calendar day of the month preceding the month in which such Payment Date
occurs (the "Record Date"), an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to Holders of the Class A-1A Certificates on such Payment Date pursuant to
Section 6.05 of the Agreement. The Class A-1A Pass-Through Rate is adjustable in
accordance with the provisions of the Agreement.
Solely for U.S. federal income tax purposes, this Certificate represents
(i) a beneficial interest in a "regular interest" in a "real estate mortgage
investment conduit" as those terms are defined, respectively, in Section 860G
and 860D of the Internal Revenue Code of 1986, as amended, and (ii) the right to
receive payments in respect of LIBOR Interest Carryovers from certain amounts
otherwise distributable to Holders of the Class X Certificates.
<PAGE>
IN WITNESS WHEREOF, the Trustee on behalf of the Trust has caused this
Certificate to be duly executed as of the date set forth below.
EQCC HOME EQUITY LOAN TRUST 1998-3
By: U.S. Bank National Association,
as Trustee
By:___________________________________
Authorized Signatory
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Class A Certificates referred to in the within-mentioned
Agreement.
By: U.S. Bank National Association,
as Trustee
By:___________________________________
Authorized Signatory
<PAGE>
EXHIBIT B-3
[FORM OF CLASS X CERTIFICATE]
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A CERTIFICATES
AS DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (The "1933 ACT"), OR THE SECURITIES LAW OF ANY STATE. ANY
RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE WITHOUT SUCH
REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION WHICH DOES NOT
REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH THE PROVISIONS
OF SECTION 4.02 OF THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO AN EMPLOYEE BENEFIT PLAN OR OTHER
RETIREMENT ARRANGEMENT, INCLUDING INDIVIDUAL RETIREMENT ACCOUNTS AND ANNUITIES,
KEOGH PLANS AND COLLECTIVE INVESTMENT FUNDS AND SEPARATE ACCOUNTS IN WHICH SUCH
PLANS, ACCOUNTS OR ARRANGEMENTS ARE INVESTED, THAT IS SUBJECT TO THE FIDUCIARY
RESPONSIBILITY PROVISIONS OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED ("ERISA") OR SECTION 4975 OF THE CODE (OR COMPARABLE PROVISIONS
OF ANY SUBSEQUENT ENACTMENTS) (EACH, AN "ERISA PLAN"), UNLESS THE TRANSFEREE
PROVIDES THE SERVICER AND TRUSTEE WITH (1) A CERTIFICATION OF FACTS AND AN
OPINION OF COUNSEL SATISFACTORY TO THE SERVICER AND THE TRUSTEE THAT THE
PURCHASE OF THIS CERTIFICATE BY OR ON BEHALF OF SUCH ERISA PLAN IS PERMISSIBLE
UNDER APPLICABLE LAW, WILL NOT CONSTITUTE OR RESULT IN ANY NON-EXEMPT PROHIBITED
TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE AND WILL NOT
SUBJECT THE SERVICER OR THE TRUSTEE TO ANY OBLIGATION OR LIABILITY (INCLUDING
OBLIGATIONS OR LIABILITIES UNDER ERISA OR SECTION 4975 OF THE CODE) IN ADDITION
TO THOSE UNDERTAKEN IN THE AGREEMENT OR (2) IF SUCH TRANSFEREE IS AN INSURANCE
COMPANY, A CERTIFICATION OF FACTS WITH RESPECT TO CERTAIN MATTERS SET FORTH IN
THE AGREEMENT.
<PAGE>
EQCC HOME EQUITY LOAN ASSET BACKED CERTIFICATES
<TABLE>
<CAPTION>
<S> <C>
Series 1998-3, Class X Percentage Interest of this Certificate:
No. X-__ _____%
Cut-off Date: September 1, 1998 Original Pool Principal Balance:
$--------------------
First Payment Date: Closing Date:
October 15, 1998 September 25, 1998
</TABLE>
This certifies that _________________________ is the registered owner of
the percentage interest (the "Percentage Interest") evidenced by this
Certificate in certain monthly distributions with respect to a Trust Fund
consisting primarily of residential fixed-rate and adjustable-rate first and
second mortgage loans (the "Mortgage Loans") master serviced by EquiCredit
Corporation of America (hereinafter called the "Servicer", in its capacity as
Servicer, and "Representative", in its capacity as Representative, which terms
include any successor entity under the Agreement referred to below). The
Mortgage Loans were originated or acquired by the Representative and certain of
its wholly-owned subsidiaries. The Mortgage Loans will be serviced by the
Servicer pursuant to the terms and conditions of that certain Pooling and
Servicing Agreement dated as of September 1, 1998 (the "Agreement") by and among
the Representative, the Servicer, EQCC Receivables Corporation, EQCC Asset
Backed Corporation and U.S. Bank National Association, as trustee (the
"Trustee"), certain of the pertinent provisions of which are set forth herein.
To the extent not defined herein, the capitalized terms used herein have the
meanings assigned in the Agreement. This Certificate is issued under and is
subject to the terms, provisions and conditions of the Agreement, to which
Agreement the holder of this Certificate by virtue of the acceptance hereof
assents and by which such holder is bound.
On each Payment Date, commencing on October 15, 1998, the Trustee shall
distribute to the Person in whose name this Certificate is registered on the
last calendar day of the month preceding the month in which such Payment Date
occurs (the "Record Date"), an amount equal to the product of the Percentage
Interest evidenced by this Certificate and any amount required to be distributed
to the Holders of the Class X Certificates on such Remittance Date pursuant to
Section 6.05 and 6.09 of the Agreement.
No transfer of any Class X Certificate shall be made unless that transfer
is made pursuant to an effective registration statement under the 1933 Act and
effective registration or qualification under applicable state securities laws,
or is made in a transaction which does not require such registration or
qualification. In the event that a transfer is to be made without such
registration or qualification, (a) the Trustee shall require the transferee to
execute an investment letter, which investment letter shall not be an expense of
the Depositors, the Servicer or the Trustee and (b) in the event that such a
transfer is not made pursuant to Rule 144A under the Act, the Depositors may
direct the Trustee to require an Opinion of Counsel satisfactory to the Trustee
and the Depositors that such transfer may be made without such registration or
qualification, which Opinion of Counsel shall not be an expense of the
Depositors, the Trustee or the Servicer. Neither the Depositors nor the Trustee
is obligated to register or qualify any of the Class X Certificates under the
1933 Act or any other securities law or to take any action not otherwise
required under the Agreement to permit the transfer of such Certificates without
registration or qualification. Any such Certificateholder desiring to effect
such transfer shall, and does hereby agree to, indemnify the Trustee, the
Depositors, the Certificate Insurer and the Servicer 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. In connection with any such transfer, the Servicer
and the Trustee will also require either (i) a certification of facts and an
Opinion of Counsel which establish to the satisfaction of the Servicer and the
Trustee that such transfer will not result in a violation of Section 406 of
ERISA or Section 4975 of the Code or cause the Servicer or the Trustee to be
deemed a fiduciary of an ERISA Plan or result in the imposition of an excise tax
under Section 4975 of the Code, or (ii) (a) a representation letter, in the form
as described in the Agreement, stating that the transferee is not an ERISA Plan
and is not acting on behalf of an ERISA Plan or using the assets of an ERISA
Plan to effect such purchase or (b) if such transferee is an insurance company,
a certification of facts with respect to certain matters set forth in the
Agreement.
This Certificate is issued on September 25, 1998, at an issue price of
6.29566% of the aggregate of the Original Class A-1F Principal Balance and the
Original Class A-1A Principal Balance (the "Class X Notional Amount"), including
accrued interest, and a stated redemption price at maturity equal to all
interest distributions hereon, and is issued with original issue discount
("OID") for federal income tax purposes. Assuming that this Certificate pays in
accordance with projected cash flows reflecting the prepayment assumption of
100% PSA (as defined in the Prospectus Supplement dated September 10, 1998 with
respect to the offering of the Class A-1A and Class A-1F Certificates) used to
price this Certificate: (i) the amount of OID as a percentage of the initial
Class X Notional Amount is approximately 4.58661567%, (ii) the annual yield to
maturity of this Certificate, compounded monthly, is approximately 37.77%; and
(iii) the amount of OID allocable to the short first accrual period (September
25, 1998 to October 15, 1998) as a percentage of the initial Class X Notional
Amount, calculated using the exact method, is approximately 0.13143519%.
Solely for U.S. federal income tax purposes, this Certificate represents
(i) a "regular interest" in a "real estate mortgage investment conduit" as those
terms are defined, respectively, in Section 860G and 860D of the Internal
Revenue Code of 1986, as amended and (ii) the rights under the Spread Account
set forth in the Agreement.
<PAGE>
IN WITNESS WHEREOF, the Trustee on behalf of the Trust has caused this
Certificate to be duly executed as of the date set forth below.
EQCC HOME EQUITY LOAN TRUST 1998-3
By: U.S. Bank National Association,
as Trustee
By:___________________________________
Authorized Signatory
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Class X Certificates referred to in the within-mentioned
Agreement.
By: U.S. Bank National Association,
as Trustee
By:___________________________________
Authorized Signatory
<PAGE>
EXHIBIT B-4
[FORM OF CLASS R CERTIFICATE]
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A AND CLASS X
CERTIFICATES AS DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO
HEREIN.
THIS CERTIFICATE MAY NOT BE HELD BY OR TRANSFERRED TO A DISQUALIFIED NON-U.S.
PERSON OR A DISQUALIFIED ORGANIZATION OR AGENT THEREOF.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "RESIDUAL
INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF
1986 (THE "CODE").
THIS CLASS R CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933 (THE "1933 ACT") OR THE SECURITIES LAWS OF ANY STATE. ANY
RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE WITHOUT SUCH
REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION WHICH DOES NOT
REQUIRE SUCH REGISTRATION OR QUALIFICATION AND WHICH IS IN ACCORDANCE WITH THE
PROVISIONS OF SECTION 4.02 OF THE POOLING AND SERVICING AGREEMENT REFERRED TO
HEREIN.
NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO AN EMPLOYEE BENEFIT PLAN OR OTHER
OR OTHER RETIREMENT ARRANGEMENT, INCLUDING INDIVIDUAL RETIREMENT ACCOUNTS AND
ANNUITIES, KEOGH PLANS AND COLLECTIVE INVESTMENT FUNDS AND SEPARATE ACCOUNTS IN
WHICH SUCH PLANS, ACCOUNTS OR ARRANGEMENTS ARE INVESTED, THAT IS SUBJECT TO THE
FIDUCIARY RESPONSIBILITY PROVISIONS OF THE EMPLOYEE RETIREMENT INCOME SECURITY
ACT OF 1974, AS AMENDED ("ERISA") OR SECTION 4975 OF THE CODE (OR COMPARABLE
PROVISIONS OF ANY SUBSEQUENT ENACTMENTS) (EACH, AN "ERISA PLAN").
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY BE MADE ONLY
IF THE PROPOSED TRANSFEREE PROVIDES A TRANSFER AFFIDAVIT TO THE DEPOSITORS AND
THE TRUSTEE THAT (1) SUCH TRANSFEREE IS NOT A DISQUALIFIED ORGANIZATION OR AGENT
THEREOF, (2) NO PURPOSE OF SUCH TRANSFER IS TO IMPEDE THE ASSESSMENT OR
COLLECTION OF TAX AND (3) SUCH TRANSFEREE SATISFIES CERTAIN ADDITIONAL
CONDITIONS RELATING TO THE FINANCIAL CONDITION OF THE PROPOSED TRANSFEREE.
NOTWITHSTANDING THE REGISTRATION IN THE CERTIFICATE REGISTER OR ANY TRANSFER,
SALE OR OTHER DISPOSITION OF THIS CERTIFICATE TO A DISQUALIFIED ORGANIZATION OR
A DISQUALIFIED NON-UNITED STATES PERSON OR AN AGENT THEREOF, SUCH REGISTRATION
SHALL BE DEEMED TO BE OF NO LEGAL FORCE OR EFFECT WHATSOEVER AND SUCH PERSON
SHALL NOT BE DEEMED TO BE A CERTIFICATEHOLDER FOR ANY PURPOSE HEREUNDER,
INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS CERTIFICATE.
A TRANSFEROR OF THIS CERTIFICATE TO A DISQUALIFIED ORGANIZATION OR AN AGENT WHO
ACQUIRES THIS CERTIFICATE ON BEHALF OF A DISQUALIFIED ORGANIZATION MAY BE
SUBJECT TO A SIGNIFICANT FEDERAL INCOME TAX UNLESS IT PROPERLY RECEIVES THE
TRANSFER AFFIDAVIT AND AGREEMENT DESCRIBED IN SECTION 4.02(d) OF THE AGREEMENT.
THIS CERTIFICATE MAY BE A "NON-ECONOMIC RESIDUAL INTEREST," CERTAIN TRANSFERS OF
WHICH MAY BE DISREGARDED FOR FEDERAL INCOME TAX PURPOSES. EACH HOLDER OF THIS
CERTIFICATE BY ACCEPTANCE OF THIS CERTIFICATE SHALL BE DEEMED TO HAVE CONSENTED
TO THE PROVISIONS OF THIS PARAGRAPH.
<PAGE>
EQCC HOME EQUITY LOAN ASSET BACKED CERTIFICATES
Series 1998-3, Class R Percentage Interest of this Certificate:
No. R-__ _____%
Cut-off Date: September 1, 1998 Original Pool Principal Balance:
$--------------------
First Payment Date: Closing Date:
October 15, 1998 September 25, 1998
This certifies that _________________________ is the registered owner of
the interest (the "Percentage Interest") evidenced by this Certificate in
certain distributions with respect to a Trust Fund consisting primarily of
residential fixed-rate and adjustable-rate first and second mortgage loans (the
"Mortgage Loans") master serviced by EquiCredit Corporation of America
(hereinafter called the "Servicer", in its capacity as Servicer, and
"Representative", in its capacity as Representative, which terms include any
successor entity under the Agreement referred to below). The Mortgage Loans were
originated or acquired by the Representative and certain of its wholly-owned
subsidiaries. The Mortgage Loans will be serviced by the Servicer pursuant to
the terms and conditions of that certain Pooling and Servicing Agreement dated
as of September 1, 1998 (the "Agreement") by and among the Representative, the
Servicer, EQCC Receivables Corporation, EQCC Asset Backed Corporation and U.S.
Bank National Association, as trustee (the "Trustee"), certain of the pertinent
provisions of which are set forth herein. To the extent not defined herein, the
capitalized terms used herein have the meanings assigned in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the holder of this Certificate
by virtue of the acceptance hereof assents and by which such holder is bound.
On each Payment Date, commencing on October 15, 1998, the Trustee shall
distribute to the Person in whose name this Certificate is registered on the
last calendar day of the month preceding the month in which such Payment Date
occurs (the "Record Date"), an amount equal to the product of the Percentage
Interest evidenced by this Certificate and any amount required to be distributed
to the Holders of the Class R Certificates on such Remittance Date pursuant to
Section 6.05 of the Agreement.
Each Holder of this Certificate will be deemed to have agreed to be bound
by the restrictions set forth in the Agreement to the effect that (i) each
person holding or acquiring any Ownership Interest in this Certificate must be a
Permitted Transferee, (ii) the transfer of any Ownership Interest in this
Certificate will be conditioned upon the delivery to the Trustee of, among other
things, an affidavit to the effect that it is a Permitted Transferee and (iii)
any attempted or purported transfer of any Ownership Interest in this
Certificate in violation of such restrictions will be absolutely null and void
and will vest no rights in the purported transferee. The Percentage Interest
this Certificate is set forth above. Notwithstanding the fact that this
Certificate has no principal balance, this Certificate will remain outstanding
under the Agreement and the Holder hereof may have additional obligations as set
forth in the Agreement.
No transfer of any Class R Certificate shall be made unless that transfer
is made pursuant to an effective registration statement under the 1933 Act and
effective registration or qualification under applicable state securities laws,
or is made in a transaction which does not require such registration or
qualification. In the event that a transfer is to be made without such
registration or qualification, (a) the Trustee shall require the transferee to
execute an investment letter, which investment letter shall not be an expense of
the Depositors, the Servicer or the Trustee and (b) in the event that such a
transfer is not made pursuant to Rule 144A under the Act, the Depositors may
direct the Trustee to require an Opinion of Counsel satisfactory to the Trustee
and the Depositors that such transfer may be made without such registration or
qualification, which Opinion of Counsel shall not be an expense of the
Depositors, the Trustee or the Servicer. Neither the Depositors nor the Trustee
is obligated to register or qualify any of the Class R Certificates under the
1933 Act or any other securities law or to take any action not otherwise
required under the Agreement to permit the transfer of such Certificates without
registration or qualification. Any such Certificateholder desiring to effect
such transfer shall, and does hereby agree to, indemnify the Trustee, the
Depositors, the Certificate Insurer and the Servicer 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. In connection with any such transfer, the Trustee
will also require a representation letter, in the form as described in the
Agreement, stating that the transferee is not an ERISA Plan and is not acting on
behalf of an ERISA Plan or using the assets of an ERISA Plan to effect such
purchase.
<PAGE>
IN WITNESS WHEREOF, the Trustee on behalf of the Trust has caused this
Certificate to be duly executed as of the date set forth below.
EQCC HOME EQUITY LOAN TRUST 1998-3
By: U.S. Bank National Association,
as Trustee
By:___________________________________
Authorized Signatory
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Class R Certificates referred to in the within-mentioned
Agreement.
By: U.S. Bank National Association,
as Trustee
By:___________________________________
Authorized Signatory
<PAGE>
EXHIBIT B-5
[FORM OF REVERSE OF CERTIFICATE]
[Form of Reverse Certificate]
Distributions on this Certificate will be made by the Trustee by wire
transfer of immediately available funds to the account of the Person entitled
thereto as shall appear on the Certificate Register without the presentation or
surrender of this Certificate or the making of any notation thereon, at a bank
or other entity having appropriate facilities therefor, if such Person shall own
of record Class A Certificates of the same Class which have denominations
aggregating at least $1,000,000 appearing in the Certificate Register and in all
cases to the Class X and Class R Certificates, and shall have so notified the
Trustee at least five business days prior to the related Record Date, or by
check mailed to the address of such Person appearing in the Certificate
Register.
Upon receiving the final distribution hereon, the Holder hereof is required
to send this Certificate to the Trustee. The Agreement provides that, in any
event, upon the making of the final distribution due on this Certificate, this
Certificate shall be deemed cancelled for all purposes under the Agreement.
This Certificate is one of a duly authorized issue of Certificates
designated as EQCC Home Equity Loan Asset Backed Certificates, Series 1998-3,
Class A-1F, Class A-1A, Class X and Class R (herein called the "Certificates")
and, as set forth in the Agreement, representing interests in (i) such Mortgage
Loans as from time to time are subject to the Agreement, together with the
Mortgage Files relating thereto and all proceeds thereof (other than the
Representative's Yield), (ii) such assets as from time to time are identified as
REO Property or are deposited in the Collection Account, Principal and Interest
Account (including all earnings thereon and proceeds thereof), Spread Account,
or Insurance Account, including amounts on deposit in the Accounts or the
Principal and Interest Account and invested in Permitted Instruments, (iii) the
Trustee's rights under all insurance policies with respect to the Mortgage Loans
required to be maintained pursuant to the Agreement and any Insurance Proceeds,
(iv) the Certificate Insurance Policy, (v) Liquidation Proceeds, (vi) Released
Mortgaged Property Proceeds and (vii) the Yield Supplement Agreement (all of the
foregoing being hereinafter collectively called the "Trust Fund").
The Class X Certificates are subordinate in right of payment to the Class A
Certificates, to the extent set forth in the Agreement.
The Certificates do not represent an obligation of, or an interest in, the
Servicer, the Representative, the Depositors or the Trustee and are not insured
or guaranteed by the Federal Deposit Insurance Corporation, the Government
National Mortgage Association, the Federal Housing Administration or the
Veterans Administration or any other governmental agency. The Certificates are
limited in right of payment to certain collections and recoveries respecting the
Mortgage Loans, and amounts withdrawable from the Collection Account, all as
more specifically set forth herein and in the Agreement.
Ambac Assurance Corporation has issued a certificate guaranty surety bond
with respect to the Class A Certificates, a copy of which is attached as Exhibit
I to the Agreement.
As provided in the Agreement, deposits and withdrawals from the Collection
Account and the Insurance Account may be made by the Trustee from time to time
for purposes other than distributions to Certificateholders, such purposes
including reimbursement of certain expenses incurred by the Servicer and
investment in Permitted Instruments.
Subject to certain restrictions, the Agreement permits the amendment
thereof with respect to certain modifications (a) by the Depositors, the
Servicer and the Trustee, with the prior written consent of the Certificate
Insurer, without the consent of the Certificateholders, and (b) by the
Depositors, the Representative, the Servicer, the Trustee, with the prior
written consent of the Certificate Insurer, the Majority in Aggregate Voting
Interest and the holders of a majority of the Percentage Interest in the Class R
Certificates. The Agreement permits the Majority in Aggregate Voting Interest to
waive, on behalf of all Certificateholders, any default by the Servicer in the
performance of its obligations under the Agreement and its consequences, except
in a default in making any required distribution on a Certificate. Any such
consent or waiver by the Majority in Aggregate Voting Interest shall be
conclusive and binding on the holder of this Certificate and upon all future
holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange hereof or in lieu hereof whether or not notation of such
consent is made upon this Certificate.
As provided in the Agreement and subject to certain limitations therein set
forth, the transfer of this Certificate is registrable in the Certificate
Register upon surrender of this Certificate for registration of transfer at the
offices or agencies maintained by the Trustee in New York, New York or Chicago,
Illinois duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to, the Trustee, duly executed by the holder hereof or such
holder's attorney duly authorized in writing, and thereupon one or more new
Certificates of authorized denominations evidencing the same aggregate undivided
Percentage Interest will be issued to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates. As provided
in the Agreement and subject to certain limitations therein set forth, the
Certificate is exchangeable for a new Certificate evidencing the same undivided
ownership interest, as requested by the holder surrendering the same.
No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Servicer, the Representative, the Depositors and the Trustee and any
agent of any of the foregoing, may treat the person in whose name this
Certificate is registered as the owner hereof for all purposes, and none of the
foregoing shall be affected by notice to the contrary.
The obligations created by the Agreement shall terminate upon notice to the
Trustee of: (i) the later of the distribution to Certificateholders of the final
payment or collection with respect to the last Mortgage Loan, or the disposition
of all funds with respect to the last Mortgage Loan and the remittance of all
funds due under the Agreement and the payment of all amounts due and payable to
the Certificate Insurer and the Trustee, (ii) the purchase by the Servicer of
all outstanding Mortgage Loans and REO Properties at a price determined as
provided in the Agreement (the exercise of the right of the Servicer to purchase
all the Mortgage Loans and property in respect of Mortgage Loans will result in
early retirement of the Certificates), the right of the Servicer to purchase
being subject to the Pool Principal Balance of the Mortgage Loans and REO
Properties at the time of purchase being less than ten percent (10%) of the
Original Pool Principal Balance, (iii) by the mutual consent of the Servicer,
the Certificate Insurer and all Certificateholders in writing or (iv) upon the
failure of the Trust REMIC to qualify as a REMIC pursuant to Section 11.05 of
the Agreement. By its acceptance of this Certificate, the Certificateholder
hereby appoints the Servicer as its attorney-in-fact to adopt a plan of
liquidation of the Trust Fund in accordance with Section 11.02 of the Agreement.
Unless the certificate of authentication hereon has been executed by the
Trustee by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.
<PAGE>
EXHIBIT C
DTC LETTER OF REPRESENTATIONS
<PAGE>
EXHIBIT D
MORTGAGE LOAN SCHEDULES
<PAGE>
ADJUSTABLE RATE GROUP
<PAGE>
FIXED RATE GROUP
<PAGE>
EXHIBIT E
FORM OF TRUSTEE INITIAL CERTIFICATION
September 25, 1998
[Representative]
[Insurer]
[Servicer]
[Depositors]
Re: Pooling and Servicing Agreement (the "Pooling and Servicing
Agreement"), EQCC Home Equity Loan Asset Backed Certificates, Series
1998-3, Class A-1F, Class A-1A, Class X and Class R, dated as of
September 1, 1998 among EquiCredit Corporation of America, as
Servicer, the Depositors listed therein and U.S. Bank National
Association, as Trustee
Ladies and Gentlemen:
In accordance with Section 2.06 of the Agreement, the undersigned, as
Trustee, hereby certifies that, except as noted on the Master Exception Report
dated [], 1998 and made a part hereof, it or the Custodian on its behalf has
received, with respect to each Mortgage Loan, the documents specified in
Sections 2.04(a), (b), (c), (g) and (h) of the Pooling and Servicing Agreement,
as applicable, a Mortgage, or a certified copy thereof, Assignment of Mortgage,
or a certified copy thereof, and a Mortgage Note with respect to each Mortgage
Loan listed in the Mortgage Loan Schedule and the documents contained therein
appear to bear original signatures or copies of originals if the originals have
not yet been delivered.
Neither the Trustee nor the Custodian on its behalf has made any
independent examination of any such documents beyond the review specifically
required in the above-referenced Pooling and Servicing Agreement. The Trustee
makes no representations as to: (i) the validity, legality, sufficiency,
enforceability or genuineness of any such documents or any of the Mortgage Loans
identified on the Mortgage Loan Schedule, or (ii) collectability, insurability,
effectiveness or suitability of any such Mortgage Loan.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.
U.S. BANK NATIONAL ASSOCIATION
By:___________________________
Name:
Title:
<PAGE>
EXHIBIT F-1
FORM OF TRUSTEE INTERIM CERTIFICATION
, 19__
[Representative]
[Insurer]
[Depositors]
[Servicer]
Re: Pooling and Servicing Agreement (the "Pooling and Servicing
Agreement"), EQCC Home Equity Loan Asset Backed Certificates, Series
1998-3, Class A-1F, Class A-1A, Class X and Class R, dated as of
September 1, 1998, among EquiCredit Corporation of America, as
Servicer, the Depositors listed therein and U.S. Bank National
Association, as Trustee
Ladies and Gentlemen:
In accordance with the provisions of Section 2.06 of the above-referenced
Pooling and Servicing Agreement, the undersigned, as Trustee, hereby certifies
that as to each Mortgage Loan listed in the Mortgage Loan Schedule (other than
any Mortgage Loan paid in full or any Mortgage Loan listed on the attachment
hereto), it or the Custodian on its behalf has reviewed the documents delivered
to it or the Custodian on its behalf pursuant to Section 2.04 of the Pooling and
Servicing Agreement and has determined that (i) all such documents are in its
possession or in the possession of the Custodian on its behalf (other than those
listed in Section 2.04(f)), (ii) such documents have been reviewed by it or the
Custodian on its behalf and have not been mutilated, damaged, torn or otherwise
physically altered and relate to such Mortgage Loan, (iii) based on its
examination, or the examination of the Custodian on its behalf, and only as to
the foregoing documents, the information set forth in the Mortgage Loan Schedule
(other than items (i), (iv) and (x) of the definition of Mortgage Loan Schedule)
respecting such Mortgage Loan accurately reflects the information set forth in
the Mortgage File and (iv) each Mortgage Note has been endorsed as provided in
Section 2.04 of the Pooling and Servicing Agreement.
Neither the Trustee nor the Custodian on its behalf has made any
independent examination of such documents beyond the review specifically
required in the above-referenced Pooling and Servicing Agreement. The Trustee
makes no representations as to: (i) the validity, legality, enforceability or
genuineness of any such documents contained in each or any of the Mortgage Loans
identified on the Mortgage Loan Schedule, or (ii) the collectability,
insurability, effectiveness or suitability of any such Mortgage Loan.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and servicing
Agreement.
as Trustee
By:_______________________
Name:
Title:
<PAGE>
EXHIBIT F-2
FORM OF TRUSTEE FINAL CERTIFICATION
, 19__
[Representative]
[Insurer]
[Depositors]
[Servicer]
Re: Pooling and Servicing Agreement (the "Pooling and Servicing
Agreement"), EQCC Home Equity Loan Asset Backed Certificates, Series
1998-3, Class A-1F, Class A-1A, Class X and Class R, dated as of
September 1, 1998 among EquiCredit Corporation of America, as
Servicer, the Depositors listed therein and U.S. Bank National
Association, as Trustee
Ladies and Gentlemen:
In accordance with Section 2.06 of the above-captioned Pooling and
Servicing Agreement, the undersigned, as Trustee, hereby certifies that, except
as noted on the attachment hereto, as to each Mortgage Loan listed in the
Mortgage Loan Schedule (other than any Mortgage Loan paid in full or listed on
the attachment hereto) it or to the Custodian on its behalf has reviewed the
documents delivered to it or to the Custodian on its behalf pursuant to Section
2.04 of the Pooling and Servicing Agreement and has determined that (i) all such
documents are in its possession or in the possession of the Custodian on its
behalf (other than those listed in Section 2.04(f)), (ii) such documents have
been reviewed by it and have not been mutilated, damaged, torn or otherwise
physically altered and relate to such Mortgage loan, (iii) based on its
examination, and only as to the foregoing documents, the information set forth
in the Mortgage Loan Schedule (other than items (i), (iv) and (x) of the
definition of Mortgage Loan Schedule) respecting such Mortgage Loan accurately
reflects the information set forth in the Trustee's Mortgage File and (iv) each
Mortgage Note has been endorsed as provided in Section 2.04 of the Pooling and
Servicing Agreement. Neither the Trustee nor the Custodian on its behalf has
made any independent examination of such documents beyond the review
specifically required in the above-referenced Pooling and Servicing Agreement.
The Trustee makes no representations as to: (i) the validity, legality,
enforceability or genuineness of any such documents contained in each or any of
the Mortgage Loans identified on the Mortgage Loan Schedule, or (ii) the
collectability, insurability, effectiveness or suitability of any such Mortgage
Loan.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.
as Trustee
By:_______________________
Name:
Title:
<PAGE>
EXHIBIT G
LIST OF BANKRUPTCY LOANS
<PAGE>
EXHIBIT H
FORM OF DELINQUENCY REPORT
Mortgage Pool
<TABLE>
<CAPTION>
% of
Number of Principal Aggregate
Accounts Balance Principal
-------- ------- ---------
<S> <C> <C> <C>
Potentially Delinquent $ %
30 Days Delinquent
60 Days Delinquent
90 or More Days
Delinquent
In Foreclosure
In Bankruptcy
30 Days Delinquent
60 Days Delinquent
90 or More Days
Delinquent
In REO
</TABLE>
<PAGE>
EXHIBIT I
CERTIFICATE INSURANCE POLICY
<PAGE>
EXHIBIT J
FORM OF TRANSFEROR CERTIFICATE
__________________, 19__
EQCC Receivables Corporation
EQCC Asset Backed Corporation
[ADDRESS]
U.S. Bank National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Re: EQCC Home Equity Loan Asset Backed Certificates, Series 1998-3, Class
R
Ladies and Gentlemen:
This letter is delivered to you in connection with the transfer by
_______________________________ (the "Seller") to __________________________
(the "Purchaser") of a ____% Percentage Interest of EQCC Home Equity Loan Asset
Backed Certificates, Series 1998-3, Class R (the "Certificates"), pursuant to
Section 4.02 of the Pooling and Servicing Agreement (the "Pooling and Servicing
Agreement"), dated as of dated as of September 1, 1998 by and among EquiCredit
Corporation of America, as Representative and Servicer, the Depositors listed
therein ("Depositors") and U.S. Bank National Association, as trustee
("Trustee"). All terms used herein and not otherwise defined shall have the
meanings set forth in the Pooling and Servicing Agreement. The Seller hereby
certifies, represents and warrants to, and covenants with, the Company and the
Trustee that:
1. No purpose of the Seller relating to the transfer of the Certificates by
the Seller to the Purchaser is or will be to impede the assessment or collection
of any tax.
2. The Seller understands that the Purchaser has delivered to the Trustee
and the Servicer a transfer affidavit and agreement in the form attached to the
Pooling and Servicing Agreement as Exhibit M-1. The Seller does not know or
believe that any representation contained therein is false.
3. The Seller has at the time of the transfer conducted a reasonable
investigation of the financial condition of the Purchaser as contemplated by
Treasury Regulations Section 1.860E-1(c)(4)(i) and, as a result of that
investigation, the Seller has determined that the Purchaser has historically
paid its debts as they become due and has found no significant evidence to
indicate that the Purchaser will not continue to pay its debts as they become
due in the future. The Seller understands that the transfer of a Class R
Certificate may not be respected for United States income tax purposes (and the
Seller may continue to be liable for United States income taxes associated
therewith) unless the Seller has conducted such an investigation.
4. The Seller has no actual knowledge that the proposed Purchaser is not
both a United States Person and a Permitted Transferee.
Very truly yours,
(Seller)
By: ________________________________
Name:
Title:
<PAGE>
EXHIBIT K
LIST OF ORIGINATORS
EquiCredit Corporation of America
EquiCredit Corporation/Ala. & Miss.
California/EquiCredit Corporation
EquiCredit Corporation of In.
EquiCredit Corporation of Pa.
EquiCredit Corporation of SC
<PAGE>
EXHIBIT L
[RESERVED]
<PAGE>
EXHIBIT M-1
FORM OF TRANSFER AFFIDAVIT AND AGREEMENT
State of ___________ )
) ss.:
County of __________ )
[NAME OF OFFICER], being first duly sworn, deposes and says:
1. That he is [Title of Officer] of [Name of Owner] (record or beneficial
owner of the EQCC Home Equity Loan Asset Backed Certificates, Series 1998-3,
Class R (the "Owner")), a [savings institution] [corporation] duly organized and
existing under the laws of [the State of __________________] [the United
States], on behalf of which he makes this affidavit and agreement.
2. That the Owner (i) is not and will not be a "disqualified organization"
as of [date of transfer] within the meaning of Section 860E(e)(5) of the
Internal Revenue Code of 1986, as amended (the "Code"), (ii) will endeavor to
remain other than a disqualified organization for so long as it retains its
ownership interest in the Class R Certificates, and (iii) is acquiring the Class
R Certificates for its own account or for the account of another Owner from
which it has received an affidavit and agreement in substantially the same form
as this affidavit and agreement. (For this purpose, a "disqualified
organization" means the United States, any state or political subdivision
thereof, any agency or instrumentality of any of the foregoing (other than an
instrumentality all of the activities of which are subject to tax and, except
for the Federal Home Loan Mortgage Corporation, a majority of whose board of
directors is not selected by any such governmental entity) or any foreign
government, international organization or any agency or instrumentality of such
foreign government or organization, any rural electric or telephone cooperative,
or any organization (other than certain farmers' cooperatives) that is generally
exempt from federal income tax unless such organization is subject to the tax on
unrelated business taxable income).
3. That the Owner is aware (i) of the tax that would be imposed on
transfers of Class R Certificates to disqualified organizations under the Code;
(ii) that such tax would be on the transferor, or, if such transfer is through
an agent (which person includes a broker, nominee or middleman) for a
disqualified organization, on the agent; (iii) that the person otherwise liable
for the tax shall be relieved of liability for the tax if the transferee
furnishes to such person an affidavit that the transferee is not a disqualified
organization and, at the time of transfer, such person does not have actual
knowledge that the affidavit is false; and (iv) that the Class R Certificates
may be "noneconomic residual interests" within the meaning of Treasury
regulations promulgated pursuant to the Code and that the transferor of a
noneconomic residual interest will remain liable for any taxes due with respect
to the income on such residual interest, unless no significant purpose of the
transfer was to impede the assessment or collection of tax.
4. That the Owner is aware that the Trustee will not register the transfer
of any Class R Certificates unless the transferee, or the transferee's agent,
delivers to it an affidavit and agreement, among other things, in substantially
the same form as this affidavit and agreement. The Owner expressly agrees that
it will not consummate any such transfer if it knows or believes that any of the
representations contained in such affidavit and agreement are false.
5. That the Owner has reviewed the restrictions set forth on the face of
the Class R Certificates and the provisions of Section 4.02(d) of the Pooling
and Servicing Agreement under which the Class R Certificates were issued (in
particular, clause (6) of Section 4.02(d) which authorize the Trustee to deliver
payments to a person other than the Owner in the event the Owner holds such
Certificates in violation of Section 4.02(c)). The Owner expressly agrees to be
bound by and to comply with such restrictions and provisions.
6. That the Owner consents to any additional restrictions or arrangements
that shall be deemed necessary upon advice of counsel to constitute a reasonable
arrangement to ensure that the Class R Certificates will only be owned, directly
or indirectly, by an Owner that is not a disqualified organization.
7. The Owner's Taxpayer Identification Number is ___________.
8. This affidavit and agreement relates only to the Class R Certificates
held by the Owner and not to any other holder of the Class R Certificates. The
Owner understands that the liabilities described herein relate only to the Class
R Certificates.
9. That no purpose of the Owner relating to the transfer of any of the
Class R Certificates by the Owner is or will be to impede the assessment or
collection of any tax.
10. That the Owner has no present knowledge or expectation that it will be
unable to pay any United States taxes owed by it so long as any of the
Certificates remain outstanding. In this regard, the Owner hereby represents to
and for the benefit of the person from whom it acquired the Class R Certificate
that the Owner intends to pay taxes associated with holding such Class R
Certificate as they become due, fully understanding that it may incur tax
liabilities in excess of any cash flows generated by the Class R Certificate.
11. That the Owner has no present knowledge or expectation that it will
become insolvent or subject to a bankruptcy proceeding for so long as any of the
Class R Certificates remain outstanding.
12. That the Owner (i) is a U.S. Person or (ii) is a person other than a
U.S. Person (a "Non-U.S. Person") that holds the Class R Certificate in
connection with the conduct of a trade or business within the United States and
has furnished the transferor and the Trustee with an effective Internal Revenue
Service Form 4224 or successor form at the time and in the manner required by
the Code or (iii) is a Non-U.S. Person that has delivered to both the transferor
and the Trustee an opinion of a nationally recognized tax counsel to the effect
that the transfer of the Class R Certificate to it is in accordance with the
requirements of the Code and the regulations promulgated thereunder and that
such transfer of the Class R Certificate will not be disregarded for federal
income tax purposes. "U.S. Person" means a citizen or resident of the United
States, a corporation, partnership (except to the extent provided in applicable
Treasury regulations) or other entity created or organized in or under the laws
of the United States or any political subdivision thereof, an estate that is
subject to U.S. federal income tax regardless of the source of its income or a
trust if a court within the United States is able to exercise primary
supervision over the administration of such trust, and one or more such U.S.
Persons have the authority to control all substantial decisions of such trust
(or, to the extent provided in applicable Treasury regulations, certain trusts
in existence on August 20, 1996 which are eligible to elect to be treated as
U.S. Persons).
<PAGE>
IN WITNESS WHEREOF, the Owner has caused this instrument to be executed on
its behalf, pursuant to the authority of its Board of Directors, by its [Title
of Officer] and its corporate seal to be hereunto attached, attested by its
[Assistant] Secretary, this ____ day of _______________, 199__.
[NAME OF OWNER]
By:_______________________
[Name of Officer]
[Title of Officer]
[Corporate Seal]
ATTEST:
[Assistant] Secretary
Personally appeared before me the above-named [Name of Officer], known or
proved to me to be the same person who executed the foregoing instrument and to
be the [Title of Officer] of the Owner, and acknowledged to me that he executed
the same as his free act and deed and the free act and deed of the Owner.
Subscribed and sworn before me this ____ day of ________________, 199__.
NOTARY PUBLIC
COUNTY
OF_____________________________________________________
STATE
OF______________________________________________________
My Commission expires the
____ day of
_______________, 19__.
<PAGE>
EXHIBIT M-2
FORM OF INVESTOR REPRESENTATION LETTER
------------,-----
U.S. Bank National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Re: EQCC Home Equity Loan Asset Backed Certificates, Series 1998-3
Ladies and Gentlemen:
_______________________ (the "Purchaser") intends to purchase from
____________________ (the "Seller"), a ____% Percentage Interest of EQCC Home
Equity Loan Asset Backed Certificates, Series 1998-3, Class [X][R] (the
"Certificates"), issued pursuant to the Pooling and Servicing Agreement (the
"Pooling and Servicing Agreement"), dated as of September 1, 1998, among U.S.
Bank National Association, as trustee (the "Trustee"), Equicredit Corporation of
America, EQCC Receivables Corporation and EQCC Asset Backed Corporation
(collectively with EQCC Receivables Corporation, the "Depositors"). All terms
used herein and not otherwise defined shall have the meanings set forth in the
Pooling and Servicing Agreement. The Purchaser hereby certifies, represents and
warrants to, and covenants with, the Company and the Trustee that:
1. The Purchaser understands that (a) the Certificates have not been
and will not be registered or qualified under the Securities Act of 1933,
as amended (the "Act") or any state securities law, (b) the Company is not
required to so register or qualify the Certificates, (c) the Certificates
may be resold only if registered and qualified pursuant to the provisions
of the Act or any state securities law, or if an exemption from such
registration and qualification is available, (d) the Pooling and Servicing
Agreement contains restrictions regarding the transfer of the Certificates
and (e) the Certificates will bear a legend to the foregoing effect.
2. The Purchaser is acquiring the Certificates for its own account for
investment only and not with a view to or for sale in connection with any
distribution thereof in any manner that would violate the Act or any
applicable state securities laws.
3. The Purchaser is (a) a substantial, sophisticated institutional
investor having such knowledge and experience in financial and business
matters, and, in particular, in such matters related to securities similar
to the Certificates, such that it is capable of evaluating the merits and
risks of investment in the Certificates, (b) able to bear the economic
risks of such an investment and (c) an "accredited investor" within the
meaning of Rule 501(a) promulgated pursuant to the Act.
4. The Purchaser has been furnished with, and has had an opportunity
to review a copy of the Private Placement Memorandum dated ___________,
_____, relating to the Certificates, the Pooling and Servicing Agreement
and such other information concerning the Certificates, the Mortgage Loans
and the Company as has been requested by the Purchaser from the Company or
the Seller and is relevant to the Purchaser's decision to purchase the
Certificates. The Purchaser has had any questions arising from such review
answered by the Company or the Seller to the satisfaction of the Purchaser.
5. The Purchaser has not and will not nor has it authorized or will it
authorize any person to (a) offer, pledge, sell, dispose of or otherwise
transfer any Certificate, any interest in any Certificate or any other
similar security to any person in any manner, (b) solicit any offer to buy
or to accept a pledge, disposition of other transfer of any Certificate,
any interest in any Certificate or any other similar security from any
person in any manner, (c) otherwise approach or negotiate with respect to
any Certificate, any interest in any Certificate or any other similar
security with any person in any manner, (d) make any general solicitation
by means of general advertising or in any other manner or (e) take any
other action, that (as to any of (a) through (e) above) would constitute a
distribution of any Certificate under the Act, that would render the
disposition of any Certificate a violation of Section 5 of the Act or any
state securities law, or that would require registration or qualification
pursuant thereto. The Purchaser will not sell or otherwise transfer any of
the Certificates, except in compliance with the provisions of the Pooling
and Servicing Agreement.
[6. For Class X Certificates] Either (A) the Purchaser is not an
employee benefit plan or other retirement arrangement subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code")
(collectively, an "ERISA Plan"), and is not acting on behalf of, as named
fiduciary of, as trustee of, or investing the assets of an ERISA Plan, (B)
if the Purchaser is an insurance company, all funds used to purchase the
Class X Certificates are from an "insurance company general account" (as
such term is defined in Section V(e) of Prohibited Transaction Class
Exemption 95-60 ("PTE 95-60"), 60 Fed. Reg. 35925 (July 12, 1995) and there
is no ERISA Plan with respect to which the amount of such general account's
reserves and liabilities for the contract(s) held by or on behalf of such
ERISA Plan and all other ERISA Plans maintained by the same employer (or
affiliate thereof as defined in Section V(a)(1) of PTE 95-60) or by the
same employee organization exceeds 10% of the total of all reserves and
liabilities of such general account (as such amounts are determined under
Section I(a) of PTE 95-60) at the date of acquisition or (C) the Purchaser
has provided a certification of facts and an opinion of counsel which
establish to the satisfaction of the Company and the Trustee that such
transfer will not result in a violation of Section 406 of ERISA or Section
4975 of the Code or cause the Servicer or the Trustee to be deemed a
fiduciary of such ERISA Plan or result in the imposition of an excise tax
under Section 4975 of the Code.
[6. For Class R Certificates] the Purchaser is not an employee benefit
plan or other retirement arrangement subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the
Internal Revenue Code of 1986, as amended (the "Code") (collectively, an
"ERISA Plan"), and is not acting on behalf of, as named fiduciary of, as
trustee of, or investing the assets of an ERISA Plan.
Very truly yours,
By: _________________________________
Name:
Title:
<PAGE>
EXHIBIT M-3
Form of Transferor Representation Letter
___________, 199__
U.S. Bank National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Re: EQCC Home Equity Loan Asset Backed Certificates, Series 1998-3
Ladies and Gentlemen:
In connection with the sale by _____________ (the "Seller") to
__________________ (the "Purchaser") of [$___________ initial Certificate
Principal Balance][_____% Percentage Interest] of EQCC Home Equity Loan Asset
Backed Certificates, Series 1998-3, Class [X][R] (the "Certificates"), issued
pursuant to the Pooling and Servicing Agreement (the "Pooling and Servicing
Agreement"), dated as of September 1, 1998, among U.S. Bank National
Association, as trustee (the "Trustee"), Equicredit Corporation of America, EQCC
Receivables Corporation and EQCC Asset Backed Corporation (collectively, the
"Company"). The Seller hereby certifies, represents and warrants to, and
covenants with, the Company and the Trustee that:
Neither the Seller nor anyone acting on its behalf has (a) offered,
pledged, sold, disposed of or otherwise transferred any Certificate, any
interest in any Certificate or any other similar security to any person in any
manner, (b) has solicited any offer to buy or to accept a pledge, disposition or
other transfer of any Certificate, any interest in any Certificate or any other
similar security from any person in any manner, (c) has otherwise approached or
negotiated with respect to any Certificate, any interest in any Certificate or
any other similar security with any person in any manner, (d) has made any
general solicitation by means of general advertising or in any other manner, or
(e) has taken any other action, that (as to any of (a) through (e) above) would
constitute a distribution of the Certificates under the Securities Act of 1933,
as amended (the "Act"), that would render the disposition of any Certificate a
violation of Section 5 of the Act or any state securities law, or that would
require registration or qualification pursuant thereto. The Seller will not act
in any manner set forth in the foregoing sentence with respect to any
Certificate. The Seller has not and will not sell or otherwise transfer any of
the Certificates, except in compliance with the provisions of the Pooling and
Servicing Agreement.
Very truly yours,
(Seller)
By: __________________________________
Name:
Title:
<PAGE>
EXHIBIT M-4
[FORM OF RULE 144A INVESTMENT REPRESENTATION]
Description of Rule 144A Securities, including numbers:
EQCC Home Equity Loan
Asset Backed Certificates
Series 1998-3, Class ___, No. ___
The undersigned Seller, as registered holder (the "Transferor"), intends to
transfer the Rule 144A Securities described above to the undersigned buyer (the
"Buyer").
1. In connection with such transfer and in accordance with the agreements
pursuant to which the Rule 144A Securities were issued, the Transferor hereby
certifies the following facts: Neither the Transferor nor anyone acting on its
behalf has offered, transferred, pledged, sold or otherwise disposed of the Rule
144A Securities, any interest in the Rule 144A Securities or any other similar
security to, or solicited any offer to buy or accept a transfer, pledge or other
disposition of the Rule 144A Securities, or otherwise approached or negotiated
with respect to the Rule 144A Securities, any interest in the Rule 144A
Securities or any other similar security with, any person in any manner, or made
any general solicitation by means of general advertising or in any other manner,
or taken any other action, which would constitute a distribution of the Rule
144A Securities under the Securities Act of 1933, as amended (the "1933 Act"),
or which would render the disposition of the Rule 144A Securities a violation of
Section 5 of the 1933 Act or require registration pursuant thereto, and that the
Transferor has not offered the Rule 144A Securities to any person other than the
Buyer or another "qualified institutional buyer" as defined in Rule 144A under
the 1933 Act.
2. The Buyer warrants and represents to, and covenants with, the
Transferor, the Trustee and the Servicer pursuant to Section 4.02 of the Pooling
and Servicing Agreement as follows:
a. The Buyer understands that the Rule 144A Securities have not been
registered under the 1933 Act or the securities laws of any state.
b. The Buyer considers itself a substantial, sophisticated
institutional investor having such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and risks
of investment in the Rule 144A Securities.
c. The Buyer has been furnished with all information regarding the
Rule 144A Securities that it has requested from the Transferor, the Trustee
or the Servicer.
d. Neither the Buyer nor anyone acting on its behalf has offered,
transferred, pledged, sold or otherwise disposed of the Rule 144A
Securities, any interest in the Rule 144A Securities or any other similar
security to, or solicited any offer to buy or accept a transfer, pledge or
other disposition of the Rule 144A Securities, any interest in the Rule
144A Securities or any other similar security from, or otherwise approached
or negotiated with respect to the Rule 144A Securities, any interest in the
Rule 144A Securities or any other similar security with, any person in any
manner, or made any general solicitation by means of general advertising or
in any other manner, or taken any other action, that would constitute a
distribution of the Rule 144A Securities under the 1933 Act or that would
render the disposition of the Rule 144A Securities a violation of Section 5
of the 1933 Act or require registration pursuant thereto, nor will it act,
nor has it authorized or will it authorize any person to act, in such
manner with respect to the Rule 144A Securities.
e. The Buyer is a "qualified institutional buyer" as that term is
defined in Rule 144A under the 1933 Act. The Buyer is aware that the sale
to it is being made in reliance on Rule 144A. The Buyer is acquiring the
Rule 144A Securities for its own account or the account of other qualified
institutional buyers, understands that such Rule 144A Securities may be
resold, pledged or transferred only (i) to a person reasonably believed to
be a qualified institutional buyer that purchases for its own account or
for the account of a qualified institutional buyer to whom notice is given
that the resale, pledge or transfer is being made in reliance on Rule 144A,
or (ii) pursuant to another exemption from registration under the 1933 Act.
3. The Buyer warrants and represents to, and covenants with, the
Transferor, the Servicer and the Representative that the Buyer is not an
employee benefit plan or other retirement arrangement subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of
the Internal Revenue Code of 1986, as amended (the "Code") (collectively, an
"ERISA Plan"), and is not acting on behalf of, as named fiduciary of, as trustee
of, or investing the assets of an ERISA Plan.
4. This document may be executed in one or more counterparts and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same document.
<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this document as of
the date set forth below.
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------- -------------------------------------------------
Print Name of Transferor Print Name of Buyer
By:______________________________________________ By:______________________________________________
Name: Name:
Title Title
Taxpayer Identification: Taxpayer Identification:
No. _____________________________________________ No. _____________________________________________
Date:____________________________________________ Date:____________________________________________
</TABLE>
<PAGE>
EXHIBIT N
FORM OF CUSTODIAL AGREEMENT
(See Item 4)
<PAGE>
EXHIBIT O
FORM OF LIQUIDATION REPORT
Customer Name:
Account Number:
Original Principal Balance:
1. Liquidation Proceeds
Principal Prepayment $ ________
Property Sale Proceeds ________
Insurance Proceeds ________
Other (Itemize) ________
Total Proceeds $_______
2. Servicing Advances $ ________
Monthly Advances ________
Servicing Fees ________
Total Advances $_______
3. Net Liquidation Proceeds $_______
(Line 1 minus Line 2)
4. Principal Balance of the Mortgage $_______
Loan on date of liquidation
5. Loss, if any $_______
(Line 4 minus Line 3)
<PAGE>
EXHIBIT P
PRINCIPAL AND INTEREST ACCOUNT LETTER AGREEMENT
(date)
To: (the "Account Depository")
As "Servicer" under the Pooling and Servicing Agreement, dated as of
September 1, 1998 (the "Agreement") with respect to EQCC Home Equity Loan Asset
Backed Certificates, Series 1998-3, Class A-1F, Class A-1A, Class X and Class R
(collectively, the "Certificates"), we hereby authorize and request you to
establish an account, as a Principal and Interest Account pursuant to Section
5.03 of the Agreement, in the name of U.S. Bank National Association and to be
titled "EQCC Home Equity Loan Trust, Series 1998-3 Principal and Interest
Account". The Principal and Interest Account shall bear an additional
designation clearly indicating that the funds deposited therein are held for the
Trustee for the benefit of the holders of the Certificates. All deposits in the
account shall be subject to withdrawal therefrom by order signed by the
Servicer. You may refuse any deposit which would result in violation of the
requirement that the account be fully insured as described below. This letter is
submitted to you in duplicate.
Please execute and return one original to us.
EQUICREDIT CORPORATION OF AMERICA
By:______________________________
Name:
Title:
The undersigned, as Account Depository, hereby certifies that the above
described account has been established under Account Number ___________, at the
office of the depository indicated above, and agrees to honor withdrawals on
such account as provided above. The amounts deposited at any time in the account
will be insured to the maximum amount provided by applicable law by the Bank
Insurance Fund or the Savings Association Insurance Fund of the Federal Deposit
Insurance Corporation.
(Name of Account Depository)
By:_________________________
Name:
Title:
<PAGE>
EXHIBIT Q
FORM OF NOTICE
TO: Ambac Assurance Corporation
One State Street Plaza
New York, New York 10004
Attention: General Counsel
Telephone: (212) 668-0340
Telecopier: (212) 363-1459
RE: EQCC Home Equity Loan Asset Backed Certificates, Series 1998-3, Class
A-1F, Class A-1A,
Policy No. __________
Determination Date:
Payment Date:
We refer to that certain Pooling and Servicing Agreement among Credit
Corporation of America, the Depositors listed therein and U.S. Bank National
Association, as trustee, relating to EQCC Home Equity Loan Asset Backed
Certificates, Series 1998-3, Class A-1F, Class A-1A, Class X and Class R (the
"Pooling and Servicing Agreement") dated as of September 1, 1998; all
capitalized terms not otherwise defined herein shall have the same respective
meanings as set forth in such Pooling and Servicing Agreement.
As of the Determination Date, the Trustee has determined under the Pooling and
Servicing Agreement and hereby certifies that in respect of the related Payment
Date:
(i) The Insured Class A Remittance Amount ($__________) exclusive of amounts
attributable to clause (iv) of the definition of "Basic Principal Amount,"
to the extent such amount is due but not paid by the Representative, the
Depositors or the Originators.
(ii) The Available Payment Amount is $______________ and the amount of Excess
Spread on deposit in the Collection Account is $_____________ (less
$_____________, the amounts to be withdrawn for deposit into the Insurance
Account or Spread Account pursuant to Sections 6.02(i) and (iii) of the
Pooling and Servicing Agreement).
(iii)$_____________, amounts previously paid to Class A Certificateholders as
Insured Payments.
(iv) The amount that has been deposited in the Collection Account but may not be
withdrawn therefrom pursuant to an order of a United States bankruptcy
court of competent jurisdiction imposing a stay pursuant to Section 362 of
the United States Bankruptcy Code and would otherwise have constituted all
or a portion of the amount described in Item (ii) above is
$_______________.
(v) The excess of the amount stated in (i), above, over the amount stated in
(ii), above, less the amount described in (iii), above, less the amount
stated in (iv) above is $_________________.
(vi) Monthly installments of principal and interest on the Mortgage Loans that
were due during the Due Period related to this Payment Date and were not
received prior to this Payment Date equal $-------------.
(vii)In accordance with the above and the Agreement, the Insured Payment is
$_________________.
[Attached hereto is a copy of the court order in connection with a voidable
preference that constitutes a component of the Class A Principal Remittance
Amount in the amount set forth therein.]
Accordingly, an Event of Nonpayment has occurred and, pursuant to Section 6.05
of the Pooling and Servicing Agreement, this statement constitutes a claim for
an Insured Payment in the amount of $__________ under the Insurance Policy.
Any person who knowingly and with intent to defraud any insurance company or
other person files an application for insurance or statement of claim containing
any materially false information, or conceals for the purpose of misleading,
information concerning any fact material thereto, commits a fraudulent insurance
act, which is a crime, and shall also be subject to a civil penalty not to
exceed Five Thousand ($5,000.00) Dollars and the stated value of the claim for
each such violation.
The amount claimed should be paid as follows:
===========================
===========================
___________, as Trustee
By: ________________________
Name:______________________
Title:_______________________
Telephone #:_________________
For Ambac Assurance Corporation Use Only
Wire Transfer Sent On:
By:___________________________
Confirmation Number:
<PAGE>
EXHIBIT R
MONTHLY INFORMATION DELIVERED BY SERVICER
1. With respect to the Mortgage Pool and each Mortgage Loan Group, the number
and Principal Balances of all Mortgage Loans which were the subject of
Principal Prepayments during the related Due Period.
2. With respect to the Mortgage Pool and each Mortgage Loan Group, the amount
of all Curtailments which were received during the related Due Period.
3. With respect to the Mortgage Pool and each Mortgage Loan Group, the
aggregate amount of principal portion of all Monthly Payments received
during the related Due Period.
4. With respect to the Mortgage Pool and each Mortgage Loan Group, the amount
of interest received on the Mortgage Loans during the related Due Period.
5. With respect to the Mortgage Pool and each Mortgage Loan Group, the
aggregate amount of the Advances made and recovered with respect to such
Payment Date.
6. With respect to the Mortgage Pool and each Mortgage Loan Group, the
delinquency and foreclosure information set forth in Exhibit H to the
Pooling and Servicing Agreement and the amount of Mortgage Loan Losses
during the related Due Period.
7. With respect to the Mortgage Pool and each Mortgage Loan Group, the
weighted average maturity, the weighted average Mortgage Interest Rate and
the weighted average Net Mortgage Interest Rate as of the last day of the
Due Period preceding of the related Accrual Period.
8. The Servicing Fees paid and Servicing Fees accrued during the related Due
Period.
9. The amount of all payments or reimbursements to the Servicer pursuant to
Section 5.04 (ii), (iv), (v), (vi) and (vii) paid or to be paid since the
prior Payment Date (or in the case of the first Payment Date, since the
Closing Date).
10. The Pool Principal Balance and aggregate Principal Balance for each
Mortgage Loan Group.
11. Such other information as the Certificate Insurer, each Account Party and
the Certificateholders may reasonably require.
12. The amounts which are reimbursable to the Servicer, the Representative or
the Depositors, as appropriate, pursuant to Section 6.05.
13. With respect to the Mortgage Pool and each Mortgage Loan Group, the number
of Mortgage Loans outstanding at the beginning and at the end of the
related Due Period.
14. The aggregate interest accrued on the Mortgage Loans at their respective
Mortgage Interest Rates for the related Due Period.
15. The amount deposited in the Collection Account which may not be withdrawn
therefrom pursuant to an Order of a United States Bankruptcy Court of
competent jurisdiction imposing a stay pursuant to Section 362 of U.S.
Bankruptcy Code.
16. The Principal Balance of Mortgage Loans in the Fixed Rate Group with
Mortgage Interest Rates less than [___]% per annum.
17. The aggregate Mortgage Loan Losses since the Cut-off Date as of the end of
the related Due Period.
18. The LIBOR Interest Carryover with respect to such Payment Date.
19. The Yield Supplement Carryover with respect to such Payment Date.
20. The Class A-1F Insured Interest Remittance Amount.
<PAGE>
EXHIBIT S
LIST OF DELINQUENT LOANS
<PAGE>
EXHIBIT T
SCHEDULE OF MORTGAGE LOANS SUBJECT TO
THE HOME OWNERSHIP AND EQUITY PROTECTION ACT OF 1994
NOTICE: Each Mortgage Loan listed on this Mortgage Loan Schedule is subject to
special rules under the federal Truth in Lending Act. Purchasers or assignees of
a Mortgage Loan listed on this Mortgage Loan Schedule could be liable for all
claims and defenses with respect to such Mortgage Loan that the related
Mortgagor could assert against the original lender.
<PAGE>
EXHIBIT U
LOST NOTE AND/OR MORTGAGE/DEED OF TRUST AFFIDAVIT
State of ____________________ Account #_______________
County of __________________
TO WIT:
Comes the affiant, _____________________________________________ (Name/Title) of
__________________________________________________________________________,
after being duly sworn by me, _________________________________________________,
and in my presence, a Notary Public in and for the county and state aforesaid
states that __________________________________
________________________________________ is the Noteholder or lien creditor,
under a certain Mortgage/Deed of Trust from ___________________________________
to _____________________________________, dated ____________________________ and
recorded in the Clerk's Office of the Circuit Court of the County of
____________________, State of ____________________ in Deed Book No.
_________________ at Page _____________, as Instrument Number __________________
to secure $ _______________, and that said _____________ Note __________
Mortgage evidencing the debt has been inadvertently lost or destroyed and cannot
be produced.
By:____________________________________
Name:
Title:
State of ____________________
County of __________________
The foregoing instrument was acknowledged before me this __________ day of
________________, 19__ By________________________________________.
Notary Public
<PAGE>
EXHIBIT V
SCHEDULE OF MORTGAGE LOANS THAT DO NOT
HAVE TITLE INSURANCE POLICIES
[No Mortgage Loans without Title Insurance as of the Closing Date]
<PAGE>
EXHIBIT W
YIELD SUPPLEMENT AGREEMENT
<PAGE>
EXHIBIT X
YIELD SUPPLEMENT COUNTERPARTY NOTIFICATION FORM
______________ __, 19__
NationsBanc Financial Products, Inc.
233 South Wacker Drive
Suite 2800
Chicago, Illinois 60606
RE: EQCC Home Equity Loan Asset Backed Certificates, Series 1998-3, Class
A-1F
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CLASS A-1F PRINCIPAL NUMBER OF DAYS IN ACCRUAL
PAYMENT DATE LIBOR BALANCE PERIOD
U.S. BANK NATIONAL ASSOCIATION
______________________________
</TABLE>
Ambac Assurance Corporation
c/o CT Corporation Systems
44 East Mifflin Street
Madison, Wisconsin 53703
Administrative Office:
One State Street Plaza
New York, New York 10004
Telephone: (212) 688-0340
Surety Bond
Issuer: EQCC Home Equity Loan Trust 1998-3 Policy Number: AB0197BE
Insured Obligations:
$745,850,848 aggregate principal
amount of EQCC Home Equity Loan
Asset Backed Certificates, Series
1998-3, Class A-1F, Class A-1A (the
"Certificates")
Trustee: U.S. Bank National Association
Ambac Assurance Corporation ("Ambac"), a Wisconsin stock insurance company, in
consideration of its receipt of the Deposit Premium and subject to the terms of
this Surety Bond, hereby unconditionally and irrevocably agrees to pay each
Insured Payment to the Trustee name above or its successor, as trustee for the
Certificates, to the extent set forth in the Pooling and Servicing Agreement,
dated as of September 1, 1998, by and among EQCC Receivables Corporation and
EQCC Asset Backed Corporation, as Depositors, EquiCredit Corporation of America,
as Representative and Servicer, and U.S. Bank National Association, as Trustee
(the "Pooling and Servicing Agreement").
Ambac will make an Insured Payment out of its own funds by 12:00 noon (New York
City time) in immediately available funds to the Trustee on the later of (i) the
Business Day next following the day on which Ambac shall have received Notice
that an Insured Payment is due and (ii) the Payment Date on which the Insured
Payment is distributable to Certificateholders pursuant to the Pooling and
Service Agreement, for disbursement to such Certificateholders in the same
manner as other payments with respect to the Certificates are required to be
made. Any Notice received by Ambac after 12:00 noon New York City time on a
given Business Day or on any day that is not a Business Day shall be deemed to
have been received by Ambac on the next succeeding Business Day.
Upon such payment, Ambac shall be fully subrogated to the rights of the
Certificateholders to receive the amount so paid. Ambac's obligations hereunder
with respect to each Payment Date shall be discharged to the extent funds
consisting of the Insured Payment are received by the Trustee on behalf of the
Certificateholders for distribution of such Certificateholders, as provided in
the Pooling and Servicing Agreement and herein, whether or not such funds are
properly applied by the Trustee. This Surety Bond is non-cancelable for any
reason, including nonpayment of any premium. The premium on this Surety Bond is
not refundable for any reason, including the payment of the payment of the
Certificates prior to their respective maturities. This Surety Bond shall expire
and terminate without any action on the part of Ambac or any other Person on the
date that is one year and one day following the date on which the Certificates
shall have been paid in full.
The "Deposit Premium" shall be due and payable on the date hereof, as provided
in a letter agreement of even date herewith among Ambac and the Depositors, and
a monthly premium shall be due and payable as provided in the Pooling and
Servicing Agreement.
This Surety Bond is subject to and shall be governed by the laws of the State of
New York. The insurance provided by this Surety Bond is not covered by the New
York Property/Casualty Insurance Security Fund (New York Insurance Law, Article
76).
Capitalized terms used and not defined herein shall have respective meanings set
forth in the Pooling and Servicing Agreement. "Notice" means written notice in
the form of Exhibit Q to the Pooling and Servicing Agreement by registered or
certified mail or telephonic or telegraphic notice, subsequently confirmed by
written notice delivered via telecopy, telex or hand delivery from the Trustee
to Ambac specifying the information set forth therein. "Certificateholder"
means, as to a particular Certificate, the person, other than the Trust, the
Servicer, any Subservicer or the Representative or any Depositor who, on the
applicable Payment Date, is entitled under the terms of such Certificate to
payment thereof.
In the event that payments under any Certificate ARE accelerated, nothing herein
contained shall obligate Ambac to make any payment of principal or interest on
such Certificates on an accelerated basis, unless such acceleration of payment
by Ambac is at the sole option of Ambac.
IN WITNESS WHEREOF, Ambac has caused this Surety Bond to be signed by its duly
authorized officer in to become effective and binding upon Ambac by virtue of
the countersignature of its duly authorized representative.
/s./ Warren Tong /s./ Laura L Kegg
- ------------------------------ -----------------------------
First Vice President Authorized Representative
Effective Date: September 25, 1998
NationsBanc Financial Products, Inc.
A subsidiary of NationsBank, N.A.
233 South Wacker Drive, Suite 2800
Chicago, Illinois 60606
Tel 312-234-2934
Fax 112-234-3160
NationsBank
TO: EQCC Home Equity Loan Trust 1998-3
U.S. Bank National Association, as Trustee
111 E. Wacker Drive, Suite 3000
Chicago, IL 60601
ATTN: Mellissa Rosal
TEL: 312-228-9416
FAX: 312-228-9401
FROM: NationsBanc Financial Products, Inc.
233 South Wacker Drive - Suite 2800
Chicago, Illinois 60606
Date: 23 Sep 98 (REV. 24SEP98)
Our Reference No. 201139 10850 841740 283711
THIS CONFIRMATION SUPERSEDES AND REPLACES ANY PREVIOUSLY SENT CONFIRMATION OF
THIS TRANSACTION.
The purpose of this letter agreement is to confirm the terms and conditions of
the Rate Cap Transaction entered into between us on the Trade Date specified
below (the "Transaction"). This letter agreement constitutes a "Confirmation" as
referred to in the ISDA Master Agreement specified below.
1. The definitions and provisions contained in the 1991 ISDA Definitions (as
published by the International Swaps and Derivatives Association, Inc.) (the
"Definitions") are incorporated into this Confirmation. In the event of any
inconsistency between the Definitions and this Confirmation, this Confirmation
will govern. Each party represents and warrants to the other that (i) it is duly
authorized to enter into this Transaction and to perform its obligations
hereunder and (ii) the person executing this Confirmation is duly authorized to
execute and deliver it.
2. This Confirmation supplements, forms part of, and is subject to, the ISDA
Master Agreement between us dated as of September 15, 1998. All provisions
contained or incorporated by reference in the Master Agreement shall govern this
Confirmation except as expressly modified below. Any capitalized terms used
herein but not otherwise defined herein shall have the respective meaning
ascribed to them in the Pooling and Servicing Agreement, dated as of September
1, 1998, among EQCC Receivables Corporation and EQCC Asset Backed Corporation
(the "Depositors"), EquiCredit Corporation of America (the "Representative" and
"Servicer") and U.S. Bank National Association (the "Trustee") (the "Pooling and
Servicing Agreement") or the Definitions or the ISDA Master Agreement. In the
event of any inconsistency between the Definitions or the ISDA Master Agreement
and this Confirmation, this Confirmation will govern.
3. The terms of the Transaction to which this Confirmation relates are as
follows:
In this Confirmation "Party A" means NationsBanc Financial Products, Inc. and
"Party B" means EQCC Home Equity Loan Trust 1998-3.
4. The terms of this Transaction to which this Confirmation relates are as
follows:
Calculation Agent: Party A
Notional Amount: USD 706,599,708.00, subject to reduction as
provided below
Effective Date: 25SEP98
Termination Date: The earlier to occur of (i) the Payment Date on
which the Class A-1 F Certificates are paid in
full, and (ii) the Final Scheduled Payment Date of
the Class A-1 F Certificates in either case after
payment of the amount due hereunder on such date.
Trade Date: 23SEP98
Fixed Amounts:
Fixed Amount Payer: Party B
Fixed Amount Payer
Payment Dates: 25SEP98
Fixed Amount: USD [INTENTIONALLY OMITTED]
Floating Amounts:
Notional Amount: USD 706,599,708.00, subject to reduction as
provided below
Floating Rate Payer: Party A
Reset Dates: The First Day of the Accrual Period (as defined in
the Pooling and Servicing Agreement)
Floating Rate Payer
Floating Rate Option
Determination Date: The LIBOR Determination Date (as defined in the
Pooling and Servicing Agreement)
Floating Rate Payer
Payment Dates: Monthly, on each Payment Date by 11:00 a.m. New
York time commencing October 15, 1998, subject to
adjustment in accordance with the Following
Business Day Convention.
Cap Rate: 5.59375%
Business Days: New York, Illinois, Florida
Floating Rate Option: USD-LIBOR-BBA
Designated Maturity
of the Floating Rate
Option: 1 Month
Spread: None
Floating Rate for the
Initial Calculation
Period: 5.59375%
Adjustment to Notional
Amount: The Notional Amount of the Transaction shall be
reduced each Accrual Period, if necessary, to
equal the outstanding principal balance of the
Class A-1 F Certificates issued by the EQCC Home
Equity Loan Trust 1998-3 pursuant to the Pooling
and Servicing Agreement as of the first day of the
then current Accrual Period for the Class A-1 F
Certificates. The parties acknowledge that (i)
such reduction shall equal the amount of the
principal payments as of the prior Payment Date
and (ii) the Notional Amount of any Accrual Period
may never exceed the Notional Amount in effect
during a prior Accrual Period.
Day Count Fraction: Actual/360
Averaging: Inapplicable
5. Recording of
Conversations: Each party to this Transaction acknowledges and
agrees to the tape recording of conversations
between the parties to this Transaction whether by
one or other or both of the parties or their
agents, and that any such tape recordings may be
submitted in evidence in any Proceedings relating
to the Agreement and/or this Transaction.
6. Account Details:
Payments to NationsBanc Financial Products, Inc.:
NATIONSBANK, TEXAS
ABA # 111 000 012
A/C 3750631674
ATTN: NATIONSBANC FINANCIAL PRODUCTS
Payments to EQCC Home Equity Loan Trust 1998-3
NAME: U.S. BANK NATIONAL ASSOCIATION
CITY: CHICAGO
ABA/SORT: 091000022
NAME: EQCC HOME EQUITY LOAN TRUST 1998-3
ACCT: 180121167365 U.S. Bank Trust
for further credit to A/C: 47300121 U.S. Bank Trust IL
ATTN: EQCC 1998-3 COLLECTION ACCOUNT #77085262,
ATTN: M. ROSAL
7. Offices:
The Office of NationsBanc Financial Products Inc. for this Swap Transaction
is: Charlotte, NC
The Office of EQCC Home Equity Loan Trust 1998-3 for this Swap Transaction
is: Chicago, IL
8. Governing Law: The Laws of the State of New York
Credit Support Document: As per Agreement (and Credit Support Annex if
applicable).
Please confirm that the foregoing correctly sets forth the terms and
conditions of our Agreement by responding within three (3) Business Days by
returning via telecopier an executed copy of this Confirmation to the attention
of Swaps Documentation Group at Fax No. (312) 234-2543 or (312) 234-3160.
Failure to respond within such period shall not affect the validity or
enforceability of this Transaction, and shall be deemed to be an affirmation of
the terms and conditions contained herein, absent manifest error.
Yours Sincerely,
NationsBanc Financial Products, Inc.
By: /s./ Erroll Pessotto
-------------------------------
Erroll Pessotto
Vice President
Accepted and confirmed as of the date first written:
EQCC Home Equity Loan Trust 1998-3
U.S. Bank National Association, as Trustee
By: /s./ Melissa Rosal
-------------------------------
Name: Melissa Rosal
Title: Vice President
Our Reference # 201139 10850
REV. 24SEP98
<PAGE>
Copyright (c)1992 by International Swap Dealers Association, Inc.
(Multicurrency-Cross Border)
ISDA
International Swap Dealers Association, Inc.
MASTER AGREEMENT
dated as of September 15, 1998
NationsBanc Financial Products, Inc. and EQCC Home Equity Loan Trust 1998-3 have
entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master Agreement, which
includes the schedule (the "Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties confirming those
Transactions.
Accordingly, the parties agree as follows:--
1. Interpretation
(a) Definitions. The terms defined in Section 14 and in the Schedule will have
the meanings therein specified for the purpose of this Master Agreement.
(b) Inconsistency. In the event of any inconsistency between the provisions of
the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purpose of the relevant Transaction.
(c) Single Agreement. All Transactions are entered into in reliance on the fact
that this Master Agreement and all Confirmations form a single agreement between
the parties (collectively referred to as this "Agreement"), and the parties
would not otherwise enter into any Transactions.
2. Obligations
(a) General Conditions.
(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of this
Agreement.
(ii) Payments under this Agreement will be made on the due date for
value on that date in the place of the account specified in the relevant
Confirmation or otherwise pursuant to this Agreement, in freely
transferable funds and in the manner customary for payments in the required
currency. Where settlement is by delivery (that is, other than by payment),
such delivery will be made for receipt on the due date in the manner
customary for the relevant obligation unless otherwise specified in the
relevant Confirmation or elsewhere in this Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject
to (1) the condition precedent that no Event of Default or Potential Event
of Default with respect to the other party has occurred and is continuing,
(2) the condition precedent that no Early Termination Date in respect of
the relevant Transaction has occurred or been effectively designated and
(3) each other applicable condition precedent specified in this Agreement.
(b) Change of Account. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to which
such change applies unless such other party gives timely notice of a reasonable
objection to such change.
(c) Netting. If on any date amounts would otherwise be payable:--
(i) in the same currency; and
(ii) in respect of the same Transaction,
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be made
in the Schedule or a Confirmation by specifying that subparagraph (ii) above
will not apply to the Transactions identified as being subject to the election,
together with the starting date (in which case subparagraph (ii) above will not,
or will cease to, apply to such Transactions from such date). This election may
be made separately for different groups of Transactions and will apply
separately to each pairing of Offices through which the parties make and receive
payments or deliveries.
(d) Deduction or Withholding for Tax.
(i) Gross-Up. All payments under this Agreement will be made without
any deduction or withholding for or on account of any Tax unless such
deduction or withholding is required by any applicable law, as modified by
the practice of any relevant governmental revenue authority, then in
effect. If a party is so required to deduct or withhold, then that party
("X") will:--
(1) promptly notify the other party ("Y") of such requirement;
(2) pay to the relevant authorities the full amount required to be
deducted or withheld (including the full amount required to be
deducted or withheld from any additional amount paid by X to Y under
this Section 2(d)) promptly upon the earlier of determining that such
deduction or withholding is required or receiving notice that such
amount has been assessed against Y;
(3) promptly forward to Y an official receipt (or a certified copy),
or other documentation reasonably acceptable to Y, evidencing such
payment to such authorities; and
(4) if such Tax is to Indemnifiable Tax, pay to Y, in addition to the
payment to which Y is otherwise entitled under this Agreement, such
additional amount as is necessary to ensure that the net amount
actually received by Y (free and clear of Indemnifiable Taxes, whether
assessed against X or Y) will equal the full amount Y would have
received had no such deduction or withholding been required. However,
X will not be required to pay any additional amount to Y to the extent
that it would not be required to be paid but for:--
(A) the failure by Y to comply with or perform any agreement
contained in Section 4(a)(i), 4(a)(iii) or 4(d); or
(B) the failure of a representation made by Y pursuant to Section
3(f) to be accurate and true unless such failure would not have
occurred but for (I) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the
date on which a Transaction is entered into (regardless of
whether such action is taken or brought with respect to a party
to this Agreement) or (II) a Change in Tax Law.
(ii) Liability. If:--
(1) X is required by any applicable law, as modified by the practice
of any relevant governmental revenue authority, to make any deduction
or withholding in respect of which X would not be required to pay an
additional amount to Y under Section 2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed directly against
X,
then, except to the extent Y has satisfied or then satisfies the
liability resulting from such Tax, Y will promptly pay to X the amount
of such liability (including any related liability for interest, but
including any related liability for penalties only if Y has failed to
comply with or perform any agreement contained in Section 4(a)(i),
4(a)(iii) or 4(d)).
(e) Default Interest; Other Amounts. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant Transaction,
a party that defaults in the performance of any payment obligation will, to the
extent permitted by law and subject to Section 6(c), be required to pay interest
(before as well as after judgment) on the overdue amount to the other party on
demand in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the date of
actual payment, at the Default Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed. If, prior to
the occurrence or effective designation of an Early Termination Date in respect
of the relevant Transaction, a party defaults in the performance of any
obligation required to be settled by delivery, it will compensate the other
party on demand if and to the extent provided for in the relevant Confirmation
or elsewhere in this Agreement.
3. Representations
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered into
and, in the case of the representations in Section 3(f), at all times until the
termination of this Agreement) that:--
(a) Basic Representations.
(i) Status. It is duly organised and validly existing under the laws of the
jurisdiction of its organisation or incorporation and, if relevant under
such laws, in good standing;
(ii) Powers. It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party, to deliver
this Agreement and any other documentation relating to this Agreement that
it is required by this Agreement to deliver and to perform its obligations
under this Agreement and any obligations it has under any Credit Support
Document to which it is a party and has taken all necessary action to
authorize such execution, delivery and performance;
(iii) No Violation or Conflict. Such execution, delivery and performance do
not violate or conflict with any law applicable to any provision of its
constitutional documents, any order or judgment of any court or other
agency of government applicable to it or any of its assets or any
contractual restriction binding on or affecting it or any of its assets;
(iv) Consents. All governmental and other consents that are required to
have been obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party have been obtained and are in full
force and effect and all conditions of any such consents have been complied
with; and
(v) Obligations Binding. Its obligations under this Agreement and any
Credit Support Document to which it is a party constitute its legal, valid
and binding obligations, enforceable in accordance with their respective
terms (subject to applicable bankruptcy, reorganisation, insolvency,
moratorium or similar laws affecting, creditors' rights generally and
subject, as to enforceability, to equitable principles of general
application (regardless of whether enforcement is sought in a proceeding in
equity or at law)).
(b) Absence of Certain Events. No Event of Default or Potential Event of Default
or, to its knowledge, Termination Event with respect to it has occurred and is
continuing and no such event or circumstance would occur as a result of its
entering into or performing its obligations under this Agreement or any Credit
Support Document to which it is a party.
(c) Absence of Litigation. There is not pending or, to its knowledge, threatened
against it or any of its Affiliates any action, suit or proceeding at law or in
equity or before any court, tribunal, governmental body, agency or official or
any arbitrator that is likely to affect the legality, validity or enforceability
against it of this Agreement or any Credit Support Document to which it is a
party or its ability to perform its obligations under this Agreement or such
Credit Support Document.
(d) Accuracy of Specified Information. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.
(e) Payer Tax Representation. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(e) is accurate and true.
(f) Payee Tax Representations. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(f) is accurate and true.
4. Agreements
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:--
(a) Furnish Specified Information. It will deliver to the other party or, in
certain cases under subparagraph (iii) below, to such Government or taxing
authority as the other party reasonably directs:--
(i) any forms, documents or certificates relating to taxation specified in
the Schedule or any Confirmation;
(ii) any other documents specified in the Schedule or any Confirmation; and
(iii) upon reasonable demand by such other party, any form or document that
may be required or reasonably requested in writing in order to allow such
other party or its Credit Support Provider to make a payment under this
Agreement or any applicable Credit Support Document without any deduction
or withholding for or on account of any Tax or with such deduction or
withholding at a reduction rate (so long as the completion, execution or
submission of such form or document would not materially prejudice the
legal or commercial position of the party in receipt of such demand), with
any such form or document to be accurate and completed in a manner
reasonably satisfactory to such other party and to be executed and to be
delivered with any reasonably required certification,
in each case by the date specified in the Schedule or such Confirmation or, if
none is specified, as soon as reasonably practicable.
(b) Maintain Authorisations. It will use all reasonable efforts to maintain in
full force and effect all consents of any governmental or other authority that
are required to be obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party and will use all reasonable efforts to
obtain any that may become necessary in the future.
(c) Comply with Laws. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.
(d) Tax Agreement. It will give notice of any failure of a representation made
by it under Section 3(f) to be accurate and true promptly upon learning of such
failure.
(e) Payment of Stamp Tax. Subject to Section 11, it will pay any Stamp Tax
levied or imposed upon it or in respect of its execution or performance of this
Agreement by a jurisdiction in which it is incorporated, organised, managed and
controlled, or considered to have its seat, or in which a branch or office
through which it is acting for the purpose of this Agreement is located ("Stamp
Tax Jurisdiction") and will indemnify the other party against any Stamp Tax
levied or imposed upon the other party or in respect of the other party's
execution or performance of this Agreement by any such Stamp Tax Jurisdiction
which is not also a Stamp Tax Jurisdiction with respect to the other party.
5. Events of Default and Termination Events
(a) Events of Default. The occurrence at any time with respect to a party or, if
applicable, any Credit Support Provider of such party or any Specified Entity of
such party of any of the following events constitutes an event of default (an
"Event of Default") with respect to such party:--
(i) Failure to Pay or Deliver. Failure by the party to make, when due, any
payment under this Agreement or delivery under Section 2(a)(i) or 2(e)
required to be made by it if such failure is not remedied on or before the
third Local Business Day after notice of such failure is given to the
party;
(ii) Breach of Agreement. Failure by the party to comply with or perform
any agreement or obligation (other than an obligation to make any payment
under this Agreement or delivery under Section 2(a)(i) or 2(e) or to give
notice of a Termination Event or any agreement or obligation under Section
4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the party
in accordance with this Agreement if such failure is not remedied on or
before the thirtieth day after notice of such failure is given to the
party;
(iii) Credit Support Default.
(1) Failure by the party or any Credit Support Provider of such party
to comply with or perform any agreement or obligation to be complied
with or performed by it in accordance with any Credit Support Document
if such failure is continuing after any applicable grace period has
elapsed;
(2) the expiration or termination of such Credit Support Document or
the failing or ceasing of such Credit Support Document to be in full
force and effect for the purpose of this Agreement (in either case
other than in accordance with its terms) prior to the satisfaction of
all obligations of such party under each Transaction to which such
Credit Support Document relates without the written consent of the
other party; or
(3) the party or such Credit Support Provider disaffirms, disclaims,
repudiates or rejects, in whole or in part, or challenges the validity
of, such Credit Support Document;
(iv) Misrepresentation. A representation (other than a representation under
Section 3(e) or (f)) made or repeated or deemed to have been made or
repeated by the party or any Credit Support Provider of such party in this
Agreement or any Credit Support Document proves to have been incorrect or
misleading in any material respect when made or repeated or deemed to have
been made or repeated;
(v) Default under Specified Transaction. The party, any Credit Support
Provider of such party or any applicable Specified Entity of such party (1)
defaults under a Specified Transaction and, after giving effect to any
applicable notice requirement or grace period, there occurs a liquidation
of, an acceleration of obligations under, or an early termination of, that
Specified Transaction, (2) defaults, after giving effect to any applicable
notice requirement or grace period, in making any payment or delivery due
on the last payment delivery or exchange date of, or any payment on early
termination of, a Specified Transaction (or such default continues for at
least Three Local Business Days if there is no applicable notice
requirement or grace period) or (3) disaffirms, disclaims, repudiates or
rejects, in whole or in part, a Specified Transaction (or such action is
taken by any person or entity appointed or empowered to operate it or act
on its behalf);
(vi) Cross Default. If "Cross Default" is specified in the Schedule as
applying to the party, the occurrence or existence of (1) a default, event
of default or other similar condition or event (however described) in
respect of such party, any Credit Support Provider of such party or any
applicable Specified Entity of such party under one or more agreements or
instruments relating to Specified Indebtedness of any of them (individually
or collectively) in an aggregate amount of not less than the applicable
Threshold Amount (as specified in the Schedule) which has resulted in such
Specified Indebtedness becoming, or becoming capable at such time of being
declared, due and payable under such agreements or instruments, before it
would otherwise have been due and payable or (2) a default by such party,
such Credit Support Provider or such Specified Entity (individually or
collectively) in making one or more payments on the due date thereof in an
aggregate amount of not less than the applicable Threshold Amount under
such agreements or instruments (after giving effect to any applicable
notice requirement or grace period);
(vii) Bankruptcy. The party, any Credit Support Provider of such party or
any applicable Specified Entity of such party:--
(1) is dissolved (other than pursuant to a consolidation, amalgamation
or merger); (2) becomes insolvent or is unable to pay its debts or
fails or admits in writing its inability generally to pay its debts as
they become due; (3) makes a general assignment, arrangement or
composition with or for the benefit of its creditors; (4) institutes
or has instituted against it a proceeding seeking a judgment of
insolvency or bankruptcy or any other relief under any bankruptcy or
insolvency law or other similar law affecting creditors' rights, or a
petition is presented for its winding-up or liquidation, and, in the
case of any such proceeding or petition instituted or presented
against it, such proceeding or petition (A) results in a judgment of
insolvency or bankruptcy or the entry of an order for relief or the
making of an order for its winding-up or liquidation or (B) is not
dismissed, discharged, stayed or restrained in each case within 30
days of the institution or presentation thereof; (5) has a resolution
passed for its winding-up, official management or liquidation (other
than pursuant to a consolidation, amalgamation or merger); (6) seeks
or becomes subject to the appointment of an administrator, provisional
liquidator, conservator, receiver, trustee, custodian or other similar
official for it or for all or substantially all its assets; (7) has a
secured party take possession of all or substantially all its assets
or has a distress, execution, attachment, sequestration or other legal
process levied, enforced or sued on or against all or substantially
all its assets and such secured party maintains possession, or any
such process is not dismissed, discharged, stayed or restrained, in
each case within 30 days thereafter; (8) causes or is subject to any
event with respect to it which, under the applicable laws of any
jurisdiction, has an analogous effect to any of the events specified
in clauses (1) to (7) (inclusive); or (9) takes any action in
furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the foregoing acts; or
(viii) Merger Without Assumption. The party or any Credit Support Provider
of such party consolidates or amalgamates with, or merges with or into, or
transfers all or substantially all its assets to, another entity and, at
the time of such consolidation, amalgamation, merger or transfer:--
(1) the resulting, surviving or transferee entity fails to assume all
the obligations of such party or such Credit Support Provider under
this Agreement or any Credit Support Document to which it or its
predecessor was a party by operation of law or pursuant to an
agreement reasonably satisfactory to the other party to this
Agreement; or
(2) the benefits of any Credit Support Document fail to extend
(without the consent of the other party) to the performance by such
resulting, surviving or transferee entity of its obligations under
this Agreement.
(b) Termination Events. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified Entity
of such party of any event specified below constitutes an Illegality if the
event is specified in (i) below, a Tax Event if the event is specified in (ii)
below or a Tax Event Upon Merger if the event is specified in (iii) below, and,
if specified to be applicable, a Credit Event Upon Merger if the event is
specified pursuant to (iv) below or an Additional Termination Event if the event
is specified pursuant to (v) below--
(i) Illegality. Due to the adoption of, or any change in, any applicable
law after the date on which a Transaction is entered into, or due to the
promulgation of, or any change in, the interpretation by any court,
tribunal or regulatory authority with competent jurisdiction of any
applicable law after such date, it becomes unlawful (other than as a result
of a breach by the party of Section 4(b)) for such party (which will be the
Affected Party)--
(1) to perform any absolute or contingent obligation to make a payment
or delivery or to receive a payment or delivery in respect of such
Transaction or to comply with any other material provision of this
Agreement relating to such Transaction; or
(2) to perform, or for any Credit Support Provider of such party to
perform, any contingent or other obligation which the party (or such
Credit Support Provider) has under any Credit Support Document
relating to such Transaction;
(ii) Tax Event. Due to (x) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the date on which
a Transaction is entered into (regardless of whether such action is taken
or brought with respect to a party to this Agreement) or (y) a Change in
Tax Law, the party (which will be the Affected Party) will, or there is a
substantial likelihood that it will, on the next succeeding Scheduled
Payment Date (1) be required to pay to the other party an additional amount
in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in
respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a
payment from which an amount is required to be deducted or withheld for or
on account of a Tax (except in respect of interest under Section 2(e),
6(d)(ii) or 6(c)) and no additional amount is required to be paid in
respect of such Tax under Section 2(d)(i)(4) (other than by reason of
Section 2(d)(i)(4)(A) or (B));
(iii) Tax Event Upon Merger. The party (the "Burdened Party") on the next
succeeding Scheduled Payment Date will either (1) be required to pay an
additional amount in respect of an Indemnifiable Tax under Section
2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or
6(e)) or (2) receive a payment from which an amount has been deducted or
withheld for or on account of any Indemnifiable Tax in respect of which the
other party is not required to pay an additional amount (other than by
reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of a
party consolidating or amalgamating with, or merging with or into, or
transferring all or substantially all its assets to, another entity (which
will be the Affected Party) where such action does not constitute an event
described in Section 5(a)(viii);
(iv) Credit Event Upon Merger. If "Credit Event Upon Merger" is specified
in the Schedule as applying to the party, such party ("X"), any Credit
Support Provider of X or any applicable Specified Entity of X consolidates
or amalgamates with, or merges with or into, or transfers all or
substantially all its assets to, another entity and such action does not
constitute an event described in Section 5(a)(viii) but the
creditworthiness of the resulting, surviving or transferee entity is
materially weaker than that of X, such Credit Support Provider or such
Specified Entity, as the case may be, immediately prior to such action
(and, in such event, X or its successor or transferee, as appropriate, will
be the Affected Party); or
(v) Additional Termination Event. If any "Additional Termination Event" is
specified in the Schedule or any Confirmation as applying, the occurrence
of such event (and, in such event, the Affected Party or Affected Parties
shall be as specified for such Additional Termination Event in the Schedule
or such Confirmation).
(c) Event of Default and Illegality. If an event or circumstance which would
otherwise constitute or give rise to an Event of Default also constitutes an
Illegality, it will be treated as an Illegality and will not constitute an Event
of Default.
6. Early Termination
(a) Right to Terminate Following Event of Default. If at any time an Event of
Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all outstanding Transactions. If, however,
"Automatic Early Termination" is specified in the Schedule as applying to a
party, then an Early Termination Date in respect of all outstanding Transactions
will occur immediately upon the occurrence with respect to such party of an
Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the time immediately preceding the
institution of the relevant proceeding or the presentation of the relevant
petition upon the occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).
(b) Right to Terminate Following Termination Event.
(i) Notice. If a Termination Event occurs, an Affected Party will, promptly
upon becoming aware of it, notify the other party. specifying the nature of
that Termination Event and each Affected Transaction and will also give
such other information about that Termination Event as the other party may
reasonably require.
(ii) Transfer to Avoid Termination Event. If either an Illegality under
Section 5(b)(i)(1) or a Tax Event occurs and there is only one Affected
Party, or if a Tax Event Upon Merger occurs and the Burdened Party is the
Affected Party, the Affected Party will, as a condition to its right to
designate an Early Termination Date under Section 6(b)(iv), use all
reasonable efforts (which will not require such party to incur a loss,
excluding immaterial, incidental expenses) to transfer within 20 days after
it gives notice under Section 6(b)(i) all its rights and obligations under
this Agreement in respect of the Affected Transactions to another of its
Offices or Affiliates so that such Termination Event ceases to exist.
If the Affected Party is not able to make such a transfer it will give
notice to the other party to that effect within such 20 day period,
whereupon the other party may effect such a transfer within 30 days after
the notice is given under Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be subject to
and conditional upon the prior written consent of the other party, which
consent will not be withheld if such other party's policies in effect at
such time would permit it to enter into transactions with the transferee on
the terms proposed.
(iii) Two Affected Parties. If an Illegality under Section 5(b)(i)(1) or a
Tax Event occurs and there are two Affected Parties, each party will use
all reasonable efforts to reach agreement within 30 days after notice
thereof is given under Section 6(b)(i) on action to avoid that Termination
Event.
(iv) Right to Terminate. If:--
(1) a transfer under Section 6(b)(ii) or an agreement under Section
6(b)(iii), as the case may be, has not been effected with respect to
all Affected Transactions within 30 days after an Affected Party gives
notice under Section 6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon Merger
or an Additional Termination Event occurs, or a Tax Event Upon Merger
occurs and the Burdened Party is not the Affected Party,
either party in the case of an Illegality, the Burdened Party in the
case of a Tax Event Upon Merger, any Affected Party in the case of a
Tax Event or an Additional Termination Event if there is more than one
Affected Party, or the party which is not the Affected Party in the
case of a Credit Event Upon Merger or an Additional Termination Event
if there is only one Affected Party may, by not more than 20 days
notice to the other party and provided that the relevant Termination
Event is then continuing, designate a day not earlier than the day
such notice is effective as an Early Termination Date in respect of
all Affected Transactions.
(c) Effect of Designation.
(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on the date
so designated, whether or not the relevant Event of Default or
Termination Event is then continuing.
(ii) Upon the occurrence or effective designation of an Early
Termination Date, no further payments or deliveries under Section
2(a)(i) or 2(e) in respect of the Terminated Transactions will be
required to be made, but without prejudice to the other provisions of
this Agreement. The amount, if any, payable in respect of an Early
Termination Date shall be determined pursuant to Section 6(e).
(d) Calculations.
(i) Statement. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and
will provide to the other party a statement (1) showing, in reasonable
detail, such calculations (including all relevant quotations and
specifying any amount payable under Section 6(e)) and (2) giving
details of the relevant account to which any amount payable to it is
to be paid. In the absence of written confirmation from the source of
a quotation obtained in determining a Market Quotation, the records of
the party obtaining such quotation will be conclusive evidence of the
existence and accuracy of such quotation.
(ii) Payment Date. An amount calculated as being due in respect of any
Early Termination Date under Section 6(e) will be payable on the day
that notice of the amount payable is effective (in the case of an
Early Termination Date which is designated or occurs as a result of an
Event of Default) and on the day which is two Local Business Days
after the day on which notice of the amount payable is effective (in
the case of an Early Termination Date which is designated as a result
of a Termination Event). Such amount will be paid together with (to
the extent permitted under applicable law) interest thereon (before as
well as after judgment) in the Termination Currency, from (and
including) be relevant Early Termination Date to (but excluding) the
date such amount is paid, at the Applicable Rate. Such interest will
be calculated on the basis of daily compounding and the actual number
of days elapsed.
(e) Payments on Early Termination. If an Early Termination Date occurs, the
following provisions shall apply based on the parties' election in the Schedule
of a payment measure, either "Market Quotation" or "Loss", and a payment method,
either the "First Method" or the "Second Method". If the parties fail to
designate a payment measure or payment method in the Schedule, it will be deemed
that "Market Quotation" or the "Second Method", as the case may be, shall apply.
The amount, if any, payable in respect of an Early Termination Date and
determined pursuant to this Section will be subject to any Set-off.
(i) Events of Default. If the Early Termination Date results from an
Event of Default:--
(1) First Method and Market Quotation. If the First Method and
Market Quotation apply, the Defaulting Party will pay to the
Non-defaulting Party the excess, if a positive number, of (A) the
sum of the Settlement Amount (determined by the Non-defaulting
Party) in respect of the Terminated Transaction and the
Termination Currency Equivalent of the Unpaid Amounts owing to
the Non-defaulting Party over (B) the Termination Currency
Equivalent of the Unpaid Amounts owing to the Defaulting Party.
(2) First Method and Loss. If the First Method and Loss apply,
the Defaulting Party will pay to the Non-defaulting Party, if a
positive number, the Non-defaulting Party's Loss in respect of
this Agreement.
(3) Second Method and Market Quotation. If the Second Method and
Market Quotation apply, an amount will be payable equal to (A)
the sum of the Settlement Amount (determined by the
Non-defaulting Party) in respect of the Terminated Transactions
and the Termination Currency Equivalent of the Unpaid Amounts
owing to the Non-defaulting Party less (B) the Termination
Currency Equivalent of the Unpaid Amounts owing to the Defaulting
Party. If that amount is a positive number, the Defaulting Party
will pay it to the Non-defaulting Party; if it is a negative
number. the Non-defaulting Party will pay the absolute value of
that amount to the Defaulting Party.
(4) Second Method and Loss. If the Second Method and Loss apply,
an amount will be payable equal to the Non-defaulting Party's
Loss in respect of this Agreement. If that amount is a positive
number, the Defaulting Party will pay it to the Non-defaulting
Party; if it is a negative number, the Non-defaulting Party will
pay the absolute value of that amount to the Defaulting Party.
(ii) Termination Events. If the Early Termination Date results from a
Termination Event:--
(1) One Affected Party. If there is one Affected Party, the
amount payable will be determined in accordance with Section
6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4).
if Loss applies, except that, in either case, references to the
Defaulting Party and to the Non-defaulting Party will be deemed
to be references to the Affected Party and the party which is not
the Affected Party, respectively, and, if Loss applies and fewer
than all the Transactions are being terminated, Loss shall be
calculated in respect of all Terminated Transactions.
(2) Two Affected Parties. If there are two Affected Parties:--
(A) if Market Quotation applies, each party will determine a
Settlement Amount in respect of the Terminated Transactions,
and an amount will be payable equal to (I) the sum of (a)
one-half of the difference between the Settlement Amount of
the party with the higher Settlement Amount ("X") and the
Settlement Amount of the party with the lower Settlement
Amount ("Y") and (b) the Termination Currency Equivalent of
the Unpaid Amounts owing to X less (II) the Termination
Currency Equivalent of the Unpaid Amounts owing to Y; and
(B) if Loss applies, each party will determine its Loss in
respect of this Agreement (or, if fewer than all the
Transactions are being terminated, in respect of all
Terminated Transactions) and an amount will be payable equal
to one-half of the difference between the Loss of the party
with the higher Loss ("X") and the Loss of the party with
the lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to
X; if it is a negative number, X will pay the absolute value
of that amount to Y.
(iii) Adjustment for Bankruptcy. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination" applies
in respect of a party, the amount determined under this Section 6(e)
will be subject to such adjustments as are appropriate and permitted
by law to reflect any payments or deliveries made by one party to the
other under this Agreement (and retained by such other party) during
the period from the relevant Early Termination Date to the date for
payment determined under Section 6(d)(ii).
(iv) Pre-Estimate. The parties agree that if Market Quotation applies
an amount recoverable under this Section 6(e) is a reasonable
pre-estimate of loss and not a penalty. Such amount is payable for the
loss of bargain and the loss of protection against future risks and
except as otherwise provided in this Agreement neither party will be
entitled to recover any additional damages as a consequence of such
losses.
7. Transfer
Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of the
other party, except that:--
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to any
other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in any
amount payable to it from a Defaulting Party under Section 6(c).
Any purported transfer that is not in compliance with this Section will be void.
8. Contractual Currency
(a) Payment in the Contractual Currency. Each payment under this Agreement will
be made in the relevant currency specified in this Agreement for that payment
(the "Contractual Currency"). To the extent permitted by applicable law, any
obligation to make payments under this Agreement in the Contractual Currency
will not be discharged or satisfied by any tender in any currency other than the
Contractual Currency, except to the extent such tender results in the actual
receipt by the party to which payment is owed, acting in a reasonable manner and
in good faith in converting the currency so tendered into the Contractual
Currency, of the full amount in the Contractual Currency of all amounts payable
in respect of this Agreement. If for any reason the amount in the Contractual
Currency so received falls short of the amount in the Contractual Currency
payable in respect of this Agreement, the party required to make the payment
will, to the extent permitted by applicable law, immediately pay such additional
amount in the Contractual Currency as may be necessary to compensate for the
shortfall. If for any reason the amount in the Contractual Currency so received
exceeds the amount in the Contractual Currency payable in respect of this
Agreement, the party receiving the payment will refund promptly the amount of
such excess.
(b) Judgments. To the extent permitted by applicable law, if any judgment or
order expressed in a currency other than the Contractual Currency is rendered
(i) for the payment of any amount owing in respect of this Agreement, (ii) for
the payment of any amount relating to any early termination in respect of this
Agreement or (iii) in respect of a judgment or order of another court for the
payment of any amount described in (i) or (ii) above, the party seeking
recovery, after recovery in full of the aggregate amount to which such party is
entitled pursuant to the judgment or order, will be entitled to receive
immediately from the other party the amount of any shortfall of the Contractual
Currency received by such party as a consequence of sums paid in such other
currency and will refund promptly to the other party any excess of the
Contractual Currency received by such party as a consequence of sums paid in
such other currency if such shortfall or such excess arises or results from any
variation between the rate of exchange at which the Contractual Currency is
converted into the currency of the judgment or order for the purposes of such
judgment or order and the rate of exchange at which such party is able, acting
in a reasonable manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual Currency with the
amount of the currency of the judgment or order actually received by such party.
The term "rate of exchange" includes, without limitation, any premiums and costs
of exchange payable in connection with the purchase of or conversion into the
Contractual Currency.
(c) Separate Indemnities. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence granted by the party
to which any payment is owed and will not be affected by judgment being obtained
or claim or proof being made for any other sums payable in respect of this
Agreement.
(d) Evidence of Loss. For the purpose of this Section 8, it will be sufficient
for a party to demonstrate that it would have suffered a loss had an actual
exchange or purchase been made.
9. Miscellaneous
(a) Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) Amendments. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced by
a facsimile transmission) and executed by each of the parties or confirmed by an
exchange of telexes or electronic messages on an electronic messaging system.
(c) Survival of Obligations. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.
(d) Remedies Cumulative. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
(e) Counterparts and Confirmations.
(i) This Agreement (and each amendment, modification and waiver in respect
of it) may be executed and delivered in counterparts (including by
facsimile transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of each
Transaction from the moment they agree to those terms (whether orally or
otherwise). A Confirmation shall be entered into as soon as practicable and
may be executed and delivered in counterparts (including by facsimile
transmission) or be created by an exchange of telexes or by an exchange of
electronic messages on an electronic messaging system, which in each case
will be sufficient for all purposes to evidence a binding supplement to
this Agreement. The parties will specify therein or through another
effective means that any such counterpart, telex or electronic message
constitutes a Confirmation.
(f) No Waiver of Rights. A failure or delay in exercising any right, power or
privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right,
power or privilege or the exercise of any other right, power or privilege.
(g) Headings. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
10. Offices: Multibranch Parties
(a) If Section 10(a) is specified in the Schedule as applying, each party that
enters into a Transaction through an Office other than its head or home office
represents to the other party that, notwithstanding the place of booking office
or jurisdiction of incorporation or organisation of such party, the obligations
of such party are the same as if it had entered into the Transaction through its
head or home office. This representation will be deemed to be repeated by such
party on each date on which a Transaction is entered into.
(b) Neither party may change the Office through which it makes and receives
payments or deliveries for the purpose of a Transaction without the prior
written consent of the other party.
(c) If a party is specified as a Multibranch Party in The Schedule, such
Multibranch Party may make and receive payments or deliveries under any
Transaction through any Office listed in the Schedule, and the Office through
which it makes and receives payments or deliveries with respect to a Transaction
will be specified in the relevant Confirmation.
11. Expenses
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees and
Stamp Tax, incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement or any Credit Support Document to
which the Defaulting Party is a party or by reason of the early termination of
any Transaction, including, but not limited to, costs of collection.
12. Notices
(a) Effectiveness. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:--
(i) if in writing and delivered in person or by courier, on the date it is
delivered;
(ii) if sent by telex, on the date the recipient's answerback is received;
(iii) if sent by facsimile transmission, on the date that transmission is
received by a responsible employee of the recipient in legible form (it
being agreed that the burden of proving receipt will be on the sender and
will not be met by a transmission report generated by the sender's
facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas) or the
equivalent (return receipt requested), on the date that mail is delivered
or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that electronic
message is received,
unless the date of that delivery (or attempted delivery) or that receipt as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) Change of Addresses. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
13. Governing Law and Jurisdiction
(a) Governing Law. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) Jurisdiction. With respect to any suit, action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably:--
(i) submits to the jurisdiction of the English courts, if this Agreement is
expressed to be governed by English law, or to the non-exclusive
jurisdiction of the courts of the State of New York and the United States
District Court located in the Borough of Manhattan in New York City, if
this Agreement is expressed to be governed by the laws of the State of New
York; and
(ii) waives any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any claim that
such Proceedings have been brought in an inconvenient forum and further
waives the right to object, with respect to such Proceedings, that such
court does not have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be covered by
English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments Act 1982 or any modification, extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) Service of Process. Each party irrevocably appoints the Process Agent (if
any) specified opposite its name in the Schedule to receive, for it and on its
behalf, service of process in any Proceedings. If for any reason any party's
Process Agent is unable to act as such party will promptly notify the other
party and within 30 days appoint a substitute process agent acceptable to the
other party. The parties irrevocably consent to service of process given in the
manner provided for notices in Section 12. Nothing in this Agreement will affect
the right of either party to serve process in any other manner permitted by law.
(d) Waiver of Immunities. Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its revenues and assets
(irrespective of their use or intended use), all immunity on the grounds of
sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
14. Definitions
As used in this Agreement:--
"Additional Termination Event" has the meaning specified in Section 5(b).
"Affected Party" has the meaning specified in Section 5(b).
"Affected Transactions" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Transactions.
"Affiliate" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"Applicable Rate" means:--
(a) in respect of obligations payable or deliverable (or which would have been
but for 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section 6(d)(ii))
on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which would
have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default
Rate; and
(d) in all other cases, the Termination Rate.
"Burdened Party" has the meaning, specified in Section 5(b).
"Change in Tax Law" means the enactment, promulgation, execution or ratification
of, or any change in or amendment to, any law (or in the application or official
interpretation of any law) that occurs on or after the date on which the
relevant Transaction is entered into.
"consent" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"Credit Event Upon Merger" has the meaning specified in Section 5(b).
"Credit Support Document" means any agreement or instrument that is specified as
such in this Agreement.
"Credit Support Provider" has the meaning specified in the Schedule.
"Default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
"Defaulting Party" has the meaning specified in Section 6(a).
"Early Termination Date" means the date determined in accordance with Section
6(a) or 6(b)(iv).
"Event of Default" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule.
"Illegality" has the meaning specified in Section 5(b).
"Indemnifiable Tax" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former connection
between the jurisdiction of the government or taxation authority imposing such
Tax and the recipient of such payment or a person related to such recipient
(including, without limitation, a connection arising from such recipient or
related person being or having been a citizen or resident of such jurisdiction,
or being or having been organised, present or engaged in a trade or business in
such jurisdiction, or having or having had a permanent establishment or fixed
place of business in such jurisdiction, but excluding a connection arising
solely from such recipient or related person having executed, delivered,
performed its obligations or received a payment under, or enforced, this
Agreement or a Credit Support Document).
"Law" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority) and
"lawful" and "unlawful" will be construed accordingly.
"Local Business Day" means. subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located and, if
different, in the principal financial centre, if any, of the currency of such
payment, (c) in relation to any notice or other communication, including notice
contemplated under Section 5(a)(i), in the city specified in the address for
notice provided by the recipient and, in the case of a notice contemplated by
Section 2(b), in the place where the relevant new account is to be located and
(d) in relation to Section 5(a)(v)(2), in the relevant locations for performance
with respect to such Specified Transaction.
"Loss" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party reasonably determines in good faith to be its
total losses and costs (or gain, in which case expressed as a negative number)
in connection with this Agreement or that Terminated Transaction or group of
Terminated Transactions, as the case may be, including any loss of bargain, cost
of funding or, at the election of such party but without duplication, loss or
cost incurred as a result of its terminating, liquidating, obtaining or
reestablishing any hedge or related trading position (or any gain resulting from
any of them). Loss includes losses and costs (or gains) in respect of any
payment or delivery required to have been made (assuming satisfaction of each
applicable condition precedent) on or before the relevant Early Termination Date
and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or (3)
or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and
out-of-pocket expenses referred to under Section 11. A party will determine its
Loss as of the relevant Early Termination Date, or, if that is not reasonably
practicable, as of the earliest date thereafter as is reasonably practicable. A
party may (but need not) determine its Loss by reference to quotations of
relevant rates or prices from one or more leading dealers in the relevant
markets.
"Market Quotation" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that
would have the effect of preserving for such party the economic equivalent of
any payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition precedent)
by the parties under Section 2(a)(i) in respect of such Terminated Transaction
or group of Terminated Transactions that would, but for the occurrence of the
relevant Early Termination Date, have been required after that date. For this
purpose, Unpaid Amounts in respect of the Terminated Transaction or group of
Terminated Transactions are to be excluded but, without limitation, any payment
or delivery that would, but for the relevant Early Termination Date, have been
required (assuming satisfaction of each applicable condition precedent) after
that Early Termination Date is to be included. The Replacement Transaction would
be subject to such documentation as such party and the Reference Market-maker
may, in good faith, agree. The party making the determination (or its agent)
will request each Reference Market-maker to provide its quotation to the extent
reasonably practicable as of the same day and time (without regard to different
time zones) on or as soon as reasonably practicable after the relevant Early
Termination Date. The day and time as of which those quotations are to be
obtained will be selected in good faith by the party obliged to make a
determination under Section 6(e), and, if each party is so obliged, after
consultation with the other. If more than three quotations are provided, the
Market Quotation will be the arithmetic mean of the quotations, without regard
to the quotations having the highest and lowest values. If exactly three such
quotations are provided, the Market Quotation will be the quotation remaining
after disregarding the highest and lowest quotations. For this purpose, if more
than one quotation has the same highest value or lowest value, then one of such
quotations shall be disregarded. If fewer than three quotations are provided, it
will be deemed that the Market Quotation in respect of such Terminated
Transaction or group of Terminated Transactions cannot be determined.
"Non-default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it) if
it were to fund the relevant amount.
"Non-defaulting Party" has the meaning specified in Section 6(a).
"Office" means a branch or office of a party, which may be such party's head or
home office.
"Potential Event of Default" means any event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.
"Reference Market-makers" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to make
an extension of credit and (b) to the extent practicable, from among such
dealers having an office in the same city.
"Relevant Jurisdiction" means, with respect to a party, the jurisdictions (a) in
which the party is incorporated, organised, managed and controlled or considered
to have its seat, (b) where an Office through which the party is acting for
purposes of this Agreement is located, (c) in which the party executes this
Agreement and (d) in relation to any payment from or through which such payment
is made.
"Scheduled Payment Date" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"Set-off" means set-off, offset, combination of accounts, right of retention or
withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under this Agreement,
another contract, applicable law or otherwise) that is exercised by, or imposed
on, such payer.
"Settlement Amount" means, with respect to a party, and any Early Termination
Date, the sum of:--
(a) the Termination Currency Equivalent of the Market Quotations (whether
positive or negative) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation is determined; and
(b) such party's Loss (whether positive or negative and without reference to any
Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation cannot be determined or would not (in
the reasonable belief of the party making the determination) produce a
commercially reasonable result.
"Specified Entity" has the meaning specified in the Schedule.
"Specified Indebtedness" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.
"Specified Transaction" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.
"Stamp Tax" means any stamp, registration, documentation or similar tax.
"Tax" means any present or future tax, levy, impost, duty, charge, assessment or
fee of any nature (including interest, penalties and additions thereto) that is
imposed by any government or other taxing authority in respect of any payment
under this Agreement other than a stamp, registration, documentation or similar
tax.
"Tax Event" has the meaning specified in Section 5(b).
"Tax Event Upon Merger" has the meaning specified in Section 5(b).
"Terminated Transactions" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"Termination Currency" has the meaning specified in the Schedule.
"Termination Currency Equivalent" means, in respect of any amount denominated in
the Termination Currency, such Termination Currency amount and, in respect of
any amount denominated in a currency other than the Termination Currency (the
"Other Currency"), the amount in the Termination Currency determined by the
party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date, or, if
the relevant Market Quotation or Loss (as the case may be), is determined as of
a later date, that later date, with the Termination Currency at the rate equal
to the spot exchange rate of the foreign exchange agent (selected as provided
below) for the purchase of such Other Currency with the Termination Currency at
or about 11:00 a.m. (in the city in which such foreign exchange agent is
located) on such date as would be customary for the determination of such a rate
for the purchase of such Other Currency for value on the relevant Early
Termination Date or that later date. The foreign exchange agent will, if only
one party is obliged to make a determination under Section 6(e), be selected in
good faith by that party and otherwise will be agreed by the parties.
"Termination Event" means an Illegality, a Tax Event or a Tax Event Upon Merger
or, if specified to be applicable, a Credit Event Upon Merger or an Additional
Termination Event.
"Termination Rate" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.
"Unpaid Amounts" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be
settled by delivery to such party on or prior to such Early Termination Date and
which has not been so settled as at such Early Termination Date, an amount equal
to the fair market value of that which was (or would have been) required to be
delivered as of the originally scheduled date for delivery, in each case
together with (to the extent permitted under applicable law) interest, in the
currency of such amounts, from (and including) the date such amounts or
obligations were or would have been required to have been paid or performed to
(but excluding) such Early Termination Date, at the Applicable Rate. Such
amounts of interest will be calculated on the basis of daily compounding and the
actual number of days elapsed. The fair market value of any obligation referred
to in clause (b) above shall be reasonably determined by the party obliged to
make the determination under Section 6(e) or, if each party is so obliged, it
shall be the average of the Termination Currency Equivalents of the fair market
values reasonably determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
NationsBanc Financial Products, Inc. EQCC Home Equity Loan Trust 1998-3
- ------------------------------------ ----------------------------------
(Name of Party) (Name of Party)
By: U.S. Bank National Association,
as Trustee
By: /s./ R. Vaughan Dodd By: /s./ Melissa A. Rosal
------------------------------- -----------------------------
Name: R. Vaughan Dodd Name: Melissa A. Rosal
Title: Senior Vice President Title: Vice President
Date: Date:
<PAGE>
SCHEDULE to the MASTER AGREEMENT
dated as of September 15, 1998 between
NATIONSBANC FINANCIAL PRODUCTS, INC. ("Party A") and
EQCC HOME EQUITY LOAN TRUST 1998-3 ("Party B")
PART 1: Termination Provisions and Certain Other Matters
(a) "Specified Entity" means in relation to Party A for the purpose of:-
Section 5(a)(v), none; Section 5(a)(vi), none; Section 5(a)(vii), none; and
Section 5(b)(iv), none;
in relation to Party B for the purpose of:-
Section 5(a)(v), none; Section 5(a)(vi), none; Section 5(a)(vii), none; and
Section 5(b)(iv), none.
(b) "Specified Transaction" will have the meaning specified in Section 14.
(c) The "Cross-Default" provisions of Section 5(a)(vi) will not apply to Party A
and will not apply to Party B.
(d) The "Credit Event Upon Merger" provisions of Section 5(b)(iv) will not apply
to Party A and will not apply to Party B.
(e) The "Automatic Early Termination" provision of Section 6(a) will not apply
to Party A or Party B.
(f) Payments on Early Termination. For the purpose of Section 6(e):-
(i) Market Quotation will apply.
(ii) The Second Method will apply.
(g) "Termination Currency" means United States Dollars.
(h) "Additional Termination Event." Additional Termination Event will apply:-
(A) The counterparty rating of Party A is withdrawn or reduced below Aaa by
Moody's or AAA by S&P and (B) Party A fails, within 30 days, to (i) enter into
an arrangement the purpose of which shall assure performance by Party A of its
obligations under the Cap Transaction, which arrangement may include a pledge of
securities to the Trustee or its agent, free and clear of the Lien of any third
party, in a manner conferring on the Trustee a perfected first Lien in such
securities pursuant to a security agreement negotiated in good faith between the
parties and (ii) confirm with each Rating Agency that such arrangement will
prevent the reduction or withdrawal of the then-current ratings of the Class
A-1F Certificates. (Capitalized terms not otherwise defined in this Agreement
shall have the meanings ascribed to them in the Pooling and Servicing
Agreement).
For purposes of the foregoing Additional Termination Event, Party A shall be the
Affected Party.
(i) Events of Default and Termination Events. The provisions of Section 5 will
not apply to Party B; provided, however, that Section 5(a)(iv) will apply to
Party B and Section 5(b)(i) will apply to Party B with respect to the payment of
the premium for the Cap Transaction contemplated hereunder.
(j) Notwithstanding any provision contained herein, in the Agreement, or in any
Confirmation (including any provision relating to Section 2(a)(iii) of the
Agreement regarding Events of Default and Potential Events of Default, Section 5
of the Agreement regarding Events of Default and Termination Events, but
excluding Section 5(b)(i) of the Agreement, or Section 6 of the Agreement
regarding Early Termination), the obligations of Party A contained herein, in
the Agreement or in any Confirmation shall be absolute, unconditional and
irrevocable and all payments required to be made by Party A hereunder, under the
Agreement and under any Confirmation shall be made without offset, counterclaim
or defense.
PART 2: Tax Representations
None
PART 3: Agreement to Deliver Documents
For the purpose of Section 4(a)(i) and (ii) of this Agreement, each party agrees
to deliver the following documents:
(a) Tax forms, documents or certificates to be delivered are: None.
(b) Other documents to be delivered are: -
<TABLE>
<CAPTION>
Party required Covered by
to deliver Form/Document/ Date by Section 3(d)
document Certificate which to be delivered Representation
-------- ----------- --------------------- --------------
<S> <C> <C> <C>
Party A and Certified copies of all corporate Closing Date* Yes
Party B authorizations and any other documents
with respect to the execution, delivery
and performance of this Agreement and any
Credit Support Document
- ----------------------
Party A and Certificate of authority and specimen Closing Date* Yes
Party B signatures of individuals executing this
Agreement, and Confirmations
- ----------------------
Party A and Opinion of Counsel satisfactory to the Closing Date* No
Party B other party substantially in the form of
Exhibit I hereto or such other form
reasonably satisfactory to the other party.
</TABLE>
* "Closing Date" shall have the meaning assigned to such term in the Pooling
and Servicing Agreement dated as of September 1, 1998 among EQCC
Receivables Corporation and EQCC Asset Backed Corporation (the
"Depositors"), EquiCredit Corporation of America (the "Representative" and
"Servicer") and U.S. Bank National Association (the "Trustee") (the
"Pooling and Servicing Agreement").
PART 4: Miscellaneous
(a) Address for Notices. For the purpose of Section 12(a) of this Agreement:-
Address for notice or communications to Party A:
NationsBanc Financial Products, Inc.
c/o NationsBank, N.A.
Derivatives Documentation Unit
100 N. Tryon St., NC1-007-13-01
Charlotte, North Carolina 28255
(Telex No: 669959; Answerback: NATIONSBK CHA)
Telecopy No.: 704-386-4113
with a copy to:
NationsBanc Financial Products, Inc.
Attention: Administrative Officer
233 South Wacker Drive, Suite 2800
Chicago, IL 60606
Telecopy No.: 312-234-2544
Address for notice or communications to Party B:
EQCC Home Equity Loan Trust 1998-3
c/o U.S. Bank National Association, as Trustee
111 East Wacker Drive, Suite 3000
Chicago, Illinois 60601
Attention: Melissa Rosal
Telephone No.: 312-228-9416
Telecopy No.: 312-228-9401
with a copy to:
NationsBank, N.A.
100 North Tryon Street, 12th Floor
Charlotte, North Carolina 28255
Attention: Leslie Fitzpatrick
Telephone No.: 704-386-0634
Telecopy No.: 704-386-1175
(b) Process Agent. For the purpose of Section 13(c):
Party A appoints as its Process Agent: Not Applicable.
Party B appoints as its Process Agent: Not Applicable.
(c) Offices. The provisions of Section 10(a) will apply to this Agreement.
(d) Multibranch Party. For the purpose of Section 10 of this Agreement:
Party A is not a Multibranch Party.
Party B is not a Multibranch Party.
(e) Calculation Agent. The Calculation Agent is Party A, unless otherwise
specified in a Confirmation in relation to the relevant Transaction.
(f) Credit Support Document. Details of any Credit Support Document:-
Not applicable.
(g) Credit Support Provider. Credit Support Provider means in relation to Party
A:
Not Applicable.
Credit Support Provider means in relation to Party B: Not Applicable.
(h) Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York (without reference to that
jurisdiction's choice of law doctrine).
(i) Netting of Payments. Section 2(c) will not apply.
(j) "Affiliate" will have the meaning specified in Section 14 of this Agreement;
provided, however, that with respect to Party A and Party B, the words "or any
of its Affiliates" shall be deleted from Section 3(c) of the Agreement.
PART 5: Other Provisions
(a) Set-off. All payments under this Agreement will be made without set-off or
counterclaim.
(b) Transfer. Neither this Agreement nor any interest or obligation in or under
this Agreement may be transferred by either party without the prior written
consent of the other party (other than pursuant to a consolidation or
amalgamation with, or merger into, or transfer of all or substantially all its
assets to, another entity) and any purported transfer without such consent will
be void.
(c) Exchange of Confirmations. For the Transaction entered into hereunder, Party
A shall promptly send to Party B a Confirmation via telex or facsimile
transmission. Party B agrees to respond to such Confirmation within three (3)
business days, either confirming agreement thereto or requesting a correction of
any error(s) contained therein. Failure by Party A to send a Confirmation or of
Party B to respond within such period shall not affect the validity or
enforceability of such Transaction. Absent manifest error, there shall be a
presumption that the terms contained in any Confirmation sent by Party A and not
objected to by Party B as provided above are the terms of the Transaction. The
parties agree that any such exchange of telexes or facsimile transmissions shall
constitute a Confirmation for all purposes hereunder.
(d) Furnishing Specified Information. Section 4(a)(iii) is hereby amended by
inserting "promptly upon the earlier of (i)" in lieu of the word "upon" at the
beginning thereof and inserting" or (ii) such party learning that the form or
document is required" before the word "any" on the first line thereof.
(e) Notice by Facsimile Transmission. Section 12(a) is hereby amended by
inserting the words "or 13(c)" between the number "6" and the word "may" in the
second line thereof.
(f) Waiver of Right to Trial by Jury. Each party hereby irrevocably waives any
and all rights to trial by jury with respect to any legal proceeding arising out
of or relating to this Agreement or any Transaction contemplated hereby.
(g) Recording of Conversations. Each party to this Agreement acknowledges and
agrees to the tape or electronic recording of conversations between the parties
to this Agreement whether by one or other or both of the parties.
(h) Relationship Between Parties. Each party will be deemed to represent to the
other party on the date on which it enters into a Transaction that (absent a
written agreement between the parties that expressly imposes affirmative
obligations to the contrary for that Transaction): --
(i) Non-Reliance. It is acting for its own account, and has made its
own independent decisions to enter into that Transaction and as to whether
that Transaction is appropriate or proper for it based upon its own
judgment and upon advice from such advisors as it has deemed necessary. It
is not relying on any communication (written or oral) of the other party as
investment advice or as a recommendation to enter into that Transaction; it
being understood that information and explanations related to the terms and
conditions of a Transaction shall not be considered investment advice or a
recommendation to enter into that Transaction. No communication (written or
oral) received from the other party shall be deemed to be an assurance or
guarantee as to the expected results of that Transaction.
(ii) Assessment and Understanding. It is capable of assessing the
merits of and understanding (on its own behalf or through independent
professional advice), and understands and accepts, the terms, conditions
and risks of that Transaction. It is also capable of assuming, and assumes,
the risks of that Transaction.
(iii) Status of Parties. The other party is not acting as a fiduciary
for or an advisor to it in respect of that Transaction.
(i) Status of Party A. Party B understands and hereby acknowledges and agrees
that (i) the obligations of Party A hereunder are solely the obligations and
responsibility of Party A and not of any of Party A's Affiliates, and (ii) none
of Party A's Affiliates has any obligation whatsoever (express or implied) to
contribute capital to Party A.
(j) Intention of Parties. It is the intention of the Parties that (i) this
Agreement and all Transactions hereunder are, and shall be deemed to be, a "swap
agreement" under and as defined in the United States Bankruptcy Code, as amended
from time to time, and (ii) if both parties are "financial institutions" within
the meaning of Section 402(9) of the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA") ((amending the Federal Deposit Insurance Act
("FDIA")), 12 U.S.C. Section 4402(9), or as otherwise provided under Regulation
EE of the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 231,
then this Agreement is, and shall be deemed to be, (a) a "netting contract" as
defined in Section 402(14) of FDICIA, 12 U.S.C. Section 4402(14), as amended
from time to time, (b) a "qualified financial contract" as defined in Section
11(e)(8)(D)(i) of FDIA, 12 U.S.C. Section 1821(e)(8)(D)(i), as amended from time
to time, and (c) a "swap agreement" as defined in Section 11(e)(8)(D)(iv) of
FDIA, 12 U.S.C. Section 1821(e)(8)(D)(iv), as amended from time to time, and any
Credit Support Document is, and shall be deemed to be, a "security arrangement"
in connection with a qualified financial contract.
<PAGE>
(k) Additional Representation. Both parties agree and acknowledge that that
certain Cap Transaction dated September 23, 1998 between the parties hereto (the
"Cap Transaction") shall be the only Transaction under this Agreement.
Accepted and agreed:
NATIONSBANC FINANCIAL EQCC HOME EQUITY LOAN TRUST
PRODUCTS, INC. 1998-3
BY: U.S. BANK NATIONAL
ASSOCIATION, AS TRUSTEE
/s/ R. Vaughan Dodd /s/ Melissa A. Rosal
- ------------------------------- ----------------------------
Name: R. Vaughan Dodd Name: Melissa A. Rosal
Title: Senior Vice President Title: Vice President
