<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 15, 1997
DLJ MORTGAGE ACCEPTANCE CORP.
-----------------------------
(Exact name of Registrant as Specified in Charter)
Delaware 333-39325 13-3460894
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
277 Park Avenue, New York, New York 10172
---------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (212) 892-3000
--------------
Not Applicable
------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 5. Other Events.
DLJ Mortgage Acceptance Corp., as depositor (the "Depositor") registered
issuances of Mortgage Pass-Through Certificates on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act of 1933, as amended (the "Act"),
by a Registration Statement on Form S-3 (Registration File No. 333-39325) (as
amended, the "Registration Statement"). Pursuant to the Registration Statement,
the Depositor caused First Greensboro Home Equity Loan Trust 1997-2 to issue
$125,000,000 principal amount of Home Equity Loan Pass-Through Certificates,
Series 1997-2 (the "Class A Certificates"), on December 15, 1997 (the "Closing
Date").
The Class A Certificates were issued pursuant to a pooling and servicing
agreement (the "Pooling and Servicing Agreement"), dated as of December 1, 1997
(the "Initial Cut-Off Date"), among the Depositor, First Greensboro Home Equity,
Inc., as sponsor and master servicer, First Greensboro Capital Corporation, as
seller, The Chase Manhattan Bank, as trustee (the "Trustee") and Ocwen Federal
Bank FSB.
Capitalized terms not defined herein have the meanings assigned in the
Pooling and Servicing Agreement attached hereto as Exhibit 4.1.
On the Closing Date, the corpus of the Trust consisted primarily of (i) a
pool of home equity loans (the "Initial Home Equity Loans"), (ii) amounts on
deposit in a pre-funding account (the "Pre-Funding Account") and a capitalized
interest account held by the Trustee; and (iii) the certificate insurance policy
(the "Certificate Insurance Policy") issued by Financial Guaranty Assurance Inc.
(the "Certificate Insurer"). On the Closing Date, cash in the amount of
$7,545,057.48 (the "Pre-Funding Account Deposit") was deposited in the
Pre-Funding Account in the name of the Trustee. The Pre-Funding Account Deposit
was intended to be used for the purchase of additional home equity loans
satisfying the criteria specified in the Pooling and Servicing Agreement and
subject to the approval of the Certificate Insurer (the "Subsequent Home Equity
Loans" and together with the Initial Home Equity Loans, the "Home Equity Loans")
on or before January 31, 1998.
The Trustee, on behalf of the Trust, and the Depositor entered into a
Subsequent Transfer Agreement, dated December 30, 1997 (the "Subsequent Transfer
Agreement"). Pursuant to the Subsequent Transfer Agreement, the Trust purchased
$7,546,042.00 aggregate principal balance of Subsequent Home Equity Loans.
The description of the Home Equity Loans in the Prospectus contained
information only with respect to the Initial Home Equity Loans as of the Initial
Cut-Off Date. This Current Report on Form 8-K is being filed to update the
description of the Home Equity Loans contained in the Prospectus and to file
copies of the Pooling and Servicing Agreement and the Certificate Insurance
Policy.
The following is a summary of certain terms of the Home Equity Loans,
which includes the Subsequent Home Equity Loans. The information set forth below
is presented with respect to the Initial Home Equity Loans as of the Initial
Cut-Off Date and with respect to the Subsequent Home Equity Loans as of the
later of (i) the date of origination of the Subsequent Home Equity Loan and (ii)
December 1, 1997 (the "Subsequent Cut-Off-Date" and together with the Initial
Cut-Off Date, the "Cut-Off Date"). The description of the Home Equity Loans
below does not reflect any payments with respect to the Home Equity Loans
received by the Master Servicer after the Cut-Off Date. The Home Equity Loans
have the characteristics set forth below. Unless otherwise noted, all
statistical percentages are measured by the aggregate principal balance of the
Home Equity Loans as of the Cut-Off Date.
The Home Equity Loans consist of 2,291 home equity loans, of which
2,207 are fixed rate home equity loans and 84 are adjustable rate home equity
loans, evidenced by promissory notes (the "Notes") secured by first and second
lien deeds of trust, security deeds or mortgages, which are located in 24
states. The aggregate outstanding Loan Balance of the fixed rate Home Equity
Loans as of the Cutoff Date is $117,021,105.55 or 93.62% of the aggregate Loan
Balance of the Home Equity Loans; the aggregate outstanding Loan Balance of the
adjustable rate Home Equity Loans as of the Cutoff Date is $7,979,878.97 or
6.38% of the aggregate Loan Balance of the Home Equity Loans. The Properties
securing the Home Equity Loans consist primarily of one-to-four family
residential properties. All of the Home Equity Loans were originated or
purchased on or after September 30, 1996. Home Equity Loans aggregating 94.70%
of the aggregate Loan Balances of the Home Equity Loans as of the Cut-Off Date
(the "Cut-Off Date Aggregate Loan Balance") are secured by first liens on the
related properties, and the remaining Home Equity Loans are secured by second
liens on the related properties. No Combined Loan-to-Value Ratio relating to any
Home Equity Loan exceeded 95.00% as of the Cut-Off Date except for 92 loans with
an aggregate Loan Balance of $1,863,748.83 (or 1.49% of the Cut-Off Date
Aggregate Loan Balance of the Home Equity Loans), which had a Combined
Loan-to-Value Ratio not greater than 100%.
As of the Cut-Off Date, the average Loan Balance of the Home Equity
Loans was $54,561.76.
<PAGE>
The minimum and maximum Loan Balances of the Home Equity Loans as of the Cut-Off
Date were $4,987.94 and $211,500.00, respectively. The weighted average Coupon
Rate of the Home Equity Loans was 11.107%; the Coupon Rate of the Home Equity
Loans ranged from 8.200% to 18.000%; the weighted average Combined Loan-to-Value
Ratio of the Home Equity Loans was 78.03%; the weighted average remaining term
to maturity of the Home Equity Loans was 281 months; the original terms to
maturity of the Home Equity Loans ranged from 48 months to 360 months; and the
remaining terms to maturity of the Home Equity Loans ranged from 46 months to
360 months. As of the Cut-Off Date, 94.70% of the aggregate Loan Balance of the
Home Equity Loans were secured by first mortgages and 5.30% of the aggregate
Loan Balance of the Home Equity Loans were secured by second mortgages. Home
Equity Loans containing "balloon" payments represented not more than 2.28% of
the aggregate Loan Balance of the Home Equity Loans. No Home Equity Loan will
mature later than January 1, 2028. As of the Cut-Off Date, no Home Equity Loan
was more than 30 days past due. However, investors in the Class A Certificates
should be aware that 70.09% of the Home Equity Loans by Cut-Off Date Aggregate
Loan Balance had a first monthly payment due on or after November 1, 1997 and it
was not possible for such Home Equity Loans to be more than 30 days past due as
of the Cut-Off Date.
The adjustable rate Home Equity Loans bear interest rates relating to
payments that on the first payment date after a period of 24 months (except for
3 loans with an aggregate Loan Balance of $216,000.00 that adjust six months
following the first payment date and have an initial cap of 1.00% above the
related initial Coupon Rate) following the related first payment date adjust
based on the six-month London Interbank Offered Rate based on quotations of
major banks as published in The Wall Street Journal. As of the Cut-off Date, the
weighted average remaining period to the next interest rate adjustment date for
the adjustable rate Home Equity Loans was approximately 22 months.
Each adjustable rate Home Equity Loan has a semi-annual rate adjustment
cap of 1.00% above the then current interest rate for such adjustable rate Home
Equity Loan. In addition, each adjustable rate Home Equity Loan that has an
initial payment adjustment date that is two years from its first payment date
will have an initial rate adjustment cap of 3.00% above the related initial
Coupon Rate (except for 1 loan with an aggregate Loan Balance of $52,000.00 that
will have an initial rate adjustment cap of 1.00% above the related initial
Coupon Rate). As of the Cut-off Date, the weighted average Coupon Rate of the
adjustable rate Home Equity Loans was approximately 10.271% per annum. The
adjustable rate Home Equity Loans had a weighted average gross margin as of the
Cut-off Date of approximately 7.473%. The gross margin for the adjustable rate
Home Equity Loans ranged from approximately 5.400% to 10.280%. The interest
rates borne by the adjustable rate Home Equity Loans as of the Cut-off Date
ranged from approximately 8.200% per annum to approximately 13.100% per annum.
As of the Cut-off Date, the maximum rates at which interest may accrue on the
adjustable rate Home Equity Loans (the "Maximum Rates") ranged from 14.200% per
annum to 19.100% per annum. The adjustable rate Home Equity Loans had a weighted
average Maximum Rate as of the Cut-off Date of approximately 16.271% per annum.
As of the Cut-off Date, the minimum rates at which interest may accrue on the
adjustable rate Home Equity Loans (the "Minimum Rates") ranged from
approximately 8.200% per annum to approximately 13.100% per annum. As of the
Cut-off Date, the weighted average Minimum Rate on the Home Equity Loans was
approximately 10.271% per annum.
The sum of the percentages on the following tables may not equal 100%
due to rounding.
<PAGE>
Geographic Distribution of Properties
The geographic distribution of the Home Equity Loans by state, as of
the Cut-Off Date, was as follows:
<TABLE>
<CAPTION>
% of Cut-Off Date
Number of Cut-Off Date Aggregate Aggregate
State Home Equity Loans Loan Balance Loan Balance
- ----- ----------------- ------------ ------------
<S> <C> <C> <C>
North Carolina 784 $44,382,456.86 35.51%
Virginia 487 26,294,296.56 21.04
Arkansas 249 10,237,214.93 8.19
Utah 91 7,293,622.06 5.83
South Carolina 132 7,022,390.23 5.62
Georgia 109 6,673,986.13 5.34
Tennessee 85 4,951,429.57 3.96
Oklahoma 91 3,823,891.78 3.06
Missouri 53 2,492,785.40 1.99
Illinois 38 1,959,496.90 1.57
Florida 35 1,789,295.69 1.43
Idaho 17 1,276,528.28 1.02
Other (1) 120 6,803,590.13 5.44
--- --------------- ----
Total: 2,291 $125,000,984.52 100.00%
===== =============== =======
- -----------
</TABLE>
(1) Includes 12 other states (none of which have a concentration of Home Equity
Loans in excess of 1.00% of the Cut-Off Date Aggregate Loan Balance).
Combined Loan-to-Value Ratios
The original Combined Loan-to-Value ratios as of the origination dates
of the Home Equity Loans as of the Cut-Off Date were distributed as follows:
<TABLE>
<CAPTION>
% of Cut-Off Date
Range of Number of Cut-Off Date Aggregate Aggregate
Original CLTV's Home Equity Loans Loan Balance Loan Balance
- --------------- ----------------- ------------ ------------
<S> <C> <C> <C>
15.01% to 20.00% 7 $ 109,039.87 0.09%
20.01 to 25.00 7 130,057.17 0.10
25.01 to 30.00 9 233,934.23 0.19
30.01 to 35.00 16 421,721.54 0.34
35.01 to 40.00 21 742,207.79 0.59
40.01 to 45.00 20 630,428.17 0.50
45.01 to 50.00 39 1,254,702.69 1.00
50.01 to 55.00 32 1,311,222.20 1.05
55.01 to 60.00 47 2,250,714.68 1.80
60.01 to 65.00 72 3,160,603.91 2.53
65.01 to 70.00 167 7,791,148.90 6.23
70.01 to 75.00 282 14,743,726.63 11.79
75.01 to 80.00 1,005 58,620,539.17 46.90
80.01 to 85.00 318 23,054,863.65 18.44
85.01 to 90.00 111 7,273,190.58 5.82
90.01 to 95.00 46 1,409,134.51 1.13
95.01 to 100.00 92 1,863,748.83 1.49
----- --------------- ------
Total: 2,291 $125,000,984.52 100.00%
===== =============== =======
</TABLE>
<PAGE>
Coupon Rates
The Coupon Rates borne by the Notes relating to the Home Equity Loans
as of the Cut-Off Date were distributed as follows as of the Cut-Off Date:
<TABLE>
<CAPTION>
% of Cut-Off Date
Range of Number of Cut-Off Date Aggregate Aggregate
Coupon Rates Home Equity Loans Loan Balance Loan Balance
------------ ----------------- ------------ ------------
<S> <C> <C> <C>
8.001 to 9.000 138 $ 10,470,375.78 8.38%
9.001 to 10.000 530 31,342,738.83 25.07
10.001 to 11.000 474 30,155,087.55 24.12
11.001 to 12.000 419 23,015,656.84 18.41
12.001 to 13.000 363 17,343,762.32 13.87
13.001 to 14.000 171 6,784,725.28 5.43
14.001 to 15.000 93 3,110,753.76 2.49
15.001 to 16.000 73 1,858,434.34 1.49
16.001 to 17.000 23 680,144.01 0.54
17.001 to 18.000 7 239,305.81 0.19
---- ----------------- ------
Total: 2,291 $125,000,984.52 100.00%
===== =============== =======
</TABLE>
Loan Balances
The distribution of the outstanding principal amounts of the Home
Equity Loans as of the Cut-Off Date was as follows:
<TABLE>
<CAPTION>
% of Cut-Off Date
Number of Cut-Off Date Aggregate Aggregate
Loan Balances Home Equity Loans Loan Balance Loan Balance
------------- ----------------- ------------ ------------
<S> <C> <C> <C>
Up to $25,000.00 342 $ 5,943,013.54 4.75%
25,000.01 to 50,000.00 781 30,200,864.56 24.16
50,000.01 to 75,000.00 755 45,903,390.52 36.72
75,000.01 to 100,000.00 237 20,464,317.81 16.37
100,000.01 to 125,000.00 103 11,490,021.02 9.19
125,000.01 to 150,000.00 46 6,207,955.51 4.97
150,000.01 to 175,000.00 12 1,921,077.42 1.54
175,000.01 to 200,000.00 12 2,242,000.64 1.79
200,000.01 to 225,000.00 3 628,343.50 0.50
----- --------------- ----
Total: 2,291 $125,000,984.52 100.00%
===== =============== ========
</TABLE>
<PAGE>
Distribution by Original Term
The distribution of the original term to maturity of the Home Equity
Loans as of the Cut-Off Date was as follows:
<TABLE>
<CAPTION>
% of Cut-Off Date
Original Months Number of Cut-Off Date Aggregate Aggregate
to Maturity Home Equity Loans Loan Balance Loan Balance
----------- ----------------- ------------ ------------
<S> <C> <C> <C>
1 to 60 14 $ 502,117.10 0.40%
61 to 120 104 3,285,813.58 2.63
121 to 180 592 22,879,207.44 18.30
181 to 240 393 20,170,960.49 16.14
241 to 300 628 36,929,321.95 29.54
301 to 360 560 41,233,563.96 32.99
--- ------------- -----
Total: 2,291 $125,000,984.52 100.00%
===== =============== ========
</TABLE>
Distribution of Months Since Origination
The distribution of the number of months since the date of origination
of the Home Equity Loans as of the Cut-Off Date was as follows:
<TABLE>
<CAPTION>
% of Cut-Off Date
Number of Months Number of Cut-Off Date Aggregate Aggregate
Since Origination Home Equity Loans Loan Balance Loan Balance
- ----------------- ----------------- ------------ ------------
<S> <C> <C> <C>
Zero 1,077 $ 59,779,246.95 47.82%
1 to 2 833 47,198,534.03 37.76
3 to 4 341 17,365,904.97 13.89
5 to 6 16 267,133.45 0.21
7 to 8 15 250,506.67 0.20
9 to 10 7 96,664.11 0.08
11 to 12 1 30,250.00 0.02
13 to 14 1 12,744.34 0.01
---- ----------------- ----
Total: 2,291 $125,000,984.52 100.00%
===== =============== ========
</TABLE>
<PAGE>
Distribution of Remaining Term to Maturity
The distribution of the number of months remaining to maturity of the
Home Equity Loans as of the Cut-Off Date was as follows:
<TABLE>
<CAPTION>
% of Cut-Off Date
Months Remaining Number of Cut-Off Date Aggregate Aggregate
to Maturity Home Equity Loans Loan Balance Loan Balance
----------- ----------------- ------------ ------------
<S> <C> <C> <C>
1 to 60 14 $ 502,117.10 0.40%
61 to 120 104 3,285,813.58 2.63
121 to 180 592 22,879,207.44 18.30
181 to 240 393 20,170,960.49 16.14
241 to 300 628 36,929,321.95 29.54
301 to 360 560 41,233,563.96 32.99
--- ------------- -----
Total: 2,291 $125,000,984.52 100.00%
===== =============== =======
</TABLE>
Occupancy Status
The occupancy status of the Properties securing the Home Equity Loans
as of the Cut-Off Date was as follows:
<TABLE>
<CAPTION>
% of Cut-Off Date
Number of Cut-Off Date Aggregate Aggregate
Occupancy Status Home Equity Loans Loan Balance Loan Balance
- ---------------- ----------------- ------------ ------------
<S> <C> <C> <C>
Owner Occupied 2,214 $121,123,330.54 96.90%
Non Owner Occupied 77 3,877,653.98 3.10
------ ------------------ ----
Total: 2,291 $125,000,984.52 100.00%
===== =============== =======
</TABLE>
Distribution by Lien Position
The lien position of the Home Equity Loans as of the Cut-Off Date was
as follows:
<TABLE>
<CAPTION>
% of Cut-Off Date
Number of Cut-Off Date Aggregate Aggregate
Lien Position Home Equity Loans Loan Balance Loan Balance
- ------------- ----------------- ------------ ------------
<S> <C> <C> <C>
First Lien 2,001 $118,370,775.50 94.70%
Second Lien 290 6,630,209.02 5.30
----- ----------------- -----
Total: 2,291 $125,000,984.52 100.00%
===== =============== =======
</TABLE>
<PAGE>
Distribution By Documentation Type
The documentation types of the Home Equity Loans as of the Cut-Off Date
was as follows:
<TABLE>
<CAPTION>
% of Cut-Off Date
Number of Cut-Off Date Aggregate Aggregate
Documentation Type Home Equity Loans Loan Balance Loan Balance
- ------------------ ----------------- ------------ ------------
<S> <C> <C> <C>
Full Documentation 2,210 $119,353,442.84 95.48%
NIQ 66 4,861,429.62 3.89
Stated 1003 15 786,112.06 0.63
----- --------------- ------
Total: 2,291 $125,000,984.52 100.00%
===== =============== =======
</TABLE>
Distribution By Credit Grade
The credit grade of the Home Equity Loans pursuant to the Sponsor's
underwriting guidelines as of the Cut-Off Date was as follows:
<TABLE>
<CAPTION>
% of Cut-Off Date
Number of Cut-Off Date Aggregate Aggregate
Credit Grade Home Equity Loans Loan Balance Loan Balance
- ------------ ----------------- ------------ ------------
<S> <C> <C> <C>
A 1,149 $ 65,294,583.18 52.24%
B 659 37,885,459.14 30.31
C 375 17,972,803.59 14.38
D 108 3,848,138.61 3.08
----- ---------------- ------
Total: 2,291 $125,000,984.52 100.00%
===== =============== =======
</TABLE>
Distribution of Adjustable Rate Home Equity Loans By Gross Margins
The gross margins of the adjustable rate Home Equity Loans as of the
Cut-Off Date was as follows:
<TABLE>
<CAPTION>
% of Cut-Off Date
Number of Cut-Off Date Aggregate Aggregate
Gross Margins Home Equity Loans Loan Balance Loan Balance
- ------------- ----------------- ------------ ------------
<S> <C> <C> <C>
5.001% to 5.500% 2 $ 172,550.00 2.16%
5.501 to 6.000 8 781,000.00 9.79
6.001 to 6.500 9 781,558.16 9.79
6.501 to 7.000 7 584,606.38 7.33
7.001 to 7.500 11 1,011,606.89 12.68
7.501 to 8.000 23 2,283,829.83 28.62
8.001 to 8.500 16 1,461,846.67 18.32
8.501 to 9.000 5 656,358.84 8.23
9.001 to 9.500 1 99,522.20 1.25
9.501 to 10.000 1 35,000.00 0.44
10.001 to 10.500 1 112,000.00 1.40
--- --------------- ------
Total: 84 $7,979,878.97 100.00%
== ============= =======
</TABLE>
<PAGE>
Distribution of Adjustable Rate Home Equity Loans By Maximum Rate
The Maximum Rates of the adjustable rate Home Equity Loans as of the
Cut-Off Date was as follows:
<TABLE>
<CAPTION>
% of Cut-Off Date
Number of Cut-Off Date Aggregate Aggregate
Maximum Rate Home Equity Loans Loan Balance Loan Balance
- ------------ ----------------- ------------ ------------
<S> <C> <C> <C>
14.001 to 14.500 1 $ 81,600.00 1.02%
14.501 to 15.000 6 829,261.19 10.39
15.001 to 15.500 7 538,577.26 6.75
15.501 to 16.000 18 1,894,005.47 23.73
16.001 to 16.500 14 1,208,656.31 15.15
16.501 to 17.000 21 2,100,270.94 26.32
17.001 to 17.500 9 795,052.80 9.96
17.501 to 18.000 4 300,557.38 3.77
18.001 to 18.500 2 153,147.62 1.92
18.501 to 19.000 1 35,000.00 0.44
19.001 to 19.500 1 43,750.00 0.55
--- ------------ ------
Total: 84 $7,979,878.97 100.00%
== ============= =======
</TABLE>
Distribution of Adjustable Rate Home Equity Loans By Minimum Rate
The Minimum Rates of the adjustable rate Home Equity Loans as of the
Cut-Off Date was as follows:
<TABLE>
<CAPTION>
% of Cut-Off Date
Number of Cut-Off Date Aggregate Aggregate
Minimum Rate Home Equity Loans Loan Balance Loan Balance
- ------------ ----------------- ------------ ------------
<S> <C> <C> <C>
8.001 to 8.500 1 $ 81,600.00 1.02%
8.501 to 9.000 6 829,261.19 10.39
9.001 to 9.500 7 538,577.26 6.75
9.501 to 10.000 18 1,894,005.47 23.73
10.001 to 10.500 14 1,208,656.31 15.15
10.501 to 11.000 21 2,100,270.94 26.32
11.001 to 11.500 9 795,052.80 9.96
11.501 to 12.000 4 300,557.38 3.77
12.001 to 12.500 2 153,147.62 1.92
12.501 to 13.000 1 35,000.00 0.44
13.001 to 13.500 1 43,750.00 0.55
--- ------------ ------
Total: 84 $7,979,878.97 100.00%
== ============= =======
</TABLE>
2
<PAGE>
Item 7. Financial statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits
Exhibit No.
4.1 Pooling and Servicing Agreement
99.1 Certificate Insurance Policy
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
DLJ MORTGAGE ACCEPTANCE CORP.
(Registrant)
By: /s/ Paul Najarian
------------------------
Name: Paul Najarian
Title: Vice President
Date: December 23, 1997
<PAGE>
EXHIBIT INDEX
Sequentially
Exhibit Number Description Numbered Page
- -------------- ----------- -------------
4.1 Pooling and Servicing Agreement
99.1 Certificate Insurance Policy
<PAGE>
Exhibit 4.1
Execution Copy
POOLING AND SERVICING AGREEMENT
Relating to
FIRST GREENSBORO HOME EQUITY LOAN TRUST 1997-2
Among
DLJ MORTGAGE ACCEPTANCE CORP.,
as Depositor,
FIRST GREENSBORO HOME EQUITY, INC.,
as Sponsor,
FIRST GREENSBORO CAPITAL CORPORATION,
as Seller
FIRST GREENSBORO HOME EQUITY, INC.,
as Master Servicer
THE CHASE MANHATTAN BANK,
as Trustee
and
OCWEN FEDERAL BANK FSB
as Backup Master Servicer
Dated as of December 1, 1997
<PAGE>
CONTENTS
Page
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
Section 1.01 Definitions 2
Section 1.02 Use of Words and Phrases 24
Section 1.03 Captions; Table of Contents 24
Section 1.04 Opinions 24
ARTICLE II
ESTABLISHMENT AND ORGANIZATION OF THE TRUST
Section 2.01 Establishment of the Trust 25
Section 2.02 Office 25
Section 2.03 Purposes and Powers 25
Section 2.04 Appointment of the Trustee; Declaration of Trust. 25
Section 2.05 Expenses of the Trust 25
Section 2.06 Ownership of the Trust 26
Section 2.07 Situs of the Trust 26
Section 2.08 Miscellaneous REMIC Provisions 26
<PAGE>
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 3.01 Representations and Warranties of the Depositor 28
Section 3.02 Representations and Warranties of the
Master Servicer and Sponsor 30
Section 3.03 Representations and Warranties of the Seller 32
Section 3.04 Covenants of Seller and Sponsor to Take Certain
Actions with Respect to the Home Equity Loans in
Certain Situations 35
Section 3.05 Deliveries and Conveyance of Qualified
Replacement Mortgages 43
Section 3.06 Acceptance by Trustee; Certain Substitutions
of Home Equity Loans; Certification by Trustee 46
Section 3.07 Conveyance of the Subsequent Home Equity Loans 47
Section 3.08 Reserved 49
Section 3.09 Representations and Warranties of the
Backup Master Servicer 49
ARTICLE IV
ISSUANCE AND SALE OF CERTIFICATES
Section 4.01 Issuance of Certificates 52
Section 4.02 Sale of Certificates 52
ARTICLE V
CERTIFICATES AND TRANSFER OF INTERESTS
Section 5.01 Terms 53
Section 5.02 Forms 53
Section 5.03 Execution, Authentication and Delivery 53
<PAGE>
Section 5.04 Registration and Transfer of Certificates 54
Section 5.05 Mutilated, Destroyed, Lost or Stolen Certificates 56
Section 5.06 Persons Deemed Owners 56
Section 5.07 Cancellation 56
Section 5.08 Limitation on Transfer of Ownership Rights 57
Section 5.09 Assignment of Rights 58
ARTICLE VI
COVENANTS
Section 6.01 Distributions 59
Section 6.02 Money for Distributions to be Held in Trust;
Withholding 59
Section 6.03 Protection of Trust Estate 60
Section 6.04 Performance of Obligations 61
Section 6.05 Negative Covenants 61
Section 6.06 No Other Powers 61
Section 6.07 Limitation of Suits 62
Section 6.08 Unconditional Rights of Owners to
Receive Distributions 62
Section 6.09 Rights and Remedies Cumulative 63
Section 6.10 Delay or Omission Not Waiver 63
<PAGE>
Section 6.11 Control by Owners 63
Section 6.12 Indemnification by the Sponsor 63
ARTICLE VII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 7.01 Collection of Money 65
Section 7.02 Establishment of Accounts 65
Section 7.03 Flow of Funds 65
Section 7.04 Pre-Funding Account and Capitalized
Interest Account 68
Section 7.05 Investment of Accounts 69
Section 7.06 Payment of Trust Expenses 69
Section 7.07 Eligible Investments 69
Section 7.08 Accounting and Directions by Trustee 71
Section 7.09 Reports by Trustee to Owners and Certificate Insurer 72
Section 7.10 Reports by Trustee 74
ARTICLE VIII
SERVICING AND ADMINISTRATION OF HOME EQUITY LOANS
Section 8.01 Master Servicer and Sub-Servicers 75
Section 8.02 Collection of Certain Home Equity Loan Payments 76
Section 8.03 Sub-Servicing Agreements 77
<PAGE>
Section 8.04 Successor Sub-Servicers 77
Section 8.05 Liability of Master Servicer; Indemnification 77
Section 8.06 No Contractual Relationship Between
Sub-Servicer, Trustee or the Owners 78
Section 8.07 Assumption or Termination of Sub-Servicing
Agreement by Trustee. 78
Section 8.08 Principal and Interest Account 78
Section 8.09 Delinquency Advances and Servicing Advances 80
Section 8.10 Compensating Interest; Repurchase of
Home Equity Loans 81
Section 8.11 Maintenance of Insurance 82
Section 8.12 Due-on-Sale Clauses; Assumption and
Substitution Agreements 83
Section 8.13 Realization Upon Defaulted Home Equity Loans;
Workout of Home Equity Loans 83
Section 8.14 Trustee to Cooperate; Release of Files 86
Section 8.15 Servicing Compensation 86
Section 8.16 Annual Statement as to Compliance 87
Section 8.17 Annual Independent Certified Public
Accountants' Reports 87
Section 8.18 Access to Certain Documentation and
Information Regarding the Home Equity Loans 87
Section 8.19 Assignment of Agreement 87
Section 8.20 Removal of Master Servicer and Backup Master
Servicer; Retention of Master Servicer and
Backup Master Servicer; Resignation of Master
Servicer and Backup Master Servicer 88
<PAGE>
Section 8.21 Inspections by Certificate Insurer;
Errors and Omissions Insurance 93
Section 8.22 Additional Servicing Responsibilities
for Second Mortgage Loans 93
ARTICLE IX
TERMINATION OF TRUST
Section 9.01 Termination of Trust 94
Section 9.02 Termination Upon Option of the Master Servicer 94
Section 9.03 Termination Upon Loss of REMIC Status 95
Section 9.04 Disposition of Proceeds 97
ARTICLE X
THE TRUSTEE
Section 10.01 Certain Duties and Responsibilities 98
Section 10.02 Removal of Trustee for Cause 99
Section 10.03 Certain Rights of the Trustee 101
Section 10.04 Not Responsible for Recitals or
Issuance of Certificates 102
Section 10.05 May Hold Certificates 102
Section 10.06 Money Held in Trust 102
Section 10.07 Compensation and Reimbursement 102
Section 10.08 Corporate Trustee Required; Eligibility 103
<PAGE>
Section 10.09 Resignation and Removal; Appointment of Successor 103
Section 10.10 Acceptance of Appointment by Successor Trustee 105
Section 10.11 Merger, Conversion, Consolidation or
Succession to Business of the Trustee 105
Section 10.12 Reporting; Withholding 105
Section 10.13 Liability of the Trustee 106
Section 10.14 Appointment of Co-Trustee or Separate Trustee 107
ARTICLE XI
MISCELLANEOUS
Section 11.01 Compliance Certificates and Opinions 109
Section 11.02 Form of Documents Delivered to the Trustee 109
Section 11.03 Acts of Owners 110
Section 11.04 Notices, etc. to Trustee 111
Section 11.05 Notices and Reports to Owners; Waiver of Notices 111
Section 11.06 Rules by Trustee 111
Section 11.07 Successors and Assigns 111
Section 11.08 Severability 112
Section 11.09 Benefits of Agreement 112
Section 11.10 Legal Holidays 112
Section 11.11 Governing Law; Submission to Jurisdiction 112
<PAGE>
Section 11.12 Counterparts 113
Section 11.13 Usury 113
Section 11.14 Amendment 114
Section 11.15 Paying Agent; Appointment and Acceptance of Duties 114
Section 11.16 REMIC Status 115
Section 11.17 Additional Limitation on Action and Imposition of Tax 118
Section 11.18 Appointment of Tax Matters Person 118
Section 11.19 The Certificate Insurer 118
Section 11.20 Reserved 119
Section 11.21 Third-Party Rights 119
Section 11.22 Notices 119
Section 11.23 Rule 144A Information 120
ARTICLE XII
CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER
Section 12.01 Trust Estate and Accounts Held for
Benefit of the Certificate Insurer. 122
Section 12.02 Claims Upon the Policy; Policy Payments Account. 122
Section 12.03 Effect of Payments by the Certificate Insurer;
Subrogation. 124
Section 12.04 Notices to the Certificate Insurer. 124
Section 12.05 Third-Party Beneficiary. 124
Section 12.06 Rights to the Certificate Insurer
To Exercise Rights of Owners 124
<PAGE>
SCHEDULE I SCHEDULE OF HOME EQUITY LOANS
EXHIBIT A-1 FORM OF CLASS A-1 CERTIFICATE
EXHIBIT A-2 FORM OF CLASS A-2 CERTIFICATE
EXHIBIT A-3 FORM OF CLASS A-3 CERTIFICATE
EXHIBIT B RESERVED
EXHIBIT C FORM OF CLASS R CERTIFICATE
EXHIBIT D FORM OF SUBSEQUENT TRANSFER AGREEMENT
EXHIBIT E FORM OF CERTIFICATE RE: HOME EQUITY LOANS
PREPAID IN FULL AFTER CUT-OFF DATE
EXHIBIT F-1 FORM OF TRUSTEE'S RECEIPT
EXHIBIT G FORM OF POOL CERTIFICATION
EXHIBIT H FORM OF DELIVERY ORDER
EXHIBIT I FORM OF CLASS R TAX MATTERS TRANSFER CERTIFICATE
EXHIBIT J-1 FORM OF CERTIFICATE REGARDING TRANSFER
(ACCREDITED INVESTOR)
EXHIBIT J-2 FORM OF CERTIFICATE REGARDING TRANSFER (RULE 144A)
EXHIBIT K HOME EQUITY LOANS WITH DOCUMENT EXCEPTIONS
<PAGE>
POOLING AND SERVICING AGREEMENT, relating to FIRST GREENSBORO HOME EQUITY
LOAN TRUST 1997-2, dated as of December 1, 1997 by and among DLJ MORTGAGE
ACCEPTANCE CORP., a Delaware corporation, in its capacity as Depositor (the
"Depositor"), FIRST GREENSBORO HOME EQUITY, INC., a North Carolina corporation
in its capacities as the Sponsor (in such capacity, the "Sponsor") and as the
Master Servicer (in such capacity, the "Master Servicer"), FIRST GREENSBORO
CAPITAL CORPORATION, a Tennessee corporation, in its capacity as Seller (the
"Seller"), THE CHASE MANHATTAN BANK, a New York banking corporation, in its
capacity as Trustee (the "Trustee") and OCWEN FEDERAL BANK FSB, a federal
savings bank, in its capacity as Backup Master Servicer (the "Backup Master
Servicer").
WHEREAS, the Sponsor wishes to establish a trust and provide for the
allocation and sale of the beneficial interests therein and the maintenance and
distribution of the trust estate;
WHEREAS, the Master Servicer has agreed to serve as master servicer of the
Home Equity Loans and to service the Home Equity Loans, which constitute the
principal assets of the trust estate;
WHEREAS, all things necessary to make the Certificates, when executed
and authenticated by the Trustee valid instruments, and to make this Agreement a
valid agreement, in accordance with their and its terms, have been done;
WHEREAS, The Chase Manhattan Bank, is willing to serve in the capacity of
Trustee hereunder;
WHEREAS, Ocwen Federal Bank FSB is willing to serve in the capacity of
Backup Master Servicer hereunder; and
WHEREAS, Financial Security Assurance Inc. (the "Certificate Insurer")
is intended to be a third party beneficiary of this Agreement and is hereby
recognized by the parties hereto to be a third-party beneficiary of this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the Depositor, the Seller, the Master Servicer, the Sponsor,
the Backup Master Servicer and the Trustee hereby agree as follows:
CONVEYANCE
To provide for the distribution of the principal of and/or interest on the Class
A Certificates and the Class R Certificates in accordance with their terms, all
of the sums distributable under this Agreement with respect to the Certificates
and the performance of the covenants contained in this Agreement, the Depositor
hereby bargains, sells, conveys, assigns and transfers to the Trustee, in trust,
without recourse and for the exclusive benefit of the Owners of the
Certificates, all of the Depositor's right, title and interest in and to any and
all benefits accruing to the Depositor from (a) the Initial Home Equity Loans
(other than any principal and interest payments due thereon prior to December 1,
1997 whether or not received) listed in Schedule I to this Agreement which the
Depositor is causing to be delivered to the Trustee herewith and the Subsequent
Home Equity Loans (other than any principal and interest due thereon prior to
the related Subsequent Cut-Off Date whether or not received) listed on Schedule
I to any Subsequent Transfer Agreement, which the Depositor will cause to be
delivered to the Trustee (and all substitutions for such Home Equity Loans as
provided by Sections 3.03, 3.04, 3.05 and 3.06), together with the related Home
Equity Loan documents and the Depositor's interest in any Property which secured
a Home
<PAGE>
Equity Loan but which has been acquired by foreclosure or deed in lieu of
foreclosure, and all payments thereon and proceeds of the conversion, voluntary
or involuntary, of the foregoing; (b) such amounts as may be held by the Trustee
in the Certificate Account, the Pre-Funding Account and the Capitalized Interest
Account, together with investment earnings on such amounts and such amounts as
may be held in the name of the Trustee in the Principal and Interest Account, if
any, exclusive of investment earnings thereon (except as otherwise provided
herein), whether in the form of cash, instruments, securities or other
properties (including any Eligible Investments held by the Master Servicer), (c)
the Depositor's rights but none of its obligations under the Loan Purchase
Agreement and the Loan Sale Agreement and (d) proceeds of all the foregoing
(including, but not by way of limitation, all proceeds of any mortgage
insurance, hazard insurance and title insurance policy relating to the Home
Equity Loans, cash proceeds, accounts, accounts receivable, notes, drafts,
acceptances, chattel paper, checks, deposit accounts, rights to payment of any
and every kind, and other forms of obligations and receivables which at any time
constitute all or part of or are included in the proceeds of any of the
foregoing) to pay the Certificates as specified herein ((a)-(d) above shall be
collectively referred to herein as the "Trust Estate"). In addition to the
foregoing, the Sponsor shall cause the Certificate Insurer to deliver the
Insurance Policy to the Trustee for the benefit of the Owners of the Class A
Certificates.
The Trustee acknowledges such sale, accepts the Trust hereunder in accordance
with the provisions hereof and the Trustee agrees to perform the duties herein
to the best of its ability to the end that the interests of the Owners may be
adequately and effectively protected.
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
Section 1.01 Definitions.
For all purposes of this Agreement, the following terms shall have the
meanings set forth below, unless the context clearly indicates otherwise:
"Account": Any account established in accordance with Section 7.02 or 8.08
hereof.
"Accrual Period": The calendar month immediately preceding the month in
which the Payment Date occurs. All calculations of interest on the Certificates
will be made on the basis of a 360-day year consisting of twelve 30 day months.
"Addition Notice": With respect to the transfer of Subsequent Home Equity
Loans to the Trust pursuant to Section 3.07 hereof, notice given not less than
five Business Days prior to the related Subsequent Transfer Date of the Seller's
designation of Subsequent Home Equity Loans to be sold to the Trust and the
aggregate Loan Balance of such Subsequent Home Equity Loans.
"Adjusted Pass-Through Rate": As of any date of determination thereof, a
rate equal to the sum of (a) the Weighted Average Pass-Through Rate, and (b) any
portion of the Premium Amount and the Trustee Fee (calculated as a percentage of
the outstanding principal amount of the Certificates) then accrued and
outstanding.
"Adjustment Date": With respect to an adjustable rate Home Equity Loan, the
date on which a change to the Coupon Rate on a Home Equity Loan becomes
effective.
"Affiliate": With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this
2
<PAGE>
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, as it may be amended
from time to time, including the Exhibits and Schedules hereto.
"Annual Loss Percentage (Rolling Twelve Month)": As of any date of
determination thereof, a fraction, expressed as a percentage, the numerator of
which is the aggregate of the Realized Losses as of the last day of the calendar
month of each Remittance Period for the twelve immediately preceding Remittance
Periods and the denominator of which is the Maximum Collateral Amount.
"Appraised Value": The appraised value of any Property based upon the
appraisal made at the time of the origination of the related Home Equity Loan,
or, in the case of a Property which was sold within twelve months of the time of
Home Equity Loan origination, the lesser of the appraisal and the sales price of
the Property.
"Authorized Officer": With respect to any Person, any officer of such
Person who is authorized to act for such Person in matters relating to this
Agreement, and whose action is binding upon, such Person; with respect to the
Depositor, the Seller, the Sponsor, the Master Servicer and the Backup Master
Servicer, initially including those individuals whose names appear on the lists
of Authorized Officers delivered at the Closing; with respect to the Trustee,
any officer assigned to the Corporate Trust Division (or any successor thereto),
including any Vice President, Assistant Vice President, Trust Officer, any
Assistant Secretary, any trust officer or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and having direct responsibility for the administration of
this Agreement.
"Available Funds": As defined in Section 7.02(b) thereof.
"Available Funds Shortfall": As defined in Section 7.03(b)(ii)(A).
"Backup Master Servicer": Ocwen Federal Bank FSB, a federal savings bank.
"Backup Master Servicing Fee": Any amounts that are to be paid to the
Backup Master Servicer by the Sponsor, pursuant to the Backup Servicing Fee
Agreement.
"Backup Master Servicing Standard": The same manner in which the Backup
Master Servicer services and administers residential mortgage loans similar to
the Home Equity Loans for its own portfolio, giving due consideration to
customary and usual standards of practice of prudent mortgage lenders and loan
servicers administering similar mortgage loans, but without regard to: (i) any
relationship that the Backup Master Servicer, any Sub-Servicer or any Affiliate
of the Backup Master Servicer or any Sub-Servicer may have with the related
Mortgagor; (ii) the ownership of any Certificate by the Backup Master Servicer
or any Affiliate of the Backup Master Servicer; (iii) the Backup Master
Servicer's obligation to make a Delinquency Advance or Servicing Advance; or
(iv) the Backup Master Servicer's or any Sub-Servicer's right to receive
compensation for its services hereunder or with respect to any other particular
transaction.
"Backup Servicing Fee Agreement": The agreement dated as of December 1,
1997 between the Sponsor and the Backup Master Servicer.
3
<PAGE>
"Business Day": Any day that is not a Saturday, Sunday or other day on
which commercial banking institutions in New York, New York, Greensboro, North
Carolina, West Palm Beach, Florida (if the Backup Master Servicer becomes the
successor Master Servicer) or the city in which the Corporate Trust Office is
located, are authorized or obligated by law or executive order to be closed.
"Capitalized Interest Account": The Capitalized Interest Account
established in accordance with Section 7.02(a) hereof and maintained by the
Trustee.
"Capitalized Interest Requirement": As to any Pre-Funding Payment Date,
interest for the number of days in the Accrual Period and Class of Class A
Certificates on the Pre-Funded Amount as of the first day of the Remittance
Period related to such Pre-Funding Payment Date at the average of the
Pass-Through Rates for the related Classes of Class A Certificates for the
applicable Accrual Period(s) related to such Pre-Funding Payment Date, weighted
on the basis of their respective Class Certificate Principal Balances as of the
first day of the Remittance Period related to such Pre-Funding Payment Date.
"Carry-Forward Amount": With respect to any Class of the Class A
Certificates and any Payment Date, the sum of (x) the amount, if any, by which
(i) the Current Interest for such Class for the immediately preceding Payment
Date exceeded (ii) the amount of the actual distribution made to the Owners of
the Class A Certificates on such immediately preceding Payment Date pursuant to
Section 7.03(b)(iv)(B) hereof plus (y) 30 days' interest on such excess at the
Pass-Through Rate for the related Class of Class A Certificate.
"Certificate": Any one of the Class A Certificates or the Class R
Certificates, each representing the interests and the rights described in this
Agreement.
"Certificate Account": The segregated certificate account established in
accordance with Section 7.02(a) hereof and maintained at the Corporate Trust
Office entitled "The Chase Manhattan Bank as Trustee on behalf of the Owners of
the First Greensboro Home Equity Loan Trust 1997-2, Home Equity Loan
Pass-Through Certificates."
"Certificate Insurance Policy": The Certificate Guaranty Insurance Policy
(number 50648-N) dated December 15, 1997 issued by the Certificate Insurer for
the benefit of the Owners of the Class A Certificates pursuant to which the
Certificate Insurer guarantees Insured Payments.
"Certificate Insurer": Financial Security Assurance Inc., a stock insurance
company organized and created under the laws of the State of New York and any
successor thereto, as issuer of the Certificate Insurance Policy.
"Certificate Insurer Default": The existence and continuance of any of the
following:
(a) the Certificate Insurer fails to make a payment required under the
Certificate Insurance Policy in accordance with its terms; or
(b) the Certificate Insurer shall have (i) filed a petition or
commenced any case or proceeding under any provision or chapter of the
United States Bankruptcy Code, the New York State Insurance Law or any
other similar federal or state law relating to insolvency, bankruptcy,
rehabilitation, liquidation, or reorganization, (ii) made a general
assignment for the benefit of its creditors or (iii) had an order for
relief entered against it under the United States Bankruptcy Code, the New
York State Insurance law or any other similar federal or state law relating
to insolvency, bankruptcy, rehabilitation, liquidation, or reorganization
that is final and
4
<PAGE>
nonappealable; or
(c) a court of competent jurisdiction, the New York Department
of Insurance or any other competent regulatory authority shall have entered a
final and nonappealable order, judgment or decree (i) appointing a custodian,
trustee, agent, or receiver for the Certificate Insurer or for all or any
material portion of its property or (ii) authorizing the taking of possession by
a custodian, trustee, agent, or receiver of the Certificate Insurer of all or
any material portion of its property.
"Certificate Principal Balance": As of the Startup Day as to each of the
following Classes of Class A Certificates, the Certificate Principal Balances
thereof, as follows:
Class A-1 Certificates - $47,500,000
Class A-2 Certificates - $29,500,000
Class A-3 Certificates - $48,000,000
The Class R Certificates do not have a Certificate Principal Balance.
"Class": Any Class of the Class A Certificates or the Class R Certificates.
"Class A Certificate": Any one of the Class A-1 Certificates, the Class A-2
Certificates or the Class A-3 Certificates.
"Class A Certificate Principal Balance": As of any time of determination,
the Certificate Principal Balance as of the Startup Day of all Class A
Certificates less the aggregate of all amounts actually distributed on account
of the Class A Distribution Amount pursuant to Section 7.03(b)(iv) hereof with
respect to principal thereon on all prior Payment Dates; provided, however, that
solely for purposes of determining the Certificate Insurer's rights, as
subrogee, the Class A Certificate Principal Balance shall not be reduced by any
principal amount paid to the Owner thereof from Insured Payments.
"Class A Certificate Termination Date": With respect to the Class A-1
Certificates, the Class A-1 Certificate Termination Date, with respect to the
Class A-2 Certificates, the Class A-2 Certificate Termination Date and with
respect to the Class A-3 Certificates, the Class A-3 Certificate Termination
Date.
"Class A Distribution Amount": The sum of (i) the Class A-1 Distribution
Amount, (ii) the Class A-2 Distribution Amount and (iii) the Class A-3
Distribution Amount.
"Class A-1 Certificate": Any one of the Certificates designated on the face
thereof as a Class A-1 Certificate, substantially in the form annexed hereto as
Exhibit A-1 authenticated and delivered by the Trustee, representing the right
to distributions as set forth herein and each evidencing an interest designated
as a "regular interest" in the REMIC created hereunder for purposes of the REMIC
Provisions.
"Class A-1 Certificate Principal Balance": As of any time of determination,
the Certificate Principal Balance as of the Startup Day of all Class A-1
Certificates less the aggregate of all amounts actually distributed with respect
to the Class A-1 Distribution Amount pursuant to Section 7.03(b)(iv) hereof with
respect to principal thereon on all prior Payment Dates; provided, however, that
solely for the purposes of determining the Certificate Insurer's rights, as
subrogee, the Class A-1 Certificate Principal Balance shall not be reduced by
any principal amounts paid to the Owners thereof from Insured Payments.
5
<PAGE>
"Class A-1 Certificate Termination Date": The Payment Date on which the
Class A-1 Certificate Principal Balance is reduced to zero.
"Class A-1 Current Interest": With respect to any Payment Date, 30 days'
interest accrued on the Class A-1 Certificate Principal Balance immediately
prior to such Payment Date during the related Accrual Period at the Class A-1
Pass-Through Rate plus the Preference Amount owed to the Owners of the Class A-1
Certificates as it relates to interest previously paid on the Class A-1
Certificates, plus the Carry Forward Amount, if any, with respect to the Class
A-1 Certificates, subject to a reduction in the event of (i) Prepayment Interest
Shortfalls, to the extent not covered by Compensating Interest and (ii) Relief
Act Shortfalls, in an amount equal to the pro rata portion of such shortfalls
based upon the Class A-1 Current Interest, Class A-2 Current Interest and Class
A-3 Current Interest.
"Class A-1 Distribution Amount": With respect to any Payment Date, the sum
of (x) the Class A-1 Current Interest and (y) the Principal Distribution Amount
payable to the Owners of the Class A-1 Certificates pursuant to Section
7.03(b)(iv)(C) for such Payment Date.
"Class A-1 Pass-Through Rate": 6.78% per annum.
"Class A-2 Certificate": Any one of the Certificates designated on the face
thereof as a Class A-2 Certificate, substantially in the form annexed hereto as
Exhibit A-2 authenticated and delivered by the Trustee, representing the right
to distributions as set forth herein and each evidencing an interest designated
as a "regular interest" in the REMIC created hereunder for purposes of the REMIC
provisions.
"Class A-2 Certificate Principal Balance": As of any time of determination,
the Certificate Principal Balance as of the Startup Day of all Class A-2
Certificates less the aggregate of all amounts actually distributed with respect
to the Class A-2 Distribution Amount pursuant to Section 7.03(b)(iv) hereof with
respect to principal thereon on all prior Payment Dates; provided, however, that
solely for the purposes of determining the Certificate Insurer's rights, as
subrogee, the Class A-2 Certificate Principal Balance shall not be reduced by
any principal amounts paid to the Owners thereof from Insured Payments.
"Class A-2 Certificate Termination Date": The Payment Date on which the
Class A-2 Certificate Principal Balance is reduced to zero.
"Class A-2 Current Interest": With respect to any Payment Date, 30 days'
interest accrued on the Class A-2 Certificate Principal Balance immediately
prior to such Payment Date during the related Accrual Period at the Class A-2
Pass-Through Rate plus the Preference Amount owed to the Owners of the Class A-2
Certificates as it relates to interest previously paid on the Class A-2
Certificates plus the Carry-Forward Amount, if any, with respect to the Class
A-2 Certificates, subject to a reduction in the event of (i) Prepayment Interest
Shortfalls, to the extent not covered by Compensating Interest and (ii) Relief
Act Shortfalls, in an amount equal to the pro rata portion of such shortfalls
based upon the Class A-1 Current Interest, Class A-2 Current Interest and Class
A-3 Current Interest.
"Class A-2 Distribution Amount": With respect to any Payment Date, the sum
of (x) Class A-2 Current Interest and (y) the Principal Distribution Amount
payable to the Owners of the Class A-2 Certificates pursuant to Section
7.03(b)(iv)(C) for such Payment Date.
"Class A-2 Pass-Through Rate": 6.66% per annum.
7
<PAGE>
"Class A-3 Certificate": Any one of the Certificates designated on the face
thereof as a Class A-3 Certificate, substantially in the form annexed hereto as
Exhibit A-3 authenticated and delivered by the Trustee, representing the right
to distributions as set forth herein and each evidencing an interest designated
as a "regular interest" in the REMIC created hereunder for purposes of the REMIC
provisions
"Class A-3 Certificate Principal Balance": As of any time of determination,
the Certificate Principal Balance as of the Startup Day of all Class A-3
Certificates less the aggregate of all amounts actually distributed with respect
to the Class A-3 Distribution Amount pursuant to Section 7.03(b)(iv) hereof with
respect to principal thereon on all prior Payment Dates; provided, however, that
solely for the purposes of determining the Certificate Insurer's rights, as
subrogee, the Class A-3 Certificate Principal Balance shall not be reduced by
any principal amounts paid to the Owners thereof from Insured Payments.
"Class A-3 Certificate Termination Date": The Payment Date on which the
Class A-3 Certificate Principal Balance is reduced to zero.
"Class A-3 Current Interest": With respect to any Payment Date, 30 days'
interest accrued on the Class A-3 Certificate Principal Balance immediately
prior to such Payment Date during the related Accrual Period at the Class A-3
Pass-Through Rate plus the Preference Amount owed to the Owners of the Class A-3
Certificates as it relates to interest previously paid on the Class A-3
Certificates plus the Carry-Forward Amount, if any, with respect to the Class
A-3 Certificates, subject to a reduction in the event of (i) Prepayment Interest
Shortfalls, to the extent not covered by Compensating Interest and (ii) Relief
Act Shortfalls, in an amount equal to the pro rata portion of such shortfalls
based upon the Class A-1 Current Interest, Class A-2 Current Interest and Class
A-3 Current Interest.
"Class A-3 Distribution Amount": With respect to any Payment Date, the sum
of (x) Class A-3 Current Interest and (y) the Principal Distribution Amount
payable to the Owners of the Class A-3 Certificates pursuant to Section
7.03(b)(iv)(C) for such Payment Date.
"Class A-3 Pass-Through Rate": With respect to each Accrual Period ending
prior (x) to the Clean-Up Call Date, 7.01% per annum and (y) on or after the
Clean-Up Call Date, 7.26% per annum.
"Class R Certificate": Any one of the Certificates designated on the face
thereof as a Class R Certificate, substantially in the form annexed hereto as
Exhibit C, authenticated and delivered by the Trustee, representing the right to
distributions as set forth herein, and evidencing an interest designated as the
"residual interest" in the REMIC created hereunder for the purposes of the REMIC
Provisions.
"Clean-Up Call Date": The first Monthly Remittance Date on which the
aggregate Loan Balances of the Home Equity Loans, as of the close of business on
the last day of the immediately preceding Remittance Period, has declined to 10%
or less of the Maximum Collateral Amount.
"Closing": As defined in Section 4.02 hereof.
"Closing Certificate Account Deposit": A deposit on the Closing in the
Certificate Account in the amount of $99,826.37.
"Code": The Internal Revenue Code of 1986, as amended.
-7-
<PAGE>
"Compensating Interest": As defined in Section 8.10(a) hereof.
"Corporate Trust Office": The principal office of the Trustee at The Chase
Manhattan Bank, 450 W. 33rd Street, 15th Floor, New York, NY 10001, Attention:
Structured Finance Services.
"Coupon Rate": The rate of interest borne by each Note.
"Cram Down Loss": With respect to a Home Equity Loan, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an order
reducing the Loan Balance or the Coupon Rate of such Home Equity Loan, the
amount of such reduction. A "Cram Down Loss" shall be deemed to have occurred on
the date of issuance of such order.
"Cumulative Loss Percentage": As of any date of determination thereof, the
aggregate of all Realized Losses since the Startup Day as a percentage of the
Maximum Collateral Amount.
"Cumulative Loss Test": The Cumulative Loss Test for each period indicated
below is satisfied if the Cumulative Loss Percentage for such period does not
exceed the percentage set out for such period below:
Cumulative Loss
Period Percentage
December 1, 1997 - May 31, 2001 1.00%
June 1, 2000 - May 31, 2002 1.60%
June 1, 2001 - May 31, 2002 2.10%
June 1, 2002 and thereafter 2.60%
"Current Interest": With respect to any Payment Date, the sum of (a) the
Class A-1 Current Interest, (b) the Class A-2 Current Interest and (c) the Class
A-3 Current Interest.
"Cut-Off Date": As of the close of business on December 1, 1997.
"Daily Collections": As defined in Section 8.08(c) hereof.
"Delinquency Advance": As defined in Section 8.09(a) hereof.
"Delinquent": A Home Equity Loan is "Delinquent" if any payment due thereon
is not made by the Mortgagor by the close of business on the related Due Date. A
Home Equity Loan is "30 days Delinquent" if such payment has not been received
by the close of business on the corresponding day of the month immediately
succeeding the month in which such payment was due, or, if there is no such
corresponding day (e.g., as when a 30-day month follows a 31-day month in which
a payment was due on the 31st day of such month) then on the last day of such
immediately succeeding month. Similarly for "60 days Delinquent," "90 days
Delinquent" and so on.
"Delivery Order": The delivery order in the form set forth as Exhibit H
hereto and delivered by the Depositor to the Trustee on the Startup Day pursuant
to Section 4.01 hereof.
"Depositor": DLJ Mortgage Acceptance Corp., a Delaware corporation, or any
successor thereto.
"Depository": The Depository Trust Company, 7 Hanover Square, New York, New
York, 10004, and any successor Depository named herein.
8
<PAGE>
"Designated Depository Institution": With respect to the Principal and
Interest Account, a trust account maintained by the trust department of a
federal or state chartered depository institution acceptable to the Certificate
Insurer, acting in its fiduciary capacity, having combined capital and surplus
of at least $50,000,000; provided, however, that if the Principal and Interest
Account is not maintained with the Trustee or Centura Bank, (i) such institution
shall have a long-term debt rating of at least "A" by Standard & Poor's and "A2"
by Moody's and (ii) the Master Servicer shall provide the Trustee and the
Certificate Insurer with a statement, which the Trustee will send to the Owners,
identifying the location and account information of the Principal and Interest
Account upon a change in the location of such account; provided, further, that
at such time, if any, that Centura Bank, does not have a long-term debt rating
of at least "BBB" by Standard & Poor's and "A3" by Moody's it will not be
considered a Designated Depository Institution.
"Determination Date": With respect to each Payment Date, the fifth Business
Day next preceding such Payment Date.
"Direct Participant" or "DTC Participant": Any broker-dealer, bank or other
financial institution for which the Depository holds Class A Certificates from
time to time as a securities depository.
"Disqualified Organization": "Disqualified Organization" shall have the
meaning set forth from time to time in the definition thereof at Section
860E(e)(5) of the Code (or any successor statute thereto) and applicable to the
Trust.
"Due Date": With respect to any Home Equity Loan, the date on which the
Monthly Payment with respect to such Home Equity Loan is required to be paid
pursuant to the related Note exclusive of any days of grace.
"Eligible Investments": Those investments so designated pursuant to Section
7.07 hereof.
"Excess Subordinated Amount": With respect to any Payment Date, the excess,
if any, of (x) the Subordinated Amount that would apply on such Payment Date
after taking into account the payment of the Class A Distribution Amount on such
Payment Date (except for any distributions of Subordination Reduction Amounts on
such Payment Date), over (y) the Specified Subordinated Amount for such Payment
Date; provided, however, that the Excess Subordinated Amount for the period
beginning on the Stepdown Date and ending six months thereafter, shall be
limited to the amount obtained by dividing (i) the positive difference of clause
(x) above minus clause (y) above by (ii) the number of consecutive Payment Dates
through and including the Payment Date for which the Specified Subordinated
Amount is being calculated (up to a maximum of six) since the Stepdown Date
divided by six.
"FDIC": The Federal Deposit Insurance Corporation, a corporate
instrumentality of the United States, or any successor thereto.
"FHLMC": The Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created pursuant to the Emergency Home
Finance Act of 1970, as amended, or any successor thereof.
"File": The documents delivered to the Trustee pursuant to Section 3.06
hereof pertaining to a particular Home Equity Loan and any additional documents
required to be added to the File pursuant to this Agreement.
"Final Certification": As defined in Section 3.06(c) hereof.
9
<PAGE>
"Final Determination": As defined in Section 9.03(a) hereof.
"Final Recovery Determination": With respect to any defaulted Home Equity
Loan or REO Property (other than a Home Equity Loan purchased by the Sponsor,
the Seller, the Depositor or the Master Servicer), a determination made by the
Master Servicer that all Liquidation Proceeds which the Master Servicer, in its
reasonable business judgment expects to be finally recoverable in respect
thereof have been so recovered or that the Master Servicer believes in its
reasonable business judgment the cost of obtaining any additional recoveries
therefrom would exceed the amount of such recoveries. The Master Servicer shall
maintain records of each Final Recovery Determination.
"Final Scheduled Payment Date": As set out in Section 2.08(a) hereof.
"First Mortgage Loan": A Home Equity Loan which constitutes a first
priority mortgage lien with respect to any Property.
"FNMA": The Federal National Mortgage Association, a federally-chartered
and privately-owned corporation existing under the Federal National Mortgage
Association Charter Act, as amended, or any successor thereof.
"FNMA Guide": FNMA's Servicing Guide, as the same may be amended by FNMA
from time to time, and the Master Servicer (other than the Backup Master
Servicer) shall elect to apply such amendments in accordance with Section 8.01
hereof.
"Funding Period": The period commencing on the Startup Day and ending on
the earliest to occur of (i) the date on which the amount on deposit in the
Pre-Funding Account (exclusive of any investment earnings) is less than $50,000,
(ii) the date on which a Master Servicer Termination Event occurs and (iii)
January 31, 1998.
"Gross Margin": With respect to an adjustable rate Home Equity Loan, the
fixed percentage amount set forth in the related Note which is added to the
six-month London Interbank Offered Rate, as provided in the related Note, to
determine the Coupon Rate.
"Highest Lawful Rate": As defined in Section 11.13 hereof.
"Home Equity Loans": Such home equity loans (including Initial Home Equity
Loans and Subsequent Home Equity Loans) transferred and assigned to the Trust
pursuant to Section 3.05(a) and 3.07(a) hereof, together with any Qualified
Replacement Mortgages substituted therefor in accordance with this Agreement, as
from time to time are held as a part of the Trust Estate, the Home Equity Loans
originally so held being identified in the Schedules of Home Equity Loans. The
term "Home Equity Loan" includes the terms "First Mortgage Loan" and "Second
Mortgage Loan". The term "Home Equity Loan" includes any Home Equity Loan which
is Delinquent, which relates to a foreclosure or which relates to a Property
which is REO Property prior to such Property's disposition by the Trust. Any
home equity loan which, although intended by the parties hereto to have been,
and which purportedly was, transferred and assigned to the Trust by the
Depositor, in fact was not transferred and assigned to the Trust for any reason
whatsoever, including, without limitation, the incorrectness of the statement
set forth in Section 3.04(b)(x) hereof with respect to such home equity loan,
shall nevertheless be considered a "Home Equity Loan" for all purposes of this
Agreement.
"Indirect Participant": Any financial institution for whom any Direct
Participant holds an interest in a Class A Certificate.
10
<PAGE>
"Initial Home Equity Loans": The Home Equity Loans to be conveyed to the
Trust by the Depositor on the Startup Day.
"Initial Specified Subordinated Amount": The product of 4.25% and the sum
of the Original Aggregate Loan Balance and the Loan Balance of each Subsequent
Home Equity Loan as of the related Subsequent Cut-Off Date.
"Insurance Agreement": The Insurance and Indemnity Agreement dated as of
December 1, 1997, among the Depositor, the Sponsor, the Master Servicer and the
Certificate Insurer, as it may be amended from time to time.
"Insurance Policy": Any hazard, flood, title or primary mortgage insurance
policy relating to a Home Equity Loan plus any amount remitted under Section
8.11 hereof.
"Insured Payment": As to any Payment Date, the sum (without duplication) of
(i) any shortfall in the amount required to pay the Subordination Deficit for
such Payment Date from a source other than the Certificate Insurance Policy,
(ii) any shortfall in the amount required to pay the Current Interest for such
Payment Date from a source other than the Certificate Insurance Policy and (iii)
any shortfall in the amount required to pay the Preference Amount from a source
other than the Certificate Insurance Policy. Notwithstanding the foregoing, any
amounts that the Certificate Insurer optionally pays under the Certificate
Insurance Policy with respect to Realized Losses shall be deemed to constitute
Insured Payments for purposes of the inclusion thereof in the funds available
for distribution on the Class A Certificates and for calculating the
Reimbursement Amount.
"Interest Remittance Amount": As of any Monthly Remittance Date, the sum,
without duplication, of (i) all interest due during the related Remittance
Period with respect to the Home Equity Loans, (ii) all Compensating Interest
paid by the Master Servicer on such Monthly Remittance Date and (iii) the
portion of the Substitution Amount relating to interest on the Home Equity
Loans.
"Late Payment Rate": With respect to any Payment Date, the Weighted Average
Pass-Through Rate for such Payment Date. The Late Payment Rate shall be computed
on the basis of a year of 360 days calculating the actual number of days
elapsed.
"Liquidated Loan": A Home Equity Loan as to which a Final Recovery
Determination has been made.
"Liquidation Proceeds": With respect to any Liquidated Loan, all amounts
(including the proceeds of any Insurance Policy) recovered by the Master
Servicer in connection with such Liquidated Loan, whether through trustee's
sale, foreclosure sale or otherwise.
"Loan Balance": With respect to each Home Equity Loan and as of any date of
determination, the actual outstanding principal balance thereof on the Cut-Off
Date with respect to the Initial Home Equity Loans or relevant Subsequent
Cut-Off Date with respect to the Subsequent Home Equity Loans excluding payments
of principal due prior to the Cut-Off Date or Subsequent Cut-Off Date, as the
case may be, whether or not received, less any principal payments relating to
such Home Equity Loan included in previous Monthly Remittance Amounts, provided,
however, that the Loan Balance for any Home Equity Loan that has become a
Liquidated Loan shall be zero as of the first day of the Remittance Period
following the Remittance Period in which such Home Equity Loan becomes a
Liquidated Loan, and at all times thereafter.
11
<PAGE>
"Loan Purchase Agreement": The Loan Purchase Agreement dated as of October
31, 1997 between the Seller and the Sponsor, as it may be amended from time to
time, including the Exhibits and Schedules thereto.
"Loan Purchase Price": With respect to any Home Equity Loan purchased from
the Trust on or prior to a Monthly Remittance Date pursuant to Section 3.03,
3.04, 3.06(b) or 8.10(b) hereof, an amount equal to the Loan Balance of such
Home Equity Loan as of the date of purchase (assuming that the Monthly
Remittance Amount remitted by the Master Servicer on such Monthly Remittance
Date has already been remitted), plus all accrued and unpaid interest on such
Home Equity Loan at the Coupon Rate to but not including the date of such
purchase together with (without duplication) the aggregate amounts of (i) all
unreimbursed Delinquency Advances and Servicing Advances theretofore made with
respect to such Home Equity Loan, (ii) all Delinquency Advances which the Master
Servicer has theretofore failed to remit with respect to such Home Equity Loan
and (iii) all reimbursed Delinquency Advances to the extent that reimbursement
is not made from the Mortgagor or from Liquidation Proceeds from the respective
Home Equity Loan.
"Loan-to-Value Ratio": As of any particular date (i) with respect to any
First Mortgage Loan, the percentage obtained by dividing the Appraised Value
into the original principal balance of the Note relating to such First Mortgage
Loan and (ii) with respect to any Second Mortgage Loan, the percentage obtained
by dividing the Appraised Value as of the date of origination of such Second
Mortgage Loan into an amount equal to the sum of (a) the remaining principal
balance of the Senior Lien note relating to such First Mortgage Loan as of the
date of origination of the related Second Mortgage Loan and (b) the original
principal balance of the Note relating to such Second Mortgage Loan.
"Loan Sale Agreement": The Loan Sale Agreement dated as of December 1, 1997
between the Seller, the Sponsor and the Depositor, as it may be amended from
time to time, including the Exhibits and Schedules thereto.
"Master Servicer": First Greensboro Home Equity, Inc., a North Carolina
corporation.
"Master Servicer Termination Event": As defined in Section 8.20(a) hereof.
"Master Servicer Termination Test": The Master Servicer Termination Test is
satisfied for any date of determination thereof, if (x) the 60+ Delinquency
Percentage (Rolling Three Month) is less than 12.35%, (y) the Servicer Loss Test
is satisfied and (z) the Annual Loss Percentage (Rolling Twelve Month) for the
twelve month period immediately preceding the date of determination thereof is
not greater than 1.10%.
"Maximum Collateral Amount": The sum of the Original Aggregate Loan Balance and
the Loan Balance of each Subsequent Home Equity Loan as of the applicable
Subsequent Cut-Off Date.
"Maximum Rate": With respect to an adjustable rate Home Equity Loan, any
absolute maximum Coupon Rate set by the provisions of the related Note.
"Minimum Rate": With respect to an adjustable rate Home Equity Loan, any
absolute minimum Coupon Rate set by the provisions of the related Note.
"Monthly Payment": With respect to any Home Equity Loan and any Remittance
Period, the payment of principal, if any, and interest due on the Due Date in
such Remittance Period pursuant to the related Note.
12
<PAGE>
"Monthly Remittance Amount": As of any Monthly Remittance Date, the sum of
(i) the Interest Remittance Amount for such Monthly Remittance Date and (ii) the
Principal Remittance Amount for such Monthly Remittance Date.
"Monthly Remittance Date": The 18th day of each month, or if such day is
not a Business Day, on the preceding Business Day, commencing in January 1998.
"Moody's": Moody's Investors Service, Inc. or any successor thereto.
"Mortgage": The mortgage, deed of trust or other instrument creating a
first or second lien on an estate in fee simple interest in real property
securing a Note.
"Mortgage Portfolio Performance Test": The Mortgage Portfolio Performance
Test is satisfied for any date of determination thereof if (x) the 60+
Delinquency Percentage (Rolling Three Month) is less than 10.50%, (y) the O/C
Loss Test is satisfied and (z) the Annual Loss Percentage (Rolling Twelve Month)
for the twelve month period immediately preceding the date of determination
thereof is not greater than or equal to 1.25%.
"Mortgagor": The obligor on a Note.
"Net Liquidation Proceeds": As to any Liquidated Loan, Liquidation Proceeds
net of expenses incurred by the Master Servicer (including unreimbursed
Servicing Advances) in connection with the liquidation of any defaulted Home
Equity Loan and unreimbursed Delinquency Advances relating to such Home Equity
Loan. In no event shall Net Liquidation Proceeds with respect to any Liquidated
Loan be less than zero.
"Net Monthly Excess Cashflow": Equals the excess of (i) Total Monthly
Excess Spread over, (ii) the portion of the Total Monthly Excess Cashflow that
is used to cover shortfalls in Available Funds on such Payment Date.
"Note": The note or other evidence of indebtedness evidencing the
indebtedness of a Mortgagor under a Home Equity Loan.
"O/C Loss Test": The O/C Loss Test for any period set out below is satisfied if
the Cumulative Loss Percentage during such period is satisfied does not exceed
the percentage set out for such period below:
Cumulative Loss
Period Percentage
December 1, 1997 - May 31, 2000 1.30%
June 1, 2000 - May 31, 2001 2.00%
June 1, 2001 - May 31, 2002 2.60%
June 1, 2002 and thereafter 3.10%
"Officer's Certificate": A certificate signed by any Authorized Officer of
any Person delivering such certificate and delivered to the Trustee.
"Operative Documents": Collectively, this Agreement, the Loan Sale
Agreement, the Loan Purchase Agreement, the Certificate Insurance Policy, the
Certificates and the Insurance Agreement.
13
<PAGE>
"Original Aggregate Loan Balance": The aggregate Loan Balances of all
Initial Home Equity Loans as of the Cut-Off Date, which is $117,454,942.52.
"Original Capitalized Interest Deposit": $44,456.11.
"Original Pre-Funded Amount": $7,545,057.48.
"Outstanding": With respect to all Certificates of a Class, as of any date
of determination, all such Certificates theretofore executed and delivered
hereunder except:
(i) Certificates theretofore canceled by the Registrar or delivered to
the Registrar for cancellation;
(ii) Certificates or portions thereof for which full and final payment
of money in the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent in trust for the Owners of such Certificates;
(iii) Certificates in exchange for or in lieu of which other
Certificates have been executed and delivered pursuant to this Agreement,
unless proof satisfactory to the Trustee is presented that any such
Certificates are held by a bona fide purchaser;
(iv) Certificates alleged to have been destroyed, lost or stolen for
which replacement Certificates have been issued as provided for in Section
5.05 hereof; and
(v) Certificates as to which the Trustee has made the final
distribution thereon, whether or not such Certificate is ever returned to
the Trustee.
"Owner": The Person in whose name a Certificate is registered in the
Register, and the Certificate Insurer, to the extent described in Section 5.06
and Section 7.03(e) hereof, respectively.
"Paying Agent": Initially, the Trustee, and thereafter, the Trustee or any
other Person that meets the eligibility standards for the Paying Agent specified
in Section 11.15 hereof and is authorized by the Trustee and the Depositor to
make payments on the Certificates on behalf of the Trustee.
"Payment Date": Any date on which the Trustee is required to make
distributions to the Owners, which shall be the 25th day of each month or if
such day is not a Business Day, the next Business Day thereafter, commencing in
the month following the Startup Day. The first Payment Date will be in January
1998.
"Percentage Interest": With respect to a Class of Class A Certificates, a
fraction, expressed as a decimal, the numerator of which is the initial Class A
Certificate Principal Balance represented by such Class A Certificate and the
denominator of which is the aggregate initial Class A Certificate Principal
Balance represented by all the Class A Certificates of such Class. With respect
to the Class R Certificates, the portion of the Class evidenced thereby,
expressed as a percentage, as stated on the face of such Certificate, all of
which shall total 100% with respect to the related Class.
14
<PAGE>
"Person": Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Policy Payments Account": The policy payments account maintained by the
Trustee pursuant to Section 12.02(b) hereof.
"Preference Amount": With respect to the Class A Certificates, means any
amounts of Current Interest and principal included in previous distributions of
the Class A Distribution Amount to the Owners of the Class A Certificates which
are recovered from such Owners as a voidable preference by a trustee in
bankruptcy pursuant to the United States Bankruptcy Code in accordance with a
final, nonappealable order of a court having competent jurisdiction and which
have not theretofore been repaid to such Owners and for which there has been
full compliance with the provisions of Section 12.02.
"Pre-Funded Amount": With respect to any Determination Date, the amount
remaining on deposit in the Pre-Funding Account.
"Pre-Funding Account": The Pre-Funding Account established in accordance
with Section 7.02(a) hereof and maintained by the Trustee.
"Pre-Funding Account Earnings": With respect to each Payment Date during
the Funding Period, the actual investment earnings earned during the previous
calendar month on the Pre-Funding Account during such period as calculated by
the Trustee pursuant to Section 3.07(d) hereof.
"Pre-Funding Payment Date": Each Payment Date occurring during the Funding
Period and the Payment Date occurring in the month (i) following the month in
which such Funding Period ends if such period ends after the Payment Date in a
month or (ii) in which such Funding Period ends, if such period ends prior to
the Payment Date in a month.
"Premium Amount": The amount payable monthly to the Certificate Insurer on
each Payment Date in an amount equal to .218% per annum, on the Certificate
Principal Balance as of the related Determination Date, and the Supplemental
Premium, as defined in the Insurance Agreement, if applicable, as provided in
the Insurance Agreement.
"Prepayment": Any payment of principal of a Home Equity Loan which is
received by the Master Servicer in advance of the scheduled due date for the
payment of such principal and which is not accompanied by an amount of interest
representing the full amount of scheduled interest due on any Due Date in any
month or months subsequent to the month of prepayment, Substitution Amounts, the
portion of the purchase price of any Home Equity Loan purchased from the Trust
pursuant to Section 3.03, 3.04, 3.06(b) or 8.10(b) hereof representing principal
and the proceeds of any Insurance Policy which are to be applied as a payment of
principal on the related Home Equity Loan shall be deemed to be Prepayments for
all purposes of this Agreement.
"Prepayment Interest Shortfall": As to any Payment Dates, Home Equity Loan
and Prepayment in full, the amount, if any, by which one month's interest at the
related Coupon Rate on such Prepayment exceeds the amount of interest paid in
connection with such Prepayment.
"Preservation Expenses": Expenditures made by the Master Servicer in
connection with a foreclosed Home Equity Loan prior to the liquidation thereof,
including, without limitation,
15
<PAGE>
expenditures for real estate property taxes, hazard insurance premiums, property
restoration or preservation.
"Principal and Interest Account": The principal and interest account(s) the
Master Servicer has created or caused to be created pursuant to Section 8.08(a)
hereof.
"Principal Distribution Amount": With respect to the Class A Certificates
for any Payment Date, the lesser of:
(a) the Total Available Funds, plus any Insured Payment, minus the sum
of the Trustee Fee and the Premium Amount, minus the Current Interest for
such Payment Date; and
(b) the excess, if any, of (i) the sum of:
(A) the Preference Amount with respect to principal owed to the Owners
of the related Class A Certificates that remains unpaid as of such Payment
Date,
(B) the principal portion of all scheduled monthly payments on the
Home Equity Loans due on or prior to the related Due Date thereof, to the
extent actually received by the Trustee during the related Remittance
Period and any Prepayments made by the Mortgagors and actually received by
the Trustee during the related Remittance Period,
(C) the Loan Balance of each Home Equity Loan that was repurchased by
the Sponsor or the Seller or purchased by the Master Servicer on or prior
to the related Monthly Remittance Date, to the extent such Loan Balance is
actually received by the Trustee during the related Remittance Period,
(D) any Substitution Amounts delivered by the Sponsor or the Seller on
the related Monthly Remittance Date in connection with a substitution of a
Home Equity Loan (to the extent such Substitution Amounts relate to
principal), to the extent such Substitution Amounts are actually received
by the Trustee on the related Remittance Date,
(E) all Net Liquidation Proceeds actually collected by or on behalf of
the Master Servicer during the related Remittance Period (to the extent
such Net Liquidation Proceeds relate to principal) to the extent such Net
Liquidation Proceeds are actually received by the Trustee,
(F) the amount of any Subordination Deficit for such Payment Date,
(G) the principal portion of the proceeds received by the Trustee from
any termination of the Trust (to the extent such proceeds related to
principal),
(H) with respect to the Payment Date immediately following the last
day of the Funding Period, all amounts (exclusive of any Pre-Funding
Account Earnings) remaining on deposit in the Pre-Funding Account to the
extent not used to purchase Subsequent Home Equity Loans during such
Funding Period, and
(I) the amount of any Subordination Increase Amount for such Payment
Date, to the extent of any Net Monthly Excess Cashflow available for such
purpose, over
16
<PAGE>
(ii) the amount of any Subordination Reduction Amount for such Payment
Date.
"Principal Remittance Amount": As of any Monthly Remittance Date, the sum,
without duplication, of (i) the principal actually collected by the Master
Servicer with respect to Home Equity Loans during the related Remittance Period,
(ii) the Loan Balance of each such Home Equity Loan that was purchased from the
Trustee on or prior to such Monthly Remittance Date, to the extent such Loan
Balance was actually deposited in the Principal and Interest Account, (iii) any
Substitution Amounts relating to principal delivered by the Sponsor or Seller in
connection with a substitution of a Home Equity Loan, to the extent such
Substitution Amounts were actually deposited in the Principal and Interest
Account on or prior to such Monthly Remittance Date, and (iv) the principal
portion of all Net Liquidation Proceeds actually collected by the Master
Servicer with respect to such Home Equity Loans during the related Remittance
Period (to the extent such Net Liquidation Proceeds related to principal).
"Prohibited Transaction": "Prohibited Transaction" shall have the meaning
set forth from time to time in the definition thereof at Section 860F(a)(2) of
the Code (or any successor statute thereto) and applicable to the Trust.
"Property": The underlying property securing a Home Equity Loan.
"Prospectus": The Depositor's Prospectus dated December 3, 1997.
"Prospectus Supplement": The First Greensboro Home Equity Loan Trust 1997-2
Prospectus Supplement dated December 3, 1997.
"Purchase Option Period": As defined in Section 9.03(a) hereof.
"Qualified Liquidation": The meaning set forth from time to time in the
definition thereof at Section 860F(a)(4) of the Code (or any successor statute
thereto) and applicable to the Trust.
"Qualified Mortgage": The meaning set forth from time to time in the
definition thereof at Section 860G(a)(3) of the Code (or any successor statute
thereto) and applicable to the Trust.
"Qualified Replacement Mortgage": A Home Equity Loan substituted for
another pursuant to Section 3.03, 3.04 and 3.06(b) hereof, which (i) has a
Coupon Rate at least equal to the Coupon Rate of the Home Equity Loan being
replaced; (ii) is of the same property type or is a single family dwelling and
the same occupancy status or is a primary residence as the Home Equity Loan
being replaced, (iii) shall mature no later than January 31, 2028 (iv) has a
Loan-to-Value Ratio as of the Replacement Cut-Off Date no higher than the
Loan-to-Value Ratio of the replaced Home Equity Loan at such time, (v) shall be
of the same or higher credit quality classification (determined in accordance
with the Sponsor's credit underwriting guidelines set forth in the Sponsor's
underwriting manual) as the Home Equity Loan which such Qualified Replacement
Mortgage replaces, (vi) shall be a First Mortgage Loan if the Home Equity Loan
which such Qualified Replacement Mortgage replaces was a First Mortgage Loan,
(vii) has a Loan Balance as of the related Replacement Cut-Off Date equal to or
less than the Loan Balance of the replaced Home Equity Loan as of such
Replacement Cut-Off Date, (viii) shall not provide for a "balloon" payment if
the related Home Equity Loan did not provide for a "balloon" payment (and if
such related Home Equity Loan provided for a "balloon" payment, such Qualified
Replacement Mortgage shall have an original maturity of not less than the
original maturity of such related Home Equity Loan), (ix) shall be a fixed rate
Home Equity Loan and (x) satisfies the criteria set forth from time to time in
the definition thereof at Section 860G(a)(4) of the Code (or
17
<PAGE>
any successor statute thereto) and applicable to the Trust. In the event that
one or more home equity loans are proposed to be substituted for one or more
Home Equity Loans, the Certificate Insurer may allow the foregoing tests to be
met on a weighted average basis or other aggregate basis acceptable to the
Certificate Insurer, as evidenced by a written approval delivered to the Trustee
by the Certificate Insurer, except that the requirements of clauses (i), (iv),
(ix) and (x) hereof must be satisfied as to each Qualified Replacement Mortgage.
"Rating Agencies": Collectively, Moody's and Standard & Poor's or any
successors thereto.
"Realized Loss": As to any Liquidated Loan (or, in the case of a Cram Down
Loss a Home Equity Loan that is not a Liquidated Loan), the amount (not less
than zero), if any, by which (A) the sum of (x) the Loan Balance thereof as of
the date of liquidation, (y) the amount of accrued but unpaid interest thereon
(to the extent that there are no outstanding advances for such interest by the
Master Servicer) and (z) the amount of any Cram Down Loss with respect thereto
is in excess of (B) the Net Liquidation Proceeds realized thereon applied in
reduction of such Loan Balance.
"Record Date": With respect to each Payment Date, the last day of the
calendar month immediately preceding the calendar month in which such Payment
Date occurs, and with respect to the January 1998 Payment Date, the Start-Up
Day.
"Register": The register maintained by the Registrar in accordance with
Section 5.04 hereof, in which the names of the Owners are set forth.
"Registrar": The Trustee, acting in its capacity as Registrar appointed
pursuant to Section 5.04 hereof, or any duly appointed and eligible successor
thereto.
"Registration Statement": The Registration Statement filed by the Depositor
with the Securities and Exchange Commission (Registration Number 333-39325),
including all amendments thereto and including the Prospectus relating to the
Class A Certificates.
"Reimbursement Amount": As of any Payment Date, the sum of (x)(i) all
Insured Payments previously paid to the Trustee by the Certificate Insurer and
not previously repaid to the Certificate Insurer pursuant to Section 7.03(b)(ii)
hereof plus (ii) interest accrued on each such Insured Payment not previously
repaid calculated pursuant to the terms of the Insurance Agreement and (y)(i)
any amounts then due and owing to the Certificate Insurer under the Insurance
Agreement (including, without limitation, any unpaid Premium Amount relating to
such Payment Date) plus (ii) interest on such amounts at the Late Payment Rate.
The Certificate Insurer shall notify the Trustee, the Depositor, the Sponsor and
the Seller of the amount of any Reimbursement Amount.
"Relief Act Shortfalls": With respect to any Payment Date and any Home
Equity Loan as to which there has been a reduction in the amount of interest
collectible thereon for the most recently ended calendar month as a result of
the application of the Soldiers' and Sailors' Civil Relief Act of 1940, the
amount, if any, by which (i) interest collectible on such Home Equity Loan for
the most recently ended calendar month is less than (ii) interest accrued
thereon for such month pursuant to the Note.
"REMIC": A "real estate mortgage investment conduit" within the meaning of
Section 860D of the Code.
18
<PAGE>
"REMIC Estate": The segregated pool of assets referred to as the Trust
Estate constituting the REMIC hereunder (except for the Pre-Funding Account and
the Capitalized Interest Account).
"REMIC Opinion": As defined in Section 3.03 hereof.
"REMIC Provisions": Provisions of the federal income tax law relating to
real estate mortgage investment conduits, which appear at Section 860A through
860G of Subchapter M of Chapter 1 of the Code, and related provisions, and
regulations and revenue rulings promulgated thereunder, as the foregoing may be
in effect from time to time.
"Remittance Period": With respect to each Monthly Remittance Date, the
calendar month immediately preceding such Monthly Remittance Date.
"REO Property": A Property acquired by the Master Servicer on behalf of the
Trust through foreclosure or deed-in-lieu of foreclosure in connection with a
defaulted Home Equity Loan.
"Replacement Cut-Off Date": With respect to any Qualified Replacement
Mortgage, the first day of the calendar month in which such Qualified
Replacement Mortgage is conveyed to the Trust.
"Representation Letter": Letters to, or agreements with, the Depository to
effectuate a book entry system with respect to the Class A Certificates
registered in the Register under the nominee name of the Depository.
"Residual Class": With respect to the REMIC, the interest therein
designated as the "residual interest" for the purposes of the REMIC Provisions.
The REMIC Residual Class shall be uncertificated, and shall be issuable only in
Percentage Interests of 99.999% to FGRHC, Inc. and 0.001% to The Chase Manhattan
Bank, as Tax Matters Person. Such interests shall be non-transferable, except
that The Chase Manhattan Bank may assign such interest to another person who
accepts such assignment and the designation as Tax Matters Person pursuant to
Section 11.18 hereof.
"Residual Net Monthly Excess Cashflow": With respect to any Payment Date,
the aggregate Net Monthly Excess Cashflow, if any, remaining after the making of
all applications, transfers and disbursements described in Sections 7.03(b)(i),
(ii), (iii) and (iv) hereof.
"Schedule of Home Equity Loans": The schedules of Home Equity Loans with
respect to the Initial Home Equity Loans listing each Initial Home Equity Loan
to be conveyed on the Startup Day and with respect to Subsequent Home Equity
Loans listing each Subsequent Home Equity Loan conveyed to the Trust as of each
Subsequent Transfer Date. Such Schedules of Home Equity Loans shall identify
each Home Equity Loan by the Master Servicer's loan number, borrower's name and
address (including the state and zip code) of the Property and shall set forth
as to each Home Equity Loan the lien status thereof, the Loan-to-Value Ratio and
the Loan Balance as of the Cut-Off Date, the Coupon Rate thereof, the original
Loan Balance thereof, the current scheduled monthly payment of principal and
interest and the maturity date of the related Note, occupancy status, Appraised
Value and the original term-to-maturity thereof and whether or not such Home
Equity Loan (including related Note) has been modified.
"Scheduled Principal Payment": As of any date of calculation, with respect
to a Home Equity Loan, the then stated scheduled monthly installment of
principal payable thereunder which, if timely paid, would result in the full
amortization of principal over the term thereof (or,
19
<PAGE>
in the case of a "balloon" Note, the term to the nominal maturity date for
amortization purposes, without regard to the actual maturity date), without
taking into account any Prepayment made on such Home Equity Loan during the
then-current Remittance Period.
"SEC Letter Agreement": The agreement dated December 15, 1997 among the
Trustee, the Depositor and Global Financial Press.
"Second Mortgage Loan": A Home Equity Loan which constitutes a second
priority mortgage lien with respect to the related Property.
"Securities Act": The Securities Act of 1933, as amended.
"Seller": First Greensboro Capital Corporation, a Tennessee corporation,
seller pursuant to the Loan Sale Agreement.
"Senior Lien": With respect to any Second Mortgage Loan, the home equity
loan relating to the corresponding Property having a first priority lien.
"Servicer Loss Test": The Servicer Loss Test for any period set out below
is satisfied if the Cumulative Loss Percentage for such period does not exceed
the percentage set out for such period below (provided, that for purposes of the
calculation of the Servicer Loss Test, Realized Losses attributable solely to
Cram Down Losses should be excluded from the calculation of Cumulative Loss
Percentage):
Cumulative Loss
Period Percentage
------ ----------
December 1, 1997 - May 31, 2000 1.65%
June 1, 2000 - May 31, 2001 2.50%
June 1, 2001 - May 31, 2002 3.35%
June 1, 2002 and thereafter 4.05%
"Servicing Advance": As defined in Section 8.09(b) and Section 8.13(a)
hereof.
"Servicing Fee": With respect to any Home Equity Loan, an amount retained
by the Master Servicer as compensation for servicing and administration duties
relating to such Home Equity Loan pursuant to Section 8.15 and equal to one
month's interest at 0.50% per annum of the then outstanding principal balance of
such Home Equity Loan as of the first day of each Remittance Period (or which
respect to an REO Property, on an assumed unpaid principal balance as of the
date the applicable Home Equity Loan was foreclosed on) payable on a monthly
basis, calculated on the basis of a 360 day year of 30-day months; provided,
however, that if a successor Master Servicer is appointed pursuant to Section
8.20 hereof, the Servicing Fee shall be the amount as agreed upon by the
Trustee, the successor Master Servicer and the Certificate Insurer, such amount
not to exceed 0.50% per annum.
"60-Day Delinquent Loan": With respect to any Determination Date, all REO
Properties and each Home Equity Loan, with respect to which any portion of a
Monthly Payment is, as of the last day of the prior Remittance Period, two
months (calculated from Due Date with respect to such Home Equity Loan to Due
Date) or more past due (without giving effect to any grace period).
20
<PAGE>
"60+ Delinquency Percentage (Rolling Three Month)": With respect to any
Determination Date, the average of the percentage equivalents of the fractions
determined for each of the three immediately preceding Remittance Periods the
numerator of each of which is equal to the aggregate Loan Balance of 60-Day
Delinquent Loans as of the end of such Remittance Period and the denominator of
which is the Loan Balance of all of the Home Equity Loans as of the end of such
Remittance Period.
"Specified Subordinated Amount": With respect to a Payment Date (x) prior
to the Stepdown Date, the amount which is equal to 4.25% of the Maximum
Collateral Amount and (y) after the Stepdown Date (i) if the Stepdown
Requirement is satisfied, the lesser of (A) the greater of (i) an amount equal
to the Stepped Down Specified Subordinated Amount for such Payment Date and (ii)
0.50% of the Maximum Collateral Amount or (B) the Initial Specified Subordinated
Amount or (ii) if the Stepdown Requirement is not satisfied, the amount which is
equal to 4.25% of the Maximum Collateral Amount; provided, however, that if on
any Payment Date the Mortgage Portfolio Performance Test is not satisfied, then
the Specified Subordinated Amount will be unlimited during the period that such
Mortgage Portfolio Performance Test is not satisfied; provided, further,
however, that on the Payment Date in March, 1998, the Certificate Insurer may in
a written notice provided to the Trustee, the Seller, the Depositor and the
Owners increase the amounts provided for in this definition to maintain the
rating assigned to the Class A Certificates by the Rating Agencies without
regard to the Certificate Insurance Policy as of the Startup Day.
"Standard & Poor's": Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies or any successor thereto.
"Startup Day": December 15, 1997.
"Stepdown Date": The Determination Date occurring in June 2001.
"Stepdown Requirement": The Stepdown Requirement is satisfied on any date
of determination thereof if, as of such date of determination, (x) the 60+
Delinquency Percentage (Rolling Three Month) is less than 9.0%, (y) the
Cumulative Loss Test is satisfied and (z) the Annual Loss Percentage (Rolling
Twelve Month) for the twelve month period immediately preceding the date of
determination thereof is not greater than or equal to 0.75%.
"Stepped Down Specified Subordinated Amount" means, with respect to any
Payment Date after the Stepdown Date, the Stepped Down Specified Subordinated
Amount Percentage multiplied by the aggregate Loan Balance as of the end of the
immediately preceding Remittance Period.
"Stepped Down Specified Subordinated Percentage" means, with respect to any
Payment Date after the Stepdown Date, a percentage equal to (i) the percentage
equivalent of a fraction, the numerator of which is 4.25% of the Maximum
Collateral Amount and the denominator of which is the aggregate Loan Balance as
of the end of the immediately preceding Remittance Period, minus (ii) the
percentage equivalent of a fraction, the numerator of which is the product of
(A) the percentage calculated under clause (i) above minus 8.50% multiplied by
(B) the number of consecutive Payment Dates through and including the Payment
Date for which the Stepped Down Specified Subordinated Amount is being
calculated, up to a maximum of six, from and including the Payment Date
immediately following the Stepdown Date, and the denominator of which is six.
"Subordinated Amount": As of any Payment Date, the excess, if any, of (x)
the sum of (i) the aggregate Loan Balances of the Home Equity Loans as of the
close of business on the last day
21
<PAGE>
of the immediately proceeding Remittance Period and (ii) any amount on deposit
in the Pre-Funding Account at such time exclusive of any Pre-Funding Account
Earnings over (y) the Certificate Principal Balance of the Class A Certificates
for such Payment Date (after taking into account the payment of the Principal
Distribution Amount thereon on such Payment Date).
"Subordination Deficiency Amount": With respect to any Payment Date, the
excess, if any, of (i) the Specified Subordinated Amount applicable to such
Payment Date over (ii) the Subordinated Amount applicable to such Payment Date,
(assuming the application of 100% of principal collections received during such
Remittance Period but prior to taking into account the payment of any related
Subordination Increase Amounts on such Payment Date).
"Subordination Deficit": With respect to any Payment Date, the amount, if
any, by which (x) the Class A Certificate Principal Balance, after taking into
account the payment of the Class A Distribution Amount on such Payment Date
(except for any Insured Payment and any distributions from amounts in the
Pre-Funding Account), exceeds (y) the sum of (i) the aggregate Loan Balances of
the Home Equity Loans as of the close of business on the last day of the related
Remittance Period and (ii) any amount on deposit in the Pre-Funding Account at
such time exclusive of any Pre-Funding Account Earnings.
"Subordination Increase Amount": With respect to any Payment Date, the
lesser of (i) the related Subordination Deficiency Amount as of such Payment
Date and (ii) the aggregate amount of Net Monthly Excess Cashflow allocated
pursuant to Section 7.03(b)(iii)(A) on such Payment Date.
"Subordination Reduction Amount": With respect to any Payment Date, an
amount equal to the lesser of (x) the Excess Subordinated Amount for such
Payment Date and (y) the Principal Remittance Amount for the related Remittance
Period.
"Subsequent Cut-Off Date": The beginning of business on the date specified
in a Subsequent Transfer Agreement with respect to those Subsequent Home Equity
Loans which are transferred and assigned to the Trust pursuant to the related
Subsequent Transfer Agreement.
"Subsequent Home Equity Loans": The Home Equity Loans sold to the Trust
pursuant to Section 3.07 hereof, which shall be listed on the Schedule of Home
Equity Loans attached to a Subsequent Transfer Agreement.
"Subsequent Transfer Agreement": Each Subsequent Transfer Agreement dated
as of a Subsequent Transfer Date executed by the Trustee the Depositor and the
Seller substantially in the form of Exhibit D hereto, by which Subsequent Home
Equity Loans are sold and assigned to the Trust.
"Subsequent Transfer Date": The date specified in each Subsequent Transfer
Agreement.
"Sub-Servicer": Any Person with whom the Master Servicer has entered into a
Sub-Servicing Agreement and who satisfies any requirements set forth in Section
8.03 hereof in respect of the qualification of a Sub-Servicer.
"Sub-Servicing Agreement": The written contract between the Master Servicer
and any Sub-Servicer relating to servicing and/or administration of certain Home
Equity Loans as permitted by Section 8.03.
"Substitution Amount": As defined in Section 3.03 hereof.
22
<PAGE>
"Successor Backup Master Servicing Fee": If a successor to the Backup
Master Servicer is appointed pursuant to Section 8.20, and with respect to any
Home Equity Loan, an amount equal to one month's interest at 0.005% per annum of
the then outstanding principal balance of such Home Equity Loan as of the first
day of each Remittance Period (or which respect to an REO Property, on an
assumed unpaid principal balance as of the date the applicable Home Equity Loan
was foreclosed on) payable on a monthly basis, calculated on the basis of a 360
day year of 30-day months.
"Tax Matters Person": The Person designated pursuant to Section 11.18
hereof to act as the Tax Matters Person under the Code.
"Tax Matters Person Residual Interest": The 0.001% interest in the Class R
Certificates shall be issued to and held by The Chase Manhattan Bank throughout
the term hereof unless another person shall accept an assignment of such
interest and the designation of Tax Matters Person pursuant to Section 11.18
hereof.
"Termination Notice": As defined in Section 9.03(a) hereof.
"Total Available Funds": As defined in Section 7.02(b) hereof.
"Total Monthly Excess Cashflow": As defined in Section 7.03(b)(ii) hereof.
"Total Monthly Excess Spread": With respect to any Payment Date, the excess
of (i) the aggregate of all interest which is collected on the Home Equity Loans
during the related Remittance Period (net of the Servicing Fee, the Premium Fee,
the Trustee Fee and the Trustee Reimbursable Expenses) plus (x) any Delinquency
Advances and (y) Compensating Interest paid by or on behalf of the Master
Servicer for such Remittance Period over (ii) the Current Interest for such
Payment Date.
"Trust": First Greensboro Home Equity Loan Trust 1997-2, the trust created
under this Agreement.
"Trust Estate": As defined in the conveyance clause under this Agreement.
"Trustee": The Chase Manhattan Bank, a New York banking corporation, the
Corporate Trust Department of which is located on the date of execution of this
Agreement at 450 W. 33rd Street, 15th Floor, New York, NY 10001, not in its
individual capacity but solely as Trustee under this Agreement, and any
successor hereunder.
"Trustee Fee": The fee payable monthly to the Trustee on each Payment Date
in an amount equal to 0.0125% per annum, payable monthly at one-twelfth the
annual rate on the aggregate Loan Balance of the Home Equity Loans as of the
first day of the related Remittance Period.
"Trustee Reimbursable Expense": Any amounts payable (i) pursuant to
Sections 11.16(a)(v) and Section 11.16(g), and (ii) pursuant to the second
sentence of Section 10.07, provided that the aggregate Trustee Reimbursable
Expenses shall not exceed $50,000 in the aggregate from the Startup Day.
"Underwriter": Donaldson, Lufkin & Jenrette Securities Corporation.
"Weighted Average Pass-Through Rate": As to the Class A Certificates and
any Payment Date, the weighted average of the Class A-1 Pass-Through Rate, the
Class A-2 Pass-Through
23
<PAGE>
Rate and the Class A-3 Pass-Through Rate, weighted by, respectively, the Class
A-1 Certificate Principal Balance, the Class A-2 Certificate Principal Balance
and the Class A-3 Certificate Principal Balance as of such Payment Date prior to
taking into account any distributions to be made on such Payment Date.
Section 1.02 Use of Words and Phrases.
"Herein", "hereby", "hereunder", "hereof", "hereinbefore", "hereinafter"
and other equivalent words refer to this Agreement as a whole and not solely to
the particular section of this Agreement in which any such word is used. The
definitions set forth in Section 1.01 hereof include both the singular and the
plural. Whenever used in this Agreement, any pronoun shall be deemed to include
both singular and plural and to cover all genders.
Section 1.03 Captions; Table of Contents .
The captions or headings in this Agreement and the Table of Contents are
for convenience only and in no way define, limit or describe the scope and
intent of any provisions of this Agreement.
Section 1.04 Opinions
Each opinion with respect to the validity, binding nature and
enforceability of documents or Certificates may be qualified to the extent that
the same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity (whether considered in a
proceeding or action in equity or at law) and may state that no opinion is
expressed on the availability of the remedy of specific enforcement, injunctive
relief or any other equitable remedy. Any opinion required to be furnished by
any Person hereunder must be delivered by counsel upon whose opinion the
addressee of such opinion may reasonably rely, and such opinion may state that
it is given in reasonable reliance upon an opinion of another, a copy of which
must be attached, concerning the laws of a foreign jurisdiction. Any opinion
delivered hereunder shall be addressed to the Rating Agencies, the Certificate
Insurer and the Trustee.
END OF ARTICLE I
24
<PAGE>
ARTICLE II
ESTABLISHMENT AND ORGANIZATION OF THE TRUST
Section 2.01 Establishment of the Trust.
The parties hereto do hereby create and establish, pursuant to the laws of
the State of New York and this Agreement, the Trust, which, for convenience,
shall be known as "First Greensboro Home Equity Loan Trust 1997-2".
Section 2.02 Office
The office of the Trust shall be in care of the Trustee, addressed to The
Chase Manhattan Bank, 450 W. 33rd Street, 15th Floor, New York, NY 10001,
Attention: Structured Finance Services, or at such other address as the Trustee
may designate by notice to the Depositor, the Seller, the Master Servicer, the
Sponsor, the Owners and the Certificate Insurer.
Section 2.03 Purposes and Powers
The purpose of the Trust is to engage in the following activities and only
such activities: (i) the issuance of the Certificates and the acquiring, owning
and holding of Home Equity Loans and the Trust Estate in connection therewith;
(ii) activities that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto or connected therewith, including the
investment of moneys in accordance with this Agreement; and (iii) such other
activities as may be required in connection with conservation of the Trust
Estate and distributions to the Owners; provided, however, that nothing
contained herein shall permit the Trustee to take any action which would
adversely affect the status of the REMIC Estate as a REMIC.
Section 2.04 Appointment of the Trustee; Declaration of Trust.
The Seller and the Depositor hereby appoint the Trustee as trustee of the
Trust effective as of the Startup Day, to have all the rights, powers and duties
set forth herein. The Trustee hereby acknowledges and accepts such appointment,
represents and warrants its eligibility as of the Startup Day to serve as
Trustee pursuant to Section 10.08 hereof and declares that it will hold the
Trust Estate in trust upon and subject to the conditions set forth herein for
the benefit of the Owners.
Section 2.05 Expenses of the Trust.
All expenses of the Trust, including (i) the fees of the Trustee (including
any portion of the Trustee Fee not paid pursuant to Section 7.03(b)(i) hereof)
and (ii) to the extent not paid pursuant to Section 10.07, any other expenses of
the Trustee that have been reviewed and approved by the Seller, which review
shall not be required in connection with the enforcement of a remedy by the
Trustee resulting from a default under this Agreement, shall be paid directly by
the Seller. Failure by the Seller to pay any such fees or other expenses shall
not relieve the Trustee of its obligations hereunder.
25
<PAGE>
Section 2.06 Ownership of the Trust.
On the Startup Day the ownership interests in the Trust shall be
transferred as set forth in Section 4.02 hereof, such transfer to be evidenced
by sale of the Certificates as described therein. Thereafter, transfer of any
ownership interest shall be governed by Sections 5.04 and 5.08 hereof.
Section 2.07 Situs of the Trust.
It is the intention of the parties hereto that the Trust constitute a trust
under the laws of the State of New York. The Trust will be created and
administered in, and all Accounts maintained by the Trustee on behalf of the
Trust will be located in, the State of New York (except that certain agents of
the Trustee may be located in the State of Texas). The Trust will not have any
employees and will not have any real or personal property (other than property
acquired pursuant to Section 8.13 hereof and Home Equity Loan Files and certain
other documents) located in any state other than in the State of New York.
Payments will be received by the Trust only in the State of New York and
payments from the Trust will be made only from the State of New York. The
Trust's only office will be at the office of the Trustee as set forth in Section
2.02 hereof.
Section 2.08 Miscellaneous REMIC Provisions.
(a) The beneficial ownership interest in the REMIC created hereunder shall
be evidenced by the interests having the following characteristics and terms as
follows, including for federal income tax purposes the Final Scheduled Payment
Dates occur:
Initial Certificate Final Scheduled
Class Designation Principal Balance Payment Date
Class A-1 $47,000,000 April 25, 2012
Class A-2 $29,500,000 July 25, 2017
Class A-3 $48,500,000 February 25, 2028
Class R (1)
- ------------
(1) The Class R Certificates do not have a Certificate Principal Balance.
(b) The Depositor hereby designates the Class A-1, Class A-2 and Class A-3
Certificates as "regular interests," and the Class R Certificates as the single
class of "residual interests" in the REMIC created hereunder for purposes of the
REMIC Provisions.
(c) The Startup Day is hereby designated as the "startup day" of the REMIC
created hereunder within the meaning of Section 860G(a)(9) of the Code.
(d) The Owner of the Tax Matters Person Residual Interest in the REMIC
created hereunder is hereby designated as "Tax Matters Person" as defined in the
REMIC Provisions with respect to the REMIC.
(e) The Trust and the REMIC created hereunder shall, for federal income tax
purposes, maintain books on a calendar year basis and report income on an
accrual basis.
(f) The Trustee shall cause the REMIC Estate created hereunder to elect to
be treated as a REMIC under Section 860D of the Code. Any inconsistencies or
ambiguities in this Agreement or in the administration of the Trust shall be
resolved in a manner that preserves the validity of
26
<PAGE>
such elections to be treated as a REMIC. The Trustee shall report all expenses
of the Trust Estate to the REMIC created hereunder.
(g) For all federal tax law purposes, amounts transferred by the Trustee to
the Owners of the Class R Certificates shall be treated as distributions by the
REMIC created hereunder.
(h) The Trustee shall provide to the Internal Revenue Service and to the
person described in Section 860E(e)(3) and (6) of the Code the information
described in Treasury regulations Section 1.860D-1(b)(5)(ii), or any successor
regulation thereto with respect to the REMIC created hereunder. Such information
will be provided in the manner described in Treasury regulations Section
1.860E-2(a)(5), or any successor regulation thereto.
END OF ARTICLE II
27
<PAGE>
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE DEPOSITOR, THE MASTER SERVICER, THE SPONSOR
AND THE SELLER; COVENANT OF SELLER TO CONVEY
HOME EQUITY LOANS
Section 3.01 Representations and Warranties of the Depositor.
The Depositor hereby represents, warrants and covenants to the Trustee, the
Sponsor, the Seller, the Backup Master Servicer, the Certificate Insurer and the
Owners that as of the Startup Day:
(a) The Depositor is a corporation duly organized, validly existing and in
good standing under the laws governing its creation and existence and is in good
standing as a foreign corporation in each jurisdiction in which the nature of
its business, or the properties owned or leased by it make such qualification
necessary. The Depositor has all requisite corporate power and authority to own
and operate its properties, to carry out its business as presently conducted and
as proposed to be conducted and to enter into and discharge its obligations
under this Agreement and the other Operative Documents to which it is a party.
(b) The execution and delivery of this Agreement by the Depositor and its
performance and compliance with the terms of this Agreement and the other
Operative Documents to which it is a party have been duly authorized by all
necessary corporate action on the part of the Depositor and will not violate the
Depositor's Charter, or Bylaws or constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, or result
in a breach of, any material contract, agreement or other instrument to which
the Depositor is a party or by which the Depositor is bound or violate any
statute or any order, rule or regulation of any court, governmental agency or
body or other tribunal having jurisdiction over the Depositor or any of its
properties.
(c) Each of this Agreement and the other Operative Documents to which the
Depositor is a party, assuming due authorization, execution and delivery by the
other parties hereto and thereto, constitutes a valid, legal and binding
obligation of the Depositor, enforceable against it in accordance with the terms
hereof and thereof, except as the enforcement thereof may be limited by (x)
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally, (y) general principles of equity
(whether considered in a proceeding or action in equity or at law) and (z) with
respect to rights of indemnity or contribution under this Agreement, the
Insurance and Indemnity Agreement and the Indemnification Agreement, to
limitations of public policy or applicable laws.
(d) The Depositor is not in default with respect to any order or decree of
any court or any order, regulation or demand of any federal, state, municipal or
governmental agency, which default would materially and adversely affect the
condition (financial or other) or operations of the Depositor or its properties
or the consequences of which would materially and adversely affect its
performance hereunder and under the other Operative Documents to which the
Depositor is a party.
(e) No litigation is pending with respect to which the Depositor has
received service of process or, to the best of the Depositor's knowledge,
threatened against the Depositor which litigation might have consequences that
would prohibit its entering into this Agreement or any other Operative Documents
to which it is a party or that would materially and adversely affect the
28
<PAGE>
condition (financial or otherwise) or operations of the Depositor or its
properties or might have consequences that would materially and adversely affect
its performance hereunder and under the other Operative Documents to which the
Depositor is a party.
(f) No certificate of an officer, statement furnished in writing or report
delivered pursuant to the terms hereof by the Depositor contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the certificate, statement or report not misleading.
(g) The statements contained in the Registration Statement which describe
the Depositor or matters or activities for which the Depositor is responsible in
accordance with the Operative Documents or which are attributable to the
Depositor therein are true and correct in all material respects, and the
Registration Statement does not contain any untrue statement of a material fact
with respect to the Depositor required to be stated therein or necessary to make
the statements contained therein with respect to the Depositor, in light of the
circumstances under which they were made, not misleading. The Registration
Statement does not contain any untrue statement of a material fact required to
be stated therein or omit to state any material fact necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading. There is no fact known to the Depositor that
materially adversely affects or in the future may (so far as the Depositor can
now reasonably foresee) materially adversely affect the Depositor or the Home
Equity Loans or the ownership interests therein represented by the Certificates
that has not been set forth in the Registration Statement.
(h) Neither the Trustee nor the Depositor has any obligation to register
the Trust as an investment company under the Investment Company Act of 1940, as
amended.
(i) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required to be
taken, given or obtained, as the case may be, by or from any federal, state or
other governmental authority or agency (other than any such actions, approvals,
etc. under any state or federal securities laws, real estate syndication or
"Blue Sky" statutes, as to which the Depositor makes no such representation or
warranty), that are necessary or advisable in connection with the purchase and
sale of the Certificates and the execution and delivery by the Depositor of the
Operative Documents to which it is a party, have been duly taken, given or
obtained, as the case may be, are in full force and effect on the date hereof,
are not subject to any pending proceedings or appeals (administrative, judicial
or otherwise) and either the time within which any appeal therefrom may be taken
or review thereof may be obtained has expired or no review thereof may be
obtained or appeal therefrom taken, and are adequate to authorize the
consummation of the transactions contemplated by this Agreement and the other
Operative Documents on the part of the Depositor and the performance by the
Depositor of its obligations under this Agreement and such of the other
Operative Documents to which it is a party.
(j) The transactions contemplated by this Agreement are in the ordinary
course of business of the Depositor.
(k) The Depositor is not insolvent, nor will it be made insolvent by the
transfer of the Home Equity Loans, nor is the Depositor aware of any pending
insolvency.
It is understood and agreed that the representations and warranties set
forth in this Section 3.01 shall survive delivery of the respective Home Equity
Loans to the Trustee.
Upon discovery by any of the Depositor, the Sponsor, the Seller, the Master
Servicer, any Sub-Servicer, the Certificate Insurer, any Owner or the Trustee
(each, for purposes of this paragraph, a party) of a breach of any of the
representations and warranties set forth in this
29
<PAGE>
Section 3.01 which materially and adversely affects the interests of the Owners
or of the Certificate Insurer, the party discovering such breach shall give
prompt written notice to the other parties. As promptly as practicable, but in
any event, within 60 days of its discovery or its receipt of notice of breach,
the Depositor shall cure such breach in all material respects; provided,
however, that if the Depositor can establish to the reasonable satisfaction of
the Certificate Insurer that it is diligently pursuing remedial action, then the
cure period may be extended for an additional 90 days with the written approval
of the Certificate Insurer.
Section 3.02 Representations and Warranties of the Master Servicer and
Sponsor.
First Greensboro Home Equity, Inc. hereby represents, warrants and
covenants to the Depositor, the Seller, the Backup Master Servicer, the Trustee,
the Certificate Insurer and the Owners that as of the Startup Day:
(a) First Greensboro Home Equity, Inc. is a corporation duly formed and
validly existing under the laws of the State of North Carolina, is in compliance
with the laws of each state in which any Property is located to the extent
necessary to enable it to perform its obligations hereunder and is in good
standing in each jurisdiction in which the nature of its business, or the
properties owned or leased by it make such qualification necessary. First
Greensboro Home Equity, Inc. has all requisite corporate power and authority to
own and operate its properties, to carry out its business as presently conducted
and as proposed to be conducted and to enter into and discharge its obligations
under this Agreement and the other Operative Documents to which it is a party.
(b) The execution and delivery of this Agreement by First Greensboro Home
Equity, Inc. and its performance and compliance with the terms of this Agreement
have been duly authorized by all necessary action on the part of First
Greensboro Home Equity, Inc. and will not violate First Greensboro Home Equity,
Inc.'s Articles of Incorporation or constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a default) under, or
result in the breach of, any material contract, agreement or other instrument to
which First Greensboro Home Equity, Inc. is a party or by which First Greensboro
Home Equity, Inc. is bound or violate any statute or any order, rule or
regulation of any court, governmental agency or body or other tribunal having
jurisdiction over First Greensboro Home Equity, Inc. or any of its properties.
(c) Each of this Agreement and the Operative Documents to which First
Greensboro Home Equity, Inc. is a party, assuming due authorization, execution
and delivery by the other parties hereto and thereto, constitutes a valid, legal
and binding obligation of First Greensboro Home Equity, Inc., enforceable
against it in accordance with the terms hereof and thereof, except as the
enforcement hereof may be limited by (x) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally, (y) general principles of equity (whether considered in a proceeding
or action in equity or at law) and (z) with respect to rights of indemnity or
contribution under this agreement, the Insurance and Indemnity agreement and the
Indemnification Agreement, to limitations of public policy or applicable laws.
(d) First Greensboro Home Equity, Inc. is not in default with respect to
any order or decree of any court or any order, regulation or demand of any
federal, state, municipal or governmental agency, which might have consequences
that would materially and adversely affect the condition (financial or
otherwise) or operations of First Greensboro Home Equity, Inc. or its properties
or might have consequences that would materially and adversely affect its
performance hereunder.
30
<PAGE>
(e) No litigation is pending with respect to which First Greensboro Home
Equity, Inc. has received service of process or, to the best of First Greensboro
Home Equity, Inc.'s knowledge, threatened against First Greensboro Home Equity,
Inc. which litigation might have consequences that would prohibit its entering
into this Agreement or that would materially and adversely affect the condition
(financial or otherwise) or operations of First Greensboro Home Equity, Inc. or
its properties or might have consequences that would materially and adversely
affect its performance hereunder and the other Operative Documents to which
First Greensboro Home Equity, Inc. is a party.
(f) No certificate of an officer, statement furnished in writing or report
delivered pursuant to the terms hereof by First Greensboro Home Equity, Inc.
contains any untrue statement of a material fact or omits to state any material
fact necessary to make the certificate, statement or report not misleading.
(g) The statements contained in the Prospectus Supplement which describe
First Greensboro Home Equity, Inc. or matters or activities for which First
Greensboro Home Equity, Inc. is responsible or which are attributed to First
Greensboro Home Equity, Inc. therein are true and correct in all material
respects, and the Prospectus Supplement does not contain any untrue statement of
a material fact with respect to First Greensboro Home Equity, Inc. or omit to
state a material fact required to be stated therein or necessary to make the
statements contained therein with respect to First Greensboro Home Equity, Inc.,
in light of the circumstances under which they were made, not misleading.
(h) The Servicing Fee, retained by the Master Servicer, is a "current
(normal) servicing fee rate" as that term is used in Statement of Financial
Accounting Standards No. 65 issued by the Financial Accounting Standards Board.
Neither First Greensboro Home Equity, Inc. nor any affiliate thereof will report
on any financial statements any part of the Servicing Fee, retained by the
Master Servicer, as an adjustment to the sales price of the Home Equity Loans.
(i) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required to be
taken, given or obtained, as the case may be, by or from any federal, state or
other governmental authority or agency (other than any such actions, approvals,
etc. under any state securities laws, real estate syndication or "Blue Sky"
statutes, as to which First Greensboro Home Equity, Inc. makes no such
representation or warranty), that are necessary or advisable in connection with
the execution and delivery by First Greensboro Home Equity, Inc. of the
Operative Documents to which it is a party, have been duly taken, given or
obtained, as the case may be, are in full force and effect on the date hereof,
are not subject to any pending proceedings or appeals (administrative, judicial
or otherwise) and either the time within which any appeal therefrom may be taken
or review thereof may be obtained has expired or no review thereof may be
obtained or appeal therefrom taken, and are adequate to authorize the
consummation of the transactions contemplated by this Agreement and the other
Operative Documents on the part of First Greensboro Home Equity, Inc. and the
performance by First Greensboro Home Equity, Inc. of its obligations under this
Agreement and such of the other Operative Documents to which it is a party.
(j) The collection practices used by the Master Servicer with respect to
the Home Equity Loans have been, in all material respects, legal, proper,
prudent and customary in the mortgage servicing business and in conformity with
relevant FNMA guidelines.
(k) The transactions contemplated by this Agreement are in the ordinary
course of business of First Greensboro Home Equity, Inc.
31
<PAGE>
(l) The practices used in originating the Home Equity Loans have been, in
all material respects, legal, proper, prudent and customary in the mortgage
lending business.
It is understood and agreed that the representations and warranties set
forth in this Section 3.02 shall survive delivery of the Home Equity Loans to
the Trustee.
Upon discovery by any of the Depositor, the Sponsor, the Seller, the Master
Servicer, any Sub-Servicer, the Certificate Insurer, any Owner or the Trustee
(each, for purposes of this paragraph, a party) of a breach of any of the
representations and warranties set forth in this Section 3.02 which materially
and adversely affects the interests of the Owners or of the Certificate Insurer,
the party discovering such breach shall give prompt written notice to the other
parties. As promptly as practicable, but in any event, within 60 days of its
discovery or its receipt of notice of breach, First Greensboro Home Equity, Inc.
shall cure such breach in all material respects and, upon First Greensboro Home
Equity, Inc.'s continued failure to cure such breach, may thereafter be removed
by the Trustee with the written consent of the Certificate Insurer pursuant to
Section 8.20 hereof; provided, however, that if First Greensboro Home Equity,
Inc. can establish to the reasonable satisfaction of the Certificate Insurer
that it is diligently pursuing remedial action, then the cure period may be
extended for an additional 90 days with the written approval of the Certificate
Insurer.
Section 3.03 Representations and Warranties of the Seller.
The Seller hereby represents, warrants and covenants to the Depositor, the
Sponsor, the Trustee, the Backup Master Servicer, the Certificate Insurer and
the Owners that as of the Startup Day:
(a) The Seller is a corporation duly formed and validly existing under the
laws governing its creation and existence and is in good standing in each
jurisdiction in which the nature of its business, or the properties owned or
leased by it make such qualification necessary. The Seller has all requisite
corporate power and authority to own and operate its properties, to carry out
its business as presently conducted and as proposed to be conducted and to enter
into and discharge its obligations under this Agreement and the other Operative
Documents to which it is a party.
(b) The execution and delivery of this Agreement by the Seller and its
performance and compliance with the terms of this Agreement and the other
Operative Documents to which it is a party have been duly authorized by all
necessary corporate action on the part of the Seller and will not violate the
Seller's Charter or constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, or result in a breach
of, any material contract, agreement or other instrument to which the Seller is
a party or by which the Seller is bound or violate any statute or any order,
rule or regulation of any court, governmental agency or body or other tribunal
having jurisdiction over the Seller or any of its properties.
(c) Each of this Agreement and the other Operative Documents to which the
Seller is a party, assuming due authorization, execution and delivery by the
other parties hereto and thereto, constitutes a valid, legal and binding
obligation of the Seller, enforceable against it in accordance with the terms
hereof and thereof, except as the enforcement thereof may be limited by, (x)
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally, (y) general principles of equity
(whether considered in a proceeding or action in equity or at law) and (z) with
respect to rights of indemnity or contribution under this Agreement, the
Insurance and Indemnity Agreement and the Indemnification Agreement, to
limitations of public policy or applicable laws.
32
<PAGE>
(d) The Seller is not in default with respect to any order or decree of any
court or any order, regulation or demand of any federal, state, municipal or
governmental agency, which default would materially and adversely affect the
condition (financial or other) or operations of the Seller or its properties or
the consequences of which would materially and adversely affect its performance
hereunder and under the other Operative Documents to which the Seller is a
party.
(e) No litigation is pending with respect to which the Seller has received
service of process or, to the best of the Seller's knowledge, threatened against
the Seller which litigation might have consequences that would prohibit its
entering into this Agreement or any other Operative Documents to which it is a
party or that would materially and adversely affect the condition (financial or
otherwise) or operations of the Seller or its properties or might have
consequences that would materially and adversely affect its performance
hereunder and under the other Operative Documents to which the Seller is a
party.
(f) No certificate of an officer, statement furnished in writing or report
delivered pursuant to the terms hereof by the Seller contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the certificate, statement or report not misleading.
(g) The statements contained in the Prospectus Supplement which describe
the Seller or matters or activities for which the Seller is responsible in
accordance with the Operative Documents or which are attributable to the Seller
therein are true and correct in all material respects, and the Prospectus
Supplement does not contain any untrue statement of a material fact with respect
to the Seller required to be stated therein or necessary to make the statements
contained therein with respect to the Seller, in light of the circumstances
under which they were made, not misleading. The Prospectus Supplement does not
contain any untrue statement of a material fact required to be stated therein or
omit to state any material fact necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading. There is no fact known to the Seller that materially adversely
affects or in the future may (so far as the Seller can now reasonably foresee)
materially adversely affect the Seller or the Home Equity Loans or the ownership
interests therein represented by the Certificates that has not been set forth in
the Prospectus Supplement.
(h) Upon the receipt of each Home Equity Loan (including the related Note)
and other items of the Trust Estate by the Trustee under this Agreement, the
Trust will have good title to such Home Equity Loan (including the related Note)
and such other items of the Trust Estate free and clear of any lien, charge,
mortgage, encumbrance or rights of others, except as set forth in Section 3.04
(b) (ix) and other than liens which will be simultaneously released.
(i) Neither the Seller nor any affiliate thereof will report on any
financial statement any part of the Servicing Fee as an adjustment to the sales
price of the Home Equity Loans.
(j) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required to be
taken, given or obtained, as the case may be, by or from any federal, state or
other governmental authority or agency (other than any such actions, approvals,
etc. under any state securities laws, real estate syndication or "Blue Sky"
statutes, as to which the Seller makes no such representation or warranty), that
are necessary or advisable in connection with the purchase and sale of the
Certificates and the execution and delivery by the Seller of the Operative
Documents to which it is a party, have been duly taken, given or obtained, as
the case may be, are in full force and effect on the date hereof, are not
subject to any pending proceedings or appeals (administrative, judicial or
otherwise) and either the time within which any appeal therefrom may be taken or
review thereof may be obtained has expired or no review thereof may be obtained
or appeal therefrom taken, and are adequate to authorize the consummation of the
transactions contemplated by this Agreement and the other
33
<PAGE>
Operative Documents on the part of the Seller and the performance by the Seller
of its obligations under this Agreement and such of the other Operative
Documents to which it is a party.
(k) The transactions contemplated by this Agreement are in the ordinary
course of business of the Seller.
(l) Neither the Trustee nor the Seller has any obligation to register the
Trust as an investment company under the Investment Company Act of 1940, as
amended.
(m) The Seller is not insolvent, nor will it be made insolvent by the
transfer of the Home Equity Loans, nor is the Seller aware of any pending
insolvency.
It is understood and agreed that the representations and warranties set
forth in this Section 3.03 shall survive delivery of the respective Home Equity
Loans to the Trustee.
Upon discovery by any of the Depositor, the Sponsor, the Master Servicer,
any Sub-Servicer, any Owner, the Seller, the Certificate Insurer or the Trustee
(each, for purposes of this paragraph, a "party") of a breach of any of the
representations and warranties set forth in this Section 3.03 which materially
and adversely affects the interests of the Owners or the interests of the
Certificate Insurer, the party discovering such breach shall give prompt written
notice to the other parties. The Seller hereby covenants and agrees that within
60 days of its discovery or its receipt of notice of breach, it shall cure such
breach in all material respects or, with respect to a breach of clause (h)
above, the Seller may (or may cause an affiliate of the Seller to) on or prior
to the second Monthly Remittance Date next succeeding such discovery or receipt
of notice (i) substitute in lieu of any Home Equity Loan not in compliance with
clause (h) a Qualified Replacement Mortgage and, if the outstanding principal
amount of such Qualified Replacement Mortgage as of the applicable Replacement
Cut-Off Date is less than the Loan Balance of such Home Equity Loan as of such
Replacement Cut-Off Date, deliver an amount (a "Substitution Amount") equal to
such difference together with the aggregate amount of (A) all Delinquency
Advances and Servicing Advances theretofore made with respect to such Home
Equity Loan and (B) all Delinquency Advances which the Master Servicer has
theretofore failed to remit with respect to such Home Equity Loan to the Master
Servicer for deposit in the Principal and Interest Account or (ii) purchase such
Home Equity Loan from the Trust at the Loan Purchase Price, which purchase price
shall be delivered to the Master Servicer for deposit in the Principal and
Interest Account. Notwithstanding any provision of this Agreement to the
contrary, with respect to any Home Equity Loan which is not in default or as to
which no default is imminent, no repurchase or substitution pursuant to Section
3.03, 3.04 or 3.06 shall be made unless the Seller obtains for the Trustee and
the Certificate Insurer at the Seller's expense an opinion of counsel
experienced in federal income tax matters to the effect that such a repurchase
or substitution would not constitute a Prohibited Transaction for the Trust or
REMIC created hereunder or otherwise subject the Trust or the REMIC created
hereunder to tax and would not jeopardize the status of the REMIC created
hereunder as a REMIC (a "REMIC Opinion") addressed to the Trustee and the
Certificate Insurer and acceptable to the Certificate Insurer and the Trustee.
The Seller shall also deliver an Officer's Certificate to the Trustee and the
Certificate Insurer concurrently with the delivery of a Qualified Replacement
Mortgage pursuant to Sections 3.03, 3.04 and 3.06 stating that such Home Equity
Loan meets the requirements of the definition of a Qualified Replacement
Mortgage and that all other conditions to the substitution thereof have been
satisfied. Any Home Equity Loan as to which repurchase or substitution was
delayed pursuant to this Section shall be repurchased or substituted for
(subject to compliance with Section 3.03, 3.04 or 3.06, as the case may be) upon
the earlier of (a) the occurrence of a default or imminent default with respect
to such Home Equity Loan and (b) receipt by the Trustee and the Certificate
Insurer of a REMIC Opinion.
34
<PAGE>
Section 3.04 Covenants of Seller and Sponsor to Take Certain Actions with
Respect to the Home Equity Loans in Certain Situations.
(a) Upon the discovery by the Depositor, the Seller, the Sponsor, the
Master Servicer, the Certificate Insurer, any Sub-Servicer, any Owner, or the
Trustee that the representations and warranties set forth in clause (b) below
were untrue in any material respect as of the Startup Day (or in the case of
Subsequent Home Equity Loans, as of the respective Subsequent Transfer Date)
with the result that the interests of the Owners or of the Certificate Insurer
are materially and adversely affected, the party discovering such breach shall
give prompt written notice to the other parties. Upon the earliest to occur of
the Seller's or Sponsor's discovery, its receipt of notice of breach from any
one of the other parties or such time as a situation resulting from an existing
statement which is untrue materially and adversely affects the interests of the
Owners or of the Certificate Insurer, the Seller and the Sponsor hereby covenant
and warrant that they shall promptly cure such breach in all material respects
or subject to the last two sentences of Section 3.03 it shall on the second
Monthly Remittance Date next succeeding such discovery, receipt of notice or
such time (i) substitute in lieu of each Home Equity Loan which has given rise
to the requirement for action by the Seller a Qualified Replacement Mortgage and
deliver the Substitution Amount to the Master Servicer for deposit in the
Principal and Interest Account or (ii) purchase such Home Equity Loan from the
Trust at a purchase price equal to the Loan Purchase Price thereof, which
purchase price shall be delivered to the Master Servicer for deposit in the
Principal and Interest Account; provided, however, that if the Seller can
establish to the reasonable satisfaction of the Certificate Insurer that it is
diligently pursuing remedial action, the period of time in which the Seller must
substitute a Qualified Replacement Mortgage or purchase such Home Equity Loan
may be extended for an additional 30 days with the written approval of the
Certificate Insurer. It is understood and agreed that the obligation of the
Seller so to substitute or purchase any Home Equity Loan as to which such a
statement set forth below is untrue in any material respect and has not been
remedied shall constitute the sole remedy respecting a discovery of any such
statement which is untrue in any material respect in this Section 3.04 available
to the Owners, the Trustee and the Certificate Insurer.
(b) The Seller and the Sponsor hereby represent, warrant and covenant to
the Trustee, the Depositor, the Master Servicer, the Backup Master Servicer, the
Certificate Insurer and the Owners that as of the Startup Day (with respect to
the Initial Home Equity Loans) and as of the respective Subsequent Transfer Date
(with respect to the Subsequent Home Equity Loans):
(i) The information with respect to each Initial Home Equity Loan
and Subsequent Home Equity Loan set forth in the related Schedule of
Home Equity Loans is true and correct as of the Cut-Off Date (or in
the case of the Subsequent Home Equity Loans, on the related
Subsequent Transfer Date);
(ii) All the original or certified documentation set forth in
Section 3.05 (including all material documents related thereto) with
respect to each Initial Home Equity Loan has been or will be delivered
to the Trustee on the Startup Day (or in the case of the Subsequent
Home Equity Loans, on the related Subsequent Transfer Date) or as
otherwise provided in Section 3.05; each of the documents and
instruments specified to be included therein has been duly executed
and is in due and proper form, and each such document or instrument is
in a form generally acceptable to prudent mortgage lenders that
regularly originate or purchase mortgage loans comparable to the Home
Equity Loans for sale to prudent investors in the secondary market
that invest in mortgage loans such as the Home Equity Loans.
(iii) Each Home Equity Loan being transferred to the Trust is a
Qualified Mortgage and is a Mortgage;
35
<PAGE>
(iv) As of the Cut-Off Date, no Initial Home Equity Loan has a
Loan-to-Value Ratio in excess of 95.00%, except for 90 Initial Home
Equity Loans in the amount of $1,827,498.83, which had a Combined
Loan-to-Value Ratio not greater than 100% and no Initial Home Equity
Loan is more than 30 days delinquent;
(v) Each Initial Home Equity Loan is being and each Subsequent
Home Equity Loan will be serviced by the Master Servicer in accordance
with the terms of this Agreement;
(vi) The Note related to each fixed rate Initial Home Equity Loan
bears a current fixed Coupon Rate of at least 8.00% per annum, each
Note related to each adjustable rate Initial Home Equity Loan has a
Minimum Rate of not less than 8.00% per annum, a Maximum Rate of not
more than 19.10% per annum and a Coupon Rate as of the Cutoff Date of
not less than 8.00% per annum;
(vii) Each Note with respect to the Initial Home Equity Loans
will provide for a schedule of substantially level and equal Monthly
Payments which are sufficient to amortize fully the principal balance
of such Note on or before its maturity date, except for 45 Initial
Home Equity Loans in the amount of $2,796,225.64, representing 2.37%
of the aggregate Loan Balance of the Initial Home Equity Loans as of
the Cut-Off Date which may provide for a "balloon" payment due at the
end of the 15th year.
(viii) As of the Startup Day and any Subsequent Transfer Date,
each Mortgage is a valid and subsisting first or second lien of record
(or is in the process of being recorded) on the Property subject in
the case of any Second Mortgage Loan only to a Senior Lien on such
Property and subject in all cases to the exceptions to title set forth
in the title insurance policy or attorney's opinion of title, with
respect to the related Home Equity Loan, which exceptions are
generally acceptable to banking institutions in connection with their
regular mortgage lending activities, and such other exceptions to
which similar properties are commonly subject and which do not
individually, or in the aggregate, materially and adversely affect the
benefits of the security intended to be provided by such Mortgage;
(ix) Immediately prior to the transfer and assignment of the Home
Equity Loans by the Sponsor to the Seller pursuant to the Loan
Purchase Agreement, by the Seller to the Depositor pursuant to the
Loan Sale Agreement and by the Depositor to the Trust herein
contemplated, the Sponsor, the Seller and the Depositor, as the case
may be, held good and indefeasible title to, and was the sole owner
of, each Home Equity Loan (including the related Note) conveyed to the
Trust subject to no liens, charges, mortgages, encumbrances or rights
of others except as set forth in clause (viii) or other liens which
will be released simultaneously with such transfer and assignment by
the Seller to the Depositor and immediately upon the transfer and
assignment herein contemplated, the Trustee will hold good and
indefeasible title to, and be the sole owner of, each Home Equity Loan
subject to no liens, charges, mortgages, encumbrances or rights of
others except as set forth in paragraph (ix) or other liens which will
be released simultaneously with such transfer and assignment;
(x) There is no delinquent tax or assessment lien on any
Property, and each Property is free of substantial damage and is in
good repair;
(xi) There is no valid and enforceable offset, defense or
counterclaim to any Note or Mortgage, including the obligation of the
related Mortgagor to pay the unpaid principal of or interest on such
Note; or the defense of usury, nor will the operation of
36
<PAGE>
any of the terms of the Note or the Mortgage, or the exercise of any
right thereunder, render either the 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;
(xii) There is no mechanics' lien or claim for work, labor or
material affecting any Property which is or may be a lien prior to, or
equal with, the lien of the related Mortgage except those which are
insured against by any title insurance policy referred to in paragraph
(xvi) below;
(xiii) Each Home Equity Loan at the time it was made complied in
all material respects with applicable local, state and federal laws
and regulations, including, without limitation, the federal
Truth-in-Lending Act (as amended by the Riegle Community Development
and Regulatory Improvement Act of 1994) and other consumer protection
laws, usury, equal credit opportunity, disclosure and recording laws;
(xiv) With respect to each Home Equity Loan a lender's title
insurance policy, issued in standard American Land Title Association
form by a title insurance company authorized to transact business in
the state in which the related Property is situated, in an amount at
least equal to the original balance of such Home Equity Loan together,
in the case of a Second Mortgage Loan, with the then-original
principal amount of the mortgage note relating to the Senior Lien,
insuring the mortgagee's interest under the related Home Equity Loan
as the holder of a valid first or second mortgage lien of record on
the real property described in the related Mortgage, as the case may
be, subject only to exceptions of the character referred to in
paragraph (ix) above, was effective on the date of the origination of
such Home Equity Loan, and, as of the Startup Day, such policy is
valid and thereafter such policy shall continue in full force and
effect;
(xv) The improvements upon each Property are covered by a valid
and existing hazard insurance policy with a carrier generally
acceptable to the Master Servicer that provides for fire and extended
coverage representing coverage not less than the least of (A) the
outstanding principal balance of the related Home Equity Loan
(together, in the case of a Second Mortgage Loan, with the outstanding
principal balance of the Senior Lien), (B) the minimum amount required
to compensate for damage or loss on a replacement cost basis or (C)
the full insurable value of the Property;
(xvi) If any Property is in an area identified in the Federal
Register by the Federal Emergency Management Agency as having special
flood hazards, a flood insurance policy in a form meeting the
requirements of the current guidelines of the Flood Insurance
Administration is in effect with respect to such Property with a
carrier generally acceptable to the Master Servicer in an amount
representing coverage not less than the least of (A) the outstanding
principal balance of the related Home Equity Loan (together, in the
case of a Second Mortgage Loan, with the outstanding principal balance
of the Senior Lien), (B) the minimum amount required to compensate for
damage or loss on a replacement cost basis or (C) the maximum amount
of insurance that is available under the Flood Disaster Protection Act
of 1973;
(xvii) Each Mortgage and Note is the legal, valid and binding
obligation of the maker thereof and is enforceable in accordance with
its terms, except only as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and by
general principles of equity (whether considered in a proceeding or
action in equity or at law),
37
<PAGE>
and all parties to each Home Equity Loan had full legal capacity to
execute all documents relating to such Home Equity Loan and convey the
estate therein purported to be conveyed;
(xviii) The Seller or Sponsor has caused and will cause to be
performed any and all acts required to be performed to preserve the
rights and remedies of the Master Servicer and the Trustee in any
Insurance Policies applicable to any Home Equity Loans delivered by
the Seller including, without limitation, any necessary notifications
of insurers, assignments of policies or interests therein, and
establishments of co-insured, joint loss payee and mortgagee rights in
favor of the Trustee;
(xix) As of the Startup Day, no more than 0.88% of the aggregate
Initial Loan Balance of the Initial Home Equity Loans will be secured
by Properties located within any single zip code area;
(xx) Each original Mortgage was recorded or is in the process of
being recorded, and all subsequent assignments of the original
Mortgage have been delivered for recordation or have been recorded in
the appropriate jurisdictions wherein such recordation is necessary to
perfect the lien thereof as against creditors of or purchasers from
the Sponsor, the Seller, the Depositor or the Trustee (or, subject to
Section 3.05 hereof, are in the process of being recorded);
(xxi) The terms of each Note and each Mortgage have not been
impaired, altered or modified in any respect, except by a written
instrument which has been recorded, if necessary, to protect the
interest of the Owners and the Certificate Insurer and which has been
delivered to the Trustee. The substance of any such alteration or
modification is reflected on the related Schedule of Home Equity
Loans;
(xxii) The proceeds of each Home Equity Loan have been fully
disbursed, and there is no obligation on the part of the mortgagee to
make future advances thereunder. Any and all requirements as to
completion of any on-site or off-site improvements and as to
disbursements of any escrow funds therefor have been complied with.
All costs, fees and expenses incurred in making or closing or
recording such Home Equity Loans were paid;
(xxiii) The related Note is not and has not been secured by any
collateral, pledged account or other security except the lien of the
corresponding Mortgage;
(xxiv) No Home Equity Loan provides for negative amortization,
has a shared appreciation feature, or other contingent interest
feature;
(xxv) Each Property is located in the state identified in the
respective Schedule of Home Equity Loans and consists of one or more
parcels of real property with a residential dwelling erected thereon;
(xxvi) Each Mortgage contains a provision for the acceleration of
the payment of the unpaid principal balance of the related Home Equity
Loan in the event the related Property is sold without the prior
consent of the mortgagee thereunder;
(xxvii) Any advances made after the date of origination of a Home
Equity Loan but prior to the Cut-Off Date (or the relevant Subsequent
Cut-Off Date) have been consolidated with the outstanding principal
amount secured by the related Mortgage, and the secured principal
amount, as consolidated, bears a single interest rate and single
38
<PAGE>
repayment term reflected on the respective Schedule of Home Equity
Loans. The consolidated principal amount does not exceed the original
principal amount of the related Home Equity Loan. No Note permits or
obligates the Master Servicer to make future advances to the related
Mortgagor at the option of the Mortgagor;
(xxviii) There is no proceeding pending or threatened for the
total or partial condemnation of any Property, nor is such a
proceeding currently occurring, and each Property is undamaged by
waste, fire, water, flood, earthquake or earth movement;
(xxix) All of the improvements which were included for the
purposes of determining the Appraised Value of any Property lie wholly
within the boundaries and building restriction lines of such Property,
and no improvements on adjoining properties encroach upon such
Property, and are stated in the title insurance policy and
affirmatively insured;
(xxx) No improvement located on or being part of any Property is
in violation of any applicable zoning law or regulation. All
inspections, licenses and certificates required to be made or issued
with respect to all occupied portions of each Property and, with
respect to the use and occupancy of the same, including but not
limited to certificates of occupancy and fire underwriting
certificates, have been made or obtained from the appropriate
authorities and such Property is lawfully occupied under the
applicable law;
(xxxi) With respect to each Mortgage constituting a deed of
trust, a trustee, duly qualified under applicable law to serve as
such, has been properly designated and currently so serves and is
named in such Mortgage, and no fees or expenses are or will become
payable by the Owners or the Trust to the trustee under the deed of
trust, except in connection with a trustee's sale after default by the
related Mortgagor;
(xxxii) Each Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder thereof
adequate for the realization against the related Property of the
benefits of the security, including (A) in the case of a Mortgage
designated as a deed of trust, by trustee's sale and (B) otherwise by
judicial foreclosure. There is no homestead or other exemption other
than any applicable Mortgagor redemption rights available to the
related Mortgagor which would materially interfere with the right to
sell the related Property at a trustee's sale or the right to
foreclose the related Mortgage;
(xxxiii) There is no default, breach, violation or event of
acceleration existing under any Mortgage or the related Note and no
event which, with the passage of time or with notice and the
expiration of any grace or cure period, would constitute a default,
breach, violation or event of acceleration; and neither the Master
Servicer nor the Seller has waived any default, breach, violation or
event of acceleration;
(xxxiv) No instrument of release or waiver has been executed in
connection with any Home Equity Loan, and no Mortgagor has been
released, in whole or in part, except in connection with an assumption
agreement which has been approved by the primary mortgage guaranty
insurer, if any, and which has been delivered to the Trustee;
(xxxv) The maturity date of each Home Equity Loan is at least
twelve months prior to the maturity date of the related first home
equity loan if such first home equity loan provides for a balloon
payment;
39
<PAGE>
(xxxvi) Each Home Equity Loan was underwritten in accordance with
the credit underwriting guidelines of the Sponsor or an affiliate of
the Sponsor as set forth in the Sponsor's or such affiliate's
underwriting manual, as in effect on the date hereof;
(xxxvii) Each Home Equity Loan was originated based upon a full
appraisal, which included an interior inspection of the subject
property;
(xxxviii) No more than 3.20% of the aggregate Loan Balance of the
Initial Home Equity Loans are secured by Properties that are non-owner
occupied Properties (i.e., investor-owned and vacation);
(xxxix) The Seller and the Sponsor have no actual knowledge that
there exist any hazardous substances, hazard wastes or solid wastes,
as such terms are defined in the Comprehensive Environmental Response
Compensation and Liability Act, the Resource Conservation and Recovery
Act of 1976, or other federal, state or local environmental
legislation on any Property;
(xl) The Sponsor was properly licensed or otherwise authorized,
to the extent required by applicable law, to originate or purchase
each Home Equity Loan; and the consummation of the transactions herein
contemplated, including, without limitation, the receipt of interest
by the Owners and the ownership of the Home Equity Loans by the
Trustee as trustee of the Trust will not involve the violation of such
laws;
(xli) No Properties are subject to a ground lease;
(xlii) As of the Startup Day, neither the Sponsor nor the Seller
has received a notice of default of any First Mortgage Loan secured by
any Property which has not been cured by a party other than the
Seller;
(xliii) No Home Equity Loan is subject to a temporary rate
reduction pursuant to a buydown program;
(xliv) No instrument of release or waiver with respect to any
Mortgagor has been executed in connection with any Home Equity Loan,
and no Mortgagor has been released, in whole or in part;
(xlv) All parties to the Note and the Mortgage had legal capacity
to execute the Note and the Mortgage and each Note and Mortgage have
been duly and properly executed by such parties;
(xlvi) None of the Home Equity Loans shall be due from the United
States of America or any State or from any agency, department,
subdivision or instrumentality thereof;
(xlvii) At the Cut-Off Date (or the relevant Subsequent Cutoff
Date), no Mortgagor had been identified on the records of the Sponsor
as being the subject of a current bankruptcy proceeding;
(xlviii) By the Start Up Date, the Sponsor will have caused the
portions of the Sponsor's records relating to the Home Equity Loans to
be clearly and unambiguously marked to show that the Home Equity Loans
constitute part of the Trust and are owned by the Trust in accordance
with the terms of this Agreement;
40
<PAGE>
(xlix) No Home Equity Loan was originated in, or is subject to
the laws of, any jurisdiction the laws of which would make unlawful,
void or voidable the sale, transfer and assignment of such Home Equity
Loan under this Agreement or pursuant to transfers of the Class A
Certificates. The Sponsor has not entered into any agreement with any
account debtor that prohibits, restricts or conditions the assignment
of any portion of the Home Equity Loans;
(xlx) All filings (including, without limitation, UCC filings)
required to be made by any Person and actions required to be taken or
performed by any Person in any jurisdiction to give the Trustee a
first priority perfected lien on, or ownership interest in, the Home
Equity Loans and the proceeds thereof and the other property of the
Trust have been made, taken or performed;
(xlxi) The Sponsor has not done anything to convey any right to
any Person that would result in such Person having a right to payments
due under the Home Equity Loan or otherwise to impair the rights of
the Trust and the Certificateholders in any Loan or the proceeds
thereof;
(xlxii) No Home Equity Loan is assumable (without the consent of
the Sponsor which consent has not been given) by another Person in a
manner which would release the Mortgagor thereof from such Mortgagor's
obligations to the Sponsor with respect to such Loan;
(xlxiii) No selection procedures adverse to the
Certificateholders or to the Certificate Insurer have been utilized in
selecting such Home Equity Loan from all other similar Home Equity
Loans originated by the Sponsor;
(xlxiv) The related Property has not been subject to any
foreclosure proceeding or litigation;
(xlxv) There was no fraud involved in the origination of the Home
Equity Loan by the mortgagee or the Mortgagor, any appraiser or any
other party involved in the origination of the Home Equity Loan; and
(xlxvi) Each File contains an appraisal of the Property
indicating an appraised value equal to the appraised value of such
Property on the Schedule of Home Equity Loans. Each appraisal has been
performed in accordance with the requirements of FNMA or FHLMC;
(xlxvii) Each Home Equity Loan is a "qualified mortgage" as
defined in Section 860G(a)(3) of the Code.
(xlxviii) No more than 3.81% and .64% of the aggregate Loan
Balance of the Initial Home Equity Loans was originated under the
Sponsor's NIQ Program and Stated 1003 Program as described in the
Prospectus Supplement, respectively;
(xlxix) The Coupon Rate on each Home Equity Loan is calculated on
the basis of a year of 360 days with twelve 30-day months (except with
respect to 54.00% of the Loan Balance of the Initial Home Equity
Loans);
(xlxx) The Coupon Rate for each adjustable rate Home Equity Loan
will be adjustable on each related Adjustment Date and will equal the
sum, rounded upward to the nearest three decimal places, of the
six-month London Interbank Offered Rate, as
41
<PAGE>
provided in the related Note, plus the related Gross Margin, subject
to any related Minimum Rates, Maximum Rates or any limitations or
periodic adjustments, in each case, as specified in the Schedule of
Home Equity Loans;
(xlxxi) With respect to each adjustable rate Home Equity Loan, no
document in the File contains any provision permitting or requiring
conversion of the Home Equity Loan to a fixed rate;
(xlxxii) Each adjustable rate Home Equity Loan was underwritten
as though such Home Equity Loan would initially have borne interest at
a rate equal to the six-month London Interbank Offered Rate, as
provided in the related Note, plus the related Gross Margin;
(xlxxiii) With respect to each adjustable rate Home Equity Loan,
all of the terms of the Mortgage pertaining to interest rate
adjustments, payment adjustments and adjustments of the outstanding
principal balance are enforceable; such adjustments will not affect
the priority of the Mortgage lien and all of the adjustments have been
properly calculated, recorded, reported and applied in accordance with
the Mortgage and applicable law; and
(x1xxiv) No more than 57.08% of the aggregate Loan Balance of the
Initial Home Equity Loans that are secured by first lien mortgages are
subject to piggyback second mortgage liens.
(c) In the event that any such repurchase pursuant to this
Section results in a prohibited transaction tax as specified in the REMIC
Opinion delivered pursuant to Section 3.03, the Trustee shall immediately notify
the Seller and Sponsor in writing thereof and the Seller or Sponsor will, within
10 days of receiving notice thereof from the Trustee, deposit the amount due
from the Trust with the Trustee for the payment thereof, including any interest
and penalties, in immediately available funds. In the event that any Qualified
Replacement Mortgage is delivered by the Seller to the Trust pursuant to Section
3.03, Section 3.04 or Section 3.06 hereof, the Seller and the Sponsor shall be
obligated to take the actions described in Section 3.04(a) with respect to such
Qualified Replacement Mortgage upon the discovery by any of the Owners, the
Sponsor, the Seller, the Master Servicer, the Certificate Insurer, any
Sub-Servicer, or the Trustee that the statements set forth in subsection (b)
above are untrue in any material respect on the date such Qualified Replacement
Mortgage is conveyed to the Trust such that the interests of the Owners or the
Certificate Insurer in the related Qualified Replacement Mortgage are materially
and adversely affected; provided, however, that for the purposes of this
subsection (c) the statements in subsection (b) above referring to items "as of
the Cut-Off Date" or "as of the Startup Day" shall be deemed to refer to such
items as of the date such Qualified Replacement Mortgage is conveyed to the
Trust. Notwithstanding the fact that a representation contained in subsection
(b) above may be limited to the Seller's or the Sponsor's knowledge, such
limitation shall not relieve the Seller or the Sponsor of their repurchase
obligation under this Section and Section 3.05 hereof.
(d) It is understood and agreed that the covenants set forth in this
Section 3.04 shall survive delivery of the respective Home Equity Loans
(including Qualified Replacement Mortgages) to the Trustee.
(e) The Trustee shall have no duty to conduct any affirmative
investigation other than as specifically set forth in this Agreement as to the
occurrence of any condition requiring the repurchase or substitution of any Home
Equity Loan pursuant to this Article III or the eligibility of any Home Equity
Loan for the purpose of this Agreement.
42
<PAGE>
Section 3.05 Deliveries and Conveyance of Qualified Replacement Mortgages.
(a) In the event that the conveyance pursuant hereto is deemed to be a
loan, the parties intend that the Depositor shall be deemed to have granted to
the Trustee a security interest in the Trust Estate, and that this Agreement
shall constitute a security agreement under applicable law.
In connection with such sale, transfer, assignment, and conveyance from the
Depositor to the Trustee, the Depositor has filed, in the appropriate office or
offices in the States of Delaware and New York, a UCC-1 financing statement
executed by the Depositor as debtor, naming the Trustee as secured party and the
Home Equity Loans and the other property described above as collateral. The
characterization of the Depositor as a debtor and the Trustee as the secured
party in such financing statements is solely for protective purposes and shall
in no way be construed as being contrary to the intent of the parties that this
transaction be treated as a sale of the Depositor's entire right, title and
interest in the Trust Estate. In connection with such filing, the Depositor
agrees that it shall cause to be filed all necessary continuation statements
thereof and to take or cause to be taken such actions and execute such documents
as are necessary to perfect and protect the Trustee's, the Owners' and the
Certificate Insurer's interest in the Trust Estate.
(b) In connection with the transfer and assignment of the Home Equity
Loans, the Seller agrees, on behalf of the Depositor, to:
(i) deliver without recourse to the Trustee, or an affiliate of the
Trustee on behalf of the Trustee, on the Startup Day with respect to
each Initial Home Equity Loan, or on each Subsequent Transfer Date with
respect to each Subsequent Home Equity Loan, (A) the original Notes
endorsed in blank or to the order of the Trustee, (B) (I) the original
title insurance commitment or a copy thereof certified as a true copy
by the closing agent or the Sponsor, and when available, the original
title insurance policy or a copy certified by the issuer of the title
insurance policy or (II) the attorney's opinion of title, (C) originals
or copies of all intervening assignments certified as true copies by
the closing agent or the Sponsor, showing a complete chain of title
from origination to the Trustee, if any, including warehousing
assignments, if recorded, (D) originals of all assumption and
modification agreements, if any and (E) either: (1) the original
Mortgage, with evidence of recording thereon (if such original Mortgage
has been returned to the Sponsor from the applicable recording office)
or a copy of the Mortgage certified as a true copy by the closing agent
or the Sponsor, or (2) a copy of the Mortgage certified by the public
recording office in those instances where the original recorded
Mortgage has been lost;
(ii) cause, within 60 days following the Startup Day or the related
Subsequent Transfer Date, as applicable, assignments of the related
Mortgages to "The Chase Manhattan Bank, as Trustee of First Greensboro
Home Equity Loan Trust 1997-2 under the Pooling and Servicing Agreement
dated as of December 1, 1997" to be submitted for recording in the
appropriate jurisdictions; provided, however, that the Seller shall not
be required to prepare an assignment for any Mortgage described in
subsection (b)(i)(E)(2) above with respect to which the original
recording information has not yet been received from the recording
office; provided, further, that the Seller shall not be required to
record an assignment of a Mortgage if the Seller furnishes to the
Trustee and the Certificate Insurer, on or before the Startup Day, with
respect to the Initial Home Equity Loans, or on each Subsequent
Transfer Date with respect to the Subsequent Home Equity Loans, at the
Seller's expense, an opinion of counsel with respect to the relevant
jurisdiction that such recording is not necessary to perfect the
Trustee's interest in the related Home Equity Loans (in form and
substance satisfactory to the Certificate Insurer and the Rating
Agencies);
43
<PAGE>
(iii) deliver the title insurance policy or title searches, the
original Mortgages and such recorded assignments, together with
originals or duly certified copies of any and all prior assignments
(other than unrecorded warehouse assignments), to the Trustee within 15
days of receipt thereof by the Seller (but in any event, with respect
to any Mortgage as to which original recording information has been
made available to the Seller, within one year after the Startup Day
Initial Home Equity Loans, or within one year after each Subsequent
Transfer Date with respect to the Subsequent Home Equity Loans); and
(iv) furnish to the Trustee, the Certificate Insurer and the Rating
Agencies at the Sponsor's expense, an opinion of counsel with respect
to the sale of the Subsequent Home Equity Loans delivered to the Trust
in form and substance reasonably satisfactory to the Certificate
Insurer.
Notwithstanding anything to the contrary contained in this Section 3.05, in
those instances where the public recording office retains the original Mortgage,
the assignment of a Mortgage or the intervening assignments of the Mortgage
after it has been recorded, the Seller and the Depositor shall be deemed to have
satisfied its obligations hereunder upon delivery to the Trustee of a copy of
such Mortgage, such assignment or assignments of Mortgage certified by the
public recording office to be a true copy of the recorded original thereof.
Not later than ten days following the end of each 60-day period referred in
clause (ii) of the preceding paragraph, the Seller shall deliver to the Trustee
a list of all Mortgages for which no Mortgage assignment has yet been submitted
for recording by the Seller, which list shall state the reason why the Seller
has not yet submitted such Mortgage assignments for recording. With respect to
any Mortgage assignment disclosed on such list as not yet submitted for
recording for a reason other than a lack of original recording information, the
Trustee shall make an immediate demand on the Seller to prepare such Mortgage
assignments, and shall inform the Certificate Insurer of the Seller's failure to
prepare such Mortgage assignments. Thereafter, the Trustee shall cooperate in
executing any documents prepared by the Certificate Insurer and submitted to the
Trustee in connection with this provision. Following the expiration of each
60-day period referred to in clause (ii) of the preceding paragraph, the Seller
and Sponsor shall promptly prepare a Mortgage assignment for any Mortgage for
which original recording information is subsequently received by the Seller or
Sponsor, and shall promptly deliver a copy of such Mortgage assignment to the
Trustee. The Sponsor and Seller agree that each will attempt to obtain the
original recording information necessary to complete a Mortgage assignment. In
the event that the Seller or Sponsor is unable to obtain such recording
information with respect to any Mortgage prior to the end of the 18th calendar
month following the Startup Day with respect to the Initial Home Equity Loans
and the 18th calendar month following the relevant Subsequent Transfer Date with
respect to Subsequent Home Equity Loans and has not provided to the Trustee a
Mortgage assignment with evidence of recording thereon relating to the
assignment of such Mortgage to the Trustee, the Trustee shall notify the Seller
and Sponsor of the Seller's and Sponsor's obligation to provide a completed
assignment (with evidence of recording thereon) on or before the end of the 20th
calendar month following the Startup Day with respect to the Initial Home Equity
Loans and the 20th calendar month following the relevant Subsequent Transfer
Date with respect to Subsequent Home Equity Loans. A copy of such notice shall
be sent by the Trustee to the Certificate Insurer. If no such completed
assignment (with evidence of recording thereon) is provided before the end of
such 20th calendar month, the related Home Equity Loan shall be deemed to have
breached the representation contained in clause (xxii) of Section 3.04(b)
hereof; provided, however, that if as of the end of such 20th calendar month the
Seller and Sponsor demonstrate to the satisfaction of the Certificate Insurer
that each is exercising its best efforts to obtain such completed assignment
and, during each month thereafter until such completed assignment is delivered
to the Trustee, the Seller and Sponsor continue to demonstrate
44
<PAGE>
to the satisfaction of the Certificate Insurer that each is exercising its best
efforts to obtain such completed assignment, the related Home Equity Loan will
not be deemed to have breached such representation. The requirement to deliver a
completed assignment with evidence of recording thereon will be deemed satisfied
upon delivery of a copy of the completed assignment certified by the applicable
public recording office.
Copies of all Mortgage assignments received by the Trustee shall be
retained in the related File.
All recording required pursuant to this Section 3.05 shall be accomplished
at the expense of the Seller.
(c) In the case of Initial Home Equity Loans which have been prepaid in
full on or after the Cut-Off Date and prior to the Startup Day, the Seller, in
lieu of the foregoing, will deliver within six (6) days after the Startup Day to
the Trustee a certification of an Authorized Officer in the form set forth in
Exhibit E.
(d) The Seller shall transfer, assign, set over and otherwise convey
without recourse, to the Trustee all right, title and interest of the Seller in
and to any Qualified Replacement Mortgage delivered to the Trustee on behalf of
the Trust by the Seller pursuant to Section 3.03, 3.04 or 3.06 hereof and all
its right, title and interest to principal and interest due on such Qualified
Replacement Mortgage after the applicable Replacement Cut-Off Date; provided,
however, that the Seller shall reserve and retain all right, title and interest
in and to payments of principal and interest due on such Qualified Replacement
Mortgage on or prior to the applicable Replacement Cut-Off Date.
(e) As to each Home Equity Loan released from the Trust in connection with
the conveyance of a Qualified Replacement Mortgage therefor, the Trustee will
transfer, assign, set over and otherwise convey without recourse or
representation, on the Seller's order, all of its right, title and interest in
and to such released Home Equity Loan and all the Trust's right, title and
interest to principal and interest due on such released Home Equity Loan after
the applicable Replacement Cut-Off Date; provided, however, that the Trust shall
reserve and retain all right, title and interest in and to payments of principal
and interest due on such released Home Equity Loan on or prior to the applicable
Replacement Cut-Off Date.
(f) In connection with any transfer and assignment of a Qualified
Replacement Mortgage to the Trustee on behalf of the Trust, the Seller agrees to
(i) deliver without recourse to the Trustee on the date of delivery of such
Qualified Replacement Mortgage the original Note relating thereto, endorsed in
blank or to the order of the Trustee, (ii) cause promptly to be recorded an
assignment in the appropriate jurisdictions, (iii) deliver the original
Qualified Replacement Mortgage and such recorded assignment, together with
original or duly certified copies of any and all prior assignments, to Trustee
within 15 days of receipt thereof by the Seller (but in any event within 120
days after the date of conveyance of such Qualified Replacement Mortgage) and
(iv) deliver the title insurance policy, or where no such policy is required to
be provided under Section 3.05(b)(i)(B), the other evidence of title in same
required in Section 3.05(b)(i)(B).
(g) As to each Home Equity Loan released from the Trust in connection with
the conveyance of a Qualified Replacement Mortgage, the Trustee shall deliver on
the date of conveyance of such Qualified Replacement Mortgage and on the order
of the Seller (i) the original Note relating thereto, endorsed without recourse
or representation, to the Seller, (ii) the original Mortgage so released and all
assignments relating thereto and (iii) such other documents as constituted the
File with respect thereto.
45
<PAGE>
(h) If a Mortgage assignment is lost during the process of recording, or is
returned from the recorder's office unrecorded due to a defect therein, the
Seller shall prepare a substitute assignment or cure such defect, as the case
may be, and thereafter cause each such assignment to be duly recorded.
Section 3.06 Acceptance by Trustee; Certain Substitutions of Home Equity
Loans; Certification by Trustee.
(a) The Trustee agrees to execute and deliver on the Startup Day an
acknowledgment of receipt of the items delivered by the Seller or the Depositor
in the forms attached as Exhibit F-1, and declares that it, or its agent, will
hold such documents and any amendments, replacement or supplements thereto, as
well as any other assets included in the definition of Trust Estate and
delivered to the Trustee, as Trustee in trust upon and subject to the conditions
set forth herein for the benefit of the Owners. The Trustee agrees, for the
benefit of the Owners, to review such items within 45 days after the Startup Day
(or, with respect to any document delivered after the Startup Day, within 45
days of receipt and with respect to any Subsequent Home Equity Loan or Qualified
Replacement Mortgage, within 45 days after the assignment thereof) and to
deliver to the Depositor, the Seller, the Master Servicer and the Certificate
Insurer a certification in the form attached hereto as Exhibit G (a "Pool
Certification") to the effect that, as to each Home Equity Loan listed in the
Schedule of Home Equity Loans (other than any Home Equity Loan paid in full or
any Home Equity Loan specifically identified in such Pool Certification as not
covered by such Pool Certification), (i) all documents required to be delivered
to it pursuant to Section 3.05(b)(i) of this Agreement are in its possession,
(ii) such documents have been reviewed by it and have not been mutilated,
damaged or torn and relate to such Home Equity Loan and (iii) based on its
examination and only as to the foregoing documents, the information set forth on
the Schedule of Home Equity Loans accurately reflects the information set forth
in the File. The Trustee shall have no responsibility for reviewing any File
except as expressly provided in this subsection 3.06(a). Without limiting the
effect of the preceding sentence, in reviewing any File, the Trustee shall have
no responsibility for determining whether any document is valid and binding,
whether the text of any assignment is in proper form (except to determine if the
Trustee is the assignee), whether any document has been recorded in accordance
with the requirements of any applicable jurisdiction or whether a blanket
assignment is permitted in any applicable jurisdiction, but shall only be
required to determine whether a document has been executed, that it appears to
be what it purports to be, and, where applicable, that it purports to be
recorded. The Trustee shall be under no duty or obligation to inspect, review or
examine any such documents, instruments, certificates or other papers to
determine that they are genuine, enforceable, or appropriate for the represented
purpose or that they are other than what they purport to be on their face, nor
shall the Trustee be under any duty to determine independently whether there are
any intervening assignments or assumption or modification agreements with
respect to any Home Equity Loan.
(b) If the Trustee during such 45-day period finds any document
constituting a part of a File which is not executed, has not been received, or
is unrelated to the Home Equity Loans identified in the Schedule of Home Equity
Loans, or that any Home Equity Loan does not conform to the description thereof
as set forth in the Schedule of Home Equity Loans, on behalf of the Trustee
shall promptly so notify the Depositor, the Seller, the Owners and the
Certificate Insurer. In performing any such review, the Trustee may conclusively
rely on the Seller as to the purported genuineness of any such document and any
signature thereon. It is understood that the scope of the review of the items
delivered by the Seller pursuant to Section 3.05(b)(i) is limited solely to
confirming that the documents listed in Section 3.05(b)(i) have been executed
and received, relate to the Files identified in the Schedule of Home Equity
Loans and conform to the description thereof in the Schedule of Home Equity
Loans. The Seller and Sponsor agree to use reasonable efforts to remedy a
material defect in a document constituting part of a File of which
46
<PAGE>
each is so notified by the Trustee. If, however, within 60 days after such
notice to it respecting such defect the Seller or Sponsor has not remedied the
defect and the defect materially and adversely affects the interest in the
related Home Equity Loan of the Owners or the Certificate Insurer, the Seller or
Sponsor will (or will cause an affiliate of the Seller to) on the next
succeeding Monthly Remittance Date (i) substitute in lieu of such Home Equity
Loan a Qualified Replacement Mortgage and deliver the Substitution Amount to the
Master Servicer for deposit in the Principal and Interest Account or (ii)
purchase such Home Equity Loan at a purchase price equal to the Loan Purchase
Price thereof, which purchase price shall be delivered to the Master Servicer
for deposit in the Principal and Interest Account.
(c) In addition to the foregoing, the Trustee also agrees to make a review
during the 12th month after the Startup Day indicating the current status of the
exceptions previously indicated on the Pool Certification (the "Final
Certification"). After delivery of the Final Certification, the Trustee and the
Master Servicer shall provide to the Certificate Insurer no less frequently than
monthly updated certifications indicating the then current status of exceptions,
until all such exceptions have been eliminated.
Section 3.07 Conveyance of the Subsequent Home Equity Loans
(a) Subject to the satisfaction of the conditions set forth in Section 3.05
and paragraph (b) below (based on the Trustee's review of such conditions) in
consideration of the Trustee's delivery on the relevant Subsequent Transfer
Dates to or upon the order of the Seller of all or a portion of the balance of
funds in the Pre-Funding Account, the Seller shall indirectly (through the
Depositor) on any Subsequent Transfer Date sell, transfer, assign, set over and
otherwise convey without recourse, to the Trustee, and the Trustee shall
purchase on behalf of the Trust all of the Seller's right, title and interest in
and to any and all benefits accruing to the Seller from the Subsequent Home
Equity Loans (other than any principal and interest due prior to the relevant
Subsequent Cut-Off Date) which the Seller (through the Depositor) is causing to
be delivered to the Trustee or an affiliate of the Trustee, on behalf of the
Trustee herewith (and all substitutions therefor as provided by Section 3.03,
3.04 and 3.06), together with the related Subsequent Home Equity Loan documents
and the Seller's interest in any Property which secured a Subsequent Home Equity
Loan but which has been acquired by foreclosure or deed in lieu of foreclosure,
and all payments thereon and proceeds of the conversion, voluntary or
involuntary, of the foregoing and proceeds of all the foregoing (including, but
not by way of limitation, all proceeds of any mortgage insurance, hazard
insurance and title insurance policy relating to the Subsequent Home Equity
Loans, cash proceeds, accounts, accounts receivable, notes, drafts, acceptances,
chattel paper, checks, deposit accounts, rights to payment of any and every
kind, and other forms of obligations and receivables which at any time
constitute all or part of or are included in the proceeds of any of the
foregoing). Notwithstanding anything to the contrary herein, there shall be no
more than three Subsequent Transfer Dates during the Funding Period.
The transfer by the Seller (through the Depositor) of the Subsequent Home
Equity Loans set forth on the Schedule of Home Equity Loans to the Trustee shall
be absolute and shall be intended by the Owners and all parties hereto to be
treated as a sale by the Seller. The amount released from the Pre-Funding
Account shall be one-hundred percent (100%) of the aggregate principal balances
of the Subsequent Home Equity Loans so transferred. Upon the transfer by the
Seller of the Subsequent Home Equity Loans hereunder, such Subsequent Home
Equity Loans (and all principal and interest due thereon on or after the
Subsequent Cut-Off Date) and all other rights and interests with respect to such
Subsequent Home Equity Loans transferred pursuant to a Subsequent Transfer
Agreement shall be deemed for all purposes hereunder to be part of the Trust
Estate.
47
<PAGE>
(b) The obligation of the Trustee to accept the transfer of the Subsequent
Home Equity Loans and the other property and rights related thereto described in
paragraph (a) above is subject to the satisfaction of each of the following
conditions on or prior to the related Subsequent Transfer Date:
(i) the Seller shall have provided the Trustee and the Certificate
Insurer with an Addition Notice and shall have provided any information
reasonably requested by any of the foregoing with respect to the
Subsequent Home Equity Loans;
(ii) the Depositor shall have delivered to the Trustee a duly executed
written Subsequent Transfer Agreement (including an acceptance by the
Trustee) in substantially the form of Exhibit D hereto, which shall
include a Schedule of Home Equity Loans, listing the Subsequent Home
Equity Loans and any other exhibits listed thereon and the Seller shall
have delivered to the Trustee a duly executed Subsequent Transfer
Agreement in substantially the form as attached to the Loan Sale
Agreement;
(iii) the Depositor shall have caused the Seller to have delivered to
the Master Servicer for deposit in the Principal and Interest Account
all principal and interest due in respect of such Subsequent Home
Equity Loans on or after the related Subsequent Cut-Off Date;
(iv) as of each Subsequent Transfer Date, neither the Seller nor the
Depositor was insolvent, nor will either of them be made insolvent by
such transfer, nor is either of them aware of any pending insolvency;
(v) the Funding Period shall not have ended; and
(vi) the Seller and the Depositor each shall have delivered to the
Trustee and the Certificate Insurer an Officer's Certificate confirming
the satisfaction of each condition precedent specified in this
paragraph (b) and in the related Subsequent Transfer Agreement and the
Certificate Insurer shall have consented to such transfer, which
consent shall not be unreasonably withheld.
(c) The obligation of the Trust to purchase a Subsequent Home Equity Loan on any
Subsequent Transfer Date is subject to the following requirements, individually,
or in the aggregate, as applicable: (i) the remaining term to maturity of each
Subsequent Home Equity Loan may not exceed 30 years; (ii) none will be greater
than 30 days contractually Delinquent as of the related Subsequent Cut-Off Date;
(iii) will have Minimum Rates no lower than 8.00%; (iv) will have Coupon Rates
no lower than 8.00%; (v) less than 52.00% of first lien Mortgages may have
piggyback second lien Mortgages; (vi) will have a weighted average Coupon Rate
that is at least 11.08%; (vii) up to 5.60% are second lien Mortgages; (viii) no
piggyback second lien Mortgages; (ix) will have a weighted average Combined
Loan-to-Value Ratio of less than 78.20%; (x) Loan Balance at the time of
origination was less than $214,600; (xi) less than 2.50% are balloon loans; and
(xii) at least 94.00% are fixed rate Home Equity Loans; provided that any of the
conditions set forth in clauses (v), (vi), (vii), (ix), (xi) or (xii) may be
waived with the consent of the Certificate Insurer.
(d) In connection with each Subsequent Transfer Date and, if applicable, on
the final Pre-Funding Payment Date, the Trustee shall determine: (i) the amount
and correct dispositions of the amounts in the Capitalized Interest Account,
Pre-Funding Account Earnings and the Pre-Funded Amount and (ii) any other
necessary matters in connection with the administration of the Pre-Funding
Account and of the Capitalized Interest Account. In the event that any amounts
are released as a result of an error in calculation to the Owners or Depositor
from the Pre-Funding
48
<PAGE>
Account or from the Capitalized Interest Account, such Owners or the Depositor
shall immediately repay such amounts to the Trustee or the Trustee shall have
the right to withhold such amounts from future distributions on such
Certificates.
On the final Pre-Funding Payment Date, if the Subsequent Home Equity Loans,
in the aggregate, do not comply in all material respects with the conditions
specified in Section 3.07(c) above, or there is a proposed change in the
Certificate Insurer credit risk exposure by the Rating Agencies, the Certificate
Insurer may increase the Specified Subordinated Amount by an amount necessary to
cause such credit risk exposure without regard to the Certificate Insurance
Policy, to be maintained at the level assigned (and shall give notice of such
increase to the Trustee) on the Startup Day.
Section 3.08 Reserved.
Section 3.09 Representations and Warranties of the Backup Master Servicer .
Ocwen Federal Bank FSB hereby represents, warrants and covenants to the
Depositor, the Seller, the Master Servicer, the Trustee and the Certificate
Insurer that as of the Startup Day:
(a) Ocwen Federal Bank FSB is a federal savings bank duly formed and
validly existing under the laws of the United States of America, is in
compliance with the laws of each state in which any Property is located to the
extent necessary to enable it to perform its obligations hereunder and is in
good standing in each jurisdiction in which the nature of its business, or the
properties owned or leased by it make such qualification necessary. Ocwen
Federal Bank FSB has all requisite corporate power and authority to own and
operate its properties, to carry out its business as presently conducted and as
proposed to be conducted and to enter into and discharge its obligations under
this Agreement and the other Operative Documents to which it is a party.
(b) The execution and delivery of this Agreement by Ocwen Federal Bank FSB
and its performance and compliance with the terms of this Agreement have been
duly authorized by all necessary action on the part of Ocwen Federal Bank FSB
and will not violate Ocwen Federal Bank FSB's charter or constitute a default
(or an event which, with notice or lapse of time, or both, would constitute a
default) under, or result in the breach of, any material contract, agreement or
other instrument to which Ocwen Federal Bank FSB is a party or by which Ocwen
Federal Bank FSB is bound or violate any statute or any order, rule or
regulation of any court, governmental agency or body or other tribunal having
jurisdiction over Ocwen Federal Bank FSB or any of its properties.
(c) Each of this Agreement and the Operative Documents to which Ocwen
Federal Bank FSB is a party, assuming due authorization, execution and delivery
by the other parties hereto and thereto, constitutes a valid, legal and binding
obligation of Ocwen Federal Bank FSB, enforceable against it in accordance with
the terms hereof and thereof, except as the enforcement hereof may be limited by
(x) applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally, (y) general principles of
equity (whether considered in a proceeding or action in equity or at law) and
(z) with respect to rights of indemnity or contribution, to limitations of
public policy or applicable laws.
(d) Ocwen Federal Bank FSB is not in default with respect to any order or
decree of any court or any order, regulation or demand of any federal, state,
municipal or governmental agency, which might have consequences that would
materially and adversely affect the condition (financial or otherwise) or
operations of Ocwen Federal Bank FSB or its properties or might have
consequences that would materially and adversely affect its performance
hereunder.
49
<PAGE>
(e) No litigation is pending with respect to which Ocwen Federal Bank FSB
has received service of process or, to the best of Ocwen Federal Bank FSB's
knowledge, threatened against Ocwen Federal Bank FSB which litigation might have
consequences that would prohibit its entering into this Agreement or that would
materially and adversely affect the condition (financial or otherwise) or
operations of Ocwen Federal Bank FSB or its properties or might have
consequences that would materially and adversely affect its performance
hereunder and the other Operative Documents to which Ocwen Federal Bank FSB is a
party.
(f) No certificate of an officer, statement furnished in writing or report
delivered pursuant to the terms hereof by Ocwen Federal Bank FSB contains any
untrue statement of a material fact or omits to state any material fact
necessary to make the certificate, statement or report not misleading.
(g) The statements contained in the Prospectus Supplement under the heading
"The Backup Master Servicer" are true and correct in all material respects and
do not contain any untrue statement of a material fact with respect to Ocwen
Federal Bank FSB or omit to state a material fact required to be stated therein
or necessary to make the statements contained therein with respect to Ocwen
Federal Bank FSB, in light of the circumstances under which they were made, not
misleading.
(h) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required to be
taken, given or obtained, as the case may be, by or from any federal, state or
other governmental authority or agency (other than any such actions, approvals,
etc. under any state securities laws, real estate syndication or "Blue Sky"
statutes, as to which Ocwen Federal Bank FSB makes no such representation or
warranty), that are necessary or advisable in connection with the execution and
delivery by Ocwen Federal Bank FSB of the Operative Documents to which it is a
party, have been duly taken, given or obtained, as the case may be, are in full
force and effect on the date hereof, are not subject to any pending proceedings
or appeals (administrative, judicial or otherwise) and either the time within
which any appeal therefrom may be taken or review thereof may be obtained has
expired or no review thereof may be obtained or appeal therefrom taken, and are
adequate to authorize the consummation of the transactions contemplated by this
Agreement and the other Operative Documents on the part Ocwen Federal Bank FSB
and the performance by Ocwen Federal Bank FSB of its obligations under this
Agreement and such of the other Operative Documents to which it is a party.
(i) The transactions contemplated by this Agreement are in the ordinary
course of business of Ocwen Federal Bank FSB.
It is understood and agreed that the representations and warranties set
forth in this Section 3.09 shall survive delivery of the Home Equity Loans to
the Trustee.
Upon discovery by any of the Depositor, the Sponsor, the Seller, the Master
Servicer, any Sub-Servicer, the Certificate Insurer, any Owner or the Trustee
(each, for purposes of this paragraph, a party) of a breach of any of the
representations and warranties set forth in this Section 3.09 which materially
and adversely affects the interests of the Owners or of the Certificate Insurer,
the party discovering such breach shall give prompt written notice to the other
parties. As promptly as practicable, but in any event, within 60 days of its
discovery or its receipt of notice of breach, Ocwen Federal Bank FSB shall cure
such breach in all material respects and upon Ocwen Federal Bank FSB's continued
failure to cure such breach may thereafter be removed by the Trustee with the
written consent of the Certificate Insurer pursuant to Section 8.20 hereof;
provided, however, that if Ocwen Federal Bank FSB can establish to the
reasonable satisfaction of the Certificate Insurer that it is diligently
pursuing remedial action, then the cure
50
<PAGE>
period may be extended for an additional 90 days with the written approval of
the Certificate Insurer.
END OF ARTICLE III
51
<PAGE>
ARTICLE IV
ISSUANCE AND SALE OF CERTIFICATES
Section 4.01 Issuance of Certificates.
On the Startup Day, upon the Trustee's receipt from the Depositor of an
executed Delivery Order in the form set forth as Exhibit H hereto, the Trustee
shall authenticate and deliver the Certificates on behalf of the Trust.
Section 4.02 Sale of Certificates.
At 11 a.m. New York City time on the Startup Day, at the offices of Stroock
& Stroock & Lavan LLP, 180 Maiden Lane, New York, New York 10038 (or at such
other location acceptable to the Seller), the Seller will sell and convey the
Initial Home Equity Loans and the money, instruments and other property related
thereto to the Depositor pursuant to the Loan Sale Agreement and the Depositor
will sell and convey the Initial Home Equity Loans and the money, instruments
and other property related thereto to the Trustee, and the Trustee will deliver
(i) to the Underwriter, the Class A Certificates with an aggregate Percentage
Interest in each Class equal to 100% registered in the name of Cede & Co. or in
such other names as the Underwriter shall direct, against payment of the
purchase price thereof by wire transfer of immediately available funds to the
Trustee and (ii) to the respective registered owners thereof, Class R
Certificates with a Percentage Interest equal to 99.999%, registered in the name
of the initial purchasers thereof and a Class R Certificate with a Percentage
Interest equal to 0.001%, registered in the name of the Tax Matters Person (all
such events shall be referred to herein as the "Closing").
Upon the Trustee's receipt of the entire net proceeds of the sale of the
Class A Certificates, the Seller shall instruct the Trustee to deposit (a) an
amount equal to the Original Pre-Funded Amount in the Pre-Funding Account, (b)
an amount equal to the Original Capitalized Interest Deposit in the Capitalized
Interest Account and (c) an amount equal to the Closing Certificate Account
Deposit in the Certificate Account, contributed out of such proceeds or
otherwise. The Trustee shall then remit the entire balance of such net proceeds
in accordance with instructions delivered by the Seller.
END OF ARTICLE IV
52
<PAGE>
ARTICLE V
CERTIFICATES AND TRANSFER OF INTERESTS
Section 5.01 Terms.
(a) The Certificates are pass-through securities having the rights
described therein and herein. Notwithstanding references herein or therein with
respect to the Certificates as to "principal" and "interest" thereof, no debt of
any Person is represented thereby, nor are the Certificates or the underlying
Notes guaranteed by any Person (except that the Notes may be recourse to the
Mortgagors thereof to the extent permitted by law and the terms of the related
Note and except for the rights of the Trustee on behalf of the Owners of the
Class A Certificates with respect to the Certificate Insurance Policy). The
Class A Certificates are payable solely from payments received on or with
respect to the Home Equity Loans (other than the Servicing Fees), moneys in the
Principal and Interest Account, except as otherwise provided herein, moneys in
the Pre-Funding Account and Capitalized Interest Account, from earnings on
moneys and the proceeds of property held as a part of the Trust Estate and, with
respect to the Class A Certificates upon the occurrence of certain events, from
Insured Payments. Each Certificate entitles the Owner thereof to receive monthly
on each Payment Date, in order of priority of distributions with respect to such
Class of Certificates as set forth in Section 7.03, a specified portion of such
payments with respect to the Home Equity Loans, certain related Insured
Payments, pro rata in accordance with such Owner's Percentage Interest and
certain amounts payable from the Capitalized Interest Account and from the
Pre-Funding Account.
(b) Each Owner is required, and hereby agrees, to return to the Trustee,
any Certificate with respect to which the Trustee has made the final
distribution due thereon. Any such Certificate as to which the Trustee has made
the final distribution thereon shall be deemed canceled and shall no longer be
Outstanding for any purpose of this Agreement, whether or not such Certificate
is ever returned to the Trustee.
Section 5.02 Forms.
The Class A-1 Certificates, the Class A-2 Certificates and the Class A-3
Certificates and the Class R Certificates shall be in substantially the forms
set forth in Exhibits A-1, A-2, A-3, and C hereof, respectively.
Section 5.03 Execution, Authentication and Delivery.
Each Certificate shall be executed on behalf of the Trust, by the manual
signature of one of the Trustee's Authorized Officers. In addition, each
Certificate shall be authenticated by the manual signature of one of the
Trustee's Authorized Officers.
Certificates bearing the manual signature of individuals who were at any
time the proper officers of the Trustee shall, upon proper authentication by the
Trustee, bind the Trust, notwithstanding that such individuals or any of them
have ceased to hold such offices prior to the execution and delivery of such
Certificates or did not hold such offices at the date of authentication of such
Certificates.
The initial Certificates shall be dated as of the Startup Day and delivered
at the Closing to the parties specified in Section 4.02 hereof. Subsequently
issued Certificates will be dated as of the issuance of the Certificate.
53
<PAGE>
No Certificate shall be valid until executed and authenticated as set forth
above.
Section 5.04 Registration and Transfer of Certificates.
(a) The Trustee shall cause to be kept a register (the "Register") in
which, subject to such reasonable regulations as it may prescribe, the Trustee
shall provide for the registration of Certificates and the registration of
transfer of Certificates. The Trustee is hereby initially appointed Registrar
for the purpose of registering Certificates and transfers of Certificates as
herein provided. The Certificate Insurer, the Owners and the Trustee shall have
the right to inspect the Register during the Trustee's normal hours and to
obtain copies thereof, and the Trustee shall have the right to rely upon a
certificate executed on behalf of the Registrar by an Authorized Officer thereof
as to the names and addresses of the Owners of the Certificates and the
principal amounts and numbers of such Certificates.
If a Person other than the Trustee is appointed as Registrar by the Owners
of a majority of the aggregate Percentage Interests represented by the Class A
Certificates then Outstanding with the consent of the Certificate Insurer or if
there are no longer any Class A Certificates then outstanding, by such majority
of the Percentage Interests represented by the Class R Certificates, such Owners
shall give the Trustee, the Certificate Insurer and the Owners prompt written
notice of the appointment of such Registrar and of the location, and any change
in the location, of the Register. In connection with any such appointment the
reasonable fees of the Registrar shall be paid, as expenses of the Trust,
pursuant to Section 7.06 hereof.
(b) Subject to the provisions of Section 5.08 hereof, upon surrender for
registration of transfer of any Certificate at the office designated as the
location of the Register, upon the direction of the Registrar, the Trustee shall
execute, authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Certificates of a like Class and in the aggregate
principal amount or percentage interest of the Certificate so surrendered.
(c) At the option of any Owner, Certificates of any Class owned by such
Owner may be exchanged for other Certificates authorized of like Class and tenor
and a like aggregate original principal amount or percentage interest and
bearing numbers not contemporaneously outstanding, upon surrender of the
Certificates to be exchanged at the office designated as the location of the
Register. Whenever any Certificate is so surrendered for exchange, upon the
direction of the Registrar, the Trustee shall execute, authenticate and deliver
the Certificate or Certificates which the Owner making the exchange is entitled
to receive.
(d) All Certificates issued upon any registration of transfer or exchange
of Certificates shall be valid evidence of the same ownership interests in the
Trust and entitled to the same benefits under this Agreement as the Certificates
surrendered upon such registration of transfer or exchange.
(e) Every Certificate presented or surrendered for registration of transfer
or exchange shall be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by the Owner
thereof or his attorney duly authorized in writing.
(f) No service charge shall be made to an Owner for any registration of
transfer or exchange of Certificates, but the Registrar or Trustee may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any registration of transfer or exchange of
Certificates; any other expenses in connection with such transfer or exchange
shall be an expense of the Trust.
54
<PAGE>
(g) It is intended that the Class A Certificates be registered so as to
participate in a global book-entry system with the Depository, as set forth
herein. Each Class of Class A Certificates shall, except as otherwise provided
in Subsection (h), be initially issued in the form of a single fully registered
Class A Certificate of such Class. Upon initial issuance, the ownership of each
such Class A Certificate shall be registered in the Register in the name of Cede
& Co., or any successor thereto, as nominee for the Depository.
On the Startup Day, no Class A-1, Class A-2 or Class A-3 Certificates shall
be issued in denominations of less than $25,000 and integral multiples of $1,000
in excess thereof.
The Depositor and the Trustee are hereby authorized to execute and deliver
the Representation Letter with the Depository in the form provided to the
Trustee by the Depositor.
With respect to the Class A Certificates registered in the Register in the
name of Cede & Co., as nominee of the Depository, the Depositor, the Master
Servicer, the Seller, the Sponsor and the Trustee shall have no responsibility
or obligation to Direct or Indirect Participants or beneficial owners for which
the Depository holds Class A Certificates from time to time as a Depository.
Without limiting the immediately preceding sentence, the Depositor, the Master
Servicer, the Seller, the Sponsor and the Trustee shall have no responsibility
or obligation with respect to (i) the accuracy of the records of the Depository,
Cede & Co., or any Direct or Indirect Participant with respect to the ownership
interest in the Class A Certificates, (ii) the delivery to any Direct or
Indirect Participant or any other Person, other than a registered Owner of a
Class A Certificate as shown in the Register, of any notice with respect to the
Class A Certificates or (iii) the payment to any Direct or Indirect Participant
or any other Person, other than a registered Owner of a Class A Certificate as
shown in the Register, of any amount with respect to any distribution of
principal or interest on the Class A Certificates. No Person other than a
registered Owner of a Class A Certificate as shown in the Register shall receive
a certificate evidencing such Class A Certificate.
Upon delivery by the Depository to the Trustee of written notice to the
effect that the Depository has determined to substitute a new nominee in place
of Cede & Co., and subject to the provisions hereof with respect to the payment
of interest by the mailing of checks or drafts to the registered Owners of Class
A Certificates appearing as registered Owners in the registration books
maintained by the Trustee at the close of business on a Record Date, the name
"Cede & Co." in this Agreement shall refer to such new nominee of the
Depository.
(h) In the event that (i) the Depository or the Seller advises the Trustee
in writing that the Depository is no longer willing or able to discharge
properly its responsibilities as nominee and depository with respect to the
Class A Certificates and the Seller or the Trustee is unable to locate a
qualified successor or (ii) the Seller at its sole option elects to terminate
the book-entry system through the Depository, the Class A Certificates shall no
longer be restricted to being registered in the Register in the name of Cede &
Co. (or a successor nominee) as nominee of the Depository. At that time, the
Seller may determine that the Class A Certificates shall be registered in the
name of and deposited with a successor depository operating a global book-entry
system, as may be acceptable to the Seller and at the Seller's expense, or such
depository's agent or designee but, if the Seller does not select such
alternative global book-entry system, then the Class A Certificates may be
registered in whatever name or names registered Owners of Class A Certificates
transferring Class A Certificates shall designate, in accordance with the
provisions hereof.
(i) Notwithstanding any other provision of this Agreement to the contrary,
so long as any Class A Certificate is registered in the name of Cede & Co., as
nominee of the Depository, all distributions of principal or interest on such
Class A Certificates and all notices with respect to
55
<PAGE>
such Class A Certificates shall be made and given, respectively, in the manner
provided in the Representation Letter.
Section 5.05 Mutilated, Destroyed, Lost or Stolen Certificates.
If (i) any mutilated Certificate is surrendered to the Trustee, or the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Certificate, and (ii) in the case of any mutilated Certificate, such
mutilated Certificate shall first be surrendered to the Trustee, and in the case
of any destroyed, lost or stolen Certificate, there shall be first delivered to
the Trustee such security or indemnity as may be reasonably required by it to
hold the Trustee and the Certificate Insurer harmless (provided, that with
respect to an Owner which is an institutional investor, a letter of indemnity
furnished by it shall be sufficient for this purpose), then, in the absence of
notice to the Trustee or the Registrar that such Certificate has been acquired
by a bona fide purchaser, the Trust shall execute and the Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate, a new Certificate of like Class, tenor
and aggregate principal amount, bearing a number not contemporaneously
outstanding.
Upon the issuance of any new Certificate under this Section, the Registrar
or Trustee may require the payment from the transferor or transferee of the
related Certificate of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto; any other expenses in connection
with such issuance shall be an expense of the Trust.
Every new Certificate issued pursuant to this Section in exchange for or in
lieu of any mutilated, destroyed, lost or stolen Certificate shall constitute
evidence of a substitute interest in the Trust, and shall be entitled to all the
benefits of this Agreement equally and proportionately with any and all other
Certificates of the same Class duly issued hereunder and such mutilated,
destroyed, lost or stolen Certificate shall not be valid for any purpose.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Certificates.
Section 5.06 Persons Deemed Owners.
Prior to due presentment for registration of transfer of any Certificate,
the Certificate Insurer, the Trustee and any agent of the Trustee may treat the
Person in whose name any Certificate is registered as the Owner of such
Certificate for the purpose of receiving distributions with respect to such
Certificate and for all other purposes whatsoever, and neither the Certificate
Insurer, the Trustee nor any agent of the Trustee shall be affected by notice to
the contrary.
Section 5.07 Cancellation.
All Certificates surrendered for registration of transfer or exchange
shall, if surrendered to any Person other than the Trustee, be delivered to the
Trustee and shall be promptly canceled by it. No Certificate shall be
authenticated in lieu of or in exchange for any Certificate canceled as provided
in this Section, except as expressly permitted by this Agreement. All canceled
Certificates may be held by the Trustee in accordance with its standard
retention policy.
Section 5.08 Limitation on Transfer of Ownership Rights.
56
<PAGE>
(a) No sale or other transfer of record or beneficial ownership of a Class
R Certificate (whether pursuant to a purchase, a transfer resulting from a
default under a secured lending agreement or otherwise) shall be made to a
Disqualified Organization or an agent of a Disqualified Organization. The
transfer, sale or other disposition of a Class R Certificate (whether pursuant
to a purchase, a transfer resulting from a default under a secured lending
agreement or otherwise) to a Disqualified Organization shall be deemed to be of
no legal force or effect whatsoever and such transferee shall not be deemed to
be an Owner for any purpose hereunder, including, but not limited to, the
receipt of distributions on such Class R Certificate. Furthermore, in no event
shall the Trustee accept surrender for transfer, registration of transfer, or
register the transfer, of any Class R Certificate nor authenticate and make
available any new Class R Certificate unless the Trustee has received an
affidavit from the proposed transferee in the form attached hereto as Exhibit I.
Each holder of a Class R Certificate by his acceptance thereof, shall be deemed
for all purposes to have consented to the provisions of this Section 5.08(a).
(b) No other sale or other transfer of record or beneficial ownership of a
Class R Certificate shall be made unless such transfer is exempt from the
registration requirements of the Securities Act, and any applicable state
securities laws or is made in accordance with said Act and laws. In the event
such a transfer is to be made within three years from the Startup Day, (i) in
the case of transfers for which an investment letter in the form of Exhibit J-1
is provided by the transferee, the Trustee or the Seller shall require a written
opinion of counsel acceptable to and in form and substance satisfactory to the
Seller, the Trustee and the Certificate Insurer in the event that such transfer
may be made pursuant to an exemption, describing the applicable exemption and
the basis therefor, from said Act and laws or is being made pursuant to said Act
and laws, which opinion of counsel shall not be an expense of the Seller, the
Depositor, the Trustee, the Trust Estate or the Certificate Insurer; and (ii) in
the form of Exhibit J-1 or J-2, which investment letter shall not be an expense
of the Seller, the Depositor, the Trustee, the Trust Estate or the Certificate
Insurer. The Owner of a Class R Certificate desiring to effect such transfer
shall, and does hereby agree to, indemnify the Trustee, the Certificate Insurer,
the Depositor and the Seller against any liability that may result if the
transfer is not so exempt or is not made in accordance with such federal and
state laws.
(c) No transfer of a Class R Certificate shall be made unless the Trustee
shall have received either: (i) a representation letter from the transferee of
such Class R Certificate, acceptable to and in form and substance satisfactory
to the Trustee (which may be combined with the investment letter required by
subsection (b) above), to the effect that such transferee is not an employee
benefit plan subject to Section 406 of ERISA nor a plan or other arrangement
subject to Section 406 of ERISA nor a plan or other arrangement subject to
Section 4975 of the Code (collectively, a "Plan"), nor is acting on behalf of
any Plan nor using the assets of any Plan to effect such transfer or (ii) in the
event that any Class R Certificate is purchased by a Plan, or by a person or
entity acting on behalf of any Plan or using the assets of any Plan to effect
such transfer (including the assets of any Plan held in an insurance company
separate or general account), an Opinion of Counsel, acceptable to and in form
and substance satisfactory to the Trustee, which Opinion of Counsel shall not be
at the expense of either the Trustee or the Trust, to the effect that the
purchase or holding of any Class R Certificates will not result in the assets of
the Trust being deemed to be "plan assets," will not cause the Trust to be
subject to the fiduciary requirements and prohibited transaction provisions of
ERISA and the Code, and will not subject the Trustee to any obligation or
liability in addition to those expressly undertaken under this Agreement.
Notwithstanding anything else to the contrary herein, any purported transfer of
a Certificate to or on behalf of any Plan without the delivery to the Trustee of
an Opinion of Counsel as described above shall be null and void and of no
effect.
(d) Reserved.
57
<PAGE>
(e) No sale or other transfer of any Class A Certificate may be made to the
Depositor, the Seller, the Sponsor, or any of their respective Affiliates.
Section 5.09 Assignment of Rights.
An Owner may pledge, encumber, hypothecate or assign all or any part of its
right to receive distributions hereunder, but such pledge, encumbrance,
hypothecation or assignment shall not constitute a transfer of an ownership
interest sufficient to render the transferee an Owner of the Trust without
compliance with the provisions of Section 5.04 and Section 5.08 hereof.
END OF ARTICLE V
58
<PAGE>
ARTICLE VI
COVENANTS
Section 6.01 Distributions.
On each Payment Date, the Trustee will withdraw amounts from the
Certificate Account and make the distributions with respect to the Certificates
in accordance with the terms of the Certificates and this Agreement. Such
distributions shall be made (i) in the case of the Class A Certificates
registered in the name of the Depository, by wire transfer to the Depository or
(ii) by check or draft mailed on each Payment Date or (iii) if requested by any
Owner (other than the Depository) of (A) a Class A Certificate having an
original principal balance of not less than $1,000,000 or (B) a Class R
Certificate having a Percentage Interest of not less than 10% in writing not
later than one Business Day prior to the applicable Record Date (which request
does not have to be repeated unless it has been withdrawn), to such Owner by
wire transfer to an account within the United States designated no later than
five Business Days prior to the related Record Date, made on each Payment Date,
in each case to each Owner of record on the immediately preceding Record Date.
Section 6.02 Money for Distributions to be Held in Trust; Withholding.
(a) All payments of amounts due and payable with respect to any Certificate
that are to be made from amounts withdrawn from the Certificate Account or from
Insured Payments shall be made by and on behalf of the Trustee or by a Paying
Agent, and no amounts so withdrawn from the Certificate Account for payments of
Certificates and no Insured Payment shall be paid over to the Trustee except as
provided in this Section.
(b) If the Seller has appointed a Paying Agent pursuant to Section 11.15
hereof, the Trustee will, on the Business Day immediately preceding each Payment
Date, deposit with such Paying Agents in immediately available funds an
aggregate sum sufficient to pay the amounts then becoming due (to the extent
funds are then available for such purpose in the Certificate Account for the
Class to which such amounts are due) such sum to be held in trust for the
benefit of the Owners entitled thereto.
(c) The Seller may at any time direct any Paying Agent to pay to the
Trustee all sums held in trust by such Paying Agent, such sums to be held by the
Trustee upon the same trusts as those upon which the sums were held by such
Paying Agent; and upon such payment by any Paying Agent to the Trustee, such
Paying Agent shall be released from all further liability with respect to such
money.
(d) The Seller shall require the Paying Agent, including the Trustee on
behalf of the Trust to comply with all requirements of the Code and applicable
state and local law with respect to the withholding from any distributions made
by it to any Owner of any applicable withholding taxes imposed thereon and with
respect to any applicable reporting requirements in connection therewith.
(e) Any money held by the Trustee or a Paying Agent in trust for the
payment of any amount due with respect to any Class A Certificate remaining
unclaimed by the Owner of such Certificate for the period then specified in the
escheat laws of the State of New York after such amount has become due and
payable shall be discharged from such trust and be paid to the Owners of the
Class R Certificates subject to the Certificate Insurer's right of subrogation;
and the Owner of such Class A Certificate shall thereafter, as an unsecured
general creditor, look only
59
<PAGE>
to the Owners of the Class R Certificates for payment thereof (but only to the
extent of the amounts so paid to the Owners of the Class R Certificates) and all
liability of the Trustee or such Paying Agent with respect to such trust money
shall thereupon cease; provided, however, that the Trustee or such Paying Agent
before being required to make any such payment, may at the expense of the Trust
cause to be published once, in the eastern edition of The Wall Street Journal,
notice that such money remains unclaimed and that, after a date specified
therein, which shall be not fewer than 30 days from the date of such
publication, any unclaimed balance of such money then remaining will be paid to
the Owners of the Class R Certificates. The Trustee shall, at the direction of
the Seller, also adopt and employ, at the expense of the Seller, any other
reasonable means of notification of such payment (including but not limited to
mailing notice of such payment to Owners whose right to or interest in moneys
due and payable but not claimed is determinable from the records of the
Registrar, the Trustee or any Paying Agent, at the last address of record for
each such Owner).
Section 6.03 Protection of Trust Estate.
(a) Subject to Sections 10.01(e) and 10.01(g), the Trustee will hold the
Trust Estate in trust for the benefit of the Owners and the Certificate Insurer
and, upon request of the Certificate Insurer or, with the consent of the
Certificate Insurer, at the request of the Depositor, will from time to time
execute and deliver all such supplements and amendments hereto pursuant to
Section 11.14 hereof and all instruments of further assurance and other
instruments, and will take such other action upon such request from the
Depositor (with the consent of the Certificate Insurer) or the Certificate
Insurer, to:
(i) more effectively hold in trust all or any portion of the Trust
Estate;
(ii) perfect, publish notice of, or protect the validity of any grant
made or to be made by this Agreement;
(iii) enforce any of the Home Equity Loans; or
(iv) preserve and defend title to the Trust Estate and the rights of
the Trustee, and the ownership interests of the Owners represented thereby,
in such Trust Estate against the claims of all Persons and parties.
To the extent not covered by the indemnity or other security contemplated
by 10.01(e) and 10.01(g), the Trustee shall be reimbursed for any costs or
expenses associated with this section pursuant to Section 7.03(b)(iv)(D) hereof.
(b) The Trustee shall have the power to enforce, and shall enforce the
obligations and rights of the other parties to this Agreement, and of the
Certificate Insurer or the Owners, by action, suit or proceeding at law or
equity, and shall also have the power to enjoin, by action or suit in equity,
any acts or occurrences which may be unlawful or in violation of the rights of
the Certificate Insurer as such rights are set forth in this Agreement;
provided, however, that nothing in this Section shall require any action by the
Trustee unless the Trustee shall first (i) have been furnished indemnity
satisfactory to it and (ii) when required by this Agreement, have been requested
by the Certificate Insurer or the Owners of a majority of the Percentage
Interests represented by the Class A Certificates then Outstanding with the
consent of the Certificate Insurer or, if there are no longer any Class A
Certificates then outstanding, by such majority of the Percentage Interests
represented by the Class R Certificates; provided, further, however, that if
there is a dispute with respect to payments under the Certificate Insurance
Policy the Trustee's sole responsibility is to the Owners.
60
<PAGE>
(c) The Trustee shall execute any instrument required pursuant to this
Section so long as such instrument does not conflict with this Agreement or with
the Trustee's fiduciary duties, or adversely affect its rights and immunities
hereunder.
Section 6.04 Performance of Obligations.
The Trustee will not take any action that would release any Person from any
of such Person's covenants or obligations under any instrument or document
relating to the Certificates or which would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or document, except as
expressly provided in this Agreement or such other instrument or document.
The Trustee may contract with other Persons to assist it in performing its
duties hereunder pursuant to Section 10.03(g); provided, that the Trustee shall
remain liable for the performance of any such duties notwithstanding any such
contractual arrangement.
Section 6.05 Negative Covenants.
The Trustee will not:
(i) sell, transfer, exchange or otherwise dispose of any of the Trust
Estate except as expressly permitted by this Agreement;
(ii) claim any credit on or make any deduction from the distributions
payable in respect of, the Certificates (other than amounts properly
withheld from such payments under the Code) or assert any claim against any
present or former Owner by reason of the payment of any taxes levied or
assessed upon any of the Trust Estate;
(iii) incur, assume or guaranty, on behalf of the Trust, any
indebtedness of any Person except pursuant to this Agreement;
(iv) dissolve or liquidate the Trust in whole or in part, except
pursuant to Article IX hereof; or
(v) (A) permit the validity or effectiveness of this Agreement to be
impaired, or permit any Person to be released from any covenant or
obligation with respect to the Trust or to the Certificates under this
Agreement, except as may be expressly permitted hereby or (B) permit any
lien, charge, adverse claim, security interest, mortgage or other
encumbrance to be created on or extend to or otherwise arise upon or burden
the Trust Estate or any part thereof or any interest therein or the
proceeds thereof.
Section 6.06 No Other Powers.
The Trustee will not permit the Trust to engage in any business activity or
transaction other than those activities permitted by Section 2.03 hereof.
Section 6.07 Limitation of Suits.
No Owner shall have any right to institute any proceeding, judicial or
otherwise, with respect to this Agreement or the Certificate Insurance Policy,
or for the appointment of a receiver or trustee of the Trust, or for any other
remedy with respect to an event of default hereunder, unless:
61
<PAGE>
(1) such Owner has previously given written notice to the Seller and
the Trustee of such Owner's intention to institute such proceeding;
(2) the Owners of not less than 25% of the Percentage Interests
represented by the Class A Certificates then Outstanding or, if there are
no Class A Certificates then Outstanding, by a majority of the Percentage
Interests represented by the Class R Certificates, shall have made written
request to the Trustee to institute such proceeding in its own name as
Trustee establishing the Trust;
(3) such Owner or Owners have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute such proceeding;
(5) as long as any Class A Certificates are Outstanding, the
Certificate Insurer consented in writing thereto (unless the Certificate
Insurer is the party against whom the proceeding is directed); and
(6) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Owners of a majority of the
Percentage Interests represented by the Class A Certificates or, if there
are no Class A Certificates then Outstanding, by such majority of the
Percentage Interests represented by the Class R Certificates;
it being understood and intended that no one or more Owners shall have any right
in any manner whatever by virtue of, or by availing themselves of, any provision
of this Agreement to affect, disturb or prejudice the rights of any other Owner
of the same Class or to obtain or to seek to obtain priority or preference over
any other Owner of the same Class or to enforce any right under this Agreement,
except in the manner herein provided and for the equal and ratable benefit of
all the Owners of the same Class.
In the event the Trustee shall receive conflicting or inconsistent requests
and indemnity from two or more groups of Owners, each representing less than a
majority of the applicable Class of Certificates and each conforming to
paragraphs (1)-(6) of this Section 6.07, the Certificate Insurer in its sole
discretion may determine what action, if any, shall be taken, notwithstanding
any other provision of this Agreement (unless the Certificate Insurer is the
party against whom the proceeding is directed and in such case the Master
Servicer shall determine what action if any shall be taken).
Section 6.08 Unconditional Rights of Owners to Receive Distributions.
Notwithstanding any other provision in this Agreement, the Owner of any
Certificate shall have the right, which is absolute and unconditional, to
receive distributions to the extent provided herein and therein with respect to
such Certificate or to institute suit for the enforcement of any such
distribution, and such right shall not be impaired without the consent of such
Owner.
Section 6.09 Rights and Remedies Cumulative.
Except as otherwise provided herein, no right or remedy herein conferred
upon or reserved to the Trustee, the Certificate Insurer or to the Owners is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be
62
<PAGE>
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. Except as otherwise
provided herein, the assertion or employment of any right or remedy hereunder,
or otherwise, shall not prevent the concurrent assertion or employment of any
other appropriate right or remedy.
Section 6.10 Delay or Omission Not Waiver.
No delay of the Trustee, the Certificate Insurer or any Owner of any
Certificate to exercise any right or remedy under this Agreement shall impair
any such right or remedy or constitute a waiver of such right or remedy. Every
right and remedy given by this Article VI or by law to the Trustee, the
Certificate Insurer or to the Owners may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee, the Certificate Insurer, or by
the Owners, as the case may be.
Section 6.11 Control by Owners.
The Certificate Insurer or the Owners of a majority of the Percentage
Interests represented by the Class A Certificates then Outstanding with the
consent of the Certificate Insurer or, if there are no longer any Class A
Certificates then Outstanding, by such majority of the Percentage Interests
represented by the Class R Certificates then Outstanding may direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee with respect to the Certificates or exercising any trust or power
conferred on the Trustee with respect to the Certificates or the Trust Estate,
including, but not limited to, those powers set forth in Section 6.03 and
Section 8.20 hereof, provided that:
(1) such direction shall not be in conflict with any rule of law or
with this Agreement;
(2) the Trustee shall have been provided with indemnity satisfactory
to it; and
(3) the Trustee may take any other action deemed proper by the
Trustee, as the case may be, which is not inconsistent with such direction;
provided, however, that the Trustee need not take any action which it
determines might involve it in liability or may be unjustly prejudicial to
the Owners not so directing.
Section 6.12 Indemnification by the Sponsor.
The Sponsor agrees to indemnify and hold the Trustee, the Depositor, the
Backup Master Servicer, the Certificate Insurer and each Owner harmless against
any and all claims, losses, penalties, fines, forfeitures, legal fees and
related costs, judgments, and any other costs, fees and expenses that the
Trustee, the Backup Master Servicer, the Certificate Insurer and any Owner
sustain in any way related to the failure of the Sponsor to perform its duties
in compliance with the terms of this Agreement. The Sponsor shall immediately
notify the Trustee, the Depositor, the Backup Master Servicer, the Certificate
Insurer and each Owner if a claim is made by a third party that the Master
Servicer has failed to perform its obligations to service and administer the
Home Equity Loans in compliance with the terms of this Agreement, and the
Sponsor shall assume (with the consent of the Trustee) the defense of any such
claim and pay all expenses in connection therewith, including reasonable counsel
fees, and promptly pay, discharge and satisfy any judgment or decree which may
be entered against the Depositor, the Master Servicer, the Seller, the Trustee,
the Backup Master Servicer, the Certificate Insurer and/or Owner in respect of
such claim. The Trustee shall, in accordance with instructions received from the
Sponsor, reimburse the Sponsor only from amounts otherwise distributable on the
Class R Certificates for all amounts advanced by it pursuant to the preceding
sentence, except when a final
63
<PAGE>
nonappealable adjudication determines that the claim relates directly to the
failure of the Sponsor to perform its duties in compliance with the terms of
this Agreement. The provisions of this Section 6.12 shall survive the
termination of this Agreement and the payment of the outstanding Certificates.
END OF ARTICLE VI
64
<PAGE>
ARTICLE VII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 7.01 Collection of Money.
Except as otherwise expressly provided herein, the Trustee shall demand
payment or delivery of all money and other property payable to or receivable by
the Trustee pursuant to this Agreement or the Certificate Insurance Policy,
including (a) all payments due on the Home Equity Loans in accordance with the
respective terms and conditions of such Home Equity Loans and required to be
paid over to the Trustee by the Master Servicer or by any Sub-Servicer and (b)
Insured Payments. The Trustee shall hold all such money and property received by
it, other than pursuant to or as contemplated by Section 6.02(e) hereof, as part
of the Trust Estate and shall apply it as provided in this Agreement.
Section 7.02 Establishment of Accounts.
(a) The Depositor shall cause to be established on the Startup Day, and the
Trustee shall maintain, at the Corporate Trust Office, the Certificate Account,
a Pre-Funding Account and a Capitalized Interest Account each to be held by the
Trustee in the name of the Trust on behalf of the Owners of the Certificates and
the Certificate Insurer, as their interests may appear. The Pre-Funding Account
and the Capitalized Interest Account are not assets of the REMIC Estate.
(b) On each Determination Date the Trustee shall determine (subject to the
terms of Section 10.03(j) hereof, based solely on information provided to it by
the Master Servicer) with respect to the immediately following Payment Date, the
amounts that are expected to be on deposit in the Certificate Account (exclusive
of any deposits from the Pre-Funding Account and the Capitalized Interest
Account expected to be made), as of such date on such Payment Date (disregarding
the amounts of any Insured Payments) and equal to the sum of (x) such amounts
excluding the amount of any Total Monthly Excess Cashflow included in such
amounts plus (y) any amounts of related Total Monthly Excess Cashflow to be
applied on such Payment Date plus (z) any deposit to the Certificate Account
from the Pre-Funding Account and the Capitalized Interest Account expected to be
made (disregarding the amount of any Insured Payment to be made on such Payment
Date). The amount described in clauses (x) and (z) of the preceding sentence
with respect to each Payment Date is the "Available Funds" and the sum of the
amounts described in clauses (x), (y) and (z) of the preceding sentence with
respect to each Payment Date is the "Total Available Funds."
Section 7.03 Flow of Funds.
(a) The Trustee shall deposit in the Certificate Account without
duplication, upon receipt, any Insured Payments, the proceeds of any liquidation
of the assets of the Trust, all remittances made to the Trustee pursuant to
Section 8.08(d)(ii) with respect to Monthly Remittance Amount remitted by the
Master Servicer.
(b) Subject to any superseding provisions of clause (c) below during the
continuance of a Certificate Insurer Default, with respect to funds on deposit
in the Certificate Account, on each Payment Date, the Trustee shall make the
following allocations, disbursements and transfers from amounts deposited
therein pursuant to subsection (a) in the following order of priority, and each
such allocation, transfer and disbursement shall be treated as having occurred
only after all preceding allocations, transfers and disbursements have occurred:
65
<PAGE>
(i) first, on each Payment Date from amounts then on deposit in the
Certificate Account, (A) the Trustee Fee and the Trustee Reimbursable
Expenses shall be paid to the Trustee, and (B) provided that no Certificate
Insurer Default has occurred and is continuing the Premium Amount for such
Payment Date shall be paid to the Certificate Insurer;
(ii) second, on each Payment Date, the Trustee shall allocate an
amount equal to the sum of (x) the Total Monthly Excess Spread with respect
to such Payment Date plus (y) any Subordination Reduction Amount with
respect to such Payment Date (such sum being the "Total Monthly Excess
Cashflow" with respect to such Payment Date) in the following order of
priority:
(A) first, such Total Monthly Excess Cashflow shall be allocated to the
payment of the Principal Distribution Amount pursuant to clause
(iv)(C) below (excluding any related Subordination Increase Amount) in
an amount equal to the amount, if any, by which (x) the Principal
Distribution Amount (excluding any related Subordination Increase
Amount) exceeds (y) the Available Funds (net of Trustee Fees, the
Premium Amount, the Trustee Reimbursable Expenses pursuant to clause
(i) and Current Interest) and shall be paid as part of the Principal
Distribution Amount pursuant to clause (iv)(C) below (the amount of
such difference being the "Available Funds Shortfall");
(B) second, any portion of the Total Monthly Excess Cashflow remaining
after the allocation described in clause (A) above shall be paid
pursuant to clause (iv)(A) below to the Certificate Insurer in respect
of amounts owed on account of any Reimbursement Amount; and
(iii) third, the amount, if any, of the Total Monthly Excess Cashflow
on a Payment Date remaining after the allocations and payments described in
clause (ii) above net of any Subordination Reduction Amount is required to
be applied in the following order or priority:
(A) first, such Net Monthly Excess Cashflow shall be used to reduce to
zero, through the payment to the Owners of the related Class A
Certificates of a Subordination Increase Amount included in the
Principal Distribution Amount, which shall be paid pursuant to clause
(iv)(C) below, any Subordination Deficiency Amount as of such Payment
Date;
(B) second, any portion of the Net Monthly Excess Cashflow remaining after
the application described in clause (A) above shall be paid to the
Master Servicer pursuant to clause (iv)(A) below to the extent of any
unreimbursed Delinquency Advances, unreimbursed Servicing Advances and
unreimbursed Compensating Interest;
(iv) fourth, following the making by the Trustee of all allocations,
transfers and disbursements described above from amounts (including any
related Insured Payment) then on deposit in the Certificate Account, the
Trustee shall distribute:
(A) (I) to the Certificate Insurer the amounts described in clause (ii)(B)
above and (II) to the Master Servicer the amounts described in clause
(iii)(B) above;
(B) to the Owners of the Class A Certificates, the related Current
Interest for each Class (including the proceeds of any Insured
Payments made by the Certificate
66
<PAGE>
Insurer) on a pro rata basis based on each such Class A Certificate's
Current Interest without priority among the Class A Certificates;
(C) the Principal Distribution Amount shall be distributed as follows: (i)
first, to the Owners of the Class A-1 Certificates until the Class A-1
Certificate Principal Balance is reduced to zero; (ii) second, to the
Owners of the Class A-2 Certificates until the Class A-2 Certificate
Principal Balance is reduced to zero; and (iii) third, to the Owners
of the Class A-3 Certificates until the Class A-3 Certificate
Principal Balance is reduced to zero; and
(D) to the Trustee, for the reimbursement of expenses of the Trustee not
reimbursed pursuant to clause (b)(i) above which expenses were
incurred in connection with its duties and obligations hereunder;
(v) fifth, following the making by the Trustee of all allocations,
transfers and disbursements described above, the Trustee shall distribute
to the Backup Master Servicer, the Backup Master Servicing Fee then due and
not paid by the Sponsor;
(vi) sixth, following the making by the Trustee of all allocations,
transfers and disbursements described above, the Trustee shall distribute
to any successor to the Backup Master Servicer, any Successor Backup Master
Servicing Fee; and
(vii) seventh, following the making by the Trustee of all allocations,
transfers and disbursements described above, the Trustee shall distribute
to the Owners of the Class R Certificates, the Residual Net Monthly Excess
Cashflow, if any, for such Payment Date.
(c) On any Payment Date during the continuance of any Certificate Insurer
Default, if there is a Subordination Deficit, then the Principal Distribution
Amount for such Payment Date shall be distributed pro rata to the Owners of any
Outstanding Class A Certificates on such Payment Date.
(d) Notwithstanding any of the foregoing provisions, the aggregate amounts
distributed on all Payment Dates to the Owners of the related Class A
Certificates on account of principal pursuant to clause (b)(iv)(C) shall not
exceed the original Certificate Principal Balance of the related Class A
Certificates.
(e) Upon receipt of Insured Payments from the Certificate Insurer on behalf
of Owners of the Class A Certificates, the Trustee shall deposit such Insured
Payments in the Policy Payments Account. On each Payment Date, pursuant to
Section 12.02(b) hereof, such amounts will be transferred from the Policy
Payment Account to the Certificate Account and the Trustee shall distribute such
Insured Payments, or the proceeds thereof in accordance with Section 7.03(b), to
the Owners of such Certificates.
(f) The Trustee or Paying Agent shall (i) receive for each Owner of the
Class A Certificates any Insured Payment from the Certificate Insurer and (ii)
disburse the same to the Owners of the related Class A Certificates as set forth
in Section 7.03(b). Insured Payments disbursed by the Trustee or Paying Agent
from proceeds of the Certificate Insurance Policy shall not be considered
payment by the Trust, nor shall such payments discharge the obligation of the
Trust with respect to such Class A Certificates and the Certificate Insurer
shall be entitled to receive the Reimbursement Amount pursuant to Section
7.03(b)(ii)(B) hereof. Nothing contained in this paragraph shall be construed so
as to impose duties or obligations on the Trustee that are different from or in
addition to those expressly set forth in this Agreement.
67
<PAGE>
The rights of the Owners to receive distributions from the proceeds of the
Trust Estate, and all ownership interests of the Owners in such distributions,
shall be as set forth in this Agreement. In this regard, all rights of the
Owners of the Class R Certificates to receive distributions in respect of the
Class R Certificates, shall be subject and subordinate to the preferential
rights of the holders of the Class A Certificates to receive distributions
thereon and the ownership interests of such Owners in such distributions, as
described herein. In accordance with the foregoing, the ownership interests of
the Owners of the Class R Certificates in amounts deposited in the Accounts from
time to time shall not vest unless and until such amounts are distributed in
respect of the Class R Certificates in accordance with the terms of this
Agreement. Notwithstanding anything contained in this Agreement to the contrary,
and the Owners of the Class R Certificate shall not be required to refund any
amount properly distributed on the Class R Certificates pursuant to this Section
7.03.
Section 7.04 Pre-Funding Account and Capitalized Interest Account.
(a) On the Startup Day, the Trustee will deposit, on behalf of the Owners
of the Class A Certificates and the Certificate Insurer, (i) in the Pre-Funding
Account the Original Pre-Funded Amount and (ii) in the Capitalized Interest
Account, the Original Capitalized Interest Deposit, each from the proceeds of
the sale of the Class A Certificates.
(b) On any Subsequent Transfer Date, the Seller shall instruct the Trustee
in writing to withdraw from the Pre-Funding Account an amount equal to 100% of
the aggregate Loan Balances of the Subsequent Home Equity Loans sold to the
Trust on such Subsequent Transfer Date and pay such amount to or upon the order
of the Seller upon satisfaction of the conditions set forth in Sections 3.05 and
3.07 hereof with respect to such transfer. In no event shall the Seller be
permitted to instruct the Trustee to release from the Pre-Funding Account to the
Certificate Account with respect to Subsequent Home Equity Loans an amount in
excess of the Original Pre-Funded Amount.
(c) After giving effect to any reductions in the Pre-Funded Amount on or
before the Monthly Remittance Date relating to the final Pre-Funding Payment
Date, the Trustee shall withdraw from the Pre-Funding Account the amount
(exclusive of any related Pre-Funding Account Earnings still on deposit therein)
remaining in the Pre-Funding Account on such Monthly Remittance Date relating to
the final Pre-Funding Payment Date and deposit such amount to the Certificate
Account on such Monthly Remittance Date.
(d) Reserved.
(e) On each Pre-Funding Payment Date, the Trustee shall transfer from the
Capitalized Interest Account to the Certificate Account, the Capitalized
Interest Requirement for such Pre-Funding Payment Date.
(f) The Capitalized Interest Account shall be closed at the end of the
Funding Period. All amounts, if any, remaining in the Capitalized Interest
Account on such day shall be transferred to the Seller.
(g) At the end of the Funding Period, the Trustee shall transfer from the
Pre-Funding Account to the Capitalized Interest Accounts all Pre-Funding Account
Earnings.
(h) The Pre-Funding Account and the Capitalized Interest Account shall not
be an asset of the REMIC Estate.
Section 7.05 Investment of Accounts.
68
<PAGE>
(a) Consistent with any requirements of the Code, all or a portion of any
Account held by the Trustee for the benefit of the Owners may (i) remain
uninvested or (ii) be invested and reinvested by the Trustee in the name of the
Trust, in one or more Eligible Investments bearing interest or sold at a
discount. The bank serving as Trustee or any affiliate thereof may be the
obligor on any investment which otherwise qualifies as an Eligible Investment.
No investment in any Account shall mature later than the Business Day
immediately preceding the next Payment Date.
(b) If any amounts are needed for disbursement from any Account held by the
Trustee and sufficient uninvested funds are not available to make such
disbursement, the Trustee shall cause to be sold or otherwise converted to cash
a sufficient amount of the investments in such Account. No investments will be
liquidated prior to maturity unless the proceeds thereof are needed for
disbursement.
(c) All income or other gain from investments in any Account held by the
Trustee shall be withdrawn and retained by the Trustee.
Section 7.06 Payment of Trust Expenses.
(a) The Trustee shall make demand on the Seller to pay and the Seller shall
pay the amount of the expenses of the Trust referred to in Section 2.05 (other
than payments of premiums to the Certificate Insurer) (including Trustee's fees
and expenses not covered by Section 7.03(b)(i) and 7.03(b)(iv)(D)), and the
Seller shall promptly pay such expenses directly to the Persons to whom such
amounts are due.
(b) The Seller shall pay directly on the Startup Day the reasonable fees
and expenses of counsel to the Trustee.
Section 7.07 Eligible Investments.
The following are Eligible Investments:
(a) direct general obligations of, or obligations fully and unconditionally
guaranteed as to the timely payment of principal and interest by, the United
States or any agency or instrumentality thereof, provided such obligations are
backed by the full faith and credit of the United States, FHLMC senior debt
obligations, and FNMA senior debt obligations, but excluding any of such
securities whose terms do not provide for payment of a fixed dollar amount upon
maturity or call for redemption;
(b) Federal Housing Administration debentures;
(c) FHLMC participation certificates which guaranty timely payment of
principal and interest and senior debt obligations;
(d) Consolidated senior debt obligations of any Federal Home Loan Banks;
(e) FNMA mortgage-backed securities (other than stripped mortgage
securities which are valued greater than par on the portion of unpaid principal)
and senior debt obligations;
(f) Federal funds, certificates of deposit, time deposits, and bankers'
acceptances (having original maturities of not more than 365 days) of any
domestic bank, the short-term debt obligations of which have been rated A-1 by
Standard & Poor's and P-1 by Moody's;
69
<PAGE>
(g) Deposits of any bank or savings and loan association (the long-term
deposit rating of which is Baa3 or better by Moody's and BBB by Standard &
Poor's) which has combined capital, surplus and undivided profits of at least
$50,000,000 which deposits are insured by the FDIC and held up to the limits
insured by the FDIC;
(h) Repurchase agreements collateralized by securities described in (a),
(c), or (e) above with any registered broker/dealer subject to the Securities
Investors Protection Corporation's jurisdiction and subject to applicable limits
therein promulgated by Securities Investors Protection Corporation or any
commercial bank, if such broker/dealer or bank has an uninsured, unsecured and
unguaranteed short-term or long-term obligation rated P-1 or Aa2, respectively,
or better by Moody's and A-1+ or AA, respectively, or better by Standard &
Poor's, provided:
a. A master repurchase agreement or specific written repurchase agreement
governs the transaction, and
b. The securities are held free and clear of any lien by the Trustee or
an independent third party acting solely as agent for the Trustee, and
such third party is (a) a Federal Reserve Bank, (b) a bank which is a
member of the FDIC and which has combined capital, surplus and
undivided profits of not less than $125 million, or (c) a bank
approved in writing for such purpose by the Certificate Insurer, and
the Trustee shall have received written confirmation from such third
party that it holds such securities, free and clear of any lien, as
agent for the Trustee, and
c. A perfected first security interest under the Uniform Commercial Code,
or book entry procedures prescribed at 31 CFR 306.1 et seq. or 31 CFR
350.0 et seq., in such securities is created for the benefit of the
Trustee, and
d. The repurchase agreement has a term of thirty days or less and the
Trustee will value the collateral securities no less frequently than
weekly and will liquidate the collateral securities if any deficiency
in the required collateral percentage is not restored within two
business days of such valuation, and
e. The fair market value of the collateral securities in relation to the
amount of the repurchase obligation, including principal and interest,
is equal to at least 106%.
(i) Commercial paper (having original maturities of not more than 270 days)
rated in the highest short-term rating categories of Standard & Poor's and
Moody's;
(j) Investments in no load money market funds rated AAAm or AAAm-G by
Standard & Poor's and Aaa by Moody's; and
(k) Any other investment permitted by each of the Rating Agencies and the
Certificate Insurer.
provided that no instrument described above shall evidence either the right to
receive (a) only interest with respect to the obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provided a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations; and provided, further,
that all instruments described hereunder shall mature at par on or prior to the
next succeeding Payment Date unless otherwise provided in this Agreement and
that no instrument described hereunder may be purchased at a price greater than
par if such instrument may be prepaid or
70
<PAGE>
called at a price less than its purchase price prior to stated maturity.
Section 7.08 Accounting and Directions by Trustee.
By 12:00 noon New York time, on each Payment Date (or such earlier period
as shall be agreed by the Seller and the Trustee), the Trustee shall notify
(subject to the terms of Section 10.03(j) hereof, based solely on information
provided to the Trustee by the Master Servicer and upon which the Trustee may
rely) the Seller, the Depositor, each Owner and the Certificate Insurer, of the
following information with respect to such Payment Date (which notification may
be given by facsimile, or by telephone promptly confirmed in writing):
(1) The aggregate amount on deposit in the Certificate Account as of
the related Determination Date;
(2) The Class A Distribution Amount, with respect to each Class
individually, and all Classes in the aggregate on the next Payment Date;
(3) Reserved;
(4) The amount of any Subordination Increase Amount;
(5) The amount of any Insured Payment to be made by the Certificate
Insurer on such Payment Date;
(6) The application of the amounts described in clauses (1), (3), (4)
and (5) above in respect of the distribution of the Class A Distribution
Amount on such Payment Date in accordance with Section 7.03 hereof;
(7) The Class A Certificate Principal Balance, the aggregate amount of
the principal of each Class of the Class A Certificates to be paid on such
Payment Date and the remaining Certificate Principal Balance of each Class
of Class A Certificates following any such payment;
(8) The amount, if any, of any Realized Losses for the related
Remittance Period;
(9) The amount of any Subordination Reduction Amount; and
(10) For the Payment Dates during the Funding Period, (A) the
Pre-Funded Amount previously used to purchase Subsequent Home Equity Loans,
(B) the Pre-Funded Amount distributed as Principal Distribution Amount, (C)
the Pre-Funding Account Earnings transferred to the Capitalized Interest
Account, (D) the amounts transferred from the Capitalized Interest Account
to the Certificate Account and the amount transferred to the Seller, if
any, and (E) the remaining Pre-Funded Amount.
Section 7.09 Reports by Trustee to Owners and Certificate Insurer.
(a) On each Payment Date the Trustee shall transmit a report in writing to
the Backup Master Servicer, each Owner, the Underwriter, the Depositor, the
Certificate Insurer, Standard & Poor's and Moody's:
(i) the amount of the distribution with respect to such Owners'
Certificates (based on a Certificate in the original principal amount of
$1,000);
71
<PAGE>
(ii) the amount of such Owner's distributions allocable to principal,
separately identifying the aggregate amount of any prepayments in full or
Prepayments or other recoveries of principal included therein (based on a
Certificate in the original principal amount of $1,000) and any related
Subordination Increase Amount;
(iii) the amount of such Owner's distributions allocable to interest
(based on a Certificate in the original principal amount of $1,000);
(iv) if the distribution (net of any Insured Payment) to the Owners of
any Class of the Class A Certificates on such Payment Date was less than
the related Class A Distribution Amount on such Payment Date, the related
Carry Forward Amount and the allocation thereof to the related Classes of
Class A Certificates resulting therefrom;
(v) the amount of any Insured Payment included in the amounts
distributed to the Owners of Class A Certificates on such Payment Date;
(vi) the principal amount of each Class of Class A Certificate (based
on a Certificate in the original principal amount of $1,000) which will be
Outstanding and the aggregate Loan Balance after giving effect to any
payment of principal on such Payment Date;
(vii) the Subordinated Amount, Specified Subordinated Amount and
Subordination Deficit, if any, remaining after giving effect to all
distributions and transfers on such Payment Date;
(viii) based upon information furnished by the Sponsor, such
information as may be required by Section 6049(d)(7)(C) of the Code and the
regulations promulgated thereunder to assist the Owners in computing their
market discount;
(ix) the total of any Substitution Amounts and any Loan Purchase Price
amounts included in such distribution;
(x) the weighted average Coupon Rate of the Home Equity Loans;
(xi) the amount of any Carry-Forward Amounts;
(xii) during the Funding Period, the Loan Balance of the Subsequent
Home Equity Loans added to the Trust during the related Remittance Period;
(xiii) during the Funding Period, the remaining Pre-Funded Amount as
of the last day of the Remittance Period; and
(xiv) such other information as the Certificate Insurer or any Owner
may reasonably request with respect to Delinquent Home Equity Loans.
The Master Servicer shall provide to the Trustee (and to the Backup Master
Servicer on computer disk) the information described in Section 8.08(d)(iii) and
in clause (b) below to enable the Trustee to perform its reporting obligations
under this Section, and such obligations of the Trustee under this Section are
conditioned upon such information being received and the information provided in
clauses (ii), (ix) and (x) shall be based solely upon information contained in
the monthly servicing report provided by the Master Servicer to the Trustee
pursuant to Section 8.08 hereof.
72
<PAGE>
(b) In addition, on each Payment Date the Trustee will distribute to
the Backup Master Servicer, each Owner, the Underwriter, the Certificate
Insurer, Standard & Poor's and Moody's, together with the information described
in Subsection (a) preceding, the following information which is hereby required
to be prepared by the Master Servicer and furnished to the Trustee and the
Backup Master Servicer for such purpose on or prior to the related Monthly
Remittance Date:
(i) the number and aggregate principal balances of Home Equity Loans
(a) 30-59 days Delinquent, (b) 60-89 days Delinquent and (c) 90 or more
days Delinquent, as of the close of business on the last Business Day of
the calendar month immediately preceding the Payment Date, (d) the numbers
and aggregate Loan Balances of all Home Equity Loans as of such Payment
Date, after giving effect to any payment of principal on such Payment Date,
as of the close of business on the last day of the Remittance Period
immediately preceding the Payment Date and (e) the percentage that each of
the amounts represented by clauses (a), (b) and (c) represent as a
percentage of the respective amounts in clause (d);
(ii) the status and the number and dollar amounts of all Home Equity
Loans in foreclosure proceedings as of the close of business on the last
Business Day of the calendar month immediately preceding such Payment Date,
separately stating, for this purpose, all Home Equity Loans with respect to
which foreclosure proceedings were commenced in the immediately preceding
calendar month;
(iii) the number of Mortgagors and the Loan Balances of the related
Mortgages involved in bankruptcy proceedings as of the close of business on
the last Business Day of the calendar month immediately preceding such
Payment Date;
(iv) the existence and status of any REO Properties, as of the close
of business of the last Business Day of the month immediately preceding the
Payment Date;
(v) the book value of any REO Property as of the close of business on
the last Business Day of the calendar month immediately preceding the
Payment Date;
(vi) the cumulative Realized Losses incurred on the Home Equity Loans
from the Startup Day to and including the Remittance Period immediately
preceding the Payment Date;
(vii) the amount of Net Liquidation Proceeds realized on the Home
Equity Loans during the Remittance Period immediately preceding the Payment
Date;
(viii) the Annual Loss Percentage (Rolling Twelve Month) with respect
to such Payment Date; and
(ix) The 60+ Delinquency Percentage (Rolling Three Month) with respect
to such Payment Date.
(c) The Trustee shall, on behalf of the Trust, prepare the periodic reports
required to be filed under the provisions of the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Securities and Exchange
Commission thereunder as described in the SEC Letter Agreement at the times and
in the manner described therein. Upon the request of the Trustee, each of the
Depositor, the Seller, the Sponsor and the Master Servicer shall cooperate with
the Trustee in the preparation of any such report and shall provide to the
Trustee in a timely manner all such information or documentation as the Trustee
may reasonably request in connection with the performance of its duties and
obligations under this Section 7.09(c).
73
<PAGE>
Section 7.10 Reports by Trustee.
(a) The Trustee shall report to the Depositor, the Seller, the Sponsor, the
Certificate Insurer and each Owner, with respect to the amount on deposit in the
Certificate Account and the identity of the investments included therein, as the
Depositor, the Seller, the Sponsor, any Owner or the Certificate Insurer may
from time to time reasonably request. Without limiting the generality of the
foregoing, the Trustee shall, at the reasonable request of the Depositor, the
Seller, the Sponsor, any Owner or the Certificate Insurer transmit promptly to
the Depositor, the Seller, any Owner and the Certificate Insurer copies of all
accountings of receipts in respect of the Home Equity Loans furnished to it by
the Master Servicer and shall notify the Seller, the Sponsor and the Certificate
Insurer if any Monthly Remittance Amount has not been received by the Trustee
when due.
(b) The Trustee shall report to the Certificate Insurer and each Owner with
respect to any written notices it may from time to time receive which provide an
Authorized Officer with actual knowledge that any of the statements set forth in
Section 3.04(b) hereof are inaccurate.
END OF ARTICLE VII
<PAGE>
ARTICLE VIII
SERVICING AND ADMINISTRATION OF HOME EQUITY LOANS
Section 8.01 Master Servicer and Sub-Servicers.
Acting directly, or through one or more Sub-Servicers as provided in
Section 8.03, the Master Servicer (other than the Backup Master Servicer as
successor Master Servicer) shall service and administer the Home Equity Loans in
accordance with this Agreement, the terms of the respective Home Equity Loans,
and the servicing standards set forth in the FNMA Guide (and if the Backup
Master Servicer is the successor Master Servicer, in accordance with this
Agreement, the terms of the respective Home Equity Loans and in accordance with
the Backup Master Servicing Standard) and shall have full power and authority,
acting alone, to do or cause to be done any and all things in connection with
such servicing and administration which it may deem necessary or desirable but
without regard to: (i) any relationship that the Master Servicer any
Sub-Servicer or any Affiliate of the Master Servicer or any Sub-Servicer may
have with the related Mortgagor; (ii) the ownership of any Certificate by the
Master Servicer or any Affiliate of the Master Servicer; (iii) the Master
Servicer's obligation to make Delinquency Advances or Servicing Advances; or
(iv) the Master Servicer's or any Sub-Servicer's right to receive compensation
for its services hereunder or with respect to any particular transaction. It is
the intent of the parties hereto that the Master Servicer (other than the Backup
Master Servicer as successor Master Servicer) shall have all of the servicing
obligations hereunder which a lender would have under the FNMA Guide (as such
provisions relate to second lien mortgages); provided, however, that to the
extent that such standards, such obligations or the FNMA Guide are amended by
FNMA after the date hereof and the effect of such amendment would be to impose
upon the Master Servicer any material additional costs or other burdens relating
to such servicing obligations, the Master Servicer may, at its option, in
accordance with the servicing standards set forth herein, determine not to
comply with such amendment. It is the intent of the parties hereto that the
Backup Master Servicer, as the successor Master Servicer, shall have all of the
servicing obligations hereunder as it has under the Backup Master Servicing
Standard.
Subject to Section 8.03 hereof, the Master Servicer may, and is hereby
authorized to, perform any of its servicing responsibilities with respect to all
or certain of the Home Equity Loans through a Sub-Servicer as it may from time
to time designate, but no such designation of a Sub-Servicer shall serve to
release the Master Servicer from any of its obligations under this Agreement.
Such Sub-Servicer shall have the rights and powers of the Master Servicer which
have been delegated to such Sub-Servicer with respect to such Home Equity Loans
under this Agreement.
Without limiting the generality of the foregoing, but subject to Sections
8.13 and 8.14, the Master Servicer in its own name or in the name of a
Sub-Servicer may be authorized and empowered pursuant to a power of attorney
executed and delivered by the Trustee to execute and deliver, and may be
authorized and empowered by the Trustee, to execute and deliver, on behalf of
itself, the Owners and the Trustee or any of them, (i) any and all instruments
of satisfaction or cancellation or of partial or full release or discharge and
all other comparable instruments with respect to the Home Equity Loans and with
respect to the Properties, (ii) to institute foreclosure proceedings or obtain a
deed in lieu of foreclosure so as to effect ownership of any Property in the
name of the Master Servicer on behalf of the Trustee, and (iii) to hold title to
any Property upon such foreclosure or deed in lieu of foreclosure on behalf of
the Trustee; provided, however, that to the extent any instrument described in
clause (i) preceding would be delivered by the Master Servicer outside of its
usual procedures for home equity loans held in its own portfolio the Master
Servicer shall, prior to executing and delivering such instrument, obtain the
prior
75
<PAGE>
written consent of the Certificate Insurer, and provided further, however,
that Section 8.13(a) and Section 8.14(a) shall each constitute a revocable power
of attorney from the Trustee to the Master Servicer to execute an instrument of
satisfaction (or assignment of mortgage without recourse) with respect to any
Home Equity Loan held by the Trustee hereunder paid in full or foreclosed (or
with respect to which payment in full has been escrowed). Revocation of the
power of attorney created by the final proviso of the preceding sentence shall
take effect upon (i) the receipt by the Master Servicer of written notice
thereof from the Trustee, (ii) a Master Servicer Termination Event or (iii) the
termination of the Trust. The Trustee shall execute any documentation furnished
to it by the Master Servicer for recordation by the Master Servicer in the
appropriate jurisdictions, as shall be necessary to effectuate the foregoing.
Subject to Sections 8.13 and 8.14, the Trustee shall execute a power of attorney
to the Master Servicer or any Sub-Servicer and furnish them with any other
documents as the Master Servicer or such Sub-Servicer shall reasonably request
to enable the Master Servicer and such Sub-Servicer to carry out their
respective servicing and administrative duties hereunder.
On or prior to the Closing Date and each Payment Date, and otherwise
promptly upon request, the Master Servicer shall send to the Backup Master
Servicer (and to the Trustee upon request), the details and current information
concerning the servicing of the Home Equity Loans on computer generated tape,
diskette or other machine readable format.
The Master Servicer shall give prompt notice to the Trustee of any action,
of which the Master Servicer has actual knowledge, to (i) assert a claim against
the Trust or (ii) assert jurisdiction over the Trust.
Servicing Advances incurred by the Master Servicer or any Sub-Servicer in
connection with the servicing of the Home Equity Loans (including any penalties
in connection with the payment of any taxes and assessments or other charges) on
any Property shall be recoverable by the Master Servicer or such Sub-Servicer to
the extent described in Section 8.09(b) hereof.
Section 8.02 Collection of Certain Home Equity Loan Payments.
The Master Servicer shall make reasonable efforts to collect all payments
called for under the terms and provisions of the Home Equity Loans, and shall,
to the extent such procedures shall be consistent with this Agreement and the
terms and provisions of any applicable Insurance Policy, follow collection
procedures for all Home Equity Loans at least as rigorous as those described in
the FNMA Guide; provided that, the Backup Master Servicer, as successor Master
Servicer shall not be required to service in accordance with the FNMA Guide but
shall service in accordance with the Backup Master Servicing Standard.
Consistent with the foregoing, the Master Servicer may in its discretion waive
or permit to be waived any late payment charge, prepayment charge, assumption
fee or any penalty interest in connection with the prepayment of a Home Equity
Loan or any other fee or charge which the Master Servicer would be entitled to
retain hereunder as servicing compensation. In the event the Master Servicer
shall consent to the deferment of the due dates for payments due on a Note, the
Master Servicer shall nonetheless make payment of any required Delinquency
Advance with respect to the payments so extended to the same extent as if such
installment were due, owing and Delinquent and had not been deferred, and shall
be entitled to reimbursement therefor in accordance with Section 8.09(a) hereof.
Section 8.03 Sub-Servicing Agreements.
The Master Servicer may enter into Sub-Servicing Agreements for any
servicing and administration of the Home Equity Loans with any Affiliate of the
Master Servicer only with the consent of the Certificate Insurer. The Master
Servicer may, with the consent of the Certificate
76
<PAGE>
Insurer, enter into Sub-Servicing Agreements for any servicing and
administration of Home Equity Loans with any institution which is acceptable to
the Certificate Insurer and which, (x) is in compliance with the laws of each
state necessary to enable it to perform its obligations under such Sub-Servicing
Agreement, (y) has experience servicing home equity loans that are similar to
the Home Equity Loans and (z) has equity of not less than $5,000,000 (as
determined in accordance with generally accepted accounting principles). The
Master Servicer shall give notice to the Trustee, the Backup Master Servicer,
the Certificate Insurer and the Rating Agencies of the appointment of any
Sub-Servicer (and shall receive the confirmation of the Rating Agencies that
such Sub-Servicer shall not result in a withdrawal or downgrading by any Rating
Agency of the rating or the shadow rating of the Class A Certificates). For
purposes of this Agreement, the Master Servicer shall be deemed to have received
payments on Home Equity Loans when any Sub-Servicer has received such payments.
Each Sub-Servicer shall be required to service the Home Equity Loans in
accordance with this Agreement and any such Sub-Servicing Agreement shall be
consistent with and not violate the provisions of this Agreement. Each
Sub-Servicing Agreement shall provide that the Trustee (if acting as successor
Master Servicer) or any other successor Master Servicer shall have the option to
terminate such agreement without payment of any fees if the original Master
Servicer is terminated or resigns. The Master Servicer shall deliver to the
Trustee, the Backup Master Servicer and the Certificate Insurer copies of all
Sub-Servicing Agreements, and any amendments or modifications thereof promptly
upon the Master Servicer's execution and delivery of such instrument.
Section 8.04 Successor Sub-Servicers.
The Master Servicer shall be entitled to terminate any Sub-Servicing
Agreement in accordance with the terms and conditions of such Sub-Servicing
Agreement and to either itself directly service the related Home Equity Loans or
enter into a Sub-Servicing Agreement with a successor Sub-Servicer which
qualifies under Section 8.03.
Section 8.05 Liability of Master Servicer; Indemnification.
(a) The Master Servicer shall not be relieved of its obligations under this
Agreement, notwithstanding any Sub-Servicing Agreement or any of the provisions
of this Agreement relating to agreements or arrangements between the Master
Servicer and a Sub-Servicer and the Master Servicer shall be obligated to the
same extent and under the same terms and conditions as if it alone were
servicing and administering the Home Equity Loans. The Master Servicer shall be
entitled to enter into any agreement with a Sub-Servicer for indemnification of
the Master Servicer by such Sub-Servicer and nothing contained in such
Sub-Servicing Agreement shall be deemed to limit or modify this Agreement.
(b) The Master Servicer agrees to indemnify and hold the Trustee and the
Certificate Insurer harmless against any and all claims, losses, penalties,
fines, forfeitures, legal fees and related costs, judgments, and any other
costs, fees and expenses that the Trustee, the Depositor and the Certificate
Insurer may sustain related to the failure of the Master Servicer to perform its
duties and service the Home Equity Loans in compliance with the terms of this
Agreement. Notwithstanding the foregoing, the Master Servicer shall have no
liability pursuant to this Section 8.05(b) for any action taken or for
refraining from the taking of any action in good faith pursuant to this
Agreement, or for errors in judgment; provided however that this provision shall
not protect the Master Servicer against any breach of warranties,
representations or covenants made herein, or against any specific liability
imposed on the Master Servicer pursuant hereto, or against any liability which
would otherwise be imposed by reason of willful misfeasance, bad faith or
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties hereunder. Upon obtaining actual knowledge of a claim,
the Master Servicer shall immediately notify the Trustee, the Depositor and the
Certificate Insurer if a claim is made by a
77
<PAGE>
third party with respect to this Agreement, and the Master Servicer shall
assume (with the consent of the Trustee and the Certificate Insurer) the defense
of any claim pursuant to the preceding two sentences of this Section 8.05(b) and
pay all expenses in connection therewith, including reasonable counsel fees, and
promptly pay, discharge and satisfy any judgment or decree which may be entered
against the Master Servicer, the Trustee, the Depositor and/or the Certificate
Insurer in respect of such claim. The Trustee shall, in accordance with
instructions received from the Master Servicer, reimburse the Master Servicer
only from amounts otherwise distributable on the Class R Certificates (and if
the Backup Master Servicer is the Master Servicer from the Principal and the
Interest Account) for all amounts advanced by it pursuant to the preceding
sentence, except when a final non-payable adjudication determines that the claim
relates directly to the failure of the Master Servicer to perform its duties in
compliance with the Agreement. The provisions of this Section 8.05(b) shall
survive the termination of this Agreement and the payment of the outstanding
Certificates.
Section 8.06 No Contractual Relationship Between Sub-Servicer, Trustee
or the Owners.
Any Sub-Servicing Agreement and any other transactions or services relating
to the Home Equity Loans involving a Sub-Servicer shall be deemed to be between
a Sub-Servicer and the Master Servicer alone and the Trustee and the Owners
shall not be deemed parties thereto and shall have no claims, rights,
obligations, duties or liabilities with respect to any Sub-Servicer except as
set forth in Section 8.07.
Section 8.07 Assumption or Termination of Sub-Servicing Agreement by
Trustee.
In connection with the assumption of the responsibilities, duties and
liabilities and of the authority, power and rights of the Master Servicer
hereunder by the Trustee pursuant to Section 8.20, it is understood and agreed
that the Master Servicer's rights and obligations under any Sub-Servicing
Agreement then in force between the Master Servicer and a Sub-Servicer shall be
assumed simultaneously by the Trustee without act or deed on part of the
Trustee; provided, however, that any successor Master Servicer may terminate a
Sub-Servicer as provided in Section 8.03.
The Master Servicer shall, upon the reasonable request of the Trustee, but
at the expense of the Master Servicer, deliver to the assuming party documents
and records relating to each Sub-Servicing Agreement and an accounting of
amounts collected and held by it and otherwise use its best reasonable efforts
to effect the orderly and efficient transfer of the Sub-Servicing Agreements to
the assuming party.
Section 8.08 Principal and Interest Account.
(a) The Master Servicer shall establish and maintain and shall cause any
Sub-Servicer to establish and maintain at one or more Designated Depository
Institutions the Principal and Interest Account to be held as a trust account.
Each Principal and Interest Account shall be identified on the records of the
Designated Depository Institution as follows: The Chase Manhattan Bank, as
Trustee on behalf of the Owners of the First Greensboro Home Equity Loan Trust
1997-2 Home Equity Loan Pass-Through Certificates. If the institution at any
time holding the Principal and Interest Account ceases to be eligible as a
Designated Depository Institution hereunder, then the Master Servicer shall
immediately be required to name a successor institution meeting the requirements
for a Designated Depository Institution hereunder. If the Master Servicer fails
to name such a successor institution, then the Principal and Interest Account
shall thenceforth be held as a trust account with a qualifying Designated
Depository Institution selected by the Trustee. The Master Servicer shall notify
the Trustee, the Certificate Insurer and
78
<PAGE>
the Owners if there is a change in the name, account number or institution
holding the Principal and Interest Account. Notwithstanding any provision of
this Section 8.08 to the contrary, in the event the Backup Master Servicer
becomes the Master Servicer, the Principal and Interest Account may be
maintained as segregated account or accounts the deposits in which are fully
insured by the FDIC (to the limits established by such corporation); provided
that at such time as amounts in such account equal or exceed $75,000, all such
amounts in excess of $75,000 shall be transferred to the Certificate Account or
another Eligible Account or an account meeting the requirements of this Section
8.08(a).
Subject to Subsection (c) below, the Master Servicer shall deposit all
receipts required pursuant to Subsection (c) below and related to the Home
Equity Loans to the Principal and Interest Account on a daily basis (but no
later than the first Business Day after receipt).
(b) All funds in the Principal and Interest Account shall be held (i)
uninvested or (ii) invested in Eligible Investments. Any investments of funds in
the Principal and Interest Account shall mature or be withdrawable at par on or
prior to the immediately succeeding Monthly Remittance Date. The Principal and
Interest Account shall be held in trust in the name of the Trust for the benefit
of the Owners.
(c) The Master Servicer shall deposit to the Principal and Interest Account
on the Business Day after receipt all principal and interest collections on the
Home Equity Loans due after the Cut-Off Date or the related Subsequent Cut-Off
Date, including any Prepayments and Net Liquidation Proceeds, other recoveries
or amounts related to the Home Equity Loans received by the Master Servicer and
any income from REO Properties, but net of (i) Net Liquidation Proceeds to the
extent such Net Liquidation Proceeds exceed the sum of (I) the Loan Balance of
the related Home Equity Loan immediately prior to liquidation, plus (II) accrued
and unpaid interest on such Home Equity Loan (net of the related Servicing Fee)
to the date of such liquidation and (III) any Realized Losses incurred during
the related Remittance Period, (ii) principal and interest due (and Prepayments
collected) on the Home Equity Loans prior to the Cut-Off Date or related
Subsequent Cut-Off Date, excluding payments received and applied prior to the
Cut-Off Date or related Subsequent Cut-Off Date which are applicable to periods
on and after the Cut-Off Date or related Subsequent Cut-Off Date, (iii)
reimbursements for Delinquency Advances and Servicing Advances pursuant to
Section 8.08(d)(i)(D) and (iv) reimbursements for amounts deposited in the
Principal and Interest Account representing payments of principal and/or
interest on a Note by a Mortgagor which are subsequently returned by a
depository institution as unpaid (all such net amount herein referred to as
"Daily Collections").
(d)(i) Except as provided in Section 8.09(b), The Master Servicer may
make withdrawals for its own account from the Principal and Interest
Account for the following purposes:
(A) on each Monthly Remittance Date, to pay itself the Servicing Fee;
(B) to withdraw investment earnings on amounts on deposit in the
Principal and Interest Account;
(C) to withdraw amounts that have been deposited to the Principal and
Interest Account in error;
(D) to reimburse itself pursuant to Section 8.09(a) for unrecovered
Delinquency Advances and to retain any excess Compensating Interest received by
it pursuant to Section 8.10(a) hereof (and if the Backup Master Servicer is the
Master Servicer, unrecovered Servicing Advances pursuant to Section 8.09(b));
79
<PAGE>
(E) to clear and terminate the Principal and Interest Account
following the termination of the Trust pursuant to Article IX; and
(F) to reimburse the Master Servicer for expenses incurred by, or
reimbursable to, the Master Servicer pursuant to Section 8.05 and Section
8.20(f).
(ii) The Master Servicer shall (a) remit to the Trustee for deposit in
the Certificate Account by wire transfer, or otherwise make funds available
in immediately available funds, without duplication, the Daily Collections
allocable to a Remittance Period not later than the related Monthly
Remittance Date and Loan Purchase Prices and Substitution Amounts two
Business Days following the related purchase or substitution, and (b) on
each Monthly Remittance Date, deliver to the Trustee, the Backup Master
Servicer (on computer disk) and the Certificate Insurer, a monthly
servicing report containing (without limitation) the following information:
principal and interest collected in respect of the Home Equity Loans,
scheduled principal and interest that was due on the Home Equity Loans,
relevant information with respect to Liquidated Loans, if any, summary and
detailed delinquency reports, Liquidation Proceeds and other similar
information concerning the servicing of the Home Equity Loans. In addition,
the Master Servicer shall inform the Trustee, the Backup Master Servicer
and the Certificate Insurer on each Monthly Remittance Date of the amounts
of any Loan Purchase Prices or Substitution Amounts so remitted during the
related Remittance Period.
(iii) The Master Servicer shall provide to the Trustee (and the Backup
Master Servicer on computer disk) the information described in Section
8.08(d)(ii)(b) and in Section 7.09(b) to enable the Trustee to perform its
reporting requirements under Section 7.09.
Section 8.09 Delinquency Advances and Servicing Advances.
(a) On each Monthly Remittance Date, the Master Servicer shall be required
to remit to the Trustee for deposit to the Certificate Account out of the Master
Servicer's own funds any Delinquent payment of interest with respect to each
Delinquent Home Equity Loan, which payment was not received on or prior to the
related Remittance Date and was not theretofore advanced by the Master Servicer.
Such amounts of the Master Servicer's own funds so deposited are "Delinquency
Advances".
The Master Servicer shall be permitted to reimburse itself on any Business
Day for any Delinquency Advances paid from the Master Servicer's own funds, from
collections on any Home Equity Loans that are not required to be distributed on
the Payment Date occurring during the month in which such reimbursement is made
(all or any portion of such amount to be replaced on future Monthly Remittance
Dates to the extent required for distribution) or as provided in Section
7.03(b)(iii)(B).
Notwithstanding the foregoing, in the event that the Master Servicer
determines in its reasonable business judgment in accordance with the servicing
standards set out herein that any proposed Delinquency Advance would not be
recoverable, the Master Servicer shall not be required to make Delinquency
Advances with respect to such Home Equity Loan. To the extent that the Master
Servicer previously has made Delinquency Advances with respect to a Home Equity
Loan that the Master Servicer subsequently determines will be nonrecoverable,
the Master Servicer shall be entitled to reimbursement for such aggregate
unreimbursed Delinquency Advances as provided in the prior paragraph and Section
8.08(d)(i)(D) The Master Servicer shall give written notice of such
determination as to why such amount would not be recoverable to the Trustee and
the Certificate Insurer; the Trustee shall promptly furnish a copy of such
notice to the
80
<PAGE>
Owners of the Class R Certificates; provided, further, that the Master Servicer
shall be entitled to recover any unreimbursed Delinquency Advances from
Liquidation Proceeds for the related Home Equity Loan.
(b) The Master Servicer will pay all "out-of-pocket" costs and expenses
incurred in the performance of its servicing obligations, including, but not
limited to, (i) Preservation Expenses, (ii) the cost of any enforcement or
judicial proceedings, including foreclosures, (iii) the cost of the management
and liquidation of REO Property (including broker's fees) and (iv) advances
required by Section 8.13(a), except to the extent that such amounts are
determined by the Master Servicer in its reasonable business judgment not to be
recoverable. Such costs will constitute "Servicing Advances". The Master
Servicer may recover a Servicing Advance (x) from the Mortgagors to the extent
permitted by the Home Equity Loans or, if not theretofore recovered from the
Mortgagor on whose behalf such Servicing Advance was made, from Liquidation
Proceeds realized upon the liquidation of the related Home Equity Loan and (y)
as provided in Section 7.03(b)(iii)(B) and 8.08(d)(i)(D). The Master Servicer
shall be entitled to recover the Servicing Advances from the aforesaid
Liquidation Proceeds prior to the payment of the Liquidation Proceeds to any
other party to this Agreement. In the event a Servicing Advance previously made
is deemed to be nonrecoverable, the Master Servicer may recover such amount
pursuant to Section 7.03(b)(iii)(B) and Section 8.08(d)(i)(D). Notwithstanding
anything else to the contrary, unless the Backup Master Servicer is the Master
Servicer, in no case may the Master Servicer recover Servicing Advances from the
principal and interest payments on any other Home Equity Loan except as provided
in Section 7.03(b)(iii)(B).
Section 8.10 Compensating Interest; Repurchase of Home Equity Loans.
(a) If a prepayment in full of a Home Equity Loan occurs during any
calendar month, any difference between (x) the interest collected from the
Mortgagor in connection with such payoff, and (y) the full month's interest at
the Coupon Rate that would be due on the related Due Date for such Home Equity
Loan ("Compensating Interest") (but not in excess of the aggregate Servicing Fee
for the related Remittance Period) shall be deposited by the Master Servicer to
the Principal and Interest Account (or if such difference is an excess, the
Master Servicer shall retain such excess) on the next succeeding Monthly
Remittance Date and shall be included in the Monthly Remittance Amount to be
made available to the Trustee on such Monthly Remittance Date.
(b) Subject to the clause (c) below, the Master Servicer has the right and
the option, but not the obligation, to purchase for its own account any Home
Equity Loan which becomes Delinquent, in whole or in part, as to at least three
consecutive monthly installments or any Home Equity Loan as to which enforcement
proceedings have been brought by the Master Servicer pursuant to Section 8.13;
provided, however, that the Master Servicer may not purchase any such Home
Equity Loan unless the Master Servicer has delivered to the Trustee at the
Master Servicer's expense, an opinion of counsel acceptable to the Certificate
Insurer and the Trustee to the effect that such a purchase would not constitute
a Prohibited Transaction for the Trust or otherwise subject the Trust to tax and
would not jeopardize the status of the REMIC Estate as a REMIC. Any such Home
Equity Loan so purchased shall be purchased by the Master Servicer on or prior
to a Monthly Remittance Date at a purchase price equal to the Loan Purchase
Price thereof, which purchase price shall be deposited in the Principal and
Interest Account.
(c) If a Home Equity Loan to be repurchased by the Master Servicer pursuant
to clause (b) above, is the greatest number of days Delinquent of all then
Delinquent Home Equity Loans, the Master Servicer may repurchase such Home
Equity Loans without having first notified the Certificate Insurer of such
repurchase. In all other cases, the Master Servicer must notify the Certificate
Insurer, in writing, of its intent to repurchase a Home Equity Loan and the
81
<PAGE>
Master Servicer may not repurchase such Home Equity Loan without the written
consent of the Certificate Insurer; provided, that the Certificate Insurer shall
be deemed to have consented to such repurchase unless it notifies the Master
Servicer, in writing, of its objection to such repurchase within 5 days after
its receipt of the notice of proposed repurchase.
(d) The Net Liquidation Proceeds from the disposition of any REO Property
shall be deposited in the Principal and Interest Account and remitted to the
Trustee as part of the Daily Collections remitted by the Master Servicer to the
Trustee.
Section 8.11 Maintenance of Insurance.
(a) The Master Servicer shall cause to be maintained with respect to each
Home Equity Loan a hazard insurance policy with a carrier generally acceptable
to the Master Servicer that provides for fire and extended coverage, and which
provides for a recovery by the Trust of insurance proceeds relating to such Home
Equity Loan in an amount not less than the least of (i) the outstanding
principal balance of the Home Equity Loan (plus the related senior lien loan, if
any), (ii) the minimum amount required to compensate for damage or loss on a
replacement cost basis and (iii) the full insurable value of the premises. The
Master Servicer shall maintain the insurance policies required hereunder in the
name of the mortgagee, its successors and assigns, as loss payee. The policies
shall require the insurer to provide the mortgagee with 30 days' notice prior to
any cancellation or as otherwise required by law. The Master Servicer may also
maintain a blanket hazard insurance policy or policies if the insurer or
insurers of such policies are rated investment grade by Moody's and Standard &
Poor's.
(b) If the Home Equity Loan at the time of origination (or if required by
federal law, at any time thereafter) relates to a Property in an area identified
in the Federal Register by the Federal Emergency Management Agency as having
special flood hazards, the Master Servicer will cause to be maintained with
respect thereto a flood insurance policy in a form meeting the requirements of
the then current guidelines of the Federal Insurance Administration with a
carrier generally acceptable to the Master Servicer in an amount representing
coverage, and which provides for a recovery by the Trust of insurance proceeds
relating to such Home Equity Loan of not less than the least of (i) the
outstanding principal balance of the Home Equity Loan (plus the related senior
lien loan, if any), (ii) the minimum amount required to compensate for damage or
loss on a replacement cost basis and (iii) the maximum amount of insurance that
is available under the Flood Disaster Protection Act of 1973. The Master
Servicer shall indemnify the Trust out of the Master Servicer's own funds for
any loss to the Trust resulting from the Master Servicer's failure to advance
premiums for such insurance required by this Section when so permitted by the
terms of the Mortgage as to which such loss relates.
Section 8.12 Due-on-Sale Clauses; Assumption and Substitution Agreements.
When a Property has been or is about to be conveyed by the Mortgagor, the
Master Servicer shall, to the extent it has knowledge of such conveyance or
prospective conveyance, exercise its rights to accelerate the maturity of the
related Home Equity Loan under any "due-on-sale" clause contained in the related
Mortgage or Note; provided, however, that the Master Servicer shall not exercise
any such right if the "due-on-sale" clause, in the reasonable belief of the
Master Servicer, is not enforceable under applicable law. An opinion of counsel,
provided at the expense of the Master Servicer, to the foregoing effect shall
conclusively establish the reasonableness of such belief. In such event, the
Master Servicer shall enter into an assumption and modification agreement with
the person to whom such property has been or is about to be conveyed, pursuant
to which such person becomes liable under the Note and, unless prohibited by
applicable law or the Mortgage Documents, the Mortgagor remains liable thereon.
If the foregoing is not permitted under applicable law, the Master Servicer is
authorized to enter into a
82
<PAGE>
substitution of liability agreement with such person, pursuant to which the
original Mortgagor is released from liability and such person is substituted as
Mortgagor and becomes liable under the Note; provided, however, that to the
extent any such substitution of liability agreement would be delivered by the
Master Servicer outside of its usual procedures for home equity loans held in
its own portfolio the Master Servicer shall, prior to executing and delivering
such agreement, obtain the prior written consent of the Certificate Insurer. The
Home Equity Loan, as assumed, shall conform in all material respects to the
requirements, representations and warranties of this Agreement. The Master
Servicer shall notify the Trustee that any such assumption or substitution
agreement has been completed by forwarding to the Trustee the original copy of
such assumption or substitution agreement (indicating the File to which it
relates) which copy shall be added by the Trustee to the related File and which
shall, for all purposes, be considered a part of such File to the same extent as
all other documents and instruments constituting a part thereof. The Master
Servicer shall be responsible for recording any such assumption or substitution
agreements. In connection with any such assumption or substitution agreement, no
material term of the Home Equity Loan (including, without limitation, the
required monthly payment on the related Home Equity Loan, the stated maturity,
the outstanding principal amount or the Coupon Rate) shall be changed nor shall
any required monthly payments of principal or interest be deferred or forgiven.
Any fee collected by the Master Servicer or a Sub-Servicer for consenting to any
such conveyance or entering into an assumption or substitution agreement shall
be retained by or paid to the Master Servicer or a Sub-Servicer as additional
servicing compensation.
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Master Servicer shall not be deemed to be in default, breach or
any other violation of its obligations hereunder by reason of any assumption of
a Home Equity Loan by operation of law or any assumption which the Master
Servicer may be restricted by law from preventing, for any reason whatsoever.
Section 8.13 Realization Upon Defaulted Home Equity Loans; Workout of Home
Equity Loans.
(a) The Master Servicer shall foreclose upon or otherwise comparably effect
the ownership in the name of the Trustee on behalf of the Trust of Properties
relating to defaulted Home Equity Loans as to which no satisfactory arrangements
can be made for collection of Delinquent payments and which the Master Servicer
has not purchased pursuant to Section 8.10(b). In connection with such
foreclosure or other conversion, the Master Servicer shall exercise such of the
rights and powers vested in it hereunder, and use the same degree of care and
skill in their exercise or use, as prudent mortgage lenders would exercise or
use under the circumstances in the conduct of their own affairs and consistent
with the servicing standards set forth in the FNMA Guide (other than the Backup
Master Servicer, as successor Master Servicer, which will service in accordance
with the Backup Master Servicing Standard), including, but not limited to,
advancing funds for the payment of taxes, amounts due with respect to Senior
Liens, and insurance premiums. Any amounts so advanced shall constitute
"Servicing Advances" within the meaning of Section 8.09(b) hereof. The Master
Servicer shall sell any REO Property within 35 months of its acquisition by the
Trust, at such price as the Master Servicer deems necessary to comply with this
covenant unless the Master Servicer obtains for the Certificate Insurer and the
Trustee, an opinion of counsel (the expense of which opinion shall be a
Servicing Advance) experienced in federal income tax matters acceptable to the
Certificate Insurer and the Trustee, addressed to the Certificate Insurer, the
Trustee and the Master Servicer, to the effect that the holding by the Trust of
such REO Property for any greater period will not result in the imposition of
taxes on "Prohibited Transactions" of the Trust or the REMIC Estate as defined
in Section 860F of the Code or cause the REMIC Estate to fail to qualify as a
REMIC under the REMIC Provisions at any time that any Certificates are
outstanding. Notwithstanding the
83
<PAGE>
generality of the foregoing provisions, the Master Servicer shall manage,
conserve, protect and operate each REO Property for the Owners solely for the
purpose of its prompt disposition and sale in a manner which does not cause such
REO Property to fail to qualify as "foreclosure property" within the meaning of
Section 860G(a)(8) of the Code or result in the receipt by the REMIC created
hereunder of any "income from non-permitted assets" within the meaning of
Section 860F(a)(2)(B) of the Code or any "net income from foreclosure property"
which is subject to taxation under the REMIC Provisions. Pursuant to its efforts
to sell such REO Property, the Master Servicer shall either itself or through an
agent selected by the Master Servicer protect and conserve such REO Property in
the same manner and to such extent as is customary in the locality where such
REO Property is located and may, incident to its conservation and protection of
the interests of the Owners, rent the same, or any part thereof, as the Master
Servicer deems to be in the best interest of the Owners for the period prior to
the sale of such REO Property. The Master Servicer shall take into account the
existence of any hazardous substances, hazardous wastes or solid wastes, as such
terms are defined in the Comprehensive Environmental Response Compensation and
Liability Act, the Resource Conservation and Recovery Act of 1976, or other
federal, state or local environmental legislation, on a Property in determining
whether to foreclose upon or otherwise comparably convert the ownership of such
Property. The Master Servicer shall not take any such action with respect to any
Property known by the Master Servicer to contain such wastes or substances or to
be within one mile of the site of such wastes or substances, without the prior
written consent of the Certificate Insurer.
(b) The Master Servicer shall determine, with respect to each defaulted
Home Equity Loan and in accordance with the procedures set forth in the FNMA
Guide (provided that the Backup Master Servicer, as successor Master Servicer
shall not be required to service in accordance with FNMA Guide but shall be
subject only to the Backup Master Servicing Standard), when it has recovered,
whether through trustee's sale, foreclosure sale or otherwise, all amounts it
expects to recover from or on account of such defaulted Home Equity Loan,
whereupon such Home Equity Loan shall become a "Liquidated Loan".
(c) The Master Servicer shall not agree to any modification, waiver or
amendment of any provision of any Home Equity Loan unless, in the Master
Servicer's good faith judgment, such modification, waiver or amendment would
minimize the loss that might otherwise be experienced with respect to such Home
Equity Loan and only in the event of a payment default with respect to such Home
Equity Loan or in the event that a payment default with respect to such Home
Equity Loan is reasonably foreseeable by the Master Servicer; provided, however,
that no such modification, waiver or amendment shall extend the maturity date of
such Home Equity Loan beyond the Remittance Period related to the Final
Scheduled Payment Date of the Class A-3 Certificates. Notwithstanding anything
set out in this Section 8.13(c) or elsewhere in this Agreement to the contrary,
the Master Servicer shall be permitted to modify, waive or amend any provision
of a Home Equity Loan if required by statute or a court of competent
jurisdiction to do so.
(d) The Master Servicer shall provide written notice to the Trustee and the
Certificate Insurer prior to the execution of any modification, waiver or
amendment of any provision of any Home Equity Loan; provided that if the
Certificate Insurer does not object in writing to the modification, waiver or
amendment specified in such notice within 5 Business Days after its receipt
thereof, the Master Servicer may effectuate such modification, waiver or
amendment and shall deliver to the Trustee for deposit in the related File, an
original counterpart of the agreement relating to such modification, waiver or
amendment, promptly following the execution thereof.
(e) The Master Servicer has no intent to foreclose on any Mortgage based on
the delinquency characteristics as of the Startup Day; provided, that the
foregoing does not prevent
84
<PAGE>
the Master Servicer from initiating foreclosure proceedings on any date
hereafter if the facts and circumstances of such Mortgage including delinquency
characteristics in the Master Servicer's discretion so warrant such action.
Section 8.14 Trustee to Cooperate; Release of Files.
(a) Upon the payment in full of any Home Equity Loan (including any
liquidation of such Home Equity Loan through foreclosure or otherwise), or the
receipt by the Master Servicer of a notification that payment in full will be
escrowed in a manner customary for such purposes, the Master Servicer shall
deliver to the Trustee the FNMA "Request for Release of Documents" (FNMA Form
2009). Upon receipt of such Request for Release of Documents, the Trustee shall
promptly release the related File, in trust, in its reasonable discretion to (i)
the Master Servicer, (ii) an escrow agent or (iii) any employee, agent or
attorney of the Trustee. Upon any such payment in full, or the receipt of such
notification that such funds have been placed in escrow, the Master Servicer is
authorized to give, as attorney-in-fact for the Trustee and the mortgagee under
the Mortgage which secured the Note, an instrument of satisfaction (or
assignment of Mortgage without recourse) regarding the Property relating to such
Mortgage, which instrument of satisfaction or assignment, as the case may be,
shall be delivered to the Person or Persons entitled thereto against receipt
therefor of payment in full, it being understood and agreed that no expense
incurred in connection with such instrument of satisfaction or assignment, as
the case may be, shall be chargeable to the Principal and Interest Account or to
the Trustee. In lieu of executing any such satisfaction or assignment, as the
case may be, the Master Servicer may prepare and submit to the Trustee, a
satisfaction (or assignment without recourse, if requested by the Person or
Persons entitled thereto) in form for execution by the Trustee with all
requisite information completed by the Master Servicer; in such event, the
Trustee shall execute and acknowledge such satisfaction or assignment, as the
case may be, and deliver the same with the related File, as aforesaid.
(b) The Master Servicer shall have the right (upon receiving the consent of
the Certificate Insurer) to accept applications of Mortgagors for consent to (i)
partial releases of Mortgages, (ii) alterations and (iii) removal, demolition or
division of properties subject to Mortgages. No application for approval shall
be considered by the Master Servicer unless: (w) the provisions of the related
Note and Mortgage have been complied with; (x) the Loan-to-Value Ratio and
debt-to-income ratio after any release does not exceed the Loan-to-Value Ratio
and debt-to-income ratio of such Note on the Cut-Off Date and any increase in
the Loan-to-Value Ratio shall not exceed 5% unless approved in writing by the
Certificate Insurer; and (y) the lien priority of the related Mortgage is not
affected and (z) the Master Servicer shall have provided a REMIC Opinion. Upon
receipt by the Trustee of an Officer's Certificate executed on behalf of the
Master Servicer setting forth the action proposed to be taken in respect of a
particular Home Equity Loan and certifying that the criteria set forth in the
immediately preceding sentence have been satisfied, the Trustee shall execute
and deliver to the Master Servicer the consent or partial release so requested
by the Master Servicer. A proposed form of consent or partial release, as the
case may be, shall accompany any Officer's Certificate delivered by the Master
Servicer pursuant to this paragraph. The Master Servicer shall notify the
Certificate Insurer and the Rating Agencies if an application is approved under
clause (y) above without approval in writing by the Certificate Insurer.
Section 8.15 Servicing Compensation.
As compensation for its activities hereunder, the Master Servicer shall be
entitled to retain the Servicing Fee with respect to each Home Equity Loan.
Additional servicing compensation in the form of prepayment charges, release
fees, bad check charges, assumption fees, late payment charges, prepayment
penalties, or any other servicing-related fees, Net
85
<PAGE>
Liquidation Proceeds not required to be deposited in the Principal and Interest
Account pursuant to Section 8.08(c)(i) and similar items may, to the extent
collected from Mortgagors, be retained by the Master Servicer, with respect to
the Home Equity Loans, unless a successor Master Servicer is appointed pursuant
to Section 8.20 hereof, in which case the successor Master Servicer shall be
entitled to such fees as are agreed upon by the Trustee, the successor Master
Servicer and the Certificate Insurer. The Backup Master Servicing Fee shall be
paid by the Sponsor to the Backup Master Servicer pursuant to the Backup
Servicing Fee Agreement out of the Servicing Fee or otherwise by the Master
Servicer pursuant to the Backup Servicing Fee Agreement.
The right to receive the Servicing Fee may not be transferred in whole or
in part (except as provided in the immediately preceding paragraph) except in
connection with the transfer of all of the Master Servicer's responsibilities
and obligations under this Agreement.
Section 8.16 Annual Statement as to Compliance.
The Master Servicer, at its own expense, will deliver to the Trustee, the
Certificate Insurer, the Depositor, and the Rating Agencies, on or before April
30 of each year, commencing in 1998, an Officer's Certificate stating, as to
each signer thereof, that (i) a review of the activities of the Master Servicer
during such preceding calendar year and of performance under this Agreement has
been made under such officers' supervision, and (ii) to the best of such
officers' knowledge, based on such review, the Master Servicer has fulfilled all
its obligations under this Agreement for such year, or, if there has been a
default in the fulfillment of all such obligations, specifying each such default
known to such officers and the nature and status thereof including the steps
being taken by the Master Servicer to remedy such default.
Section 8.17 Annual Independent Certified Public Accountants' Reports.
On or before April 30 of each year, commencing in 1998, the Master
Servicer, at its own expense, shall cause to be delivered to the Trustee, the
Certificate Insurer, the Depositor, and the Rating Agencies a letter or letters
of a firm of independent, nationally recognized certified public accountants
reasonably acceptable to the Certificate Insurer stating that such firm has
examined the Master Servicer's overall servicing operations in accordance with
the requirements of the Uniform Single Attestation Program for Mortgage Bankers,
and stating such firm's conclusions relating thereto.
Section 8.18 Access to Certain Documentation and Information Regarding
the Home Equity Loans.
The Master Servicer shall provide to the Trustee, the Certificate Insurer
and, to the extent required by law, the Office of Thrift Supervision (the
"OTS"), the FDIC and the supervisory agents and examiners of each of the FDIC
and the OTS (which, in the case of supervisory agents and examiners, may be
required by applicable state and federal regulations) access to the
documentation regarding the Home Equity Loans, such access being afforded
without charge but only upon reasonable request and during normal business hours
at the offices of the Master Servicer designated by it.
Section 8.19 Assignment of Agreement.
Other than with respect to entering into Sub-Servicing Agreements pursuant
to Section 8.03 hereof, the Master Servicer may not assign its obligations under
this Agreement, in whole or in part, unless it shall have first obtained the
written consent of the Trustee and the Certificate Insurer, which such consent
shall not be unreasonably withheld; provided, however, that any
86
<PAGE>
assignee must meet the eligibility requirements set forth in Section 8.20(h)
hereof for a successor Master Servicer.
Section 8.20 Removal of Master Servicer and Backup Master Servicer;
Retention of Master Servicer and Backup Master Servicer; Resignation of Master
Servicer and Backup Master Servicer.
(a) (X) The Certificate Insurer or the Trustee (or, except in the case of
item (v) and (vi) below, the Owners, with the consent of the Certificate Insurer
pursuant to Section 6.11 hereof) may remove the Master Servicer upon the
occurrence of any of the following events (each a "Master Servicer Termination
Event"):
(i) The Master Servicer shall (I) apply for or consent to the
appointment of a receiver, trustee, liquidator or custodian or similar
entity with respect to itself or its property, (II) admit in writing its
inability to pay its debts generally as they become due, (III) make a
general assignment for the benefit of creditors, (IV) be adjudicated a
bankrupt or insolvent, (V) commence a voluntary case under the federal
bankruptcy laws of the United States of America or file a voluntary
petition or answer seeking reorganization, an arrangement with creditors or
an order for relief or seeking to take advantage of any insolvency law or
file an answer admitting the material allegations of a petition filed
against it in any bankruptcy, reorganization or insolvency proceeding or
(VI) take corporate action for the purpose of effecting any of the
foregoing; or
(ii) If without the application, approval or consent of the Master
Servicer, a proceeding shall be instituted in any court of competent
jurisdiction, under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking in respect of the Master
Servicer an order for relief or an adjudication in bankruptcy,
reorganization, dissolution, winding up, liquidation, a composition or
arrangement with creditors, a readjustment of debts, the appointment of a
trustee, receiver, liquidator or custodian or similar entity with respect
to the Master Servicer or of all or any substantial part of its assets, or
other like relief in respect thereof under any bankruptcy or insolvency
law, and, if such proceeding is being contested by the Master Servicer in
good faith, the same shall (A) result in the entry of an order for relief
or any such adjudication or appointment or (B) continue undismissed or
pending and unstayed for any period of seventy-five (75) consecutive days;
or
(iii) The Master Servicer shall fail to perform any one or more of its
obligations hereunder and shall continue in default thereof for a period of
thirty (30) days (one (1) Business Day in the case of a delay in making a
payment required of the Master Servicer under this Agreement) after the
earlier of (a) actual knowledge of an officer of the Master Servicer or (b)
receipt of notice from the Trustee or the Certificate Insurer of said
failure; provided, however, that if the Master Servicer can demonstrate to
the reasonable satisfaction of the Certificate Insurer that it is
diligently pursuing remedial action, then the cure period may be extended
with the written approval of the Certificate Insurer; or
(iv) The Master Servicer shall fail to cure any breach of any of its
representations and warranties set forth in Section 3.02 which materially
and adversely affects the interests of the Owners or the Certificate
Insurer for a period of sixty (60) days after the earlier of the Master
Servicer's discovery or receipt of notice thereof; provided, however, that
if the Master Servicer can demonstrate to the reasonable satisfaction of
the Certificate Insurer that it is diligently pursuing remedial action,
then the cure period may be extended with the written approval of the
Certificate Insurer;
87
<PAGE>
(v) The failure of the Master Servicer to satisfy the Master Servicer
Termination Test; or
(vi) any event of default under the Insurance Agreement.
(Y) The Certificate Insurer or the Trustee (or, except in the case of item
(v) below, the Owners, with the consent of the Certificate Insurer pursuant to
Section 6.11 hereof) may remove the Backup Master Servicer upon the occurrence
of any of the following events:
(i) The Backup Master Servicer shall (I) apply for or consent to the
appointment of a receiver, trustee, liquidator or custodian or similar
entity with respect to itself or its property, (II) admit in writing its
inability to pay its debts generally as they become due, (III) make a
general assignment for the benefit of creditors, (IV) be adjudicated a
bankrupt or insolvent, (V) commence a voluntary case under the federal
bankruptcy laws of the United States of America or file a voluntary
petition or answer seeking reorganization, an arrangement with creditors or
an order for relief or seeking to take advantage of any insolvency law or
file an answer admitting the material allegations of a petition filed
against it in any bankruptcy, reorganization or insolvency proceeding or
(VI) take corporate action for the purpose of effecting any of the
foregoing; or
(ii) If without the application, approval or consent of the Backup
Master Servicer, a proceeding shall be instituted in any court of competent
jurisdiction, under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking in respect of the Backup
Master Servicer an order for relief or an adjudication in bankruptcy,
reorganization, dissolution, winding up, liquidation, a composition or
arrangement with creditors, a readjustment of debts, the appointment of a
trustee, receiver, liquidator or custodian or similar entity with respect
to the Backup Master Servicer or of all or any substantial part of its
assets, or other like relief in respect thereof under any bankruptcy or
insolvency law, and, if such proceeding is being contested by the Backup
Master Servicer in good faith, the same shall (A) result in the entry of an
order for relief or any such adjudication or appointment or (B) continue
undismissed or pending and unstayed for any period of seventy-five (75)
consecutive days; or
(iii) The Backup Master Servicer shall fail to perform any one or more
of its obligations hereunder and shall continue in default thereof for a
period of thirty (30) days after the earlier of (a) actual knowledge of an
officer of the Backup Master Servicer or (b) receipt of notice from the
Trustee or the Certificate Insurer of said failure; provided, however, that
if the Backup Master Servicer can demonstrate to the reasonable
satisfaction of the Certificate Insurer that it is diligently pursuing
remedial action, then the cure period may be extended with the written
approval of the Certificate Insurer; or
(iv) The Backup Master Servicer shall fail to cure any breach of any
of its representations and warranties set forth in Section 3.09 which
materially and adversely affects the interests of the Owners or the
Certificate Insurer for a period of sixty (60) days after the earlier of
the Backup Master Servicer's discovery or receipt of notice thereof;
provided, however, that if the Backup Master Servicer can demonstrate to
the reasonable satisfaction of the Certificate Insurer that it is
diligently pursuing remedial action, then the cure period may be extended
with the written approval of the Certificate Insurer.
(b) The Master Servicer hereby covenants and agrees to act as the Master
Servicer under this Agreement for an initial term, commencing on the Closing and
ending on March 31, 1998, which term shall be extendable by the Certificate
Insurer for successive terms of three
88
<PAGE>
calendar months thereafter, until the termination of the Trust Fund pursuant to
Article IX. Each such notice of extension (a "Master Servicer Extension Notice")
shall be delivered by the Certificate Insurer to the Trustee, the Master
Servicer and the Backup Master Servicer. The Master Servicer hereby agrees that,
upon its receipt of any such Master Servicer Extension Notice, the Master
Servicer shall become bound for the duration of the term covered by such Master
Servicer Extension to continue as the Master Servicer subject to and in
accordance with the other provisions of this Agreement. The failure of the
Certificate Insurer to deliver a Master Servicer Extension Notice, provided that
no Certificate Insurer Default exists, by the end of a calendar month in which
such notice is due shall, subject to Section 8.20(e), result in the termination
of the Master Servicer. The foregoing provisions of this paragraph shall apply
to the Backup Master Servicer in the event the Backup Master Servicer succeeds
to the rights and obligations of the Master Servicer and the Backup Master
Servicer shall continue in such capacity until the earlier of the termination of
this Agreement pursuant to Article IX or the appointment of a successor Master
Servicer.
(c) Reserved.
(d) The Master Servicer shall not resign from the obligations and duties
hereby imposed on it, except upon determination that its duties hereunder are no
longer permissible under applicable law or are in material conflict by reason of
applicable law with any other activities carried on by it, the other activities
of the Master Servicer so causing such a conflict being of a type and nature
carried on by the Master Servicer at the date of this Agreement. Any such
determination permitting the resignation of the Master Servicer shall be
evidenced by an opinion of counsel acceptable to the Trustee at the expense of
the Master Servicer to such effect which shall be delivered to the Trustee and
the Certificate Insurer. The Backup Master Servicer shall not resign from the
obligations and duties hereby imposed on it, except upon determination that its
duties hereunder are no longer permissible under applicable law or are in
material conflict by reason of applicable law with any other activities carried
on by it, the other activities of the Backup Master Servicer so causing such a
conflict being of a type and nature carried on by the Backup Master Servicer at
the date of this Agreement. Any such determination permitting the resignation of
the Backup Master Servicer shall be evidenced by an opinion of counsel
acceptable to the Certificate Insurer and the Trustee at the expense of the
Backup Master Servicer to such effect which shall be delivered to the Trustee
and the Certificate Insurer. Upon the resignation of the Backup Master Servicer,
the termination of the Backup Master Servicer pursuant to Section 8.20(a) or the
appointment of the Backup Master Servicer as Master Servicer pursuant to Section
8.20(h), the Certificate Insurer (unless a Certificate Insurer Default shall
have occurred and is continuing) shall direct the Trustee to appoint another
party to serve as Backup Master Servicer. If the Certificate Insurer does not
direct the Trustee to appoint another party to serve as successor to the Backup
Master Servicer within 45 days after the date the Backup Master Servicer has
resigned, is terminated pursuant to Section 8.20(a) or has been appointed to act
as Master Servicer pursuant to Section 8.20(h), the Trustee shall appoint, or
petition a court of competent jurisdiction to appoint any housing and income
finance institution, bank or mortgage servicing institution which has been
designated as an approved servicer by FNMA or FHLMC for first and second home
equity loans and having equity of not less than $5,000,000, as determined in
accordance with generally accepted accounting principles as the successor to the
Backup Master Servicer hereunder in the assumption of all or any party of the
responsibilities, duties or liabilities of the Backup Master Servicer hereunder.
Notwithstanding the above, a successor Backup Master Servicer shall not be
appointed in the event that the Backup Master Servicer is appointed to act as
Master Servicer pursuant to Section 8.20(h) if the Trustee shall have provided
written notice to the Depositor, the Master Servicer, the Backup Master
Servicer, the Sponsor and the Underwriter that such appointment is no longer
required.
89
<PAGE>
(e) No removal or resignation of the Master Servicer shall become effective
until the successor Master Servicer shall have assumed the Master Servicer's
responsibilities and obligations in accordance with this Section.
(f) Upon removal or resignation of the Master Servicer, the Master Servicer
at its own expense also shall promptly deliver or cause to be delivered to a
successor Master Servicer all the books and records (including, without
limitation, records kept in electronic form) that the Master Servicer has
maintained for the Home Equity Loans, including all tax bills, assessment
notices, insurance premium notices and all other documents as well as all
original documents then in the Master Servicer's possession. In no event shall a
successor Master Servicer be responsible for the expenses involved in
transferring such items to the successor Master Servicer. The Master Servicer
shall indemnify and hold harmless any successor Master Servicer for any loss,
liability or expense incurred by the successor in connection with any acts or
omissions of the Master Servicer in the performance of its duties under this
Section 8.20(f) and the successor Master Servicer shall be entitled to be
reimbursed from the Principal and Interest Account in the event the Master
Servicer fails to satisfy its obligations hereunder.
(g) Any collections then being held by the Master Servicer prior to its
removal and any collections received by the Master Servicer after removal or
resignation shall be endorsed by it to the successor Master Servicer and
remitted directly and immediately to the successor Master Servicer.
(h) The Trustee shall give written notice to the Certificate Insurer and
the Backup Matter Servicer of the removal or resignation of the Master Servicer
within one Business Day of a responsible officer of the Trustee obtaining actual
knowledge that such removal or resignation is to occur. Upon removal or
resignation of the Master Servicer, the Trustee shall, after giving notice to
the Certificate Insurer and the Backup Master Servicer appoint the Backup Master
Servicer as Master Servicer; provided, that the Certificate Insurer may direct
the Trustee to appoint another party to serve as Master Servicer. The Trustee
shall, if the Backup Master Servicer is prevented by law from acting as Master
Servicer and the Certificate Insurer does not direct the appointment of a Master
Servicer, appoint, or petition a court of competent jurisdiction to appoint any
housing and home finance institution, bank or mortgage servicing institution
which has been designated as an approved servicer by FNMA or FHLMC for first and
second home equity loans and having equity of not less than $5,000,000, as
determined in accordance with generally accepted accounting principles as the
successor to the Master Servicer hereunder in the assumption of all or any part
of the responsibilities, duties or liabilities of the Master Servicer hereunder;
provided, however, the Trustee agrees to assume all duties of the Master
Servicer (except as otherwise provided in this Agreement) until a successor
Master Servicer has been appointed. The compensation of any successor Master
Servicer so appointed shall be the amount agreed to between the successor Master
Servicer and the Certificate Insurer (up to a maximum of 0.50% per annum on each
Home Equity Loan), together with the other servicing compensation in the form of
assumption fees, late payment charges or otherwise as provided in Sections 8.08
and 8.15; provided, however, that if the Backup Master Servicer becomes the
successor Master Servicer it shall receive as its compensation the same
compensation paid to the Master Servicer immediately prior to the Master
Servicer's removal or resignation; provided, further, however, that if the
Backup Master Servicer acts as successor Master Servicer then the Sponsor agrees
to pay to the Backup Master Servicer at such time that the Backup Master
Servicer becomes such successor Master Servicer any fee due to the Backup Master
Servicer pursuant to the Backup Servicing Fee Agreement. The Backup Master
Servicer shall be obligated to serve as successor Master Servicer whether or not
the fee described in this section is paid by the Sponsor, but shall in any event
be entitled to receive, and to enforce payment of, such fee from the Sponsor
provided that if the Backup Master Servicer is paid the outstanding Backup
90
<PAGE>
Master Servicing Fee pursuant to Section 7.03, the Trustee shall be entitled to
seek reimbursement from the Sponsor.
(i) Reserved.
(j) The Trustee and such successor shall take such action, consistent with
this Agreement, as shall be necessary to effectuate any such succession,
including the notification to all Mortgagors of the transfer of servicing. The
Master Servicer agrees to cooperate with the Trustee and any successor Master
Servicer in effecting the termination of the Master Servicer's servicing
responsibilities and rights hereunder and shall promptly provide such successor
Master Servicer, as applicable, all documents and records reasonably requested
by it to enable it to assume the Master Servicer's functions hereunder and shall
promptly also transfer to such successor Master Servicer, as applicable, all
amounts which then have been or should have been deposited in the Principal and
Interest Account by the Master Servicer or which are thereafter received with
respect to the Home Equity Loans. Neither the Trustee nor any successor Master
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 Master 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 Master Servicer. If the Master Servicer
resigns or is replaced hereunder, the Master Servicer agrees to reimburse the
Backup Master Servicer, the Trust, the Owners and the Certificate Insurer for
the costs and expenses associated with the transfer of servicing to the
replacement Master Servicer, but subject to a maximum reimbursement (x) if the
successor Master Servicer is the Backup Master Servicer, to all such parties in
the amount provided in the Backup Servicing Fee Agreement and (y) if the
successor Master Servicer is an entity other than the Backup Master Servicer, to
all such parties in the amount of twenty-five dollars ($25.00) for each Home
Equity Loan then included in the Trust Estate and transferred to the successor
Master Servicer. The amount payable in excess of twenty-five dollars ($25.00)
per Home Equity Loan, if any, shall be payable to the successor Master Servicer
and reimbursable pursuant to Section 7.03(b)(iv)(D) hereof.
(k) The successor Master Servicer, upon assuming the duties of Master
Servicer hereunder, shall immediately (i) record all assignments of Home Equity
Loans not previously recorded in the name of the Trustee pursuant to Section
3.05(b)(ii) as a result of an opinion of counsel and (ii) make all Delinquency
Advances and Compensating Interest payments and deposit them to the Principal
and Interest Account which the Master Servicer has theretofore failed to remit
with respect to the Home Equity Loans, but only to the extent that such amounts
are less than 30 days past due.
(l) The Master Servicer that is being removed or is resigning shall give
notice to the Mortgagors, to Moody's and to Standard & Poor's of the transfer of
the servicing to the successor.
(m) The Trustee shall give notice to the Certificate Insurer, the Owners,
the Seller, Moody's and Standard & Poor's of the occurrence of any event
described in paragraph (a) above of which the Trustee is aware.
(n) The successor Master Servicer shall not be required to make any
Delinquency Advances that, in the good faith judgment of such successor Master
Servicer, would not be recoverable. Any Master Servicer that retires or is
removed shall only be entitled to recover unreimbursed Delinquency Advances and
Servicing Advances from the Liquidation Proceeds for the related Home Equity
Loan after the successor Master Servicer has been fully reimbursed for any
Delinquency Advances or Servicing Advances made by it with respect to such Home
Equity Loan.
91
<PAGE>
Section 8.21 Inspections by Certificate Insurer; Errors and Omissions
Insurance.
(a) At any reasonable time and from time to time upon reasonable notice,
the Backup Master Servicer, the Trustee, the Certificate Insurer, any Owner of a
Class R Certificate, or any agents thereof may inspect the Master Servicer's
servicing operations and discuss the servicing operations of the Master Servicer
during the Master Servicer's normal business hours with any of its officers or
directors; provided, however, that the costs and expenses incurred by the Master
Servicer or its agents or representatives in connection with any such
examinations or discussions shall be paid by the Master Servicer.
(b) The Master Servicer agrees to maintain errors and omissions coverage
and a fidelity bond, each at least to the extent required by Section 305 of Part
I of FNMA Guide or any successor provision thereof; provided, however, that in
any event that the fidelity bond or the errors and omissions coverage is no
longer in effect, the Trustee shall promptly give such notice to the Certificate
Insurer and the Owners.
Section 8.22 Additional Servicing Responsibilities for Second Mortgage
Loans.
The Master Servicer must notify any superior lienholder in writing of
the existence of the Second Mortgage Loan and request notification of any action
(as described below) to be taken against the Mortgagor or the Mortgaged Property
by the superior lienholder.
If the Master Servicer is notified that any superior lienholder has
accelerated or intends to accelerate the obligations under a First Mortgage
Loan, or has declared or intends to declare a default under the mortgage or the
promissory note secured thereby, or has filed or intends to file an election to
have the Mortgaged Property sold or foreclosed, the Master Servicer shall take,
on behalf of the Trust, whatever actions are necessary to protect the interests
of the Owners and the Certificate Insurer, and/or to preserve the security of
the related Home Equity Loan, subject to the application of the REMIC
Provisions. The Master Servicer shall advance the necessary funds to cure the
default or reinstate the lien securing a First Mortgage Loan, if such advance is
in the best interests of the Certificate Insurer and the Owners; provided,
however, that no such additional advance need be made if such advance would be
nonrecoverable. The Master Servicer shall thereafter take such action as is
necessary to recover the amount so advanced. Any expenses incurred by the Master
Servicer pursuant to this Section 8.22 shall be Servicing Advances.
END OF ARTICLE VIII
92
<PAGE>
ARTICLE IX
TERMINATION OF TRUST
Section 9.01 Termination of Trust.
The Trust created hereunder and all obligations created by this Agreement
will terminate upon the payment to the Owners of all Certificates from amounts
other than those available under the Certificate Insurance Policy of all amounts
held by the Trustee and required to be paid to such Owners pursuant to this
Agreement upon the later to occur of (a) the final payment or other liquidation
(or any advance made with respect thereto) of the last Home Equity Loan in the
Trust Estate, (b) the disposition of all property acquired in respect of any
Home Equity Loan remaining in the Trust Estate and (c) at any time when a
Qualified Liquidation within the Trust is effected as described in Section 9.02.
To effect a termination of this Agreement pursuant to clause (c) above, the
Owners of all Certificates then Outstanding shall provide to the Trustee, at
their expense, an opinion of counsel experienced in federal income tax matters
acceptable to the Certificate Insurer and the Trustee to the effect that each
such liquidation constitutes a Qualified Liquidation, and the Master Servicer
either shall sell the Home Equity Loans and the Trustee shall distribute the
proceeds of the liquidation of the Trust Estate, or the Master Servicer shall
distribute equitably in kind all of the assets of the Trust Estate to the
remaining Owners of the Certificates to the effect that each such liquidation
constitutes a Qualified Liquidation. In no event, however, will the Trust
created by this Agreement continue beyond the expiration of twenty-one (21)
years from the death of the last survivor of the descendants of Joseph P.
Kennedy, the late Ambassador of the United States to the United Kingdom, living
on the date hereof. The Trustee shall give written notice of termination of the
Agreement to each Owner in the manner set forth in Section 11.05.
Section 9.02 Termination Upon Option of the Master Servicer.
(a) On any Monthly Remittance Date after the Clean-Up Call Date, the Master
Servicer may determine to purchase, in whole only, and may cause the purchase
from the Trust of all (but not fewer than all) Home Equity Loans and all
property theretofore acquired in respect of any Home Equity Loan by foreclosure,
deed in lieu of foreclosure, or otherwise then remaining in the Trust Estate (i)
on terms agreed upon between the Certificate Insurer and the Master Servicer, or
(ii) in the absence of such an agreement, at a price equal to (x) in the case of
Home Equity Loans 100% of the aggregate Loan Balances of the related Home Equity
Loans and (y) in the case of REO Properties, the appraised value of such
properties (such appraisal to be conducted by an appraiser mutually agreed upon
by the Master Servicer and the Trustee) as of the day of purchase minus amounts
remitted from the Principal and Interest Account to the Certificate Account
representing collections of principal on the Home Equity Loans during the
current Remittance Period, plus one month's interest on such amount computed at
the Adjusted Pass-Through Rate, plus all accrued and unpaid Servicing Fees plus
the aggregate amount of any unreimbursed Delinquency Advances and Servicing
Advances and Delinquency Advances which the Master Servicer has theretofore
failed to remit; provided, that in any case such price shall not be less than
the then outstanding Class A Certificate Principal Balance and such price shall
be sufficient not to result in a draw on the Certificate Insurance Policy or
result in any Reimbursement Amount not being paid to the Certificate Insurer. In
connection with such purchase, the Master Servicer shall remit to the Trustee
all amounts then on deposit in the Principal and Interest Account for deposit to
the Certificate Account, which deposit shall be deemed to have occurred
immediately preceding such purchase.
93
<PAGE>
(b) In the event that the Master Servicer purchases all Home Equity Loans
and each REO Property remaining in the Trust Estate pursuant to Section 9.02(a),
the Trust Estate shall be terminated in accordance with the following additional
requirements:
(i) The Trustee shall specify the first day in the 90-day liquidation
period in a statement attached to the final Tax Return of the REMIC created
hereunder pursuant to Treasury regulation Section 1.860F-1 and shall
satisfy all requirements of a qualified liquidation under Section 860F of
the Code and any regulations thereunder,
(ii) During such 90-day liquidation period, and at or prior to the
time of making the final payment on the Certificates, the Trustee shall
sell all of the assets of the Trust Estate to the Master Servicer for cash;
and
(iii) At the time of the making of the final payment on the
Certificates, the Trustee shall distribute or credit, or cause to be
distributed or credited, to the Owners of the Class R Certificates all cash
on hand in the Trust Estate (other than cash retained to meet claims), and
the Trust Estate shall terminate at that time.
(c) By their acceptance of the Certificates, the Owners thereof hereby
agree to authorize the Trustee to specify the first day in the 90-day
liquidation period in a statement attached to the Trust Estate's final Tax
Return, which shall be binding upon all successor Owners.
(d) In connection with any such purchase, the Master Servicer shall provide
to the Trustee and the Certificate Insurer an opinion of counsel at the expense
of the Master Servicer experienced in federal income tax matters acceptable to
the Certificate Insurer and the Trustee to the effect that such purchase and
liquidation constitutes a Qualified Liquidation of the REMIC Estate.
(e) Promptly following any purchase described in this Section 9.02, the
Trustee will release the Files to the Master Servicer or the Certificate
Insurer, as the case may be, or otherwise upon their order, in a manner similar
to that described in Section 8.14 hereof.
Section 9.03 Termination Upon Loss of REMIC Status.
(a) Following a final determination by the Internal Revenue Service or by a
court of competent jurisdiction, in either case from which no appeal is taken
within the permitted time for such appeal, or if any appeal is taken, following
a final determination of such appeal from which no further appeal can be taken,
to the effect that the REMIC created hereunder does not and will no longer
qualify as a REMIC pursuant to Section 860D of the Code (the "Final
Determination"), at any time on or after the date which is 30 calendar days
following such Final Determination (i) the Certificate Insurer or the Owners of
a majority in Percentage Interests represented by the Class A Certificates then
Outstanding with the consent of the Certificate Insurer may direct the Trustee
on behalf of the Trust to adopt a plan of complete liquidation, as contemplated
by Section 860F(a)(4) of the Code and (ii) the Certificate Insurer may notify
the Trustee of the Certificate Insurer's determination to purchase from the
Trust all (but not fewer than all) Home Equity Loans and all property
theretofore acquired by foreclosure, deed in lieu of foreclosure, or otherwise
in respect of any Home Equity Loan then remaining in the Trust Estate at a price
equal to the sum of (x) the greater of (i) 100% of the aggregate Loan Balances
of the Home Equity Loans as of the day of purchase minus amounts remitted from
the Principal and Interest Account representing collections of principal on the
Home Equity Loans during the current Remittance Period, and (ii) the fair market
value of such Home Equity Loans (disregarding accrued interest), (y) one month's
interest on such amount computed at the Adjusted Pass-Through Rate and (z) the
94
<PAGE>
aggregate amount of any unreimbursed Delinquency Advances and Servicing Advances
and any Delinquency Advances which the Master Servicer has theretofore failed to
remit.
Upon receipt of such direction from the Certificate Insurer, the Trustee
shall notify the Owners of the Class R Certificates of such election to
liquidate or such determination to purchase, as the case may be (the
"Termination Notice"). The Owners of a majority of the Percentage Interest of
the Class R Certificates then Outstanding may, within 60 days from the date of
receipt of the Termination Notice (the "Purchase Option Period"), at their
option, purchase from the Trust all (but not fewer than all) Home Equity Loans
and all property theretofore acquired by foreclosure, deed in lieu of
foreclosure, or otherwise in respect of any Home Equity Loan then remaining in
the Trust Estate at a purchase price equal to the aggregate Loan Balances of all
Home Equity Loans as of the date of such purchase, plus (a) one month's interest
on such amount at the Adjusted Pass-Through Rate, (b) the aggregate amount of
any unreimbursed Delinquency Advances and Servicing Advances and (c) any
Delinquency Advances which the Master Servicer has theretofore failed to remit.
If, during the Purchase Option Period, the Owners of the Class R Certificates
have not exercised the option described in the immediately preceding paragraph,
then upon the expiration of the Purchase Option Period (i) in the event that the
Certificate Insurer or the Owners of the Class A Certificates with the consent
of the Certificate Insurer have given the Trustee the direction described in
clause (a)(i) above, the Master Servicer shall sell the Home Equity Loans and
distribute the proceeds of the liquidation of the Trust Estate, each in
accordance with the plan of complete liquidation, such that, if so directed, the
liquidation of the Trust Estate, the distribution of the proceeds of the
liquidation and the termination of this Agreement occur no later than the close
of the 60th day, or such later day as the Certificate Insurer or the Owners of
the Class A Certificates with the consent of the Certificate Insurer shall
permit or direct in writing, after the expiration of the Purchase Option Period
and (ii) in the event that the Certificate Insurer has given the Trustee notice
of the Certificate Insurer's determination to purchase the Trust Estate
described in clause (a)(ii) preceding the Certificate Insurer shall, within 60
days, purchase all (but not fewer than all) Home Equity Loans and all property
theretofore acquired by foreclosure, deed in lieu of foreclosure or otherwise in
respect of any Home Equity Loan then remaining in the Trust Estate. In
connection with such purchase, the Master Servicer shall remit to the Trustee
all amounts then on deposit in the Principal and Interest Account for deposit to
the Certificate Account, which deposit shall be deemed to have occurred
immediately preceding such purchase.
(b) Following a Final Determination, the Owners of a majority of the
Percentage Interest of the Class R Certificates then Outstanding may, at their
option and upon delivery to the Certificate Insurer of an opinion of counsel
experienced in federal income tax matters, acceptable to the Certificate Insurer
and selected by the Owners of the Class R Certificates, which opinion shall be
reasonably satisfactory in form and substance to the Certificate Insurer, to the
effect that the effect of the Final Determination is to increase substantially
the probability that the gross income of the Trust will be subject to federal
taxation, purchase from the Trust all (but not fewer than all) Home Equity Loans
and all property theretofore acquired by foreclosure, deed in lieu of
foreclosure, or otherwise in respect of any Home Equity Loan then remaining in
the Trust Estate at a purchase price equal to the aggregate Loan Balances of all
Home Equity Loans as of the date of such purchase, plus (a) one month's interest
on such amount computed at the Adjusted Pass-Through Rate, (b) the aggregate
amount of unreimbursed Delinquency Advances and (c) any Delinquency Advances
which the Master Servicer has theretofore failed to remit. In connection with
such purchase, the Master Servicer shall remit to the Trustee all amounts then
on deposit in the Principal and Interest Account for deposit to the Certificate
Account, which deposit shall be deemed to have occurred immediately preceding
such purchase. The foregoing opinion shall be deemed satisfactory unless the
Certificate Insurer gives the Owners of a majority of the
95
<PAGE>
Percentage Interest of the Class R Certificates notice that such opinion is not
satisfactory within thirty days after receipt of such opinion.
Section 9.04 Disposition of Proceeds.
The Trustee shall, upon receipt thereof, deposit the proceeds of any
liquidation of the Trust Estate pursuant to this Article IX to the Certificate
Account; provided, however, that any amounts representing unreimbursed
Delinquency Advances and Servicing Advances theretofore funded by the Master
Servicer from the Master Servicer's own funds shall be paid by the Trustee to
the Master Servicer from the proceeds of the Trust Estate.
END OF ARTICLE IX
96
<PAGE>
ARTICLE X
THE TRUSTEE
Section 10.01 Certain Duties and Responsibilities.
(a) The Trustee (i) (A) undertakes to perform such duties and only such
duties as are specifically set forth in this Agreement, and no implied covenants
or obligations shall be read into this Agreement against the Trustee and (B) the
banking institution that is the Trustee shall serve as the Trustee at all times
under this Agreement, and (ii) in the absence of bad faith on its part, may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions or any other
resolutions, statements, reports, documents, orders or other instruments
furnished pursuant to and conforming to the requirements of this Agreement; but
in the case of any such certificates or opinions or any other resolutions,
statements, reports, documents, orders or other instruments which by any
provision hereof are specifically required to be furnished to the Trustee, shall
be under a duty to examine the same to determine whether or not they conform to
the requirements of this Agreement; provided, however, that the Trustee shall
not be responsible for the accuracy or content of any resolution, certificate,
statement, opinion, report, document, order or other instrument furnished by the
Master Servicer, the Certificate Insurer, the Seller, the Sponsor or the
Depositor hereunder. If any such instrument is found not to conform in any
material respect to the requirements of this Agreement, the Trustee shall notify
the Owners of the Certificates of such instrument in the event that the Trustee,
after so requesting, does not receive a satisfactorily corrected instrument.
Notwithstanding the foregoing, if a Master Servicer Termination Event of which a
responsible officer of the Trustee shall have actual knowledge has occurred and
has not been cured or waived, the Trustee shall exercise such of the rights and
powers vested in it by this Agreement, and use the same degree of care and skill
in their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(b) Reserved
(c) No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct, except that:
(i) this subsection shall not be construed to limit the effect of
subsection (a) of this Section;
(ii) the Trustee shall not be personally liable for any error of
judgment made in good faith by an Authorized Officer, unless it shall be
proved that the Trustee was negligent in ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction
of the Certificate Insurer or of the Owners of a majority in Percentage
Interest of the Certificates of the affected Class or Classes and the
Certificate Insurer relating to the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or exercising any
trust or power conferred upon the Trustee, under this Agreement relating to
such Certificates;
(iv) The Trustee shall not be required to take notice or be deemed to
have notice or knowledge of any default unless an Authorized Officer of the
Trustee shall
97
<PAGE>
have received written notice thereof. In the absence of receipt of such
notice, the Trustee may conclusively assume that there is no default; and
(v) Subject to the other provisions of this Agreement and without
limiting the generality of this Section 10.01, the Trustee shall have no
duty (A) to see to any recording, filing, or depositing of this Agreement
or any agreement referred to herein or any financing statement or
continuation statement evidencing a security interest, or to see to the
maintenance of any such recording or filing or depositing or to any
rerecording, refiling or redepositing of any thereof, (B) to see to any
insurance or (C) to see to the payment or discharge of any tax, assessment,
or other governmental charge or any lien or encumbrance of any kind owing
with respect to, assessed or levied against, any part of the Trust Estate
from funds available in the Certificate Account.
(d) Whether or not therein expressly so provided, every provision of this
Agreement relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.
(e) No provision of this Agreement shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it. None of the provisions contained in this Agreement shall in any
event require the Trustee to perform, or be responsible for the manner of
performance of, any of the obligations of the Master Servicer, the Backup Master
Servicer or any Sub-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 Master Servicer in accordance with the
terms on this Agreement.
(f) The permissive right of the Trustee to take actions enumerated in this
Agreement shall not be construed as a duty and the Trustee shall not be
answerable for other than its own negligence or willful misconduct.
(g) The Trustee shall be under no obligation to institute any suit, or to
take any remedial proceeding under this Agreement, or to take any steps in the
execution of the trusts hereby created or in the enforcement of any rights and
powers hereunder until it shall be indemnified to its satisfaction against any
and all costs and expenses, outlays and counsel fees and other reasonable
disbursements and against all liability, except liability which is adjudicated
to have resulted from its negligence or willful misconduct, in connection with
any action so taken.
Section 10.02 Removal of Trustee for Cause.
(a) The Trustee may be removed pursuant to paragraph (b) hereof upon the
occurrence of any of the following events (whatever the reason for such event
and whether it shall be voluntary or involuntary or be effected by operation of
law or pursuant to any judgment, decree or order of any court or any order, rule
or regulation of any administrative or governmental body):
(1) the Trustee shall fail to distribute to the Owners entitled hereto
on any Payment Date any amounts available for distribution that it has
received in accordance with the terms hereof; (provided, however, that any
such failure which is due to circumstances beyond the control of the
Trustee shall not be a cause for removal hereunder); or
98
<PAGE>
(2) the Trustee shall fail in the performance of, or breach, any
covenant or agreement of the Trustee in this Agreement, or if any
representation or warranty of the Trustee made in this Agreement or in any
certificate or other writing delivered pursuant hereto or in connection
herewith shall prove to be incorrect in any material respect as of the time
when the same shall have been made, and such failure or breach shall
continue or not be cured for a period of 30 days after there shall have
been given, by registered or certified mail, to the Trustee by the Seller,
the Certificate Insurer, or by the Owners of at least 25% of the aggregate
Percentage Interests in the Trust Estate represented by the Class A
Certificates then Outstanding, or, if there are no Class A Certificates
then Outstanding, by such Percentage Interests represented by the Class R
Certificates, a written notice specifying such failure or breach and
requiring it to be remedied; or
(3) a decree or order of a court or agency or supervisory authority
having jurisdiction for the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshalling of assets
and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the Trustee,
and such decree or order shall have remained in force undischarged or
unstayed for a period of 75 days; or
(4) a conservator or receiver or liquidator or sequestrator or
custodian of the property of the Trustee is appointed in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings of or relating to the Trustee or relating to all or
substantially all of its property; or
(5) the Trustee shall become insolvent (however insolvency is
evidenced), generally fail to pay its debts as they come due, file or
consent to the filing of a petition to take advantage of any applicable
insolvency or reorganization statute, make an assignment for the benefit of
its creditors, voluntarily suspend payment of its obligations, or take
corporate action for the purpose of any of the foregoing.
The Depositor shall give to the Certificate Insurer, Moody's and Standard &
Poor's notice of the occurrence of any such event of which the Depositor is
aware.
(b) If any event described in Paragraph (a) occurs and is continuing, then
and in every such case (i) the Certificate Insurer or (ii) with the prior
written consent (which shall not be unreasonably withheld) of the Certificate
Insurer, the Depositor and the Owners of a majority of the Percentage Interests
represented by the Class A Certificates or if there are no Class A Certificates
then outstanding by such majority of the Percentage Interests represented by the
Class R Certificates, may, whether or not the Trustee resigns pursuant to
Section 10.09(b) hereof, immediately, concurrently with the giving of notice to
the Trustee, and without delaying the 30 days required for notice therein,
appoint a successor Trustee pursuant to the terms of Section 10.09 hereof.
(c) The Master Servicer shall not be liable for any costs relating to the
removal of the Trustee or the appointment of a new Trustee.
Section 10.03 Certain Rights of the Trustee.
Except as otherwise provided in Section 10.01 hereof:
(a) the Trustee (acting as Trustee or Tax Matters Person) may request and
may rely and shall be protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, note or
99
<PAGE>
other paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request or direction of the Depositor, the Seller, the Sponsor, the
Certificate Insurer, or the Owners of any Class of Certificates mentioned herein
shall be sufficiently evidenced in writing;
(c) whenever in the administration of this Agreement the Trustee shall deem
it desirable that a matter be proved or established prior to taking, suffering
or omitting any action hereunder, the Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith on its part, rely upon
an Officer's Certificate;
(d) the Trustee may consult with counsel, and the advice of such counsel
(selected in good faith by the Trustee) shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reasonable reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Agreement at the request or direction of any of
the Owners pursuant to this Agreement, unless such Owners shall have offered to
the Trustee reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such request or
direction;
(f) the Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, note or other
paper or document, unless requested in writing to do so by the Owners; provided,
however, that if the payment within a reasonable time to the Trustee of the
costs, expenses or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured to the
Trustee by the security afforded to it by the terms of this Agreement, the
Trustee may require reasonable indemnity against such cost, expense or liability
as a condition to taking any such action;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents, attorneys
or custodian;
(h) the Trustee shall not be liable for any action it takes or omits to
take in good faith which it reasonably believes to be authorized by the
Authorized Officer of any Person or within its rights or powers under this
Agreement other than as to validity and sufficiency of its authentication of the
Certificates;
(i) the right of the Trustee to perform any discretionary act enumerated in
this Agreement shall not be construed as a duty, and the Trustee shall not be
answerable for other than its negligence or willful misconduct in the
performance of such act;
(j) pursuant to the terms of this Agreement, the Master Servicer is
required to furnish to the Trustee from time to time certain information and
make various calculations which are relevant to the performance of the Trustee's
duties under the Agreement. The Trustee shall be entitled to rely in good faith
on any such information and calculations in the performance of its duties
hereunder, (i) unless and until an Authorized Officer of the Trustee has actual
knowledge, or is advised by any Owner of a Certificate (either in writing or
orally with prompt written or telecopy confirmations), that such information or
calculations is or are incorrect, or (ii) unless there is a manifest error in
any such information; and
100
<PAGE>
(k) the Trustee shall not be required to give any bond or surety in respect
of the execution of the Trust Estate created hereby or the powers granted
hereunder.
Section 10.04 Not Responsible for Recitals or Issuance of Certificates.
The recitals and representations contained herein and in the Certificates,
except the execution and authentication of the Certificates, shall be taken as
the statements of the Depositor, and the Trustee assumes no responsibility for
their correctness (other than with respect to such execution and
authentication). The Trustee makes no representation as to the validity or
sufficiency of this Agreement, of the Certificates, or any Home Equity Loan or
document related thereto other than as to validity and sufficiency of its
authentication of the Certificates. The Trustee shall not be accountable for the
use or application by the Depositor of any of the Certificates or of the
proceeds of such Certificates, or for the use or application of any funds paid
to the Depositor, the Seller, the Sponsor or the Master Servicer in respect of
the Home Equity Loans or deposited into or withdrawn from the Principal and
Interest Account or the Certificate Account by the Depositor, the Master
Servicer or the Seller, and shall have no responsibility for filing any
financing or continuation statement in any public office at any time or
otherwise to perfect or maintain the perfection of any security interest or lien
for the Trust or to record this Agreement. The Trustee shall not be required to
take notice or be deemed to have notice or knowledge of any default unless an
Authorized Officer of the Trustee shall have received written notice thereof or
an Authorized Officer has actual knowledge thereof. In the absence of receipt of
such notice, the Trustee may conclusively assume that no default has occurred.
Section 10.05 May Hold Certificates.
The Trustee, any Paying Agent, Registrar or any other agent of the Trust,
in its individual or any other capacity, may become an Owner or pledgee of
Certificates and may otherwise deal with the Trust with the same rights it would
have if it were not Trustee, any Paying Agent, Registrar or such other agent.
Section 10.06 Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated from
other trust funds except to the extent required herein or required by law. The
Trustee shall be under no liability for interest on any money received by it
hereunder except as otherwise agreed with the Depositor and except to the extent
of income or other gain on investments which are deposits in or certificates of
deposit of the Trustee in its commercial capacity.
Section 10.07 Compensation and Reimbursement.
The Trustee shall receive compensation for fees and reimbursement for
expenses pursuant to Section 2.05, Section 6.12, Section 7.03(b)(i), Section
7.06, Section 10.07 and Section 10.13 hereof. Except as otherwise provided in
this Agreement, the Trustee and any director, officer, employee or agent of the
Trustee shall be indemnified by the Trust and held harmless against any loss,
liability, or "unanticipated out-of-pocket" expense incurred or paid to third
parties (which expenses shall not include salaries paid to employees, or
allocable overhead, of the Trustee) in connection with the acceptance or
administration of its trusts hereunder or the Certificates, other than any loss,
liability or expense incurred by reason of willful misfeasance, bad faith or
negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties hereunder. All such amounts described in the
preceding sentence shall be payable as provided in (A) Section 7.03(b)(i) with
respect to the first $50,000 of such amounts and (B) Section 7.03(b)(iv)(D) with
respect to the remainder of such amounts, subject in the case of clause (B), to
Sections 10.01(e) and 10.01(g). In addition, the Trustee shall receive
compensation for its services as custodian hereunder pursuant to a separate
letter agreement
101
<PAGE>
between the Trustee and the Sponsor. The Trustee and any director, officer,
employee or agent of the Trustee shall be indemnified by the Seller and held
harmless against any loss, liability or reasonable expenses incurred by the
Trustee in performing its duties as Tax Matters Person for the REMIC created
under this Agreement, other than any loss, liability or expense incurred by
reason of willful misfeasance, bad faith or negligence in the performance of its
duties as Tax Matters Person for the REMIC created hereunder. The provisions of
this Section 10.07 shall survive the termination of this Agreement.
Section 10.08 Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a
corporation or association organized and doing business under the laws of the
United States of America or of any State authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least
$50,000,000 subject to supervision or examination by the United States of
America, acceptable to the Certificate Insurer and the Owners of a majority of
the Percentage Interests of the Class A Certificates and having a deposit rating
of at least A- from Standard & Poor's and A2 by Moody's. If such Trustee
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such corporation
or association shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. If at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section, it shall, upon the request of the Seller with the consent of the
Certificate Insurer (which consent shall not be unreasonably withheld) or of the
Certificate Insurer, resign immediately in the manner and with the effect
hereinafter specified in this Article X.
Section 10.09 Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article X shall become effective until the
acceptance of appointment by the successor Trustee under Section 10.10 hereof.
(b) The Trustee, or any trustee or trustees hereafter appointed, may resign
at any time by giving written notice of resignation to the Depositor and by
mailing notice of resignation by first-class mail, postage prepaid, to the
Certificate Insurer and the Owners at their addresses appearing on the Register.
A copy of such notice shall be sent by the resigning Trustee to the Rating
Agencies. Upon receiving notice of resignation, the Depositor shall promptly
appoint a successor Trustee or trustees acceptable to the Certificate Insurer by
written instrument, in duplicate, executed on behalf of the Trust by an
Authorized Officer of the Seller, one copy of which instrument shall be
delivered to the Trustee so resigning and one copy to the successor Trustee or
trustees. If no successor Trustee shall have been appointed and have accepted
appointment within 30 days after the giving of such notice of resignation, the
resigning trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee, or any Owner may, on behalf of himself and
all others similarly situated, petition any such court for the appointment of a
successor Trustee. Such court may thereupon, after such notice, if any, as it
may deem proper and appropriate, appoint a successor Trustee.
(c) If at any time the Trustee shall cease to be eligible under Section
10.08 hereof and shall fail to resign after written request therefor by the
Depositor or by the Certificate Insurer, the Certificate Insurer or the
Depositor with the written consent of the Certificate Insurer may remove the
Trustee and appoint a successor Trustee acceptable to the Certificate Insurer by
written instrument, in duplicate, executed on behalf of the Trust by an
Authorized Officer of the
102
<PAGE>
Depositor, one copy of which instrument shall be delivered to the Trustee so
removed and one copy to the successor Trustee.
(d) The Owners of a majority of the Percentage Interests represented by the
Class A Certificates with the consent of the Certificate Insurer, or, if there
are no Class A Certificates then Outstanding, by such majority of the Percentage
Interests represented by the Class R Certificates, may at any time remove the
Trustee and appoint a successor Trustee acceptable to the Certificate Insurer by
delivering to the Trustee to be removed, to the successor Trustee so appointed,
to the Depositor, to the Master Servicer and to the Certificate Insurer, copies
of the record of the act taken by the Owners, as provided for in Section 12.03
hereof.
(e) If the Trustee fails to perform its duties in accordance with the terms
of this Agreement, or becomes ineligible pursuant to Section 10.08 to serve as
Trustee, the Certificate Insurer may remove the Trustee and appoint a successor
Trustee by written instrument, in triplicate, signed by the Certificate Insurer
duly authorized, one complete set of which instruments shall be delivered to the
Depositor, one complete set to the Trustee so removed and one complete set to
the successor Trustee so appointed.
(f) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of the Trustee for any cause, the
Seller shall promptly appoint a successor Trustee acceptable to the Certificate
Insurer and the Owner of the majority of Percentage Interests of the Class A
Certificates then Outstanding. If within one year after such resignation,
removal or incapability or the occurrence of such vacancy, a successor Trustee
shall be appointed by act of the Certificate Insurer or the Owners of a majority
of the Percentage Interests represented by the Class A Certificates then
Outstanding with the consent of the Certificate Insurer, the successor Trustee
so appointed shall forthwith upon its acceptance of such appointment become the
successor Trustee and supersede the successor Trustee appointed by the
Depositor. If no successor Trustee shall have been so appointed by the Depositor
or the Owners and shall have accepted appointment in the manner hereinafter
provided, any Owner may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
Trustee. Such court may thereupon, after such notice, if any, as it may deem
proper and prescribe, appoint a successor Trustee.
(g) The Seller shall give notice of any removal of the Trustee by mailing
notice of such event by first-class mail, postage prepaid, to the Certificate
Insurer, to the Rating Agencies and to the Owners as their names and addresses
appear in the Register. Each notice shall include the name of the successor
Trustee and the address of its corporate trust office.
Section 10.10 Acceptance of Appointment by Successor Trustee.
Every successor Trustee appointed hereunder shall execute, acknowledge and
deliver to the Depositor on behalf of the Trust and to its predecessor Trustee
an instrument accepting such appointment hereunder and stating its eligibility
to serve as Trustee hereunder, and thereupon the resignation or removal of the
predecessor Trustee shall become effective and such successor Trustee, without
any further act, deed or conveyance, shall become vested with all the rights,
powers, trusts, duties and obligations of its predecessor hereunder; but, on
request of the Depositor or the successor Trustee, such predecessor Trustee
shall, upon payment of its charges then unpaid, execute and deliver an
instrument transferring to such successor Trustee all of the rights, powers and
trusts of the Trustee so ceasing to act, and shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such Trustee so
ceasing to act hereunder. Upon request of any such successor Trustee, the
Depositor on behalf of the Trust shall execute any and all instruments for more
fully and certainly vesting in and confirming to such successor Trustee all such
rights, powers and trusts.
103
<PAGE>
Upon acceptance of appointment by a successor Trustee as provided in this
Section, the Depositor shall mail notice thereof by first-class mail, postage
prepaid, to the Owners at their last addresses appearing upon the Register. The
Depositor shall send a copy of such notice to the Rating Agencies. If the
Depositor fails to mail such notice within ten days after acceptance of
appointment by the successor Trustee, the successor Trustee shall cause such
notice to be mailed at the expense of the Trust.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor shall be qualified and eligible under this
Article X.
Section 10.11 Merger, Conversion, Consolidation or Succession to Business
of the Trustee.
Any corporation or association into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation or
association resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation or association succeeding to all or
substantially all of the corporate trust business of the Trustee, shall be the
successor of the Trustee hereunder, without the execution or filing of any paper
or any further act on the part of any of the parties hereto; provided, however,
that such corporation or association shall be otherwise qualified and eligible
under this Article X. In case any Certificates have been executed, but not
delivered, by the Trustee then in office, any successor by merger, conversion or
consolidation to such Trustee may adopt such execution and deliver the
Certificates so executed with the same effect as if such successor Trustee had
itself executed such Certificates.
Section 10.12 Reporting; Withholding.
(a) The Trustee shall timely provide to the Owners the Internal Revenue
Service's Form 1099 and any other statement required by applicable Treasury
regulations as determined by the Tax Matters Person, and shall withhold, as
required by applicable law, federal, state or local taxes, if any, applicable to
distributions to the Owners, including but not limited to backup withholding
under Section 3406 of the Code and the withholding tax on distributions to
foreign investors under Sections 1441 and 1442 of the Code.
(b) As required by law or upon request of the Tax Matters Person and except
as otherwise specifically set forth in (a) preceding, the Trustee shall timely
file all reports prepared by the Seller and required to be filed by the Trust
with any federal, state or local governmental authority having jurisdiction over
the Trust, including other reports that must be filed with the Owners, such as
the Internal Revenue Service's Form 1066 and Schedule Q and the form required
under Section 6050K of the Code, if applicable to REMICs. Furthermore, the
Trustee shall report to Owners, if required, with respect to the allocation of
expenses pursuant to Section 212 of the Code in accordance with the specific
instructions to the Trustee by the Seller with respect to such allocation of
expenses. The Trustee shall, upon request of the Seller, collect any forms or
reports from the Owners determined by the Seller to be required under applicable
federal, state and local tax laws.
(c) Except as otherwise provided, the Trustee shall have the responsibility
for preparation and execution of those returns, forms, reports and other
documents referred to in this Section.
(d) The Sponsor covenants and agrees that it shall provide to the Trustee
any information necessary to enable the Trustee to meet its obligations under
subsections (a), (b) and (c) above.
104
<PAGE>
Section 10.13 Liability of the Trustee.
The Trustee shall be liable in accordance herewith only to the extent
of the obligations specifically imposed upon and undertaken by the Trustee
herein. Neither the Trustee nor any of the directors, officers, employees or
agents of the Trustee shall be under any liability on any Certificate or
otherwise to the Certificate Account, the Depositor, the Seller, the Master
Servicer or any Owner for any action taken or for refraining from the taking of
any action in good faith pursuant to this Agreement, or for errors in judgment;
provided, however, that this provision shall not protect the Trustee, its
directors, officers, employees or agents or any such Person against any
liability which would otherwise be imposed by reason of negligent action,
negligent failure to act or willful misconduct in the performance of duties or
by reason of reckless disregard of obligations and duties hereunder. Subject to
the foregoing sentence, the Trustee shall not be liable for losses on
investments of amounts in the Certificate Account (except for any losses on
obligations on which the bank serving as Trustee is the obligor). In addition,
the Depositor, the Seller and Master Servicer covenant and agree to indemnify
the Trustee and the Master Servicer (if the Master Servicer is also the Trustee)
from, and hold it harmless against, any and all losses, liabilities, damages,
claims or expenses (including reasonable legal fees and expenses) of whatsoever
kind arising out of or in connection with the performance of its duties
hereunder other than those resulting from the negligence or bad faith of the
Trustee, and the Seller shall pay all amounts not otherwise paid or reimbursed
pursuant to Sections 2.05, 6.12 and 7.06 hereof. The Trustee and any director,
officer, employee or agent of the Trustee may rely and shall be protected in
acting or refraining from acting in good faith on any certificate, notice or
other document of any kind prima facie properly executed and submitted by the
Authorized Officer of any Person respecting any matters arising hereunder. The
provisions of this Section 10.13 shall survive the termination of this Agreement
and the payment of the outstanding Certificates.
Section 10.14 Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust Estate or Property may at the time be located, the Master
Servicer and the Trustee acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the
Trustee and reasonably acceptable to the Certificate Insurer to act as
Co-Trustee or Co-Trustees, jointly with the Trustee, of all or any part of the
Trust Estate or separate Trustee or separate Trustees of any part of the Trust
Estate, and to vest in such Person or Persons, in such capacity and for the
benefit of the Owners, such title to the Trust Estate, or any part thereof, and,
subject to the other provisions of this Section 10.14, such powers, duties,
obligations, rights and trusts as the Master Servicer and the Trustee may
consider necessary or desirable. If the Master Servicer shall not have joined in
such appointment within 15 days after the receipt by it of a request so to do,
or in the case any event indicated in Section 8.20(a) shall have occurred and be
continuing, the Trustee subject to reasonable approval of the Certificate
Insurer alone shall have the power to make such appointment. No Co-Trustee or
separate Trustee hereunder shall be required to meet the terms of eligibility as
a successor Trustee under Section 10.08 and no notice to Owner of the
appointment of any Co-Trustee or separate Trustee shall be required under
Section 10.09.
Every separate Trustee and Co-Trustee shall, to the extent permitted, be
appointed and act subject to the following provisions and conditions:
(i) All rights, powers, duties and obligations conferred or imposed
upon the Trustee shall be conferred or imposed upon and exercised or
performed by the Trustee and such separate Trustee or Co-Trustee jointly
(it being understood that such separate
105
<PAGE>
Trustee or Co-Trustee is not authorized to act separately without the
Trustee joining in such act), except to the extent that under any law of
any jurisdiction in which any particular act or acts are to be performed
(whether as Trustee hereunder or as successor to the Master Servicer
hereunder), the Trustee shall be incompetent or unqualified to perform such
act or acts, in which event such rights, powers, duties and obligations
(including the holding of title to the Trust Estate or any portion thereof
in any such jurisdiction) shall be exercised and performed singly by such
separate Trustee or Co-Trustee, but solely at the direction of the Trustee;
(ii) No Co-Trustee hereunder shall be held personally liable by reason
of any act or omission of any other Co-Trustee hereunder; and
(iii) The Master Servicer, and the Certificate Insurer and the Trustee
acting jointly may at any time accept the resignation of or remove any
separate Trustee or Co-Trustee.
Any notice, request or other writing given to the Trustee shall be deemed
to have been given to each of the then separate Trustees and Co-Trustees, as
effectively as if given to each of them. Every instrument appointing any
separate Trustee or Co-Trustee shall refer to this Agreement and the conditions
of this Section 10.14. Each separate Trustee and Co-Trustee, upon its acceptance
of the trusts conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee or separately,
as may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Master Servicer.
Any separate Trustee or Co-Trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate Trustee or Co-Trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor Trustee.
The parties hereto acknowledge that any Co-Trustee shall be entitled to the
same rights and subject to the same standards as the Trustee with respect to all
rights and immunities of the Trustee, including with respect to indemnification
and the obligations and duties of the Master Servicer to the Trustee pursuant to
Sections 2.05, 8.05, 10.07 and 11.16(a). The Trustee shall pay the Co-Trustee
any compensation to which the Co-Trustee may be entitled from its own funds.
END OF ARTICLE X
106
<PAGE>
ARTICLE XI
MISCELLANEOUS
Section 11.01 Compliance Certificates and Opinions.
Upon any application or request by the Depositor, the Seller, the Sponsor,
the Certificate Insurer or the Owners to the Trustee to take any action under
any provision of this Agreement, the Depositor, the Seller, the Sponsor, the
Certificate Insurer or the Owners, as the case may be, shall furnish to the
Trustee a certificate stating that all conditions precedent, if any, provided
for in this Agreement relating to the proposed action have been complied with,
except that in the case of any such application or request as to which the
furnishing of such documents is specifically required by any provision of this
Agreement relating to such particular application or request, no additional
certificate need be furnished.
Except as otherwise specifically provided herein, each certificate or
opinion with respect to compliance with a condition or covenant provided for in
this Agreement (including one furnished pursuant to specific requirements of
this Agreement relating to a particular application or request) shall include:
(a) a statement that each individual signing such certificate or opinion
has read such covenant or condition and the definitions herein relating thereto;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based; and
(c) a statement as to whether, in the opinion of each such individual, such
condition or covenant has been complied with.
Section 11.02 Form of Documents Delivered to the Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Trustee may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by counsel, unless such Authorized Officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate or opinion of an Authorized
Officer of the Trustee or any opinion of counsel may be based, insofar as it
relates to factual matter upon a certificate or opinion of, or representations
by, one or more Authorized Officers of the Depositor, the Seller or the Master
Servicer, stating that the information with respect to such factual matters is
in the possession of the Depositor, the Seller or the Master Servicer, unless
such Authorized Officer or counsel knows, or in the exercise
107
<PAGE>
of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous. Any opinion of
counsel may also be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an Authorized Officer of the
Trustee, stating that the information with respect to such matters is in the
possession of the Trustee, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to such matters are erroneous. Any opinion of counsel may be based
on the written opinion of other counsel, in which event such opinion of counsel
shall be accompanied by a copy of such other counsel's opinion and shall include
a statement to the effect that such counsel believes that such counsel and the
Trustee may reasonably rely upon the opinion of such other counsel.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Agreement, they may, but need not, be consolidated and
form one instrument.
Section 11.03 Acts of Owners.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Agreement to be given or taken by the Owners
may be embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such Owners in person or by agent duly appointed in
writing; and, except as herein otherwise expressly provided, such action shall
become effective when such instrument or instruments are delivered to the
Trustee, and, where it is hereby expressly required, to the Seller. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "act" of the Owners signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Agreement and conclusive in favor of the Trustee and the Trust, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by
the certificate of any notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Whenever such execution is
by an officer of a corporation or a member of a partnership on behalf of such
corporation or partnership, such certificate or affidavit shall also constitute
sufficient proof of his authority.
(c) The ownership of Certificates shall be proved by the Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Owner of any Certificate shall bind the Owner of every
Certificate issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done, omitted or suffered to
be done by the Trustee or the Trust in reliance thereon, whether or not notation
of such action is made upon such Certificates.
Section 11.04 Notices, etc. to Trustee.
Any request, demand, authorization, direction, notice, consent, waiver or
act of the Owners or other documents provided or permitted by this Agreement to
be made upon, given or furnished to, or filed with the Trustee by any Owner, the
Certificate Insurer, the Depositor, the Seller shall be sufficient for every
purpose hereunder if made, given, furnished or filed in writing to or with and
received by the Trustee at its Corporate Trust Office as set forth in Section
2.02 hereof.
Section 11.05 Notices and Reports to Owners; Waiver of Notices.
Where this Agreement provides for notice to Owners of any event or the
mailing of any report to Owners, such notice or report shall be sufficiently
given (unless otherwise herein
108
<PAGE>
expressly provided) if mailed, first-class postage prepaid, to each Owner
affected by such event or to whom such report is required to be mailed, at the
address of such Owner as it appears on the Register, not later than the latest
date, and not earlier than the earliest date, prescribed for the giving of such
notice or the mailing of such report. In any case where a notice or report to
Owners is mailed in the manner provided above, neither the failure to mail such
notice or report nor any defect in any notice or report so mailed to any
particular Owner shall affect the sufficiency of such notice or report with
respect to other Owners, and any notice or report which is mailed in the manner
herein provided shall be conclusively presumed to have been duly given or
provided. Notwithstanding the foregoing, if the Master Servicer is removed or
resigned or the Trust is terminated, notice of any such events shall be made by
overnight courier, registered mail or telecopy followed by a telephone call.
Where this Agreement provides for notice in any manner, such notice may be
waived in writing by any Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Owners shall be filed with the Trustee, but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
In case, by reason of the suspension of regular mail service as a result of
a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event to Owners when such notice is required to be given pursuant
to any provision of this Agreement, then any manner of giving such notice as
shall be satisfactory to the Trustee shall be deemed to be a sufficient giving
of such notice.
Where this Agreement provides for notice to any rating agency that rated
any Certificates, failure to give such notice shall not affect any other rights
or obligations created hereunder.
Section 11.06 Rules by Trustee.
The Trustee may make reasonable rules for any meeting of Owners.
Section 11.07 Successors and Assigns.
All covenants and agreements in this Agreement by any party hereto shall
bind its successors and assigns, whether so expressed or not.
Section 11.08 Severability.
In case any provision in this Agreement or in the Certificates shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 11.09 Benefits of Agreement.
Nothing in this Agreement or in the Certificates, expressed or implied,
shall give to any Person, other than the Owners, the Certificate Insurer and the
parties hereto and their successors hereunder, any benefit or any legal or
equitable right, remedy or claim under this Agreement.
Section 11.10 Legal Holidays.
In any case where the date of any Monthly Remittance Date, any Payment
Date, any other date on which any distribution to any Owner is proposed to be
paid, or any date on which a notice is required to be sent to any Person
pursuant to the terms of this Agreement shall not be a
109
<PAGE>
Business Day, then (notwithstanding any other provision of the Certificates or
this Agreement) payment or mailing need not be made on such date, but may be
made on the next succeeding Business Day with the same force and effect as if
made or mailed on the nominal date of any such Monthly Remittance Date, such
Payment Date, or such other date for the payment of any distribution to any
Owner or the mailing of such notice, as the case may be, and no interest shall
accrue for the period from and after any such nominal date, provided such
payment is made in full on such next succeeding Business Day.
Section 11.11 Governing Law; Submission to Jurisdiction.
(a) In view of the fact that Owners are expected to reside in many states
and outside the United States and the desire to establish with certainty that
this Agreement will be governed by and construed and interpreted in accordance
with the law of a state having a well-developed body of commercial and financial
law relevant to transactions of the type contemplated herein, this Agreement and
each Certificate shall be construed in accordance with and governed by the laws
of the State of New York applicable to agreements made and to be performed
therein, without giving effect to the conflicts of law principles thereof.
(b) The parties hereto hereby irrevocably submit to the jurisdiction of the
United States District Court for the Southern District of New York and any court
in the State of New York located in the City and County of New York, and any
appellate court from any thereof, in any action, suit or proceeding brought
against it or in connection with this Agreement or any of the related documents
or the transactions contemplated hereunder or for recognition or enforcement of
any judgment, and the parties hereto hereby irrevocably and unconditionally
agree that all claims in respect of any such action or proceeding may be heard
or determined in such New York State court or, to the extent permitted by law,
in such federal court. The parties hereto agree that a final judgment in any
such action, suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law. To
the extent permitted by applicable law, the parties hereto hereby waive and
agree not to assert by way of motion, as a defense or otherwise in any such
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of such courts, that the suit, action or proceeding is brought in
an inconvenient forum, that the venue of the suit, action or proceeding is
improper or that the related documents or the subject matter thereof may not be
litigated in or by such courts.
(c) Each of the Depositor, Seller, Sponsor and Master Servicer hereby
irrevocably appoints and designates the Trustee as its true and lawful attorney
and duly authorized agent for acceptance of service of legal process with
respect to any action, suit or proceeding set forth in paragraph (b) hereof.
Each of the Seller and Master Servicer agrees that service of such process upon
the Trustee shall constitute personal service of such process upon it.
(d) Nothing contained in this Agreement shall limit or affect the right of
the Depositor, the Seller, the Sponsor, the Master Servicer or the Certificate
Insurer or third-party beneficiary hereunder, as the case may be, to serve
process in any other manner permitted by law or to start legal proceedings
relating to any of the Home Equity Loans against any Mortgagor in the courts of
any jurisdiction.
Section 11.12 Counterparts.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
110
<PAGE>
Section 11.13 Usury.
The amount of interest payable or paid on any Certificate under the terms
of this Agreement shall be limited to an amount which shall not exceed the
maximum nonusurious rate of interest allowed by the applicable laws of the State
of New York or any applicable law of the United States permitting a higher
maximum nonusurious rate that preempts such applicable New York laws, which
could lawfully be contracted for, charged or received (the "Highest Lawful
Rate"). In the event any payment of interest on any Certificate exceeds the
Highest Lawful Rate, the Trust stipulates that such excess amount will be deemed
to have been paid to the Owner of such Certificate as a result of an error on
the part of the Trustee acting on behalf of the Trust and the Owner receiving
such excess payment shall promptly, upon discovery of such error or upon notice
thereof from the Trustee on behalf of the Trust, refund the amount of such
excess or, at the option of such Owner, apply the excess to the payment of
principal of such Certificate, if any, remaining unpaid. In addition, all sums
paid or agreed to be paid to the Trustee for the benefit of Owners of
Certificates for the use, forbearance or detention of money shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of such Certificates.
Section 11.14 Amendment.
(a) The Trustee, the Depositor, the Seller, the Sponsor and the Master
Servicer, may at any time and from time to time, with the prior approval of the
Certificate Insurer but without the giving of notice to or the receipt of the
consent of the Owners, amend this Agreement, and the Trustee shall consent to
the amendment for the purposes of (i) if accompanied by an approving opinion of
counsel which shall not be at the expense of the Trustee experienced in federal
income tax matters, removing the restriction against the transfer of a Class R
Certificate to a Disqualified Organization (as such term is defined in the
Code), (ii) complying with the requirements of the Code including any amendments
necessary to maintain REMIC status of the REMIC Estate, (iii) curing any
ambiguity, (iv) correcting or supplementing any provisions of this Agreement
which are inconsistent with any other provisions of this Agreement or (v) for
any other purpose, provided that in the case of clause (v), (A) the Seller
delivers an opinion of counsel acceptable to the Trustee which shall not be at
the expense of the Trustee that such amendment will not adversely effect in any
material respect the interest of the Owners and (B) such amendment will not
result in a withdrawal or reduction of the rating of the Class A Certificates
without regard to the Certificate Insurance Policy. Notwithstanding anything to
the contrary, no such amendment shall (a) change in any manner the amount of, or
delay the timing of, payments which are required to be distributed to any Owner
without the consent of the Owner of such Certificate, (b) change the percentages
of Percentage Interest which are required to consent to any such amendments,
without the consent of the Owners of all Certificates of the Class or Classes
affected then outstanding or (c) which affects in any manner the terms or
provisions of the Certificate Insurance Policy.
(b) The Certificate Insurer and the Rating Agencies shall be provided by
the Seller with copies of any amendments to this Agreement, together with copies
of any opinions or other documents or instruments executed in connection
therewith.
(c) Notwithstanding any contrary provisions of this Agreement, the Trustee
shall not consent to any amendment to this Agreement unless it shall have first
received an Opinion of Counsel (provided by the Person requesting such
amendment) to the effect that such amendment will not result in the imposition
of any tax on the Trust pursuant to the REMIC Provisions or cause the REMIC
created hereunder to fail to qualify as a REMIC at any time that any of the
Certificates are outstanding.
111
<PAGE>
Section 11.15 Paying Agent; Appointment and Acceptance of Duties.
The Trustee is hereby appointed Paying Agent. The Depositor may, subject to
the eligibility requirements for the Trustee set forth in Section 10.08 hereof,
including, without limitation, the written consent of the Certificate Insurer,
appoint one or more other Paying Agents or successor Paying Agents.
Each Paying Agent, immediately upon such appointment, shall signify its
acceptance of the duties and obligations imposed upon it by this Agreement by
written instrument of acceptance deposited with the Trustee.
Each such Paying Agent other than the Trustee shall execute and deliver to
the Trustee an instrument in which such Paying Agent shall agree with the
Trustee, subject to the provisions of Section 6.02, that such Paying Agent will:
(a) allocate all sums received for distribution to the Owners of
Certificates of each Class for which it is acting as Paying Agent on each
Payment Date among such Owners in the proportion specified by the Trustee; and
(b) hold all sums held by it for the distribution of amounts due with
respect to the Certificates in trust for the benefit of the Owners entitled
thereto until such sums shall be paid to such Owners or otherwise disposed of as
herein provided and pay such sums to such Persons as herein provided.
Any Paying Agent other than the Trustee may at any time resign and be
discharged of the duties and obligations created by this Agreement by giving at
least sixty (60) days written notice to the Trustee. Any such Paying Agent may
be removed at any time by an instrument filed with such Paying Agent and signed
by the Trustee.
In the event of the resignation or removal of any Paying Agent other than
the Trustee such Paying Agent shall pay over, assign and deliver any moneys held
by it as Paying Agent to its successor, or if there be no successor, to the
Trustee.
Upon the appointment, removal or notice of resignation of any Paying Agent,
the Trustee shall notify the Certificate Insurer and the Owners by mailing
notice thereof at their addresses appearing on the Register.
Section 11.16 REMIC Status.
(a) The parties hereto intend that the REMIC Estate shall constitute, and
that the affairs of the REMIC Estate shall be conducted so as to qualify it as a
REMIC in accordance with the REMIC Provisions. In furtherance of such intention,
The Chase Manhattan Bank or such other person designated pursuant to Section
11.18 hereof shall act as agent for the Trust and as Tax Matters Person for the
Trust and that in such capacity it shall: (i) prepare or cause to be prepared
and filed, at its own expense, in a timely manner, annual tax returns and any
other tax return required to be filed by the REMIC created hereunder using a
calendar year as the taxable year for such REMIC; (ii) in the related first such
tax return, make (or cause to be made) an election satisfying the requirements
of the REMIC Provisions, on behalf of the REMIC Estate, for it to be treated as
a REMIC; (iii) at the Tax Matters Person's expense, prepare and forward, or
cause to be prepared and forwarded, to the Owners all information, reports or
tax returns required with respect to the REMIC created hereunder, including
Schedule Q to Form 1066, as, when and in the form required to be provided to the
Owners, and to the Internal Revenue Service and any other relevant governmental
taxing authority in accordance with the REMIC Provisions and any
112
<PAGE>
other applicable federal, state or local laws, including without limitation
information reports relating to "original issue discount" as defined in the Code
based upon the prepayment assumption and calculated by using the "Issue Price"
(within the meaning of Section 1273 of the Code) of the Certificates of the
related Class; provided that the tax return filed on Schedule Q to Form 1066
shall be prepared and forwarded to the Owners of the Class R Certificates no
later than 50 days after the end of the period to which such tax return related;
(iv) not take any action or omit to take any action that would cause the
termination of the REMIC status of the REMIC created hereunder, except as
provided under this Agreement; (v) represent, the Trust or the REMIC created
hereunder in any administrative or judicial proceedings relating to an
examination or audit by any governmental taxing authority, request an
administrative adjustment as to a taxable year of the Trust or the REMIC created
hereunder, enter into settlement agreements with any governmental taxing agency,
extend any statute of limitations relating to any tax item of the Trust or the
REMIC created hereunder, and otherwise act on behalf of the Trust or the REMIC
created hereunder in relation to any tax matter involving the Trust or the REMIC
created hereunder (the legal expenses and costs of any such action described in
this subsection (v) and any liability resulting therefrom shall constitute
expenses of the Trust and the Trustee shall be entitled to reimbursement
therefor as provided in Section 7.03(b)(i) unless such legal expenses and costs
are incurred by reason of the Trustee's willful misfeasance, bad faith or
negligence); (vi) comply with all statutory or regulatory requirements with
regard to its conduct of activities pursuant to the foregoing clauses of this
Section 11.16, including, without limitation, providing all notices and other
information to the Internal Revenue Service and Owners of Class R Certificates
required of a "tax matters person" pursuant to subtitle F of the Code and the
Treasury Regulations thereunder; (vii) make available information necessary for
the computation of any tax imposed (A) on transferor of residual interests to
certain Disqualified Organizations or (B) on pass-through entities, any interest
in which is held by a Disqualified Organization; and (viii) acquire and hold the
Tax Matters Person Residual Interest. The obligations of the Trustee or such
other designated Tax Matters Person pursuant to this Section 11.16 shall survive
the termination or discharge of this Agreement.
In addition to the foregoing, the Tax Matters Person shall prepare and
forward, or cause to be prepared and forwarded, to the Seller as long as it is
an Owner of a Class R Certificate each year, beginning in December 1998, on or
before the twenty-seventh day (or if such day is not a business day, on the next
succeeding business day) of the month of (1) March (beginning in 1998), with
respect to the period January 1 to March 31, (2) May (beginning in 1998), with
respect to the period April 1 to May 31, (3) August (beginning in 1998), with
respect to the period June 1 to August 31 and (4) December (beginning in 1998),
with respect to the period September 1 to December 31, an estimate of such
Owner's allocable portion of taxable income or net loss, excess inclusions and
investment expenses for the related period to the extent such amounts are
required to be furnished on Schedule Q to Form 1066. Such estimates shall be
made to the extent of and based upon information provided to the Tax Matters
Person by the Master Servicer (which information may consist of actual
information related to payments received on the Home Equity Loans, except that
the estimate with respect to any month for which actual information is not
available may be based on the payment history for prior months and an assumption
of prepayments of the Home Equity Loans as provided by the Master Servicer). The
legal expenses and costs of any action or proceeding resulting from or relating
to the estimates provided by the Tax Matters Person pursuant to this Section
11.16(a) and any liability resulting therefrom shall constitute expenses of the
Master Servicer and the Trustee shall be entitled to reimbursement therefor from
the Master Servicer unless such legal expenses, costs or liability are incurred
by reason of the Trustee willful misfeasance, bad faith or gross negligence.
(b) The Seller, the Depositor, the Trustee and the Master Servicer covenant
and agree for the benefit of the Owners and the Certificate Insurer (i) to take
no action which would result
113
<PAGE>
in the termination of REMIC status for the REMIC created hereunder, (ii) not to
engage in any "prohibited transaction", as such term is defined in Section
860F(a)(2) of the Code, (iii) not to engage in any other action which may result
in the imposition on the Trust of any other taxes under the Code and (iv) to
cause the Master Servicer not to take or engage in any such action, to the
extent the Seller is aware of any such proposed action by the Master Servicer.
(c) The REMIC created hereunder shall, for federal income tax purposes,
maintain books on a calendar year basis and report income on an accrual basis.
(d) Except as otherwise permitted by Section 7.05(b), no Eligible
Investment shall be sold prior to its stated maturity (unless sold pursuant to a
plan of liquidation in accordance with Article IX hereof).
(e) Neither the Depositor, the Seller nor the Trustee shall enter into any
arrangement by which the Trustee will receive a fee or other compensation for
services rendered pursuant to this Agreement, other than as expressly
contemplated by this Agreement.
(f) Notwithstanding the foregoing clauses (d) and (e), the Trustee or the
Seller may engage in any of the transactions prohibited by such clauses,
provided that the Trustee shall have received an opinion of counsel experienced
in federal income tax matters acceptable to the Certificate Insurer to the
effect that such transaction does not result in a tax imposed on the Trustee or
cause a termination of REMIC status for the REMIC created hereunder; provided,
however, that such transaction is otherwise permitted under this Agreement.
(g) In the event that any tax is imposed on "prohibited transactions" of
the Trust created hereunder as defined in Section 860F(a)(2) of the Code, on
"net income from foreclosure property" of the Trust as defined in Section
860G(c) of the Code, on any contributions to the Trust after the Startup Date
therefor pursuant to Section 860G(d) of the Code, or any other tax is imposed by
the Code or any applicable provisions of state or local tax laws, such tax shall
be charged (i) to the Trustee if such tax arises out of or results from the
willful misfeasance, bad faith or negligence in performance by the Trustee of
any of its obligations under Article X, (ii) to the Master Servicer if such tax
arises out of or results from a breach by the Master Servicer of any of its
obligations under Article VIII or otherwise (iii) against amounts on deposit in
the Certificate Account and shall be paid by withdrawal therefrom.
Section 11.17 Additional Limitation on Action and Imposition of Tax.
Any provision of this Agreement to the contrary notwithstanding, the
Trustee shall not, without having obtained an opinion of counsel experienced in
federal income tax matters acceptable to the Certificate Insurer at the expense
of the party seeking to take such action but in no event at the expense of the
Trust to the effect that such transaction does not result in a tax imposed on
the Trust or the REMIC created hereunder or cause a termination of REMIC status
for the REMIC created hereunder, (i) sell any assets in the Trust Estate, (ii)
accept any contribution of assets after the Startup Day (other than Subsequent
Home Equity Loans), (iii) allow the Master Servicer to foreclose upon any Home
Equity Loan if such foreclosure would result in a tax on the Trust or the REMIC
or cause termination of the REMIC status for the REMIC created hereunder or (iv)
agree to any modification of this Agreement. To the extent that sufficient
amounts cannot be so retained to pay or provide for the payment of such tax, the
Trustee is hereby authorized to and shall segregate, into a separate
non-interest bearing account, the net income from any such Prohibited
Transactions of the REMIC created hereunder and use such income, to the extent
necessary, to pay such tax; provided that, to the extent that any such income is
paid to the Internal Revenue Service, the Trustee shall retain an equal amount
from future amounts otherwise distributable to the Owners of Class R
Certificates and shall distribute
114
<PAGE>
such retained amounts to the Owners of Class A Certificates to the extent they
are fully reimbursed and then to the Owners of the Class R Certificates. If any
tax, including interest penalties or assessments, additional amounts or
additions to tax, is imposed on the Trust, such tax shall be charged against
amounts otherwise distributable to the owners of the Class R Certificates on a
pro rata basis. The Trustee is hereby authorized to and shall retain from
amounts otherwise distributable to the Owners of the Class R Certificates
sufficient funds to pay or provide for the payment of, and to actually pay, such
tax as is legally owed by the Trust (but such authorization shall not prevent
the Trustee from contesting any such tax in appropriate proceedings, and
withholding payment of such tax, if permitted by law, pending the outcome of
such proceedings).
Section 11.18 Appointment of Tax Matters Person.
A Tax Matters Person will be appointed for the REMIC created hereunder for
all purposes of the Code and such Tax Matters Person will perform, or cause to
be performed, such duties and take, or cause to be taken, such actions as are
required to be performed or taken by the Tax Matters Person under the Code. The
Tax Matters Person for the REMIC created hereunder shall be the Trustee as long
as it owns a Class R Certificate; provided, however, that the Trustee may
appoint KPMG Peat Marwick to act as its agent with respect to the performance of
its obligations as Tax Matters person under Section 11.16. The parties hereto
acknowledge that the Trustee shall not be liable for the acts of KPMG Peat
Marwick and any fees of KPMG Peat Marwick shall be paid by the Master Servicer.
If the Trustee does not own a Class R Certificate, the Tax Matters Person may be
any other entity that owns a Class R Certificate and accepts a designation
hereunder as Tax Matters person by delivering an affidavit in the form of
Exhibit I.
Section 11.19 The Certificate Insurer.
Any right conferred to the Certificate Insurer hereunder shall be suspended
and shall run to the benefit of the Owners during any period in which there
exists a Certificate Insurer Default; provided, that the right of the
Certificate Insurer to receive the Premium Amount shall not be suspended if such
Certificate Insurer Default was a default other than a default under clause (a)
of the definition thereof. At such time as the Class A Certificates are no
longer Outstanding hereunder and the Certificate Insurer has received all
Reimbursement Amounts, the Certificate Insurer's rights hereunder shall
terminate.
Section 11.20 Reserved.
Section 11.21 Third-Party Rights.
The Trustee, the Seller, the Depositor, the Sponsor, the Master Servicer,
the Backup Master Servicer and the Owners agree that the Certificate Insurer
shall be deemed a third-party beneficiary of this Agreement as if it were a
party hereto.
115
<PAGE>
Section 11.22 Notices.
All notices hereunder shall be given as follows, until any superseding
instructions are given to all other Persons listed below:
The Trustee: The Chase Manhattan Bank
450 W. 33rd Street, 15th Floor
New York, NY 10001
Attention: Structured Finance Services
(212) 946-8600
(212) 946-3240 - Fax
The Depositor: DLJ Mortgage Acceptance Corp.
277 Park Avenue
New York, New York 10172
Attention: Paul Najarian
(212) 892-8193
(212) 892-4096 - Fax
with a copy to General Counsel's Office
The Seller: First Greensboro Capital Corporation
5909 Shelby Oak
Suite 137
Memphis, Tennessee 38139
Attention: Robert Bennett, Jr.
( ) --------
( ) ___-____ - Fax
The Master Servicer: First Greensboro Home Equity, Inc.
4830 Koger Blvd.
Greensboro, North Carolina 27407
Attention: Robert Bennett, Jr.
(910) 855-4925
(910) 854-8609 - Fax
The Backup Master
Servicer: Ocwen Federal Bank FSB
1675 Palm Beach Lakes Boulevard,
Suite 1002
West Palm Beach, Florida 33401
Attention: Secretary
(561) 681-8000
(561) 681-8177
With a copy to:
1675 Palm Beach Lakes Boulevard, Suite 532
West Palm Beach, Florida 33401
Attention: Senior Vice President, Law Department
Fax: (561) 681-8463
Tel: (561) 681-8661
116
<PAGE>
The Certificate
Insurer: Financial Security Assurance
350 Park Avenue
New York, New York 10022
Attention: Surveillance Department
Tel: (212) 826-0100
Fax: (212) 339-3518
(212) 339-3529
The Underwriter: Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue, 9th Floor
New York, NY 10172
Attention: Paul Najarian
(212) 892-8193
(212) 892-4096 - Fax
with a copy to General Counsel's Office
Moody's Investors Service, Inc.
99 Church Street
New York, New York 10007
Attention: The Residential Mortgage
Monitoring Department
Tel: (212) 553-0300
Fax: (212) 553-0355
Standard & Poor's: Standard & Poor's Ratings Services, a division of
the McGraw-Hill Companies
26 Broadway
15th Floor
New York, New York 10004
Attention: Residential Mortgage Group
Tel: (212) 208-8000
Fax: (212) 208-8365
Section 11.23 Rule 144A Information. For so long as any of the Class R
Certificates are "restricted securities" within the meaning of Rule 144A under
the Securities Act, the Master Servicer agrees to provide to any Owner of the
Class R Certificate and to any prospective purchaser who is a "Qualified
Institutional Buyer" (as defined in Rule 144A under the Securities Act) of Class
R Certificates who is a "Qualified Institutional Buyer" (as defined in Rule 144A
under the Securities Act) designated by such an Owner, upon the request of such
Owner or prospective purchaser, the information specified below which is
intended to satisfy the condition set forth in Rule 144A(d)(4) under the
Securities Act; provided that this Section 11.23 shall require, as to the
Trustee or the Master Servicer, only that the Master Servicer provide publicly
available information regarding it or the Trustee in response to any such
request; and provided further that the Master Servicer shall be obligated to
provide only such basic, material information concerning the structure of the
Class R Certificates and distributions thereon, the nature, performance and
servicing of the Home Equity Loans supporting the Certificates, and any credit
enhancement mechanism, if any, associated with the Certificates. Any recipient
of information provided pursuant to this Section 11.23 shall agree that such
information shall not be disclosed or used for any purpose other than the
evaluation of the Class R Certificates by the prospective purchaser. The Trustee
shall have no responsibility for the sufficiency under Rule
117
<PAGE>
144A of any information so provided by the Master Servicer to any Owner or
prospective purchaser of Class R Certificates.
END OF ARTICLE XI
118
<PAGE>
ARTICLE XII
CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER
Section 12.01 Trust Estate and Accounts Held for Benefit of the
Certificate Insurer.
The Trustee shall hold the Trust Estate for the benefit of the related
Owners and the Certificate Insurer and all references in this Agreement and in
the Certificates to the benefit of Owners of the Certificates shall be deemed to
include the Certificate Insurer. The Trustee shall cooperate in all reasonable
respects with any reasonable request by the Certificate Insurer for action to
preserve or enforce the Certificate Insurer's rights or interests under this
Agreement and the Certificates.
The Master Servicer hereby acknowledges and agrees that it shall service and
administer the Home Equity Loans and any REO Properties, and shall maintain the
Principal and Interest Account, for the benefit of the Owners and for the
benefit of the Certificate Insurer, and all references in this Agreement to the
benefit of or actions on behalf of the Owners shall be deemed to include the
Certificate Insurer. Unless a Certificate Insurer Default exists, the Master
Servicer shall not terminate any Sub-Servicing Agreements without the prior
consent of the Certificate Insurer.
Section 12.02 Claims Upon the Policy; Policy Payments Account.
(a) If on the Determination Date, the funds then on deposit in the
Certificate Account, are insufficient to pay the Insured Payments on such
Payment Date, the Trustee shall give notice to the Certificate Insurer by
telephone or telecopy of the amount of such deficiency, confirmed in writing in
the form set forth as Exhibit A to the Endorsement of the Certificate Insurance
Policy, to the Certificate Insurer and the Fiscal Agent (as defined in the
Certificate Insurance Policy), if any, at or before 9:00 a.m., New York City
time, on the second Business Day prior to such Payment Date.
(b) The Trustee shall establish a separate special purpose trust account
for the benefit of the Owners of the Class A Certificates and the Certificate
Insurer referred to herein as the "Policy Payments Account" over which the Trust
shall have exclusive control and sole right of withdrawal. The Trustee shall
deposit any amount paid under the Certificate Insurance Policy in the Policy
Payments Account and distribute such amount only for purposes of payment to the
Owners of the Class A Certificates of the Insured Payments for which a claim was
made and such amount may not be applied to satisfy any costs, expenses or
liabilities of the Master Servicer, the Trustee or the Trust. Amounts paid under
the Certificate Insurance Policy shall be transferred to the Certificate Account
in accordance with the next succeeding paragraph and disbursed by the Trustee to
Owners of the Class A Certificates in accordance with Section 7.03. It shall not
be necessary for such payments to be made by checks or wire transfers separate
from the checks or wire transfers used to pay the Insured Payments with other
funds available to make such payment. However, the amount of any payment of
principal of or interest on the related Class A Certificates to be paid from
funds transferred from the Policy Payments Account shall be noted as provided in
paragraph (c) below in the Register and in the statement to be furnished to
Owners of the Class A Certificates pursuant to Section 7.08. Funds held in the
Policy Payments Account shall not be invested by the Trustee.
On any Payment Date with respect to which a claim has been made under the
Insurance Policy, the amount of funds received by the Trustee as a result of any
claim under the Insurance Policy, to the extent required to make the Insured
Payment on such Payment Date shall be
119
<PAGE>
withdrawn from the Policy Payments Account and deposited in the Certificate
Account and applied by the Trustee, together with the other funds to be
withdrawn from the Certificate Account, directly to the payment in full of the
Insured Payment due on the related Class of Class A Certificates. Funds received
by the Trustee as a result of any claim under the Insurance Policy shall be
deposited by the Trustee in the Policy Payments Account and used solely for
payment to the Owners of the Class A Certificates may not be applied to satisfy
any costs, expenses or liabilities of the Master Servicer, the Trustee or the
Trust. Any funds remaining in the Policy Payments Account on the first Business
Day following a Payment Date shall be remitted to the Certificate Insurer,
pursuant to the instructions of the Certificate Insurer, by the end of such
Business Day.
(c) The Trustee shall keep a complete and accurate record of the amount of
interest and principal paid in respect of any Class A Certificate from moneys
received under the Certificate Insurance Policy. The Certificate Insurer shall
have the right to inspect such records at reasonable times during normal
business hours upon one Business Day's prior notice to the Trustee.
(d) The Trustee shall promptly notify the Certificate Insurer and Fiscal
Agent of any proceeding or the institution of any action, of which an Authorized
Officer of the Trustee has actual knowledge, seeking the avoidance as a
preferential transfer under applicable bankruptcy, insolvency, receivership or
similar law (a "Preference Claim") of any distribution made with respect to the
Class A Certificates. Each Owner of a Class A Certificate by its purchase of
such Certificate, the Master Servicer and the Trustee hereby agree that, the
Certificate Insurer (so long as no Certificate Insurer Default exists) may at
any time during the continuation of any proceeding relating to a Preference
Claim direct all matters relating to such Preference Claim, including without
limitation, (i) the direction of any appeal of any order relating to such
Preference Claim and (ii) the posting of any surety, supercedeas or performance
bond pending any such appeal. In addition and without limitation of the
foregoing, the Certificate Insurer shall be subrogated to the rights of the
Master Servicer, the Trustee and Owner of Class A Certificate in the conduct of
any such Preference Claim, including, without limitation, all rights of any
party to an adversary proceeding action with respect to any court order issued
in connection with any such Preference Claim.
Section 12.03 Effect of Payments by the Certificate Insurer; Subrogation.
Anything herein to the contrary notwithstanding, any payment with respect
to principal of or interest on any of the Class A Certificates which is made
with moneys received pursuant to the terms of the Certificate Insurance Policy
shall not be considered payment of such Certificates from the Trust and shall
not result in the payment of or the provision for the payment of the principal
of or interest on such Certificates within the meaning of Section 7.03. The
Depositor, the Master Servicer and the Trustee acknowledge, and each Owner by
its acceptance of a Certificate agrees, that without the need for any further
action on the part of the Certificate Insurer, the Depositor, the Master
Servicer, the Trustee or the Registrar (a) to the extent the Certificate Insurer
makes payments, directly or indirectly, on account of principal of or interest
on any Class A Certificates to the Owners of such Certificates, the Certificate
Insurer will be fully subrogated to the rights of such Holders to receive such
principal and interest from the Trust and (b) the Certificate Insurer shall be
paid such principal and interest but only from the sources and in the manner
provided herein for the payment of such principal and interest.
The Trustee, the Seller, the Depositor and the Master Servicer shall
cooperate in all respects with any reasonable request by the Certificate Insurer
for action to preserve or enforce the Certificate Insurer's rights or interests
under this Agreement without limiting the rights or affecting the interests of
the Owners as otherwise set forth therein.
120
<PAGE>
Section 12.04 Notices to the Certificate Insurer.
All notices, statements, reports, certificates or opinions required by this
Agreement to be sent to any other party hereto or to any of the Owners shall
also be sent to the Certificate Insurer.
Section 12.05 Third-Party Beneficiary.
The Certificate Insurer shall be a third-party beneficiary of this
Agreement, entitled to enforce the provisions hereof as if a party hereto.
Section 12.06 Rights to the Certificate Insurer To Exercise Rights
of Owners
By accepting its Certificate, each Owner of a Class A Certificate agrees
that unless a Certificate Insurer Default exists, the Certificate Insurer shall
have the right to exercise all rights of the Owners of the Class A Certificates
as specified under this Agreement without any further consent of the Owners of
the Class A Certificates.
END OF ARTICLE XII
121
<PAGE>
IN WITNESS WHEREOF, the Depositor, the Seller, the Sponsor, the Master
Servicer, the Trustee and the Backup Master Servicer have caused this Agreement
to be duly executed by their respective officers thereunto duly authorized, all
as of the day and year first above written.
DLJ MORTGAGE ACCEPTANCE CORP., as Depositor
By:
-----------------------------------------------
Title:
--------------------------------------------
FIRST GREENSBORO CAPITAL CORPORATION, as Seller
By:
-----------------------------------------------
Title:
--------------------------------------------
FIRST GREENSBORO HOME EQUITY, INC.,
as Sponsor and Master Servicer
By:
-----------------------------------------------
Title:
---------------------------------------------
THE CHASE MANHATTAN BANK,
as Trustee
By:
-----------------------------------------------
Title:
---------------------------------------------
OCWEN FEDERAL BANK FSB,
as Backup Master Servicer
By:
-----------------------------------------------
Title:
---------------------------------------------
122
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the 15th day of December, 1997, before me came Paul J. Najarian,
personally known to me, who, being by me duly sworn, did depose and say that he
is a Vice President of DLJ Mortgage Acceptance Corp., a Delaware corporation;
and that he signed his name thereto by order of the Board of Directors of said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
NOTARIAL SEAL
- --------------------------
Notary Public
123
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the __th day of December, 1997, before me personally came Robert
Bennett, Jr., to me known, who, being by me duly sworn, did depose and say that
he is a Vice President of First Greensboro Capital Corporation, a Tennessee
corporation, and that he signed his name thereto by order of the respective
Boards of Directors of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the
day and year in this certificate first above written.
NOTARIAL SEAL
- --------------------------
Holly Dormeyer
Notary Public
124
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the __th day of December, 1997, before me personally came Robert
Bennett, Jr., to me known, who, being by me duly sworn, did depose and say that
he is a Vice President of First Greensboro Home Equity, Inc., a North Carolina
corporation, and that he signed his name thereto by order of the respective
Boards of Directors of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the
day and year in this certificate first above written.
NOTARIAL SEAL
- --------------------------
Holly Dormeyer
Notary Public
125
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the __th day of December, 1997, before me personally came Ann Marie
Jose, to me known, who, being by me duly sworn did depose and say that she is a
Trust Officer of The Chase Manhattan Bank, the New York banking corporation
described in and that executed the above instrument as Trustee; and that she
signed her name thereto by order of the Board of Directors of said New York
banking corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
NOTARIAL SEAL
- --------------------------
Holly Dormeyer
Notary Public
126
<PAGE>
STATE OF )
: ss.:
COUNTY OF )
On the __th day of December, 1997, before me personally came
________________, to me known, who, being by me duly sworn did depose and say
that he is [a][the] ___________ of Ocwen Federal Bank FSB, a federal savings
bank; and that he signed his name thereto by order of the Board of Directors of
said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
NOTARIAL SEAL
- --------------------------
Notary Public
127
<PAGE>
SCHEDULE I
SCHEDULE OF HOME EQUITY LOANS
A copy of this Schedule is maintained by the Trustee at the Corporate Trust
Office and by the Master Servicer.
128
<PAGE>
EXHIBIT A-1
FORM OF CLASS A-1 CERTIFICATE
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS A CLASS OF
"REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" ("REMIC") AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTION 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE WITH THE
REMIC PROVISIONS OF THE CODE.
FIRST GREENSBORO HOME EQUITY LOAN TRUST 1997-2
HOME EQUITY LOAN PASS-THROUGH CERTIFICATE
CLASS A-1
(___% Pass-Through Rate)
Representing Certain Interests in a Pool Home Equity
Loans Originated or Purchased by
FIRST GREENSBORO HOME EQUITY, INC.
(This certificate does not represent an interest in, or an obligation of,
nor are the underlying Home Equity Loans insured or guaranteed by DLJ Mortgage
Acceptance Corp. or First Greensboro Home Equity, Inc. This Certificate
represents a fractional ownership interest in the Home Equity Loans and certain
other property held by the Trust.)
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer ("First
Greensboro Home Equity Loan Trust 1997-2") or its agent for registration of
transfer, exchange, or payment and any certificate issued is registered in the
name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
No: A-1-1 ----------
CUSIP
$----------------- December __, 1997 ---------------
Original Class A-1 Date Final Scheduled
Certificate Principal Payment Date
Balance
CEDE & CO.
---------------------
Registered Owner
A-1-1
<PAGE>
The registered Owner named above is the registered beneficial Owner of a
fractional interest in (a) the Home Equity Loans (other than any principal and
interest due thereon prior to December 1, 1997 whether or not received) listed
in Schedule I to the Pooling and Servicing Agreement which the Seller is causing
to be delivered to the Depositor pursuant to the Loan Sale Agreement and the
Depositor is causing to be delivered to the Trustee (and all substitutions
therefor as provided by Section 3.03, 3.04, 3.05 and 3.06 of the Pooling and
Servicing Agreement), together with the related Home Equity Loan documents and
the Depositor's interest in any Property which secured a Home Equity Loan but
which has been acquired by foreclosure or deed in lieu of foreclosure, and all
payments thereon and proceeds of the conversion, voluntary or involuntary, of
the foregoing; (b) such amounts as may be held by the Trustee in the Certificate
Account, together with investment earnings on such amounts and such amounts as
may be held in the name of the Trustee in the Principal and Interest Account, if
any, exclusive of investment earnings thereon (except as otherwise provided in
the Pooling and Servicing Agreement), whether in the form of cash, instruments,
securities or other properties (including any Eligible Investments held by the
Master Servicer) and (c) proceeds of all the foregoing (including, but not by
way of limitation, all proceeds of any mortgage insurance, hazard insurance and
title insurance policy relating to the Home Equity Loans, cash proceeds,
accounts, accounts receivable, notes, drafts, acceptances, chattel paper,
checks, deposit accounts, rights to payment of any and every kind, and other
forms of obligations and receivables which at any time constitute all or part of
or are included in the proceeds of any of the foregoing) to pay the Certificates
as specified in the Pooling and Servicing Agreement ((a) - (c) above shall be
collectively referred to herein as the "Trust Estate").
The Owner hereof is entitled to principal payments on each Payment Date, as
hereinafter described, which will fully amortize such original Class A-1
Certificate Principal Balance over the period from the date of initial issuance
of the Certificates to the final Payment Date for the Class A-1 Certificates.
Therefore, the actual Outstanding principal amount of this Certificate may, on
any date subsequent to January 25, 1998 (the first Payment Date) be less than
the original Certificate Principal Balance set forth above.
Upon receiving the final distribution hereon, the Owner hereof is required
to send this Certificate to the Trustee. The Pooling and Servicing Agreement (as
defined below) 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 Pooling and Servicing Agreement.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING HOME EQUITY LOANS ARE INSURED
OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT
NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
THE PRINCIPAL OF THIS CERTIFICATE IS PAYABLE IN INSTALLMENTS. THEREFORE,
THE ACTUAL OUTSTANDING PRINCIPAL AMOUNT OF THIS CERTIFICATE MAY ON ANY DATE
SUBSEQUENT TO JANUARY 25, 1998 (THE FIRST PAYMENT DATE) BE LESS THAN ITS
ORIGINAL CERTIFICATE PRINCIPAL BALANCE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING
REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS
REPRESENTED HEREBY.
A-1-2
<PAGE>
This Certificate is one of a Class of duly-authorized Certificates
designated as First Greensboro Home Equity Loan Trust 1997-2, Home Equity Loan
Pass-Through Certificates, Class A-1 (the "Class A-1 Certificates") and issued
under and subject to the terms, provisions and conditions of that certain
Pooling and Servicing Agreement dated as of December 1, 1997 (the "Pooling and
Servicing Agreement") by and among First Greensboro Home Equity, Inc., in its
capacity as the Sponsor (the "Sponsor") and as the Master Servicer (the "Master
Servicer"), DLJ Mortgage Acceptance Corp., in its capacity as Depositor (the
"Depositor"), First Greensboro Capital Corporation, in its capacity as the
Seller (the "Seller"), The Chase Manhattan Bank, a New York banking corporation,
in its capacity as the Trustee (the "Trustee") and Ocwen Federal Bank FSB, a
__________, in its capacity as Backup Master Servicer (the "Backup Master
Servicer"), to which the Owner of this Certificate by virtue of acceptance
hereof assents and by which such Owner is bound. Also issued under the Pooling
and Servicing Agreement are Certificates designated as First Greensboro Home
Equity Loan Trust 1997-2 Home Equity Loan Pass-Through Certificates, Class A-2
(the "Class A-2 Certificates"), Class A-3 (the "Class A-3 Certificates") and
Class R (Residual Interest) (the "Class R Certificates"). The Class A-1
Certificates, the Class A-2 Certificates and the Class A-3 Certificates shall be
together referred to as the "Class A Certificates" and the Class A Certificates
and the Class R Certificates are together referred to herein as the
"Certificates." Terms capitalized herein and not otherwise defined herein shall
have the respective meanings set forth in the Pooling and Servicing Agreement.
On the 25th day of each month, or, if such day is not a Business Day, then
the next succeeding Business Day (each such day being a "Payment Date")
commencing January 25, 1998, the Owners of the Class A-1 Certificates as of the
close of business on the last day of the calendar month immediately preceding
the calendar month in which a Payment Date occurs (the "Record Date") will be
entitled to receive the Class A-1 Distribution Amount relating to such
Certificate on such Payment Date. Distributions will be made in immediately
available funds to Owners of Certificates having an aggregate original
Certificate Principal Balance of at least $1,000,000 (by wire transfer or
otherwise) to the account of an Owner at a domestic bank or other entity having
appropriate facilities therefor, if such Owner has so notified the Trustee, or
by check mailed to the address of the person entitled thereto as it appears on
the Register.
Each Owner of record of a Class A-1 Certificate will be entitled to receive
such Owner's Percentage Interest in the amounts due on such Payment Date to the
Owners of the Class A-1 Certificates. The Percentage Interest of each Class A-1
Certificate as of any date of determination will be equal to the percentage
obtained by dividing the original Certificate Principal Balance of such Class
A-1 Certificate on the Startup Day by the aggregate Class A-1 Certificate
Principal Balance on the Startup Day.
The Certificate Insurer is required, subject to the terms of the
Certificate Insurance Policy to make Insured Payments available to the Trustee
on or prior to the related Payment Date for distribution to the Owners.
Upon receipt of amounts under the Certificate Insurance Policy on behalf of
the Owners of the Class A Certificates, the Trustee shall distribute in
accordance with the Pooling and Servicing Agreement such amounts (directly or
through a Paying Agent) to the Owners of the appropriate Class of the Class A
Certificates.
The Trustee or any duly-appointed Paying Agent will duly and punctually pay
distributions with respect to this Certificate in accordance with the terms
hereof and the Pooling and Servicing Agreement. Amounts properly withheld under
the Code by any Person from a distribution to any Owner shall be considered as
having been paid by the Trustee to such Owner for all purposes of the Pooling
and Servicing Agreement.
A-1-3
<PAGE>
The Home Equity Loans will be master serviced by the Master Servicer
pursuant to the Pooling and Servicing Agreement. The Pooling and Servicing
Agreement permits the Master Servicer to enter into Sub-Servicing Agreements
with certain institutions eligible for appointment as Sub- Servicers for the
servicing and administration of certain Home Equity Loans. No appointment of any
Sub- Servicer shall release the Master Servicer from any of its obligations
under the Pooling and Servicing Agreement.
This Certificate does not represent a deposit or other obligation of, or an
interest in, nor are the underlying Home Equity Loans insured or guaranteed by
DLJ Mortgage Acceptance Corp. or First Greensboro Home Equity, Inc. or any of
their affiliates. This Certificate is limited in right of payment to certain
collections and recoveries relating to the Home Equity Loans and amounts on
deposit in the Certificate Account and the Principal and Interest Account
(except as otherwise provided in the Pooling and Servicing Agreement) and
payments received by the Trustee pursuant to the Certificate Insurance Policy,
all as more specifically set forth hereinabove and in the Pooling and Servicing
Agreement.
No Owner shall have any right to institute any proceeding, judicial or
otherwise, with respect to the Pooling and Servicing Agreement, or for the
appointment of a receiver or trustee, or for any other remedy under the Pooling
and Servicing Agreement except in compliance with the terms thereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Owner of any Certificate shall have the right which is absolute
and unconditional to receive distributions to the extent provided in the Pooling
and Servicing Agreement with respect to such Certificate or to institute suit
for the enforcement of any such distribution, and such right shall not be
impaired without the consent of such Owner. The Owner of this Certificate, by
its acceptance hereof, agrees, however, that to the extent the Certificate
Insurer makes Insured Payments, either directly or indirectly (as by paying
through the Trustee or Paying Agent), to the owners of such Class A-1
Certificates, the Certificate Insurer will be subrogated to the rights of such
Owners of Class A-1 Certificates with respect to such Insured Payment, shall be
deemed to the extent of the payments so made to be a registered Owner of such
Class A-1 Certificates and shall receive all future distributions of the Class
A-1 Distribution Amount until all such Insured Payments by the Certificate
Insurer have been fully reimbursed.
The Pooling and Servicing Agreement provides that the obligations created
thereby will terminate upon the earlier of (i) the payment to the Owners of all
Certificates from amounts other than those available under the Certificate
Insurance Policy of all amounts held by the Trustee and required to be paid to
such Owners pursuant to the Pooling and Servicing Agreement upon the later to
occur of (a) the final payment or other liquidation (or any advance made with
respect thereto) of the last Home Equity Loan in the Trust Estate or (b) the
disposition of all property acquired in respect of any Home Equity Loan
remaining in the Trust Estate or (c) at any time when a Qualified Liquidation of
the Trust Estate is effected as described below. To effect a termination of the
Pooling and Servicing Agreement pursuant to clause (c) above, the Owners of all
Certificates then Outstanding shall provide the Trustee an opinion of counsel
experienced in federal income tax matters acceptable to the Certificate Insurer
and the Trustee to the effect that each such liquidation constitutes a Qualified
Liquidation, and the Master Servicer shall either sell the Home Equity Loans and
the Trustee shall distribute the proceeds of the liquidation of the Trust
Estate, or the Master Servicer shall distribute equitably in kind all of the
assets of the Trust Estate to the remaining Owners of the Certificates to the
effect that each such liquidation constitutes a Qualified Liquidation, each in
accordance with such plan, so that the liquidation or distribution of the Trust
Estate, the distribution of any proceeds of the liquidation and the termination
of the Pooling and Servicing Agreement occur no later than the close of the 90th
day
A-1-4
<PAGE>
after the date of adoption of the plan of liquidation and such liquidation
qualifies as a Qualified Liquidation.
The Pooling and Servicing Agreement additionally provides that (i) the
Master Servicer may, at its option, purchase from the Trust all remaining Home
Equity Loans and other property then constituting the Trust Estate, and thereby
effect early retirement of the Certificates, on any Monthly Remittance Date
after the Clean up Call Date and (ii) under certain circumstances relating to
the qualification of the REMIC as a REMIC under the Code the Home Equity Loans
may be sold, thereby effecting the early retirement of the Certificates.
The Trustee shall give written notice of termination of the Pooling and
Servicing Agreement to each Owner in the manner set forth therein.
The Certificate Insurer or the Owners of the majority of the Percentage
Interests represented by the Class A Certificates with the prior written consent
of the Certificate Insurer have the right to exercise any trust or power set
forth in Section 6.11 of the Pooling and Servicing Agreement.
As provided in the Pooling and Servicing Agreement and subject to certain
limitations therein set forth and referred to on the face hereof, the transfer
of this Certificate is registrable in the Register upon surrender of this
Certificate for registration of transfer at the office designated as the
location of the Register duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Registrar duly executed by,
the Owner hereof or his attorney duly authorized in writing, and thereupon one
or more new Certificates of the like Class, tenor and a like Percentage Interest
will be issued to the designated transferee or transferees.
The Pooling and Servicing Agreement permits, with certain exceptions as
therein provided, the amendment thereof and the modifications of rights and
obligations of the parties provided therein by the Depositor, the Trustee, the
Sponsor, the Seller and the Master Servicer at any time and from time to time,
with the prior written approval of the Certificate Insurer and without the
consent of the Owners; provided that in certain other circumstances provided for
in the Pooling and Servicing Agreement such consent of the Owners will be
required prior to amendments. Any such consent by the Owner at the time of the
giving thereof, of this Certificate shall be conclusive and binding upon such
Owner and upon all future Owners of the Certificate and of any Certificate
issued upon the registration of Transfer hereof or in exchange hereof or in lieu
hereof whether or not notation of such consent or waiver is made upon this
Certificate.
The Trustee is required to furnish certain information on each Payment Date
to the Owner of this Certificate, as more fully described in the Pooling and
Servicing Agreement.
The Class A-1 Certificates are issuable only as registered Certificates in
minimum denominations of $25,000 original Certificate Principal Balance. As
provided in the Pooling and Servicing Agreement and subject to certain
limitations therein set forth, Class A-1 Certificates are exchangeable for new
Class A-1 Certificates of authorized denominations evidencing the same aggregate
principal amount.
No service charge will be made for any such registration of transfer or
exchange, but the Registrar or Trustee may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
The Trustee and any agent of the Trustee may treat the Person in whose name
this Certificate is registered as the owner hereof for all purposes, and neither
the Trustee or any such
A-1-5
<PAGE>
agent shall be affected by notice to the contrary, except as may otherwise be
specifically provided in the Pooling and Servicing Agreement with respect to the
Certificate Insurer.
A-1-6
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed on behalf of the Trust.
THE CHASE MANHATTAN BANK, as Trustee
By:
-------------------------------
Title:
----------------------------
Trustee Authentication
THE CHASE MANHATTAN BANK, as Trustee
By:
-----------------------------------
Title:
-----------------------------------
A-1-7
<PAGE>
Exhibit A-2
A-2-1
<PAGE>
Exhibit A-3
A-4-1
<PAGE>
Exhibit B
RESERVED.
B-1
<PAGE>
Exhibit C
FORM OF CLASS R CERTIFICATE
FIRST GREENSBORO HOME EQUITY LOAN TRUST 1997-2
HOME EQUITY LOAN PASS-THROUGH CERTIFICATE
CLASS R
(Residual Interest)
Representing Certain Interests Relating to two Pools of
Home Equity Loans Originated or Purchased by
FIRST GREENSBORO HOME EQUITY, INC.
(This certificate does not represent an interest in, or an obligation of,
nor are the underlying Home Equity Loans insured or guaranteed by, DLJ Mortgage
Acceptance Corp. or First Greensboro Home Equity, Inc. This Certificate
represents a fractional residual ownership interest in the Trust Estate as
defined below.)
No: R-1 December __, 1997
Date
Percentage Interest _____%
-----------
Registered Owner
The registered Owner named above is the registered Owner of a fractional
interest in (a) the Home Equity Loans (other than any principal and interest due
thereon on or prior to December 1, 1997 whether or not received) listed in
Schedule I to the Pooling and Servicing Agreement which the Seller is causing to
be delivered to the Depositor pursuant to the Loan Sale Agreement and the
Depositor is causing to be delivered to the Trustee (and all substitutions
therefor as provided by Section 3.03, 3.04, 3.05 and 3.06 of the Pooling and
Servicing Agreement), together with the related Home Equity Loan documents and
the Seller's interest in any Property which secured a Home Equity Loan but which
has been acquired by foreclosure or deed in lieu of foreclosure, and all
payments thereon and proceeds of the conversion, voluntary or involuntary, of
the foregoing; (b) such amounts as may be held by the Trustee in the Certificate
Account, together with investment earnings on such amounts and such amounts as
may be held in the name of the Trustee in the Principal and Interest Account, if
any, exclusive of investment earnings thereon (except as otherwise provided in
the Pooling and Servicing Agreement), whether in the form of cash, instruments,
securities or other properties (including any Eligible Investments held by the
Master Servicer) and (c) proceeds of all the foregoing (including, but not by
way of limitation, all proceeds of any mortgage insurance, hazard insurance and
title insurance policy relating to the Home Equity Loans, cash proceeds,
accounts, accounts receivable, notes, drafts, acceptances, chattel paper,
checks, deposit accounts, rights to payment of any and every kind, and other
forms of obligations and receivables which at any time constitute all or part of
or are included in the proceeds of any of the foregoing) to pay the Certificates
as specified in the Pooling and Servicing Agreement ((a)-(c) above shall be
collectively referred to herein as the "Trust Estate").
C-1
<PAGE>
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING
REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS
REPRESENTED HEREBY.
This Certificate is one of a Class of duly authorized Certificates
designated as First Greensboro Home Equity Loan Trust 1997-2, Home Equity Loan
Pass-Through Certificates, Class R (the "Class R Certificates") and issued under
and subject to the terms, provisions and conditions of that certain Pooling and
Servicing Agreement dated as of December 1, 1997 (the Pooling and Servicing
Agreement") by and among First Greensboro Home Equity, Inc., in its capacity as
the Sponsor (the "Sponsor") and as the Master Servicer (the "Master Servicer"),
DLJ Mortgage Acceptance Corp. in its capacity as Depositor, (the "Depositor"),
First Greensboro Capital Corporation, in its capacity as the Seller (the
"Seller"), The Chase Manhattan Bank, a New York banking corporation, in its
capacity as the Trustee (the "Trustee") and Ocwen Federal Bank FSB, a federal
savings bank, in its capacity as Backup Master Servicer (the "Backup Master
Servicer"), to which the Owner of this Certificate by virtue of acceptance
hereof assents and by which such Owner is bound. Also issued under the Pooling
and Servicing Agreement are Certificates designated as First Greensboro Home
Equity Loan Trust 1997-2 Home Equity Loan Pass-Through Certificates, Class A-1,
Class A-2 and Class A-3 (collectively, the "Class A Certificates"). The Class A
Certificates and the Class R Certificates are together referred to herein as the
"Certificates." Terms capitalized herein and not otherwise defined herein shall
have the respective meanings set forth in the Pooling and Servicing Agreement.
On the 25th day of each month, or, if such day is not a Business Day, then
the next succeeding Business Day (each such day being a "Payment Date")
commencing January 25, 1998 , each Owner of a Class R Certificate as of the
close of business on the last day of the calendar month immediately preceding
the calendar month in which a Payment Date occurs (the "Record Date") will be
entitled to receive the Residual Net Monthly Excess Cashflow relating to such
Certificate on such Payment Date. Distributions will be made in immediately
available funds to Owners of Class R Certificates having an aggregate Percentage
Interest of at least 10% (by wire transfer or otherwise) to the account of an
Owner at a domestic bank or other entity having appropriate facilities therefor,
if such Owner has so notified the Trustee, or by check mailed to the address of
the person entitled thereto as it appears on the Register.
The Trustee or any duly-appointed Paying Agent will duly and punctually pay
distributions with respect to this Certificate in accordance with the terms
hereof and the Pooling and Servicing Agreement. Amounts properly withheld under
the Code by any Person from a distribution to any Owner shall be considered as
having been paid by the Trustee to such Owner for all purposes of the Pooling
and Servicing Agreement.
The Home Equity Loans will be master serviced by the Master Servicer
pursuant to the Pooling and Servicing Agreement. The Pooling and Servicing
Agreement permits the Master Servicer to enter into Sub-Servicing Agreements
with certain institutions eligible for appointment as Sub- Servicers for the
servicing and administration of certain Home Equity Loans. No appointment of any
Sub-Servicer shall release the Master Servicer from any of its obligations under
the Pooling and Servicing Agreement.
This Certificate does not represent a deposit or other obligation of, or an
interest in, nor are the underlying Home Equity Loans insured or guaranteed by
DLJ Mortgage Acceptance Corp. or First Greensboro Home Equity, Inc. or any of
their affiliates. This Certificate is limited in right of payment to certain
collections and recoveries relating to the Home Equity Loans, all as more
specifically set forth hereinabove and in the Pooling and Servicing Agreement.
C-2
<PAGE>
No Owner shall have any right to institute any proceeding, judicial or
otherwise, with respect to the Pooling and Servicing Agreement, or for the
appointment of a receiver or trustee, or for any other remedy under the Pooling
and Servicing Agreement except in compliance with the terms thereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Owner of any Certificate shall have the right which is absolute
and unconditional to receive distributions to the extent provided in the Pooling
and Servicing Agreement with respect to such Certificate or to institute suit
for the enforcement of any such distribution, and such right shall not be
impaired without the consent of such Owner.
The Pooling and Servicing Agreement provides that the obligations created
thereby will terminate upon the earlier of (i) the payment to the Owners of all
Certificates from amounts other than those available under the Certificate
Insurance Policy of all amounts held by the Trustee and required to be paid to
such Owners pursuant to the Pooling and Servicing Agreement upon the later to
occur of (a) the final payment or other liquidation (or any advance made with
respect thereto) of the last Home Equity Loan in the Trust Estate or (b) the
disposition of all property acquired in respect of any Home Equity Loan
remaining in the Trust Estate or (c) at any time when a Qualified Liquidation of
the Trust Estate is effected as described below. To effect a termination of the
Pooling and Servicing Agreement pursuant to clause (c) above, the Owners of all
Certificates then Outstanding shall provide the Trustee an opinion of counsel
experienced in federal income tax matters acceptable to the Certificate Insurer
and the Trustee to the effect that each such liquidation constitutes a Qualified
Liquidation, and the Master Servicer shall either sell the Home Equity Loans and
the Trustee shall distribute the proceeds of the liquidation of the Trust
Estate, or the Master Servicer shall distribute equitably in kind all of the
assets of the Trust Estate to the remaining Owners of the Certificates to the
effect that each such liquidation constitutes a Qualified Liquidation, each in
accordance with such plan, so that the liquidation or distribution of the Trust
Estate, the distribution of any proceeds of the liquidation and the termination
of the Pooling and Servicing Agreement occur no later than the close of the 90th
day after the date of adoption of the plan of liquidation and such liquidation
qualifies as a Qualified Liquidation.
The Pooling and Servicing Agreement additionally provides that (i) the
Master Servicer may at its option, purchase from the Trust all remaining Home
Equity Loans and other property then constituting the Trust Estate, and thereby
effect early retirement of the Certificates, on any Monthly Remittance Date
after the Clean up Call Date and (ii) under certain circumstances relating to
the qualification of the REMIC as a REMIC under the Code the Home Equity Loans
may be sold, thereby effecting the early retirement of the Certificates.
The Trustee shall give written notice of termination of the Pooling and
Servicing Agreement to each Owner in the manner set forth therein.
The Certificate Insurer or the Owners of a majority of the Percentage
Interests represented by the Class A Certificates then outstanding with the
prior written consent of the Certificate Insurer have the right to exercise any
trust or power set forth in Section 6.11 of the Pooling and Servicing Agreement.
As provided in the Pooling and Servicing Agreement and subject to certain
limitations therein set forth and referred to on the face hereof, the transfer
of this Certificate is registrable in the Register upon surrender of this
Certificate for registration of transfer at the office designated as the
location of the Register duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Registrar duly executed by,
the Owner hereof or his attorney duly authorized in writing, and thereupon one
or more new Certificates of the like Class, tenor
C-3
<PAGE>
and a like aggregate fractional undivided interest in the Trust Estate will be
issued to the designated transferee or transferees.
The Pooling and Servicing Agreement permits, with certain exceptions as
therein provided, the amendment thereof and the modifications of rights and
obligations of the parties provided therein by the Depositor, the Trustee, the
Sponsor, the Seller and the Master Servicer at any time and from time to time,
with the prior written approval of the Certificate Insurer and without the
consent of the Owners; provided, that in certain other circumstances provided
for in the Pooling and Servicing Agreement such consent of the Owners will be
required prior to amendment. Any such consent by the Owner at the time of the
giving thereof, of this Certificate shall be conclusive and binding upon such
Owner and upon all future Owners of the Certificate and of any Certificate
issued upon the registration of Transfer hereof or in exchange hereof or in lieu
hereof whether or not notation of such consent or waiver is made upon this
Certificate.
The Trustee is required to furnish certain information on each Payment Date
to the Owner of this Certificate, as more fully described in the Pooling and
Servicing Agreement.
The Class R Certificates are issuable only as registered Certificates. As
provided in the Pooling and Servicing Agreement and subject to certain
limitations therein set forth, Class R Certificates are exchangeable for new
Class R Certificates evidencing the same Percentage Interest as the Class R
Certificates exchanged.
No service charge will be made for any such registration of transfer or
exchange, but the Registrar or Trustee may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
The Trustee and any agent of the Trustee may treat the Person in whose name
this Certificate is registered as the owner hereof for all purposes, and neither
the Trustee or any such agent shall be affected by notice to the contrary,
except as may otherwise be specifically provided in the Pooling and Servicing
Agreement with respect to the Certificate Insurer.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed on behalf of the Trust.
THE CHASE MANHATTAN BANK,
as Trustee
By:
-------------------------------
Name:
----------------------------
Title:
---------------------------
Trustee Authentication
THE CHASE MANHATTAN BANK, as Trustee
By:
-----------------------------------
Title:
-----------------------------------
C-4
<PAGE>
EXHIBIT D
FORM OF SUBSEQUENT TRANSFER AGREEMENT
FORM OF SUBSEQUENT TRANSFER AGREEMENT, dated __________ (the
"Subsequent Transfer Date"), between DLJ MORTGAGE ACCEPTANCE CORP. (the
"Depositor") and THE CHASE MANHATTAN BANK, as trustee (the "Trustee").
WITNESSETH:
WHEREAS, the Pooling and Servicing Agreement, dated as of
December 1, 1997 (the "Pooling and Servicing Agreement"), among the Depositor,
First Greensboro Home Equity, Inc., (the "Sponsor" and the "Master Servicer"),
First Greensboro Capital Corporation (the "Seller"), the Trustee and Ocwen
Federal Bank FSB, contemplated the sale of Subsequent Home Equity Loans to the
Trust by the Depositor; and
WHEREAS, the Depositor is acquiring Subsequent Home Equity
Loans from the Seller pursuant to the Loan Sale Agreement, dated as of December
1, 1997, among the Sponsor, the Seller and the Depositor, and the Subsequent
Transfer Agreement, dated the date hereof (the "Seller Transfer Agreement"),
among the Sponsor, the Seller and the Depositor; and
WHEREAS, the parties desire to consummate the purchase and
sale of the Subsequent Home Equity Loans identified on the related Schedule of
Subsequent Home Equity Loans;
NOW, THEREFORE, in consideration of the premises and of other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. For the consideration set forth in Paragraph 2 below as of
________ (the "Subsequent Transfer Date"), the Depositor does hereby sell,
transfer, convey and assign to the Trustee, on behalf of the Certificateholders
and the Certificate Insurer, without recourse as to payment and without any
representations or warranties express or implied except as set forth in
Paragraph 3 hereof, and the Trustee, on behalf of the Certificateholders and the
Certificate Insurer, does hereby purchase and acquire from the Depositor, (x)
all of the Depositor's right, title and interest in and to any and all benefits
accruing to the Depositor from the Subsequent Home Equity Loans (other than any
principal and interest payments due thereon prior to ________ (the "Subsequent
Cut-Off Date") whether or not received) listed in Schedule I to this Subsequent
Transfer Agreement which the Depositor is causing to be delivered to the Trustee
herewith, which the Depositor will cause to be delivered to the Trustee (and all
substitutions for such Subsequent Home Equity Loans as provided by Sections
3.03, 3.04, 3.05 and 3.06 of the Pooling and Servicing Agreement), together with
the related Subsequent Home Equity Loan documents and the Depositor's interest
in any Property which secured a Subsequent Home Equity Loan but which has been
acquired by foreclosure or deed in lieu of foreclosure, and all payments thereon
and proceeds of the conversion, voluntary or involuntary, of the foregoing and
(y) all of the Depositor's rights, but none of its obligations, under the Seller
Transfer Agreement. The transfer by the Depositor of the Subsequent Home Equity
Loans set forth on the Schedule of Subsequent Home Equity Loans and of the
Depositor's rights under the Seller Transfer Agreement to the Trustee is
absolute and is intended by all parties hereto to be treated as a sale by the
Depositor.
2. The cash consideration for the Subsequent Home Equity Loans
sold
D-1
<PAGE>
hereby shall be $_______, representing the aggregate outstanding principal
balance of the Subsequent Home Equity Loans as of the Subsequent Cut-Off Date.
3. The Depositor hereby represents that (a) it is solvent,
will not be rendered insolvent as a result of the sale of the Subsequent Home
Equity Loans sold pursuant to this Subsequent Transfer Agreement and is not
aware of any pending insolvency and (b) all of the conditions precedent to the
transfer accomplished hereby set forth in Section 3.07 of the Pooling and
Servicing Agreement have been satisfied.
4. This Subsequent Transfer 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.
5. This Subsequent Transfer Agreement may be signed in
counterparts, each of which shall be an original but all of which, taken
together, shall constitute one and the same instrument.
6. Terms capitalized herein and not defined herein shall have
their respective meanings as set forth in the Pooling and Servicing Agreement.
7. The Certificate Insurer shall be a third party beneficiary
of this Agreement.
D-2
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this
Agreement by their duly authorized officers as of the date first above written.
DLJ MORTGAGE ACCEPTANCE CORP., as Depositor
By:
--------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, as Trustee
By:
--------------------------------
Name:
Title:
D-3
<PAGE>
Schedule I
D-4
<PAGE>
EXHIBIT E
FORM OF CERTIFICATE RE: HOME EQUITY LOANS
PREPAID IN FULL AFTER CUT-OFF DATE
CERTIFICATE RE: PREPAID LOANS
I, ___________________________, ____________ of First Greensboro Home
Equity, Inc. ("FIRST GREENSBORO"), hereby certify that between the "Cut-Off
Date" (as defined in the Pooling and Servicing Agreement dated as of December 1,
1997 among DLJ Mortgage Acceptance Corp., as Depositor, FIRST GREENSBORO as
Sponsor and Master Servicer, First Greensboro Capital Corporation, in its
capacity as the Seller, The Chase Manhattan Bank, as Trustee and Ocwen Federal
Bank FSB, as Backup Master Servicer and the "Startup Day," the following
schedule of "Home Equity Loans" (each as defined in the Pooling and Servicing
Agreement) have been prepaid in full.
Account Original Current Date
Number Name Amount Balance Paid Off
- ---------- -------- -------------- ---------------- ---------------
Dated: December _, 1997
By:
----------------------------
Title:
-------------------------
E-1
<PAGE>
EXHIBIT F-l
TRUSTEE'S ACKNOWLEDGMENT OF RECEIPT
The Chase Manhattan Bank, in its capacity as Trustee (the "Trustee")
under that certain Pooling and Servicing Agreement dated as of December 1, 1997
(the "Pooling and Servicing Agreement") among DLJ Mortgage Acceptance Corp., as
Depositor, First Greensboro Home Equity, Inc., a North Carolina corporation, as
sponsor and master servicer ("FIRST GREENSBORO"), First Greensboro Capital
Corporation, in its capacity as the Seller (the "Seller"), The Chase Manhattan
Bank, as Trustee (the "Trustee") and Ocwen Federal Bank FSB, a __________, in
its capacity as Backup Master Servicer (the "Backup Master Servicer"), hereby
acknowledges receipt of an aggregate cash amount of approximately $ ___________
into the Certificate Account pursuant to Section 4.02 of the Pooling and
Servicing Agreement and receipt (subject to review as required by Section
3.06(a) of the Pooling and Servicing Agreement) of the items delivered to it by
FIRST GREENSBORO with respect to the Home Equity Loans pursuant to Section
3.05(b)(i) of the Pooling and Servicing Agreement.
The Schedules of Home Equity Loans is attached to this Receipt.
The Trustee hereby additionally acknowledges that it shall review such
items as required by Section 3.06(a) of the Pooling and Servicing Agreement and
shall otherwise comply with Section 3.06(b) of the Pooling and Servicing
Agreement as required thereby..
THE CHASE MANHATTAN BANK, as Trustee
By:
------------------------------------
Name:
----------------------------------
Title:
----------------------------------
Dated: December __, 1997
F-1-1
<PAGE>
EXHIBIT G
FORM OF POOL CERTIFICATION
POOL CERTIFICATION
WHEREAS, the undersigned is an Authorized Officer of The Chase
Manhattan Bank, in its capacity as Trustee (the "Trustee") under that certain
Pooling and Servicing Agreement dated as of December 1, 1997 (the "Pooling and
Servicing Agreement") among DLJ Mortgage Acceptance Corp., as Depositor, First
Greensboro Home Equity, Inc., as Sponsor (the "Sponsor") and Master Servicer,
First Greensboro Capital Corporation, in its capacity as the Seller (the
"Seller"), The Chase Manhattan Bank, as Trustee and Ocwen Federal Bank FSB, a
__________, in its capacity as Backup Master Servicer (the "Backup Master
Servicer"); and
WHEREAS, the Trustee is required, pursuant to Section 3.06(a) of the
Pooling and Servicing Agreement, to review the Mortgage Files relating to the
Pool within a specified period following the Startup Day and to notify the
Sponsor promptly of any defects with respect to the Pool, and the Sponsor is
required to remedy such defects or take certain other action, all as set forth
in Section 3.06(b) of the Pooling and Servicing Agreement; and
WHEREAS, Section 3.06(a) of the Pooling and Servicing Agreement
requires the Trustee to deliver this Pool Certification upon the satisfaction of
certain conditions set forth therein.
NOW, THEREFORE, the Trustee hereby certifies that it has determined
that all required documents (or certified copies of documents listed in Section
3.05 of the Pooling and Servicing Agreement) have been executed or received, and
that such documents relate to the Home Equity Loans identified in the Schedule
of Home Equity Loans pursuant to Section 3.06(a) of the Pooling and Servicing
Agreement or, in the event that such documents have not been executed and
received or do not so relate to such Home Equity Loans, any remedial action by
the Sponsor pursuant to Section 3.06(b) of the Pooling and Servicing Agreement
has been completed. The Trustee makes no certification hereby, however, with
respect to any intervening assignments or assumption and modification
agreements.
THE CHASE MANHATTAN BANK,
as Trustee
By:
-------------------------------------
Title:
----------------------------------
Dated: December _, 1997
G-1
<PAGE>
EXHIBIT H
FORM OF DELIVERY ORDER
DELIVERY ORDER
The Chase Manhattan Bank, as Trustee
450 W. 33rd Street, 15th Floor
New York, NY 10001
Attention: Structured Finance Services
Dear Sirs:
Pursuant to Section 4.01 of the Pooling and Servicing Agreement, dated
as of December 1, 1997 (the "Pooling and Servicing Agreement") among DLJ
Mortgage Acceptance Corp., as Depositor (the "Depositor"), First Greensboro Home
Equity, Inc., a North Carolina corporation ("FIRST GREENSBORO"), as Sponsor and
Master Servicer, First Greensboro Capital Corporation, in its capacity as the
Seller (the "Seller"), The Chase Manhattan Bank, a New York banking corporation,
as Trustee (the "Trustee") and Ocwen Federal Bank FSB, a federal savings bank,
in its capacity as Backup Master Servicer (the "Backup Master Servicer"), the
Depositor HEREBY CERTIFIES that all conditions precedent to the issuance of the
First Greensboro Home Equity Loan Trust 1997-2, Home Equity Loan Pass-Through
Certificate, Class A and Class R (the "Certificates"), HAVE BEEN SATISFIED, and
HEREBY REQUESTS YOU TO AUTHENTICATE AND DELIVER said Certificates, and to
RELEASE said Certificates to the owners thereof, or otherwise upon their order.
Instructions regarding the registration of the Certificates are attached hereto.
Very truly yours,
DLJ MORTGAGE ACCEPTANCE CORP.
By:
-------------------------------------
Title:
----------------------------------
Dated: December _, 1997
H-1
<PAGE>
EXHIBIT I
FORM OF CLASS R TAX MATTERS TRANSFER CERTIFICATE
AFFIDAVIT PURSUANT TO SECTION
860E(e) OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED
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 Investor] (the "Investor"), 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.
2. That (i) the Investor is not a "disqualified organization" and will not
be a "disqualified organization" as of [date of transfer] (For this purpose, a
"disqualified organization" means the United States, any state or political
subdivision thereof, any foreign government, any international organization, any
agency or instrumentality of any of the foregoing (other than certain taxable
instrumentalities), any cooperative organization furnishing electric energy or
providing telephone service to persons in rural areas, or any organization
(other than a farmers' cooperative) that is exempt from federal income tax
unless such organization is subject to the tax on unrelated business income.);
(ii) it is not acquiring the Class R Certificate for the account of a
disqualified organization; (iii) it consents to any amendment of the Pooling and
Servicing Agreement that shall be deemed necessary by the Trustee (upon advice
of counsel) to constitute a reasonable arrangement to ensure that the Class R
Certificates will not be owned directly or indirectly by a disqualified
organization; and (iv) it will not transfer such Class R Certificate unless (a)
it has received from the transferee an affidavit in substantially the same form
as this affidavit containing these same four representations and (b) as of the
time of the transfer, it does not have actual knowledge that such affidavit is
false.
IN WITNESS WHEREOF, the Investor has caused this instrument to be executed
on its behalf, pursuant to 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 ______, ______.
[NAME OF INVESTOR]
By:
------------------------------------
[Name of Officer]
[Title of Officer]
I-2
<PAGE>
[Corporate Seal]
Attest:
- --------------------------
[Assistant] Secretary
Personally appeared before me the above-named [Name of Officer], known
or proved to be the same person who executed the foregoing instrument and to be
the [Title of Officer] of the Investor, and acknowledged to me that he executed
the same as his free act and deed and the free act and deed of the Investor.
Subscribed and sworn before me this ___ day of ___________, ___.
- -------------------------
NOTARY PUBLIC
COUNTY OF --------------
STATE OF ---------------
My commission expires the _ day of _________________, _____.
I-2
<PAGE>
EXHIBIT J-1
FORM OF CERTIFICATE REGARDING TRANSFER
(ACCREDITED INVESTOR)
[DATE]
The Chase Manhattan Bank, as Trustee
450 W. 33rd Street, 15th Floor
New York, NY 10001
Attention: Advanced Structured Products Services
Re: First Greensboro Home Equity Loan Trust 1997-2 Home Equity
Loan Pass-Through Certificates, Class R (the "Certificates")
Gentlemen:
In connection with our purchase on the date hereof of the
above-referenced Certificates from ___________________ ("Seller"), [PURCHASER]
(the "Purchaser") hereby certifies that:
1. The Purchaser is acquiring the Certificates for [investment purposes
only for]1 the Purchaser's own account and not with a view to or for sale or
transfer in connection with any distribution thereof in any manner which would
violate Section 5 of the Securities Act of 1933, as amended (the "Act"),
provided that the disposition of its property shall at all times be and remain
within its control;
2. The Purchaser understands that the Certificates have not been and
will not be registered under the Act and may not be resold or transferred unless
they are (a) registered pursuant to the Act or (b) sold or transferred in
transactions which are exempt from registration;
3. The Purchaser has received a copy of the Pooling and Servicing
Agreement dated as of December 1, 1997 (the "Pooling and Servicing Agreement")
pursuant to which the Certificates are being sold, and such other documents and
information concerning the Certificates and the home equity loans in which the
Certificates represent interests which it has requested;
4. The Purchaser believes it has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of an investment in the Certificates and that it is able to bear the
economic risks of such an investment;
5. [The Purchaser is not an "employee benefit plan," within the meaning
of Section 3(3) of the Employment Retirement Income Security Act of 1974, as
amended ("ERISA") that is subject to the provisions of Title I of ERISA or a
"plan" described in Section 4975(e)(1) of the Internal Revenue Code of 1986] OR
[The source of funds to be used by the Purchaser to purchase the Certificates is
a general account and either (i) no part of such assets constitutes assets of an
"employee benefit plan," within the meaning of Section 3(3) of the Employment
Retirement Income Security Act of 1974, as amended ("ERISA") that is subject to
the provisions of Title I of ERISA or a "plan" described in Section 4975(e)(1)
of the Internal Revenue Code of 1986, or (ii) to the extent that such assets
constitute assets of an "employee benefits plan" within
- -------------------------
1 Not required if the Purchaser is a broker/dealer.
J-1
<PAGE>
the meaning of Section 3(3) of ERISA, or a "plan" within the meaning of Section
4975(e)(1) of the Code, it acknowledges that in the discharge of its duty as a
plan fiduciary in connection with the purchase of the Certificates it has
concluded that such purchase will not constitute a violation of Section 404(a)
of ERISA];
6. If the Purchaser sells any of the Certificates at its option, it
will (i) obtain from any investor that purchases any Certificate from it a
letter substantially in the form of Exhibit J-1 or J-2 to the Pooling and
Servicing Agreement and (ii) to the extent required by the Pooling and Servicing
Agreement, cause an opinion of counsel to be delivered, addressed and
satisfactory to the Sponsor and the Trustee, to the effect that such sale is in
compliance with all applicable federal and state securities laws; and
7. The Purchaser certifies that for purposes of the Certificate
Register, its address, including telecopier number and telephone number, is as
follows:
telecopier:
telephone:
8. The purchase of the Certificates by the Purchaser does not violate
the provisions of the first sentence of Section 5.08(d) of the Pooling and
Servicing Agreement.
J-2
<PAGE>
IN WITNESS WHEREOF, the Purchaser has caused this letter to be executed
by its signatory, duly authorized, as of the date first above written.
[PURCHASER]
By:
--------------------------------------------
Name:
------------------------------------------
Title:
------------------------------------------
J-3
<PAGE>
EXHIBIT J-2
FORM OF CERTIFICATE REGARDING TRANSFER
(Rule 144A)
[Date]
The Chase Manhattan Bank
450 W. 33rd Street, 15th Floor
New York, NY 10001
Attention: Advanced Structured Products Services
Re: First Greensboro Home Equity Loan Trust 1997-2 Home Equity
Loan Pass-Through Certificates, Class R (the "Certificates")
Dear Gentlemen or Ladies:
In connection with our purchase on the date hereof of the
above-referenced Certificates from _______________ ("Seller") hereby certify
that:
1. We are acquiring the Certificates for our own account for investment
and not with a view to or for sale or transfer in connection with any
distribution thereof in any manner which would violate the Securities Act of
1933, as amended (the "Act"), provided that the disposition of our property
shall at all times be and remain within our control;
2. We understand that the Certificates have not been and will not be
registered under the Act and may not be resold or transferred unless they are
(a) registered pursuant to the Act or (b) sold or transferred in transactions
which are exempt from registration;
3. We have received a copy of the Pooling and Servicing Agreement dated
as of December 1, 1997 (the "Pooling and Servicing Agreement") pursuant to which
the Certificates are being sold, and such other documents and information
concerning the Certificates and the home equity loans in which the Certificates
represent interests which we have requested;
4. We believe we have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of an
investment in the Certificates and that we are able to bear the economic risks
of such an investment;
5. If we sell any of the Certificates at our option, we will either (i)
obtain from any institutional investor that purchases any Certificate from us a
certificate containing the same representations, warranties and agreements
contained in the foregoing paragraphs 1, 2 through 4 and this paragraph 5 or
(ii) deliver an opinion of counsel to such institutional investor, addressed and
satisfactory to the Sponsor and the Trustee, to the effect that such sale is in
compliance with all applicable federal and state securities laws;
6. We are acquiring the Certificates for our own account and the source
of funds to be used by us to purchase the Certificates is a general account and
either (i) no part of such assets constitutes assets of an "employee benefit
plan," within the meaning of Section 3(3) of the Employment Retirement Income
Security Act of 1974, as amended ("ERISA") that is subject to
J-4
<PAGE>
the provisions of Title I of ERISA or a "plan" described in Section 4975(e)(1)
of the Internal Revenue Code of 1986, or (ii) to the extent that such assets
constitute assets of an "employee benefits plan" within the meaning of Section
3(3) of ERISA, or a "plan" within the meaning of Section 4975(e)(1) of the Code,
we acknowledge that in the discharge of our duty as a plan fiduciary in
connection with the purchase of the Certificates we have concluded that such
purchase will not constitute a violation of Section 404(a) of ERISA;
7. We certify that for purposes of the Certificate Register, our
address, including telecopier number and telephone number, is as follows:
------------------------------------------
------------------------------------------
------------------------------------------
telecopier:
----------------------------------------------
telephone:
----------------------------------------------
8. If we sell any of the Certificates, will obtain from any purchaser
from us the same representations contained in the foregoing paragraph 6 and this
paragraph 7; and
9. Our purchase of the Certificates does not violate the provisions of
the first sentence of Section 5.08(d) of the Pooling and Servicing Agreement.
J-5
<PAGE>
IN WITNESS WHEREOF, we have signed this certificate as of the date
first written above.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
J-6
<PAGE>
EXHIBIT K TO THE POOLING AND SERVICING AGREEMENT
HOME EQUITY LOANS WITH DOCUMENT EXCEPTIONS
Loan Number Borrower Name Original Loan Amount Exception
- --------------- ------------------ ------------------------ ----------------
<PAGE>
Exhibit 99.1
FINANCIAL FINANCIAL GUARANTY
SECURITY INSURANCE POLICY
ASSURANCE{Service Mark}
Trust: As described in Endorsement No. 1 hereto Policy No.: 50648-N
Certificates: $125,000,000 First Greensboro Home Date of Issuance: 12/15/97
Equity Loan Pass- Through
Certificates, Series 1997-2,
Class A-1, Class A-2, and
Class A-3 Certificates
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), for
consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY GUARANTEES to the
Trustee for the benefit of each Holder, subject only to the terms of this Policy
(which includes each endorsement hereto), the full and complete payment of
Guaranteed Distributions with respect to the Certificates of the Trust referred
to above.
For the further protection of each Holder, Financial Security
irrevocably and unconditionally guarantees payment of the amount of any
distribution of principal or interest with respect to the Certificates made
during the Term of this Policy to such Holder that is subsequently avoided in
whole or in part as a preference payment under applicable law.
Payment of any amount required to be paid under this Policy will be
made following receipt by Financial Security of notice as described in
Endorsement No. 1 thereto.
Financial Security shall be subrogated to the rights of each Holder to
receive distributions with respect to each Certificate held by such Holder to
the extent of any payment by Financial Security hereunder.
Except to the extent expressly modified by Endorsement No. 1 hereto,
the following terms shall have the meanings specified for all purposes of this
Policy. "Holder" means the registered owner of any Certificate as indicated on
the registration books maintained by or on behalf of the Trustee for such
purpose or, if the Certificate is in bearer form, the holder of the Certificate.
"Trustee", "Guaranteed Distributions" and "Term of this Policy" shall have the
meanings set forth in Endorsement No. 1 hereto.
This Policy sets forth in full the undertaking of Financial Security,
and shall not be modified, altered or affected by any other agreement or
instrument, including any modification or amendment thereto. Except to the
extent expressly modified by an endorsement hereto, the premiums paid in respect
of this Policy are nonrefundable for any reason whatsoever. This Policy may not
be canceled or revoked during the Term of this Policy. An acceleration payment
shall not be due under this Policy unless such acceleration is at the sole
option of Financial Security. THIS POLICY IS NOT COVERED BY THE
PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW
YORK INSURANCE LAW.
In witness whereof, FINANCIAL SECURITY ASSURANCE INC. has caused this
Policy to be executed on its behalf by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By: /s/
------------------------------------
AUTHORIZED OFFICER
A subsidiary of Financial Security Assurance Holdings L.t.d.
350 Park Avenue, New York, N.Y. 10022-6022 (212) 826-0100
Form 101NY (5/89)
<PAGE>
ENDORSEMENT NO. 1 TO
FINANCIAL GUARANTY INSURANCE POLICY
FINANCIAL SECURITY ASSURANCE INC.
TRUST: Established pursuant to the Pooling and Servicing Agreement dated as
of December 1, 1997 among DLJ Mortgage Acceptance Corp., as Depositor,
First Greensboro Home Equity, Inc., as Sponsor and Master Servicer,
First Greensboro Capital Corporation, as Seller, The Chase Manhattan
Bank, as Trustee, and Ocwen Federal Bank FSB, as Backup Master
Servicer.
POLICY NO.: 50648-N
SECURITIES: $125,000,000 First Greensboro Home Equity Loan Pass-Through
Certificates, Series 1997-2, Class A-1, Class A-2, and Class A-3
Certificates (collectively, the AClass A Certificates@).
DATE OF ISSUANCE: December 15, 1997
1. Definitions. For all purposes of this Policy, the terms specified below
shall have the meanings or constructions provided below. Capitalized terms used
herein and not otherwise defined herein shall have the meanings provided in the
Pooling and Servicing Agreement unless the context shall otherwise require.
"Business Day" means any day other than (i) a Saturday or Sunday, or (ii) a
day on which banking institutions in New York, Tampa, Florida or Greensboro,
North Carolina are authorized or obligated by law or executive order to be
closed.
"Guaranteed Distributions" means the Insured Payments (other than any
portion thereof consisting of Optional Payments).
"Insured Payments" has the meaning set forth in the Pooling and Servicing
Agreement.
"Optional Payments" shall mean any Insured Payment made at the option of
Financial Security hereunder in respect of Realized Losses, but not required to
be made by Financial Security hereunder.
"Policy" means this Financial Guaranty Insurance Policy and includes each
endorsement thereto.
"Pooling and Servicing Agreement" means the Pooling and Servicing Agreement
dated as of December 1, 1997 among DLJ Mortgage Acceptance Corp., as Depositor,
First Greensboro Home Equity, Inc., as Sponsor and Master Servicer, First
Greensboro Capital Corporation, as Seller, and The Chase Manhattan Bank, as
Trustee, and Ocwen Federal Bank FSB, as Backup Master Servicer, as amended from
time to time as required by the Pooling and Servicing Agreement in accordance
with the terms of the Pooling and Servicing Agreement and with the consent of
Financial Security.
<PAGE>
"Receipt" and "Received" mean actual delivery to Financial Security and to
the Fiscal Agent (as defined below), if any, at or prior to 12:00 noon, New York
City time, on a Business Day; delivery either on a day that is not a Business
Day, or after 12:00 noon, New York City time, shall be deemed to be Received on
the next succeeding Business Day. If any notice or certificate given hereunder
by the Trustee is not in proper form or is not properly completed, executed or
delivered, it shall be deemed not to have been Received, and Financial Security
or its Fiscal Agent shall promptly so advise the Trustee and the Trustee may
submit an amended notice.
"Term of This Policy" means the period from and including the Date of
Issuance to and including the date on which (i) the aggregate Certificate
Principal Balance of the Securities is zero, (ii) any period during which any
payment on the Securities could have been avoided in whole or in part as a
preference payment under applicable bankruptcy, insolvency, receivership or
similar law has expired, and (iii) if any proceedings requisite to avoidance as
a preference payment have been commenced prior to the occurrence of (i) and
(ii), a final and non-appealable order in resolution of each such proceeding has
been entered.
"Trustee" means The Chase Manhattan Bank, in its capacity as Trustee under
the Pooling and Servicing Agreement and any successor in such capacity.
2. Notices and Conditions to Payment in Respect of Guaranteed
Distributions. Following Receipt by Financial Security of a notice and
certificate from the Trustee in the form attached as Exhibit A to this
Endorsement, Financial Security will pay any amount payable hereunder in respect
of Guaranteed Distributions out of the funds of Financial Security on the later
to occur of (a) 12:00 noon, New York City time, on the second Business Day
following such Receipt; and (b) 12:00 noon, New York City time, on the Payment
Date to which such claim relates. Payments due hereunder in respect of
Guaranteed Distributions will be disbursed by wire transfer of immediately
available funds to the Policy Payments Account established pursuant to the
Pooling and Servicing Agreement or, if no such Policy Payments Account has been
established, to the Trustee.
Financial Security shall be entitled to pay any amount hereunder in respect
of Guaranteed Distributions, whether or not any notice and certificate shall
have been Received by Financial Security as provided above. Financial Security's
obligations hereunder in respect of Guaranteed Distributions shall be discharged
to the extent funds are disbursed by Financial Security as provided herein
whether or not such funds are properly applied by the Trustee.
3. Notices and Conditions to Payment in Respect of Guaranteed Distributions
Avoided as Preference Payments. If any amount previously distributed on the
Class A Certificates is avoided as a preference payment under applicable
bankruptcy, insolvency, receivership or similar law, Financial Security will pay
such amount out of the funds of Financial Security on the later of (a) the date
when due to be paid pursuant to the Order referred to below or (b) the first to
occur of (i) the fourth Business Day following Receipt by Financial Security
from the Trustee of (A) a certified copy of the order of the court or other
governmental body which exercised jurisdiction to the effect that the relevant
Certificateholder is required to return principal or interest distributed with
respect to the Class A Certificate during the Term of this Policy because such
distributions were avoidable as preference payments under applicable bankruptcy
law (the "Order"), (B) a certificate of the relevant Certificateholder that the
Order has been entered and is not subject to any stay and (C) an assignment duly
executed and delivered by the relevant Certificateholder, in such form as is
reasonably required by Financial Security and
11
<PAGE>
provided to the relevant Certificateholder by Financial Security, irrevocably
assigning to Financial Security all rights and claims of the relevant
Certificateholder relating to or arising under the Security against the debtor
which made such preference payment or otherwise with respect to such preference
payment or (ii) the date of Receipt by Financial Security from the Trustee of
the items referred to in clauses (A), (B) and (C) above if, at least four
Business Days prior to such date of Receipt, Financial Security shall have
Received written notice from the Trustee that such items were to be delivered on
such date and such date was specified in such notice. Such payment shall be
disbursed to the receiver, conservator, debtor-in-possession or trustee in
bankruptcy named in the Order and not to the Trustee or any Certificateholder
directly (unless a Certificateholder has previously paid such amount to the
receiver, conservator, debtor-in-possession or trustee in bankruptcy named in
the Order, in which case such payment shall be disbursed to the Trustee for
distribution to such Certificateholder upon proof of such payment reasonably
satisfactory to Financial Security). In connection with the foregoing, Financial
Security shall have the rights provided pursuant to Section 12.02(d) of the
Pooling and Servicing Agreement.
4. Governing Law. This Policy shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
5. Fiscal Agent. At any time during the Term of this Policy, Financial
Security may appoint a fiscal agent (the "Fiscal Agent") for purposes of this
Policy by written notice to the Trustee at the notice address specified in the
Pooling and Servicing Agreement specifying the name and notice address of the
Fiscal Agent. From and after the date of receipt of such notice by the Trustee,
(i) copies of all notices and documents required to be delivered to Financial
Security pursuant to this Policy shall be simultaneously delivered to the Fiscal
Agent and to Financial Security and shall not be deemed Received until Received
by both and (ii) all payments required to be made by Financial Security under
this Policy may be made directly by Financial Security or by the Fiscal Agent on
behalf of Financial Security. The Fiscal Agent is the agent of Financial
Security only and the Fiscal Agent shall in no event be liable to any Holder for
any acts of the Fiscal Agent or any failure of Financial Security to deposit, or
cause to be deposited, sufficient funds to make payments due under this Policy.
6. Waiver of Defenses. To the fullest extent permitted by applicable law,
Financial Security agrees not to assert, and hereby waives, for the benefit of
each Holder, all rights (whether by counterclaim, setoff or otherwise) and
defenses (including, without limitation, the defense of fraud), whether acquired
by subrogation, assignment or otherwise, to the extent that such rights and
defenses may be available to Financial Security to avoid payment of its
obligations under this Policy in accordance with the express provisions of this
Policy.
7. Notices. All notices to be given hereunder shall be in writing (except
as otherwise specifically provided herein) and shall be mailed by registered
mail or personally delivered or telecopied to Financial Security as follows:
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Re: First Greensboro Home Equity Loan
Pass-Through Certificates Series 1997-2
12
<PAGE>
Attention: Senior Vice President
- Surveillance Department
Telecopy No.: (212) 339-3518
Confirmation: (212) 826-0100
Financial Security may specify a different address or addresses by writing
mailed or delivered to the Trustee.
8. Priorities. In the event any term or provision of the face of this
Policy is inconsistent with the provisions of this Endorsement, the provisions
of this Endorsement shall take precedence and shall be binding.
9. Exclusions From Insurance Guaranty Funds. This Policy is not covered by
the Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law. This Policy is not covered by the Florida Insurance Guaranty
Association created under Part II of Chapter 631 of the Florida Insurance Code.
In the event Financial Security were to become insolvent, any claims arising
under this Policy are excluded from coverage by the California Insurance
Guaranty Association, established pursuant to Article 14.2 of Chapter 1 of Part
2 of Division 1 of the California Insurance Code.
10. Surrender of Policy. The Trustee shall surrender this Policy to
Financial Security for cancellation upon expiration of the Term of this Policy.
11. Optional Payments. Financial Security may at its option make payments
under the this Policy that are Optional Payments. In the event Financial
Security makes Optional Payments hereunder, such payments will be disbursed by
wire transfer of immediately available funds to the Policy Payments Account
established pursuant to the Pooling and Servicing Agreement or, if no such
Policy Payments Account has been established, to the Trustee. Such funds shall
thereupon constitute Insured Payments for purposes of computation of the
Reimbursement Amount, whether or not such funds are properly applied by the
Trustee.
13
<PAGE>
IN WITNESS WHEREOF, FINANCIAL SECURITY ASSURANCE INC. has caused this
Endorsement No. 1 to be executed by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By:
-------------------------------------
Authorized Officer
<PAGE>
Exhibit A
To Endorsement 1
NOTICE OF CLAIM AND CERTIFICATE
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
The undersigned, a duly authorized officer of The Chase Manhattan Bank
(the "Trustee"), hereby certifies to Financial Security Assurance Inc.
("Financial Security"), with reference to Financial Guaranty Insurance Policy
No. 50648-N dated December 15, 1997 (the "Policy"), issued by Financial Security
in respect of First Greensboro Home Equity Loan Pass-Through Certificates,
Series 1997-2, Class A-1, Class A-2 and Class A-3 Certificates that:
(i) The Trustee is the Trustee under the Pooling and Servicing
Agreement for the Holders.
(ii) the sum of all amounts on deposit (or scheduled to be on
deposit) in the Certificate Account and available for distribution to
the Holders of the Class A-1, Class A-2, and Class A-3 Certificates
(collectively, the "Securities") pursuant to the Pooling and Servicing
Agreement will be $______________ (the "Shortfall") less than the
Guaranteed Distributions with respect to the Payment Date.
(iii) The Trustee is making a claim under the Policy for the
Shortfall to be applied to distributions of principal or interest or
both with respect to the Securities.
(iv) The Trustee agrees that, following receipt of funds from
Financial Security, it shall (a) hold such amounts in trust and apply
the same directly to the payment of Guaranteed Distributions on the
Securities when due (or, in the case of Optional Payments, apply the
same in the manner that Net Liquidation Proceeds are required to be
applied pursuant to the Pooling and Servicing Agreement); (b) not
apply such funds for any other purpose; (c) not commingle such funds
with other funds held by the Trustee and (d) maintain an accurate
record of such payments with respect to each Security and the
corresponding claim on the Policy and proceeds thereof and, if the
Security is required to be surrendered for such payment, shall stamp
on each such Security the legend "$[insert applicable amount] paid by
Financial Security and the balance hereof has been cancelled and
reissued" and then shall deliver such Security to Financial Security.
(v) The Trustee, on behalf of the Certificateholders, hereby
assigns to Financial Security the rights of the Certificateholders
with respect to the Trust Fund to the extent of any payments under the
Policy, including, without limitation, any amounts due to the
Certificateholders in respect of securities law violations arising
from the offer and sale of the Trust Fund. The foregoing assignment is
in addition to, and not in limitation of, rights of subrogation
otherwise available to Financial Security in respect of such payments.
The Trustee shall take such action and deliver such instruments as may
be reasonably requested or required by Financial Security to
effectuate the purpose or provisions of this clause (v).
(vi) The Trustee, on its behalf and on behalf of the
Certificateholders, hereby
15
<PAGE>
appoints Financial Security as agent and attorney-in-fact for the
Trustee and each such Certificateholder in any legal proceeding with
respect to the Trust Fund. The Trustee hereby agrees that Financial
Security may at any time during the continuation of any proceeding by
or against any debtor under the United States Bankruptcy Code or any
other applicable bankruptcy, insolvency, receivership, rehabilitation
or similar law (an "Insolvency Proceeding") direct all matters
relating to such Insolvency Proceeding, including without limitation,
(A) all matters relating to any claim in connection with an Insolvency
Proceeding seeking the avoidance as a preferential transfer of any
payment with respect to the Trust Fund (a "Preference Claim"), (B) the
direction of any appeal of any order relating to any Preference Claim
at the expense of Financial Security but subject to reimbursement as
provided in the Insurance Agreement and (C) the posting of any surety,
supersedeas or performance bond pending any such appeal. In addition,
the Trustee hereby agrees that Financial Security shall be subrogated
to, and the Trustee on its behalf and on behalf of each
Certificateholder, hereby delegates and assigns, to the fullest extent
permitted by law, the rights of the Trustee and each Certificateholder
in the conduct of any Insolvency Proceeding, including, without
limitation, all rights of any party to an adversary proceeding or
action with respect to any court order issued in connection with any
such Insolvency Proceeding.
(vii) Payment should be made by wire transfer directed to the
[SPECIFY POLICY PAYMENTS ACCOUNT].
Unless the context otherwise requires, capitalized terms used in this
Notice of Claim and Certificate and not defined herein shall have the meanings
provided in the Policy.
IN WITNESS WHEREOF, the Trustee has executed and delivered this Notice of
Claim and Certificate as of the _______ day of _____________________, _____.
THE CHASE MANHATTAN BANK,
as Trustee
By:
-------------------------------------
Title:
---------------------------------
- --------------------------------------------------------------------------------
For Financial Security or Fiscal Agent Use Only
Wire transfer sent _____________ by _____________________________________
Confirmation Number ___________________________________________
16
