<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) June 4, 1996
EquiVantage Home Equity Loan Trust 1996-2
------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 33-99364 Application Pending
- ----------------- ------------------ -------------------
(State or Other (Commission File (I.R.S. Employer
Jurisdiction of Number) Identification No.)
Incorporation)
c/o EquiVantage Acceptance Corp. 77040
Attention: John E. Smith ---------------------
13111 Northwest Freeway (Zip Code)
Houston, Texas
(Address of Principal Executive Offices)
Registrant's telephone number, including area code (713) 895-1957
--------------
No change
- --------------------------------------------------------------------
(Former name or former address, if changed since last report)<PAGE>
<PAGE>
Item 5. Other Events
------------
In connection with the offering of EquiVantage Home
Equity Loan Trust 1996-2 Home Equity Loan Asset-Backed Certificates,
Series 1996-2, described in a Prospectus Supplement dated May 16,
1996 to the Prospectus dated May 7, 1996, certain executed agreements
relating to the issuance of such Certificates.
1.1 Underwriting Agreement between the Registrant and
the Representative named therein, dated May 16,
1996 (incorporated by reference to Exhibit 1.1 of
Amendment No. 1 to the Registrant's Registration
Statement on Form S-3 (File No. 33-99364)).
4.1 Pooling and Servicing Agreement among the
Registrant, EquiVantage Inc. and Norwest Bank
Minnesota, National Association, as Trustee, dated
as of May 1, 1996 (incorporated by reference to
Exhibit 4.1 to the Registrant's Registration
Statement on Form S-3 (File No. 33-99364)).
4.2 Indemnification Agreement among Financial Guaranty
Insurance Company, the Registrant and the
Representative named therein, dated as of May 1,
1996 (incorporated by reference to Exhibit 4.2 to
the Registrant's Registration Statement on Form S-3
(File No. 33-99364)).
4.3 Insurance and Indemnity Agreement among Financial
Guaranty Insurance Company, the Registrant and
EquiVantage Inc., dated as of May 1, 1996 among
Financial Guaranty Insurance Company, the
Registrant and EquiVantage Inc. (incorporated by
reference as Exhibit 4.2 to the Registrant's
Registration Statement on Form S-3 (File No.
33-99364)).<PAGE>
<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.
EQUIVANTAGE HOME EQUITY LOAN TRUST 1996-2
By: EquiVantage Acceptance Corp., as Sponsor
By: /s/ John E. Smith
--------------------------
Name: John E. Smith
Title: President
Dated: June 4, 1996<PAGE>
<PAGE>
Exhibit Index
-------------
Description of Exhibit
----------------------
Exhibit No. Description
- ----------- -----------
1.1 Underwriting Agreement between the Registrant and
the Representative named therein, dated May 16,
1996 (incorporated by reference to Exhibit 1.1 of
Amendment No. 1 to the Registrant's Registration
Statement on Form S-3 (File No. 33-99364)).
4.1 Pooling and Servicing Agreement among the
Registrant, EquiVantage Inc. and Norwest Bank
Minnesota, National Association, as Trustee, dated
as of May 1, 1996 (incorporated by reference to
Exhibit 4.1 to the Registrant's Registration
Statement on Form S-3 (File No. 33-99364)).
4.2 Indemnification Agreement among Financial Guaranty
Insurance Company, the Registrant and the
Representative named therein, dated as of May 1,
1996 (incorporated by reference to Exhibit 4.2 to
the Registrant's Registration Statement on Form S-3
(File No. 33-99364)).
4.3 Insurance and Indemnity Agreement among Financial
Guaranty Insurance Company, the Registrant and
EquiVantage Inc., dated as of May 1, 1996 among
Financial Guaranty Insurance Company, the
Registrant and EquiVantage Inc. (incorporated by
reference as Exhibit 4.2 to the Registrant's
Registration Statement on Form S-3 (File No.
33-99364)).
Exhibit 1.1<PAGE>
Execution
EQUIVANTAGE ACCEPTANCE CORP.
EQUIVANTAGE INC.
AND
PRUDENTIAL SECURITIES INCORPORATED
As Representative of the several Underwriters
UNDERWRITING AGREEMENT
FOR
EQUIVANTAGE HOME EQUITY LOAN TRUST 1996-2
HOME EQUITY LOAN ASSET-BACKED CERTIFICATES,
CLASS A FIXED RATE CERTIFICATES
May 16, 1996<PAGE>
<PAGE>
TABLE OF CONTENTS
Page
SECTION I. Representations and Warranties of the
Company . . . . . . . . . . . . . . . . . 2
SECTION II. Purchase and Sale . . . . . . . . . . . . 6
SECTION III. Delivery and Payment . . . . . . . . . 6
SECTION IV. Offering by the Underwriters. . . . . . . 6
SECTION V. Covenants of the Company. . . . . . . . . 6
SECTION VI. Condition to the Underwriters'
Obligations . . . . . . . . . . . . . . . 9
SECTION VII. Payment of Expenses. . . . . . . . . . 19
SECTION VIII. Indemnification and Contribution . . . 20
SECTION IX. Representations, Warranties and
Agreements to Survive Delivery. . . . . . 24
SECTION X. Default by One or More of the
Underwriters. . . . . . . . . . . . . . . 24
SECTION XI. Termination of Agreement. . . . . . . . . 25
SECTION XII. Notices. . . . . . . . . . . . . . . . 25
SECTION XIII. Persons Entitled to the Benefit of
this Agreement . . . . . . . . . . . . 25
SECTION XIV. Survival . . . . . . . . . . . . . . . 25
SECTION XV. Definition of the Term "Business Day" . . 25
SECTION XVI. Governing Law; Submission to
Jurisdiction . . . . . . . . . . . . . 26
SECTION XVII. Counterparts . . . . . . . . . . . . . 26
SECTION XVIII. Headings . . . . . . . . . . . . . . . 26
SECTION XIX. Amendments and Waivers . . . . . . . . 26
<PAGE>
<PAGE>
EQUIVANTAGE HOME EQUITY LOAN TRUST 1996-2
HOME EQUITY LOAN ASSET-BACKED CERTIFICATES,
CLASS A FIXED RATE CERTIFICATES
UNDERWRITING AGREEMENT
May 16, 1996
Prudential Securities Incorporated
as Representative of the
several Underwriters
1 New York Plaza
26th Floor
New York, New York 10292
Dear Ladies and Gentlemen:
EquiVantage Acceptance Corp. (the "Company"), a
Delaware corporation, has authorized the issuance and
sale of Home Equity Loan Asset-Backed Certificates, Class
A (the "Offered Certificates") and the Class R
Certificates (the "Subordinated Certificates," and
collectively with the Offered Certificates, the
"Certificates"), evidencing interests in a pool of home
equity loans (the "Home Equity Loans"). The Home Equity
Loans are secured primarily by first lien deeds of trust
or mortgages on one- to four-family residential
properties.
Only the Offered Certificates are being
purchased by the Underwriters named in Schedule A hereto,
and the Underwriters are purchasing, severally, only the
Offered Certificates set forth opposite their names in
Schedule A, except that the amounts purchased by the
Underwriters may change in accordance with Section X of
this Agreement. Prudential Securities Incorporated is
acting as representative of the several Underwriters and
in such capacity, is hereinafter referred to as the
"Representative."
The Certificates will be issued under a pooling
and servicing agreement (the "Pooling and Servicing
Agreement'), dated as of May 1, 1996 among the Company,
as Seller (the "Seller"), EquiVantage Inc. (a corporation
organized under the laws of Delaware, ("EquiVantage
Inc.")) as Servicer (the "Servicer") and Norwest Bank
Minnesota, National Association, as trustee (the
"Trustee"). The Certificates will evidence fractional
undivided interests in the trust (the "Trust"). The
assets of the Trust will initially include, among other
things, a pool of Home Equity Loans and such amounts as
may be held by the Trustee in the Certificate Account
(the "Certificate Account"), the Principal and Interest
Account (the "P&I Account") and any other accounts held
by the Trustee for the Trust. The Home Equity Loans will
be acquired from EquiVantage Inc. pursuant to a Master
Loan Transfer Agreement dated May 1, 1996, and related
Conveyance Agreement dated May 23, 1996 (the "Conveyance
Agreement," together the "Purchase Agreements"). The
Offered Certificates will initially represent an
undivided ownership interest in the pool of Home Equity
Loans in an amount of $100,000,000 (approximate) as of
the close of business on May 1, 1996 (the "Cut-Off
Date"). The Offered Certificates will also have the
benefit of a Certificate Insurance Policy (the
"Certificate Insurance Policy") issued by Financial
Guaranty Insurance Corporation, a New York stock
insurance company (the "Certificate Insurer"). The
Certificate Insurance Policy will be issued pursuant to<PAGE>
<PAGE>
the insurance and indemnity agreement (the "Insurance
Agreement") dated as of May 1, 1996 among the Certificate
Insurer, the Company, the Servicer and the Trustee. A
form of the Pooling and Servicing Agreement has been
filed as an exhibit to the Registration Statement
(hereinafter defined).
The Certificates are more fully described in a
Registration Statement which the Company has furnished to
the Underwriters. Capitalized terms used but not defined
herein shall have the meanings given to them in the
Pooling and Servicing Agreement.
SECTION I. Representations and Warranties of
the Company. The Company represents and warrants to, and
agrees with the Underwriters that:
A. A Registration Statement on Form S-3 (No.
33-99364), has (i) been prepared by the Company in
conformity with the requirements of the Securities Act
of 1933 (the "Securities Act") and the rules and
regulations (the "Rules and Regulations") of the United
States Securities and Exchange Commission (the
"Commission") thereunder, (ii) been filed with the
Commission under the Securities Act and (iii) become
effective under the Securities Act. Copies of such
Registration Statement have been delivered by the Company
to the Representative. As used in this Agreement,
"Effective Time" means the date and the time as of which
such Registration Statement, or the most recent post-
effective amendment thereto, if any, was declared
effective by the Commission; "Effective Date" means the
date of the Effective Time; "Registration Statement"
means such registration statement, at the Effective Time,
including any documents incorporated by reference therein
at such time; "Basic Prospectus" means such final
prospectus dated May 7, 1996; and "Prospectus Supplement"
means the final prospectus supplement relating to the
Offered Certificates, to be filed with the Commission
pursuant to paragraphs (2), (3) or (5) of Rule 424(b) of
the Rules and Regulations. "Prospectus" means the Basic
Prospectus together with the Prospectus Supplement.
Reference made herein to the Prospectus shall be deemed
to refer to and include any documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under
the Securities Act as of the date of the Prospectus, any
reference to any amendment or supplement to the
Prospectus shall be deemed to refer to and include any
document filed under the Securities Exchange Act of 1934
(the "Exchange Act") after the date of the Prospectus and
incorporated by reference in the Prospectus, and any
reference to any amendment to the Registration Statement
shall be deemed to include any report of the Company
filed with the Commission pursuant to section 13(a) or
15(d) of the Exchange Act after the Effective Time that
is incorporated by reference in the Registration
Statement. The Commission has not issued any order
preventing or suspending the use of the Prospectus.
There are not contracts or documents of the Company which
are required to be filed as exhibits to the Registration
Statement pursuant to the Securities Act or the Rules and
Regulations which have not been so filed or incorporated
by reference therein on or prior to the Effective Date of
the Registration Statement other than such documents or
materials, if any, as any Underwriter delivers to the
Company pursuant to Section VIII D hereof for filing on
Form 8-K.
B. The Registration Statement conforms, and
the Prospectus and any further amendments or supplements
to the Registration Statement or the Prospectus will,
when they become effective or are filed with the
Commission, as the case may be, conform in all respects<PAGE>
<PAGE>
to the requirements of the Securities Act and the Rules
and Regulations. The Registration Statement, as of the
Effective Date thereof and of any amendment thereto, did
not contain an untrue statement of a material fact or
omit to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading. The Prospectus as of its date, and as
amended or supplemented as of the Closing Date does not
and will not contain any untrue statement of a material
fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
provided that no representation or warranty is made as to
information contained in or omitted from the Registration
Statement or the Prospectus in reliance upon and in
conformity with written information furnished to the
Company in writing by the Underwriters expressly for use
therein.
C. The documents incorporated by reference in
the Prospectus, when they became effective or were filed
with the Commission, as the case may be, conformed in all
material respects to the requirements of the Securities
Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder, and none of
such documents contained an untrue statement of a
material fact or omitted to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading; and any further
documents so filed and incorporated by reference in the
Prospectus, when such documents become effective or are
filed with the Commission, as the case may be, will
conform in all material respects to the requirements of
the Securities Act or the Exchange Act, as applicable,
and the rules and regulations of the Commission
thereunder and will not contain an untrue statement of a
material fact or omit to state a material fact required
to be stated therein or necessary to make the statements
therein not misleading; provided that no representation
is made as to documents deemed to be incorporated by
reference in the Prospectus as the result of filing a
Form 8-K at the request of the Underwriters except to the
extent such documents reflect information furnished by
the Company to the Underwriters for the purpose of
preparing such documents.
D. Since the respective dates as of which
information is given in the Prospectus, there has not
been any material adverse change, or any development
involving a prospective material adverse change, in the
general affairs, management, financial condition, or
results of operations of the Company, otherwise than as
set forth or contemplated in the Prospectus as
supplemented or amended as of the Closing Date.
E. The Company has been duly incorporated and
is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation, is
duly qualified to do business and is in good standing as
a foreign corporation in each jurisdiction in which its
ownership or lease of property or the conduct of its
business requires such qualification, and has all power
and authority necessary to own or hold its properties, to
conduct the business in which it is engaged and to enter
into and perform its obligations under this Agreement,
the Pooling and Servicing Agreement and the Insurance
Agreement or the Purchase Agreements and to cause the
Certificates to be issued.
F. There are no actions, proceedings or
investigations pending with respect to which the Company
has received service of process before or threatened by
any court, administrative agency or other tribunal to<PAGE>
<PAGE>
which the Company is a party or of which any of its
properties is the subject (a) which if determined
adversely to the Company would have a material adverse
effect on the business or financial condition of the
Company, (b) asserting the invalidity of this Agreement,
the Pooling and Servicing Agreement, the Insurance
Agreement or the Certificates, or the Purchase Transfer
Agreements, (c) seeking to prevent the issuance of the
Certificates or the consummation by the Company of any of
the transactions contemplated by the Pooling and
Servicing Agreement, the Insurance Agreement or this
Agreement, or the Purchase Transfer Agreement, as the
case may be, (d) which might individually or in the
aggregate materially and adversely affect the performance
by the Company of its obligations under, or the validity
or enforceability of, the Pooling and Servicing
Agreement, this Agreement, and the Insurance Agreement
or the Certificates or the Purchase Agreements or (e)
which might adversely affect the federal income tax
attributes of the Certificates as described in the
Prospectus.
G. This Agreement has been, and the Pooling
and Servicing Agreement, the Purchase Agreements and the
Insurance Agreement, when executed and delivered as
contemplated hereby and thereby will have been, duly
authorized, executed and delivered by the Company, and
this Agreement constitutes, and the Pooling and Servicing
Agreement and the Insurance Agreement when executed and
delivered as contemplated herein, will constitute legal,
valid and binding instruments enforceable against the
Company in accordance with their respective terms,
subject as to enforceability to (x) applicable
bankruptcy, reorganization, insolvency, moratorium or
other similar laws affecting creditors' rights generally,
(y) general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at
law), and (z) with respect to rights of indemnity under
this Agreement and the Insurance Agreement, limitations
of public policy under applicable securities laws.
H. The execution, delivery and performance of
this Agreement, the Pooling and Servicing Agreement, the
Purchase Agreements and the Insurance Agreement by the
Company and the consummation of the transactions
contemplated hereby and thereby, compliance with the
provisions thereof, and the issuance and delivery of the
Certificates do not and will not conflict with or result
in a breach or violation of any of the terms or
provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which the Company is a
party, by which the Company is bound or to which any of
the properties or assets of the Company or any of its
subsidiaries is subject, which breach or violation would
have a material adverse effect on the business,
operations or financial condition of the Company, nor
will such actions result in any violation of the
provisions of the articles of incorporation or by-laws of
the Company or any statute or any order, rule or
regulation of any court or governmental agency or body
having jurisdiction over the Company or any of its
properties or assets, which breach or violation would
have a material adverse effect on the business,
operations or financial condition of the Company. The
Company is not a party to, bound by, or in breach or
violation of, any indenture or other agreement or
instrument, or subject to or in violation of any statute,
order, rule or regulation of any court, governmental
agency or body or other tribunal having jurisdiction over
the Company, which materially and adversely affects, or
is reasonably likely in the future to materially and
adversely affect, (i) the ability of the Company to<PAGE>
<PAGE>
perform its obligations under this Agreement and the
Insurance Agreement or (ii) the business, operations,
results of operations, financial position, income,
properties or assets of the Company.
I. The Company has no reason to know that
KPMG Peat Marwick LLP are not independent public
accountants with respect to the Company as required by
the Securities Act and the Rules and Regulations.
J. The direction by the Company to the
Trustee to execute, authenticate, issue and deliver the
Certificates has been duly authorized by the Company, and
assuming the Trustee has been duly authorized to do so,
when executed, authenticated, issued and delivered by the
Trustee in accordance with the Pooling and Servicing
Agreement, the Certificates will be validly issued and
outstanding and will be entitled to the benefits provided
by the Pooling and Servicing Agreement.
K. No consent, approval, authorization,
order, registration or qualification of or with any court
or governmental agency or body of the United States is
required for the issuance of the Certificates and the
sale of the Offered Certificates to the Underwriters, or
the consummation by the Company of the other transactions
contemplated by this Agreement, the Pooling and Servicing
Agreement, the Purchase Agreements and the Insurance
Agreement, except such consents, approvals,
authorizations, registrations or qualifications as may be
required under State securities or Blue Sky laws in
connection with the purchase and distribution of the
Offered Certificates by the Underwriters or as have been
obtained.
L. The Company possesses all material
licenses, certificates, authorities or permits issued by
the appropriate state, Federal or foreign regulatory
agencies or bodies necessary to conduct the business now
conducted by it and as described in the Prospectus, and
there are no proceedings pending with respect to which
the Company has received service of process or, to the
best knowledge of the Company threatened, relating to the
revocation or modification of any such license,
certificate, authority or permit which if decided
adversely to the Company would, singly or in the
aggregate, materially and adversely affect the conduct of
its business, operations or financial condition.
M. At the time of execution and delivery of
the Pooling and Servicing Agreement, the Company will:
(i) have good title to the Home Equity Loans conveyed by
the Seller, free and clear of any lien, mortgage, pledge,
charge, encumbrance, adverse claim or other security
interest (collectively, "Liens"); (ii) not have assigned
to any person any of its right or title in the Home
Equity Loans, in the Pooling and Servicing Agreement or
in the Certificates being issued pursuant thereto; and
(iii) have the power and authority to sell its interest
in the Home Equity Loans to the Trustee and to sell the
Offered Certificates to the Underwriters. Upon execution
and delivery of the Pooling and Servicing Agreement by
the Trustee, the Trustee will have acquired beneficial
ownership of all of the Company's right, title and
interest in and to the Home Equity Loans. Upon delivery
to the Underwriters of the Offered Certificates, the
Underwriters will have good title to the Offered
Certificates, free of any Liens.
N. As of the Cut-Off Date, each of the Home
Equity Loans will meet the eligibility criteria described
in the Prospectus and will conform to the descriptions
thereof contained in the Prospectus in all material respects.<PAGE>
<PAGE>
O. Neither the Company nor the Trust created
by the Pooling and Servicing Agreement is an "investment
company" within the meaning of such term under the
Investment Company Act of 1940 (the "1940 Act") and the
rules and regulations of the Commission thereunder.
P. At the Closing Date, the Offered
Certificates, the Purchase Agreements and the Pooling and
Servicing Agreement will conform in all material respects
to the descriptions thereof contained in the Prospectus.
The Offered Certificates will be duly and validly
authorized and, when duly and validly executed,
authenticated, issued and delivered in accordance with
the Pooling and Servicing Agreement and sold to the
Underwriters as provided herein, will be validly issued
and outstanding and entitled to the benefits of the
Pooling and Servicing Agreement.
Q. At the Closing Date, the Offered
Certificates shall have been rated in the highest rating
category by at least two nationally recognized rating
agencies.
R. Any taxes, fees and other governmental
charges in connection with the execution, delivery and
issuance of this Agreement, the Pooling and Servicing
Agreement, the Insurance Agreement and the Certificates
have been paid or will be paid at or prior to the Closing
Date.
S. At the Closing Date, each of the
representations and warranties of the Company set forth
in the Pooling and Servicing Agreement and the Insurance
Agreement will be true and correct in all material
respects.
T. The transfer of the Home Equity Loans to
the Trust at the Closing Date will be treated by the
Company for financial accounting and reporting purposes
as a sale of assets and not as a pledge of assets to
secure debt.
U. The Company is not aware of (i) any
request by the Commission for any further amendment of
the Registration Statement or the Prospectus or for any
additional information, or (ii) any notification with
respect to the suspension of the qualification of the
Certificates for sale in any jurisdiction or the
initiating or threatening of any proceeding for such
purpose.
Any certificate signed by an officer of the
Company and delivered to the Representative or counsel
for the Representative in connection with an offering of
the Offered Certificates shall be deemed, and shall state
that it is, a representation and warranty as to the
matters covered thereby to each person to whom the
representations and warranties in this Section I are
made.
SECTION II. Purchase and Sale. The
commitment of the Underwriters to purchase the Offered
Certificates pursuant to this Agreement shall be deemed
to have been made on the basis of the representations and
warranties herein contained and shall be subject to the
terms and conditions herein set forth. The Company agrees
to instruct the Trustee to issue the Offered Certificates
and agrees to sell to the Underwriters, and the Underwriters
agree (except as provided in Sections X and XI hereof) severally
and not jointly to purchase from the Company the aggregate
initial principal amounts or percentage interests of the Class A
Certificates set forth opposite their names on Schedule A, at
the purchase price or prices set forth in Schedule A.<PAGE>
<PAGE>
SECTION III. Delivery and Payment. Delivery
and payment for the Offered Certificates to be purchased
by the Underwriters shall be made at the offices of Dewey
Ballantine, or at such other place as shall be agreed
upon by the Company at 10:00 a.m. New York City time on
May 23, 1996 or at such other time or date as shall be
agreed upon in writing by the Representative and the
Company (such date being referred to as the "Closing
Date"). Payment shall be made to the Company by wire
transfer of same day funds payable to the account of the
Company. Delivery of the Offered Certificates shall be
made to the Representative for the accounts of the
Underwriters against payment of the purchase price
thereof. The Certificates shall be in such authorized
denominations and registered in such names as the
Underwriters may request in writing at least two business
days prior to the Closing Date. The Offered Certificates
will be made available for examination by the
Representative no later than 2:00 p.m. New York City time
on the first business day prior to the Closing Date.
SECTION IV. Offering by the Underwriters.
It is understood that, subject to the terms and
conditions hereof, the Underwriters propose to offer the
Offered Certificates for sale to the public as set forth
in the Prospectus.
SECTION V. Covenants of the Company. The
Company agrees as follows:
A. To prepare the Prospectus in a form
approved by the Underwriters and to file such Prospectus
pursuant to Rule 424(b) under the Securities Act not
later than the Commission's close of business on the
second business day following the availability of the
Prospectus to the Underwriters; to make no further
amendment or any supplement to the Registration Statement
or to the Prospectus prior to the Closing Date except as
permitted herein; to advise the Underwriters, promptly
after it receives notice thereof, of the time when any
amendment to the Registration Statement has been filed or
becomes effective prior to the Closing Date or any
supplement to the Prospectus or any amended Prospectus
has been filed prior to the Closing Date and to furnish
the Underwriters with copies thereof; to file promptly
all reports and any definitive proxy or information
statements required to be filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of the
Prospectus and, for so long as the delivery of a
prospectus is required in connection with the offering or
sale of the Offered Certificates; to promptly advise the
Underwriters of its receipt of notice of the issuance by
the Commission of any stop order or of: (i) any order
preventing or suspending the use of the Prospectus; (ii)
the suspension of the qualification of the Offered
Certificates for offering or sale in any jurisdiction;
(iii) the initiation of or threat of any proceeding for
any such purpose; (iv) any request by the Commission for
the amending or supplementing of the Registration
Statement or the Prospectus or for additional
information. In the event of the issuance of any stop
order or of any order preventing or suspending the use of
the Prospectus or suspending any such qualification, the
Company promptly shall use its best efforts to obtain the
withdrawal of such order by the Commission.
B. To furnish promptly to the Underwriters
and to counsel for the Underwriters a signed copy of the
Registration Statement as originally filed with the
Commission, and of each amendment thereto filed with the
Commission, including all consents and exhibits filed
therewith.<PAGE>
<PAGE>
C. To deliver promptly to the Underwriters
such number of the following documents as the
Underwriters shall reasonably request: (i) conformed
copies of the Registration Statement as originally filed
with the Commission and each amendment thereto (in each
case including exhibits); (ii) the Prospectus and any
amended or supplemented Prospectus; and (iii) any
document incorporated by reference in the Prospectus
(including exhibits thereto). If the delivery of a
prospectus is required at any time prior to the
expiration of nine months after the Effective Time in
connection with the offering or sale of the Offered
Certificates, and if at such time any events shall have
occurred as a result of which the Prospectus as then
amended or supplemented would include any untrue
statement of a material fact or omit to state any
material fact necessary in order to make the statements
therein, in the light of the circumstances under which
they were made when such Prospectus is delivered, not
misleading, or, if for any other reason it shall be
necessary during such same period to amend or supplement
the Prospectus or to file under the Exchange Act any
document incorporated by reference in the Prospectus in
order to comply with the Securities Act or the Exchange
Act, the Company shall notify the Underwriters and, upon
any Underwriter's request, shall file such document and
prepare and furnish without charge to the Underwriters
and to any dealer in securities as many copies as the
Underwriters may from time to time reasonably request of
an amended Prospectus or a supplement to the Prospectus
which corrects such statement or omission or effects such
compliance, and in case the Underwriters are required to
deliver a Prospectus in connection with sales of any of
the Offered Certificates at any time nine months or more
after the Effective Time, upon the request of an
Underwriter but at its expense, the Company shall prepare
and deliver to such Underwriter as many copies as such
Underwriter may reasonably request of an amended or
supplemented Prospectus complying with Section 10(a)(3)
of the Securities Act. If such amendment or supplement
to the Prospectus is required to be contained in a post-
effective amendment to the Registration Statement, the
Company will use its best efforts to cause such amendment
of the Registration Statement to be made effective as
soon as possible.
D. To file promptly with the Commission any
amendment to the Registration Statement or the Prospectus
or any supplement to the Prospectus that may, in the
judgment of the Company or the Underwriters, be required
by the Securities Act or requested by the Commission.
E. To furnish the Underwriters and counsel
for the Underwriters, prior to filing with the
Commission, and to obtain the consent of the Underwriters
for the filing of the following documents relating to the
Certificates: (i) amendment to the Registration
Statement or supplement to the Prospectus, or document
incorporated by reference in the Prospectus, or (ii)
Prospectus pursuant to Rule 424 of the Rules and
Regulations.
F. To make generally available to holders of
the Offered Certificates as soon as practicable, but in
any event not later than 90 days after the close of the
period covered thereby, a statement of earnings of the
Trust (which need not be audited) complying with Section
11(a) of the Securities Act and the Rules and Regulations
(including, at the option of the Company, Rule 158) and
covering a period of at least twelve consecutive months
beginning not later than the first day of the first
fiscal quarter following the Closing Date.<PAGE>
<PAGE>
G. To use its best efforts, in cooperation
with the Underwriters, to qualify the Offered
Certificates for offering and sale under the applicable
securities laws of such states and other jurisdictions of
the United States or elsewhere as the Underwriters may
designate, and maintain or cause to be maintained such
qualifications in effect for as long as may be required
for the distribution of the Offered Certificates. The
Company will file or cause the filing of such statements
and reports as may be required by the laws of each
jurisdiction in which the Offered Certificates have been
so qualified.
H. So long as the Offered Certificates shall
be outstanding the Company shall cause the Trustee,
pursuant to the Pooling and Servicing Agreement, to
deliver to the Underwriters as soon as such statements
are furnished to the Trustee: (i) the annual statement
as to compliance delivered to the Trustee pursuant to
Section 8.16 of the Pooling and Servicing Agreement; (ii)
the annual statement of a firm of independent public
accountants furnished to the Trustee pursuant to Section
8.17 of the Pooling and Servicing Agreement; (iii) the
monthly servicing report furnished to the Trustee
pursuant to Section 7.8 and Section 8.1 of the Pooling
and Servicing Agreement; (iv) the monthly reports
furnished to the Certificateholders pursuant to Section
7.8 of the Pooling and Servicing Agreement; and (v) from
time to time, any other information concerning the Trust
filed with any government or regulatory authority that is
otherwise publicly available, as the Representative may
reasonably request.
I. To apply the net proceeds from the sale of
the Offered Certificates in the manner set forth in the
Prospectus.
J. During a period of seven calendar days
from the Closing Date, neither the Company nor any trust
established, directly or indirectly, by the Company will,
without the Representative's prior written consent (which
consent shall not be unreasonably withheld), offer or
sell mortgage pass-through certificates backed by
mortgage loans, except pursuant to this Agreement.
K. The Company will enter into the applicable
agreements, to which it is a party pursuant to the
Pooling and Servicing Agreement, on or prior to the
Closing Date and will cause to be delivered to the
Trustee the Insurance Policy issued by the Certificate
Insurer.
L. The Company will cause the Computational
Materials (as defined in Section VIII(D) below) with
respect to the Certificates which are delivered to the
Company as provided in Section VIII(D) below to be filed
with the Commission on a Current Report on Form 8-K (the
"Current Report") not later than the date on which such
materials are required to be filed pursuant to the
Kidder/PSA Letters (as defined in Section VIII(D) below).
SECTION VI. Condition to the Underwriters'
Obligations. The obligations of the Underwriters to purchase
the Offered Certificates pursuant to this Agreement are subject
to: (i) the accuracy on and as of the Closing Date of the
representations and warranties on the part of the Company herein
contained (including those representations and warranties set
forth in the Pooling and Servicing Agreement and incorporated
herein); (ii) the performance by the Company of all of its
obligations hereunder; (iii) the accuracy of the statements of
the Company made in any certificate or other document delivered
pursuant to the provisions hereof; and (iv) the following
conditions as of the Closing Date:<PAGE>
<PAGE>
A. The Underwriters shall have received
confirmation of the effectiveness of the Registration
Statement. No stop order suspending the effectiveness of
the Registration Statement or any part thereof shall have
been issued and no proceeding for that purpose shall have
been initiated or threatened by the Commission. Any
request of the Commission for inclusion of additional
information in the Registration Statement or the
Prospectus shall have been complied with. The Prospectus
shall have been filed pursuant to Rule 424(b).
B. The Underwriters shall not have discovered
and disclosed to the Company on or prior to the Closing
Date that the Registration Statement or the Prospectus or
any amendment or supplement thereto contains an untrue
statement of a fact or omits to state a fact which, in
the opinion of Dewey Ballantine, counsel for the
Underwriters, is material and is required to be stated
therein or is necessary to make the statements therein
not misleading.
C. All corporate proceedings and other legal
matters relating to the authorization, form and validity
of this Agreement, the Pooling and Servicing Agreement,
the Insurance Agreement, the Purchase Agreements, the
Certificates, the Registration Statement and the
Prospectus, and all other legal matters relating to this
Agreement and the transactions contemplated hereby shall
be satisfactory in all respects to counsel for the
Underwriters, and the Company shall have furnished to
such counsel all documents and information that they may
reasonably request to enable them to pass upon such
matters. The Representative shall have received the
Pooling and Servicing Agreement and the Offered
Certificates in form and substance satisfactory to the
Representative, duly executed by all signatories required
pursuant to the respective terms thereof.
D. Dewey Ballantine, shall have furnished to
the Underwriters their written opinion, as counsel to the
Company, addressed to the Underwriters and dated the
Closing Date, in form and substance satisfactory to the
Underwriters, to the effect that:
1. The conditions to the use by the
Company of a registration statement on Form S-3
under the Securities Act, as set forth in the
General Instructions to Form S-3, have been
satisfied with respect to the Registration Statement
and the Prospectus.
2. The Registration Statement and any
amendments thereto have become effective under the
1993 Act; to the best of such counsel's knowledge,
no stop order suspending the effectiveness of the
Registration Statement has been issued and not
withdrawn and no proceedings for that purpose have
been instituted or threatened and not terminated;
and the Registration Statement, the Prospectus and
each amendment or supplement thereto, as of their
respective effective or issue dates (other than the
financial and statistical information contained
therein, as to which such counsel need express no
opinion), complied as to form in all material
respects with the applicable requirements of the
1933 Act and the rules and regulations thereunder,
and such counsel does not know of any amendment to
the Registration Statement required to be filed.
3. There are no material contracts,
indentures or other documents of a character
required to be described or referred to in the
Registration Statement or the Prospectus or to be<PAGE>
<PAGE>
filed as exhibits to the Registration Statement
other than those described or referred to therein or
filed or incorporated by reference as exhibits
thereto.
4. The statements set forth in the Basic
Prospectus under the caption "Description of the
Securities" and in the Prospectus Supplement under
the captions "Description of the Certificates" and
"The Pooling and Servicing Agreement," to the extent
such statements purport to summarize certain
provisions of the Certificates or of the Pooling and
Servicing Agreement, are fair and accurate in all
material respects.
5. The statements set forth in the Basic
Prospectus and the Prospectus Supplement under the
captions "ERISA Considerations," "Certain Federal
Income Tax Consequences," "Legal Investment Matters"
and "Certain Legal Aspects of Mortgage Loans and
Related Matters," to the extent that they constitute
matters of federal law, provide a fair and accurate
summary of such law or conclusions.
6. The Pooling and Servicing Agreement
and the Purchase Agreements conform in all material
respects to the description thereof contained in the
Prospectus and the Pooling and Servicing Agreement
is not required to be qualified under the Trust
Indenture Act of 1939, as amended, and the Trust is
not required to be registered under the Investment
Company Act of 1940, as amended.
7. Assuming that the Trustee causes
certain assets of the Trust Estate, as the Trustee
has covenanted to do in the Pooling and Servicing
Agreement, to be treated as a "real estate mortgage
investment conduit" ("REMIC"), as such term is
defined in the Internal Revenue Code of 1986, as
amended (the "Code"), and the parties to the Pooling
and Servicing Agreement comply with the terms
thereof, such assets of the Trust Estate will be
treated as a REMIC, the Offered Certificates will be
treated as the "regular interests" in the Trust and
the Class R Certificates will be treated as the sole
"residual interest" in the REMIC. Neither the Trust
nor certain assets and accounts are subject to tax
upon its income or assets by any taxing authority of
the State of New York or the City of New York.
8. To the best of such counsel's
knowledge, there are no actions, proceedings or
investigations pending that would adversely affect
the status of the Trust Estate as a REMIC.
9. As a consequence of the qualification
of the Trust Estate as a REMIC, the Offered
Certificates will be treated as "qualifying real
property loans" under Section 593(d) of the Code,
"regular. . .interest(s) in a REMIC" under Section
7701(a)(19)(C) of the Code and "real estate assets"
under Section 856(c) of the Code in the same
proportion that the assets in the Trust consist of
qualifying assets under such Sections. In addition,
as a consequence of the qualification of the Trust
Estate as a REMIC, interest on the Offered
Certificates will be treated as "interest on
obligations secured by mortgages on real property"
under Section 856(c) of the Code to the extent that
such Offered Certificates are treated as "real
estate assets" under Section 856(c) of the Code.<PAGE>
<PAGE>
10. The Certificates will, when issued,
conform to the description thereof contained in the
Prospectus.
Such counsel shall also have furnished to the
Underwriters a written statement, addressed to the
Underwriters and dated the Closing Date, in form and
substance satisfactory to the Underwriters to the effect
that no facts have come to the attention of such counsel
which lead them to believe that: (a) the Registration
Statement, at the time such Registration Statement became
effective, contained an untrue statement of a material
fact or omitted to state a material fact required to be
stated therein or necessary to make the statements
therein misleading (except as to financial or statistical
data contained in the Registration Statement); (b) the
Prospectus, as of its date and as of the Closing Date,
contained or contains an untrue statement of a material
fact or omitted or omits to state a material fact
required to be stated therein or necessary in order to
make the statements therein, in the light of the
circumstances under which they were made, not misleading
(except as to statements set forth in the Prospectus
Supplement under the caption "The Certificate Insurer");
or (c) any document incorporated by reference in the
Prospectus or any further amendment or supplement to any
such incorporated document made by the Company prior to
the Closing Date (other than any document filed at the
request of an Underwriter to the extent such document
relates to Computational Materials) contained, as of the
time it became effective or was filed with the
Commission, as the case may be, an untrue statement of a
material fact or omitted to state a material fact
required to be stated therein or necessary in order to
make the statements therein, in the light of the
circumstances under which they were made, not misleading.
In rendering such opinion or making such
statement, such counsel may rely, as to matters of fact,
on certificates of responsible officers of the Company.
Such opinions and written statements may also assume the
due authorization, execution and delivery of the
instruments and documents referred to therein by the
parties thereto other than the Company.
E. The Underwriters have received the
favorable opinion, dated the Closing Date, of Dewey
Ballantine, special counsel to the Company, addressed to
the Company and satisfactory to the Certificate Insurer,
Standard & Poor's, A Division of The McGraw-Hill
Companies, Moody's Investors Service Inc. and the
Underwriters, with respect to certain matters relating to
the transfer of the Home Equity Loans to the Company and
from the Company to the Trust, and such counsel shall
have consented to reliance on such opinion by the
Certificate Insurer, Standard & Poor's, A Division of The
McGraw-Hill Companies, Moody's Investors Service, Inc.
and the Underwriters as though such opinion had been
addressed to each such party.
F. Karen Crawford, Esq., counsel to the
Servicer, shall have furnished to the Underwriters her
written opinion, as counsel to the Servicer, addressed to
the Underwriters and the Company and dated the Closing
Date, in form and substance satisfactory to the
Underwriters, to the effect that:
1. The Servicer is validly existing in
good standing as a corporation under the laws of its
State of incorporation.<PAGE>
<PAGE>
2. The Servicer has full corporate power
and authority to serve in the capacity of servicer
of the related Home Equity Loans as contemplated in
the Pooling and Servicing Agreement.
3. The Pooling and Servicing Agreement
and the Insurance Agreement have been duly
authorized, executed and delivered by the Servicer,
and, assuming the due authorization, execution and
delivery of such agreements by the other parties
thereto, constitute the legal, valid and binding
agreements of the Servicer, enforceable against it
in accordance with their terms, subject as to
enforceability to (x) bankruptcy, insolvency,
reorganization, moratorium, receivership or other
similar laws now or hereafter in effect relating to
creditors' rights generally and (y) the
qualification that the remedy of specific
performance and injunctive and other forms of
equitable relief may be subject to equitable
defenses and to the discretion, with respect to such
remedies, of the court before which any proceedings
with respect thereto may be brought.
4. No consent, approval, authorization,
order, registration or qualification of or with any
court or governmental agency or body having
jurisdiction over the Servicer is required for the
consummation by either of them of the transactions
contemplated by the Pooling and Servicing Agreement
and the Insurance Agreement, except such consents,
approvals, authorizations, registrations and
qualifications as have been obtained.
5. The execution, delivery or performance
by the Servicer of the Pooling and Servicing
Agreement or the Insurance Agreement and the
transactions contemplated thereby do not (A)
conflict with or result in a breach of, or
constitute a default under, (i) any term or
provision of the certificate of incorporation or
by-laws of the Servicer; (ii) any term or provision
of any material agreement, deed of trust, mortgage
loan agreement, contract, instrument or indenture,
or other agreement to which the Servicer is a party
or is bound or to which any of the property or
assets of the Servicer or any of its subsidiaries is
subject; (iii) to the best of the Servicer's
knowledge without independent investigation any
order, judgment, writ, injunction or decree of any
court or governmental authority having jurisdiction
over the Servicer; or (iv) any law, rule or
regulations applicable to the Servicer; or (B) to
the best of such firm's knowledge without
independent investigation, results in the creation
or imposition of any lien, charge or encumbrance
upon the Trust Estate or upon the Certificates.
6. There are no actions, proceedings or
investigations pending with respect to which the
Servicer has received service of process before, or
to the best of such counsel's knowledge without
independent investigation, threatened against the
Servicer by any court, administrative agency or
other tribunal (a) asserting the validity of the
Pooling and Servicing Agreement, the Insurance
Agreement or the Certificates, (b) seeking to
prevent the consummation of any of the transactions
contemplated by the Pooling and Servicing Agreement
or (c) which would materially adversely affect the
performance by the Servicer of its obligations under,
or the validity or enforceability of, the Pooling and
Servicing Agreement, or the Insurance Agreement.<PAGE>
<PAGE>
G. Karen Crawford, Esq., counsel to the
Company shall have furnished to the Underwriters such
counsel's written opinion, addressed to the Underwriters
and dated the Closing Date, in form and substance
satisfactory to the Underwriters, to the effect that:
1. The Company has been duly organized
and is validly existing as a corporation in good
standing under the laws of the State of Delaware and
is duly qualified to do business and is in good
standing as a foreign corporation in each
jurisdiction in which its ownership or lease of
property or the conduct of its business requires
such qualification (except where any such failure
would not have a material adverse effect on the
Company's ability to perform its obligations under
this Agreement, the Pooling and Servicing Agreement
or the Insurance Agreement), and has all power and
authority necessary to own or hold its properties
and to conduct the business in which it is engaged
and to enter into and perform its obligations under
this Agreement, the Pooling and Servicing Agreement
and the Insurance Agreement, and cause the
Certificates to be issued.
2. The Company is not in violation of its
articles of incorporation or by-laws or in default
in the performance or observance of any material
obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which
the Company is a party or by which it or its
properties may be bound, which default might result
in any material adverse change in the financial
condition of the Company or which might materially
and adversely affect the properties or assets, taken
as a whole, of the Company.
3. This Agreement, the Pooling and
Servicing Agreement, the Indemnification Agreement,
the Insurance Agreement and the Purchase Agreements
have been duly authorized, executed and delivered by
the Company and, assuming the due authorization,
execution and delivery of such agreements by the
other parties thereto, such agreements constitute
valid and binding obligations, enforceable against
the Company in accordance with their respective
terms, subject as to enforceability to (x)
bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect
relating to creditors' rights generally, (y) general
principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or
at law) and (z) with respect to rights of indemnity
under this Agreement and the Insurance Agreement,
limitations of public policy under applicable
securities laws.
4. The execution, delivery and
performance of this Agreement, the Pooling and
Servicing Agreement, the Insurance Agreement and the
Purchase Agreements by the Company, the consummation
of the transactions contemplated hereby and thereby,
and the issuance and delivery of the Certificates
(i) do not and will not conflict with or result in a
breach or violation of any of the terms or
provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the
Company is a party or by which the Company is bound
or to which any of the property or assets of the
Company or any of its subsidiaries is subject, which
breach or violation would have a material adverse<PAGE>
<PAGE>
effect on the business, operations or financial
condition of the Company, (ii) nor will such actions
result in a violation of the provisions of the
articles of incorporation or by-laws of the Company
or any statute or any order, rule or regulation of
any court or governmental agency or body having
jurisdiction over the Company or any of its
properties or assets, which breach or violation
would have a material adverse effect on the
business, operations or financial condition of the
Company, and (iii) nor will such actions result in
the creation or imposition of any lien, charge or
encumbrance upon the Trust Estate or upon the
Certificates, except as otherwise contemplated by
the Pooling and Servicing Agreement.
5. The direction by the Company to the
Trustee to execute, issue, authenticate and deliver
the Certificates has been duly authorized by the
Company and, assuming that the Trustee has been duly
authorized to do so, when executed by the Company
and authenticated and delivered by the Trustee in
accordance with the Pooling and Servicing Agreement,
the Certificates will be validly issued and
outstanding and will be entitled to the benefits of
the Pooling and Servicing Agreement.
6. No consent, approval, authorization,
order, registration or qualification of or with any
court or governmental agency or body of the United
States is required for the issuance of the Certificates,
and the sale of the Offered Certificates to the
Underwriters, or the consummation by the Company
of the other transactions contemplated by this Agreement,
the Pooling and Servicing Agreement and the Insurance
Agreement, except such consents, approvals,
authorizations, registrations or qualifications as
may be required under the 1933 Act or State
securities or Blue Sky laws in connection with the
purchase and distribution of the Offered
Certificates by the Underwriters or as have been
previously obtained.
7. There are no actions, proceedings or
investigations pending with respect to which the
Company has received service of process before or,
to the best of such counsel's knowledge, without
independent investigation, threatened by any court,
administrative agency or other tribunal to which the
Company is a party or of which any of its properties
is the subject: (a) which if determined adversely
to the Company would have a material adverse effect
on the business, results of operations or financial
condition of the Company; (b) asserting the
invalidity of the Pooling and Servicing Agreement,
the Insurance Agreement or the Certificates; (c)
seeking to prevent the issuance of the Certificates
or the consummation by the Company of any of the
transactions contemplated by the Pooling and
Servicing Agreement, the Insurance Agreement or this
Agreement, as the case may be; or (d) which might
materially and adversely affect the performance by
the Company of its obligations under, or the
validity or enforceability of, the Pooling and
Servicing Agreement, the Insurance Agreement, this
Agreement or the Certificates.
8. The Certificates have been duly and
validly authorized and issued, and, immediately
prior to the sale of the Offered Certificates to the
Underwriters, such Certificates are owned by the
Company, free and clear of all Liens.<PAGE>
<PAGE>
9. The Company has been duly organized
and is validly existing as a corporation in good
standing under the laws of the State of Delaware and
is duly qualified to do business and is in good
standing as a foreign corporation in each
jurisdiction in which its ownership or lease of
property or the conduct of its business requires
such qualification, and has all power and authority
necessary to own or hold its properties and to
conduct the business in which it is engaged and to
enter into and perform its obligations under the
Purchase Agreements.
10. The Company is not in violation of
its articles of incorporation or by-laws or in
default in the performance or observance of any
material obligation, agreement, covenant or
condition contained in any contract, indenture,
mortgage, loan agreement, note, lease or other
instrument to which the Company is a party or by
which it or its properties may be bound, which
default might result in any material adverse changes
in the financial condition, earnings, affairs or
business of the Company or which might materially
and adversely affect the properties or assets, taken
as a whole, of the Company.
11. The Purchase Agreements have been
duly authorized, executed and delivered by the
Company and, assuming the due authorization,
execution and delivery of such agreements by the
parties thereto, such agreements will constitute
valid and binding obligations, enforceable against
the Company in accordance with their respective
terms, subject as to enforceability to (x)
bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect
relating to creditors' rights generally, (y) general
principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or
at law).
12. The execution, delivery and
performance of the Purchase Agreements by the
Company and the consummation of the transactions
contemplated thereby do not and will not conflict
with or result in a breach or violation of any of
the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which
the Company is a party or by which the Company is
bound or to which any of the property or assets of
the Company or any of its subsidiaries is subject,
which breach or violation would have a material
adverse effect on the business, operations or
financial condition of the Company, nor will such
actions result in a violation of the provisions of
the articles of incorporation or by-laws of the
Company or any statute or any order, rule or
regulation of any court or governmental agency or
body having jurisdiction over the Company or any of
its properties or assets, which breach or violation
would have a material adverse effect on the
business, operations or financial condition of the
Company.
H. The Underwriters shall have received the
favorable opinion of counsel (which may be in-house
counsel) to the Trustee, dated the Closing Date,
addressed to the Underwriters and in form and scope
satisfactory to counsel to the Underwriters, to the
effect that:<PAGE>
<PAGE>
1. The Trustee is a banking association
duly incorporated and validly existing under the
laws of the United States of America.
2. The Trustee has the full corporate
trust power to execute, deliver and perform its
obligations under the Pooling and Servicing
Agreement.
3. The execution and delivery by the
Trustee of the Pooling and Servicing Agreement and
the performance by the Trustee of its obligations
under the Pooling and Servicing Agreement have been
duly authorized by all necessary corporate actions
of the Trustee.
4. The Pooling and Servicing Agreement is
a valid and legally binding obligation of the
Trustee enforceable against the Trustee.
5. The execution and delivery by the
Trustee of the Pooling and Servicing Agreement does
not (a) violate the organization certificate of the
Trustee or the By-laws of the Trustee, (b) to such
counsel's knowledge, violate any judgment, decree or
order of any Minnesota or United States federal
court or other Minnesota or United States federal
governmental authority by which the Trustee is bound
or (c) assuming the non-existence of any judgment,
decree or order of any court or other governmental
authority that would be violated by such execution
and delivery, violate any Minnesota or United States
federal statute, rule or regulation or require any
consent, approval or authorization of any Minnesota
or United States federal court or other Minnesota or
United States federal governmental authority.
6. The Certificates have been duly
authenticated, executed and delivered by the
Trustee.
7. If the Trustee were acting in the
stead of the Servicer under the Pooling and
Servicing Agreement as of the date of such opinion,
the Trustee would have the full corporate trust
power to perform the obligations of the Servicer
under the Pooling and Servicing Agreement; and
8. To the best of such counsel's
knowledge, there are no actions, proceedings or
investigations pending or threatened against or
affecting the Trustee before or by any court,
arbitrator, administrative agency or other
governmental authority which, if decided adversely
to the Trustee, would materially and adversely
affect the ability of the Trustee to carry out the
transactions contemplated in the Pooling and
Servicing Agreement.
I. The Underwriters shall have received a
favorable opinion or opinions, dated the date of the
Closing Date, of counsel for the Underwriters, with
respect to the issue and sale of the Offered
Certificates, this Agreement, the Prospectus and such
other related matters as the Underwriters may reasonably
require.
J. The Underwriters shall have received the
favorable opinion dated the Closing Date, from in-house
counsel to the Certificate Insurer in form and scope
satisfactory to counsel for the Underwriters,
substantially to the effect that:<PAGE>
<PAGE>
1. The Certificate Insurer is a stock
insurance corporation duly incorporated, validly
existing, and in good standing under the laws of the
State of New York. The Certificate Insurer is
validly licensed and authorized to issue the
Certificate Insurance Policy and perform its
obligations under the Insurance Agreement in
accordance with the terms thereof, under the laws of
the State of New York.
2. The Certificate Insurer has the
corporate power to execute and deliver, and to take
all action required of it under the Insurance
Agreement and the Certificate Insurance Policy.
3. The execution, delivery and
performance by the Certificate Insurer of the
Certificate Insurance Policy, the Insurance
Agreement and the Indemnification Agreement is
within the corporate power of the Certificate
Insurer and has been authorized by all necessary
corporate action on the part of the Certificate
Insurer, and does not require the consent or
approval of, the giving of notice to, the prior
registration with, or the taking of any other action
in respect of any state or other governmental agency
or authority which has not previously been obtained
or effected.
4. The Certificate Insurance Policy, the
Insurance Agreement and the Indemnification
Agreement have been duly authorized, executed and
delivered by the Certificate Insurer and constitute
the legal, valid and binding agreement of the
Certificate Insurer, enforceable against the
Certificate Insurer in accordance with its terms
subject, as to enforcement, to (x) bankruptcy,
reorganization, insolvency, moratorium and other
similar laws relating to or affecting the
enforcement of creditors' rights generally,
including, without limitation, laws relating to
fraudulent transfer or conveyances, preferential
transfers and equitable subordination, presently or
from time to time in effect and general principles
of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law), as
such laws may be applied in any such proceeding with
respect to the Certificate Insurer and (y) the
qualification that the remedy of specific
performance and other forms of equitable relief may
be subject to equitable defenses and to the
discretion of the court before which any proceedings
with respect thereto may be brought.
5. To the extent the Certificate
Insurance Policy constitutes a security within the
meaning of Section 2(l) of the Securities Act, it is
a security that is exempt from the registration
requirements of the Act.
6. The information set forth under the
caption "THE CERTIFICATE INSURER" in the Prospectus
Supplement, insofar as such information constitutes
a description of the Certificate Insurance Policy,
accurately summarizes the Certificate Insurance
Policy.
K. The Company shall have furnished to the
Underwriters a certificate, dated the Closing Date and signed
by the Chairman of the Board, the President or a Vice President
of the Company to the extent that the signer of such certificate
has carefully examined the Registration Statement (excluding any
documents incorporated therein by reference), the Pooling and <PAGE>
<PAGE>
Servicing Agreement and this Agreement and that, to the best of
his or her knowledge based upon reasonable investigation:
1. The representations and warranties of
the Company in this Agreement, the Pooling and
Servicing Agreement and all related agreements are
true and correct as of the Closing Date; and the
Company has complied with all agreements and
satisfied all the conditions on its part which are
to have been complied with on or prior to the
Closing Date.
2. There has been no amendment or other
document filed affecting the certificate of
incorporation or bylaws of the Company since March
31, 1996 and no such amendment has been authorized.
No event has occurred since February 26, 1996 which
has affected the good standing of the Company under
the laws of the State of Delaware.
3. There has not occurred any material
adverse change, or any development involving a
prospective material adverse change, in the
condition, financial or otherwise, or in the
earnings, business or operations of the Company from
March 31, 1996.
4. There are no actions, suits or
proceedings pending with respect to which it has
received service of process or, to the best of such
officer's knowledge, threatened against or affecting
the Company which if adversely determined,
individually or in the aggregate, would be
reasonably likely to adversely affect the Company's
obligations under the Pooling and Servicing
Agreement or this Agreement in any material way; and
no merger, liquidation, dissolution or bankruptcy of
the Company is pending or contemplated.
L. The Trustee shall have furnished to the
Underwriters a certificate of the Trustee, signed by one
or more duly authorized officers of the Trustee, dated
the Closing Date, as to the due authorization, execution
and delivery of the Pooling and Servicing Agreement by
the Trustee and the acceptance by the Trustee of the
trusts created thereby and the due execution,
authentication and delivery of the Certificates by the
Trustee thereunder and such other matters as the
Representative shall reasonably request.
M. The Certificate Insurance Policy and the
Insurance Agreement shall have been issued by the
Certificate Insurer and shall have been duly
authenticated by an authorized agent of the Certificate
Insurer, if so required under applicable state law or
regulations.
N. The Offered Certificates shall have been
rated "AAA" by Standard & Poor's and "Aaa" by Moody's
Investors Service.
O. The Company shall, by the Closing Date,
have furnished to the Underwriters such further
information, certificates and documents as the
Underwriters may reasonably have requested pursuant to a
request made not less than three full business days prior
to the Closing Date.
P. Prior to the Closing Date, counsel for the
Underwriters shall have been furnished with such
documents and opinions as they may reasonably require for
the purpose of enabling them to pass upon the issuance
and sale of the Certificates as herein contemplated and<PAGE>
<PAGE>
related proceedings or in order to evidence the accuracy
and completeness of any of the representations and
warranties, or the fulfillment of any of the conditions,
herein contained, and all proceedings taken by the
Company in connection with the issuance and sale of the
Certificates as herein contemplated shall be satisfactory
in form and substance to the Underwriters and counsel for
the Underwriters.
Q. Subsequent to the execution and delivery
of this Agreement none of the following shall have
occurred: (i) trading in securities generally on the New
York Stock Exchange, the American Stock Exchange or the
over-the-counter market shall have been suspended or
minimum prices shall have been established on either of
such exchanges or such market by the Commission, by such
exchange or by any other regulatory body or governmental
authority having jurisdiction; (ii) a banking moratorium
shall have been declared by Federal or state authorities;
(iii) the United States shall have become engaged in
hostilities, there shall have been an escalation of
hostilities involving the United States or there shall
have been a declaration of a national emergency or war by
the United Stats; or (iv) there shall have occurred such
a material adverse change in general economic, political
or financial conditions (or the effect of international
conditions on the financial markets of the United States
shall be such) as to make it in each of the instances set
forth in clauses (i), (ii), (iii) and (iv) herein, in the
reasonable judgment of the Underwriters, impractical or
inadvisable to proceed with the public offering or
delivery of the Certificates on the terms and in the
manner contemplated in the Prospectus.
R. The Representative shall have received a
letter from KPMG Peat Marwick, LLP, dated on or before
the Closing Date, in form and substance satisfactory to
the Representative and special counsel for the
Underwriters, addressed to each of the Underwriters to
the effect that they have performed certain specified
procedures requested by the Representative with respect
to the information set forth in the Prospectus and
certain matters relating to the Company.
S. The Representative and special counsel for
the Underwriters shall have received copies of any
opinions of counsel supplied to the rating organizations
relating to any matters with respect to the Certificates.
Any such opinions shall be dated the Closing Date and
addressed to each of the Underwriters or accompanied by
reliance letters to the Representative or shall state
that each of the Underwriters may rely upon them.
T. On or prior to the Closing Date there
shall not have occurred any downgrading, nor shall any
notice have been given of (A) any intended or potential
downgrading or (B) any review or possible change in
rating the direction of which has not been indicated, in
the rating accorded the Certificate Insurer's claims
paying ability by any "nationally recognized statistical
rating organization," as such term is defined for
purposes of the Securities Act.
U. There has not occurred any change, or any
development involving a prospective change, in a
condition, financial or otherwise, or in the earnings,
business or operations, since December 31, 1995, of (A)
the Company and its subsidiaries or (B) the Certificate
Insurer, that is, in the Representative's judgment,
material and adverse and that makes it, in the
Representative's judgment, impracticable to market the
Offered Certificates on the terms and in the manner
contemplated in the Prospectus.<PAGE>
<PAGE>
If any conditions specified in this Section VI
shall not have been fulfilled when and as required to be
fulfilled, this Agreement may be terminated by the
Underwriters by notice to the Company at any time at or
prior to the Closing Date, and such termination shall be
without liability of any party to any other party except
as provided in Section VII.
All opinions, letters, evidence and
certificates mentioned above or elsewhere in this
Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance
reasonable satisfactory to counsel for the Underwriters.
SECTION VII. Payment of Expenses. If the
transaction closes, or if the transaction fails to close
other than as a result of a failure of the Underwriters
to perform hereunder, the Company agrees to pay: (a) the
costs incident to the authorization, issuance, sale and
delivery of the Certificates and any taxes payable in
connection therewith; (b) the costs incident to the
preparation, printing and filing under the Securities Act
of the Registration Statement and any amendments and
exhibits thereto (including the Prospectus); (c) the
costs of distributing the Registration Statement as
originally filed and each amendment thereto and any post-
effective amendments thereof (including, in each case,
exhibits), the Prospectus and any amendment or supplement
to the Prospectus or any document incorporated by
reference therein, all as provided in this Agreement; (d)
the costs of reproducing and distributing this Agreement;
(e) the fees and expenses of qualifying the Certificates
under the securities laws of the several jurisdictions as
provided in Section V(G) hereof and of preparing,
printing and distributing a Blue Sky Memorandum
(including related fees and expenses of counsel to the
Representative); (f) any fees charged by securities
rating services for rating the Offered Certificates; (g)
the cost of the accountant's letter relating to the
Prospectus; (h) the fees and expenses of the Certificate
Insurer (other than the fees payable pursuant to the
Pooling and Servicing Agreement); and (i) all other costs
and expenses incident to the performance of the
obligations of the Company (including costs and expenses
of its counsel); provided that, except as provided in
this Section VII, the Underwriters shall pay their own
costs and expenses, including the costs and expenses of
their counsel, any transfer taxes on the Offered
Certificates which they may sell and the expenses of
advertising any offering of the Offered Certificates made
by the Underwriters, and the Underwriters shall pay the
cost of any accountant's comfort letters which such
Underwriters choose to request relating to any
Computational Materials (as defined herein).
If this Agreement is terminated by the
Underwriters in accordance with the provisions of Section
VI or Section XI, whether or not the transactions
contemplated hereunder are consummated, the Company shall
cause the Underwriters to be reimbursed for all
reasonable out-of-pocket expenses, including fees and
disbursements of Dewey Ballantine, counsel for the
Underwriters, except that the Company shall not be
obligated under this Agreement to reimburse the
Underwriters for reasonable out-of-pocket expenses,
excluding fees and disbursements of Dewey Ballantine,
counsel for the Underwriters, if this Agreement is
terminated by the Underwriters in accordance with Section
VI(Q) herein.
<PAGE>
<PAGE>
SECTION VIII. Indemnification and
Contribution. A. The Company agrees to indemnify and
hold harmless each Underwriter and each person, if any,
who controls such Underwriter within the meaning of
Section 15 of the Securities Act or Section 12 of the
Exchange Act from and against any and all loss, claim,
damage or liability, joint or several, or any action in
respect thereof (including, but not limited to, any loss,
claim, damage, liability or action relating to purchases
and sales of the Offered Certificates), to which such
Underwriter or any such controlling person may become
subject, under the Securities Act or otherwise, insofar
as such loss, claim, damage, liability or action arises
out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in
the Registration Statement, or any amendment thereof or
supplement thereto, (ii) the omission or alleged omission
to state in the Registration Statement a material fact
required to be stated therein or necessary to make the
statements therein not misleading, (iii) any untrue
statement or alleged untrue statement of a material fact
contained in the Prospectus, or any amendment thereof or
supplement thereto, or (iv) the omission or alleged
omission to state in the Prospectus a material fact
required to be stated therein or necessary to make the
statements therein, in the light of the circumstances
under which they were made, not misleading and shall
reimburse, as provided herein, such Underwriter and each
such controlling person promptly upon demand for any
legal or other expenses reasonably incurred by such
Underwriter or such controlling person in connection with
investigating or defending or preparing to defend against
any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that the
Company shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or
action arises out of, or is based upon, any untrue
statement or alleged untrue statement or omission or
alleged omission made in the Prospectus, or any amendment
thereof or supplement thereto, or the Registration
Statement, or any amendment thereof or supplement
thereto, in reliance upon and in conformity with written
information furnished to the Company by or on behalf of
such Underwriter specifically for inclusion therein
(except to the extent that any untrue statement or
alleged untrue statement or omission or alleged omission
is a result of Seller Provided Information which is not
accurate and complete in all material respects). The
foregoing indemnity agreement is in addition to any
liability which the Company may otherwise have to any
Underwriter or any controlling person of any such
Underwriter.
B. Each Underwriter severally agrees to
indemnify and hold harmless the Company, each of its
directors, each of its officers who signed the
Registration Statement, and each person, if any, who
controls the Company within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act
against any and all loss, claim, damage or liability,
joint or several, or any action in respect thereof,
(including, but not limited to, any loss, claim, damage,
liability or action relating to purchases and sales of
the Offered Certificates), to which the Company or any
such director, officer or controlling person may become
subject, under the Securities Act or otherwise, insofar
as such loss, claim, damage, liability or action arises
out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in
the Prospectus, or any amendment thereof or supplement
thereto, or (ii) the omission or alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements in the<PAGE>
<PAGE>
Prospectus, when considered in conjunction with the
Prospectus, and in the light of the circumstances under
which they were made, not misleading, but in each case
only to the extent that the untrue statement or alleged
untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written
information furnished to the Company by or on behalf of
such Underwriter specifically for inclusion therein, and
shall reimburse, as provided herein, the Company and any
such director, officer or controlling person for any
legal or other expenses reasonably incurred by the
Company or any director, officer or controlling person in
connection with investigating or defending or preparing
to defend against any such loss, claim, damage, liability
or action as such expenses are incurred. The foregoing
indemnity agreement is in addition to any liability which
any Underwriter may otherwise have to the Company or any
such director, officer or controlling person.
C. Promptly after receipt by any indemnified
party under this Section VIII of notice of any claim or
the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made
against any indemnifying party under this Section VIII,
notify the indemnifying party in writing of the claim or
the commencement of that action; provided, however, that
the failure to notify an indemnifying party shall not
relieve it from any liability which it may have under
this Section VIII except to the extent it has been
materially prejudiced by such failure and, provided
further, that the failure to notify any indemnifying
party shall not relieve it from any liability which it
may have to any indemnified party otherwise than under
this Section VIII except as otherwise provided by law.
If any such claim or action shall be brought
against an indemnified party, and it shall notify the
indemnifying party thereof, the indemnifying party shall
be entitled to participate therein and, to the extent
that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party.
After notice from the indemnifying party to the
indemnified party of its election to assume the defense
of such claim or action, except to the extent provided in
the next following paragraph, the indemnifying party
shall not be liable to the indemnified party under this
Section VIII for any legal or other expenses subsequently
incurred by the indemnified party in connection with the
defense thereof other than reasonable costs of
investigation.
Any indemnified party shall have the right to
employ separate counsel in any such action and to
participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such
indemnified party unless: (i) the employment thereof has
been specifically authorized by the indemnifying party in
writing; (ii) the named parties to any such proceeding
(including any impleaded parties) include both the
indemnifying party and the indemnified party and such
indemnifying party shall have been advised by such
counsel that there may be one or more legal defenses
available to it which are different from or additional to
those available to the indemnifying party and in the
reasonable judgment of such counsel it is advisable for
such indemnified party to employ separate counsel; or
(iii) the indemnifying party has failed to assume the
defense of such action and employ counsel reasonably
satisfactory to the indemnified party within a reasonably
prompt period following the receipt of notification in
writing from the indemnified party, in which case, if
such indemnified party notifies the indemnifying party in<PAGE>
<PAGE>
writing that it elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party
shall not have the right to assume the defense of such
action on behalf of such indemnified party, it being
understood, however, the indemnifying party shall not, in
connection with any one such action or separate but
substantially similar or related actions in the same
jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (in
addition to one local counsel per jurisdiction) which
counsel shall be reasonably acceptable to the
indemnifying party at any time for all such indemnified
parties, which firm shall be designated in writing by the
related Underwriter, if the indemnified parties under
this Section VIII consist of one or more Underwriters or
any of its or their controlling persons, or the Company,
if the indemnified parties under this Section VIII
consist of the Company or any of the Company's directors,
officers or controlling persons.
Each indemnified party, as a condition of the
indemnity agreements contained in Section VIII(A) and
(B), shall use its best efforts to cooperate with the
indemnifying party in the defense of any such action or
claim. No indemnifying party shall be liable for any
settlement of any such action effected without its
written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if
there be a final judgment for the plaintiff in any such
action, the indemnifying party agrees to indemnify and
hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or
judgment.
Notwithstanding the foregoing paragraph, if at
any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for
fees and expenses of counsel as required by this
Agreement, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior
to the date of such settlement. No indemnifying party
shall, without the prior written consent of the
indemnified party, (which consent shall not be
unreasonably withheld), effect any settlement of any
pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and
indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all
liability on claims that are the subject matter of such
proceeding.
D. Computational Materials. Not later than
10:30 a.m. New York City time, on the business day before
the date on which the Current Report relating to the
Certificates is required to be filed by the Company with
the Commission pursuant to Section V(L) hereof, each
Underwriter shall deliver to the Company five complete
copies of all materials, if any, provided by such
Underwriter to prospective investors in such Certificates
which constitute "Computational Materials" within the
meaning of the no-action letter dated May 20, 1994,
issued by the Division of Corporation Finance of the
Commission to Kidder, Peabody Acceptance Corporation I,
Kidder, Peabody & Co. Incorporated, and Kidder Structured
Asset Corporation, the no-action letter dated May 27,
1994, issued by the Division of Corporation Finance of<PAGE>
<PAGE>
the Commission to the Public Securities Association and
the no-action letter of February 17, 1995 issued by the
Commission to the Public Securities Association
(collectively, the "Kidder/PSA Letters") and the filing
of which is a condition of the relief granted in such
letters (such materials being the "Computational
Materials"). Each delivery of Computational Materials to
the Company pursuant to this paragraph (a) shall be
effected by delivering four copies of such material to
counsel for the Company on behalf of the Company and one
copy of such materials to the Company.
E. Each Underwriter severally and not jointly
agrees, except to the extent that the Seller Provided
Information is not accurate and complete in all material
respects, to indemnify and hold harmless the Company,
each of the Company's officers and directors and each
person who controls the Company within the meaning of
Section 15 of the Securities Act and Section 12 of the
Exchange Act against any and all losses, claims, damages
or liabilities, joint or several, to which they may
become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) (including, but not
limited to, any loss, claim, damage, liability or action
relating to purchases and sales of the Offered
Certificates), arise out of or are based upon any untrue
statement of a material fact contained in the
Computational Materials provided by such Underwriter, or
arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements
therein, when considered in conjunction with the
Prospectus, and in the light of the circumstances under
which they were made, not misleading, except to the
extent that such untrue statement or omission is based
upon the Seller Provided Information and agrees to
reimburse each such indemnified party for any legal or
other expenses reasonably incurred by him, her or it in
connection with investigating or defending or preparing
to defend any such loss, claim, damage, liability or
action as such expenses are incurred. The obligations of
an Underwriter under this Section VIII(E) shall be in
addition to any liability which such Underwriter may
otherwise have.
The procedures set forth in Section VIII(C)
shall be equally applicable to this Section VIII(E).
F. If the indemnification provided for in
this Section VIII shall for any reason be unavailable to
or insufficient to hold harmless an indemnified party
under Section VIII(A), (B) or (E) in respect of any loss,
claim, damage or liability, or any action in respect
thereof, referred to therein, then each indemnifying
party shall, in lieu of indemnifying such indemnified
party, contribute to the amount paid or payable by such
indemnified party as a result of such loss, claim, damage
or liability, or action in respect thereof, (i) in such
proportion as shall be appropriate to reflect the
relative benefits received by the Company on the one hand
and the related Underwriters on the other from the
offering of the related Offered Certificates or (ii) if
the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative
fault of the Company on the one hand and the related
Underwriter on the other with respect to the statements
or omissions which resulted in such loss, claim, damage
or liability, or action in respect thereof, as well as
any other relevant equitable considerations.<PAGE>
<PAGE>
The relative benefits of an Underwriter and the
Company shall be deemed to be in such proportion as the
total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total
underwriting discounts and commissions received by the
related Underwriter from time to time in negotiated sales
of the related Offered Certificates.
The relative fault of an Underwriter and the
Company shall be determined by reference to whether the
untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact
relates to information supplied or prepared by the
Company or by such Underwriter, the intent of the parties
and their relative knowledge, access to information and
opportunity to correct or prevent such statement or
omission and other equitable considerations.
The Company and the Underwriters agree that it
would not be just and equitable if contributions pursuant
to this Section VIII(F) were to be determined by pro rata
allocation (even if the Underwriters were treated as one
entity for such purposes) or by any other method of
allocation which does not take into account the equitable
considerations referred to herein. The amount paid or
payable by an indemnified party as a result of the loss,
claim, damage or liability, or action in respect thereof,
referred to above in this Section VIII(F) shall be deemed
to include, for purposes of this Section VIII(F), any
legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or
defending any such action or claim.
For purposes of this Section VIII, in no case
shall any Underwriter (except with respect to any
document (other than the Computational Materials)
incorporated by reference into the Registration Statement
or Prospectus at the request of such Underwriter and
except as may be provided in any agreement among the
Underwriters relating to the offering of the Offered
Certificates) be responsible for any amount in excess of
(x) the amount received by such Underwriter in connection
with its resale of the Offered Certificates over (y) the
amount paid by such Underwriter to the Company for the
Offered Certificates by such Underwriter hereunder. No
person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
"Seller Provided Information" means any
computer tape (or other information provided to
Underwriter for the purpose of preparation of the
Prospectus Supplement or Computational Materials)
furnished to any Underwriter by the Company concerning
the assets comprising the Trust.
G. The Underwriters confirm that the
information set forth in the last paragraph on the front
cover page of the Prospectus Supplement, the information
under the heading "Underwriting" therein and the
Computational Materials are correct, and the Company
acknowledges that such information constitutes the only
information furnished in writing to the Company by or on
behalf of any Underwriter specifically for inclusion in
the Registration Statement and the Prospectus.
SECTION IX. Representations, Warranties and
Agreements to Survive Delivery. All representations,
warranties and agreements contained in this Agreement or
contained in agreements delivered pursuant hereto or
certificates of officers of the Company submitted
pursuant hereto shall remain operative and in full force<PAGE>
<PAGE>
and effect, regardless of any investigation made by or on
behalf of the Underwriters or controlling persons
thereof, or by or on behalf of the Company and shall
survive delivery of any Offered Certificates to the
Underwriters.
SECTION X. Default by One or More of the
Underwriters. If one or more of the Underwriters
participating in the public offering of the Offered
Certificates shall fail at the Closing Date to purchase
the Offered Certificates which it is (or they are)
obligated to purchase hereunder (the "Defaulted
Certificates"), then the non-defaulting Underwriters
shall have the right, within 48 hours thereafter, to make
arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all,
but not less than all, of the Defaulted Certificates in
such amounts as may be agreed upon and upon the terms
herein set forth (as used in this Agreement, the term
"Underwriter" includes any underwriter substituted for an
Underwriter under this Section X). If, however, the
Underwriters have not completed such arrangements within
such 48-hour period, then:
(i) if the aggregate original
principal amount of Defaulted Certificates does not
exceed 10% of the aggregate original principal
amount of the Offered Certificates to be purchased
pursuant to this Agreement, the non-defaulting
Underwriters named in this Agreement shall be
obligated to purchase the full amount thereof in the
proportions that their respective obligations
hereunder bear to the underwriting obligations of
all such non-defaulting Underwriters, or
(ii) if the aggregate original
principal amount of Defaulted Certificates exceeds
10% of the aggregate original principal amount of the
Offered Certificates to be purchased pursuant to this
Agreement, this Agreement shall terminate, without any
liability on the part of any non-defaulting Underwriters.
No action taken pursuant to this Section X
shall relieve any defaulting Underwriter from the
liability with respect to any default of such Underwriter
under this Agreement.
In the event of a default by any Underwriter as
set forth in this Section X, each of the Underwriters and
the Company shall have the right to postpone the Closing
Date for a period not exceeding seven Business Days in
order that any required changes in the Registration
Statement or Prospectus or in any other documents or
arrangements may be effected.
SECTION XI. Termination of Agreement. The
Underwriters may terminate this Agreement immediately
upon notice to the Company, at any time at or prior to
the Closing Date if any of the events or conditions
described in Section VI(Q) of this Agreement shall occur
and be continuing. In the event of any such termination,
the provisions of Section VII, the indemnity agreement
set forth in Section VIII, and the provisions of Sections
IX and XIV shall remain in effect.
SECTION XII. Notices. All statements,
requests, notices and agreements hereunder shall be in
writing, and:
(i) if to the Underwriters, shall be delivered
or sent by mail, telex or facsimile transmission to
the Representative at its address set forth above;<PAGE>
<PAGE>
(ii) if to the Company, shall be delivered or
sent by overnight mail or facsimile transmission to
13111 Northwest Freeway, Suite 300, Houston, TX
77040, Attn.: General Counsel, Fax No. (713) 895-
3870.
SECTION XIII. Persons Entitled to the Benefit
of this Agreement. This Agreement shall inure to the
benefit and be binding upon the Underwriters and the
Company, and their respective successors. This Agreement
and the terms and provisions hereof are for the sole
benefit of only those persons, except that the
representations, warranties, indemnities and agreements
contained in this Agreement shall also be deemed to be
for the benefit of the person or persons, if any, who
control any of the Underwriters within the meaning of
Section 15 of the Securities Act, and for the benefit of
directors of the Company, officers of the Company who
have signed the Registration Statement and any person
controlling the Company within the meaning of Section 15
of the Securities Act. Nothing in this Agreement is
intended or shall be construed to give any person, other
than the persons referred to in this Section XIII, any
legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained
herein.
SECTION XIV. Survival. The respective
indemnities, representations, warranties and agreements
of the Company and the Underwriters contained in this
Agreement, or made by or on behalf of them, respectively,
pursuant to this Agreement, shall survive the delivery of
and payment for the Certificates and shall remain in full
force and effect, regardless of any investigation made by
or on behalf of any of them or any person controlling any
of them. The provisions of Sections V, VII and VIII
hereof shall survive the termination or cancellation of
this Agreement.
SECTION XV. Definition of the Term "Business
Day". For purposes of this Agreement, "Business Day"
means any day on which the New York Stock Exchange, Inc.
is open for trading.
SECTION XVI. Governing Law; Submission to
Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of New
York without giving effect to the conflict of law rules
thereof.
The parties hereto submit to the jurisdiction
of the United States District Court for the Southern
District of New York and any court in the State of New
York located in the City and County of New York, and
appellate court from any thereof, in any action, suit or
proceeding brought against it or in connection with this
Agreement or any of the related documents or the
transactions contemplated hereunder or for recognition or
enforcement of any judgment, and the parties hereto
hereby agree that all claims in respect of any such
action or proceeding may be heard or determined in New
York State court or, to the extent permitted by law, in
such federal court.
SECTION XVII. Counterparts. This Agreement
may be executed in counterparts and, if executed in more
than one counterpart, the executed counterparts shall
each be deemed to be an original but all such
counterparts shall together constitute one and the same
instrument.
<PAGE>
<PAGE>
SECTION XVIII. Headings. The headings herein
are inserted for convenience of reference only and are
not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
SECTION XIX. Amendments and Waivers. This
Agreement may be amended, modified, altered or
terminated, and any of its provisions waived, only in a
writing signed on behalf of the Company and the
Representative.
If the foregoing correctly sets forth the
agreement between the Company and the Underwriters,
please indicate your acceptance in the space provided for
the purpose below.
Very truly yours,
EQUIVANTAGE ACCEPTANCE
CORP.
By:_______________________
Name:
Title:
CONFIRMED AND ACCEPTED, as
of the date first above written:
PRUDENTIAL SECURITIES INCORPORATED,
Acting on its own behalf and as Representative
of the several Underwriters referred to in the
foregoing Agreement
By:____________________________
Name:
Title:
[Underwriting Agreement]<PAGE>
<PAGE>
SCHEDULE A
Principal
Class of Amount of
Certificates Certificates Purchase
Name of Purchased by the Purchased by Price
Underwriter Underwriters Underwriters (% of Par)
___________ ________________ ____________ __________
Prudential
Securities
Incorporated A-1 $ 19,434,000 99.96875%
A-2 15,310,000 99.953125
A-3 7,541,500 99.984375
A-4 7,714,500 99.90625
____________
TOTAL: $ 50,000,000
_____
CS First Boston A-1 $ 19,434,000 99.96875%
A-2 15,310,000 99.953125
A-3 7,541,500 99.984375
A-4 7,714,000 99.90625
____________
TOTAL: $ 50,000,000
_____
<PAGE>
<PAGE>
May 23, 1996
Prudential Securities Incorporated
One New York Plaza, 26th Floor
New York, New York 10292
Ladies and Gentlemen:
This Guaranty is made by EquiVantage Inc., a
Delaware corporation with its principal office at 13111
Northwest Freeway, Suite 300, Houston, Texas 77040
("EquiVantage"), in favor of Prudential Securities
Incorporated, in its capacity as Representative
Underwriter (the "Representative") of the several
Underwriters (the "Several Underwriters") in connection
with the underwriting of the Class A Certificates, with
its principal office at 1 New York Plaza, 26th Floor, New
York, New York 10292.
As an inducement to you and in consideration of
EquiVantage Acceptance Corp. (the "Company") entering
into the Underwriting Agreement referred to below,
EquiVantage Inc. hereby absolutely, unconditionally and
irrevocably guarantees the prompt performance of the
obligations, including any payment obligations, of the
Company, a Delaware corporation with its principal office
at 13111 Northwest Freeway, Suite 302, Houston, Texas
77040, under Section VIII of the Underwriting Agreement,
dated May 16, 1996, between the Company and the
Representative. This Guaranty is a guaranty of
performance and payment and not of collection. The
obligations of EquiVantage Inc. hereunder shall not be
impaired by failure of Company to provide notice to
EquiVantage Inc. of any modification or amendment of said
contract agreed to by the parties thereto. This Guaranty
shall exist notwithstanding the validity or
enforceability of any instrument evidencing any such
obligations by reason of the dissolution, liquidation,
reorganization of the Company, or the commencement
against the Company of a case in bankruptcy or any other
law affecting creditors' rights generally or the seeking
of a trustee, receiver, liquidator, custodian or other
similar official. EquiVantage Inc. hereby waives any
requirement that the Representative shall take legal
action against the Company before enforcing this
Guaranty. This Guaranty may be amended only by an
instrument in writing executed by the undersigned and
accepted in writing by the Representative.
This Guaranty shall be governed by the laws of
the State of New York applicable to agreements made and
to be performed in the State of New York without giving
effect to the conflict of law rules thereof.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, EquiVantage Inc. has caused
this Guaranty to be executed by duly authorized corporate
officers the day and year first above written.
EQUIVANTAGE INC.
By: /s/ John E. Smith
____________________________
Name: John E. Smith
Title: President
ACCEPTED this 16th day
of May, 1996
Prudential Securities Incorporated,
as Representative of the Several Underwriters
By: /s/ Len Blum
_________________________________
Name: Len Blum
Title:
<PAGE>
EXHIBIT 4.1<PAGE>
<PAGE>
POOLING AND SERVICING AGREEMENT, relating to EQUIVANTAGE
HOME EQUITY LOAN TRUST 1996-2, dated as of May 1, 1996, by and among
EQUIVANTAGE ACCEPTANCE CORP., a Delaware corporation, in its capacity
as Sponsor of the Trust (the "Sponsor"), EquiVantage Inc., a Delaware
corporation, in its capacity as servicer (the "Servicer"), and
Norwest Bank Minnesota, National Association, in its capacity as
trustee (the "Trustee").
WHEREAS, the Sponsor wishes to establish a trust which
provides for the allocation and sale of the beneficial interests
therein and the maintenance and distribution of the trust estate;
WHEREAS, the Servicer has agreed to service the Mortgage
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, Norwest Bank Minnesota, National Association is
willing to serve in the capacity of Trustee hereunder; and
WHEREAS, Financial Guaranty Insurance Company (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 Sponsor, the Servicer and the
Trustee hereby agree as follows:
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
Section 1.1. 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 7.2 or 8.8 hereof.
"Aggregate Certificate Principal Balance": As of the
Startup Date, $100,000,000 and as of any date thereafter, the sum of
the Class A-1 Certificate Principal Balance, the Class A-2
Certificate Principal Balance, the Class A-3 Certificate Principal
Balance and the Class A-4 Certificate Principal Balance as of such
date.
"Aggregate Loan Balance": As of any date, the aggregate
Loan Balance of all Mortgage Loans as of such date.
"Agreement": This Pooling and Servicing Agreement, as it
may be amended from time to time, and including the Exhibits hereto.
"Appraised Value": The appraised value of any Property
based upon the appraisal or other valuation made at the time of the
origination of the related Mortgage Loan, or, in the case of a
Mortgage Loan which is a purchase money mortgage, the sales price of
the Property at such time of origination, if such sales price is less
than such appraised value or, in the case of an appraised value or
purchase price determined by the related Originator to be excessive,
such appraised value adjusted downward.
"Assignment Opinion": As defined in Section 3.5(b)(ii)
hereof.
"Authorized Officer": With respect to any Person, any
individual who is authorized to act for such Person in matters
relating to this Agreement, and whose action is binding upon such<PAGE>
<PAGE>
Person and, with respect to the Trustee, the Sponsor and the
Servicer, initially including those individuals whose names appear on
the lists of Authorized Officers delivered on the Startup Day.
"Available Funds": As defined in Section 7.3(a) hereof.
The term "Available Funds" does not include Insured Payments and does
not include any amounts that cannot be distributed to the Owners of
the Certificates by the Trustee as a result of proceedings under the
United States Bankruptcy Code.
"Available Funds Shortfall": As defined in Section
7.3(b) hereof.
"Balloon Loan": Any Mortgage Loan which has an
amortization schedule which extends beyond its maturity date,
resulting in a relatively large unamortized principal balance due in
a single payment at maturity.
"Base Subordinated Amount": As defined in the Insurance
and Indemnity Agreement.
"Business Day": Any day that is not a Saturday, Sunday
or other day on which commercial banking institutions in the State of
New York, the State of Texas or in the city in which the Corporate
Trust Office of the Trustee is located, which initially is
Minneapolis, Minnesota, are authorized or obligated by law or
executive order to be closed.
"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 Certificate Account
established in accordance with Section 7.2 hereof and maintained by
the Trustee.
"Certificate Insurance Policy": The certificate guaranty
surety bond number 96010245, issued by the Certificate Insurer to the
Trustee for the benefit of the Owners of the Class A-1 Certificates,
the Class A-2 Certificates, the Class A-3 Certificates and the Class
A-4 Certificates.
"Certificate Insurer": Financial Guaranty Insurance
Company, a New York stock insurance company, and any successor
thereto.
"Certificate Insurer Default": The failure by the
Certificate Insurer to make a payment required under the Certificate
Insurance Policy in accordance with its terms.
"Certificate Principal Balance": As to the Class A-1
Certificates, the Class A-1 Certificate Principal Balance; as to the
Class A-2 Certificates, the Class A-2 Certificate Principal Balance;
as to the Class A-3 Certificates, the Class A-3 Certificate Principal
Balance; and as to the Class A-4 Certificates, the Class A-4
Certificate Principal Balance. As to any particular Class A
Certificate, the product of the Percentage Interest evidenced thereby
and the Certificate Principal Balance of all Class A Certificates of
the same Class. The Class R Certificates do not have a "Certificate
Principal Balance".
"Class": All of the Class A-1 Certificates, all of the
Class A-2 Certificates, all of the Class A-3 Certificates, all of the
Class A-4 Certificates or all of the Class R Certificates, as the
case may be.
"Class A Certificate": Any one of the Class A-1
Certificates, any one of the Class A-2 Certificates, any one of the
Class A-3 Certificates or any one of the Class A-4 Certificates, as
the case may be.<PAGE>
<PAGE>
"Class A-1 Certificate": Any Certificate designated as a
"Class A-1 Certificate" on the face thereof, in the form of Exhibit
A-1 hereto. The Class A-1 Certificates shall be issued with an
initial aggregate Certificate Principal Balance equal to the Original
Certificate Principal Balance therefor.
"Class A-1 Certificate Principal Balance": As of any
time of determination, the Original Certificate Principal Balance of
the Class A-1 Certificates less any amounts actually distributed as
part of the Class A-1 Distribution Amount pursuant to Section
7.5(b)(iv) hereof with respect to principal thereon on all prior
Payment Dates.
"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 Distribution Amount": With respect to the
Class A-1 Certificates for any Payment Date, the amount actually
distributed to the Owners of the Class A-1 Certificates on such
Payment Date, applied first to interest and then to principal, which
amount shall be the lesser of (x) the Class A-1 Formula Distribution
Amount for such Payment Date and (y) the amount (including any
applicable portion of any Insured Payment) available for distribution
on account of the Class A-1 Certificates for such Payment Date.
"Class A-1 Formula Distribution Amount": With respect to
the Class A-1 Certificates for any Payment Date, the sum of the Class
A-1 Interest Distribution Amount and the Class A-1 Principal
Distribution Amount.
"Class A-1 Interest Carry-Forward Amount": With respect
to any Payment Date, the sum of (i) the amount, if any, by which (x)
the Class A-1 Interest Distribution Amount as of the immediately
preceding Payment Date exceeded (y) the amount of the actual
distribution, exclusive of any Insured Payment, made to the Owners of
the Class A-1 Certificates on such immediately preceding Payment Date
on account of the Class A-1 Interest Distribution Amount pursuant to
Section 7.5(b)(iv) and (ii) 30 days' interest on such excess at the
Class A-1 Pass-Through Rate.
"Class A-1 Interest Distribution Amount": With respect
to the Class A-1 Certificates for any Payment Date the sum of:
(i) the aggregate amount of interest accrued on the
Class A-1 Certificate Principal Balance immediately prior to such
Payment Date during the related Interest Accrual Period at the Class
A-1 Pass-Through Rate (based on a 360-day year of 12 30-day months);
and
(ii) the Class A-1 Interest Carry-Forward Amount.
"Class A-1 Pass-Through Rate": 6.725% per annum.
"Class A-1 Principal Distribution Amount": With respect
to the Class A-1 Certificates for any Payment Date, the lesser of (x)
the Principal Distribution Amount for such Payment Date, and (y) the
Class A-1 Certificate Principal Balance as of such Payment Date.
On the Class A-1 Certificate Termination Date, any excess
of (a) the amount described in clause (x) of the preceding paragraph
over (b) the amount described in clause (y) of the preceding
paragraph shall be distributed as principal with respect to the Class
A-2 Certificates, as elsewhere provided herein.
"Class A-2 Certificate": Any Certificate designated as a
"Class A-2 Certificate" on the face thereof, in the form of Exhibit
A-2 hereto. The Class A-2 Certificates shall be issued with an
initial aggregate Certificate Principal Balance equal to the Original
Certificate Principal Balance therefor.<PAGE>
<PAGE>
"Class A-2 Certificate Principal Balance": As of any
time of determination, the Original Certificate Principal Balance of
the Class A-2 Certificates less any amounts actually distributed as
part of the Class A-2 Distribution Amount pursuant to Section
7.5(b)(iv) hereof with respect to principal thereon on all prior
Payment Dates.
"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 Distribution Amount": With respect to the
Class A-2 Certificates for any Payment Date, the amount actually
distributed to the Owners of the Class A-2 Certificates on such
Payment Date, applied first to interest and then to principal, which
amount shall be the lesser of (x) the Class A-2 Formula Distribution
Amount for such Payment Date and (y) the amount (including any
applicable portion of any Insured Payment) available for distribution
on account of the Class A-2 Certificates for such Payment Date.
"Class A-2 Formula Distribution Amount": With respect to
the Class A-2 Certificates for any Payment Date, the sum of the Class
A-2 Interest Distribution Amount and the Class A-2 Principal
Distribution Amount.
"Class A-2 Interest Carry-Forward Amount": With respect
to any Payment Date, the sum of (i) the amount, if any, by which (x)
the Class A-2 Interest Distribution Amount as of the immediately
preceding Payment Date exceeded (y) the amount of the actual
distribution, exclusive of any Insured Payment, made to the Owners of
the Class A-2 Certificates on such immediately preceding Payment Date
on account of the Class A-2 Interest Distribution Amount pursuant to
Section 7.5(b)(iv) and (ii) 30 days' interest on such excess at the
Class A-2 Pass-Through Rate.
"Class A-2 Interest Distribution Amount": With respect
to the Class A-2 Certificates for any Payment Date the sum of:
(i) the aggregate amount of interest accrued on the
Class A-2 Certificate Principal Balance immediately prior to such
Payment Date during the related Interest Accrual Period at the Class
A-2 Pass-Through Rate (based on a 360-day year of 12 30-day months);
and
(ii) the Class A-2 Interest Carry-Forward Amount.
"Class A-2 Pass-Through Rate": 7.075% per annum.
"Class A-2 Principal Distribution Amount": With respect
to the Class A-2 Certificates for any Payment Date prior to the Class
A-1 Certificate Termination Date, zero.
On the Class A-1 Certificate Termination Date, the excess
of (x) the Principal Distribution Amount as of the Class A-1
Certificate Termination Date over (y) the Class A-1 Certificate
Principal Balance on the Class A-1 Certificate Termination Date.
With respect to the Class A-2 Certificates for any
Payment Date following the Class A-1 Certificate Termination Date,
the lesser of (x) the Principal Distribution Amount for such Payment
Date and (y) the Class A-2 Certificate Principal Balance as of such
Payment Date. On the Class A-2 Certificate Termination Date any
remaining portion of the Principal Distribution Amount shall be
distributed with respect to the Class A-3 Certificates.
"Class A-3 Certificate": Any Certificate designated as a
"Class A-3 Certificate" on the face thereof, in the form of Exhibit
A-3 hereto. The Class A-3 Certificates shall be issued with an
initial aggregate Certificate Principal Balance equal to the Original
Certificate Principal Balance therefor.<PAGE>
<PAGE>
"Class A-3 Certificate Principal Balance": As of any
time of determination, the Original Certificate Principal Balance of
the Class A-3 Certificates less any amounts actually distributed as
part of the Class A-3 Distribution Amount pursuant to Section
7.5(b)(iv) hereof with respect to principal thereon on all prior
Payment Dates.
"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 Distribution Amount": With respect to the
Class A-3 Certificates for any Payment Date, the amount actually
distributed to the Owners of the Class A-3 Certificates on such
Payment Date, applied first to interest and then to principal, which
amount shall be the lesser of (x) the Class A-3 Formula Distribution
Amount for such Payment Date and (y) the amount (including any
applicable portion of any Insured Payment) available for distribution
on account of the Class A-3 Certificates for such Payment Date.
"Class A-3 Formula Distribution Amount": With respect to
the Class A-3 Certificates for any Payment Date, the sum of the Class
A-3 Interest Distribution Amount and the Class A-3 Principal
Distribution Amount.
"Class A-3 Interest Carry-Forward Amount": With respect
to any Payment Date, the sum of (i) the amount, if any, by which (x)
the Class A-3 Interest Distribution Amount as of the immediately
preceding Payment Date exceeded (y) the amount of the actual
distribution, exclusive of any Insured Payment, made to the Owners of
the Class A-3 Certificates on such immediately preceding Payment Date
on account of the Class A-3 Interest Distribution Amount pursuant to
Section 7.5(b)(iv) and (ii) 30 days' interest on such excess at the
Class A-3 Pass-Through Rate.
"Class A-3 Interest Distribution Amount": With respect
to the Class A-3 Certificates for any Payment Date the sum of:
(i) the aggregate amount of interest accrued on the
Class A-3 Certificate Principal Balance immediately prior to such
Payment Date during the related Interest Accrual Period at the Class
A-3 Pass-Through Rate (based on a 360-day year of 12 30-day months);
and
(ii) the Class A-3 Interest Carry-Forward Amount.
"Class A-3 Pass-Through Rate": 7.475% per annum.
"Class A-3 Principal Distribution Amount": With respect
to the Class A-3 Certificates for any Payment Date prior to the Class
A-2 Certificate Termination Date, zero.
On the Class A-2 Certificate Termination Date, the
excess of (x) the Principal Distribution Amount as of the Class A-2
Certificate Termination Date over (y) the Class A-2 Certificate
Principal Balance on the Class A-2 Certificate Termination Date.
With respect to the Class A-3 Certificates for any
Payment Date following the Class A-2 Certificate Termination Date,
the lesser of (x) the Principal Distribution Amount as of such
Payment Date and (y) the Class A-3 Certificate Principal Balance as
of such Payment Date. On the Class A-3 Certificate Termination Date
any remaining portion of the Principal Distribution Amount shall be
distributed with respect to the Class R Certificates.
"Class A-4 Certificate": Any Certificate designated as a
"Class A-4 Certificate" on the face thereof, in the form of Exhibit
A-4 hereto. The Class A-4 Certificates shall be issued with an
initial aggregate Certificate Principal Balance equal to the Original
Certificate Principal Balance therefor.<PAGE>
<PAGE>
"Class A-4 Certificate Principal Balance": As of any
time of determination, the Original Certificate Principal Balance of
the Class A-4 Certificates less any amounts actually distributed as
part of the Class A-4 Distribution Amount pursuant to Section
7.5(b)(iv) hereof with respect to principal thereon on all prior
Payment Dates.
"Class A-4 Certificate Termination Date": The Payment
Date on which the Class A-4 Certificate Principal Balance is reduced
to zero.
"Class A-4 Distribution Amount": With respect to the
Class A-4 Certificates for any Payment Date, the amount actually
distributed to the Owners of the Class A-4 Certificates on such
Payment Date, applied first to interest and then to principal, which
amount shall be the lesser of (x) the Class A-4 Formula Distribution
Amount for such Payment Date and (y) the amount (including any
applicable portion of any Insured Payment) available for distribution
on account of the Class A-4 Certificates for such Payment Date.
"Class A-4 Formula Distribution Amount": With respect to
the Class A-4 Certificates for any Payment Date, the sum of the Class
A-4 Interest Distribution Amount and the Class A-4 Principal
Distribution Amount.
"Class A-4 Interest Carry-Forward Amount": With respect
to any Payment Date, the sum of (i) the amount, if any, by which (x)
the Class A-4 Interest Distribution Amount as of the immediately
preceding Payment Date exceeded (y) the amount of the actual
distribution, exclusive of any Insured Payment, made to the Owners of
the Class A-4 Certificates on such immediately preceding Payment Date
on account of the Class A-4 Interest Distribution Amount pursuant to
Section 7.5(b)(iv) and (ii) 30 days' interest on such excess at the
Class A-4 Pass-Through Rate.
"Class A-4 Interest Distribution Amount": With respect
to the Class A-4 Certificates for any Payment Date the sum of:
(i) the aggregate amount of interest accrued on the
Class A-4 Certificate Principal Balance immediately prior to such
Payment Date during the related Interest Accrual Period at the Class
A-4 Pass-Through Rate (based on a 360-day year of 12 30-day months);
and
(ii) the Class A-4 Interest Carry-Forward Amount.
"Class A-4 Net Funds Cap Rate": As of any Payment Date,
a per annum rate, expressed as a percentage, equal to the product of
(x) 100 and (y) a fraction, the numerator of which is an amount equal
to (i) the sum of (A) a full month's scheduled interest due on all of
the Mortgage Loans during the immediately preceding Remittance Period
and (B) the amount of any Subordination Reduction Amount for such
Payment Date minus (ii) the sum of (A) the sum of the Class A-1
Interest Distribution Amount, the Class A-2 Interest Distribution
Amount, and the Class A-3 Interest Distribution Amount and, in each
case as of such Payment Date, (B) the product of (1) one-twelfth of
the applicable Servicing Fee Rate and (2) the aggregate Loan Balances
of the Mortgage Loans as of the beginning of the immediately
preceding Remittance Period, (C) the Premium Amount, and (D) the
product of (1) one-twelfth of the then applicable Trustee Fee Rate
and (2) the aggregate Loan Balances of the Mortgage Loans as of the
beginning of the immediately preceding Remittance Period, and the
denominator of which is one-twelfth of the Class A-4 Certificate
Principal Balance immediately prior to such Payment Date.
"Class A-4 Pass-Through Rate": 8.050% per annum, subject
to Class A-4 Net Funds Cap Rate.
"Class A-4 Principal Distribution Amount": With respect
to the Class A-4 Certificates for any Payment Date prior to the Class
A-3 Certificate Termination Date, zero.<PAGE>
<PAGE>
On the Class A-3 Certificate Termination Date, the
excess of (x) the Principal Distribution Amount as of the Class A-3
Certificate Termination Date over (y) the Class A-2 Certificate
Principal Balance on the Class A-3 Certificate Termination Date.
With respect to the Class A-4 Certificates for any
Payment Date following the Class A-3 Certificate Termination Date,
the lesser of (x) the Principal Distribution Amount as of such
Payment Date and (y) the Class A-4 Certificate Principal Balance as
of such Payment Date. On the Class A-4 Certificate Termination Date
any remaining portion of the Principal Distribution Amount shall be
distributed with respect to the Class R Certificates.
"Class R Certificate": Any of those Certificates
representing residual rights to distributions from the REMIC and
designated as a "Class R Certificate" on the face thereof, in the
form of Exhibit B hereto.
"Clean-Up Call Date": The first Remittance Date
following the date on which the aggregate Loan Balances of all
Mortgage Loans has declined to 10% or less of the aggregate principal
balance of the Mortgage Loans as of the Closing Date.
"Code": The Internal Revenue Code of 1986, as amended
and any successor statute.
"Combined Loan-to-Value Ratio": With respect to any
First Mortgage Loan, the percentage equal to the Original Principal
Amount of the related Note divided by the Appraised Value of the
related Property and with respect to any Second Mortgage Loan, the
percentage equal to (a) the sum of (i) the remaining principal
balance, as of origination of the Second Mortgage Loan of the Senior
Lien note(s) relating to such Second Mortgage Loan and (ii) the
Original Principal Amount of the Note relating to such Second
Mortgage Loan divided by (b) the Appraised Value.
"Compensating Interest": As defined in Section 8.9(b)
hereof.
"Corporate Trust Office" means the principal corporate
trust office of the Trustee at which, at any particular time, its
corporate trust business shall be administered, which office at the
date hereof is located at Sixth Street and Marquette Avenue,
Minneapolis, Minnesota 55479-0069, Attention: Corporate Trust
Department. The telecopy number for the Corporate Trust Office on
the Closing Date is (612) 667-9825.
"Coupon Rate": The rate of interest borne by each Note.
"Cumulative Loss Amount": With respect to any Payment
Date, an amount equal to the aggregate of all Realized Losses
incurred in all prior Remittance Periods.
"Cut-Off Date": The close of business on May 1, 1996.
"Delinquency Advance": With respect to any Delinquent
Mortgage Loan and Remittance Period, the interest (calculated at the
Mortgage Loan Coupon Rate net of the Servicing Fee Rate) due, but not
collected, with respect to such Mortgage Loan during such Remittance
Period.
"Delinquency Ratio": With respect to any Payment Date, a
fraction expressed as a percentage (a) the numerator of which equals
the aggregate Loan Balance of all Mortgage Loans that are 90 or more
days Delinquent, in foreclosure or converted to REO Properties, as
the case may be, as of the last day of the immediately preceding
calendar month and (b) the denominator of which is the aggregate Loan
Balance of all of the Mortgage Loans as of the last day of such
immediately preceding calendar month. <PAGE>
<PAGE>
"Delinquent": A Mortgage Loan is "delinquent" if any
payment due thereon is not made by the close of business on the day
such payment is scheduled to be due. A Mortgage 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 F hereto and delivered by the Sponsor to the Trustee
on the Startup Day pursuant to Section 4.1 hereof.
"Depository": The Depository Trust Company, 7 Hanover
Square, New York, New York 10004 and any successor Depository
hereafter named.
"Designated Depository Institution": With respect to
each Account, an institution whose deposits are insured by the Bank
Insurance Fund or the Savings Association Insurance Fund of the FDIC,
the long-term deposits of which shall be rated (x) A or better by S&P
and (y) A2 or better by Moody's and in one of the two highest
short-term ratings of each of S&P and Moody's, unless otherwise
approved in writing by the Certificate Insurer and each of Moody's
and S&P, and which is any of the following: (i) a federal savings and
loan association duly organized, validly existing and in good
standing under the federal banking laws, (ii) an institution duly
organized, validly existing and in good standing under the applicable
banking laws of any state, (iii) a national banking association duly
organized, validly existing and in good standing under the federal
banking laws, (iv) a principal subsidiary of a bank holding company,
or (v) approved in writing by the Certificate Insurer, Moody's and
S&P, and, in each case acting or designated by the Servicer as the
depository institution for such Account; provided, however, that any
such institution or association shall have combined capital, surplus
and undivided profits of at least $100,000,000. Notwithstanding the
foregoing, an Account may be held by an institution otherwise meeting
the preceding requirements except that the only applicable rating
requirement shall be that the unsecured and uncollateralized debt
obligations thereof shall be rated Baa3 or better by Moody's if such
institution has trust powers and the Account is held by such
institution in its trust capacity and not in its commercial capacity.
"Determination Date": As to each Payment Date, the third
Business Day next preceding such Payment Date or such earlier day as
shall be agreed by the Certificate Insurer and Trustee.
"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.
"Document Delivery Requirements": The Sponsor's
obligations to deliver certain legal documents, to prepare and record
certain Mortgage assignments or to deliver certain opinions relating
to Mortgage assignments, in each case with respect to the Mortgage
Loans and as set forth in Section 3.5 hereof.
"Eligible Investments": Those investments so designated
pursuant to Section 7.7 hereof.
"ERISA": The Employee Retirement Income Security Act of
1974, as amended.
"Escrow Loans": Any Mortgage Loan all or a portion of
the proceeds of which were originally paid into an escrow account<PAGE>
<PAGE>
pending completion of improvements to be made to the related
Property, but excluding any Mortgage Loan for which $5,000 or less
was paid into an escrow account for a period not exceeding 90 days
after the date of origination of the Mortgage Loan to cover the cost
of specified deferred maintenance on the related Property. The
Escrow Loans will be identified in a schedule to be prepared by the
Originator and delivered to the Sponsor, the Certificate Insurer and
the Trustee pursuant to Section 3.5(j) hereof.
"Event of Default": Any event described in clause (a) of
Section 8.20 hereof.
"Excess Subordinated Amount": With respect to any
Payment Date, the amount, if any, by which (x) the Subordinated
Amount on such Payment Date after taking into account the payment of
principal made pursuant to clause (a) through clause (e) of the
Principal Distribution Amount on such Payment Date to the Owners of
the Class A Certificates exceeds (y) the Specified Subordinated
Amount for such Payment Date.
"FDIC": The Federal Deposit Insurance Corporation, 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 3.5 hereof pertaining to a particular Mortgage Loan and
any additional documents required to be added to the Mortgage File
pursuant to this Agreement.
"Final Certification": As defined in Section 3.6(b)
hereof.
"Final Determination": As defined in Section 9.3(a)
hereof.
"Financing Statements": UCC-1 Financing Statements
naming the Originator and the Sponsor as debtor and the Trustee as
secured party, filed with the Secretary of State of each of Texas and
Minnesota.
"First Mortgage Loan": A Mortgage Loan secured by 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.
"Formula Distribution Amount": The sum of the Class A-1
Formula Distribution Amount, the Class A-2 Formula Distribution
Amount, the Class A-3 Formula Distribution Amount and the Class A-4
Formula Distribution Amount.
"Highest Lawful Rate": As defined in Section 11.13.
"Indemnification Agreement": The Indemnification
Agreement dated as of May 1, 1996 among the Sponsor, the Underwriter
and the Certificate Insurer.
"Indirect Participant": shall mean any financial
institution for whom any Direct Participant holds an interest in a
Class A Certificate.
"Initial Premium": The initial premium payable by the
Sponsor on behalf of the Trust to the Certificate Insurer in
consideration of the delivery to the Trustee of the Certificate
Insurance Policy.<PAGE>
<PAGE>
"Insurance Agreement": The Insurance and Indemnity
Agreement dated as of May 1, 1996 among the Sponsor, the Servicer and
the Certificate Insurer, as it may be amended from time to time.
"Insurance Policy": Any hazard, title or primary
mortgage insurance policy relating to a Mortgage Loan.
"Insurance Proceeds": The proceeds of any Insurance
Policy relating to a Mortgage Loan, a Property or a REO Property, net
of proceeds to be applied to the repair of the Property or released
to the Mortgagor and net of expenses reimbursable therefrom, but
excluding any Insured Payment.
"Insured Distribution Amount": As to any Payment Date,
the sum of (x) the sum of the Class A-1 Interest Distribution Amount,
the Class A-2 Interest Distribution Amount, the Class A-3 Interest
Distribution Amount and the Class A-4 Interest Distribution Amount
for such Payment Date, (y) the Subordination Deficit, if any, for
such Payment Date and (z) any Preference Amounts with respect to
which affected Owners have complied with the provisions of Section
7.3(e) hereof
"Insured Payment": As of each Payment Date, an amount
equal to the Available Funds Shortfall as of such Payment Date.
"Interest Accrual Period": With respect to each Class of
the Class A Certificates and any Payment Date, the calendar month
immediately preceding such Payment Date.
"Liquidated Loan": As defined in Section 8.13(b) hereof.
A Mortgage Loan which is purchased from the Trust pursuant to Section
3.3, 3.4, 3.6(b) or 8.10 hereof is not a "Liquidated Loan".
"Liquidation Expenses": Expenses which are incurred by
the Servicer or any Sub-Servicer in connection with the liquidation
of any defaulted Mortgage Loan, such expenses, including, without
limitation, reasonable legal fees and expenses, and any unreimbursed
Servicing Advances expended by the Servicer or any Sub-Servicer
pursuant to Section 8.9(c) with respect to the related Mortgage Loan.
"Liquidation Proceeds": With respect to any Liquidated
Loan, any amounts (including the proceeds of any Insurance Policy)
recovered by the Servicer in connection with such Liquidated Loan,
whether through trustee's sale, foreclosure sale or otherwise.
"Loan Balance": With respect to each Mortgage Loan, the
outstanding principal balance thereof on the Cut-Off Date, less any
related principal collections or recoveries relating to such Mortgage
Loan included in previous related Monthly Remittance Amounts that
were transferred by the Servicer or any Sub-Servicer to the Trustee
for deposit in the Certificate Account; provided, however, that the
Loan Balance for any Mortgage Loan which has become a Liquidated Loan
shall be zero following the date on which such Mortgage Loan becomes
a Liquidated Loan, and at all times thereafter. The Loan Balance of
any Mortgage Loan as of the Cut-Off Date shall be the balance of such
Mortgage Loan as of the Cut-Off Date prior to application of any
Prepaid Installments.
"Loan Purchase Price": With respect to any Mortgage Loan
purchased from the Trust on a Remittance Date pursuant to Section
3.3, 3.4, 3.6(b) or 8.10 hereof, an amount equal to the Loan Balance
of such Mortgage Loan as of the date of purchase, plus one month's
interest on the outstanding Loan Balance thereof as of the beginning
of the preceding Remittance Period computed at the related Coupon
Rate less, if the Servicer is the purchasing party, the Servicing Fee
Rate, together with, without duplication, the aggregate amount of
(i) all delinquent interest and all unreimbursed Reimbursable
Advances, (ii) all Delinquency Advances which the Servicer or any
Sub-Servicer has theretofore failed to remit with respect to such
Mortgage Loan and (iii) any Reimbursement Amount relating to such
Mortgage Loan.<PAGE>
<PAGE>
"Majority Owners": The Owner or Owners of Class A
Certificates evidencing Percentage Interests in excess of 51% in the
aggregate.
"Master Transfer Agreement": The Master Loan Transfer
Agreement between the Sponsor and the Transferor dated as of May 1,
1996.
"Monthly Remittance Amount": As defined in Section
8.8(d)(iii) hereof.
"Monthly Trustee Fee Amount": As of any Payment Date the
sum of (A) the product of (x) one-twelfth of the Trustee Fee Rate and
(y) the Aggregate Certificate Principal Balance as of the day
preceding such Payment Date and (B) one twelfth of $2,500.
"Moody's": Moody's Investors Service, Inc.
"Mortgage": The mortgage, deed of trust or other
instrument creating a first or second lien on an estate in fee simple
interest in real property securing a Note.
"Mortgage Loans": Such of the mortgage loans transferred
and assigned to the Trust pursuant to Section 3.5(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 Mortgage Loans originally so held being
identified in the Schedule of Mortgage Loans. The term "Mortgage
Loan" includes the terms "First Mortgage Loan", and "Second Mortgage
Loan". The term "Mortgage Loan" includes any Mortgage Loan which is
Delinquent, which relates to a foreclosure or which relates to a
Property which is a REO Property prior to such Property's disposition
by the Trust. Any mortgage loan which, although intended by the
parties hereto to have been, and which purportedly was, transferred
and assigned to the Trust by the Sponsor, in fact was not transferred
and assigned to the Trust for any reason whatsoever shall
nevertheless be considered a "Mortgage Loan" for all purposes of this
Agreement.
"Mortgagor": The obligor on a Note.
"Net Coupon Rate": With respect to any Mortgage Loan and
any Remittance Period, such Mortgage Loan's Coupon Rate applicable to
its due date occurring during such Remittance Period less the sum of
(i) the applicable Servicing Fee Rate, (ii) the Premium Percentage
and (iii) the Trustee Fee Rate.
"Net Liquidation Proceeds": As to any Liquidated Loan,
Liquidation Proceeds net of, without duplication, Liquidation
Expenses and unreimbursed Servicing Advances, unreimbursed
Delinquency Advances and accrued and unpaid Servicing Fees through
the date of liquidation relating to such Liquidated Loan. In no
event shall Net Liquidation Proceeds with respect to any Liquidated
Loan be less than zero.
"Note": The note or other evidence of indebtedness
evidencing the indebtedness of a Mortgagor under a Mortgage Loan.
"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
Master Loan Transfer Agreement, the Certificate Insurance Policy, the
Certificates, the Indemnification Agreement, the Insurance Agreement
and the Sub-Servicing Agreement.
"Original Aggregate Loan Balance": The aggregate Loan
Balances of all Mortgage Loans as of the Cut-Off Date, i.e.,
$100,707,471.63.
"Original Certificate Principal Balance": As of the
Startup Day and as to each Class of Class A Certificates, the
original Certificate Principal Balances thereof, as follows:<PAGE>
<PAGE>
Class A-1 Certificates $38,868,000
Class A-2 Certificates $30,620,000
Class A-3 Certificates $15,083.000
Class A-4 Certificates $15,429,000
The Class R Certificates do not have an Original
Certificate Principal Balance.
"Original Principal Amount": With respect to each Note,
the principal amount of such Note or the mortgage note relating to a
Senior Lien, as the case may be, on the date of origination thereof.
"Originator": EquiVantage Inc., a Delaware corporation,
and its successors and assigns.
"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 cancelled by
the Trustee or delivered to the Trustee for cancellation;
(ii) Certificates or portions thereof for
which full and final payment money in the necessary amount has been
theretofore deposited with the Trustee 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; and
(iv) Certificates alleged to have been
destroyed, lost or stolen for which replacement Certificates have
been issued as provided for in Section 5.5 hereof.
Any Certificates in which the Certificate Insurer has an
interest pursuant to its right of subrogation shall be "Outstanding
Certificates."
"Owner": The Person in whose name a Certificate is
registered in the Register, to the extent described in Section 5.4.
"Pass-Through Rate". With respect to any Payment Date as
to the Class A-1 Certificates, the Class A-1 Pass-Through Rate, as to
the Class A-2 Certificates, the Class A-2 Pass-Through Rate, as to
the Class A-3 Certificates, the Class A-3 Pass-Through Rate and as to
the Class A-4 Certificates, the Class A-4 Pass-Through Rate.
"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 25th day is not a Business Day, the
next succeeding Business Day), commencing in the month immediately
following the month in which the Startup Day occurs.
"Percentage Interest": As to any Class A Certificate,
that percentage, expressed as a fraction, the numerator of which is
the Certificate Principal Balance of such Certificate as of the
Cut-Off Date and the denominator of which is the Original Certificate
Principal Balance of all Class A Certificates of the same Class; and
as to any Class R Certificate, that Percentage Interest set forth on
such Class R Certificate.
"Person": Any individual, corporation, partnership,
joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.<PAGE>
<PAGE>
"Preference Amount": As to any Payment Date (i) with
respect to the Class A-1 Certificates, any amounts included in
previous distributions to Class A-1 Certificate Owners of Class A-1
Distribution Amounts (exclusive of Insured Payments) which are
recovered from such Class A-1 Certificate 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 Class A-1 Certificate Owners provided such Class
A-1 Certificate Owners have complied with the provisions of Section
7.3(e); (ii) with respect to the Class A-2 Certificates, any amounts
included in previous distributions to Class A-2 Certificate Owners of
Class A-2 Distribution Amounts (exclusive of Insured Payments) which
are recovered from such Class A-2 Certificate 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 heretofore
been repaid to such Class A-2 Certificate Owners provided such Class
A-2 Certificate Owners have complied with the provisions of Section
7.3(e); (iii) with respect to the Class A-3 Certificates, any amounts
included in previous distributions to Class A-3 Certificate Owners of
Class A-3 Distribution Amounts (exclusive of Insured Payments) which
are recovered from such Class A-3 Certificate 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 Class A-3 Certificate Owners provided such Class
A-3 Certificate Owners have complied with the provisions of Section
7.3(e); and (iv) with respect to the Class A-4 Certificates, any
amounts included in previous distributions to Class A-4 Certificate
Owners of Class A-4 Distribution Amounts (exclusive of Insured
Payments) which are recovered from such Class A-4 Certificate 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 Class A-4 Certificate
Owners provided such Class A-4 Certificate Owners have complied with
the provisions of Section 7.3(e).
"Premium Amount": As to any Payment Date, the product of
(x) one-twelfth of the Premium Percentage and (y) the Certificate
Principal Balance on such Payment Date (after taking into account any
distributions of principal to the Owners of the Class A Certificates
to be made on such Payment Date but prior to the payment of any
amount determined pursuant to clause (h) of the definition of
Principal Distribution Amount).
"Premium Percentage": As defined in the Insurance and
Indemnity Agreement.
"Prepaid Installment": With respect to any Mortgage
Loan, any installment of principal thereof and interest thereon
received prior to the scheduled due date for such installment,
intended by the Mortgagor as an early payment thereof and not as a
Prepayment with respect to such Mortgage Loan.
"Prepayment": Any payment of principal of a Mortgage
Loan which is received by the Servicer in advance of the scheduled
due date for the payment of such principal (other than the principal
portion of any Prepaid Installment), and the proceeds of any
Insurance Policy which are to be applied as a payment of principal on
the related Mortgage Loan shall be deemed to be Prepayments for all
purposes of this Agreement.
"Preservation Expenses": Expenditures made by the
Servicer or any Sub-Servicer in connection with a foreclosed Mortgage
Loan prior to the liquidation thereof, including, without limitation,
expenditures for real estate property taxes, hazard insurance
premiums, property restoration or preservation.
"Primary Parcel": With respect to any Property with
multiple parcels, the parcel having the greatest Appraised Value.<PAGE>
<PAGE>
"Principal Carry-Forward Amount": With respect to any
Payment Date, the amount, if any, by which (x) the amount, if any,
described in clause (f) of the definition of "Principal Distribution
Amount," as of the immediately preceding Payment Date exceeded (y)
the amount of the actual distribution made to the Owners of the Class
A Certificates on such immediately preceding Payment Date on account
of the Principal Distribution Amount.
"Principal Distribution Amount": With respect to any
Payment Date, the sum of:
(a) the Principal Carry-Forward Amount, if any,
(b) the scheduled or unscheduled principal (other than
the principal portion of Prepaid Installments) due and received with
respect to the Mortgage Loans during the related Remittance Period
and actually collected by the Servicer during the related Remittance
Period, in each case to the extent actually received by the Trustee
on the related Remittance Date,
(c) the Loan Balance of each Mortgage Loan that either
was repurchased by the Originator or by the Sponsor or purchased by
the Servicer on the related Remittance Date, to the extent such Loan
Balance is actually received by the Trustee on the related Remittance
Date,
(d) any Substitution Amounts delivered by the Sponsor on
the related Remittance Date in connection with a substitution of a
Mortgage Loan, to the extent such Substitution Amounts are actually
received by the Trustee on the related Remittance Date,
(e) all Net Liquidation Proceeds and net insurance
proceeds actually collected by the Servicer with respect to the
Mortgage Loans during the related Remittance Period (to the extent
such Net Liquidation Proceeds and net insurance proceeds relate to
principal and are actually received by the Trustee on the related
Remittance Date),
(f) any Subordination Deficit for such Payment Date,
(g) the proceeds of any termination of the Trust
received by the Trustee on the related Remittance Date (to the extent
such proceeds related to principal of the Mortgage Loans),
(h) any Subordination Increase Amount for such Payment
Date,
minus
(i) any Subordination Reduction Amount for such Payment
Date.
"Principal and Interest Account": Collectively, each
principal and interest account created by the Servicer or any
Sub-Servicer pursuant to Section 8.8(a) hereof, or pursuant to any
Sub-Servicing Agreement.
"Principal Remittance Amount": With respect to any
Remittance Period, the amount remitted to the Trustee by the Servicer
on the related Remittance Date with respect to principal collections
on the Mortgage Loans for such Remittance Period.
"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 on which a lien is
granted securing a Mortgage Loan.
"Prospectus": Any prospectus (including any prospectus
supplement) relating to the Registration Statement pursuant to which
the Class A Certificates are offered.<PAGE>
<PAGE>
"Purchase Option Period": As defined in Section 9.3(b)
hereof.
"Qualified Liquidation": "Qualified liquidation" shall
have 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": "Qualified mortgage" shall have
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 Mortgage Loan
substituted for another pursuant to Section 3.3, 3.4 or 3.6(b)
hereof, which (i) bears a fixed rate of interest, (ii) has a Coupon
Rate at least equal to the Coupon Rate of the Mortgage Loan being
replaced, (iii), in the discretion of the Certificate Insurer, is of
the same or better property type and the same or better occupancy
status as the replaced Mortgage Loan, (iv) shall be of the same or
better credit quality classification at origination of the Mortgage
Loan (determined in accordance with the Sponsor's credit underwriting
guidelines) as the Mortgage Loan being replaced, (v) shall mature no
later than June 1, 2027, (vi) has a Combined Loan-to-Value Ratio as
of the Cut-Off Date no higher than the Combined Loan-to-Value Ratio
of the replaced Mortgage Loan at such time and shall relate to a
Mortgagor having a debt-to-income ratio no higher than the
debt-to-income ratio of the Mortgagor whose Mortgage Loan is being
replaced, (vii) has a Loan Balance as of the related Replacement
Cut-Off Date equal to or less than the Loan Balance of the replaced
Mortgage Loan as of such Replacement Cut-Off Date, (viii) satisfies
the criteria set forth from time to time in the definition thereof at
Section 860G(a)(4) of the Code (or any successor statute thereto) and
applicable to the Trust, all as evidenced by an Officer's Certificate
of the Sponsor delivered to the Trustee and the Certificate Insurer
prior to any such substitution, (ix) is a valid First Mortgage Loan
and (x) if such Qualified Replacement Mortgage is an Escrow Loan, all
Required Escrow Documents with respect thereto are delivered to the
Trustee within one year of the related Replacement Cut-Off Date. In
the event that one or more mortgage loans are proposed to be
substituted for one or more Mortgage 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 requirement of clause (viii)
hereof must be satisfied as to each Qualified Replacement Mortgage.
"Realized Loss": As to any Liquidated Loan, the amount,
if any, by which the Loan Balance thereof, accrued and unpaid
interest and unreimbursed advances as of the date of liquidation is
in excess of Net Liquidation Proceeds realized thereon.
"Record Date": With respect to each Payment Date, for
each of the Class A Certificates, the last day of the calendar month
immediately preceding the calendar month in which such Payment Date
occurs, whether or not such day is a Business Day.
"Register": The register maintained by the Trustee in
accordance with Section 5.4 hereof, in which the names of the Owners
are set forth.
"Registrar": The Trustee, acting in its capacity as
Trustee appointed pursuant to Section 5.4 hereof, or any duly
appointed and eligible successor thereto.
"Registration Statement": The Registration Statement
filed by the Sponsor with the Securities and Exchange Commission,
including all amendments thereto and including the Prospectus
relating to the Class A Certificates constituting a part thereof.
"Reimbursable Advances": As to any Mortgage Loan, all
Delinquency Advances and Servicing Advances made by the Servicer with<PAGE>
<PAGE>
respect thereto, to the extent not previously paid to or withheld by
the Servicer.
"Reimbursement Amount": As of any Payment Date, the sum
of (a)(i) all Insured Payments previously paid by the Certificate
Insurer and all preference payments (as described in the Certificate
Insurance Policy) previously paid by the Certificate Insurer and in
each case not previously repaid to the Certificate Insurer pursuant
to 7.5(b)(iii) hereof plus (ii) interest accrued on each such Insured
Payment and such preference payments not previously repaid calculated
at the Weighted Average Class A Pass-Through Rate in each case from
the date the Certificate Insurer paid the related Insured Payment or
the preference payment, as the case may be, and (b)(i) any amounts
then due and owing to the Certificate Insurer under the Insurance
Agreement, as certified to the Trustee by the Certificate Insurer
plus (ii) interest on such amounts at the rate specified in the
Insurance Agreement. The Certificate Insurer shall notify in writing
the Trustee and the Sponsor of the amount of any Reimbursement
Amount.
"REMIC": A "real estate mortgage investment conduit"
within the meaning of Section 860D of the Code.
"REMIC Provisions": Provisions of the federal income tax
law relating to real estate mortgage investment conduits, which
appear at Sections 860A through 860G of the Code, and related
provisions, and regulations and rulings promulgated thereunder, as
the foregoing may be in effect from time to time.
"Remittance Date": Any date on which the Servicer is
required to remit monies on deposit in the Principal and Interest
Account to the Trustee, which shall be the eighteenth day of each
calendar month, commencing in June 1996 (or, if such eighteenth day
is not a Business Day, the next succeeding Business Day).
"Remittance Period": The period (inclusive) beginning at
the opening of business on the second day of the calendar month
immediately preceding the month in which a Remittance Date occurs and
ending at the close of business on the first day of the calendar
month in which a Remittance Date occurs.
"REO Property": A Property acquired by the Servicer or
any Sub-Servicer on behalf of the Trust through foreclosure or
deed-in-lieu of foreclosure in connection with a defaulted Mortgage
Loan.
"Replacement Cut-Off Date": With respect to any
Qualified Replacement Mortgage, the close of business on the first
day of the calendar month in which such Qualified Replacement
Mortgage is conveyed to the Trust.
"Representation Letter" shall mean 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.
"Representations and Warranties": The representations
and warranties relating to the Mortgage Loans, as set forth in
Section 5 of the Master Loan Transfer Agreement and Section 3.3(a)
hereof, together with any Additional Representations and Warranties
(as defined in the Master Loan Transfer Agreement).
"Required Escrow Document": As defined in Section 3.5(k)
hereof.
"Rolling Three Month Delinquency Rate": As of any Payment
Date, the fraction, expressed as a percentage, equal to the average
of the Delinquency Ratio for each of the three (or one and two, in
the case of the first and second Payment Dates) immediately preceding
Remittance Periods.
"S&P": Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc.<PAGE>
<PAGE>
"Schedule of Mortgage Loans": The Schedule of Mortgage
Loans attached hereto as Schedule I.
"Second Mortgage Loan": A Mortgage Loan which is secured
by a second priority mortgage lien with respect to the related
Property.
"Securities Act": The Securities Act of 1933, as
amended.
"Senior Lien": With respect to any Second Mortgage Loan,
the mortgage loan relating to the corresponding Property having a
first priority lien.
"Servicer": EquiVantage Inc., a Delaware corporation,
and its permitted successors and assigns.
"Servicer Affiliate": A Person (i) controlling,
controlled by or under common control with the Servicer and (ii)
which is qualified to service residential mortgage loans.
"Servicer's Trust Receipt": The Servicer's trust receipt
in the form set forth as Exhibit I hereto.
"Servicing Advance": As defined in Section 8.9(c) and
Section 8.13(a) hereof.
"Servicing Fee": With respect to any Mortgage Loan, the
monthly amount retained by the Servicer or by any successor thereto
as compensation for servicing and administration duties relating to
such Mortgage Loan pursuant to Section 8.15 hereof and equal to the
product of (x) one-twelfth of the related Servicing Fee Rate and (y)
the outstanding Loan Balance of such Mortgage Loan as of the opening
of business on the first day of the immediately preceding Remittance
Period.
"Servicing Fee Rate": With respect to each First
Mortgage Loan, .50% per annum. With respect to each Second Mortgage
Loan, .75% per annum.
"Servicing Standards": As defined in Section 8.1(a)
hereof.
"Specified Subordinated Amount": As defined in the
Insurance and Indemnity Agreement.
"Sponsor": EquiVantage Acceptance Corp., a Delaware
corporation.
"Startup Day": May 23, 1996.
"Subordinated Amount": As of any Payment Date, the
excess, if any, of (x) the Aggregate Loan Balance as of the close of
business on the last day of the related Remittance Period over (y)
the Certificate Principal Balance as of such Payment Date (after
taking into account the payment of principal made pursuant to clause
(a) through clause (e) of the definition of the Principal
Distribution Amount to the Owners of the Class A Certificates on such
Payment Date, except for any portion thereof related to an Insured
Payment on such Payment Date or on any prior Payment Date and not
previously reimbursed to the Certificate Insurer pursuant to Section
7.3(e) hereof).
"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 prior to taking into account
the payment of any Subordination Increase Amount on such Payment
Date.<PAGE>
<PAGE>
"Subordination Deficit": As of any Payment Date, the
excess, if any, of (x) the Aggregate Certificate Principal Balance,
after taking into account the payment of the Principal Distribution
Amount on such Payment Date, over (y) the Aggregate Loan Balance as
of the close of business on the last day of the preceding Remittance
Period.
"Subordination Increase Amount": With respect to any
Payment Date, the lesser of the (x) Subordination Deficiency Amount
for such Payment Date and (y) amounts available for such purpose
after taking into account the payment of principal to the Owners of
the Class A Certificates on such Payment Date minus any amount
determined pursuant to clause (h) of the definition of Principal
Distribution Amount.
"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.
"Sub-Servicer": Transworld Mortgage Corporation, a Texas
corporation, and its permitted successors and assigns, or any Person
with whom the Servicer has entered into a Sub-Servicing Agreement and
who satisfies any requirements set forth in Section 8.3 hereof in
respect of the qualification of a Sub-Servicer.
"Sub-Servicing Agreement": The written contract between
the Servicer and any Sub-Servicer relating to servicing and/or
administration of certain Mortgage Loans as permitted by Section 8.3.
"Substitution Amount": In connection with the delivery
of any Qualified Replacement Mortgage, 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 the
Mortgage Loan being replaced as of such Replacement Cut-Off Date, an
amount equal to such difference together with accrued and unpaid
interest on such amount calculated at the Coupon Rate less, if the
Servicer is the replacing party, the Servicing Fee Rate of the
Mortgage Loan being replaced.
"Tax Matters Person": The Tax Matters Person appointed
pursuant to Section 11.17 hereof.
"Termination Notice": As defined in Section 9.3(b)
hereof.
"Termination Price": As defined in Section 9.2(a)
hereof.
"Transaction Documents": Collectively this Agreement,
the Insurance Agreement, the Underwriting Agreement relating to the
Class A Certificates, any Sub-Servicing Agreement, the
Indemnification Agreement relating to the Prospectus, the
Registration Statement and the Certificates.
"Transferor": EquiVantage Inc., a Delaware corporation,
and its permitted successors and assigns.
"Trust": EquiVantage Home Equity Loan Trust 1996-2, the
trust created under this Agreement.
"Trust Estate": Collectively, all money, instruments and
other property, to the extent such money, instruments and other
property are subject or intended to be held in trust, and in the
subtrusts, for the benefit of the Owners, including all proceeds
thereof, including, without limitation, (i) the Mortgage Loans, (ii)
such amounts, including Eligible Investments, as from time to time
may be held in all Accounts, (iii) any Property, the ownership of
which has been effected on behalf of the Trust as a result of
foreclosure or acceptance by the Servicer of a deed in lieu of
foreclosure and that has not been withdrawn from the Trust, (iv) any
Insurance Policies relating to the Mortgage Loans and any rights of
the Sponsor under any Insurance Policies, (v) Net Liquidation<PAGE>
<PAGE>
Proceeds with respect to any Liquidated Loan, (vi) rights under the
Certificate Insurance Policy and (vii) the Sponsor's rights under the
Master Loan Transfer Agreement.
"Trustee": Norwest Bank Minnesota, National Association,
located on the date of execution of this Agreement at the Corporate
Trust Office, not in its individual capacity but solely as Trustee
under this Agreement, and any successor hereunder.
"Trustee Fee Rate": .025% per annum, plus for so long as
a backup sub-servicer is required by the Certificate Insurer, an
additional .015% per annum.
"Underwriter": Prudential Securities Incorporated, as
representative of the several underwriters.
"Unrecoverable Delinquency Advance": Any Delinquency
Advance which the Servicer, in its good faith business judgment,
believes will not ultimately be recovered from the related Mortgage
Loan.
"Weighted Average Class A Pass-Through Rate": With
respect to any Payment Date, the weighted average of the Class A-1
Pass-Through Rate, the Class A-2 Pass-Through Rate, the Class A-3
Pass-Through Rate and the Class A-4 Pass-Through Rate, weighted by
the Class A-1 Certificate Principal Balance, the Class A-2
Certificate Principal Balance, the Class A-3 Certificate Principal
Balance and the Class A-4 Certificate Principal Balance,
respectively, outstanding immediately prior to such Payment Date.
Section 1.2. 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 1.1 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 1.3. 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 1.4. 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.
ARTICLE II
ESTABLISHMENT AND ORGANIZATION OF THE TRUST
Section 2.1. 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 "EquiVantage Home Equity Loan Trust
1996-2".<PAGE>
<PAGE>
Section 2.2. Office. The office of the Trust shall
be in care of the Trustee, addressed to the Corporate Trust Office,
or at such other address as the Trustee may designate by notice to
the Sponsor, the Servicer, the Owners and to the Certificate Insurer.
Section 2.3. 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 Mortgage 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 require or permit the Trustee to take any
action which would result in the loss of REMIC status for the Trust.
Section 2.4. Appointment of the Trustee; Declaration
of Trust. The Sponsor hereby appoints the Trustee as trustee of the
Trust effective as of the Startup Day, to have all the rights, powers
and duties set forth herein. The Trustee hereby acknowledges and
accepts such appointment, represents and warrants its eligibility as
of the Startup Day to serve as Trustee pursuant to Section 10.8
hereof and declares that it will hold the Trust Estate in trust upon
and subject to the conditions set forth herein for the benefit of the
Owners and the Certificate Insurer, as their interests may appear.
Section 2.5. Expenses of the Trust. On each Payment
Date the Trustee shall receive the Monthly Trustee Fee Amount, as
provided in Section 7.5(b)(ii) hereof. Any other expenses of the
Trust that have been reviewed and approved by the Sponsor or the
Servicer (which approval shall not be unreasonably withheld),
including the reasonable expenses of the Trustee, its agents and
counsel, shall be paid directly by the Sponsor or the Servicer to the
Trustee or to such other Person to whom such amounts may be due.
Failure by the Sponsor to pay any such fees or other expenses shall
not relieve the Trustee of its obligations hereunder. The Trustee
hereby covenants with the Owners that every material contract or
other material agreement entered into by the Trustee on behalf of the
Trust shall expressly state therein that no Owner shall be personally
liable in connection with such contract or agreement.
Section 2.6. Ownership of the Trust. On the Startup
Day the ownership interests in the Trust and the subtrusts shall be
transferred as set forth in Section 4.2 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 5.4 and 5.8 hereof.
Section 2.7. [Reserved].
Section 2.8. Miscellaneous REMIC Provisions. (a)
The Trust shall elect to be treated as a REMIC under Section 860D of
the Code, as described in Section 11.15. 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 the
election of the Trust to be treated as a REMIC.
(b) The Class A-1 Certificates, the Class A-2
Certificates, the Class A-3 Certificates and the Class A-4
Certificates are hereby designated as "regular interests" in the
Trust and the Class R Certificates are hereby designated as the
"residual interest" in the Trust, as defined in Section 860G(a) of
the Code.
(c) The Startup Day is hereby designated as the "startup
day" of the Trust within the meaning of Section 860G(a)(9) of the
Code.
(d) The final scheduled Payment Date for each Class of
Certificates is hereby set to be the Payment Date succeeding by one
year the latest maturity date of any Mortgage Loan, as follows:<PAGE>
<PAGE>
Class Final Scheduled Payment Date
Class A-1 Certificates April 25, 2011
Class A-2 Certificates June 25, 2015
Class A-3 Certificates January 25, 2022
Class A-4 Certificates June 25, 2027
Section 2.9. Grant of Security Interest. (a) Except
with respect to the REMIC Provisions, it is the intention of the
parties hereto that the conveyance by the Sponsor of the Trust Estate
to the Trustee on behalf of the Trust shall constitute a purchase and
sale of such Trust Estate and not a loan. In the event, however,
that a court of competent jurisdiction were to hold that the
transaction evidenced hereby constitutes a loan and not a purchase
and sale, it is the intention of the parties hereto that this
Agreement shall constitute a security agreement under applicable law,
and that the Sponsor shall be deemed to have granted to the Trustee,
on behalf of the Owners and the Certificate Insurer, a first priority
perfected security interest in all of the Sponsor's right, title and
interest in, to and under the Trust Estate. The conveyance by the
Sponsor of the Trust Estate to the Trustee on behalf of the Trust
shall not constitute and is not intended to result in an assumption
by the Trustee or any Owner of any obligation of the Originators or
any other Person in connection with the Trust Estate.
(i) The Sponsor and the Servicer shall take no action
inconsistent with the Trust's ownership of the Trust Estate and shall
indicate or shall cause to be indicated in their records and records
held on their behalf that ownership of each Mortgage Loan and the
assets in the Trust Estate are held by the Trustee on behalf of the
Owners and the Certificate Insurer. In addition, the Sponsor and the
Servicer shall respond to any inquiries from third parties with
respect to ownership of a Mortgage Loan or any other asset in the
Trust Estate by stating that it is not the owner of such asset and
that ownership of such Mortgage Loan or other Trust Estate asset is
held by the Trustee on behalf of the Trust; provided that this
paragraph shall not be construed to prohibit the Servicer from
appearing as lienholder of record of the Mortgage Loans on behalf of
the Trustee for the purpose of receiving notices, executing release
and modification documents and taking other actions related to the
Servicing of the Mortgage Loans, so long as such actions are
consistent with Article VIII hereof.
<PAGE>
<PAGE>
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE SPONSOR AND THE SERVICER;
COVENANT OF SPONSOR TO CONVEY MORTGAGE LOANS
Section 3.1. Representations and Warranties of the
Sponsor. The Sponsor hereby represents, warrants and covenants to
the Trustee, the Servicer, the Certificate Insurer and to the Owners
as of the Startup Day that:
(a) The Sponsor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and is in good standing as a foreign corporation in each jurisdiction
in which the nature of its business, or the properties owned or
leased by it make such qualification necessary. The Sponsor has all
requisite corporate power and authority to own and operate its
properties, to carry out its business as presently conducted and as
proposed to be conducted and to enter into and discharge its
obligations under this Agreement and the other Operative Documents to
which it is a party.
(b) The execution and delivery of this Agreement and the
other Operative Documents to which the Sponsor is a party by the
Sponsor and its performance and compliance with the terms of this
Agreement and of the other Operative Documents to which it is a party
have been duly authorized by all necessary corporate action on the
part of the Sponsor and will not violate the Sponsor's Certificate of
Incorporation or Bylaws or constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a default)
under, or result in the breach of, any material contract, agreement
or other instrument to which the Sponsor is a party or by which the
Sponsor 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 Sponsor or any of its
properties.
(c) This Agreement and the other Operative Documents to
which the Sponsor is a party, assuming due authorization, execution
and delivery by the other parties hereto and thereto, each
constitutes a valid, legal and binding obligation of the Sponsor,
enforceable against it in accordance with the terms hereof and
thereof, except as the enforcement hereof and thereof may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally and by
general principles of equity (whether considered in a proceeding or
action in equity or at law).<PAGE>
<PAGE>
(d) The Sponsor 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 other) or operations of the Sponsor or its
properties or might have consequences that would materially and
adversely affect its performance hereunder and under the other
Operative Documents to which it is a party.
(e) No litigation is pending or, to the best of the
Sponsor's knowledge, threatened against the Sponsor which litigation
might have consequences that would prohibit its entering into this
Agreement or any other Operative Document to which it is a party, or
issuing the Certificates, or that would materially and adversely
affect the condition (financial or otherwise) or operations of the
Sponsor or its properties or might have consequences that would
materially and adversely affect its performance hereunder and under
the other Operative Documents to which it is a party.
(f) No certificate of an officer, statement furnished in
writing or report delivered pursuant to the terms hereof by the
Sponsor 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 Sponsor or matters or activities for
which the Sponsor is responsible in accordance with the Operative
Documents or which are attributed to the Sponsor 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 Sponsor or omit to state a material fact required to be stated
therein or necessary in order to make the statements contained
therein with respect to the Sponsor not misleading. To the best of
the Sponsor's knowledge and belief, 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 required to be
stated therein or necessary to make the statements contained therein
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 the Sponsor makes no such representation<PAGE>
<PAGE>
or warranty), that are necessary or advisable in connection with the
purchase and sale of the Certificates and the execution and delivery
by the Sponsor 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
Sponsor and the performance by the Sponsor 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 and
the Other Operative Documents to which the Sponsor is a party are in
the ordinary course of business of the Sponsor.
(j) The Sponsor received fair consideration and
reasonably equivalent value in exchange for the sale of the interests
in the Mortgage Loans evidenced by the Certificates.
(k) The Sponsor did not sell any interest in any
Mortgage Loan evidenced by the Certificates with any intent to
hinder, delay or defraud any of its respective creditors.
(l) The Sponsor is solvent and the Sponsor will not be
rendered insolvent as a result of the sale of the Mortgage Loans to
the Trust or the sale of the Certificates.
It is understood and agreed that the representations and
warranties set forth in this Section 3.1 shall survive delivery of
the Mortgage Loans to the Trustee.
Upon discovery by any of the Servicer, the Sponsor, the
Certificate Insurer or the Trustee of a breach of any of the
representations and warranties set forth in Section 3.1 which
materially and adversely affects the interests of the Owners or of
the Certificate Insurer, the party discovering such breach shall give
prompt written notice to the other parties. Within 30 days of its
discovery or its receipt of notice of breach the Sponsor shall cure
such breach in all material respects; provided, however, that if the
Sponsor 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 and with notice to each of Moody's and S&P.<PAGE>
<PAGE>
Section 3.2. Representations and Warranties of the
Servicer. The Servicer hereby represents, warrants and covenants to
the Trustee, the Sponsor, the Certificate Insurer and to the Owners
as of the Startup Day that:
(a) The Servicer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware, and is, or a Sub-Servicer is, in compliance with the laws
of each state in which any Property is located to the extent
necessary to enable it to perform its obligations hereunder and is in
good standing as a foreign corporation in each jurisdiction in which
the nature of its business, or the properties owned or leased by it
make such qualification necessary. The Servicer 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, either directly or through
Sub-Servicers, its obligations under this Agreement and the other
Operative Documents to which it is a party. The Servicer has equity
of at least $10,000,000, as determined in accordance with generally
accepted accounting principles. Any Sub-Servicer appointed by the
Servicer will have 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.
(b) The execution and delivery of this Agreement by the
Servicer and its performance and compliance with the terms of this
Agreement, any Sub-Servicing 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 Servicer and will not
violate the Servicer's Articles of Incorporation or Bylaws or
constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, or result in the
breach of, any material contract, agreement or other instrument to
which the Servicer is a party or by which the Servicer is bound or
violate any statute or any order, rule or regulation of any court,
governmental agency or body or other tribunal having jurisdiction
over the Servicer or any of its properties.
(c) This Agreement, any Sub-Servicing Agreement and the
other Operative Documents to which the Servicer is a party, assuming
due authorization, execution and delivery by the other parties hereto
and thereto, each constitutes a valid, legal and binding obligation
of the Servicer, enforceable against it in accordance with the terms
hereof, except as the enforcement hereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and by general principles
of equity (whether considered in a proceeding or action in equity or
at law).<PAGE>
<PAGE>
(d) The Servicer is not in default with respect to any
order or decree of any court or any order, regulation or demand of
any federal, state, municipal or governmental agency, which might
have consequences that would materially and adversely affect the
condition (financial or other) or operations of the Servicer or its
properties or might have consequences that would materially and
adversely affect its performance hereunder, under any Sub-Servicing
Agreement and under the other Operative Documents to which the
Servicer is a party.
(e) No litigation is pending or, to the best of the
Servicer's knowledge, threatened against the Servicer which
litigation might have consequences that would prohibit its entering
into this Agreement, any Sub-Servicing Agreement or any other
Operative Document to which it is a party or that would materially
and adversely affect the condition (financial or otherwise) or
operations of the Servicer or its properties or might have
consequences that would materially and adversely affect its
performance hereunder and under the other Operative Documents to
which the Servicer is a party.
(f) No certificate of an officer, statement furnished in
writing or report delivered pursuant to the terms hereof by the
Servicer contains any untrue statement of a material fact or omits to
state any material fact necessary to make the certificate, statement
or report not misleading.
(g) The statements contained in the Registration
Statement which describe matters or activities for which the Servicer
is responsible in accordance with the Operative Documents or which
are attributable to the Servicer, either directly or through any
Sub-Servicer, therein are true and correct in all material respects,
and the Registration Statement does not contain any untrue statement
of a material fact with respect to the Servicer or omit to state a
material fact required to be stated therein or necessary to make the
statements contained therein with respect to the Servicer not
misleading. To the best of the Servicer's knowledge and belief, the
Registration Statement does not contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary to make the statements contained therein
not misleading.
(h) The Servicing Fee is a "current (normal) servicing
fee rate" as that term is used in Statement of Financial Accounting
Standards No. 65 issued by the Financial Accounting Standards Board.
Neither the Servicer nor any affiliate thereof will report on any
financial statements any part of the Servicing Fee as an adjustment
to the sales price of the Mortgage Loans.<PAGE>
<PAGE>
(i) All actions, approvals, consents, waivers,
exemptions, variances, franchises, orders, permits, authorizations,
rights and licenses required to be taken, given or obtained, as the
case may be, by or from any federal, state or other governmental
authority or agency (other than any such actions, approvals, etc.
under any state securities laws, real estate syndication or "Blue
Sky" statutes, as to which the Servicer makes no such representation
or warranty), that are necessary or advisable in connection with the
execution and delivery by the Servicer of the Operative Documents to
which it is a party, have been duly taken, given or obtained, as the
case may be, are in full force and effect on the date hereof and on
the Startup Day, are not subject to any pending proceedings or
appeals (administrative, judicial or otherwise) and either the time
within which any appeal therefrom may be taken or review thereof may
be obtained has expired or no review thereof may be obtained or
appeal therefrom taken, and are adequate to authorize the
consummation of the transactions contemplated by this Agreement and
the other Operative Documents on the part of the Servicer and the
performance by the Servicer, either directly or through a
Sub-Servicer, of its obligations under this Agreement, any
Sub-Servicing Agreement and such of the other Operative Documents to
which it is a party.
(j) The collection practices used by the Servicer, or
any Sub-Servicer, with respect to the Mortgage Loans directly
serviced by it have been, in all material respects, legal, proper,
prudent and customary in the mortgage loan servicing business.
(k) The transactions contemplated by this Agreement are
in the ordinary course of business of the Servicer.
It is understood and agreed that the representations and
warranties set forth in this Section 3.2 shall survive delivery of
the Mortgage Loans to the Trustee.
Upon discovery by any of the Servicer, the Sponsor, the
Certificate Insurer or the Trustee of a breach of any of the
representations and warranties set forth in this Section 3.2 which
materially and adversely affects the interests of the Owners or of
the Certificate Insurer, the party discovering such breach shall give
prompt written notice to the other parties. Within 30 days of its
discovery or its receipt of notice of breach, the Servicer shall cure
such breach in all material respects and, upon the Servicer's
continued failure to cure such breach, may thereafter be removed by
the Trustee pursuant to Section 8.20 hereof; provided, however, that
if the Servicer can demonstrate to the reasonable satisfaction of the
Certificate Insurer that it is diligently pursuing remedial action,<PAGE>
<PAGE>
then the cure period may be extended with the written approval of the
Certificate Insurer and notice to each of Moody's and S&P.
Section 3.3. Representations and Warranties of the
Sponsor with Respect to the Mortgage Loans.
(a) The Sponsor makes the following representations and
warranties as to the Mortgage Loans on which the Trustee relies in
accepting the Mortgage Loans in trust and executing and
authenticating the Certificates and on which the Certificate Insurer
relies in issuing the Certificate Insurance Policy. Such
representations and warranties speak as of the Startup Day (unless
otherwise specified), but shall survive the sale, transfer, and
assignment of the Mortgage Loans to the Trustee on behalf of the
Trust:
(i) The information with respect to each
Mortgage Loan set forth in the Schedule of Mortgage Loans is true and
correct as of the Cut-Off Date;
(ii) All of the original or certified
documentation set forth in Section 3.5 (including all material
documents related thereto) with respect to each Mortgage Loan has
been or will be delivered to the Trustee on the Startup Day, or as
otherwise provided in Section 3.5;
(iii) Each Mortgage Loan is being serviced by
the Servicer or a Person controlling, controlled by or under common
control with the Servicer and qualified to service the Mortgage Loans
serviced by it;
(iv) Each Mortgage Loan conforms, and all
such Mortgage Loans in the aggregate conform, in all material
respects to the description thereof set forth in the Registration
Statement;
(v) The credit underwriting guidelines
applicable to each Mortgage Loan conform in all material respects to
the description thereof set forth in the Prospectus; and
(vi) None of the Mortgage Loans are subject
to Section 32 of the Federal Truth-in-Lending Act.
(b) The Sponsor hereby assigns to the Trustee for the
benefit of the Owners of the Certificates and the Certificate Insurer
all of its right, title and interest (but none of its obligations,
other than those set forth herein) in respect of the Master Transfer<PAGE>
<PAGE>
Agreement, except for such rights to indemnification thereunder for
losses actually incurred only by the Sponsor. Insofar as the Master
Transfer Agreement provides for representations and warranties and
remedies thereunder for any breach of such representations and
warranties, the remedies with respect to such breaches may be
enforced by the Servicer or by the Trustee on behalf of the Owners
and the Certificate Insurer against the Person making such
representation and warranty, and any rights to indemnification for
any breaches of such representations and warranties are hereby
assigned by the Sponsor to the Trustee for the benefit of the Owners
of the Certificates and the Certificate Insurer, except for such
rights to indemnification thereunder only for losses actually
incurred only by the Sponsor. Upon the discovery by the Sponsor, the
Servicer, the Certificate Insurer or the Trustee of a breach of any
of the representations and warranties made in the Master Transfer
Agreement in respect of any Mortgage Loan which materially and
adversely affects the interests of the Owners or of the Certificate
Insurer in such Mortgage Loan, the party discovering such breach
shall give prompt written notice to the other parties and each of
Moody's and S&P. The Servicer shall promptly notify the Originator
of such breach and request that the Originator cure such breach or
take the actions described in Section 3.4(a) hereof within the time
periods required thereby, and (i) if the Originator does not cure
such breach in all material respects, the Sponsor shall cure such
breach or take such actions and (ii) if the Originator does not
purchase such Mortgage Loan, the Sponsor shall purchase such Mortgage
Loan. The obligations of the Sponsor or Servicer, as the case may
be, set forth herein with respect to any Mortgage Loan as to which
such a breach has occurred and is continuing shall constitute the
sole obligations of the Sponsor and of the Servicer in respect of
such breach.
Section 3.4. Covenants of Sponsor to Take Certain
Actions with Respect to the Mortgage Loans In Certain Situations.
(a) Upon the earliest to occur of the Sponsor's discovery, its
receipt of notice of breach from any one of the other parties hereto
or from the Certificate Insurer or such time as a breach of any
Representation and Warranty materially and adversely affects the
interests of the Owners or of the Certificate Insurer as set forth
above, the Sponsor shall promptly cure (or cause the Originator to
cure) such breach in all material respects or it shall (or shall
cause the Originator to), subject to the further requirements of this
paragraph, on the second Remittance Date next succeeding such
discovery, receipt of notice or such other time (i) substitute in
lieu of each Mortgage Loan which has given rise to the requirement
for action by the Sponsor a Qualified Replacement Mortgage and
deliver the Substitution Amount applicable thereto, together with the
aggregate amount of all unreimbursed Delinquency Advances and<PAGE>
<PAGE>
unreimbursed Servicing Advances theretofore made with respect to such
Mortgage Loan, to the Servicer for deposit in the Principal and
Interest Account or (ii) purchase such Mortgage Loan from the Trust
at a purchase price equal to the Loan Purchase Price thereof, which
purchase price shall be delivered to the Servicer for deposit in the
Principal and Interest Account. In connection with any such proposed
purchase or substitution, the Sponsor at its expense, shall cause to
be delivered to the Trustee and to the Certificate Insurer an opinion
of counsel experienced in federal income tax matters stating whether
or not such a proposed purchase or substitution would constitute a
Prohibited Transaction for the Trust or would jeopardize the REMIC
status of the Trust as a REMIC, and unless otherwise directed by the
Certificate Insurer the Sponsor shall only be required to take either
such action to the extent such action would not constitute a
Prohibited Transaction for the Trust or would not jeopardize the
status of the Trust as a REMIC. It is understood and agreed that the
obligation of the Sponsor to cure the defect, or substitute for, or
purchase any Mortgage Loan as to which a Representation or Warranty
is untrue in any material respect and has not been remedied shall
constitute the sole remedy available to the Owners, the Trustee or
the Certificate Insurer.
(b) In the event that any Qualified Replacement Mortgage
is delivered by the Sponsor to the Trust pursuant to Section 3.3,
Section 3.4 or Section 3.6 hereof, the Originator and the Sponsor
shall be obligated to take the actions described in Section 3.4(a)
with respect to such Qualified Replacement Mortgage upon the
discovery by any of the Owners, the Sponsor, the Servicer, the
Certificate Insurer, or the Trustee that the Representations and
Warranties applicable to such Qualified Replacement Mortgage 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 (b) any of the
Representations and Warranties 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.
(c) The Sponsor acknowledges that a breach of any of
the Representations and Warranties (x) relating to marketability of
title sufficient to transfer unencumbered title to a Mortgage Loan,
(y) relating to enforceability of the Mortgage Loan against the
related Mortgagor or Property or (z) set forth in clause (a)(v) of
Section 3.3 above constitutes a breach of a representation or
warranty which "materially and adversely affects the interests of the
Owners or of the Certificate Insurer" in such Mortgage Loan.<PAGE>
<PAGE>
(d) It is understood and agreed that the
representations, warranties and covenants set forth in this Section
3.4 shall survive delivery of the respective Mortgage Loans
(including Qualified Replacement Mortgage Loans) to the Trustee.
Section 3.5. Conveyance of the Mortgage Loans. (a)
The Sponsor, concurrently with the execution and delivery hereof,
hereby transfers, sells, assigns, sets over and otherwise conveys
without recourse, to the Trustee on behalf of the Trust, all right,
title and interest of the Sponsor in and to each Mortgage Loan listed
on the Schedule of Mortgage Loans delivered by the Sponsor on the
Startup Day, all its right, title and interest in and to payments of
principal and interest (including Prepaid Installments) due after the
Cut-Off Date, and all payments of principal collected after the
Cut-Off Date, together with all of its right, title and interest in
and to all related Insurance Policies. The transfer by the Sponsor
of the Mortgage Loans set forth on the Schedule of Mortgage Loans to
the Trustee on behalf of the Trust is absolute and is intended by the
Owners and all parties hereto to be treated as a sale by the Sponsor.
(b) In connection with the transfer, sale and assignment
of the Mortgage Loans, the Sponsor agrees to:
(i) cause to be delivered, on the Startup Day with
respect to the Mortgage Loans, without recourse, to the Trustee (A)
the original Notes, endorsed without recourse by the related
Originator "For value received, I hereby transfer, endorse and assign
to Norwest Bank Minnesota, National Association, as Trustee for
EquiVantage Home Equity Loan Trust 1996-2, the Note and Deed of Trust
or Mortgage securing the same, so far as the same pertains to said
Note, without recourse"; (B) originals or certified copies of all
intervening assignments, if any, showing a complete chain of
assignment from origination to the Originator, including warehousing
assignments, with evidence of recording or certification of filing
for recordation thereon; (C) originals of all assumption and
modification agreements, if any; (D) either: (1) the original
Mortgage, with evidence of recording thereon, (2) a true and accurate
copy of the Mortgage where the original Mortgage has been transmitted
for recording, until such time as the original Mortgage is returned
by the public recording office, or (3) a copy of the Mortgage
certified by the public recording office in those instances where the
original recorded Mortgage has been lost; (E) the original mortgage
title insurance policy, title commitment, binder or attorney's
opinion of title and abstract of title; provided that, in the event a
copy of any mortgage, title policy or title commitment was originally
delivered to the Trustee pursuant to this Section 3.5(b)(i)(E), the
Sponsor shall cause the related original mortgage, title policy, or
title commitment to be delivered to the Trustee within one year of
the Startup Day; and (F) an assignment in blank of each Mortgage
executed by the record holder of such Mortgage, which assignment
shall be in recordable form;
(ii) cause, within 30 days following the Startup Day,
assignments of the Mortgages from the Sponsor or the related
Originator, if the Originator is the record holder of such Mortgage
to "Norwest Bank Minnesota, National Association, as Trustee of
EquiVantage Home Equity Loan Trust 1996-2 under the Pooling and
Servicing Agreement dated as of May 1, 1996", to be submitted for
recording in the appropriate jurisdictions wherein such recordation
is necessary to perfect the lien thereof as against creditors of or
purchasers from the Sponsor to the Trustee on behalf of the Trust;
provided, however, that the Sponsor shall not be required to prepare
an assignment for any Mortgage (x) until such original recording
information is available or (y) as to which the Sponsor furnishes,
within such 30-day period, at the Sponsor's expense, an opinion of
counsel to the Trustee ("Assignment Opinion") which opines that
recording is not necessary to perfect the rights of the Trustee in
the related Mortgage (in form and substance satisfactory to the
Certificate Insurer, Moody's and S&P). Following the expiration of
such 30-day period and except with respect to Mortgages covered by
the Assignment Opinions, the Sponsor shall cause to be prepared a
Mortgage assignment for any Mortgage for which original recording
information is subsequently received by the related Originator, and
shall promptly deliver a copy of such Mortgage assignment to the
Trustee; and
(iii) cause, within five Business Days following the
expiration of such 30-day period referred to in clause (ii) above, to
be delivered to the Trustee certified copies of all Mortgage
assignments submitted for recording, together with a list (which list
also shall be delivered to the Certificate Insurer) of (x) all
Mortgages for which no Mortgage assignment has yet been submitted for
recording by the Sponsor and (y) reasons why the Sponsor has not yet
submitted such Mortgage assignments for recording. With respect to
any Mortgage assignment set forth on the aforementioned list which
has not been submitted for recording for a reason other than a lack
of original recording information or with respect to Mortgages
covered by the Assignment Opinions, the Trustee shall make an
immediate demand on the Sponsor to cause such Mortgage assignments to
be prepared, and shall inform the Certificate Insurer of the
Sponsor's failure to cause such Mortgage assignments to be prepared.
Thereafter, the Trustee shall cooperate in executing any documents
prepared by the Certificate Insurer, submitted to the Trustee and
reasonably necessary in connection with this provision. <PAGE>
<PAGE>
All Mortgage assignments as to which an acceptable
Assignment Opinion has not been delivered shall be accomplished
within twelve months of the Startup Day (including any assignments
not originally recorded due to lack of recordation information),
unless the Certificate Insurer agrees to extend such period, at the
expense of the Originator or of the Sponsor. Notwithstanding
anything to the contrary contained in this Section 3.5, in those
instances as identified by the Sponsor 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 Sponsor 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.
If the Servicer is removed pursuant to Section 8.20, the
Trustee or other successor Servicer shall submit all assignments for
recording; the costs of such assignments shall be paid by the
Servicer.
Copies of all Mortgage assignments received by the
Trustee shall be kept in the related File.
The Servicer hereby acknowledges that the Financing
Statements have been duly submitted for filing. From time to time
hereafter, the Servicer shall take or cause to be taken such actions
and execute such documents as are necessary to perfect and protect
the Trust's and the Owners' interests in the Files against all other
Persons, including, without limitation, the filing of financing
statements, amendments thereto and continuation statements.
(c) In the case of Mortgage Loans which have been
prepaid in full on or after the Cut-Off Date and prior to the Startup
Day, the Sponsor, in lieu of the foregoing, will deliver within 15
Business Days after the Startup Day to the Trustee a certification of
an Authorized Officer in the form set forth in Exhibit C.
(d) The Sponsor shall transfer, sell, assign, set over
and otherwise convey without recourse, to the Trustee on behalf of
the Trust all right, title and interest of the Sponsor in and to any
Qualified Replacement Mortgage delivered to the Trustee on behalf of
the Trust by the Sponsor pursuant to Section 3.3, Section 3.4 or
Section 3.6 hereof and all its right, title and interest to
unscheduled payments of principal (including Prepayments) collected
on and after the applicable Replacement Cut-Off Date, together with
all payments of principal collected and interest due after the<PAGE>
<PAGE>
applicable Replacement Cut-Off Date, and all of its right, title and
interest in and to all related Insurance Policies.
(e) As to each Mortgage Loan released from the Trust in
connection with the conveyance of a Qualified Replacement Mortgage
therefor, the Sponsor will prepare and deliver to the Trustee an
appropriate instrument for execution by the Trustee, and the Trustee
will transfer, assign, set over and otherwise convey without
recourse, on the Sponsor's order, all of its right, title and
interest in and to such released Mortgage Loan and all the Trust's
right, title and interest to unscheduled payments of principal
(including Prepayments) collected on and after the applicable
Replacement Cut-Off Date, together with all payments of principal
collected and interest due after the applicable Replacement Cut-Off
Date, and all of its right, title and interest in and to all related
Insurance Policies.
(f) In connection with any transfer, sale and assignment
of a Qualified Replacement Mortgage to the Trustee on behalf of the
Trust, the Sponsor agrees to cause to be delivered to the Trustee the
items described in Section 3.5(b) on the date of such transfer, sale
and assignment or, if a later delivery time is permitted by Section
3.5(b), then no later than such later delivery time.
(g) As to each Mortgage 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 Sponsor (i) the original
Note, or the certified copy, relating thereto, if the certified copy
is a legal substitute for an otherwise unavailable original Note
endorsed without recourse, to the Sponsor and (ii) such other
documents as constituted the File with respect thereto.
(h) If a Mortgage assignment is lost during the process
of recording, or is returned from the recorder's office unrecorded
due to a defect therein, the Sponsor shall prepare a substitute
assignment or cure such defect, as the case may be, and thereafter
cause each such assignment to be duly recorded.
(i) The Sponsor shall reflect on its records that the
Mortgage Loans have been sold to the Trust.
(j) The Sponsor shall deliver to the Servicer, the
Certificate Insurer and the Trustee a schedule of the Escrow Loans.<PAGE>
<PAGE>
(k) With respect to each Escrow Loan, the Sponsor shall
deliver to the Trustee within one year after the Closing Date the
following documents related to such Escrow Loan: (i) escrow
agreement, (ii) disbursement ledger, (iii) Mortgagor's certification
as to completion, (iv) if applicable, contractor's certification as
to completion and (v) if applicable, appraiser's unqualified
certification as to final completion pursuant to which the appraiser
(or, if the original appraiser has since died, retired, has been
certified as an incompetent, has gone insane or otherwise is unable
to perform, a suitable substitute appraiser) confirms that the
Appraised Value of the Property upon completion of the improvement
(disregarding intervening changes, if any, in market value) is at
least equal to such appraiser's original estimate of such Appraised
Value (each such document, a "Required Escrow Document"). The
Trustee shall hold each Required Escrow Document so delivered in the
related File. No later than the end of the thirteenth month
following the Startup Day, the Trustee shall report to the Sponsor,
the Originator, the Servicer and the Certificate Insurer whether all
Required Escrow Documents relating to the Escrow Loans have been
received by the Trustee. If such report indicates that any Required
Escrow Document has not been received, the Sponsor shall be required
to take the actions set forth in Section 3.6(b) if the lack of such
Required Escrow Document materially and adversely affects the
interest of the Owners or of the Certificate Insurer in the related
Escrow Loan.
Section 3.6. Acceptance by Trustee; Certain
Substitutions of Mortgage Loans; Certification by Trustee. (a) The
Trustee agrees to execute and deliver on the Startup Day an
acknowledgment of receipt of the Notes delivered by the Sponsor in
the form attached as Exhibit D hereto, and declares that it will hold
the related File, together with any amendments, replacements 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 and the Certificate Insurer. The Trustee
further agrees to review any other documents delivered by the Sponsor
within 90 days after the Startup Day (or within 90 days with respect
to any Qualified Replacement Mortgage after the assignment thereof)
and to deliver to the Sponsor, the Servicer and the Certificate
Insurer a Pool Certification in the form attached hereto as Exhibit E
to the effect that, except as described in such certification, as to
each Mortgage Loan listed in the Schedule of Mortgage Loans (other
than any Mortgage Loan paid in full or any Mortgage 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 this Agreement are in its possession, (ii) such documents<PAGE>
<PAGE>
have been reviewed by it and have not been mutilated, damaged, torn
or otherwise physically altered and relate to such Mortgage Loan and
(iii) based on its examination and only as to the foregoing
documents, the information set forth on the Schedule of Mortgage
Loans accurately reflects the information set forth in the related
File; provided, however, that such Pool Certificate shall not be
delivered prior to 90 days after the Startup Day. 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 Mortgage
Loan.
(b) If the Trustee during such 90-day period finds any
document constituting a part of a File which is not properly
executed, has not been received within the specified period, or is
unrelated to the Mortgage Loans identified in the Schedule of
Mortgage Loans, or that any Mortgage Loan does not conform in a
material respect to the description thereof as set forth in the
Schedule of Mortgage Loans, the Trustee shall promptly so notify the
Sponsor and the Certificate Insurer. In performing any such review,
the Trustee may conclusively rely on the Sponsor as to the purported
genuineness of any such document and any signature thereon. It is
understood that the scope of the Trustee's review of the items
delivered by the Sponsor pursuant to Section 3.5(b)(i) is limited
solely to confirming that the documents listed in Section 3.5(b)(i)
have been executed and received, relate to the Files identified in
the Schedule of Mortgage Loans and conform materially to the
description thereof in the Schedule of Mortgage Loans. The Sponsor
agrees to use reasonable efforts to remedy a material defect in a
document constituting part of a File of which it is so notified by
the Trustee. If, however, within 60 days after the Trustee's notice
to it respecting such defect the Sponsor has not remedied or caused
to be remedied the defect and the defect materially and adversely
affects the interest in the related Mortgage Loan of the Owners or of
the Certificate Insurer, the Sponsor will (or will cause the
Originator or an affiliate of the Sponsor to) on the next succeeding
Remittance Date (i) substitute in lieu of such Mortgage Loan a
Qualified Replacement Mortgage and, deliver the Substitution Amount
applicable thereto to the Servicer for deposit in the Principal and
Interest Account or (ii) purchase such Mortgage Loan at a purchase
price equal to the Loan Purchase Price thereof, which purchase price
shall be delivered to the Servicer for deposit in the Principal and
Interest Account. In connection with any such proposed purchase or<PAGE>
<PAGE>
substitution the Sponsor shall cause at the Sponsor's expense to be
delivered promptly to the Trustee and to the Certificate Insurer an
opinion of counsel experienced in federal income tax matters stating
whether or not such a proposed purchase or substitution would
constitute a Prohibited Transaction for the Trust or would jeopardize
the status of the Trust as a REMIC, and the Sponsor shall only be
required to take either such action to the extent such action would
not constitute a Prohibited Transaction for the Trust or would not
jeopardize the status of the Trust as a REMIC. Within 375 days after
the Closing Date, the Trustee shall deliver to the Certificate
Insurer a final certification (the "Final Certification") evidencing
the completeness of the Files acquired by the Trustee on behalf of
the Trust. To the extent that the Final Certification reflects any
exceptions, the Seller and Trustee shall continue to deliver to the
Certificate Insurer a monthly certification reflecting the status of
any exceptions until all such exceptions have been cured.
Section 3.7. Cooperation Procedures. (a) The
Sponsor shall, in connection with the delivery of each Qualified
Replacement Mortgage to the Trustee, provide the Trustee with the
information set forth in the Schedule of Mortgage Loans with respect
to such Qualified Replacement Mortgage.
(b) The Sponsor, the Servicer and the Trustee covenant
to provide each other, the Certificate Insurer and each of Moody's
and S&P with all data and information required to be provided by them
hereunder at the times required hereunder, and additionally covenant
reasonably to cooperate with each other in providing any additional
information required by any of them, the Certificate Insurer or
either Moody's and S&P in connection with their respective duties
hereunder.
(c) The Trustee shall have no duty hereunder with
respect to any complaint, claim, demand, notice or other document it
may receive or which may be alleged to have been delivered to or
served upon it by third parties as a consequence of the assignment of
any Mortgage Loan hereunder, and the Servicer hereby expressly
releases, indemnifies and agrees to hold the Trustee harmless from
any losses to the Trustee or Trust Fund resulting therefrom;
provided, however, that the Trustee shall use commercially reasonable
efforts to deliver to the Servicer any such complaint, claim, demand,
notice or other document which is delivered to the Corporate Trust
Office of the Trustee and contains sufficient information to enable
the Trustee to identify it as pertaining to a Mortgage Loan.<PAGE>
<PAGE>
(d) The Trustee shall file on behalf of the Trust all
reports required to be filed with the Securities and Exchange
Commission or any exchange or association of securities dealers
pursuant to the Securities and Exchange Act of 1934, as amended, or
any rules and regulations thereunder.
ARTICLE IV
ISSUANCE AND SALE OF CERTIFICATES
Section 4.1. Issuance of Certificates. On the
Startup Day, upon the Trustee's receipt from the Sponsor of an
executed Delivery Order in the form set forth as Exhibit F hereto,
the Trustee shall execute, authenticate and deliver the Certificates
on behalf of the Trust in accordance with the directions set forth in
such Delivery Order.
Section 4.2. Sale of Certificates. At 11:00 a.m.
New York City time on the Startup Date, at the offices of Dewey
Ballantine, 1301 Sixth Avenue, New York, New York, the Sponsor will
sell and convey the Mortgage Loans and the money, instruments and
other property related thereto to the Trustee, and the Trustee will
(i) deliver 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)
deliver to the Sponsor, the Class R Certificates, with an aggregate
Percentage Interest equal to 100%, registered as the Sponsor shall
request. Upon receipt of the proceeds of the sale of the
Certificates, the Trustee shall, from the proceeds of the sale of the
Certificates, pay such fees and expenses as are identified by the
Sponsor, and pay to the Sponsor the balance after deducting such
amounts. The Sponsor shall pay directly to the Certificate Insurer
the Initial Premium.
ARTICLE V
CERTIFICATES AND TRANSFER OF INTERESTS
Section 5.1. 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" no debt of any
Person is represented thereby, nor are the Certificates or the<PAGE>
<PAGE>
underlying Notes guaranteed by any Person (except that the Notes may
be recourse to the Mortgagors thereof to the extent permitted by law
and except for the rights of the Trustee with respect to the
Certificate Insurance Policy). Distributions on the Certificates are
payable solely from payments received on or with respect to the
Mortgage Loans (other than the Servicing Fees), moneys in the
Principal and Interest Account and the Certificate Account, except as
otherwise provided herein, from earnings on moneys and the proceeds
of property held as a part of the Trust Estate upon the occurrence of
certain events, from Insured Payments, Delinquency Advances and
Compensating Interest made by the Servicer or otherwise held by the
Servicer in Trust for the Owners, except as otherwise provided
herein. 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, a specified portion of
such payments with respect to the Mortgage Loans, certain related
Insured Payments, pro rata in accordance with such Owner's Percentage
Interest.
(b) Each Owner is required, and hereby agrees, to return
to the Trustee any Certificate with respect to which the Trustee has
made the final distribution due thereon. Any such Certificate as to
which the Trustee has made the final distribution thereon shall be
deemed cancelled and shall no longer be Outstanding for any purpose
of this Agreement, whether or not such Certificate is ever returned
to the Trustee.
Section 5.2. Forms. The Class A-1 Certificates, the
Class A-2 Certificates, the Class A-3 Certificates, the Class A-4
Certificates and the Class R Certificates shall be in substantially
the forms set forth in Exhibits A-1, A-2, A-3 and A-4 and B hereof,
respectively, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by
this Agreement or as may in the Sponsor's judgment be necessary,
appropriate or convenient to comply, or facilitate compliance, with
applicable laws, and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may
be required to comply with the rules of any applicable securities
laws.
Section 5.3. Execution, Authentication and Delivery.
Each Certificate shall be executed on behalf of the Trust, by the
manual or facsimile signature of one of the Trustee's Authorized
Officers and shall be authenticated by the manual signature of one of
the Trustee's Authorized Officers.<PAGE>
<PAGE>
Certificates bearing the 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
4.2 hereof.
No Certificate shall be valid until executed and
authenticated as set forth above.
Section 5.4. Registration and Transfer of
Certificates. (a) The Trustee, as registrar, 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 appointed registrar for the
purpose of registering Certificates and transfers of Certificates as
herein provided. The Owners shall have the right to inspect the
Register at all reasonable times and to obtain copies thereof.
(b) Subject to the provisions of Section 5.8 hereof,
upon surrender for registration of transfer of any Certificate at the
office designated as the location of the Register, 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 Certificate Principal Balance 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, tenor and a like aggregate Certificate
Principal Balance 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, 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.<PAGE>
<PAGE>
(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 Trustee 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 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. The Trustee shall not be liable for any
expenses in connection with the issuance of Certificates pursuant to
this Section 5.4.
(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 the next
paragraph, be initially issued in the form of a single fully
registered Class A Certificate with a denomination equal to the
related Original Certificate Principal Balance. 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.
The Sponsor and the Trustee are hereby authorized to
execute and deliver the Representation Letter with the Depository.
With respect to Class A Certificates registered in the
Register in the name of Cede & Co., as nominee of the Depository, the
Sponsor, the Servicer, the Certificate Insurer and the Trustee shall
have no responsibility or obligation to Direct or Indirect
Participants or beneficial owners for which the Depository holds
Class A Certificates from time to time as a Depository. Without
limiting the immediately preceding sentence, the Sponsor, the
Servicer, the Certificate Insurer and the Trustee shall have no
responsibility or obligation with respect to (i) the accuracy of the
records of the Depository, Cede & Co., or any Direct or Indirect
Participant with respect to the ownership interest in the Class A
Certificates, (ii) the delivery to any Direct or Indirect Participant
or any other Person, other than a registered Owner of a Class A
Certificate as shown in the Register, of any notice with respect to
the Class A Certificates or (iii) the payment to any Direct or
Indirect Participant or any other Person, other than a registered
Owner of a Class A Certificate as shown in the Register, of any<PAGE>
<PAGE>
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 Sponsor
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
Sponsor is unable to locate a qualified successor or (ii) the Sponsor
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 Sponsor 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 Sponsor, or such depository's agent or designee but, if the
Sponsor 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 as the case may be and all notices with respect to such
Class A Certificates as the case may be shall be made and given,
respectively, in the manner provided in the Representation Letter.
Section 5.5. 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<PAGE>
<PAGE>
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 Trust and the Trustee harmless (provided, that with respect
to an Owner which is an insurance company of investment grade credit
rating, a letter of indemnity furnished by it shall be sufficient for
this purpose), then, in the absence of notice to the Trustee that
such Certificate has been acquired by a bona fide purchaser, the
Trustee shall execute, authenticate and deliver, in exchange for or
in lieu of any such mutilated, destroyed, lost or stolen Certificate,
a new Certificate of like Class, tenor and aggregate Certificate
Principal Balance, bearing a number not contemporaneously
outstanding.
Upon the issuance of any new Certificate under this
Section, the Trustee may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in
relation thereto; any other expenses in connection with such issuance
shall be an expense of the Trust. The Trustee shall not be liable
for any expenses in connection with the issuance of Certificates
pursuant to this Section 5.5.
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 5.6. Persons Deemed Owners. The Trustee and
the Certificate Insurer and any of their respective agents may treat
the Person in whose name any Certificate is registered as the Owner
of such Certificate for the purpose of receiving distributions with
respect to such Certificate and for all other purposes whatsoever,
and neither the Trustee, the Certificate Insurer nor any of their
respective agents shall be affected by notice to the contrary.
Section 5.7. 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 cancelled by it. No Certificate shall<PAGE>
<PAGE>
be authenticated in lieu of or in exchange for any Certificate
cancelled as provided in this Section, except as expressly permitted
by this Agreement. All cancelled Certificates may be held or
destroyed by the Trustee in accordance with its standard policy. The
Sponsor, the Servicer, the Certificate Insurer and any Originator may
at any time deliver any Certificate to the Trustee for cancellation,
and the Trustee is hereby authorized to cancel any such Certificate.
Section 5.8. Limitation on Transfer of Ownership
Rights. (a) No sale or other transfer of any Class A Certificate
shall be made to the Sponsor or any of its respective affiliates, the
Servicer, any Sub-Servicer or the Trust.
(b) 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 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 substantially in the form attached hereto as
Exhibit G. 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 5.8(b).
(c) 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 of 1933, as amended, 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, (i) the Trustee or the
Sponsor shall require a written opinion of counsel acceptable to and
in form and substance satisfactory to the Sponsor that such transfer
may be made pursuant to an exemption, describing the applicable
exemption and the basis therefor, from said Act and laws or is being
made pursuant to said Act and laws, which opinion of counsel shall
not be an expense of the Trustee or the Sponsor, and (ii) the Trustee<PAGE>
<PAGE>
shall require the Transferee to execute an investment letter
acceptable to and in form and substance satisfactory to the Sponsor
certifying to the Trustee and the Sponsor the facts surrounding such
transfer, which investment letter shall not be an expense of the
Trustee. The Owner of a Class R Certificate desiring to effect such
transfer shall, and does hereby agree to, indemnify the Trustee and
the Sponsor against any liability that may result if the transfer is
not so exempt or is not made in accordance with such federal and
state laws.
(d) Notwithstanding the foregoing, no sale or other
transfer of record or beneficial ownership of a Class R Certificate
shall be made unless the Trustee shall have received a representation
letter from the transferee of such Class R Certificate, acceptable to
and in form and substance satisfactory to the Trustee, to the effect
that such transferee is not an employee benefit plan subject to
Section 406 of the Employee Retirement Income Security Act nor a plan
nor 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 affect such transfer.
Section 5.9. 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 5.4 and
Section 5.8 hereof.
ARTICLE VI
COVENANTS
Section 6.1. Distributions. The Trustee will duly
and punctually pay distributions with respect to the Certificates
from the Trust Estate in accordance with the terms of the
Certificates and this Agreement based on the related Servicer's
report. Such distributions shall be made (i) by check mailed on each
Payment Date or (ii) if requested by any Owner, 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; provided, however, that an Owner
of a Class A Certificate shall only be entitled to payment by wire
transfer if such Owner owns Class A Certificates with an Original
Certificate Principal Balance of at least $5,000,000.<PAGE>
<PAGE>
Section 6.2. 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 pursuant to Section 7.5 hereof
or from Insured Payments shall be made by the Trustee on behalf of
the Trust, and no amounts so withdrawn from the Certificate Account
for payments of the Certificates and no Insured Payment shall be paid
over to the Trustee except as provided in this Section.
(b) The Trustee on behalf of the Trust shall 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.
(c) Any money held by the Trustee in trust for the
payment of any amount due with respect to any Class A Certificate and
remaining unclaimed by the Owner of such Class A Certificate for the
period then specified in the escheat laws of the State of New York
after such amount has become due and payable shall be discharged from
such trust and be paid first, to the Certificate Insurer on account
of any Reimbursement Amounts, and second to the Owners of the Class R
Certificates; and the Owner of such Class A Certificate shall
thereafter, as an unsecured general creditor, look only to the
Certificate Insurer or the Owners of the Class R Certificates for
payment thereof (but only to the extent of the amounts so paid to the
Certificate Insurer or the Owners of the Class R Certificates), and
all liability of the Trustee with respect to such trust money shall
thereupon cease; provided, however, that the Trustee, before being
required to make any such payment, shall at the expense of the Trust
cause to be published once, in the eastern edition of The Wall Street
Journal, notice that such money remains unclaimed and that, after a
date specified therein, which shall be not fewer than 30 days from
the date of such publication, any unclaimed balance of such money
then remaining will be paid to the Certificate Insurer (to the extent
of any Reimbursement Amount then owing to it) or the Owners of the
Class R Certificates. The Trustee shall, at the direction of the
Sponsor, also adopt and employ, at the expense of the Owners of the
Class R Certificates, 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 Register at the last
address of record for each such Owner).<PAGE>
<PAGE>
Section 6.3. Protection of Trust Estate. (a) The
Trustee will hold the Trust Estate in trust for the benefit of the
Owners and the Certificate Insurer, and with the consent of the
Certificate Insurer, at the request and expense of the Sponsor, 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 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 Mortgage Loans; or
(iv) preserve and defend title to the Trust Estate and
the rights of the Trustee, and the ownership interests of the Owners
represented thereby, in such Trust Estate against the claims of all
Persons and parties.
The Trustee shall send copies of any request received
from the Certificate Insurer or the Sponsor to take any action
pursuant to this Section 6.3 to the other party.
(b) The Trustee shall have the power to enforce, and
shall enforce the obligations of the other parties to this Agreement
and of the Certificate Insurer, by action, suit or proceeding at law
or equity, and shall also have the power to enjoin, by action or suit
in equity, any acts or occurrences which may be unlawful or in
violation of the rights of the Owners; 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 to take such action by a majority of the Percentage
Interests represented by the affected Class or Classes of Class A
Certificates then Outstanding or, if there are no longer any affected
Class A Certificates then outstanding, by such majority of the
Percentage Interests represented by the Class R Certificates.
(c) The Trustee shall execute any instrument reasonably
required pursuant to this Section so long as such instrument does not
conflict with this Agreement or with the Trustee's fiduciary duties.<PAGE>
<PAGE>
Section 6.4. Performance of Obligations. The
Trustee will not take any action that would release the Sponsor, the
Servicer, the Originator or the Certificate Insurer from any of their
respective covenants or obligations under any instrument or document
relating to the Trust Estate or 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.
Section 6.5. Negative Covenants. The Trustee will
not, to the extent within the control of the Trustee, take any of the
following actions:
(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 Estate in whole or
in part, except pursuant to Article IX hereof; or
(v) (A) impair the validity or effectiveness of this
Agreement, or release any Person from any covenants or obligations
with respect to the Trust or to the Certificates under this
Agreement, except as may be expressly permitted hereby or (B) create
or extend any lien, charge, adverse claim, security interest,
mortgage or other encumbrance to or upon the Trust Estate or any part
thereof or any interest therein or the proceeds thereof except as may
be expressly permitted herein.
Section 6.6. No Other Powers. The Trustee will not,
to the extent within the control of the Trustee, permit the Trust to
engage in any business activity or transaction other than those
activities permitted by Section 2.3 hereof.<PAGE>
<PAGE>
Section 6.7. 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, or for any other remedy
hereunder, unless:
(1) such Owner has previously given written notice to the
Sponsor 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 affected Class or Classes of
Certificates then Outstanding or, if there are no affected Classes of
Class A Certificates then Outstanding, by such percentage of the
Percentage Interests represented by the Class R Certificates, shall
have made written request to the Trustee to institute such proceeding
in respect of such Event of Default;
(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; and
(6) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the
Certificate Insurer or 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.<PAGE>
<PAGE>
In the event the Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more Classes of
Owners, each representing less than a majority of the applicable
Class of Certificates, the Trustee shall act at the direction of the
Certificate Insurer.
Section 6.8. 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 6.9. Rights and Remedies Cumulative. Except
as otherwise provided herein, no right or remedy herein conferred
upon or reserved to the Trustee, the Certificate Insurer or to the
Owners is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or
otherwise. Except as otherwise provided herein, the assertion or
employment of any right or remedy hereunder, or otherwise, shall not
prevent the concurrent assertion or employment of any other
appropriate right or remedy.
Section 6.10. Delay or Omission Not Waiver. No delay
of the Trustee, the Certificate Insurer or any Owner of any
Certificate to exercise any right or remedy under this Agreement to
any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence
therein. 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 Majority Owners, with the consent of the Certificate
Insurer (which may not be unreasonably withheld) 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 6.3, Section 8.20 and Section
11.20 hereof, provided that:<PAGE>
<PAGE>
(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, 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.
ARTICLE VII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 7.1. Collection of Money. Except as
otherwise expressly provided herein, the Trustee may demand payment
or delivery of all money and other property payable to or receivable
by the Trustee pursuant to this Agreement, including (a) all payments
due on the Mortgage Loans in accordance with the respective terms and
conditions of such Mortgage Loans and required to be paid over to the
Trustee by the Servicer or by any Sub-Servicer and (b) Insured
Payments in accordance with the terms of the Certificate Insurance
Policy. The Trustee shall hold all such money and property received
by it, other than pursuant to or as contemplated by Section 6.2(b)
hereof, as part of the Trust Estate and shall apply it as provided in
this Agreement.
Section 7.2. Establishment of Certificate Account.
The Sponsor shall cause the Certificate Account to be established,
and the Trustee shall maintain the Certificate Account, at the
Corporate Trust Office of the Trustee, as a trust account in the name
of the Trust to be held by the Trustee as a segregated Trust account
so long as the Trustee qualifies as a Designated Depository
Institution and if the Trustee does not qualify, then by any
Designated Depository Institution for the benefit of the Owners of
the Certificates and the Certificate Insurer, as their interests may
appear.
Section 7.3. The Certificate Insurance Policy.
(a) By 12:00 noon New York City time on each
Determination Date the Trustee shall determine with respect to the
immediately following Payment Date the amount (after taking into
account investment earnings) to be on deposit in the Certificate<PAGE>
<PAGE>
Account on such Payment Date with respect to all classes of Class A
Certificates excluding any amounts payable under Section 7.5(b)(iii)
and excluding an amount equal to the sum of Premium Amount and the
Monthly Trustee Fee Amount for the related Payment Date. The amount
described in the preceding sentence with respect to each Payment
Date, after taking into account the portion of the Principal
Distribution Amount to be actually distributed on such Payment Date
without regard to any Insured Payment to be made with respect to such
Payment Date, is the "Available Funds."
(b) If the Insured Distribution Amount for any Payment
Date exceeds the Available Funds for such Payment Date (such event
being an "Available Funds Shortfall"), the Trustee shall complete a
Notice in the form of Exhibit A attached to the Certificate Insurance
Policy and submit such notice to the Certificate Insurer no later
than 5:00 p.m. New York City time on the Determination Date as a
claim for an Insured Payment in an amount equal to such Available
Funds Shortfall. The Notice shall specify the amount of the Insured
Payment and shall constitute a claim for an Insured Payment pursuant
to the Certificate Insurance Policy.
(c) The Trustee shall report to the Sponsor, the
Certificate Insurer and the Servicer with respect to the amounts then
held in each Account held by the Trustee and the identity of the
investments included therein, as the Sponsor, the Certificate Insurer
or the Servicer may from time to time request. Without limiting the
generality of the foregoing, the Trustee shall, at the request of the
Sponsor, the Certificate Insurer or the Servicer, transmit promptly
to the Certificate Insurer, the Sponsor and the Servicer copies of
all accountings of receipts in respect of the Mortgage Loans
furnished to it by the Servicer.
(d) The Trustee shall (i) receive as attorney-in-fact of
the Owners of the Class A Certificates any Insured Payment from the
Certificate Insurer and (ii) disburse the same to such Owners as set
forth in Section 7.5(b)(iv). Insured Payments disbursed by the
Trustee from proceeds of the Certificate Insurance Policies shall not
be considered payment by the Trust with respect to the Class A
Certificates, and the Certificate Insurer shall become the owner of
such unpaid amounts due from the Trust in respect of Insured Payments
as the deemed assignee of such Owners, as hereinafter provided. The
Trust and the Trustee hereby agree on behalf of each Owner of Class A
Certificates for the benefit of the Certificate Insurer that they
recognize that to the extent the Certificate Insurer pays Insured
Payments, either directly or indirectly (as by paying through the
Trustee), to the Owners of the Class A Certificates, the Certificate
Insurer will be entitled to receive the amount of any Class A-1<PAGE>
<PAGE>
Interest Carry-Forward Amount, Class A-1 Principal Carry-Forward
Amount, Class A-2 Interest Carry-Forward Amount, Class A-2 Principal
Carry-Forward Amount, Class A-3 Interest Carry-Forward Amount, Class
A-3 Principal Carry-Forward Amount, Class A-4 Interest Carry-Forward
Amount and Class A-4 Principal Carry-Forward Amount, and will be
subrogated to the rights of the Owners of the Class A Certificates
with respect to such Insured Payment, shall be deemed to the extent
of the payments so made to be an Owner of such Class A-1
Certificates, Class A-2 Certificates, Class A-3 Certificates and
Class A-4 Certificates and shall receive future distributions of the
Class A-1 Distribution Amount, Class A-2 Distribution Amount, Class
A-3 Distribution Amount and Class A-4 Distribution Amount until all
such Insured Payments by the Certificate Insurer have been fully
reimbursed, as described in the following paragraph. To evidence
such subrogation, the Trustee shall note the Certificate Insurer's
rights as subrogee on the Register upon receipt from the Certificate
Insurer of proof of the payment of any Insured Payment, after making
the distribution on any such future Payment Date to Owners of the
Class A Certificates other than to the Certificate Insurer.
It is understood and agreed that the intention of the
parties is that the Certificate Insurer shall not be entitled to
reimbursement on any Payment Date for amounts previously paid by it
unless on such Payment Date the Owners of the Class A Certificates
shall also have received the full amount of the Class A-1
Distribution Amount, the Class A-2 Distribution Amount, the Class A-3
Distribution Amount and the Class A-4 Distribution Amount (exclusive
of any Class A-1 Interest Carry-Forward Amount, Class A-1 Principal
Carry Forward Amount, Class A-2 Interest Carry-Forward Amount, Class
A-2 Principal Carry-Forward Amount, Class A-3 Interest Carry-Forward
Amount, Class A-3 Principal Carry-Forward Amount, Class A-4 Interest
Carry-Forward Amount and Class A-4 Principal Carry-Forward Amount,
representing amounts previously paid to the Owners of the Class A
Certificates as Insured Payments) for such Payment Date.
The Certificate Insurer shall be entitled to receive the
related Reimbursement Amount pursuant to Sections 7.5(b)(iii) hereof
with respect to each Insured Payment made by the Certificate Insurer.
The Trustee hereby agrees on behalf of each Owner of Class A
Certificates and the Trust for the benefit of the Certificate Insurer
that it recognizes that to the extent the Certificate Insurer makes
Insured Payments, either directly or indirectly (as by paying through
the Trustee), to the Owners of such Class A Certificates, the
Certificate Insurer will be entitled to receive the related
Reimbursement Amount pursuant to Sections 7.5(b)(iii).<PAGE>
<PAGE>
(e) Each Owner of a Class A Certificate which pays any
Preference Amounts theretofore received by such Owner on account of
such Class A Certificate will be entitled to receive reimbursement
for such amounts from the Certificate Insurer in accordance with the
terms of the Certificate Insurance Policy, but only after (i)
delivering a copy to the Certificate Insurer of a final,
nonappealable order (a "Preference Order") of a court having
competent jurisdiction under the United States Bankruptcy Code
demanding payment of such amount to the bankruptcy court and (ii)
irrevocably assigning such Owner's claim with respect to such
Preference Order to the Certificate Insurer in such form as is
required by the Certificate Insurer. In no event shall the
Certificate Insurer pay more than one Insured Payment in respect of
any Preference Amount. Consequently, the Trustee shall not be
entitled to reimbursement with respect to any Preference Order
relating to the Owner's receipt of funds representing Insured
Payments made by the Certificate Insurer in respect of such
Distribution Date.
The Trustee, for itself and on behalf of the Owners,
agrees that the Certificate Insurer may at any time during the
continuation of any proceeding relating to a Preference Order direct
all matters relating to such Preference Order, including, without
limitation, the direction of any appeal of any order relating to such
Preference Order and the posting of any surety, supersedeas or
performance bond pending any such appeal. In addition and without
limitation of the foregoing, the Certificate Insurer shall be
subrogated, to the extent of Insured Payments, to the rights of the
Sponsor, the Servicer, the Trustee and each Owner in the conduct of
any such preference claim, including without limitation, all rights
of any party to any adversarial proceeding or action with respect to
any court order issued in connection with any such preference claim.
(f) The Trustee shall keep a complete and accurate
record of the amount of interest and principal paid in respect of any
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.
Section 7.4. [Reserved]
Section 7.5. Flow of Funds. (a) The Trustee shall
deposit to the Certificate Account, without duplication, upon
receipt, any Insured Payments, the proceeds of any liquidation of the
assets of the Trust, the Monthly Remittance Amount remitted by the
Servicer or any Sub-Servicer, together with any Substitution Amounts
and any Loan Purchase Price amounts received by the Trustee.<PAGE>
<PAGE>
(b) With respect to the Certificate Account, on each
Payment Date, the Trustee shall, based upon the information set forth
in a report provided by the Servicer and based upon a calculation
made by the Trustee, make the following allocations, disbursements
and transfers in the following order of priority, and each such
allocation, transfer and disbursement shall be treated as having
occurred only after all preceding allocations, transfers and
disbursements have occurred:
(i) first, to the Certificate Insurer, from amounts then on
deposit in the Certificate Account, the Premium Amount for such
Payment Date;
(ii) second, to the Trustee, from amounts then on deposit in
the Certificate Account, the Monthly Trustee Fee Amount and expenses
(to the extent not paid by the Sponsor or the Servicer pursuant to
Section 2.5) for such Payment Date;
(iii) third, on each Payment Date, the Trustee shall pay to the
Certificate Insurer an amount equal to the lesser of (x) the excess
of (i) the amount then on deposit in the Certificate Account over
(ii) the Insured Distribution Amount for such Payment Date and (y)
the Reimbursement Amount as of such Payment Date.
(iv) fourth, on each Payment Date the Trustee shall distribute
in equal priority the amount, if any, remaining after the allocations
described in clause (iii) above, (w) to the Owners of the Class A-1
Certificates, the Class A-1 Distribution Amount for such Payment
Date; (x) to the Owners of the Class A-2 Certificates, the Class A-2
Distribution Amount for such Payment Date; (y) to the Owners of the
Class A-3 Certificates, the Class A-3 Distribution Amount for such
Payment Date; and (z) to the Owners of the Class A-4 Certificates,
the Class A-4 Distribution Amount for such Payment Date;
(v) fifth, following the making by the Trustee of all
allocations, transfers and disbursements described above under
Section 7.3 hereof and the prior clauses of this Section 7.5
(including any related Insured Payment with respect to the Class A
Certificates) then on deposit in the Certificate Account, the Trustee
shall pay to the Servicer, to the extent of any unreimbursed
Delinquency Advances, unreimbursed Servicing Advances and accrued and
unpaid Servicing Fees, in each case as certified to the Trustee by
the Servicer to be owing to it as of such Payment Date, and/or to the
Trustee, any reimbursable amounts then unpaid to the Trustee;
(vi) sixth, on each Payment Date, the Trustee shall apply the
amount, if any, remaining after the allocations described in clause
(v) above, to the Owners of the Class R Certificates.<PAGE>
<PAGE>
provided, however, that if, on any Payment Date, (x) the Certificate
Insurer is then in default under the Certificate Insurance Policy
relating to the Mortgage Loans and (y) a Subordination Deficit
exists, then any distribution of the Formula Distribution Amount on
such Payment Date shall be made pro rata to the Owners of each of the
Class A Certificates. Notwithstanding any of the distributions or
allocations set forth in clause (vi) above, no money will be
allocated or distributed to the Owners of the Class R Certificates on
any Payment Date unless the Subordinated Amount is equal to or
greater than the required Specified Subordinated Amount as determined
after distributions in clauses (i) through (v) for such Payment Date.
(c) Notwithstanding clause (b)(v) above, the aggregate
amounts distributed on all Payment Dates to the Owners of the Class
A-1 Certificates on account of principal shall not exceed the
Original Certificate Principal Balance for the Class A-1
Certificates; the aggregate amounts distributed on all Payment Dates
to the Owners of the Class A-2 Certificates on account of principal
shall not exceed the Original Certificate Principal Balance for the
Class A-2 Certificates; the aggregate amounts distributed on all
Payment Dates to the Owners of the Class A-3 Certificates on account
of principal shall not exceed the Original Certificate Principal
Balance for the Class A-3 Certificates; and the aggregate amounts
distributed on all Payment Dates to the Owners of the Class A-4
Certificates on account of principal shall not exceed the Original
Certificate Principal Balance for the Class A-4 Certificates.
(d) Any amounts properly distributed to the Owners of
the Class R Certificates pursuant to the terms of this Agreement
shall be distributed free of the subordination described herein, and
any such amounts shall in no event be required to be returned to the
Trustee or paid over to the Owners of the Class A Certificates.
(e) Whenever, during the administration of the Trust,
there comes into the possession of the Trustee any money or property
which this Agreement does not otherwise require to be distributed on
account of the Class A Certificates, the Trustee shall distribute
such money or other property in equal priority to the Owners of the
Class A Certificates.
Section 7.6. Investment of Accounts. (a) So long
as no event described in Sections 8.20(a) hereof shall have occurred
and be continuing, and consistent with any requirements of the Code,
all or a portion of the Accounts held by the Trustee shall be
invested and reinvested by the Trustee in the name of the Trustee for
the benefit of the Owners, as directed in writing by the Servicer, in
one or more Eligible Investments bearing interest or sold at a discount.
No investment in any Account shall mature later than the Payment Date.<PAGE>
<PAGE>
(b) If any amounts are needed for disbursement from any
Account held by the Trustee and sufficient uninvested funds are not
available to make such disbursement, the Trustee shall cause to be
sold or otherwise converted to cash a sufficient amount of the
investments in such Account. No investments will be liquidated prior
to maturity unless the proceeds thereof are needed for disbursement.
(c) Subject to Section 10.1 hereof, the Trustee shall
not in any way be held liable by reason of any insufficiency in any
Account held by the Trustee resulting from any loss on any Eligible
Investment included therein (except to the extent that the bank
serving as Trustee is the obligor thereon).
(d) The Trustee shall hold funds in the Accounts held
by the Trustee uninvested upon the occurrence of either of the
following events:
(i) the Servicer or the Certificate
Insurer, as the case may be, shall have failed to give investment
directions to the Trustee within ten days after receipt of a written
request for such directions from the Trustee; or
(ii) the Servicer or the Certificate
Insurer, as the case may be, shall have failed to give investment
directions to the Trustee during the ten-day period described in
clause (i) preceding, by 11:15 a.m. New York time (or such other time
as may be agreed by the Servicer or the Certificate Insurer, as the
case may be, and the Trustee) on any Business Day (any such
investment by the Trustee pursuant to this clause (ii) to mature on
the next Business Day after the date of such investment).
(e) For purposes of investment, the Trustee may but
shall not be required to aggregate all amounts on deposit in the
Accounts. All income or other gain from investments in the Accounts
shall be deposited in the related Account immediately on receipt.
Section 7.7. Eligible Investments. The following
are Eligible Investments:
(a) Direct general obligations of the United States or
the obligations of any agency or instrumentality of the United States
fully and unconditionally guaranteed, the timely payment or the
guarantee of which constitutes a full faith and credit obligation of
the United States.
(b) Federal Housing Administration debentures, but
excluding any such securities whose terms do not provide for payment
of a fixed dollar amount upon maturity or call for redemption.<PAGE>
<PAGE>
(c) FHLMC senior debt obligations, but excluding any
such securities whose terms do not provide for payment of a fixed
dollar amount upon maturity or call for redemption.
(d) FNMA senior debt obligations, but excluding any such
securities whose terms do not provide for payment of a fixed dollar
amount upon maturity or call for redemption.
(e) Federal funds, certificates of deposit, time and
demand deposits, and bankers' acceptances (having original maturities
of not more than 365 days) of any domestic bank, the short-term debt
obligations of which have been rated A-1 or better by S&P and P-1 by
Moody's.
(f) Deposits of any bank or savings and loan association
which has combined capital, surplus and undivided profits of at least
$50,000,000 which deposits are not in excess of the applicable limits
insured by the Bank Insurance Fund or the Savings Association
Insurance Fund of the FDIC, provided that the long-term deposits of
such bank or savings and loan association are rated at least "BBB" by
S&P and "Baa3" by Moody's.
(g) Commercial paper (having original maturities of not
more than 270 days) rated A-1 or better by S&P and P-1 or better by
Moody's.
(h) Investments in money market or common trust funds
rated AAAm or AAAm-G by S&P and Aaa by Moody's.
(i) Such other investments as have been approved in
writing by S&P, Moody's and the Certificate Insurer.
provided that no instrument described above is permitted to evidence
either the right to receive (a) only interest with respect to
obligations underlying such instrument or (b) both principal and
interest payments derived from obligations underlying such instrument
and the interest and principal payments with respect to such
instrument provided a yield to maturity at par greater than 120% of
the yield to maturity at par of the underlying obligations; and
provided, further, that no instrument described above may be
purchased at a price greater than par if such instrument may be
prepaid or called at a price less than its purchase price prior to
stated maturity. Any Eligible Investment may be purchased by or
through the Trustee or any of its affiliates.
Section 7.8. Reports by Trustee. (a) On each
Payment Date the Trustee shall provide to each Owner, to the
Servicer, to the Certificate Insurer, to the Underwriter, to the<PAGE>
<PAGE>
Sponsor, to S&P and to Moody's a written report in substantially the
form set forth as Exhibit H hereto, as such form may be revised by
the Trustee, the Servicer, Moody's and S&P from time to time, but in
every case setting forth the information requested on Exhibit H
hereto and the following information, in each case as of such Payment
Date:
(i) the amount of the distribution with respect
to each Class of the Class A Certificates and the Class R
Certificates;
(ii) the amount of such distributions allocable to
principal on the related Certificates, separately identifying the
aggregate amount of any Prepayments or other unscheduled recoveries
of principal included therein and separately identifying any
Subordination Increase Amount;
(iii) the amount of such distributions allocable to
interest on the related Certificates;
(iv) the Monthly Remittance Amount, separately
identifying the Mortgage interest and principal collections;
(v) the Certificate Principal Balance for each
Class of Class A Certificates as of such Payment Date, together with
the principal amount of such Class of Class A Certificates (based on
a Certificate in an original principal amount of $1,000) then
outstanding, in each case after giving effect to any payment of
principal on such Payment Date;
(vi) the amounts described in Sections 7.5(b)(iii)
and (v);
(vii) the amount of any Insured Payment included in
the amounts distributed on the Class A Certificates on such Payment
Date, and the aggregate unreimbursed Insured Payments outstanding
since the Closing Date;
(viii) information furnished by the Sponsor pursuant
to 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 amount of any Subordination Reduction
Amount;<PAGE>
<PAGE>
(xi) the amounts, if any, of any Realized Losses
for the related Remittance Period and the Aggregate Loan Balance of
Mortgage loans which experienced such Realized Losses, the Cumulative
Loss Amount and the Rolling Three Month Delinquency Rate, in each
case as of such Payment Date;
(xii) a number with respect to each Class of Class
A Certificates (the "Pool Factor" for such Class) computed by
dividing the Certificate Loan Balance for such Class (after giving
effect to any distribution of principal to be made on such Payment
Date) by the Original Certificate Principal Balance for such Class on
the Startup Day;
(xiii) the aggregate of any Insurance Proceeds
received by the Servicer during the related Remittance Period;
(xiv) the Specified Subordinated Amount, and the
Subordinated Amount;
(xv) the weighted average Coupon Rate of the
Mortgage Loans, and the weighted average maturity of the Mortgage
Loans; and
(xvi) the Aggregate Loan Balance.
Items (i) through (iii) above shall, with respect to each
Class of Class A Certificates, be presented on the basis of a
Certificate having a $1,000 denomination. In addition, by January 31
of each calendar year following any year during which the
Certificates are outstanding, the Trustee shall furnish a report to
each Owner of record at any time during each calendar year as to the
aggregate of amounts reported pursuant to (i), (ii) and (iii) with
respect to the Certificates for such calendar year.
(b) In addition, on each Payment Date the Trustee will
distribute to each Owner, to the Certificate Insurer, to the
Underwriter, to the Servicer, to the Sponsor, to S&P and to Moody's,
together with the information described in Subsection (a) preceding,
the following information as of the close of business on the last
Business Day of the prior calendar month, which is hereby required to
be prepared by the Servicer and furnished to the Trustee for such
purpose on or prior to the related Remittance Date:
(i) the total number of Mortgage Loans and the
Aggregate Loan Balance thereof, together with the number, aggregate
principal balances of the Mortgage Loans and the percentage of all
Mortgage Loans (a) 30-59 days Delinquent, (b) 60-89 days Delinquent
and (c) 90 or more days Delinquent;<PAGE>
<PAGE>
(ii) the number, Aggregate Loan Balance of all
Mortgage Loans and percentage of the Aggregate Loan Balance of such
Mortgage Loans in foreclosure proceedings (and whether any such
Mortgage Loans are also included in any of the statistics described
in the foregoing clause (i));
(iii) the number, Aggregate Loan Balance of all
Mortgage Loans and percentage of the Aggregate Loan Balance of such
Mortgage Loans relating to Mortgagors in bankruptcy proceedings (and
whether any such Mortgage Loans are also included in any of the
statistics described in the foregoing clause (i));
(iv) the number, Aggregate Loan Balance of all
Mortgage Loans and percentage of the Aggregate Loan Balance of such
Mortgage Loans relating to REO Properties (and whether any such
Mortgage Loans are also included in any of the statistics described
in the foregoing clause (i));
(v) the book value of any REO Property;
(vi) the number and amount of all Prepayments;
(vii) the number and amount of all Mortgages
subject to losses;
(viii) the number and amount of Mortgages
outstanding; and
(ix) a Form of Liquidation Report, substantially
in the form of Exhibit J hereto, for each Mortgage Loan which has
experienced a Realized Loss during the Remittance Period.
Section 7.9. Additional Reports by Trustee. (a)
The Trustee shall report to the Sponsor, the Servicer and the
Certificate Insurer with respect to the amount then held in each
Account (including investment earnings accrued or scheduled to
accrue) held by the Trustee and the identity of the investments
included therein, as the Sponsor, the Servicer or the Certificate
Insurer may from time to time request. Without limiting the
generality of the foregoing, the Trustee shall, at the request of the
Sponsor, the Servicer or the Certificate Insurer, transmit promptly
to the Sponsor, the Servicer and the Certificate Insurer copies of
all accountings of receipts in respect of the Mortgage Loans
furnished to it by the Servicer. The content of reports by the
Trustee pursuant to this subsection shall consist of its trust
accounting system statements.<PAGE>
<PAGE>
(b) The Trustee is hereby authorized to execute
purchases and sales directed by the Servicer through the facilities
of its own trading or capital markets operations. The Trustee shall
send statements to the servicer monthly reflecting activity for each
account created hereunder for the preceding month. Although the
Servicer recognizes that it may obtain a broker confirmation or
written statement containing comparable information at no additional
cost, the Servicer hereby agrees that confirmations of investments
are not required to be issued by the Trustee for each month in which
a monthly statement is rendered. No statement need be rendered
pursuant to the provision hereof if no activity occurred in the
account for such month.
(c) From time to time, at the request of the Certificate
Insurer, the Trustee shall report to the Certificate Insurer and each
of Moody's and S&P with respect to its actual knowledge, without
independent investigation, of any breach of any of the
Representations and Warranties. On the date that is eighteen months
after the Startup Day, the Trustee shall provide the Certificate
Insurer with a written report of all of such inaccuracies to such
date of which it has actual knowledge, without independent
investigation, and of the action taken by the Originator under the
related Master Transfer Agreement or by the Sponsor under Section
3.4(a) hereof with respect thereto.
<PAGE>
ARTICLE VIII
SERVICING AND ADMINISTRATION
OF MORTGAGE LOANS
Section 8.1. Servicer and Sub-Servicers. (a)
Acting directly or through one or more Sub-Servicers as provided in
Section 8.3, the Servicer, as master servicer, shall service and
administer the Mortgage Loans for the benefit, and in the best
interests of, the Owners and, to the extent not conflicting with the
best interests of the Owners, the interest of the Certificate Insurer
in accordance with this Agreement and applicable law and with
reasonable care, and using that degree of skill and attention that
the Servicer exercises with respect to comparable mortgage loans that
it services for itself or others, 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. To the extent consistent with the
foregoing, the Servicer shall seek to maximize the timely and
complete recovery of principal of and interest on the Mortgage Loans.
Notwithstanding any provision to the contrary elsewhere in this
Agreement, the Servicer shall not have any duties, responsibilities,
or fiduciary relationship with the Trustee except those expressly set
forth herein.
(b) The duties of the Servicer shall include collecting
and posting of all payments, responding to inquiries of Mortgagors or
by federal, state or local government authorities with respect to the
Mortgage Loans, investigating delinquencies, reporting tax
information to Mortgagors in accordance with its customary practices
and accounting for collections and furnishing monthly and annual
statements to the Trustee with respect to distributions, paying
Compensating Interest and making Delinquency Advances and Servicing
Advances pursuant hereto. The Servicer and any Sub-Servicer shall
follow its customary standards, policies and procedures in performing
its duties as Servicer or Sub-Servicer, as applicable. The Servicer
shall cooperate with the Trustee and furnish to the Trustee with
reasonable promptness information in its possession as may be
necessary or appropriate to enable the Trustee to perform its duties
hereunder. The Trustee shall furnish the Servicer and any
Sub-Servicer with any powers of attorney and other documents
reasonably necessary or appropriate to enable the Servicer and any
Sub-Servicer to carry out its servicing and administrative duties
hereunder.<PAGE>
<PAGE>
(c) Without limiting the generality of the foregoing,
the Servicer (i) shall continue, and is hereby authorized and
empowered by the Trustee, subject to Section 8.1(a), to execute and
deliver, on behalf of itself, the Owners and the Trustee or any of
them, any and all instruments of satisfaction or cancellation, or of
partial release, subject to the provisions of Section 8.1(i) below,
or full release or discharge and all other comparable instruments,
with respect to the Mortgage Loans and with respect to the related
Properties; (ii) may consent to any modification of the terms of any
Note not expressly prohibited hereby if the effect of any such
modification (x) will not be to affect materially and adversely the
security afforded by the related Property, the timing of receipt or
amounts of any payments required hereby or the interests of the
Certificate Insurer and (y) will not cause the Trust to fail to
qualify as a REMIC.
(d) The parties intend that the Trust shall constitute,
and that the affairs of the Trust shall be conducted so as to qualify
the Trust as a REMIC. In furtherance of such intention, the Servicer
covenants and agrees that it shall act as agent (and the Servicer is
hereby appointed to act as agent) on behalf of the Trust and that in
such capacity it shall: (i) use its best efforts to conduct the
affairs of the Trust at all times that any Class of Certificates are
outstanding so as to maintain the status of the Trust as a REMIC
under the REMIC Provisions; (ii) not knowingly or intentionally take
any action or omit to take any action that would cause the
termination of the REMIC status of the Trust or that would subject
the Trust to tax and (iii) exercise reasonable care not to allow the
Trust to receive income from the performance of services or from
assets not permitted under the REMIC Provisions to be held by a REMIC
provided, however, that the Servicer shall not consent to any such
modifications without the prior consent of the Certificate Insurer if
the Aggregate Loan Balance of all Mortgage Loans which have been
subject to modifications pursuant to this Section 8.1(d) exceeds 5%
of the Original Aggregate Loan Balance.
(e) The Servicer may, and is hereby authorized to,
perform any or all of its servicing responsibilities with respect to
all or certain of the Mortgage Loans through a Sub-Servicer as it may
from time to time designate, but no such designation of a
Sub-Servicer shall serve to release the Servicer from any of its
obligations under this Agreement. Such Sub-Servicer shall have all
the rights and powers of the Servicer with respect to such Mortgage
Loans under this Agreement.<PAGE>
<PAGE>
(f) Without limiting the generality of the foregoing,
but subject to Sections 8.13 and 8.14, the Servicer in its own name
or in the name of a Sub-Servicer may be authorized and empowered
pursuant to a power of attorney executed and delivered by the Trustee
to execute and deliver, and may be authorized and empowered by the
Trustee, to execute and deliver, on behalf of itself, the Owners and
the Trustee or any of them, (i) any and all instruments of
satisfaction or cancellation or of partial or full release or
discharge and all other comparable instruments with respect to the
Mortgage Loans and with respect to the Properties, (ii) and to
institute foreclosure proceedings or obtain a deed in lieu of
foreclosure so as to effect ownership of any Property on behalf of
the Trust, and (iii) to hold title to any Property upon such
foreclosure or deed in lieu of foreclosure on behalf of the Trust.
Section 8.14(a) shall constitute a power of attorney from the Trustee
to the Servicer to execute an instrument of satisfaction (or
assignment of mortgage without recourse) with respect to any Mortgage
Loan paid in full (or with respect to which payment in full has been
escrowed). Subject to Sections 8.13 and 8.14, the Trustee shall
furnish the Servicer with any powers of attorney and other documents
as the Servicer or such Sub-Servicer shall reasonably request to
enable the Servicer and such Sub-Servicer to carry out their
respective servicing and administrative duties hereunder.
(g) The Servicer shall give prompt notice to the
Trustee and the Certificate Insurer of any action, of which the
Servicer has actual knowledge, to (i) assert a claim against the
Trust or (ii) assert jurisdiction over the Trust.
(h) Unreimbursed Servicing Advances incurred by the
Servicer or any Sub-Servicer in connection with the servicing of the
Mortgage Loans (including any penalties in connection with the
payment of any taxes and assessments or other charges) on any
Property shall be recoverable by the Servicer or such Sub-Servicer to
the extent described in Section 8.9(c) and in Section 7.5(b)(v)
hereof.
(i) The Servicer shall have the right to approve
requests of Mortgagors for consent to partial releases or division of
Mortgaged Properties. No such request shall be approved by the
Servicer unless: (A) (w) the provisions of the related Note and
Mortgage have been complied with, (x) the loan-to-value ratio (which
may, for this purpose be determined at the time of any such action in
a manner reasonably acceptable to the Certificate Insurer) after any
release does not exceed the loan-to-value ratio set forth for such
Mortgage Loan in the related Schedule of Mortgage Loans, and (y) the
lien priority of the related Mortgage is not affected; or (B) the
Certificate Insurer shall have approved the granting of such request.<PAGE>
<PAGE>
(j) Each of the Sponsor and the Servicer may make loans
to and generally engage in any kind of business with the Mortgagors
and/or any other obligors under the Mortgage Loans as though either
the Sponsor or the Servicer were not a party to this Agreement;
provided, that the foregoing shall not have a material adverse effect
on the transactions contemplated by this Agreement. Each of the
Sponsor and the Servicer may have other existing loans and in the
future may make additional loans to any of the Mortgagors and/or to
other obligors under the Mortgage Loans, which other and/or
additional loans may not be sold, or a loan participation therein
granted, to the Trustee. The Servicer shall collect payments under
the Mortgage Loans in the same preference and priority as the
collection and/or enforcement of any other and/or additional loans by
the Servicer.
(k) Each of the Sponsor, the Servicer and the Trustee
shall be entitled to rely, and shall be fully protected in relying,
upon any promissory note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex
or teletype message, statement, order or other document reasonably
believed by it to be genuine and correct and to have been signed,
sent or made by the proper person or persons and upon advice and
statements of legal counsel (including, without limitation, counsel
to the Mortgagor(s)), independent accountants and other experts
selected by the Sponsor or the Trustee. The Servicer shall be fully
justified in failing or refusing to take any action under this
Agreement for which it has sought and failed to receive instructions
from the Trustee provided that the Servicer is entitled to receive
instructions from the Trustee hereunder. The Servicer shall in all
cases be fully protected in acting, or in refraining from acting,
under this Agreement and the Mortgage Loans in accordance with an
express written request of the Trustee, and such request and any
action taken or failure to act pursuant thereto shall be binding upon
the Sponsor and Trustee.
(l) The relationship of the Servicer (and of any
successor to the Servicer as servicer under this Agreement) to the
Trustee under this Agreement is intended by the parties to be that of
an independent contractor and not that of a joint venturer, partner
or agent of the Trustee.
Section 8.2. Collection of Certain Mortgage Loan
Payments. (a) The Servicer may in its discretion (i) waive any
assumption fees, late payment charges, charges for checks returned
for insufficient funds, prepayment fees, if any, or other fees which
may be collected in the ordinary course of servicing the Mortgage
Loans, (ii) if a Mortgagor is in default or about to be in default
because of a Mortgagor's financial condition, arrange with the<PAGE>
<PAGE>
Mortgagor a schedule for the payment of delinquent payments due on
the related Mortgage Loan, (iii) modify payments of monthly principal
and interest on any Mortgage Loan becoming subject to the terms of
the Soldiers' and Sailors' Civil Relief Act of 1940, as amended, in
accordance with the Servicer's general policies for comparable
mortgage loans subject to such Act, (iv) extend the due date for
payments due on a Note for a period (with respect to each payment as
to which the due date is extended) not greater than 125 days after
the initially scheduled due date for such payment, (v) amend any Note
to extend the maturity thereof, provided that no maturity shall be
extended by more than three (3) months and that no more than 5.0% of
the Original Aggregate Loan Balance shall be modified to have a
maturity date which has been extended beyond the maturity date
thereof as of the Cut-Off Date without the prior consent of the
Certificate Insurer. With respect to clause (v) above, the
Certificate Insurer shall respond within three (3) Business Days of
the Servicer's request for such consent, and if the Certificate
Insurer fails to so respond, the Servicer shall assume that the
consent of the Certificate Insurer has been given.
(b) The Servicer shall hold in escrow in the Principal
and Interest Account on behalf of the related Mortgagor all Prepaid
Installments received by it, and shall apply such Prepaid
Installments as directed by such Mortgagor and as set forth in the
related Note.
Section 8.3. Sub-Servicing Agreements Between
Servicer and Sub-Servicers. The Servicer may enter into
Sub-Servicing Agreements for any servicing and administration of
Mortgage Loans with any institution which is in compliance with the
laws of each state necessary to enable it to perform its obligations
under such Sub-Servicing Agreement and which is acceptable to the
Certificate Insurer and is experienced in serving loans of a type
similar to the Mortgage Loans and has equity of at least $2,500,000,
as determined in accordance with generally accepted accounting
principles. The Servicer shall give notice to the Certificate
Insurer, the Trustee, Moody's and S&P of the appointment of any
Sub-Servicer and shall furnish to the Certificate Insurer, the
Trustee, Moody's and S&P a copy of the Sub-Servicing Agreement. For
purposes of this Agreement, the Servicer shall be deemed to have
received payments on Mortgage Loans when any Sub-Servicer has
received such payments. Any such Sub-Servicing Agreement shall be
consistent with and not violate the provisions of this Agreement.
Any such Sub-Servicing Agreement may be terminated by the Trustee
with the written consent of the Certificate Insurer (which consent
shall not be unreasonably withheld), provided that the Servicer has
been terminated hereunder. As of the Startup Day the only
Sub-Servicer is Transworld Mortgage Corporation.<PAGE>
<PAGE>
Section 8.4. Successor Sub-Servicers. Each
Sub-Servicing Agreement shall expressly provide that the Servicer may
terminate any Sub-Servicing Agreement in accordance with the terms
and conditions of such Sub-Servicing Agreement and either directly
service the related Mortgage Loans itself or enter into a
Sub-Servicing Agreement with a successor Sub-Servicer that qualifies
under Section 8.3. The Trustee shall have no duty or obligation to
monitor or supervise the performance of any Sub-Servicer.
Section 8.5. Liability of Servicer. The Servicer
shall not be relieved of its obligations under this Agreement
notwithstanding any Sub-Servicing Agreement or any of the provisions
of this Agreement relating to agreements or arrangements between the
Servicer and a Sub-Servicer or otherwise, and the Servicer shall be
obligated to the same extent and under the same terms and conditions
as if it alone were servicing and administering the Mortgage Loans.
The Servicer shall be entitled to enter into any agreement with a
Sub-Servicer for indemnification of the Servicer by such Sub-Servicer
and nothing contained in such Sub-Servicing Agreement shall be deemed
to limit or modify this Agreement. The Trust shall have no liability
to the Servicer except for payment of the Servicing Fee and
reimbursement of Delinquency Advances and Servicing Advances as
expressly contemplated in this Agreement. The Trust shall have no
obligation to indemnify the Servicer for costs or expenses, except
with respect to the preceding sentence. The Trust shall not
indemnify the Servicer for any losses due to the Servicer's
negligence.
Section 8.6. No Contractual Relationship Between
Sub-Servicer and Trustee or the Owners. Any Sub-Servicing Agreement
and any other transactions or services relating to the Mortgage Loans
involving a Sub-Servicer shall be deemed to be between the
Sub-Servicer and the Servicer alone and the Certificate Insurer, 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 8.7.
Section 8.7. Assumption or Termination of
Sub-Servicing Agreement by Trustee. In connection with the
assumption of the responsibilities, duties and liabilities and of the
authority, power and rights of the Servicer hereunder by the Trustee
pursuant to Section 8.20, the Servicer's rights and obligations under
any Sub-Servicing Agreement then in force between the Servicer and a
Sub-Servicer may be assumed or terminated by the Trustee at the
Trustee's option, in each case after consultation with the
Certificate Insurer.<PAGE>
<PAGE>
The Servicer shall, upon request of the Trustee, but at
the expense of the Servicer, deliver to the assuming party documents
and records relating to each Sub-Servicing Agreement and an
accounting of amounts collected and held by it and otherwise use its
best reasonable efforts to effect the orderly and efficient transfer
of the Sub-Servicing Agreements to the assuming party.
Section 8.8. Principal and Interest Account.
(a) The Servicer and/or each Sub-Servicer shall
establish in the name of the Trust for the benefit of the Owners of
the Certificates and the Certificate Insurer and maintain at one or
more Designated Depository Institutions the Principal and Interest
Account.
Subject to Subsection (c) below, the Servicer and any
Sub-Servicer shall deposit all receipts related to the Mortgage Loans
to the Principal and Interest Account on a daily basis (but no later
than the second Business Day after receipt).
On the Startup Day, the Sponsor and/or the Servicer shall
deposit to the Principal and Interest Account all payments of
principal and interest due and received, and all Prepayments received
after the Cut-Off Date.
(b) All funds in the Principal and Interest Account may
only be held (i) uninvested, up to the limits insured by the FDIC or
(ii) invested in Eligible Investments. The Principal and Interest
Account shall be held in trust in the name of the Trust and for the
benefit of the Owners of the Certificates and the Certificate
Insurer. Any investment earnings on funds held in the Principal and
Interest Account shall be for the account of the Servicer and may
only be withdrawn from the Principal and Interest Account by the
Servicer immediately following the remittance of the Monthly
Remittance Amounts by the Servicer. Any references herein to amounts
on deposit in the Principal and Interest Account shall refer to
amounts net of such investment earnings. The amount of any losses on
investments in the Principal and Interest Account, to the extent not
offset by earnings on other investments held therein, shall be
deposited in the Principal and Interest Account by the Servicer
promptly upon the recognition of such net losses.
(c) The Servicer shall deposit to the Principal and
Interest Account all payments of principal and interest (including
Prepaid Installments) due after the Cut-Off Date, and all payments of
principal collected after the Cut-Off Date, any Prepayments and Net
Liquidation Proceeds, all Loan Purchase Prices and Substitution
Amounts received or paid by the Servicer with respect to the Mortgage<PAGE>
<PAGE>
Loans, other recoveries or amounts related to the Mortgage Loans
received by the Servicer, Compensating Interest and Delinquency
Advances together with any amounts which are reimbursable from the
Principal and Interest Account, amounts on account of net investment
losses and any condemnation proceeds, but net of (i) the Servicing
Fee with respect to each Mortgage Loan and other servicing
compensation to the Servicer as permitted by Section 8.15 hereof, and
(ii) Net Liquidation Proceeds to the extent such Net Liquidation
Proceeds exceed the sum of (A) the Loan Balance of the related
Mortgage Loan plus (B) accrued and unpaid interest on such Mortgage
Loan at the Coupon Rate (net of any Servicing Fee) to the date of
such liquidation. Amounts described in clause (ii) of the preceding
sentence shall be retained by the Servicer as additional servicing
compensation or paid over to the related Mortgagor if required by
law.
(d)(i) The Servicer may make withdrawals from the
Principal and Interest Account only for the following purposes:
(A) to effect the timely remittance to the Trustee of
the Monthly Remittance Amounts due on each Remittance Date;
(B) to reimburse itself pursuant to Section 8.9 hereof
for any unreimbursed Reimbursable Advances;
(C) to withdraw investment earnings on amounts on
deposit in the Principal and Interest Account;
(D) to withdraw amounts that have been deposited to the
Principal and Interest Account in error; and
(E) to clear and terminate the Principal and Interest
Account following the termination of the Trust pursuant to Article
IX.
(ii) On each Remittance Date, the Servicer shall send
to the Trustee a report, in print and/or electronic form, detailing
the payments on the Mortgage Loans during the prior Remittance
Period. Such report shall be in the form and have the specifications
as may be agreed to between the Servicer and the Trustee from time to
time. The Trustee shall have no duty or obligation with respect to
the accuracy of the information contained in the report referred to
in this Section 8.8(d)(ii).
(iii) On each Remittance Date, the Servicer shall remit
to the Trustee by wire transfer, or otherwise make funds available in
immediately available funds all amounts then on deposit in the
Principal and Interest Account which relate to collections on or with<PAGE>
<PAGE>
respect to the Mortgage Loans with respect to the immediately
preceding Remittance Period, including the amount of any Delinquency
Advance, any Compensating Interest, Loan Purchase Prices and
Substitution Amounts; such amount being the "Monthly Remittance
Amount."
(iv) On or before each Remittance Date, the Servicer
will provide to the Trustee a computer tape or electronic
transmission containing servicing information regarding the Mortgage
Loans as of the end of the prior month. The Trustee shall have no
duty or obligation with respect to the accuracy of the information
contained in the computer tape or electronic transmission referred to
in this Section 8.8(d)(iv).
(e) The Servicer shall furnish the Trustee monthly
statements of the Principal and Interest Account, if it is not held
by the Trustee.
(f) Notwithstanding any other provisions of this
Agreement, the Servicer shall be entitled to reimburse itself for any
previously unreimbursed expense otherwise reimbursable pursuant to
the terms of this Agreement, including but not limited to any
Delinquency Advance, any Servicing Advance, and any Liquidation
Expense, that the Servicer determines (as evidenced by an Officer's
Certificate) to be otherwise nonrecoverable by withdrawal from the
Principal and Interest Account of amounts on deposit therein
attributable to any of the Mortgage Loans on any Business Day prior
to the Payment Date succeeding the date of any such determination.
Section 8.9. Delinquency Advances, Compensating
Interest and Servicing Advances. (a) On each Remittance Date the
Servicer shall make a Delinquency Advance with respect to delinquent
interest on each Mortgage Loan which was a Delinquent Mortgage Loan
with respect to the related Remittance Period; provided, however,
that the Servicer will not be required to make any Delinquency
Advance if it determines that such Delinquency Advance would be an
Unrecoverable Delinquency Advance.
The Servicer shall be permitted to reimburse itself for
any Delinquency Advance from any subsequent collections or recoveries
on the Mortgage Loans. If not theretofore recovered by the Servicer,
Delinquency Advances shall be recoverable pursuant to Section
7.5(b)(v) hereof.
(b) On or prior to each Remittance Date, the Servicer
shall deposit in the Principal and Interest Account with respect to
any full or partial Prepayment received on a Mortgage Loan during the
related Remittance Period, out of its own funds without any right of<PAGE>
<PAGE>
reimbursement therefor, an amount equal to the difference between (x)
30 days' interest at the related Coupon Rate less the Servicing Fee
Rate on the Loan Balance of such Mortgage Loan as of the first day of
the related Remittance Period and (y) to the extent not previously
advanced, the interest (less the Servicing Fee) actually paid by the
Mortgagor with respect to the Mortgage Loan during such Remittance
Period (any such amount paid by the Servicer, "Compensating
Interest"). The Servicer shall in no event be required to pay
Compensating Interest with respect to any Remittance Period in an
amount in excess of the aggregate Servicing Fee received by the
Servicer with respect to all Mortgage Loans for the related
Remittance Period.
(c) The Servicer will pay all reasonable and customary
"out-of-pocket" costs and expenses (including reasonable legal fees)
incurred in the performance of its servicing obligations, including,
but not limited to, the cost of (i) Preservation Expenses, (ii) any
enforcement or judicial proceedings, including foreclosures, (iii)
the management and liquidation of REO Property (including without
limitation realtor's commissions), and (iv) advances made for taxes,
insurance and other charges against the Property, each such
expenditure under clauses (i) - (iv) constituting a Servicing
Advance, but the Servicer is only required to pay such costs and
expenses to the extent the Servicer reasonably believes such costs
and expenses will increase Net Liquidation Proceeds on the related
Mortgage Loan. Each such amount so paid will constitute a "Servicing
Advance".
The Servicer may recover Servicing Advances from the
Mortgagors to the extent permitted by the Mortgage Loans and from Net
Liquidation Proceeds, condemnation proceeds or other insurance
proceeds with respect to the related Mortgage Loan.
Section 8.10. Purchase of Mortgage Loans. The
Servicer may, but is not obligated to, purchase for its own account
any Mortgage Loan which becomes Delinquent, in whole or in part, as
to four consecutive monthly installments or any Mortgage Loan as to
which enforcement proceedings have been brought by the Servicer or by
any Sub-Servicer pursuant to Section 8.13. Any such Loan so
purchased shall be purchased by the Servicer on a Remittance Date at
a purchase price equal to the Loan Purchase Price thereof, which
purchase price shall be deposited in the Certificate Account
simultaneously with the purchase of such Mortgage Loan.
Section 8.11. Maintenance of Insurance. (sp The
Servicer shall cause to be maintained with respect to each Mortgage
Loan a hazard insurance policy with a generally acceptable carrier
licensed in the state in which the Property is located that provides<PAGE>
<PAGE>
for fire and extended coverage, and which provides for a recovery by
the Servicer on behalf of the Trust of insurance proceeds relating to
such Mortgage Loan in an amount not less than the least of (i) the
outstanding Loan Balance of the Mortgage Loan, (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 but in
any event in an amount not less than such amount as is necessary to
avoid the application of any coinsurance clause contained in the
related insurance policy. No amounts advanced by the Servicer for
force-placed insurance shall be added to the Loan Balance of a
Mortgage Loan for any purpose under this Agreement.
(b) If the Mortgage Loan at the time of origination
relates to a Property in an area identified in the Federal Register
by the Federal Emergency Management Agency as having special flood
hazards, the Servicer will cause to be maintained with respect
thereto a flood insurance policy in a form meeting the requirements
of the current guidelines of the Federal Insurance Administration
with a generally acceptable carrier in an amount representing
coverage, and which provides for a recovery by the Servicer on behalf
of the Trust of insurance proceeds relating to such Mortgage Loan of
not less than the least of (i) the outstanding Loan Balance of the
Mortgage Loan, (ii) the minimum amount required to compensate for
damage or loss on a replacement cost basis and (iii) the maximum
amount of insurance that is available under the Flood Disaster
Protection Act of 1973. The Servicer shall indemnify the Trust and
the Certificate Insurer out of the Servicer's own funds for any loss
to the Trust and the Certificate Insurer resulting from the
Servicer's failure to maintain the insurance required by this
Section.
(c) In the event that the Servicer shall obtain and
maintain a blanket policy from an insurer rated at least "A:X" or
better in Best's Key Rating Guide insuring against fire, flood and
hazards of extended coverage on all of the Mortgage Loans, then, to
the extent such policy names the Servicer as loss payee and provides
coverage in an amount equal to the aggregate unpaid principal balance
on the Mortgage Loans without co-insurance, and otherwise complies
with the requirements of this Section 8.11, the Servicer shall be
deemed conclusively to have satisfied its obligations with respect to
fire and hazard insurance coverage under this Section 8.11, it being
understood and agreed that such blanket policy may contain a
deductible clause, in which case the Servicer shall, in the event
that there shall not have been maintained on the related Property a
policy complying with the preceding paragraphs of this Section 8.11,
and there shall have been a loss which would have been covered by
such policy, deposit in the Principal and Interest Account from the
Servicer's own funds the difference, if any, between the amount that<PAGE>
<PAGE>
would have been payable under a policy complying with the preceding
paragraphs of this Section 8.11 and the amount paid under such
blanket policy, including the amount in the deductible clause. Upon
the request of the Trustee or the Certificate Insurer, the Servicer
shall cause to be delivered to the Trustee or the Certificate
Insurer, a certified true copy of such policy.
Section 8.12. Due-on-Sale Clauses; Assumption and
Substitution Agreements. When a Property has been or is about to be
conveyed by the Mortgagor, the Servicer shall, to the extent it has
knowledge of such conveyance or prospective conveyance, exercise its
rights to accelerate the maturity of the related Mortgage Loan under
any "due-on-sale" clause contained in the related Mortgage or Note;
provided, however, that the Servicer shall not exercise any such
right if (i) the "due-on-sale" clause, in the reasonable belief of
the Servicer, is not enforceable under applicable law or (ii) the
Servicer reasonably believes that to permit an assumption of the
Mortgage Loan would not materially and adversely affect the interest
of the Owners or of the Certificate Insurer and the Certificate
Insurer provides its prior written consent. In such event, the
Servicer shall enter into an assumption and modification agreement
with the person to whom such Property has been or is about to be
conveyed, pursuant to which such person becomes liable under the Note
and, unless prohibited by such Note or applicable law, the Mortgagor
remains liable thereon. If the foregoing is not permitted under
applicable law, the Servicer is authorized to enter into a
substitution of liability agreement with such person, pursuant to
which the original Mortgagor is released from liability and such
person is substituted as Mortgagor and becomes liable under the Note;
provided, however, that any such substitution of liability agreement
must be delivered by the Servicer pursuant to its usual procedures
for mortgage loans held in its own portfolio and the Servicer shall,
prior to executing and delivering such agreement, obtain the prior
written consent of the Certificate Insurer. The Mortgage Loan, as
assumed, shall conform in all respects to the requirements,
representations and warranties of this Agreement and any related
agreement. The Servicer shall notify the Trustee that any such
assumption or substitution agreement has been completed by forwarding
to the Trustee the original copy of such assumption or substitution
agreement, which copy shall be added by the Trustee to the related
File and which shall, for all purposes, be considered a part of such
File to the same extent as all other documents and instruments
constituting a part thereof. The Servicer shall be responsible for
recording any such assumption or substitution agreements. In
connection with any such assumption or substitution agreement, the
required monthly payment on the related Mortgage Loan shall not be
changed but shall remain as in effect immediately prior to the
assumption or substitution, the stated maturity or outstanding<PAGE>
<PAGE>
principal amount of such Mortgage Loan shall not be changed, the
Coupon Rate shall not be changed nor shall any required monthly
payments of principal or interest be deferred or forgiven. Any fee
collected by the Servicer or the Sub-Servicer for consenting to any
such conveyance or entering into an assumption or substitution
agreement shall be retained by or paid to the Servicer as additional
servicing compensation.
Notwithstanding the foregoing paragraph or any other
provision of this Agreement, the Servicer shall not be deemed to be
in default, breach or any other violation of its obligations
hereunder by reason of any assumption of a Mortgage Loan by operation
of law or any assumption which the Servicer may be restricted by law
from preventing, for any reason whatsoever.
Section 8.13. Realization Upon Defaulted Mortgage
Loans. (a) The Servicer shall foreclose upon or otherwise
comparably effect the ownership on behalf of the Trust of Properties
relating to defaulted Mortgage Loans as to which no satisfactory
arrangements can be made for collection of Delinquent payments and
which the Servicer has not purchased pursuant to Section 8.10, unless
the Servicer reasonably believes as evidenced by an Officer's
Certificate that Net Liquidation Proceeds with respect to such
Mortgage Loan would not be increased as a result of such foreclosure
or other action, in which case such Mortgage Loan will be charged-off
and will become a Liquidated Loan. The Servicer shall have no
obligation to purchase any property at any foreclosure sale. The
Servicer will give notice of any such charge-off to the Certificate
Insurer and each of Moody's and S&P by delivery of a Liquidation
Report in the form attached as Exhibit J hereto. In connection with
such foreclosure or other conversion, the Servicer shall exercise
such of the rights and powers vested in it hereunder, and use the
same degree of care and skill in their exercise or use, as prudent
mortgage lenders would exercise or use under the circumstances in the
conduct of their own affairs, 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 8.9(c)
hereof.
The Servicer shall sell any REO Property within 23 months
of its acquisition by the Trust, unless the Servicer obtains for the
Trustee an opinion of counsel experienced in federal income tax
matters, addressed to the Trustee, the Certificate Insurer and the
Servicer, to the effect that the holding by the Trust of such REO
Property for any greater period will not result in the imposition of
taxes on "Prohibited Transactions" of the REMIC Trust as defined in
Section 860F of the Code or cause the Trust to fail to qualify as a<PAGE>
<PAGE>
REMIC under the REMIC Provisions at any time that any Certificates
are outstanding, in which case the Servicer shall sell any REO
Property by the end of any extended period specified in any such
opinion.
Notwithstanding the generality of the foregoing
provisions, the Servicer shall manage, conserve, protect and operate
each REO Property for the Owners solely for the purpose of its prompt
disposition and sale in a manner which does not cause such REO
Property to fail to qualify as "foreclosure property" within the
meaning of Section 860G(a)(8) of the Code or result in the receipt by
the REMIC Trust of any "income from non-permitted assets" within the
meaning of Section 860F(a)(2)(B) of the Code or any "net income from
foreclosure property" which is subject to taxation under the REMIC
Provisions. Pursuant to its efforts to sell such REO Property, the
Servicer shall either itself or through an agent selected by the
Servicer protect and conserve such REO Property in the same manner
and to such extent as is customary in the locality where such REO
Property is located and may, incident to its conservation and
protection of the interests of the Owners, rent the same, or any part
thereof, as the Servicer deems to be in the best interest of the
Owners for the period prior to the sale of such REO Property.
The Servicer shall take into account the existence of any
hazardous substances, hazardous wastes or solid wastes, as such terms
are defined in the Comprehensive Environmental Response Compensation
and Liability Act, the Resource Conservation and Recovery Act of
1976, or other federal, state or local environmental legislation, on
a Property in determining whether to foreclose upon or otherwise
comparably convert the ownership of such Property. To the extent
that the Servicer has actual knowledge of any such substance or
waste, it shall consult with the Certificate Insurer and the Trustee
regarding the appropriate course of action. The Servicer shall not
institute foreclosure actions with respect to a property containing
substance or waste as described above if it reasonably believes that
such action would not be consistent with its servicing standards, and
in no event shall the Servicer manage, operate or take any other
action with respect thereto which the Servicer in good faith believes
will result in "clean-up" or other liability under applicable law.
The net income from the rental or sale of a REO property shall be
deposited in the Principal and Interest Account within two (2)
Business Days after receipt thereof by the Servicer.
(b) The Servicer shall determine, with respect to each
defaulted Mortgage Loan, 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 Mortgage Loan,
whereupon such Mortgage Loan shall become a "Liquidated Loan".<PAGE>
<PAGE>
Section 8.14. Trustee to Cooperate; Release of Files.
(a) Upon the payment in full of any Mortgage Loan (including the
repurchase of any Mortgage Loan or any liquidation of such Mortgage
Loan through foreclosure or otherwise), or the receipt by the
Servicer of a notification that payment in full will be escrowed in a
manner customary for such purposes, the Servicer shall deliver to the
Trustee a Servicer's Trust Receipt. Upon receipt of such Servicer's
Trust Receipt, the Trustee shall promptly release the related File,
in trust to (i) the Servicer, (ii) an escrow agent or (iii) any
employee, agent or attorney of the Trustee, in each case pending its
release by the Servicer, such escrow agent or such employee, agent or
attorney of the Trustee, as the case may be. Upon any such payment
in full, or the receipt of such notification that such funds have
been placed in escrow, the Servicer is authorized to give, as
attorney-in-fact for the Trustee and the mortgagee under the Mortgage
which secured the Note, an instrument of satisfaction (or assignment
of Mortgage without recourse) regarding the Property relating to such
Mortgage, which instrument of satisfaction or assignment, as the case
may be, shall be delivered to the Person or Persons entitled thereto
against receipt therefor of payment in full. No expense incurred in
connection with such instrument of satisfaction or assignment, as the
case may be, shall be chargeable to the Principal and Interest
Account. In lieu of executing any such satisfaction or assignment,
as the case may be, the Servicer may prepare and submit to the
Trustee, a satisfaction (or assignment without recourse, if requested
by the Person or Persons entitled thereto) in form for execution by
the Trustee with all requisite information completed by the Servicer;
in such event, the Trustee shall execute and acknowledge such
satisfaction or assignment, as the case may be, and deliver the same
with the related File, as aforesaid. In connection with a
foreclosure, the Servicer may prepare and submit to the Trustee an
assignment of mortgage to the Servicer, in form for execution by the
Trustee with all requisite information completed by the Servicer; in
such event, the Trustee shall execute and acknowledge such
assignment, and deliver the same with the related File to the
Servicer.
(b) From time to time and as appropriate in the
servicing of any Mortgage Loan, including, without limitation,
foreclosure or other comparable conversion of a Mortgage Loan or
collection under any applicable Insurance Policy, the Trustee shall
(except in the case of the payment or liquidation pursuant to which
the related File is released to an escrow agent or an employee, agent
or attorney of the Trustee), upon request of the Servicer and
delivery to the Trustee of a Servicer's Trust Receipt, release the
related File to the Servicer and shall execute such documents as<PAGE>
<PAGE>
shall be reasonably necessary to the prosecution of any such
proceedings, including, without limitation, an assignment without
recourse of the related Mortgage to the Servicer; provided that there
shall not, without the prior written consent of the Certificate
Insurer, be released and unreturned at any one time more than 10% of
the entire number of Files then on deposit with the Trustee. Such
receipt by the Servicer shall obligate the Servicer to return the
File to the Trustee when the need therefor by the Servicer no longer
exists unless the Mortgage Loan shall be liquidated, in which case,
upon receipt of the liquidation information, in physical or
electronic form, the Servicer's Trust Receipt shall be released by
the Trustee to the Servicer.
(c) In all cases where the Servicer determines that it
is necessary for the Trustee to sign any document or to authorize the
release of a File within a limited period of time, the Servicer shall
notify an Authorized Officer of the Trustee by telephone or facsimile
transmission of such need and the Trustee shall thereupon use its
best efforts to comply with the Servicer's needs, but in any event
will comply within two Business Days of such request with respect to
the release of a File or the execution of a release or assignment
provided such request shall be received by 12:00 noon on the second
Business Day prior to such release, execution or assignment.
Section 8.15. Servicing Compensation. As
compensation for its activities hereunder, the Servicer shall be
entitled to retain the amount of the Servicing Fee from the interest
collections with respect to each Mortgage Loan. Additional servicing
compensation in the form of prepayment charges, release fees, bad
check charges, assumption fees, late payment charges, or any other
servicing-related fees, Net Liquidation Proceeds not required to be
deposited in the Principal and Interest Account pursuant to Section
8.8(c), and similar items may, to the extent collected from
Mortgagors, be retained by the Servicer.
The Servicer may not sell, pledge or transfer its right
to the Servicing Fee or any servicing compensation, under this
Agreement (in whole or in part), except to a successor servicer
hereunder, without the consent of the Certificate Insurer. Any
pledge of the Servicing Fee hereunder shall be expressly subordinate
to the rights of the Trustee under this Agreement.
Section 8.16. Annual Statement as to Compliance. The
Servicer, at its own expense, will deliver to the Trustee,
Certificate Insurer, S&P and Moody's, on or before the last day of
April of each year, commencing in 1997, an Officer's Certificate
stating, as to each signer thereof, that (i) a review of the
Activities of each of the Servicer and the Sub-Servicer during such<PAGE>
<PAGE>
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, each of the Servicer
and the Sub-Servicer has fulfilled all its obligations under this
Agreement for such year, or, if there has been a default in the
fulfillment of all such obligations, specifying each such default
known to such officers and the nature and status thereof including
the steps being taken by the Servicer or the Sub-Servicer as
applicable, to remedy such defaults. Any Sub-Servicer which is not a
Servicer Affiliate shall also deliver an annual statement as to
compliance in the form described above or the Servicer shall cover
such Sub-Servicer's performance in its own statement. These
statements shall be available to Owners upon written request.
Section 8.17. Annual Independent Certified Public
Accountants' Reports; Annual Financial Statements of the
Sub-Servicer. (a) On or before the last day of April of each year,
commencing in 1997, the Sub-Servicer, at its own expense, shall cause
to be delivered to the Trustee, the Certificate Insurer, S&P and
Moody's 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, with respect to the
Sub-Servicer's overall servicing operations (i) performed applicable
tests in accordance with the compliance testing procedures as set
forth in Appendix 3 of the Audit Guide for Audits of HUD Approved
Nonsupervised Mortgagees or (ii) examined such operations in
accordance with the requirements of the Uniform Single Audit Program
for Mortgage Bankers, and in either case stating such firm's
conclusions relating thereto.
(b) The Servicer shall furnish or caused to be furnished
to the Trustee as soon as available, and in any event within 90 days
after the close of each fiscal year of the Servicer, the audited
balance sheet of the Servicer and the audited profit and loss
statement and statement of cash flows of the Servicer for such year,
all in reasonable detail and stating in comparative form the
respective figures for the corresponding date and period in the
preceding year, prepared in accordance with generally accepted
accounting principles, consistently applied, and accompanied by the
certificate of the Servicer's independent accountants (who shall be a
nationally recognized firm).
(c) The Trustee shall have no duty or obligation with
respect to the information provided pursuant to this Section 8.17.<PAGE>
<PAGE>
Section 8.18. Access to Certain Documentation and
Information Regarding the Mortgage Loans. The Servicer shall provide
to the Trustee, the Certificate Insurer and the supervisory agents
and examiners of each of the foregoing access to the documentation
regarding the Mortgage Loans required by applicable state and federal
regulations, such access being afforded without charge but only upon
reasonable request and during normal business hours at the offices of
the Servicer designated by it.
Upon any change in the format of the computer diskette or
other form of report maintained by the Servicer in respect of the
Mortgage Loans, the Servicer shall deliver a copy of such new format
to the Trustee.
Section 8.19. Assignment of Agreement. The Servicer
may not assign its obligations under this Agreement, in whole or in
part, unless it shall have first obtained the written consent of the
Trustee and Certificate Insurer, which such consent shall not be
unreasonably withheld; provided, however, that any assignee must meet
the eligibility requirements set forth in Section 8.20(g) hereof for
a successor servicer. Notice of any such assignment shall be given
by the Servicer to the Trustee, the Certificate Insurer and Moody's.
Section 8.20. Removal of Servicer; Resignation of
Servicer. (a) The Certificate Insurer (or, with the consent of the
Certificate Insurer, the Majority Owners) may remove the Servicer
upon the occurrence of any of the following events (each, an "Event
of Default"); provided in the event of an Event of Default pursuant
to clauses (ix), (x) or (xi) below, the Certificate Insurer may
consider whether such Event of Default is related to the Servicer's
performance, the credit quality of the Mortgage Loans or economic
conditions beyond the control of the Servicer:
(i) The Servicer shall (A) apply for or consent to the
appointment of a receiver, trustee, liquidator or custodian or
similar entity with respect to itself or its property, (B) admit in
writing its inability to pay its debts generally as they become due,
(C) make a general assignment for the benefit of creditors, (D) be
adjudicated a bankrupt or insolvent, (E) commence a voluntary case
under the federal bankruptcy laws of the United States of America or
file a voluntary petition or answer seeking reorganization, an
arrangement with creditors or an order for relief or seeking to take
advantage of any insolvency law or file an answer admitting the
material allegations of a petition filed against it in any
bankruptcy, reorganization or insolvency proceeding or (F) cause
corporate action to be taken by it for the purpose of effecting any
of the foregoing; or <PAGE>
<PAGE>
(ii) If without the application, approval or consent of
the Servicer, a proceeding shall be instituted in any court of
competent jurisdiction, under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking in respect
of the Servicer an order for relief or an adjudication in bankruptcy,
reorganization, dissolution, winding up, liquidation, a composition
or arrangement with creditors, a readjustment of debts, the
appointment of a trustee, receiver, conservator, liquidator or
custodian or similar entity with respect to the Servicer or of all or
any substantial part of its assets, or other like relief in respect
thereof under any bankruptcy or insolvency law, and, if such
proceeding is being contested by the Servicer in good faith, the same
shall (A) result in the entry of an order for relief or any such
adjudication or appointment or (B) continue undismissed or pending
and unstayed for any period of thirty (30) consecutive days; or
(iii) The Servicer shall fail to perform any one or more
of its obligations hereunder (other than its obligations referenced
in clauses (vi) and (vii) below) and shall continue in default
thereof for a period of thirty (30) days after the earlier to occur
of (x) the date on which an Authorized Officer of the Servicer knows
or reasonably should know of such failure or (y) receipt by the
Servicer of a written notice from the Trustee, any Owner, the Sponsor
or the Certificate Insurer of said failure; or
(iv) The Servicer shall fail to cure any breach of any
of its representations and warranties set forth in Section 3.2 which
materially and adversely affects the interests of the Owners or
Certificate Insurer for a period of thirty (30) days after the
earlier of (x) the date on which an Authorized Officer of the
Servicer knows or reasonably should know of such breach or (y)
receipt by the Servicer of a written notice from the Trustee, any
Owner, the Sponsor or the Certificate Insurer of such breach; or
(v) If the Certificate Insurer pays out any money under
the Certificate Insurance Policy, or if the Certificate Insurer
otherwise funds any shortfall with its own money, because the amounts
available to the Trustee (other than from the Certificate Insurer)
are insufficient to make required distributions on the Class A
Certificates; or
(vi) The failure by the Servicer to make any required
Servicing Advance for a period of 30 days following the earlier of
(x) the date on which an Authorized Officer of the Servicer knows or
reasonably should know of such failure or (y) receipt by the Servicer
of a written notice from the Trustee, any Owner, the Sponsor or the
Certificate Insurer of such failure; or<PAGE>
<PAGE>
(vii) The failure by the Servicer to make any required
Delinquency Advance, to pay any Compensating Interest or to pay over
any Monthly Remittance Amount or other amounts required to be
remitted by the Servicer pursuant to this Agreement; or
(viii) If on any Payment Date the net worth of the
Servicer is less than $10,000,000, as determined in accordance with
generally accepted accounting principals; or
(ix) If (a) on any Payment Date occurring before July 1,
1997, the Rolling Three Month Delinquency Rate exceeds 4.0%, (b) on
any Payment Date on or after July 1, 1997 and before July 1, 1998,
the Rolling Three Month Delinquency Rate exceeds 5.0_%, (c) on any
Payment Date on or after July 1, 1998 and before July 1, 1999, the
Rolling Three Month Delinquency Rate exceeds 6.5%, (d) on any Payment
Date on or after July 1, 1999 and before July 1, 2000, the Rolling
Three Month Delinquency Rate exceeds 8.0%, or (e) on any Payment Date
on or after July 1, 2000, the Rolling Three Month Delinquency Rate
exceeds 12.0%; or
(x) If on any Payment Date occurring in December of any
year, commencing in December, 1996, the aggregate Cumulative Loss
Amounts over the prior twelve month period exceed 1.05% of the
average Aggregate Loan Balance as of the close of business on the
last day of each of the twelve preceding Remittance Periods; or
(xi) If (a) on any Payment Date occurring before July 1,
1997, the Cumulative Loss Amount exceeds 1.30%, (b) on any Payment
Date on or after July 1, 1997 and before July 1, 1998, the Cumulative
Loss Amount exceeds 1.65%, (c) on any Payment Date on or after July
1, 1998 and before July 1, 1999, the Cumulative Loss Amount exceeds
2.10%, (d) on any Payment Date on or after July 1, 1999 and before
July 1, 2000, the Cumulative Loss Amount exceeds 2.60%, or (e) on any
Payment Date on or after July 1, 2000, the Cumulative Loss Amount
exceeds 3.15%; or
(xii) The Certificate Insurer determines that the
performance of the Servicer (or any Sub-Servicer) is not in
compliance with the Servicing Standards, which non-compliance is
reasonably likely to have a material adverse effect on the servicing
of the Mortgage Loans; or
(xiii) The Servicer shall enter into any merger,
consolidation or other corporate transaction pursuant to which (x)
the Servicer is not the surviving entity, (y) the long-term unsecured
debt rating of the surviving entity is below investment grade or (z)
the Certificate Insurer determines that the servicing capabilities of<PAGE>
<PAGE>
such surviving entity as successor Servicer could materially
adversely affect the servicing of the Mortgage Loans;
provided, however, that (A) prior to any removal of the Servicer
pursuant to clauses (iii) and (iv), the Certificate Insurer, in its
sole discretion, may extend the 30-day cure period upon the
Servicer's prompt and diligent pursuit of such cure, (B) prior to any
removal of the Servicer pursuant to clauses (iii), (iv) and (vi) of
this Section 8.20(a), any applicable grace period granted by any such
clause shall have expired prior to the time such occurrence shall
have been remedied and (C) in the event of the refusal or inability
of the Servicer to comply with its obligations described in clause
(vii) above, such removal shall be effective (without the requirement
of any action on the part of the Sponsor the Certificate Insurer or
of the Trustee) at 4 p.m. New York City time on the second Business
Day following the day on which the Trustee or the Certificate Insurer
notifies an Authorized Officer of the Servicer that a required amount
described in clause (vii) above has not been received by the Trustee,
unless the required amount described in clause (vii) above is paid by
the Servicer prior to such time. Upon the Trustee's obtaining actual
knowledge that a required amount described in clause (vii) above has
not been made by the Servicer, the Trustee shall so notify an
Authorized Officer of the Servicer, the Certificate Insurer and each
of Moody's and S&P as soon as is reasonably practical.
(b) The Servicer shall not resign from the obligations
and duties hereby imposed on it, except upon determination that its
duties hereunder are no longer permissible under applicable law or
are in material conflict by reason of applicable law with any other
activities carried on by it, the other activities of the Servicer so
causing such a conflict being of a type and nature carried on by the
Servicer at the date of this Agreement. Any such determination
permitting the resignation of the Servicer shall be evidenced by an
opinion of counsel to such effect which shall be delivered to the
Trustee, the Sponsor and the Certificate Insurer.
(c) No removal or resignation of the Servicer shall
become effective until the Trustee or a successor servicer shall have
assumed the Servicer's responsibilities and obligations in accordance
with this Section.
(d) Upon removal or resignation of the Servicer, the
Servicer also shall promptly deliver or cause to be delivered to a
successor servicer or the Trustee all the books and records
(including, without limitation, records kept in electronic form) that
the Servicer has maintained for the Mortgage Loans, including all tax
bills, assessment notices, insurance premium notices and all other<PAGE>
<PAGE>
documents as well as all original documents then in the Servicer's
possession.
(e) Any collections received by the Servicer after
removal or resignation shall be endorsed by it to the Trustee and
remitted directly and immediately to the Trustee or the successor
Servicer.
(f) Upon removal or resignation of the Servicer, the
Trustee shall act as the successor Servicer. If, at the time the
Servicer is removed or resigns, the Trustee is unable to act as
successor Servicer, then the Trustee (x) may solicit bids for a
successor Servicer as described below, and (y) pending the
appointment of a successor Servicer as a result of soliciting such
bids, shall serve as Servicer. The Trustee shall, if it is unable to
obtain a qualifying bid and is prevented by law from acting as
Servicer, appoint, or petition a court of competent jurisdiction to
appoint, any housing and home finance institution, bank or mortgage
servicing institution which is acceptable to the Certificate Insurer
and is experienced in servicing loans of a type similar to the
Mortgage Loans and has equity of not less than $10,000,000, as
determined in accordance with generally accepted accounting
principles, and acceptable to the Certificate Insurer as the
successor to the Servicer hereunder in the assumption of all or any
part of the responsibilities, duties or liabilities of the Servicer
hereunder.
The compensation of any successor servicer (including,
without limitation, the Trustee) so appointed shall be the aggregate
Servicing Fees, together with the other servicing compensation in the
form of assumption fees, late payment charges or otherwise as
provided in Section 8.15.
(g) In the event the Trustee solicits bids as provided
above, the Trustee shall solicit, by public announcement, bids from
housing and home finance institutions, banks and mortgage servicing
institutions meeting the qualifications set forth above. Such public
announcement shall specify that the successor Servicer shall be
entitled to the full amount of the aggregate Servicing Fees as
servicing compensation, together with the other servicing
compensation in the form of assumption fees, late payment charges or
otherwise as provided in Section 8.15. Within thirty days after any
such public announcement, the Trustee shall, with the consent of the
Certificate Insurer, negotiate and effect the sale, transfer and
assignment of the servicing rights and responsibilities hereunder to
the qualified party submitting the highest satisfactory bid. The
Trustee shall deduct from any sum received by the Trustee from the<PAGE>
<PAGE>
successor to the Servicer in respect of such sale, transfer and
assignment all costs and expenses of any public announcement and of
any sale, transfer and assignment of the servicing rights and
responsibilities hereunder. After such deductions, the remainder of
such sum shall be paid by the Trustee to the Servicer at the time of
such sale, transfer and assignment to the Servicer's successor.
(h) The Trustee and such successor shall take such
action, consistent with this Agreement, as shall be necessary to
effectuate any such succession, and the Servicer shall bear all the
costs of transferring all files and records related to the Mortgage
Loans and other reasonable costs necessary to effect such succession.
The Servicer agrees to cooperate with the Trustee and any successor
Servicer in effecting the termination of the Servicer's servicing
responsibilities and rights hereunder and shall promptly provide the
Trustee or such successor Servicer, as applicable, all documents and
records reasonably requested by it to enable it to assume the
Servicer's functions hereunder and shall promptly also transfer to
the Trustee or such successor Servicer, as applicable, all amounts
which then have been or should have been deposited in the Principal
and Interest Account by the Servicer or which are thereafter received
with respect to the Mortgage Loans. Neither the Trustee nor any
other successor Servicer shall be held liable by reason of any
failure to make, or any delay in making, any distribution hereunder
or any portion thereof caused by (i) the failure of the Servicer to
deliver, or any delay in delivering, cash, documents or records to
it, or (ii) restrictions imposed by any regulatory authority having
jurisdiction over the Servicer.
(i) The Trustee or any other successor Servicer, upon
assuming the duties of Servicer hereunder, shall immediately make all
Delinquency Advances and pay all Compensating Interest which the
Servicer has theretofore failed to remit with respect to the Mortgage
Loans; provided, however, that if the Trustee is acting as successor
Servicer, the Trustee shall only be required to make Delinquency
Advances (including the Delinquency Advances described in this clause
(j)) if, in the Trustee's reasonable good faith judgment, such
Delinquency Advances will ultimately be recoverable from the related
Mortgage Loans.
(j) The Servicer which is being removed or is resigning
shall give notice to the Mortgagors and to each of Moody's and S&P of
the transfer of the servicing to the successor.
(k) Any successor Servicer shall assume all rights and
obligations of the predecessor Servicer under this Agreement, except
those arising before succession (other than the obligation to make
Delinquency Advances) and under Section 3.<PAGE>
<PAGE>
(l) If the Servicer is removed pursuant to Section
8.20(a) hereof the Servicer shall remain entitled to reimbursement
for Reimbursable Advances to the extent that the related amounts are
thereafter recovered with respect to the related Mortgage Loans.
(m) The Certificate Insurer shall respond within five
Business Days to any Servicer request for the Certificate Insurer's
consent under this Section 8.20, which consent relates to the
Servicer's servicing activities.
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 Certificate Insurer, the
Trustee, or any agents or representatives thereof may inspect the
Servicer's servicing operations and discuss the servicing operations
of the Servicer with any of its officers or directors. The costs and
expenses incurred by the Servicer or its agents or representatives in
connection with any such examinations or discussions shall be paid by
the Servicer.
(b) The Servicer agrees to maintain (and to cause each
Sub-Servicer to maintain) errors and omissions coverage and a
fidelity bond, each at least to the extent generally maintained by
prudent mortgage loan servicers having servicing portfolios of a
similar size.
Section 8.22. Merger, Conversion, Consolidation or
Succession to Business of Servicer. Any corporation into which the
Servicer may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Servicer shall be a party,
or any corporation succeeding to all or substantially all of the
business of the Servicer, shall be the successor of the Servicer
hereunder, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided (x)
that such corporation meets the qualifications set forth in Section
8.20(g) and (y) that any successor Servicer must meet the
qualifications set forth in Section 8.20(g).
Section 8.23. Financial Statements. The Servicer
understands that, in connection with the transfer of the
Certificates, Owners may request that the Servicer make available to
prospective Owners any quarterly unaudited financial statement of the
Servicer for the then-current fiscal year and annual audited
financial statements of the Servicer for one or more of the most
recently completed five fiscal years for which such statements are
available, which request shall not be unreasonably denied. Such<PAGE>
<PAGE>
financial statements shall also be supplied to the Certificate
Insurer and each of Moody's and S&P.
The Servicer also agrees to make available on a
reasonable basis to the Sponsor, the Trustee, the Certificate
Insurer, any Owner or any prospective Owner a knowledgeable financial
or accounting officer for the purpose of answering reasonable
questions respecting recent developments affecting the Servicer or
Sub-Servicer or the financial statements of the Servicer or
Sub-Servicer and to permit the Sponsor, the Trustee, the Certificate
Insurer, any Owner or any prospective Owner to inspect the
Sub-Servicer's servicing facilities during normal business hours for
the purpose of satisfying the Sponsor, the Trustee, the Certificate
Insurer, any Owner or such prospective Owner that the Servicer has
the ability to service the Mortgage Loans in accordance with this
Agreement.
Section 8.24. REMIC. The Servicer covenants and
agrees for the benefit of the Owners (i) to take no action which
would result in the termination of REMIC status for the Trust, (ii)
not to engage in any "prohibited transaction", as such term is
defined in Section 860F(a)(2) of the Code and (iii) not to engage in
any other action which may result in the imposition of any other
taxes under the Code.
Section 8.25. The Designated Depository Institution.
The Servicer shall give the Sponsor, the Trustee and the Certificate
Insurer (a) at least thirty days' prior written notice of any
anticipated change of the Designated Depository Institution at which
any Account is maintained and (b) written notice of any change in the
ratings of such Designated Depository Institution of which the
Servicer is aware, within two Business Days after discovery.
Section 8.26. Appointment of Custodian. If the
Servicer in good faith determines that the Trustee is unable to
deliver Files to the Servicer as required pursuant to Section 8.14
hereof, the Servicer shall so notify the Sponsor, the Certificate
Insurer, S&P, Moody's and the Trustee, and make request that a
custodian acceptable to the Servicer and the Certificate Insurer be
appointed to retain custody of the Files on behalf of the Trustee.
The Trustee and the Sponsor agree to co-operate reasonably with the
Servicer in connection with the appointment of such custodian.
Section 8.27. Indemnification by the Sponsor and
Servicer. The Sponsor and Servicer each jointly and severally agrees
to indemnify and hold the Trust, harmless against any and all claims,
losses, penalties, fines, forfeitures, legal fees and related costs,<PAGE>
<PAGE>
judgments and any other costs, fees and expenses that the Trust may
sustain in any way related to (i) the breach of any representation or
warranty made by the Sponsor or the Servicer under this Agreement or
the Master Transfer Agreement or (ii) the failure of the Sponsor or
the Servicer to perform their respective duties in compliance with
the terms of this Agreement or the Master Transfer Agreement. The
provisions of this section shall survive the termination of this
Agreement and the payment of the outstanding Certificates.
Section 8.28. Retention and Termination of the
Servicer. The Servicer hereby covenants and agrees to act as
servicer under this Agreement for an initial term commencing on the
Startup Day and expiring on August 31, 1996, which term automatically
shall be extended for successive terms thereafter of one calendar
quarter each (in each case ending on the next succeeding day that is
a May 31st, August 31st, November 30th or February 28th (or 29th),
until the occurrence of a Servicing Event of Default).
ARTICLE IX
TERMINATION OF TRUST
Section 9.1. Termination of Trust. The Trust
created hereunder and all obligations created by this Agreement 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 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 Mortgage Loan in
the Trust Estate or (b) the disposition of all property acquired in
respect of any Mortgage Loan remaining in the Trust Estate, (ii) at
any time when a Qualified Liquidation of the REMIC Trust is effected
as described below or (iii) as described in Section 9.2, 9.3 and 9.4
hereof. To effect a termination of this Agreement pursuant to clause
(ii) above, the Owners of all Certificates then Outstanding shall (x)
unanimously direct the Trustee on behalf of the Trust to adopt a plan
of complete liquidation for the REMIC Trust, as contemplated by
Section 860F(a)(4) of the Code and (y) provide to the Trustee an
opinion of counsel experienced in federal income tax matters to the
effect that such liquidation constitutes a Qualified Liquidation, and
the Trustee either shall sell the Mortgage Loans and distribute the
proceeds of the liquidation of the Trust Estate, or shall distribute
equitably in kind all of the assets of the Trust Estate to the
remaining Owners of the Certificates based on their interests in the
Trust, each in accordance with such plan, so that the liquidation or
distribution of the Trust Estate, the distribution of any proceeds of<PAGE>
<PAGE>
the liquidation and the termination of this Agreement occur no later
than the close of the 90th day after the date of adoption of the plan
of liquidation and such liquidation qualifies as a Qualified
Liquidation. In no event, however, will the Trust created by this
Agreement continue beyond the expiration of twenty-one (21) years
from the death of the last survivor of the descendants of Joseph P.
Kennedy, the late Ambassador of the United States to the 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 11.5.
Section 9.2. Termination Upon Option of Class R
Certificate Owners and Servicer. (a) On any Remittance Date on or
after the Remittance Date on which the then-outstanding aggregate
Loan Balances of the Mortgage Loans in the Trust Estate is less than
or equal to ten percent of the sum of the aggregate Loan Balances of
all Mortgage Loans in the Trust Estate as of the Cut-Off Date, the
Owners of the Class R Certificates and the Servicer, acting directly
or through one or more affiliates, may determine to purchase and may
cause the purchase from the Trust of all (but not fewer than all)
Mortgage Loans in the Trust Estate and all property theretofore
acquired in respect of any such Mortgage Loan by foreclosure, deed in
lieu of foreclosure, or otherwise then remaining in the Trust Estate
at a price equal to the sum of (w) the greater of (i) 100% of the
aggregate Loan Balances of the related Mortgage Loans and related
accrued interest as of the day of purchase minus the amount actually
remitted by the Servicer representing the related Monthly Remittance
Amount on such Remittance Date for the related Remittance Period and
(ii) the fair market value of such Mortgage Loans (disregarding
accrued interest), (x) the amount of any difference between the
Monthly Remittance Amount actually remitted by the Servicer on such
Remittance Date and the Monthly Remittance Amount due on such
Remittance Date and (y) the Reimbursement Amount, if any, as of such
Remittance Date (such amount, the "Termination Price"). The right of
the Owners of the Class R Certificates so to exercise such optional
purchase right is superior to such right of the Servicer. The
Servicer may only exercise such optional right if the Owners of the
Class R Certificates decline to do so. In connection with such
purchase, the Servicer shall remit to the Trustee all amounts then on
deposit in the Principal and Interest Account for deposit to the
Certificate Account, which deposit shall be deemed to have occurred
immediately preceding such purchase.
(b) In connection with any such purchase, the Servicer
shall provide to the Trustee and the Certificate Insurer an opinion
of counsel, at the expense of the Servicer, experienced in federal
income tax matters to the effect that such purchase constitutes a
Qualified Liquidation of the REMIC Trust.<PAGE>
<PAGE>
(c) Promptly following any such purchase, the Trustee
will release the Files to the Servicer, or otherwise upon their
order, in a manner similar to that described in Section 8.14 hereof.
(d) If the Servicer does not exercise its option
pursuant to this Section 9.2 with respect to the Trust Estate, then
the Certificate Insurer may do so on the same terms.
Section 9.3. 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
Trust does not and will no longer qualify as a "REMIC" pursuant to
Section 860D of the Code (the "Final Determination"), on any
Remittance Date on or after the date which is 30 calendar days
following such Final Determination, (i) the Owners of a majority in
Percentage Interest represented by the Class A Certificates then
Outstanding may direct the Trustee to adopt a plan of complete
liquidation with respect to the Trust Estate 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)
Mortgage Loans in the Trust Estate and all property theretofore
acquired by foreclosure, deed in lieu of foreclosure, or otherwise in
respect of any Mortgage Loan then remaining in the Trust Estate at a
price equal to the Termination Price. In connection with such
purchase, the Servicer shall remit to the Trustee all amounts then on
deposit in the Principal and Interest Account for deposit in the
Certificate Account, which deposit shall be deemed to have occurred
immediately preceding such purchase.
(b) Upon receipt of such direction from the Owners of
such Class A Certificates or such notice from the Certificate
Insurer, the Trustee shall notify the holders 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, on any Remittance Date, 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) Mortgage Loans in the Trust Estate, and all property
theretofore acquired by foreclosure, deed in lieu of foreclosure, or
otherwise in respect of any Mortgage Loan then remaining in the Trust
Estate at a purchase price equal to the Termination Price.<PAGE>
<PAGE>
(c) 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 Owners of the
Class A Certificates have given the Trustee the direction described
in clause (a)(i) above, the Trustee shall sell the Mortgage Loans and
distribute the proceeds of the liquidation of the Trust Estate, such
that, if so directed, the liquidation of the Trust Estate and the
distribution of the proceeds of such liquidation occur no later than
the close of the 60th day, or such later day as the Owners of the
Class A Certificates 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 Mortgage Loans in
the Trust Estate described in clause (a)(ii) preceding, the
Certificate Insurer shall, on any Remittance Date within 60 days
after such notice, purchase all (but not fewer than all) Mortgage
Loans in the Trust Estate, and all property theretofore acquired by
foreclosure, deed in lieu of foreclosure or otherwise in respect of
any Mortgage Loan then remaining in the Trust Estate. In connection
with such purchase, the Servicer shall remit to the Trustee all
amounts then on deposit in the Principal and Interest Account for
deposit to the Certificate Account, which deposit shall be deemed to
have occurred immediately preceding such purchase.
(d) Following a Final Determination, the Owners of a
majority of the Percentage Interest of the Class R Certificates then
Outstanding may, at their option on any Remittance Date and upon
delivery to the Owners of the Class A Certificates and the
Certificate Insurer of an opinion of counsel experienced in federal
income tax matters selected by the Owners of such Class R
Certificates which opinion shall be reasonably satisfactory in form
and substance to a majority of the Percentage Interests represented
by the Class A Certificates then Outstanding and the Certificate
Insurer, to the effect that the effect of the Final Determination is
to increase substantially the probability that the gross income of
the Trust will be subject to federal taxation, purchase from the
Trust all (but not fewer than all) Mortgage Loans in the Trust
Estate, and all property theretofore acquired by foreclosure, deed in
lieu of foreclosure, or otherwise in respect of any Mortgage Loan
then remaining in the Trust Estate at a purchase price equal to the
Termination Price. In connection with such purchase, the Servicer
shall remit to the Trustee all amounts then on deposit in the
Principal and Interest Account for deposit to the Certificate
Account, which deposit shall be deemed to have occurred immediately
preceding such purchase. The foregoing opinion shall be deemed
satisfactory unless the Owners of a majority of the Percentage
Interest represented by the Class A Certificates then Outstanding or<PAGE>
<PAGE>
the Certificate Insurer give the Owners of a majority of the
Percentage Interest of the Class R Certificates notice that such
opinion is not satisfactory within thirty days after receipt of such
opinion.
Section 9.4. 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 Servicing
Fees, unreimbursed Delinquency Advances or unreimbursed Servicing
Advances theretofore funded by the Servicer from the Servicer's own
funds shall be paid by the Trustee to the Servicer from such
proceeds.
Section 9.5. Netting of Amounts. If any Person
paying the Termination Price would receive a portion of the amount so
paid, such Person may net any such amount against the Termination
Price otherwise payable.
ARTICLE X
THE TRUSTEE
Section 10.1. Certain Duties and Responsibilities.
(a) The Trustee (i) except during the continuance of an
Event of Default, 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 (ii) in the absence of bad faith on its part,
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished pursuant to and conforming to the requirements of
this Agreement; but in the case of any such certificates or opinions
which by any provision hereof are specifically required to be
furnished to the Trustee, shall be under a duty to examine the same
to determine whether or not they conform to the requirements of this
Agreement.
During the continuance of an Event of Default, 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 with respect to such person's property or affairs.<PAGE>
<PAGE>
(b) Notwithstanding the appointment of the Servicer
hereunder, the Trustee is hereby empowered, but prior to the Trustee
assuming the duties of the Servicer pursuant to Section 8.20, shall
not be obligated or otherwise responsible to perform the duties of
the Servicer. Specifically, and not in limitation of the foregoing,
the Trustee shall have the power (but not the obligation if prior to
the Trustee assuming the duties of the Servicer pursuant to Section
8.20):
(i) to collect Mortgagor payments;
(ii) to foreclose on defaulted Mortgage
Loans;
(iii) to enforce due-on-sale clauses and to
enter into assumption and substitution agreements as permitted by
Section 8.12 hereof;
(iv) to deliver instruments of satisfaction
pursuant to Section 8.14 hereof;
(v) to make Delinquency Advances and
Servicing Advances and to pay Compensating Interest, all as provided
in this Agreement; and
(vi) to enforce the Mortgage Loans.
(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 liable for any
error of judgment made in good faith by an Authorized Officer, unless
it shall be proved that the Trustee was negligent in ascertaining the
pertinent facts; and
(iii) the Trustee shall not be liable with
respect to any action taken, suffered or omitted to be taken by it in
good faith in accordance with the direction of the Sponsor, the
Certificate Insurer or, with the Certificate Insurer's consent, 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<PAGE>
<PAGE>
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
by the Servicer unless the Trustee shall have received written notice
thereof. In the absence of actual receipt of such notice, the
Trustee may conclusively assume that there is no such default; and
(v) subject to the other provisions of this
Agreement and without limiting the generality of this Section, the
Trustee shall have no duty (A) to see to any recording, filing, or
depositing of this Agreement, any Mortgage or any agreement referred
to herein or any financing statement or continuation statement
evidencing a security interest, or to see to the maintenance of any
such recording or filing or depositing or to any rerecording,
refiling or redepositing of any thereof, (B) to see to any insurance,
(C) to see 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 property of the Trust,
(D) to confirm or verify the contents of any reports or certificates
of the Servicer delivered to the Trustee pursuant to this Agreement
believed by the Trustee to be genuine and to have been signed or
presented by the proper party or parties.
(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 and none of the provisions contained in this
Agreement shall in any event require the Trustee to perform, or be
responsible for the manner of performance of, any of the obligations
of the Servicer under this Agreement except during such time, if any,
as the Trustee shall be the successor to, and be vested with the
rights, duties and powers and privileges of, the Servicer in
accordance with the terms of this Agreement.<PAGE>
<PAGE>
(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 reasonable 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 10.2. 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 thereto on any Payment Date amounts available for
distribution in accordance with the terms hereof; or
(2) the Trustee shall cease to be eligible in accordance with
Section 10.8 hereof or 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 Sponsor, the Certificate Insurer or by
the Owners of at least 25% of the aggregate Percentage Interests
represented by any Class of Class A Certificates, 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<PAGE>
<PAGE>
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 60 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.
(b) The Sponsor and the Trustee shall give notice to
Moody's and S&P, to each other, to the Certificate Insurer and to
each Owner if it becomes aware that an event described in subsection
(a) has occurred and is continuing.
(c) If any event described in paragraph (a) occurs and
is continuing, then and in every such case (i) the Sponsor or the
Certificate Insurer or (ii) with the written consent of the
Certificate Insurer, the Majority Owners, or, if there are no Class A
Certificates then Outstanding, by a majority of the Class R
Certificates then Outstanding, may, whether or not the Trustee
resigns pursuant to Section 10.9 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 10.9 hereof.
Section 10.3. Certain Rights of the Trustee. Except
as otherwise provided in Section 10.1 hereof:
(a) the Trustee may rely and shall be protected in
acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, note or other paper or document believed by it
to be genuine and to have been signed or presented by the proper
party or parties;
(b) any request or direction of the Sponsor, the
Servicer or the Owners of any Class of Certificates mentioned herein
shall be sufficiently evidenced in writing;<PAGE>
<PAGE>
(c) whenever in the administration of this Agreement the
Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action
hereunder, the Trustee (unless other evidence be herein specifically
prescribed) may, in the absence of bad faith on its part, rely upon
an Officer's Certificate;
(d) the Trustee may consult with counsel, and the
written advice of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reasonable reliance
thereon;
(e) the Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Agreement at the
request or direction of any of the Owners pursuant to this Agreement,
unless such Owners shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities
which might be incurred by it in compliance with such request or
direction;
(f) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, note or other paper or document, but
the Trustee in its discretion may make such further inquiry or
investigation into such facts or matters as it may see fit;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder; and
(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. The Trustee
shall at no time have any responsibility for or with respect to (i)
the legality, validity, sufficiency or enforceability of any
Mortgages and the Mortgage Loans, including the perfection or
priority thereof, (ii) the ability of the Mortgage Loans to pay any
portion of the Certificates, (iii) the validity of the assignment of
any of the Mortgages and the Mortgage Loans, (iv) the review of any
Mortgage or Mortgage Loan, except as provided herein, (v) the
compliance by the Sponsor or any Mortgagor with any covenant<PAGE>
<PAGE>
contained hereunder or in the Mortgages and the Mortgage Loans, (vi)
the breach by the Sponsor or the Servicer of any warranty or
representation made hereunder or the accuracy of any such warranty or
representation, (vii) the use or application by the Sponsor of the
proceeds of the Certificates, (viii) any offering materials used to
sell the Certificates and (ix) the acts or omissions of the Servicer.
Section 10.4. Not Responsible for Recitals or
Issuance of Certificates. The recitals contained herein and in the
Certificates, except any such recitals relating to the Trustee, shall
be taken as the statements of the Sponsor, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no
representation as to the validity or sufficiency of this Agreement or
of the Certificates other than as to validity and sufficiency of its
authentication of the Certificates.
Section 10.5. May Hold Certificates. The Trustee 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 or such other agent.
Section 10.6. 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 Sponsor
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 and income or other gain actually received by the
Trustee on Eligible Investments.
Section 10.7. Compensation and Reimbursement; No Lien
for Fees. The Trustee shall receive compensation for fees and
reimbursement pursuant to Section 2.5 hereof and Section 7.5(b)(ii)
hereof. The Trustee shall have no lien on the Trust Estate for the
payment of any fees or expenses (prior to an Event of Default).
Section 10.8. 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 $100,000,000, subject to
supervision or examination by the United States of America, having a
rating or ratings acceptable to the Certificate Insurer and having a
long-term deposit rating of at least BBB from S&P (or such lower<PAGE>
<PAGE>
rating as may be acceptable to S&P) and Baa-2 from 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 Sponsor or of the
Certificate Insurer, resign immediately in the manner and with the
effect hereinafter specified in this Article X.
Section 10.9. 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 Certificate Insurer and to the Sponsor and by
mailing notice of resignation by first-class mail, postage prepaid,
to the Owners at their addresses appearing on the Register. A copy
of such notice shall be sent by the resigning Trustee to Moody's and
S&P. Upon receiving notice of resignation, the Sponsor shall
promptly appoint a successor trustee or trustees satisfying the
eligibility requirements of Section 10.8 and acceptable to the
Certificate Insurer by written instrument, in duplicate, executed on
behalf of the Trust by an Authorized Officer of the Sponsor, 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
prescribe, appoint a successor trustee.
(c) If at any time the Trustee shall cease to be
eligible under Section 10.8 hereof and shall fail to resign after
written request therefor by the Sponsor or by the Certificate
Insurer, the Sponsor or the Certificate Insurer may remove the
Trustee and appoint a successor trustee by written instrument, in
duplicate, executed on behalf of the Trust by an Authorized Officer
of the Sponsor or the Certificate Insurer, one copy of which<PAGE>
<PAGE>
instrument shall be delivered to the Trustee so removed and one copy
to the successor trustee.
(d) The Majority Owners, or, if there are no Class A
Certificates then Outstanding, by a majority of the Class R
Certificates then Outstanding, 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 Sponsor and to the Certificate Insurer, copies of
the record of the act taken by the Owners, as provided for in
Sections 11.3 and 11.4 hereof.
(e) If the Trustee fails to perform its duties in
accordance with the terms of this Agreement or becomes ineligible to
serve as Trustee, the Sponsor, the Seller or the Certificate Insurer
may remove the Trustee and appoint a successor trustee by written
instrument, in triplicate, signed by the Sponsor, the Seller or the
Certificate Insurer duly authorized, one complete set of which
instruments shall be delivered to each of the Sponsor, the Seller and
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 Sponsor shall promptly appoint a successor
trustee satisfying the eligibility requirements of Section 10.8.
(g) The Sponsor shall give notice of any removal of the
Trustee by mailing notice of such event by first-class mail, postage
prepaid 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 Sponsor 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 Sponsor 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<PAGE>
<PAGE>
ceasing to act hereunder. Upon request of any such successor
trustee, the Sponsor on behalf of the Trust shall execute any and all
instruments for more fully and certainly vesting in and confirming to
such successor trustee all such rights, powers and trusts.
Upon acceptance of appointment by a successor trustee as
provided in this Section, the Sponsor shall mail notice thereof by
first-class mail, postage prepaid, to the Owners at their last
addresses appearing upon the Register. The Sponsor shall send a copy
of such notice to Moody's and S&P. If the Sponsor 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 Sponsor.
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 Sponsor, 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.<PAGE>
<PAGE>
(b) The Trustee shall timely file all reports 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.
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 Sponsor with respect to such allocation of expenses. The Trustee
shall collect any forms or reports from the Owners determined by the
Sponsor to be required under applicable federal, state and local tax
laws.
(c) The Trustee shall provide to the Internal Revenue
Service and to persons described in section 860(e)(3) and (6) of the
Code the information described in Treasury Regulation section
1.860D-1(b)(5)(ii), or any successor regulation thereto. Such
information will be provided in the manner described in Treasury
Regulation section 1.860E-2(a)(5), or any successor regulation
thereto.
(d) The Servicer covenants and agrees that it shall
provide, or cause to be provided, to the Trustee any information
necessary to enable the Trustee to meet its obligations under
subsections (a), (b) and (c) above.
Section 10.13. Liability of the Trustee. Except during
the continuance of an Event of Default, 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 any Account, the Certificate Insurer, the Sponsor,
the Servicer or any Owner for any action taken or for refraining from
the taking of any action in good faith pursuant to this Agreement, or
for errors in judgment; provided, however, that this provision shall
not protect the Trustee or any such Person against any liability
which would otherwise be imposed by reason of negligent action,
negligent failure to act or bad faith 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 any Account (except for any
losses on obligations on which the bank serving as Trustee is the
obligor). In addition, the Sponsor and Servicer covenant and agree
to indemnify the Trustee, and when the Trustee is acting as Servicer,
the Servicer, from, and hold it harmless against, any and all losses,
liabilities, damages, claims or expenses (including all reasonable<PAGE>
<PAGE>
and documented legal fees and expenses) other than those resulting
from the negligence or bad faith of the Trustee. 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 any Property
may at the time be located, the Servicer and the Trustee acting
jointly and with the consent of the Certificate Insurer shall have
the power and shall execute and deliver all instruments to appoint
one or more Persons approved by the Trustee to act as co-Trustee or
co-Trustees, jointly with the Trustee, of all or any part of the
Trust Estate or separate Trustee or separate Trustees of any part of
the Trust Estate, and to vest in such Person or Persons, in such
capacity and for the benefit of the Owners, such title to the Trust
Estate, or any part thereof, and, subject to the other provisions of
this Section 10.14, such powers, duties, obligations, rights and
trusts as the Servicer and the Trustee may consider necessary or
desirable. If the Servicer shall not have joined in such appointment
within 15 days after the receipt by it of a request so to do, or in
the case any event indicated in Sections 8.20(a) shall have occurred
and be continuing, the Trustee alone (with the consent of the
Certificate Insurer) 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 10.8
and no notice to Owners of the appointment of any co-Trustee or
separate Trustee shall be required under Section 10.8.
Every separate Trustee and co-Trustee shall, to the
extent permitted, be appointed and act subject to the following
provisions and conditions:
(i) All rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed
upon and exercised or performed by the Trustee and such separate
Trustee or co-Trustee jointly (it being understood that such separate
Trustee or co-Trustee is not authorized to act separately without the
Trustee joining in such act), except to the extent that under any law
of any jurisdiction in which any particular act or acts are to be
performed (whether as Trustee hereunder or as successor to the<PAGE>
<PAGE>
Servicer hereunder), the Trustee shall be incompetent or unqualified
to perform such act or acts, in which event such rights, powers,
duties and obligations (including the holding of title to the Trust
Estate or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate Trustee or
co-Trustee, but solely at the direction of the Trustee;
(ii) No co-Trustee hereunder shall be held personally
liable by reason of any act or omission of any other co-Trustee
hereunder; and
(iii) The Servicer and the Trustee acting jointly and
with the consent of the Certificate Insurer may at any time accept
the resignation of or remove any separate Trustee or co-Trustee.
Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate
Trustees and co-Trustees, as effectively as if given to each of them.
Every instrument appointing any separate Trustee or co-Trustee shall
refer to this Agreement and the conditions of this Section 10.14.
Each separate Trustee and co-Trustee, upon its acceptance of the
trusts conferred, shall be vested with the estates or property
specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the
provisions of this Agreement, specifically including every provision
of this Agreement relating to the conduct of, affecting the liability
of, or affording protection to, the Trustee. Every such instrument
shall be filed with the Trustee and a copy thereof given to the
Servicer.
Any separate Trustee or co-Trustee may, at any time,
constitute the Trustee, its agent or attorney-in-fact, with full
power and authority, to the extent not prohibited by law, to do any
lawful act under or in respect of this Agreement on its behalf and in
its name. If any separate Trustee or co-Trustee shall die, become
incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor Trustee.
The Trustee shall give to Moody's, the Sponsor and the
Certificate Insurer notice of the appointment of any co-Trustee or
separate Trustee.<PAGE>
<PAGE>
ARTICLE XI
MISCELLANEOUS
Section 11.1. Compliance Certificates and Opinions.
Upon any application or request by the Sponsor, the Servicer, the
Certificate Insurer or the Owners to the Trustee to take any action
under any provision of this Agreement, the Sponsor, the Servicer, 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 any 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 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 11.2. 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 of an Authorized Officer of the Sponsor,
the Servicer or the Trustee may be based, insofar as it relates to
legal matters, upon an opinion of counsel, unless such Authorized
Officer knows, or in the exercise of reasonable care should know,
that the opinion is erroneous. Any such certificate of an Authorized<PAGE>
<PAGE>
Officer or any opinion of counsel may be based, insofar as it relates
to factual matters upon a certificate or opinion of, or
representations by, one or more Authorized Officers of the Sponsor or
of the Servicer, stating that the information with respect to such
factual matters is in the possession of the Sponsor or of the
Servicer, unless such Authorized Officer or counsel knows, or in the
exercise of reasonable care should know, that the certificate or
opinion or representations with respect to such matters are
erroneous. Any opinion of counsel may also be based, insofar as it
relates to factual matters, upon a certificate or opinion of, or
representations by, an Authorized Officer of the Sponsor, the
Servicer or the Trustee, stating that the information with respect to
such matters is in the possession of such Person, 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 addressee thereof 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 11.3. 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 an
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 Sponsor. 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,<PAGE>
<PAGE>
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 11.4. 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 or by the Sponsor 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 2.2 hereof.
Section 11.5. Notices and Reports to Owners; Waiver
of Notices. Where this Agreement provides for notice to Owners of
any event or the mailing of any report to Owners, such notice or
report shall be sufficiently given (unless otherwise herein expressly
provided) if mailed, first-class postage prepaid, to each Owner
affected by such event or to whom such report is required to be
mailed, at the address of such Owner as it appears on the Register,
not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice or the mailing of such
report. In any case where a notice or report to Owners is mailed in
the manner provided above, neither the failure to mail such notice or
report nor any defect in any notice or report so mailed to any
particular Owner shall affect the sufficiency of such notice or
report with respect to other Owners, and any notice or report which
is mailed in the manner herein provided shall be conclusively
presumed to have been duly given or provided.
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<PAGE>
<PAGE>
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 11.6. Rules by Trustee and Sponsor. The
Trustee may make reasonable rules for any meeting of Owners. The
Sponsor may make reasonable rules and set reasonable requirements for
its functions.
Section 11.7. 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 11.8. 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 11.9. 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 Remittance Date, any Payment Date, any other date on
which any distribution to any Owner is proposed to be paid, or any
date on which a notice is required to be sent to any Person pursuant
to the terms of this Agreement shall not be a Business Day, then
(notwithstanding any other provision of the Certificates or this
Agreement) payment or mailing need not be made on such date, but may
be made on the next succeeding Business Day with the same force and
effect as if made or mailed on the nominal date of any such
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<PAGE>
<PAGE>
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. 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.
Section 11.12. Counterparts. This instrument may be
executed in any number of counterparts, each of which so executed
shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.
Section 11.13. Usury. The amount of interest payable or
paid on any Certificate under the terms of this Agreement shall be
limited to an amount which shall not exceed the maximum nonusurious
rate of interest allowed by the applicable laws of the State of New
York or any applicable law of the United States permitting a higher
maximum nonusurious rate that preempts such applicable New York laws,
which could lawfully be contracted for, charged or received (the
"Highest Lawful Rate"). In the event any payment of interest on any
Certificate exceeds the Highest Lawful Rate, the Trust stipulates
that such excess amount will be deemed to have been paid to the Owner
of such Certificate as a result of an error 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 Sponsor
and the Servicer, may at any time and from time to time, with the
prior written 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 such
amendment, for the purpose of (i) curing any ambiguity, or correcting
or supplementing any provision hereof which may be inconsistent with
any other provision hereof, or to add provisions hereto which are not
inconsistent with the provisions hereof, (ii) upon receipt of an<PAGE>
<PAGE>
opinion of counsel, the cost of which shall be paid by the Servicer,
experienced in federal income tax matters to the effect that no
entity-level tax will be imposed on the Trust or upon the transferor
of a Class R Certificate as a result of the ownership of any Class R
Certificate by a Disqualified Organization, removing the restriction
on transfer set forth in Section 5.8(b) hereof or (iii) complying
with the requirements of the Code and the regulations proposed or
promulgated thereunder; provided, however, that any such action shall
not, as evidenced by an opinion of counsel delivered to the Trustee,
materially and adversely affect the interests of any Owner (without
its written consent).
(b) The Trustee, the Sponsor and the Servicer may, at
any time and from time to time, with the prior written 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 is hereby authorized to accept and execute such amendment,
for the purpose of changing the definition of "Specified Subordinated
Amount".
(c) This Agreement may also be amended by the Trustee,
the Sponsor, and the Servicer at any time and from time to time, with
the prior written approval of the Certificate Insurer and not less
than a majority of the Percentage Interest represented by each
affected Class of Certificates then Outstanding, for the purpose of
adding any provisions or changing in any manner or eliminating any of
the provisions of this Agreement or of modifying in any manner the
rights of the Owners hereunder; provided, however, that no such
amendment shall (i) change in any manner the amount of, or change the
timing of, payments which are required to be distributed to any Owner
without the consent of the Owner of such Certificate or (ii) reduce
the aforesaid percentages of Percentage Interests 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.
(d) Each proposed amendment to this Agreement shall be
accompanied by an opinion of counsel nationally recognized in federal
income tax matters addressed to the Trustee and to the Certificate
Insurer to the effect that such amendment would not adversely affect
the status of the Trust as a REMIC.
(e) The Sponsor shall provide the Certificate Insurer,
the Owners, Moody's and S&P with copies of any amendments to this
Agreement, together with copies of any opinions or other documents or
instruments executed in connection therewith.<PAGE>
<PAGE>
(f) The Trustee shall not be required to enter into any
amendment which affects its rights or obligations hereunder.
Section 11.15. REMIC Status; Taxes. (a) The Tax
Matters Person, at its own expense, shall prepare and file or cause
to be filed with the Internal Revenue Service Federal tax or
information returns with respect to the Trust and the Certificates
containing such information and at the times and in such manner as
may be required by the Code or applicable Treasury regulations, and
shall furnish to Owners such statements or information at the times
and in such manner as may be required thereby. For this purpose, the
Tax Matters Person may, but need not, rely on any proposed
regulations of the United States Department of the Treasury. The Tax
Matters Person shall indicate the election to treat the Trust as a
REMIC (which election shall apply to the taxable period ending
December 31, 1996 and each calendar year thereafter) in such manner
as the Code or applicable Treasury regulations may prescribe. The
Trustee, as Tax Matters Person appointed pursuant to Section 11.17
hereof shall sign all tax information returns filed pursuant to this
Section 11.15. The Tax Matters Person shall provide information
necessary for the computation of tax imposed on the transfer of a
Class R Certificate to a Disqualified Organization, or an agent of a
Disqualified Organization, or a pass-through entity in which a
Disqualified Organization is the record holder of an interest. The
Tax Matters Person shall provide the Trustee with copies of any
Federal tax or information returns filed, or caused to be filed, by
the Tax Matters Person with respect to the Trust or the Certificates.
(b) The Tax Matters Person, at its own expense, shall
timely file all reports 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 Tax Matters Person 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 Tax Matters Person by the Sponsor with
respect to such allocation of expenses. The Tax Matters Person shall
collect any forms or reports from the Owners determined by the
Sponsor to be required under applicable federal, state and local tax
laws.
(c) The Tax Matters Person, at its own expense, shall
provide to the Internal Revenue Service and to persons described in
Section 860E(e)(3) and (6) of the Code the information described in
Proposed Treasury Regulation Section 1.860D-1(b)(5)(ii), or any<PAGE>
<PAGE>
successor regulation thereto. Such information will be provided in
the manner described in Proposed Treasury Regulation Section
1.860E(2)(a)(5), or any successor regulation thereto.
(d) The Sponsor covenants and agrees that within ten
Business Days after the Startup Day it shall provide to the Trustee
any information necessary to enable the Trustee to meet its
obligations under subsections (b) and (c) above.
(e) The Trustee, the Sponsor and the Servicer each
covenants and agrees for the benefit of the Owners (i) to take no
action which would result in the termination of "REMIC" status for
the Trust, (ii) not to engage in any "prohibited transaction", as
such term is defined in Section 860F(a)(2) of the Code and (iii) not
to engage in any other action which may result in the imposition on
the REMIC Trust of any other taxes under the Code.
(f) The Trust shall, for federal income tax purposes,
maintain books on a calendar year basis and report income on an
accrual basis.
(g) Except as otherwise permitted by Section 7.6(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).
(h) Neither the Sponsor 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, which
fee or other compensation is paid from the Trust Estate, other than
as expressly contemplated by this Agreement.
(i) Notwithstanding the foregoing clauses (g) and (h),
the Trustee or the Sponsor may engage in any of the transactions
prohibited by such clauses, provided that the Trustee shall have
received (not at the expense of the Trust or the Trustee) an opinion
of counsel experienced in federal income tax matters to the effect
that such transaction does not result in a tax imposed on the Trust
or cause a termination of REMIC status for the Trust; provided,
however, that such transaction is otherwise permitted under this
Agreement.
Section 11.16. Additional Limitation on Action and
Imposition of Tax. (a) Any provision of this Agreement to the
contrary notwithstanding, the Trustee shall not, without having
obtained (not at the expense of the Trust or the Trustee) an opinion
of counsel experienced in federal income tax matters to the effect
that such transaction does not result in a tax imposed on the Trust<PAGE>
<PAGE>
or cause a termination of REMIC status for the Trust, (i) sell any
assets in the Trust Estate, (ii) accept any contribution of assets
after the Startup Day or (iii) agree to any amendment of this
Agreement under Section 11.14 hereof.
(b) In the event that any tax is imposed on "prohibited
transactions" of the Trust as defined in Section 860F(a)(2) of the
Code, on the "net income from foreclosure property" as defined in
Section 860G(c) of the Code, on any contribution to the Trust after
the Startup Day pursuant to Section 860G(d) of the Code, or any other
tax is imposed, such tax shall be paid by (i) the Trustee, if such
tax arises out of or results from a material breach by the Trustee of
any of its obligations under this Agreement, (ii) the Servicer, if
such tax arises out of or results from a breach by the Servicer of
any of its obligations under this Agreement, or otherwise (iii) the
Owners of the Class R Certificates in proportion to their Percentage
Interests. To the extent such tax is chargeable against the Owners
of the Class R Certificates, notwithstanding anything to the contrary
contained herein, the Trustee is hereby authorized to retain from
amounts otherwise distributable to the Owners of the Class R
Certificates on any Payment Date sufficient funds to reimburse the
Trustee for the payment of such tax (to the extent that the Trustee
has not been previously reimbursed or indemnified therefor). The
Trustee agrees to first seek indemnification for any such tax payment
from any indemnifying parties before reimbursing itself from amounts
otherwise distributable to the Owners of the Class R Certificates.
Section 11.17. Appointment of Tax Matters Person. A Tax
Matters Person will be appointed for Trust for all purposes of the
Code and such Tax Matters Person will perform, or cause to be
performed, without any right of reimbursement, 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, including, but not
limited to, the representation of the Trust in any tax audit
(including any administrative or judicial proceedings with respect
thereto that involve the Internal Revenue Service or state tax
authorities). The Owners of the Class R Certificates hereby
designate the Trustee, acting as their agent, to be the Tax Matters
Person for the Trust.
Section 11.18. The Certificate Insurer. (a) The
Certificate Insurer is a third-party beneficiary of this Agreement.
Any right conferred to the Certificate Insurer shall be suspended
during occurrence and continuance of a Certificate Insurer Default.
During any period of suspension the Certificate Insurer's rights
hereunder shall vest in the Owners of the Class A Certificates and
shall be exercisable by the Owners of at least a majority in
Percentage Interest of the Class A Certificates then Outstanding. At<PAGE>
<PAGE>
such time as the Class A Certificates are no longer Outstanding
hereunder and the Certificate Insurer has been reimbursed for all
Insured Payments to which it is entitled hereunder, the Certificate
Insurer's rights hereunder shall terminate.
Section 11.19. Notices. All notices hereunder shall be
given as follows, until any superseding instructions are given to all
other Persons listed below:
The Trustee: Norwest Bank Minnesota,
National Association
Sixth Street & Marquette Avenue
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust
Department
Re: EquiVantage Home Equity
Loan Trust 1996-2
Tel: (612) 667-7167
Fax: (612) 667-9825
The Sponsor: EquiVantage Acceptance Corp.
13111 Northwest Freeway,
Suite 302
Houston, Texas 77040
Attention: President
Tel: (713) 895-1957
Fax: (713) 895-1999
with a copy addressed to the
attention of the General Counsel
at the same address.
The Servicer: EquiVantage Inc.
13111 Northwest Freeway,
Suite 300
Houston, Texas 77040
Attention: President
Tel: (713) 895-1900
Fax: (713) 895-3870
with a copy addressed to the
attention of the General
Counsel at the same address.<PAGE>
<PAGE>
The Certificate
Insurer : Financial Guaranty Insurance Company
115 Broadway
New York, NY 10006
Attention: Research and Risk
Management Department
Re: EquiVantage Home Equity
Loan Trust 1996-2
Confirmation: (212) 312-3000
Fax: (212) 312-3093
Moody's: Moody's Investors Service
99 Church Street
New York, New York 10007
Attention: The Mortgage
Monitoring Department
S&P: Standard & Poor's Ratings Services
26 Broadway
15th Floor
New York, New York 10004
Attention: Surveillance Dept.
Underwriter: Prudential Securities Incorporated
One New York Plaza
New York, New York 10292
Attention: Asset Backed
Securities Group
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Sponsor, the Servicer and the
Trustee have caused this Agreement to be duly executed by their
respective officers thereunto duly authorized, all as of the day and
year first above written.
EQUIVANTAGE ACCEPTANCE CORP.,
as Sponsor
By: /s/ John E. Smith
______________________________
Name: John E. Smith
Title: President
EQUIVANTAGE INC.,
as Servicer
By: /s/ John E. Smith
________________________________
Name: John E. Smith
Title: President
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee
By: /s/ Kelly Faykus
________________________________
Name: Kelly Faykus
Title: Assistant Vice President
[Pooling and Servicing Agreement]
Exhibit 4.2<PAGE>
<PAGE>
EXECUTION
INDEMNIFICATION AGREEMENT
This Agreement, dated as of May 1, 1996, is by and among
Financial Guaranty Insurance Company (the "Insurer"), as the Insurer
under the certificate guaranty surety bonds (the "Policy") to be
issued in connection with the Certificates described below,
EquiVantage Acceptance Corp. (the "Issuer") and Prudential Securities
Incorporated, as Representative (the "Representative") of itself and
CS First Boston (collectively, the "Underwriters").
1. Definitions. As used in this Agreement, the
following terms shall have the respective meanings stated below:
"Act" means the Securities Act of 1933, as amended,
together with all related rules and regulations.
"Agreement" means this Indemnification Agreement by and
among the Insurer, the Issuer and the Underwriters.
"Certificates" means the EquiVantage Home Equity Loan
Asset-Backed Certificates, Series 1996-2, Class A-1 Fixed Rate, Class
A-2 Fixed Rate, Class A-3 Fixed Rate and Class A-4 Fixed Rate issued
pursuant to a Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement") dated as of May 1, 1996 among the Issuer, as
Sponsor, EquiVantage Inc., as Servicer and Norwest Bank Minnesota,
National Association, as Trustee.
"Class A Certificates" means the EquiVantage Home Equity
Loan Asset-Backed Certificates, Series 1996-2, Class A-1 Fixed Rate,
Class A-2 Fixed Rate, Class A-3 Fixed Rate and Class A-4 Fixed Rate
issued pursuant to the Pooling and Servicing Agreement.
"Indemnified Party" means any party entitled to any
indemnification pursuant to Section 5 below, as the context requires.
"Indemnifying Party" means any party required to provide
indemnification pursuant to Section 5 below, as the context requires.
"Insurer Party" means the Insurer and its respective
parents, subsidiaries and affiliates, and any shareholder, director,
officer, employee, agent or any "controlling person" (as such term is
used in the Act) of any of the foregoing.
"Issuer Party" means the Issuer, each of its parents,
subsidiaries and affiliates, and any shareholder, director, officer,
employee, agent or any "controlling person" (as such term is used in
the Act) of any of the foregoing.
"Losses" means (i) any actual out-of-pocket loss paid by
the party entitled to indemnification or contribution hereunder, and
(ii) any actual out-of-pocket costs and expenses paid by such party,
including reasonable fees and expenses of its counsel, to the extent
not paid, satisfied or reimbursed from funds provided by any other
Person (provided that the foregoing shall not create or imply any
obligation to pursue recourse against any such other Person).
"Person" means any individual, partnership, joint
venture, corporation, trust or unincorporated organization or any
government or agency or political subdivision thereof.
"Prospectus" means the form of final Prospectus, dated
May 7, 1996 as supplemented by the Prospectus Supplement included in
the Registration Statement on each date that the Registration
Statement and any post-effective amendment or amendments thereto
became effective.
"Prospectus Supplement" means the form of final
Prospectus Supplement, dated May 16, 1996 relating to the offer and
sale of the Class A Fixed Rate Certificates.<PAGE>
<PAGE>
"Registration Statement" means the registration statement
on Form S-3 of the Issuer (Registration No. 33-99364) relating to the
Certificates in the form in which it has become effective.
"State Securities Law" means any state, local or foreign
statute, and any rule or regulation thereunder, regulating (i)
transactions and dealings in securities, (ii) any person or entity
engaging in such transactions or advising with respect to securities
or (iii) investment companies.
"Underwriting Agreement" means the Underwriting Agreement
by and among the Issuer, EquiVantage Inc. and the Representative,
dated May 16, 1996.
"Underwriter Party" means the Underwriter and its
parents, subsidiaries and affiliates and any shareholder, director,
officer, employee, agent or "controlling person" (as such term is
used in the Act) of any of the foregoing.
2. Representations and Warranties of the Insurer. The
Insurer represents and warrants to the Underwriter and the Issuer as
follows:
(a) Organization and Licensing. The Insurer is a
duly incorporated and existing New York stock insurance company
licensed to do business in the State of New York.
(b) Corporate Power. The Insurer has the
corporate power and authority to issue the Policy and execute and
deliver this Agreement and to perform all of its obligations
hereunder and thereunder.
(c) Authorization; Approvals. The issuance of
the Policy and the execution, delivery and performance of this
Agreement have been duly authorized by all necessary corporate
proceedings. No further approvals or filings of any kind, including,
without limitation, any further approvals of or further filing with
any governmental agency or other governmental authority, or any
approval of the Insurer's board of directors or stockholders, are
necessary for the Policy and this Agreement to constitute the legal,
valid and binding obligations of the Insurer.
(d) No Conflicts. The execution and delivery of
this Agreement and consummation of the transactions contemplated
hereunder will not result in the breach of any terms or provisions of
the certificate of incorporation or by-laws of Insurer, or result in
the breach of a term or provision of, or conflict with or constitute
a default under or result in the acceleration of any obligation
under, any material agreement or other material instrument to which
the Insurer or its property is subject, or result in the violation of
any law, rule, regulation, order, judgment or decree to which the
Insurer or any of its property is subject or result in the creation
of any lien on any of Insurer's assets or property (other than
pursuant to this Agreement).
(e) Enforceability. The Policy, when issued, and
this Agreement, will each constitute a legal, valid and binding
obligation of the Insurer, enforceable in accordance with its terms
subject to applicable laws affecting the enforceability of creditors'
rights generally and general principles of equity.
(f) Financial Information. The balance sheet of
the Insurer as of December 31, 1995 and the related statements of
income, stockholders' equity and cash flows for the fiscal year then
ended, and the accompanying footnotes, together with an opinion
thereon dated January 19, 1996 of KPMG Peat Marwick LLP, independent
certified public accountants, a copy of which is attached as Appendix
A to the Prospectus (the "Insurer Financial Statements"), fairly
present in all material respects the financial condition of the
Insurer as of such date and for the period covered by such statements
in accordance with generally accepted accounting principles
consistently applied, and, since December 31, 1995, there has been no<PAGE>
<PAGE>
material change in such financial condition of the Insurer which
would materially and adversely affect its ability to perform its
obligations under the Policy.
(g) Insurer Information. The information in the
Prospectus as of the date hereof under the captions "The Certificate
Insurer" and "The Certificate Insurance Policy" (collectively, the
"Insurer Information") is true and correct in all material respects
and does not contain any untrue statement of a fact that is material
to the Insurer's ability to perform its obligations under the Policy.
(h) Limitations. Nothing in this Agreement shall
be construed as a representation or undertaking by the Insurer
concerning maintenance of the rating currently assigned to its
claims-paying ability by Moody's Investors Service, Inc. ("Moody's"),
Standard & Poor's Corporation ("S&P"), or any other rating agency
(collectively, the "Rating Agencies"). The Rating Agencies, in
assigning such rating, may take into account facts and assumptions
not described in the Prospectus, and the facts and assumptions which
are considered by the Rating Agencies are subject to change over
time. The Insurer has not attempted to disclose all facts and
assumptions which the Rating Agencies deem relevant in assigning a
rating within a particular rating category to the Insurer's
claims-paying ability. Notwithstanding the foregoing, the Insurer is
not aware of any facts that, if disclosed to Moody's, or S&P, would
be reasonably expected to result in a downgrade of the rating of the
claims-paying ability of the Insurer by either of such Rating
Agencies.
(i) No Litigation. There are no actions, suits,
proceedings or investigations pending, or to the best of the
Insurer's knowledge, threatened against it at law or in equity or
before or by any court, governmental agency, board or commission or
any arbitrator which, if decided adversely, would materially and
adversely affect its condition (financial or otherwise) or operations
of it or would materially and adversely affect its ability to perform
its obligations under this Agreement or the Policy.
(j) 1933 Act Registration. The Policy is exempt
from registration under the Act.
3. Agreements, Representations and Warranties of the
Underwriters. Each of the Underwriters severally represents and
warrants to and agrees with the Issuer and the Insurer that the
statements contained in the Prospectus under the caption
"Underwriting" and relating to such Underwriter (referred to herein
as the "Underwriters Information") are true and correct in all
material respects.
4. Agreements, Representations and Warranties of the
Issuer. The Issuer represents and warrants to and agrees with the
Insurer and the Underwriters as follows:
(a) Registration Statement. The information in
the Registration Statement, other than the Insurer Information, is
true and correct in all material respects and does not contain any
untrue statement of a fact that is material or omit to state a fact
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) Organization. The Issuer is duly
incorporated and existing under the laws of the State of Delaware 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.
(c) Corporate Power. The Issuer has the
corporate power and authority to execute and deliver this Agreement,
the Underwriting Agreement, the Pooling and Servicing Agreement and
to perform all of its obligations hereunder and thereunder.
(d) Authorization; Approvals. The execution,
delivery and performance of this Agreement, the Underwriting<PAGE>
<PAGE>
Agreement and the Pooling and Servicing Agreement by the Issuer
have been duly authorized by all necessary corporate proceedings.
No further approvals or filings of any kind, including, without
limitation, any further approvals of or further filing with any
governmental agency or other governmental authority, or any approval
of the Issuer's board of directors or stockholders, are necessary
for this Agreement, the Underwriting Agreement and the Pooling and
Servicing Agreement to constitute the legal, valid and binding
obligations of the Issuer.
(e) No Conflicts. The execution and delivery of
this Agreement and consummation of the transactions contemplated
hereunder will not result in the breach of any terms or provisions of
the certificate of incorporation or by-laws of Issuer or result in
the breach of a term or provision of, or conflict with or constitute
a default under or result in the acceleration of any obligation
under, any material agreement or other material instrument to which
the Issuer or its property is subject, or result in the violation of
any law, rule, regulation, order, judgment or decree to which the
Issuer or any of its property is subject or result in the creation of
any lien on any of Issuer's assets or property (other than pursuant
to this Agreement).
(f) Enforceability. This Agreement, the Pooling
and Servicing Agreement and the Underwriting Agreement, will each
constitute a legal, valid and binding obligation of the Issuer,
enforceable in accordance with its terms subject, as to the
enforcement of remedies, to bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting the enforceability of
creditors' rights generally applicable in the event of the
bankruptcy, insolvency or reorganization of the Issuer and to general
principles of equity.
(g) No Litigation. There are no actions, suits,
proceedings or investigations pending, or to the best of the Issuer's
knowledge, threatened against it at law or in equity or before any
court, governmental agency, board or commission or any arbitrator
which, if decided adversely, would materially and adversely affect
its condition (financial or otherwise) or operations of it or would
materially and adversely affect its ability to perform its
obligations under this Agreement, the Underwriting Agreement or the
Pooling and Servicing Agreement.
5. Indemnification.
---------------
(a) The Insurer hereby agrees, upon the terms and
subject to the conditions of this Agreement, to indemnify, defend and
hold harmless each Issuer Party and each Underwriter Party against
any and all Losses incurred by them with respect to the offer and
sale of the Certificates and resulting from the Insurer's breach of
any of its representations and warranties set forth in Section 2 of
this Agreement.
(b) The Underwriters hereby severally and not
jointly agree, upon the terms and subject to the conditions of this
Agreement, to indemnify, defend and hold harmless each Insurer Party
against any and all Losses incurred by them which arise out of or are
based upon (i) any untrue statement or alleged untrue statement of a
material fact in the Underwriters Information or (ii) the omission or
alleged omission to state in the Underwriters Information a material
fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which
they were made, not misleading.
(c) The Issuer hereby agrees, upon the terms and
subject to the conditions of this Agreement, to indemnify, defend and
hold harmless each Insurer Party against any and all losses incurred
by them with respect to the offer and sale of the Certificates and
resulting from the Issuer's breach of any of its representations and
warranties set forth in Section 4 of this Agreement.<PAGE>
<PAGE>
(d) Upon the incurrence of any Losses entitled to
indemnification hereunder, the Indemnifying Party shall reimburse the
Indemnified Party promptly upon establishment by the Indemnified
Party to the Indemnifying Party of the Losses incurred.
6. Insurer Undertaking. The Insurer hereby agrees
that, for so long as the Underwriters are required under the Act to
deliver a Prospectus in connection with the sale of the Class A
Certificates, the Insurer will furnish to either the Representative
or the Issuer, or both, upon written request of such party or parties
and at the expense of the Underwriters or the Issuer, as the case may
be, copies of the Insurer's most recent financial statements (annual
or interim, as the case may be) prepared in accordance with generally
accepted accounting principles (subject, as to interim statements, to
normal year-end adjustments and to the absence of footnotes) within a
reasonable time after they are available.
7. Notice to be Given to the Insurer. Except as
provided in Section 10 below with respect to contribution, the
indemnification provided herein by the Insurer shall be the exclusive
remedy of the Underwriter Party or Issuer Party for the Losses
resulting from the Insurer's breach of a representation, warranty or
agreement hereunder; provided, however, that the Underwriter Party or
Issuer Party shall be entitled to pursue any other remedy at law or
in equity for any such breach so long as the damages sought to be
recovered shall not exceed the Losses incurred thereby resulting from
such breach. In the event that any action or regulatory proceeding
shall be commenced or claim asserted which may entitle the
Underwriter Party or Issuer Party to be indemnified under this
Agreement, such party shall give the Insurer written or telegraphic
notice of such action or claim reasonably promptly after receipt of
written notice thereof. The Insurer shall be entitled to participate
in the defense of any such action or claim in reasonable cooperation
with, and with the reasonable cooperation of, the Issuer Party or
Underwriter Party, as the case may be. The Indemnified Party will
have the right to employ its own counsel in any such action in
addition to counsel for the Insurer, but the fees and expenses of
such counsel will be at the expense of such Indemnified Party unless
(1) the employment of counsel by the Indemnified Party at its expense
has been authorized in writing by the Insurer, or (2) the Insurer has
not in fact employed counsel to assume the defense of such action
within a reasonable time after receiving notice of the commencement
of the action, or (3) the named parties to any such action include
the Insurer on the one hand, and, on the other hand, the Indemnified
Party, and such Indemnified Party shall have been advised by counsel
that there may be one or more legal defenses available to it which
are different from or additional to those available to the Insurer
(in which case, if such Indemnified Party notifies the Insurer in
writing that it elects to employ separate counsel at the expense of
the Insurer, the Insurer shall not have the right to assume the
defense of such action or proceeding on such Indemnified Party's
behalf), in each of which cases the reasonable fees and expenses of
counsel (including local counsel) will be at the expense of the
Insurer and all such fees and expenses will be reimbursed promptly as
they are incurred but, in connection with any one action or separate
but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, the
Insurer shall not be liable for the fees and expenses of more than
one counsel for all Issuer Parties and more than one counsel for all
Underwriter Parties. The Underwriter Parties and Issuer Parties
shall cooperate with the Insurer Parties in resolving any event which
would give rise to an indemnity obligation pursuant to Section 5(a)
hereof in the most efficient manner. No settlement of any such claim
or action shall be entered into without the consent of the Issuer
Party or Underwriter Party, as the case may be, who is subject to
such claim or action, on the one hand and the Insurer Party who is
subject to such claim or action on the other hand; provided, however,
that the consent of such Issuer Party or such Underwriter Party, as
applicable, shall not be required if such settlement fully
discharges, with prejudice against the plaintiff, the claim or action
against such Issuer Party or Underwriter Party. Any failure by an
Issuer Party or Underwriter Party, as the case may be, to comply with
the provisions of this Section shall relieve the Insurer of liability<PAGE>
<PAGE>
only if such failure is materially prejudicial to any legal
pleadings, grounds, defenses or remedies in respect thereof or the
Insurer's financial liability hereunder and then only to the extent
of such prejudice.
8. Notice to be Given to the Representative. Except
as provided below in Section 10 with respect to contribution, the
indemnification provided herein by the Underwriters shall be the
exclusive remedy of any Insurer Party for the Losses resulting from
the Underwriter's breach of a representation, warranty or agreement
hereunder; provided, however, that the Insurer Party shall be
entitled to pursue any other remedy at law or in equity for any such
breach so long as the damages sought to be recovered shall not exceed
the Losses incurred thereby resulting from such breach. In the event
that any action or regulatory proceeding shall be commenced or claim
asserted which may entitle an Insurer Party to be indemnified under
this Agreement, such party shall give the Representative written or
telegraphic notice of such action or claim reasonably promptly after
receipt of written notice thereof. The Underwriters shall be
entitled to participate in the defense of any such action or claim in
reasonable cooperation with, and with the reasonable cooperation of,
the Insurer Party. The Indemnified Party will have the right to
employ its own counsel in any such action in addition to counsel for
the Underwriters, but the fees and expenses of such counsel will be
at the expense of such Indemnified Party unless (1) the employment of
counsel by the Indemnified Party at its expense has been authorized
in writing by the Representative, or (2) the Underwriters have not in
fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the
action, or (3) the named parties to any such action include the
Underwriters on the one hand, and on the other hand, the Indemnified
Party, and such Indemnified Party shall have been advised by counsel
that there may be one or more legal defenses available to it which
are different from or additional to those available to the
Underwriters (in which case, if such Indemnified Party notifies the
Representative in writing that it elects to employ separate counsel
at the expense of the Underwriters, the Underwriters shall not have
the right to assume the defense of such action or proceeding on such
Indemnified Party's behalf), in each of which cases the reasonable
fees and expenses of counsel will be at the expense of the
Underwriters and all such fees and expenses will be reimbursed
promptly as they are incurred but, in connection with any one action
or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or
circumstances, the Underwriters shall not be liable for the fees and
expenses of more than one counsel for all Insurer Parties. The
Insurer Party shall cooperate with the Underwriter Party and the
Issuer Party in resolving any event which would give rise to an
indemnification obligation pursuant to Section 5(b) hereof in the
most efficient manner. No settlement of any such claim or action
shall be entered into without the consent of the Insurer Party who is
subject to such claim or action, on the one hand and the Underwriter
Party who is subject to such claim or action on the other hand;
provided, however, that the consent of such Insurer Party shall not
be required if such settlement fully discharges, with prejudice
against the plaintiff, the claim or action against such Insurer
Party. Any failure by an Insurer Party to comply with the provisions
of this Section shall relieve the Underwriters of liability only if
such failure is materially prejudicial to any legal pleadings,
grounds, defenses or remedies in respect thereof or the Underwriters'
liability hereunder and then only to the extent of such prejudice.
9. Notice to be Given to the Issuer. Except as
provided below in Section 10 with respect to contribution, the
indemnification provided herein by the Issuer shall be the exclusive
remedy of any Insurer Party for the Losses resulting from the
Issuer's breach of a representation, warranty or agreement hereunder;
provided, however, that the Insurer Party shall be entitled to pursue
any other remedy at law or in equity for any such breach so long as
the damages sought to be recovered shall not exceed the Losses
incurred thereby resulting from such breach. In the event that any
action or regulatory proceeding shall be commenced or claim asserted
which may entitle an Insurer Party to be indemnified under this<PAGE>
<PAGE>
Agreement, such party shall give the Issuer written or telegraphic
notice of such action or claim reasonably promptly after receipt of
written notice thereof. The Issuer shall be entitled to participate
in the defense of any such action or claim in reasonable cooperation
with, and with the reasonable cooperation of, the Insurer Party. The
Indemnified Party will have the right to employ its own counsel in
any such action in addition to counsel for the Issuer, but the fees
and expenses of such counsel will be at the expense of such
Indemnified Party unless (1) the employment of counsel by the
Indemnified Party at its expense has been authorized in writing by
the Issuer, or (2) the Issuer has not in fact employed counsel to
assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, or (3) the named
parties to any such action include the Issuer on the one hand, and on
the other hand, the Indemnified Party, and such Indemnified Party
shall have been advised by counsel that there may be one or more
legal defenses available to it which are different from or additional
to those available to the Issuer (in which case, if such Indemnified
Party notifies the Issuer in writing that it elects to employ
separate counsel at the expense of the Issuer, the Issuer shall not
have the right to assume the defense of such action or proceeding on
such Indemnified Party's behalf), in each of which cases the
reasonable fees and expenses of counsel will be at the expense of the
Issuer and all such fees and expenses will be reimbursed promptly as
they are incurred but, in connection with any one action or separate
but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, the
Issuer shall not be liable for the fees and expenses of more than one
counsel for all Insurer Parties. The Insurer Party shall cooperate
with the Issuer Party and the Underwriter Party in resolving any
event which would give rise to an indemnification obligation pursuant
to Section 5(c) hereof in the most efficient manner. No settlement
of any such claim or action shall be entered into without the consent
of the Insurer Party, who is subject to such claim or action, on the
one hand and the Issuer Party on the other hand; provided, however,
that the consent of such Insurer Party shall not be required if such
settlement fully discharges, with prejudice against the plaintiff,
the claim or action against such Insurer Party. Any failure by an
Insurer Party to comply with the provisions of this Section shall
relieve the Issuer of liability only if such failure is materially
prejudicial to any legal pleadings, grounds, defenses, or remedies in
respect thereof or the Issuer's liability hereunder and then only to
the extent of such prejudice.
10. Contribution.
(a) To provide for just and equitable
contribution if the indemnification provided by the Insurer is
determined to be unavailable for any Underwriter Party or Issuer
Party (other than pursuant to Section 5 or 7 of this Agreement), the
Insurer shall contribute to the aggregate costs of liabilities
arising from any breach of a representation or warranty set forth in
this Agreement on the basis of the relative fault of all Underwriter
Parties, all Issuer Parties and all Insurer Parties, respectively.
(b) To provide for just and equitable
contribution if the indemnification provided by the Issuer is
determined to be unavailable for any Insurer Party (other than
pursuant to Section 5 or 9 of this Agreement), the Issuer shall
contribute to the aggregate costs of liabilities arising from any
breach of a representation or warranty set forth in this Agreement on
the basis of the relative fault of all Underwriter Parties, all
Issuer Parties and all Insurer Parties.
(c) To provide for just and equitable
contribution if the indemnification provided by the Underwriters is
determined to be unavailable for any Insurer Party (other than
pursuant to Section 5 or 8 of this Agreement), the Underwriters shall
contribute to the aggregate costs of liabilities arising from (i) any
untrue statement or alleged untrue statement of a material fact in
the Underwriters Information or (ii) the omission or alleged omission
to state in the Underwriters Information a material fact required to
be stated therein or necessary to make the statements therein, in the<PAGE>
<PAGE>
light of the circumstances under which they were made, not misleading
on the basis of the relative fault of all Underwriter Parties, all
Issuer Parties and all Insurer Parties; provided however, that the
Underwriter Party shall not be liable for any amount in excess of (i)
the excess of the sales prices of the Class A Certificates to the
public over the prices paid therefor by the Underwriters, over (ii)
the aggregate amount of any damages which the Underwriter Party has
been otherwise required to pay in respect of the same or any
substantially similar claim.
(d) The relative fault of each Indemnifying
Party, on the one hand, and of each Indemnified Party, on the other,
shall be determined by reference to, among other things, whether the
breach of, or alleged breach of, any of its representations and
warranties set forth in Section 2, 3 or 4 of this Agreement relates
to information supplied by, or action within the control of, the
Indemnifying Party or the Indemnified Party and the parties' relative
intent, knowledge, access to information and opportunity to correct
or prevent such breach.
(e) The parties agree that the Insurer shall be
solely responsible for the Insurer Information and for the Insurer
Financial Statements, that the Underwriters shall be solely
responsible for the Underwriters Information and that the Issuer
shall be responsible for all other information in the Registration
Statement and in the Prospectus.
(f) No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation.
(g) The indemnity and contribution agreements
contained in this Agreement shall remain operative and in full force
and effect, regardless of (i) any investigation made by or on behalf
of any Underwriter Party, any Issuer Party or any Insurer Party, (ii)
the issuance of the Certificates or the Policy or (iii) any
termination of this Agreement.
(h) Upon the incurrence of any Losses entitled to
contribution hereunder, the contributor shall reimburse the party
entitled to contribution promptly upon establishment by the party
entitled to contribution to the contributor of the Losses incurred.
It is understood and agreed that the indemnities set
forth in this Agreement shall service the execution and delivery of
this Agreement and the issuance, sale and delivery of the Class A
Certificates.
11. Notices. All notices and other communications
provided for under this Agreement shall be addressed to the address
set forth below as to each party or at such other address as shall be
designated by a party in a written notice to the other party.
If to the Insurer: Financial Guaranty Insurance Company
115 Broadway
New York, New York 10006
Attention: General Counsel
If to the Issuer: EquiVantage Acceptance Corp.
13111 Northwest Freeway,
Suite 300
Houston, Texas 77040
If to the Underwriter: Prudential Securities Incorporated
1 New York Plaza, 26th Floor
New York, New York 10292
Attn: Legal Department<PAGE>
<PAGE>
12. Governing Law, Etc. This Agreement shall be deemed
to be a contract under the laws of the State of New York and shall be
governed by and construed in accordance with the laws of the State of
New York without regard to its conflicts of laws provisions. This
Agreement may not be assigned by any party without the express
written consent of each other party. Amendments of this Agreement
shall be in writing signed by each party. This Agreement shall not
be effective until executed by each of the Insurer, the Issuer and
the Representative.
13. Underwriting Agreement; Pooling and Servicing
Agreement. This Agreement in no way limits or otherwise affects the
indemnification obligations of the Issuer under (a) the Underwriting
Agreement or (b) the Pooling and Servicing Agreement.
14. Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall together constitute
but one and the same instrument.<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their respective
officers thereunto duly authorized, all as of the date first above
written.
FINANCIAL GUARANTY INSURANCE COMPANY
By: /s/ Jay L. Remis
__________________________
Name: Jay L. Remis
Title: Vice President
EQUIVANTAGE ACCEPTANCE CORP.
By: /s/ John E. Smith
__________________________
Name: John E. Smith
Title: President
PRUDENTIAL SECURITIES INCORPORATED
By: /s/ Len Blum
__________________________
Name: Len Blum
Title:
[Indemnification Agreement]
Exhibit 4.3<PAGE>
<PAGE>
Execution
- --------------------------------------------------------------
INSURANCE AND INDEMNITY AGREEMENT
by and among
FINANCIAL GUARANTY INSURANCE COMPANY,
EQUIVANTAGE ACCEPTANCE CORP.
and
EQUIVANTAGE INC.
Dated as of May 1, 1996
$100,000,000
EquiVantage Home Equity Loan Trust 1996-2
Home Equity Loan Asset-Backed Certificates
Series 1996-1, Class A-1, Class A-2, Class A-3 and Class A-4
------------------------------------------------------------<PAGE>
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS; LIMITED RECOURSE
Section 1.01. Definitions. . . . . . . . . . . . . . . . 1
Section 1.02. Limited Recourse . . . . . . . . . . . . . 1
ARTICLE II REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Representations and Warranties
of the Sponsor. . . . . . . . . . . . . . 2
Section 2.02. Representations and Warranties
of the Company. . . . . . . . . . . . . . 5
Section 2.03. Affirmative Covenants of the Sponsor. . . 8
Section 2.04. Affirmative Covenants of the Company. . . 11
Section 2.05. Negative Covenants of the Sponsor . . . . 15
Section 2.06. Negative Covenants of the Company . . . . 16
ARTICLE III THE POLICY; REIMBURSEMENT; INDEMNIFICATION
Section 3.01. Issuance of the Policy . . . . . . . . . 17
Section 3.02. Payment of Fees and Premium. . . . . . . 17
Section 3.03. Reimbursement and Additional
Payment Obligation . . . . . . . . . . . 17
Section 3.04. Indemnification. . . . . . . . . . . . . 18
Section 3.05. Subrogation. . . . . . . . . . . . . . . 21
ARTICLE IV FURTHER AGREEMENTS
Section 4.01. Effective Date; Term of Agreement. . . . 21
Section 4.02. Obligations Absolute . . . . . . . . . . 21
Section 4.03. Assignments; Reinsurance;
Third-Party Rights . . . . . . . . . . . 23
Section 4.04. Liability of FGIC. . . . . . . . . . . . 23
Section 4.05. Waiver of FGIC Rights. . . . . . . . . . 24
ARTICLE V EVENTS OF DEFAULT; REMEDIES
Section 5.01. Events of Default. . . . . . . . . . . . 24
Section 5.02. Remedies; Waivers. . . . . . . . . . . . 25
ARTICLE VI MISCELLANEOUS
Section 6.01. Amendments, Etc. . . . . . . . . . . . . 26
Section 6.02. Notices. . . . . . . . . . . . . . . . . 26
Section 6.03. Payment Procedure. . . . . . . . . . . . 27
Section 6.04. Severability . . . . . . . . . . . . . . 28
Section 6.05. Governing Law. . . . . . . . . . . . . . 28
Section 6.06. Consent to Jurisdiction. . . . . . . . . 28
Section 6.07. Consent of FGIC. . . . . . . . . . . . . 29
Section 6.08. Counterparts . . . . . . . . . . . . . . 29
Section 6.09. Trial by Jury Waived . . . . . . . . . . 29
Section 6.10. Limited Liability. . . . . . . . . . . . 30
Section 6.11. Entire Agreement . . . . . . . . . . . . 30
Appendix I - Definitions
Appendix II - Opinions of Counsel
Annex I - Form of Financial Guaranty Insurance Policy
Appendix A - Conditions Precedent to Issuance of the Policy
<PAGE>
<PAGE>
INSURANCE AND INDEMNITY AGREEMENT
INSURANCE AND INDEMNITY AGREEMENT dated as of May 1, 1996, by
and among FINANCIAL GUARANTY INSURANCE COMPANY ("FGIC"), EQUIVANTAGE
ACCEPTANCE CORP. (the "Sponsor") and EQUIVANTAGE INC. (the
"Company").
INTRODUCTORY STATEMENTS
The Sponsor intends to deposit the Mortgage Loans in the Trust,
which shall issue Home Equity Loan Asset-Backed Certificates, Series
1996-2, Class A-1, Class A-2, Class A-3 and Class A-4 pursuant to a
Pooling and Servicing Agreement dated as of May 1, 1996 among the
Sponsor, the Company, as servicer, and the Trustee.
The Sponsor has requested that FGIC issue a financial guaranty
insurance policy guarantying certain distributions on the Securities
(including any such distributions subsequently avoided as a
preference under applicable United States bankruptcy law) upon the
terms and subject to the conditions provided herein and subject to
compliance with certain procedures set forth in the Pooling and
Servicing Agreement.
The parties hereto desire to specify the conditions precedent
to the issuance of the Policy by FGIC, the payment of premium in
respect of the Policy, the indemnity and reimbursement to be provided
to FGIC in respect of amounts paid by FGIC under the Policy or
otherwise and certain other matters.
In consideration of the premises and of the agreements herein
contained, FGIC, the Sponsor and the Company hereby agree as follows:
ARTICLE I
DEFINITIONS; LIMITED RECOURSE
Section 1.01. Definitions. Capitalized terms used herein
shall have the meanings provided in Appendix I hereto unless the
context otherwise requires.
Section 1.02. Limited Recourse. Notwithstanding any provision
of this Agreement to the contrary, the payment obligations set forth
herein (other than those set forth in Sections 3.02(a), 3.02(b)(i)
and 3.04) shall be non-recourse obligations with respect to the
Sponsor and the Company and shall be payable only from monies
available for such payment in accordance with the provisions of the
Pooling and Servicing Agreement.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Representations and Warranties of the Sponsor.
The Sponsor represents, warrants and covenants, as of the date hereof
and as of the Date of Issuance, as follows:
(a) Due Organization and Qualification. The Sponsor is
a corporation, duly organized, validly existing and in good standing
under the laws of the State of Delaware. The Sponsor is duly
qualified to do business, is in good standing and has obtained all
necessary licenses, permits, charters, registrations and approvals
(together, "approvals") necessary for the conduct of its business as
currently conducted and as described in the Offering Document and the
performance of its obligations under the Transaction Documents, in
each jurisdiction in which the failure to be so qualified or to
obtain such approvals would render any Mortgage Loan unenforceable in
any respect or would otherwise have a material adverse effect upon
the Transaction.<PAGE>
<PAGE>
(b) Power and Authority. The Sponsor has all necessary
corporate power and authority to conduct its business as currently
conducted and as described in the Offering Document, to execute,
deliver and perform its obligations under the Transaction Documents
and to consummate the Transaction.
(c) Due Authorization. The execution, delivery and
performance of the Transaction Documents by the Sponsor have been
duly authorized by all necessary corporate action and do not require
any additional approvals or consents or other action by or any notice
to or filing with any Person, including, without limitation, any
governmental entity or the Sponsor's stockholders.
(d) Noncontravention. Neither the execution and
delivery of the Transaction Documents by the Sponsor, the
consummation of the transactions contemplated thereby nor the
satisfaction of the terms and conditions of the Transaction
Documents,
(i) conflicts with or results in any breach or
violation of any provision of the certificate of incorporation or
by-laws of the Sponsor or any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award currently in
effect having applicability to the Sponsor or any of its properties,
including regulations issued by an administrative agency or other
governmental authority having supervisory powers over the Sponsor,
(ii) constitutes a default by the Sponsor under or
a breach of any provision of any loan agreement, mortgage, indenture
or other agreement or instrument to which the Sponsor is a party or
by which it or any of its properties is or may be bound or affected,
or
(iii) results in or requires the creation of any
Lien upon or in respect of any of the Sponsor's assets except as
otherwise expressly contemplated by the Transaction Documents.
(e) Legal Proceedings. There is no action, proceeding
or investigation by or before any court, governmental or
administrative agency or arbitrator against or affecting all or any
of the Mortgage Loans, or the Sponsor, or any properties or rights of
the Sponsor, pending or, to the Sponsor's knowledge after reasonable
inquiry, threatened, which, in any case, if decided adversely to the
Sponsor, would result in a Material Adverse Change with respect to
the Sponsor or any Mortgage Loan.
(f) Valid and Binding Obligations. The Transaction
Documents, when executed and delivered by the Sponsor, will
constitute the legal, valid and binding obligations of the Sponsor,
enforceable in accordance with their respective terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and general equitable principles. The Securities,
when executed, authenticated and delivered in accordance with the
Pooling and Servicing Agreement, will be validly issued and
outstanding and entitled to the benefits of the Pooling and Servicing
Agreement and, together with the Class R Certificates, will evidence
the entire beneficial ownership interest in the Trust Fund.
(g) Financial Statements. The Financial Statements of
the Company (which includes the Sponsor's assets and operations),
copies of which have been furnished to FGIC by the Company, (i) are,
as of the dates and for the periods referred to therein, complete and
correct in all material respects, (ii) present fairly the financial
condition and results of operations of the Company as of the dates
and for the periods indicated and (iii) have been prepared in
accordance with generally accepted accounting principles consistently
applied, except as noted therein (subject as to interim statements to
normal year-end adjustments). Since the date of the most recent
Financial Statements, there has been no material adverse change in
such financial condition or results of operations. Except as
disclosed in the Financial Statements, the Company is not subject to
any contingent liabilities or commitments that, individually or in<PAGE>
<PAGE>
the aggregate, have a material possibility of causing a Material
Adverse Change in respect of the Sponsor.
(h) ERISA. The Sponsor is in compliance with ERISA and
has not incurred and does not reasonably expect to incur liabilities
to the PBGC under ERISA in connection with any Plan or Multiemployer
Plan.
(i) Accuracy of Information. None of the Provided
Documents contain any statement of a material fact with respect to
the Sponsor or the Transaction that was untrue or misleading in any
material respect when made. Since the furnishing of the Provided
Documents, there has been no change, nor any development or event
involving a prospective change known to the Sponsor, that would
render any of the Provided Documents untrue or misleading in any
material respect. There is no fact known to the Sponsor which has a
material possibility of causing a Material Adverse Change with
respect to the Sponsor or the Mortgage Loans.
(j) Compliance With Securities Laws. The offer and
sale of the Securities comply in all material respects with all
requirements of law, including all registration requirements of
applicable securities laws. Without limitation of the foregoing, the
Offering Document does not contain any untrue statement of a material
fact and does not omit to state a material fact required to be stated
therein or necessary to make the statements made therein, in light of
the circumstances under which they were made, not misleading.
Neither the Trust nor the Trust Fund is required to be registered as
an "investment company" under the Investment Company Act. The
Pooling and Servicing Agreement is not required to be qualified under
the Trust Indenture Act.
(k) Transaction Documents. Each of the representations
and warranties of the Sponsor contained in the Transaction Documents
is true and correct in all material respects and the Sponsor hereby
makes each such representation and warranty to, and for the benefit
of, FGIC as if the same were set forth in full herein.
(l) Compliance With Law, Etc. No practice, procedure
or policy employed or proposed to be employed by the Sponsor in the
conduct of its business violates any law, regulation, judgment,
agreement, order or decree applicable to the Sponsor which, if
enforced, would result in a Material Adverse Change with respect to
the Sponsor.
(m) Good Title; Absence of Liens; Security Interest.
The Sponsor is the owner of, and has good and marketable title to,
the Mortgage Loans free and clear of all Liens and Restrictions on
Transferability, and has full right, corporate power and lawful
authority to assign, transfer and pledge the Mortgage Loans. In the
event that, in contravention of the intention of the parties, the
transfer of the Mortgage Loans by the Sponsor to the Trust is
characterized as other than a sale, such transfer shall be
characterized as a secured financing, and the Trustee shall, for the
benefit of the Certificateholders and FGIC, have a valid and
perfected first priority security interest in the Mortgage Loans free
and clear of all Liens and Restrictions on Transferability.
(n) Taxes. The Sponsor has filed all federal and state
tax returns which are required to be filed and paid all taxes,
including, any assessments received by it, to the extent that such
taxes have become due. Any taxes, fees and other governmental
charges payable by the Sponsor in connection with the Transaction,
the execution and delivery of the Transaction Documents and the
issuance of the Securities have been paid or shall have been paid at
or prior to the Date of Issuance.
(o) Solvency; Fraudulent Conveyance. The Sponsor is
solvent and will not be rendered insolvent by the transactions
contemplated by the Transaction Documents and, after giving effect to
such transactions, the Sponsor will not be left with an unreasonably
small amount of capital with which to engage in its business. The
Sponsor does not intend to incur, or believe that it has incurred,<PAGE>
<PAGE>
debts beyond its ability to pay such debts as they mature. The
Sponsor does not contemplate the commencement of insolvency,
bankruptcy, liquidation or consolidation proceedings or the
appointment of a receiver, liquidator, conservator, trustee or
similar official in respect of the Sponsor or any of its assets.
The amount of consideration being received by the Sponsor upon
the sale of the Securities to the Underwriters constitutes
reasonably equivalent value and fair consideration for the interest
in the Mortgage Loans evidenced by the Securities. The Sponsor
is not transferring the Mortgage Loans to the Trust or selling the
Securities to the Underwriters, as provided in the Transaction
Documents, with any intent to hinder, delay or defraud any of the
Sponsor's creditors.
Section 2.02. Representations and Warranties of the Company.
The Company represents, warrants and covenants, as of the date hereof
and as of the Date of Issuance, as follows:
(a) Due Organization and Qualification. The Company is
a corporation, duly organized, validly existing and in good standing
under the laws of the State of Delaware. The Company and each of its
Subsidiaries is duly qualified to do business, is in good standing
and has obtained all necessary licenses, permits, charters,
registrations and approvals (together, "approvals") necessary for the
conduct of its business as currently conducted and as described in
the Offering Document and the performance of its obligations under
the related Transaction Documents, in each jurisdiction in which the
failure to be so qualified or to obtain such approvals would have a
material adverse effect upon the Transaction.
(b) Power and Authority. The Company has all necessary
power and authority to conduct its business as currently conducted,
to execute, deliver and perform its obligations under the related
Transaction Documents and to consummate the Transaction.
(c) Due Authorization. The execution, delivery and
performance of the related Transaction Documents by the Company have
been duly authorized by all necessary action and do not require any
additional approvals or consents or other action by or any notice to
or filing with any Person, including, without limitation, any
governmental entity.
(d) Noncontravention. Neither the execution and
delivery of the related Transaction Documents by the Company, the
consummation of the transactions contemplated thereby nor the
satisfaction of the terms and conditions of the related Transaction
Documents,
(i) conflicts with or results in any breach or
violation of any provision of the Certificate of Incorporation or
Bylaws of the Company or any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award currently in
effect having applicability to the Company or any of its properties,
including regulations issued by an administrative agency or other
governmental authority having supervisory powers over the Company,
(ii) constitutes a default by the Company under or
a breach of any provision of any loan agreement, mortgage, indenture
or other agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which it or any of its or their
properties is or may be bound or affected, or
(iii) results in or requires the creation of any
Lien upon or in respect of any of the Company's assets except as
otherwise expressly contemplated by the related Transaction
Documents.
(e) Legal Proceedings. There is no action, proceeding
or investigation by or before any court, governmental or
administrative agency or arbitrator against or affecting all or any
of the Mortgage Loans, or the Company or any properties or rights of
the Company pending or, to the Company's knowledge after reasonable
inquiry, threatened, which, in any case, if decided adversely to the<PAGE>
<PAGE>
Company, would result in a Material Adverse Change with respect to
the Company or any Mortgage Loan.
(f) Valid and Binding Obligations. The related
Transaction Documents, when executed and delivered by the Company,
will constitute the legal, valid and binding obligations of the
Company, enforceable in accordance with their respective terms,
except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general equitable
principles.
(g) Financial Statements. The Financial Statements of
the Company (which includes the Sponsor's assets and operations),
copies of which have been furnished to FGIC by the Company, (i) are,
as of the dates and for the periods referred to therein, complete and
correct in all material respects, (ii) present fairly the financial
condition and results of operations of the Company as of the dates
and for the periods indicated and (iii) have been prepared in
accordance with generally accepted accounting principles consistently
applied, except as noted therein (subject as to interim statements to
normal year-end adjustments). Since the date of the most recent
Financial Statements, there has been no material adverse change in
such financial condition or results of operations. Except as
disclosed in the Financial Statements, the Company is not subject to
any contingent liabilities or commitments that, individually or in
the aggregate, have a material possibility of causing a Material
Adverse Change in respect of the Company.
(h) ERISA. No Accumulated Funding Deficiency, whether
or not waived, has occurred with respect to any Plan. No Plan has
been terminated, and no Commonly Controlled Entity has withdrawn from
any Multiemployer Plan which could result in any liability under
ERISA of a Commonly Controlled Entity. No Reportable Event or other
event or condition has occurred which could result in the termination
of any Plan by the PBGC. No Plan has an Underfunding greater than
$100,000. The aggregate amount of Underfunding for all Underfunded
Plans does not exceed $100,000. The liability to which the Commonly
Controlled Entities would become subject under ERISA if they were to
withdraw completely from all Multiemployer Plans as of the most
recent valuation date is not in excess of $100,000. The
Multiemployer Plans are neither in Reorganization (as defined in
Section 4241 of ERISA) nor Insolvent (as defined in Section 4245 of
ERISA).
(i) Accuracy of Information. None of the Provided
Documents contain any statement of a material fact with respect to
the Company or the Transaction that was untrue or misleading in any
material respect when made. Since the furnishing of the Provided
Documents, there has been no change, nor any development or event
involving a prospective change known to the Company, that would
render any of the Provided Documents untrue or misleading in any
material respect. There is no fact known to the Company which has a
material possibility of causing a Material Adverse Change with
respect to the Company or the Mortgage Loans.
(j) Transaction Documents. Each of the representations
and warranties of the Company contained in the related Transaction
Documents is true and correct in all material respects and the
Company hereby makes each such representation and warranty to, and
for the benefit of, FGIC as if the same were set forth in full
herein.
(k) Compliance With Law, Etc. No practice, procedure
or policy employed or proposed to be employed by the Company in the
conduct of its business violates any law, regulation, judgment,
agreement, order or decree applicable to the Company which, if
enforced, would result in a Material Adverse Change with respect to
the Company.
(l) Good Title; Absence of Liens; Security Interest.
Immediately prior to the sale of the Mortgage Loans to the Sponsor,
the Company was the owner of, and had good and marketable title to,<PAGE>
<PAGE>
the Mortgage Loans free and clear of all Liens and Restrictions on
Transferability, and had full right, corporate power and lawful
authority to assign, transfer and pledge the Mortgage Loans to the
Sponsor.
(m) Taxes. The Company, has filed all federal and
state tax returns which are required to be filed and paid all taxes,
including any assessments received by it, to the extent that such
taxes have become due. Any taxes, fees and other governmental
charges payable by the Company in connection with the Transaction,
the execution and delivery of the Transaction Documents and the
issuance of the Securities have been paid or shall have been paid
at or prior to the Date of Issuance.
(n) Solvency; Fraudulent Conveyance. The Company is
solvent and will not be rendered insolvent by the transactions
contemplated by the Transaction Documents and, after giving effect to
such transactions, the Company will not be left with an unreasonably
small amount of capital with which to engage in its business. The
Company does not intend to incur, or believe that it has incurred,
debts beyond its ability to pay such debts as they mature. The
Company does not contemplate the commencement of insolvency,
bankruptcy, liquidation or consolidation proceedings or the
appointment of a receiver, liquidator, conservator, trustee or
similar official in respect of the Company or any of its assets. The
amount of consideration being received by the Company upon the sale
of the Mortgage Loans to the Sponsor constitutes reasonably
equivalent value and fair consideration for the Mortgage Loans. The
Company is not transferring the Mortgage Loans to the Sponsor as
provided in the Transaction Documents, with any intent to hinder,
delay or defraud any of the Company's creditors.
Section 2.03. Affirmative Covenants of the Sponsor. The
Sponsor hereby agrees that during the Term of the Agreement, unless
FGIC shall otherwise expressly consent in writing:
(a) Compliance With Agreements and Applicable Laws.
The Sponsor shall perform each of its obligations under the
Transaction Documents and shall comply with all material requirements
of, and the Securities shall be offered and sold in accordance with,
any law, rule or regulation applicable to it or thereto, or that are
required in connection with its performance under any of the
Transaction Documents.
(b) Other Information.
(i) The Sponsor shall provide or cause to be
provided to FGIC, promptly upon receipt thereof, copies of all
reports, statements, certifications, schedules, or other similar
items delivered to or by the Sponsor pursuant to the terms of the
Transaction Documents and, promptly upon request, such other data as
FGIC may reasonably request; provided, however, that the Sponsor
shall not be required to deliver any such items if provision by some
other party to FGIC is required under the Transaction Documents
unless such other party wrongfully fails to deliver such item and
FGIC requests the Sponsor to deliver such item. The Sponsor shall,
upon the request of FGIC, permit FGIC or its authorized agents (A) to
inspect the books and records of the Sponsor as they may relate to
the Securities, the Mortgage Loans, the obligations of the Sponsor
under the Transaction Documents, the Transaction and the Sponsor's
business; (B) to discuss the affairs, finances and accounts of the
Sponsor with the President or Senior Vice President of the Sponsor;
and (C) to discuss the affairs, finances and accounts of the Sponsor
with the Sponsor's independent accountants, provided that the Chief
Financial Officer of the Sponsor shall have the right to be present
during such discussions. Such inspections and discussions shall be
conducted during normal business hours and shall not unreasonably
disrupt the business of the Sponsor. The books and records of the
Sponsor will be maintained at the address of the Sponsor designated
herein for receipt of notices, unless the Sponsor shall otherwise
advise the parties hereto in writing.<PAGE>
<PAGE>
(ii) The Sponsor shall provide or cause to be
provided to FGIC an executed original copy of each document executed
in connection with the transaction within 30 days after the date of
closing.
(c) Compliance Certificate. The Sponsor shall deliver
to FGIC, concurrently with the Company's compliance certificate
delivered pursuant to Section 2.04(c), a certificate signed by the
President or a Senior Vice President of the Sponsor stating that:
(i) a review of the Sponsor's performance under
the Transaction Documents during such period has been made under such
officer's supervision; and
(ii) to the best of such individual's knowledge
following reasonable inquiry, no Trigger Event, Default or Event of
Default has occurred, or if a Trigger Event, Default or Event of
Default has occurred, specifying the nature thereof and, if the
Sponsor has a right to cure any such Default or Event of Default
pursuant to Section 5.01, stating in reasonable detail the steps, if
any, being taken by the Sponsor to cure such Default or Event of
Default or to otherwise comply with the terms of the agreement to
which such Default or Event of Default relates.
(d) Notice of Material Events. The Sponsor shall
promptly inform FGIC in writing of the occurrence of any of the
following:
(i) the submission of any claim or the initiation
of any legal process, litigation or administrative or judicial
investigation (A) against the Sponsor pertaining to the Mortgage
Loans in general, (B) with respect to a material portion of the
Mortgage Loans or (C) in which a request has been made for
certification as a class action (or equivalent relief) that would
involve a material portion of the Mortgage Loans;
(ii) any change in the location of the Sponsor's
principal office or any change in the location of the Sponsor's books
and records;
(iii) the occurrence of any Trigger Event, Default
or Event of Default;
(iv) any other event, circumstance or condition
that has resulted, or has a material possibility of resulting, in a
Material Adverse Change in respect of the Sponsor; or
(v) a change of (A) ownership or (B) executive
management of the Sponsor.
(e) Further Assurances. The Sponsor shall, upon the
request of FGIC, from time to time, execute, acknowledge and deliver,
or cause to be executed, acknowledged and delivered, within thirty
(30) days of such request, such amendments hereto and such further
instruments and take such further action as may be reasonably
necessary to effectuate the intention, performance and provisions of
the Transaction Documents or to protect the interest of the Trustee,
for the benefit of the Certificateholders and FGIC, in the Mortgage
Loans, free and clear of all Liens and Restrictions on
Transferability except those in favor of the Trustee, for the benefit
of the Certificateholders and FGIC, imposed by the Pooling and
Servicing Agreement. In addition, the Sponsor agrees to cooperate
with S&P and Moody's in connection with any review of the Transaction
which may be undertaken by S&P and Moody's after the date hereof.
(f) Retirement of Securities. The Sponsor shall cause
the Trustee, upon retirement of the Securities pursuant to the
Pooling and Servicing Agreement or otherwise, to furnish to FGIC a
notice of such retirement, and, upon retirement of the Securities and
the expiration of the term of the Policy, to surrender the Policy to
FGIC for cancellation.<PAGE>
<PAGE>
(g) Corporate Existence. The Sponsor shall maintain
its corporate existence and shall at all times continue to be duly
organized under the laws of the State of Delaware and duly qualified
and duly authorized (as described in Sections 2.01(a), (b) and (c)
hereof) and shall conduct its business in accordance with the terms
of its certificate of incorporation and by-laws.
(h) Third-Party Beneficiary. The Sponsor agrees that
FGIC shall have all rights of a third-party beneficiary in respect of
the Pooling and Servicing Agreement and hereby incorporates and
restates its representations, warranties and covenants as set forth
therein for the benefit of FGIC.
Section 2.04. Affirmative Covenants of the Company. The
Company hereby agrees that during the Term of the Agreement, unless
FGIC shall otherwise expressly consent in writing:
(a) Compliance With Agreements and Applicable Laws.
The Company shall perform each of its obligations under the
Transaction Documents and any credit agreements and shall comply with
all material requirements of any law, rule or regulation applicable
to it or thereto, or that are required in connection with its
performance under any of the Transaction Documents.
(b) Financial Statements; Accountants' Reports; Other
Information. The Company shall keep or cause to be kept in
reasonable detail books and records of account of the Company's
assets and business. The Company shall furnish or cause to be
furnished to FGIC:
(i) Annual Financial Statements. As soon as
available, and in any event within 90 days after the close of each
year of the Company, the audited balance sheet of the Company and the
audited profit and loss statement and statement of cash flows of the
Company for such year, all in reasonable detail and stating in
comparative form the respective figures for the corresponding date
and period in the preceding year, prepared in accordance with
generally accepted accounting principles, consistently applied, and
accompanied by the certificate of the Company's independent
accountants (who shall be a nationally recognized firm or otherwise
acceptable to FGIC).
(ii) Quarterly Financial Statements. As soon as
available, and in any event within 45 days after the close of each of
the first three quarters of each year of the Company, unaudited
balance sheet of the Company and the unaudited profit and loss
statement and statement of cash flows of the Company for the portion
of the year then ended, all in reasonable detail and stating in
comparative form the respective figures for the corresponding date
and period in the preceding year, prepared in accordance with
generally accepted accounting principles, consistently applied
(subject to normal year-end adjustments).
(iii) Accountants' Reports. If a Trigger Event has
occurred, copies of any reports submitted to the Company by its
independent accountants in connection with any examination of the
financial statements of the Company, promptly upon receipt thereof.
(iv) Other Information. Promptly upon receipt
thereof, copies of all reports, statements, certifications,
schedules, or other similar items delivered to or by the Company
pursuant to the terms of the Transaction Documents and, promptly upon
request, such other data as FGIC may reasonably request; provided,
however, that the Company shall not be required to deliver any such
items if provision by some other party to FGIC is required under the
Transaction Documents unless such other party wrongfully fails to
deliver such item and FGIC requests the Company to deliver such item.
The Company shall, upon the request of FGIC, permit FGIC or its
authorized agents (A) to inspect the books and records of the Company
as they may relate to the obligations of the Company under the
Transaction Documents, the Transaction and the Company's business;
(B) to discuss the affairs, finances and accounts of the Company with
the President or Senior Vice President of the Company, no more<PAGE>
<PAGE>
frequently than annually; and (C) to discuss the affairs, finances
and accounts of the Company with the Company's independent
accountants, provided that the Chief Financial Officer of the Company
shall have the right to be present during such discussions. Such
inspections and discussions shall be conducted during normal business
hours and shall not unreasonably disrupt the business of the Company.
In addition, the Company shall promptly (but in no case more than 30
days following issuance or receipt by the Commonly Controlled Entity)
provide to FGIC a copy of all correspondence between a Commonly
Controlled Entity and the PBGC, IRS, Department of Labor or the
administrators of a Multiemployer Plan relating to any Reportable
Event or the underfunded status, termination or possible termination
of a Plan or a Multiemployer Plan. The books and records of the
Company will be maintained at the address of the Company designated
herein for receipt of notices, unless the Company shall otherwise
advise the parties hereto in writing.
(v) The Company shall provide or cause to be
provided to FGIC an executed original copy of each document executed
in connection with the Transaction within 30 days after the date of
closing.
(vi) The Company shall promptly inform FGIC in
writing (A) if the Company's current shareholders of the Company's
voting common stock cease to own 51% or a greater share of such stock
or (B) of the occurrence of a change of executive management of the
Company.
All financial statements specified in clauses (i) and (ii)
above shall be furnished in consolidated form for the Company and all
Subsidiaries in the event the Company shall consolidate its financial
statements with its Subsidiaries.
(c) Compliance Certificate. The Company shall deliver
to FGIC concurrently with the delivery of the financial statements
required pursuant to Section 2.04(b)(i) hereof (and concurrently with
the delivery of the financial statements required pursuant to Section
2.04(b)(ii) hereof, if a Trigger Event has occurred), a certificate
signed by the President or Senior Vice President of the Company
stating that:
(i) a review of the Company's performance under
the Transaction Documents during such period has been made under such
officer's supervision;
(ii) to the best of such individual's knowledge
following reasonable inquiry, no Trigger Event, Default or Event of
Default has occurred, or if a Trigger Event, Default or Event of
Default has occurred, specifying the nature thereof and, if the
Company has a right to cure any such Default or Event of Default
pursuant to Section 5.01, stating in reasonable detail the steps, if
any, being taken by the Company to cure such Default or Event of
Default or to otherwise comply with the terms of the agreement to
which such Default or Event of Default relates; and
(iii) the attached financial reports submitted in
accordance with Section 2.04(b)(i) or (ii) hereof, as applicable, are
complete and correct in all material respects and present fairly the
financial condition and results of operations of the Company as of
the dates and for the periods indicated, in accordance with generally
accepted accounting principles consistently applied (subject as to
interim statements to normal year-end adjustments).
(d) Notice of Material Events. The Company shall
promptly inform FGIC in writing of the occurrence of any of the
following:
(i) any change in the location of the Company's
principal office or any change in the location of the Company's books
and records;<PAGE>
<PAGE>
(ii) the occurrence of any Trigger Event, Default
or Event of Default; or
(iii) any other event, circumstance or condition
that has resulted, or has a material possibility of resulting, in a
Material Adverse Change in respect of the Company.
(e) Further Assurances. The Company shall, upon the
request of FGIC, from time to time, execute, acknowledge and deliver,
or cause to be executed, acknowledged and delivered, within thirty
(30) days of such request, such amendments hereto and such further
instruments and take such further action as may be reasonably
necessary to effectuate the intention, performance and provisions of
the Transaction Documents or to protect the interest of the Trustee,
for the benefit of the Certificateholders and FGIC, in the Mortgage
Loans, free and clear of all Liens and Restrictions on
Transferability except those in favor of the Trustee, for the benefit
of the Certificateholders and FGIC, imposed by the Pooling and
Servicing Agreement. In addition, the Company agrees to cooperate
with S&P and Moody's in connection with any review of the Transaction
which may be undertaken by S&P and Moody's after the date hereof.
(f) Existence. The Company shall maintain its
corporate existence and shall at all times continue to be duly
organized under the laws of the State of Delaware and duly qualified
and duly authorized (as described in Sections 2.02(a), (b) and (c)
hereof) and shall conduct its business in accordance with the terms
of its certificate of incorporation and by-laws.
(g) Third-Party Beneficiary. The Company agrees that
FGIC shall have all rights of a third-party beneficiary in respect of
the Pooling and Servicing Agreement and hereby incorporates and
restates its representations, warranties and covenants as set forth
therein for the benefit of FGIC.
(h) Maintenance of Equity. The Company has and shall
maintain equity of at least $10,000,000, as determined in accordance
with generally accepted accounting principles, for the term of this
Agreement.
(i) The Company agrees to maintain an arrangement for
backup sub-servicing by Norwest Mortgage, Inc., a California
corporation, (or another sub-servicer acceptable to FGIC) and the
Trustee, which backup sub-servicing arrangement is in form and
substance acceptable to FGIC.
(j) Management Changes. If John E. Smith should cease
to serve as an executive officer of the Company, within 30 days
thereafter the Company shall appoint as his replacement a person who
is (i) qualified and experienced in the Servicer's type of business,
(ii) experienced in a similar executive position and (iii) competent
to serve in such capacity.
Section 2.05. Negative Covenants of the Sponsor. The Sponsor
hereby agrees that during the Term of the Agreement, unless FGIC
shall otherwise expressly consent in writing:
(a) Restrictions on Liens. The Sponsor shall not (i)
create, incur or suffer to exist, or agree to create, incur or suffer
to exist, or consent to cause or permit in the future (upon the
happening of a contingency or otherwise) the creation, incurrence or
existence of any Lien or Restriction on Transferability on the
Mortgage Loans except for those in favor of the Trustee, for the
benefit of the Certificateholders and FGIC, imposed by the Pooling
and Servicing Agreement or (ii) sign or file under the Uniform
Commercial Code of any jurisdiction any financing statement which
names the Sponsor as a debtor, or sign any security agreement
authorizing any secured party thereunder to file such financing
statement, with respect to the Mortgage Loans, except in each case
any such instrument solely securing the rights and preserving the
Lien of the Trustee, for the benefit of the Certificateholders and
FGIC.<PAGE>
<PAGE>
(b) Impairment of Rights. The Sponsor shall not take
any action, or fail to take any action, except with the prior written
approval of FGIC, if such action or failure to take action is likely
to (i) interfere with the enforcement of any rights under the
Transaction Documents that are material to the rights, benefits or
obligations of the Trustee, the Certificateholders or FGIC, (ii)
result in a Material Adverse Change in respect of any Mortgage Loan
or (iii) impair the ability of the Sponsor to perform its obligations
under the Transaction Documents.
(c) Waiver, Amendments, Etc. The Sponsor shall not
waive, modify or amend, or consent to any waiver, modification or
amendment of, any of the provisions of any of the Transaction
Documents, except with the prior written approval of FGIC.
Section 2.06. Negative Covenants of the Company. The Company
hereby agrees that during the Term of the Agreement, unless FGIC
shall otherwise expressly consent in writing:
(a) Restrictions on Liens. The Company shall not (i)
create, incur or suffer to exist, or agree to create, incur or suffer
to exist, or consent to cause or permit in the future (upon the
happening of a contingency or otherwise) the creation, incurrence or
existence of any Lien or Restriction on Transferability on the
Mortgage Loans except for the Lien in favor of the Trustee, for the
benefit of the Certificateholders and FGIC, and the Restrictions on
Transferability imposed by the Pooling and Servicing Agreement or
(ii) sign or file under the Uniform Commercial Code of any
jurisdiction any financing statement which names the Company as a
debtor, or sign any security agreement authorizing any secured party
thereunder to file such financing statement, with respect to the
Mortgage Loans, except in each case any such instrument solely
securing the rights and preserving the Lien of the Trustee, for the
benefit of the Certificateholders and FGIC.
(b) Impairment of Rights. The Company shall not take
any action, or fail to take any action, except with the prior written
approval of FGIC, if such action or failure to take action is likely
to (i) interfere with the enforcement of any rights under the
Transaction Documents that are material to the rights, benefits or
obligations of the Trustee, the Certificateholders or FGIC, (ii)
result in a Material Adverse Change in respect of any Mortgage Loan
or (iii) impair the ability of the Company to perform its obligations
under the Transaction Documents, including any consolidation, merger
with any Person or any transfer of all or any material amount of the
Company's assets to any other Person if such consolidation, merger or
transfer would materially impair the net worth of the Company or any
successor Person obligated, after such event, to perform the
Company's obligations under the Transaction Documents.
(c) Waiver, Amendments, Etc. The Company shall not
waive, modify or amend, or consent to any waiver, modification or
amendment of, any of the provisions of any of the Transaction
Documents, except with the prior written approval of FGIC.
(d) Successor Sub-Servicer. The Company shall not
terminate or designate, or consent to the termination or designation
of, a sub-servicer or any successor thereto without the prior written
consent of FGIC.
ARTICLE III
THE POLICY; REIMBURSEMENT; INDEMNIFICATION
Section 3.01. Issuance of the Policy. FGIC agrees to issue
the Policy subject to satisfaction of the conditions precedent set
forth in Appendix A hereto.<PAGE>
<PAGE>
Section 3.02. Payment of Fees and Premium.
Inducement Letter Fees and Expenses. On the Date
of Issuance, the Company shall pay or cause to be paid the amounts
specified with respect to fees, expenses and disbursements in the
Inducement Letter, unless otherwise agreed between the Company and
FGIC. All periodic and subsequent fees of S&P or Moody's with
respect to, and directly allocable to, the Securities shall be for
the account of, and shall be billed to, the Company. The fees for
any other rating agency shall be paid by the party requesting such
other agency's rating, unless such other agency is a substitute for
S&P or Moody's in the event that S&P or Moody's is no longer rating
the Securities, in which case the cost for such agency shall be paid
by the Company.
(b) Premium. In consideration of the issuance by FGIC
of the Policy, FGIC shall be entitled to receive the Premium as and
when due in accordance with the terms of the Inducement Letter (i) in
the case of Premium due on or before the Date of Issuance, directly
from the Company and (ii) in the case of the Premium due after the
Date of Issuance, pursuant to Section 7.5(b)(i) of the Pooling and
Servicing Agreement. The Premium paid hereunder or under the Pooling
and Servicing Agreement shall be nonrefundable without regard to
whether FGIC makes any payment under the Policy or any other
circumstances relating to the Securities or provision being made for
payment of the Securities prior to maturity.
Section 3.03. Reimbursement and Additional Payment Obligation.
The Sponsor and the Company agree to pay to FGIC the following amounts
as and when incurred:
(a) a sum equal to the total of all amounts paid by
FGIC under the Policy;
(b) any and all out-of-pocket charges, fees, costs and
expenses which FGIC may reasonably pay or incur, including, but not
limited to, attorneys' and accountants' fees and expenses, in
connection with (i) in the event of payments under the Policy, any
accounts established to facilitate payments under the Policy, to the
extent FGIC has not been immediately reimbursed on the date that any
amount is paid by FGIC under the Policy, or other administrative
expenses relating to such payments under the Policy, (ii) the
enforcement, defense or preservation of any rights in respect of any
of the Transaction Documents, including defending, monitoring or
participating in any litigation or proceeding (including any
insolvency or bankruptcy proceeding in respect of any Transaction
participant or any affiliate thereof) relating to any of the
Transaction Documents, any party to any of the Transaction Documents
or the Transaction, (iii) any amendment, waiver or other action with
respect to, or related to, any Transaction Document whether or not
executed or completed, (iv) any review or investigation made by FGIC
in those circumstances where its approval or consent is sought under
any of the Transaction Documents;
(c) interest on any and all amounts described in
Section 3.03(a) from the date due to FGIC pursuant to the provisions
hereof until payment thereof in full, payable to FGIC at the Late
Payment Rate per annum; and
(d) any payments made by FGIC on behalf of, or advanced
to, the Sponsor or the Company, including, without limitation, any
amounts payable by the Sponsor or the Company pursuant to the
Securities or any other Transaction Documents; and any payments made
by FGIC as, or in lieu of, any servicing, management, trustee,
custodial or administrative fees payable, in the sole discretion of
FGIC to third parties in connection with the Transaction.
Section 3.04. Indemnification.
(a) Indemnification by the Sponsor. In addition to any
and all rights of reimbursement, indemnification, subrogation and any
other rights pursuant hereto or under law or in equity, the Sponsor
agrees to pay, and to protect, indemnify and save harmless, FGIC and
its officers, directors, shareholders, employees, agents and each<PAGE>
<PAGE>
Person, if any, who controls FGIC within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act
from and against any and all claims, losses, liabilities (including
penalties), actions, suits, judgments, demands, damages, costs or
expenses (including, without limitation, fees and expenses of
attorneys, consultants and auditors and reasonable costs of
investigations) of any nature arising out of or relating to the
transactions contemplated by the Transaction Documents by reason of:
(i) the negligence, bad faith, willful
misconduct, misfeasance, malfeasance or theft committed by any
director, officer, employee or agent of the Sponsor;
(ii) the breach by the Sponsor of any
representation, warranty or covenant under any of the Transaction
Documents or the occurrence, in respect of the Sponsor, under any of
the Transaction Documents of any "event of default" or any event
which, with the giving of notice or the lapse of time or both, would
constitute any "event of default"; or
(iii) any untrue statement or alleged untrue
statement of a material fact contained in any Offering Document or
any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such claims arise out of or
are based upon any untrue statement or omission in information
included in an Offering Document and furnished by FGIC in writing
expressly for use therein (all such information so furnished being
referred to herein as "FGIC Information"), it being understood that,
in respect of the initial Offering Document, the FGIC Information
is limited to the information included under the caption "The
Certificate Insurer" and the financial statements of FGIC appended
thereto.
(b) Indemnification by the Company. In addition to any
and all rights of reimbursement, indemnification, subrogation and any
other rights pursuant hereto or under law or in equity, the Company
agrees to pay, and to protect, indemnify and save harmless, FGIC and
its officers, directors, shareholders, employees, agents and each
Person, if any, who controls FGIC within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act
from and against any and all claims, losses, liabilities (including
penalties), actions, suits, judgments, demands, damages, costs or
expenses (including, without limitation, fees and expenses of
attorneys, consultants and auditors and reasonable costs of
investigations) of any nature arising out of or relating to the
transactions contemplated by the Transaction Documents by reason of:
(i) the negligence, bad faith, willful
misconduct, misfeasance, malfeasance or theft committed by any
director, officer, employee or agent of the Company;
(ii) the breach by the Company of any
representation, warranty or covenant under any of the Transaction
Documents or the occurrence, in respect of the Company, under any of
the Transaction Documents of any "event of default" or any event
which, with the giving of notice or the lapse of time or both, would
constitute any "event of default"; or
(iii) any untrue statement or alleged untrue
statement of a material fact contained in any Offering Document or
any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such claims arise out of or
are based upon any untrue statement or omission in the FGIC
Information.
(c) Conduct of Actions or Proceedings. If any action
or proceeding (including any governmental investigation) shall be
brought or asserted against FGIC, any officer, director, shareholder,
employee or agent of FGIC or any Person controlling FGIC
(individually, an "Indemnified Party" and, collectively, the
"Indemnified Parties") in respect of which indemnity may be sought<PAGE>
<PAGE>
from the Sponsor or the Company (the "Indemnifying Party") hereunder,
FGIC shall promptly notify the Indemnifying Party in writing, and the
Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to FGIC and the payment
of all expenses. An Indemnified Party shall have the right to employ
separate counsel in any such action and to participate in the defense
thereof at the expense of the Indemnified Party; provided, however,
that the fees and expenses of such separate counsel shall be at the
expense of the Indemnifying Party only if (i) the Indemnifying Party
has agreed to pay such fees and expenses, (ii) the Indemnifying Party
shall have failed to assume the defense of such action or proceeding
and employ counsel satisfactory to FGIC in any such action or
proceeding or (iii) the named parties to any such action or
proceeding (including any impleaded parties) include both the
Indemnified Party and the Indemnifying Party, and the Indemnified
Party shall have been advised by counsel that (A) there may be one or
more legal defenses available to it which are different from or
additional to those available to the Indemnifying Party and (B) the
representation of the Indemnifying Party and the Indemnified Party by
the same counsel would be inappropriate or contrary to prudent
practice (in which case, if the Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate
counsel at the expense of the Indemnifying Party, the Indemnifying
Party shall not have the right to assume the defense of such action
or proceeding on behalf of such Indemnified Party, it being
understood, however, that the Indemnifying Party shall not, in
connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more
than one separate firm of attorneys at any time for the Indemnified
Parties, which firm shall be designated in writing by FGIC). The
Indemnifying Party shall not be liable for any settlement of any such
action or proceeding effected without its written consent to the
extent that any such settlement shall be prejudicial to the
Indemnifying Party, but, if settled with its written consent, or if
there be a final judgment for the plaintiff in any such action or
proceeding with respect to which the Indemnifying Party shall have
received notice in accordance with this subsection (c), the
Indemnifying Party agrees to indemnify and hold the Indemnified
Parties harmless from and against any loss or liability by reason of
such settlement or judgment.
(d) Contribution. To provide for just and equitable
contribution if the indemnification provided by the Indemnifying
Party is determined to be unavailable for any Indemnified Party
(other than due to application of this Section), the Indemnifying
Party shall contribute to the losses incurred by the Indemnified
Party on the basis of the relative fault of the Indemnifying Party,
on the one hand, and the Indemnified Party, on the other hand.
Section 3.05. Subrogation. Subject only to the priority of
payment provisions of the Pooling and Servicing Agreement, the
Sponsor and the Company acknowledge that, to the extent of any
payment made by FGIC pursuant to the Policy, the rights of FGIC are
to be fully subrogated to the extent of such payment and any
additional interest due on any late payment, to the rights of the
Certificateholders to any moneys paid or payable in respect of the
Securities under the Transaction Documents or otherwise. The Sponsor
and the Company agree to such subrogation and, further, agree to
execute such instruments and to take such actions as, in the sole
judgment of FGIC, are necessary to evidence such subrogation and to
perfect the rights of FGIC to receive any moneys paid or payable in
respect of the Securities under the Transaction Documents or
otherwise.<PAGE>
<PAGE>
ARTICLE IV
FURTHER AGREEMENTS
Section 4.01. Effective Date; Term of Agreement. This
Agreement shall take effect on the Date of Issuance and shall remain
in effect until the later of (a) such time as FGIC is no longer
subject to a claim under the Policy and the Policy shall have been
surrendered to FGIC for cancellation and (b) all amounts payable to
FGIC and the Certificateholders under the Transaction Documents and
under the Securities have been paid in full; provided, however, that
the provisions of Sections 3.02, 3.03 and 3.04 hereof shall survive
any termination of this Agreement.
Section 4.02. Obligations Absolute.
(a) The payment obligations of the Sponsor and the
Company hereunder shall be absolute and unconditional, and shall be
paid strictly in accordance with this Agreement under all
circumstances irrespective of (i) any lack of validity or
enforceability of, or any amendment or other modifications of, or
waiver with respect to, any of the Transaction Documents, the
Securities or the Policy; (ii) any exchange or release of any other
obligations hereunder; (iii) the existence of any claim, setoff,
defense, reduction, abatement or other right which the Sponsor or the
Company may have at any time against FGIC or any other Person; (iv)
any document presented in connection with the Policy proving to be
forged, fraudulent, invalid or insufficient in any respect, including
any failure to strictly comply with the terms of the Policy, or any
statement therein being untrue or inaccurate in any respect; (v) any
failure of the Sponsor to receive the proceeds from the sale of the
Securities; (vi) any breach by the Sponsor or the Company of any
representation, warranty or covenant contained in any of the
Transaction Documents; or (vii) any other circumstances, other than
payment in full, which might otherwise constitute a defense available
to, or discharge of, the Sponsor or the Company in respect of any
Transaction Document.
(b) The Sponsor and the Company and any and all others
who are now or may become liable for all or part of the obligations
of the Sponsor or the Company under this Agreement agree to be bound
by this Agreement and (i) to the extent permitted by law, waive and
renounce any and all redemption and exemption rights and the benefit
of all valuation and appraisement privileges against the
indebtedness, if any, and obligations evidenced by any Transaction
Document or by any extension or renewal thereof; (ii) waive
presentment and demand for payment, notices of nonpayment and of
dishonor, protest of dishonor and notice of protest; (iii) waive all
notices in connection with the delivery and acceptance hereof and all
other notices in connection with the performance, default or
enforcement of any payment hereunder except as required by the
Transaction Documents; (iv) waive all rights of abatement,
diminution, postponement or deduction, or to any defense other than
payment, or to any right of setoff or recoupment arising out of any
breach under any of the Transaction Documents, by any party thereto
or any beneficiary thereof, or out of any obligation at any time
owing to the Sponsor or the Company; (v) agree that any consent,
waiver or forbearance hereunder with respect to an event shall
operate only for such event and not for any subsequent event; (vi)
consent to any and all extensions of time that may be granted by FGIC
with respect to any payment hereunder or other provisions hereof and
to the release of any security at any time given for any payment
hereunder, or any part thereof, with or without substitution, and to
the release of any Person or entity liable for any such payment; and
(vii) consent to the addition of any and all other makers, endorsers,
guarantors and other obligors for any payment hereunder, and to the
acceptance of any and all other security for any payment hereunder,
and agree that the addition of any such obligors or security shall
not affect the liability of the parties hereto for any payment
hereunder.<PAGE>
<PAGE>
(c) Nothing herein shall be construed as prohibiting
the Sponsor or the Company from pursuing any rights or remedies it
may have against any Person other than FGIC in a separate legal
proceeding.
Section 4.03. Assignments; Reinsurance; Third-Party Rights.
(a) This Agreement shall be a continuing obligation of
the parties hereto and shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted
assigns. Neither the Sponsor nor the Company may assign its rights
under this Agreement, or delegate any of its duties hereunder,
without the prior written consent of FGIC. Any assignment made in
violation of this Agreement shall be null and void.
(b) FGIC shall have the right to give participations in
its rights under this Agreement and to enter into contracts of
reinsurance with respect to the Policy upon such terms and conditions
as FGIC may in its discretion determine; provided, however, that no
such participation or reinsurance agreement or arrangement shall
relieve FGIC of any of its obligations hereunder or under the Policy.
(c) In addition, FGIC shall be entitled to assign or
pledge to any bank or other lender providing liquidity or credit with
respect to the Transaction or the obligations of FGIC in connection
therewith any rights of FGIC under the Transaction Documents or with
respect to any real or personal property or other interests pledged
to FGIC, or in which FGIC has a security interest, in connection with
the Transaction.
(d) Except as provided herein with respect to
participants and reinsurers, nothing in this Agreement shall confer
any right, remedy or claim, express or implied, upon any Person,
including, particularly, any Certificateholder, other than FGIC,
against the Sponsor or the Company, and all the terms, covenants,
conditions, promises and agreements contained herein shall be for the
sole and exclusive benefit of the parties hereto and their successors
and permitted assigns. Neither the Trustee nor any Certificateholder
shall have any right to payment from any premiums paid or payable
hereunder or from any other amounts paid by the Sponsor or the
Company pursuant to Section 3.02, 3.03 or 3.04 hereof.
Section 4.04. Liability of FGIC. Neither FGIC nor any of its
officers, directors or employees shall be liable or responsible for:
(a) the use which may be made of the Policy by the Trustee or for any
acts or omissions of the Trustee in connection therewith or (b) the
validity, sufficiency, accuracy or genuineness of documents delivered
to FGIC (or its Fiscal Agent) in connection with any claim under the
Policy, or of any signatures thereon, even if such documents or
signatures should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged (unless FGIC had actual knowledge
thereof). In furtherance and not in limitation of the foregoing,
FGIC (or its Fiscal Agent) may accept documents that appear on their
face to be in order, without responsibility for further
investigation.
Section 4.05. Waiver of FGIC Rights. With respect to its
rights under any of the Transaction Documents, FGIC shall give notice
to each of the Rating Agencies of any intent by FGIC to waive: (i)
any Servicer Event of Default, (ii) any rights to require a
repurchase of Mortgage Loans, (iii) its right to give consent. In
the event of any such waiver by FGIC, each Rating Agency shall have
confirmed in writing that no additional capital requirement is
necessary as a result of such waiver.<PAGE>
<PAGE>
ARTICLE V
EVENTS OF DEFAULT; REMEDIES
Section 5.01. Events of Default. The occurrence of any of the
following events shall constitute an Event of Default hereunder with
respect to the Sponsor or the Company, severally and not jointly:
(a) any representation or warranty made by the Sponsor
or the Company under any of the Transaction Documents, or in any
certificate or report furnished under any of the Transaction
Documents, shall prove to be untrue or incorrect in any material
respect; provided, however, that if the Sponsor or the Company
effectively cures any such defect in any representation or warranty
under any Transaction Document, or certificate or report furnished
under any Transaction Document, within the time period specified in
the relevant Transaction Document as the cure period therefor, such
defect shall not in and of itself constitute an Event of Default
hereunder;
(b) (i) the Sponsor or the Company shall fail to pay
when due any amount payable by the Sponsor under any of the
Transaction Documents unless such amounts are paid in full within any
applicable cure period explicitly provided for under the relevant
Transaction Document; (ii) the Sponsor or the Company shall have
asserted that any of the Transaction Documents to which it is a party
is not valid and binding on the parties thereto; or (iii) any court,
governmental authority or agency having jurisdiction over any of the
parties to any of the Transaction Documents or any property thereof
shall find or rule that any material provision of any of the
Transaction Documents is not valid and binding on the parties
thereto;
(c) the Sponsor or the Company shall fail to perform or
observe any other covenant or agreement contained in any of the
Transaction Documents (except for the obligations described under
clause (b) above) and such failure shall continue for a period of 30
days after written notice given to it; provided, however, that, if
such failure shall be of a nature that it cannot be cured within 30
days, such failure shall not constitute an Event of Default hereunder
if within such 30-day period the Sponsor or the Company, as the case
may be, shall have given notice to FGIC of corrective action it
proposes to take, which corrective action is agreed in writing by
FGIC to be satisfactory and the Sponsor or the Company shall
thereafter pursue such corrective action diligently until such
default is cured;
(d) the Sponsor or the Company shall fail to pay its
debts generally as they come due, or shall admit in writing its
inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors, or shall institute any
proceeding seeking to adjudicate the Sponsor or the Company
insolvent or seeking a liquidation, or shall take advantage of any
insolvency act, or shall commence a case or other proceeding naming
the Sponsor or the Company as debtor under the United States
Bankruptcy Code or similar law, domestic or foreign, or a case or
other proceeding shall be commenced against the Sponsor or the
Company under the United States Bankruptcy Code or similar law,
domestic or foreign, or any proceeding shall be instituted against
the Sponsor or the Company seeking liquidation of the Sponsor's or
the Company's assets and the Sponsor or the Company, as the case may
be, shall fail to take appropriate action resulting in the withdrawal
or dismissal of such proceeding within 60 days or there shall be
appointed or the Sponsor or the Company, as the case may be, shall
consent to, or acquiesce in, the appointment of a receiver,
liquidator, conservator, trustee or similar official in respect of
the Sponsor or the Company or the whole or any substantial part of
its properties or assets or the Sponsor shall take any corporate
action in furtherance of any of the foregoing;
(e) the occurrence of an "event of default" under any
of the Transaction Documents; and<PAGE>
<PAGE>
(f) with respect to the Company, a breach of the
covenant set forth in Section 2.04(h) hereof, that is not cured
within 15 days after the Company becomes aware of such breach.
Section 5.02. Remedies; Waivers.
(a) Upon the occurrence of an Event of Default, FGIC may
exercise any one or more of the rights and remedies set forth below:
(i) exercise any rights and remedies available
under the Transaction Documents in its own capacity or in its
capacity as the Person entitled to exercise the rights of the
Certificateholders in respect of the Securities; or
(ii) take whatever action at law or in equity may
appear necessary or desirable in its judgment to enforce performance
of any obligation of the Sponsor under the Transaction Documents.
(b) Unless otherwise expressly provided, no remedy
herein conferred upon or reserved is intended to be exclusive of any
other available remedy, but each remedy shall be cumulative and shall
be in addition to other remedies given under the Transaction
Documents or existing at law or in equity. No delay or failure to
exercise any right or power accruing under any Transaction Document
upon the occurrence of any Event of Default or otherwise shall impair
any such right or power or shall be construed to be a waiver thereof,
but any such right and power may be exercised from time to time and
as often as may be deemed expedient. In order to entitle FGIC to
exercise any remedy reserved to FGIC in this Article, it shall not be
necessary to give any notice, other than such notice as may be
expressly required in this Article.
(c) If any proceeding has been commenced to enforce any
right or remedy under this Agreement and such proceeding has been
discontinued or abandoned for any reason, or has been determined
adversely to FGIC, then and in every such case the parties hereto
shall, subject to any determination in such proceeding, be restored
to their respective former positions hereunder, and, thereafter, all
rights and remedies of FGIC shall continue as though no such
proceeding had been instituted.
(d) FGIC shall have the right, to be exercised in its
complete discretion, to waive any covenant, Default or Event of
Default by a writing setting forth the terms, conditions and extent
of such waiver signed by FGIC and delivered to the Sponsor. Any such
waiver may only be effected in writing duly executed by FGIC, and no
other course of conduct shall constitute a waiver of any provision
hereof. Unless such writing expressly provides to the contrary, any
waiver so granted shall extend only to the specific event or
occurrence so waived and not to any other similar event or
occurrence.
ARTICLE VI
MISCELLANEOUS
Section 6.01. Amendments, Etc. This Agreement may be amended,
modified or terminated only by written instrument or written
instruments signed by the parties hereto. No act or course of
dealing shall be deemed to constitute an amendment, modification or
termination hereof.
Section 6.02. Notices. All demands, notices and other
communications 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 the
recipient as follows:<PAGE>
<PAGE>
(a) To FGIC: Financial Guaranty Insurance Company
115 Broadway
New York, NY 10006
Attention: Research and Risk
Management Department
Re: EquiVantage Acceptance Corp.
Home Equity Loan Trust 1996-2
Confirmation: (212) 312-3000
Fax: (212) 312-3093
(b) To the Sponsor: EquiVantage Acceptance Corp.
13111 Northwest Freeway, Suite 302
Houston, Texas 77040
Attention: John E. Smith
Tel: (713) 895-1957
Fax: (713) 895-1999
(c) To the Company: EquiVantage Inc.
13111 Northwest Freeway, Suite 300
Houston, Texas 77040
Attention: Chief Financial Officer
Tel: (713) 895-1900
Fax: (713) 895-3870
(d) To the Trustee: Norwest Bank Minnesota,
National Association
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Department
Re: EquiVantage Home Equity Loan
Trust 1996-2
Tel: (612) 667-5786
Fax: (612) 667-9825
A party may specify an additional or different address or
addresses by writing mailed or delivered to the other party as
aforesaid. All such notices and other communications shall be
effective upon receipt.
Section 6.03. Payment Procedure. In the event of any payment
by FGIC for which it is entitled to be reimbursed or indemnified as
provided above, each of the Sponsor and the Company agrees to accept
the voucher or other evidence of payment as prima facie evidence of
the propriety thereof and the liability therefor to FGIC. All
payments to be made to FGIC under this Agreement shall be made to
FGIC in lawful currency of the United States of America in
immediately available funds to the account number provided in the
Inducement Letter before 1:00 p.m. (New York, New York time) on the
date when due or as FGIC shall otherwise direct by written notice to
the Sponsor or the Company. In the event that the date of any
payment to FGIC or the expiration of any time period hereunder occurs
on a day which is not a Business Day, then such payment or expiration
of time period shall be made or occur on the next succeeding Business
Day with the same force and effect as if such payment was made or
time period expired on the scheduled date of payment or expiration
date. Payments to be made to FGIC under this Agreement shall bear
interest at the Late Payment Rate from the date due to the date paid.
Section 6.04. Severability. In the event that any provision
of this Agreement shall be held invalid or unenforceable by any court
of competent jurisdiction, the parties hereto agree that such holding
shall not invalidate or render unenforceable any other provision
hereof. The parties hereto further agree that the holding by any
court of competent jurisdiction that any remedy pursued by any party
hereto is unavailable or unenforceable shall not affect in any way
the ability of such party to pursue any other remedy available to it.
Section 6.05. Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.<PAGE>
<PAGE>
Section 6.06. Consent to Jurisdiction.
(a) 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 AND TO
OR IN CONNECTION WITH ANY OF THE TRANSACTION DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED THEREUNDER 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 TRANSACTION DOCUMENTS OR THE SUBJECT MATTER
THEREOF MAY NOT BE LITIGATED IN OR BY SUCH COURTS.
(b) To the extent permitted by applicable law, the
parties hereto shall not seek and hereby waive the right to any
review of the judgment of any such court by any court of any other
nation or jurisdiction which may be called upon to grant an
enforcement of such judgment.
(c) Each of the Sponsor and the Company hereby
irrevocably appoints and designates Prentice-Hall Corporation System,
Inc., whose address is 15 Columbus Circle, New York, New York 10023,
as its true and lawful attorney and duly authorized agent for
acceptance of service of legal process. Each of the Sponsor and the
Company agrees that service of such process upon such Person shall
constitute personal service of such process upon it.
(d) Nothing contained in this Agreement shall limit or
affect FGIC's right to serve process in any other manner permitted by
law or to start legal proceedings relating to any of the Transaction
Documents against the Sponsor or its property in the courts of any
jurisdiction.
Section 6.07. Consent of FGIC. In the event that FGIC's
consent is required under any of the Transaction Documents, the
determination whether to grant or withhold such consent shall be made
by FGIC in its sole discretion without any implied duty towards any
other Person, except as otherwise expressly provided therein and
herein.
Section 6.08. Counterparts. This Agreement may be executed in
counterparts by the parties hereto, and all such counterparts shall
constitute one and the same instrument.
Section 6.09 Trial by Jury Waived. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION ARISING DIRECTLY OR INDIRECTLY
OUT OF, UNDER OR IN CONNECTION WITH ANY OF THE TRANSACTION DOCUMENTS
OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREUNDER. EACH PARTY
HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT IT WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER
AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THE
TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY BY, AMONG OTHER THINGS,
THIS WAIVER.
Section 6.10 Limited Liability. No recourse under any
Transaction Document shall be had against, and no personal liability
shall attach to, any officer, employee, director, affiliate or
shareholder of any party hereto, as such, by the enforcement of any
assessment or by any legal or equitable proceeding, by virtue of any<PAGE>
<PAGE>
statute or otherwise in respect of any of the Transaction Documents,
the Securities or the Policy, it being expressly agreed and
understood that each Transaction Document is solely a corporate
obligation of each party hereto, and that any and all personal
liability, either at common law or in equity, or by statute or
constitution, of every such officer, employee, director, affiliate or
shareholder for breaches by any party hereto of any obligations under
any Transaction Document is hereby expressly waived as a condition of
and in consideration for the execution and delivery of this
Agreement.
Section 6.11. Entire Agreement. This Agreement, the
Inducement Letter, the Inducement Letter and the Policy set forth the
entire agreement between the parties with respect to the subject
matter thereof, and this Agreement supersedes and replaces any
agreement or understanding that may have existed between the parties
prior to the date hereof in respect of such subject matter.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement, all as of the day and year first above
written.
FINANCIAL GUARANTY INSURANCE COMPANY
By /s/ Jay L. Remis
_________________________________
Name: Jay L. Remis
Title: Authorized Officer
EQUIVANTAGE ACCEPTANCE CORP.
By /s/ John E. Smith
__________________________________
Name: John E. Smith
Title: President
EQUIVANTAGE INC.
By /s/ John E. Smith
__________________________________
Name: John E. Smith
Title: President
[Insurance and Indemnity Agreement]
<PAGE>
<PAGE>
APPENDIX I
DEFINITIONS
"Accumulated Funding Deficiency" shall have the meaning
provided in Section 412 of the Code and Section 302 of ERISA, whether
or not waived.
"Base Subordinated Amount" means an amount equal to the product
of (a) the Original Aggregate Loan Balance, as defined in the Pooling
and Servicing Agreement, and (b) 3.15%.
"Business Day" means any day other than (a) a Saturday or
Sunday or (b) a day on which banking institutions in New York, New
York, Houston, Texas, or Minneapolis, Minnesota are authorized or
obligated by law or executive order to be closed.
"Certificateholders" means registered holders of the
Securities.
"Class R Certificates" means the Home Equity Loan Asset-Backed
Certificates, Series 1996-2, Class R Certificates issued under the
Pooling and Servicing Agreement together with the Securities.
"Code" means the Internal Revenue Code of 1986, including,
unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"Commission" means the Securities and Exchange Commission.
"Commonly Controlled Entity" means the Company and each entity,
whether or not incorporated, which is affiliated with the Sponsor
pursuant to Section 414(b), (c), (m) or (o) of the Code.
"Company" or "Servicer" means EquiVantage Inc.
"Date of Issuance" means the date on which the Policy is issued
as specified therein.
"Default" means any event which results, or which with the
giving of notice or the lapse of time or both would result, in an
Event of Default.
"ERISA" means the Employee Retirement Income Security Act of
1974, including, unless the context otherwise requires, the rules and
regulations thereunder, as amended from time to time.
"Event of Default" means any event of default specified in
Section 5.01 of this Insurance Agreement.
"Exchange Act" means the Exchange Act of 1934, including,
unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"Expiration Date" means the final date of the Term of the
Policy, as specified in the Policy.
"FGIC" means Financial Guaranty Insurance Company, a New York
stock insurance company, its successors and assigns.
"Financial Statements" means with respect to the Company, the
audited balance sheets as of December 31, 1995 and the notes thereto.
"Fiscal Agent" means the Fiscal Agent, if any, designated
pursuant to the terms of the Policy.
"Indemnification Agreement" means the Indemnification Agreement
dated as of May 1, 1996 among FGIC, the Sponsor and the
Representative, as the same may be amended from time to time.
"Inducement Letter" means the letter dated May 23, 1996 from
FGIC to EquiVantage Inc. .<PAGE>
<PAGE>
"Insurance Agreement" means this Insurance and Indemnity
Agreement dated as of May 1, 1996, by and among FGIC, the Sponsor
and the Company, as the same may be amended from time to time.
"Investment Company Act" means the Investment Company Act of
1940, including, unless the context otherwise requires, the rules and
regulations thereunder, as amended from time to time.
"IRS" means the Internal Revenue Service.
"Late Payment Rate" means the lesser of (a) the greater of (x)
the then applicable highest rate of interest on the Securities or (y)
the prime rate as published in the Wall Street Journal on the related
due date of amounts owned to FGIC under the Insurance Agreement
(including such amounts owed pursuant to Section 3.03(c) thereof) and
(b) the maximum rate permissible under applicable usury or similar
laws limiting interest rates. The Late Payment Rate shall be
computed on the basis of the actual number of days elapsed over a
year of 360 days.
"Lien" means, as applied to the property or assets (or the
income or profits therefrom) of any Person, in each case whether the
same is consensual or nonconsensual or arises by contract, operation
of law, legal process or otherwise: (a) any mortgage, lien, pledge,
attachment, charge, lease, conditional sale or other title retention
agreement, or other security interest or encumbrance of any kind or
(b) any arrangement, express or implied, under which such property or
assets are transferred, sequestered or otherwise identified for the
purpose of subjecting or making available the same for the payment of
debt or performance of any other obligation in priority to the
payment of the general, unsecured creditors of such Person.
"Master Loan Transfer Agreement" means the Master Loan Transfer
Agreement between the Sponsor and the Company dated as of May 1,
1996.
"Material Adverse Change" means, (a) in respect of any Person,
a material adverse change in (i) the business, financial condition,
results of operations or properties of such Person or any of its
Subsidiaries or (ii) the ability of such Person to perform its
obligations under any of the Transaction Documents to which it is a
party and (b) in respect of any Mortgage Loan, a material adverse
change in (i) the value or marketability of such Mortgage Loan or
(ii) the probability that amounts now or hereafter due in respect of
such Mortgage Loan will be collected on a timely basis.
"Moody's" means Moody's Investors Service, Inc., a Delaware
corporation, and any successor thereto, and, if such corporation
shall for any reason no longer perform the functions of a securities
rating agency, "Moody's" shall be deemed to refer to any other
nationally recognized rating agency designated by FGIC.
"Mortgage Documents" means the Mortgage Notes, Mortgages,
assignments of Mortgages and other related documents required to be
delivered to the Trustee pursuant to Section 3.5 of the Pooling and
Servicing Agreement.
"Mortgage Loan" has the meaning provided in the Pooling and
Servicing Agreement.
"Multiemployer Plan" means a multiemployer plan (within the
meaning of Section 4001(a)(3) of ERISA) in respect of which a
Commonly Controlled Entity makes contributions or has liability.
"Notice of Claim" means a Notice of Claim and Certificate in
the form attached to the Policy.
"Offering Document" means the Prospectus, dated May 7, 1996, of
the Sponsor, in respect of the Securities and any amendment or
supplement thereto in respect of the Securities and any other
offering document in respect of the Securities that makes reference
to the Policy.<PAGE>
<PAGE>
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor agency, corporation or instrumentality of the United States
to which the duties and powers of the Pension Benefit Guaranty
Corporation are transferred.
"Person" means an individual, joint stock company, trust,
unincorporated association, joint venture, corporation, business or
owner trust, partnership or other organization or entity (whether
governmental or private).
"Plan" means any pension plan (other than a Multiemployer Plan)
covered by Title IV of ERISA, which is maintained by a Commonly
Controlled Entity or in respect of which a Commonly Controlled Entity
has liability.
"Policy" means the financial guaranty insurance policy,
including any endorsements thereto, issued by FGIC with respect to
the Securities, substantially in the form attached as Annex I to this
Agreement.
"Pooling and Servicing Agreement" means the Pooling and
Servicing Agreement dated as of May 1, 1996 among the Sponsor, as
sponsor, the Company, as servicer, and the Trustee on behalf of FGIC
and the Certificateholders, pursuant to which the Securities are to
be issued and the Mortgage Loans are to be serviced and administered,
as the same may be amended from time to time.
"Premium" means the premium payable in accordance with Section
3.02 of the Insurance Agreement.
"Premium Percentage" 0.16% per annum.
"Prospectus" means the form of prospectus, as supplemented,
relating to the Securities, as first filed with the Commission
pursuant to Rule 424 under the Securities Act.
"Provided Documents" means the Transaction Documents together
with all exhibits and schedules attached thereto, the portfolio data
tape and the Financial Statements furnished to FGIC by or on behalf
of the Sponsor or the Company with respect to itself or the
Transaction.
"Registration Statement" means the registration statement on
Form S-3 (No. 33-99364), including a form of prospectus, relating to
the Securities, as amended to the date hereof.
"Rating Agency" has the meaning set forth in the Pooling and
Servicing Agreement.
"Reportable Event" means any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder.
"Representative" means Prudential Securities Incorporated as
representative of itself and CS First Boston collectively as
Underwriters.
"Restrictions on Transferability" means, as applied to the
property or assets (or the income or profits therefrom) of any
Person, in each case whether the same is consensual or nonconsensual
or arises by contract, operation of law, legal process or otherwise,
any material condition to, or restriction on, the ability of such
Person or any transferee therefrom to sell, assign, transfer or
otherwise liquidate such property or assets in a commercially
reasonable time and manner or which would otherwise materially
deprive such Person or any transferee therefrom of the benefits of
ownership of such property or assets.
"S&P" means Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc., and any successor thereto, and, if
such corporation shall for any reason no longer perform the functions
of a securities rating agency, "S&P" shall be deemed to refer to any
other nationally recognized rating agency designated by FGIC.<PAGE>
<PAGE>
"Securities" means the $100,000,000 of Home Equity Loan
Asset-Backed Certificates, Series 1996-2, Class A-1, Class A-2, Class
A-3 and Class A-4, issued by the EquiVantage Home Equity Loan Trust
1996-2 pursuant to the Pooling and Servicing Agreement.
"Securities Act" means the Securities Act of 1933, including,
unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"Servicer Prior 12 Month Loss Test" means the event as set
forth in Section 8.20(x) of the Pooling and Servicing Agreement.
"Servicer Termination Delinquency Test" means the events as set
forth in Section 8.20(ix) of the Pooling and Servicing Agreement.
"Servicer Termination Event" means the Servicer Termination
Delinquency Test, the Servicer Termination Loss Test and the Servicer
Prior 12 Month Loss Test.
"Servicer Termination Loss Test" means the events as set forth
in Section 8.20(xi) of the Pooling and Servicing Agreement.
"Specified Subordinated Amount" means:
(a) each of the first 36 Payment Dates following the
Startup Day, the greater of (i) the Base Subordinated Amount and (ii)
the product of (x) the excess, if any, of (1) the Rolling Three Month
Delinquency Rate for such Payment Date over (2) 2% and (y) the
Aggregate Loan Balance as of the close of business on the last day of
the preceding Remittance Period; and
(b) after the first 36 Payment Dates following the
Startup Day, the greatest of (i) the lesser of (x) the Base
Subordinated Amount and (y) the product of (a) 7.0% and (b) the
Aggregate Loan Balance as of the close of business on the last day of
the preceding Remittance Period, (ii) the product of (x) the excess,
if any, of (1) the Rolling Three Month Delinquency Rate for such
Payment Date over (2) 2% and (y) the Aggregate Loan Balance as of the
close of business on the last day of the preceding Remittance Period
and (iii) 1.00% times the Original Aggregate Loan Balance;
provided, however, that the Specified Subordinated Amount will
not be reduced on any Payment Date pursuant to the operation of
clause (b) (i)(y) above if either (I) aggregate Cumulative Loss
Amounts over the prior twelve month period exceed 1.00% of the
average Aggregate Loan Balance during such period or (II) aggregate
Cumulative Loss Amounts for all prior Remittance Periods since the
Startup Day exceed 4.00% of the Original Aggregate Loan Balance.
"Sponsor" means EquiVantage Acceptance Corp.
"Subsidiary" means, with respect to any Person, any corporation
of which a majority of the outstanding shares of capital stock having
ordinary voting power for the election of directors is at the time
owned by such Person directly or through one or more Subsidiaries.
"Term of the Agreement" shall be determined as provided in
Section 4.01 of the Insurance Agreement.
"Term of the Policy" has the meaning provided in the Policy.
"Transaction" means the transactions contemplated by the
Transaction Documents, including the transactions described in the
Offering Document.
"Transaction Documents" means the Insurance Agreement, the
Indemnification Agreement, the Pooling and Servicing Agreement, the
Underwriting Agreement, the Inducement Letter, the Master Loan
Transfer Agreement and the Conveyance Agreement.<PAGE>
<PAGE>
"Trigger Event" means the occurrence of any one of the
following: (a) an Event of Default under the Insurance Agreement has
occurred and is continuing, (b) any legal proceeding or binding
arbitration is instituted with respect to the Transaction or (c) any
governmental or administrative investigation, action or proceeding is
instituted that would, if adversely decided, result in a Material
Adverse Change in respect of the Sponsor, the Company or of a
material portion of the Mortgage Loans.
"Trust" means the EquiVantage Home Equity Loan Trust 1996-2
created under the Pooling and Servicing Agreement.
"Trustee" means Norwest Bank Minnesota, National Association,
as trustee under the Pooling and Servicing Agreement, and any
successor thereto as trustee under the Pooling and Servicing
Agreement.
"Trust Fund" has the meaning provided in the Pooling and
Servicing Agreement.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
including, unless the context otherwise requires, the rules and
regulations thereunder, as amended from time to time.
"Underfunded Plan" means any Plan that has an Underfunding.
"Underfunding" means, with respect to any Plan, the excess, if
any, of (a) the present value of all benefits under the Plan (based
on the assumptions used to fund the Plan pursuant to Section 412 of
the Code) as of the most recent valuation date over (b) the fair
market value of the assets of such Plan as of such valuation date.
"Underwriters" means Prudential Securities Incorporated and CS
First Boston.
"Underwriting Agreement" means the Underwriting Agreement
between the Sponsor, the Company and the Representative with respect
to the offer and sale of the Securities, as the same may be amended
from time to time.<PAGE>
<PAGE>
APPENDIX II
OPINIONS OF COUNSEL
There shall be delivered to FGIC, Moody's and S&P opinions of
counsel as follows:
(i) opinions to the effect that the Securities have
been duly issued, and the Transaction Documents have been duly
executed and delivered, and each constitutes legal, valid and
binding obligations, enforceable in accordance with their
respective terms;
(ii) opinions as to compliance with applicable securities
laws, including, but not limited to, opinions to the effect that:
(A) to the best of counsel's knowledge, no filing or
registration with or notice to or consent, approval, authorization or
order of any court or governmental authority or agency is required
for the consummation of the Transaction, except such as may be
required and have been obtained under the Securities Act and state
securities or "blue sky" laws;
(B) the Registration Statement is effective under the
Securities Act and, to the best of counsel's knowledge and
information, no stop order suspending the effectiveness of the
Registration Statement has been issued under the Securities Act or
proceedings therefor initiated or threatened by the Commission;
(C) neither the Trust nor the Trust Fund is required to
be registered under the Investment Company Act; and
(D) the Pooling and Servicing Agreement is not required
to be qualified under the Trust Indenture Act;
(iii) an opinion to the effect that (A) the Trustee is the
owner of the Mortgage Loans, holding good and marketable title
thereto; (B) the Mortgage Loans would not be included as part of the
estate of the Sponsor in the event of any receivership or insolvency
proceedings in respect thereof; and (C) the transfer of the Mortgage
Loans would be characterized by a court of competent jurisdiction as
a sale of such Mortgage Loans and not as a borrowing by the Sponsor
or a relationship of joint ownership, partnership, joint venture or
similar arrangement; and
(iv) an opinion to the effect that (A) the Trust Fund
qualifies as a REMIC for federal income tax purposes and for state
and local tax purposes; and (B) the Trust Fund will not be subject to
income, franchise or tangible or intangible personal property taxes
in the State of Delaware.<PAGE>
<PAGE>
ANNEX I
TO
INSURANCE AND INDEMNITY AGREEMENT
FORM OF FINANCIAL GUARANTY INSURANCE POLICY
<PAGE>
<PAGE>
APPENDIX A
TO INSURANCE AND INDEMNITY AGREEMENT
CONDITIONS PRECEDENT TO ISSUANCE OF THE POLICY
(a) Payment of Initial Premium and Expenses; Inducement
Letter. FGIC shall have been paid, by or on behalf of Sponsor, a
nonrefundable Premium and shall have been reimbursed, by or on behalf
of the Sponsor, for other fees and expenses identified in Section
3.02 of the Insurance Agreement as payable at closing and FGIC shall
have received a fully executed copy of the Inducement Letter.
(b) Transaction Documents. FGIC shall have received a copy
of each of the Transaction Documents, in form and substance
satisfactory to FGIC, duly authorized, executed and delivered by each
party thereto. Without limiting the foregoing, the provisions of the
Pooling and Servicing Agreement relating to the payment to FGIC of
Premium due on the Policy and the reimbursement to FGIC of amounts
paid under the Policy shall be in form and substance acceptable to
FGIC in its sole discretion.
(c) Certified Documents, Resolutions and Consents. FGIC
shall have received a copy of (i) the certificate of incorporation
and bylaws of the Sponsor, (ii) the resolutions of the Sponsor's
Board of Directors authorizing the issuance of the Securities and the
execution, delivery and performance by the Sponsor of the Transaction
Documents and the transactions contemplated thereby, certified by the
Secretary or an Assistant Secretary of the Sponsor (which certificate
shall state that such certificate of incorporation, bylaws and
resolutions are in full force and effect without modification on the
Date of Issuance), (iii) the certificate of incorporation and bylaws
of the Company, (iv) written consents of the Company's shareholders
authorizing the sale of the Mortgage Loans to the Sponsor and the
execution, delivery and performance by the Company of the Transaction
Documents and the transactions contemplated thereby, certified by a
Secretary or Assistant Secretary of the Company (which certificate
shall state that such certificate of incorporation, bylaws and
written consents are in full force and effect without modification on
the Date of Issuance).
(d) Incumbency Certificates. FGIC shall have received a
certificate of the Secretary or an Assistant Secretary of the Sponsor
certifying the name and signatures of the officers of the Sponsor
authorized to execute and deliver the Transaction Documents and that
shareholder consent to the execution and delivery of such documents
is not necessary.
(e) Representations and Warranties; Certificate. The
representations and warranties of the Sponsor and the Company in the
Insurance Agreement shall be true and correct as of the Date of
Issuance as if made on the Date of Issuance and FGIC shall have
received a certificate of appropriate officers of each of the Sponsor
and the Company to that effect.
(f) Opinions of Counsel. FGIC shall have received opinions
of counsel addressed to FGIC, Moody's and S&P in respect of the
Sponsor, the Company, the other parties to the Transaction Documents
and the Transaction in form and substance satisfactory to FGIC,
addressing such matters as FGIC may reasonably request, including
without limitation, the items set forth in Appendix II hereto, and
the counsel providing each such opinion shall have been instructed by
its client to deliver such opinion to the addressees thereof.
(g) Approvals, Etc. FGIC shall have received true and
correct copies of all approvals, licenses and consents, if any,
including, without limitation, the approval of the shareholders of
the Sponsor and shareholders of the Company required in connection
with the Transaction.
<PAGE>
<PAGE>
(h) No Litigation, Etc. No suit, action or other proceeding,
investigation, or injunction or final judgment relating thereto,
shall be pending or threatened before any court or governmental
agency in which it is sought to restrain or prohibit or to obtain
damages or other relief in connection with any of the Transaction
Documents or the consummation of the Transaction.
(i) Legality. No statute, rule, regulation or order shall
have been enacted, entered or deemed applicable by any government or
governmental or administrative agency or court which would make the
transactions contemplated by any of the Transaction Documents illegal
or otherwise prevent the consummation thereof.
(j) Satisfaction of Conditions of Underwriting Agreement.
All conditions in the Underwriting Agreement relating to the
Underwriters' obligation to purchase the Securities shall have been
satisfied.
(k) Issuance of Ratings. FGIC shall have received
confirmation that the risk secured by the Policy constitutes an
investment grade risk by S&P and Moody's and that the Securities,
when issued, will be rated "AAA" by S&P and "Aaa" by Moody's.
(l) Delivery of Mortgage Documents. FGIC shall have received
evidence satisfactory to it that: (i) delivery has been made to the
Trustee or to a Custodian of the Mortgage Documents required to be so
delivered pursuant to Section 3.5 of the Pooling and Servicing
Agreement; and (ii) each Mortgage Note is endorsed as provided in
Section 3.5 of the Pooling and Servicing Agreement.
(m) No Default. No Default or Event of Default shall have
occurred.
(n) Additional Items. FGIC shall have received such other
documents, instruments, approvals or opinions requested by FGIC as
may be reasonably necessary to effect the Transaction, including but
not limited to evidence satisfactory to FGIC that all conditions
precedent, if any, in the Transaction Documents have been satisfied.
<PAGE>
<PAGE>
CERTIFICATE OF OFFICER
The undersigned, Theodore Louie, Treasurer of EquiVantage
Acceptance Corp., a Delaware corporation (the "Sponsor"), hereby
certifies as follows:
1. A review of the Sponsor's performance under the
Transaction Documents has been made under my supervision; and
2. To the best of my knowledge, following reasonable
inquiry, no Trigger Event or Event of Default has occurred; and
3. The attached financial reports submitted in accordance
with Section 2.03(b)(i) or (ii) hereof, as applicable, are complete
and correct in all material respects and present fairly the financial
condition and results of operations of the Sponsor as of the dates
and for the periods indicated, in accordance with generally accepted
accounting principles consistently applied (subject as to interim
statements to normal year-end adjustments).
Executed this ____ of , 1996.
__________________________
Name:
Title:
EquiVantage Acceptance Corp.
<PAGE>
<PAGE>
CERTIFICATE OF OFFICER
The undersigned, Elizabeth Folk, Senior Vice President and
Chief Financial Officer of EquiVantage Inc., a Delaware corporation
(the "Corporation"), hereby certifies as follows:
1. A review of the Corporation's performance under the
Transaction Documents has been made under my supervision; and
2. To the best of my knowledge, following reasonable
inquiry, no Trigger Event or Event of Default has occurred; and
3. The attached financial reports submitted in accordance
with Section 2.04(b)(i) or (ii) hereof, as applicable, are complete
and correct in all material respects and present fairly the financial
condition and results of operations of the Corporation as of the
dates and for the periods indicated, in accordance with generally
accepted accounting principles consistently applied (subject as to
interim statements to normal year-end adjustments).
Executed this ____ of , 1996.
____________________________
Name:
Title:
EquiVantage Inc.
