<PAGE>
==============================================================================
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):
December 15, 1997
EquiVantage Acceptance Corp.
------------------------------
on behalf of EquiVantage Home Equity Loan Trust 1997-4
- ------------------------------------------------------------------------------
(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
----------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
==============================================================================
<PAGE>
Item 5. Other Events
EquiVantage Acceptance Corp. (the "Sponsor") registered up to
$500,000,000 principal amount of Home Equity Loan Asset-Backed Certificates
pursuant to Rule 415 of the Securities Act of 1933, as amended, pursuant to a
Registration Statement on Form S-3, including a prospectus (Registration
Statement File No. 333-22343) (as amended, the "Registration Statement").
Pursuant to the Registration Statement, the Sponsor filed a Prospectus
Supplement, and a Prospectus, each dated November 25, 1997 (together, the
"Prospectus"), relating to $100,000,000 aggregate principal amount of Home
Equity Loan Asset-Backed Certificates, Series 1997-4 (the "Certificates"),
issued by EquiVantage Home Equity Loan Trust 1997-4 (the "Trust") on December
15, 1997 (the "Closing Date"). The Certificates consist of the Class A-1,
Class A-2, Class A-3, Class A-4 and Class A-5 Certificates (collectively, the
"Class A Certificates"), one class of subordinate Certificates and two
classes of residual Certificates. Only the Class A Certificates were offered
by the Prospectus. Capitalized terms used but not otherwise defined herein
shall have the meanings ascribed to such terms in the Prospectus. The
Prospectus was filed with the Securities and Exchange Commission (the
"Commission") pursuant to Rule 424(b)(2) on December 11, 1997, and a
supplement to the Prospectus Supplement was filed with the Commission
pursuant to Rule 424(b)(3) on December 15, 1997.
The Certificates represent the entire undivided interest in the Trust
created pursuant to the Pooling and Servicing Agreement dated as of December 1,
1997 between the Sponsor, in the capacity of Seller, EquiVantage Inc., as
Servicer, and Norwest Bank Minnesota, National Association, as Trustee.
The description of the pool of Mortgage Loans that were to be included in
the Trust (the "Mortgage Pool"), as set forth in the Prospectus, contained
information only with respect to those Mortgage Loans identified as of the close
of business on October 31, 1997 (the "Statistic Calculation Date"). The
statistical information presented in this Current Report on Form 8-K is based on
the characteristics of the Mortgage Loans in the Mortgage Pool as of the close
of business on December 1, 1997 (the "Cut-off Date"). This Current Report on
Form 8-K is being filed to update the description of the Mortgage Pool contained
in the Prospectus and to file copies of certain final agreements executed in
connection with the issuance of the Certificates. A description of the final
Mortgage Pool follows.
2
<PAGE>
THE MORTGAGE POOL
General
As of the Cut-off Date, approximately 80% of the Mortgage Loans were home
equity loans, i.e., loans used (x) to refinance an existing mortgage loan on
more favorable terms, (y) to consolidate debt or (z) to obtain cash proceeds by
borrowing against the Mortgagor's equity in the related Mortgaged Property. The
remaining Mortgage Loans are "purchase money" loans, the proceeds of which were
used to purchase the related Mortgaged Property.
Each Mortgage Loan in the Trust has been assigned to one of two mortgage
loan groups (the "Fixed Rate Group" and the "Adjustable Rate Group" and, each, a
"Mortgage Loan Group") comprised of Mortgage Loans that bear interest at fixed
rates only (except for Program Loans included in the Fixed Rate Group described
below) in the case of the Fixed Rate Group, and Mortgage Loans that bear
interest at rates subject to periodic adjustment only, in the case of the
Adjustable Rate Group. As of the Cut-off Date, approximately 4.94% of the
Mortgage Loans in the Fixed Rate Group by aggregate principal balance (3.49% of
the aggregate Loan Balances) were Program Loans that provide for reductions in
the related Mortgage Rates by as much as 1.50% under certain circumstances. As
of the Cut-off Date, no Mortgage Loan in the Adjustable Rate Group was a
Program Loan. The Class A-1, Class A-2, Class A-3 and Class A-4 Certificates
represent undivided ownership interests in all Mortgage Loans contained in the
Fixed Rate Group, and the Class A-5 Certificates represent undivided ownership
interests in all Mortgage Loans contained in the Adjustable Rate Group.
The Mortgage Loan Groups contained, as of the Cut-off Date, 1405 loans to
be sold by the Sponsor to the Trust evidenced by promissory notes (the "Notes")
secured by Mortgages on the Mortgaged Properties, which are located in 31
states. The Mortgaged Properties securing the Mortgage Loans consist primarily
of single-family residences (each of which may be detached, a rowhouse or
townhouse, part of a two- to four-family dwelling, a condominium unit or a unit
in a planned unit development ("PUD")). The Mortgaged Properties are both
owner-occupied (which includes second and vacation homes) and non-owner occupied
investment properties. Approximately 94.17% of the Mortgage Loans in the Fixed
Rate Group as of the Cut-off Date are secured by first lien mortgages or deeds
of trust on the related Mortgaged Properties and approximately 5.83% of the
Mortgage Loans in the Fixed Rate Group as of the Cut-off Date are secured by
junior liens on the related Mortgaged Properties. All of the Mortgage Loans
included in the Adjustable Rate Group are secured by first lien mortgages or
deeds of trust on the related Mortgaged Properties.
As of the Cut-off Date, no Mortgage Loan had a remaining term to maturity
greater than 30 years and no Mortgage Loan was more than 30 days delinquent
(as such term is defined in footnote (2) to the Delinquency Experience table
on page S-20 of the Prospectus Supplement). As of the last day of the month
immediately preceding the Closing Date, no Mortgage Loan was more than 59
days delinquent.
3
<PAGE>
Fixed Rate Group
As of the Cut-off Date, the Mortgage Loans in the Fixed Rate Group
consisted of 1,118 loans secured by Mortgaged Properties located in 26
states, as specified in the tables below. As of the Cut-off Date, the
Mortgage Loans in the Fixed Rate Group had an aggregate principal balance of
$71,722,201.50, the minimum principal balance of any of such Mortgage Loans
was $10,000.00, the maximum principal balance thereof was $649,780.55 and the
average principal balance of such Mortgage Loans was $64,152.24. The
Mortgage Rates on the Mortgage Loans in the Fixed Rate Group as of the
Cut-off Date ranged from 7.75% to 14.95% per annum, and the weighted average
Mortgage Rate of the Mortgage Loans in the Fixed Rate Group was 10.40% per
annum. The original term to stated maturity of the Mortgage Loans in the
Fixed Rate Group as of the Cut-off Date ranged from 60 months to 360 months,
the remaining term to stated maturity ranged from 60 months to 360 months,
the weighted average original term to stated maturity was approximately 240
months, the weighted average remaining term to stated maturity was
approximately 239 months, the weighted average seasoning was approximately
one month and the weighted average CLTV (based on property values of the
related Mortgage Properties at the time of origination) was 82.05%. As of
the Cut-off Date, no Mortgage Loan in the Fixed Rate Group had a stated
maturity later than November 15, 2027. Approximately 57.48% of the Mortgage
Loans in the Fixed Rate Group by aggregate principal balance as of the
Cut-off Date require monthly payments of principal that will fully amortize
the Mortgage Loans by their respective maturity dates, and 42.52% of the
aggregate principal balance of the Mortgage Loans in the Fixed Rate Group are
Balloon Loans.
4
<PAGE>
FIXED RATE GROUP
GEOGRAPHIC DISTRIBUTION (1)
<TABLE>
<CAPTION>
AGGREGATE % OF AGGREGATE
PRINCIPAL BALANCE PRINCIPAL BALANCE
NUMBER OF AS OF THE CUT-OFF AS OF THE CUT-OFF
STATE MORTGAGE LOANS DATE DATE
- -------------------------------------------------------- ----------------- -------------------- -----------------
<S> <C> <C> <C>
Arizona................................................. 1 $ 41,905.45 0.06%
Arkansas................................................ 2 80,626.02 0.11%
Colorado................................................ 2 261,324.00 0.36%
Florida................................................. 77 4,795,668.33 6.69%
Georgia................................................. 85 6,029,350.99 8.41%
Idaho................................................... 1 256,500.00 0.36%
Illinois................................................ 60 4,365,487.94 6.09%
Indiana................................................. 109 5,785,422.77 8.07%
Iowa.................................................... 8 453,252.84 0.63%
Kansas.................................................. 7 218,176.79 0.30%
Kentucky................................................ 62 3,449,179.46 4.81%
Louisiana............................................... 46 2,326,685.93 3.24%
Maryland................................................ 28 2,185,011.89 3.05%
Michigan................................................ 92 6,242,373.92 8.70%
Mississippi............................................. 5 240,361.07 0.34%
Missouri................................................ 3 246,301.60 0.34%
North Carolina.......................................... 57 3,173,692.74 4.42%
Ohio.................................................... 194 13,780,303.76 19.21%
Oregon.................................................. 2 251,750.00 0.35%
South Carolina.......................................... 76 3,924,735.92 5.47%
Tennessee............................................... 183 12,350,899.26 17.22%
Texas................................................... 10 661,737.29 0.92%
Virginia................................................ 3 242,751.70 0.34%
Washington.............................................. 1 99,750.00 0.14%
Wisconsin............................................... 1 65,600.00 0.09%
West Virginia........................................... 3 193,351.83 0.27%
----- -------------------- ------
TOTAL................................................. 1,118 $ 71,722,201.50 100.00%
----- -------------------- ------
----- -------------------- ------
</TABLE>
(1) Geographic location generally is determined by location of the related
Mortgaged Property; however, with respect to certain Mortgage Loans,
geographic location is determined by Mortgagor mailing address.
5
<PAGE>
FIXED RATE GROUP
DISTRIBUTION OF CLTVs
<TABLE>
<CAPTION>
AGGREGATE % OF AGGREGATE
PRINCIPAL BALANCE PRINCIPAL BALANCE
NUMBER OF AS OF THE CUT-OFF AS OF THE CUT-OFF
RANGE OF CLTV RATIOS MORTGAGE LOANS DATE DATE
- ---------------------------------------- ------------------- -------------------- --------------------
<S> <C> <C> <C>
15.00% to 20.00%........................ 2 $ 37,845.72 0.05%
20.01% to 25.00%........................ 1 45,000.00 0.06%
25.01% to 30.00%........................ 9 218,215.78 0.30%
30.01% to 35.00%........................ 7 170,505.66 0.24%
35.01% to 40.00%........................ 9 298,625.02 0.42%
40.01% to 45.00%........................ 10 454,244.54 0.63%
45.01% to 50.00%........................ 16 536,262.86 0.75%
50.01% to 55.00%........................ 23 877,699.00 1.22%
55.01% to 60.00%........................ 33 1,993,360.54 2.78%
60.01% to 65.00%........................ 41 1,664,611.47 2.32%
65.01% to 70.00%........................ 72 3,773,143.92 5.26%
70.01% to 75.00%........................ 62 3,936,894.95 5.49%
75.01% to 80.00%........................ 250 15,613,649.56 21.77%
80.01% to 85.00%........................ 199 12,575,701.85 17.53%
85.01% to 90.00%........................ 215 15,304,050.40 21.34%
90.01% to 95.00%........................ 164 13,859,657.18 19.32%
95.01% to 100.00%....................... 4 277,279.76 0.39%
100.01% >............................... 1 85,453.29 0.12%
----- -------------------- ------
TOTAL................................. 1,118 $ 71,722,201.50 100.00%
----- -------------------- ------
----- -------------------- ------
</TABLE>
6
<PAGE>
FIXED RATE GROUP
DISTRIBUTION OF MORTGAGE RATES (1)
<TABLE>
<CAPTION>
AGGREGATE % OF AGGREGATE
PRINCIPAL BALANCE PRINCIPAL BALANCE
NUMBER OF AS OF THE CUT-OFF AS OF THE CUT-OFF
RANGE OF MORTAGE RATES MORTGAGE LOANS DATE DATE
- ---------------------------------------- --------------------- -------------------- --------------------
<S> <C> <C> <C>
7.750% to 8.000%........................ 5 $ 358,172.76 0.50%
8.001% to 8.250%........................ 30 2,121,114.45 2.96%
8.251% to 8.500%........................ 21 1,570,555.66 2.19%
8.501% to 8.750%........................ 12 888,561.13 1.24%
8.751% to 9.000%........................ 30 2,473,136.16 3.45%
9.001% to 9.250%........................ 77 6,256,753.87 8.72%
9.251% to 9.500%........................ 84 6,461,230.38 9.01%
9.501% to 9.750%........................ 68 5,061,116.09 7.06%
9.751% to 10.000%....................... 89 6,228,168.58 8.68%
10.001% to 10.250%...................... 55 3,550,062.61 4.95%
10.251% to 10.500%...................... 92 5,984,120.43 8.34%
10.501% to 10.750%...................... 92 5,373,431.17 7.49%
10.751% to 11.000%...................... 97 5,818,034.16 8.11%
11.001% to 11.250%...................... 52 3,846,381.56 5.36%
11.251% to 11.500%...................... 61 3,724,016.52 5.19%
11.501% to 11.750%...................... 54 2,523,286.38 3.52%
11.751% to 12.000%...................... 56 3,171,241.26 4.42%
12.001% to 12.250%...................... 40 1,878,498.35 2.62%
12.251% to 12.500%...................... 25 1,181,973.11 1.65%
12.501% to 12.750%...................... 27 1,304,268.72 1.82%
12.751% to 13.000%...................... 16 825,823.75 1.15%
13.001% to 13.250%...................... 9 324,445.48 0.45%
13.251% to 13.500%...................... 12 426,232.72 0.59%
13.501% to 13.750%...................... 7 169,047.83 0.24%
13.751% to 14.000%...................... 1 32,492.54 0.05%
14.001% to 14.250%...................... 3 80,895.83 0.11%
14.501% to 14.750%...................... 1 21,000.00 0.03%
14.751% to 14.950%...................... 2 68,140.00 0.10%
----- -------------------- ------
TOTAL................................. 1,118 $ 71,722,201.50 100.00%
----- -------------------- ------
----- -------------------- ------
</TABLE>
(1) Does not reflect any reductions of Mortgage Rates that may be permitted
on Program Loans originated under the Sponsor's Incentive Program.
7
<PAGE>
FIXED RATE GROUP
REMAINING TERM TO MATURITY DISTRIBUTION
<TABLE>
<CAPTION>
AGGREGATE % OF AGGREGATE
PRINCIPAL BALANCE PRINCIPAL BALANCE
NUMBER OF AS OF THE CUT-OFF AS OF THE CUT-OFF
MONTHS MORTGAGE LOANS DATE DATE
- ----------------------------------------------------- ----------------- -------------------- ---------------------
<S> <C> <C> <C>
60 to 84............................................. 3 $ 71,277.87 0.10%
108 to 120........................................... 40 1,301,657.86 1.81%
128 to 144........................................... 4 182,958.10 0.26%
168 to 180........................................... 636 39,763,305.81 55.44%
228 to 240........................................... 159 8,668,409.85 12.09%
288 to 300........................................... 11 714,981.59 1.00%
348 to 360........................................... 265 21,019,610.42 29.31%
----- -------------------- ------
TOTAL.............................................. 1,118 $ 71,722,201.50 100.00%
----- -------------------- ------
----- -------------------- ------
</TABLE>
8
<PAGE>
FIXED RATE GROUP
DISTRIBUTION OF PRINCIPAL BALANCES
<TABLE>
<CAPTION>
AGGREGATE % OF AGGREGATE
PRINCIPAL BALANCE PRINCIPAL BALANCE
NUMBER OF AS OF THE CUT-OFF AS OF THE CUT-OFF
RANGE OF PRINCIPAL BALANCES MORTGAGE LOANS DATE DATE
- ----------------------------------------------------- ----------------- -------------------- ---------------------
<S> <C> <C> <C>
$25,000 or less...................................... 113 $ 2,220,190.55 3.10%
25,001 to 30,000..................................... 53 1,483,502.36 2.07%
30,001 to 35,000..................................... 63 2,087,966.56 2.91%
35,001 to 40,000..................................... 82 3,112,465.91 4.34%
40,001 to 45,000..................................... 71 3,045,624.19 4.25%
45,001 to 50,000..................................... 81 3,869,645.14 5.40%
50,001 to 55,000..................................... 73 3,839,550.17 5.35%
55,001 t0 60,000..................................... 73 4,220,856.94 5.89%
60,001 to 65,000..................................... 82 5,145,461.50 7.17%
65,001 to 70,000..................................... 59 3,982,342.92 5.55%
70,001 to 75,000..................................... 61 4,435,541.24 6.18%
75,001 to 80,000..................................... 55 4,281,285.81 5.97%
80,001 to 85,000..................................... 37 3,062,025.13 4.27%
85,001 to 90,000..................................... 33 2,907,288.40 4.05%
90,001 to 95,000..................................... 21 1,958,600.67 2.73%
95,001 to 100,000.................................... 19 1,858,746.87 2.59%
100,001 to 105,000................................... 18 1,854,369.04 2.59%
105,001 to 110,000................................... 19 2,040,602.47 2.85%
110,001 to 115,000................................... 8 907,151.74 1.26%
115,001 to 120,000................................... 14 1,654,441.59 2.31%
120,001 to 125,000................................... 6 743,682.75 1.04%
125,001 to 130,000................................... 13 1,664,781.60 2.32%
130,001 to 135,000................................... 8 1,064,326.56 1.48%
135,001 to 140,000................................... 14 1,926,812.30 2.69%
140,001 to 145,000................................... 4 569,373.14 0.79%
145,001 to 150,000................................... 3 443,123.62 0.62%
150,001 to 200,000................................... 23 3,808,347.49 5.31%
200,001 to 250,000................................... 6 1,383,598.69 1.93%
250,001 to 300,000................................... 3 791,011.58 1.10%
300,001 to 350,000................................... 1 309,927.11 0.43%
350,001 to 400,000................................... 1 399,776.91 0.56%
600,000 to 650,000................................... 1 649,780.55 0.91%
----- -------------------- ------
TOTAL.............................................. 1,118 $ 71,722,201.50 100.00%
----- -------------------- ------
----- -------------------- ------
</TABLE>
9
<PAGE>
FIXED RATE GROUP
DISTRIBUTION OF PROPERTY TYPE
<TABLE>
<CAPTION>
AGGREGATE % OF AGGREGATE
PRINCIPAL BALANCE PRINCIPAL BALANCE
NUMBER OF AS OF THE CUT-OFF AS OF THE CUT-OFF
PROPERTY TYPE MORTGAGE LOANS DATE DATE
- ----------------------------------------------------- ----------------- -------------------- ---------------------
<S> <C> <C> <C>
Condominium.......................................... 6 $ 295,011.93 0.41%
Manufactured Housing................................. 52 2,519,677.11 3.51%
PUD.................................................. 21 2,502,571.03 3.49%
Single Family Attached............................... 10 515,472.84 0.72%
Single Family Dettached.............................. 1,006 64,565,953.22 90.02%
Townhouse............................................ 1 46,750.00 0.07%
Two- to Four-Family.................................. 22 1,276,765.37 1.78%
----- -------------------- ------
TOTAL.............................................. 1,118 $ 71,722,201.50 100.00%
----- -------------------- ------
----- -------------------- ------
</TABLE>
FIXED RATE GROUP
DISTRIBUTION OF OCCUPANCY
<TABLE>
<CAPTION>
AGGREGATE % OF AGGREGATE
PRINCIPAL BALANCE PRINCIPAL BALANCE
NUMBER OF AS OF THE CUT-OFF AS OF THE CUT-OFF
OCCUPANCY TYPE MORTGAGE LOANS DATE DATE
- ----------------------------------------------------- ----------------- -------------------- ---------------------
<S> <C> <C> <C>
Owner Occupied....................................... 1,063 $ 69,022,256.82 96.24%
Investor............................................. 50 2,494,044.12 3.48%
Second Home.......................................... 5 205,900.56 0.29%
----- -------------------- ------
TOTAL.............................................. 1,118 $ 71,722,201.50 100.00%
----- -------------------- ------
----- -------------------- ------
</TABLE>
FIXED RATE GROUP
DISTRIBUTION OF TERM OF SEASONING
<TABLE>
<CAPTION>
AGGREGATE % OF AGGREGATE
PRINCIPAL BALANCE PRINCIPAL BALANCE
NUMBER OF AS OF THE CUT-OFF AS OF THE CUT-OFF
MONTHS OF SEASONING MORTGAGE LOANS DATE DATE
- ----------------------------------------------------- ----------------- -------------------- ---------------------
<S> <C> <C> <C>
0.................................................... 181 $ 12,979,544.00 18.10%
1 to 12.............................................. 937 58,742,657.50 81.90%
----- -------------------- ------
TOTAL.............................................. 1,118 $ 71,722,201.50 100.00%
----- -------------------- ------
----- -------------------- ------
</TABLE>
10
<PAGE>
Adjustable Rate Group
As of the Cut-off Date, the Mortgage Loans in the Adjustable Rate Group
consisted of 287 Mortgage Loans secured by Mortgaged Properties located in 25
states, as specified in the table below. As of the Cut-off Date, the
Mortgage Loans in the Adjustable Rate Group had an aggregate principal
balance of $29,603,451.19, the minimum principal balance of any of such
Mortgage Loans was $17,594.42, the maximum principal balance thereof was
$384,502.27 and the average principal balance of such Mortgage Loans was
$103,147.91. As of the Cut-off Date, the weighted average current Mortgage
Rate of the Mortgage Loans in the Adjustable Rate Group was 9.73% and the
weighted average margin was 6.04%.
For the Mortgage Loans in the Adjustable Rate Group as of the Cut-off
Date, the original term to stated maturity ranged from 180 months to 360
months, the remaining term to stated maturity ranged from 179 months to 360
months, the weighted average remaining term to stated maturity was 358
months, the weighted average original term to stated maturity was 359 months
and the weighted average seasoning was approximately two months. No Mortgage
Loan in the Adjustable Rate Group as of the Cut-off Date had a stated
maturity later than November 15, 2027. All of the Mortgage Loans in the
Adjustable Rate Group require monthly payments of principal that will fully
amortize the Mortgage Loans by their respective maturity dates.
As of the Cut-off Date the weighted average original LTV (based on
property values of the related Mortgage Properties at the time of
origination) of the Adjustable Rate Group was 82.63%. All of the Mortgage
Loans included in the Adjustable Rate Group are secured by first lien
mortgages or deeds of trust on the related Mortgaged Properties.
All of the Mortgage Loans included in the Adjustable Rate Group bear
interest at a rate equal to six-month LIBOR plus a margin.
The Adjustable Rate Group Mortgage Loans have semi-annual interest rate
and semi-annual payment adjustment frequencies. As of the Cut-off Date,
approximately 67.43% of the Mortgage Loans included in the Adjustable Rate
Group had initial Mortgage Rates and payments that are fixed for 24 months or
more from the date of origination thereof before such Mortgage Loans become
subject to the semi-annual adjustment described in the preceding sentence.
The margins for the Adjustable Rate Group Mortgage Loans range from 3.500% to
9.100%. Substantially all of the Adjustable Rate Group Mortgage Loans have a
semi-annual rate adjustment cap of 1.50%, with approximately 79.80% having a
lifetime adjustment cap of 7.0% in excess of the related initial Mortgage
Rate, and approximately 20.20% having lifetime caps other than 7.0% in excess
of the related initial Mortgage Rate. As of the Cut-off Date, the weighted
average number of months until the next adjustment date was 17. The weighted
average minimum Mortgage Rate as of the Cut-off Date was 9.98%. The
weighted average maximum Mortgage Rate as of the Cut-off Date was 16.44%.
11
<PAGE>
ADJUSTABLE RATE GROUP
GEOGRAPHIC DISTRIBUTION (1)
<TABLE>
<CAPTION>
AGGREGATE % OF AGGREGATE
PRINCIPAL BALANCE PRINCIPAL BALANCE
NUMBER OF AS OF THE CUT-OFF AS OF THE CUT-OFF
STATE MORTGAGE LOANS DATE DATE
- -------------------------------------------------------- ------------------- -------------------- -----------------
<S> <C> <C> <C>
Arizona................................................. 3 $ 462,057.67 1.56%
California.............................................. 17 3,366,228.68 11.37%
Colorado................................................ 3 391,805.48 1.32%
Delaware................................................ 1 139,880.15 0.47%
Florida................................................. 14 1,472,887.26 4.98%
Georgia................................................. 6 407,897.44 1.38%
Illinois................................................ 26 3,203,118.91 10.82%
Indiana................................................. 28 2,076,826.66 7.02%
Kansas.................................................. 2 58,159.65 0.20%
Kentucky................................................ 9 817,980.39 2.76%
Louisiana............................................... 2 187,838.05 0.63%
Maryland................................................ 7 984,524.78 3.33%
Michigan................................................ 54 5,809,441.80 19.62%
Nevada.................................................. 1 139,854.28 0.47%
North Carolina.......................................... 10 996,750.97 3.37%
Ohio.................................................... 60 4,406,738.33 14.89%
Oregon.................................................. 4 558,728.69 1.89%
Pennsylvania............................................ 8 884,717.25 2.99%
South Carolina.......................................... 1 70,948.90 0.24%
Tennessee............................................... 22 2,222,500.97 7.51%
Texas................................................... 1 69,673.34 0.24%
Utah.................................................... 2 192,978.61 0.65%
Virginia................................................ 3 416,644.01 1.41%
Washington.............................................. 1 68,000.00 0.23%
Wisconsin............................................... 2 197,268.92 0.67%
----- ------------------ ------
TOTAL................................................. 287 $ 29,603,451.19 100.00%
----- ------------------ ------
----- ------------------ ------
(1) Geographic location generally is determined by location of the related
Mortgaged Property; however, with respect to certain Mortgage Loans,
geographic location is determined by Mortgagor mailing address.
</TABLE>
12
<PAGE>
ADJUSTABLE RATE GROUP
DISTRIBUTION OF LTVs
<TABLE>
<CAPTION>
AGGREGATE % OF AGGREGATE
PRINCIPAL BALANCE PRINCIPAL BALANCE
NUMBER OF AS OF THE CUT-OFF AS OF THE CUT-OFF
RANGE OF LTV RATIOS MORTGAGE LOANS DATE DATE
- -------------------------------------------------------- ------------------- -------------------- -----------------
<S> <C> <C> <C>
20.00% to 25.00%........................................ 1 $ 82,000.00 0.28%
25.01% to 30.00%........................................ 1 28,500.00 0.10%
30.01% to 35.00%........................................ 1 84,873.57 0.29%
40.01% to 45.00%........................................ 1 118,692.19 0.40%
45.01% to 50.00%........................................ 1 40,000.00 0.14%
50.01% to 55.00%........................................ 3 226,328.17 0.76%
55.01% to 60.00%........................................ 3 167,498.07 0.57%
60.01% to 65.00%........................................ 9 752,291.53 2.54%
65.01% to 70.00%........................................ 15 1,557,597.65 5.26%
70.01% to 75.00%........................................ 18 1,627,277.71 5.50%
75.01% to 80.00%........................................ 84 9,045,093.47 30.55%
80.01% to 85.00%........................................ 55 5,303,360.17 17.91%
85.01% to 90.00%........................................ 60 6,154,493.01 20.79%
90.01% to 95.00%........................................ 33 4,191,728.39 14.16%
95.01% to 100.00%....................................... 1 39,982.26 0.14%
100.01% >............................................... 1 183,735.00 0.62%
----- ------------------ ------
TOTAL................................................. 287 $ 29,603,451.19 100.00%
----- ------------------ ------
----- ------------------ ------
</TABLE>
13
<PAGE>
ADJUSTABLE RATE GROUP
DISTRIBUTION OF MORTGAGE RATES
<TABLE>
<CAPTION>
AGGREGATE % OF AGGREGATE
PRINCIPAL BALANCE PRINCIPAL BALANCE
NUMBER OF AS OF THE CUT-OFF AS OF THE CUT-OFF
RANGE OF MORTAGE RATES MORTGAGE LOANS DATE DATE
- -------------------------------------------------------- ------------------- -------------------- -----------------
<S> <C> <C> <C>
6.000% to 6.500%........................................ 2 $ 244,000.00 0.82%
6.501% to 7.000%........................................ 5 706,991.00 2.39%
7.001% to 7.500%........................................ 1 89,000.00 0.30%
7.501% to 8.000%........................................ 9 1,397,158.74 4.72%
8.001% to 8.500%........................................ 21 3,180,426.84 10.74%
8.501% to 9.000%........................................ 35 4,091,026.45 13.82%
9.001% to 9.500%........................................ 30 3,037,068.89 10.26%
9.501% to 10.000%....................................... 46 4,970,056.40 16.79%
10.001% to 10.500%...................................... 38 3,688,220.47 12.46%
10.501% to 11.000%...................................... 34 3,119,807.71 10.54%
11.001% to 11.500%...................................... 36 2,832,771.00 9.57%
11.501% to 12.000%...................................... 20 1,640,893.20 5.54%
12.001% to 12.500%...................................... 5 352,792.22 1.19%
12.501% to 13.000%...................................... 4 189,927.14 0.64%
13.001% to 13.500%...................................... 1 63,311.13 0.21%
----- ------------------ ------
TOTAL................................................. 287 $ 29,603,451.19 100.00%
----- ------------------ ------
----- ------------------ ------
</TABLE>
14
<PAGE>
ADJUSTABLE RATE GROUP
REMAINING TERM TO MATURITY DISTRIBUTION
<TABLE>
<CAPTION>
AGGREGATE % OF AGGREGATE
PRINCIPAL BALANCE PRINCIPAL BALANCE
NUMBER OF AS OF THE CUT-OFF AS OF THE CUT-OFF
MONTHS MORTGAGE LOANS DATE DATE
- -------------------------------------------------------- ------------------- -------------------- -----------------
<S> <C> <C> <C>
145 to 180.............................................. 1 $ 100,075.04 0.34%
181 to 240.............................................. 2 57,470.80 0.19%
301 to 360.............................................. 284 29,445,905.35 99.47%
----- ------------------ ------
TOTAL................................................. 287 $29,603,451.19 100.00%
----- ------------------ ------
----- ------------------ ------
</TABLE>
ADJUSTABLE RATE GROUP
DISTRIBUTION OF PRINCIPAL BALANCES
<TABLE>
<CAPTION>
AGGREGATE % OF AGGREGATE
PRINCIPAL BALANCE PRINCIPAL BALANCE
NUMBER OF AS OF THE CUT-OFF AS OF THE CUT-OFF
RANGE OF PRINCIPAL BALANCES MORTGAGE LOANS DATE DATE
- -------------------------------------------------------- ------------------- -------------------- -----------------
<S> <C> <C> <C>
$25,000 or less......................................... 3 $ 64,327.76 0.22%
25,001 to 30,000........................................ 6 165,450.07 0.56%
30,001 to 35,000........................................ 5 161,615.21 0.55%
35,001 to 40,000........................................ 9 343,418.96 1.16%
40,001 to 45,000........................................ 9 386,472.78 1.31%
45,001 to 50,000........................................ 8 384,529.22 1.30%
50,001 to 55,000........................................ 16 841,848.96 2.84%
55,001 t0 60,000........................................ 11 635,624.53 2.15%
60,001 to 65,000........................................ 18 1,137,262.27 3.84%
65,001 to 70,000........................................ 15 1,022,714.05 3.45%
70,001 to 75,000........................................ 11 795,112.01 2.69%
75,001 to 80,000........................................ 18 1,383,299.83 4.67%
80,001 to 85,000........................................ 12 996,737.61 3.37%
85,001 to 90,000........................................ 21 1,840,901.59 6.22%
90,001 to 95,000........................................ 7 652,518.47 2.20%
95,001 to 100,000....................................... 4 389,565.00 1.32%
100,001 to 105,000...................................... 9 919,315.81 3.11%
105,001 to 110,000...................................... 8 868,653.45 2.93%
110,001 to 115,000...................................... 9 1,007,954.40 3.40%
115,001 to 120,000...................................... 6 700,665.57 2.37%
120,001 to 125,000...................................... 5 617,481.41 2.09%
125,001 to 130,000...................................... 9 1,146,650.65 3.87%
130,001 to 135,000...................................... 4 526,056.89 1.78%
135,001 to 140,000...................................... 4 555,689.48 1.88%
140,001 to 145,000...................................... 4 563,641.18 1.90%
145,001 to 150,000...................................... 6 883,588.37 2.98%
150,001 to 200,000...................................... 30 5,158,358.23 17.42%
200,001 to 250,000...................................... 10 2,217,587.68 7.49%
250,001 to 300,000...................................... 3 807,897.40 2.73%
300,001 to 350,000...................................... 3 956,136.87 3.23%
350,001 to 400,000...................................... 4 1,472,375.48 4.97%
----- ------------------ ------
TOTAL................................................. 287 $ 29,603,451.19 100.00%
----- ------------------ ------
----- ------------------ ------
</TABLE>
15
<PAGE>
ADJUSTABLE RATE GROUP
DISTRIBUTION OF PROPERTY TYPE
<TABLE>
<CAPTION>
AGGREGATE % AGGREGATE
PRINCIPAL BALANCE PRINCIPAL BALANCE
NUMBER OF AS OF THE CUT-OFF AS OF THE CUT-OFF
PROPERTY TYPE MORTGAGE LOANS DATE DATE
- ------------------------------------ ---------------- --------------------- --------------------
<S> <C> <C> <C>
Condominium......................... 2 $ 77,922.35 0.26%
Manufactured Housing................ 5 309,101.55 1.04%
PUD................................. 6 595,756.79 2.01%
Single Family Attached.............. 3 177,381.84 0.60%
Single Family Dettached............. 262 27,425,196.85 92.64%
Townhouse........................... 3 551,924.37 1.86%
Two- to -Four Family................ 6 466,167.44 1.57%
----- ---------------- ------
TOTAL............................. 287 $ 29,603,451.19 100.00%
----- ---------------- ------
----- ---------------- ------
</TABLE>
ADJUSTABLE RATE GROUP
DISTRIBUTION OF OCCUPANCY
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE
PRINCIPAL BALANCE PRINCIPAL BALANCE
NUMBER OF AS OF THE CUT-OFF AS OF THE CUT-OFF
OCCUPANCY TYPE MORTGAGE LOANS DATE DATE
- ----------------------------- ----------------------- --------------------- -----------------
<S> <C> <C> <C>
Owner Occupied............... 273 $28,737,901.70 97.08%
Investor..................... 13 799,208.49 2.70%
Second Home.................. 1 66,341.00 0.22%
----- ---------------- ------
TOTAL...................... 287 $29,603,451.19 100.00%
----- ---------------- ------
----- ---------------- ------
</TABLE>
ADJUSTABLE RATE GROUP
DISTRIBUTION OF TERM OF SEASONING
<TABLE>
<CAPTION>
AGGREGATE % OF AGGREGATE
PRINCIPAL BALANCE PRINCIPAL BALANCE
NUMBER OF AS OF THE CUT-OFF AS OF THE CUT-OFF
MONTHS OF SEASONING MORTGAGE LOANS DATE DATE
------------------------ ---------------- -------------------- ---------------------
<S> <C> <C> <C>
0....................... 45 $ 4,179,791.00 14.12%
1 to 12................. 242 25,423,660.19 85.88%
------ ---------------- ------
TOTAL................. 287 $ 29,603,451.19 100.00%
------ ---------------- ------
------ ---------------- ------
</TABLE>
16
<PAGE>
ADJUSTABLE RATE GROUP
DISTRIBUTION OF MAXIMUM MORTGAGE RATES
<TABLE>
<CAPTION>
AGGREGATE % OF AGGREGATE
PRINCIPAL BALANCE PRINCIPAL BALANCE
NUMBER OF AS OF THE CUT-OFF AS OF THE CUT-OFF
MAXIMUM MORTGAGE RATES MORTGAGE LOANS DATE DATE
- ------------------------- ---------------- -------------------- ---------------------
<S> <C> <C> <C>
13.000% to 13.500%....... 2 $ 244,000.00 0.82%
13.501% to 14.000%....... 7 1,065,020.20 3.60%
14.001% to 14.500%....... 7 1,629,200.55 5.50%
14.501% to 15.000%....... 24 3,597,255.35 12.15%
15.001% to 15.500%....... 23 2,618,778.80 8.85%
15.501% to 16.000%....... 27 2,856,749.51 9.65%
16.001% to 16.500%....... 30 3,206,543.05 10.83%
16.501% to 17.000%....... 41 4,095,141.36 13.83%
17.001% to 17.500%....... 33 2,723,263.73 9.20%
17.501% to 18.000%....... 30 2,670,873.88 9.02%
18.001% to 18.500%....... 34 2,683,192.49 9.06%
18.501% to 19.000%....... 20 1,640,893.20 5.54%
19.001% to 19.500%....... 4 319,300.80 1.08%
19.501% to 20.000%....... 4 189,927.14 0.64%
20.001% to 20.500%....... 1 63,311.13 0.21%
----- ---------------- ------
TOTAL.................. 287 $ 29,603,451.19 100.00%
----- ---------------- ------
----- ---------------- ------
</TABLE>
17
<PAGE>
ADJUSTABLE RATE GROUP
DISTRIBUTION OF MINIMUM MORTGAGE RATES
<TABLE>
<CAPTION>
AGGREGATE % OF AGGREGATE
PRINCIPAL BALANCE PRINCIPAL BALANCE
NUMBER OF AS OF THE CUT-OFF AS OF THE CUT-OFF
MINIMUM MORTGAGE RATES MORTGAGE LOANS DATE DATE
- ---------------------- -------------- ----------------- -----------------
<S> <C> <C> <C>
7.001% to 7.500%...... 2 $ 244,000.00 0.82%
7.501% to 8.000%...... 9 1,184,264.30 4.00%
8.001% to 8.500%...... 8 1,809,200.55 6.11%
8.501% to 9.000%...... 29 4,066,181.53 13.74%
9.001% to 9.500%...... 34 3,220,108.12 10.88%
9.501% to 10.000%..... 47 4,868,068.99 16.44%
10.001% to 10.500%.... 44 4,597,175.06 15.53%
10.501% to 11.000%.... 40 3,770,152.14 12.74%
11.001% to 11.500%.... 40 3,201,003.47 10.81%
11.501% to 12.000%.... 23 1,986,128.04 6.71%
12.001% to 12.500%.... 5 352,792.22 1.19%
12.501% to 13.000%.... 5 241,065.64 0.81%
13.001% to 13.500%.... 1 63,311.13 0.21%
------ -------------- ------
TOTAL............... 287 $29,603,451.19 100.00%
------ -------------- ------
------ -------------- ------
</TABLE>
18
<PAGE>
ADJUSTABLE RATE GROUP
DISTRIBUTION OF MARGINS
<TABLE>
<CAPTION>
AGGREGATE % OF AGGREGATE
PRINCIPAL BALANCE PRINCIPAL BALANCE
NUMBER OF AS OF THE CUT-OFF AS OF THE CUT-OFF
MARGINS MORTGAGE LOANS DATE DATE
- ---------------------- ---------------- ------------------- --------------------
<S> <C> <C> <C>
3.001% to 3.500%...... 2 $ 244,000.00 0.82%
3.501% to 4.000%...... 10 1,155,432.92 3.90%
4.001% to 4.500%...... 4 356,716.10 1.20%
4.501% to 5.000%...... 25 3,023,152.15 10.21%
5.001% to 5.500%...... 44 4,823,283.70 16.29%
5.501% to 6.000%...... 54 6,540,682.60 22.09%
6.001% to 6.500%...... 49 5,234,570.94 17.68%
6.501% to 7.000%...... 36 2,961,638.14 10.00%
7.001% to 7.500%...... 32 3,060,035.62 10.34%
7.501% to 8.000%...... 23 1,584,124.16 5.35%
8.001% to 8.500%...... 4 312,943.10 1.06%
8.501% to 9.000%...... 3 154,917.74 0.52%
9.001% to 9.500%...... 1 151,954.02 0.51%
------ -------------- ------
TOTAL............. 287 $29,603,451.19 100.00%
------ -------------- ------
------ -------------- ------
</TABLE>
19
<PAGE>
ADJUSTABLE RATE GROUP
NET INTEREST RATE ADJUSMENT DATE
<TABLE>
<CAPTION>
AGGREGATE % OF AGGREGATE
PRINCIPAL BALANCE PRINCIPAL BALANCE
NEXT INTEREST NUMBER OF AS OF THE CUT-OFF AS OF THE CUT-OFF
ADJUSTMENT DATE MORTGAGE LOANS DATE DATE
- ----------------------------- ------------------- -------------------- -----------------
<S> <C> <C> <C>
February 1, 1998............. 2 $ 288,474.18 0.97%
March 1, 1998................ 4 598,092.71 2.02%
April 1, 1998................ 1 194,851.06 0.66%
May 1, 1998.................. 30 3,739,652.45 12.63%
May 15, 1998................. 10 918,425.00 3.10%
June 1, 1998................. 25 2,442,858.19 8.25%
June 15, 1998................ 2 209,520.00 0.71%
November 15, 1998............ 1 60,200.00 0.20%
July 1, 1999................. 1 51,138.50 0.17%
August 1, 1999............... 4 655,942.52 2.22%
September 1, 1999............ 38 5,365,853.34 18.13%
September 6, 1999............ 1 68,824.34 0.23%
September 15, 1999........... 7 530,975.06 1.79%
October 1, 1999.............. 66 6,389,536.36 21.58%
October 15, 1999............. 11 874,122.13 2.95%
November 1, 1999............. 53 4,479,610.35 15.13%
November 15, 1999............ 13 1,196,960.00 4.04%
December 1, 1999............. 16 1,447,215.00 4.89%
December 15, 1999............ 2 91,200.00 0.31%
--- -------------------- ------
TOTAL................... 287 $ 29,603,451.19 100.00%
--- -------------------- ------
--- -------------------- ------
</TABLE>
20
<PAGE>
Item 7. Financial Statements; Pro Forma Financial Information and Exhibits.
-------------------------------------------------------------------
(a) Not applicable.
(b) Not applicable.
(c) Exhibits:
1.1 Underwriting Agreement dated November 25, 1997 between
EquiVantage Acceptance Corp. and Prudential Securities
Incorporated, as representative of the Underwriters named therein
1.2 Guaranty of EquiVantage Inc. dated December 15, 1997 relating to
performance of certain obligations of EquiVantage Acceptance
Corp.
4.1 Pooling and Servicing Agreement dated as of December 1, 1997
among EquiVantage Acceptance Corp., EquiVantage Inc. and Norwest
Bank Minnesota, National Association
4.2 Surety Bond effective December 15, 1997 issued by Financial
Guaranty Insurance Company relating to EquiVantage Home Equity
Loan Trust 1997-4
4.3 Master Loan Transfer Agreement dated as of December 1, 1997
between EquiVantage Acceptance Corp. and EquiVantage Inc.
4.4 Conveyance Agreement dated as of December 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)
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EQUIVANTAGE ACCEPTANCE CORP.
By: /s/ Elizabeth Folk
------------------------
Elizabeth Folk
Senior Vice President
Date: December 29, 1997
22
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit
- ------- -------
1.1 Underwriting Agreement dated November 25, 1997 between
EquiVantage Acceptance Corp. and Prudential Securities
Incorporated, as representative of the Underwriters named
therein
1.2 Guaranty of EquiVantage Inc. dated December 15, 1997
relating to performance of certain obligations of
EquiVantage Acceptance Corp.
4.1 Pooling and Servicing Agreement dated as of December 1, 1997
among EquiVantage Acceptance Corp., EquiVantage Inc. and
Norwest Bank Minnesota, National Association
4.2 Surety Bond effective December 15, 1997 issued by Financial
Guaranty Insurance Company relating to EquiVantage Home
Equity Loan Trust 1997-4
4.3 Master Loan Transfer Agreement dated as of December 1, 1997
between EquiVantage Acceptance Corp. and EquiVantage Inc.
4.4 Conveyance Agreement dated as of December 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)
23
<PAGE>
UNDERWRITING AGREEMENT
between
EQUIVANTAGE ACCEPTANCE CORP.
and
PRUDENTIAL SECURITIES INCORPORATED,
as Representative of the Underwriters
EquiVantage Home Equity Loan Trust 1997-4
Home Equity Loan Asset-Backed Certificates, Series 1997-4
November 25, 1997
<PAGE>
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......................................8
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........................................................32
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
<PAGE>
November 25, 1997
UNDERWRITING AGREEMENT
Prudential Securities Incorporated
First Union Capital Markets Corp.
c/o Prudential Securities Incorporated,
as Representative of the Underwriters
named in Schedule II hereto
One New York Plaza
New York, New York 10292
Ladies and Gentlemen:
EquiVantage Acceptance Corp., a Delaware corporation (the "Company"),
hereby confirms its agreement to sell to Prudential Securities Incorporated and
First Union Capital Markets Group (the "Underwriters") the Home Equity Loan
Asset-Backed Certificates, Series 1997-4, 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 1997-4
(the "Trust") consisting of two segregated pools 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.
Prudential Securities 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 December 1, 1997 (the "Master Loan Transfer
Agreement"), and the related conveyance agreement, dated as of December 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.
<PAGE>
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 December 1, 1997 (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 Norwest Bank Minnesota, N.A., as
trustee (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 Financial
Guaranty Insurance Company (the "Certificate Insurer"). The Certificate
Insurance Policy will be issued pursuant to the insurance agreement, dated as of
December 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
2
<PAGE>
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 (as defined herein) 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 date hereof and 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
3
<PAGE>
operations of the Company, otherwise than as set forth or contemplated in the
Prospectus as supplemented or amended as of the Closing Date.
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 if
determined adversely to the Company would have a material adverse effect on the
business or financial condition of the Company, (b) asserting the invalidity of
this Agreement, the Pooling and Servicing Agreement, the Insurance Agreement,
the Purchase Agreements 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 this Agreement, the Pooling and Servicing
Agreement, the Insurance Agreement or the Purchase Agreements, as the case may
be, (d) 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 (e) 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
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and the consummation of the transactions contemplated hereby and thereby,
compliance with the provisions thereof and the issuance and delivery of the
Certificates do not and will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company is a party, by which the Company
is bound or to which any of the properties or assets of the Company or any of
its subsidiaries is subject, which breach or violation would have a material
adverse effect on the business, operations or financial condition of the
Company, nor will such actions result in any violation of the provisions of
the 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
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proceedings pending with respect to which the Company has received service of
process or, to the best knowledge of the Company, threatened relating to the
revocation or modification of any such license, certificate, authority or
permit 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
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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.
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 Sections X and XI
hereof), severally and not jointly, to purchase from the Company, the respective
principal amount 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.
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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 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 24, 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
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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 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, to the extent the
Prospectus does not specifically correct such inaccuracies, 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.
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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
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 Underwriters 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
Underwriters have 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)
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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 from any error contained in the
Mortgage Pool information provided to the Underwriters by the Company.
D. Each Underwriter that delivers any Computational Materials and ABS
Term Sheets to the Company shall deliver to the Company a certificate, dated as
of the date hereof, 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 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
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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) 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
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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 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.
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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 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 Company. 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; (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
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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.
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., 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
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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 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.
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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.
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
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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 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 shall 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.
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<PAGE>
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.
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); 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,
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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, 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
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Company and authenticated and delivered by the Trustee in accordance
with the Pooling and Servicing Agreement, the Certificates will be
validly issued and outstanding and will be entitled to the benefits of
the Pooling and Servicing Agreement.
6. No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body of the
United States is required for the issuance of the Certificates, and the
sale of the Offered Certificates to the Underwriters, or the consummation
by the Company of the other transactions contemplated by this Agreement,
the Pooling and Servicing Agreement and the Insurance Agreement, except
such consents, approvals, authorizations, registrations or qualifications
as may be required under the 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.
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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.
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.
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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.
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.
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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 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 and all related agreements are true and correct as of the Closing
Date; 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. There has been no amendment or other document filed affecting the
charter documents or the by-laws of the Company since March 2, 1995 and no
such amendment has been authorized. No event has occurred that has
affected the good standing of the Company under the laws of the State of
Delaware.
3. There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company from the end of the fiscal quarter immediately
proceeding the fiscal quarter in which the Closing Date occurs.
4. There are no actions, suits or proceedings pending with respect
to which it has received service of process or, to the best of such
officer's knowledge, threatened against or affecting the Company that, if
adversely determined, individually or in the aggregate, would be reasonably
likely to adversely affect the Company's obligations under the Pooling and
Servicing Agreement or this Agreement in any material way; no merger,
liquidation, dissolution or bankruptcy of the Company is pending or
contemplated.
L. The Trustee shall have furnished to the Underwriters a certificate of
the Trustee, signed by one or more duly authorized officers of the Trustee,
dated the Closing Date, as to the due authorization, execution and delivery of
the Pooling and Servicing Agreement by the Trustee and the acceptance by the
Trustee of the Trust Fund created thereby and the due execution,
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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.
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
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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 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.
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
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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
and expenses of counsel to the Underwriters); (f) any fees charged by the
Rating Agencies for rating the Offered Certificates; (g) the cost of the
accountant's letter relating to the Prospectus; (h) the fees and expenses of
the Certificate Insurer (other than the fees payable pursuant to the Pooling
and Servicing Agreement); (i) the cost of any accountant's comfort letters
that the Underwriters request relating to any Computational Materials or ABS
Term Sheets (except that the cost of any accountant's comfort letters that
the Underwriters request relating to any corrected Computational Materials or
ABS Term Sheets shall be at the expense of the Underwriter requesting same);
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
27
<PAGE>
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 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
28
<PAGE>
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 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
claims 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
29
<PAGE>
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.
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
30
<PAGE>
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 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, Attention: General Counsel,
telecopy number (212) 778-3716; 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, Attention: 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
31
<PAGE>
person, other than the persons referred to in this Section XIII, any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision contained herein.
SECTION XIV. Survival. The respective indemnities, representations,
warranties and agreements of the Company and the Underwriters contained in this
Agreement, or made by or on behalf of them, respectively, pursuant to this
Agreement, shall survive the delivery of and payment for the Certificates and
shall remain in full force and effect, regardless of any investigation made by
or on behalf of any of them or any person controlling any of them. The
provisions of Sections V, VII and VIII hereof shall survive the termination or
cancellation of this Agreement.
SECTION XV. Definition of the Term "Business Day". For purposes of this
Agreement, "Business Day" means any day on which the New York Stock Exchange,
Inc. is open for trading.
SECTION XVI. Governing Law; Submission to Jurisdiction. This Agreement
shall be governed by and construed in accordance with the laws of the State of
New York without giving effect to the conflict of law rules thereof.
The parties hereto submit to the jurisdiction of the United States District
Court for the Southern District of New York and 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:
PRUDENTIAL SECURITIES INCORPORATED
Acting on its own behalf and as
Representative of the Underwriters
referred to in the foregoing Agreement
By: /s/ Len Blum
----------------------------
Name: Len Blum
Title: Managing Director
<PAGE>
Schedule I
EquiVantage Home Equity Loan Trust 1997-4, Series 1997-4
Registration Statement No. 333-22343
Base Prospectus dated November 25, 1997
Prospectus Supplement dated November 25, 1997
Title of Certificates: Class A-1
Amount of Certificates: $29,380,000 (approximate)
Pass-Through Rate: LIBOR* + 0.17% per annum
Purchase Price Percentage: 99.70%
Cut-off Date: December 1, 1997
Closing: December 15, 1997
Denominations: $1,000 and integral multiples
of $1.00 in excess thereof
Title of Certificates: Class A-2
Amount of Certificates: $21,000,000 (approximate)
Pass-Through Rate 6.640% per annum
Purchase Price Percentage: 99.70% (plus accrued interest
from the Cut-off Date at
applicable Pass-Through
Rate)
Cut-off Date: December 1, 1997
Closing: December 15, 1997
Denominations: $1,000 and integral multiples
of $1.00 in excess thereof
* As defined in the Prospectus Supplement.
Schedule I-1
<PAGE>
Title of Certificates: Class A-3
Amount of Certificates: $14,000,000 (approximate)
Pass-Through Rate: With respect to any Payment Date* that
occurs prior to the Step-Up Payment
Date*, 7.045% per annum and, with
respect to any Payment Date on the
Step-Up Payment Date or thereafter,
7.545% per annum
Purchase Price Percentage: 99.70% (plus accrued interest from
the Cut-off Date at applicable
Pass-Through Rate)
Cut-off Date: December 1, 1997
Closing: December 15, 1997
Denominations: $1,000 and integral multiples
of $1.00 in excess thereof
Title of Certificates: Class A-4
Amount of Certificates: $7,000,000 (approximate)
Pass-Through Rate: With respect to any Payment Date that
occurs prior to the Step-Up Payment
Date, 6.705% per annum and, with respect
to any Payment Date on the Step-Up
Payment Date or thereafter, 7.205% per
annum
Purchase Price Percentage: 99.70% (plus accrued interest from
the Cut-off Date at applicable
Pass-Through Rate)
Cut-off Date: December 1, 1997
Closing: December 15, 1997
Denominations: $1,000 and integral multiples
of $1.00 in excess thereof
* As defined in the Prospectus Supplement.
Schedule I-2
<PAGE>
Title of Certificates: Class A-5
Amount of Certificates: $28,620,000 (approximate)
Pass-Through Rate: LIBOR + 0.24% for each Accrual Period*on
or prior to the Clean-Up Call Date*;
LIBOR + 0.48% thereafter
Purchase Price Percentage: 99.70%
Cut-off Date: December 1, 1997
Closing: December 15, 1997
Denominations: $1,000 and integral multiples
of $1.00 in excess thereof
Representative: Prudential Securities Incorporated
Date, Time and Location of Settlement: 10:00 a.m. on December 15, 1997
at the offices of Andrews &
Kurth L.L.P., 1701 Pennsylvania
Avenue, N.W., Suite 200,
Washington, DC 20006
* As defined in the Prospectus Supplement.
Schedule I-3
<PAGE>
Schedule II
<TABLE>
<CAPTION>
Class ofCertificates Principal Amount of Certificates
Name of Underwriter Purchased by suchUnderwriter Purchased by such Underwriter
<S> <C> <C>
Prudential Securities Incorporated Class A-1 $14,690,000
Class A-2 $10,500,000
Class A-3 $ 7,000,000
Class A-4 $ 3,500,000
Class A-5 $14,310,000
------------
TOTAL $50,000,000
============
</TABLE>
<TABLE>
<CAPTION>
Class of Certificates Principal Amount ofCertificates
Name of Underwriter Purchased by suchUnderwriter Purchased by such Underwriter
<S> <C> <C>
First Union Capital Markets Corp. Class A-1 $14,690,000
Class A-2 $10,500,000
Class A-3 $ 7,000,000
Class A-4 $ 3,500,000
Class A-5 $14,310,000
------------
TOTAL $50,000,000
============
</TABLE>
SCHEDULE II
<PAGE>
December 15, 1997
Prudential Securities Incorporated
First Union Capital Markets Corp.
c/o Prudential Securities Incorporated
as Representative of the Underwriters
One New York Plaza
New York, New York 10292
Ladies and Gentlemen:
This Guaranty is made by EquiVantage Inc., a Delaware corporation with
its principal office at 13111 Northwest Freeway, Suite 300, Houston, Texas
77040 ("EquiVantage"), in favor of Prudential Securities Incorporated, in its
capacity as Representative 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 One New York Plaza,
New York, New York 10292.
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
November 25, 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/ Carolyn B. Andrew
------------------------------
Name: Carolyn B. Andrew
Title: Senior Vice President
ACCEPTED this 15th day of December, 1997
PRUDENTIAL SECURITIES INCORPORATED
Acting on its own behalf and as
Representative of the Underwriters
referred to in the Underwriting Agreement
By: /s/ Len Blum
--------------------------
Name: Len Blum
Title: Managing Director
<PAGE>
POOLING AND SERVICING AGREEMENT
Dated as of December 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 1997-4
Home Equity Loan Asset-Backed Certificates, Series 1997-4
<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...........................35
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....40
Section 3.2. Representations and Warranties of the Servicer...43
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.................49
Section 3.6. Acceptance by Trustee; Certain Substitutions
of Mortgage Loans; Certification by Trustee......53
Section 3.7. Cooperation Procedures...........................55
ii
<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............................................56
Section 5.2. Forms............................................56
Section 5.3. Execution, Authentication and Delivery...........57
Section 5.4. Registration and Transfer of Certificates........57
Section 5.5. Mutilated, Destroyed, Lost or Stolen
Certificates.....................................59
Section 5.6. Persons Deemed Holders...........................60
Section 5.7. Cancellation.....................................60
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..................................64
Section 6.7. Limitation of Suits..............................64
Section 6.8. Unconditional Rights of Holders to Receive
Distributions....................................65
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..............................66
Section 7.2. Establishment of Certificate Account.............66
Section 7.3. The Certificate Insurance Policy.................66
Section 7.4. Closing Date Deposit Account.....................69
Section 7.5. Flow of Funds....................................70
iii
<PAGE>
Section 7.6. Investment of Accounts...........................74
Section 7.7. Eligible Investments.............................75
Section 7.8. Reports by Trustee...............................76
Section 7.9. Additional Reports by Trustee....................79
Section 7.10. Allocation of Realized Losses....................80
Section 7.11. Reserve Fund.....................................80
ARTICLE VIII
SERVICING AND ADMINISTRATION OF MORTGAGE LOANS
Section 8.1. Servicer and Sub-Servicers.......................81
Section 8.2. Collection of Certain Mortgage Loan Payments.....84
Section 8.3. Sub-Servicing Agreements Between Servicer and
Sub-Servicers....................................85
Section 8.4. Successor Sub-Servicers..........................85
Section 8.5. Liability of Servicer............................85
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.............................86
Section 8.8. Principal and Interest Account...................86
Section 8.9. Delinquency Advances, Compensating Interest
and Servicing Advances...........................88
Section 8.10. Purchase of Mortgage Loans.......................89
Section 8.11. Maintenance of Insurance.........................89
Section 8.12. Due-on-Sale Clauses; Assumption and Substitution
Agreements.......................................90
Section 8.13. Realization Upon Defaulted Mortgage Loans........92
Section 8.14. Trustee to Cooperate; Release of Files...........93
Section 8.15. Servicing Compensation...........................94
Section 8.16. Annual Statement as to Compliance................94
Section 8.17. Annual Independent Certified Public Accountants'
Reports; Annual Financial Statements of the
Servicer.........................................95
Section 8.18. Access to Certain Documentation and Information
Regarding the Mortgage Loans.....................95
Section 8.19. Assignment of Agreement..........................96
Section 8.20. Removal of Servicer; Resignation of Servicer.....96
Section 8.21. Inspections by Certificate Insurer; Errors and
Omissions Insurance.............................101
Section 8.22. Merger, Conversion, Consolidation or Succession
to Business of Servicer.........................102
Section 8.23. Financial Statements............................103
Section 8.24. REMIC...........................................103
Section 8.25. The Designated Depository Institution...........103
Section 8.26. Appointment of Custodian........................103
Section 8.27. Indemnification by the Sponsor and Servicer.....103
iv
<PAGE>
ARTICLE IX
TERMINATION OF TRUST
--------------------
Section 9.1. Termination of Trust...........................104
Section 9.2. Termination Upon Option of Holders of Class RL
Certificates and Servicer......................104
Section 9.3. Termination Upon Loss of REMIC Status..........105
Section 9.4. Disposition of Proceeds........................107
Section 9.5. Netting of Amounts.............................107
ARTICLE X
THE TRUSTEE
-----------
Section 10.1. Certain Duties and Responsibilities............107
Section 10.2. Removal of Trustee for Cause...................109
Section 10.3. Certain Rights of the Trustee..................111
Section 10.4. Not Responsible for Recitals or Issuance of
Certificates...................................112
Section 10.5. May Hold Certificates..........................112
Section 10.6. Money Held in Trust............................112
Section 10.7. Compensation and Reimbursement; No Lien for
Fees...........................................112
Section 10.8. Corporate Trustee Required; Eligibility........112
Section 10.9. Resignation and Removal; Appointment of
Successor......................................113
Section 10.10.Acceptance of Appointment by Successor
Trustee........................................114
Section 10.11.Merger, Conversion, Consolidation or Succession
to Business of the Trustee.....................114
Section 10.12.Reporting; Withholding.........................115
Section 10.13.Liability of the Trustee.......................115
Section 10.14.Appointment of Co-Trustee or Separate Trustee..116
ARTICLE XI
MISCELLANEOUS
-------------
Section 11.1. Compliance Certificates and Opinions...........117
Section 11.2. Form of Documents Delivered to the Trustee.....118
Section 11.3. Acts of Holders................................118
Section 11.4. Notices, etc., to Trustee......................119
Section 11.5. Notices and Reports to Holders; Waiver of
Notices........................................119
Section 11.6. Rules by Trustee and Sponsor...................120
Section 11.7. Successors and Assigns.........................120
Section 11.8. Severability...................................120
Section 11.9. Benefits of Agreement..........................120
Section 11.10.Legal Holidays.................................120
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Section 11.11.Governing Law...................................120
Section 11.12.Counterparts....................................120
Section 11.13.Usury...........................................120
Section 11.14.Amendment.......................................121
Section 11.15.REMIC Status; Taxes.............................122
Section 11.16.Additional Limitation on Action and Imposition of
Tax.............................................124
Section 11.17.Appointment of Tax Matters Person...............124
Section 11.18.The Certificate Insurer.........................124
Section 11.19.Notices.........................................125
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LIST OF SCHEDULES AND EXHIBITS
------------------------------
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
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POOLING AND SERVICING AGREEMENT, relating to EQUIVANTAGE HOME EQUITY LOAN
TRUST 1997-4, dated as of December 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 I
DEFINITIONS; RULES OF CONSTRUCTION
Section 1.1 Definitions. For all purposes of this Agreement, the
following terms shall have the meanings set forth below, unless the context
clearly indicates otherwise:
"Account": Any account established in accordance with Section 7.2 or
Section 8.8 hereof.
"Actual Loss Severity": With respect to any Payment Date, a fraction,
expressed as a percentage, (a) the numerator of which equals the sum of all
Realized Losses incurred with respect to Liquidated Loans as of the last day of
the immediately preceding calendar month and (b) the denominator of which equals
the sum as of such Payment Date of the Loan Balances of all Liquidated Loans,
the amount of such Loan Balances to be determined in each case as of the last
day of the calendar month immediately preceding the month in which such Mortgage
Loan became a Liquidated Loan.
<PAGE>
"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.
"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
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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.
"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 1997-4 Home Equity Loan Asset-Backed
Certificates, Series 1997-4, Certificate Account".
"Certificate Insurance Policy": The certificate guaranty surety bond
number 97010782 issued by the Certificate Insurer to the Trustee for the benefit
of the Holders of the Class A Certificates.
3
<PAGE>
"Certificate Insurer": Financial Guaranty Insurance Company, a New York
stock insurance company, and any successor thereto.
"Certificate Insurer Default": The failure by the Certificate Insurer to
make a payment required under the Certificate Insurance Policy in accordance
with its terms 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
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<PAGE>
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 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 Class A-2 Certificates, the
Class A-3 Certificates and the Class A-4 Certificates, based on a
360-day year of twelve 30-day months and, in the case of the Class A-1
Certificates and the Class A-5 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
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<PAGE>
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.
"Class A-1 Pass-Through Rate": (a) For the initial Interest Accrual
Period, 6.17%, and (b) for each Interest Accrual Period thereafter, a per annum
rate of interest equal to the lesser of (i) LIBOR plus 0.17% and (ii) the per
annum rate equal to the percentage obtained as the product of (x) the Weighted
Average Net Coupon Rate of the Mortgage Loans in Group I during the related
Remittance Period and (y) the actual number of days elapsed during such Interest
Accrual Period divided by 360.
"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": 6.640%.
"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": As to any Payment Date that occurs prior to
the Step-Up Payment Date, 7.045% and, as to any Payment Date that occurs on or
after the Step-Up Payment Date, the lesser of (i) 7.545% 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
6
<PAGE>
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 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
------------ ------------------
January 1998 through December 2000 0%
January 2001 through December 2002 45%
January 2003 through December 2003 80%
January 2004 through December 2004 100%
January 2005 and thereafter 300%
"Class A-4 Pass-Through Rate": As to any Payment Date that occurs prior to
the Step-Up Payment Date, 6.705% and, as to any Payment Date that occurs on or
after the Step-Up Payment Date, the lesser of (i) 7.205% 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
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<PAGE>
Certificate shall be the product of the Percentage Interest evidenced thereby
and the Class A-5 Certificate Principal Balance.
"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, 0.24% and, for each Interest
Accrual Period ending on or after the Step-Up Payment Date, 0.48%.
"Class A-5 Pass-Through Rate": (a) For the initial Interest Accrual
Period, 6.24%, 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 February 1998, 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 A-5 Regular Interest": The regular interest, within the meaning of
Section 860G(a)(1) of the Code, represented by the Class A-5 Certificates, other
than the rights to receive amounts under the Cap Agreement.
"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 $1,325,652.69 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.
8
<PAGE>
"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.
"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 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.
"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,
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<PAGE>
distributed to the Holders of the Class RL Certificates pursuant to Section
7.5(b)(ix) and (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": December 15, 1997.
"Closing Date Deposit": An amount equal to the sum of (a) 11 days'
interest at the Class A-1 Pass-Through Rate for the initial Interest Accrual
Period on the Original Class A-1 Certificate Principal Balance and (b) 11 days'
interest at the Class A-5 Pass-Through Rate for the initial Interest Accrual
Period on the Original Class A-5 Certificate Principal Balance. Such amount
shall be deposited by the Sponsor in the Closing Date Deposit Account on the
Closing Date and may be invested in Eligible Investments during the period prior
to the first Remittance Date.
"Closing Date Deposit Account": The account, which shall at all times be
an Eligible Account, established and maintained in accordance with Section 7.4
hereof and entitled "Norwest Bank Minnesota, National Association, as Trustee
for EquiVantage Home Equity Loan Trust 1997-4 Home Equity Loan Asset-Backed
Certificates, Series 1997-4, Closing Date Deposit Account."
"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 the related Property.
"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.
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"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 December 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.
"Data Dictionary": As defined in Section 8.8(d)(iv) hereof.
"Data Tape": As defined in Section 8.8(d)(iv) hereof.
"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,
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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 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.
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"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.
"Final Determination": As defined in Section 9.3(a) hereof.
"Financing Statements": The UCC-1 Financing Statement naming the
Originator as debtor and the Sponsor as secured party and the UCC-1 Financing
Statement naming the Sponsor as debtor and the Trustee as secured party with
respect to the right, title and interest of the Originator or the Sponsor, as
applicable, in and to the Mortgage Loans, as filed with the Secretary of State
of each of Texas, Delaware 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 Closing Date Deposit": As defined in Section 7.4(a) hereof.
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"Group I Excess": As defined in Section 2.8(c) hereof.
"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 clauses (a) - (g) and (j) of the
definition of 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 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 Rate 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 Rate 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.
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"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 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.
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"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, as specified in clauses
(b) and (c) in the definition of Group I Principal Distribution Amount, 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 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.
"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.
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"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 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 Closing Date Deposit": As defined in Section 7.4(a) hereof.
"Group II Excess": As defined in Section 2.8(c) hereof.
"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 clauses (a) - (g) and (j) of the
definition of 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
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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 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.
"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 Rate 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 Rate 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;
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(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 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
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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 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 December 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.
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"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 5.6.
"Indemnification Agreement": The Indemnification Agreement dated as of
December 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 December 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 Class A-2 Certificates, the
Class A-3 Certificates and the Class A-4 Certificates and any Payment Date, the
calendar month immediately preceding such Payment Date; with respect to the
Class A-1 Certificates and 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
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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:
(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-1 Certificates and 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
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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 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.
"Loss Coverage Ratio": With respect to any Payment Date, a fraction,
expressed as a percentage, (a) the numerator of which equals the sum of (i) the
product of (A) the sum of (I) 25% of the Aggregate Loan Balance of all Mortgage
Loans that are 30-59 days Delinquent, plus (II) 50% of the Aggregate Loan
Balance of all Mortgage Loans that are 60-89 days Delinquent, plus (III) 100% of
the Aggregate Loan Balance of all Mortgage Loans that are 90 or more days
Delinquent, in each case as of the close of business on the last day of the
immediately preceding calendar month and including Mortgage Loans that are in
foreclosure or that have been converted to REO Properties, times (B) the greater
of (I) 40.42% or (II) (a) prior to the date specified in clause (b), zero, and
(b) after the earlier of the 30th Payment Date or the first Payment Date after
which the Trust has incurred Realized Losses with respect to at least 20
Liquidated Loans, the Actual Loss Severity, plus (ii) the Cumulative Loss
Amount, and (b) the denominator of which equals the product of (i) 11.40% times
(ii) the Original Aggregate Loan Balance.
"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 December 1, 1997.
"Monthly Remittance Amount": As defined in Section 8.8(d)(iii) hereof.
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"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.
"Mortgagor": The obligor on a Note.
"Net Group I Excess": As defined in Section 2.8(c) hereof.
"Net Group II Excess": As defined in Section 2.8(c) hereof.
"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.
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"Operative Documents": Collectively, this Agreement, the Master Transfer
Agreement, the Certificate Insurance Policy, the Certificates, the
Indemnification Agreement, the Insurance Agreement and any Sub-Servicing
Agreement.
"Original Aggregate Loan Balance": The aggregate Loan Balances of all
Mortgage Loans as of the Cut-Off Date, i.e., $101,325,652.69 of which the
Mortgage Loans in Group I represent $71,722,201.50 and the Mortgage Loans in
Group II represent $29,603,451.19.
"Original Class A Certificate Principal Balance": $100,000,000.00.
"Original Class A-1 Certificate Principal Balance": $29,380,000.00.
"Original Class A-2 Certificate Principal Balance": $21,000,000.00.
"Original Class A-3 Certificate Principal Balance": $14,000,000.00.
"Original Class A-4 Certificate Principal Balance": $7,000,000.00.
"Original Class A-5 Certificate Principal Balance": $28,620,000.00.
"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.
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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.
"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 Rate": As defined in the Insurance Agreement.
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"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.
"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 1997-4, Home Equity Loan
Asset-Backed Certificates, Series 1997-4, 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 November 25, 1997 and the related
prospectus supplement dated November 25, 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
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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 December 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 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": Bankers Trust Company, Barclay's Bank PLC and National
Westminster Bank PLC; provided that, if any of the foregoing banks are deemed by
the Servicer (as indicated in writing to the Trustee) not suitable to serve as a
Reference Bank, then any leading banks selected by the Trustee (in consultation
with the Servicer) 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.
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"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 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 January 1998
(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 6 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).
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"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.
"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.
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"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.
"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": December 15, 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": 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.
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"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.
"Termination Price": As defined in Section 9.2(a) hereof.
"Total Monthly Excess Cashflow": As defined in Section 7.5(b)(iii) 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 1997-4, 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, (viii)
amounts held in the Closing Date Deposit Account and (ix) the Reserve Fund.
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"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": Prudential Securities Incorporated, as representative of
itself and First Union Capital Markets Corp.
"Underwriting Agreement": The Underwriting Agreement between the Sponsor
and the Underwriter dated as of November 25, 1997.
"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 Average Net 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 (i) the applicable Servicing
Fee Rate, (ii) the Trustee Fee Rate and (iii) the Premium Rate.
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
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qualified to the extent that the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity (whether considered in a proceeding or action in equity
or at law) and may state that no opinion is expressed on the availability of
the remedy of specific enforcement, injunctive relief or any other equitable
remedy. Any opinion required to be furnished by any Person hereunder must be
delivered by counsel upon whose opinion the addressee of such opinion may
reasonably rely, and such opinion may state that it is given in reasonable
reliance upon an opinion of another, a copy of which must be attached,
concerning the laws of a foreign jurisdiction.
ARTICLE II
ESTABLISHMENT AND ORGANIZATION OF THE TRUST
Section 2.1. Establishment of the Trust. The parties hereto do hereby
create and establish, pursuant to the laws of the State of New York and this
Agreement, the Trust, which, for convenience, shall be known as the "EquiVantage
Home Equity Loan Trust 1997-4".
Section 2.2. Office. The office of the Trust shall be in care of the
Trustee, addressed to the Corporate Trust Office, or at such other address as
the Trustee may designate by notice to the Sponsor, the Servicer, the 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
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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 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 (other than the Class A-5 Certificates),
the Class A-5 Regular Interest 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.
Each Beneficial Owner of a Class A-5 Certificate shall be deemed to
own an undivided beneficial ownership interest in two assets: (i) the Class A-5
Regular Interest and (ii) the Cap Agreement. The Cap Agreement is not included
as part of either the Lower-Tier REMIC or 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-AL Certificates and Class
LT-5L 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.
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For purposes of this Section, (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 Rate. 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-A Certificate that 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-A 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) 99% to the Class LT-A Certificates
and (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
will be accrued and added to principal on the Class RL Certificates). Except as
provided in footnote (6) below, 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 (the "Group I Excess") shall be added to the
amounts allocated below with respect to the Class LT-AL and Class LT-5L
Certificates. Principal payments on the Group I Mortgage Loans shall be
allocated 99% to the Class LT-A 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, any principal on the Group I
Mortgage Loans that is attributable to a Group I Subordination Reduction Amount
shall be allocated to the Class LT-A Certificate until paid in full, except that
an amount otherwise allocable to the Class LT-A Certificate not to exceed any
Net Group I Excess (as defined in footnote (6)), not previously applied under
this sentence, shall be allocated to the Lower-Tier Regular Interests that would
have received such allocation but for the limitation under footnote (6) below.
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 100% to the Class
LT-A Certificate 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.
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Similarly, for purposes of this Section, (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 Rate. 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-AL 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-AL
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) 99% to the Class LT-AL Certificates and (ii) 1% to
the Class LT-5L Certificates (and will be accrued and added to principal on the
Class RL Certificates). Except as provided in footnote (6) below, 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 (the "Group II 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 and Class LT-4 Certificates. Principal payments on the Group II
Mortgage Loans shall be allocated 99% to the Class LT-AL Certificate and 1% to
the Class LT-5L Certificates until paid in full. Notwithstanding the foregoing,
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
Certificate until paid in full, except that an amount otherwise allocable to the
Class LT-AL Certificates not to exceed any Net Group II Excess (as defined in
footnote (6)), not previously applied under this sentence, shall be allocated to
the Lower-Tier Regular Interests that would have received such allocation but
for the limitation under footnote (6) below. . 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 100% to the Class LT-AL 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:
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<TABLE>
<CAPTION>
Allocation Allocation
Lower-Tier Interests Initial Balance Pass-Through Rate of Principal of Interest
- -------------------- --------------- ----------------- ------------ -----------
<S> <C> <C> <C> <C>
LT-A $71,008,401.50 (1)(a) (2) (3), (4a)
LT-1 $293,800.00 (1)(a) (2) (3), (4a)
LT-2 $210,000.00 (1)(a) (2) (3), (4a)
LT-3 $140,000.00 (1)(a) (2) (3), (4a)
LT-4 $70,000.00 (1)(a) (2) (3), (4a)
LT-AL $29,317,251.19 (1)(a) (2) (3), (4b)
LT-5L $286,200.00 (1)(a) (2) (3), (4b)
Class RL Certificates $ 0.00 (1)(b) N/A N/A (5)
</TABLE>
- ------------------
(1) (a) The pass-through rate on these Lower-Tier Regular Interests
("Pass-Through Rate") shall at any time of determination equal the Weighted
Average Net 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 and the Class RL Certificates.
(b) The pass-through rate on the Class RL Certificates shall at any time
of determination equal the weighted average of the Weighted Average Net
Coupon Rates of the two Mortgage Loan Groups, where such rates are weighted
in proportion to the portion of the Class RL Certificate Principal Balance
attributable to accrual of interest from the related Mortgage Loan Group.
(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 until the balance thereof is zero and then
to the Class RU 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 until the balance thereof is zero
and then to the Class RU 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
and Class LT-4 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 and Class LT-5L Certificates will be allocated to the
Class A-5 Certificates, subject to Note 4.
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To the extent interest is paid on the Lower-Tier Interests in excess of
that payable to the Certificates (other than the Residual Certificates), as
interest or principal, such interest shall be payable to the Class RU
Certificates.
(4) (a) Any interest with respect to this Lower-Tier Interest in excess of the
product of (i) 100 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-A Certificates, where each of such Classes, other
than the Class LT-A 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-A 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) 100 times the weighted average coupon of the Class LT-5L and
LT-AL 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-AL
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.
(6) To the extent that 1% of the Net Group I Turbo Amount exceeds (after
consideration of the addition of the Group II Excess, if any) the interest
payable with respect to the Class LT-A Certificate, such excess (the "Net
Group I Excess") will not be payable as a reduction of the principal
balance of the Class LT-1 Certificates, Class LT-2 Certificates, Class LT-3
Certificates and Class LT-4 Certificates (or accrued and added to principal
on the Class LT-A Certificates).
To the extent that 1% of the Net Group II Turbo Amount exceeds (after
consideration of the addition of the Group I Excess, if any) the interest
payable with respect to the Class LT-AL Certificate, such excess (the "Net
Group II Excess") will not be payable as a reduction of the principal
balance of the Class LT-5L Certificates (or accrued and added to principal
on the Class LT-AL Certificates).
(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 November 2012; for the Class A-2
Certificates, the Payment Date in July 2019; for the Class A-3 Certificates,
the Payment Date in December 2028; for the Class A-4 Certificates, the
Payment Date in December 2028; for the Class A-5 Certificates, the Payment
Date in December 2027; and for the Lower-Tier Regular Interests, the Payment
Date in December 2028.
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
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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 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
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<PAGE>
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.
(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.
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(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 is receiving 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 is not transferring or selling any interest in any
Mortgage Loan evidenced by the Certificates with any intent to hinder,
delay or defraud any of its respective creditors.
(l) The Sponsor is solvent and the Sponsor will not be rendered insolvent
as a result of the sale of the Mortgage Loans to the Trust or the sale of
the Certificates.
It is understood and agreed that the representations and warranties set
forth in this Section 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.
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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 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,
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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 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
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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 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 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 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
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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.
(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,
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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 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
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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 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.
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(d) It is understood and agreed that the representations, warranties and
covenants set forth in this Section 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, 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:
(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 1997-4, the
Note and 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, 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;
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(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 1997-4 under
the Pooling and Servicing Agreement dated as of December 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, or has furnished, within the one-year period prior to the Startup
Day, at the Sponsor's expense, an opinion of counsel ("Assignment Opinion")
or other documentation in form and substance satisfactory to the Trustee,
the Certificate Insurer, Moody's and S&P, that opines or provides evidence
that recording is not necessary to perfect the rights of the Trustee in the
related Mortgage. Following the expiration of such 30-day period and
except with respect to Mortgages covered by the Assignment Opinions, the
Sponsor shall cause to be 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. In addition, the Sponsor shall cause to be
recorded a Mortgage assignment for any Mortgage that was not recorded by
virtue of the Sponsor having previously furnished an Assignment Opinion
pursuant to this clause (ii) if the laws of the state in which the related
Mortgaged Property is located shall have changed so as to require
recordation of such Mortgage, notwithstanding the opinion provided in such
Assignment Opinion or other evidence that recordation was not required; 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
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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, in those instances as identified by the
Sponsor where the public recording office retains the original Mortgage, the
assignment of a Mortgage or the intervening assignments of the Mortgage after it
has been recorded, the Sponsor shall be deemed to have satisfied its obligations
hereunder upon delivery to the Trustee of a copy of such Mortgage, such
assignment or assignments of Mortgage certified by the public recording office
to be a true copy of the recorded original thereof.
If the Servicer is removed pursuant to Section 8.20, the Trustee or other
successor Servicer shall submit all assignments for recording; the costs of such
assignments shall be paid by the Servicer.
Copies of all Mortgage assignments received by the Trustee shall be kept in
the related File.
The Servicer hereby acknowledges that the Financing Statements have been
or, within 10 days of the Closing Date, will be 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
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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.
(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.
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(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.
(l) The Sponsor shall transfer the Closing Date Deposit to the Trustee for
deposit in the Closing Date Deposit Account on the Closing Date pursuant to
Section 7.4 hereof.
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
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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 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 Sponsor 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.
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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.
(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
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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 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.
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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 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.
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(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.
(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.
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.
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(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.
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.
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.
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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.
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.
(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
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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.
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.
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(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 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.
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The Trustee shall send copies of any request received from the Certificate
Insurer or the Sponsor to take any action pursuant to this Section 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.
(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
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(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.
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
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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 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
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any action that it determines might involve it in liability or may be
unjustly prejudicial to the Holders not so directing.
ARTICLE VII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 7.1 Collection of Money. Except as otherwise expressly provided
herein, the Trustee may demand payment or delivery of all money and other
property payable to or receivable by the Trustee pursuant to this Agreement,
including (a) all payments due on the Mortgage Loans in accordance with the
respective terms and conditions of such Mortgage Loans and required to be
paid over to the Trustee by the Servicer or by any Sub-Servicer and (b)
Insured Payments in accordance with the terms of the Certificate Insurance
Policy. The Trustee shall hold all such money and property received by it,
other than pursuant to or as contemplated by Section 6.2(b) hereof, as part
of the Trust Estate and shall apply it as provided in this Agreement.
Section 7.2 Establishment of Certificate Account. The Sponsor shall
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 (including, in the case of the Determination Date
relating to the Payment Date occurring in January 1998, the
Group I Closing Date Deposit) and equal to the sum of (A)
such amount excluding the amount of any Total Monthly Excess
Cashflow relating to Group I included in such amount for the
related Payment Date plus (B) any amount of Total Monthly
Excess Cashflow 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
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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 (including, in the case of the Determination Date
relating to the Payment Date occurring in January 1998, the
Group II Closing Date Deposit) and equal to the sum of (A)
such amount excluding the amount of any Total Monthly Excess
Cashflow relating to Group II included in such amount for
the related Payment Date plus (B) any amounts of Total
Monthly Excess Cashflow from either Group to be 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
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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 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 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).
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(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 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 Closing Date Deposit Account.
(a) The Trustee shall establish and maintain the Closing Date Deposit
Account. On the Closing Date, the Trustee will deposit in the Closing Date
Deposit Account the Closing Date Deposit. The Trustee shall hold the portion
of the Closing Date Deposit equal to the amount determined pursuant to clause
(a) of the definition of the term "Closing Date Deposit" (the "Group I
Closing Date Deposit") for the benefit of the Holders of the Class A-1, Class
A-2, Class A-3 and Class A-4 Certificates and the portion of the Closing Date
Deposit equal to the amount determined pursuant to clause (b) of the
definition of the term "Closing Date Deposit" (the "Group II Closing Date
Deposit") for the benefit of the Holders of the Class A-5 Certificates. On
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the January 1998 Remittance Date, (a) an amount equal to the Group I Closing
Date Deposit shall be withdrawn from the Closing Date Deposit Account and
deposited into the Certificate Account and (b) an amount equal to the Group
II Closing Date Deposit shall be withdrawn from the Closing Date Deposit
Account and deposited into the Certificate Account in respect of Group II
Available Funds for the related Remittance Date. Any amounts so deposited
shall not be invested in Eligible Investments or otherwise.
(b) The Closing Date Deposit Account will be part of the Trust
Estate but not part of the REMIC. Amounts held in the Closing Date Deposit
Account shall be invested in Eligible Investments, which Eligible Investments
shall mature no later than the Remittance Date relating to the January 1998
Payment Date. The Trustee shall not be liable for any losses on amounts
invested in accordance with the provisions hereof. All interest and other
investment earnings on amounts held in the Closing Date Deposit Account shall
be paid by the Trustee to the Sponsor on the January 1998 Payment Date and
for federal and state income tax purposes the Sponsor shall be deemed to be
the owner of the Closing Date Deposit Account. Any losses realized in
connection with any such investment shall be for the account of the Sponsor
and the Sponsor shall deposit the amount of such loss (to the extent not
offset by income from other investments) in the Closing Date Deposit Account
immediately upon the realization of such loss. All amounts earned on deposit
in the Closing Date Deposit Account shall be taxed to the Sponsor.
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;
(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
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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 Group I Formula
Distribution Amount or the Group II Formula
Distribution Amount, as applicable, 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 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
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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 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 to the extent allocable to the
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Class B Distribution Amount and any excess shall be deemed
to be made to the Class RL Certificates to the extent of the
balances thereof and then to the Class RU Certificates;
(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 clauses (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) to the extent allocable to the Class B
Certificates; 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 clause (ix) to the extent allocable to the
Class B Certificates and clause (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;
(xii) 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
(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;
(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;
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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 clauses (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 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
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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.
(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
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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;
(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;
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(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 and
the Actual Loss Severity and Loss Coverage Ratio as of such
Payment Date;
(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;
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(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;
(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
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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 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
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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 1997-4", which account shall be an
Eligible Account and which shall be used to make 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 except that the Holders of the Class RL
Certificates and the Class RU Certificates shall be deemed to be the owners
to the extent any distributions pursuant to Section 7.5(ix) are allocable to
such
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Certificates, respectively. 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 or the Class RL Certificates,
as the case may be. 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 until paid in full, then to the Class RL Certificates until paid
in full, and then to the Class RU 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, filing reports of foreclosures and abandonments of any
Mortgaged Property required by Code Section 6050J, paying Compensating
Interest and making Delinquency Advances and Servicing Advances pursuant
hereto. The Servicer and any Sub-Servicer shall follow its customary
standards, policies and procedures in performing its duties as Servicer or
Sub-Servicer, as applicable. The Servicer shall cooperate with the Trustee
and furnish to the Trustee with reasonable promptness information in its
possession as may be necessary or appropriate to enable the Trustee to
perform its duties hereunder. The Trustee shall furnish the Servicer and any
Sub-Servicer with any powers of attorney and other documents reasonably
necessary or appropriate to enable the Servicer and any Sub-Servicer to carry
out its servicing and administrative duties hereunder.
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(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 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 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
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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 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.
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(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 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.
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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 there are no
Sub-Servicers.
Section 8.4 Successor Sub-Servicers. Each Sub-Servicing Agreement shall
expressly provide that the Servicer may terminate any Sub-Servicing Agreement
in accordance with the terms and conditions of such Sub-Servicing Agreement
and either directly service the related Mortgage Loans itself or enter into a
Sub-Servicing Agreement with a successor Sub-Servicer that qualifies under
Section 8.3. The Trustee shall have no duty or obligation to monitor or
supervise the performance of any Sub-Servicer.
Section 8.5 Liability of Servicer. The Servicer shall not be relieved
of its obligations under this Agreement notwithstanding any Sub-Servicing
Agreement or any of the provisions of this Agreement relating to agreements
or arrangements between the Servicer and a Sub-Servicer or otherwise, and the
Servicer shall be obligated to the same extent and under the same terms and
conditions as if it alone were servicing and administering the Mortgage
Loans. The Servicer shall be entitled to enter into any agreement with a
Sub-Servicer for indemnification of the Servicer by such Sub-Servicer and
nothing contained in such Sub-Servicing Agreement shall be deemed to limit or
modify this Agreement. The Trust shall have no liability to the Servicer
except for payment of the Servicing Fee and reimbursement of Delinquency
Advances and Servicing Advances as expressly contemplated in this Agreement.
The Trust shall have no obligation to indemnify the Servicer for costs or
expenses, except with respect to the preceding sentence. The Trust shall not
indemnify the Servicer for any losses due to the Servicer's negligence.
Section 8.6 No Contractual Relationship Between Sub-Servicer and
Trustee or the 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.
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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 be held only
(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 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,
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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 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.
(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
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Prices and Substitution Amounts; such amount being the
"Monthly Remittance Amount."
(iv) On or before January 20, 1998, the Servicer will provide
to the Certificate Insurer and the Trustee a computer tape
or electronic transmission, in a format mutually agreed to
by the Servicer and the Certificate Insurer, containing
all of the servicing data maintained by the Servicer with
respect to the Mortgage Loans as of the last day of the
preceding calendar month (a "Data Tape"), together with a
written explanation (the "Data Dictionary") of each of the
data fields included in such Data Tape. Thereafter, on or
before each subsequent Remittance Date, the Servicer will
provide to the Certificate Insurer a Data Tape as of the
last day of the preceding calendar month, together with a
written explanation of any revisions made to the Data
Dictionary during the preceding calendar month. The
Certificate Insurer shall have no duty or obligation with
respect to the accuracy of the information contained in
any Data Tape or in the Data Dictionary.
(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
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therefor, an amount equal to the difference between (x) 30 days' interest at
the related Coupon Rate less the Servicing Fee Rate on the Loan Balance of
such Mortgage Loan as of the first day of the related Remittance Period and
(y) to the extent not previously advanced, the interest (less the Servicing
Fee) actually paid by the Mortgagor with respect to the Mortgage Loan during
such Remittance Period (any such amount paid by the Servicer, "Compensating
Interest"). The Servicer shall in no event be required to pay Compensating
Interest with respect to any Remittance Period in an amount in excess of the
aggregate Servicing Fee received by the Servicer with respect to all Mortgage
Loans for the related Remittance Period.
(c) The Servicer will pay all reasonable and customary
"out-of-pocket" costs and expenses (including reasonable legal fees) incurred
in the performance of its servicing obligations, including, but not limited
to, the cost of (i) Preservation Expenses, (ii) any enforcement or judicial
proceedings, including foreclosures, (iii) the management and liquidation of
REO Property (including, without limitation, realtor's commissions), and (iv)
advances made for taxes, insurance and other charges against the Property,
each such expenditure under clauses (i) - (iv) constituting a Servicing
Advance, but the Servicer is only required to pay such costs and expenses to
the extent the Servicer reasonably believes such costs and expenses will
increase Net Liquidation Proceeds on the related Mortgage Loan. Each such
amount so paid will constitute a "Servicing Advance".
The Servicer may recover Servicing Advances from the Mortgagors to the
extent permitted by the Mortgage Loans and from Net Liquidation Proceeds,
condemnation proceeds or other insurance proceeds with respect to the related
Mortgage Loan 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, the Servicer shall
be deemed conclusively to have satisfied its obligations with respect to fire
and hazard insurance coverage under this Section, 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, 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 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 (b) the requested
assumption is, in the judgment of the Servicer, necessary to prevent or cure
a
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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 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 36 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 in substantially the form set forth as Exhibit J hereto. 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 an assignment of mortgage to the Servicer, in form for execution by
the Trustee with all requisite
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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 April of each year, commencing in 1999,
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
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(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 Servicer.
(a) On or before the last day of April of each year, commencing in 1999, the
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 Servicer's overall servicing operations for the immediately
preceding calendar year (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.
Section 8.18. Access to Certain Documentation and Information Regarding
the Mortgage Loans. The Servicer shall provide to the Trustee, the
Certificate Insurer and the supervisory agents and examiners of each of the
foregoing access to the documentation regarding the Mortgage Loans required
by applicable state and federal regulations, such access being afforded
without charge but only upon reasonable request and during normal business
hours at the offices of the Servicer designated by it.
Upon any change in the format of the computer diskette or other form of
report maintained by the Servicer in respect of the Mortgage Loans, the
Servicer shall deliver a copy of such new format to the Trustee.
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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 substantial part of
its assets, or other like relief in respect thereof under any
bankruptcy or insolvency law, and, if such proceeding is being
contested by the Servicer in good faith, the same shall
(A) result in the entry of an order for relief or any such
adjudication or appointment or (B) continue undismissed or
pending and unstayed for any period of thirty (30) consecutive
days; or
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(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
(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 December 1, 1998,
the Rolling Three Month Delinquency Rate exceeds 6.0%, (b) on
any Payment Date on or after December 1, 1998 and before
December 1, 1999, the Rolling Three Month Delinquency Rate
exceeds 7.0%, (c) on any Payment Date on or after December 1,
1999 and before December 1, 2000, the Rolling Three Month
Delinquency Rate exceeds 8.5%, (d) on any Payment Date on or
after December 1, 2000 and before December 1, 2001, the Rolling
Three Month
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Delinquency Rate exceeds 10.0%, or (e) on any Payment Date on
or after December 1, 2001, the Rolling Three Month Delinquency
Rate exceeds 12.0%; or
(x) If (a) on the Payment Date occurring in December 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 December 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
December 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
December 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
December 2002 and on each successive twelfth Payment Date
thereafter, 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 January 1, 1999,
the Cumulative Loss Amount exceeds 0.50% of the Original
Aggregate Loan Balance, (b) on any Payment Date on or after
January 1, 1999 and before January 1, 2000, the Cumulative Loss
Amount exceeds 1.00% of the Original Aggregate Loan Balance,
(c) on any Payment Date on or after January 1, 2000 and before
January 1, 2001, the Cumulative Loss Amount exceeds 2.50% of
the Original Aggregate Loan Balance, (d) on any Payment Date on
or after January 1, 2001 and before January 1, 2002, the
Cumulative Loss Amount exceeds 4.00% of the Original Aggregate
Loan Balance, or (e) on any Payment Date on or after January 1,
2002, 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 (a) is reasonably
likely to have a material adverse effect on the servicing of
the Mortgage Loans and (b) continues for a period of 30 days
after receipt by the Servicer of a written notice from the
Certificate Insurer of the specific Servicing Standards with
which the Certificate Insurer has determined that the Servicer
is not in compliance; provided, however, that if the
Certificate Insurer determines that the Servicer is not
employing reasonable efforts to remedy such non-compliance or
if the Certificate Insurer
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determines that such non-compliance is not reasonably likely to
be cured within 30 days, then the Certificate Insurer may
declare an Event of Default under this clause (xii)(b) prior to
the expiration of such 30-day period; or
(xiii) If (a) on the sixth Payment Date or on any Payment Date
thereafter prior to the twelfth Payment Date, the Loss Coverage
Ratio is greater than or equal to 25%, (b) on the twelfth
Payment Date or on any Payment Date thereafter prior to the
eighteenth Payment Date, the Loss Coverage Ratio is greater
than or equal to 40%, (c) on the eighteenth Payment Date or on
any Payment Date thereafter prior to the twenty-fourth Payment
Date, the Loss Coverage Ratio is greater than or equal to 55%,
(d) on the twenty-fourth Payment Date or on any Payment Date
thereafter prior to the thirty-sixth Payment Date, the Loss
Coverage Ratio is greater than or equal to 70%, or (e) on the
thirty-sixth Payment Date or on any Payment Date thereafter,
the Loss Coverage Ratio is greater than or equal to 80%; or
(xiv) 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), (iv) and (xii), 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), (vi) and (xii) of this Section, 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
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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.
(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
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and assignment all costs and expenses of any public announcement and of any
sale, transfer and assignment of the servicing rights and responsibilities
hereunder. After such deductions, the remainder of such sum shall be paid by
the Trustee to the Servicer at the time of such sale, transfer and assignment
to the Servicer's successor.
(h) The Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession, and the Servicer shall bear all the costs of transferring all
files and records related to the Mortgage Loans and other reasonable costs
necessary to effect such succession. The Servicer agrees to cooperate with
the Trustee and any successor Servicer in effecting the termination of the
Servicer's servicing responsibilities and rights hereunder and shall promptly
provide the Trustee or such successor Servicer, as applicable, all documents
and records reasonably requested by it to enable it to assume the Servicer's
functions hereunder and shall promptly also transfer to the Trustee or such
successor Servicer, as applicable, all amounts 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 prdeecessor 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.
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The costs and expenses incurred by the Servicer or its agents or
representatives in connection with any such examinations or discussions shall
be paid by the Servicer.
(b) In addition to the right to inspect the Servicer's servicing
operations, the Certificate Insurer or its agents or representatives shall
have the right, upon reasonable notice and during normal business hours on
the Servicer's or any Sub-Servicer's premises, as the case may be, to
examine, review and audit the books, records and files of the Servicer or
Sub-Servicer relating to the Mortgage Loans (including, without limitation,
any servicing and origination files) and the servicing thereof and to receive
such other information as the Certificate Insurer may reasonably request, and
to make such copies or take excerpts from such books, records and files as
any such agent or representative reasonably deems necessary or advisable to
properly monitor the Servicer's performance hereunder. During any such
examination or review, the Servicer or Sub-Servicer, as the case may be,
shall make an employee knowledgeable about the books, records and/or files
being examined or reviewed available to the Certificate Insurer, its agents
or representatives and shall have the right to have one or more additional
representatives of its choosing present during all such examinations, reviews
or audits. In addition, the Servicer will permit the Certificate Insurer or
its authorized agents to discuss the affairs, finances and accounts of the
Servicer with the Servicer's independent accountants, provided that the
Servicer's Chief Financial Officer or his or her designee shall have the
right to be present during all such discussions. The rights of the
Certificate Insurer under this subsection (b) may be exercised no more
frequently than annually unless an Event of Default exists, in which event
the Certificate Insurer may exercise its rights under this subsection (b)
from time to time without any limitation as to frequency so long as such
Event of Default continues. The costs and expenses of the Servicer or its
representatives or agents in connection with any such examination or review
or discussion shall be paid by the Servicer, and the costs and expenses of
the Certificate Insurer, its agents or representatives shall be paid by the
Certificate Insurer, except after the occurrence and during the continuance
of an Event of Default pursuant to which the Certificate Insurer retains the
right to remove the Servicer. During the continuance of any such Event of
Default, the Servicer shall pay the costs and expenses of the Certificate
Insurer, its agents or representatives and of the Servicer, its agents and
representatives in connection with any such examination, review or discussion.
(c) 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).
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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.
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
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this section shall survive the termination of this Agreement and the payment
of the outstanding Certificates.
ARTICLE IX
TERMINATION OF TRUST
Section 9.1. Termination of Trust. The Trust created hereunder and all
obligations created by this Agreement will terminate upon the earlier of (i)
the payment to the 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 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
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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 with respect to the Trust Estate, then the Certificate Insurer may do
so on the same terms.
Section 9.3. Termination Upon Loss of REMIC Status.
(a) Following a final determination by the Internal Revenue Service,
or by a court of competent jurisdiction, in either case from which no appeal
is taken within the permitted time for such appeal, or if any appeal is
taken, following a final determination of such appeal from which no further
appeal can be taken, to the effect that 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
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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 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.
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Section 9.4. Disposition of Proceeds. The Trustee shall, upon receipt
thereof, deposit the proceeds of any liquidation of the Trust Estate pursuant
to this Article IX to the Certificate Account; provided, however, that any
amounts representing Servicing Fees, unreimbursed Delinquency Advances or
unreimbursed Servicing Advances theretofore funded by the Servicer from the
Servicer's own funds shall be paid by the Trustee to the Servicer from such
proceeds.
Section 9.5. Netting of Amounts. If any Person paying the Termination
Price would receive a portion of the amount so paid, such Person may net any
such amount against the Termination Price otherwise payable.
ARTICLE X
THE TRUSTEE
Section 10.1. Certain Duties and Responsibilities.
(a) The Trustee (i) except during the continuance of an Event of
Default, undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement, and no implied covenants or
obligations shall be read into this Agreement against the Trustee and (ii) in
the absence of bad faith on its part, may conclusively rely, as to the truth
of the statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished pursuant to and conforming to the
requirements of this Agreement; but in the case of any such certificates or
opinions 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;
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(v) to make Delinquency Advances and Servicing
Advances and to pay Compensating Interest,
all as provided in this Agreement; and
(vi) to enforce the Mortgage Loans.
(c) No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct, except that:
(i) this subsection shall not be construed to
limit the effect of subsection (a) of this
Section;
(ii) the Trustee shall not be liable for any error
of judgment made in good faith by an
Authorized Officer, unless it shall be proved
that the Trustee was negligent in
ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect
to any action taken, suffered or omitted to
be taken by it in good faith in accordance
with the direction of the Sponsor, the
Certificate Insurer or, with the Certificate
Insurer's consent, of the 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 or
any Event of Default unless an Authorized
Officer of the Trustee assigned to and
working in the Corporate Trust Office shall
have received written notice thereof, which
written notice references the Certificates,
the Trust or this Agreement. 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
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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.
(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
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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 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.
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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 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
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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
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.
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Section 10.9. Resignation and Removal; Appointment of
Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor trustee pursuant to this Article X shall become effective until the
acceptance of appointment by the successor trustee under Section 10.10 hereof.
(b) The Trustee, or any trustee or trustees hereafter appointed, may
resign at any time by giving written notice of resignation to the Certificate
Insurer and to the Sponsor and by mailing notice of resignation by
first-class mail, postage prepaid, to the 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 or the Certificate Insurer may remove the Trustee and appoint a
successor trustee by written instrument, in triplicate, signed by the Sponsor
or the Certificate Insurer duly authorized, one complete set of which
instruments shall be delivered to each of the Sponsor 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.
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(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.
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.
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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 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,
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notice or other document of any kind prima facie properly executed and
submitted by the Authorized Officer of any Person respecting any matters
arising hereunder. The provisions of this Section 10.13 shall survive the
termination of this Agreement and the payment of the Outstanding Certificates.
Section 10.14. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any
part of the Trust Estate or any Property may at the time be located, the
Servicer and the Trustee acting jointly and with the consent of the
Certificate Insurer shall have the power and shall execute and deliver all
instruments to appoint one or more Persons approved by the Trustee to act as
co-Trustee or co-Trustees, jointly with the Trustee, of all or any part of
the Trust Estate or separate Trustee or separate Trustees of any part of the
Trust Estate, and to vest in such Person or Persons, in such capacity and for
the benefit of the Holders, such title to the Trust Estate, or any part
thereof, and, subject to the other provisions of this Section, 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
(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.
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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. 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 XI
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;
(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.
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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
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
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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.
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.
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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.
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
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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).
(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
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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
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 on the first December 31 to occur after the Startup Day 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 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
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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.
(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.
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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.
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
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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
1997-4
Tel: (612) 667-7167
Fax: (612) 667-3539
with a copy to:
Norwest Bank Minnesota, National Association
11000 Broken Land Parkway
Columbia, Maryland 21044
Attention: Corporate Trust Services
Re: EquiVantage Home Equity Loan Trust
1997-4
Tel: (410) 884-2000
Fax: (410) 884-2363
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
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Certificate Insurer: Financial Guaranty Insurance Company
115 Broadway
New York, New York 10006
Attention: Research and Risk
Management Department
Re: EquiVantage Home Equity Loan
Trust 1997-4
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: Prudential Securities Incorporated
One New York Plaza
New York, New York 10292
Attention: Asset Backed
Securities Group
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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/ Elizabeth Folk
------------------------------
Name: Elizabeth Folk
Title: Senior Vice President
EQUIVANTAGE INC.,
as Servicer
By: /s/ Carolyn B. Andrew
--------------------------------
Name: Carolyn B. Andrew
Title: Senior Vice President
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee
By: /s/ Randall S. Reider
----------------------------
Name: Randall S. Reider
Title: Officer
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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 1997-4
HOME EQUITY LOAN ASSET-BACKED CERTIFICATE
CLASS A-1 ADJUSTABLE RATE CERTIFICATES
(Adjustable Rate Class A-1 Certificate)
Representing Certain Interests Relating to a Pool of
Mortgage Loans in the EquiVantage Home Equity Loan Trust 1997-4
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 December 15, 1997 29476Y BF 5
_________________ ___________
Date CUSIP
$29,380,000.00 November 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 1997-4 (the "Trust") pursuant to
that certain Pooling and Servicing Agreement dated as of December 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 December
15, 1997 (the "Startup Date"), which aggregate amount as of December 15, 1997
was $29,380,000 (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 January 26, 1998 (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-1-2
<PAGE>
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED OR
GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
This Certificate is one of a Class of duly-authorized Certificates
designated as EquiVantage Home Equity Loan Trust 1997-4, Home Equity Loan
Asset-Backed Certificates, Class A-1 Adjustable 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 January 26, 1998, 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 $29,380,000.
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 the Pooling and Servicing Agreement to the Holders of the
Class A-1 Certificates any portion thereof to which such Holders may be
entitled.
A-1-3
<PAGE>
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 any governmental
agency or instrumentality. 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 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.
A-1-4
<PAGE>
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 1997-4
By: NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:
________________________________
Name:
Title:
Trustee Authentication
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:
____________________________
Name:
Title:
Dated: December 15, 1997
A-1-6
<PAGE>
EXHIBIT A-2
FORM OF
EQUIVANTAGE HOME EQUITY LOAN TRUST 1997-4
HOME EQUITY LOAN ASSET-BACKED CERTIFICATE
CLASS A-2 FIXED RATE CERTIFICATES
(6.640% Class A-2 Certificate)
Representing Certain Interests Relating to a Pool of
Mortgage Loans in the EquiVantage Home Equity Loan Trust 1997-4
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 December 15, 1997 29476Y BG 3
_________________ ___________
Date CUSIP
$21,000,000.00 July 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 1997-4 (the "Trust") pursuant to
that certain Pooling and Servicing Agreement dated as of December 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 December
15, 1997 (the "Startup Date"), which aggregate amount as of December 15, 1997
was $21,000,000 (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 January 26, 1998 (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-2-2
<PAGE>
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED OR
GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
This Certificate is one of a Class of duly-authorized Certificates
designated as EquiVantage Home Equity Loan Trust 1997-4, 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 January 26, 1998, 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 $21,000,000.
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 Pooling and Servicing Agreement to the Holders of the
Class A-2 Certificates any portion thereof to which such Holders may be
entitled.
A-2-3
<PAGE>
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 any governmental
agency or instrumentality. 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 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.
A-2-4
<PAGE>
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 1997-4
By: NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:
________________________________
Name:
Title:
Trustee Authentication
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:
_______________________________
Name:
Title:
Dated: December 15, 1997
A-2-6
<PAGE>
EXHIBIT A-3
FORM OF
EQUIVANTAGE HOME EQUITY LOAN TRUST 1997-4
HOME EQUITY LOAN ASSET-BACKED CERTIFICATE
CLASS A-3 FIXED RATE CERTIFICATES
(7.045%* Class A-3 Certificate)
Representing Certain Interests Relating to a Pool of
Mortgage Loans in the EquiVantage Home Equity Loan Trust 1997-4
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 December 15, 1997 29476Y BH 1
_________________ ___________
Date CUSIP
$14,000,000.00 December 25, 2028
_________________________ ____________________________
Original Principal Amount Final Scheduled Payment Date
CEDE & CO.
_________________
Registered Holder
__________________
* With respect to any Payment Date that occurs prior to the Step-Up
Payment Date, 7.045% per annum and, with respect to any Payment Date
thereafter, 7.545% 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
A-3-1
<PAGE>
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 1997-4 (the
"Trust") pursuant to that certain Pooling and Servicing Agreement dated as of
December 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 December
15, 1997 (the "Startup Date"), which aggregate amount as of December 15, 1997
was $14,000,000 (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 January 26, 1998 (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.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED OR
GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
A-3-2
<PAGE>
This Certificate is one of a Class of duly-authorized Certificates
designated as EquiVantage Home Equity Loan Trust 1997-4, 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 January 26, 1998, 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 $14,000,000.
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.
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.
A-3-3
<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, 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 any governmental
agency or instrumentality. 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-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.
A-3-4
<PAGE>
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 1997-4
By: NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:
________________________________
Name:
Title:
Trustee Authentication
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:
____________________________
Name:
Title:
Dated: December 15, 1997
A-3-6
<PAGE>
EXHIBIT A-4
FORM OF
EQUIVANTAGE HOME EQUITY LOAN TRUST 1997-4
HOME EQUITY LOAN ASSET-BACKED CERTIFICATE
CLASS A-4 FIXED RATE CERTIFICATES
(6.705%* Class A-4 Certificate)
Representing Certain Interests Relating to a Pool of
Mortgage Loans in the EquiVantage Home Equity Loan Trust 1997-4
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 December 15, 1997 29476Y BJ 7
_________________ ___________
Date CUSIP
$7,000,000.00 December 25, 2028
_________________________ ____________________________
Original Principal Amount Final Scheduled Payment Date
CEDE & CO.
_________________
Registered Holder
__________________
* With respect to any Payment Date that occurs prior to the Step-Up
Payment Date, 6.705% per annum and, with respect to any Payment Date
thereafter, 7.205% 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
A-4-1
<PAGE>
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 1997-4 (the
"Trust") pursuant to that certain Pooling and Servicing Agreement dated as of
December 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 December
15, 1997 (the "Startup Date"), which aggregate amount as of December 15, 1997
was $7,000,000 (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 January 26, 1998 (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.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED OR
GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
A-4-2
<PAGE>
This Certificate is one of a Class of duly-authorized Certificates
designated as EquiVantage Home Equity Loan Trust 1997-4, 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 January 26, 1998, 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 $7,000,000.
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.
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.
A-4-3
<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, 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 any governmental
agency or instrumentality. 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-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.
A-4-4
<PAGE>
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 1997-4
By: NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:
________________________________
Name:
Title:
Trustee Authentication
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:
_______________________________
Name:
Title:
Dated: December 15, 1997
A-4-6
<PAGE>
EXHIBIT A-5
FORM OF
EQUIVANTAGE HOME EQUITY LOAN TRUST 1997-4
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 1997-4
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 December 15, 1997 29476Y BK 4
_________________ ____________
Date CUSIP
$28,620,000.00 December 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 1997-4 (the "Trust") pursuant to
that certain Pooling and Servicing Agreement dated as of December 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 December
15, 1997 (the "Startup Date"), which aggregate amount as of December 15, 1997
was $28,620,000 (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 January 26, 1998 (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 ANY OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
This Certificate is one of a Class of duly-authorized Certificates
designated as EquiVantage Home Equity Loan Trust 1997-4, 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 January 26, 1998, 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 $28,620,000.
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 Pooling and Servicing Agreement to the Holders of the
Class A-5 Certificates any portion thereof to which such Holders may be
entitled.
A-5-3
<PAGE>
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 any governmental
agency or instrumentality. 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, 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.
A-5-4
<PAGE>
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 1997-4
By: NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:
_______________________________
Name:
Title:
Trustee Authentication
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:
____________________________
Name:
Title:
Dated: December 15, 1997
A-5-6
<PAGE>
EXHIBIT B
FORM OF
EQUIVANTAGE HOME EQUITY LOAN TRUST 1997-4
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 1997-4
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 SPONSOR 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 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 other rights relating thereto and is payable only from amounts
received by the Trustee relating to the Trust Estate.
No: B-1 Date: December 15, 1997
B-1
<PAGE>
Percentage Interest: 100% December 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 1997-4 (the "Trust") pursuant to that
certain Pooling and Servicing Agreement dated as of December 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 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.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED OR
GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
This Certificate is one of a Class of duly authorized Certificates
designated as EquiVantage Home Equity Loan Trust 1997-4, 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
B-2
<PAGE>
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 January 26, 1998, 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.
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 any governmental agency or instrumentality. 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.
B-3
<PAGE>
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 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.
B-4
<PAGE>
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 1997-4
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: December 15, 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 ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS A
BENEFICIAL 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
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
C-1-1
<PAGE>
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 1997-4
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: December 15, 1997
Percentage Interest: 100% December 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 ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
This Certificate is one of a Class of duly-authorized Certificates
designated as EquiVantage Home Equity Loan Trust 1997-4, 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 January 26, 1998, 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 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.
C-1-3
<PAGE>
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 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
C-1-4
<PAGE>
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 1997-4
By: NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:
________________________________
Name:
Title:
Trustee Authentication
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:
_______________________________
Name:
Title:
Dated: December 15, 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 ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS A
BENEFICIAL 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 1997-4
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: December 15, 1997
Percentage Interest: 100% December 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 ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
This Certificate is one of a Class of duly-authorized Certificates
designated as EquiVantage Home Equity Loan Trust 1997-4, Home Equity Loan
Asset-Backed Certificates, Series 1997-4, 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 January 26, 1998, 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 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.
C-2-3
<PAGE>
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 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
C-2-4
<PAGE>
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 1997-4
By: NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:
________________________________
Name:
Title:
Trustee Authentication
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:
_______________________________
Name:
Title:
Dated: December 15, 1997
C-2-6
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE REGARDING PREPAID LOANS
I, ___________________, _________________ 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 December 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: December 15, 1997
By:
________________________________-
Name:
Title:
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 December 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
pursuant to Section 3.6 of the Pooling and Servicing Agreement, receipt of
the Notes delivered to it by the Sponsor.
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: December 15, 1997
E-2
<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 December 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: December 15, 1997
F-1
<PAGE>
EXHIBIT G
FORM OF DELIVERY ORDER
December 15, 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 December 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 1997-4, 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:
Title:
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 1997-4
Statement to Holders
<TABLE>
<CAPTION>
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 29476Y BF5 $ 29,380,000
A-2 29476Y BG3 $ 21,000,000
A-3 29476Y BH1 $ 14,000,000
A-4 29476Y BJ7 $ 7,000,000
A-5 29476Y BKY $ 28,620,000
B n/a
RU n/a
TOTAL
AMOUNT PER $1,000 UNIT
</TABLE>
<TABLE>
<CAPTION>
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 ________
A-2 ________
A-3 ________
A-4 ________
A-5 ________
B n/a
RU n/a
</TABLE>
I-1
<PAGE>
PASS THROUGH RATES
<TABLE>
<CAPTION>
ORIGINAL PASS- CURRENT PASS
CLASS THROUGH RATE THROUGH RATE CLASS RECORD DATE
- ----- -------------- ------------ ----- -----------
<C> <S> <S> <S> <S>
A-1 Adjustable Rate % A-1
A-2 6.640% % A-2
A-3 7.045% % A-3
A-4 6.705% % A-4
A-5 Adjustable Rate % A-5
B n/a % B
RU n/a % RU
SPONSOR: EquiVantage Acceptance Corp.
SERVICER: EquiVantage Inc.
LEAD UNDERWRITER: Prudential Securities Incorporated
RECORD DATE:
DISTRIBUTION DATE: FACTOR INFORMATION: ___________________
</TABLE>
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 December 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.
Monthly Delinquency Summary Report
EquiVantage Mortgage Loan Trust 1997-4
Dates as of ______________
<TABLE>
<S> <C> <C> <C> <C> <C>
Class A Certificates
Ending Number of Loans:
Ending Principal Balance:
DELINQUENT LOANS Count Percent Principal Bal. Percent
GROSS Delinquent Loans - Status
1. 30 - 59 Days Delinquent
2. 60 - 89 Days Delinquent
3. 90 or More Days Delinquent
GROSS Total Delinquencies
Foreclosure Loans - Status Count Percent Principal Bal. Percent
1. Current
2. 30 - 59 Days Delinquent
3. 60 - 89 Days Delinquent
4. 90 or More Days Delinquent
Total Foreclosures
Bankruptcy Loans - Status Count Percent Principal Bal. Percent
1. Current
2. 30 - 59 Days Delinquent
3. 60 - 89 Days Delinquent
4. 90 or More Days Delinquent
Total Bankruptcies
REO Loans - Status from Foreclosure Count Percent Principal Bal. Percent Book Value
1. 30 - 59 Days
2. 60 - 89 Days
3. 90 or More Days
Total REO
NET DELINQUENCY (Gross Delinquent less Foreclosure, Bankruptcy, REO)
Count Percent Principal Bal. Percent
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
December 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. Accrued and unpaid interest
in excess of
Delinquency Advances $ ________
6. 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
December 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: 97010782
Loan Trust 1997-4
Control Number: 0010001
Insured Obligations: $100,000,000
in aggregate principal amount of
Home Equity Loan Backed
Certificates, Series 1997-4,
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
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
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.
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
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
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 December 1, 1997.
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/ President /s/ Authorized Representative
Effective Date: December 15, 1997
Form 9043
Page 4 of 4
<PAGE>
EXHIBIT 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) 312-3220
Re: EquiVantage Home Equity Loan Trust
Home Equity Loan Backed Certificates,
Series 1997-4, Class A
Policy No. 97010782
Determination Date:____________________________
Payment Date:__________________________________
We refer to that certain Pooling and Servicing Agreement dated as of December
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
$__________;
<PAGE>
(vi) The Group II Interest Distribution Amount, is $__________;
(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.
<PAGE>
IN WITNESS WHEREOF, the Trustee has executed and delivered this Notice this
_____ day of___________________.
______________________________
as Trustee
By: __________________________
Title: _______________________
<PAGE>
MASTER LOAN TRANSFER AGREEMENT
Dated as of December 1, 1997
by and between
EQUIVANTAGE ACCEPTANCE CORP.,
the Company
and
EQUIVANTAGE INC.,
the Originator
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Definitions.....................................................1
Section 2. Interest Calculations...........................................5
Section 3. Transfers of Mortgage Loans.....................................5
Section 4. Grant of Security Interest......................................6
Section 5. Representations, Warranties and Covenants Regarding the
Originator and the Company......................................6
Section 6. Representations and Warranties of the Originator Regarding the
Mortgage Loans.................................................12
Section 7. Covenants of the Originator to Take Certain Actions with Respect
to the Mortgage Loans in Certain Situations....................22
Section 8. Term of Agreement..............................................24
Section 9. Authorized Representatives.....................................24
Section 10. Notices........................................................24
Section 11. Governing Law..................................................25
Section 12. Assignment.....................................................26
Section 13. Counterparts...................................................26
Section 14. Amendment......................................................26
Section 15. Severability of Provisions.....................................26
Section 16. No Agency; No Partnership or Joint Venture.....................26
Section 17. Further Assurances.............................................26
Section 18. The Certificate Insurer and the Trustee........................26
<PAGE>
THIS MASTER LOAN TRANSFER AGREEMENT, dated as of December 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 6(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 9 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.
<PAGE>
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.
Company: EquiVantage Acceptance Corp., a Delaware corporation.
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.
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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.
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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<PAGE>
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, that 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
5
<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. Grant of Security Interest. (a) It is the intention of the
parties hereto that the conveyance by the Originator of the Mortgage Loans to
the Company shall constitute a purchase and sale of such Mortgage Loans 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 Originator
shall be deemed to have granted to the Company a first priority perfected
security interest in all of the Originators's right, title and interest in, to
and under the Mortgage Loans. The conveyance by the Originator of the Mortgage
Loans to the Company shall not constitute and is not intended to result in an
assumption by the Company of any obligation of the Originator or any other
Person in connection with the Mortgage Loans.
(b) The Originator shall take no action inconsistent with the Company's
ownership of the Mortgage Loans and shall indicate or shall cause to be
indicated in their records and records held on their behalf that ownership of
each Mortgage Loan has been transferred to the Company. In addition, the
Originator shall respond to any inquiries from third parties with respect to
ownership of a Mortgage Loan by stating that it is not the owner of such
asset and that ownership of such Mortgage Loan has been transferred to the
Company; 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 the
servicing provisions of the related Pooling and Servicing Agreement.
Section 5. 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
6
<PAGE>
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 that, 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 that 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.
(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
7
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the related Trust Estate free and clear of any lien (other
than liens that 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.
(x) The transactions contemplated by this Agreement are in the ordinary
course of business of the Originator.
(xi) The Originator is receiving fair consideration and reasonably
equivalent value in exchange for the sale of the interests in the
Mortgage Loans.
(xii) The Originator is not transferring or selling 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 that 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
8
<PAGE>
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 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 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 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.
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(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 that 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 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 that 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
10
<PAGE>
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.
(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 transferring or 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 that materially and adversely affects the
interests of the Originator, the party discovering such breach shall give
prompt written notice to the other.
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Within 30 days of its receipt of notice of breach, the Company shall cure
such breach in all material respects.
Section 6. Representations and Warranties of the Originator Regarding
the Mortgage Loans. (a) Set forth in paragraph (b) below, are listings of
representations and warranties that 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 6. 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.
(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 that do not
materially interfere with the benefits of the security intended to be
provided by such Mortgage.
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(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, 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 that 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.
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(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.
(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
that 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.
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(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.
(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 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.
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(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 that 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 that will be released
simultaneously with such transfer and assignment.
(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 that 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 that 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 (xxxvii) and (xliii) 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
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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 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
that has been recorded,
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if necessary, to protect the interest of the Trustee, as assignee of
the Company, and that 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.
(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 threatened for the total or partial condemnation of any Property,
nor is such a proceeding currently occurring, and each Property is
undamaged by waste, fire, 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 that
were included for the purposes of determining the Appraised Value of
each Property lie wholly within the boundaries and building
restriction lines of
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such Property, and no improvements on adjoining properties encroach
upon such Property, except for minor encroachments and protrusions
that 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 that
render the rights and remedies of the holder thereof adequate for the
realization against the related Property of the benefits of the
security, including (A) in the case of a Mortgage designated as a deed
of trust, by trustee's sale and (B) otherwise by judicial foreclosure.
There is no homestead or other exemption available to the related
Mortgagor that 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 that, 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 that 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.
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(xliii) 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 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 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
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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 that 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.
(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
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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 that 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.
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 6 that "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 6
limited to the Originator's knowledge shall be limited to the actual
knowledge of the officers executing this Agreement.
Section 7. 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
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and Servicing Agreement or from the Certificate Insurer or such time as a
breach of any representation and warranty in Section 6 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 that 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 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 7 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 6 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 6 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 7 shall survive delivery of
the respective Mortgage Loans (including Qualified Replacement Mortgage
Loans) to the Trustee.
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Section 8. 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 9. 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 10. 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 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
Telephone: (713) 895-1957
Telecopy: (713) 895-1999
With a copy to:
EquiVantage Acceptance Corp.
13111 Northwest Freeway, Suite 301
Houston, Texas 77040
Attention: General Counsel
Telephone: (713) 895-1957
Telecopy: (713) 895-1999
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If to the Originator:
EquiVantage Inc.
13111 Northwest Freeway, Suite 300
Houston, Texas 77040
Attention: Chief Financial Officer
Telephone: (713) 895-1900
Telecopy: (713) 895-3870
With a copy to:
EquiVantage Inc.
13111 Northwest Freeway, Suite 300
Houston, Texas 77040
Attention: General Counsel
Telephone: (713) 895-1900
Telecopy: (713) 895-3870
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 1997-4
Telephone: (612) 667-9825
Telecopy: (612) 667-7167
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 1997-4
Telephone: (212) 312-3000
Telecopy: (212) 312-3231
Section 11. 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.
25
<PAGE>
Section 12. 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 13. 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 14. 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 15. 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.
Section 16. 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 17. Further Assurances. The Originator and Company agree to
cooperate reasonably and in good faith with one another in the performance of
this Agreement.
Section 18. 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/ Elizabeth Folk
__________________
Name: Elizabeth Folk
Title: Senior Vice President
EQUIVANTAGE INC.
the Originator
By: /s/ Carolyn B. Andrew
_____________________
Name: Carolyn B. Andrew
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 _________ __, 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 6(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 that 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 Loans 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 that 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
[Attached as Schedule I to the related
Pooling & Servicing Agreement
and incorporated herein]
A-5
<PAGE>
Exhibit B
AUTHORIZED REPRESENTATIVES
Reference is hereby made to the Master Loan Transfer Agreement, dated as of
December 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 __________________________
Karen S. Crawford Senior Vice President __________________________
and Secretary
IN WITNESS WHEREOF, I, ____________________, hereby certify that the
above signatures are true and correct as of this ____ day of
____________________.
______________________________
Name:
Title:
B-1
<PAGE>
The following are the Company's Authorized Representatives for purposes of
the Agreement:
Specimen
Name Title Signature
John E. Smith President ______________________________
Karen S. Crawford Senior Vice President ______________________________
and Secretary
IN WITNESS WHEREOF, I, _____________________, hereby certify that the
above signatures are true and correct as of this ____ day of
_____________________.
______________________________
Name:
Title:
B-2
<PAGE>
SCHEDULE I
LOAN NO. LAST NAME ADDRESS CITY STATE ZIP CODE LOAN AMT.
- -------- --------- ------- ---- ----- -------- ---------
[None]
<PAGE>
CONVEYANCE AGREEMENT
THIS CONVEYANCE AGREEMENT, dated December 1, 1997, is between EquiVantage
Acceptance Corp. (the "Company") and EquiVantage Inc. (the "Originator").
Pursuant to the Master Loan Transfer Agreement dated as of December 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 6(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 December 1, 1997
or, if any Transferred Mortgage Loan was originated subsequent to December 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.
(i) With respect to each Transferred Mortgage Loan involving property
improved by a manufactured home, such manufactured home constitutes
real property under
<PAGE>
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 95%, owner occupied, or in
excess of 85%, non-owner occupied, except for:
loan number 3164589, which has a Combined Loan-to-Value Ratio of 096.33%;
loan number 3169562, which has a Combined Loan-to-Value Ratio of 103.01%;
loan number 3172046, which has a Combined Loan-to-Value Ratio of 095.24%;
loan number 3174174, which has a Combined Loan-to-Value Ratio of 098.00%;
loan number 3183522, which has a Combined Loan-to-Value Ratio of 095.22%;
loan number 3188596, which has a Combined Loan-to-Value Ratio of 100.73%.
(iii) No Transferred Mortgage Loan is a Third Mortgage Loan.
(iv) No more than 5% 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 6.50% 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 12
years and an amortization schedule based on not more than 30 years.
(vii) As of the Cut-Off Date, of the Transferred Mortgage Loans, loan number
3165248 was more than 60 days Delinquent. As of the Start Up Date,
there were no loans which were more than 30 days Delinquent.
(viii) No Transferred Mortgage Loan had a Loan Balance less than $10,000.00 as
of the Cut-Off Date or greater than $649,780.55 as of the Cut-Off Date.
(ix) The Primary Parcel of each Mortgaged Property is located in the state
identified in the Schedule of Mortgage Loans attached hereto; no more
than 1.0% of the aggregate Loan Balance as of the Cut-Off Date is
secured by Mortgaged Properties
2
<PAGE>
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 0.5% 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 0.5% of the Original Principal Balance.
(xii) As of the Cut-Off Date, no more than 3.6% 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 1.7% of the Transferred Mortgage Loans are subject to
Section 32 of the federal Truth-in-Lending Act.
(xv)As of the Cut-Off Date, 70.78% of the outstanding principal balance of
the Transferred Mortgage Loans are fixed rate mortgage loans (except
4.94% 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 29.22%
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 1997-4.
3
<PAGE>
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
/s/ Elizabeth Folk
------------------
Name: Elizabeth Folk
Title: Senior Vice President
EquiVantage Inc.,
the Originator
/s/ Carolyn B. Andrew
---------------------
Name: Carolyn B. Andrew
Title: Senior Vice President
4
<PAGE>
SCHEDULE OF MORTGAGE LOANS
[Attached as Schedule I to the related
Pooling and Servicing Agreement
and incorporated herein]
<PAGE>
ANDREWS & KURTH L.L.P.
A REGISTERED LIMITED LIABILITY PARTNERSHIP
OTHER OFFICES: ATTORNEYS TELEPHONE: (202) 662-2700
HOUSTON 1701 PENNSYLVANIA AVENUE, N.W. TELECOPIER: (202) 662-2739
DALLAS SUITE 200 TELEX: 79-1208
LOS ANGELES WASHINGTON, D.C. 20060-5805
NEW YORK
THE WOODLANDS
LONDON
December 15, 1997
Prudential Securities Incorporated Financial Guaranty Insurance Company
One New York Plaza, 26th Floor 115 Broadway
New York, New York 10292 New York, New York 10006
First Union Capital Markets Corp.
301 South College Street, TW-06
Charlotte, North Carolina 28288-0166
Re: EquiVantage Home Equity Loan Trust 1997-4
Home Equity Loan Asset-Backed Certificates, Series 1997-4
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 1997-4, including $29,380,000 aggregate principal amount of Class A-1
Certificates (the "Class A-1 Certificates"), $21,000,000 aggregate principal
amount of Class A-2 Certificates (the "Class A-2 Certificates"), $14,000,000
aggregate principal amount of Class A-3 Certificates (the "Class A-3
Certificates"), $7,000,000 aggregate principal amount of Class A-4
Certificates (the "Class A-4 Certificates") and $28,620,000 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
Prudential Securities Incorporated (the "Representative") and First Union
Capital Markets Corp. (together with the Representative, the "Underwriters"),
pursuant to the terms of an Underwriting Agreement dated November 25, 1997
(the "Underwriting Agreement") between the Sponsor and the Underwriters.
Simultaneously with the issuance and sale of the Class A Certificates,
approximately $1,325,653 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>
Prudential Securities Incorporated
First Union Capital Markets Corp.
Financial Guaranty Insurance Company
December 15, 1997
Page 2
The Certificates are being issued pursuant to a Pooling and Servicing
Agreement dated as of December 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 December 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
December 1, 1997 between the Sponsor and the Servicer and the related
Conveyance Agreement dated December 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 11, 1997, together with any
documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the Act that have been filed with the Commission pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), through
December 15, 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 November 25, 1997 and 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 December 11, 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
<PAGE>
Prudential Securities Incorporated
First Union Capital Markets Corp.
Financial Guaranty Insurance Company
December 15, 1997
Page 3
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 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 (other than the
Class A-5 Certificates), the Class A-5 Regular Interest (as such term is
defined in the Agreement) 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).
<PAGE>
Prudential Securities Incorporated
First Union Capital Markets Corp.
Financial Guaranty Insurance Company
December 15, 1997
Page 4
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 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.
