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------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 27, 1997
EquiVantage Acceptance Corp. on behalf of
EquiVantage Home Equity Loan Trust 1997-2
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(Exact Name of Registrant as Specified in its Charter)
Delaware 333-22343 76-0448074
- ------------------------ ------------ -------------------
(State of Incorporation) (Commission (I.R.S. Employer
File Number) Identification No.)
13111 Northwest Freeway, Suite 301, Houston, Texas 77040
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (713) 895-1957
No Change
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(Former Name or Former Address, if Changed Since Last Report)
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Item 7. Financial Statements; Pro Forma Financial Information and Exhibits.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits:
1.1 Underwriting Agreement dated June 19, 1997 between EquiVantage
Acceptance Corp. and Morgan Stanley & Co. Incorporated, as
representative of the Underwriters named therein
1.2 Guaranty of EquiVantage Inc. dated June 27, 1997 relating to
performance of certain obligations of EquiVantage Acceptance
Corp.
4.1 Pooling and Servicing Agreement dated as of June 1, 1997 among
EquiVantage Acceptance Corp., EquiVantage Inc. and Norwest Bank
Minnesota, National Association
4.2 Surety Bond effective June 27, 1997 issued by Financial Guaranty
Insurance Company relating to EquiVantage Home Equity Loan Trust
1997-2
4.3 Master Loan Transfer Agreement dated as of June 1, 1997 between
EquiVantage Acceptance Corp. and EquiVantage Inc.
4.4 Conveyance Agreement dated as of June 1, 1997 between EquiVantage
Acceptance Corp. and EquiVantage Inc.
8.1 Opinion of Andrews & Kurth L.L.P. as to tax matters
23.1 Consent of Andrews & Kurth L.L.P. (included in Exhibit 8.1)
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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 ACCEPTANCE CORP.
By: /s/ John E. Smith
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John E. Smith
President
Date: July 11, 1997
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ------- -------
<S> <C>
1.1 Underwriting Agreement dated June 19, 1997 between
EquiVantage Acceptance Corp. and Morgan Stanley & Co.
Incorporated, as representative of the Underwriters named
therein
1.2 Guaranty of EquiVantage Inc. dated June 27, 1997 relating to
performance of certain obligations of EquiVantage Acceptance
Corp.
4.1 Pooling and Servicing Agreement dated as of June 1, 1997
among EquiVantage Acceptance Corp., EquiVantage Inc. and
Norwest Bank Minnesota, National Association
4.2 Surety Bond effective June 27, 1997 issued by Financial
Guaranty Insurance Company relating to EquiVantage Home
Equity Loan Trust 1997-2
4.3 Master Loan Transfer Agreement dated as of June 1, 1997
between EquiVantage Acceptance Corp. and EquiVantage Inc.
4.4 Conveyance Agreement dated as of June 1, 1997 between
EquiVantage Acceptance Corp. and EquiVantage Inc.
8.1 Opinion of Andrews & Kurth L.L.P. as to tax matters
23.1 Consent of Andrews & Kurth L.L.P. (included in Exhibit 8.1)
</TABLE>
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Execution Copy
UNDERWRITING AGREEMENT
between
EQUIVANTAGE ACCEPTANCE CORP.
and
MORGAN STANLEY & CO. INCORPORATED,
as Representative of the Underwriters
EquiVantage Home Equity Loan Trust 1997-2
Home Equity Loan Asset-Backed Certificates, Series 1997-2
June 19, 1997
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TABLE OF CONTENTS
Page
SECTION I. Representations and Warranties of the Company.....................3
SECTION II. Purchase and Sale................................................7
SECTION III. Delivery and Payment............................................7
SECTION IV. Offering by the Underwriters.....................................7
SECTION V. Covenants of the Company.........................................11
SECTION VI. Conditions to the Underwriters' Obligations.....................14
SECTION VII. Payment of Expenses.............................................26
SECTION VIII. Indemnification and Contribution..............................27
SECTION IX. Representations, Warranties and Agreements to Survive Delivery..30
SECTION X. Default by an Underwriter........................................30
SECTION XI. Termination of Agreement........................................31
SECTION XII. Notices........................................................31
SECTION XIII. Persons Entitled to the Benefit of this Agreement.............31
SECTION XIV. Survival.......................................................31
SECTION XV. Definition of the Term "Business Day"...........................32
SECTION XVI. Governing Law; Submission to Jurisdiction......................32
SECTION XVII. Counterparts..................................................32
SECTION XVIII. Headings.....................................................32
SECTION XIX. Amendments and Waivers.........................................32
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June 19, 1997
UNDERWRITING AGREEMENT
Morgan Stanley & Co. Incorporated
Prudential Securities Incorporated
c/o Morgan Stanley & Co. Incorporated,
as Representative of the
Underwriters named in Schedule II hereto
1585 Broadway
New York, New York 10036
Ladies and Gentlemen:
EquiVantage Acceptance Corp., a Delaware corporation (the "Company"),
proposes to sell to Morgan Stanley & Co. Incorporated and Prudential Securities
Incorporated (the "Underwriters") the Home Equity Loan Asset-Backed
Certificates, Series 1997-2, of the classes, and in the respective original
principal amounts or notional amounts, as the case may be, set forth in Schedule
I hereto (the "Offered Certificates"), evidencing fractional, undivided
beneficial ownership interests in the EquiVantage Home Equity Loan Trust 1997-2
(the "Trust") consisting of a pool of fixed-rate and adjustable-rate closed-end
home equity mortgage loans secured by first or junior mortgages or deeds of
trust on one- to four-family residential properties (the "Home Equity Loans")
and related property (collectively, the "Trust Fund"). The Underwriters are
purchasing, severally, only the Offered Certificates set forth opposite their
names in Schedule II, except that the amounts purchased by the Underwriters may
change in accordance with Section X of this Agreement. Morgan Stanley & Co.
Incorporated is acting as representative of the Underwriters and in such
capacity is hereafter referred to as the "Representative". The Home Equity
Loans will be acquired by the Company from EquiVantage Inc., a Delaware
corporation ("EquiVantage Inc."), pursuant to a transfer agreement, dated as of
June 1, 1997 (the "Master Loan Transfer Agreement"), and the related conveyance
agreement, dated as of June 1, 1997 (the "Conveyance Agreement" and, together
with the Master Loan Transfer Agreement, the "Purchase Agreements"). The Home
Equity Loans will be of the type and will have the characteristics described in
the Prospectus Supplement (hereinafter defined), subject to the variances,
ranges, minimums and maximums set forth in the Prospectus Supplement, and will
have the aggregate principal balance set forth in the Prospectus Supplement,
subject to an upward or downward variance in principal balance not to exceed the
percentage set forth in the Prospectus Supplement, the precise aggregate
principal balance within such range to be determined by the Company in its sole
discretion.
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The Trust, which will issue the Offered Certificates, together with other
classes of certificates not being sold to the Underwriters hereunder (the
"Private Certificates" and, collectively with the Offered Certificates, the
"Certificates"), will be established under a pooling and servicing agreement,
dated as of the Cut-off Date (as defined in the Prospectus Supplement) (the
"Pooling and Servicing Agreement"), among the Company, as seller (in such
capacity, the "Seller"), EquiVantage Inc., as servicer (in such capacity, the
"Servicer") and the trustee specified in the Prospectus Supplement (the
"Trustee"). A form of the Pooling and Servicing Agreement has been filed as an
exhibit to the Registration Statement (hereinafter defined).
The Offered Certificates will have the benefit of a financial guaranty
insurance policy (the "Certificate Insurance Policy") issued by the stock
insurance company named in the Prospectus Supplement (the "Certificate
Insurer"). The Certificate Insurance Policy will be issued pursuant to the
insurance agreement, dated as of June 1, 1997 (the "Insurance Agreement"), among
the Certificate Insurer, the Company and the Servicer.
The Offered Certificates of each class will be issued in the minimum
denominations and will have the terms set forth in the Prospectus Supplement.
Capitalized terms used but not otherwise defined herein shall have the meanings
ascribed to such terms in the Pooling and Servicing Agreement.
The Company has prepared a registration statement on Form S-3 (No.
333-22343), including a prospectus, and has filed such registration statement
with the Securities and Exchange Commission (the "Commission") and has filed
with, or transmitted for filing to or shall promptly hereafter file with or
transmit for filing to the Commission a prospectus supplement (the "Prospectus
Supplement") specifically relating to the Offered Certificates pursuant to the
Securities Act of 1933, as amended (the "Securities Act") and the rules and
regulations (the "Rules and Regulations") of the Commission thereunder. Copies
of the registration statement have been delivered by the Company to the
Representative. As used herein, the term "Registration Statement" means such
registration statement, including the exhibits thereto, as amended to the date
of this Agreement. The term "Base Prospectus" means the prospectus included in
the Registration Statement. The term "Prospectus" means the Base Prospectus
together with the Prospectus Supplement. As used herein, the terms
"Registration Statement", "preliminary prospectus" or "Prospectus" shall be
deemed to refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the Securities Act specifically relating
to the terms of the Certificates or the Trust, which documents were filed under
the Securities Exchange Act of 1934, as amended (the "Exchange Act") on or
before the date on which the Registration Statement, as amended, became
effective or the issue date of such preliminary prospectus or the date on which
the Prospectus is filed pursuant to Rule 424 of the Rules and Regulations, as
the case may be; and as used herein, the terms "amend", "amendment" or
"supplement" with respect to the Registration Statement, any preliminary
prospectus or the Prospectus shall be deemed to refer to and include the filing
of any document under the Exchange Act after the date on which the Registration
Statement became effective or the issue date of any preliminary prospectus or
the date on which the Prospectus is filed pursuant
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to Rule 424 of the Rules and Regulations, as the case may be, deemed to be
incorporated therein by reference.
SECTION I. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Underwriters that:
A. The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect and no
proceedings for such purpose are pending or, to the Company's knowledge,
threatened by the Commission.
B. The Registration Statement and the Prospectus, as of the date of the
Prospectus Supplement, conform, and the Registration Statement and the
Prospectus as revised, amended or supplemented and filed with the Commission
prior to the termination of the offering of the Offered Certificates, as of
their respective effective or issue dates, will conform, in all material
respects to the requirements of the Securities Act and the Rules and Regulations
applicable to such documents as of such respective dates; the Registration
Statement and the Prospectus as revised, amended or supplemented and filed with
the Commission as of the Closing Date will conform in all material respects to
the requirements of the Securities Act and the Rules and Regulations applicable
to such documents as of the Closing Date. The Registration Statement, at the
time it became effective, did not contain any 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 the date of
the Prospectus Supplement, and the Prospectus as revised, amended or
supplemented and filed prior to the Closing Date, as of the Closing Date, 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, however,
that the Company makes no representation or warranty as to (1) information
contained in or omitted from the Prospectus or any revision or amendment thereof
or supplement thereto in reliance upon and in conformity with written
information furnished to the Company in writing by any Underwriter specifically
for use in connection with the preparation of the Prospectus or any revision or
amendment thereof or supplement thereto and (2) any information in any
Computational Materials or ABS Term Sheets (each as hereinafter defined)
required to be provided by any Underwriter to the Company pursuant to Section
IV.B. There are no contracts or documents of the Company that are required to
be filed as exhibits to the Registration Statement pursuant to the Securities
Act or the Rules and Regulations that have not been so filed or incorporated by
reference therein on or prior to the effective date thereof other than such
documents or materials, if any, as any Underwriter delivers to the Company
pursuant to Section IV.B hereof for filing on Form 8-K.
C. 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.
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D. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, 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; the Company has all power and
authority necessary to own or hold its properties, to conduct the business in
which it is engaged and to enter into and perform its obligations under this
Agreement, the Pooling and Servicing Agreement, the Insurance Agreement and the
Purchase Agreements and to cause the Certificates to be issued.
E. 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 which the
Company is a party or of which any of its properties is the subject (a) that are
required to be described in the Registration Statement or the Prospectus and
that are not so described, (b) that if determined adversely to the Company would
have a material adverse effect on the business or financial condition of the
Company, (c) asserting the invalidity of this Agreement, the Pooling and
Servicing Agreement, the Insurance Agreement, the Purchase Agreements or the
Certificates, (d) seeking to prevent the issuance of the Certificates or the
consummation by the Company of any of the transactions contemplated by this
Agreement, the Pooling and Servicing Agreement, the Insurance Agreement or the
Purchase Agreements, as the case may be, (e) that 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, this Agreement, the
Pooling and Servicing Agreement, the Insurance Agreement, the Purchase
Agreements or the Certificates or (f) that might adversely affect the federal
income tax attributes of the Certificates as described in the Prospectus.
F. This Agreement has been duly authorized, executed and delivered by the
Company. At or prior to the Closing Date, the Pooling and Servicing Agreement,
the Insurance Agreement and the Purchase Agreements will have been duly
authorized, executed and delivered by the Company and will conform in all
material respects to the descriptions thereof contained in the Prospectus.
Assuming the valid execution and delivery thereof by the other parties thereto,
this Agreement constitutes, and the Pooling and Servicing Agreement and the
Insurance Agreement, 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.
G. The execution, delivery and performance of this Agreement, the Pooling
and Servicing Agreement, the Insurance Agreement and the Purchase Agreements 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
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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 charter documents or the 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 perform its obligations under this
Agreement, the Pooling and Servicing Agreement and the Insurance Agreement or
(ii) the business, operations, results of operations, financial position,
income, properties or assets of the Company.
H. 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.
I. 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.
J. 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 Insurance Agreement or the Purchase Agreements, 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.
K. 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
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such license, certificate, authority or permit that 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.
L. At the time of execution and delivery of the Pooling and Servicing
Agreement by the parties thereto, the Company will: (i) have good title to the
Home Equity Loans being conveyed by the Company, in its capacity as Seller
thereunder, to the Trust pursuant to the terms of the Pooling and Servicing
Agreement, free and clear of any lien, mortgage, pledge, charge, encumbrance,
adverse claim or other security interest (collectively, "Liens"), except to the
extent permitted in the Pooling and Servicing Agreement; (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, in its capacity as Seller thereunder, to
convey its interest in the Home Equity Loans to the Trust pursuant to the terms
of the Pooling and Servicing Agreement and to sell the Offered Certificates to
the Underwriters. Upon execution and delivery of the Pooling and Servicing
Agreement by the Trustee, the Trust will have acquired beneficial ownership of
all of the Company's right, title and interest in and to the Home Equity Loans
free of Liens other than Liens permitted by the Pooling and Servicing Agreement.
Upon payment by and delivery to the Underwriters of the Offered Certificates,
the Underwriters will have good title to the Offered Certificates, free of any
Liens other than Liens permitted by the Pooling and Servicing Agreement.
M. 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.
N. The Pooling and Servicing Agreement is not required to be qualified
under the Trust Indenture Act of 1939, as amended, and the Trust created thereby
is not required to be registered thereunder, and the Company is not an
"investment company" as such term is defined, under the Investment Company Act
of 1940, as amended (the "1940 Act").
O. At the Closing Date, the Offered Certificates 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.
P. 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, except for fees for recording
assignments of the Home Equity Loans to the Trustee pursuant to the Pooling and
Servicing Agreement that have not yet been completed, which fees will be paid by
or on behalf of the Company in accordance with the Pooling and Servicing
Agreement.
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Q. 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.
R. 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.
S. 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 Underwriters in connection with an offering of
the Offered Certificates shall be deemed, and shall state that it is, a
representation and warranty as to the matters covered thereby to each person to
whom the representations and warranties in this Section I are made.
SECTION II. Purchase and Sale. Subject to the terms and conditions and
in reliance upon the representations and warranties herein set forth, the
Company agrees to instruct the Trustee to issue the Offered Certificates and
agrees to sell, and each Underwriter agrees (except as provided in Section X and
XI hereof), severally and not jointly, to purchase from the Company, the
respective principal amount or notional amount, as the case may be, of Offered
Certificates set forth opposite its name in Schedule II hereto, at the
respective price, plus interest accrued, if any, at the related pass-through
rate on the aggregate original principal amount or notional amount thereof from
the date specified in Schedule I to, but not including, the Closing Date, for
each such class set forth therein.
SECTION III. Delivery and Payment. The Offered Certificates shall be
delivered at the office and on the date and time specified in Schedule I
attached hereto, which place, date and time may be changed by agreement between
the Representative and the Company (such date and time of delivery of and
payment for such Offered Certificates being referred to herein as the "Closing
Date"). Delivery of the Offered Certificates shall be made to the
Representative for the accounts of the Underwriters through The Depository Trust
Company against payment of the purchase price thereof to or upon the order of
the Company by wire transfer in immediately available funds.
SECTION IV. Offering by the Underwriters.
A. It is understood that, subject to the terms and conditions hereof, the
Underwriters propose to offer the Offered Certificates for sale as set forth in
the Prospectus and that the Underwriters will not offer, sell or otherwise
distribute the Offered Certificates (except for the sale thereof in exempt
transactions) in any state in which the Offered Certificates are not exempt
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from registration under "blue sky" or state securities laws (except where the
Offered Certificates will have been qualified for offering and sale at the
Representative's direction under such "blue sky" or state securities laws).
B. It is understood that the Underwriters may prepare and provide to
prospective investors certain Computational Materials and ABS Term Sheets in
connection with the offering of the Offered Certificates, subject to the
following conditions:
1. In connection with the use of Computational Materials, the
Underwriters shall comply with all applicable requirements 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, as made
applicable to other issuers and underwriters by the Division of Corporation
Finance of the Commission in response to the request of the Public
Securities Association ("PSA"), dated May 27, 1994 (collectively, the
"Kidder/PSA Letters"), as well as the PSA Letter referred to below. In
connection with the use of ABS Term Sheets, the Underwriters shall comply
with all applicable requirements of the No-Action Letter, dated February
17, 1995, issued by the Division of Corporation Finance to the Commission
to PSA (the "PSA Letter" and, together with the Kidder/PSA Letters, the
"No-Action Letters").
2. The term "Computational Materials" as used herein shall have the
meaning given to such term in the No-Action Letters, but shall include only
those Computational Materials that have been prepared or delivered to
prospective investors by or at the direction of the Underwriters. The
terms "ABS Term Sheets", "Collateral Term Sheets" and "Structural Term
Sheets" as used herein shall have the meanings given to such terms in the
PSA Letter, but shall include only those ABS Term Sheets, Collateral Term
Sheets or Structural Term Sheets that have been prepared or delivered to
prospective investors by or at the direction of the Underwriters.
3. All Computational Materials and ABS Term Sheets provided to
prospective investors that are required to be filed pursuant to the
No-Action Letters shall bear a legend on each page in a form previously
agreed upon by the Company and the Underwriters.
4. Any Computational Materials and ABS Term Sheets are subject to
review by and approval of the Company prior to their distribution to any
prospective investors and a copy of such Computational Materials and ABS
Term Sheets as are delivered to prospective investors shall, in addition to
the foregoing delivery requirements, to be delivered to the Company
simultaneously with delivery to prospective investors.
5. The Underwriters shall provide to the Company, for filing on Form
8-K as provided in Section V.N, five copies (in such format as required by
the Company) of all
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Computational Materials and ABS Term Sheets that are required to be filed
with the Commission pursuant to the No-Action Letters. Each delivery of
Computational Materials or ABS Term Sheets to the Company pursuant to this
paragraph 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. The Underwriters may provide copies of the
foregoing in a consolidated or aggregate form that includes all information
required to be filed. All Computational Materials and ABS Term Sheets
described in this Section must be provided to the Company not later than
10:00 a.m. New York time on the business day before the date on which filing
thereof is required pursuant to the terms of this Agreement. Each
Underwriter agrees that it will not provide to any investor or prospective
investor in the Offered Certificates any Computational Materials or ABS
Term Sheets on or after the day on which Computational Materials and ABS
Term Sheets are required to be provided to the Company pursuant to this
Section (other than copies of Computational Materials or ABS Term Sheets
previously submitted to the Company in accordance with this Section for
filing pursuant to Section V.N), unless such Computational Materials or ABS
Term Sheets are preceded or accompanied by the delivery of a Prospectus to
such investor or prospective investor.
6. All information included in the Computational Materials and ABS
Term Sheets shall be generated based on substantially the same methodology
and assumptions that are used to generate the information in the Prospectus
Supplement as set forth therein; provided, however, that the Computational
Materials and ABS Term Sheets may include information based on alternative
methodologies or assumptions specified therein. If any Computational
Materials or ABS Term Sheets that are required to be filed were based on
assumptions with respect to the Home Equity Loans that are incorrect, that
differ from the final information about the Mortgage Pool in any material
respect or on Certificate structuring terms that were revised in any
material respect prior to the printing of the Prospectus, the Underwriters
shall prepare revised Computational Materials or ABS Term Sheets, as the
case may be, based on the final information about the Mortgage Pool and
structuring assumptions, circulate such revised Computational Materials or
ABS Term Sheets, as the case may be, to all recipients of the preliminary
versions thereof that indicated orally to an Underwriter that they would
purchase all or any portion of the Offered Certificates and include such
revised Computational Materials or ABS Term Sheets (marked "as revised") in
the materials delivered to the Company pursuant to Section IV.B.5.
7. The Company shall not be obligated to file any Computational
Materials or ABS Term Sheets that (i) in the reasonable determination of
the Company and the Underwriters are not required to be filed pursuant to
the No-Action Letters or (ii) have been determined to contain any material
error or omission, provided that, at the request of an Underwriter, the
Company will file Computational Materials or ABS Term Sheets that contain a
material error or omission if clearly marked "superseded by materials dated
_________" and accompanied by corrected Computational Materials or ABS Term
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Sheets that are marked "material previously dated ____________, as
corrected". In the event that at any time when a prospectus relating to
the Offered Certificates is required to be delivered under the Securities
Act, any Computational Materials or ABS Term Sheets are determined, in the
reasonable judgement of the Company or the Underwriter to contain a
material error or omission, the applicable Underwriter shall prepare a
corrected version of such Computational Materials or ABS Term Sheets, shall
circulate such corrected version of such Computational Materials or ABS
Term Sheets to all recipients of the prior version thereof that either
indicated orally to such Underwriter that they would purchase all or any
portion of the Offered Certificates, or actually purchased all or any
portion thereof, and shall deliver copies of such corrected Computational
Materials or ABS Term Sheets (marked "as corrected") to the Company for
filing with the Commission in a subsequent Form 8-K submission (subject to
the Company's obtaining an accountant's comfort letter in respect of such
corrected Computational Materials or ABS Term Sheets, which shall be at the
expense of the applicable Underwriter or Underwriters).
C. Each Underwriter represents and warrants and agrees with the Company
that, as of the date hereof and as of the Closing Date, that: (i) the
Computational Materials and ABS Term Sheets furnished to the Company pursuant to
Section IV.B.5 constitute (either in original, aggregated or consolidated form)
all of the materials furnished to prospective investors by the Underwriter prior
to the time of delivery thereof to the Company that are required to be filed
with the Commission with respect to the Offered Certificates in accordance with
the No-Action Letters, and such Computational Materials and ABS Term Sheets
comply with the requirements of the No-Action Letters; (ii) on the date any such
Computational Materials and ABS Term Sheets with respect to such Certificates
(or any written or electronic materials furnished to prospective investors on
which the Computational Materials and ABS Term Sheets are based) were last
furnished to each prospective investor and on the date of delivery thereof to
the Company pursuant to Section IV.B.5 and on the related Closing Date, such
Computational Materials and ABS Term Sheets (or materials) were accurate in all
material respects when read in conjunction with the Prospectus (taking into
account the assumptions explicitly set forth in the Computational Materials,
except to the extent of any errors therein that are caused by errors in the
Mortgage Pool information provided to the Underwriters by the Company; (iii) the
Underwriter has not and will not represent to potential investors that any
Computational Materials or ABS Term Sheets were prepared or disseminated on
behalf of the Company; and (iv) all Computational Materials and ABS Term Sheets
(or underlying materials distributed to prospective investors on which the
Computational Materials and ABS Term Sheets were based) contained and will
contain the legend in the form previously agreed upon by the Company and the
Underwriters as required by Section IV.B.3.
Notwithstanding the foregoing, the Underwriters make no representation
or warranty as to whether any Computational Materials or ABS Term Sheets (or any
written or electronic materials furnished to prospective investors on which the
Computational Materials or ABS Term Sheets are based) included or will include
any inaccurate statement resulting directly
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from any error contained in the Mortgage Pool information provided to the
Underwriters by the Company.
D. Each Underwriter shall deliver to the Company a certificate, dated as
of the date the Underwriter delivers any Computational Materials and ABS Term
Sheets to the Company pursuant to Section IV.B.5 to the effect that the
representations and warranties of the Underwriter contained in this Section IV
are true and correct as of such date. If an Underwriter does not provide any
Computational Materials or ABS Term Sheets to the Company pursuant to Section
IV.B.4, the Underwriter shall be deemed to have represented, as of the Closing
Date, that it did not provide any prospective investors with any information in
written or electronic form in connection with the offering of the Offered
Certificates that is required to be filed with the Commission in accordance with
the No-Action Letters, and the Underwriter shall provide the Company with a
certification to that effect on the Closing Date.
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 transmit such Prospectus to the Commission for filing pursuant to Rule 424(b)
of the Rules and Regulations by means reasonably calculated to result in filing
with the Commission pursuant to said rule and, if necessary, within 15 days
after the initial issuance of the Offered Certificates or, in the case of a
series of Certificates including a "forward purchase commitment," within 15 days
of the end of the related acquisition period, to transmit for filing by means
reasonably calculated to result in filing with the Commission a report on Form
8-K for purposes of filing the Pooling and Servicing Agreement, and will
promptly advise the Underwriters when the Prospectus is so filed.
B. 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, but to make no further amendment or any revision
of or supplement to the Registration Statement or to the Prospectus prior to the
Closing Date (other than any such amendment, revision or supplement that does
not relate to the Offered Certificates), except as otherwise permitted herein.
C. To furnish the Representative and counsel for the Underwriters, prior
to filing with the Commission, and to obtain the consent of the Representative
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) the Prospectus
pursuant to Rule 424 of the Rules and Regulations.
D. Prior to the termination of the offering of the Offered Certificates,
to promptly advise the Representative (i) when any amendment to the Registration
Statement has been filed or has become effective or any revision of or
supplement to the Prospectus has been so filed (unless such amendment, revision
or supplement does not relate to the Offered Certificates), (ii)
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of any request by the Commission of any amendment of the Registration
Statement or the Prospectus or for any additional information (unless such
request for additional information does not relate to the Offered
Certificates), (iii) of any written notification received by the Company of
the suspension of qualification of the Offered Certificates for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose and (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the institution
or, to the knowledge of the Company, the threatening of any proceeding for
that purpose. The Company will use its best efforts to prevent the issuance
of any such stop order and, if issued, to obtain as soon as possible the
withdrawal thereof.
E. 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.
F. To furnish promptly to the Underwriters and to counsel for the
Underwriters, without charge, conformed copies of the Registration Statement as
originally filed with the Commission and of each amendment thereto filed with
the Commission (including exhibits) and, so long as delivery of a prospectus
relating to the Offered Certificates is required under the Securities Act, as
many copies of the Prospectus and any revisions or amendments thereof or
supplements thereto as may be reasonably requested.
G. If at any time when a prospectus relating to the Offered Certificates
is required to be delivered under the Securities Act (i) any event occurs 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 (ii)
it shall be necessary to revise, 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, the Rules and Regulations or the
Exchange Act, to notify the Underwriters and, upon an Underwriter's request, to
prepare and file with the Commission a revision, amendment or supplement that
will correct such statement or omission or effect such compliance, and to
furnish without charge to the Underwriters as many copies as the Underwriters
may from time to time reasonably request of an amended Prospectus or a
supplement to the Prospectus that corrects such statement or omission or effects
such compliance.
H. 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
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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.
I. 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.
J. So long as the Offered Certificates shall be outstanding, to 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 the
Pooling and Servicing Agreement; (ii) the annual statement of a firm of
independent public accountants furnished to the Trustee pursuant to the Pooling
and Servicing Agreement; (iii) each report of the Company regarding the Offered
Certificates filed with the Commission under the Exchange Act or mailed to the
holders of the Offered Certificates; and (iv) 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.
K. To apply the net proceeds from the sale of the Offered Certificates in
the manner set forth in the Prospectus.
L. 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.
M. To 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 to cause to be delivered to the Trustee the Insurance Policy issued by
the Certificate Insurer.
N. To cause any Computational Materials with respect to the Certificates
that are delivered to the Company as provided in Section IV.B.5 to be filed with
the Commission on a Current Report on Form 8-K at or before the time of filing
of the Prospectus pursuant to Rule 424(b) under the Securities Act; to cause any
ABS Term Sheets with respect to the Certificates that are delivered to the
Company as provided in Section IV.B.5 to be filed with the Commission on one or
more Current Reports on Form 8-K (i) at or before the time of filing of the
Prospectus pursuant to Rule 424(b) of the Rules and Regulations in the case of
Structural Term Sheets, and (ii) within two business days of first use in the
case of Collateral Term Sheets. Prior to any such
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filing of Computational Materials or ABS Term Sheets (other than any
Collateral Term Sheets that are not based on Mortgage Pool information
provided to the Underwriters by the Company) by the Company, however, the
Underwriters must comply with their obligations pursuant to Section IV.B and
the Company must receive a letter from KPMG Peat Marwick LLP, certified
public accountants, satisfactory in form and substance to the Company and its
counsel, to the effect that such accountants have performed certain specified
procedures, all of which have been agreed to by the Company, as a result of
which they determined that all information that is included in the
Computational Materials and ABS Term Sheets (if any) provided by the
Underwriters to the Company for filing on Form 8-K, as provided in Section
IV.B and this Section V.N, is accurate except as to such matters that are not
deemed by the Company to be material. The foregoing letter shall be at the
expense of the Underwriters. The Company shall file any corrected
Computational Materials or ABS Term Sheets described in Section IV.B.7 as
soon as practicable following receipt thereof.
SECTION VI. Conditions to the Underwriters' Obligations. The obligations
of the Underwriters to purchase the Offered Certificates pursuant to this
Agreement are subject to: (i) the accuracy in all material respects of the
representations and warranties on the part of the Company herein contained as of
the date hereof and as of the Closing Date (including those representations and
warranties set forth in the Pooling and Servicing Agreement and incorporated
herein); (ii) the performance in all material respects 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:
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, to the Company's
knowledge, 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
or transmitted for filing by means reasonably calculated to result in a filing
with the Commission pursuant to Rule 424(b) of the Rules and Regulations.
B. The Underwriters shall not have discovered and disclosed to the
Company on or prior to the Closing Date that the Registration Statement or any
amendment or supplement thereto contains an untrue statement of a fact or omits
to state a fact that, in the opinion of counsel for the Underwriters, is
material and is required to be stated therein or is necessary to make the
statements therein not misleading, and the Underwriters shall not have
discovered and disclosed to the Company on or prior to the Closing Date that the
Prospectus or any amendment or supplement thereto contains an untrue statement
of a fact or omits to state a fact that, in the opinion of counsel for the
Underwriters, is material and is necessary to make the statements therein not
misleading in light of the circumstances under which they were made.
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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; 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. The Company shall have furnished to the Underwriters a written
opinion, dated the Closing Date, of Andrews & Kurth L.L.P., as counsel to the
Company addressed to the Underwriters, in form and substance satisfactory to the
Underwriters, to the effect that:
1. The Pooling and Servicing Agreement, the Insurance Agreement and
the Purchase Agreements, assuming the due authorization, execution and
delivery by parties thereto other than the Company and the Servicer,
constitute the legal, valid and binding obligations of the Company and the
Servicer, as applicable, enforceable against the Company and the Servicer,
as applicable, in accordance with their respective terms, except as
enforcement thereof may be limited by (a) bankruptcy, insolvency,
reorganization, liquidation, receivership, moratorium or other similar laws
relating to or affecting creditors' rights generally or (b) general
principles of equity or public policy, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
2. The execution and delivery of this Agreement have been duly
authorized by all necessary corporate action of the Company and this
Agreement has been duly executed and delivered by the Company.
3. Each Offered Certificate, when duly executed and authenticated as
specified in the Pooling and Servicing Agreement and delivered pursuant to
the Pooling and Servicing Agreement, will be validly issued and outstanding
and entitled to the benefits of the Pooling and Servicing Agreement
afforded by such Offered Certificate.
4. To the best knowledge of such counsel, no consent, approval,
authorization or order of, registration or filing with, or notice to, any
governmental authority or court is required to be obtained for the
execution, delivery and performance of this Agreement or any of the Pooling
and Servicing Agreement, the Insurance Agreement or the Purchase Agreements
or the consummation of any of the transactions contemplated thereby by the
Company or the Servicer, as the case may be, except such as may be required
under the "blue sky" or state securities laws of any jurisdiction in
connection with the offering, sale or acquisition of the Offered
Certificates, any
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recordations of the assignment of the Home Equity Loans to the Trustee (to
the extent such recordations are required pursuant to the Pooling and
Servicing Agreement) that have not yet been completed and such other
approvals as have been obtained.
5. 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.
6. The Registration Statement and any amendments thereto have become
effective under the Securities 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
Computational Materials, any ABS Term Sheets and any financial and
statistical data included or incorporated by reference in the Registration
Statement and the Prospectus, as to which such counsel need express no
opinion), complied as to form in all material respects with the applicable
requirements of the Securities Act and the Rules and Regulations, and such
counsel does not know of any amendment to the Registration Statement
required to be filed.
7. The statements set forth in the Base Prospectus under the
captions "Description of the Securities" and "The Pooling and Servicing
Agreement" 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.
8. The statements set forth in the Base Prospectus and the
Prospectus Supplement, as the case may be, under the captions "ERISA
Considerations," "Material 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
or legal conclusions with respect thereto, provide a fair and accurate
summary of such law or legal conclusions.
9. The Pooling and Servicing Agreement, the Certificates and the
Purchase Agreements conform in all material respects to the description
thereof contained in the Prospectus; other than the Pooling and Servicing
Agreement, the Certificates and the Purchase Agreements, to the best
knowledge of such counsel, there are no material contracts, indentures or
other documents of a character required to be described or referred to in
the Registration Statement or the Prospectus or to be filed as exhibits to
the Registration Statement other than those described or referred to
therein or filed or incorporated by reference as exhibits thereto.
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10. 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 1940 Act.
11. 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 as a REMIC.
12. Assuming that the Trustee causes certain assets of the Trust, as
the Trustee has covenanted to do in the Pooling and Servicing Agreement, to
be treated as one or more "real estate mortgage investment conduits"
("REMICs"), 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 will be
treated as one or more REMICs, the Offered Certificates will be treated as
the "regular interests" in a REMIC and a specified class of the Private
Certificates will be treated as the "residual interest" in a 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.
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 that 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 the financial, numerical,
statistical and quantitative information included in the Registration Statement
or incorporated by reference therein, as to which such counsel need not make any
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 necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading
(except as to the Computational Materials, ABS Term Sheets and the financial,
numerical, statistical and quantitative information included in the Prospectus
or incorporated by reference therein and statements in the Prospectus with
respect to the Certificate Insurer, as to which such counsel need not make any
statement); 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 or ABS Term Sheets) 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 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
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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. Such opinion may be qualified as an opinion only on
the corporate laws of the State of Delaware, the laws of the State of New
York and the federal laws of the United States.
E. The Underwriters have received the favorable opinion, dated the
Closing Date, of Andrews & Kurth L.L.P., counsel to the Company, addressed to
the Company and satisfactory to the Certificate Insurer, the nationally
recognized statistical rating organizations named in the Prospectus Supplement
(the "Rating Agencies") 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, the Rating Agencies and the Underwriters as
though such opinion had been addressed to each such party.
F. Karen S. 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 the State of Delaware.
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, except as enforcement thereof may be limited by (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 the
Servicer 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.
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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
charter documents or the 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 such counsel'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
regulation applicable to the Servicer; or (B) to the best of such counsel's
knowledge, without independent investigation, result in the creation or
imposition of any lien, charge or encumbrance upon the Trust 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 invalidity 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) that 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.
G. Karen S. 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 in, and is in good standing as a foreign
corporation under the laws of, 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 the Company 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, the Insurance Agreement and the Purchase
Agreements, and to cause the Certificates to be issued.
2. The Company is not in violation of its charter documents or the
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,
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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 that
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
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, except as
enforcement thereof may be limited by (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 do not and will not (i) 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, (ii) result in a violation of the provisions of
the charter documents or the 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, or (iii) result
in the creation or imposition of any lien, charge or encumbrance upon the
Trust 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
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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 Securities 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) that 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) that 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.
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:
1. The Trustee is a national banking association duly incorporated
and validly existing under the laws of the United States of America.
2. The Trustee has the full power to execute, deliver and perform
its obligations under the Pooling and Servicing Agreement and to execute,
countersign and deliver the Certificates.
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 actions of the Trustee.
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4. The Pooling and Servicing Agreement is a valid and legally
binding obligation of the Trustee, enforceable against the Trustee, in
accordance with its terms, except as enforcement thereof may be limited by
(a) bankruptcy, insolvency, reorganization, liquidation, receivership,
moratorium or other similar laws relating to or affecting creditors' rights
generally or (b) general principles of equity or public policy, regardless
of whether such enforceability is considered in a proceeding in equity or
at law.
5. The execution and delivery by the Trustee of the Pooling and
Servicing Agreement does not (a) violate the charter documents or the
by-laws of the Trustee, (b) to such counsel's knowledge, violate any
judgment, decree or order of any state or federal court or other state or
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 state or federal statute, rule or regulation or
require any consent, approval or authorization of any state or federal
court or other state or federal governmental authority to which the Trustee
is bound.
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 full power and authority to perform the obligations of the
Servicer under the Pooling and Servicing Agreement.
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 that, 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.
In rendering such opinion or making such statement, such counsel may rely,
as to matters of fact, on certificates of responsible officers of the Trustee.
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 Trustee. Such opinion may be qualified as an
opinion only on the laws of the state where the Trustee is located and the State
of New York and the federal laws of the United States.
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 issuance and sale of the Offered Certificates, this Agreement,
the Prospectus and such other related matters as the Underwriters may reasonably
require.
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J. The Underwriters shall have received a favorable opinion, dated the
Closing Date, from counsel to the Certificate Insurer (which may be in-house
counsel) in form and scope satisfactory to counsel for the Underwriters,
substantially to the effect that:
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 and the Insurance Agreement are
within the corporate power of the Certificate Insurer and have been
authorized by all necessary corporate action on the part of the Certificate
Insurer, and do 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 that has
not previously been obtained or effected.
4. The Certificate Insurance Policy and the Insurance Agreement have
been duly authorized, executed and delivered by the Certificate Insurer and
constitute legal, valid and binding agreements of the Certificate Insurer,
enforceable against the Certificate Insurer in accordance with their terms,
except as enforcement thereof may be limited by (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
Securities Act.
6. The information set forth under the captions "The Certificate
Insurer" and "The Certificate Insurance Policy" in the Prospectus
Supplement are materially correct
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and, 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 stating that the signer of such certificate has
carefully examined the Registration Statement (excluding any documents
incorporated therein by reference), the Prospectus, the Pooling and 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 to be
satisfied on or prior to the Closing Date.
2. No stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted and are pending or have been threatened as of the Closing Date.
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 the end of the fiscal quarter immediately
proceeding the fiscal quarter in which the Closing Date occurs.
4. Nothing has come to the attention of such person that would lead
him or her to believe that the Prospectus (other than the Computational
Materials or ABS Term Sheets incorporated therein by reference) contains
any untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
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 Trust Fund 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 be rated not lower than the required
ratings set forth under the heading "Ratings" in the Prospectus Supplement, such
ratings shall not have been
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rescinded and no public announcement shall have been made that any such
required rating of the Offered Certificates has been placed under review
(otherwise than for possible upgrading).
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 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 States; or (iv) there shall have occurred such a material adverse change
in general economic, political or financial conditions (or the effect of
international conditions on the financial markets of the United States shall be
such) as to make it in each of the instances set forth in clauses (i), (ii),
(iii) and (iv) herein, in the reasonable judgment of the Underwriters,
impractical or inadvisable to proceed with the public offering or delivery of
the Certificates on the terms and in the manner contemplated in the Prospectus.
R. The Representative shall have received from KPMG Peat Marwick LLP,
certified public accountants, (a) a letter, dated on or before the Closing Date,
in form and substance satisfactory to the Representative and 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 and (b) the letter prepared pursuant to Section V.N.
S. The Representative and counsel for the Underwriters shall have
received copies of any opinions of counsel supplied to the Rating Agencies
relating to any matters with respect to the Certificates. Any such opinions
shall be dated the Closing Date and addressed to each of the
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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. Subsequent to the date hereof, there shall not have occurred any
change, or any development involving a prospective change, in a condition,
financial or otherwise, or in the earnings, business, properties or operations
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.
V. The Underwriters shall have received payment from the Company on the
Closing Date of a fee equal to the amount specified as the "Underwriting Fee" in
Schedule I hereto.
If any of the conditions specified in this Section VI shall not have been
fulfilled in all material respects when and as provided herein, this Agreement
and all obligations of an Underwriter hereunder may be canceled at, or at any
time prior to, the Closing Date by such Underwriter. The applicable Underwriter
shall give notice of such cancellation to the Company in writing, or by
telephone confirmed in writing. Such cancellation 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.I hereof and of
preparing, printing and distributing a "blue sky" memorandum (including any
related fees); (f) any fees charged by the Rating Agencies for rating
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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); (i)
the reasonable fees and expenses of counsel to the Underwriters (exclusive of
fees and expenses related to extraordinary services performed at the request
of the Underwriters that result in the total amount of the aggregate fees of
counsel to the Company and the Underwriters exceeding $50,000); and (j) all
other costs and expenses incident to the performance of the obligations of
the Company (including costs and expenses of its counsel); provided, however,
that the Underwriters shall pay any transfer taxes on the Offered
Certificates that they may sell and the expenses of advertising any offering
of the Offered Certificates made by the Underwriters.
If this Agreement is terminated by either Underwriter in accordance with
the provisions of Section VI or Section XI, whether or not the transactions
contemplated hereunder are consummated, the Company shall cause such Underwriter
to be reimbursed for all reasonable out-of-pocket expenses, including fees and
disbursements of counsel for such Underwriter, except that the Company shall not
be obligated under this Agreement to reimburse such Underwriter for reasonable
out-of-pocket expenses, excluding fees and disbursements of counsel for such
Underwriter, if this Agreement is terminated by either Underwriter in accordance
with Section VI.Q herein.
SECTION VIII. Indemnification and Contribution. The Company agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls such Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act from and against any and all
losses, claims, damages and liabilities, joint or several, to which they or any
of them may become subject under the Securities Act, the Exchange Act or other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) were caused by (a) any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement, any preliminary
prospectus or the Prospectus (if used within the period mentioned in Section V.G
and as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) or were caused by 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
losses, claims, damages or liabilities were caused by any such untrue statement
or omission or alleged untrue statement or omission made therein based upon and
in conformity with (i) the information furnished in writing to the Company by
either Underwriter specifically for use in connection with the preparation of
the Registration Statement, any preliminary prospectus or the Prospectus or any
revision or amendment thereof or supplement thereto and (ii) any information in
any Computational Materials or ABS Term Sheets or Collateral Term Sheets, as
applicable (except to the extent such losses, claims, damages or liabilities, or
actions in respect thereof, are based on errors in such Computational Materials
or ABS Term Sheets caused directly by errors described in clause (b) below),
required to be provided by the Underwriters to the Company pursuant to Section
IV.B or (b) any error contained in the Mortgage Pool information provided to the
Underwriters by the Company for
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use in connection with the preparation by the Underwriters of Computational
Materials or ABS Term Sheets. Such indemnity with respect to any Corrected
Statement (as defined below) in such Prospectus (or supplement thereto) shall
not inure to the benefit of the Underwriters (or any person controlling
either of the Underwriters) from whom the person asserting any loss, claim,
damage or liability purchased the Offered Certificates that are the subject
thereof if such person did not receive a copy of the supplement to such
Prospectus at or prior to the confirmation of the sale of such Certificates
and the untrue statement or omission of a material fact contained in such
Prospectus (or supplement thereto) was corrected (a "Corrected Statement") in
such other supplement and such supplement was furnished by the Company to the
Underwriters prior to the delivery of such confirmation.
The Underwriters agree, severally and not jointly, to indemnify and hold
harmless the Company and its directors and officers who sign the Registration
Statement and any person controlling the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, to the same
extent as the foregoing indemnity from the Company to the Underwriters, but only
with reference to (i) information relating to either Underwriter furnished in
writing to the Company by such Underwriter specifically for use in connection
with the preparation of the Registration Statement, any preliminary prospectus
or the Prospectus or any revision or amendment thereof or supplement thereto and
(ii) any Computational Materials or ABS Term Sheets, as applicable, except for
errors therein caused directly by errors contained in the Mortgage Pool
information provided to the Underwriters by the Company for use in connection
with the preparation by the Underwriters of such materials.
In case any proceeding (including any governmental investigation) shall be
instituted involving any person in respect of which indemnity may be sought
pursuant to either of the two preceding paragraphs, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding
within thirty days after a statement therefor is received by the indemnifying
party. In any such proceeding, any indemnified party shall have the right to
retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such counsel or
(ii) the named parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
indemnifying party shall not, in respect of the legal expenses of any
indemnified party, in connection with any proceeding or relating proceedings in
the same jurisdiction, be liable for the fees and expenses of more than one
separate firm (in addition to any local counsel) for all such indemnified
parties and that all such fees and expenses shall be reimbursed as they are
incurred. Such firm shall be designated in writing by the Representative in the
case of parties indemnified pursuant to the first
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paragraph of this Section VIII and by the Company in the case of parties
indemnified pursuant to the second paragraph of this Section VIII. The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by
reason of such settlement or judgment. Notwithstanding the foregoing
sentence, 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 contemplated by the third sentence of this paragraph, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of
the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior to the
date of such settlement. No indemnifying party shall, without the prior
written consent of the indemnified party, 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 claim that are the
subject matter of such proceeding.
To the extent the indemnification provided for this Section VIII is
available to an indemnified party under the first or second paragraph of this
Section VIII or is insufficient in respect of any losses, claims, damages or
liabilities referred to therein, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand, and the Underwriters on the
other, from the offering of the 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 of each of the Underwriters on the other, in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand, and each of the
Underwriters on the other, in connection with the offering of the Offered
Certificates shall be deemed to be in the same respective proportions that the
total net proceeds from the offering of the Offered Certificates (before
deducting expenses) received by the Company and the total underwriting discounts
and commissions received by each of the Underwriters in respect thereof,
respectively, bear to the aggregate public offering price of the Offered
Certificates. The relative fault of the Company on the one hand, and of each of
the Underwriters on the other, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact related to information
supplied by the Company or by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. Each Underwriter's obligation to contribute pursuant to
this Section VIII is several in proportion to the respective principal amounts
of the Offered Certificates it has purchased hereunder, and not joint.
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The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section VIII were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section VIII, neither Underwriter shall be required to
contribute any amount in excess of the amount by which the total underwriting
discounts and commissions received by such Underwriter in connection with the
Offered Certificates underwritten and distributed to the public by such
Underwriter exceeds the amount of any damages that such Underwriter has
otherwise been required to pay by reason of any such untrue or alleged untrue
statement or omission or alleged omission. No person guilty or 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. The remedies provided for this Section VIII are
not exclusive and shall not limit any rights or remedies that may otherwise be
available to any indemnified party at law or in equity.
The indemnity and contribution agreements contained in this Section VIII
and the representations and warranties of the Company in this Agreement shall
remain operative and in full force and effect regardless of (i) any termination
of this Agreement, (ii) any investigation made by or on behalf of the
Underwriters or any person controlling either of the Underwriters or by or on
behalf of the Company, its directors or officers or any person controlling the
Company and (iii) acceptance of any payment for any of the Offered Certificates.
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 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 an Underwriter. If either of the Underwriters
shall fail to purchase and pay for any of the Offered Certificates agreed to be
purchased by such Underwriter hereunder and such failure to purchase shall
constitute a default in the performance of its obligations under this Agreement,
the remaining Underwriter shall be obligated severally to take up and pay for
the Offered Certificates that the defaulting Underwriter agreed but failed to
purchase; provided, however, that in the event that the aggregate principal
amount of Offered Certificates that the defaulting Underwriter agreed but failed
to purchase shall exceed 10% of the aggregate principal amount of all of the
Offered Certificates set forth in the Prospectus Supplement, the remaining
Underwriter shall have the right to purchase all, but shall not be under any
obligation to purchase any, of the Offered Certificates, and if such
nondefaulting
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Underwriter does not purchase all the Offered Certificates, this Agreement
will terminate without liability to the nondefaulting Underwriter or the
Company. In the event of a default by either Underwriter as set forth in
this Section X, the Closing Date shall be postponed for such period, not
exceeding seven days, as the nondefaulting Underwriter shall determine in
order that required changes in the Registration Statement and the Prospectus
or in any other documents or arrangements may be effected. Nothing contained
in this Agreement shall relieve a defaulting Underwriter of its liability, if
any, to the Company and to the nondefaulting Underwriter for damages
occasioned by its defaulting hereunder.
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 effective only on receipt, and:
(i) if to the Underwriters, shall be delivered or sent by overnight
mail or facsimile transmission (confirmed by overnight mail) to the
Representative at its address set forth above, Attn.: General Counsel,
telecopy number (212) 761-8915; and
(ii) if to the Company, shall be delivered or sent by overnight mail
or facsimile transmission (confirmed by overnight mail) to 13111 Northwest
Freeway, Suite 301, Houston, Texas 77040, Attn.: General Counsel, telecopy
number (713) 895-3805.
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
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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 the appellate court thereof, to
the extent jurisdiction is proper therein, 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, 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.
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.
32
<PAGE>
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: /s/ Elizabeth Folk
----------------------------------------
Name: Elizabeth Folk
Title: Senior Vice President
CONFIRMED AND ACCEPTED, as
of the date first above written:
MORGAN STANLEY & CO. INCORPORATED,
Acting on its own behalf and as
Representative of the Underwriters
referred to in the foregoing Agreement
By: /s/ James P. Fadel
----------------------------------------
Name: James P. Fadel
Title: Principal
<PAGE>
Schedule I
EquiVantage Home Equity Loan Trust 1997-2, Series 1997-2
Registration Statement No. 333-22343
Base Prospectus dated June 3, 1997
Prospectus Supplement dated June 19, 1997
Title of Certificates: Class A-1
---------
Amount of Certificates: $23,800,000 (approximate)
Pass-Through Rate: 6.575% (plus accrued interest from
the Cut-off Date at applicable
Pass-Through Rate)
Purchase Price Percentage: 99.96875%
Cut-Off Date: June 1, 1997
Closing: June 27, 1997
Denominations: $1,000 and integral multiples
of $1.00 in excess thereof
Title of Certificates: Class A-2
---------
Amount of Certificates: $15,600,000 (approximate)
Pass-Through Rate 6.800%
Purchase Price Percentage: 99.96875% (plus accrued
interest from
the Cut-off Date at
applicable
Pass-Through Rate)
Cut-Off Date: June 1, 1997
Closing: June 27, 1997
Denominations: $1,000 and integral multiples
of $1.00 in excess thereof
Schedule I-1
<PAGE>
Title of Certificates: Class A-3
---------
Amount of Certificates: $11,683,000 (approximate)
Pass-Through Rate: 7.275%
Purchase Price Percentage: 99.984375% (plus accrued
interest from
the Cut-off Date at
applicable
Pass-Through Rate)
Cut-Off Date: June 1, 1997
Closing: June 27, 1997
Denominations: $1,000 and integral multiples
of $1.00 in excess thereof
Title of Certificates: Class A-4
---------
Amount of Certificates: $5,675,000 (approximate)
Pass-Through Rate: 7.000%
Purchase Price Percentage: 99.96875 % (plus accrued
interest from
the Cut-off Date at
applicable
Pass-Through Rate)
Cut-Off Date: June 1, 1997
Closing: June 27, 1997
Denominations: $1,000 and integral multiples
of $1.00 in excess thereof
Schedule I-2
<PAGE>
Title of Certificates: Class A-5
---------
Amount of Certificates: $43,242,000 (approximate)
Initial Pass-Through Rate: LIBOR + 0.22% for each
Interest Accrual Period
on or prior to the
Clean-Up Call Date; LIBOR
+ 0.44% thereafter
Purchase Price Percentage: 100%
Cut-Off Date: June 1, 1997
Closing: June 27, 1997
Denominations: $1,000 and integral multiples
of $1.00 in excess thereof
Representative: Morgan Stanley & Co. Incorporated
Underwriting Fee: 0.30% of the aggregate original principal amount of the
Offered Certificates
Certificate Insurer: Financial Guaranty Insurance Company
Date, Time and Location of Settlement: 10:00 a.m. on June 27, 1997 at the
offices of Andrews & Kurth L.L.P., 1701
Pennsylvania Avenue, N.W., Suite 200,
Washington, DC 20006
Schedule I-3
<PAGE>
SCHEDULE II
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
CLASS OF CERTIFICATES CERTIFICATES
NAME OF UNDERWRITER PURCHASED BY SUCH UNDERWRITER PURCHASED BY SUCH UNDERWRITER
- ---------------------------------------- ---------------------------------------- -----------------------------
<S> <C> <C>
Morgan Stanley & Co. Incorporated Class A-1 $ 11,900,000
Class A-2 $ 7,800,000
Class A-3 $ 5,841,500
Class A-4 $ 2,837,500
Class A-5 $ 21,621,000
-------------
TOTAL $ 50,000,000
-------------
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
CLASS OF CERTIFICATES CERTIFICATES
NAME OF UNDERWRITER PURCHASED BY SUCH UNDERWRITER PURCHASED BY SUCH UNDERWRITER
- ---------------------------------------- ---------------------------------------- -----------------------------
<S> <C> <C>
Prudential Securities Incorporated Class A-1 $ 11,900,000
Class A-2 $ 7,800,000
Class A-3 $ 5,841,000
Class A-4 $ 2,837,500
Class A-5 $ 21,621,000
-------------
TOTAL $ 50,000,000
-------------
-------------
</TABLE>
Schedule II
<PAGE>
June 27, 1997
Morgan Stanley & Co. Incorporated
Prudential Securities Incorporated
c/o Morgan Stanley & Co. Incorporated
as Representative of the Underwriters
1585 Broadway
New York, New York 10036
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 Morgan Stanley & Co. Incorporated, in its capacity
as Representative of the Underwriters (the "Representative") in connection with
the underwriting of the Offered Certificates (as defined in the Underwriting
Agreement), with its principal office at 1585 Broadway, New York, New York
10036.
As an inducement to the Representative 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 301, Houston, Texas 77040, under
Section VII of the Underwriting Agreement, dated June 19, 1997, 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>
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/ Elizabeth Folk
-------------------------------
Name: Elizabeth Folk
Title: Senior Vice President
ACCEPTED this 27th day of June, 1997
MORGAN STANLEY & CO. INCORPORATED,
as Representative of the Underwriters
By: /s/ James P. Fadel
----------------------
Name: James P. Fadel
Title: Principal
<PAGE>
POOLING AND SERVICING AGREEMENT
Dated as of June 1, 1997
among
EQUIVANTAGE ACCEPTANCE CORP.,
as Sponsor,
EQUIVANTAGE INC.,
as Servicer,
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee
EquiVantage Home Equity Loan Trust 1997-2
Home Equity Loan Asset-Backed Certificates, Series 1997-2
<PAGE>
TABLE OF CONTENTS
(Not a part of this Agreement)
Page
Parties........................................................................1
Recitals.......................................................................1
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
Section 1.1. Definitions.....................................................1
Section 1.2. Use of Words and Phrases.......................................33
Section 1.3. Captions; Table of Contents....................................33
Section 1.4. Opinions.......................................................33
ARTICLE II
ESTABLISHMENT AND ORGANIZATION OF THE TRUST
Section 2.1. Establishment of the Trust.....................................34
Section 2.2. Office.........................................................34
Section 2.3. Purposes and Powers............................................34
Section 2.4. Appointment of the Trustee; Declaration of Trust...............34
Section 2.5. Expenses of the Trust..........................................34
Section 2.6. Ownership of the Trust.........................................34
Section 2.7. Receipt of Trust Estate........................................35
Section 2.8. Miscellaneous REMIC Provisions.................................35
Section 2.9. Grant of Security Interest.....................................39
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..................39
Section 3.2. Representations and Warranties of the Servicer.................42
Section 3.3. Representations and Warranties of the Sponsor with Respect to
the Mortgage Loans.............................................45
Section 3.4. Covenants of Sponsor to Take Certain Actions with Respect to
the Mortgage Loans In Certain Situations.......................47
Section 3.5. Conveyance of the Mortgage Loans...............................48
Section 3.6. Acceptance by Trustee; Certain Substitutions of Mortgage Loans;
Certification by Trustee.......................................53
Section 3.7. Cooperation Procedures.........................................54
ii
<PAGE>
Page
ARTICLE IV
ISSUANCE AND SALE OF CERTIFICATES
Section 4.1. Issuance of Certificates.......................................55
Section 4.2. Sale of Certificates...........................................55
ARTICLE V
CERTIFICATES AND TRANSFER OF INTERESTS
Section 5.1. Terms..........................................................55
Section 5.2. Forms..........................................................56
Section 5.3. Execution, Authentication and Delivery.........................56
Section 5.4. Registration and Transfer of Certificates......................56
Section 5.5. Mutilated, Destroyed, Lost or Stolen Certificates..............59
Section 5.6. Persons Deemed Holders.........................................59
Section 5.7. Cancellation...................................................59
Section 5.8. Limitation on Transfer of Ownership Rights.....................60
Section 5.9. Assignment of Rights...........................................61
ARTICLE VI
COVENANTS
Section 6.1. Distributions..................................................61
Section 6.2. Money for Distributions to be Held in Trust; Withholding.......61
Section 6.3. Protection of Trust Estate.....................................62
Section 6.4. Performance of Obligations.....................................63
Section 6.5. Negative Covenants.............................................63
Section 6.6. No Other Powers................................................63
Section 6.7. Limitation of Suits............................................64
Section 6.8. Unconditional Rights of Holders to Receive Distributions.......64
Section 6.9. Rights and Remedies Cumulative.................................65
Section 6.10. Delay or Omission Not Waiver...................................65
Section 6.11. Control by Holders.............................................65
ARTICLE VII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 7.1. Collection of Money............................................65
Section 7.2. Establishment of Certificate Account...........................66
Section 7.3. The Certificate Insurance Policy...............................66
Section 7.4. [Reserved].....................................................69
iii
<PAGE>
Page
Section 7.5. Flow of Funds..................................................69
Section 7.6. Investment of Accounts.........................................73
Section 7.7. Eligible Investments...........................................74
Section 7.8. Reports by Trustee.............................................75
Section 7.9. Additional Reports by Trustee..................................78
Section 7.10. Allocation of Realized Losses..................................79
Section 7.11. Reserve Fund...................................................79
ARTICLE VIII
SERVICING AND ADMINISTRATION OF MORTGAGE LOANS
Section 8.1. Servicer and Sub-Servicers.....................................80
Section 8.2. Collection of Certain Mortgage Loan Payments...................83
Section 8.3. Sub-Servicing Agreements Between Servicer and Sub-Servicers....84
Section 8.4. Successor Sub-Servicers........................................84
Section 8.5. Liability of Servicer..........................................84
Section 8.6. No Contractual Relationship Between Sub-Servicer
and Trustee or the Holders.....................................85
Section 8.7. Assumption or Termination of Sub-Servicing Agreement by
Trustee........................................................85
Section 8.8. Principal and Interest Account.................................85
Section 8.9. Delinquency Advances, Compensating Interest and Servicing
Advances.......................................................87
Section 8.10. Purchase of Mortgage Loans.....................................88
Section 8.11. Maintenance of Insurance.......................................88
Section 8.12. Due-on-Sale Clauses; Assumption and Substitution Agreements....89
Section 8.13. Realization Upon Defaulted Mortgage Loans......................91
Section 8.14. Trustee to Cooperate; Release of Files.........................92
Section 8.15. Servicing Compensation.........................................93
Section 8.16. Annual Statement as to Compliance..............................93
Section 8.17. Annual Independent Certified Public Accountants' Reports;
Annual Financial Statements of the Sub-Servicer................94
Section 8.18. Access to Certain Documentation and Information Regarding
the Mortgage Loans.............................................94
Section 8.19. Assignment of Agreement........................................95
Section 8.20. Removal of Servicer; Resignation of Servicer...................95
Section 8.21. Inspections by Certificate Insurer; Errors and Omissions
Insurance.....................................................100
Section 8.22. Merger, Conversion, Consolidation or Succession to Business of
Servicer......................................................101
Section 8.23. Financial Statements..........................................101
Section 8.24. REMIC.........................................................101
Section 8.25. The Designated Depository Institution.........................101
Section 8.26. Appointment of Custodian......................................102
Section 8.27. Indemnification by the Sponsor and Servicer...................102
iv
<PAGE>
Page
ARTICLE IX
TERMINATION OF TRUST
Section 9.1. Termination of Trust..........................................102
Section 9.2. Termination Upon Option of Holders of Class RL
Certificates and Servicer.....................................103
Section 9.3. Termination Upon Loss of REMIC Status.........................104
Section 9.4. Disposition of Proceeds.......................................105
Section 9.5. Netting of Amounts............................................105
ARTICLE X
THE TRUSTEE
Section 10.1. Certain Duties and Responsibilities..........................105
Section 10.2. Removal of Trustee for Cause.................................108
Section 10.3. Certain Rights of the Trustee................................109
Section 10.4. Not Responsible for Recitals or Issuance of Certificates.....110
Section 10.5. May Hold Certificates........................................111
Section 10.6. Money Held in Trust..........................................111
Section 10.7. Compensation and Reimbursement; No Lien for Fees.............111
Section 10.8. Corporate Trustee Required; Eligibility......................111
Section 10.9. Resignation and Removal; Appointment of Successor............111
Section 10.10. Acceptance of Appointment by Successor Trustee...............113
Section 10.11. Merger, Conversion, Consolidation or Succession to
Business of the Trustee......................................113
Section 10.12. Reporting; Withholding.......................................113
Section 10.13. Liability of the Trustee.....................................114
Section 10.14. Appointment of Co-Trustee or Separate Trustee................115
ARTICLE XI
MISCELLANEOUS
Section 11.1. Compliance Certificates and Opinions..........................116
Section 11.2. Form of Documents Delivered to the Trustee....................117
Section 11.3. Acts of Holders...............................................117
Section 11.4. Notices, etc., to Trustee.....................................118
Section 11.5. Notices and Reports to Holders; Waiver of Notices.............118
Section 11.6. Rules by Trustee and Sponsor..................................119
Section 11.7. Successors and Assigns........................................119
Section 11.8. Severability..................................................119
v
<PAGE>
Page
Section 11.9. Benefits of Agreement........................................119
Section 11.10. Legal Holidays...............................................119
Section 11.11. Governing Law................................................120
Section 11.12. Counterparts.................................................120
Section 11.13. Usury........................................................120
Section 11.14. Amendment....................................................120
Section 11.15. REMIC Status; Taxes..........................................121
Section 11.16. Additional Limitation on Action and Imposition of Tax........123
Section 11.17. Appointment of Tax Matters Person............................124
Section 11.18. The Certificate Insurer......................................124
Section 11.19. Notices......................................................124
vi
<PAGE>
Page
SCHEDULE I -- Schedule of Mortgage Loans...............................S-1
EXHIBIT A-1 -- Form of Class A-1 Certificate..........................A-1-1
EXHIBIT A-2 -- Form of Class A-2 Certificate..........................A-2-1
EXHIBIT A-3 -- Form of Class A-3 Certificate..........................A-3-1
EXHIBIT A-4 -- Form of Class A-4 Certificate..........................A-4-1
EXHIBIT A-5 -- Form of Class A-5 Certificate..........................A-5-1
EXHIBIT B -- Form of Class B Certificate..............................B-1
EXHIBIT C-1 -- Form of Class RL Certificate...........................C-1-1
EXHIBIT C-2 -- Form of Class RU Certificate...........................C-2-1
EXHIBIT D -- Form of Certificate Regarding Prepaid Loans..............D-1
EXHIBIT E -- Form of Trustee's Receipt................................E-1
EXHIBIT F -- Form of Pool Certification...............................F-1
EXHIBIT G -- Form of Delivery Order...................................G-1
EXHIBIT H -- Form of Class R Tax Matters Transfer Certificate.........H-1
EXHIBIT I -- Form of Monthly Report...................................I-1
EXHIBIT J -- Form of Servicer's Trust Receipt.........................J-1
EXHIBIT K -- Form of Liquidation Report...............................K-1
EXHIBIT L -- Form of Special Power of Attorney........................L-1
vii
<PAGE>
POOLING AND SERVICING AGREEMENT, relating to EQUIVANTAGE HOME EQUITY LOAN
TRUST 1997-2, dated as of June 1, 1997, 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 that 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 that
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, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Sponsor, the Servicer and the
Trustee hereby agree as follows:
ARTICLE
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
Section 8.8 hereof.
"Aggregate Loan Balance": As of any date, the aggregate Loan Balance, by
Mortgage Loan Group, as appropriate, 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 and schedules hereto.
<PAGE>
"Allocable Losses": As defined in Section 7.10 hereof.
"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 that 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 actions are binding upon such 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": With respect to a Mortgage Loan Group, either the Group
I Available Funds or the Group II Available Funds, as appropriate, each 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 Holders of the Certificates by the Trustee as a result of proceedings under
the United States Bankruptcy Code.
"Available Funds Cap Carry-Forward Amortization Amount": As of any Payment
Date, any amount distributed to the Holders of the Class A-5 Certificates on
such Payment Date pursuant to Section 7.5(c)(x) hereof.
"Available Funds Cap Carry-Forward Amount": As of any Payment Date, the
excess, if any, of (x) the sum of (i) the excess, if any, of (a) the amount of
interest due on the Class A-5 Certificates on such Payment Date, calculated at
the Class A-5 Formula Pass-Through Rate on such Payment Date over (b) the amount
of interest due on the Class A-5 Certificates on such Payment Date, calculated
at the Class A-5 Pass-Through Rate applicable to such Payment Date, (ii) the
excess, if any, of (a) the aggregate amount of interest due on the Class A-5
Certificates on all prior Payment Dates, calculated at the Class A-5 Formula
Pass-Through Rate applicable to each such Payment Date over (b) the aggregate
amount of interest due on the Class A-5 Certificates on all prior Payment Dates,
calculated at the Class A-5 Pass-Through Rate applicable to each such Payment
Date, (iii) the amount, if any, described in clause (iv) hereof as of the
immediately preceding Payment Date and (iv) the product of (a) one-twelfth of
the Class A-5 Formula Pass-Through Rate on such Payment Date and (b) the sum of
the amounts described in clauses (ii) and (iii) preceding over (y) all Available
Funds Cap Carry-Forward Amortization Amounts actually funded on all prior
Payment Dates.
2
<PAGE>
"Available Funds Shortfall": With respect to a Mortgage Loan Group, as
defined in Section 7.5(b)(iii)(A) hereof.
"Balloon Loan": Any Mortgage Loan that has an amortization schedule that
extends beyond its maturity date, resulting in a relatively large unamortized
principal balance due in a single payment at maturity.
"Beneficial Owner": With respect to any Book-Entry Certificate, the Person
for whom, as the beneficial owner thereof, the Depository holds such Book-Entry
Certificate from time to time in its capacity as the Depository.
"Book-Entry Certificate": Any Certificate registered in the name of the
Depository or its nominee, ownership of which is reflected on the books of the
Depository or on the books of a Person maintaining an account with such
Depository (as a Direct Participant or as an Indirect Participant in accordance
with the rules of such Depository). As of the Closing Date, only the Class A
Certificates constitute Book-Entry Certificates.
"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 is located, which city
initially is Minneapolis, Minnesota, are authorized or obligated by law,
regulation or executive order to be closed; provided that, in connection with
any determination of LIBOR, "Business Day" means a day on which banks are open
for dealing in foreign currency and exchange in London and New York City.
"Cap Agreement": The requirement of the Trustee to make distributions from
the Reserve Fund pursuant to Section 7.5(b)(x).
"Certificate": Any one of the Class A Certificates, Class B Certificates
or the Residual Certificates, each representing the interests and the rights
described in this Agreement.
"Certificate Account": The account, which shall at all times be an
Eligible Account, established and maintained in accordance with Section 7.2
hereof and entitled "Norwest Bank Minnesota, National Association, as Trustee
for EquiVantage Home Equity Loan Trust 1997-2 Home Equity Loan Asset-Backed
Certificates, Series 1997-2, Certificate Account".
"Certificate Insurance Policy": The certificate guaranty surety bond
number 97010356 issued by the Certificate Insurer to the Trustee for the benefit
of the Holders of the Class A Certificates.
"Certificate Insurer": Financial Guaranty Insurance Company, a New York
stock insurance company, and any successor thereto.
3
<PAGE>
"Certificate Insurer Default": The failure by the Certificate Insurer to
make a payment required under the Certificate Insurance Policy in accordance
with its terms or the bankruptcy or insolvency of the Certificate Insurer.
"Certificate Principal Balance": With respect to the Class A Certificates
taken as a whole, the Class A Certificate Principal Balance; with respect to the
Class A-1 Certificates, the Class A-1 Certificate Principal Balance; with
respect to the Class A-2 Certificates, the Class A-2 Certificate Principal
Balance; with respect to the Class A-3 Certificates, the Class A-3 Certificate
Principal Balance; with respect to the Class A-4 Certificates, the Class A-4
Certificate Principal Balance; with respect to the Class A-5 Certificates, the
Class A-5 Certificate Principal Balance; and, with respect to the Class B
Certificates, the Class B Certificate Principal Balance. Except as described in
the definition of "Class RL Certificate Principal Balance," the Residual
Certificates do not have a "Certificate Principal Balance".
"Class": All of the Class A-1 Certificates, Class A-2 Certificates, Class
A-3 Certificates, Class A-4 Certificates, Class A-5 Certificates, the Class B
Certificates or the Residual Certificates, as the case may be, taken as a whole.
"Class A Certificates": All of the Certificates designated as "Class A-1
Certificates", "Class A-2 Certificates", "Class A-3 Certificates", "Class A-4
Certificates" or "Class A-5 Certificates".
"Class A Certificate Principal Balance": As of any time of determination,
the sum of the Class A-1 Certificate Principal Balance, the Class A-2
Certificate Principal Balance, the Class A-3 Certificate Principal Balance, the
Class A-4 Certificate Principal Balance and the Class A-5 Certificate Principal
Balance.
"Class A Distribution Amount": With respect to the Group I Certificates
for any Payment Date, the amount actually distributed to the Holders of such
Group I Certificates on such Payment Date, applied first to interest and then to
principal, which amount shall be the lesser of (x) the Group I 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 such Group I Certificates for such Payment Date. With respect to the Group
II Certificates for any Payment Date, the amount actually distributed to the
Holders of the Group II Certificates on such Payment Date, applied first to
interest and then to principal, which amount shall be the lesser of (x) the
Group II 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 Group II Certificates for such Payment Date.
"Class A Interest Carry-Forward Amount": With respect to any Payment Date
and any Class of Class A Certificates, the sum of (i) the amount, if any, by
which (x) the Class A Interest Distribution Amount for such Class as of the
immediately preceding Payment Date exceeded (y) the amount of the actual
distribution made to the Holders of such Class of Class A
4
<PAGE>
Certificates on such immediately preceding Payment Date on account of the Class
A Interest Distribution Amount pursuant to Section 7.5(b)(v) and (ii) 30 days'
interest on such excess at the applicable Class A Pass-Through Rate.
"Class A Interest Distribution Amount": With respect to any Class of the
Class A Certificates for any Payment Date the sum of:
(i) the aggregate amount of interest accrued on the Class A Certificate
Principal Balance thereof immediately prior to such Payment Date
during the related Interest Accrual Period at the applicable Class A
Pass-Through Rate (in the case of the Group I Certificates, based on a
360-day year of twelve 30-day months and, in the case of the Group II
Certificates, based on a 360-day year and the actual number of days
elapsed in such Interest Accrual Period); and
(ii) the Class A Interest Carry-Forward Amount for such Class of Class A
Certificates.
"Class A Pass-Through Rate": The Class A-1 Pass-Through Rate, the Class
A-2 Pass-Through Rate, the Class A-3 Pass-Through Rate, the Class A-4
Pass-Through Rate or the Class A-5 Pass-Through Rate, as applicable.
"Class A Principal Carry-Forward Amount": With respect to any Payment
Date, either the Group I Principal Carry-Forward Amount or the Group II
Principal Carry-Forward Amount, or the sum of such amounts, as appropriate.
"Class A Principal Distribution Amount": With respect to the Group I
Certificates for any Payment Date, the lesser of (x) the Group I Principal
Distribution Amount for such Payment Date and (y) the Group I Certificate
Principal Balance as of such Payment Date; with respect to the Group II
Certificates for any Payment Date, the lesser of (x) the Group II Principal
Distribution Amount for such Payment Date and (y) the Group II Certificate
Principal Balance as of such Payment Date.
"Class A-1 Certificate": Any one of the Certificates executed by the
Trustee on behalf of the Trust, not in its individual capacity, but solely as
Trustee, authenticated by the Trustee and in substantially the form set forth in
Exhibit A-1 hereto. The Class A-1 Certificates are a subclass of the Class A
Certificates. The Class A-1 Certificates shall be issued with an initial
aggregate Certificate Principal Balance equal to the Original Class A-1
Certificate Principal Balance.
"Class A-1 Certificate Principal Balance": As of any time of
determination, the Original Class A-1 Certificate Principal Balance less all
amounts distributed to Holders of Class A-1 Certificates with respect to
principal thereon on all prior Payment Dates. The principal balance of any
particular Class A-1 Certificate shall be the product of the Percentage Interest
evidenced thereby and the Class A-1 Certificate Principal Balance.
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"Class A-1 Pass-Through Rate": 6.575%.
"Class A-2 Certificate": Any one of the Certificates executed by the
Trustee on behalf of the Trust, not in its individual capacity, but solely as
Trustee, authenticated by the Trustee and in substantially the form set forth in
Exhibit A-2 hereto. The Class A-2 Certificates are a subclass of the Class A
Certificates. The Class A-2 Certificates shall be issued with an initial
aggregate Certificate Principal Balance equal to the Original Class A-2
Certificate Principal Balance.
"Class A-2 Certificate Principal Balance": As of any time of
determination, the Original Class A-2 Certificate Principal Balance less all
amounts distributed to Holders of Class A-2 Certificates with respect to
principal thereon on all prior Payment Dates. The principal balance of any
particular Class A-2 Certificate shall be the product of the Percentage Interest
evidenced thereby and the Class A-2 Certificate Principal Balance.
"Class A-2 Pass-Through Rate": 6.800%.
"Class A-3 Certificate": Any one of the Certificates executed by the
Trustee on behalf of the Trust, not in its individual capacity, but solely as
Trustee, authenticated by the Trustee and in substantially the form set forth in
Exhibit A-3 hereto. The Class A-3 Certificates are a subclass of the Class A
Certificates. The Class A-3 Certificates shall be issued with an initial
aggregate Certificate Principal Balance equal to the Original Class A-3
Certificate Principal Balance.
"Class A-3 Certificate Principal Balance": As of any time of
determination, the Original Class A-3 Certificate Principal Balance less all
amounts distributed to Holders of Class A-3 Certificates with respect to
principal thereon on all prior Payment Dates. The principal balance of any
particular Class A-3 Certificate shall be the product of the Percentage Interest
evidenced thereby and the Class A-3 Certificate Principal Balance.
"Class A-3 Pass-Through Rate": For any Payment Date, the lesser of (i) as
to any Payment Date that occurs prior to the Step-Up Payment Date, 7.275% and,
as to any Payment Date that occurs on or after the Step-Up Payment Date, 7.775%
and (ii) the Weighted Average Net Coupon Rate of the Mortgage Loans included in
Group I during the related Remittance Period.
"Class A-4 Certificate": Any one of the Certificates executed by the
Trustee on behalf of the Trust, not in its individual capacity, but solely as
Trustee, authenticated by the Trustee and in substantially the form set forth in
Exhibit A-4 hereto. The Class A-4 Certificates are a subclass of the Class A
Certificates. The Class A-4 Certificates shall be issued with an initial
aggregate Certificate Principal Balance equal to the Original Class A-4
Certificate Principal Balance.
"Class A-4 Certificate Principal Balance": As of any time of
determination, the Original Class A-4 Certificate Principal Balance less all
amounts distributed to Holders of Class A-4 Certificates with respect to
principal thereon on all prior Payment Dates. The principal balance
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of any particular Class A-4 Certificate shall be the product of the Percentage
Interest evidenced thereby and the Class A-4 Certificate Principal Balance.
"Class A-4 Lockout Distribution": For any Payment Date, an amount equal to
the lesser of (i) the product of the applicable Class A-4 Lockout Percentage and
the Class A-4 Pro Rata Distribution Amount for such Payment Date and (ii) the
Group I Principal Distribution Amount for such Payment Date.
"Class A-4 Lockout Percentage": For each Payment Date, as follows:
Payment Date Class A-4
occurring in Lockout Percentage
--------------------- ------------------
July 1997 - June 2000 0%
July 2000 - June 2002 45%
July 2002 - June 2003 80%
July 2003 - June 2004 100%
July 2004 and thereafter 300%
"Class A-4 Pass-Through Rate": For any Payment Date, the lesser of (i) as
to any Payment Date that occurs prior to the Step-Up Payment Date, 7.000% and,
as to any Payment Date that occurs on or after the Step-Up Payment Date, 7.500%
and (ii) the Weighted Average Net Coupon Rate of the Mortgage Loans included in
Group I during the related Remittance Period.
"Class A-4 Pro Rata Distribution Amount": For any Payment Date, an amount
equal to the product of (i) a fraction, the numerator of which is the Class A-4
Certificate Principal Balance and the denominator of which is the Group I
Certificate Principal Balance, in each case immediately prior to such Payment
Date, and (ii) the Group I Principal Distribution Amount.
"Class A-5 Certificate": Any one of the Certificates executed by the
Trustee on behalf of the Trust, not in its individual capacity, but solely as
Trustee, authenticated by the Trustee and in substantially the form set forth in
Exhibit A-5 hereto. The Class A-5 Certificates are a subclass of the Class A
Certificates. The Class A-5 Certificates shall be issued with an initial
aggregate Certificate Principal Balance equal to the Original Class A-5
Certificate Principal Balance.
"Class A-5 Certificate Principal Balance": As of any time of
determination, the Original Class A-5 Certificate Principal Balance less all
amounts distributed to Holders of Class A-5 Certificates with respect to
principal thereon on all prior Payment Dates (but not including any Available
Funds Cap Carry-Forward Amount). The principal balance of any particular Class
A-5 Certificate shall be the product of the Percentage Interest evidenced
thereby and the Class A-5 Certificate Principal Balance.
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"Class A-5 Formula Pass-Through Rate": For any Interest Accrual Period,
LIBOR applicable to such Interest Accrual Period plus, for each Interest Accrual
Period ending prior to the Step-Up Payment Date, 0.22% and, for each Interest
Accrual Period ending on or after the Step-Up Payment Date, 0.44%.
"Class A-5 Pass-Through Rate": (a) For the initial Interest Accrual
Period, 5.9075%, and (b) for each Interest Accrual Period thereafter, a per
annum rate of interest equal to the lesser of (x) the Class A-5 Formula
Pass-Through Rate for such Interest Accrual Period and (y) the per annum rate
equal to the percentage obtained by (i) dividing (I) the amount of interest
included in the Group II Monthly Remittance Amount during the related Remittance
Period, reduced by the sum of (A) the Servicing Fee with respect to the Mortgage
Loans in Group II during the related Remittance Period, (B) the Group II Premium
Amount for such Remittance Period, (C) the Group II Monthly Trustee Fee Amount
for such Remittance Period and (D) in the case of each Interest Accrual Period
ending after the Payment Date in November 1997, an amount equal to 1/12 of 0.75%
multiplied by the Aggregate Loan Balance of the Mortgage Loans in Group II as of
the first day of the related Remittance Period, by (II) the product of (A) the
Class A-5 Certificate Principal Balance as of the first day of such Interest
Accrual Period and (B) the actual number of days elapsed during such Interest
Accrual Period divided by 360 and (ii) multiplying the result by 100.
"Class B Carry-Forward Amount": As of any Payment Date, the amount, if
any, by which (x) the Class B Distribution Amount as of the immediately
preceding Payment Date exceeded (y) the amount of the actual distribution to the
Holders of the Class B Certificates on such immediately preceding Payment Date
pursuant to Section 7.5(b)(ix), (xi) and (xii).
"Class B Certificates": Those certificates in substantially the form set
forth in Exhibit B hereto.
"Class B Certificate Principal Balance": The Class B Certificate Principal
Balance shall initially be $969,071.84 and shall be (x) increased on each
Payment Date by the amount of any unpaid Class B Interest pursuant to Section
7.5(b)(xi) and (y) decreased on each Payment Date by the amounts of (i) the
excess of any distributions to the Holders of the Class B Certificates on such
Payment Date pursuant to Section 7.5(b)(ix), (xi) and (xii) over the Class B
Interest for the related Payment Date, and (ii) the amount of any Allocable
Losses allocated as a reduction of the Class B Certificate Principal Balance on
such Payment Date pursuant to Section 7.10 hereof. The Class B Certificate
Principal Balance in no event shall be less than zero.
"Class B Distribution Amount": As of any Payment Date, the sum of (i) the
Class B Interest Distribution Amount for such Payment Date and (ii) the Class B
Principal Distribution Amount for such Payment Date.
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"Class B Interest": As of any Payment Date, the interest allocated to the
Class B Certificates as separate components in accordance with Note (4) of
Section 2.8(c) with respect to such Payment Date.
"Class B Interest Distribution Amount": As of any Payment Date, the lesser
of (i) the Class B Interest for such Payment Date and (ii) the amount actually
paid pursuant to Section 7.5(b)(ix) and (xi).
"Class B Principal Distribution Amount": As of any Payment Date, the sum
of (i) the Subordination Reduction Amount, if any, for such Payment Date and
(ii) the Class B Carry-Forward Amount, if any, as of such Payment Date.
"Class LT-A Certificates": The uncertificated class of interests in the
Lower-Tier REMIC, as described in and designated in Section 2.8 hereof.
"Class LT-AL Certificates": The uncertificated class of interests in the
Lower-Tier REMIC, as described in and designated in Section 2.8 hereof.
"Class LT-1 Certificates": The uncertificated class of interests in the
Lower-Tier REMIC, as described in and designated in Section 2.8 hereof.
"Class LT-2 Certificates": The uncertificated class of interests in the
Lower-Tier REMIC, as described in and designated in Section 2.8 hereof.
"Class LT-3 Certificates": The uncertificated class of interests in the
Lower-Tier REMIC, as described in and designated in Section 2.8 hereof.
"Class LT-4 Certificates": The uncertificated class of interests in the
Lower-Tier REMIC, as described in and designated in Section 2.8 hereof.
"Class LT-5L Certificates": The uncertificated class of interests in the
Lower-Tier REMIC, as described in and designated in Section 2.8 hereof.
"Class LT-M Certificates": The uncertificated class of interests in the
Lower-Tier REMIC, as described in and designated in Section 2.8 hereof.
"Class LT-ML Certificates": The uncertificated class of interests in the
Lower-Tier REMIC, as described in and designated in Section 2.8 hereof.
"Class RL Certificates": Those certificates representing certain residual
rights to distributions from the Lower-Tier REMIC in substantially the form set
forth as Exhibit C-1 hereto.
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"Class RL Certificate Principal Balance": The Class RL Certificate
Principal Balance shall be no less than zero, shall initially be zero and shall
be (x) increased on each Payment Date as described in Section 2.8(c) and (y)
decreased on each Payment Date by the amounts, if any, distributed to the
Holders of the Class RL Certificates pursuant to Section 7.5(b)(xiv) and any
Allocable Losses allocated thereto pursuant to Section 7.10.
"Class RU Certificates": Those Certificates representing certain residual
rights to distributions from the Upper-Tier REMIC in substantially the form set
forth as Exhibit C-2 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 Original Aggregate Loan Balance.
"Closing Date": June 27, 1997.
"Code": The Internal Revenue Code of 1986, as amended, and any successor
statute.
"Combined Loan-to-Value Ratio": With respect to any Second Mortgage Loan,
the ratio (expressed as a percentage) of (a) the sum of (i) the outstanding
principal balance (at the time of origination of such 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 of such Second Mortgage Loan.
"Compensating Interest": As defined in Section 8.9(b) hereof.
"Corporate Trust Office": 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 55479-0070, Attention: Corporate Trust
Services. The telecopy number for the Corporate Trust Office on the Closing
Date is (612) 667-3539.
"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 June 1, 1997 or, in the event any
Mortgage Loan was originated subsequent to the Cut-Off Date but prior to the
Startup Day, the date of origination of such Mortgage Loan.
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"Delinquency Advance": With respect to any Delinquent Mortgage Loan and
Remittance Period, the interest (calculated at the applicable 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.
"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, and the terms "60 days Delinquent," "90
days Delinquent" and so on should be construed similarly. For purposes of this
definition, Mortgage Loans relating to Mortgagors in bankruptcy or insolvency
proceedings under the United States Bankruptcy Code that limit the ability of
the Servicer to pursue collection of such loans are not considered "Delinquent".
"Delivery Order": The delivery order in the form set forth as Exhibit G
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
that 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
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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": Any broker-dealer, bank or other financial
institution for which the Depository holds Book-Entry Certificates from time to
time as a securities depository.
"Disqualified Organization": As set forth from time to time in the
definition thereof at Section 860E(e)(5) of the Code and applicable to the
Trust.
"Eligible Account": A segregated account maintained with a Designated
Depository Institution.
"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 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.
"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 thereto.
"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 File pursuant to this Agreement.
"Final Certification": As defined in Section 3.6(b) hereof.
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"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 with respect to the
Originator's and the Sponsor's right, title and interest in and to the Mortgage
Loans, as 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": Fannie Mae, a federally-chartered and privately-owned corporation
existing under the Federal National Mortgage Association Charter Act, as
amended, or any successor thereto.
"Group I": The pool of Mortgage Loans bearing fixed rates of interest
identified in the related Schedule of Mortgage Loans as having been assigned to
Group I, including any Qualified Replacement Mortgages delivered in replacement
thereof.
"Group I Aggregate Loan Balance": As of any date, the aggregate Loan
Balance of all Mortgage Loans in Group I.
"Group I Available Funds": As defined in Section 7.3(a)(i) hereof.
"Group I Certificate Principal Balance": With respect to any Payment Date,
the aggregate 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 Payment Date.
"Group I Certificates": The Class A-1 Certificates, the Class A-2
Certificates, the Class A-3 Certificates and the Class A-4 Certificates.
"Group I Excess Subordinated Amount": With respect to any Payment Date,
the amount, if any, by which (x) the Group I Subordinated Amount on such Payment
Date, after taking into account the payment of principal made pursuant to clause
(a) through clause (e) of the definition of the Group I Principal Distribution
Amount on such Payment Date to the Holders of the Group I Certificates, exceeds
(y) the Group I Specified Subordinated Amount for such Payment Date.
"Group I Formula Distribution Amount": With respect to any Payment Date,
the Group I Interest Distribution Amount and the Group I Principal Distribution
Amount.
"Group I Insured Distribution Amount": As to any Payment Date, the sum of
(x) the Group I Interest Distribution Amount for such Payment Date, (y) the
Group I Subordination
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Deficit, if any, for such Payment Date, and (z) any Preference Amounts with
respect to which affected Holders have complied with the provisions of Section
7.3(e) hereof.
"Group I Interest Distribution Amount": As of any Payment Date, the
aggregate of the Class A Interest Distribution Amounts for the Class A-1
Certificates, the Class A-2 Certificates, the Class A-3 Certificates and the
Class A-4 Certificates for such Payment Date.
"Group I Monthly Remittance Amount": The amount remitted by the Servicer
from the Principal and Interest Account to the Trustee on each Remittance Date
pursuant to Section 8.8(d)(iii) hereof and relating to Group I.
"Group I Monthly Trustee Fee Amount": As of any Payment Date, the product
of (x) one-twelfth of the Trustee Fee Rate and (y) the Group I Certificate
Principal Balance as of the day preceding such Payment Date.
"Group I Premium Amount": As to any Payment Date, the excess of (i) the
product of (x) one-twelfth of the Premium Percentage and (y) the Group I
Certificate Principal Balance on such Payment Date (before taking into account
any distributions of principal to the Holders of the Group I Certificates to be
made on such Payment Date) over (ii) (a) with respect to the initial Payment
Date, zero and (b) with respect to each Payment Date thereafter, the product of
(x) one-twelfth of the Premium Percentage and (y) the Group I Principal
Distribution Amount with respect to the immediately preceding Payment Date.
"Group I Principal Carry-Forward Amount": With respect to any Payment
Date, the amount, if any, described in clause (f) of the definition of "Group I
Principal Distribution Amount" as of the immediately preceding Payment Date
remaining after taking into account all amounts distributed to the Holders of
the Group I Certificates on such immediately preceding Payment Date in respect
of the Group I Principal Distribution Amount.
"Group I Principal Distribution Amount": With respect to the Group I
Certificates for any Payment Date, the sum, without duplication, of:
(a) the Group I Principal Carry-Forward Amount, if any;
(b) the scheduled or unscheduled principal (other than the principal
portion of Prepaid Installments) due with respect to the Mortgage
Loans in Group I 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 before the
related Payment Date;
(c) the Loan Balance of each Mortgage Loan in Group I that either was
repurchased by the Originator or by the Sponsor or purchased by the
Servicer on the related
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Remittance Date, to the extent such Loan Balance is actually received
by the Trustee before the related Payment Date;
(d) any Substitution Amounts delivered by the Sponsor on the related
Remittance Date in connection with a substitution of a Mortgage Loan
in Group I, to the extent such Substitution Amounts are actually
received by the Trustee before the related Payment Date;
(e) all Net Liquidation Proceeds and net insurance proceeds actually
collected by the Servicer with respect to the Mortgage Loans in Group
I 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 before the related Payment
Date);
(f) any Group I Subordination Deficit for such Payment Date;
(g) the proceeds received by the Trustee of any termination of the Trust
(to the extent such proceeds relate to principal of the Mortgage Loans
in Group I);
(h) any Group I Subordination Increase Amount for such Payment Date, to
the extent of any Net Monthly Excess Cashflow in respect of the Group
I Monthly Remittance Amount;
(i) to the extent not included in the amount described in clause (h) of
the definition of "Group II Principal Distribution Amount", any Group
I Subordination Increase Amount for such Payment Date, to the extent
of Net Monthly Excess Cashflow in respect of the Group II Monthly
Remittance Amount, available for such purpose;
minus
(j) any Group I Subordination Reduction Amount for such Payment Date.
"Group I 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 for the Mortgage Loans in
Group I for such Remittance Period.
"Group I Reimbursement Amount": As of any Payment Date, the sum of (a)(i)
all Insured Payments previously paid by the Certificate Insurer in respect of
Group I and all Preference Amounts relating to Group I (in respect of Group I)
previously paid by the Certificate Insurer and in each case not previously
repaid to the Certificate Insurer pursuant to 7.5(b)(iii) and (iv) hereof plus
(ii) interest accrued on each such Insured Payment and such Preference Amounts
not previously repaid calculated at 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
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Rate, in each case from the date the Certificate Insurer paid the related
Insured Payment or the Preference Amount, as the case may be, and (b)(i) any
amounts then due and owing to the Certificate Insurer under the Insurance
Agreement relating to Group I, 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 the Trustee and the
Sponsor of the amount of any Group I Reimbursement Amount.
"Group I Specified Subordinated Amount": As defined in the Insurance
Agreement.
"Group I Subordinated Amount": As of any Payment Date, the excess, if any,
of (x) the Group I Aggregate Loan Balance of the Mortgage Loans as of the close
of business on the last day of the related Remittance Period over (y) the Group
I 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 Group I Principal Distribution Amount to the Holders of
the Group I Certificates on such Payment Date, except for any portion thereof
related to an Insured Payment).
"Group I Subordination Deficit": As of any Payment Date, the excess, if
any, of (x) the Group I Certificate Principal Balance, after taking into account
the payment of principal made pursuant to clause (a) through clause (e) of the
definition of the Group I Principal Distribution Amount to the Holders of the
Group I Certificates on such Payment Date (other than the principal portion of
any Group I Insured Payment), over (y) the Group I Aggregate Loan Balance as of
the close of business on the last day of the prior Remittance Period; provided,
that with respect to the Payment Date occurring in July 2028 for the Group I
Certificates, the Group I Subordination Deficit shall be the aggregate
outstanding Group I Certificate Principal Balance if the Servicer has not
purchased all remaining Mortgage Loans in Group I as of the preceding Remittance
Date at the Loan Purchase Price thereof.
Group I Subordination Increase Amount": With respect to any Payment Date,
the excess, if any, of (i) the Group I Specified Subordinated Amount applicable
to such Payment Date over (ii) the Group I Subordinated Amount applicable to
such Payment Date prior to taking into account the payment of any Group I
Subordination Increase Amount on such Payment Date.
"Group I Subordination Reduction Amount": With respect to any Payment
Date, an amount equal to the lesser of (x) the Group I Excess Subordinated
Amount for such Payment Date and (y) the Group I Principal Remittance Amount for
the related Remittance Period.
"Group I Total Available Funds": As defined in Section 7.3(a)(i) hereof.
"Group I Total Available Funds Shortfall": As defined in Section 7.3(b)
hereof.
"Group I Total Monthly Excess Spread": As of any Payment Date, the excess
of (x) the interest portion of the Group I Monthly Remittance Amount remitted by
the Servicer on the
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immediately preceding Remittance Date over (y) the sum of (i) the Group I
Premium Amount, (ii) the Group I Monthly Trustee Fee Amount and (iii) the Group
I Interest Distribution Amount, in each case as of such Payment Date.
"Group I Turbo Amount": As defined in Section 2.8(c) hereof.
"Group II": The pool of adjustable rate Mortgage Loans identified in the
related Schedule of Mortgage Loans as having been assigned to Group II,
including any Qualified Replacement Mortgages delivered in replacement thereof.
"Group II Aggregate Loan Balance": As of any date, the aggregate Loan
Balance of all Mortgage Loans in Group II.
"Group II Available Funds": As defined in Section 7.3(a)(ii) hereof.
"Group II Certificate Principal Balance": With respect to any Payment
Date, the Class A-5 Certificate Principal Balance as of such Payment Date.
"Group II Certificates": The Class A-5 Certificates.
"Group II Excess Subordinated Amount": With respect to any Payment Date,
the amount, if any, by which (x) the Group II Subordinated Amount on such
Payment Date after taking into account the payment of principal made pursuant to
clause (a) through clause (e) of the definition of the Group II Principal
Distribution Amount on such Payment Date to the Holders of the Group II
Certificates exceeds (y) the Group II Specified Subordinated Amount for such
Payment Date.
"Group II Formula Distribution Amount": With respect to any Payment Date,
the Group II Interest Distribution Amount and the Group II Principal
Distribution Amount.
"Group II Insured Distribution Amount": As to any Payment Date, the sum of
(x) the Group II Interest Distribution Amount for such Payment Date, (y) the
Group II Subordination Deficit, if any, for such Payment Date, and (z) any
Preference Amounts with respect to which affected Holders have complied with the
provisions of Section 7.3(e) hereof.
"Group II Interest Distribution Amount": As of any Payment Date the Class
A Interest Distribution Amount with respect to the Class A-5 Certificates for
such Payment Date.
"Group II Monthly Remittance Amount": The amount remitted by the Servicer
to the Trustee on each Remittance Date pursuant to Section 8.8(d)(iii) hereof
and relating to Group II.
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"Group II Monthly Trustee Fee Amount": As of any Payment Date, the product
of (x) one-twelfth of the Trustee Fee Rate and (y) the Group II Certificate
Principal Balance as of the day preceding such Payment Date.
"Group II Premium Amount": As to any Payment Date, the excess of (i) the
product of (x) one-twelfth of the Premium Percentage and (y) the Group II
Certificate Principal Balance on such Payment Date (before taking into account
any distributions of principal to the Holders of the Group II Certificates to be
made on such Payment Date) over (ii) (a) with respect to the initial Payment
Date, zero and (b) with respect to each Payment Date thereafter, the product of
(x) one-twelfth of the Premium Percentage and (y) the Group II Principal
Distribution Amount with respect to the immediately preceding Payment Date.
"Group II Principal Carry-Forward Amount": With respect to any Payment
Date, the amount, if any, described in clause (f) of the definition of "Group II
Principal Distribution Amount" as of the immediately preceding Payment Date
remaining after taking into account all amounts distributed to the Holders of
the Group II Certificates on such immediately preceding Payment Date in respect
of the Group II Principal Distribution Amount.
"Group II Principal Distribution Amount": With respect to the Group II
Certificates for any Payment Date, the sum, without duplication, of:
(a) the Group II Principal Carry-Forward Amount, if any;
(b) the scheduled and unscheduled principal (other than the principal
portion of Prepaid Installments) due with respect to the Mortgage
Loans in Group II 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 before the
related Payment Date;
(c) the Loan Balance of each Mortgage Loan in Group II that either was
repurchased by an 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 before the related Payment
Date;
(d) any Substitution Amounts delivered by the Sponsor on the related
Remittance Date in connection with a substitution of a Mortgage Loan
in Group II, to the extent such Substitution Amounts are actually
received by the Trustee before the related Payment Date;
(e) all Net Liquidation Proceeds and net insurance proceeds actually
collected by the Servicer with respect to the Mortgage Loans in Group
II during the related Remittance Period (to the extent such Net
Liquidation Proceeds and net insurance
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proceeds relate to principal and are actually received by the Trustee
before the related Payment Date);
(f) any Group II Subordination Deficit and for such Payment Date;
(g) the proceeds received by the Trustee of any termination of the Trust
(to the extent such proceeds relate to principal of the Mortgage Loans
in Group II);
(h) any Group II Subordination Increase Amount for such Payment Date, to
the extent of any Net Monthly Excess Cashflow in respect of the Group
II Monthly Remittance Amount;
(i) to the extent not included in the amount described in clause (h) of
the definition of "Group I Principal Distribution Amount", any Group
II Subordination Increase Amount for such Payment Date, to the extent
of Net Monthly Excess Cashflow in respect of the Group I Monthly
Remittance Amount, available for such purpose;
minus
(j) any Group II Subordination Reduction Amount for such Payment Date.
"Group II 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 in
Group II for such Remittance Period.
"Group II Reimbursement Amount": As of any Payment Date, the sum of (a)(i)
all Insured Payments previously paid by the Certificate Insurer in respect of
Group II and all Preference Amounts relating to Group II (in respect of Group
II) previously paid by the Certificate Insurer and in each case not previously
repaid to the Certificate Insurer pursuant to 7.5(b)(iii) and (iv) hereof plus
(ii) interest accrued on each such Insured Payment and such Preference Amounts
not previously repaid calculated at the Class A-5 Pass-Through Rate in each case
from the date the Certificate Insurer paid the related Insured Payment or the
Preference Amounts, as the case may be, and (b)(i) any amounts then due and
owing to the Certificate Insurer under the Insurance Agreement relating to Group
II, 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 the Trustee and the Sponsor of the amount of any Group II
Reimbursement Amount.
"Group II Specified Subordinated Amount": As defined in the Insurance
Agreement.
"Group II Subordinated Amount": As of any Payment Date, the excess, if
any, of (x) the Group II Aggregate Loan Balances of the Mortgage Loans as of the
close of business on the last day of the related Remittance Period over (y) the
Group II Certificate Principal Balance as of
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such Payment Date (after taking into account the payment of principal made
pursuant to clause (a) through (e) of the definition of the Group II Principal
Distribution Amount to the Holders of the Group II Certificates on such Payment
Date, except for any portion thereof related to an Insured Payment).
"Group II Subordination Deficit": As of any Payment Date, the excess, if
any, of (x) the Group II Certificate Principal Balance, after taking into
account the payment of principal made pursuant to clause (a) through clause (e)
of the Group II Principal Distribution Amount to the Holders of the Group II
Certificates on such Payment Date (other than the principal portion of any Group
II Insured Payment), over (y) the Group II Aggregate Loan Balance as of the
close of business on the last day of the prior Remittance Period; provided that,
with respect to the Payment Date occurring in July 2027 for the Group II
Certificates, the Group II Subordination Deficit shall be the aggregate
outstanding Class A-5 Certificate Principal Balance if the Servicer has not
purchased all remaining Mortgage Loans in Group II as of the preceding
Remittance Date at the Loan Purchase Price thereof.
"Group II Subordination Increase Amount": With respect to any Payment
Date, the excess, if any, of (i) the Group II Specified Subordinated Amount
applicable to such Payment Date over (ii) the Group II Subordinated Amount
applicable to such Payment Date prior to taking into account the payment of any
Group II Subordination Increase Amount on such Payment Date.
"Group II Subordination Reduction Amount": With respect to any Payment
Date, an amount equal to the lesser of (x) the Group II Excess Subordinated
Amount for such Payment Date and (y) the Group II Principal Remittance Amount
for the related Remittance Period.
"Group II Total Available Funds": As defined in Section 7.3(a)(ii) hereof.
"Group II Total Available Funds Shortfall": As defined in Section 7.3(b)
hereof.
"Group II Total Monthly Excess Spread": As of any Payment Date, the excess
of (x) the interest portion of the Group II Monthly Remittance Amount remitted
by the Servicer on the immediately preceding Remittance Date over (y) the sum of
(i) the Group II Premium Amount, (ii) the Group II Monthly Trustee Fee Amount
and (iii) the Class A-5 Interest Distribution Amount, in each case as of such
Payment Date.
"Group II Turbo Amount": As defined in Section 2.8(c) hereof.
"Highest Lawful Rate": As defined in Section 11.13 hereof.
"Holder": The Person in whose name a Certificate is registered in the
Register, to the extent described in Section 5.4.
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"Indemnification Agreement": The Indemnification Agreement dated as of
June 1, 1997 between the Underwriter and the Certificate Insurer.
"Indirect Participant": Any financial institution for whom any Direct
Participant holds an interest in a Book-Entry 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.
"Insurance Agreement": The Insurance Agreement dated as of June 1, 1997
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 the
Group I Insured Distribution Amount and the Group II Insured Distribution
Amount.
"Insured Payment": As of each Payment Date, an amount equal to the Group I
Total Available Funds Shortfall or the Group II Total Available Funds Shortfall,
as the case may be, as of such Payment Date.
"Interest Accrual Period": With respect to the Group I Certificates and
any Payment Date, the calendar month immediately preceding such Payment Date;
with respect to the Class A-5 Certificates, the actual number of days elapsed
from and including the preceding Payment Date (or with respect to the first
Interest Accrual Period, from and including the Closing Date) to but excluding
such Payment Date.
"LIBOR": The London interbank offered rate for one-month United States
dollar deposits. LIBOR for each Interest Accrual Period shall be determined on
the second Business Day preceding the first day of such Interest Accrual Period
(each, a "LIBOR Determination Date"), on the basis of the offered rates of the
Reference Banks for one-month United States dollar deposits, as such rates
appear on the Reuters Screen LIBO Page, as of 11:00 a.m. (London time) on such
LIBOR Determination Date. On each LIBOR Determination Date, LIBOR will be
established by the Trustee as follows:
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(a) If on such LIBOR Determination Date two or more Reference Banks
provide such offered quotations, LIBOR shall be the arithmetic mean
(rounded upwards if necessary to the nearest whole multiple of
0.0625%) of such offered quotations.
(b) If on such LIBOR Determination Date fewer than two Reference Banks
provide such offered quotations, LIBOR shall be the greater of (x)
LIBOR as determined on the previous LIBOR Determination Date and (y)
the Reserve Interest Rate.
The establishment of LIBOR on each LIBOR Determination Date by the Trustee
and the Trustee's calculation of the rate of interest applicable to the Class
A-5 Certificates for the related Interest Accrual Period shall (in the absence
of manifest error) be final and binding.
"Lifetime Rate Cap": The provision in the Note for a Mortgage Loan in
Group II that limits the maximum Coupon Rate over the life of such Mortgage Loan
to a maximum over the Coupon Rate on the date of origination of such Mortgage
Loan.
"Liquidated Loan": As defined in Section 8.13(b) hereof. A Mortgage Loan
that is purchased from the Trust pursuant to Section 3.3, Section 3.4, Section
3.6(b) or Section 8.10 hereof is not a "Liquidated Loan".
"Liquidation Expenses": Expenses that 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, as of any date of
determination, the outstanding principal balance thereof on the Cut-Off Date,
less any related principal collections or recoveries relating to such Mortgage
Loan received by the Servicer as of such date, as reported by the Servicer in
its report to the Trustee pursuant to Section 7.8(b) and/or Section 8.8(d)(ii)
hereof, as applicable; provided, however, that the Loan Balance for any Mortgage
Loan that 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.
"Loan Purchase Price": With respect to any Mortgage Loan purchased from
the Trust on a Remittance Date pursuant to Section 3.3, Section 3.4, Section
3.6(b) or Section 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
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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 that 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.
"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.
"Lower-Tier Interests": As defined in Section 2.8(c) hereof.
"Lower-Tier Regular Interests": As defined in Section 2.8(c) hereof.
"Lower-Tier REMIC": The segregated pool of assets held by the Trust
consisting of the Mortgage Loans, the Certificate Insurance Policy and the
Certificate Account.
"Majority Holders": The Holder or Holders 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 June 1, 1997.
"Monthly Remittance Amount": As defined in Section 8.8(d)(iii) hereof.
"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 Loan Group": Either Group I or Group II, as appropriate.
"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 that is Delinquent,
that relates to a foreclosure or that relates to a Property that is a REO
Property prior to such Property's disposition by the Trust. Any mortgage loan
that, although intended by the parties hereto to have been, and that 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.
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"Mortgagor": The obligor on a Note.
"Net Group I Turbo Amount": As defined in Section 2.8(c) hereof.
"Net Group II Turbo Amount": As defined in Section 2.8(c) hereof.
"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.
"Net Monthly Excess Cashflow": As of any Payment Date, and with respect to
either Mortgage Loan Group, the excess of (x) Total Monthly Excess Cashflow for
such Mortgage Loan Group over (y) amounts applied pursuant to Section
7.5(b)(iii)(A)-(D).
"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 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., $100,969,071.84 of which the
Mortgage Loans in Group I represent $56,773,601.52 and the Mortgage Loans in
Group II represent $44,195,470.32.
"Original Class A Certificate Principal Balance": $100,000,000.00.
"Original Class A-1 Certificate Principal Balance": $23,800,000.00.
"Original Class A-2 Certificate Principal Balance": $15,600,000.00.
"Original Class A-3 Certificate Principal Balance": $11,683,000.00.
"Original Class A-4 Certificate Principal Balance": $5,675,000.00.
"Original Class A-5 Certificate Principal Balance": $43,242,000.00.
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"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 canceled 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 Holders 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."
"Pass-Through Rate": As defined in Note 1 to the table in Section 2.8(c)
hereof.
"Payment Date": Any date on which the Trustee is required to make
distributions to the Holders, 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": With respect to a Class A Certificate, the
undivided percentage interest (carried to eight places, rounded down) obtained
by dividing the original principal balance of such Certificate by the Original
Class A-1 Certificate Principal Balance, Original Class A-2 Certificate
Principal Balance, Original Class A-3 Certificate Principal Balance, Original
Class A-4 Certificate Principal Balance or Original Class A-5 Certificate
Principal Balance, as applicable, and multiplying the result by 100; and as to
any Class B Certificate or Residual Certificate, that Percentage Interest set
forth on such Class B Certificate or Residual Certificate.
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"Periodic Rate Cap": The provision in the Note for a Mortgage Loan in
Group II that limits increases or decreases in the Coupon Rate on each rate
adjustment date to a maximum increment specified in such provision.
"Person": Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Plan": As defined in Section 5.8(d) hereof.
"Pool Certification": As defined in Section 3.6(a) hereof.
"Pool Factor": As defined in Section 7.8(a)(xiii) hereof.
"Preference Amount": As to any Payment Date, with respect to the Class A
Certificates, any amounts included in previous distributions to Holders of
Class A Certificates of Class A Distribution Amounts (exclusive of Insured
Payments) that are recovered from such Holders 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 that have not theretofore been repaid to such Holders, provided
such Holders have complied with the provisions of Section 7.3(e).
"Preference Order": As defined in Section 7.3(e) hereof.
"Premium Percentage": As defined in the Insurance 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 that 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 that 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.
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"Principal and Interest Account": The account, which shall at all times be
an Eligible Account, established and maintained by the Servicer or any
Sub-Servicer pursuant to Section 8.8(a) hereof, or pursuant to any Sub-Servicing
Agreement, and entitled "[Servicer or Sub-Servicer], in trust for the benefit of
Holders of EquiVantage Home Equity Loan Trust 1997-2, Home Equity Loan
Asset-Backed Certificates, Series 1997-2, Principal and Interest Account".
"Prohibited Transaction": As set forth from time to time in the definition
thereof at Section 860F(a)(2) of the Code and applicable to the Trust.
"Property": The underlying property on which a lien is granted securing a
Mortgage Loan.
"Prospectus": The prospectus dated June 3, 1997 and the related prospectus
supplement dated June 19, 1997 pursuant to which the Class A Certificates are
offered.
"Purchase Option Period": As defined in Section 9.3(b) hereof.
"Qualified Liquidation": As set forth from time to time in the definition
thereof at Section 860F(a)(4) of the Code and applicable to the Upper-Tier REMIC
or the Lower-Tier REMIC.
"Qualified Replacement Mortgage": A Mortgage Loan replaced for another
pursuant to Section 3.3, Section 3.4 or Section 3.6(b) hereof that (i) bears a
fixed rate of interest if the replaced Mortgage Loan was in Group I or bears a
variable rate of interest if the replaced Mortgage Loan was in Group II,
(ii) has a Coupon Rate at least equal to the Coupon Rate of the replaced
Mortgage Loan (that, in the case of a Mortgage Loan in Group II, shall mean a
Mortgage Loan having an interest rate based on LIBOR and a margin over LIBOR, a
Periodic Rate Cap and a Lifetime Rate Cap at least equal to those applicable to
the replaced Mortgage Loan), (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 guidelines) as the replaced Mortgage Loan,
(v) shall mature no later than June 15, 2027, (vi) has a Combined Loan-to-Value
Ratio or Loan-to Value Ratio, as applicable, as of the Cut-Off Date no higher
than the Combined Loan-to-Value Ratio or Loan-to-Value Ratio, as applicable, 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 of
the replaced Mortgage Loan, (vii) has a Loan Balance as of the related
Replacement Cut-Off Date equal to or less than the Loan Balance of the replaced
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 and applicable to the Upper-Tier REMIC or the Lower-Tier REMIC, 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) has a Mortgage
with a valid lien priority equal to or greater than the replaced mortgage loan,
and (x) if such Qualified Replacement
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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 replaced
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.
"Reference Banks": Leading banks selected by the Trustee and engaged in
transactions in Eurodollar deposits in the international Eurocurrency market (i)
with an established place of business in London, (ii) whose quotations appear on
the Reuters Screen LIBO Page on the LIBOR Determination Date in question, (iii)
that have been designated as such by the Trustee and (iv) not controlling,
controlled by or under common control with the Sponsor or the Originator.
"Register": The register maintained by the Trustee in accordance with
Section 5.4 hereof, in which the names of the Holders are set forth.
"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 respect thereto, to the extent
not previously paid to or withheld by the Servicer.
"Reimbursement Amount": Either a Group I Reimbursement Amount or a Group
II Reimbursement Amount, as appropriate.
"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, that appear at Sections 860A through
860G of the Code, and
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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 July 1997 (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 Book-Entry
Certificates.
"Representations and Warranties": The representations and warranties
relating to the Mortgage Loans, as set forth in Section 5 of the Master Transfer
Agreement and Section 3.3(a) hereof, together with any Additional
Representations and Warranties (as defined in the Master Transfer Agreement).
"Required Escrow Document": As defined in Section 3.5(k) hereof.
"Reserve Fund": The trust account created and maintained pursuant to
Section 7.11 hereof. Funds held in the Reserve Fund shall be used solely for
the purposes set forth in such Section.
"Reserve Interest Rate": The rate per annum that the Trustee determines to
be either (i) the arithmetic mean (rounded upwards if necessary to the nearest
whole multiple of 0.0625%) of the one-month U.S. dollar lending rates that New
York City banks selected by the Trustee are quoting on the relevant LIBOR
Determination Date to the principal London offices of leading banks in the
London interbank market or, in the event that the Trustee can determine no such
arithmetic mean, (ii) the lowest one-month U.S. dollar lending rate that New
York City banks selected by the Trustee are quoting on such LIBOR Determination
Date to leading European banks.
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"Residual Certificate": Any Class RL Certificate or any Class RU
Certificate.
"Reuters Screen LIBO Page": The page so designated on the Reuters Monitor
Money Rates Service (or such other page as may replace the page on that service
for the purpose of displaying London interbank offered rates of major banks).
"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 Group, a division of The McGraw-Hill
Companies, Inc.
"Schedule of Mortgage Loans": The Schedule of Mortgage Loans attached
hereto as Schedule I.
"Second Mortgage Loan": A Mortgage Loan that is secured by a second
priority mortgage lien with respect to the related Property.
"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) that is qualified to service
residential mortgage loans.
"Servicer's Trust Receipt": The Servicer's trust receipt in the form set
forth as Exhibit J 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, 0.50% per
annum. With respect to each Second Mortgage Loan, 0.75% per annum.
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"Servicing Standards": As defined in Section 8.1(a) hereof.
"Specified Subordinated Amount": Either the Group I Specified Subordinated
Amount or the Group II Specified Subordinated Amount, as appropriate.
"Sponsor": EquiVantage Acceptance Corp., a Delaware corporation.
"Startup Day": June 27, 1997.
"Step-Up Payment Date": The second Payment Date that follows the Clean-Up
Call Date.
"Subordinated Amount": As of any Payment Date, either the Group I
Subordinated Amount or the Group II Subordinated Amount, as appropriate.
"Subordination Deficit": Either the Group I Subordination Deficit or the
Group II Subordination Deficit, as appropriate.
"Subordination Increase Amount": Either the Group I Subordination Increase
Amount or the Group II Subordination Increase Amount, as appropriate.
"Subordination Reduction Amount": Either the Group I Subordination
Reduction Amount or the Group II Subordination Reduction Amount, as appropriate.
"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": As defined in Section 11.17 hereof.
"Termination Notice": As defined in Section 9.3(b) hereof.
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"Termination Price": As defined in Section 9.2(a) hereof.
"Total Monthly Excess Cashflow": As defined in Section 7.5(b) hereof.
"Total Monthly Excess Spread": Either the Group I Total Monthly Excess
Spread or the Group II Total Monthly Excess Spread, as appropriate.
"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 1997-2, 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 Holders,
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 Proceeds
with respect to any Liquidated Loan, (vi) rights under the Certificate Insurance
Policy, (vii) the Sponsor's rights under the Master Transfer Agreement and
(viii) the Reserve Fund.
"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": 0.025% per annum.
"Underwriter": Morgan Stanley & Co. Incorporated, as representative of the
underwriters.
"Underwriting Agreement": The Underwriting Agreement between the Sponsor
and the Underwriter dated as of June 19, 1997.
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"United States Bankruptcy Code": The United States Bankruptcy Code, 11
U.S.C. Section 101 et seq., as amended, and any successor statute thereto
"Unrecoverable Delinquency Advance": Any Delinquency Advance that the
Servicer, in its good faith business judgment, believes will not ultimately be
recovered from the related Mortgage Loan.
"Unregistered Certificates": Certificates that are not registered as
evidenced by inclusion in the Register.
"Upper-Tier REMIC": The segregated pool of assets held by the Trust
consisting of the Lower-Tier Interests (except for the Class RL Certificate, as
set forth in the chart in Section 2.8(c) hereof).
"Weighted Net Average Coupon Rate": With respect to any Remittance Period
and a Mortgage Loan Group, the weighted average Coupon Rates (weighted by Loan
Balances) of the related Mortgage Loans, calculated at the opening of business
on the first day of such Remittance Period, less the rate at which the Servicing
Fee is then calculated and less the Trustee Fee Rate and Premium Percentage.
Section 1.2. Use of Words and Phrases. "Herein", "hereby", "hereunder",
"hereof", "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 hereof 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.
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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 the "EquiVantage
Home Equity Loan Trust 1997-2".
Section 2.2. Office. The office of the Trust shall be in care of the
Trustee, addressed to he Corporate Trust Office, or at such other address as the
Trustee may designate by notice to the Sponsor, the Servicer, the Holders and
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 Holders; provided,
however, that nothing contained herein shall require or permit the Trustee to
take any action that would result in the loss of REMIC status for the Upper-Tier
REMIC or the Lower-Tier REMIC.
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
Holders 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 Group I Monthly Trustee Fee Amount and the Group II 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 Holders that every material contract or other
material agreement entered into by the Trustee on behalf of the Trust shall
expressly state therein that no Holder 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 shall be transferred as set forth in Section 4.2 hereof,
such transfer to be evidenced by sale
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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. Receipt of Trust Estate. The Sponsor hereby directs the
Trustee to accept the property conveyed to it pursuant to Section 3.5 hereof in
connection with the establishment of the Trust, and the Trustee hereby
acknowledges receipt of such property. The Sponsor further directs the Trustee
to issue the Certificates, to hold the Class A Certificates as transfer agent
for the Depository as provided in Section 5.4, and to deliver the Class B
Certificates and the Residual Certificates to the Sponsor.
Section 2.8. Miscellaneous REMIC Provisions.
(a) The Trustee shall elect that the Upper-Tier REMIC and the Lower-Tier
REMIC shall be treated as REMICs 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 such REMIC elections.
(b) The Class A Certificates and the Class B Certificates are hereby
designated as "regular interests" with respect to the Upper-Tier REMIC and the
Class RU Certificates are hereby designated as the single Class of "residual
interest" with respect to the Upper-Tier REMIC.
(c) The Lower-Tier REMIC will be evidenced by (x) the Class LT-A
Certificates, Class LT-1 Certificates, Class LT-2 Certificates, Class LT-3
Certificates, Class LT-4 Certificates, Class LT-M Certificates, Class LT-AL
Certificates, Class LT-5L Certificates and Class LT-ML Certificates (the
"Lower-Tier Regular Interests"), which will be uncertificated and
non-transferable and are hereby designated as the "regular interests" in the
Lower-Tier REMIC and (y) the Class RL Certificates, which are hereby designated
as the single "residual interest" in the Lower-Tier REMIC (the Lower-Tier
Regular Interests, together with the Class RL Certificates, the "Lower-Tier
Interests"). The Lower-Tier Regular Interests shall be recorded on the records
of the Lower-Tier REMIC as being issued to and held by the Trustee on behalf of
the Upper-Tier REMIC.
For purposes of this Section 2.8, (i) the "Group I Turbo Amount"
means the sum of (A) any Group I Subordination Deficit (including the portion
of a Group I Principal Carry-Forward Amount that relates to a shortfall in a
distribution of a Group I Subordination Deficit) and (B) any Group I
Subordination Increase Amount, to the extent of any Net Monthly Excess
Cashflow in respect of the Group I Monthly Remittance Amount and (ii) the
"Net Group I Turbo Amount" means the Group I Turbo Amount determined as if
each Group I Mortgage Loan accrued interest at a rate equal to the excess of
its Coupon Rate over the sum of the Servicing Fee Rate, Trustee Fee Rate and
Premium Percentage. Any Net Group I Turbo Amount that is attributable to
interest on the Group I Mortgage Loans will not be paid to the Lower-Tier
Regular Interests, but a portion of the interest payable with respect to the
Class LT-M Certificate that
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equals 1% of the Net Group I Turbo Amount will be payable as a reduction of the
principal balances of the Class LT-1, Class LT-2, Class LT-3 and Class LT-4
Certificates in the same manner in which the Net Group I Turbo Amount is
allocated among the Class A-1 Certificates, Class A-2 Certificates, Class A-3
Certificates and Class A-4 Certificates, respectively (and will be accrued and
added to principal on the Class LT-M Certificate). The amount of interest on
the Group I Mortgage Loans equal to the excess of the Group I Turbo Amount over
the Net Group I Turbo Amount will be payable as a reduction of the principal
balances of the Lower-Tier Regular Interests as follows: (i) 98% to the
Class LT-A Certificates, (ii) 1% to the Class LT-1, Class LT-2, Class LT-3 and
Class LT-4 Certificates in the same manner in which such excess is allocated
among the Class A-1, Class A-2, Class A-3 and Class A-4 Certificates,
respectively, and (iii) 1% to the Class LT-M Certificates (and will be accrued
and added to principal on the Class RL Certificates). To the extent that
interest on the Group I Mortgage Loans exceeds the sum of interest allocated, as
described below, to the Class A-1, Class A-2, Class A-3, Class A-4 and Class B
Certificates and the Group I Turbo Amount, such excess shall be added to the
amounts allocated below with respect to the Class LT-AL, Class LT-5L and Class
LT-ML Certificates. Principal payments on the Group I Mortgage Loans shall be
allocated 98% to the Class LT-A Certificate, 1% to the Class LT-M Certificate
and 1% to the Class LT-1, Class LT-2, Class LT-3 and Class LT-4 Certificates
until paid in full. The aggregate amount of principal allocated to the Class
LT-1, Class LT-2, Class LT-3 and Class LT-4 Certificates shall be apportioned
among such Classes in the same manner in which principal is payable with respect
to the Class A-1 Certificates, Class A-2 Certificates, Class A-3 Certificates
and Class A-4 Certificates, respectively. Notwithstanding the foregoing, 98%
and 2% of any principal on the Group I Mortgage Loans that are attributable to a
Group I Subordination Reduction Amount shall be allocated to the Class LT-A and
Class LT-M Certificates, respectively, until paid in full. Allocable Losses on
the Group I Mortgage Loans will be allocated first to the Class RL Certificate
until the balance thereof attributable to accruals with respect to the Group I
Turbo Amount is reduced to zero, then 98% to the Class LT-A Certificates and 2%
to the Class LT-M Certificates unless an Allocable Loss causes a Group I
Subordination Deficit, and then such loss is allocated to the extent paid from
interest as above, and if not paid from interest, as if such loss were a
principal payment on the Group I Mortgage Loans.
Similarly, for purposes of this Section 2.8, (i) the "Group II Turbo
Amount" means the sum of (A) any Group II Subordination Deficit (including
the portion of a Group II Principal Carry-Forward Amount that relates to a
shortfall in a distribution of a Group II Subordination Deficit) and (B) any
Group II Subordination Increase Amount, to the extent of any Net Monthly
Excess Cashflow in respect of the Group II Monthly Remittance Amount and (ii)
the "Net Group II Turbo Amount" means the Group II Turbo Amount determined as
if each Group II Mortgage Loan accrued interest at a rate equal to the excess
of its Coupon Rate over the sum of the Servicing Fee Rate, Trustee Fee Rate
and Premium Percentage. Any Net Group II Turbo Amount that is attributable to
interest on the Group II Mortgage Loans will not be paid to the Lower-Tier
Regular Interests, but a portion of the interest payable with respect to the
Class LT-ML Certificate that equals 1% of the Net Group II Turbo Amount will
be payable to the Class LT-5L Certificates (and will be accrued and added to
principal on the Class LT-ML
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Certificate). The amount of interest on the Group II Mortgage Loans equal to
the excess of the Group II Turbo Amount over the Net Group II Turbo Amount will
be payable as a reduction of the principal balances of the Lower-Tier Regular
Interests as follows: (i) 98% to the Class LT-AL Certificates, (ii) 1% to the
Class LT-5L Certificates and (iii) 1% to the Class LT-ML Certificates (and will
be accrued and added to principal on the Class RL Certificates). To the extent
that interest on the Group II Mortgage Loans exceeds the sum of interest
allocated, as described below, to the Class A-5 and Class B Certificates and the
Group II Turbo Amount, such excess shall be added to the amounts allocated above
with respect to the Class LT-A, Class LT-1, Class LT-2, Class LT-3, Class LT-4
and Class LT-M Certificates. Principal payments on the Group II Mortgage Loans
shall be allocated 98% to the Class LT-AL Certificates, 1% to the Class LT-ML
Certificates and 1% to the Class LT-5L Certificates until paid in full.
Notwithstanding the foregoing, 98% and 2% of any principal payments on the
Group II Mortgage Loans that are attributable to a Group II Subordination
Reduction Amount shall be allocated to the Class LT-AL and Class LT-ML
Certificates, respectively, until paid in full. Allocable Losses on the
Group II Mortgage Loans will be allocated first to the Class RL Certificate
until the balance thereof attributable to accruals with respect to the Group II
Turbo Amount is reduced to zero, then 98% to the Class LT-AL Certificates and 2%
to the Class LT-ML Certificates unless an Allocable Loss causes a Group II
Subordination Deficit, and then such loss is allocated to the extent paid from
interest as above, and if not paid from interest, as if such loss were a
principal payment on the Group II Mortgage Loans.
The Lower-Tier Interests will have the following designations and
pass-through rates, and distributions of principal and interest thereon shall be
allocated to the Certificates in the following manner:
<TABLE>
Allocation Allocation
Lower-Tier Interests Initial Balance Pass-Through Rate of Principal of Interest
<S> <C> <C> <C> <C>
LT-A $55,638,129.49 (1) (2) (3),(4a)
LT-1 $ 238,000.00 (1) (2) (3),(4a)
LT-2 $ 156,000.00 (1) (2) (3),(4a)
LT-3 $ 116,830.00 (1) (2) (3),(4a)
LT-4 $ 56,750.00 (1) (2) (3),(4a)
LT-M $ 567,892.03 (1) (2) (3),(4a)
LT-AL $43,311,560.91 (1) (2) (3),(4b)
LT-5L $ 432,420.00 (1) (2) (3),(4b)
LT-ML $ 451,489.41 (1) (2) (4b)
Class RL Certificate $ 0.00 N/A N/A N/A(5)
</TABLE>
- --------------------------
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(1) The pass-through rate on these Lower-Tier Regular Interests ("Pass-Through
Rate") shall at any time of determination equal the Weighted Net Average
Coupon Rate in the related Mortgage Loan Group. If there are any
prepayment interest shortfalls with respect to a Mortgage Loan Group not
covered by Compensating Interest pursuant to Section 8.9(b), such shortfall
will reduce the interest accrued on each corresponding Lower-Tier Regular
Interest proportionally.
(2) Principal attributable to the Group I Mortgage Loans will be allocated to
and apportioned among the Class A-1 Certificates, Class A-2 Certificates,
Class A-3 Certificates and Class A-4 Certificates in the same proportion as
principal is payable with respect to such Certificates pursuant to Section
7.5(b), except that a portion of such principal in an amount equal to the
Group I Subordination Reduction Amount shall first be allocated to the
Class B Certificates until the balance thereof is zero and then to the
Class RL Certificate, and all principal will be allocated to the Class B
Certificates after the Certificate Principal Balance of the Group I
Certificates has been reduced to zero until the balance thereof is zero and
then to the Class RL Certificate. Similarly, principal attributable to the
Group II Mortgage Loans will be allocated to the Group II Certificates in
the same amount as principal is payable with respect to such Certificates
pursuant to Section 7.5(b), except that a portion of such principal in an
amount equal to the Group II Subordination Reduction Amount shall first be
allocated to the Class B Certificates until the balance thereof is zero and
then to the Class RL Certificate, and all principal will be allocated to
the Class B Certificates after the Certificate Principal Balance of the
Group II Certificates has been reduced to zero until the balance thereof is
zero and then to the Class RL Certificate.
(3) Except as provided in Note 4, interest on the Class LT-A Certificates,
Class LT-1 Certificates, Class LT-2 Certificates, Class LT-3 Certificates,
Class LT-4 Certificates and Class LT-M Certificates will be allocated among
the Class A-1 Certificates, Class A-2 Certificates, Class A-3 Certificates
and Class A-4 Certificates in the same proportion as interest is payable on
such Certificates pursuant to Section 7.5(b). Similarly, interest on the
Class LT-AL Certificates, Class LT-5L Certificates and Class LT-ML
Certificates will be allocated to the Class A-5 Certificates, subject to
Note 4.
(4) (a) Any interest with respect to this Lower-Tier Interest in excess of the
product of (i) two times the weighted average coupon of the Class LT-1
Certificates, Class LT-2 Certificates, Class LT-3 Certificates, Class LT-4
Certificates and Class LT-M Certificates, where each of such Classes, other
than the Class LT-M Certificate, is first subject to a cap and floor equal
to the Class A-1 Pass-Through Rate, Class A-2 Pass-Through Rate, Class A-3
Pass-Through Rate and Class A-4 Pass-Through Rate, respectively, and the
Class LT-M Certificate is subject to a cap equal to 0%, and (ii) the
principal balance of this Lower-Tier Interest, shall not be allocated to
the Class A Certificates but will be allocated to the Class B Certificates
as a separate component.
(b) Any interest with respect to this Lower-Tier Interest in excess of the
product of (i) two times the weighted average coupon of the Class LT-5L and
LT-ML Certificates, where the Class LT-5L is first subject to a cap and
floor equal to the Class A-5 Pass-Through Rate, and the Class LT-ML
Certificate is subject to a cap equal to 0%, and (ii) the principal balance
of this Lower-Tier Interest, shall not be allocated to the Class A
Certificates but will be allocated to the Class B Certificates as a
separate component.
(5) On each Payment Date, available funds, if any, remaining in the Lower-Tier
REMIC after payments of interest and principal, as designated above, will
be distributed to the Class RL Certificate.
(d) The Startup Day is hereby designated as the "startup day" of the Trust
within the meaning of Section 860G(a)(9) of the Code. The "latest possible
maturity date" for purposes of Treasury Regulation Section 1.860G-1(a)(4)(iii)
for the regular interests are as follows: for the Class A-1 Certificates, the
Payment Date in April 2012; for the Class A-2 Certificates, the
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Payment Date in January 2019; for the Class A-3 Certificates, the Payment
Date in July 2028; for the Class A-4 Certificates, the Payment Date in July
2028; for the Class A-5 Certificates, the Payment Date in January 2027; and
for the Lower-Tier Regular Interests, the Payment Date in January 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 Holders 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 Holder of any obligation of the Originators or
any other Person in connection with the Trust Estate.
(b) 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 Holders 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.
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 Holders 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
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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 that, 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).
(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 that 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 that 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.
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(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 that describe
the Sponsor or matters or activities for which the Sponsor is responsible
in accordance with the Operative Documents or that 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 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.
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(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 that materially and adversely affects the interests of the
Holders 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.
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 Holders 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 that, 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
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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).
(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 that 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 that 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 that describe
matters or activities for which the Servicer is responsible in accordance
with the Operative Documents or that 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
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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.
(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 that materially and adversely affects the interests of
the Holders 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
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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, 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) Except as disclosed in the Master Transfer Agreement and the related
Conveyance Agreement, none of the Mortgage Loans are subject to
Section 32 of the federal Truth-in-Lending Act.
(vii)Each Mortgage Loan, as of the Startup Day, satisfies either the test
set out in paragraph (1) or the test set out in paragraph (2) below.
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(1) The fair market value of the interest in real property
securing such Mortgage Loan
(A) was at least equal to 80 percent of the adjusted issue
price of the Mortgage Loan at the time the Mortgage
Loan was originated (or, if later, the time the
Mortgage Loan was significantly modified); or
(B) is at least equal to 80 percent of the adjusted issue
price of the Mortgage Loan on the Closing Date.
For purposes of this paragraph (1), the fair market value of the
real property interest must be first reduced by the amount of any
lien on the real property interest that is senior to the Mortgage
Loan being tested, and must be further reduced by a proportionate
amount of any lien that is in parity with the obligation being
tested, in each case before the percentages set forth in (1)(A)
and (1)(B) are determined. The adjusted issue price of a
Mortgage Loan is its issue price plus the amount of accrued
original issue discount, if any, as of the date of determination;
or
(2) Substantially all of the proceeds of the Mortgage Loan were
used to acquire or to improve or protect an interest in real
property that, at the origination date, is the only security
for the Mortgage Loan. For purposes of this test, loan
guarantees made by the United States or any state (or any
political subdivision, agency, or instrumentality of the
United States or of any state), or other third-party credit
enhancement are not viewed as additional security for a
loan. An Mortgage Loan is not considered to be secured by
property other than real property solely because the obligor
is personally liable on the obligation. For this purpose
only, substantially all of the proceeds of the Mortgage Loan
means at least 90 percent of the gross proceeds.
(b) The Sponsor hereby assigns to the Trustee for the benefit of the Holders
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 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 Holders 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 Holders of
the Certificates
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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 that materially and
adversely affects the interests of the Holders 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 Holders 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 in the
related Mortgage Loan Group that 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 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 either the Upper-Tier REMIC or the Lower-Tier REMIC 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 either the Upper-Tier REMIC or the Lower-Tier REMIC 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
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Representation or Warranty is untrue in any material respect and has not been
remedied shall constitute the sole remedy available to the Holders, 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 Holders, 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 Holders 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 that "materially and adversely affects the interests of the Holders or
of the Certificate Insurer" in such Mortgage Loan.
(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) 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, 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 Holders 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:
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(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 1997-2, 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 1997-2 under the Pooling and Servicing Agreement
dated as of June 1, 1997", 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 record 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"), or other documentation acceptable to
the Trustee and the Certificate Insurer, that opines or provides
evidence 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
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respect to Mortgages covered by the Assignment Opinions, the Sponsor
shall cause to be recorded 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 that 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 recorded, and
shall inform the Certificate Insurer of the Sponsor's failure to
cause such Mortgage assignments to be recorded. Thereafter, the
Trustee shall, with respect to any assignment on the aforementioned
list, upon the request of the Certificate Insurer (which request
shall be made only if (i) applicable law requires such recordation
to perfect the rights of the Trustee in the related Mortgage or
(ii) the Certificate Insurer has removed the Servicer pursuant to
Section 8.20), complete and cause to be submitted for recording the
assignment of Mortgage referred to in clause (F) of
Section 3.5(b)(i).
In furtherance of the foregoing, the Sponsor agrees to cause to be
delivered on the Startup Day an original executed power of attorney, executed by
the Sponsor, substantially in the form of Exhibit L, authorizing the Trustee to
complete and record the assignments of Mortgage described in clause (F) of
Section 3.5(b)(i) above, and if necessary, to execute a new assignment of
Mortgage for any Mortgage Loan if the original assignment of Mortgage delivered
by the Sponsor to the Trustee is not in recordable form at such time as the
assignment of Mortgage is to be recorded by the Trustee.
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
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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 Holders' 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 that 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 D.
(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 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 repurchase thereof or 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 representation, warranty or 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.
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(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 repurchase thereof or 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.
(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 Holders or of the
Certificate Insurer in the related Escrow Loan.
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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 E 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 Holders and the Certificate Insurer. The Trustee further
agrees to review the documents contained in each such File and 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
F (the "Pool Certification") 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 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 Certification 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 that 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
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remedied the defect and the defect materially and adversely affects the
interest in the related Mortgage Loan of the Holders 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 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 either the Upper-Tier REMIC or the Lower-Tier REMIC
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 either the Upper-Tier REMIC
or the Lower-Tier REMIC 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 that
is delivered to the Corporate Trust Office and contains sufficient information
to enable the Trustee to identify it as pertaining to a Mortgage Loan.
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(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 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, 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 Andrews & Kurth L.L.P., 1701 Pennsylvania
Avenue, N.W., Washington, D.C. 20006, 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 B Certificates and the Residual 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 Class A Certificates, the Trustee shall, from
the proceeds of the sale of the Class A 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 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 Accounts,
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
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Servicer or otherwise held by the Servicer in Trust for the Holders, except
as otherwise provided herein. Each Certificate entitles the Holder 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 in the related Mortgage
Loan Group, certain related Insured Payments, pro rata in accordance with
such Holder's Percentage Interest.
(b) Each Holder is required, and hereby agrees, to return to the Trustee
any Certificate with respect to which the Trustee has made the final
distribution due thereon. Any such Certificate as to which the Trustee has made
the final distribution thereon shall be deemed canceled and shall no longer be
Outstanding for any purpose of this Agreement, whether or not such Certificate
is ever returned to the Trustee.
Section 5.2. Forms. The Class A-1 Certificates, Class A-2 Certificates,
Class A-3 Certificates, Class A-4 Certificates, Class A-5 Certificates, Class B
Certificates, Class RL Certificates and Class RU Certificates shall be in
substantially the forms set forth in Exhibit A-1, Exhibit A-2, Exhibit A-3,
Exhibit A-4, Exhibit A-5, Exhibit B, Exhibit C-1 and Exhibit C-2 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.
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
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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 Holders 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 Holder, Certificates of any Class owned by such
Holder may be exchanged for other Certificates authorized of like Class, tenor
and 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 that the Holder making
the exchange is entitled to receive.
(d) All Certificates issued upon any registration of transfer or exchange
of Certificates shall be valid evidence of the same ownership interests in the
Trust and entitled to the same benefits under this Agreement as the Certificates
surrendered upon such registration of transfer or exchange.
(e) Every Certificate presented or surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Trustee duly executed by the
Holder thereof or his attorney duly authorized in writing.
(f) No service charge shall be made to a Holder 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 Book-Entry
Certificates, as set forth herein. Therefore, the 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 Class A Certificate Principal Balance and, 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 minimum denominations shall be $1,000 for any Class A Certificate, and
10% Percentage Interest for any Class B Certificate or any Residual Certificate.
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The Sponsor and the Trustee are hereby authorized to execute and deliver
the Representation Letter with the Depository.
With respect to the Book-Entry Certificates, the Sponsor, the Servicer, the
Certificate Insurer and the Trustee shall have no responsibility or obligation
to Direct Participants, Indirect Participants or Beneficial Owners. 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 Participant or Indirect Participant with respect to the ownership
interest in the Book-Entry Certificates, (ii) the delivery to any Direct
Participant or Indirect Participant or any other Person (including any
Beneficial Owner), other than a Holder of a Book-Entry Certificate, of any
notice with respect to the Book-Entry Certificates or (iii) the payment to any
Direct Participant or Indirect Participant or any other Person (including any
Beneficial Owner), other than a Holder of a Book-Entry Certificate, of any
amount with respect to any distribution of principal or interest on the
Book-Entry Certificates. No Person (including any Beneficial Owner) other than
a Holder of a Book-Entry Certificate shall receive a certificate evidencing such
Book-Entry 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 Holders of Certificates
appearing as Holders 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
Book-Entry 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 will cease to
be Book-Entry Certificates. 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 Holders 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 a Book-Entry Certificate, 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.
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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 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 a Holder that
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 Holders. 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 Holder 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 canceled by it. No
Certificate shall be authenticated in lieu of or in exchange for any Certificate
canceled as provided in this Section, except as expressly permitted by this
Agreement. All canceled Certificates may be held or destroyed by the Trustee in
accordance with its standard policy. The Sponsor, the Servicer, the Certificate
Insurer and the Originator may at any time deliver any Certificate to the
Trustee for cancellation, and the Trustee is hereby authorized to cancel any
such Certificate.
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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 any
Residual 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 any Residual 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 a Holder for any purpose hereunder, including, but not limited to,
the receipt of distributions on such Residual Certificate. Furthermore, in no
event shall the Trustee accept surrender for transfer, registration of transfer,
or register the transfer, of any Residual Certificate nor authenticate and make
available any new Residual Certificate unless the Trustee has received an
affidavit from the proposed transferee substantially in the form attached hereto
as Exhibit H. Each holder of any Residual 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
Unregistered 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 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 Holder of a Unregistered
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 B Certificate or a Residual Certificate shall be
made unless the Trustee shall have received a representation letter from the
transferee of such Certificate, acceptable to and in form and substance
satisfactory to the Trustee, to the effect that such transferee is not an
employee benefit plan subject to Section 406 of ERISA nor a plan 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.
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Section 5.9. Assignment of Rights. A Holder 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 a Holder 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 Holder, to such Holder 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 Holder of record on the immediately preceding Record Date;
provided, however, that a Holder of a Class A Certificate shall only be entitled
to payment by wire transfer if such Holder owns Class A Certificates with an
original principal balance of at least $5,000,000.
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 Holder 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, Class B Certificate or Residual
Certificate and remaining unclaimed by the Holder of such Certificate for the
period then specified in the escheat laws of the State of New York after such
amount has become due and payable shall be discharged from such trust and be
paid first to the Holders of the Class A Certificates, second, to the
Certificate Insurer on account of any Reimbursement Amounts, third, to the
Holders of the Class B Certificates and fourth to the Holders of the Residual
Certificates; and the Holder of such Certificate shall thereafter, as an
unsecured general creditor, look only to the Certificate Insurer or the Sponsor
for payment thereof (but only to the extent of the amounts so paid to the
Certificate Insurer or the Sponsor), 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
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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 Sponsor.
The Trustee shall, at the direction of the Sponsor, also adopt and employ, at
the expense of the Sponsor, any other reasonable means of notification of
such payment (including but not limited to mailing notice of such payment to
Holders 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
Holder).
Section 6.3. Protection of Trust Estate.
(a) The Trustee will hold the Trust Estate in trust for the benefit of the
Holders 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 Holders 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 that may
be unlawful or in violation of the rights of the Holders; 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 Class A Certificates
then Outstanding or, if there are no longer any Class A Certificates then
outstanding, by such majority of the Percentage Interests represented by the
Class B Certificates.
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(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.
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
that 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 Holder 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.
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Section 6.7. Limitation of Suits. No Holder 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 Holder has previously given written notice to the Sponsor and the
Trustee of such Holder's intention to institute such proceeding;
(2) the Holders of not less than 25% of the Percentage Interests
represented by the Class A Certificates then Outstanding or, if there
are no Class A Certificates then Outstanding, by such percentage of
the Percentage Interests represented by the Class B Certificates,
shall have made written request to the Trustee to institute such
proceeding in respect of such Event of Default;
(3) such Holder or Holders 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 Holders 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 B Certificates;
it being understood and intended that no one or more Holders 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 Holder of the same Class or to obtain or to seek to obtain priority or
preference over any other Holder 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 Holders of the same Class.
In the event the Trustee shall receive conflicting or inconsistent requests
and indemnity from two or more Classes of Holders, 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 Holders to Receive Distributions.
Notwithstanding any other provision in this Agreement, the Holder of any
Certificate shall have the right, which is absolute and unconditional, to
receive distributions to the extent provided
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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 Holder.
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 Holders 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 Holder 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 Holders may be exercised from time to
time, and as often as may be deemed expedient, by the Trustee, the Certificate
Insurer or by the Holders, as the case may be.
Section 6.11. Control by Holders. The Certificate Insurer or the Majority
Holders, 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 and Section 8.20 hereof; provided that:
(1) such direction shall not be in conflict with any rule of law or with
this Agreement;
(2) the Trustee shall have been provided with indemnity satisfactory to
it; and
(3) the Trustee may take any other action deemed proper by the Trustee,
which is not inconsistent with such direction; provided, however, that
the Trustee need not take any action that it determines might involve
it in liability or may be unjustly prejudicial to the Holders not so
directing.
ARTICLE
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
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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
establish and maintain, at the Corporate Trust Office, the Certificate
Account to be held by the Trustee as a segregated trust account in the name
of the Trust 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 Holders of the Certificates and
the Certificate Insurer, as their interests may appear. The Certificate
Account and the amounts deposited therein shall not be subject to any claim,
lien or encumbrance of any creditor or depositor of the Trustee or the
Sponsor (whether made directly or indirectly through a liquidator, receiver
or trustee in bankruptcy of the Trustee or the Sponsor).
Section 7.3. The Certificate Insurance Policy.
(a)(i) 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) expected to be on deposit in the Certificate Account on
such Payment Date with respect to Group I and equal to the sum of
(A) such amount excluding the amount of any Total Monthly Excess
Cash Flow relating to Group I included in such amount for the
related Payment Date plus (B) any amount of Total Monthly Excess
Cash Flow from either Group to be applied on account of Group I
on such Payment Date. The amount described in clause (A) of the
preceding sentence with respect to each Payment Date, after taking
into account the portion of the Group I Principal Distribution
Amount to be actually distributed on such Payment Date without
regard to any Insured Payment to be made with respect to Group I
on such Payment Date, is the "Group I Available Funds"; the sum of
the amounts described in clauses (A) and (B) of the preceding
sentence with respect to each Payment Date is the "Group I Total
Available Funds."
(ii) 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) expected to be on deposit in the Certificate Account on
such Payment Date with respect to Group II and equal to the sum of
(A) such amount excluding the amount of any Total Monthly Excess
Cash Flow relating to Group II included in such amount for the
related Payment Date plus (B) any amounts of Total Monthly Excess
Cash Flow from either Group to be
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applied on account of Group II on such Payment Date. The amount
described in clause (A) of the preceding sentence with respect to
each Payment Date, after taking into account the portion of the
Group II Principal Distribution Amount to be actually distributed
on such Payment Date without regard to any Insured Payment to be
made with respect to Group II on such Payment Date, is the "Group
II Available Funds" the sum of the amounts described in clauses
(A) and (B) of the preceding sentence with respect to each Payment
Date is the "Group II Total Available Funds."
(b) If the Group I Insured Distribution Amount for any Payment Date
exceeds the Group I Total Available Funds for such Payment Date (but net of
any Group I Reimbursement Amount, Group I Premium Amount and Group I Monthly
Trustee Fee Amount) (such event being a "Group I Total 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 Group I Total 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. Similarly, if on any
Payment Date the Group II Insured Distribution Amount exceeds the Group II
Total Available Funds for such Payment Date (but net of any Group II
Reimbursement Amount, Group II Premium Amount and Group II Monthly Trustee
Fee Amount) (such event being a "Group II Total 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 Group II Total
Available Funds Shortfall.
(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, at
the request of the Sponsor, the Certificate Insurer or the Servicer, shall
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 Holders of
the Class A Certificates any Insured Payment from the Certificate Insurer and
(ii) disburse the same to such Holders as set forth in Section 7.5(b).
Insured Payments disbursed by the Trustee from proceeds of the Certificate
Insurance Policy 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 Holders, as hereinafter provided. The Trust and
the Trustee hereby agree on behalf of each Holder of Class A Certificates for
the benefit of the Certificate Insurer that they recognize that to
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the extent the Certificate Insurer pays Insured Payments, either directly or
indirectly (as by paying through the Trustee), to the Holders of the Class A
Certificates, the Certificate Insurer will be entitled to receive the amount
of any Class A Interest Carry-Forward Amount and Class A Principal
Carry-Forward Amount (each calculated for purposes of this Section 7.3(d)
without regard to any related Insured Payment) and will be subrogated to the
rights of the Holders of the Class A Certificates with respect to such
Insured Payment, shall be deemed to the extent of the payments so made to be
a Holder of such Class A Certificates and shall receive future distributions
of the Class A Distribution Amount until all such Insured Payments by the
Certificate Insurer have been fully reimbursed, as described in the following
paragraph, and without duplication of any Reimbursement Amounts paid pursuant
to Section 7.5. 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 Holders 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
Holders of the Class A Certificates shall also have received the full amount
of the Class A Distribution Amount (exclusive of any Class A Interest
Carry-Forward Amount and Class A Principal Carry Forward Amount, representing
amounts previously paid to the Holders 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) and (iv) hereof with
respect to each Insured Payment made by the Certificate Insurer. The Trustee
hereby agrees on behalf of each Holder 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 Holders of such Class A
Certificates, the Certificate Insurer will be entitled to receive the related
Reimbursement Amount pursuant to Sections 7.5(b)(iii) and (iv).
(e) Each Holder of a Class A Certificate that pays any Preference
Amounts theretofore received by such Holder 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, (ii) irrevocably
assigning such Holder's rights and claim with respect to such Preference
Order to the Certificate Insurer in such form as is required by the
Certificate Insurer, and (iii) appointing the Certificate Insurer as such
Holder's agent in respect of such claim or amount in such form as required by
the Certificate Insurer. In no event, however, shall any Holder of a Class A
be entitled to reimbursement for any payment avoided under a Preference Order
as to which the Certificate Insurer previously has made a payment under the
Certificate
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Insurance Policy, nor is the Certificate Insurer obligated to make any
payment in respect of any payment avoided under a Preference Order that
represents a payment of the principal amount of the Class A Certificates
prior to the time the Certificate Insurer otherwise would have been required
to make a payment in respect of such principal.
The Trustee, for itself and on behalf of the Holders, 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 Holder 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.
(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, (x) from amounts then on deposit therein
with respect to Group I, the Group I Premium Amount for such
Payment Date and (y) from amounts then on deposit therein with
respect to Group II, the Group II Premium Amount for such Payment
Date;
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(ii) SECOND, to the Trustee, from amounts then on deposit in the
Certificate Account, (x) from amounts then on deposit therein with
respect to Group I, the Group I Monthly Trustee Fee Amount for
such Payment Date and (y) from amounts then on deposit therein
with respect to Group II, the Group II Monthly Trustee Fee Amount
for such Payment Date, together with 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 allocate, with
respect to each Mortgage Loan Group an amount equal to the sum of
(x) the Total Monthly Excess Spread with respect to such Mortgage
Loan Group and Payment Date plus (y) any Subordination Reduction
Amount with respect to such Mortgage Loan Group and Payment Date
(such sum being the "Total Monthly Excess Cashflow" with respect
to such Mortgage Loan Group and Payment Date) in the following
order of priority:
(A) FIRST, such Total Monthly Excess Cashflow shall be allocated
on such Payment Date with respect to the related Mortgage
Loan Group in an amount equal to the difference, if any,
between (x) the related Group Formula Distribution Amount
for such Payment Date and (y) the Available Funds with
respect to such Mortgage Loan Group for such Payment Date
(the amount of such difference being the "Available Funds
Shortfall" with respect to the related Mortgage Loan Group);
(B) SECOND, any portion of the Total Monthly Excess Cashflow
with respect to such Mortgage Loan Group remaining after the
application described in clause (A) above shall be allocated
against any Available Funds Shortfall with respect to the
other Mortgage Loan Group;
(C) THIRD, any portion of the Total Monthly Excess Cashflow with
respect to such Mortgage Loan Group remaining after the
allocations described in clauses (A) and (B) above shall be
paid to the Certificate Insurer in respect of amounts owed
on account of any Reimbursement Amount with respect to the
related Mortgage Loan Group; and
(D) FOURTH, any portion of the Total Monthly Excess Cashflow
with respect to such Mortgage Loan Group remaining after the
allocations described in clauses (A), (B) and (C) above
shall be
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paid to the Certificate Insurer in respect of any
Reimbursement Amount with respect to the other Mortgage Loan
Group.
(iv) FOURTH, 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) any Reimbursement Amount as of such Payment Date not
reimbursed pursuant to clause (iii) above.
(v) FIFTH, from remaining amounts then on deposit in the Certificate
Account for the related Mortgage Loan Group, together with the
amount of any related Insured Payment, concurrently to the Holders
of the Class A-1 Certificates, the Class A-2 Certificates, the
Class A-3 Certificates, the Class A-4 Certificates and the Class
A-5 Certificates, respectively, the Class A Interest Distribution
Amount for each such Class of Class A Certificates;
(vi) SIXTH, from remaining amounts then on deposit in the Certificate
Account for the Group I, together with the amount of any related
Insured Payment, to the Holders of the Class A-4 Certificates, in
reduction of the Class A-4 Certificate Principal Balance, an
amount equal to the Class A-4 Lockout Distribution;
(vii) SEVENTH, from remaining amounts then on deposit in the
Certificate Account for Group I, together with the amount of any
related Insured Payment, in respect of the Group I Principal
Distribution Amount, net of amounts distributed pursuant to clause
(vi), to the Holders of the Class A-1 Certificates, in reduction
of the Class A-1 Certificate Principal Balance, until such Class
A-1 Certificate Principal Balance is reduced to zero, then to the
Holders of the Class A-2 Certificates, in reduction of the Class
A-2 Certificate Principal Balance, until such Class A-2
Certificate Principal Balance is reduced to zero, then to the
Holders of the Class A-3 Certificates, in reduction of the Class
A-3 Certificate Principal Balance, until such Class A-3
Certificate Principal Balance is reduced to zero, then to the
Holders of the Class A-4 Certificates, in reduction of the Class
A-4 Certificate Principal Balance, until such Class A-4
Certificate Principal Balance is reduced to zero;
(viii) EIGHTH, from remaining amounts then on deposit in the Certificate
Account for Group II, together with the amount of any related
Insured Payment, in respect of the Group II Principal Distribution
Amount, to the Holders of the Class A-5 Certificates, in reduction
of the Class A-5 Certificate
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Principal Balance, until such Class A-5 Certificate Principal
Balance is reduced to zero;
(ix) NINTH, to the Reserve Fund, to the extent of the lesser of (i) all
remaining amounts then on deposit in the Certificate Account for
Group II, and (ii) amounts distributable pursuant to clause (x)
below, which distribution shall be deemed to be made to the
Holders of the Class B Certificates as part of the Class B
Distribution Amount;
(x) TENTH, from amounts deposited into the Reserve Fund pursuant to
the preceding clause, to the Holders of the Class A-5
Certificates, an amount equal to the Available Funds Cap Carry-
Forward Amount for such Payment Date;
(xi) ELEVENTH, on each Payment Date, the Trustee shall distribute from
the amount, if any, remaining on deposit in the Certificate
Account after the allocations described in clause (i) through (x)
above, to the Holders of the Class B Certificates, the lesser of
(x) such remaining available funds and (y) the Class B Interest
in excess of the amount deposited in the Reserve Fund pursuant to
clause (ix); however, any unpaid Class B Interest for such Payment
Date shall be added to the Class B Certificate Principal Balance;
(xii) TWELFTH, on each Payment Date, the Trustee shall distribute from
the amount, if any, remaining on deposit in the Certificate
Account after the allocations described in clause (i) through (xi)
above, to the Holders of the Class B Certificates, the lesser of
(x) such remaining available funds and (y) the Class B
Distribution Amount as of such Payment Date, less the amounts
distributed pursuant to clauses (x) and (xi), applied as a
distribution of principal on account of the Class B Certificates,
until the Class B Certificate Principal Balance has been reduced
to zero;
(xiii) THIRTEENTH, from the amount, if any, remaining on deposit in the
Certificate Account following the making by the Trustee of all
allocations, transfers and disbursements described above under
the prior clauses of this Section 7.5 (including any related
Insured Payment with respect to the Class A Certificates), the
Trustee shall pay to the Servicer, to the extent the Servicer has
not otherwise withheld such amounts pursuant to Sections 8.8(c)
and (d), 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;
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(xiv) FOURTEENTH, on each Payment Date, the Trustee shall apply the
amount, if any, remaining in the Certificate Account after the
allocations described in clauses (i) through (xiii) above, to
the Holders of the Class RL Certificates;
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 Group I Subordination Deficit exists, then any
distribution of the Group I Principal Distribution Amount on such Payment
Date shall be made pro rata to the Holders of each of the Class A-1
Certificates, Class A-2 Certificates, Class A-3 Certificates and Class A-4
Certificates. Notwithstanding any of the distributions or allocations set
forth in clause (ix), (xi) and (xii) above, no money will be allocated or
distributed to the Holders of the Class B Certificates on any Payment Date
unless the Subordinated Amount for each Mortgage Loan Group is equal to or
greater than the required Specified Subordinated Amount for such Mortgage
Loan Group as determined after distributions in clauses (i) through (x) for
such Payment Date.
(c) Notwithstanding clauses (b)(v), (vi) and (vii) above, the aggregate
amounts distributed on all Payment Dates to the Holders of the Class A
Certificates on account of principal shall not exceed the Original Class A
Certificate Principal Balance.
(d) Any amounts properly distributed to the Holders of the Class B
Certificates or to the Holders of the Residual 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 Holders of the Class A
Certificates, except as provided in Section 7.5(b)(ix) and (xi).
(e) Whenever, during the administration of the Trust, there comes into
the possession of the Trustee any money or property that this Agreement does
not otherwise require to be distributed on account of the Class A
Certificates or the Class B Certificates, the Trustee shall distribute such
money or other property to the Holders of the Class RL 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
Holders, 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.
(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
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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.
(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.
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(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 that 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 (including money
market funds advised by the Trustee or any of its affiliates) 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 Holder, to
the Servicer, to the Certificate Insurer, to the Underwriter, to the Sponsor,
to S&P and to Moody's a written report in substantially the form set forth as
Exhibit I 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 I 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, the Class B Certificates and the Residual
Certificates;
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(ii) the amount of such distributions allocable to principal on the
related Certificates, separately identifying the aggregate amount
of regularly scheduled installment payments of principal, 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 for each Mortgage Loan Group,
separately identifying the Mortgage interest and principal
collections;
(v) the Class A Certificate Principal Balance for each Class of Class
A Certificates, together with the principal amount of the 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 Class B Certificate Principal Balance, together with the
principal amount of the Class B 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;
(vii) the amounts described in Sections 7.5(b)(iii), (iv) and (xiii);
(viii) the amount of any Insured Payment included in the amounts
distributed on any of the Class A Certificates on such Payment
Date, and the aggregate unreimbursed Insured Payments outstanding
since the Closing Date;
(ix) information furnished by the Sponsor pursuant to Section
6049(d)(7)(C) of the Code and the regulations promulgated
thereunder to assist the Holders in computing their market
discount;
(x) the total of any Substitution Amounts and any Loan Purchase Price
amounts included in such distribution;
(xi) the amount of any Subordination Reduction Amount;
(xii) the amounts, if any, of any Realized Losses for the related
Remittance Period and the Aggregate Loan Balance of Mortgage
Loans that experienced such Realized Losses, the Cumulative Loss
Amount and the Rolling Three Month Delinquency Rate, in each case
by Mortgage Loan Group as of such Payment Date;
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(xiii) a number with respect to each Class of the Class A Certificates
(the "Pool Factor") computed by dividing the Class A Certificate
Principal Balance of such Class (after giving effect to any
distribution of principal to be made on such Payment Date) by the
Original Class A Certificate Principal Balance of such Class;
(xiv) the aggregate of any Insurance Proceeds received by the Servicer
during the related Remittance Period;
(xv) the Specified Subordinated Amount, and the Subordinated Amount
for each Mortgage Loan Group;
(xvi) the weighted average Coupon Rate of the Mortgage Loans for each
Mortgage Loan Group, and the weighted average maturity of the
Mortgage Loans for each Mortgage Loan Group; and
(xvii) the Aggregate Loan Balance for each Mortgage Loan Group.
Items (i) through (iii) above shall, with respect to the 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 Holder 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. Such obligation of the
Trustee shall be deemed to have been satisfied to the extent that
substantially comparable information shall be prepared and furnished by the
Trustee to the Holders pursuant to any requirements of the Code as are in
force from time to time.
(b) In addition, on each Payment Date, the Trustee will distribute to
each Holder, 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 (or
later day within the calendar month prior to such Payment Date that the
Servicer elects as a reporting cut-off), which is pursuant to Section
8.8(d)(ii) required to be prepared by the Servicer and furnished to the
Trustee for such purpose on or prior to the related Remittance Date:
(i) for each Mortgage Loan Group, 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, identified by Mortgage Loan
Group, (a) 30-59 days Delinquent, (b) 60-89 days Delinquent and
(c) 90 or more days Delinquent;
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(ii) the number, Aggregate Loan Balance of all Mortgage Loans and
percentage by Mortgage Loan Group of the Aggregate Loan Balance
of such Mortgage Loans, identified by Mortgage Loan Group, 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 by Mortgage Loan Group of the Aggregate Loan Balance of
such Mortgage Loans, identified by Mortgage Loan Group, 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 by Mortgage Loan Group of the Aggregate Loan Balance of
such Mortgage Loans, identified by Mortgage Loan Group, 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 received in respect of
each Mortgage Loan Group (and separately setting forth the number
and amount of any voluntary Prepayments in full);
(vii) the number and Aggregate Loan Balance of all Mortgages,
identified by Mortgage Loan Group, subject to losses;
(viii) the number and Aggregate Loan Balance of Mortgages, identified
by Mortgage Loan Group, outstanding; and
(ix) a Form of Liquidation Report, substantially in the form of
Exhibit K hereto, for each Mortgage Loan that 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
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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.
(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.
Section 7.10. Allocation of Realized Losses. If, on any Payment Date,
and following the making of all allocations, transfers and distributions
(other than as provided in this Section) on such Payment Date (x) the sum of
(i) the Group I Certificate Principal Balance and (ii) the portions of the
Class B Certificate Principal Balance and the Class RL Certificate Principal
Balance evidencing an interest in the Mortgage Loans in Group I exceeds (y)
the Group I Aggregate Loan Balance as of the close of business on the last
day of the related Remittance Period, or (x) the sum of (i) the Group II
Certificate Principal Balance and (ii) the portions of the Class B
Certificate Principal Balance and the Class RL Certificate Principal Balance
evidencing an interest in the Mortgage Loans in Group II exceeds (y) the
Group II Aggregate Loan Balance as of the close of business on the last day
of the related Remittance Period, (any such excess, "Allocable Losses"), such
Allocable Losses shall be applied as a reduction of the Class RL Certificate
Principal Balance until the Class RL Certificate Principal Balance has been
reduced to zero, then to the Class B Certificate Principal Balance until the
Class B Certificate Principal Balance has been reduced to zero and allocated
to the corresponding Lower-Tier Interests pursuant to Section 2.8(c).
Section 7.11. Reserve Fund.
(a) The Trustee shall establish and maintain a separate trust account in
its own name and designated "Reserve Fund/EquiVantage Home Equity Loan Trust
Pass-Through Certificates, Series 1997-2", which account shall be an Eligible
Account and which shall be used to make
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payments under the Cap Agreement with respect to the Class A-5 Certificates
in accordance with Section 7.5. The Trustee shall account for payments made
to the Class A-5 Certificates under the Cap Agreement separately from the
other distributions on the Class A-5 Certificates. Any amounts deposited
into the Reserve Fund pursuant to Section 7.5 hereof shall by held in
non-interest bearing accounts.
(b) The Reserve Fund will be part of the Trust Fund but not part of
either the Upper-Tier REMIC or the Lower-Tier REMIC. For federal and state
income tax purposes the Holders of the Class B Certificates shall be deemed
to be the owners of the Reserve Fund. Any amounts transferred by the
Upper-Tier REMIC to the Reserve Fund shall be treated as amounts distributed
by the Upper-Tier REMIC to the Holders of the Class B Certificates. Any
amounts remaining in the Reserve Fund upon termination of the Trust shall be
paid to the Holders of the Class A-5 Certificates, to the extent of any
outstanding Available Funds Cap Carry-Forward Amount, and thereafter to the
Holders of the Class B Certificates.
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 Holders
and, to the extent not conflicting with the best interests of the Holders,
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 (the "Servicing Standards"), 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 that
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
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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.
(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
Holders 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 Upper-Tier REMIC or the Lower-Tier REMIC to fail
to qualify as 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 that have been
subject to modifications pursuant to this Section 8.1(c) exceeds 5% of the
Original Aggregate Loan Balance. For purposes of the foregoing proviso, no
modification that provides for partial releases pursuant to Section 8.1(i),
modification pursuant to Section 8.2 or assumptions pursuant to Section 8.12
will be counted toward such 5% limit. The Servicer will, however, notify the
Certificate Insurer of all partial releases to the extent that the Aggregate
Loan Balance of Mortgage Loans affected by such partial releases exceeds 5%
of the Original Aggregate Loan Balance.
(d) The parties intend that the Upper-Tier REMIC and the Lower-Tier
REMIC each shall constitute, and that the affairs of the Trust shall be
conducted so as to qualify each of the Upper-Tier REMIC and the Lower-Tier
REMIC 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 each of the Upper-Tier REMIC and the Lower-Tier REMIC 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 Upper-Tier REMIC or the Lower-Tier REMIC or that would subject the
Upper-Tier REMIC or the Lower-Tier REMIC to tax and (iii) exercise reasonable
care not to allow the Upper-Tier REMIC or the Lower-Tier REMIC to receive
income from the performance of services or from assets not permitted under
the REMIC Provisions to be held by a REMIC.
(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
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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.
(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 Holders 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)(xiii) 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; or (C) the partial
release is expressly provided for by the terms of the Mortgage Loan.
(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
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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 that 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 Mortgagor a schedule, not to exceed twelve (12) months in duration,
for the payment of delinquent payments due on the related Mortgage Loan (it
being understood that such Mortgagor will be considered Delinquent until all
such delinquent payments have been made), (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) with respect to Mortgage Loans aggregating not more
than 5% of the Original Aggregate Loan Balance, 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 (during which extension the Mortgagor
will not be considered Delinquent with respect to the payment(s) for which
the due date is so extended), (v) amend any Note to extend
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the maturity thereof, provided that no maturity shall be extended by more
than three (3) months and that no more than 5% of the Original Aggregate Loan
Balance shall be modified to have a maturity date that has been extended
beyond the maturity date thereof as of the Cut-Off Date without the prior
consent of the Certificate Insurer.
(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 that is
in compliance with the laws of each state necessary to enable it to perform
its obligations under such Sub-Servicing Agreement and that 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.
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
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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 Holders. 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 Holders 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.
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 Holders 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 scheduled 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 Holders 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
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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, any Prepayments and Net Liquidation Proceeds collected after
the Cut-Off Date, all Loan Purchase Prices and Substitution Amounts received or
paid by the Servicer with respect to the Mortgage Loans, other recoveries or
amounts related to the Mortgage Loans received by the Servicer, Compensating
Interest and Delinquency Advances together with any amounts that 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
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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 that relate to collections on or
with 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."
(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 that 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)(xiii) 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 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
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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 pursuant to Section 7.5(b)(xiii).
Section 8.10. Purchase of Mortgage Loans. The Servicer may, but is not
obligated to, purchase for its own account any Mortgage Loan that 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.
(a) 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 for fire
and extended coverage, and that 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
to the material improvements on a Property on a replacement cost basis and
(iii) the full insurable value of the material improvements to the Property 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
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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
as to which material improvements are located 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 that 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 for such improvements 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 that would have been covered by such policy,
deposit in the Principal and Interest Account from the Servicer's own funds the
difference, if any, between the amount that would have been payable under a
policy complying with 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 the assumption of the Mortgage Loan would not materially and adversely
affect the interests of the Holders or the Certificate Insurer and (a) the
requested assumption of the Mortgage Loan results from the death of a Mortgagor,
or
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(b) the requested assumption is, in the judgment of the Servicer, necessary
to prevent or cure a default or imminent default on the Mortgage Loan, or
(iii) the Certificate Insurer provides its prior written consent. The
Servicer shall notify the Certificate Insurer of any assumptions permitted
under this Section 8.12 to the extent such assumptions exceed 5% of the
Original Aggregate Loan Balance. 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 that 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 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 that the Servicer may be
restricted by law from preventing, for any reason whatsoever.
Any request for consent by the Servicer under Sections 8.1(c), 8.1(i),
8.2(a) and 8.12 to the Certificate Insurer shall be deemed granted unless denied
by notice in writing to the Servicer within five (5) Business Days after receipt
of a written request for such consent.
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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 that 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 K 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, if it determines that such advances
would be recoverable. 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 Upper-Tier REMIC or the
Lower-Tier REMIC as defined in Section 860F of the Code or cause the Upper-Tier
REMIC or the Lower-Tier REMIC to fail to qualify as a 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 Holders
solely for the purpose of its prompt disposition and sale in a manner that 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
Upper-Tier REMIC or the Lower-Tier REMIC of any "income from non-permitted
assets" within the meaning of Section 860F(a)(2)(B) of the Code or any "net
income from foreclosure property" that 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 Holders, rent the same, or
any part thereof, as the Servicer deems to be in the best interest of the
Holders for the period prior to the sale of such REO Property.
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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. Except with the prior written consent of the
Certificate Insurer, 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 that 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".
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 that 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
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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 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
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April of each year, commencing in 1998, 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 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 that 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 Holders 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 1998,
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.
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.
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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 Holders) 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
(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
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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; 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 Holder, 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 that
materially and adversely affects the interests of the Holders 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 Holder, 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 Holder, the
Sponsor or the Certificate Insurer of such failure; or
(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
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(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 June 1, 1998, the
Rolling Three Month Delinquency Rate exceeds 6.0%, (b) on any
Payment Date on or after June 1, 1998 and before June 1, 1999,
the Rolling Three Month Delinquency Rate exceeds 7.0%, (c) on
any Payment Date on or after June 1, 1999 and before June 1,
2000, the Rolling Three Month Delinquency Rate exceeds 8.5%,
(d) on any Payment Date on or after June 1, 2000 and before
June 1, 2001, the Rolling Three Month Delinquency Rate exceeds
10.0%, or (e) on any Payment Date on or after June 1, 2001,
the Rolling Three Month Delinquency Rate exceeds 12.0%; or
(x) If (a) on the Payment Date occurring in June 1998, the aggregate
Cumulative Loss Amounts over the prior twelve month period exceed
0.50% of the average Aggregate Loan Balance as of the close of
business on the last day of each of the twelve preceding
Remittance Periods, (b) on the Payment Date occurring in
June 1999, the aggregate Cumulative Loss Amounts exceed 0.75%
of the average Aggregate Loan Balance as of the close of business
on the last day of each of the twelve preceding Remittance
Periods, (c) on the Payment Date occurring in June 2000, the
aggregate Cumulative Loss Amounts exceed 1.50% of the average
Aggregate Loan Balance as of the close of business on the last
day of each of the twelve preceding Remittance Periods, (d) on
the Payment Date occurring in June 2001, the aggregate Cumulative
Loss Amounts exceed 2.00% 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 (e) on the Payment Date occurring
in June 2002, the aggregate Cumulative Loss Amounts exceed 1.50%
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 June 1, 1998, the
Cumulative Loss Amount exceeds 0.50% of the Original Aggregate
Loan Balance, (b) on any Payment Date on or after June 1, 1998
and before June 1, 1999, the Cumulative Loss Amount exceeds
1.00% of the Original Aggregate Loan Balance, (c) on any Payment
Date on or after June 1, 1999 and before June 1, 2000, the
Cumulative Loss Amount exceeds 2.50% of the Original Aggregate
Loan Balance, (d) on any Payment Date on or after June 1, 2000
and before June 1, 2001, the Cumulative Loss Amount exceeds 4.00%
of the Original Aggregate Loan Balance, or (e) on any
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Payment Date on or after June 1, 2001, the Cumulative Loss Amount
exceeds 5.00% of the Original Aggregate Loan Balance; 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 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 opinion 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.
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(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 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 that 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 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.
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(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 that then have been or should have been deposited in the
Principal and Interest Account by the Servicer or that 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 that 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 that 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.
(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.
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.
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(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(f) and (y) that any successor Servicer must meet the
qualifications set forth in Section 8.20(f).
Section 8.23. Financial Statements. The Servicer understands that, in
connection with the transfer of the Certificates, Holders may request that the
Servicer make available to prospective Holders 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 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 Holder or any prospective
Holder 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 Holder or any prospective Holder 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 Holder or such prospective
Holder 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 Holders (i) to take no action that would result in the termination of REMIC
status for the Upper-Tier REMIC or the Lower-Tier REMIC, (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 that 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.
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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, 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.
ARTICLE
TERMINATION OF TRUST
Section 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 Holders 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 Holders 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 Upper-Tier REMIC or the Lower-Tier REMIC 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 Holders 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 Upper-Tier REMIC or the Lower-
Tier REMIC, 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 Holders 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 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
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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 Holder in the
manner set forth in Section 11.5.
Section 9.2. Termination Upon Option of Holders of Class RL Certificates
and Servicer.
(a) On any Remittance Date on or after the Remittance Date on which the
then-outstanding Aggregate Loan Balance of the Mortgage Loans in the Trust
Estate is less than or equal to ten percent of the sum of the Aggregate Loan
Balance of all Mortgage Loans in the Trust Estate as of the Cut-Off Date, the
Holders of the Class RL 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 Balance 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 Holders of the
Class RL 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 Holders of the Class RL 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 Upper-Tier REMIC and the
Lower-Tier REMIC.
(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.
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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 either the Upper-Tier REMIC or the Lower-Tier REMIC 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 that is
30 calendar days following such Final Determination, (i) the Holders 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 Holders of such Class A
Certificates or such notice from the Certificate Insurer, the Trustee shall
notify the holders of the Class RL Certificates of such election to liquidate or
such determination to purchase, as the case may be, (the "Termination Notice").
The Holders of a majority of the Percentage Interest of the Class RL
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.
(c) If, during the Purchase Option Period, the Holders of the Class RL
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 Holders 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 Holders 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
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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 Holders of a majority of the
Percentage Interest of the Class RL Certificates then Outstanding may, at their
option on any Remittance Date and upon delivery to the Holders of the Class A
Certificates and the Certificate Insurer of an opinion of counsel experienced in
federal income tax matters selected by the Holders of such Class RL
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 Holders of a majority of the Percentage Interest represented by the
Class A Certificates then Outstanding or the Certificate Insurer give the
Holders of a majority of the Percentage Interest of the Class RL 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
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pursuant to and conforming to the requirements of this Agreement; but in the
case of any such certificates or opinions that 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.
(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
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consent, of the Holders of a majority in Percentage Interest
of the Certificates of the affected Class or Classes and the
Certificate Insurer relating to the time, method and place of
conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the
Trustee, under this Agreement relating to such Certificates;
(iv) the Trustee shall not be required to take notice or be deemed to
have notice or knowledge of any default 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.
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(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 that 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 Holders 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 Holders of at least 25% of the
aggregate Percentage Interests represented by the Class A
Certificates, or, if there are no Class A Certificates then
Outstanding, by such Percentage Interests represented by the
Class B Certificates, a written notice specifying such failure or
breach and requiring it to be remedied; or
(3) a decree or order of a court or agency or supervisory authority
having jurisdiction for the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings, or
for the winding-up or liquidation of its
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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, marshaling of assets and
liabilities or similar proceedings of or relating to the Trustee
or relating to all or substantially all of its property; or
(5) the Trustee shall become insolvent (however insolvency is
evidenced), generally fail to pay its debts as they come due,
file or consent to the filing of a petition to take advantage of
any applicable insolvency or reorganization statute, make an
assignment for the benefit of its creditors, voluntarily suspend
payment of its obligations, or take corporate action for the
purpose of any of the foregoing.
(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 Holder 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 Holders, or, if
there are no Class A Certificates then Outstanding, by a majority of the Class B
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 Holders
of any Class of Certificates mentioned herein shall be sufficiently evidenced in
writing;
(c) whenever in the administration of this Agreement the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action
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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 Holders pursuant to this Agreement, unless such Holders shall have offered
to the Trustee reasonable security or indemnity against the costs, expenses and
liabilities that 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 that 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
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
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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 a Holder 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 that
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 that 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 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
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mailing notice of resignation by first-class mail, postage prepaid, to the
Holders 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 Holder 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 instrument shall be
delivered to the Trustee so removed and one copy to the successor trustee.
(d) The Majority Holders, or, if there are no Class A Certificates then
Outstanding, by a majority of the Class B 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 Holders, 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 Holders 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.
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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 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 Holders 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 Holders the Internal Revenue
Service's Form 1099 and any other statement required by applicable Treasury
regulations as determined by
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the Sponsor, and shall withhold, as required by applicable law, federal, state
or local taxes, if any, applicable to distributions to the Holders, including,
but not limited to, backup withholding under Section 3406 of the Code and the
withholding tax on distributions to foreign investors under Sections 1441 and
1442 of the Code.
(b) 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
Holders, 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 Holders, 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 Holders
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 Holder 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 that 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 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
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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 Holders,
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 Holders 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
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
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(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.
ARTICLE
MISCELLANEOUS
Section 11.1. Compliance Certificates and Opinions. Upon any application
or request by the Sponsor, the Servicer, the Certificate Insurer or the Holders
to the Trustee to take any action under any provision of this Agreement, the
Sponsor, the Servicer, the Certificate Insurer or the Holders, 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;
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(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 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 Holders.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Agreement to be given or taken by the Holders
may be embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such Holders in person or by an agent duly appointed in
writing; and, except as herein otherwise expressly
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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 Holders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Agreement and conclusive in favor of the Trustee and the Trust,
if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Whenever
such execution is by an officer of a corporation or a member of a partnership on
behalf of such corporation or partnership, such certificate or affidavit shall
also constitute sufficient proof of his authority.
(c) The ownership of Certificates shall be proved by the Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Certificate shall bind the Holder 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 Holders or other
documents provided or permitted by this Agreement to be made upon, given or
furnished to, or filed with the Trustee by any Holder, 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 Holders; Waiver of Notices. Where
this Agreement provides for notice to Holders of any event or the mailing of any
report to Holders, such notice or report shall be sufficiently given (unless
otherwise herein expressly provided) if mailed, first-class postage prepaid, to
each Holder affected by such event or to whom such report is required to be
mailed, at the address of such Holder 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 Holders 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 Holder shall affect the sufficiency of such notice or report
with respect to other Holders, and any notice or report that is mailed in the
manner herein provided shall be conclusively presumed to have been duly given or
provided.
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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 Holders shall be filed with the Trustee, but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
In case, by reason of the suspension of regular mail service as a result of
a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event to Holders 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 Holders. 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
Holders, 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 Holder 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 Holder or
the mailing of such notice, as the case may be, and no interest shall accrue for
the period from and after any such nominal date, provided such payment is made
in full on such next succeeding Business Day.
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Section 11.11. Governing Law. In view of the fact that Holders 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 that
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 that 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 Holder of such Certificate
as a result of an error and the Holder 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 Holder, 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 Holders 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 Holders,
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 that may be inconsistent with any other provision hereof, or to
add provisions hereto that are not inconsistent with the provisions hereof,
(ii) upon receipt of an 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
Residual Certificate as a result of the ownership of any Residual 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 Holder (without
its written consent).
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<PAGE>
(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 Holders,
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 Holders hereunder; provided, however, that no such
amendment shall (i) change in any manner the amount of, or change the timing of,
payments that are required to be distributed to any Holder without the consent
of the Holder of such Certificate or (ii) reduce the aforesaid percentages of
Percentage Interests that are required to consent to any such amendments,
without the consent of the Holders 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 Lower-Tier REMIC or the Upper-Tier
REMIC as a REMIC.
(e) The Sponsor shall provide the Certificate Insurer, the Holders,
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.
(f)The Trustee shall not be required to enter into any amendment that
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 each of the Lower-Tier REMIC and the Upper-Tier REMIC
and the Certificates containing such information and at the times and in such
manner as may be required by the Code or applicable
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<PAGE>
Treasury regulations, and shall furnish to Holders 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 each of the Lower-Tier REMIC and the
Upper-Tier REMIC as a REMIC (which election shall apply to the taxable period
ending December 31, 1997 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 unless applicable law
requires otherwise. The Tax Matters Person shall provide information necessary
for the computation of tax imposed on the transfer of a Residual 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 each of the Lower-Tier REMIC and the Upper-Tier
REMIC or the Certificates.
(b) The Tax Matters Person, at its own expense, shall timely file all
reports required to be filed by the Trust and each of the Lower-Tier REMIC and
the Upper-Tier REMIC with any federal, state or local governmental authority
having jurisdiction over the Trust, including other reports that must be filed
with the Holders, 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 Holders, 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 Holders 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 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 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 Holders (i) to take no action that would result in the
termination of "REMIC" status for the Upper-Tier REMIC and the Lower-Tier REMIC,
(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 that
may result in the imposition on the Upper-Tier REMIC or the Lower-Tier REMIC of
any other taxes under the Code.
(f) Each of the Lower-Tier REMIC and the Upper-Tier REMIC shall, for
federal income tax purposes, maintain books on a calendar year basis and report
income on an accrual basis.
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(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 Upper-Tier REMIC or the
Lower-Tier REMIC; 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
or cause a termination of REMIC status for the Upper-Tier REMIC or the
Lower-Tier REMIC, (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 Lower-Tier REMIC or Upper-Tier REMIC 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 Lower-Tier REMIC or Upper-Tier
REMIC 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 Holders of the Class B Certificates in
proportion to their Percentage Interests. To the extent such tax is chargeable
against the Holders of the Class B Certificates, notwithstanding anything to the
contrary contained herein, the Trustee is hereby authorized to retain from
amounts otherwise distributable to the Holders of the Class B 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 Holders of the Class B Certificates.
123
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Section 11.17. Appointment of Tax Matters Person. A Person (a "Tax
Matters Person") will be appointed for each of the Upper-Tier REMIC and the
Lower-Tier REMIC for all purposes of the Code to 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 such Person
under the Code, including, but not limited to, the representation of each of the
Upper-Tier REMIC and the Lower-Tier REMIC in any tax audit (including any
administrative or judicial proceedings with respect thereto that involve the
Internal Revenue Service or state tax authorities). The Holders of the Class RL
and Class RU Certificates hereby designate the Trustee, acting as their
respective agent, to be the Tax Matters Person for the Lower-Tier REMIC and the
Upper-Tier REMIC
Section 11.18. The Certificate Insurer. 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 Holders of the Class A Certificates
and shall be exercisable by the Holders of at least a majority in Percentage
Interest of the Class A Certificates then Outstanding or if there are no Class A
Certificates then Outstanding, by such Percentage Interest represented by the
Class B Certificates then Outstanding. At 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:
Trustee: Norwest Bank Minnesota, National Association
Sixth Street & Marquette Avenue
Minneapolis, Minnesota 55479-0070
Attention: Corporate Trust Services
Asset-Backed Administration
Re: EquiVantage Home Equity Loan Trust 1997-2
Tel: (612) 667-7167
Fax: (612) 667-3539
with a copy to:
Norwest Bank Minnesota, N.A.
11000 Broken Land Parkway
Columbia, Maryland 21044
Attention: Corporate Trust Services
Re: EquiVantage Home Equity Loan Trust 1997-2
Tel: (410) 884-2000
Fax: (410) 884-2363
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Sponsor: EquiVantage Acceptance Corp.
13111 Northwest Freeway, Suite 301
Houston, Texas 77040
Attention: Chief Financial Officer
Tel: (713) 895-1957
Fax: (713) 895-1999
with a copy to the attention of the General Counsel at the same
address
Servicer: EquiVantage Inc.
13111 Northwest Freeway, Suite 300
Houston, Texas 77040
Attention: Chief Financial Officer
Tel: (713) 895-1900
Fax: (713) 895-3870
with a copy to the attention of the General Counsel at the same
address
Certificate Financial Guaranty Insurance Company
Insurer: 115 Broadway
New York, New York 10006
Attention: Research and Risk Management Department
Re: EquiVantage Home Equity Loan Trust 1997-2
Tel: (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.
Representative: Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Attention: Asset Backed Securities Group
125
<PAGE>
IN WITNESS WHEREOF, the Sponsor, the Servicer and the Trustee have caused
this Pooling and Servicing 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/ Karen S. Crawford
-----------------------------------------
Name: Karen S. Crawford
Title: Senior Vice President
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee
By: /s/ Michael L. Mayer
-----------------------------------------
Name: Michael L. Mayer
Title: Vice President
<PAGE>
SCHEDULE I
SCHEDULE OF MORTGAGE LOANS
[Omitted from this filing on Form 8-K]
<PAGE>
EXHIBIT A-1
FORM OF
EQUIVANTAGE HOME EQUITY LOAN TRUST 1997-2
HOME EQUITY LOAN ASSET-BACKED CERTIFICATE
CLASS A-1 FIXED RATE CERTIFICATES
(6.575% Class A-1 Certificate)
Representing Certain Interests Relating to a Pool of Mortgage
Loans in the EquiVantage Home Equity Loan Trust 1997-2 formed by
EquiVantage Acceptance Corp., as Sponsor, and Serviced by EquiVantage Inc.
Unless this certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to Issuer or
its agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered holder hereof, Cede & Co., has an interest herein.
(This certificate does not represent an interest in, or an obligation of,
nor are the underlying Mortgage Loans insured or guaranteed by, EquiVantage
Acceptance Corp., EquiVantage Inc., any Originator or any of their
subsidiaries and affiliates. This certificate represents a fractional
ownership interest in the Class A-1 Certificates described herein, moneys in
certain Accounts created pursuant to the Pooling and Servicing Agreement and
certain other rights relating thereto and is payable only from amounts
received by the Trustee (i) relating to the Mortgage Loans held by the Trust,
(ii) moneys held in such Accounts and (iii) pursuant to the Certificate
Insurance Policy.)
No.: A-1-1 June 27, 1997 29476Y AV 1
------------- -----------
Date CUSIP
$23,800,000 April 25, 2012
- ------------------------- -----------------------
Original Principal Amount Final Scheduled Payment
Date
CEDE & CO.
-----------------
Registered Holder
A-1-1
<PAGE>
The registered Holder named above is the registered Holder of a
fractional interest in (i) a pool of fixed rate and adjustable rate,
closed-end mortgage loans (the "Mortgage Loans") that will be formed by
EquiVantage Acceptance Corp. ("EquiVantage" or the "Sponsor"), a Delaware
corporation, and sold by the Sponsor to Norwest Bank Minnesota, National
Association, a national banking association, as trustee (the "Trustee") on
behalf of EquiVantage Home Equity Loan Trust 1997-2 (the "Trust") pursuant to
that certain Pooling and Servicing Agreement dated as of June 1, 1997 (the
"Pooling and Servicing Agreement") by and among the Sponsor, the Trustee and
EquiVantage Inc., as Servicer (the "Servicer"), (ii) such amounts, including
Eligible Investments and the proceeds of payments under the Certificate
Insurance Policy, as from time to time may be held in the related Accounts
(except as otherwise provided in the Pooling and Servicing Agreement), each
created pursuant to the Pooling and Servicing Agreement, (iii) any Property,
the ownership of which has been effected in the name of the Servicer 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 Estate, (iv) any Insurance Policies and any rights of the Sponsor in
any Insurance Policies and (v) Net Liquidation Proceeds.
The Original Principal Amount set forth above is equal to the product of
(i) the Percentage Interest represented by this Certificate and (ii) the
aggregate original principal amount of the Class A-1 Certificates on June 27,
1997 (the "Startup Date"), which aggregate amount as of June 27, 1997 was
$23,800,000 (the "Original Principal Amount"). The Holder hereof is entitled
to principal payments on each Payment Date, as hereinafter described, which
will fully amortize such Original Principal Amount over the period from the
date of initial delivery hereof to the final Payment Date of the Class A-1
Certificates. Therefore, the actual outstanding principal amount of this
Certificate, on any date subsequent to July 25, 1997 (the first Payment Date)
will be less than the Original Principal Amount set forth above.
Upon receiving the final distribution hereon, the Holder hereof is
required to send this Certificate to the Trustee. The Pooling and Servicing
Agreement provides that, in any event, upon the making of the final
distribution due on this Certificate, this Certificate shall be deemed
canceled for all purposes under the Pooling and Servicing Agreement.
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN
INTEREST IN A CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE
INVESTMENT CONDUIT" ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN
SECTION 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE"), ASSUMING COMPLIANCE WITH THE REMIC PROVISIONS OF THE CODE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING
REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS
REPRESENTED HEREBY.
A-1-2
<PAGE>
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT
NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
This Certificate is one of a Class of duly-authorized Certificates
designated as EquiVantage Home Equity Loan Trust 1997-2, Home Equity Loan
Asset-Backed Certificates, Class A-1 Fixed Rate Certificates (the "Class A-1
Certificates") and issued under and subject to the terms, provisions and
conditions of the Pooling and Servicing Agreement, to which Pooling and
Servicing Agreement the Holder of this Certificate by virtue of acceptance
hereof assents and by which such Holder is bound. Also issued under the
Pooling and Servicing Agreement are the Class A-2 Certificates, Class A-3
Certificates, Class A-4 Certificates, Class A-5 Certificates, Class B
Certificates and the Residual Certificates; all such Certificates are
collectively referred to herein as the "Certificates."
Terms capitalized herein and not otherwise defined herein shall have the
respective meanings set forth in the Pooling and Servicing Agreement.
On the 25th day of each month or, if such day is not a Business Day, then
the next succeeding Business Day (each such day being a "Payment Date")
commencing July 25, 1997, the Holders of the Class A-1 Certificates as of the
close of business on the last business day of the calendar month immediately
preceding the calendar month in which such Payment Date occurs (the "Record
Date") will be entitled to receive the Class A Distribution Amount with
respect to the Class A-1 Certificate relating to such Payment Date.
Distributions will be made in immediately available funds to such Holders, by
wire transfer or otherwise, to the account of an Holder at a domestic bank or
other entity having appropriate facilities therefor, if such Holder has so
notified the Trustee at least five business days prior to the related record
date, or by check mailed to the address of the person entitled thereto as it
appears on the Register.
Each Holder of Record of a Class A-1 Certificate will be entitled to
receive such Holder's Percentage Interest in the amounts distributed on such
Payment Date to the Holders of the Class A-1 Certificates. The Percentage
Interest of each Class A-1 Certificate as of any date of determination will
be equal to the percentage obtained by dividing the Original Principal Amount
set forth on such Class A-1 Certificate by $23,800,000.
Pursuant to the Certificate Insurance Policy, the Certificate Insurer is
required, to the extent of any insufficiency in Available Funds, to make
Insured Payments available to the Trustee necessary to distribute the amount
of the Insured Distribution Amount payable with respect to the Class A-1
Certificates on each Payment Date.
Upon receipt of amounts under the Certificate Insurance Policy on behalf
of the Holders of the Class A-1 Certificates, the Trustee shall distribute in
accordance with
A-1-3
<PAGE>
the Pooling and Servicing Agreement to the Holders of the Class A-1
Certificates any portion thereof to which such Holders may be entitled.
The Trustee is required to duly and punctually pay distributions with
respect to this Certificate in accordance with the terms hereof and the Pooling
and Servicing Agreement. Amounts properly withheld under the Code or applicable
to any Holder shall be considered as having been paid by the Trustee to such
Holder for all purposes of the Pooling and Servicing Agreement.
The Mortgage Loans will be serviced by the Servicer pursuant to the
Pooling and Servicing Agreement. The Pooling and Servicing Agreement permits
the Servicer to enter into Sub-Servicing Agreements with certain institutions
eligible for appointment as Sub-Servicers for the servicing and
administration of certain Mortgage Loans. No appointment of any Sub-Servicer
shall release the Servicer from any of its obligations under the Pooling and
Servicing Agreement.
This Certificate does not represent a deposit or other obligation of, or
an interest in, nor are the underlying Mortgage Loans insured or guaranteed
by, EquiVantage Acceptance Corp., EquiVantage Inc., any Originator or any of
their subsidiaries and affiliates. Neither this Certificate nor the
underlying Mortgage Loans are insured or guaranteed by the Federal Deposit
Insurance Corporation, the Government National Mortgage Association or any
other governmental agency. This Certificate is limited in right of payment
to certain collections and recoveries and amounts on deposit in the Accounts
(except as otherwise provided in the Pooling and Servicing Agreement) and
payments received by the Trustee pursuant to the Certificate Insurance
Policy, all as more specifically set forth hereinabove and in the Pooling and
Servicing Agreement.
No Holder shall have any right to institute any proceeding, judicial or
otherwise, with respect to the Pooling and Servicing Agreement, or for the
appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in compliance with the terms hereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Holder of any Certificate shall have the right, which is
absolute and unconditional, to receive distributions to the extent provided
in the Pooling and Servicing Agreement with respect to such Certificate or to
institute suit for the enforcement of any such distribution, and such right
shall not be impaired without the consent of such Holder.
The Pooling and Servicing Agreement additionally provides that (i) the
Holders of the Class RL Certificates or, if such Holders decline to exercise,
the Servicer or, if the Servicer declines to exercise, the Certificate
Insurer, may, at their respective options, purchase from the Trust all (but
not fewer than all) remaining Mortgage Loans and other property then
constituting the Trust Estate, and thereby effect early retirement of the
Class A-1 Certificates, on any Remittance Date when the aggregate outstanding
Loan Balances of the Mortgage
A-1-4
<PAGE>
Loans in the Trust Estate is 10% or less of the sum of the original aggregate
Loan Balance of the Mortgage Loans in the Trust Estate as of the Cut-Off Date
and (ii) under certain circumstances relating to the qualification of the
Lower-Tier REMIC or Upper-Tier REMIC as a REMIC under the Code, the Mortgage
Loans may be sold, thereby affecting the early retirement of the Class A-1
Certificates.
The Trustee shall give written notice of termination of the Pooling and
Servicing Agreement to each Holder in the manner set forth therein.
The Majority Holders, upon compliance with the requirements set forth in
the Pooling and Servicing Agreement, have the right, with the consent of the
Certificate Insurer, to exercise any trust or power set forth in the Pooling
and Servicing Agreement with respect to the Certificates or the Trust Estate.
As provided in the Pooling and Servicing Agreement and subject to certain
limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register, and thereupon one or more new Certificates of like
Class, tenor and a like Percentage Interest will be issued to the designated
transferee or transferees.
The Trustee is required to furnish certain information on each Payment
Date to the Holder of this Certificate, as more fully described in the
Pooling and Servicing Agreement.
The Class A-1 Certificates are issuable only as registered Certificates
in denominations of $1,000 original principal amount and integral multiples
of $1,000. As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, Class A-1 Certificates are
exchangeable for new Class A-1 Certificates of authorized denominations
evidencing the same aggregate principal amount.
The Trustee and any agent of the Trustee may treat the Person in whose
name this Certificate is registered as the holder hereof for all purposes,
and neither the Trustee or any such agent shall be affected by notice to the
contrary.
A-1-5
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed on behalf of the Trust.
EQUIVANTAGE HOME EQUITY
LOAN TRUST 1997-2
By: NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:
Name:
Title:
Trustee Authentication
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:
Name:
Title:
Dated: June 27, 1997
A-1-6
<PAGE>
EXHIBIT A-2
FORM OF
EQUIVANTAGE HOME EQUITY LOAN TRUST 1997-2
HOME EQUITY LOAN ASSET-BACKED CERTIFICATE
CLASS A-2 FIXED RATE CERTIFICATES
(6.800% Class A-2 Certificate)
Representing Certain Interests Relating to a Pool of Mortgage
Loans in the EquiVantage Home Equity Loan Trust 1997-2 formed by
EquiVantage Acceptance Corp., as Sponsor, and Serviced by EquiVantage Inc.
Unless this certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to Issuer or
its agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered holder hereof, Cede & Co., has an interest herein.
(This certificate does not represent an interest in, or an obligation of,
nor are the underlying Mortgage Loans insured or guaranteed by, EquiVantage
Acceptance Corp., EquiVantage Inc., any Originator or any of their
subsidiaries and affiliates. This certificate represents a fractional
ownership interest in the Class A-2 Certificates described herein, moneys in
certain Accounts created pursuant to the Pooling and Servicing Agreement and
certain other rights relating thereto and is payable only from amounts
received by the Trustee (i) relating to the Mortgage Loans held by the Trust,
(ii) moneys held in such Accounts and (iii) pursuant to the Certificate
Insurance Policy.)
No.: A-2-1 June 27, 1997 29476Y AW 9
------------- -----------
Date CUSIP
$15,600,000 January 25, 2019
- ------------------------- -----------------------
Original Principal Amount Final Scheduled Payment
Date
CEDE & CO.
----------
Registered Holder
A-2-1
<PAGE>
The registered Holder named above is the registered Holder of a
fractional interest in (i) a pool of fixed rate and adjustable rate,
closed-end mortgage loans (the "Mortgage Loans") that will be formed by
EquiVantage Acceptance Corp. ("EquiVantage" or the "Sponsor"), a Delaware
corporation, and sold by the Sponsor to Norwest Bank Minnesota, National
Association, a national banking association, as trustee (the "Trustee") on
behalf of EquiVantage Home Equity Loan Trust 1997-2 (the "Trust") pursuant to
that certain Pooling and Servicing Agreement dated as of June 1, 1997 (the
"Pooling and Servicing Agreement") by and among the Sponsor, the Trustee and
EquiVantage Inc., as Servicer (the "Servicer"), (ii) such amounts, including
Eligible Investments and the proceeds of payments under the Certificate
Insurance Policy, as from time to time may be held in the related Accounts
(except as otherwise provided in the Pooling and Servicing Agreement), each
created pursuant to the Pooling and Servicing Agreement, (iii) any Property,
the ownership of which has been effected in the name of the Servicer 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 Estate, (iv) any Insurance Policies and any rights of the Sponsor in
any Insurance Policies and (v) Net Liquidation Proceeds.
The Original Principal Amount set forth above is equal to the product of
(i) the Percentage Interest represented by this Certificate and (ii) the
aggregate original principal amount of the Class A-2 Certificates on June 27,
1997 (the "Startup Date"), which aggregate amount as of June 27, 1997 was
$15,600,000 (the "Original Principal Amount"). The Holder hereof is entitled
to principal payments on each Payment Date, as hereinafter described, which
will fully amortize such Original Principal Amount over the period from the
date of initial delivery hereof to the final Payment Date of the Class A-2
Certificates. Therefore, the actual outstanding principal amount of this
Certificate, on any date subsequent to July 25, 1997 (the first Payment Date)
will be less than the Original Principal Amount set forth above.
Upon receiving the final distribution hereon, the Holder hereof is
required to send this Certificate to the Trustee. The Pooling and Servicing
Agreement provides that, in any event, upon the making of the final
distribution due on this Certificate, this Certificate shall be deemed
canceled for all purposes under the Pooling and Servicing Agreement.
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN
INTEREST IN A CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE
INVESTMENT CONDUIT" ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN
SECTION 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE"), ASSUMING COMPLIANCE WITH THE REMIC PROVISIONS OF THE CODE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING
REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS
REPRESENTED HEREBY.
A-2-2
<PAGE>
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT
NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
This Certificate is one of a Class of duly-authorized Certificates
designated as EquiVantage Home Equity Loan Trust 1997-2, Home Equity Loan
Asset-Backed Certificates, Class A-2 Fixed Rate Certificates (the "Class A-2
Certificates") and issued under and subject to the terms, provisions and
conditions of the Pooling and Servicing Agreement, to which Pooling and
Servicing Agreement the Holder of this Certificate by virtue of acceptance
hereof assents and by which such Holder is bound. Also issued under the
Pooling and Servicing Agreement are the Class A-1 Certificates, Class A-3
Certificates, Class A-4 Certificates, Class A-5 Certificates, Class B
Certificates and the Residual Certificates; all such Certificates are
collectively referred to herein as the "Certificates."
Terms capitalized herein and not otherwise defined herein shall have the
respective meanings set forth in the Pooling and Servicing Agreement.
On the 25th day of each month or, if such day is not a Business Day, then
the next succeeding Business Day (each such day being a "Payment Date")
commencing July 25, 1997, the Holders of the Class A-2 Certificates as of the
close of business on the last business day of the calendar month immediately
preceding the calendar month in which such Payment Date occurs (the "Record
Date") will be entitled to receive the Class A Distribution Amount with
respect to the Class A-2 Certificate relating to such Payment Date.
Distributions will be made in immediately available funds to such Holders, by
wire transfer or otherwise, to the account of an Holder at a domestic bank or
other entity having appropriate facilities therefor, if such Holder has so
notified the Trustee at least five business days prior to the related record
date, or by check mailed to the address of the person entitled thereto as it
appears on the Register.
Each Holder of Record of a Class A-2 Certificate will be entitled to
receive such Holder's Percentage Interest in the amounts distributed on such
Payment Date to the Holders of the Class A-2 Certificates. The Percentage
Interest of each Class A-2 Certificate as of any date of determination will
be equal to the percentage obtained by dividing the Original Principal Amount
set forth on such Class A-2 Certificate by $15,600,000.
Pursuant to the Certificate Insurance Policy, the Certificate Insurer is
required, to the extent of any insufficiency in Available Funds, to make
Insured Payments available to the Trustee necessary to distribute the amount
of the Insured Distribution Amount payable with respect to the Class A-2
Certificates on each Payment Date.
Upon receipt of amounts under the Certificate Insurance Policy on behalf of
the Holders of the Class A-2 Certificates, the Trustee shall distribute in
accordance with the
A-2-3
<PAGE>
Pooling and Servicing Agreement to the Holders of the Class A-2 Certificates
any portion thereof to which such Holders may be entitled.
The Trustee is required to duly and punctually pay distributions with
respect to this Certificate in accordance with the terms hereof and the
Pooling and Servicing Agreement. Amounts properly withheld under the Code or
applicable to any Holder shall be considered as having been paid by the
Trustee to such Holder for all purposes of the Pooling and Servicing
Agreement.
The Mortgage Loans will be serviced by the Servicer pursuant to the
Pooling and Servicing Agreement. The Pooling and Servicing Agreement permits
the Servicer to enter into Sub-Servicing Agreements with certain institutions
eligible for appointment as Sub-Servicers for the servicing and
administration of certain Mortgage Loans. No appointment of any Sub-Servicer
shall release the Servicer from any of its obligations under the Pooling and
Servicing Agreement.
This Certificate does not represent a deposit or other obligation of, or
an interest in, nor are the underlying Mortgage Loans insured or guaranteed
by, EquiVantage Acceptance Corp., EquiVantage Inc., any Originator or any of
their subsidiaries and affiliates. Neither this Certificate nor the
underlying Mortgage Loans are insured or guaranteed by the Federal Deposit
Insurance Corporation, the Government National Mortgage Association or any
other governmental agency. This Certificate is limited in right of payment
to certain collections and recoveries and amounts on deposit in the Accounts
(except as otherwise provided in the Pooling and Servicing Agreement) and
payments received by the Trustee pursuant to the Certificate Insurance
Policy, all as more specifically set forth hereinabove and in the Pooling and
Servicing Agreement.
No Holder shall have any right to institute any proceeding, judicial or
otherwise, with respect to the Pooling and Servicing Agreement, or for the
appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in compliance with the terms hereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Holder of any Certificate shall have the right, which is
absolute and unconditional, to receive distributions to the extent provided
in the Pooling and Servicing Agreement with respect to such Certificate or to
institute suit for the enforcement of any such distribution, and such right
shall not be impaired without the consent of such Holder.
The Pooling and Servicing Agreement additionally provides that (i) the
Holders of the Class RL Certificates or, if such Holders decline to exercise,
the Servicer or, if the Servicer declines to exercise, the Certificate
Insurer, may, at their respective options, purchase from the Trust all (but
not fewer than all) remaining Mortgage Loans and other property then
constituting the Trust Estate, and thereby effect early retirement of the
Class A-2 Certificates, on any Remittance Date when the aggregate outstanding
Loan Balances of the Mortgage
A-2-4
<PAGE>
Loans in the Trust Estate is 10% or less of the sum of the original aggregate
Loan Balance of the Mortgage Loans in the Trust Estate as of the Cut-Off Date
and (ii) under certain circumstances relating to the qualification of the
Lower-Tier REMIC or Upper-Tier REMIC as a REMIC under the Code, the Mortgage
Loans may be sold, thereby affecting the early retirement of the Class A-2
Certificates.
The Trustee shall give written notice of termination of the Pooling and
Servicing Agreement to each Holder in the manner set forth therein.
The Majority Holders, upon compliance with the requirements set forth in
the Pooling and Servicing Agreement, have the right, with the consent of the
Certificate Insurer, to exercise any trust or power set forth in the Pooling
and Servicing Agreement with respect to the Certificates or the Trust Estate.
As provided in the Pooling and Servicing Agreement and subject to certain
limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register, and thereupon one or more new Certificates of like
Class, tenor and a like Percentage Interest will be issued to the designated
transferee or transferees.
The Trustee is required to furnish certain information on each Payment
Date to the Holder of this Certificate, as more fully described in the
Pooling and Servicing Agreement.
The Class A-2 Certificates are issuable only as registered Certificates
in denominations of $1,000 original principal amount and integral multiples
of $1,000. As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, Class A-2 Certificates are
exchangeable for new Class A-2 Certificates of authorized denominations
evidencing the same aggregate principal amount.
The Trustee and any agent of the Trustee may treat the Person in whose
name this Certificate is registered as the holder hereof for all purposes,
and neither the Trustee or any such agent shall be affected by notice to the
contrary.
A-2-5
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed on behalf of the Trust.
EQUIVANTAGE HOME EQUITY
LOAN TRUST 1997-2
By: NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:
Name:
Title:
Trustee Authentication
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:
Name:
Title:
Dated: June 27, 1997
A-2-6
<PAGE>
EXHIBIT A-3
FORM OF
EQUIVANTAGE HOME EQUITY LOAN TRUST 1997-2
HOME EQUITY LOAN ASSET-BACKED CERTIFICATE
CLASS A-3 FIXED RATE CERTIFICATES
(7.275% Class A-3 Certificate)
Representing Certain Interests Relating to a Pool of
Mortgage Loans in the EquiVantage Home Equity Loan Trust 1997-2
formed by EquiVantage Acceptance Corp., as Sponsor, and Serviced by EquiVantage
Inc.
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to Issuer or its agent
for registration of transfer, exchange, or payment, and any certificate issued
is registered in the name of Cede & Co. or in such other name as is requested by
an authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered holder hereof, Cede & Co., has an
interest herein.
(This certificate does not represent an interest in, or an obligation of,
nor are the underlying Mortgage Loans insured or guaranteed by, EquiVantage
Acceptance Corp., EquiVantage Inc., any Originator or any of their subsidiaries
and affiliates. This certificate represents a fractional ownership interest in
the Class A-3 Certificates described herein, moneys in certain Accounts created
pursuant to the Pooling and Servicing Agreement and certain other rights
relating thereto and is payable only from amounts received by the Trustee
(i) relating to the Mortgage Loans held by the Trust, (ii) moneys held in such
Accounts and (iii) pursuant to the Certificate Insurance Policy.)
No.: A-3-1 June 27, 1997 29476Y AX 7
------------- -----------
Date CUSIP
$11,683,000 July 25, 2028
- ------------------------- -----------------------
Original Principal Amount Final Scheduled Payment
Date
CEDE & CO.
-----------------
Registered Holder
A-3-1
<PAGE>
- ------------------------
* With respect to any Payment Date that occurs prior to the Step-Up Payment
Date, 7.275% per annum and, with respect to any Payment Date thereafter,
7.775% per annum.
The registered Holder named above is the registered Holder of a fractional
interest in (i) a pool of fixed rate and adjustable rate, closed-end mortgage
loans (the "Mortgage Loans") that will be formed by EquiVantage Acceptance Corp.
("EquiVantage" or the "Sponsor"), a Delaware corporation, and sold by the
Sponsor to Norwest Bank Minnesota, National Association, a national banking
association, as trustee (the "Trustee") on behalf of EquiVantage Home Equity
Loan Trust 1997-2 (the "Trust") pursuant to that certain Pooling and Servicing
Agreement dated as of June 1, 1997 (the "Pooling and Servicing Agreement") by
and among the Sponsor, the Trustee and EquiVantage Inc., as Servicer (the
"Servicer"), (ii) such amounts, including Eligible Investments and the proceeds
of payments under the Certificate Insurance Policy, as from time to time may be
held in the related Accounts (except as otherwise provided in the Pooling and
Servicing Agreement), each created pursuant to the Pooling and Servicing
Agreement, (iii) any Property, the ownership of which has been effected in the
name of the Servicer 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 Estate, (iv) any Insurance Policies and any rights
of the Sponsor in any Insurance Policies and (v) Net Liquidation Proceeds.
The Original Principal Amount set forth above is equal to the product of
(i) the Percentage Interest represented by this Certificate and (ii) the
aggregate original principal amount of the Class A-3 Certificates on June 27,
1997 (the "Startup Date"), which aggregate amount as of June 27, 1997 was
$11,683,000 (the "Original Principal Amount"). The Holder hereof is entitled to
principal payments on each Payment Date, as hereinafter described, which will
fully amortize such Original Principal Amount over the period from the date of
initial delivery hereof to the final Payment Date of the Class A-3 Certificates.
Therefore, the actual outstanding principal amount of this Certificate, on any
date subsequent to July 25, 1997 (the first Payment Date) will be less than the
Original Principal Amount set forth above.
Upon receiving the final distribution hereon, the Holder hereof is required
to send this Certificate to the Trustee. The Pooling and Servicing Agreement
provides that, in any event, upon the making of the final distribution due on
this Certificate, this Certificate shall be deemed canceled for all purposes
under the Pooling and Servicing Agreement.
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN
INTEREST IN A CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT
CONDUIT" ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTION 860G AND
860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING
COMPLIANCE WITH THE REMIC PROVISIONS OF THE CODE.
A-3-2
<PAGE>
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING
REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS
REPRESENTED HEREBY.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
This Certificate is one of a Class of duly-authorized Certificates
designated as EquiVantage Home Equity Loan Trust 1997-2, Home Equity Loan
Asset-Backed Certificates, Class A-3 Fixed Rate Certificates (the "Class A-3
Certificates") and issued under and subject to the terms, provisions and
conditions of the Pooling and Servicing Agreement, to which Pooling and
Servicing Agreement the Holder of this Certificate by virtue of acceptance
hereof assents and by which such Holder is bound. Also issued under the Pooling
and Servicing Agreement are the Class A-1 Certificates, Class A-2 Certificates,
Class A-4 Certificates, Class A-5 Certificates, Class B Certificates and the
Residual Certificates; all such Certificates are collectively referred to herein
as the "Certificates."
Terms capitalized herein and not otherwise defined herein shall have the
respective meanings set forth in the Pooling and Servicing Agreement.
On the 25th day of each month or, if such day is not a Business Day, then
the next succeeding Business Day (each such day being a "Payment Date")
commencing July 25, 1997, the Holders of the Class A-3 Certificates as of the
close of business on the last business day of the calendar month immediately
preceding the calendar month in which such Payment Date occurs (the "Record
Date") will be entitled to receive the Class A Distribution Amount with respect
to the Class A-3 Certificate relating to such Payment Date. Distributions will
be made in immediately available funds to such Holders, by wire transfer or
otherwise, to the account of an Holder at a domestic bank or other entity having
appropriate facilities therefor, if such Holder has so notified the Trustee at
least five business days prior to the related record date, or by check mailed to
the address of the person entitled thereto as it appears on the Register.
Each Holder of Record of a Class A-3 Certificate will be entitled to
receive such Holder's Percentage Interest in the amounts distributed on such
Payment Date to the Holders of the Class A-3 Certificates. The Percentage
Interest of each Class A-3 Certificate as of any date of determination will be
equal to the percentage obtained by dividing the Original Principal Amount set
forth on such Class A-3 Certificate by $11,683,000.
Pursuant to the Certificate Insurance Policy, the Certificate Insurer is
required, to the extent of any insufficiency in Available Funds, to make Insured
Payments available to the Trustee necessary to distribute the amount of the
Insured Distribution Amount payable with respect to the Class A-3 Certificates
on each Payment Date.
A-3-3
<PAGE>
Upon receipt of amounts under the Certificate Insurance Policy on behalf of
the Holders of the Class A-3 Certificates, the Trustee shall distribute in
accordance with the Pooling and Servicing Agreement to the Holders of the Class
A-3 Certificates any portion thereof to which such Holders may be entitled.
The Trustee is required to duly and punctually pay distributions with
respect to this Certificate in accordance with the terms hereof and the Pooling
and Servicing Agreement. Amounts properly withheld under the Code or applicable
to any Holder shall be considered as having been paid by the Trustee to such
Holder for all purposes of the Pooling and Servicing Agreement.
The Mortgage Loans will be serviced by the Servicer pursuant to the Pooling
and Servicing Agreement. The Pooling and Servicing Agreement permits the
Servicer to enter into Sub-Servicing Agreements with certain institutions
eligible for appointment as Sub-Servicers for the servicing and administration
of certain Mortgage Loans. No appointment of any Sub-Servicer shall release the
Servicer from any of its obligations under the Pooling and Servicing Agreement.
This Certificate does not represent a deposit or other obligation of, or an
interest in, nor are the underlying Mortgage Loans insured or guaranteed by,
EquiVantage Acceptance Corp., EquiVantage Inc., any Originator or any of their
subsidiaries and affiliates. Neither this Certificate nor the underlying
Mortgage Loans are insured or guaranteed by the Federal Deposit Insurance
Corporation, the Government National Mortgage Association or any other
governmental agency. This Certificate is limited in right of payment to certain
collections and recoveries and amounts on deposit in the Accounts (except as
otherwise provided in the Pooling and Servicing Agreement) and payments received
by the Trustee pursuant to the Certificate Insurance Policy, all as more
specifically set forth hereinabove and in the Pooling and Servicing Agreement.
No Holder shall have any right to institute any proceeding, judicial or
otherwise, with respect to the Pooling and Servicing Agreement, or for the
appointment of a receiver or trustee, or for any other remedy under the Pooling
and Servicing Agreement except in compliance with the terms hereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Holder of any Certificate shall have the right, which is absolute
and unconditional, to receive distributions to the extent provided in the
Pooling and Servicing Agreement with respect to such Certificate or to institute
suit for the enforcement of any such distribution, and such right shall not be
impaired without the consent of such Holder.
The Pooling and Servicing Agreement additionally provides that (i) the
Holders of the Class RL Certificates or, if such Holders decline to exercise,
the Servicer or, if the Servicer declines to exercise, the Certificate Insurer,
may, at their respective options, purchase from the
A-3-4
<PAGE>
Trust all (but not fewer than all) remaining Mortgage Loans and other
property then constituting the Trust Estate, and thereby effect early
retirement of the Class A-3 Certificates, on any Remittance Date when the
aggregate outstanding Loan Balances of the Mortgage Loans in the Trust Estate
is 10% or less of the sum of the original aggregate Loan Balance of the
Mortgage Loans in the Trust Estate as of the Cut-Off Date and (ii) under
certain circumstances relating to the qualification of the Lower-Tier REMIC
or Upper-Tier REMIC as a REMIC under the Code, the Mortgage Loans may be
sold, thereby affecting the early retirement of the Class A-3 Certificates.
The Trustee shall give written notice of termination of the Pooling and
Servicing Agreement to each Holder in the manner set forth therein.
The Majority Holders, upon compliance with the requirements set forth in
the Pooling and Servicing Agreement, have the right, with the consent of the
Certificate Insurer, to exercise any trust or power set forth in the Pooling and
Servicing Agreement with respect to the Certificates or the Trust Estate.
As provided in the Pooling and Servicing Agreement and subject to certain
limitations therein set forth and referred to on the face hereof, the transfer
of this Certificate is registrable in the Register upon surrender of this
Certificate for registration of transfer at the office designated as the
location of the Register, and thereupon one or more new Certificates of like
Class, tenor and a like Percentage Interest will be issued to the designated
transferee or transferees.
The Trustee is required to furnish certain information on each Payment Date
to the Holder of this Certificate, as more fully described in the Pooling and
Servicing Agreement.
The Class A-3 Certificates are issuable only as registered Certificates in
denominations of $1,000 original principal amount and integral multiples of
$1,000. As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, Class A-3 Certificates are exchangeable
for new Class A-3 Certificates of authorized denominations evidencing the same
aggregate principal amount.
The Trustee and any agent of the Trustee may treat the Person in whose name
this Certificate is registered as the holder hereof for all purposes, and
neither the Trustee or any such agent shall be affected by notice to the
contrary.
A-3-5
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed on behalf of the Trust.
EQUIVANTAGE HOME EQUITY
LOAN TRUST 1997-2
By: NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as
Trustee
By:
--------------------------------------
Name:
Title:
Trustee Authentication
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By: -------------------------------------
Name:
Title:
Dated: June 27, 1997
A-3-6
<PAGE>
EXHIBIT A-4
FORM OF
EQUIVANTAGE HOME EQUITY LOAN TRUST 1997-2
HOME EQUITY LOAN ASSET-BACKED CERTIFICATE
CLASS A-4 FIXED RATE CERTIFICATES
(7.000% Class A-4 Certificate)
Representing Certain Interests Relating to a Pool of
Mortgage Loans in the EquiVantage Home Equity Loan Trust 1997-2
formed by EquiVantage Acceptance Corp., as Sponsor, and Serviced by EquiVantage
Inc.
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to Issuer or its agent
for registration of transfer, exchange, or payment, and any certificate issued
is registered in the name of Cede & Co. or in such other name as is requested by
an authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered holder hereof, Cede & Co., has an
interest herein.
(This certificate does not represent an interest in, or an obligation of,
nor are the underlying Mortgage Loans insured or guaranteed by, EquiVantage
Acceptance Corp., EquiVantage Inc., any Originator or any of their subsidiaries
and affiliates. This certificate represents a fractional ownership interest in
the Class A-4 Certificates described herein, moneys in certain Accounts created
pursuant to the Pooling and Servicing Agreement and certain other rights
relating thereto and is payable only from amounts received by the Trustee
(i) relating to the Mortgage Loans held by the Trust, (ii) moneys held in such
Accounts and (iii) pursuant to the Certificate Insurance Policy.)
No.: A-4-1 June 27, 1997 29476Y AY 5
------------- ------------
Date CUSIP
$5,675,000 July 25, 2028
- ------------------------- -----------------------
Original Principal Amount Final Scheduled Payment
Date
CEDE & CO.
-----------------
Registered Holder
A-4-1
<PAGE>
- ----------------------------
* With respect to any Payment Date that occurs prior to the Step-Up Payment
Date, 7.000% per annum and, with respect to any Payment Date thereafter,
7.500% per annum.
The registered Holder named above is the registered Holder of a fractional
interest in (i) a pool of fixed rate and adjustable rate, closed-end mortgage
loans (the "Mortgage Loans") that will be formed by EquiVantage Acceptance Corp.
("EquiVantage" or the "Sponsor"), a Delaware corporation, and sold by the
Sponsor to Norwest Bank Minnesota, National Association, a national banking
association, as trustee (the "Trustee") on behalf of EquiVantage Home Equity
Loan Trust 1997-2 (the "Trust") pursuant to that certain Pooling and Servicing
Agreement dated as of June 1, 1997 (the "Pooling and Servicing Agreement") by
and among the Sponsor, the Trustee and EquiVantage Inc., as Servicer (the
"Servicer"), (ii) such amounts, including Eligible Investments and the proceeds
of payments under the Certificate Insurance Policy, as from time to time may be
held in the related Accounts (except as otherwise provided in the Pooling and
Servicing Agreement), each created pursuant to the Pooling and Servicing
Agreement, (iii) any Property, the ownership of which has been effected in the
name of the Servicer 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 Estate, (iv) any Insurance Policies and any rights
of the Sponsor in any Insurance Policies and (v) Net Liquidation Proceeds.
The Original Principal Amount set forth above is equal to the product of
(i) the Percentage Interest represented by this Certificate and (ii) the
aggregate original principal amount of the Class A-4 Certificates on June 27,
1997 (the "Startup Date"), which aggregate amount as of June 27, 1997 was
$5,675,000 (the "Original Principal Amount"). The Holder hereof is entitled to
principal payments on each Payment Date, as hereinafter described, which will
fully amortize such Original Principal Amount over the period from the date of
initial delivery hereof to the final Payment Date of the Class A-4 Certificates.
Therefore, the actual outstanding principal amount of this Certificate, on any
date subsequent to July 25, 1997 (the first Payment Date) will be less than the
Original Principal Amount set forth above.
Upon receiving the final distribution hereon, the Holder hereof is required
to send this Certificate to the Trustee. The Pooling and Servicing Agreement
provides that, in any event, upon the making of the final distribution due on
this Certificate, this Certificate shall be deemed canceled for all purposes
under the Pooling and Servicing Agreement.
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN
INTEREST IN A CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT
CONDUIT" ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTION 860G AND
860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING
COMPLIANCE WITH THE REMIC PROVISIONS OF THE CODE.
A-4-2
<PAGE>
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING
REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS
REPRESENTED HEREBY.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
This Certificate is one of a Class of duly-authorized Certificates
designated as EquiVantage Home Equity Loan Trust 1997-2, Home Equity Loan
Asset-Backed Certificates, Class A-4 Fixed Rate Certificates (the "Class A-4
Certificates") and issued under and subject to the terms, provisions and
conditions of the Pooling and Servicing Agreement, to which Pooling and
Servicing Agreement the Holder of this Certificate by virtue of acceptance
hereof assents and by which such Holder is bound. Also issued under the Pooling
and Servicing Agreement are the Class A-1 Certificates, Class A-2 Certificates,
Class A-3 Certificates, Class A-5 Certificates, Class B Certificates and the
Residual Certificates; all such Certificates are collectively referred to herein
as the "Certificates."
Terms capitalized herein and not otherwise defined herein shall have the
respective meanings set forth in the Pooling and Servicing Agreement.
On the 25th day of each month or, if such day is not a Business Day, then
the next succeeding Business Day (each such day being a "Payment Date")
commencing July 25, 1997, the Holders of the Class A-4 Certificates as of the
close of business on the last business day of the calendar month immediately
preceding the calendar month in which such Payment Date occurs (the "Record
Date") will be entitled to receive the Class A Distribution Amount with respect
to the Class A-4 Certificate relating to such Payment Date. Distributions will
be made in immediately available funds to such Holders, by wire transfer or
otherwise, to the account of an Holder at a domestic bank or other entity having
appropriate facilities therefor, if such Holder has so notified the Trustee at
least five business days prior to the related record date, or by check mailed to
the address of the person entitled thereto as it appears on the Register.
Each Holder of Record of a Class A-4 Certificate will be entitled to
receive such Holder's Percentage Interest in the amounts distributed on such
Payment Date to the Holders of the Class A-4 Certificates. The Percentage
Interest of each Class A-4 Certificate as of any date of determination will be
equal to the percentage obtained by dividing the Original Principal Amount set
forth on such Class A-4 Certificate by $5,675,000.
Pursuant to the Certificate Insurance Policy, the Certificate Insurer is
required, to the extent of any insufficiency in Available Funds, to make Insured
Payments available to the Trustee necessary to distribute the amount of the
Insured Distribution Amount payable with respect to the Class A-4 Certificates
on each Payment Date.
A-4-3
<PAGE>
Upon receipt of amounts under the Certificate Insurance Policy on behalf of
the Holders of the Class A-4 Certificates, the Trustee shall distribute in
accordance with the Pooling and Servicing Agreement to the Holders of the Class
A-4 Certificates any portion thereof to which such Holders may be entitled.
The Trustee is required to duly and punctually pay distributions with
respect to this Certificate in accordance with the terms hereof and the Pooling
and Servicing Agreement. Amounts properly withheld under the Code or applicable
to any Holder shall be considered as having been paid by the Trustee to such
Holder for all purposes of the Pooling and Servicing Agreement.
The Mortgage Loans will be serviced by the Servicer pursuant to the Pooling
and Servicing Agreement. The Pooling and Servicing Agreement permits the
Servicer to enter into Sub-Servicing Agreements with certain institutions
eligible for appointment as Sub-Servicers for the servicing and administration
of certain Mortgage Loans. No appointment of any Sub-Servicer shall release the
Servicer from any of its obligations under the Pooling and Servicing Agreement.
This Certificate does not represent a deposit or other obligation of, or an
interest in, nor are the underlying Mortgage Loans insured or guaranteed by,
EquiVantage Acceptance Corp., EquiVantage Inc., any Originator or any of their
subsidiaries and affiliates. Neither this Certificate nor the underlying
Mortgage Loans are insured or guaranteed by the Federal Deposit Insurance
Corporation, the Government National Mortgage Association or any other
governmental agency. This Certificate is limited in right of payment to certain
collections and recoveries and amounts on deposit in the Accounts (except as
otherwise provided in the Pooling and Servicing Agreement) and payments received
by the Trustee pursuant to the Certificate Insurance Policy, all as more
specifically set forth hereinabove and in the Pooling and Servicing Agreement.
No Holder shall have any right to institute any proceeding, judicial or
otherwise, with respect to the Pooling and Servicing Agreement, or for the
appointment of a receiver or trustee, or for any other remedy under the Pooling
and Servicing Agreement except in compliance with the terms hereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Holder of any Certificate shall have the right, which is absolute
and unconditional, to receive distributions to the extent provided in the
Pooling and Servicing Agreement with respect to such Certificate or to institute
suit for the enforcement of any such distribution, and such right shall not be
impaired without the consent of such Holder.
The Pooling and Servicing Agreement additionally provides that (i) the
Holders of the Class RL Certificates or, if such Holders decline to exercise,
the Servicer or, if the Servicer declines to exercise, the Certificate Insurer,
may, at their respective options, purchase from the
A-4-4
<PAGE>
Trust all (but not fewer than all) remaining Mortgage Loans and other
property then constituting the Trust Estate, and thereby effect early
retirement of the Class A-4 Certificates, on any Remittance Date when the
aggregate outstanding Loan Balances of the Mortgage Loans in the Trust Estate
is 10% or less of the sum of the original aggregate Loan Balance of the
Mortgage Loans in the Trust Estate as of the Cut-Off Date and (ii) under
certain circumstances relating to the qualification of the Lower-Tier REMIC
or Upper-Tier REMIC as a REMIC under the Code, the Mortgage Loans may be
sold, thereby affecting the early retirement of the Class A-4 Certificates.
The Trustee shall give written notice of termination of the Pooling and
Servicing Agreement to each Holder in the manner set forth therein.
The Majority Holders, upon compliance with the requirements set forth in
the Pooling and Servicing Agreement, have the right, with the consent of the
Certificate Insurer, to exercise any trust or power set forth in the Pooling and
Servicing Agreement with respect to the Certificates or the Trust Estate.
As provided in the Pooling and Servicing Agreement and subject to certain
limitations therein set forth and referred to on the face hereof, the transfer
of this Certificate is registrable in the Register upon surrender of this
Certificate for registration of transfer at the office designated as the
location of the Register, and thereupon one or more new Certificates of like
Class, tenor and a like Percentage Interest will be issued to the designated
transferee or transferees.
The Trustee is required to furnish certain information on each Payment Date
to the Holder of this Certificate, as more fully described in the Pooling and
Servicing Agreement.
The Class A-4 Certificates are issuable only as registered Certificates in
denominations of $1,000 original principal amount and integral multiples of
$1,000. As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, Class A-4 Certificates are exchangeable
for new Class A-4 Certificates of authorized denominations evidencing the same
aggregate principal amount.
The Trustee and any agent of the Trustee may treat the Person in whose name
this Certificate is registered as the holder hereof for all purposes, and
neither the Trustee or any such agent shall be affected by notice to the
contrary.
A-4-5
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed on behalf of the Trust.
EQUIVANTAGE HOME EQUITY
LOAN TRUST 1997-2
By: NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as
Trustee
By:
--------------------------------------
Name:
Title:
Trustee Authentication
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:
---------------------------------
Name:
Title:
Dated: June 27, 1997
A-4-6
<PAGE>
EXHIBIT A-5
FORM OF
EQUIVANTAGE HOME EQUITY LOAN TRUST 1997-2
HOME EQUITY LOAN ASSET-BACKED CERTIFICATE
CLASS A-5 ADJUSTABLE RATE CERTIFICATES
(Adjustable Rate Class A-5 Certificate)
Representing Certain Interests Relating to a Pool of
Mortgage Loans in the EquiVantage Home Equity Loan Trust 1997-2
formed by EquiVantage Acceptance Corp., as Sponsor, and Serviced by EquiVantage
Inc.
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to Issuer or its agent
for registration of transfer, exchange, or payment, and any certificate issued
is registered in the name of Cede & Co. or in such other name as is requested by
an authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered holder hereof, Cede & Co., has an
interest herein.
(This certificate does not represent an interest in, or an obligation of,
nor are the underlying Mortgage Loans insured or guaranteed by, EquiVantage
Acceptance Corp., EquiVantage Inc., any Originator or any of their subsidiaries
and affiliates. This certificate represents a fractional ownership interest in
the Class A-5 Certificates described herein, moneys in certain Accounts created
pursuant to the Pooling and Servicing Agreement and certain other rights
relating thereto and is payable only from amounts received by the Trustee
(i) relating to the Mortgage Loans held by the Trust, (ii) moneys held in such
Accounts and (iii) pursuant to the Certificate Insurance Policy.)
No.: A-5-1 June 27, 1997 29476Y AZ 2
------------- ------------
Date CUSIP
$43,242,000 January 25, 2027
- ------------------------- -----------------------
Original Principal Amount Final Scheduled Payment
Date
CEDE & CO.
------------------
Registered Holder
A-5-1
<PAGE>
The registered Holder named above is the registered Holder of a fractional
interest in (i) a pool of fixed rate and adjustable rate, closed-end mortgage
loans (the "Mortgage Loans") that will be formed by EquiVantage Acceptance Corp.
("EquiVantage" or the "Sponsor"), a Delaware corporation, and sold by the
Sponsor to Norwest Bank Minnesota, National Association, a national banking
association, as trustee (the "Trustee") on behalf of EquiVantage Home Equity
Loan Trust 1997-2 (the "Trust") pursuant to that certain Pooling and Servicing
Agreement dated as of June 1, 1997 (the "Pooling and Servicing Agreement") by
and among the Sponsor, the Trustee and EquiVantage Inc., as Servicer (the
"Servicer"), (ii) such amounts, including Eligible Investments and the proceeds
of payments under the Certificate Insurance Policy, as from time to time may be
held in the related Accounts (except as otherwise provided in the Pooling and
Servicing Agreement), each created pursuant to the Pooling and Servicing
Agreement, (iii) any Property, the ownership of which has been effected in the
name of the Servicer 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 Estate, (iv) any Insurance Policies and any rights
of the Sponsor in any Insurance Policies and (v) Net Liquidation Proceeds.
The Original Principal Amount set forth above is equal to the product of
(i) the Percentage Interest represented by this Certificate and (ii) the
aggregate original principal amount of the Class A-5 Certificates on June 27,
1997 (the "Startup Date"), which aggregate amount as of June 27, 1997 was
$43,242,000 (the "Original Principal Amount"). The Holder hereof is entitled to
principal payments on each Payment Date, as hereinafter described, which will
fully amortize such Original Principal Amount over the period from the date of
initial delivery hereof to the final Payment Date of the Class A-5 Certificates.
Therefore, the actual outstanding principal amount of this Certificate, on any
date subsequent to July 25, 1997 (the first Payment Date) will be less than the
Original Principal Amount set forth above.
Upon receiving the final distribution hereon, the Holder hereof is required
to send this Certificate to the Trustee. The Pooling and Servicing Agreement
provides that, in any event, upon the making of the final distribution due on
this Certificate, this Certificate shall be deemed canceled for all purposes
under the Pooling and Servicing Agreement.
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS A
BENEFICIAL INTEREST IN A CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE
INVESTMENT CONDUIT" ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN
SECTION 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE"), ASSUMING COMPLIANCE WITH THE REMIC PROVISIONS OF THE CODE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING
REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS
REPRESENTED HEREBY.
A-5-2
<PAGE>
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
This Certificate is one of a Class of duly-authorized Certificates
designated as EquiVantage Home Equity Loan Trust 1997-2, Home Equity Loan
Asset-Backed Certificates, Class A-5 Adjustable Rate Certificates (the "Class
A-5 Certificates") and issued under and subject to the terms, provisions and
conditions of the Pooling and Servicing Agreement, to which Pooling and
Servicing Agreement the Holder of this Certificate by virtue of acceptance
hereof assents and by which such Holder is bound. Also issued under the Pooling
and Servicing Agreement are the Class A-1 Certificates, Class A-2 Certificates,
Class A-3 Certificates, Class A-4 Certificates, Class B Certificates and the
Residual Certificates; all such Certificates are collectively referred to herein
as the "Certificates."
Terms capitalized herein and not otherwise defined herein shall have the
respective meanings set forth in the Pooling and Servicing Agreement.
On the 25th day of each month or, if such day is not a Business Day, then
the next succeeding Business Day (each such day being a "Payment Date")
commencing July 25, 1997, the Holders of the Class A-5 Certificates as of the
close of business on the last business day of the calendar month immediately
preceding the calendar month in which such Payment Date occurs (the "Record
Date") will be entitled to receive the Class A Distribution Amount with respect
to the Class A-5 Certificate relating to such Payment Date. Distributions will
be made in immediately available funds to such Holders, by wire transfer or
otherwise, to the account of an Holder at a domestic bank or other entity having
appropriate facilities therefor, if such Holder has so notified the Trustee at
least five business days prior to the related record date, or by check mailed to
the address of the person entitled thereto as it appears on the Register.
Each Holder of Record of a Class A-5 Certificate will be entitled to
receive such Holder's Percentage Interest in the amounts distributed on such
Payment Date to the Holders of the Class A-5 Certificates. The Percentage
Interest of each Class A-5 Certificate as of any date of determination will be
equal to the percentage obtained by dividing the Original Principal Amount set
forth on such Class A-5 Certificate by $43,242,000.
Pursuant to the Certificate Insurance Policy, the Certificate Insurer is
required, to the extent of any insufficiency in Available Funds, to make Insured
Payments available to the Trustee necessary to distribute the amount of the
Insured Distribution Amount payable with respect to the Class A-5 Certificates
on each Payment Date.
Upon receipt of amounts under the Certificate Insurance Policy on behalf of
the Holders of the Class A-5 Certificates, the Trustee shall distribute in
accordance with the
A-5-3
<PAGE>
Pooling and Servicing Agreement to the Holders of the Class A-5 Certificates
any portion thereof to which such Holders may be entitled.
The Trustee is required to duly and punctually pay distributions with
respect to this Certificate in accordance with the terms hereof and the Pooling
and Servicing Agreement. Amounts properly withheld under the Code or applicable
to any Holder shall be considered as having been paid by the Trustee to such
Holder for all purposes of the Pooling and Servicing Agreement.
The Mortgage Loans will be serviced by the Servicer pursuant to the Pooling
and Servicing Agreement. The Pooling and Servicing Agreement permits the
Servicer to enter into Sub-Servicing Agreements with certain institutions
eligible for appointment as Sub-Servicers for the servicing and administration
of certain Mortgage Loans. No appointment of any Sub-Servicer shall release the
Servicer from any of its obligations under the Pooling and Servicing Agreement.
This Certificate does not represent a deposit or other obligation of, or an
interest in, nor are the underlying Mortgage Loans insured or guaranteed by,
EquiVantage Acceptance Corp., EquiVantage Inc., any Originator or any of their
subsidiaries and affiliates. Neither this Certificate nor the underlying
Mortgage Loans are insured or guaranteed by the Federal Deposit Insurance
Corporation, the Government National Mortgage Association or any other
governmental agency. This Certificate is limited in right of payment to certain
collections and recoveries and amounts on deposit in the Accounts (except as
otherwise provided in the Pooling and Servicing Agreement) and payments received
by the Trustee pursuant to the Certificate Insurance Policy, all as more
specifically set forth hereinabove and in the Pooling and Servicing Agreement.
No Holder shall have any right to institute any proceeding, judicial or
otherwise, with respect to the Pooling and Servicing Agreement, or for the
appointment of a receiver or trustee, or for any other remedy under the Pooling
and Servicing Agreement except in compliance with the terms hereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Holder of any Certificate shall have the right, which is absolute
and unconditional, to receive distributions to the extent provided in the
Pooling and Servicing Agreement with respect to such Certificate or to institute
suit for the enforcement of any such distribution, and such right shall not be
impaired without the consent of such Holder.
The Pooling and Servicing Agreement additionally provides that (i) the
Holders of the Class RL Certificates or, if such Holders decline to exercise,
the Servicer or, if the Servicer declines to exercise, the Certificate Insurer,
may, at their respective options, purchase from the Trust all (but not fewer
than all) remaining Mortgage Loans and other property then constituting the
Trust Estate, and thereby effect early retirement of the Class A-5 Certificates,
A-5-4
<PAGE>
on any Remittance Date when the aggregate outstanding Loan Balances of the
Mortgage Loans in the Trust Estate is 10% or less of the sum of the original
aggregate Loan Balance of the Mortgage Loans in the Trust Estate as of the
Cut-Off Date and (ii) under certain circumstances relating to the qualification
of the Lower-Tier REMIC or Upper-Tier REMIC as a REMIC under the Code, the
Mortgage Loans may be sold, thereby affecting the early retirement of the Class
A-5 Certificates.
The Trustee shall give written notice of termination of the Pooling and
Servicing Agreement to each Holder in the manner set forth therein.
The Majority Holders, upon compliance with the requirements set forth in
the Pooling and Servicing Agreement, have the right, with the consent of the
Certificate Insurer, to exercise any trust or power set forth in the Pooling and
Servicing Agreement with respect to the Certificates or the Trust Estate.
As provided in the Pooling and Servicing Agreement and subject to certain
limitations therein set forth and referred to on the face hereof, the transfer
of this Certificate is registrable in the Register upon surrender of this
Certificate for registration of transfer at the office designated as the
location of the Register, and thereupon one or more new Certificates of like
Class, tenor and a like Percentage Interest will be issued to the designated
transferee or transferees.
The Trustee is required to furnish certain information on each Payment Date
to the Holder of this Certificate, as more fully described in the Pooling and
Servicing Agreement.
The Class A-5 Certificates are issuable only as registered Certificates in
denominations of $1,000 original principal amount and integral multiples of
$1,000. As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, Class A-5 Certificates are exchangeable
for new Class A-5 Certificates of authorized denominations evidencing the same
aggregate principal amount.
The Trustee and any agent of the Trustee may treat the Person in whose name
this Certificate is registered as the holder hereof for all purposes, and
neither the Trustee or any such agent shall be affected by notice to the
contrary.
A-5-5
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed on behalf of the Trust.
EQUIVANTAGE HOME EQUITY
LOAN TRUST 1997-2
By: NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as
Trustee
By:
--------------------------------------
Name:
Title:
Trustee Authentication
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:
-----------------------------------
Name:
Title:
Dated: June 27, 1997
A-5-6
<PAGE>
EXHIBIT B
FORM OF
EQUIVANTAGE HOME EQUITY LOAN TRUST 1997-2
HOME EQUITY LOAN ASSET-BACKED CERTIFICATE
CLASS B
Representing Certain Interests Relating to a Pool
of Mortgage Loans in the EquiVantage Home Equity Loan Trust 1997-2
Formed by EquiVantage
Acceptance Corp. and Serviced by EquiVantage Inc.
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF CERTAIN PAYMENTS TO THE
CLASS A CERTIFICATES AS DESCRIBED IN THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN. DISTRIBUTIONS HEREON ARE SUBJECT TO THE PRIOR RIGHT OF
THE CLASS A CERTIFICATE HOLDERS.
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE
IN RELIANCE UPON EXEMPTIONS PROVIDED BY THE SECURITIES ACT AND SUCH STATE
SECURITIES LAWS. NO RESALE OR OTHER TRANSFER OF THIS CERTIFICATE MAY BE MADE
UNLESS SUCH RESALE OR TRANSFER (A) IS MADE IN ACCORDANCE WITH SECTION 5.8 OF
THE POOLING AND SERVICING AGREEMENT, (B) IS MADE (i) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (ii) IN A TRANSACTION EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS, (iii) TO THE SELLER OR (iv) TO A PERSON WHO THE TRANSFEROR
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE SECURITIES ACT THAT IS AWARE THAT THE RESALE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A AND (C) UPON THE SATISFACTION
OF CERTAIN OTHER REQUIREMENTS SPECIFIED IN THE POOLING AND SERVICING
AGREEMENT. NONE OF THE SELLER, THE SERVICER, THE TRUST OR THE TRUSTEE IS
OBLIGATED TO REGISTER THE CERTIFICATES UNDER THE SECURITIES ACT OR ANY
APPLICABLE STATE SECURITIES LAWS.
This Certificate does not represent an interest in, or an obligation of,
nor are the underlying Mortgage Loans insured or guaranteed by, EquiVantage
Acceptance Corp., EquiVantage Inc., any Originator or any of their
subsidiaries and affiliates. This Certificate represents a fractional
ownership interest in the assets of the Trust described herein, moneys in
certain Accounts created pursuant to the Pooling and Servicing Agreement and
certain
B-1
<PAGE>
other rights relating thereto and is payable only from amounts received by
the Trustee relating to the Trust Estate.
No: B-1 Date: June 27, 1997
Percentage Interest: 100% July 25, 2028
Final Scheduled Payment Date
EQUIVANTAGE ACCEPTANCE CORP.
-------------------------------------
Registered Holder
The registered Holder named above is the registered Holder of a
fractional interest in (i) a pool of fixed rate and adjustable rate,
closed-end mortgage loans (the "Mortgage Loans") which will be formed by
EquiVantage Acceptance Corp. (the "Sponsor"), a Delaware corporation, and
sold by the Sponsor to Norwest Bank Minnesota, National Association, a
national banking association, as trustee (the "Trustee") on behalf of
EquiVantage Home Equity Loan Trust 1997-2 (the "Trust") pursuant to that
certain Pooling and Servicing Agreement dated as of June 1, 1997 (the
"Pooling and Servicing Agreement") by and among the Sponsor, the Trustee and
EquiVantage Inc., as Servicer (the "Servicer"), (ii) such amount, including
Eligible Investments, as from time to time may be held in the Accounts
created pursuant to the Pooling and Servicing Agreement, (iii) any Property
relating to the Mortgage Loans, the ownership of which has been effected in
the name of the Servicer 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) Net Liquidation Proceeds relating to the
Mortgage Loans and (v) any Insurance Policies relating to the Mortgage Loans
and any rights of the Sponsor in any Insurance Policies relating to such
Mortgage Loans. Such Mortgage Loans and other amounts and property
enumerated above are hereinafter referred to as the "Trust Estate".
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN
INTEREST IN A CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE
INVESTMENT CONDUIT" ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN
SECTION 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE"), ASSUMING COMPLIANCE WITH THE REMIC PROVISIONS OF THE CODE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING
REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS
REPRESENTED HEREBY.
B-2
<PAGE>
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT
NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
This Certificate is one of a Class of duly authorized Certificates
designated as EquiVantage Home Equity Loan Trust 1997-2, Home Equity Loan
Asset-Backed Certificates, Class B Certificates (the "Class B Certificates")
and issued under and subject to the terms, provisions and conditions of the
Pooling and Servicing Agreement, to which Pooling and Servicing Agreement the
Holder of this Certificate by virtue of acceptance hereof assents and by
which such Holder is bound. Also issued under the Pooling and Servicing
Agreement are the Class A Certificates, Class RL Certificates and Class RU
Certificates (together with the Class B Certificates, the "Certificates").
Terms capitalized herein and not otherwise defined herein shall have the
respective meanings set forth in the Pooling and Servicing Agreement.
On the 25th day of each month or, if such day is not a Business Day, then
the next succeeding Business Day (each such day being a "Payment Date"),
commencing July 25, 1997, to the persons in whose names the Class B
Certificates are registered at the close of business on the last business day
of the calendar month immediately preceding the calendar month in which such
Payment Date occurs (the "Record Date"), the Trustee will distribute to each
Holder of the Class B Certificates such Holder's Percentage Interest in the
Class B Distribution Amount due on such Payment Date. The Class B
Distribution Amount as of any date of determination will be determined as set
forth in the Pooling and Servicing Agreement. Distributions will be made in
immediately available funds, by wire transfer or otherwise, to the account of
such Holder at a domestic bank or other entity having appropriate facilities
therefor, if such Holder has so notified the Trustee at least five business
days prior to the related record date, or by check mailed to the address of
the person entitled thereto as it appears on the Register.
Upon receiving the final distribution hereon, the Holder hereof is required
to send this Certificate to the Trustee. The Pooling and Servicing Agreement
provides that, in any event, upon the making of the final distribution due on
this Certificate, this Certificate shall be deemed canceled for all purposes
under the Pooling and Servicing Agreement.
The Trustee is required to duly and punctually pay distributions with
respect to this Certificate in accordance with the terms hereof and the Pooling
and Servicing Agreement. Amounts properly withheld under the Code or applicable
state or local law by any Person from a distribution to any Holder shall be
considered as having been paid by the Trustee to such Holder for all purposes of
the Pooling and Servicing Agreement.
B-3
<PAGE>
The Mortgage Loans will be serviced by the Servicer pursuant to the Pooling
and Servicing Agreement. The Pooling and Servicing Agreement permits the
Servicer to enter into Sub-Servicing Agreements with certain institutions
eligible for appointment as Sub-Servicers for the servicing and administration
of certain Mortgage Loans. No appointment of any Sub-Servicer shall release the
Servicer from any of its obligations under the Pooling and Servicing Agreement.
This Certificate does not represent a deposit or other obligation of, or an
interest in, nor are the underlying Mortgage Loans insured or guaranteed by, the
Sponsor, EquiVantage Inc. or any of their subsidiaries and affiliates. Neither
this Certificate nor the underlying Mortgage Loans are insured or guaranteed by
the Federal Deposit Insurance Corporation, the Government National Mortgage
Association or any other governmental agency. This Certificate is limited in
right of payment to certain collections and recoveries relating to the Mortgage
Loans, all as more specifically set forth hereinabove and in the Pooling and
Servicing Agreement.
No Holder shall have the right to institute any proceeding, judicial or
otherwise, with respect to the Pooling and Servicing Agreement, or for the
appointment of a receiver or trustee, or for any other remedy under the Pooling
and Servicing Agreement except in compliance with the terms thereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Holder of any Certificate shall have the right which is absolute
and unconditional to receive distributions to the extent provided in the Pooling
and Servicing Agreement with respect to such Certificate or to institute suit
for the enforcement of any such distribution, and such right shall not be
impaired without the consent of such Holder.
The Pooling and Servicing Agreement provides that the obligations created
thereby will terminate upon the earlier of (i) the payment to the Holders of all
Certificates from amounts other than those available under the Certificate
Insurance Policies of all amounts held by the Trustee and required to be paid to
such Holders pursuant to the Pooling and Servicing Agreement upon the later to
occur of (a) the final payment or other liquidation (or any advance made with
respect thereto) of the last 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 or (ii) at any time when a Qualified Liquidation of the
Upper-Tier REMIC and the Lower-Tier REMIC is effected as described in the
Pooling and Servicing Agreement.
The Pooling and Servicing Agreement additionally provides that (i) the
Holders of the Class RL Certificates or, if such Holders decline to exercise,
the Servicer or, if the Servicer declines to exercise, the Certificate Insurer,
may, at their respective options, purchase from the Trust all (but not fewer
than all) Mortgage Loans and other property then constituting the Trust Estate,
and thereby effect early retirement of the Certificates, on any Remittance Date
when the aggregate outstanding Loan Balances of the Mortgage Loans in the Trust
Estate is
B-4
<PAGE>
10% or less of the original aggregate Loan Balance of the Mortgage Loans as
of the Cut-Off Date and (ii) under certain circumstances relating to the
qualification of the Lower-Tier REMIC or Upper-Tier REMIC as a REMIC under
the Code, the Mortgage Loans may be sold, thereby affecting the early
retirement of the Certificates.
The Trustee shall give written notice of termination of the Pooling and
Servicing Agreement to each Holder in the manner set forth therein.
As provided in the Pooling and Servicing Agreement and subject to certain
limitations therein set forth and referred to on the face hereof, the transfer
of this Certificate is registrable in the Register upon surrender of this
Certificate for registration of transfer at the office designated as the
location of the Register duly endorsed by, or accompanied by a written
instrument of transfer in the form required by the Pooling and Servicing
Agreement duly executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Certificates of like Class, tenor and a
like aggregate fractional undivided interest in the Trust Estate will be issued
to the designated transferee or transferees.
Notwithstanding the foregoing, no sale or other transfer of record or
beneficial ownership of a Class B Certificate shall be made unless the Trustee
shall have received a representation letter from the transferee of such Class B
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.
The Trustee is required to furnish certain information on each Payment Date
to the Holder of this Certificate, as more fully described in the Pooling and
Servicing Agreement.
The Class B Certificates are issuable only as registered Certificates in
minimum denominations of 10% Percentage Interest. As provided in the Pooling
and Servicing Agreement and subject to certain limitations therein set forth,
Class B Certificates are exchangeable for new Class B Certificates evidencing
the same Percentage Interest as the Class B Certificates exchanged.
No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Trustee and any agent of the Trustee may treat the Person in whose name
this Certificate is registered as the Holder hereof for all purposes, and
neither the Trustee nor any such agent shall be affected by notice to the
contrary.
B-5
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed on behalf of the Trust.
EQUIVANTAGE HOME EQUITY
LOAN TRUST 1997-2
By: NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:
----------------------------------
Name:
Title:
Trustee's Authentication
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
as Trustee
By:
- --------------------------------
Name:
Title:
Dated: June 27, 1997
B-6
<PAGE>
EXHIBIT C-1
FORM OF CLASS RL CERTIFICATE
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"). ANY RESALE OR TRANSFER OF THIS CERTIFICATE WITHOUT
REGISTRATION THEREOF UNDER THE ACT MAY BE MADE ONLY IN A TRANSACTION EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE ACT AND IN ACCORDANCE WITH THE PROVISIONS
OF SECTION 5.8 OF THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN
INTEREST IN THE ONLY "RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT
CONDUIT" ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTION 860G and
860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING
COMPLIANCE WITH THE REMIC PROVISIONS OF THE CODE.
TRANSFER OF THIS CLASS RL CERTIFICATE IS RESTRICTED AS SET FORTH IN THE
POOLING AND SERVICING AGREEMENT. NO TRANSFER OF THIS CLASS RL CERTIFICATE MAY
BE MADE TO A "DISQUALIFIED ORGANIZATION" AS DEFINED IN SECTION 860E(e)(5) OF
THE CODE. SUCH TERM INCLUDES THE UNITED STATES, ANY STATE OR POLITICAL
SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, ANY
AGENCY OR INSTRUMENTALITY OF ANY OF THE FOREGOING (OTHER THAN CERTAIN TAXABLE
INSTRUMENTALITIES), ANY COOPERATIVE ORGANIZATION FURNISHING ELECTRIC ENERGY OR
PROVIDING TELEPHONE SERVICE TO PERSONS IN RURAL AREAS, OR ANY ORGANIZATION
(OTHER THAN A FARMERS' COOPERATIVE) THAT IS EXEMPT FROM FEDERAL INCOME TAX
UNLESS SUCH ORGANIZATION IS SUBJECT TO THE TAX ON UNRELATED BUSINESS INCOME. NO
TRANSFER OF THIS CLASS RL CERTIFICATE WILL BE REGISTERED BY THE TRUSTEE UNLESS
THE PROPOSED TRANSFEREE HAS DELIVERED AN AFFIDAVIT AFFIRMING, AMONG OTHER
THINGS, THAT THE PROPOSED TRANSFEREE IS NOT A DISQUALIFIED ORGANIZATION AND IS
NOT ACQUIRING THE CLASS RL CERTIFICATE FOR THE ACCOUNT OF A DISQUALIFIED
ORGANIZATION. A COPY OF THE FORM OF AFFIDAVIT
C-1-1
<PAGE>
REQUIRED OF EACH PROPOSED TRANSFEREE IS ON FILE AND AVAILABLE FROM THE
TRUSTEE.
A TRANSFER IN VIOLATION OF THE APPLICABLE RESTRICTIONS MAY GIVE RISE TO A
SUBSTANTIAL TAX UPON THE TRANSFEROR OR, IN CERTAIN CASES, UPON AN AGENT ACTING
FOR THE TRANSFEREE. A PASS-THRU ENTITY THAT HOLDS THIS CLASS RL CERTIFICATE AND
THAT HAS A DISQUALIFIED ORGANIZATION AS A RECORD HOLDER IN ANY TAXABLE YEAR
GENERALLY WILL BE SUBJECT TO A TAX FOR EACH SUCH YEAR EQUAL TO THE PRODUCT OF
(A) THE AMOUNT OF EXCESS INCLUSIONS WITH RESPECT TO THE PORTION OF THIS
CERTIFICATE OWNED THROUGH SUCH PASS-THRU ENTITY BY SUCH DISQUALIFIED
ORGANIZATION, AND (B) THE HIGHEST MARGINAL FEDERAL TAX RATE ON CORPORATIONS.
FOR PURPOSES OF THE PRECEDING SENTENCE, THE TERM "PASS-THRU" ENTITY INCLUDES
REGULATED INVESTMENT COMPANIES, REAL ESTATE INVESTMENT TRUSTS, COMMON TRUST
FUNDS, PARTNERSHIPS, TRUSTS, ESTATES, COOPERATIVES TO WHICH PART I OF SUBCHAPTER
I OF THE CODE APPLIES AND, EXCEPT AS PROVIDED IN REGULATIONS, NOMINEES.
EQUIVANTAGE HOME EQUITY LOAN TRUST 1997-2
HOME EQUITY LOAN ASSET-BACKED CERTIFICATE
CLASS RL
Representing Certain Interests Relating to a Pool of Mortgage Loans Formed by
EquiVantage Acceptance Corp. and Serviced by EquiVantage Inc.
(This Certificate does not represent an interest in, or an obligation of,
nor are the underlying Mortgage Loans insured or guaranteed by, EquiVantage
Acceptance Corp., EquiVantage Inc., any Originator or any of their subsidiaries
and affiliates. This Certificate represents a fractional residual ownership
interest in the Lower-Tier REMIC described in the Pooling and Servicing
Agreement.)
No: RL-1 Date: June 27, 1997
Percentage Interest: 100% July 25, 2028
-------------------------
Final Scheduled Payment Date
EQUIVANTAGE ACCEPTANCE CORP.
------------------------------------
Registered Holder
C-1-2
<PAGE>
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING
REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS
REPRESENTED HEREBY.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
This Certificate is one of a Class of duly-authorized Certificates
designated as EquiVantage Home Equity Loan Trust 1997-2, Home Equity Loan
Asset-Backed Certificates, Class RL (the "Class RL Certificates") and issued
under and subject to the terms, provisions and conditions of the Pooling and
Servicing Agreement, to which Pooling and Servicing Agreement the Holder of this
Certificate by virtue of acceptance hereof assents and by which such Holder is
bound. Also issued under the Pooling and Servicing Agreement are Certificates
designated as the Class A Certificates, Class B Certificates, and Class RU
Certificates (together with the Class RL Certificates, the "Certificates.")
Terms capitalized herein and not otherwise defined herein shall have the
respective meanings set forth in the Pooling and Servicing Agreement.
On the 25th day of each month, or, if such day is not a Business Day, then
the next succeeding Business Day (each such day being a "Payment Date"),
commencing July 25, 1997, to the Holders of the Class RL Certificates as of the
close of business on the first Business Day of the calendar month in which such
Payment Date occurs (the "Record Date"), the Trustee will distribute to each
Holder of the Class RL Certificates such Holder's Percentage Interest multiplied
by the amounts then available to be distributed to the Holders of the Class RL
Certificates. No significant distributions are anticipated to be made.
Upon receiving the final distribution hereon, the Holder hereof is required
to send this Certificate to the Trustee. The Pooling and Servicing Agreement
provides that, in any event, upon the making of the final distribution due on
this Certificate, this Certificate shall be deemed canceled for all purposes
under the Pooling and Servicing Agreement.
The Trustee is required to duly and punctually pay distributions with
respect to this Certificate in accordance with the terms hereof and the Pooling
and Servicing Agreement. Amounts properly withheld under the Code or applicable
state or local law by any Person from a distribution to any Holder shall be
considered as having been paid by the Trustee to such Holder for all purposes of
the Pooling and Servicing Agreement.
EquiVantage Inc., as Servicer, pursuant to the related Servicing Agreement
will service the Mortgage Loans. The Pooling and Servicing Agreement permits
the Servicer to enter into Sub-Servicing Agreements with certain institutions
eligible for appointment as Sub-Servicers for
C-1-3
<PAGE>
the servicing and administration of the Mortgage Loans. No appointment of
any Sub-Servicer shall release the Servicer from any of its obligations under
either Servicing Agreement.
No Holder shall have any right to institute any proceeding, judicial or
otherwise, with respect to the Pooling and Servicing Agreement, or for the
appointment of a receiver or trustee, or for any other remedy under the Pooling
and Servicing Agreement except in compliance with the terms thereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Holder of any Certificate shall have the right which is absolute
and unconditional to receive distributions to the extent provided in the Pooling
and Servicing Agreement with respect to such Certificate or to institute suit
for the enforcement of any such distribution, and such right shall not be
impaired without the consent of such Holder.
The Pooling and Servicing Agreement provides that the obligations created
thereby will terminate upon the earlier of (i) the payment to the Holders of all
Certificates of all amounts held by the Trustee and required to be paid to such
Holders pursuant to the Pooling and Servicing Agreement upon the later to occur
of (a) the final payment or other liquidation (or any advance made with respect
thereto) of the last 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 or (ii) at any time when a Qualified Liquidation of the Upper-Tier REMIC
and the Lower-Tier REMIC is effected as described in the Pooling and Servicing
Agreement.
The Pooling and Servicing Agreement provides that (i) the Holders of the
Class RL Certificates or, if such Holders decline to exercise, the Servicer or,
if the Servicer declines to exercise, the Certificate Insurer, may, at their
respective options, purchase from the Trust all (but not fewer than all)
remaining Mortgage Loans and other property then constituting the Trust Estate,
and thereby effect early retirement of the Certificates, on any Remittance Date
when the aggregate outstanding Loan Balances of the Mortgage Loans in the Trust
Estate is 10% or less of the original aggregate Loan Balance of the Mortgage
Loans as of the Cut-Off Date and (ii) under certain circumstances relating to
the qualification of the Lower-Tier REMIC or Upper-Tier REMIC as a REMIC under
the Code, the Mortgage Loans may be sold, thereby affecting the early retirement
of the Certificates.
The Trustee shall give written notice of termination of the Pooling and
Servicing Agreement to each Holder in the manner set forth therein.
As provided in the Pooling and Servicing Agreement and subject to certain
limitations therein set forth and referred to on the face hereof, the transfer
of this Certificate is registrable in the Register upon surrender of this
Certificate for registration of transfer at the office designated as the
location of the Register duly endorsed by, or accompanied by a written
instrument of transfer in the form set forth in the Pooling and Servicing
Agreement duly executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new
C-1-4
<PAGE>
Certificates of like Class, tenor and a like Percentage Interest will be
issued to the designated transferee or transferees.
Notwithstanding the foregoing, no sale or other transfer of record or
beneficial ownership of a Class RL Certificate shall be made unless the Trustee
shall have received a representation letter from the transferee of such Class RL
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.
The Trustee is required to furnish certain information on each Payment Date
to the Holder of this Certificate, as more fully described in the Pooling and
Servicing Agreement.
The Class RL Certificates are issuable only as registered Certificates. As
provided in the Pooling and Servicing Agreement and subject to certain
limitations therein set forth, Class RL Certificates are exchangeable for new
Class RL Certificates evidencing the same Percentage Interest as the Class RL
Certificates exchanged.
No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Trustee and any agent of the Trustee may treat the Person in whose name
this Certificate is registered as the holder hereof for all purposes, and
neither the Trustee or any such agent shall be affected by notice to the
contrary.
C-1-5
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed on behalf of the Trust.
EQUIVANTAGE HOME EQUITY
LOAN TRUST 1997-2
By: NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:
-------------------------------
Name:
Title:
Trustee Authentication
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:
--------------------------------
Name:
Title:
Dated: June 27, 1997
C-1-6
<PAGE>
EXHIBIT C-2
FORM OF CLASS RU CERTIFICATE
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"). ANY RESALE OR TRANSFER OF THIS CERTIFICATE WITHOUT
REGISTRATION THEREOF UNDER THE ACT MAY BE MADE ONLY IN A TRANSACTION EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE ACT AND IN ACCORDANCE WITH THE PROVISIONS
OF SECTION 5.8 OF THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN
INTEREST IN THE ONLY "RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT
CONDUIT" ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTION 860G and
860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING
COMPLIANCE WITH THE REMIC PROVISIONS OF THE CODE.
TRANSFER OF THIS CLASS RU CERTIFICATE IS RESTRICTED AS SET FORTH IN THE
POOLING AND SERVICING AGREEMENT. NO TRANSFER OF THIS CLASS RU CERTIFICATE MAY
BE MADE TO A "DISQUALIFIED ORGANIZATION" AS DEFINED IN SECTION 860E(e)(5) OF
THE CODE. SUCH TERM INCLUDES THE UNITED STATES, ANY STATE OR POLITICAL
SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, ANY
AGENCY OR INSTRUMENTALITY OF ANY OF THE FOREGOING (OTHER THAN CERTAIN TAXABLE
INSTRUMENTALITIES), ANY COOPERATIVE ORGANIZATION FURNISHING ELECTRIC ENERGY OR
PROVIDING TELEPHONE SERVICE TO PERSONS IN RURAL AREAS, OR ANY ORGANIZATION
(OTHER THAN A FARMERS' COOPERATIVE) THAT IS EXEMPT FROM FEDERAL INCOME TAX
UNLESS SUCH ORGANIZATION IS SUBJECT TO THE TAX ON UNRELATED BUSINESS INCOME. NO
TRANSFER OF THIS CLASS RU CERTIFICATE WILL BE REGISTERED BY THE TRUSTEE UNLESS
THE PROPOSED TRANSFEREE HAS DELIVERED AN AFFIDAVIT AFFIRMING, AMONG OTHER
THINGS, THAT THE PROPOSED TRANSFEREE IS NOT A DISQUALIFIED ORGANIZATION AND IS
NOT ACQUIRING THE CLASS RU CERTIFICATE FOR THE ACCOUNT OF A DISQUALIFIED
ORGANIZATION. A COPY OF THE FORM OF AFFIDAVIT REQUIRED OF EACH PROPOSED
TRANSFEREE IS ON FILE AND AVAILABLE FROM THE TRUSTEE.
C-2-1
<PAGE>
A TRANSFER IN VIOLATION OF THE APPLICABLE RESTRICTIONS MAY GIVE RISE TO A
SUBSTANTIAL TAX UPON THE TRANSFEROR OR, IN CERTAIN CASES, UPON AN AGENT ACTING
FOR THE TRANSFEREE. A PASS-THRU ENTITY THAT HOLDS THIS CLASS RU CERTIFICATE AND
THAT HAS A DISQUALIFIED ORGANIZATION AS A RECORD HOLDER IN ANY TAXABLE YEAR
GENERALLY WILL BE SUBJECT TO A TAX FOR EACH SUCH YEAR EQUAL TO THE PRODUCT OF
(A) THE AMOUNT OF EXCESS INCLUSIONS WITH RESPECT TO THE PORTION OF THIS
CERTIFICATE OWNED THROUGH SUCH PASS-THRU ENTITY BY SUCH DISQUALIFIED
ORGANIZATION, AND (B) THE HIGHEST MARGINAL FEDERAL TAX RATE ON CORPORATIONS.
FOR PURPOSES OF THE PRECEDING SENTENCE, THE TERM "PASS-THRU" ENTITY INCLUDES
REGULATED INVESTMENT COMPANIES, REAL ESTATE INVESTMENT TRUSTS, COMMON TRUST
FUNDS, PARTNERSHIPS, TRUSTS, ESTATES, COOPERATIVES TO WHICH PART I OF SUBCHAPTER
I OF THE CODE APPLIES AND, EXCEPT AS PROVIDED IN REGULATIONS, NOMINEES.
EQUIVANTAGE HOME EQUITY LOAN TRUST 1997-2
HOME EQUITY LOAN ASSET-BACKED CERTIFICATE
CLASS RU
Representing Certain Interests Relating to a Pool of Mortgage Loans Formed by
EquiVantage Acceptance Corp. and Serviced by EquiVantage Inc.
(This Certificate does not represent an interest in, or an obligation of,
nor are the underlying Mortgage Loans insured or guaranteed by EquiVantage
Acceptance Corp., EquiVantage Inc., any Originator or any of their subsidiaries
and affiliates. This Certificate represents a fractional residual ownership
interest in the Upper-Tier REMIC described in the Pooling and Servicing
Agreement.)
No: RU-1 Date: June 27, 1997
Percentage Interest: 100% July 25, 2028
----------------------------
Final Scheduled Payment Date
EQUIVANTAGE ACCEPTANCE CORP.
-----------------------------------
Registered Holder
C-2-2
<PAGE>
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING
REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS
REPRESENTED HEREBY.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
This Certificate is one of a Class of duly-authorized Certificates
designated as EquiVantage Home Equity Loan Trust 1997-2, Home Equity Loan
Asset-Backed Certificates, Series 1997-2, Class RU (the "RU Certificates") and
issued under and subject to the terms, provisions and conditions of the Pooling
and Servicing Agreement, to which Pooling and Servicing Agreement the Holder of
this Certificate by virtue of acceptance hereof assents and by which such Holder
is bound. Also issued under the Pooling and Servicing Agreement are
Certificates designated as the Class A Certificates, Class B Certificates and
Class RL Certificates (together with the Class RU Certificates, the
"Certificates.")
Terms capitalized herein and not otherwise defined herein shall have the
respective meanings set forth in the Pooling and Servicing Agreement.
On the 25th day of each month, or, if such day is not a Business Day, then
the next succeeding Business Day (each such day being a "Payment Date"),
commencing July 25, 1997, to the Holders of the Class RU Certificates as of the
close of business on the first Business Day of the calendar month immediately
preceding the calendar month in which such Payment Date occurs (the "Record
Date"), the Trustee will distribute to each Holder of the Class RU Certificates
such Holder's Percentage Interest multiplied by the amounts then available to be
distributed to the Holders of the Class RU Certificates. No significant
distributions are anticipated to be made.
Upon receiving the final distribution hereon, the Holder hereof is required
to send this Certificate to the Trustee. The Pooling and Servicing Agreement
provides that, in any event, upon the making of the final distribution due on
this Certificate, this Certificate shall be deemed canceled for all purposes
under the Pooling and Servicing Agreement.
The Trustee is required to duly and punctually pay distributions with
respect to this Certificate in accordance with the terms hereof and the Pooling
and Servicing Agreement. Amounts properly withheld under the Code or applicable
state or local law by any Person from a distribution to any Holder shall be
considered as having been paid by the Trustee to such Holder for all purposes of
the Pooling and Servicing Agreement.
EquiVantage Inc., as Servicer, pursuant to the Pooling and Servicing
Agreement will service the Mortgage Loans. The Pooling and Servicing Agreement
permits the Servicer to enter into Sub-Servicing Agreements with certain
institutions eligible for appointment as Sub-Servicers
C-2-3
<PAGE>
for the servicing and administration of the Mortgage Loans. No appointment
of any Sub-Servicer shall release the Servicer from any of its obligations
under the Pooling and Servicing Agreement.
No Holder shall have any right to institute any proceeding, judicial or
otherwise, with respect to the Pooling and Servicing Agreement, or for the
appointment of a receiver or trustee, or for any other remedy under the Pooling
and Servicing Agreement except in compliance with the terms thereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Holder of any Certificate shall have the right which is absolute
and unconditional to receive distributions to the extent provided in the Pooling
and Servicing Agreement with respect to such Certificate or to institute suit
for the enforcement of any such distribution, and such right shall not be
impaired without the consent of such Holder.
The Pooling and Servicing Agreement provides that the obligations created
thereby will terminate upon the earlier of (i) the payment to the Holders of all
Certificates of all amounts held by the Trustee and required to be paid to such
Holders pursuant to the Pooling and Servicing Agreement upon the later to occur
of (a) the final payment or other liquidation (or any advance made with respect
thereto) of the last 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 or (ii) at any time when a Qualified Liquidation of the Upper-Tier REMIC
and the Lower-Tier REMIC is effected as described in the Pooling and Servicing
Agreement.
The Pooling and Servicing Agreement provides that (i) the Holders of the
Class RL Certificates or, if such Holders decline to exercise, the Servicer or,
if the Servicer decline to exercise, the Certificate Insurer, may, at their
respective options, purchase from the Trust all (but not fewer than all)
remaining Mortgage Loans and other property then constituting the Trust Estate,
and thereby effect early retirement of the Certificates, on any Remittance Date
when the aggregate outstanding Loan Balances of the Mortgage Loans is 10% or
less of the original aggregate Loan Balance of the Mortgage Loans as of the
Cut-Off Date and (ii) under certain circumstances relating to the qualifications
of the Lower-Tier REMIC or Upper-Tier REMIC as a REMIC under the Code, the
Mortgage Loans may be sold, thereby affecting the early retirement of the
Certificates.
The Trustee shall give written notice of termination of the Pooling and
Servicing Agreement to each Holder in the manner set forth therein.
As provided in the Pooling and Servicing Agreement and subject to certain
limitations therein set forth and referred to on the face hereof, the transfer
of this Certificate is registrable in the Register upon surrender of this
Certificate for registration of transfer at the office designated as the
location of the Register duly endorsed by, or accompanied by a written
instrument of transfer in the form set forth in the Pooling and Servicing
Agreement duly executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new
C-2-4
<PAGE>
Certificates of like Class, tenor and a like Percentage Interest will be
issued to the designated transferee or transferees.
Notwithstanding the foregoing, no sale or other transfer of record or
beneficial ownership of a Class RU Certificate shall be made unless the Trustee
shall have received a representation letter from the transferee of such Class RU
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.
The Trustee is required to furnish certain information on each Payment Date
to the Holder of this Certificate, as more fully described in the Pooling and
Servicing Agreement.
The Class RU Certificates are issuable only as registered Certificates. As
provided in the Pooling and Servicing Agreement and subject to certain
limitations therein set forth, Class RU Certificates are exchangeable for new
Class RU Certificates evidencing the same Percentage Interest as the Class RU
Certificates exchanged.
No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Trustee and any agent of the Trustee may treat the Person in whose name
this Certificate is registered as the holder hereof for all purposes, and
neither the Trustee or any such agent shall be affected by notice to the
contrary.
C-2-5
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed on behalf of the Trust.
EQUIVANTAGE HOME EQUITY
LOAN TRUST 1997-2
By: NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:
----------------------------------
Name:
Title:
Trustee Authentication
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:
---------------------------------
Name:
Title:
Dated: June 27, 1997
C-2-6
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE REGARDING PREPAID LOANS
I, John E. Smith, President of EquiVantage Acceptance Corp., a Delaware
corporation, as sponsor (the "Sponsor"), hereby certify that between the
"Cut-Off Date" (as defined in the Pooling and Servicing Agreement dated as of
June 1, 1997 among the Sponsor, EquiVantage Inc., a Delaware corporation, as
servicer, and Norwest Bank Minnesota, National Association, as trustee) and the
date hereof the following schedule of "Mortgage Loans" (as defined in such
Pooling and Servicing Agreement) has been prepaid in full.
Dated: June 27, 1997
By:
------------------------------------
John E. Smith
President
D-1
<PAGE>
EXHIBIT E
FORM OF TRUSTEE'S ACKNOWLEDGMENT OF RECEIPT
Norwest Bank Minnesota, National Association, a national banking
corporation, in its capacity as trustee (the "Trustee") under that certain
Pooling and Servicing Agreement dated as of June 1, 1997 (the "Pooling and
Servicing Agreement") by and among EquiVantage Acceptance Corp., a Delaware
corporation, as sponsor (the "Sponsor"), EquiVantage Inc., a Delaware
corporation, as servicer, and the Trustee, hereby acknowledges receipt of the
items delivered to it by the Sponsor with respect to the Mortgage Loans of the
Pooling and Servicing Agreement.
The Schedule of Mortgage Loans is deemed attached to this Receipt.
The Trustee hereby additionally acknowledges that it shall review such
items as required by Section 3.6(a) of the Pooling and Servicing Agreement and
shall otherwise comply with Section 3.6(b) of the Pooling and Servicing
Agreement as required thereby.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee
By:
-----------------------------------
Name:
Title:
Dated: June 27, 1997
E-1
<PAGE>
EXHIBIT F
FORM OF POOL CERTIFICATION
WHEREAS, the undersigned is an Authorized Officer of Norwest Bank
Minnesota, National Association, a national banking association, acting in its
capacity as trustee (the "Trustee") of a certain pool of mortgage loans (the
"Pool") heretofore conveyed in trust to the Trustee pursuant to that certain
Pooling and Servicing Agreement dated as of June 1, 1997 (the "Pooling and
Servicing Agreement") by and among EquiVantage Acceptance Corp., a Delaware
corporation, as sponsor (the "Sponsor"), EquiVantage Inc., a Delaware
corporation, as Servicer, and the Trustee;
WHEREAS, the Trustee is required, pursuant to Section 3.6(a) of the Pooling
and Servicing Agreement, to review the Files relating to the Pool within a
specified period following the Startup Day and to notify the Sponsor promptly of
any defects with respect to the Pool, and the Sponsor is required to remedy such
defects or take certain other action, all as set forth in Section 3.6(b) of the
Pooling and Servicing Agreement; and
WHEREAS, Section 3.6(a) of the Pooling and Servicing Agreement requires the
Trustee to deliver this Pool Certification upon the satisfaction of certain
conditions set forth therein.
NOW, THEREFORE, the Trustee hereby certifies that it has determined that
all required documents (or certified copies of documents listed in Section 3.5
of the Pooling and Servicing Agreement) have been executed or received, and that
such documents relate to the Mortgage Loans identified in the Schedule of
Mortgage Loans pursuant to Section 3.5(a) of the Pooling and Servicing Agreement
or, in the event that such documents have not been executed and received or do
not so relate to such Mortgage Loans, any remedial action by the Sponsor
pursuant to Section 3.6(b) of the Pooling and Servicing Agreement has been
completed, except as noted in the list of exceptions attached. The Trustee
makes no certification hereby, however, with respect to any intervening
assignments or assumption and modification agreements.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:
-----------------------------------
Name:
Title:
Dated: June 27, 1997
F-1
<PAGE>
EXHIBIT G
FORM OF DELIVERY ORDER
June 27, 1997
Norwest Bank Minnesota,
National Association
Norwest Center
Sixth Street & Marquette Avenue
Minneapolis, Minnesota 55479-0070
Attention: Corporate Trust Services
Ladies and Gentlemen:
Pursuant to Article IV of the Pooling and Servicing Agreement dated as of
June 1, 1997 (the "Pooling and Servicing Agreement") by and among EquiVantage
Acceptance Corp., a Delaware corporation, as sponsor (the "Sponsor"),
EquiVantage Inc., a Delaware corporation, as servicer, and Norwest Bank
Minnesota, National Association, as trustee, the Sponsor hereby certifies that
all conditions precedent to the issuance of EquiVantage Home Equity Loan Trust
1997-2, Home Equity Loan Asset-Backed Certificates, Class A-1, Class A-2, Class
A-3, Class A-4, Class A-5, Class B and the Residual Certificates (collectively,
the "Certificates"), have been satisfied and hereby requests you to authenticate
and deliver said Certificates, and to release said Certificates to the Holders
thereof, or otherwise upon their order.
Very truly yours,
EQUIVANTAGE ACCEPTANCE CORP.
By:
--------------------------------------
Name: John E. Smith
Title: President
G-1
<PAGE>
EXHIBIT H
FORM OF CLASS R TAX MATTERS TRANSFER CERTIFICATE
AFFIDAVIT PURSUANT TO SECTION 860E(e) OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED
STATE OF )
) ss:
COUNTY OF )
[NAME OF OFFICER], being first duly sworn, deposes and says:
1. That [s/he] is [Title of Officer] of [Name of Investor] (the
"Investor"), a [savings institution] [corporation] duly organized and existing
under the laws of [the State of __________] [the United States], on behalf of
which [s/he] makes this affidavit.
2. That (i) the Investor is not a "disqualified organization" and will not
be a "disqualified organization" as of [date of transfer] (For this purpose, a
"disqualified organization" means the United States, any state or political
subdivision thereof, any foreign government, any international organization, any
agency or instrumentality of any of the foregoing (other than certain taxable
instrumentalities), any cooperative organization furnishing electric energy or
providing telephone service to persons in rural areas, or any organization
(other than a farmers' cooperative) that is exempt from federal income tax
unless such organization is subject to the tax on unrelated business income);
(ii) it is not acquiring the Class R Certificates for the account of a
disqualified organization; (iii) it consents to any amendment of the Pooling and
Servicing Agreement that shall be deemed necessary by the Trustee (upon advice
of counsel) to constitute a reasonable arrangement to ensure that the Class R
Certificates will not be owned directly or indirectly by a disqualified
organization; and (iv) it will not transfer any such Class R Certificate unless
(a) it has received from the transferee an affidavit in substantially the same
form as this affidavit containing these same four representations and (b) as of
the time of the transfer, it does not have actual knowledge that such affidavit
is false.
H-1
<PAGE>
IN WITNESS WHEREOF, the Investor has caused this instrument to be executed
on its behalf, pursuant to authority of its Board of Directors, by its [Title of
Officer] and its corporate seal to be hereunto attached, attested by its
[Assistant] Secretary, this __ day of __________, ____.
[NAME OF INVESTOR]
By:___________________________
[Name of Officer]
[Title of Officer]
[Corporate Seal]
Attest:
___________________________
[Assistant] Secretary
Personally appeared before me the above-named [Name of Officer], known or
proved to be the same person who executed the foregoing instrument and to be the
[Title of Officer] of the Investor, and acknowledged to me that he executed the
same as his free act and deed and the free act and deed of the Investor.
Subscribed and sworn before me this ____ day of _______, ____.
___________________________
NOTARY PUBLIC
COUNTY OF ________________
STATE OF _________________
My commission expires the ____ day of _______________, ____.
H-2
<PAGE>
EXHIBIT I
Form of
Monthly Report
EquiVantage Acceptance Corp.
Home Equity Loan Asset-Backed Certificates
Series 1997-2
Statement to Holders
<TABLE>
INTEREST
ORIGINAL BEGINNING INTEREST TOTAL CARRY ENDING
CERTIFICATE CERTIFICATE PRINCIPAL DISTRI- DISTRI- FORWARD CERTIFICATE
CLASS FACE VALUE BALANCE DISTRIBUTION BUTION BUTION AMOUNT BALANCE
- ----- ---------------- ----------- ------------ -------- ------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
A-1 $23,800,000.00
A-2 $15,600,000.00
A-3 $11,683,000.00
A-4 $ 5,675,000.00
A-5 $43,242,000.00
B $ 969,071.84
RU n/a
</TABLE>
TOTAL
- -----
AMOUNT PER $1,000 UNIT
<TABLE>
BEGINNING INTEREST TOTAL CURRENT ENDING
CERTIFICATE PRINCIPAL DISTRI- DISTRI- PRINCIPAL CERTIFICATE
CLASS CUSIP BALANCE DISTRIBUTION BUTION BUTION BALANCE BALANCE
- ----- ---------------- ----------- ------------ -------- ------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
A-1 29476Y AV 1
A-2 29476Y AW 9
A-3 29476Y AX 7
A-4 29476Y AY 5
A-5 29476Y AZ 2
B n/a
RU n/a
</TABLE>
I-1
<PAGE>
PASS THROUGH RATES
<TABLE>
ORIGINAL PASS- CURRENT PASS
CLASS THROUGH RATE THROUGH RATE CLASS RECORD DATE
- -------------- -------------- ------------ ----- -----------
<S> <C> <C> <C> <C>
A-1 6.575% % A-1
A-2 6.800% % A-2
A-3 7.275% % A-3
A-4 7.000% % A-4
A-5 Adjustable Rate % A-5
B n/a % B
RU n/a % RU
</TABLE>
SPONSOR: EquiVantage Acceptance Corp.
SERVICER: EquiVantage Inc.
SUB-SERVICER: Transworld Mortgage Corporation
LEAD UNDERWRITER: Morgan Stanley & Co. Incorporated
RECORD DATE:
DISTRIBUTION DATE: FACTOR INFORMATION: _____________
PLEASE DIRECT ANY QUESTIONS OR COMMENTS TO THE FOLLOWING ADMINISTRATOR:
Trust Administrator
Norwest Bank Minnesota, National Association
Sixth Street & Marquette Avenue
Minneapolis, Minnesota 55479-0070
Attention: Corporate Trust Services
(612) 667-5786
I-2
<PAGE>
Distribution Period:
Information pursuant to Section 7.8(a) of the
Pooling and Servicing Agreement dated as of June 1, 1997
i) Distribution to each Class of
Certificates
ii) Principal Distributions to the
Certificates:
Scheduled Principal
Prepayments
Paid-in-Full Loans
Other Unscheduled Recoveries
of Principal
Substitution Amounts
Loan Repurchases
Principal Portion of
Liquidation Proceeds
Subordination Increase Amount
Total Principal
iii) Interest distributions to the
Certificate Holders
iv) Monthly Remittance Amount for each
Mortgage Loan Group Principal
Interest
v) Certificate Principal Balances
vi) Amounts described in Sections
7.5(b)(iii), (iv) and (xii)
vii) Insured Payment included in
distributions to the Holders
Aggregate unreimbursed Insured
Payments since the Closing Date
viii) Information furnished by the
Sponsor pursuant to Section
6049(d)(7)(c)
ix) Substitution Amounts and Loan
Purchase Price Amounts included in
the distribution
x) Subordination Reduction Amount
xi) Realized Losses
[Cumulative Loss Amount]
[Rolling Three Month Delinquency
Rate]
xii) Certificate Factors
xiii) Insurance Proceeds
xiv) Specified Subordinated Amount
(aggregate and for each
Mortgage Loan Group)
xv) Weighted average Coupon Rate and
weighted average maturity of
Mortgage Loans for each Mortgage
Loan Group
xvi) Aggregate Loan Balances for
each Mortgage Loan Group
I-3
<PAGE>
Distribution Period:
As to all Mortgage Loans
Delinquency Advances Made
Paid-In-Full Compensating
Interest
Accrued Servicing Fees
Servicing Fees Retained
Trustee Fees
Premium Amount
Current Next
Distribution Distribution
Date Date
------------ ------------
Available Funds
Available Funds
Available Funds Shortfall
Amortized Subordinated Amount
Requirement
Excess Subordinated Amount
Specified Subordinated Amount
Subordinated Amount
Subordination Deficiency Amount
Subordination Deficit
Subordination Increase Amount
Subordination Reduction Amount
Principal Carry Forward Amount
Principal Distribution Amount
Reimbursement Amount
Balance of Largest Loan
I-4
<PAGE>
EquiVantage Inc.
Transworld Mortgage Corporation
Monthly Delinquency Summary Report
EquiVantage Mortgage Loan Trust 1997-2
Dates as of ______________
Class A Certificates
Ending Number of Loans:
Ending Principal Balance:
<TABLE>
DELINQUENT LOANS Count Percent Principal Bal. Percent
<S> <C> <C> <C> <C>
GROSS Delinquent Loans
- Status
1. 30 - 59 Days
Delinquent
2. 60 - 89 Days
Delinquent
3. 90 or More Days
Delinquent
GROSS Total
Delinquencies
</TABLE>
<TABLE>
Foreclosure Loans -
Status Count Percent Principal Bal. Percent
<S> <C> <C> <C> <C>
1. Current
2. 30 - 59 Days
Delinquent
3. 60 - 89 Days
Delinquent
4. 90 or More Days
Delinquent
Total Foreclosures
</TABLE>
<TABLE>
Bankruptcy Loans -
Status Count Percent Principal Bal. Percent
<S> <C> <C> <C> <C>
1. Current
2. 30 - 59 Days
Delinquent
3. 60 - 89 Days
Delinquent
4. 90 or More Days
Delinquent
Total Bankruptcies
</TABLE>
<TABLE>
REO Loans - Status
from Foreclosure Count Percent Principal Bal. Percent Book Value
<S> <C> <C> <C> <C> <C>
1. 30 - 59 Days
2. 60 - 89 Days
3. 90 or More Days
Total REO
</TABLE>
<TABLE>
NET DELINQUENCY (Gross Delinquent less Foreclosure, Bankruptcy, REO)
Count Percent Principal Bal. Percent
<S> <C> <C> <C> <C>
1. 30 - 59 Days
Delinquent
2. 60 - 89 Days
Delinquent
3. 90 or More Days
Delinquent
NET DELINQUENCY TOTALS
</TABLE>
I-5
<PAGE>
EXHIBIT J
FORM OF SERVICER'S TRUST RECEIPT
To: Norwest Bank Minnesota, National Association
Sixth Street & Marquette Avenue
Minneapolis, Minnesota 55479-0070
Attn.: Corporate Trust Services
Date:____________________
In connection with the administration of the mortgage loans held by you, as
Trustee under a certain Pooling and Servicing Agreement dated as of June 1, 1997
by and among EquiVantage Acceptance Corp., as sponsor, EquiVantage Inc., as
servicer (the "Servicer"), and you, as Trustee (the "Agreement"), the Servicer
hereby requests a release of the File held by you as Trustee with respect to the
following described Mortgage Loan for the reason indicated below:
Mortgagor's Name:
Loan No.:
Reason for requesting file:
_______ 1. Mortgage Loan paid in full.
(The Servicer hereby certifies that all amounts
received in connection with the loan have been or will
be credited to the Certificate Account (whichever is
applicable) pursuant to the Agreement.)
_______ 2. Mortgage Loan repurchased pursuant to the Agreement.
(The Servicer hereby certifies that the Loan Purchase
Price has been or will be paid to the Certificate
Account pursuant to the Agreement.)
J-1
<PAGE>
_______ 3. Mortgage Loan substituted.
(The Servicer hereby certifies that a Qualified
Replacement Mortgage has been or will be assigned and
delivered to you along with the related File pursuant
to the Agreement.)
_______ 4. The Mortgage Loan is being foreclosed.
_______ 5. Other. (Describe)
Total Number of Mortgage Loans currently held under the Agreement:_____________
Total Number of Files now held by the Servicer: _______________________________
The undersigned (i) acknowledges that the above File will be held by the
undersigned in accordance with the provisions of the Agreement and will be
returned to you, except if the Mortgage Loan has been paid in full, foreclosed,
repurchased or substituted for by a Qualified Replacement Mortgage (in which
case the File will be retained by us permanently), and (ii) certifies that all
conditions precedent for delivery of the File requested by this Trust Receipt
have been satisfied.
Capitalized terms used herein shall have the meanings ascribed to them in
the Agreement.
EQUIVANTAGE INC.
By:
------------------------------------
Name:
Title:
J-2
<PAGE>
EXHIBIT K
FORM OF LIQUIDATION REPORT
1. Type of Liquidation (REO disposition/charge-off/short pay-off)
- Date last paid
- Date of foreclosure
- Date of REO
- Date of REO disposition
- Property sale price/estimated market value at disposition
2. Liquidation Proceeds
Principal Prepayment $ ________
Property Sale Proceeds ________
Insurance Proceeds ________
Other (itemize) ________
3. Liquidation expenses
Servicing Advances $ ________
Delinquency Advances ________
Contingency Fees ________
Servicing Fees ________
Annual Expense Escrow Amount ________
Supplemental Fee (if any) ________
Additional Interest (if any) ________
4. Net Liquidation Proceeds $ ________
(Item 2 minus item 3)
5. Principal Balance of Mortgage Loan $ ________
K-1
<PAGE>
EXHIBIT L
SPECIAL POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that I, ____________, ____________ of
EquiVantage Inc. (the "Originator"), do hereby constitute and appoint Norwest
Bank Minnesota, National Association, as the true and lawful attorney for the
Originator and its name, place and stead, to record the assignments of mortgage
with respect to the Mortgage Loans transferred to the Norwest Bank Minnesota,
National Association, as trustee (the "Trustee"), under that Pooling and
Servicing Agreement dated as of June 1, 1997 by and among EquiVantage Acceptance
Corp., as Sponsor, the Originator, as Servicer, and the Trustee, and to do and
perform all other things and acts relating to such assignments of mortgage as
may be necessary to effectuate the transfer of such Mortgage Loans to the
Trustee, including the execution and delivery of new assignments of mortgage
where necessary to comply with applicable real estate recording laws at the time
of recordation.
This power of attorney is irrevocable and is coupled with an interest in
the Mortgage Loans, and it may at all times be relied upon by any person, firm
or corporation dealing with the attorney named herein as remaining in full force
and effect, and such person, firm or corporation shall have no liability to the
Originator with respect thereto.
WITNESS the following signature this ___ day of _______, 19__.
EQUIVANTAGE INC.
By:_____________________
Name:
Title:
STATE OF NEW YORK
COUNTY OF NEW YORK, to-wit:
I, ______________, a Notary Public in and for the jurisdiction aforesaid,
do hereby certify that _______________, who acknowledged himself to be the
__________________ of EquiVantage Inc., a Delaware corporation, personally
appeared before me in the jurisdiction aforesaid and that he as such
________________ executed the foregoing instrument on behalf of said corporation
for the purposes therein contained.
Witness my hand and official seal this ____ day of _______, 19__.
_____________________(SEAL)
Notary Public
My Commission Expires:
L-1
<PAGE>
Financial Guaranty Insurance Company
115 Broadway
New York, New York 10006
(212) 312-3000
(800) 352-0001
Surety Bond
Issuer: EquiVantage Home Equity Policy Number: 97010356
Loan Trust 1997-2
Control Number: 0010001
Insured Obligations: $100,000,000
in aggregate principal amount of
Home Equity Loan Backed
Certificates, Series 1997-2,
Class A (the "Certificates")
Trustee: Norwest Bank Minnesota, National Association
Financial Guaranty Insurance Company ("Financial Guaranty"), a New York stock
insurance company, in consideration of its receipt of the Deposit Premium and
subject to the terms of this Surety Bond, hereby unconditionally and
irrevocably agrees to pay each Insured Payment to the Trustee named above or
its successor, as trustee for the Certificates, to the extent set forth in
the Pooling and Servicing Agreement.
Financial Guaranty will make an Insured Payment (other than that portion of
an Insured Payment constituting a Preference Amount) out of its own funds by
11:00 A.M. (New York City Time) in immediately available funds to the Trustee
on the later of (i) the Business Day next following the day on which
Financial Guaranty shall have received Notice that an Insured Payment is due
and (ii) the Payment Date on which the Insured Payment is distributable to
Certificateholders pursuant to the Pooling and Servicing Agreement, for
disbursement to such Certificateholders in the same manner as other payments
with respect to the Certificates are required to be made. Any Notice
received by Financial Guaranty after 2:00 p.m. New York City time on a given
Business Day or on any day that is not a Business Day shall be deemed to have
been received by Financial Guaranty on the next succeeding Business Day.
Form 9043
Page 1 of 4
<PAGE>
Financial Guaranty Insurance Company
115 Broadway
New York, New York 10006
(212)312-3000
(800)352-0001
Surety Bond
Upon such payment, Financial Guaranty shall be fully subrogated to the rights
of the Certificateholders to receive the amount so paid. Financial
Guaranty's obligations hereunder with respect to each Payment Date shall be
discharged to the extent funds comprising the Insured Payment are received by
the Trustee on behalf of the Certificateholders for distribution to such
holders, as provided in the Pooling and Servicing Agreement and herein,
whether or not such funds are properly applied by the Trustee.
If the payment of any portion or all of any amount that is insured hereunder
is voided pursuant to a final order of a court exercising proper jurisdiction
in an insolvency proceeding to the effect that the Trustee or the
Certificateholder, as the case may be, is required to return any such payment
or portion thereof prior to the expiration date of this Surety Bond because
such payment was voided under the U. S. Bankruptcy Code, with respect to
which order the appeal period has expired without an appeal having been filed
(a "Final Order"), and, as a result, the Trustee or any Certificateholder is
required to return such voided payment, or any portion of such voided payment
made in respect of the Certificates (a "Preference Amount"), Financial
Guaranty will pay on the guarantee described in the first paragraph hereof,
an amount equal to each such Preference Amount, on the second Business Day
following receipt by Financial Guaranty of (x) a certified copy of the Final
Order, (y) an assignment, in form reasonably satisfactory to Financial
Guaranty, irrevocably assigning to Financial Guaranty all rights and claims
of the Trustee and/or such Certificateholder relating to or arising under
such Preference Amount and appointing Financial Guaranty as the agent of the
Trustee and/or such Certificateholder in respect of such Preference Amount,
and (z) a Notice appropriately completed and executed by the Trustee or such
Certificateholder, as the case may be. Such payment shall be made to the
receiver, conservator, debtor-in-possession or trustee in bankruptcy named in
the Final Order and not to the Trustee or Certificateholder directly (unless
a Certificateholder has previously paid such amount to such receiver,
conservator, debtor-in-possession or trustee named in such Final Order in
which case payment shall be made to the Trustee for distribution to the
Certificateholder upon proof of such payment reasonably satisfactory to
Financial Guaranty). Notwithstanding the foregoing, in no event shall
Financial Guaranty be (i) required to make any payment under this Surety Bond
in respect of any Preference Amount to the extent such Preference Amount is
comprised of amounts previously paid by Financial Guaranty hereunder, or (ii)
obligated to make any payment in respect of any Preference Amount, which
payment represents a payment of the principal amount of the Certificates,
prior to the time Financial Guaranty otherwise would have been required to
make a payment in respect of such principal.
Form 9043
Page 2 of 4
<PAGE>
Financial Guaranty Insurance Company
115 Broadway
New York, New York 10006
(212)312-3000
(800)352-0001
Surety Bond
Financial Guaranty shall make payments due in respect of Preference Amounts
prior to 2:00 p.m. New York City time on the second Business Day following
Financial Guaranty's receipt of the documents required under clauses (x)
through (z) of the second preceding paragraph. Any such documents received
by Financial Guaranty after 2:00 p.m. New York City time on a given Business
Day or on any day that is not a Business Day shall be deemed to have been
received by Financial Guaranty on the next succeeding Business Day. All
payments made by Financial Guaranty hereunder in respect of Preference
Amounts will be made with Financial Guaranty's own funds.
This Surety Bond is non-cancelable for any reason, including nonpayment of
any premium. The premium on this Surety Bond is not refundable for any
reason, including the payment of the Certificates prior to their respective
maturities. This Surety Bond shall expire -and terminate without any action
on the part of Financial Guaranty or any other Person on the date that is one
year and one day following the date on which the Certificates shall have been
paid in full.
The Deposit Premium shall be due and payable on the date hereof, and a
monthly premium shall be due and payable as provided in the Pooling and
Servicing Agreement.
This Surety Bond is subject to and shall be governed by the laws of the State
of New York. The proper venue for any action or proceeding on this Surety
Bond shall be the County of New York, State of New York. The insurance
provided by this Surety Bond is not covered by the New York Property/Casualty
Insurance Security Fund (New York Insurance Code, Article 76).
Capitalized terms used and not defined herein shall have respective meanings
set forth in the Pooling and Servicing Agreement. "Notice" means written
notice in the form of Exhibit A to this Surety Bond by registered or
certified mail or telephonic or telegraphic notice, subsequently confirmed by
written notice delivered via telecopy, telex or hand delivery from the
Trustee to Financial Guaranty specifying the information set forth therein.
"Certificateholder" means, as to a particular Certificate, the person, other
than the Trust, the Servicer, any subservicer or Underwriter or the Sponsor
who, on the applicable Payment Date is entitled under the terms of such
Certificate to payment thereof "Pooling and Servicing Agreement" means the
Pooling and Servicing Agreement by and among EquiVantage Acceptance Corp., as
Sponsor, EquiVantage Inc., as Servicer, and Norwest Bank Minnesota, National
Association, as Trustee, dated as of June 1, 1997.
Form 9043
Page 3 of 4
<PAGE>
Financial Guaranty Insurance Company
115 Broadway
New York, New York 10006
(212)312-3000
(800)352-0001
Surety Bond
In the event that payments under any Certificate is accelerated, nothing
herein contained shall obligate Financial Guaranty to make any payment of
principal or interest on such Certificates on an accelerated basis, unless
such acceleration of payment by Financial Guaranty is at the sole option of
Financial Guaranty.
IN WITNESS WHEREOF, Financial Guaranty has caused this Surety Bond to be
affixed with its corporate seal and to be signed by its duly authorized
officer in facsimile to become effective and binding upon Financial Guaranty
by virtue of the countersignature of its duly authorized representative.
/s/ Ann C. Stern /s/ Michael Miran
- -------------------------- --------------------------
President Authorized Representative
Effective Date: June 27, 1997
Form 9043
Page 4 of 4
<PAGE>
EXHIB1T A
NOTICE
To: Financial Guaranty Insurance Company
115 Broadway
New York, New York 10006
(212) 312-3000
Attention: General Counsel
Telephone: (212) 312-3000
Telecopier: (212) 312-3093
Re: EquiVantage Home Equity Loan Trust
Home Equity Loan Backed Certificates,
Series 1997-2, Class A
Determination Date: _________________________
Payment Date: _________________________
We refer to that certain Pooling and Servicing Agreement dated as of June 1,
1997, by and among EquiVantage Acceptance Corp., as Sponsor, EquiVantage
Inc., as Servicer, and Norwest Bank Minnesota, National Association, as
Trustee (the "Pooling and Servicing Agreement") relating to the above
referenced Certificates. All capitalized terms not otherwise defined herein
or in the Surety Bond shall have the same respective meanings assigned to
such terms in the Pooling and Servicing Agreement.
(a) The Trustee has determined under the Pooling and Servicing Agreement that
in respect of the Payment Date set forth above:
(i) The Group I Interest Distribution Amount is $_________________.
(ii) The Group I Subordination Deficit is $_________________.
(iii) Preference Amounts with respect to which Owners have complied
with Section 7.3(e) allocable to Group I are $_________________.
(iv) The Group I Total Available Funds (excluding Total Monthly Excess
Cashflow) are $_________________.
(v) The Total Monthly Excess Cashflow allocable to Group I is
$_________________.
(vi) The Group II Interest Distribution Amount, is $_________________.
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(vii) The Group II Subordination Deficit is $_________________.
(viii) Preference Amounts with respect to which Owners have complied
with Section 7.3(e) allocable to Group II are $_________________.
(ix) The Group II Total Available Funds (excluding Total Monthly Excess
Cashflow) are $_________________.
(x) The Total Monthly Excess Cashflow allocable to Group II is
$_________________.
(xi) The sum of (i), (ii) (iii), (vi), (vii) and (viii) is
$_________________.
(xii) The sum of (iv), (v), (ix) and (x) is $_________________; and
(xiii) The amount in (xi) exceeds the amount in (xii) by
$_________________.
Please be advised that the amount set forth in (a)(xii) above is not
sufficient to pay the amount set forth in (a)(xi) above.
Accordingly, pursuant to the Pooling and Servicing Agreement, this statement
constitutes a notice for payment of an Insured Payment in respect of Group
[I][II] in the amount of $_______________ under the Surety Bond.
(b) No payment claimed hereunder is in excess of the amount payable under the
Surety Bond.
The amount requested in this Notice should be paid to:
[Payment Instructions]
[Attached hereto is a copy of the Final Order (as defined in the Surety Bond)
in connection with a Preference Amount in the amount set forth therein,
together with an assignment of rights and appointment of agent.]
Any person who knowingly and with intent to defraud any insurance company or
other person files an application for insurance or statement of claim
containing any materially false information or conceals for the purpose of
misleading, information concerning any fact material thereto, commits a
fraudulent insurance act, which is a crime, and shall also be subject to a
civil penalty not to exceed Five Thousand Dollars ($5,000.00) and the stated
value of the claim for each such violation.
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IN WITNESS WHERE0F, the Trustee has executed and delivered this Notice this
____ day of ___________________________.
__________________________________,
as Trustee
By: _____________________________
Title: ___________________________
<PAGE>
MASTER LOAN TRANSFER AGREEMENT
Dated as of June 1, 1997
by and between
EQUIVANTAGE ACCEPTANCE CORP.,
the Company
and
EQUIVANTAGE INC.,
the Originator
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TABLE OF CONTENTS
Page
Section 1. Definitions.....................................................1
Section 2. Interest Calculations...........................................5
Section 3. Transfers of Mortgage Loans.....................................5
Section 4. Representations, Warranties and Covenants Regarding
the Originator and the Company..................................6
Section 5. Representations and Warranties of the Originator
Regarding the Mortgage Loans...................................11
Section 6. Covenants of the Originator to Take Certain Actions with
Respect to the Mortgage Loans in Certain Situations............22
Section 7. Term of Agreement..............................................23
Section 8. Authorized Representatives.....................................23
Section 9. Notices........................................................23
Section 10. Governing Law..................................................25
Section 11. Assignment.....................................................25
Section 12. Counterparts...................................................25
Section 13. Amendment......................................................25
Section 14. Severability of Provisions.....................................25
Section 15. No Agency; No Partnership or Joint Venture.....................26
Section 16. Further Assurances.............................................26
Section 17. The Certificate Insurer and the Trustee........................26
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THIS MASTER LOAN TRANSFER AGREEMENT, dated as of June 1, 1997, is between
EquiVantage Acceptance Corp. (the "Company") and EquiVantage Inc., in its
separate capacity as an originator or purchaser of mortgage loans (the
"Originator").
WHEREAS, the Originator is an originator and purchaser of mortgage loans
that the Originator may, from time to time, sell to the Company;
WHEREAS, the Company may, from time to time, purchase such mortgage loans
from the Originator; and
WHEREAS, it is the intent of the Company to include mortgage loans so
purchased by the Company in securitization transactions from time to time
sponsored by the Company.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
Section 1. Definitions. Whenever used in this Agreement or in any
Conveyance Agreement, the following words and phrases, unless the context
otherwise requires, shall have the meanings specified in this Article; provided,
however, that any capitalized terms used herein or in any Conveyance Agreement
and not defined herein shall have their respective meanings as set forth in the
related Pooling and Servicing Agreement.
Additional Representations and Warranties: As defined in Section 5(a)
hereof.
Agreement: This Master Loan Transfer Agreement as may be amended from time
to time, including the exhibits and supplements 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 that 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, in either case subject to
downward adjustment by the Originator.
Authorized Representatives: As defined in Section 8 hereof and each Person
as set forth in Exhibit B hereto.
Balloon Loan: Any Mortgage Loan that has an amortization schedule that
extends beyond its maturity date, resulting in a relatively large unamortized
principal balance due in a single payment at maturity.
Certificate Insurance Policy: The Certificate Insurance Policy issued by
the Certificate Insurer as described in the related Pooling and Servicing
Agreement.
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Certificate Insurer: Financial Guaranty Insurance Company, a New York
stock insurance company, or any successor thereto, issuing the Certificate
Insurance Policy.
Closing Date: With respect to any Pool, as defined in the related
Conveyance Agreement.
Code: The Internal Revenue Code of 1986, as amended, and any successor
statute thereto.
Conveyance Agreement: Any Conveyance Agreement relating to a Pool, in
substantially the form set forth as Exhibit A hereto.
Coupon Rate: The rate of interest borne by each Note.
Cut-Off Date: With respect to any Pool, as defined in the related
Conveyance Agreement.
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; and a Mortgage Loan that is 60 days
delinquent, 90 days delinquent and so on, should be construed similarly.
EquiVantage Trust: An investor trust created by the Company to purchase
the Mortgage Loans acquired by the Company from the Originator pursuant to this
Agreement and the Conveyance Agreements.
EquiVantage Trust Certificates: The certificates issued by an EquiVantage
Trust.
File: The documents delivered to the Trustee pursuant to the document
delivery provisions of the related Pooling and Servicing Agreement pertaining to
a particular Mortgage Loan, together with any additional documents required to
be added to the File pursuant to this Agreement.
First Mortgage Loan: A Mortgage Loan secured by a first priority mortgage
lien with respect to any Property.
Holder: The Person in whose name an EquiVantage Trust Certificate is
recorded in a register maintained by the Trustee, as defined in the related
Pooling and Servicing Agreement.
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Insured Payment: As defined in the related Pooling and Servicing
Agreement.
Insurance Policy: Any hazard, title or primary mortgage insurance policy
relating to a Mortgage Loan.
Loan Balance: With respect to each Mortgage Loan, as defined in the
related Pooling and Servicing Agreement.
Mortgage: The mortgage, deed of trust or other instrument creating a first
or second lien on an estate in fee simple in real property, in accordance with
applicable law, securing a Note.
Mortgage Loan: Each of the mortgage loans transferred and assigned to the
Company by the Originator pursuant hereto.
Mortgagor: The obligor on a Note.
Note: The note or other evidence of indebtedness evidencing the
indebtedness of a Mortgagor under a Mortgage Loan.
Offered Certificates: Any securities issued by an EquiVantage Trust that
are not retained by the Company, any of the Company's affiliates or the
Originator.
Operative Documents: This Agreement, the related Pooling and Servicing
Agreement, the related Conveyance Agreement and other agreements described in
the related Pooling and Servicing Agreement.
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.
Percentage Interest: As defined in the related Pooling and Servicing
Agreement.
Person: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
Pool: The pool of Mortgage Loans transferred to the Company or an
EquiVantage Trust pursuant to a specific Conveyance Agreement.
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Pooling and Servicing Agreement: Any Pooling and Servicing Agreement
entered into by and among EquiVantage Acceptance Corp., in its corporate
capacity and in its capacity as Sponsor, the Servicer and the Trustee, as it may
be amended and supplemented from time to time by the parties thereto.
Primary Parcel: With respect to any Property with multiple parcels, the
parcel that was given primary consideration.
Principal and Interest Account: As defined in the related Pooling and
Servicing Agreement.
Program Loan: A Mortgage Loan evidenced by a Note amended to reflect the
participation of the Mortgagor thereunder in a loan program created by the
Company to encourage timely mortgage loan payments from certain borrowers
through the use of an automatic interest rate reduction mechanism.
Property: The property on which a lien is granted to secure a Mortgage
Loan.
Prospectus: Any prospectus (including any prospectus supplement) relating
to the Registration Statement pursuant to which Offered Certificates are
offered.
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
and applicable to the related EquiVantage Trust.
Qualified Replacement Mortgage: A Mortgage Loan substituted for another
pursuant to the relevant provisions of the related Pooling and Servicing
Agreement.
Registration Statement: The Registration Statement filed by the Company
with the Securities and Exchange Commission, including all amendments thereto
and including the Prospectus concerning the related EquiVantage Trust
Certificates constituting a part thereof.
REMIC: A "real estate mortgage investment conduit" within the meaning of
Section 860D of the Code.
Remittance Date: Any date on which the Servicer is required to remit to
the Trustee moneys on deposit in the Principal and Interest Account as defined
in the related Pooling and Servicing Agreement.
Schedule of Mortgage Loans: Any of the Schedules of Mortgage Loans
required to be delivered pursuant to the related Pooling and Servicing
Agreement.
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Second Mortgage Loan: A Mortgage Loan secured by a second priority
mortgage lien with respect to the related Property.
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, or any other party, including the Sub-Servicer,
accepting the rights and obligations of Servicer in a Pooling and Servicing
Agreement.
Startup Day: Any startup date of a Pooling and Servicing Agreement.
Sub-Servicer: As defined in the related Pooling and Servicing Agreement.
Third Mortgage Loan: A Mortgage Loan secured by a third priority mortgage
lien with respect to the related Property
Trustee: Any party accepting the rights and obligations of Trustee in a
Pooling and Servicing Agreement.
Section 2. Interest Calculations. All calculations of interest
hereunder, including, without limitation, calculations of interest at the Coupon
Rate, which are made in respect of the Loan Balance of a Mortgage Loan shall be
made on a daily basis using a 360-day year.
Section 3. Transfers of Mortgage Loans. (a) From time to time in
connection with the establishment of EquiVantage Trusts, the Originator intends
to transfer to the Company, and the Company intends to accept the transfer from
the Originator of, Mortgage Loans. Each such transfer will be evidenced by a
Conveyance Agreement in substantially the form of Exhibit A hereto.
(b) In connection with each such transfer under this Agreement or in
connection with any prior transfer pursuant to another instrument of transfer
the Company will pay or will have paid to the Originator, in cash, its pro rata
portion of the consideration received by the Company for the Pool in connection
with the issuance of the Offered Certificates, together with the Originator's
pro rata portion of any subordinate certificates, unless otherwise agreed
between the Originator and the Company.
(c) In connection with each such transfer the Originator and the Company
will deliver to the Trustee the documents required by the related Pooling and
Servicing Agreement during the time periods required thereby. In the event of
any document deficiencies, the Originator and the Company shall take the actions
required by the related Pooling and Servicing Agreement during the time periods
required thereby. The Originator in addition hereby acknowledges that the
Trustee, the Servicer and the Certificate Insurer may enforce directly against
the Originator any
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<PAGE>
rights granted to any of them in the related Pooling and Servicing Agreement,
and the Originator and the Company agree to comply with their respective
duties and obligations set forth in such Pooling and Servicing Agreement.
Section 4. Representations, Warranties and Covenants Regarding the
Originator and the Company. (a) The Originator hereby represents and warrants
to the Company, the Trustee, the Certificate Insurer and their respective
successors and assigns that, as of the date hereof:
(i) The Originator is a corporation duly organized, validly existing and
in good standing under the laws governing its creation and existence
and is in good standing as a foreign corporation as applicable, in
each jurisdiction in which the nature of its business, or the
properties owned or leased by it make such qualification necessary.
The Originator has all requisite organizational power and authority
to own and operate its properties, to carry out its business as
presently conducted and as proposed to be conducted, to enter into
and discharge its obligations under this Agreement and the Conveyance
Agreements.
(ii) The execution and delivery of this Agreement by the Originator and
its performance and compliance with the terms of this Agreement and
the Conveyance Agreements to which it is a party have been duly
authorized by all necessary action on the part of the Originator and
will not violate the Originator's Articles of Incorporation or Bylaws
or constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, or result in a
breach of, any material contract, agreement or other instrument to
which the Originator is a party or by which the Originator 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 Originator or any of its properties.
(iii) This Agreement and the Conveyance Agreements to which the Originator
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 Originator, enforceable against it in
accordance with the terms hereof, except as the enforcement thereof
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights
generally and by general principles of equity (whether considered in
a proceeding or action in equity or at law).
(iv) The Originator 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 Originator or its
properties or might have consequences that would materially and
adversely affect its performance hereunder and under the Conveyance
Agreements.
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(v) Except as described in a related Pooling and Servicing Agreement and
as disclosed in any Prospectus, no litigation is pending or, to the
best of the Originator's knowledge, threatened against the
Originator which litigation is likely to have consequences that
would prohibit its entering into this Agreement or any Conveyance
Agreements or that is likely to materially and adversely affect the
condition (financial or otherwise) or operations of the Originator
or its properties or might have consequences that would materially
and adversely affect its performance hereunder and under the
Conveyance Agreements.
(vi) No certificate of an officer, statement furnished in writing or
report delivered pursuant to the terms hereof by the Originator
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.
(vii) Upon the receipt of each Mortgage Loan and other items of the
File, including the Note and Mortgage by the Trustee under this
Agreement, the related Trust will have good and indefeasible title
to such Mortgage Loan and such other items of the related Trust
Estate free and clear of any lien (other than liens which will be
simultaneously released).
(viii) 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 Originator makes no such representation or warranty)
that are necessary in connection with the sale of the Mortgage Loans
and the execution and delivery by the Originator of this Agreement
and the Conveyance Agreements 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),
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 Conveyance Agreements on the part of the Originator and
the performance by the Originator of its obligations under this
Agreement and the Conveyance Agreements.
(ix) The origination practices and the collection practices used by the
Originator with respect to the Mortgage Loans have been and are, in
all material respects, legal, proper, prudent and customary in the
mortgage loan lending business.
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(x) The transactions contemplated by this Agreement are in the ordinary
course of business of the Originator.
(xi) The Originator will receive fair consideration and reasonably
equivalent value in exchange for the sale of the interests in the
Mortgage Loans.
(xii) The Originator will not transfer or sell any interest in any
Mortgage Loan with any intent to hinder, delay or defraud any of
its respective creditors.
(xiii) The Originator is solvent, and the Originator will not be rendered
insolvent as a result of the sale of the Mortgage Loans to the
related Trust.
(xiv) The statements contained in the Registration Statement that describe
the Originator or matters or activities for which the Originator is
responsible in accordance with the Operative Documents or which are
attributable to the Originator thereon 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
Originator 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 Originator not misleading.
(xv) The Originator will not, prior to the date that is one year and one
day after the final payment of any Certificates issued by the
EquiVantage Trust under the Pooling and Servicing Agreement,
institute against the Company, or join any other Person in
instituting against the Company, any bankruptcy, insolvency,
liquidation, readjustment of debt, marshaling of assets or similar
proceeding or acquiesce, petition or otherwise invoke or cause the
Company to invoke the process of any governmental authority for the
purpose of appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official of the Company or
any substantial part of its property or ordering the winding up or
liquidation of the affairs of the Company.
It is understood and agreed that the representations and warranties set forth in
this paragraph (a) shall survive the sale and assignment by the Originator of
the Mortgage Loans to the Company and by the Company to the related EquiVantage
Trust.
(b) The Company hereby represents and warrants to the Originator, the
Certificate Insurer, the Trustee and the Owners that, as of the date hereof:
(i) The Company 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
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Company 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.
(ii) The execution and delivery of this Agreement, the related Conveyance
Agreement and the other Operative Documents to which the Company is
a party by the Company and its performance and compliance with the
terms of this Agreement, the related Conveyance 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
Company and will not violate the Company's articles of
incorporation, bylaws or other organizational documents of the
Company 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 Company is a party or by which the Company
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 Company or any of its properties.
(iii) This Agreement, the related Conveyance Agreement and the other
Operative Documents to which the Company 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 Company, 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).
(iv) The Company 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 Company or its
properties or might have consequences that would materially and
adversely affect its performance hereunder, under the related
Conveyance Agreement and under the other Operative Documents to
which it is a party.
(v) Except as described in the related Pooling and Servicing Agreement
and as disclosed in any Prospectus, no litigation is pending or, to
the best of the Company's knowledge, threatened against the Company
which litigation might have consequences that would prohibit its
entering into this Agreement, the related Conveyance Agreement or
any other Operative Document to which it is a party or that would
materially and adversely affect the condition (financial or
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otherwise) or operations of the Company or its properties or might
have consequences that would materially and adversely affect its
performance hereunder, under the related Conveyance Agreement and
under the other Operative Documents to which it is a party.
(vi) No certificate of an officer, statement furnished in writing or
report delivered pursuant to the terms hereof by the Company
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.
(vii) The statements contained in the Registration Statement which
describe the Company or matters or activities for which the Company
is responsible in accordance with the Operative Documents or which
are attributed to the Company 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 Company
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 Company not misleading. To the best of the Company'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.
(viii) 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 Company makes no such representation or
warranty), that are necessary or advisable in connection with the
purchase and sale of the related EquiVantage Trust Certificates
and the execution and delivery by the Company 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, the related Conveyance Agreement and the other
Operative Documents on the part of the Company and the
performance by the Company of its obligations under this
Agreement, the related Conveyance Agreement and under such of the
other Operative Documents to which it is a party.
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(ix) The transactions contemplated by this Agreement are in the ordinary
course of business of the Company.
(x) The Company is receiving fair consideration and reasonably
equivalent value in exchange for the sale of the interests in the
Mortgage Loans evidenced by the related EquiVantage Trust
Certificates.
(xi) The Company is not selling any interest in any Mortgage Loan
evidenced by the related EquiVantage Trust Certificates with any
intent to hinder, delay or defraud any of its respective creditors.
(xii) The Company is solvent and the Company will not be rendered
insolvent as a result of the sale of the Mortgage Loans to the
Trust or the sale of the related EquiVantage Trust Certificates.
The representations and warranties set forth in this paragraph (b) shall survive
the sale and assignment of the Mortgage Loans to the Company and the sale and
assignment of the Mortgage Loans by the Company to the related EquiVantage
Trust. Upon discovery of a breach of any of the foregoing representations and
warranties which materially and adversely affects the interests of the
Originator, the party discovering such breach shall give prompt written notice
to the other. Within 30 days of its receipt of notice of breach, the Company
shall cure such breach in all material respects.
Section 5. Representations and Warranties of the Originator Regarding
the Mortgage Loans. (a) Set forth in paragraph (b) below, are listings of
representations and warranties which are hereby made by the Originator to the
Company in connection with each purchase of a Pool with respect to the related
Mortgage Loans in such Pool as of the related Cut-Off Date. In addition, with
respect to the Mortgage Loans in the related Pool, a Conveyance Agreement may
delete or modify any of such representations and warranties or may add
additional representations and warranties (the Company may also modify, add or
delete any such representations and warranties in the related Pooling and
Servicing Agreement) (collectively, any such modified or additional
representations and warranties, the "Additional Representations and
Warranties"); provided, however, that all such deletions, additions or
modifications shall have been approved by the Certificate Insurer. The
representations and warranties listed in paragraphs (a) and (b), together with
any Additional Representations and Warranties, constitute the representations
and warranties under this Section 5. The parties hereto agree that the
representations and warranties are incorporated by reference into the related
Pooling and Servicing Agreement and that the Trustee and the Certificate Insurer
may pursue all of the Company's rights and remedies hereunder with respect to
any breach of a representation and warranty in the same manner as if the
Trustee, or the Certificate Insurer, as the case may be, were a party to this
Agreement.
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(b) With respect to each Mortgage Loan as of the related Cut-Off Date, the
Originator hereby represents, warrants and covenants to the Company, the
Certificate Insurer, Servicer and the Trustee as follows; the Originator
acknowledges that the Trustee will be relying on such representations,
warranties and covenants in accepting the Mortgage Loans from the Company and
that the Certificate Insurer will be relying thereon in issuing the Certificate
Insurance Policy:
(i) Such Mortgage Loan was originated or acquired by the Originator and
as of the Startup Day the related Mortgage creates a valid lien on
the related Property securing the amount owed by the Mortgagor
under the related Note subject only to (w) the lien of current real
property taxes and assessments, (x) the lien of any related Senior
Lien (as to any Mortgage Loan that is not secured by a first
priority lien), (y) covenants, conditions and restrictions, rights
of way, easements and other matters of public record as of the date
of recording of such Mortgage, such exceptions appearing of record
being acceptable to mortgage lending institutions generally in the
area wherein the related Property is located or specifically
reflected in the appraisal or title policy obtained in connection
with the origination of the related Mortgage Loan by the Company and
the Originator and (z) other matters to which like properties are
commonly subject which do not materially interfere with the benefits
of the security intended to be provided by such Mortgage.
(ii) No Property consists solely of raw land, an apartment building
having more than four units or a cooperative apartment. Each
Primary Parcel is improved by one or more single (one-to-four)
family residential dwellings, which may include condominiums,
townhouses and manufactured homes.
(iii) Immediately prior to the sale, transfer, assignment and
conveyance by the Originator to the Company, the Originator had
good title to such Mortgage Loan, free of any interest of any
other Person, and the Originator has sold, transferred, assigned
and conveyed all of its right, title and interest in and to such
Mortgage Loan to the Company.
(iv) The Originator and, with respect to any Mortgage Loan purchased by
the Originator, the seller of such Mortgage Loan to the Originator,
was properly licensed or otherwise authorized, to the extent
required by applicable law including, without limitation, any "doing
business" laws, to originate or acquire such Mortgage Loan. Such
Mortgage Loan at the time it was made complied or, if the Mortgage
Loan was acquired and not originated by the Originator, to the best
of the Originator's knowledge, such Mortgage Loan either
(y) complied in all material respects with applicable state and
federal laws and regulations, including, without limitation, the
federal Truth-in-Lending Act, the Real Estate Settlement Procedures
Act and other federal, state and local consumer protection, usury,
equal credit opportunity,
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disclosure and recording laws or (z) any such lack of compliance
under clause (y) has been cured such that all such Mortgage Loans
acquired and not originated by the Originator are materially in
compliance pursuant to clause (y). The consummation of the
transactions herein contemplated, including, without limitation,
the sale of the Mortgage Loans to the related EquiVantage Trust,
will not violate any such state or federal law or regulation.
(v) The Originator has not received a notice of default on any Senior
Lien secured by the related Property which has not been cured by a
party other than the Originator.
(vi) Except as provided in the related Conveyance Agreement, none of
the Mortgage Loans are subject to Section 32 of the Federal
Truth-in-Lending Act.
(vii) As of its date of origination, no Mortgage Loan had a Combined
Loan-to-Value Ratio in excess of the level specified in the
related Conveyance Agreement.
(viii) No Senior Lien or any Mortgage Loan secured by the related
Property provides for negative amortization of the principal
balance thereof.
(ix) Each original Mortgage was recorded, or is in the process of being
recorded, and all subsequent assignments of the original Mortgage
have been recorded, or are in the process of being recorded, in the
appropriate jurisdictions wherein such recordation is necessary to
perfect the lien thereof as against creditors of the Originator and
any other originator or as against creditors of the Originator's
predecessors in title, except as otherwise provided for in the
related Pooling and Servicing Agreement.
(x) The related Note is not and has not been secured by any collateral,
pledged account or other security except the lien of the related
Mortgage. Each Senior Lien, if any, on a Property permits the
granting of a junior lien similar to the related Mortgage Loan
without consent, or, if consent is required, it has been obtained
and is contained in the related File.
(xi) As of the related Cut-Off Date, to the best knowledge of the
Originator, the Property subject to the related Mortgage is free of
material damage and is in good repair, except for deferred
maintenance for which sufficient funds have been escrowed.
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(xii) The sale, transfer, assignment and conveyance of each Mortgage
Loan by the Originator to the Company is not subject to the bulk
transfer laws or any similar statutory provisions in effect in
any applicable jurisdiction.
(xiii) Each Mortgage Loan is being serviced by the Servicer or a
Sub-Servicer in accordance with the Servicer's standard servicing
procedures.
(xiv) Each Mortgage Loan is a mortgage loan principally secured by an
interest in real property for purposes of the REMIC provisions of
the Code and is secured by a first or second priority Mortgage.
(xv) The credit underwriting guidelines applicable to the origination of
each Mortgage Loan conformed in all material respects to the
description thereof set forth in the Prospectus relating to the
Offered Certificates. None of the Mortgage Loans were selected from
among the Originator's or any other originator's assets in a manner
which would cause them to be adversely selected as to credit risk
from the pool of mortgage loans owned by the Originator.
(xvi) As of the Startup Day, to the best of the Originator's knowledge,
there is no valid and enforceable offset, defense, right of
rescission, set-off or counterclaim to any Note or Mortgage,
including the defense of usury, or the obligation of the related
Mortgagor to pay the unpaid principal of or interest on such
Note.
(xvii) If any material improvement to the Property is in an area
identified in the Federal Register by the Federal Emergency
Management Agency as having special flood hazards, a flood
Insurance Policy in a form meeting the requirements of the
current guidelines of the Federal Insurance Administration is in
effect with respect to such material improvement located on such
Property with a generally acceptable carrier in an amount
representing coverage not less than the least of (A) the
outstanding principal balance of the related Mortgage Loan
(together, in the case of a Mortgage Loan that is not a first
priority lien, with the outstanding principal balance of any
liens that are prior to the related Mortgage Loan lien), (B) the
minimum amount required to compensate for damage or loss to such
improvement on a replacement cost basis or (C) the maximum amount
of insurance that is available under the Flood Disaster
Protection Act of 1973.
(xviii) Each Mortgage Loan contains a provision for the acceleration of
the payment of the unpaid principal balance of the related
Mortgage Loan in the event the related Property is sold without
the prior consent of the holder of the Mortgage, subject to
limitations under applicable law.
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(xix) Except as otherwise set forth on the related Schedule of Mortgage
Loans, no instrument of release or waiver has been executed in
connection with any Mortgage Loan, and no Mortgagor has been
released, in whole or in part, from his or her obligations
thereunder, except (A) with respect to release of excess acreage,
(B) where necessary to create a utility easement, (C) release of
portions of land, none of which materially adversely affects the
value of the relevant Property or which causes the resulting
Combined Loan-to-Value Ratio to be outside of the underwriting
guidelines or (D) in a manner consistent with the Originator's or
Servicer's ordinary practice.
(xx) 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 related Prospectus.
(xxi) The information with respect to each Mortgage Loan set forth in
the Schedules of Mortgage Loans is true and correct as of the
Cut-Off Date.
(xxii) All of the original or certified documentation set forth in the
related Pooling and Servicing Agreement (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 the related Pooling and Servicing
Agreement.
(xxiii) Each Mortgage Loan being transferred to the Trust is secured by a
Mortgage that is a Qualified Mortgage and each Note is in a form
that is acceptable to prudent mortgage lenders which make
mortgage loans comparable to the Mortgage Loans.
(xxiv) Each Mortgage is a valid and subsisting first or second (as shown
in the related Schedule of Mortgage Loans) lien of record on the
Primary Parcel of the related Property subject in all cases to
the exceptions to title set forth in the title Insurance Policy
or title opinion with respect to the related Mortgage Loan, which
are exceptions to which similar properties are commonly subject
and which do not individually, or in the aggregate, materially
and adversely affect the benefits of the security intended to be
provided by such Mortgage.
(xxv) Prior to the sale to the Company of Mortgage Loans by the
Originator, the Originator held good and indefeasible title to,
and was the sole owner of, each Mortgage Loan subject to no
liens, charges, mortgages, encumbrances or rights of others
except as set forth in clauses (viii), (xi) and (xiii) above or
other liens which will be released simultaneously with such
transfer and assignment.
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(xxvi) There is no delinquent tax, ground rent, water charge, sewer
rent, insurance premium, leasehold payment or delinquent
assessment lien, mechanics' lien or claim for work, labor or
material affecting any Property which is or may have a priority
over, be a lien prior to, or equal with, the lien of the related
Mortgage, except those liens for which funds sufficient to
discharge such liens are held in escrow by the Servicer or by an
escrow agent, or which are insured against by the title Insurance
Policy.
(xxvii) With respect to each Mortgage Loan, either (A) lender's title
Insurance Policy (or commitment therefor), issued in standard or
American Land Title Association form (with modifications, if any,
approved by the state in which the related Property is located)
by a title insurance company authorized to transact business in
the state in which the related Property is situated, in an amount
at least equal to the Original Principal Amount of such Mortgage
Loan insuring the mortgagee's interest under the related Mortgage
Loan as the holder of a valid first or second mortgage lien of
record on the real property described in the related Mortgage,
subject only to a survey exception and other exceptions of the
character referred to in clauses (xxiv), (xxv) and (xxvi) above
and (xliv) below, was effective on the date of the origination of
such Mortgage Loan, and, as of the Closing Date, such policy will
be valid and thereafter such policy shall continue in full force
and effect, (B) in those jurisdictions in which it is customary
to obtain opinions of counsel as to title matters rather than
title insurance, an opinion of counsel as to the mortgagee's
interest under the related Mortgage Loan as the holder of a valid
first or second mortgage lien of record on the real property
described in the related Mortgage, was obtained in connection
with the date or origination of such Mortgage Loan.
(xxviii) The material improvements upon each Property are covered by a
valid and existing hazard Insurance Policy with a carrier
licensed in the state in which the Property is located that
provides for fire and extended coverage representing coverage not
less than the least of (A) the outstanding principal balance of
the related Mortgage Loan and, in the case of a Second Mortgage
Loan, the outstanding principal balance of the related Senior
Lien, (B) the minimum amount required to compensate for loss or
damage on a replacement cost basis or (C) the full insurable
value of the material improvements to the Property, but in any
event in an amount not less than such amount as is necessary to
avoid the application of any co-insurance clause contained in the
related Insurance Policy. All individual Insurance Policies are
the valid and binding obligation of the insurer and contain a
standard mortgagee clause naming the Servicer on behalf of the
Originator, its successors and assigns, as mortgagee. All
premiums then due thereon have been paid. The Mortgage
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obligates the Mortgagor thereunder to maintain all such insurance
at the Mortgagor's cost and expense.
(xxix) Each Mortgage and Note is genuine and constitutes the legal,
valid and binding obligation of the maker thereof and is
enforceable in accordance with its terms, except only as such
enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general
principles of equity (whether considered in a proceeding or
action in equity or at law), and to the best of the Originator's
knowledge all parties to each Mortgage Loan had full legal
capacity to execute all documents relating to such Mortgage Loan
and to convey the estate therein purported to be conveyed and
each Mortgage and Note have been duly and properly executed by
such parties.
(xxx) The Originator has caused and will cause to be performed any and
all acts required to be performed to preserve the rights and
remedies of the Trustee in any Insurance Policies applicable to
any of the Mortgage Loans delivered by the Originator to the
Trustee including, without limitation, any necessary
notifications of insurers, assignments of policies or interest
therein, and establishments of co-insured, joint loss payee and
mortgagee rights in favor of the Trustee.
(xxxi) The terms of each Note and each Mortgage have not been impaired,
altered or modified in any respect, except by a written
instrument which has been recorded, if necessary, to protect the
interest of the Trustee, as assignee of the Company, and which
has been delivered to the Trustee. The substance of any such
alteration or modification made prior to the Cut-Off Date
is reflected on the related Schedule of Mortgage Loans; and any
subsequent alteration or modification prior to the date hereof
has been made only as permitted by the related Pooling and
Servicing Agreement.
(xxxii) The proceeds of each Mortgage Loan have been fully disbursed to
the Mortgagor or into an escrow account (i) for completion of any
improvements to the related Property or (ii) to establish as an
escrow fund for payment of taxes and insurance related to the
Property. Each Mortgage Loan is a closed-end Mortgage Loan, and
there is no obligation on the part of the Servicer, the
Originator or the Originator's assignees to make future advances
thereunder at the option of the Mortgagor. All costs, fees and
expenses incurred in making, closing or recording such Mortgage
Loans have been paid or will be paid from escrowed funds.
(xxxiii) No Mortgage Loan has a shared appreciation feature, or other
contingent interest feature.
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(xxxiv) As of the Cut-Off Date, the percentage of Mortgage Loans stated
in the related Conveyance Agreement were originated pursuant to a
"no-income verification" program.
(xxxv) Any advances made after the date of origination of a Mortgage
Loan but prior to the Cut-Off Date have been consolidated with
the outstanding principal amount secured by the related Mortgage,
and the secured principal amount, as consolidated, bears a single
interest rate and single repayment term as reflected on the
Schedule of Mortgage Loans. The consolidated principal amount
does not exceed the Original Principal Amount of the related
Mortgage Loan.
(xxxvi) To the best of the Company's knowledge, there is no proceeding
pending or hreatened for the total or partial condemnation
of any Property, nor is such a proceeding currently occurring,
and each Property is undamaged by waste, fire, earthquake, earth
movement, windstorm (including a hurricane), flood, tornado or
other casualty, except for damage materially covered by policies
of insurance as described in clause (xxviii) above and identified
in Schedule I attached hereto.
(xxxvii) To the best of the Company's knowledge, all of the improvements
which were included for the purposes of determining the Appraised
Value of each Property lie wholly within the boundaries and
building restriction lines of such Property, and no improvements
on adjoining properties encroach upon such Property, except for
minor encroachments and protrusions which do not materially
affect the Appraised Value of the Property.
(xxxviii) To the best of the Company's knowledge, no improvement located on
or being part of any Property is in material violation of any
applicable zoning law or regulation. To the best of Originator's
knowledge, all inspections, licenses and certificates required to
be made or issued with respect to all occupied portions of each
Property and, with respect to the use and occupancy of the same,
have been made or obtained from the appropriate authorities.
(xxxix) With respect to each Mortgage constituting a deed of trust, a
trustee, duly qualified under applicable law to serve as such,
has been properly designated and currently so serves and is named
in such Mortgage, and no fees or expenses are or will become
payable by the Company to the trustee under the deed of trust,
except in connection with a trustee's sale after default by the
related Mortgagor.
(xl) Each Mortgage contains customary and enforceable provisions which
render the rights and remedies of the holder thereof adequate
for the realization
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against the related Property of the benefits of the security,
including (A) in the case of a Mortgage designated as a deed of
trust, by trustee's sale and (B) otherwise by judicial
foreclosure. There is no homestead or other exemption available
to the related Mortgagor which would materially interfere with
the right to sell the related Property at a trustee's sale or
the right to foreclose the related Mortgage.
(xli) To the best of the Originator's knowledge except as disclosed on
the Schedules of Mortgage Loans, there is no default, breach,
violation or event of acceleration existing as of the Cut-Off
Date under any Mortgage or the related Note and no event which,
with the passage of time or with notice and the expiration of any
grace or cure period, would constitute a default, breach,
violation or event of acceleration; and neither the Servicer nor
the Originator has waived any default, breach, violation or event
of acceleration which would, but for such waiver, exist on the
Cut-Off Date; except that the Servicer or the Originator may have
heretofore waived late payments or granted extensions of payments
(none of which extensions are material).
(xlii) An appraisal, completed by independent fee appraisers, was
performed with respect to each Mortgage Loan and is contained in
the File, and no appraisal was based solely on a cost approach
analysis.
(xliii) With respect to each Mortgaged Property subject to a ground lease
(i) the current ground lessor has been identified and all ground
rents which previously become due and owing have been paid; (ii)
the ground lease term extends, or is automatically renewable, for
a least five years beyond the maturity date of the related
Mortgage Loan; (iii) the ground lease has been duly executed;
(iv) the amount of the ground rent and any increases therein are
clearly identified in the lease and are for predetermined amounts
at predetermined times; (v) the Trust has the right to cure
defaults on the ground lease; and (vi) the terms and conditions
of the leasehold do not prevent the free and absolute
marketability of the Mortgaged Property. As of the Cut-Off Date,
the Principal Balance of Mortgage Loans with related Mortgaged
Properties subject to ground leases does not exceed the
percentage of the Original Principal Balance stated in the
related Conveyance Agreement.
(xliv) As of the Cut-Off Date, no more than the percentage of the
Original Aggregate Loan Balance stated in the related Conveyance
Agreement is secured by investor-owned Properties.
(xlv) The Originator has no actual knowledge that there exist on any
Property, any hazardous substances, hazardous wastes or solid
wastes, as such terms are defined in the Comprehensive
Environmental Response Compensation
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and Liability Act, the Resource Conservation and Recovery Act
of 1976, or other federal, state or local environmental
legislation. For purposes of this clause, actual knowledge of
the Originator means actual knowledge of an officer of the
Originator involved in the servicing of the relevant Mortgage
Loan. Actual knowledge of the Originator does not include
knowledge imputable by virtue of the availability of or
accessibility to information relating to environmental or
hazardous waste sites or the locations thereof.
(xlvi) To the best of the Originator's knowledge, except for payments in
the nature of escrow payments, including, without limitation,
taxes and insurance payments, or payments for protection and
preservation of the Property; including the cost of legal
proceedings against the Property, the Servicer has not advanced
funds directly or indirectly, for the payment of any amount
required by the Mortgage.
(xlvii) Any Mortgage Loan in which the related Mortgagor is subject to a
bankruptcy proceeding filed after the Mortgage Loan was
originated is current under the terms of the bankruptcy payment
plan.
(xlviii) Each Mortgage Loan bears a fixed rate of interest (except that,
with respect to Program Loans bearing a fixed rate of interest,
the related Mortgage Rate may be reduced by as much as 1.50% in
accordance with the terms of the related Note), except for the
number of Mortgage Loans bearing rates of interest that adjust at
periodic intervals, if any, stated in the related Conveyance
Agreement.
(xlix) With respect to each Mortgage Loan which is or has been the
subject of bankruptcy or insolvency proceedings, (a) as of the
Cut-Off Date, the Mortgagor is not contractually Delinquent more
than 30 days with respect to any payment due under the related
plan, (b) the current Combined Loan-to-Value Ratio is less than
or equal to 85%, and (c) either (i) if the current Combined
Loan-to-Value Ratio is between 70% and 85% as of the Cut-Off
Date, the Mortgagor has made at least six consecutive payments
under the related Plan or (ii) if the current Combined
Loan-to-Value Ratio is less than 70% as of the Cut-Off Date, the
Mortgagor has made at least three consecutive payments under the
related plan.
(l) To the best knowledge of the Originator, the proceeds of any
Mortgage Loan made to a Mortgagor in bankruptcy at the time of
origination of such Mortgage Loan were applied in a manner
consistent with the related bankruptcy plan.
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(li) The maturity date of each Mortgage Loan that is a junior lien
loan is at least twelve months prior to the maturity date of the
related first mortgage loan if such related first mortgage loan
provides for a balloon payment.
(lii) The Mortgagor has not notified the Originator of and the
Originator has no knowledge of any relief requested or allowed to
the Mortgagor under the Soldiers and Sailors Civil Relief Act of
1940.
(liii) (a) To the best of the Originator's knowledge, no action, error,
omission, misrepresentation, negligence, fraud or similar
occurrence with respect to a Mortgage Loan has taken place on the
part of any person, including without limitation the Mortgagor,
any appraiser, any builder or developer, or any other party
involved in the origination of the Mortgage Loan or in the
application of any insurance in relation to such Mortgage Loan,
that would have a material adverse effect on the Mortgage Loan,
except in the case of a Mortgage Loan with respect to which
information contained in an appraisal, Mortgagor income
verification report or other document related to the origination
of the Mortgage Loan has been determined to be incorrect or
incomplete and such information has been corrected or completed
as of the related Cut-Off Date, and (b) the Originator has no
knowledge of any action that has been taken or failed to have
been taken, or of any event that has occurred, or state of facts
that exists or has existed on or prior to the related Cut-Off
Date (whether or not known to the Originator on or prior to such
date) which occurrence described in clause (a) and clause (b) of
this subsection (liii) has resulted or will result in an
exclusion from, denial of, or defense to coverage under any
primary Insurance Policy or pool policy certification (including,
without limitation, any exclusions, denials or defenses which
would limit or reduce the availability of the timely payment of
the full amount of the loss otherwise due thereunder to the
insured) whether arising out of actions, representations, errors,
omissions, negligence, or fraud of a seller, the Originator, the
related Mortgagor or any party involved in the application for
such coverage, including the appraisal, plans and specifications
and other exhibits or documents submitted therewith to the
insurer under such Insurance Policy, or for any other reason
under such coverage, but not including the failure of such
insurer to pay by reason of such insurer's breach of such
Insurance Policy or such insurer's financial inability to pay.
(liv) The Originator has no knowledge of any circumstance or condition
with respect to the Property, Mortgagor or the Mortgagor's credit
standing that can reasonably be expected to materially adversely
affect the value of the Mortgage Loan.
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The representations and warranties of this paragraph (b) shall survive the
transfer and assignment of the Mortgage Loans to the Company. The
representations and warranties of this paragraph (b) shall survive the transfer
and assignment of the Mortgage Loans by the Company to EquiVantage Trusts. Upon
discovery by the Company of a breach of any of the representations and
warranties of this paragraph (b), without regard to any limitation set forth in
such representation or warranty concerning the knowledge of the Originator or
the Company as to the facts stated therein, which breach, in the opinion of the
Company, the Certificate Insurer or the Trustee, materially and adversely
affects the interests of the Company, the Owners or of the Certificate Insurer
in the related Mortgage Loan or Mortgage Loans, the party discovering such
breach shall give prompt written notice to the other parties, and the Originator
shall be required to take the remedial actions required by the related Pooling
and Servicing Agreement within the time periods required thereto, which in no
case shall be less than 30 days.
The Originator acknowledges that a breach of any representation or warranty
relating to (x) title sufficient to transfer indefeasible title to a Mortgage
Loan or (y) enforceability of the Mortgage Loan against the related Mortgagor or
Property constitutes breach of a representation or warranty of this Section 5
which "materially and adversely affects the interests of the Owners or of the
Certificate Insurer" in such Mortgage Loan. For purposes of this Agreement the
representations and warranties made in this Section 5 limited to the
Originator's knowledge shall be limited to the actual knowledge of the officers
executing this Agreement.
Section 6. Covenants of the Originator to Take Certain Actions with
Respect to the Mortgage Loans in Certain Situations. (a) Upon the earliest to
occur of the Originator's discovery, its receipt of notice of breach from any
one of the other parties to the related Pooling and Servicing Agreement or from
the Certificate Insurer or such time as a breach of any representation and
warranty in Section 5 hereof materially and adversely affects the interests of
the Owners or of the Certificate Insurer as set forth above, the Originator
hereby covenants and warrants that it shall promptly cure such breach in all
material respects or it shall, 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 Originator a Qualified
Replacement Mortgage and deliver to the Servicer for deposit in the Principal
and Interest Account the Substitution Amount applicable thereto, together with
the aggregate amount of all Delinquency Advances and 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 Originator 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 status of the Trust as a REMIC, and the Originator 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
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status of the Trust as a REMIC. Any required purchase or substitution, if
delayed by the absence of such opinion shall nonetheless occur upon the earlier
of (i) the occurrence of a default or imminent default with respect to the
Mortgage Loan or (ii) the delivery of such opinion. The obligation of the
Originator 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 against the Originator
with respect to such breach available to the Owners, the Trustee or the
Certificate Insurer.
(b) In the event that any Qualified Replacement Mortgage is delivered by
the Originator, the Originator shall be obligated to take the actions described
in this Section 6 with respect to such Qualified Replacement Mortgage upon the
discovery by any of the Owners, the Company, the Servicer, the Certificate
Insurer, or the Trustee that the representations and warranties set forth in
Section 5 hereof are untrue with respect to such Qualified Replacement Mortgage
in any material respect on the date such Qualified Replacement Mortgage is
conveyed to the related EquiVantage 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 paragraph (b) the representations and warranties in Section 5 hereof
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 related EquiVantage Trust.
(c) The covenants set forth in this Section 6 shall survive delivery of
the respective Mortgage Loans (including Qualified Replacement Mortgage Loans)
to the Trustee.
Section 7. Term of Agreement. This Agreement shall terminate upon (i)
the final payment or other liquidation of the last Mortgage Loan required
pursuant to this Agreement or included in an EquiVantage Trust under this
Agreement or (ii) the disposition of all property acquired upon foreclosure or
deed in lieu of foreclosure of any Mortgage Loan.
Section 8. Authorized Representatives. The names of the officers of
the Originator and of the Company who are authorized to give and receive
notices, requests and instructions and to deliver certificates and documents in
connection with this Agreement on behalf of the Originator and of the Company
("Authorized Representatives") are set forth in Exhibit B, along with the
specimen signature of each such officer. From time to time, the Originator and
the Company may, by delivering to the Trustee and the Certificate Insurer a
revised exhibit, change the information previously given, but the Trustee shall
be entitled to rely conclusively on the last exhibit until receipt of a
superseding exhibit.
Section 9. Notices. All demands, notices and communications relating
to this Agreement shall be in writing and shall be deemed to have been duly
given when received by the other party or parties at the address shown below, or
such other address as may hereafter be furnished to the other party or parties
by like notice. Any such demand, notice or communication hereunder shall
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be deemed to have been received on the date delivered to or received at the
premises of the addressee.
If to the Company:
EquiVantage Acceptance Corp.
13111 Northwest Freeway, Suite 301
Houston, Texas 77040
Attention: Chief Financial Officer
Telecopy: (713) 895-1999
Telephone: (713) 895-1957
With a copy to:
EquiVantage Acceptance Corp.
13111 Northwest Freeway, Suite 301
Houston, Texas 77040
Attention: General Counsel
Telecopy: (713) 895-1999
Telephone: (713) 895-1957
If to the Originator:
EquiVantage Inc.
13111 Northwest Freeway, Suite 300
Houston, Texas 77040
Attention: Chief Financial Officer
Telecopy: (713) 895-3870
Telephone: (713) 895-1900
With a copy to:
EquiVantage Inc.
13111 Northwest Freeway, Suite 300
Houston, Texas 77040
Attention: General Counsel
Telecopy: (713) 895-3870
Telephone: (713) 895-1900
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If to the Trustee:
Norwest Bank Minnesota, National Association
Sixth Street & Marquette Avenue
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Servicer
Asset-Backed Administration
Re: EquiVantage Home Equity Loan Trust 1997-2
Telecopy: (612) 667-7167
Telephone: (612) 667-9825
If to the Certificate Insurer:
Financial Guaranty Insurance Company
115 Broadway
New York, New York 10006
Attention: Surveillance Department
Re: EquiVantage Acceptance Corp. Home Equity Loan Trust 1997-2
Telephone: (212) 312-3000
Telecopy: (212) 312-3231
Section 10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, without regard
to conflict of laws rules applied in the State of New York.
Section 11. Assignment. No party to this Agreement may assign its
rights or delegate its obligations under this Agreement without the express
written consent of the other parties, except as otherwise set forth in this
Agreement.
Section 12. Counterparts. For the purpose of facilitating the execution
of this Agreement and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which shall be deemed to
be an original, and together shall constitute and be one and the same
instrument.
Section 13. Amendment. This Agreement may be amended from time to time
by the Originator and the Company only by a written instrument executed by such
parties and with the prior written consent of the Certificate Insurer.
Section 14. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
25
<PAGE>
Section 15. No Agency; No Partnership or Joint Venture. Neither the
Originator nor the Company is the agent or representative of the other (except
with respect to Mortgage Loans originated or acquired by the Company in its
capacity as Originator), and nothing in this Agreement shall be construed to
make either the Originator or the Company liable to any third party for services
performed by it or for debts or claims accruing to it against the other party.
Nothing contained herein nor the acts of the parties hereto shall be construed
to create a partnership or joint venture between the Company and the Originator.
Section 16. Further Assurances. The Originator and Company agree to
cooperate reasonably and in good faith with one another in the performance of
this Agreement.
Section 17. The Certificate Insurer and the Trustee. The Certificate
Insurer and the Trustee are third-party beneficiaries of this Agreement. The
Trustee and the Certificate Insurer shall have the right to enforce the
representations and warranties set forth in this Agreement through the Company
or directly. Any right conferred to the Certificate Insurer shall be suspended
during any period in which the Certificate Insurer is in default in its payment
obligations under the Certificate Insurance Policy. During any period of
suspension, the Certificate Insurer's rights hereunder shall vest in the Owners
of the related Offered Certificates and shall be exercisable by the Owners of at
least a majority in Percentage Interest of the related Offered Certificates then
Outstanding. At such time as the related Offered Certificates are no longer
Outstanding under the related Pooling and Servicing Agreement and the
Certificate Insurer has been reimbursed for all Insured Payments to which it is
entitled under the related Pooling and Servicing Agreement, the Certificate
Insurer's rights hereunder shall terminate.
26
<PAGE>
IN WITNESS WHEREOF, the Company and the Originator have caused this Master
Transfer Agreement to be duly executed by their respective officers, all as of
the day and year first above written.
EQUIVANTAGE ACCEPTANCE CORP.,
the Company
By: /s/ John E. Smith
------------------------------------
Name: John E. Smith
Title: President
EQUIVANTAGE INC.
the Originator
By: /s/ Karen S. Crawford
------------------------------------
Name: Karen S. Crawford
Title: Senior Vice President
<PAGE>
Exhibit A
FORM OF CONVEYANCE AGREEMENT
THIS CONVEYANCE AGREEMENT, dated ______, 199_, is between EquiVantage
Acceptance Corp. (the "Company") and EquiVantage Inc. (the "Originator").
Pursuant to the Master Loan Transfer Agreement dated as of June __, 1997 between
the Company and the Originator (the "Mortgage Transfer Agreement"), the parties
hereto hereby confirm their understanding with respect to the sale by the
Originator and the purchase by the Company of those Mortgage Loans listed on the
Schedule of Mortgage Loans attached hereto (the "Transferred Mortgage Loans").
Conveyance of Transferred Mortgage Loans. The Originator, concurrently
with the execution and delivery of this Conveyance Agreement, does hereby
irrevocably transfer, sell, assign, set over and otherwise convey to the
Company, without recourse (except as otherwise explicitly provided for herein)
all of its right, title and interest in and to the Transferred Mortgage Loans
being conveyed by it, including specifically, without limitation, the Mortgages,
the Files and all other documents, materials and properties appurtenant thereto
and the Notes, including all interest and principal received by the Originator
on or with respect to such Transferred Mortgage Loans on or after the related
Cut-Off Date, together with all of its right, title and interest in and to the
proceeds received on or after the related Cut-Off Date of any related insurance
policies on behalf of the Company. It is the intention of the parties hereto
that the conveyance by the Originator of the Transferred Mortgage Loans to the
Company shall constitute a purchase and sale of such Transferred Mortgage Loans
and not a loan. If the Originator cannot deliver the original Mortgage or
mortgage assignment with evidence of recording thereon concurrently with the
execution and delivery of this Conveyance Agreement solely because of a delay
caused by the public recording office where such original Mortgage or mortgage
assignment has been delivered for recordation, the Originator shall promptly
deliver to the Trustee on behalf of the Company such original Mortgage or
mortgage assignment with evidence of recording indicated thereon upon receipt
thereof from the public recording official, as soon as possible but in no event
later than 12 months from the Startup Day.
The costs relating to the delivery of the documents specified in this
Conveyance Agreement shall be borne by the Originator.
The Originator hereby makes the representations and warranties set forth in
Section 5(a) of the Master Transfer Agreement with respect to the Transferred
Mortgage Loans. The "Cut-Off Date" with respect to such Transferred Mortgage
Loans shall be the close of business on [INSERT DATE] or, if any Transferred
Mortgage Loan was originated subsequent to [INSERT DATE], but prior to the
Startup Day, the date of origination of such Transferred Mortgage Loan.
A-1
<PAGE>
Except as set forth immediately below, all terms and conditions of the
Mortgage Transfer Agreement are hereby incorporated herein; provided that, in
the event of any conflict, the provisions of this Conveyance Agreement shall
control over the conflicting provisions of the Mortgage Transfer Agreement.
(i) With respect to each Transferred Mortgage Loan involving property
improved by a manufactured home, such manufactured home constitutes
real property under applicable state law and the Originator has
taken all action necessary to create a valid and perfected first
or second priority lien and security interest in such manufactured
home and the related Property, including, without limitation, the
filing of a Uniform Commercial Code financing statement or notations
on certificates of title, if necessary under applicable state law.
(ii) As of its date of origination, no Transferred Mortgage Loan had a
Combined Loan-to-Value Ratio in excess of [INSERT PERCENTAGE].
(iii) No Transferred Mortgage Loan is a Third Mortgage Loan.
(iv) No more than [INSERT PERCENTAGE] of the Transferred Mortgage Loans
were originated under any "no-income verification" program.
(v) The Note related to each Transferred Mortgage Loan bears a minimum
Coupon Rate of at least [INSERT PERCENTAGE] per annum.
(vi) Each Note for a fixed rate Transferred Mortgage Loan that is not a
Balloon Loan provides for a schedule of substantially level and
equal monthly scheduled payments which are sufficient to amortize
fully the principal balance of such Note on or before its maturity
date, which maturity date is not more than [INSERT NUMBER] years
from the date of origination of such Transferred Mortgage Loan.
Each Balloon Loan has an original term to stated maturity of not
more than [INSERT NUMBER] years and an amortization schedule based
on not more than [INSERT NUMBER] years.
(vii) No more than [INSERT PERCENTAGE] of the Transferred Mortgage
oans is more than 30 days Delinquent (assuming a 30-day month).
(viii) No Transferred Mortgage Loan had a Loan Balance less than [INSERT
DOLLAR AMOUNT] as of the Cut-Off Date or greater than [INSERT
DOLLAR AMOUNT] as of the Cut-Off Date.
(ix) The Primary Parcel of each Property is located in the state
identified in the Schedule of Mortgage Loans attached hereto; no
more than [INSERT PERCENTAGE] of the aggregate Loan Balance as of
the Cut-Off Date is
A-2
<PAGE>
secured by mortgaged Properties located within any single postal
zip code area; and each Property consists of one or more parcels
of real property with a residential dwelling erected on the
Primary Parcel.
(x) As of the Cut-Off Date, no more than [INSERT PERCENTAGE] of the
aggregate Loan Balance is secured by condominiums; no Transferred
Mortgage Loan relates to a cooperative.
(xi) With respect to each Mortgaged Property subject to a ground lease
(i) the current ground lessor has been identified and all ground
rents that previously become due and owing have been paid; (ii)
the ground lease term extends, or is automatically renewable, for
at least five years beyond the maturity date of the related
Transferred Mortgage Loan; (iii) the ground lease has been duly
executed and recorded; (iv) the amount of the ground rent and any
increases therein are clearly identified in the lease and are for
predetermined amounts at predetermined times; (v) the Trust has
the right to cure defaults on the ground lease; and (vi) the
terms and conditions of the leasehold do not prevent the free and
absolute marketability of the Mortgaged Property. As of the
Cut-Off Date, the Principal Balance of Transferred Mortgage Loans
with related Mortgaged Properties subject to ground leases does
not exceed [INSERT PERCENTAGE] of the Original Principal Balance.
(xii) As of the Cut-Off Date, no more than [INSERT PERCENTAGE] of the
Original Aggregate Loan Balance is secured by investor-owned
Properties.
(xiii) With respect to each Transferred Mortgage Loan which is or has
been the subject of bankruptcy or insolvency proceedings, (a) as
of the Cut-Off Date, the Mortgagor is not contractually
delinquent more than 30 days with respect to any payment due
under the related plan, (b) the current Combined Loan-to-Value
Ratio is less than or equal to [INSERT PERCENTAGE], and (c)
either (i) if the current Combined Loan-to-Value Ratio is between
[INSERT PERCENTAGE] and [INSERT PERCENTAGE] as of the Cut-Off
Date, the Mortgagor has made at least six consecutive payments
under the related Plan or (ii) if the current Combined
Loan-to-Value Ratio is less than [INSERT PERCENTAGE] as of the
Cut-Off Date, the Mortgagor has made at least three consecutive
payments under the related plan.
(xiv) Not more than [INSERT PERCENTAGE] of the Transferred Mortgage
Loans are subject to Section 32 of the federal Truth-in-Lending
Act.
(xv) As of the Cut-Off Date, [INSERT PERCENTAGE] of the outstanding
principal balance of the Transferred Mortgage Loans are fixed rate
mortgage loans (except [INSERT PERCENTAGE] thereof that, as
Program Loans, bear
A-3
<PAGE>
fixed rates of interest that under the terms of the related
Mortgage Notes may be reduced by as much as 1.50% during the
first three years of such Program Loans) and [INSERT PERCENTAGE]
of the outstanding principal balance of the Transferred Mortgage
Loans are adjustable rate mortgage loans.
(xvi) With respect to Transferred Mortgage Loans that are adjustable
rate mortgage loans, as of the Cut-Off Date, all interest rate
adjustments have been performed correctly in accordance with the
terms of the related Mortgage.
For purposes of this Conveyance Agreement, the "related Pooling and
Servicing Agreement" is the Pooling and Servicing Agreement relating to the
EquiVantage Home Equity Loan Trust [INSERT SERIES].
Terms capitalized herein and not defined herein shall have their respective
meanings as set forth in the Mortgage Transfer Agreement.
IN WITNESS WHEREOF, the Company and the Originator have caused this
Conveyance 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.,
the Company
By:
--------------------------------
Name:
Title:
EQUIVANTAGE INC.
the Originator
By:
--------------------------------
Name:
Title:
A-4
<PAGE>
SCHEDULE OF MORTGAGE LOANS
A-5
<PAGE>
Exhibit B
AUTHORIZED REPRESENTATIVES
Reference is hereby made to the Master Loan Transfer Agreement, dated as
of June 1, 1997 (the "Agreement"), among EquiVantage Acceptance Corp. (the
"Company") and EquiVantage Inc., as Originator:
The following are the Originator's Authorized Representatives for purposes
of the Agreement:
Specimen
Name Title Signature
John E. Smith President /s/ John E. Smith
------------------------
Karen S. Crawford Senior Vice President /s/ Karen S. Crawford
and Secretary ------------------------
IN WITNESS WHEREOF, I, Bonnie Garber, hereby certify that the above
signatures are true and correct as of this 27th day of June, 1997.
/s/ Bonnie Garber
-----------------------------------
Name: Bonnie Garber
Title: Assistant Secretary
B-1
<PAGE>
The following are the Company's Authorized Representatives for purposes of
the Agreement:
Specimen
Name Title Signature
John E. Smith President /s/ John E. Smith
------------------------
Karen S. Crawford Senior Vice President /s/ Karen S. Crawford
and Secretary ------------------------
IN WITNESS WHEREOF, I, Bonnie Garber, hereby certify that the above
signatures are true and correct as of this 27th day of June 1997.
/s/ Bonnie Garber
-----------------------------------
Name: Bonnie Garber
Title: Assistant Secretary
B-2
<PAGE>
SCHEDULE I
[Omitted from this filing on Form 8-K]
<PAGE>
CONVEYANCE AGREEMENT
THIS CONVEYANCE AGREEMENT, dated June 1, 1997, is between EquiVantage
Acceptance Corp. (the "Company") and EquiVantage Inc. (the "Originator").
Pursuant to the Master Loan Transfer Agreement dated as of June 1, 1997
between the Company and the Originator (the "Mortgage Transfer Agreement"),
the parties hereto hereby confirm their understanding with respect to the
sale by the Originator and the purchase by the Company of those Mortgage
Loans listed on the Schedule of Mortgage Loans attached hereto (the
"Transferred Mortgage Loans").
Conveyance of Transferred Mortgage Loans. The Originator,
concurrently with the execution and delivery of this Conveyance
Agreement, does hereby irrevocably transfer, sell, assign, set
over and otherwise convey to the Company, without recourse
(except as otherwise explicitly provided for herein) all of its
right, title and interest in and to the Transferred Mortgage
Loans being conveyed by it, including specifically, without
limitation, the Mortgages, the Files and all other documents,
materials and properties appurtenant thereto and the Notes,
including all interest and principal received by the Originator
on or with respect to such Transferred Mortgage Loans on or after
the related Cut-Off Date, together with all of its right, title
and interest in and to the proceeds received on or after the
related Cut-Off Date of any related insurance policies on behalf
of the Company. It is the intention of the parties hereto that
the conveyance by the Originator of the Transferred Mortgage
Loans to the Company shall constitute a purchase and sale of such
Transferred Mortgage Loans and not a loan. If the Originator
cannot deliver the original Mortgage or mortgage assignment with
evidence of recording thereon concurrently with the execution and
delivery of this Conveyance Agreement solely because of a delay
caused by the public recording office where such original
Mortgage or mortgage assignment has been delivered for
recordation, the Originator shall promptly deliver to the Trustee
on behalf of the Company such original Mortgage or mortgage
assignment with evidence of recording indicated thereon upon
receipt thereof from the public recording official, as soon as
possible but in no event later than 12 months from the Startup
Day.
The costs relating to the delivery of the documents specified in this
Conveyance Agreement shall be borne by the Originator.
The Originator hereby makes the representations and warranties set forth
in Section 5(a) of the Master Transfer Agreement with respect to the
Transferred Mortgage Loans. The "Cut-Off Date" with respect to such
Transferred Mortgage Loans shall be the close of business on June 1, 1997 or,
if any Transferred Mortgage Loan was originated subsequent to June 1, 1997,
but prior to the Startup Day, the date of origination of such Transferred
Mortgage Loan.
Except as set forth immediately below, all terms and conditions of the
Mortgage Transfer Agreement are hereby incorporated herein; provided that, in
the event of any conflict, the provisions of this Conveyance Agreement shall
control over the conflicting provisions of the Mortgage Transfer Agreement.
<PAGE>
(i) With respect to each Transferred Mortgage Loan
involving property improved by a manufactured home,
such manufactured home constitutes real property under
applicable state law and the Originator has taken all
action necessary to create a valid and perfected first
or second priority lien and security interest in such
manufactured home and the related Property, including,
without limitation, the filing of a Uniform Commercial
Code financing statement or notations on certificates
of title, if necessary under applicable state law.
(ii) As of its date of origination, no Transferred Mortgage
Loan had a Combined Loan-to-Value Ratio in excess of
90%, except for loan number 313236, which has a
Combined Loan-to-Value Ratio of 90.55%; loan number
312509, which has a Combined Loan-to-Value Ratio of
92.31%; loan number 314816, which has a Combined
Loan-to-Value Ratio of 92.73%; loan number 311455,
which has a Combined Loan-to-Value Ratio of 93.50%;
loan number 314068, which has a Combined Loan-to-Value
Ratio of 97.32%; loan number 314305, which has a
Combined Loan-to-Value Ratio of 100.71%; loan number
314037, which has a Combined Loan-to-Value Ratio of
112.64%.
(iii) No Transferred Mortgage Loan is a Third Mortgage Loan.
(iv) No more than 0.65% of the Transferred Mortgage Loans
were originated under any "no-income verification"
program.
(v) The Note related to each Transferred Mortgage Loan
bears a minimum Coupon Rate of at least 7.25% per
annum.
(vi) Each Note for a fixed rate Transferred Mortgage Loan
that is not a Balloon Loan provides for a schedule of
substantially level and equal monthly scheduled
payments which are sufficient to amortize fully the
principal balance of such Note on or before its
maturity date, which maturity date is not more than 30
years from the date of origination of such Transferred
Mortgage Loan. Each Balloon Loan has an original term
to stated maturity of not more than 15 years and an
amortization schedule based on not more than 30 years.
(vii) None of the Transferred Mortgage Loans is more than 30
days Delinquent (assuming a 30-day month).
(viii) No Transferred Mortgage Loan had a Loan Balance
less than $6,000.00 as of the Cut-Off Date or
greater than $596,000.00 as of the Cut-Off Date.
(ix) The Primary Parcel of each Property is located in the
state identified in the Schedule of Mortgage Loans
attached hereto; no more than 0.97% of the aggregate
Loan Balance as of the Cut-Off Date is secured by
mortgaged
2
<PAGE>
Properties located within any single postal
zip code area; and each Property consists of one or
more parcels of real property with a residential
dwelling erected on the Primary Parcel.
(x) As of the Cut-Off Date, no more than 0.74% of the
aggregate Loan Balance is secured by condominiums; no
Transferred Mortgage Loan relates to a cooperative.
(xi) With respect to each Mortgaged Property subject to a
ground lease (i) the current ground lessor has been
identified and all ground rents that previously become
due and owing have been paid; (ii) the ground lease
term extends, or is automatically renewable, for at
least five years beyond the maturity date of the
related Transferred Mortgage Loan; (iii) the ground
lease has been duly executed and recorded; (iv) the
amount of the ground rent and any increases therein
are clearly identified in the lease and are for
predetermined amounts at predetermined times; (v) the
Trust has the right to cure defaults on the ground
lease; and (vi) the terms and conditions of the
leasehold do not prevent the free and absolute
marketability of the Mortgaged Property. As of the
Cut-Off Date, the Principal Balance of Transferred
Mortgage Loans with related Mortgaged Properties
subject to ground leases does not exceed 0.06% of the
Original Principal Balance.
(xii) As of the Cut-Off Date, no more than 4.33% of the
Original Aggregate Loan Balance is secured by
investor-owned Properties.
(xiii) As of the Cut-Off Date, there are no Transferred
Mortgage Loans that are the subject of bankruptcy
or insolvency proceedings.
(xiv) Not more than 1.87% of the Transferred Mortgage Loans
are subject to Section 32 of the federal
Truth-in-Lending Act.
(xv) As of the Cut-Off Date, 56.23% of the outstanding
principal balance of the Transferred Mortgage Loans
are fixed rate mortgage loans (except 7.80% thereof
that, as Program Loans, bear fixed rates of interest
that under the terms of the related Mortgage Notes may
be reduced by as much as 1.50% during the first three
years of such Program Loans) and 43.77% of the
outstanding principal balance of the Transferred
Mortgage Loans are adjustable rate mortgage loans.
(xvi) With respect to Transferred Mortgage Loans that are
adjustable rate mortgage loans, as of the Cut-Off
Date, all interest rate adjustments have been
performed correctly in accordance with the terms of
the related Mortgage.
3
<PAGE>
For purposes of this Conveyance Agreement, the "related Pooling and
Servicing Agreement" is the Pooling and Servicing Agreement relating to the
EquiVantage Home Equity Loan Trust 1997-2.
Terms capitalized herein and not defined herein shall have their
respective meanings as set forth in the Mortgage Transfer Agreement.
4
<PAGE>
IN WITNESS WHEREOF, the Company and the Originator have
caused this Conveyance 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.,
the Company
By: /s/ John E. Smith
-------------------------
Name: John E. Smith
Title: President
EQUIVANTAGE INC.,
the Originator
By: /s/ Karen S. Crawford
-------------------------
Name: Karen S. Crawford
Title: Senior Vice President
<PAGE>
SCHEDULE OF MORTGAGE LOANS
[Attached as Schedule I to the related
Pooling and Servicing Agreement
and incorporated herein]
<PAGE>
Other Offices: Andrews & Kurth l.l.p.
Houston A REGISTERED LIMITED LIABILITY PARTNERSHIP
Dallas ATTORNEYS
Los Angeles 1701 PENNSYLVANIA AVENUE, N.W. Telephone: (202) 662-2700
New York SUITE 200 Telecopier: (202) 662-2739
The Woodlands WASHINGTON, D.C. 20006-5805 Telex: 79-1208
London
June 27, 1997
Morgan Stanley & Co. Incorporated Financial Guaranty Insurance Company
1585 Broadway 115 Broadway
New York, NY 10036 New York, New York 10006
Prudential Securities Incorporated
One New York Plaza, 26th Floor
New York, New York 10292
Re: EquiVantage Home Equity Loan Trust 1997-2
Home Equity Loan Asset-Backed Certificates, Series 1997-2
Ladies and Gentlemen:
We have acted as counsel to EquiVantage Acceptance Corp., a Delaware
corporation (the "Sponsor"), and EquiVantage Inc., a Delaware corporation (the
"Servicer" and, together with the Sponsor, the "Companies"), in connection with
the issuance of Home Equity Loan Asset-Backed Certificates Series 1997-2,
including $23,800,000.00 aggregate principal amount of Class A-1 Certificates
(the "Class A-1 Certificates"), $15,600,000.00 aggregate principal amount of
Class A-2 Certificates (the "Class A-2 Certificates"), $11,683,000.00 aggregate
principal amount of Class A-3 Certificates (the "Class A-3 Certificates"),
$5,675,000.00 aggregate principal amount of Class A-4 Certificates (the "Class
A-4 Certificates") and $43,242,000.00 aggregate principal amount of Class A-5
Certificates (the "Class A-5 Certificates" and, together with the Class A-1
Certificates, the Class A-2 Certificates, the Class A-3 Certificates and the
Class A-4 Certificates, the "Class A Certificates") and the sale of the Class A
Certificates by the Sponsor to Morgan Stanley & Co. Incorporated (the
"Representative") and Prudential Securities Incorporated (together with the
Representative, the "Underwriters"), pursuant to the terms of an Underwriting
Agreement dated June 19, 1997 (the "Underwriting Agreement") between the Sponsor
and the Underwriters. Simultaneously with the issuance and sale of the Class A
Certificates, $969,071.84 aggregate principal amount of Class B Certificates
(the "Class B Certificates"), Class RL Certificates representing certain
residual rights to distributions from the Lower-Tier REMIC and Class RU
Certificates representing certain residual rights to distributions from the
Upper-Tier REMIC (the "Residual Certificates" and, together with the Class A
Certificates and the Class B Certificates, the "Certificates") are being issued.
<PAGE>
Morgan Stanley & Co. Incorporated
Financial Guaranty Insurance Company
Prudential Securities Incorporated
June 27, 1997
Page 2
The Certificates are being issued pursuant to a Pooling and Servicing
Agreement dated as of June 1, 1997 (the "Agreement"), between the Sponsor, the
Servicer and Norwest Bank Minnesota, National Association, as trustee (the
"Trustee") and will evidence fractional, undivided, beneficial ownership
interests in a pool of fixed and adjustable rate residential mortgage loans
(collectively, the "Mortgage Loans"), sold by the Sponsor and serviced by the
Servicer. Holders of the Class A Certificates will be entitled to the benefits
of a Certificate Insurance Policy issued pursuant to an Insurance Agreement
dated as of June 1, 1997 (the "Insurance Agreement") among the Sponsor, the
Servicer and Financial Guaranty Insurance Corporation (the "Certificate
Insurer").
This opinion is furnished pursuant to Section VI.D of the Underwriting
Agreement and pursuant to the Insurance Agreement. Capitalized terms used but
not otherwise defined herein shall have the respective meanings ascribed to such
terms in the Underwriting Agreement.
As counsel to the Companies, we have examined executed originals of the
Agreement, forms of the Certificates, the Underwriting Agreement, the Insurance
Agreement and the Master Loan Transfer Agreement, dated as of June 1, 1997
between the Sponsor and the Servicer and the related Conveyance Agreement dated
June 1, 1997 (together, the "Master Loan Transfer Agreement"), the Registration
Statement on Form S-3 (File No. 333-22343) filed by the Sponsor with the
Securities and Exchange Commission (the "Commission") pursuant to the Securities
Act of 1933, as amended (the "Act") (the Registration Statement, including the
exhibits thereto, in the form in which it became effective on June 3, 1997,
together with any documents incorporated by reference therein pursuant to Item
12 of Form S-3 under the Act which have been filed with the Commission pursuant
to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), through
June 27, 1997, and are identified as being applicable to the offering of the
Class A Certificates is herein after referred to as the "Registration
Statement"), the Base Prospectus and the Prospectus Supplement (the term "Base
Prospectus" shall mean the prospectus, constituting a part of the Registration
Statement at the time it became effective, as amended and supplemented through
the date hereof, including any documents incorporated by reference therein
pursuant to the Exchange Act that are identified as being applicable to the
offering of the Class A Certificates, and the term "Prospectus Supplement" shall
mean the supplement to the Base Prospectus dated June 19, 1997 relating to the
offering of the Class A Certificates; the Base Prospectus as supplemented by the
Prospectus Supplement and in the form transmitted electronically on June 27,
1997 for filing with the Commission pursuant to Rule 424(b)(2) under the Act is
hereinafter referred to as the "Prospectus") relating to the offering of the
Class A Certificates, representative forms of a Mortgage Note and Mortgage, and
originals (or copies certified or otherwise identified to our satisfaction) of
such other documents, instruments and certificates and have made such
investigations of such matters of law and fact as we have considered necessary
or appropriate for the purpose of this opinion. For purposes of such
examination, we have assumed the genuineness of all signatures, the legal
capacity of natural persons, the authenticity of
<PAGE>
Morgan Stanley & Co. Incorporated
Financial Guaranty Insurance Company
Prudential Securities Incorporated
June 27, 1997
Page 3
all documents submitted to us as originals and the conformity with the
original documents of all documents submitted to us as forms or copies. We
have assumed that all parties to any agreement had the corporate power and
authority to enter into such agreement and perform all obligations thereunder
and, as to such parties, we have also assumed the due authorization by all
requisite corporate action, the due execution and delivery and, except as to
the Sponsor and the Servicer, the validity and binding effect and
enforceability thereof.
Based upon the foregoing, and in reliance thereon, and subject to the
limitations hereinafter set forth, we are of the opinion that:
(i) The statements set forth in the Base Prospectus and the
Prospectus Supplement under the caption "Material Federal Income Tax
Consequences" to the extent that they constitute matters of federal law,
provide a fair and accurate summary of such law or conclusions.
(ii) Assuming (1) an election will be properly made to treat the
segregated pool of assets consisting of the Lower-Tier REMIC (as such term
is defined in the Agreement) as a "real estate mortgage investment conduit"
("REMIC") for Federal income tax purposes, (2) an election will properly be
made to treat the segregated assets (the "Upper-Tier REMIC") consisting of
the Lower Tier Interests other than the Class RL Certificates as a REMIC
for federal income tax purposes, and (3) compliance with all provisions of
the Agreement, for federal income tax purposes each of the Lower-Tier REMIC
and the Upper-Tier REMIC will qualify as a REMIC within the meaning of
Section 860D of the Code, each of the Class A Certificates and the Class B
Certificates described in the Prospectus and issued pursuant to the
Agreement will be treated as a "regular interest" in a REMIC for purposes
of Code Section 860G(a)(1), the Class RU Certificates issued pursuant to
the Agreement will be treated as the "residual interest" in the Upper-Tier
REMIC for purposes of Code Section 860G(a)(2) and the Class RL Certificates
issued pursuant to the Agreement will be treated as the "residual interest"
in the Lower-Tier REMIC for purposes of Code Section 860G(a)(2).
The opinion herein is based upon our interpretations of current law,
including court authority and existing Final and Temporary Regulations, which
are subject to change both prospectively and retroactively, and upon the facts
and assumptions discussed herein. This opinion letter is limited to the matters
set forth herein, and no opinions are intended to be implied or may be inferred
beyond those expressly stated herein. Our opinion is rendered as of the date
hereof and we assume no obligation to update or supplement this opinion or any
matter related to this opinion to reflect any change of fact, circumstances, or
law after the date hereof. In addition, our opinion is based on the
<PAGE>
Morgan Stanley & Co. Incorporated
Financial Guaranty Insurance Company
Prudential Securities Incorporated
June 27, 1997
Page 4
assumption that the matter will be properly presented to the applicable court.
Furthermore, our opinion is not binding on the Internal Revenue Service or a
court. Our opinion represents merely our best legal judgment on the matters
presented; others may disagree with our conclusion. There can be no assurance
that the Internal Revenue Service will not take a contrary position or that a
court would agree with our opinion if litigated. In the event any one of the
statements, representations or assumptions we have relied upon to issue this
opinion is incorrect, our opinion might be adversely affected and may not be
relied upon.
We hereby consent to the filing of this letter as an exhibit to a Form 8-K
to be filed by the Sponsor with the Commission, without implying or admitting
that we are "experts" within the meaning of the Act or the rules and regulations
of the Commission issued thereunder, with respect to any part of the
Registration Statement.
Sincerely,
/s/ Andrews & Kurth L.L.P.
