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Exhibit 10.1
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AVCO ABS RECEIVABLES CORP.,
as Seller,
and
AVCO FINANCIAL SERVICES MANAGEMENT COMPANY,
as Master Servicer,
and
AVCO FINANCIAL SERVICES, INC.,
as Representative,
and
AVCO HOME EQUITY LOAN TRUST 199_-_,
as Issuer
and
THE ORIGINATORS LISTED HEREIN
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FORM OF SALE AND SERVICING AGREEMENT
Dated as of ________________
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Home Equity Loan Asset-Backed Certificates
Series 199_-_
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions...................................................................... 1
SECTION 1.2. Other Definitional Provisions.................................................... 18
SECTION 1.3. Interest Calculations............................................................ 19
ARTICLE II
CONVEYANCE OF HOME EQUITY LOANS
SECTION 2.1. Conveyance of Home Equity Loans.................................................. 19
SECTION 2.2. Acceptance by Trustee............................................................ 22
SECTION 2.3. Reserved......................................................................... 22
SECTION 2.4. Representations and Warranties of the Originators Regarding the Home
Equity Loans................................................................... 22
SECTION 2.5. Substitution of Home Equity Loans................................................ 30
ARTICLE III
ADMINISTRATION AND SERVICING OF HOME EQUITY LOANS
SECTION 3.1. Duties of Master Servicer........................................................ 31
SECTION 3.2. Collection and Allocation of Home Equity Loan Payments........................... 32
SECTION 3.3. Withdrawals from each Collection Account......................................... 33
SECTION 3.4. Reserved......................................................................... 34
SECTION 3.4. Reserved......................................................................... 34
SECTION 3.4. Reserved......................................................................... 34
SECTION 3.7. Management and Realization Upon Defaulted Home Equity Loans...................... 34
SECTION 3.8. Trustee to Cooperate............................................................. 34
SECTION 3.9. Servicing Fee.................................................................... 35
SECTION 3.10. Master Servicer's Certificate.................................................... 35
SECTION 3.11 Annual Statement as to Compliance; Notice of Default............................. 36
SECTION 3.12. Annual Independent Certified Public Accountants' Report.......................... 36
SECTION 3.13. Access to Certain Documentation and Information Regarding Home Equity Loans...... 36
SECTION 3.14. Master Servicer Expenses......................................................... 37
SECTION 3.15. Advances by the Master Servicer.................................................. 37
SECTION 3.15. Optional Purchase of Defaulted Home Equity Loans................................. 37
SECTION 3.16. Superior Liens................................................................... 38
SECTION 3.17. Reserved......................................................................... 38
SECTION 3.18. Appointment of Subservicer....................................................... 38
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ARTICLE IV
DISTRIBUTIONS; RESERVE ACCOUNT; STATEMENTS TO
CERTIFICATEHOLDERS AND NOTEHOLDERS
SECTION 4.1. Establishment of Trust Accounts.................................................. 39
SECTION 4.2. Reserved......................................................................... 41
SECTION 4.3. Application of Collections....................................................... 41
SECTION 4.4. Additional Deposits.............................................................. 41
SECTION 4.5. Distributions.................................................................... 42
SECTION 4.6. Reserve Account.................................................................. 43
SECTION 4.7. Reserved......................................................................... 43
SECTION 4.8 Statements to Certificateholders and Noteholders................................. 43
SECTION 4.9. Net Deposits..................................................................... 44
ARTICLE V
THE SELLER, THE REPRESENTATIVE AND THE ORIGINATORS
SECTION 5.1. Representations of Seller........................................................ 44
SECTION 5.2. Corporate Existence.............................................................. 45
SECTION 5.3 Liability of Seller; Indemnities................................................. 45
SECTION 5.4. Merger or Consolidation of, or Assumption of the Obligations of, Seller.......... 46
SECTION 5.5. Limitation on Liability of Seller and Others..................................... 47
SECTION 5.6. Seller May Own Certificates or Notes............................................. 47
SECTION 5.6. Representations and Warranties Regarding the Representative and the
Originators.................................................................... 47
ARTICLE VI
THE MASTER SERVICER
SECTION 6.1. Representations of Master Servicer............................................... 52
SECTION 6.2. Indemnities of Master Servicer................................................... 55
SECTION 6.3. Merger or Consolidation of, or Assumption of the Obligations of, Master
Servicer......................................................................... 55
SECTION 6.4. Limitation on Liability of Master Servicer and Others............................ 56
SECTION 6.5. Avco Financial Services Management Company Not To Resign as Master Servicer...... 56
ARTICLE VII
DEFAULT
SECTION 7.1. Master Servicer Default.......................................................... 57
SECTION 7.2. Appointment of Successor......................................................... 58
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SECTION 7.3. Payment of Servicing Fee......................................................... 59
SECTION 7.4. Notification to Noteholders and Certificateholders............................... 59
SECTION 7.5. Waiver of Past Defaults.......................................................... 59
ARTICLE VIII
TERMINATION
SECTION 8.1. Optional Purchase of All Home Equity Loans....................................... 59
ARTICLE IX
ADMINISTRATIVE DUTIES OF THE MASTER SERVICER
SECTION 9.1. Administrative Duties............................................................ 60
SECTION 9.2. Records.......................................................................... 62
SECTION 9.3. Additional Information To Be Furnished to the Issuer............................. 62
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. Amendment........................................................................ 63
SECTION 10.2. Protection of Title to Trust..................................................... 63
SECTION 10.3. Notices.......................................................................... 65
SECTION 10.4. Assignment....................................................................... 66
SECTION 10.5. Limitations on Rights of Others.................................................. 66
SECTION 10.6. Severability..................................................................... 66
SECTION 10.7. Separate Counterparts............................................................ 66
SECTION 10.8. Headings......................................................................... 66
SECTION 10.9. Governing Law.................................................................... 66
SECTION 10.10. Assignment to Trustee............................................................ 66
SECTION 10.11. Nonpetition Covenant............................................................. 67
SECTION 10.12. Limitation of Liability of Owner Trustee and Trustee............................. 67
SECTION 10.13. Independence of the Master Servicer.............................................. 67
SECTION 10.14. No Joint Venture................................................................. 67
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SALE AND SERVICING AGREEMENT dated as of _________________, 199 , among
Avco Home Equity Loan Trust 199_-_, a Delaware business trust (the "Issuer"),
Avco ABS Receivables Corp., as Seller (the "Seller"), Avco Financial Services
Management Company, as Master Servicer (the "Master Servicer"), Avco Financial
Services, Inc., as Representative (the "Representative") and the entities listed
on Exhibit D hereto (collectively, the "Originators").
WHEREAS, the Issuer desires to purchase a portfolio of mortgage loans
from the Seller; and
WHEREAS, the Master Servicer is willing to service such mortgage loans.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.1. Definitions. Whenever used in this Agreement, the following
words and phrases shall have the following meanings:
"Accrual Period" means as to any Simple Interest Loan and Monthly Payment,
the period commencing from and after the date through which interest was last
paid up to but excluding the date of receipt of such Monthly Payment. As to any
Actuarial Loan and Monthly Payment, the period from and including a Due Date for
such Actuarial Loan to but excluding the succeeding Due Date.
"Actuarial Loan" means a Home Equity Loan for which the relative
application of each Monthly Payment to interest and principal is based on the
period between Due Dates and not on the timing of receipt of such Monthly
Payment.
"Aggregate Net Losses" means with respect to a Due Period, the aggregate
principal balance of all Home Equity Loans newly designated during such Due
Period as Liquidated Home Equity Loans minus Liquidation Proceeds collected
during such Due Period with respect to all Liquidated Home Equity Loans.
"Agreement" means this Sale and Servicing Agreement, as the same may be
amended and supplemented from time to time.
"ARM" means a Home Equity Loan which is serviced as an Actuarial Loan and
the Mortgage Rate of which is subject to adjustment on each Change Date by
reference to the Index, subject to rounding and the Periodic Cap, the applicable
Lifetime Cap and the applicable Lifetime Floor.
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"Assignment of Mortgage" means, with respect to any Mortgage, an
assignment, notice of transfer or equivalent instrument, in recordable form,
sufficient under the laws of the jurisdiction in which the related Mortgaged
Property is located to reflect the sale of the Mortgage to the Issuer, which
assignment, notice of transfer or equivalent instrument may be in the form of
one or more blanket assignments covering the Home Equity Loans secured by
Mortgaged Properties located in the same jurisdiction.
"Available Principal" means with respect to any Distribution Date, the sum
of the following amounts without duplication: (a) that portion of all
collections on the Home Equity Loans allocable to principal in respect of the
preceding Due Period; (b) Liquidation Proceeds attributable to the principal
amount of Home Equity Loans which became Liquidated Home Equity Loans during the
preceding Due Period in accordance with the Master Servicer's customary
servicing procedures; and (c) to the extent attributable to principal, the
Purchase Price of each Home Equity Loan repurchased by the Seller or purchased
by the Master Servicer during the preceding Due Period; provided, however, that
in calculating the Available Principal, all payments and proceeds (including
Liquidation Proceeds) of any Home Equity Loans repurchased by the Seller or
purchased by the Master Servicer the Purchase Price of which has been included
in the Available Principal in a prior Due Period shall be excluded.
"Basic Documents" means the Certificate of Trust, the Trust Agreement, the
Indenture, the Depository Agreements and other documents and certificates
delivered in connection therewith.
"Business Day" means any day other than (i) a Saturday or a Sunday or (ii)
a day on which banking institutions in New York City or the city in which the
corporate trust office of the Trustee under this Agreement is located are
authorized or obligated by law or executive order to close.
"Certificate" means a Trust Certificate (as defined in the Trust
Agreement).
"Certificate Balance" equals, initially, $_______________ and, thereafter,
equals the initial Certificate Balance, reduced by all amounts allocable to
principal previously distributed to Certificateholders.
"Certificate Distribution Account" has the meaning assigned to such term
in the Trust Agreement.
"Certificate Rate" means __% per annum.
"Certificateholder" has the meaning assigned to such term in the Trust
Agreement.
"Certificateholders' Distributable Amount" means, with respect to any
Distribution Date, the sum of the Certificateholders' Interest Distributable
Amount and the Certificateholders' Principal Distributable Amount.
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"Certificateholders' Interest Carryover Shortfall" means, with respect to
any Distribution Date, the excess of the Certificateholders' Monthly Interest
Distributable Amount for the preceding Distribution Date and any outstanding
Certificateholders' Interest Carryover Shortfall on such preceding Distribution
Date, over the amount in respect of interest at the Certificate Rate that is
actually deposited in the Certificate Distribution Account on such preceding
Distribution Date, plus interest on such excess, to the extent permitted by law,
at the Certificate Rate from and including such preceding Distribution Date to
but excluding the current Distribution Date.
"Certificateholders' Interest Distributable Amount" means, with respect to
any Distribution Date, the sum of the Certificateholders' Monthly Interest
Distributable Amount for such Distribution Date and the Certificateholders'
Interest Carryover Shortfall for such Distribution Date.
"Certificateholders' Monthly Interest Distributable Amount" means, with
respect to any Distribution Date, 30 days of interest (or, in the case of the
first Distribution Date, interest accrued from and including the Closing Date to
but excluding such Distribution Date) at the Certificate Rate on the Certificate
Balance on the immediately preceding Distribution Date, after giving effect to
all payments of principal to the Certificateholders on or prior to such
Distribution Date (or, in the case of the first Distribution Date, the
Certificate Balance on the Closing Date).
"Certificateholders' Monthly Principal Distributable Amount" means, with
respect to any Distribution Date, the Certificateholders' Percentage of the
Principal Distribution Amount or, with respect to any Distribution Date on or
after the Distribution Date on which the outstanding principal balance of the
Class A Notes is reduced to zero, 100% of the Principal Distribution Amount
(less any amount required on the first such Distribution Date to reduce the
outstanding principal balance of the Class A Notes to zero, which shall be
deposited into the Note Distribution Account).
"Certificateholders' Percentage" means 100% minus the Noteholders'
Percentage.
"Certificateholders' Principal Carryover Shortfall" means, as of the close
of any Distribution Date, the excess of the Certificateholders' Monthly
Principal Distributable Amount and any outstanding Certificateholders' Principal
Carryover Shortfall from the preceding Distribution Date, over the amount in
respect of principal that is actually deposited in the Certificate Distribution
Account on such current Distribution Date.
"Certificateholders' Principal Distributable Amount" means, with respect
to any Distribution Date, the sum of the Certificateholders' Monthly Principal
Distributable Amount for such Distribution Date and the Certificateholders'
Principal Carryover Shortfall as of the close of the preceding Distribution
Date; provided, however, that the Certificateholders' Principal Distributable
Amount shall not exceed the Certificate Balance. In addition, on the Certificate
Final Scheduled Distribution Date, the principal required to be distributed to
Certificateholders will include the lesser of (a) any payments of principal due
and remaining unpaid on each Home Equity Loan in the Trust as of _________,
______ or (b) the portion of the amount that is
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necessary (after giving effect to the other amounts to be deposited in the
Certificate Distribution Account on such Distribution Date and allocable to
principal) to reduce the Certificate Balance to zero, in either case after
giving effect to any required distribution of the Noteholders' Principal
Distributable Amount to the Note Distribution Account. In addition, on any
Distribution Date on which, after giving effect to all distributions to the
Master Servicer, the Noteholders and the Certificateholders on such Distribution
Date, (i) the outstanding principal balance of the Notes is zero and (ii) the
amount on deposit in the Reserve Account is equal to or greater than the
Certificate Balance, Certificateholders' Principal Distributable Amount shall
include an amount equal to such Certificate Balance.
"Change Date" means the date on which the Mortgage Rate of each ARM is
subject to adjustment, which date is the Due Date set forth in the related
Mortgage Note and every twelfth Due Date thereafter.
"Charge-off Rate" means, with respect to a Due Period, the Aggregate Net
Losses with respect to the Home Equity Loans expressed, on an annualized basis,
as a percentage of the average of (x) the Pool Balance on the last day of the
immediately preceding Due Period and (y) the Pool Balance on the last day in
such Due Period.
"Civil Relief Act" means the Soldiers' and Sailors' Civil Relief Act of
1940, as amended.
"Closing Date" means _________, 199__.
"Collection Account" means the account designated as such, established and
maintained pursuant to Section 3.2(c).
"Cutoff Date" means __________, 199__.
"Cutoff Date Principal Balance" means with respect to any Home Equity
Loan, the unpaid principal balance thereof as of the Cut-Off Date (or as of the
applicable date of substitution with respect to an Eligible Substitute Home
Equity Loan pursuant to Section 2.2 or 2.4).
"Debt Service Reduction" means with respect to any Home Equity Loan, a
reduction by a court of competent jurisdiction of the Monthly Payment due on
such Home Equity Loan.
"Defective Home Equity Loan" means any Home Equity Loan subject to
repurchase or substitution pursuant to Section 2.2 or 2.4.
"Delinquency Percentage" means, with respect to a Due Period, the ratio of
(a) the outstanding principal balance of all outstanding Home Equity Loans 60
days or more delinquent (which amount shall include Home Equity Loans in respect
of Mortgaged Properties that have been repossessed but not yet sold or otherwise
liquidated) as of the last day of such Due Period, determined in accordance with
the Master Servicer's normal practices, divided by (b) the outstanding principal
balance of all Home Equity Loans on the last day of such Due Period.
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"Delivery" when used with respect to Trust Account Property means:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that constitute
"instruments" within the meaning of Section 9.105(1)(i) of the UCC and are
susceptible of physical delivery, transfer thereof to the Trustee or its nominee
or custodian by physical delivery to the Trustee or its nominee or custodian
endorsed to, or registered in the name of, the Trustee or its nominee or
custodian or endorsed in blank, and, with respect to a certificated security (as
defined in Section 8-102 of the UCC) transfer thereof (i) by delivery of such
certificated security endorsed to, or registered in the name of, the Trustee or
its nominee or custodian or endorsed in blank to a financial intermediary (as
defined in Section 8-313 of the UCC) and the making by such financial
intermediary of entries on its books and records identifying such certificated
securities as belonging to the Trustee or its nominee or custodian and the
sending by such financial intermediary of a confirmation of the purchase of such
certificated security by the Trustee or its nominee or custodian, or (ii) by
delivery thereof to a "clearing corporation" (as defined in Section 8-102(3) of
the UCC) and the making by such clearing corporation of appropriate entries on
its books reducing the appropriate securities account of the transferor and
increasing the appropriate securities account of a financial intermediary by the
amount of such certificated security, the identification by the clearing
corporation of the certificated securities for the sole and exclusive account of
the financial intermediary, the maintenance of such certificated securities by
such clearing corporation or a "custodian bank" (as defined in Section 8-102(4)
of the UCC) or the nominee of either subject to the clearing corporation's
exclusive control, the sending of a confirmation by the financial intermediary
of the purchase by the Trustee or its nominee or custodian of such securities
and the making by such financial intermediary of entries on its books and
records identifying such certificated securities as belonging to the Trustee or
its nominee or custodian (all of the foregoing, "Physical Property"), and, in
any event, any such Physical Property in registered form shall be in the name of
the Trustee or its nominee or custodian; and such additional or alternative
procedures as may hereafter become appropriate to effect the complete transfer
of ownership of any such Trust Account Property to the Trustee or its nominee or
custodian, consistent with changes in applicable law or regulations or the
interpretation thereof;
(b) with respect to any securities issued by the U.S. Treasury,
FHLMC or by FNMA that is a book-entry security held through the Federal Reserve
System pursuant to Federal book-entry regulations, the following procedures, all
in accordance with applicable law, including applicable Federal regulations and
Articles 8 and 9 of the UCC: book-entry registration of such Trust Account
Property to an appropriate book-entry account maintained with a Federal Reserve
Bank by a financial intermediary which is also a "depository" pursuant to
applicable Federal regulations and issuance by such financial intermediary of a
deposit advice or other written confirmation of such book-entry registration to
the Trustee or its nominee or custodian of the purchase by the Trustee or its
nominee or custodian of such book-entry securities; the making by such financial
intermediary of entries in its books and records identifying such book-entry
security held through the Federal Reserve System pursuant to Federal book-entry
regulations as belonging to the Trustee or its nominee or custodian and
indicating that such custodian holds
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such Trust Account Property solely as agent for the Trustee or its nominee or
custodian; and such additional or alternative procedures as may hereafter become
appropriate to effect complete transfer of ownership of any such Trust Account
Property to the Trustee or its nominee or custodian, consistent with changes in
applicable law or regulations or the interpretation thereof; and
(c) with respect to any item of Trust Account Property that is an
uncertificated security under Article 8 of the UCC and that is not governed by
clause (b) above, registration on the books and records of the issuer thereof in
the name of the financial intermediary, the sending of a confirmation by the
financial intermediary of the purchase by the Trustee or its nominee or
custodian of such uncertificated security, the making by such financial
intermediary of entries on its books and records identifying such uncertificated
certificates as belonging to the Trustee or its nominee or custodian.
"Depository Agreements" mean the Certificate Depository Agreement and
the Note Depository Agreement.
"Determination Date" means, with respect to any Distribution Date, the
fourth Business Day prior to each Distribution Date.
"Distribution Date" means, with respect to each Due Period, the ______ day
of the following month, or if such day is not a Business Day, the immediately
following Business Day, commencing on _______________, 199___.
"Due Period" means a calendar month, except with respect to the first Due
Period, which shall be the period from the Cutoff Date to ______________, 199__.
Any amount stated "as of the close of business on the last day of a Due Period"
shall give effect to the following calculations as determined as of the end of
the day on such last day: (1) all applications of collections and (2) all
distributions to be made on the immediately following Distribution Date.
"Eligible Deposit Account" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate trust
department of a depository institution (other than the Seller or any affiliate
of the Seller) organized under the laws of the United States of America or any
one of the states thereof or the District of Columbia (or any domestic branch of
a foreign bank), having corporate trust powers and acting as trustee for funds
deposited in such account, so long as any of the securities of such depository
institution have a credit rating from each Rating Agency in one of its generic
rating categories which signifies investment grade.
"Eligible Institution" means a depository institution (other than the
Seller or any affiliate of the Seller) organized under the laws of the United
States of America or any one of the states thereof or the District of Columbia
(or any domestic branch of a foreign bank), which (i) has (A) either a long-term
senior unsecured debt rating of AAA or a short-term senior unsecured debt or
certificate of deposit rating of A-l+ or better by Standard & Poor's and (B)(1)
a long-term senior unsecured debt rating of Al or better and (2) a short-term
senior unsecured debt rating of Pl or
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better by Moody's, or any other long-term, short-term or certificate of deposit
rating acceptable to the Rating Agencies and (ii) whose deposits are insured by
the Federal Deposit Insurance Corporation. If so qualified, the Owner Trustee or
the Trustee may be considered an Eligible Institution.
"Eligible Investments" mean book-entry securities, negotiable instruments
or securities represented by instruments in bearer or registered form which
evidence:
(a) direct obligations of, and obligations fully guaranteed as to
timely payment by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit of any
depository institution (including the Seller or any Affiliate of the Seller) or
trust company incorporated under the laws of the United States of America or any
state thereof or the District of Columbia (or any domestic branch of a foreign
bank) and subject to supervision and examination by Federal or state banking or
depository institution authorities (including depository receipts issued by any
such institution or trust company as custodian with respect to any obligation
referred to in clause (a) above or portion of such obligation for the benefit of
the holders of such depository receipts); provided, however, that at the time of
the investment or contractual commitment to invest therein (which shall be
deemed to be made again each time funds are reinvested following each
Distribution Date), the commercial paper or other short-term senior unsecured
debt obligations (other than such obligations the rating of which is based on
the credit of a Person other than such depository institution or trust company)
of such depository institution or trust company shall have a credit rating from
Standard & Poor's of A-1+ and from Moody's of P1;
(c) commercial paper (including commercial paper of the Seller or
any Affiliate of the Seller) having, at the time of the investment or
contractual commitment to invest therein, a rating from Standard & Poor's of
A-1+ and from Moody's of P1;
(d) investments in money market funds (including funds for which the
Seller, the Trustee or the Owner Trustee or any of their respective Affiliates
is investment manager or advisor) having a rating from Standard & Poor's of
AAA-m or AAAm-G and from Moody's of Aaa;
(e) bankers' acceptances issued by any depository institution or
trust company referred to in clause (b) above;
(f) repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United States of America or
any agency or instrumentality thereof the obligations of which are backed by the
full faith and credit of the United States of America, in either case entered
into with a depository institution or trust company (acting as principal)
referred to in clause (b) above; and
(g) any other investment which would not cause either Rating Agency
to downgrade or withdraw its then current rating of any class of Notes or the
Certificates.
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"Eligible Substitute Home Equity Loan" means a Home Equity Loan
substituted by the Seller for a Defective Home Equity Loan which must, on the
date of such substitution, (i) have an outstanding Principal Balance not in
excess of and not more than ___% less than the Principal Balance of the
Defective Home Equity Loan; (ii) have a current Mortgage Rate not less than the
Mortgage Rate of the Defective Home Equity Loan and not more than ___% in excess
of the Mortgage Rate of such Defective Home Equity Loan; (iii) have a Mortgage
of the same or higher level of lien priority as the Mortgage relating to the
Defective Home Equity Loan at the time such Mortgage was transferred to the
Trust; (iv) have a remaining term to maturity not more than six months earlier
and not later than the remaining term to maturity of the Defective Home Equity
Loan; (v) comply with each representation and warranty set forth in Section 2.4
(deemed to be made as of the date of substitution); and (vi) have an original
Loan-to-Value Ratio not greater than that of the Defective Home Equity Loan;
(vii) be an ARM if the Defective Home Equity Loan was an ARM; and (viii) if an
ARM, use the same Index, have the same Periodic Cap, have a Lifetime Cap and a
Gross Margin no less than, those of the Defective Home Equity Loan.
"FHLMC" means Federal Home Loan Mortgage Corporation or any successor
thereto.
"Final Scheduled Distribution Date" means with respect to List Classe(s)
of Notes and their Respective Final Scheduled Distribution Dates.
"Final Scheduled Maturity Date" means ______________, _________.
"First Lien" means, with respect to any Home Equity Loan which is a second
priority lien, the mortgage loan relating to the corresponding Mortgaged
Property having a first priority lien.
"Fitch" means Fitch Investors Service, L.P., or its successors.
"FNMA" means Federal National Mortgage Association or any successor
thereto.
"Foreclosure Profits" means, with respect to a Liquidated Home Equity
Loan, the amount, if any, by which (i) the aggregate of the related Net
Liquidation Proceeds exceeds (ii) the related Principal Balance (plus accrued
and unpaid interest thereon at the applicable Mortgage Rate from the date
interest was last paid through the date of receipt of the final Liquidation
Proceeds) of such Liquidated Home Equity Loan immediately prior to the final
recovery of its Liquidation Proceeds.
"Gross Margin" means, with respect to each ARM, the number of basis points
set forth in the related Mortgage Note which is added to the Index to determine
the Mortgage Rate on the related Change Date, subject to rounding and the
Periodic Cap and the applicable Lifetime Cap and the applicable Lifetime Floor.
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"Home Equity Loan" means a mortgage loan transferred and assigned to the
Trustee pursuant to Section 2.1 or Section 2.4 and held as a part of the Trust,
as identified in the Home Equity Loan Schedule.
"Home Equity Loan Schedule" means with respect to any date, the schedule
of Home Equity Loans included in the Trust on such date. The initial schedule of
Home Equity Loans as of the Cutoff Date is the schedule set forth herein as
Exhibit A, which schedule sets forth as to each Home Equity Loan (i) the Cut-Off
Date Principal Balance, (ii) the account number, (iii) the original principal
amount, (iv) the Loan-to-Value Ratio as of the date of the origination of the
related Home Equity Loan, (v) the Due Date, (vi) the current Mortgage Rate,
(vii) the first date on which a Monthly Payment is due under the Mortgage Note,
(viii) the original stated maturity date of the Mortgage Note, (ix) the
remaining number of months to maturity as of the Cutoff Date, (x) the State in
which the related Mortgaged Property is situated, (xi) the type of property,
(xii) the lien status, (xiii) a code indicating whether the Home Equity Loan is
an ARM, and (xiv) for each ARM, the Gross Margin and the Mortgage Rate at
origination.
"Indenture" means the Indenture dated as of ________________, 199_,
between the Issuer and the Trustee, as the same may be amended and supplemented
from time to time.
"Index" means the weekly average yield on United States Treasury
securities adjusted to a constant maturity of one year, as made available by the
Federal Reserve Board and most recently available as of the date --days before
each Change Date.
"Insolvency Event" means, with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable Federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or appointing a receiver
(including any receiver appointed under the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, as amended), liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for any
substantial part of its property, or ordering the winding-up or liquidation of
such Person's affairs, and such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or (b) the commencement by such
Person of a voluntary case under any applicable Federal or state bankruptcy,
insolvency or other similar law now or hereafter in effect, or the consent by
such Person to the entry of an order for relief in an involuntary case under any
such law, or the consent by such Person to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator
or similar official for such Person or for any substantial part of its property,
or the making by such Person of any general assignment for the benefit of
creditors, or the failure by such Person generally to pay its debts as such
debts become due, or the taking of action by such Person in furtherance of any
of the foregoing.
"Insurance Proceeds" means proceeds paid by any insurer pursuant to any
insurance policy covering a Home Equity Loan, or amounts required to be paid by
the Master Servicer pursuant to Section 3.5, net of any component thereof (i)
covering any expenses incurred by or on behalf of the Master Servicer in
connection with obtaining such proceeds, (ii) that is applied
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to the restoration or repair of the related Mortgaged Property, (iii) released
to the Mortgagor in accordance with the Master Servicer's normal servicing
procedures or (iv) required to be paid to any holder of a mortgage senior to
such Home Equity Loan.
"Interest Distribution Amount" means, with respect to any Distribution
Date, the sum of the following amounts without duplication: (a) that portion of
all collections on the Home Equity Loans allocable to interest in respect of the
preceding Due Period; (b) Liquidation Proceeds attributable to interest on the
Home Equity Loans which became Liquidated Home Equity Loans during the preceding
Due Period in accordance with the Master Servicer's customary servicing
procedures; (c) the Purchase Price of each Home Equity Loan that became a
Purchased Home Equity Loan during the preceding Due Period to the extent
attributable to accrued interest on such Home Equity Loan; (d) Recoveries for
such Due Period and (e) Investment Earnings for such Distribution Date;
provided, however, that in calculating the Interest Distribution Amount, all
payments and proceeds (including Liquidation Proceeds) of any Purchased Home
Equity Loans the Purchase Price of which has been included in the Interest
Distribution Amount in a prior Due Period shall be excluded.
"Investment Earnings" means, with respect to any Distribution Date, the
investment earnings (net of losses and investment expenses) on amounts on
deposit in the Trust Accounts and the Certificate Distribution Account to be
deposited into the Collection Account on such Distribution Date pursuant to
Section 4.1(b).
"Issuer" means Avco Home Equity Loan Trust 199_-_.
"Lien" means a security interest, lien, charge, pledge or encumbrance of
any kind, other than tax liens, mechanics' liens and any liens which attach to
the respective Home Equity Loan by operation of law as a result of any act or
omission by the related Mortgagor.
"Lifetime Cap" means the provision in the Mortgage Note for each ARM which
limits the maximum Mortgage Rate over the life of such ARM to __ basis points
greater than the Mortgage Rate on the date of origination of such ARM.
"Lifetime Floor" means the provision in the Mortgage Note for each ARM
which limits the minimum Mortgage Rate over the life of such ARM to the Mortgage
Rate on the date of origination of such ARM.
"Liquidated Home Equity Loan" means, as to any Distribution Date, any Home
Equity Loan with respect to which the Master Servicer has determined, in
accordance with the servicing procedures specified herein, as of the end of the
related Due Period that all Liquidation Proceeds which it expects to recover
with respect to the liquidation of the Home Equity Loan or disposition of the
related REO Property have been recovered.
"Liquidation Proceeds" means proceeds (including Insurance Proceeds)
received in connection with the liquidation of any Home Equity Loan or related
REO Property, whether through trustee's sale, foreclosure sale or otherwise.
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"Loan-to-Value Ratio" means the fraction, expressed as a percentage, the
numerator of which is the original principal balance of the related Home Equity
Loan and the denominator of which is the Original Value of the related Mortgaged
Property.
"Monthly Advance" means an advance made by the Master Servicer pursuant to
Section 3.15 hereof.
"Monthly Payment" means the scheduled monthly payment of principal and/or
interest required to be made by a Mortgagor on the related Home Equity Loan.
"Moody's" means Xxxxx'x Investors Service, Inc., or its successor.
"Mortgage" means 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 Home Equity Loan.
"Mortgage File" means the mortgage documents listed in Section 2.1(b)
pertaining to a particular Home Equity Loan and any additional documents
required to be added to the Mortgage File pursuant to this Agreement.
"Mortgage Note" means the originally executed note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor under the related Home
Equity Loan.
"Mortgaged Property" means the land and improvements securing the
indebtedness of a Mortgagor under the related Home Equity Loan.
"Mortgagor" means the obligor or obligors on a Mortgage Note.
"Net Liquidation Proceeds" means, with respect to any Liquidated Home
Equity Loan, Liquidation Proceeds net of unreimbursed Servicing Fees,
unreimbursed Servicing Advances and Monthly Advances with respect thereto.
"Net Rate" means, with respect to any Home Equity Loan as to any day, the
Mortgage Rate less the related Servicing Fee Rate.
"Nonrecoverable Advances" means, with respect to any Home Equity Loan, (i)
any Monthly Advance previously made and not reimbursed pursuant to Section
3.2(c) or 3.3(ii), or (ii) a Servicing Advance or Monthly Advance proposed to be
made in respect of a Home Equity Loan or REO Property which, in the good faith
business judgment of the Master Servicer, will not or, in the case of a proposed
advance, would not be ultimately recoverable pursuant to Sections 3.2(c) or
3.3(ii).
"Note Distribution Account" means the account designated as such,
established and maintained pursuant to Section 4.1.
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"Noteholders' Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Principal Distributable Amount
and the Noteholders' Interest Distributable Amount.
"Noteholders' Interest Carryover Shortfall" means, with respect to any
Distribution Date, the excess of the Noteholders' Monthly Interest Distributable
Amount for the preceding Distribution Date and any outstanding Noteholders'
Interest Carryover Shortfall on such preceding Distribution Date, over the
amount in respect of interest that is actually deposited in the Note
Distribution Account on such preceding Distribution Date, plus interest on the
amount of interest due but not paid to Noteholders on the preceding Distribution
Date, to the extent permitted by law, at the respective Interest Rate borne by
each class of Notes from such preceding Distribution Date through the current
Distribution Date.
"Noteholders' Interest Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Monthly Interest Distributable
Amount for such Distribution Date and the Noteholders' Interest Carryover
Shortfall for such Distribution Date.
"Noteholders' Monthly Interest Distributable Amount" means, with respect
to any Distribution Date, the product of (i)(A) in the case of the Class
A-Notes, the product of the Interest Rate for such class and a fraction, the
numerator of which is the number of days elapsed from and including the prior
Distribution Date (or, in the case of the first Distribution Date, from and
including the Closing Date) to but excluding such Distribution Date and the
denominator of which is ___________ and (B) in the case of each other class of
Notes, of the Interest Rate for such class (or, in the case of the first
Distribution Date, the Interest Rate for such class multiplied by a fraction,
the numerator of which is the number of days elapsed from and including the
Closing Date to but excluding such Distribution Date and the denominator of
which is ____________) and (ii) the outstanding principal balance of the Notes
of such class on the immediately preceding Distribution Date, after giving
effect to all distributions of principal to Noteholders of such class on such
Distribution Date (or, in the case of the first Distribution Date, on the
Closing Date).
"Noteholders' Monthly Principal Distributable Amount" means, with
respect to any Distribution Date, the Noteholders' Percentage of the
Principal Distribution Amount.
"Noteholders' Percentage" means 100% until the point in time at which List
Class(es) of Notes have been paid in full and zero thereafter.
"Noteholders' Principal Carryover Shortfall" means, as of the close of any
Distribution Date, the excess of the Noteholders' Monthly Principal
Distributable Amount and any outstanding Noteholders' Principal Carryover
Shortfall from the preceding Distribution Date over the amount in respect of
principal that is actually deposited in the Note Distribution Account.
"Noteholders' Principal Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholder's Monthly Principal Distributable
Amount for such Distribution Date and the Noteholders' Principal Carryover
Shortfall as of the close of the preceding
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Distribution Date; provided, however, that the Noteholders' Principal
Distributable Amount shall not exceed the outstanding principal balance of the
Notes. In addition, on the Final Scheduled Distribution Date of each class of
Notes, the principal required to be deposited in the Note Distribution Account
will include the amount necessary (after giving effect to the other amounts to
be deposited in the Note Distribution Account on such Distribution Date and
allocable to principal) to reduce the Outstanding Amount of such class of Notes
to zero.
"Officers' Certificate" means a certificate signed by (a) the chairman of
the board, the president, the vice chairman of the board, any executive vice
president, any senior vice president or any vice president and (b) a cashier,
assistant cashier, secretary or assistant secretary of the Seller or the Master
Servicer, as appropriate, provided that no one person may sign in a capacity
fulfilling both clause (a) and clause (b).
"Opinion of Counsel" means one or more written opinions of counsel who may
be an employee of or counsel to the Seller or the Master Servicer, which counsel
shall be acceptable to the Trustee, the Owner Trustee or the Rating Agencies, as
applicable. "Original Pool Balance" means the Pool Balance as of the Cutoff Date
which is $_____________.
"Original Value" means the value of the Mortgaged Property at the time of
origination of the related Home Equity Loan, such value being the lower of the
value of such property set forth in an appraisal acceptable to the originator of
the Home Equity Loan or the sales price of such property at the time of
origination or, in the case of a refinancing, the value of such property set
forth in an appraisal acceptable to the originator.
"Owner Trust Estate" has the meaning assigned to such term in the Trust
Agreement.
"Owner Trustee" means, not in its individual capacity but solely as Owner
Trustee under the Trust Agreement, its successors in interest or any successor
Owner Trustee under the Trust Agreement.
"Payahead" on a Actuarial Home Equity Loan means the amount, as of the
close of business on the last day of a Due Period, computed in accordance with
Section 4.3 with respect to such Home Equity Loan.
"Payahead Account" means the account designated as such, established and
maintained pursuant to Section 4.1(d)(ii).
"Payahead Balance" on a Actuarial Home Equity Loan means the sum, as of
the close of business on the last day of a Due Period, of all Payaheads made by
or on behalf of the Mortgagor with respect to such Actuarial Home Equity Loan,
as reduced by applications of previous Payaheads with respect to such Actuarial
Home Equity Loan, pursuant to Sections 4.3 and 4.4.
"Periodic Cap" means the provision in the Mortgage Note for each ARM which
limits increases or decreases in the Mortgage Rate on each Change Date to basis
points.
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"Person" means any individual, corporation, limited liability company,
estate, partnership, joint venture, association, joint stock company, trust
(including any beneficiary thereof), unincorporated organization or government
or any agency or political subdivision thereof.
"Physical Property" has the meaning assigned to such term in the
definition of "Delivery" above.
"Pool Balance" as of the close of business on the last day of a Due Period
means the aggregate Principal Balance of the Home Equity Loans (excluding
Purchased Home Equity Loans and Liquidated Home Equity Loans).
"Primary Mortgage Insurance Policy" means the certificate of primary
mortgage insurance relating to a particular Home Equity Loan, or any replacement
policy therefor.
"Principal Balance" means as to any Home Equity Loan other than a
Liquidated Home Equity Loan and any day, the related Cut-Off Date Principal
Balance (or unpaid principal balance as of the date of substitution), minus all
collections credited against the Principal Balance of any such Home Equity Loan.
For purposes of this definition, a Liquidated Home Equity Loan shall be deemed
to have a Principal Balance equal to the Principal Balance of the related Home
Equity Loan immediately prior to the final recovery of related Liquidation
Proceeds and a Principal Balance of zero thereafter.
"Principal Distribution Amount" means, with respect to any Distribution
Date, the sum of the following amounts, without duplication, in respect of the
preceding Due Period: (a) that portion of all collections on Home Equity Loans
(including, with respect to Actuarial Loans, amounts withdrawn from the Payahead
Account but excluding amounts deposited into the Payahead Account) allocable to
principal, (b) Liquidation Proceeds attributable to the principal amount of Home
Equity Loans which became Liquidated Home Equity Loans during such Due Period in
accordance with the Master Servicer's customary servicing procedures, plus the
amount of Realized Losses with respect to such Liquidated Home Equity Loans, (c)
to the extent attributable to principal, the Purchase Price of each Home Equity
Loan that became a Purchased Home Equity Loan during such Due Period and (d) on
the Final Scheduled Distribution Date for the Certificates, any amounts advanced
by the Master Servicer on such Final Scheduled Distribution Date with respect to
principal on the Home Equity Loans; provided, however, that in calculating the
Principal Distribution Amount the following will be excluded: (i) amounts
received on Actuarial Home Equity Loans to the extent that the Master Servicer
has previously made an unreimbursed Precomputed Advance of principal, (ii)
Liquidation Proceeds with respect to a particular Actuarial Home Equity Loan to
the extent of any unreimbursed Precomputed Advances of principal, (iii) all
payments and proceeds (including Liquidation Proceeds) of any Purchased Home
Equity Loans the Purchase Price of which has been included in the Principal
Distribution Amount in a prior Due Period and (iv) Recoveries.
"Purchase Price" means as to any Defective Home Equity Loan repurchased on
any date pursuant to Sections 2.2 or 2.4, an amount equal to the sum of (i) the
unpaid Principal Balance
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thereof, (ii) the greater of (a) all unpaid accrued interest thereon and (b)
days' interest thereon, computed at the applicable Mortgage Rate and (iii) any
unreimbursed Servicing Advances with respect to such Home Equity Loan; provided,
however, that if at the time of repurchase the Seller or an Affiliate is the
Master Servicer, the amount described in clause (ii) shall be computed at the
Net Rate.
"Purchased Home Equity Loan" means a Home Equity Loan purchased as of the
close of business on the last day of a Due Period by the Master Servicer
pursuant to Section 3.16 or repurchased by the Seller, an Originator or the
Representative pursuant to Section 2.2.
"Rating Agency" means ______, _________, ______ and/or any other rating
agency requested by the Seller or an affiliate thereof to rate the Notes and/or
the Certificates. If no such organization or successor is any longer in
existence, "Rating Agency" shall be a nationally recognized statistical rating
organization or other comparable Person designated by the Seller, notice of
which designation shall be given to the Trustee, the Owner Trustee and the
Master Servicer.
"Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have been given 10 days' prior notice thereof (or such
shorter period as shall be acceptable to the Rating Agencies) and that neither
of the Rating Agencies shall have notified the Seller, the Master Servicer, the
Owner Trustee or the Trustee in writing that such action will, in and of itself,
result in a reduction or withdrawal of the then current rating of any class of
Notes, or the Certificates.
"Realized Losses" means the excess of the Principal Balance of any
Liquidated Home Equity Loan over Liquidation Proceeds to the extent allocable to
principal.
"Recoveries" means, with respect to any Liquidated Home Equity Loan,
monies collected in respect thereof, from whatever source, during any Due Period
following the Due Period in which such Home Equity Loan became a Liquidated Home
Equity Loan, net of the sum of any amounts expended by the Master Servicer for
the account of the Mortgagor and any amounts required by law to be remitted to
the Mortgagor.
"REO Property" means a Mortgaged Property that is acquired by the Master
Servicer on behalf of the Trustee in foreclosure or by deed-in-lieu of
foreclosure.
"Released Mortgaged Property Proceeds" means, as to any Home Equity Loan,
proceeds received by the Master Servicer in connection with (a) a taking of an
entire Mortgaged Property by exercise of the power of eminent domain or
condemnation or (b) any release of part of the Mortgaged Property from the lien
of the related Mortgage, whether by partial condemnation, sale or otherwise,
which are not released to the Mortgagor in accordance with applicable law,
mortgage servicing standards the Master Servicer would use in servicing mortgage
loans for its own account and this Agreement.
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"Reserve Account" means the account designated as such, established and
maintained pursuant to Section 4.1.
"Reserve Account Initial Deposit" means, with respect to the Closing Date,
$___________________.
"Reserve Account Transfer Amount" means an amount equal to the lesser of
(i) the amount of cash or other immediately available funds on deposit in the
Reserve Account on such Distribution Date (before giving effect to any
withdrawals therefrom relating to such Distribution Date) or (ii) the amount, if
any, by which (x) the sum of the Total Servicing Fee, the Noteholders' Interest
Distributable Amount, the Certificateholders' Interest Distributable Amount, the
Noteholders' Principal Distributable Amount and the: _________________
Certificateholders' Principal Distributable Amount for such Distribution Date
exceeds (y) the sum of the Interest Distribution Amount and the Available
Principal for such Distribution Date.
"Seller" means Avco ABS Receivables Corp., as the seller of the Home
Equity Loans, and each successor to Avco ABS Receivables Corp.(in the same
capacity) to the extent permitted hereunder.
"Master Servicer" means Avco Financial Services Management Company, the
master servicer of the Home Equity Loans, and each successor to Avco Financial
Services Management Company, (in the same capacity) pursuant to Section 6.3 or
7.2.
"Master Servicer Default" means an event specified in Section 7.1.
"Master Servicer's Certificate" means an Officers' Certificate of the
Master Servicer delivered pursuant to Section 3.10, substantially in the form of
Exhibit D.
"Servicing Advances" means all reasonable and customary "out of pocket"
costs and expenses incurred in the performance by the Master Servicer of its
servicing obligations, including, but not limited to, the cost of (i) the
preservation, restoration and protection of the Mortgaged Property, (ii) any
enforcement or judicial proceedings, including foreclosures, (iii) the
management and liquidation of the REO Property, including reasonable fees paid
to any independent contractor in connection therewith, (iv) compliance with the
obligations under Sections 3.4, 3.7 or 3.19 and (v) in connection with the
liquidation of a Home Equity Loan, expenditures relating to the purchase or
maintenance of the First Lien pursuant to Section 3.17.
"Servicing Compensation" means the Servicing Fee, the Supplemental
Servicing Fee and any other amounts to which the Master Servicer is entitled
pursuant to Section 3.9.
"Servicing Fee" has the meaning specified in Section 3.9.
"Servicing Fee Rate" means __% per annum.
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"Simple Interest Loan" means any Home Equity Loan as to which, pursuant to
the Mortgage Note related thereto, interest is calculated on the basis of the
outstanding principal balance of the Home Equity Loan multiplied by the
applicable Mortgage Rate and further multiplied by a fraction, of which the
numerator is the number of days in the period elapsed since the date to which
interest was paid and the denominator is the number of days in the annual period
for which interest accrues on such Home Equity Loan, and the Monthly Payment
received is applied first to interest accrued to the date of payment and the
balance is applied to reduce the unpaid principal balance.
"Specified Reserve Account Balance" means, with respect to (i) any
Distribution Date prior to the Distribution Date on which the Outstanding Amount
of the Class A 1 Notes has been paid in full, $______________ and (ii) any
Distribution Date on or after the Distribution Date on which the Outstanding
Amount of the Class A Notes has been paid in full the greater of (a) ______% of
the sum of the aggregate outstanding principal amount of each class of Notes
plus the outstanding Certificate Balance on such Distribution Date (after giving
effect to all payments on the Notes and distributions with respect to the
Certificates to be made on such Distribution Date); or (b) ______% of the sum of
the aggregate initial principal of the Notes plus the initial Certificate
Balance except that, if on any Distribution Date (x) the average of the Charge
off Rates for the three preceding Due Periods exceeds ____% or (y) the average
of the Delinquency Percentages for the three preceding Due Periods exceeds
_____%, then the Specified Reserve Account Balance shall be an amount equal to
________% of the sum of the aggregate outstanding principal amount of each class
of Notes and the aggregate outstanding Certificate Balance on such Distribution
Date (after giving effect to all payments on the Notes and distributions with
respect to the Certificates to be made on such Distribution Date).
"Standard & Poor's" means Standard & Poor's Ratings Group, or its
successor.
"Supplemental Servicing Fee" means the fee payable to the Master Servicer
for certain services rendered during the respective Due Period, determined
pursuant to and defined in Section 3.9.
"Total Servicing Fee" means with respect to each Distribution Date the
Servicing Fee for the related Due Period and all accrued and unpaid Servicing
Fees for prior Due Periods.
"Total Distribution Amount" means, for each Distribution Date, the sum of
(i) the Interest Distribution Amount (ii) the Available Principal and (iii) the
Reserve Account Transfer Amount, in each case in respect of such Distribution
Date; provided, however, that if on the Class A-1 Final Scheduled Distribution
Date, the Total Distribution Amount (as defined above) would be insufficient to
pay the Total Servicing Fee, Noteholders' Interest Distributable Amount,
Certificateholders' Interest Distributable Amount and the Noteholders' Principal
Distributable Amount for such Distribution Date, then the Total Distribution
Amount for such Distribution Date will include, in addition to the Total
Distribution Amount (as defined above), an amount, up to the amount necessary to
pay any such items, of the Interest Distribution Amount and the Available
Principal on deposit (or, if the conditions specified in Section 3.2(c) have
been satisfied, that would have been required to have been deposited but for the
satisfaction of such
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conditions) in the Collection Account on the Determination Date relating to such
Class A-1 Final Scheduled Distribution Date which would have constituted the
Interest Distribution Amount or Available Principal, as the case may be, for the
Due Period relating to the succeeding Distribution Date and the Interest
Distribution Amount and Available Principal, as the case may be, for such
succeeding Distribution Date will be reduced accordingly.
"Transfer Date" means, with respect to any Distribution Date, the Business
Day preceding such Distribution Date.
"Trust" means the Issuer.
"Trust Account Property" means the Trust Accounts, all amounts and
investments held from time to time in any Trust Account (whether in the form of
deposit accounts, Physical Property, book-entry securities, uncertificated
securities or otherwise), including the Reserve Account Initial Deposit, and all
proceeds of the foregoing.
"Trust Accounts" has the meaning assigned thereto in Section 4.1.
"Trust Agreement" means the Trust Agreement dated as of _________,
_______, between the Seller and the Owner Trustee, as the same may be amended
and supplemented from time to time.
"Trust Officer" means, (i) in the case of the Trustee, any Officer within
the Corporate Trust Office of the Trustee, including any Vice President,
Assistant Vice President, Assistant Treasurer, Assistant Secretary or any other
officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also, with respect to a
particular matter, any other officer to whom such matter is referred because of
such officer's knowledge of and familiarity with the particular subject and (ii)
in the case of the Owner Trustee, any officer in the corporate trust office of
the Owner Trustee with direct responsibility for the administration of this
Agreement or any of the Basic Documents on behalf of the Owner Trustee.
"Trustee" means the Person acting as Trustee under the Indenture, its
successors in interest and any successor trustee under the Indenture.
SECTION 1.2. Other Definitional Provisions. (a) Capitalized terms used
herein and not otherwise defined herein have the meanings assigned to them in
the Indenture, or, if not defined therein, in the Trust Agreement.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any instrument governed hereby and in any certificate or
other document made or delivered pursuant hereto unless otherwise defined
therein.
(c) As used in this Agreement, in any instrument governed hereby and
in any certificate or other document made or delivered pursuant hereto or
thereto, accounting terms not
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defined in this Agreement or in any such instrument, certificate or other
document, and accounting terms partly defined in this Agreement or in any such
instrument, certificate or other document to the extent not defined, shall have
the respective meanings given to them under generally accepted accounting
principles as in effect on the date of this Agreement or any such instrument,
certificate or other document, as applicable. To the extent that the definitions
of accounting terms in this Agreement or in any such instrument, certificate or
other document are inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained in this Agreement or
in any such instrument, certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; Section and Exhibit
references contained in this Agreement are references to Sections and Exhibits
in or to this Agreement unless otherwise specified; and the term "including"
shall mean "including without limitation."
(e) The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms.
SECTION 1.3. Interest Calculations. All calculations of interest hereunder
that are made in respect of the Principal Balance of a Simple Interest Loan
shall be made on the basis of the actual number of days in an Accrual Period and
a year assumed to consist of 365 days. All calculations of interest in respect
of the Principal Balance of an Actuarial Loan or in respect of the Notes or the
Certificates shall be made on the basis of a 360-day year consisting of twelve
30-day months. The calculation of the Servicing Fee shall be made on the basis
of the actual number of days in an Accrual Period and a year assumed to consist
of 365 days.
ARTICLE II
Conveyance of Home Equity Loans
SECTION 2.1. Conveyance of Home Equity Loans. (a) In consideration of the
Issuer's delivery to or upon the order of the Seller on the Closing Date of the
net proceeds from the sale of the Notes and the Certificates and the other
amounts to be distributed from time to time to the Seller in accordance with the
terms of this Agreement, the Originators, concurrently with the execution and
delivery of this Agreement, hereby transfer, assign, set over and otherwise
convey to the Seller and the Seller does hereby transfer, assign, set over and
otherwise convey to the Issuer, without recourse (subject to the obligations
herein): (A) all right, title and interest of the Seller in and to the Home
Equity Loans, and all moneys received thereon, on or after the Cutoff Date; (B)
all right, title and interest of the Seller in the security interests in the
Mortgaged Properties granted by Mortgagors pursuant to the Home Equity Loans and
any other interest of the Seller in the Mortgaged Properties; (C) the interest
of the Seller in any proceeds with respect to the Home Equity Loans from claims
on any physical damage, theft, credit life or disability insurance policies
covering Mortgaged Properties or Mortgagors; (D) all right, title and interest
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in all funds on deposit from time to time in the Certificate Distribution
Account, in the Trust Accounts, including the Reserve Account Initial Deposit,
and in all investments and proceeds thereof (including all income thereon); and
(E) the proceeds of any and all of the foregoing. In connection with such
transfer, assignment and conveyance by the Originators to the Seller and by the
Seller to the Trust, the Seller shall deliver to, and deposit with the Trustee,
on or before the Closing Date, the following documents or instruments with
respect to each Home Equity Loan (the "Related Documents"):
(i) The original Mortgage Note, with all prior and intervening
endorsements showing a complete chain of endorsements from the originator
of the Home Equity Loan to the Person so endorsing the Home Equity Loan to
the Trustee, endorsed by such Person "Pay to the order of
______________________ without recourse" and signed, by facsimile or
manual signature, in the name of the Person delivering the Mortgage Note
by a Responsible Officer;
(ii) Any of: (1) the original Mortgage and related power of
attorney, if any, with evidence of recording thereon, (2) a copy of the
Mortgage and related power of attorney, if any, certified as a true copy
of the original Mortgage or power of attorney by a Responsible Officer by
facsimile or manual signature or by the closing attorney or by an officer
of the title insurer or agent of the title insurer that issued the related
title insurance policy, in each case, if the original has been transmitted
for recording until such time as the original is returned by the public
recording office or (3) a copy of the original recorded Mortgage and
related power of attorney, if any, certified by the public recording
office;
(iii) The original Assignment of Mortgage in recordable form, from
the Person delivering such Assignment to [Name of Trustee];
(iv) The original lender's policy of title insurance or a true copy
thereof or, if such original lender's title insurance policy has been
lost, a copy thereof certified by the appropriate title insurer to be true
and complete or, if such lender's title insurance policy has not been
issued as of the Closing Date, a marked up commitment (binder) to issue
such policy;
(v) All intervening assignments, if any, showing a complete chain of
assignments from the originator to the Person delivering such assignment,
including any recorded warehousing assignments, with evidence of recording
thereon, or a copy thereof certified by a Responsible Officer by facsimile
or manual signature, or by the closing attorney or by an officer of the
title insurer or agent of the title insurer that issued the related title
insurance policy, as a true copy of the original of such intervening
assignments if the original has been transmitted for recording until such
time as the original is returned by the public recording office or a copy
of the original recorded intervening assignments certified by the public
recording office;
(vi) Originals of all assumption, written assurance, substitution
and modification agreements, if any; and
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(vii) in the case of a Cooperative Loan, the originals of the
following documents or instruments:
(a) The Cooperative Shares, together with a stock power in
blank;
(b) The executed Security Agreement;
(c) The executed Proprietary Lease;
(d) The executed Recognition Agreement;
(e) The executed assignment of Recognition Agreement;
(f) The executed UCC-1 financing statement with evidence of
recording thereon which have been filed in all places required
to perfect the applicable Originator's interest in the
Cooperative Shares and the Proprietary Lease; and
(g) Executed UCC-3 financing statements or other appropriate UCC
financing statements required by state law, evidencing a
complete and unbroken line from the mortgagee to the Trustee
with evidence of recording thereon (or in a form suitable for
recordation).
(h) The Trustee agrees, for the benefit of the Noteholders and the
Certificateholders, within 90 days after execution and delivery of this
Agreement, to review the Mortgage Files to ascertain that all required documents
set forth in paragraphs (i) - (v) of Section 2.1(a) have been executed and
received, and that the Mortgage Notes have been endorsed as set forth in Section
2.1(a), and that such documents relate to the Home Equity Loans identified on
the Home Equity Loan Schedule and in so doing the Trustee may rely on the
purported due execution and genuineness of any signature thereon. If within such
90-day period the Trustee finds any document constituting a part of a Mortgage
File not to have been executed or received or to be unrelated to the Home Equity
Loans identified in said Home Equity Loan Schedule or, if in the course of its
review, the Trustee determines that such Mortgage File is otherwise defective in
any material respect, the Trustee shall promptly upon the conclusion of its
review notify the Seller, and the Seller shall have a period of 90 days after
such notice within which to correct or cure any such defect.
(i) The Trustee shall have no responsibility for reviewing any Mortgage
File except as expressly provided in Section 2.1(b). Without limiting the effect
of the preceding sentence, in reviewing any Mortgage File pursuant to such
subsection, the Trustee shall have no responsibility for determining whether any
document is valid and binding, whether the text of any assignment or endorsement
is in proper or recordable form (except, if applicable, to determine if the
Trustee is the assignee or endorsee), whether any document has been recorded in
accordance with the requirements of any applicable jurisdiction, or whether a
blanket assignment
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is permitted in any applicable jurisdiction, but shall only be required to
determine whether a document has been executed, that it appears to be what it
purports to be, and, where applicable, that it purports to be recorded, but
shall not be required to determine whether any Person executing any document is
authorized to do so or whether any signature thereon is genuine.
SECTION 2.2. Acceptance by Trustee. The Trustee hereby acknowledges,
subject to the review and period for delivery provided for in Section 2.1, its
receipt of the Mortgage Files, and declares that the Trustee holds and will hold
such documents and all amounts received by it thereunder and hereunder in trust,
upon the terms herein set forth, for the use and benefit of all present and
future Noteholders and Certificateholders. If the Seller is given notice under
Section 2.1(c) above and if the Seller does not correct or cure such omission or
defect within the 90-day period specified in Section 2.1(c) above, the Seller
shall substitute one or more Eligible Substitute Home Equity Loans therefor as
provided in Section 2.5 hereof or purchase such Home Equity Loan from the
Trustee on the Determination Date in the month following the month in which such
90-day period expired at the Purchase Price of such Home Equity Loan. The
Purchase Price for the purchased Home Equity Loan shall be deposited in the
Collection Account no later than the applicable Determination Date or the
Business Day preceding the expiration of such 90-day period, as the case may be,
and, upon receipt by the Trustee of written notification of such deposit signed
by an officer of the Seller, the Trustee shall release to the Seller the related
Mortgage File and the Trustee shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, as shall be necessary to
vest in the Seller or its designee any Home Equity Loan released pursuant
hereto. It is understood and agreed that the obligation of the Seller to cure,
substitute for or purchase any Home Equity Loan as to which a material defect in
or omission of a constituent document exists shall constitute the sole remedy
against the Seller respecting such defect or omission available to the Issuer,
the Owner Trustee, the Trustee, the Noteholders or the Certificateholders. The
Master Servicer, promptly following the transfer of (i) a Defective Home Equity
Loan from or (ii) an Eligible Substitute Home Equity Loan to the Trust pursuant
to this Section and Section 2.5, as the case may be, shall amend the Home Equity
Loan Schedule and make appropriate entries in its general account records to
reflect such transfer and the addition of any Eligible Substitute Home Equity
Loan, if applicable.
SECTION 2.3. Reserved
SECTION 2.4. Representations and Warranties of the Originators Regarding
the Home Equity Loans (a) Each Originator with respect to each Home Equity Loan
it has conveyed hereunder represents and warrants to the Trustee on behalf of
the Certificateholders as follows as of the Closing Date:
(i) The information set forth on the Home Equity Loan Schedule
relating to the Home Equity Loans is complete, true and correct as of the
Cut-Off Date;
(ii) The Mortgage Notes and the Mortgages have not been assigned or
pledged by the applicable Originator to any Person, and immediately prior
to the transfer and assignment of the Home Equity Loans by the Originators
to the Seller herein contemplated, the applicable Originator had good and
marketable title thereto, and was the sole owner and
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holder of the Home Equity Loans free and clear of any and all liens,
claims, encumbrances, participation interests, equities, pledges, charges
or security interests of any nature (collectively, a "Lien"), other than
any such Lien released simultaneously with the sale contemplated herein,
and had full right and authority, subject to no interest or participation
of, or agreement with, any other party, to sell and assign the same
pursuant to this Agreement, and immediately upon the transfer and
assignment of the Home Equity Loans by the Originators to the Seller and
by the Seller to the Trustee on behalf of the Certificateholders as
contemplated herein, the Trustee will be the sole beneficial owner of,
each Home Equity Loan free and clear of any lien, claim, participation
interest, mortgage, security interest, pledge, charge or other encumbrance
or other interest of any nature;
(iii) Each Mortgage is a valid and existing lien on the property
therein described, and each Mortgaged Property is free and clear of all
encumbrances and liens having priority over the lien of the Mortgage,
except (i) liens for real estate taxes and special assessments not yet due
and payable, (ii) in the case of a Mortgaged Property that is a
condominium or an individual unit in a planned unit development, liens for
common charges permitted by statute, (iii) in the case of a Home Equity
Loan secured by a second lien on the related Mortgaged Property, the
related First Lien and (iv) easements, mineral rights and covenants,
conditions and restrictions of record. Any security agreement, chattel
mortgage or equivalent document related to the Mortgage and delivered to
the Trustee establishes in the applicable Originator a valid and
subsisting lien on the property described therein, and such Originator has
full right to sell and assign the same hereunder;
(iv) The terms of each Mortgage Note and Mortgage have not been
impaired, altered or modified in any respect, except by a written
instrument which has been recorded, if necessary to protect the interests
of the Certificateholders and the Certificate Insurer, and which has been
delivered to the Trustee. The substance of any such alteration or
modification is reflected on the Home Equity Loan Schedule;
(v) No instrument of release or waiver has been executed in
connection with any Home Equity Loan, and no Mortgagor has been released,
in whole or in part, except in connection with an assumption agreement
which has been approved by the primary mortgage guaranty insurer, if any,
and which has been delivered to the Trustee [carve-out for sale of one of
multiple parcels];
(vi) Except with respect to delinquencies described in clause (xiii)
hereof, to the best of the Originator's knowledge, no Mortgagor is in
default in complying with the terms of its Mortgage Note or Mortgage, and
no Originator has waived any default, breach, violation or event of
acceleration except that an Originator may have accepted late payments,
and all taxes, governmental assessments, insurance premiums or water,
sewer and municipal charges which previously became due and owing have
been paid. No Originator has advanced funds or induced, solicited or
knowingly received any advance of funds by a party other than the
Mortgagor, directly or indirectly, for the payment of any amount required
by the Mortgage, except for interest accruing from the date of the
Mortgage Note or date of disbursement of the Mortgage proceeds, whichever
is more
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recent, to the day which precedes by one month the Due Date of the first
installment of principal and interest;
(vii) To the best of the Originator's knowledge, there is no
proceeding pending or threatened for the total or partial condemnation of
any Mortgaged Property, nor is such a proceeding currently occurring, and
such property is undamaged by waste, fire, earthquake or earth movement,
windstorm, flood, tornado or otherwise, so as to affect adversely the
value of the Mortgaged Property as security for the Home Equity Loan or
the use for which the premises were intended;
(viii) To the best of the Originator's knowledge, there are no
mechanics' or similar liens or claims which have been filed for work,
labor or material (and no rights are outstanding that under law could give
rise to such lien) affecting any Mortgaged Property which are, or may be,
liens prior or equal to, or coordinate with, the lien of the Mortgage
except those that are stated in the title insurance policy and for which
related losses are affirmatively insured against by such policy;
(ix) To the best of the Originator's knowledge, all of the
improvements that were included for the purpose of determining the
Appraised Value of each Mortgaged Property lie wholly within the
boundaries and building restriction lines of such property, and no
improvements on adjoining properties encroach upon the Mortgaged Property
except those that are stated in the title insurance policy and for which
related losses are affirmatively insured against by such policy;
(x) To the best of the Originator's knowledge, there do not exist
any circumstances or conditions with respect to any Home Equity Loan, any
Mortgaged Property, any Mortgagor or any Mortgagor's credit standing that
can be reasonably expected to adversely affect the value or marketability
of the Home Equity Loan;
(xi) To the best of the Originator's knowledge, no improvement
located on or being part of any Mortgaged Property is in violation of any
applicable zoning law or regulation. All inspections, licenses and
certificates required to be made or issued with respect to all occupied
portions of the Mortgaged Property and, with respect to the use and
occupancy of the same, including, but not limited to, certificates of
occupancy and fire underwriting certificates, have been made or obtained
from the appropriate authorities and the Mortgaged Property is lawfully
occupied under applicable law;
(xii) To the best of the Originator's knowledge, all parties that
have had any interest in any Home Equity Loan, whether as mortgagee,
assignee, pledgee or otherwise, are (or, during the period in which they
held and disposed of such interest, were) (1) in compliance with any and
all licensing requirements of the United States and of the laws of the
state wherein the Mortgaged Property is located that are applicable to
such parties and (2)(A) organized under the laws of such state or (B)
qualified to do business in such state or exempt from such qualification
in a manner so as not to affect adversely the enforceability
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of such Home Equity Loan or (C) federal savings and loan associations or
national banks having principal offices in such state or (D) not doing
business in such state;
(xiii) With respect to the Home Equity Loans, as of the Cut-Off
Date, (i) all payments required to be made on each Initial Home Equity
Loan under the terms of the related Mortgage Note have been made [except
for ___% of the Home Equity Loans (by Cut-Off Date Pool Principal Balance)
are up to 60 days Delinquent and (ii) no payment required to be made on
any Home Equity Loan has been more than 60 days Delinquent more than once
during the twelve month period immediately preceding the Cut-Off Date];
(xiv) Each of the documents and instruments included in a Mortgage
File is duly executed and in due and proper form and each such document or
instrument is in a form generally acceptable to prudent institutional
mortgage lenders that regularly originate or purchase Home Equity Loans;
(xv) The Mortgage Notes and the related Mortgages are genuine, and
each is the legal, valid and binding obligation of the maker thereof,
enforceable in accordance with its terms, except as such enforcement may
be limited by bankruptcy, insolvency, reorganization, receivership,
moratorium or other similar laws relating to or affecting the rights of
creditors generally, and by general equity principles (regardless of
whether such enforcement is considered in a proceeding in equity or at
law). All parties to the Mortgage Note and the Mortgage had legal capacity
to execute the Mortgage Note and the Mortgage, and each Mortgage Note and
Mortgage have been duly and properly executed by such parties. The
Mortgagor is a natural person who is a party to the Mortgage Note and the
Mortgage in an individual capacity, and not in the capacity of a trustee
or otherwise;
(xvi) Any and all requirements of any federal, state or local law,
including, without limitation, usury, truth-in-lending, real estate
settlement procedures, consumer credit protection, equal credit
opportunity or disclosure laws, applicable to the origination and
servicing of the Home Equity Loans or otherwise applicable to the Home
Equity Loans have been complied with, and the Representative has and shall
maintain, or shall cause the applicable Originator to maintain, in its
possession, available for the Trustee's inspection, and shall deliver to
the Trustee upon demand, evidence of compliance with all such
requirements;
(xvii) The proceeds of the Home Equity Loans have been fully
disbursed, there is no requirement for future advances thereunder and any
and all requirements as to completion of any on-site or off-site
improvements and as to disbursements of any escrow funds therefor have
been complied with. All costs, fees and expenses incurred in making,
closing or recording the Home Equity Loan have been paid;
(xviii) [Except for _____ Home Equity Loans with an aggregate
original principal balance of $__________ for which an attorney's opinion
of title has been obtained,] each Home Equity Loan with an original
principal balance greater than $10,000 is covered by an ALTA mortgage
title insurance policy or such other form of policy acceptable to FNMA or
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FHLMC, issued by and constituting the valid and binding obligation of a
title insurer approved by the applicable Originator and qualified to do
business in the jurisdiction where the Mortgaged Property is located,
insuring the applicable Originator, its successors and assigns, as to the
first priority lien of the Mortgage in the case of a Home Equity Loan
secured by a First Lien on the related Mortgaged Property and the second
priority lien of the Mortgage in the case of a Home Equity Loan secured by
a second lien on the related Mortgaged Property, in the original principal
amount of the Home Equity Loan. The applicable Originator is the sole
named insured of such mortgage title insurance policy. The assignment to
the Trustees, as assignee of the Seller, of the Originator's interest in
such mortgage title insurance policy does not require the consent of or
notification to the insurer or the same has been obtained, and such
mortgage title insurance policy is in full force and effect and will be in
full force and effect and inure to the benefit of the Trustee, as assignee
of the Seller, upon the consummation of the transactions contemplated by
this Agreement. No claims have been made under such mortgage title
insurance policy and no prior holder of the related Mortgage, including
the applicable Originator, has done, by act or omission, anything that
would impair the coverage of such mortgage title insurance policy;
(xix) The Mortgage obligates the Mortgagor thereunder to maintain
all hazard insurance at the Mortgagor's cost and expense;
(xx) No Home Equity Loan is subject to any right of rescission,
set-off, counterclaim or defense, including the defense of usury, nor will
the operation of any of the terms of any Mortgage Note or the related
Mortgage, or the exercise of any right thereunder in accordance with the
terms thereof, render either the Mortgage Note or the Mortgage
unenforceable, in whole or in part, or subject to any right of rescission,
set-off, counterclaim or defense, including the defense of usury, and no
such right of rescission, set-off, counterclaim or defense has been
asserted with respect thereto;
(xxi) Each Home Equity Loan was originated or purchased and
reunderwritten by an Originator. No more than __% of the Home Equity
Loans, measured by outstanding principal balances as of the Cut-Off Date,
were originated by independent originators and acquired by an Originator;
(xxii) Except with respect to any Balloon Loan, each Home Equity
Loan is payable in substantially equal monthly installments of principal
and interest which would be sufficient, in the absence of late payments,
to fully amortize such loan within the term thereof, beginning no later
than 60 days after disbursement of the proceeds of the Home Equity Loan.
Each Home Equity Loan bears a fixed interest rate for the term of the Home
Equity Loan. Each Balloon Loan has an original term of not less than [five
(5)] years and provides for level monthly payments based on a thirty (30)
year amortization schedule and a final Monthly Payment substantially
greater than the preceding Monthly Payments;
(xxiii) Each Mortgage contains a provision for the acceleration of
the payment of the unpaid principal balance of the Home Equity Loan in the
event the related Mortgaged Property is sold without the prior consent of
the holder thereunder;
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(xxiv) No Home Equity Loan is a loan for which the disbursements are
made as construction proceeds;
(xxv) Reserved;
(xxvi) Each Mortgage contains customary and enforceable provisions
which render the rights and remedies of the holder thereof adequate for
the realization against the Mortgaged Property of the benefits of the
security, including (i) in the case of a Mortgage designated as a deed of
trust, by trustee's sale and (ii) otherwise by judicial or nonjudicial
foreclosure. There is no homestead or other exemption available to the
Mortgagor that would interfere with the right to sell the Mortgaged
Property at a trustee's sale or the right to foreclose the Mortgage;
(xxvii) With respect to each Mortgage constituting a deed of trust,
a trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in such Mortgage,
and no fees or expenses are or will become payable by the Trustee or the
Certificateholders to the trustee under the deed of trust, except in
connection with a trustee's sale after default by the Mortgagor, which
fees and expenses shall constitute Servicing Advances;
(xxviii) Each Mortgaged Property is located in the state identified
in the Home Equity Loan Schedule and consists of at least one parcel of
real property with a one family residence erected thereon, or a two- to
four-family dwelling, or an individual condominium unit or townhome,
provided, however, that no residence or dwelling is a mobile home or a
manufactured dwelling. [No Mortgaged Properties are held under a ground
lease];
(xxix) The Home Equity Loans were underwritten in accordance with
the Originators' underwriting guidelines described in the Prospectus
Supplement under the heading "THE HOME EQUITY LOAN PROGRAM -- Underwriting
Standards;"
(xxx) There exist no deficiencies with respect to escrow deposits
and payments, if such are required, for which customary arrangements for
repayment thereof have not been made, and no other charges or payments due
an Originator have been capitalized under any Mortgage or the related
Mortgage Note;
(xxxi) No Home Equity Loan was originated under a buy-down plan;
(xxxii) Other than as provided by this Agreement, there is no
obligation on the part of an Originator or any other party to make
payments in addition to those made by the Mortgagors;
(xxxiii) With respect to each Home Equity Loan, the Trustee is in
possession of a complete Mortgage File, and there are no custodial
agreements in effect adversely affecting
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the right or ability of the applicable Person to make the document
deliveries required hereby;
(xxxiv) No Home Equity Loan was selected for inclusion under this
Agreement on any basis which was intended to have a material adverse
effect on the Certificateholders or the Certificate Insurer;
(xxxv) No Home Equity Loan has a shared appreciation or other
contingent interest feature;
(xxxvi) With respect to each Home Equity Loan secured by a second
lien on the related Mortgaged Property:
(a) if the Combined Loan-to-Value Ratio is higher than __%,
either the related First Lien does not provide for a balloon payment or,
if the related First Lien does provide for a balloon payment, the maturity
date of the second lien is prior to the maturity date of the First Lien;
(b) the related First Lien does not provide for negative
amortization; and
(c) either no consent for the Home Equity Loan secured by a
second lien on the related Mortgaged Property is required by the holder of
the related First Lien or such consent has been obtained and is contained
in the Mortgage File.
(xxxvii) Each Home Equity Loan conforms, and all the Home Equity
Loans in the aggregate conform, in all material respects to the
description thereof set forth in the Prospectus Supplement;
(xxxviii) A full appraisal on forms approved by the Originator was
performed in connection with the origination of each Home Equity Loan.
Each appraisal meets guidelines that would be generally acceptable to
prudent mortgage lenders that regularly originate or purchase Home Equity
Loans comparable to the Home Equity Loans for sale to prudent investors in
the secondary market that invest in Home Equity Loans such as the Home
Equity Loans;
(xxxix) To the best knowledge of the Representative and the
applicable Originator, no Mortgaged Property was, as of the related
Cut-Off Date, located within a one-mile radius of any site listed in the
National Priorities List as defined under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, or on any
similar state list of hazardous waste sites which are known to contain any
hazardous substance or hazardous waste;
(xl) None of the Home Equity Loans are subject to a bankruptcy
proceeding;
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(xli) No more than __% of the aggregate Principal Balance of all the
Home Equity Loans as of Cut-Off Date relates to Home Equity Loans
originated or purchased under the Originators' limited documentation
program for self-employed borrowers;
(xlii) The range of points financed or "net funded" on Home Equity
Loans originated after ________________ is 0% to __%;
(xliii) Each Home Equity Loan constitutes a "qualified mortgage"
within the meaning of Section 860G(a)(3) of the Code;
(xliv) With respect to any Home Equity Loan that is not a
Cooperative Loan, each Mortgage is a valid and enforceable first or second
lien on the Mortgaged Property subject only to (a) the lien of
non-delinquent current real property taxes and assessments, (b) 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 or specifically reflected in the appraisal made in
connection with the origination of the related Home Equity Loan, (c) other
matters to which like properties are commonly subject which do not
materially interfere with the benefits of the security intended to be
provided by such Mortgage and (d) the related First Lien, if any;
(xlv) Each Cooperative Loan is secured by a valid, subsisting and
enforceable perfected first or second lien and security interest in the
related Mortgaged Property, subject only to (i) the rights of the
Cooperative Corporation to collect Maintenance and assessments from the
Mortgagor, (ii) the lien of the Blanket Mortgage, if any, on the
Cooperative Property and of real property taxes, water and sewer charges,
rents and assessments on the Cooperative Property not yet due and payable,
(iii) the related First Lien, if any and (iv) other matters to which like
Cooperative Units are commonly subject which do not materially interfere
with the benefits of the security intended to be provided by the Security
Agreement or the use, enjoyment, value or marketability of the Cooperative
Unit. Each original UCC financing statement, continuation statement or
other governmental filing or recordation necessary to create or preserve
the perfection and priority of the first or second, as applicable,
priority lien and security interest in the Cooperative Shares and
Proprietary Lease has been timely and properly made. Any security
agreement, chattel mortgage or equivalent document related to the
Cooperative Loan and delivered to the applicable Originator or any
designee of the applicable Originator establishes in such Person a valid
and subsisting perfected first or second, as applicable, lien on and
security interest in the property described therein, and such Person has
full right to sell and assign the same;
(xlvi) Each Cooperative Corporation qualifies as a "cooperative
housing corporation" as defined in Section 216 of the Code; and
(xlvii) Each Mortgaged Property is free of substantial damage and is
in reasonably good repair.
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(b) It is understood and agreed that the representations and warranties
set forth in Section 2.4(a) shall survive the sale, transfer and assignment of
the Home Equity Loans to the Issuer and the pledge thereof to the Trustee
pursuant to the Indenture. Upon discovery by the Seller, the Master Servicer,
the Representative, an Originator or the Owner Trustee of a breach of any of the
foregoing representations and warranties, without regard to any limitation set
forth therein concerning the knowledge of the Originators as to the facts stated
therein, which materially and adversely affects the interests of the Noteholders
or the Certificateholders in the related Home Equity Loan, the party discovering
such breach shall give prompt written notice to the other parties and the
Trustee. Within 60 days of its discovery or its receipt of notice of breach, the
Representative shall use all reasonable efforts to cure, or cause the applicable
Originator to cure, such breach in all material respects or shall purchase or
cause the applicable Originator to purchase from the Trust or substitute or
cause the applicable Originator to substitute an Eligible Substitute Home Equity
Loan as provided in Section 2.5 for such Home Equity Loan. Any such purchase by
the Representative or an Originator shall be at the Purchase Price, and in each
case shall be accomplished in the manner set forth in Section 2.2. It is
understood and agreed that the obligation of the Representative to cure,
substitute for or purchase or to cause the applicable Originator to cure,
substitute or purchase any Home Equity Loan as to which such a breach has
occurred and is continuing shall constitute the sole remedies against the
Representative and the applicable Originator, or another affiliate of the
Representative respecting such breach available to the Issuer, the Owner
Trustee, the Trustee, the Noteholders or Certificateholders. Neither the Owner
Trustee nor the Trustee shall have a duty to conduct any affirmative
investigation as to the occurrence of any conditions requiring the repurchase of
any Home Equity Loan pursuant to this Section.
SECTION 2.5. Substitution of Home Equity Loans. (a) On a Determination
Date within two years following the Closing Date and which is on or before the
date on which the Seller would otherwise be required to repurchase a Home Equity
Loan under Section 2.2 or 2.4, the Seller may deliver to the Trustee one or more
Eligible Substitute Home Equity Loans in substitution for any one or more of the
Defective Home Equity Loans which the Seller would otherwise be required to
repurchase pursuant to Sections 2.2 or 2.4.
(b) The Seller shall notify the Issuer, the Owner Trustee, the Master
Servicer, the Representative, the applicable Originator and the Trustee in
writing not less than five Business Days before the related Determination Date
which is on or before the date on which the Representative would otherwise be
required to repurchase or cause the repurchase of such Home Equity Loan pursuant
to Section 2.2 or 2.4 of its intention to effect a substitution under this
Section. On such Determination Date (the "Substitution Date"), the
Representative shall deliver or cause the applicable Originator to deliver to
the Issuer (1) the Eligible Substitute Home Equity Loans to be substituted for
the Original Home Equity Loans, (2) a list of the Original Home Equity Loans to
be substituted for by such Eligible Substitute Home Equity Loans, (3) an
Officers' Certificate (A) stating that no failure by the Master Servicer
described in Section 7.1 shall have occurred and be continuing, (B) stating that
all conditions precedent to such substitution specified in subsection (a) have
been satisfied and attaching as an exhibit a supplemental Home Equity Loan
schedule (the "Supplemental Home Equity Loan Schedule") setting forth the same
type of information as appears on the Home Equity Loan Schedule and
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representing as to the accuracy thereof and (C) confirming that the
representations and warranties contained in Section 2.4 are true and correct in
all material respects with respect to the Substitute Home Equity Loans on and as
of such Determination Date, provided that remedies for the inaccuracy of such
representations are limited as set forth in Sections 2.2, 2.4 and this Section
2.5 and (4) a certificate stating that cash in the amount of the related
Substitution Adjustment, if any, has been deposited to the Collection Account.
Upon receipt of the foregoing, the Issuer shall release such Original Home
Equity Loans to the Seller.
(c) Concurrently with the satisfaction of the conditions set forth in
Section 2.5(a) and (b) above and the grant of such Eligible Substitute Home
Equity Loans to the Trustee pursuant to Section 2.5(a) above, Exhibit A to this
Agreement shall be deemed to be amended to exclude all Home Equity Loans being
replaced by such Eligible Substitute Home Equity Loans and to include the
information set forth on the Supplemental Home Equity Loan Schedule with respect
to such Eligible Substitute Home Equity Loans, and all references in this
Agreement to Home Equity Loans shall include such Eligible Substitute Home
Equity Loans and be deemed to be made on or after the related Substitution Date,
as the case may be, as to such Eligible Substitute Home Equity Loans.
ARTICLE III
Administration and Servicing of Home Equity Loans
SECTION 3.1. Duties of Master Servicer. (a) The Master Servicer, as agent
for the Issuer (to the extent provided herein) shall supervise, or take such
actions as are necessary to ensure, the servicing and administration of the Home
Equity Loans and any REO Property in accordance with this Agreement and the
customary and usual standards of an institution prudently servicing mortgage
loans for its own account and shall have full authority to do anything it
reasonably deems appropriate in connection with such servicing and
administration. The Master Servicer shall maintain servicing standards
equivalent to those required for approval by FNMA or FHLMC. The Master Servicer
may perform its responsibilities relating to servicing through other agents or
independent contractors, but shall not thereby be released from any of its
responsibilities as hereinafter set forth. The authority of the Master Servicer,
in its capacity as servicer, shall include the power to (i) supervise the filing
and collection of insurance claims and take or cause to be taken such actions on
behalf of the insured person thereunder as shall be reasonably necessary to
prevent the denial of coverage thereunder, and (ii) effectuate foreclosure or
other conversion of the ownership of the Mortgaged Property securing a related
Home Equity Loan, including the employment of attorneys, the institution of
legal proceedings, the collection of deficiency judgments, the acceptance of
compromise proposals, the filing of claims under any Primary Insurance Policy
and any other matter pertaining to a delinquent Home Equity Loan. The authority
of the Master Servicer shall include, in addition, the power to (i) execute and
deliver customary consents or waivers and other instruments and documents, (ii)
consent to transfers of any related Mortgaged Property and assumptions of the
related Mortgage Notes and Security Instruments (but only in the manner provided
in this Agreement) and (iii) collect any Insurance Proceeds and Liquidation
Proceeds. Without limiting the generality of the foregoing, the Master Servicer
is authorized and empowered to execute and deliver, on behalf of itself, the
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Issuer, the Owner Trustee, the Trustee, the Certificateholders and the
Noteholders or any of them, any and all instruments of satisfaction or
cancellation, or partial or full release or discharge, and all other comparable
instruments, with respect to such Home Equity Loans or to the Mortgaged
Properties securing such Home Equity Loans.
(b) Notwithstanding the provisions of Subsection 3.1(a), the Master
Servicer shall not take any action inconsistent with the interest of the
Noteholders or the Certificateholders in the Home Equity Loans or with the
rights and interests of the Owner Trustee, the Trustee, the Noteholders or the
Certificateholders under this Agreement.
(c) The Owner Trustee shall furnish the Master Servicer with any
powers of attorney and other documents in form as provided to it necessary or
appropriate (as certified to the Owner Trustee by the Master Servicer) to enable
the Master Servicer to service and administer the related Home Equity Loans and
REO Property.
SECTION 3.2. Collection and Allocation of Home Equity Loan Payments. (a)
The Master Servicer shall make reasonable efforts to collect all payments called
for under the terms and provisions of the Home Equity Loans as and when the same
shall become due and shall follow such collection procedures as it follows with
respect to all mortgage loans in its servicing portfolio comparable to the Home
Equity Loans that it services for itself or others.
(b) Consistent with the terms of this Agreement, the Master Servicer
may waive, modify or vary any term of any Home Equity Loan or consent to the
postponement of strict compliance with any such term or in any manner grant
indulgence to any Mortgagor if in the Master Servicer's determination such
waiver, modification, postponement or indulgence is not materially adverse to
the interests of the Noteholders and the Certificateholders; provided, however,
that the Master Servicer may not permit any modification with respect to any
Home Equity Loan that would change the Mortgage Rate, defer or forgive the
payment of any principal or interest (unless in connection with the liquidation
of the related Home Equity Loan) or extend the Final Scheduled Maturity Date on
the Home Equity Loan. No costs incurred by the Master Servicer in respect of
Servicing Advances shall for the purposes of distributions to Noteholders or
Certificateholders be added to the amount owing under the related Home Equity
Loan.
(c) The Master Servicer, for the benefit of the Noteholders and the
Certificateholders, shall establish and maintain in the name of the Trustee an
Eligible Deposit Account (the "Collection Account"), bearing a designation
clearly indicating that the funds deposited therein are held for the benefit of
the Noteholders and the Certificateholders. The Collection Account shall
initially be established with the Trustee. The Master Servicer shall on the
Closing Date deposit into the Collection Account any amounts representing
payments on and any collections in respect of the Home Equity Loans in received
on or after the Cutoff Date and prior to the Closing Date, and thereafter shall
use its best efforts to deposit within one Business Day, and shall in any event
deposit within two Business Days following receipt thereof the following
payments and collections received or made by it (without duplication) with
respect to the Home Equity Loans: (i) all payments received on and after the
Cutoff Date on account of principal on the Home Equity Loans and all full or
partial prepayments collected after the Cutoff
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Date; (ii) all payments received on and after the Cutoff Date on account of
interest on the Home Equity Loans; (iii) all Net Liquidation Proceeds net of
Foreclosure Profits; (iv) all Insurance Proceeds; (v) all Released Mortgaged
Property Proceeds; (vi) any amounts payable in connection with the repurchase of
any Home Equity Loan and the amount of any Substitution Adjustment pursuant to
Sections 2.2, 2.4, 2.6 and 3.16; and (vii) any amount required to be deposited
in the Collection Account pursuant to Sections 3.5, 3.7, 3.15, 3.16 or 8.1;
provided, however, that (x) with respect to each Due Period, the Master Servicer
shall be permitted to retain from payments in respect of interest on the Home
Equity Loans, the Servicing Fee for such Due Period and (y) the Master Servicer
shall be permitted to retain late collections, including Liquidation Proceeds,
Released Mortgaged Property Proceeds and Insurance Proceeds, to the extent of
any unpaid Servicing Fees, unreimbursed Monthly Advance and/or Servicing Advance
with respect to the related Home Equity Loan. The foregoing requirements
respecting deposits to the Collection Account are exclusive, it being understood
that, without limiting the generality of the foregoing, the Master Servicer need
not deposit in the Collection Account amounts representing Foreclosure Profits,
fees (including annual fees), late charges or penalties payable by Mortgagors,
or amounts received by the Master Servicer for the accounts of Mortgagors for
application towards the payment of taxes, insurance premiums, assessments and
similar items.
SECTION 3.3. Withdrawals from each Collection Account. The Trustee shall
withdraw or cause to be withdrawn funds from the Collection Account for the
following purposes with respect to the Home Equity Loans: (i) the deposits and
distributions required by Section 4.5(d); (ii) to the extent not retained by the
Master Servicer as provided in Section 3.2(c), to reimburse the Master Servicer
for any accrued unpaid Servicing Fees and for unreimbursed Monthly Advances and
Servicing Advances. The Master Servicer's right to reimbursement for unpaid
Servicing Fees and unreimbursed Servicing Advances shall be limited to late
collections on the related Home Equity Loan, including Liquidation Proceeds,
Released Mortgaged Property Proceeds, Insurance Proceeds and such other amounts
as may be collected by the Master Servicer from the related Mortgagor or
otherwise relating to the Home Equity Loan in respect of which such reimbursed
amounts are owed. If a Monthly Advance was made net of the Servicing Fee as
permitted by Section 3.15 hereof, no additional Servicing Fee for the related
Mortgage loan and Due Period shall be payable. The Master Servicer's right to
reimbursement from such Collection Account for unreimbursed Monthly Advances
shall be limited to late collections of interest on any Home Equity Loan and to
Liquidation Proceeds and Insurance Proceeds on related Home Equity Loans; (iii)
to withdraw any amount received from a Mortgagor that is recoverable and sought
to be recovered as a voidable preference by a trustee in bankruptcy pursuant to
the United States Bankruptcy Code in accordance with a final, nonappealable
order of a court having competent jurisdiction; (iv) (a) to make investments in
Eligible Investments and (b) to pay to the Master Servicer, interest earned in
respect of Eligible Investments or on funds deposited in the Collection Account;
(v) to withdraw any funds deposited in such Collection Account that were not
required to be deposited therein (such as Servicing Compensation) or were
deposited therein in error and to pay such funds to the appropriate Person; (vi)
to pay the Master Servicer Servicing Compensation pursuant to Section 3.9 hereof
to the extent not retained or paid pursuant to Section 3.2(c); (vii) to withdraw
funds necessary for the conservation and disposition of REO Property pursuant to
Section 3.7; and (viii) to clear and terminate such Collection
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Account upon the termination of this Agreement and to pay any amounts remaining
therein in accordance with Section 8.1(b).
SECTION 3.4. Reserved.
SECTION 3.5. Reserved.
SECTION 3.6. Reserved.
SECTION 3.7. Management and Realization Upon Defaulted Home Equity Loans.
On behalf of the Issuer, the Master Servicer shall manage, conserve, protect and
operate each REO Property for the Noteholders and the Certificateholders solely
for the purpose of its prudent and prompt disposition and sale. The Master
Servicer shall, either itself or through an agent selected by the Master
Servicer, manage, conserve, protect and operate the REO Property in the same
manner that it manages, conserves, protects and operates other foreclosed
property for its own account, and in the same manner that similar property in
the same locality as the REO Property is managed. The Master Servicer shall
attempt to sell the same (and may temporarily rent the same) on such terms and
conditions as the Master Servicer deems to be in the best interests of the
Noteholders and the Certificateholders. The Master Servicer shall cause to be
deposited, no later than five Business Days after the receipt thereof, in the
Collection Account, all revenues received with respect to the related REO
Property and shall retain, or cause the Trustee to withdraw therefrom funds
necessary for the proper operation, management and maintenance of the REO
Property and the fees of any managing agent acting on behalf of the Master
Servicer. The disposition of REO Property shall be carried out by the Master
Servicer for cash at such price, and upon such terms and conditions, as the
Master Servicer deems to be in the best interests of the Noteholders and the
Certificateholders and, as soon as practicable thereafter, the expenses of such
sale shall be paid. The cash proceeds of sale of the REO Property shall be
promptly deposited in the Collection Account, net of Foreclosure Profits and of
any related unreimbursed Servicing Advances, accrued and unpaid Servicing Fees
and unreimbursed Monthly Advances payable to the Master Servicer in accordance
with Section 3.3, for distribution to the Noteholders and the Certificateholders
in accordance with Section 4.5 hereof. The Master Servicer shall foreclose upon
or otherwise comparably convert to ownership Mortgaged Properties securing such
of the Home Equity Loans as come into and continue in default when no
satisfactory arrangements can be made for collection of delinquent payments
pursuant to Section 3.2 subject to the provisions contained in the last
paragraph of this Section 3.7. In the event that title to any Mortgaged Property
is acquired in foreclosure or by deed in lieu of foreclosure, the deed or
certificate of sale shall be issued to the Owner Trustee, or to its nominee on
behalf of the Noteholders and the Certificateholders.
SECTION 3.8. Trustee to Cooperate. Upon payment in full of any Home Equity
Loan, the Master Servicer is authorized to execute, pursuant to the
authorization contained in Section 3.1, if the related Assignment of Mortgage
has been recorded as required hereunder, an instrument of satisfaction regarding
the related Mortgage, which instrument of satisfaction shall be recorded by the
Master Servicer if required by applicable law and be delivered to the Person
entitled thereto. It is understood and agreed that no expenses incurred in
connection with such
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instrument of satisfaction or transfer shall be reimbursed from amounts
deposited in the Collection Account. If the Trustee is holding the Mortgage
Files, from time to time and as appropriate for the servicing or foreclosure of
any Home Equity Loan, the Trustee shall, upon request of the Master Servicer and
delivery to the Trustee of a Request for Release, in the form annexed hereto as
Exhibit E, signed by a Servicing Officer, release the related Mortgage File to
the Master Servicer, and the Trustee shall execute such documents, in the forms
provided by the Master Servicer, as shall be necessary to the prosecution of any
such proceedings or the taking of other servicing actions. Such Request for
Release shall obligate the Master Servicer to return the Mortgage File to the
Trustee when the need therefor by the Master Servicer no longer exists unless
the Home Equity Loan shall be liquidated, in which case, upon receipt of a
certificate of a Servicing Officer similar to that hereinabove specified, the
Request for Release shall be released by the Trustee to the Master Servicer. In
order to facilitate the foreclosure of the Mortgage securing any Home Equity
Loan that is in default following recordation of the related Assignment of
Mortgage in accordance with the provisions hereof, the Trustee shall, if so
requested in writing by the Master Servicer, execute an appropriate assignment
in the form provided to the Trustee by the Master Servicer to assign such Home
Equity Loan for the purpose of collection to the Master Servicer (any such
assignment shall unambiguously indicate that the assignment is for the purpose
of collection only), and, upon such assignment, such assignee for collection
will thereupon bring all required actions in its own name and otherwise enforce
the terms of the Home Equity Loan and deposit or credit the Net Liquidation
Proceeds, exclusive of Foreclosure Profits, received with respect thereto in the
Collection Account. In the event that all delinquent payments due under any such
Home Equity Loan are paid by the Mortgagor and any other defaults are cured then
the assignee for collection shall promptly reassign such Home Equity Loan to the
Trustee and return it to the place where the related Mortgage File was being
maintained.
SECTION 3.9. Servicing Fee. The servicing fee for a Distribution Date
shall equal the product of (a) one-twelfth, (b) the Servicing Fee Rate and (c)
the Pool Balance as of the first day of the preceding Due Period (the "Servicing
Fee"). The Master Servicer shall also be entitled to all late payment charges
and other administrative fees or similar charges, including without limitation,
Foreclosure Profits, allowed by applicable law with respect to Home Equity
Loans, collected (from whatever source) on the Home Equity Loans (the
"Supplemental Servicing Fee"). The Master Servicer also shall be entitled to and
may retain from Collections the Servicing Fee, as provided herein. The Master
Servicer, in its discretion at its election, may defer receipt of all or any
portion of the Servicing Fee or Supplemental Servicing Fee for any Due Period to
and until a later Due Period for any reason, including in order to avoid a
shortfall in any payments due on any Notes or Certificates. Any such deferred
amount shall be payable to (or may be retained from subsequent collections by)
the Master Servicer on demand.
SECTION 3.10. Master Servicer's Certificate. On each Determination Date,
the Master Servicer shall deliver to the Owner Trustee, the Trustee and the
Seller, with a copy to the Rating Agencies, a Master Servicer's Certificate
containing all information necessary to make the distributions pursuant to
Sections 4.5 and 4.6 for the Due Period preceding the date of such Master
Servicer's Certificate. Home Equity Loans to be purchased by the Master Servicer
or to
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be repurchased by the Seller shall be identified by the Master Servicer by
account number with respect to such Home Equity Loan (as specified in
Exhibit A).
SECTION 3.11 Annual Statement as to Compliance; Notice of Default. (a) The
Master Servicer shall deliver to the Owner Trustee and the Trustee, on or before
of each year beginning , 199__, an Officers' Certificate, dated as of December
31 of the preceding year, stating that (i) a review of the activities of the
Master Servicer during the preceding twelve-month period (or, in the case of the
first such report, during the period from the Closing Date to December 31,
199__) and of its performance under this Agreement has been made under such
officers' supervision and (ii) to the best of such officers' knowledge, based on
such review, the Master Servicer has fulfilled all its obligations under this
Agreement throughout such year or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officers and the nature and status thereof. The Trustee shall send a copy of
such certificate and the report referred to in Section 3.10 to the Rating
Agencies. A copy of such certificate and the report referred to in Section 3.10
may be obtained by any Certificateholder by a request in writing to the Owner
Trustee addressed to the Corporate Trust Office (as defined in the Trust
Agreement) or by any Noteholder by a request in writing to the Trustee addressed
to the Corporate Trust Office. Upon the telephone request of the Owner Trustee,
the Trustee will promptly furnish the Owner Trustee a list of Noteholders as of
the date specified by the Owner Trustee.
(b) The Master Servicer shall deliver to the Owner Trustee, the Trustee
and the Rating Agencies, promptly after having obtained knowledge thereof, but
in no event later than five Business Days thereafter, written notice in an
Officers' Certificate of any event which with the giving of notice or lapse of
time, or both, would become a Master Servicer Default under Section 7.1(a) or
(b).
SECTION 3.12. Annual Independent Certified Public Accountants' Report. The
Master Servicer shall cause a firm of independent certified public accountants,
which may also render other services to the Master Servicer or the Seller, to
deliver to the Seller, the Owner Trustee and the Trustee on or before of each
year beginning , 199__, an letter addressed to the Master Servicer, the Seller,
the Owner Trustee and the Trustee and each Rating Agency, to the effect that
such firm has with respect to the Master Servicer's overall servicing operations
examined such operations in accordance with the requirements of the Uniform
Single Audit Program for Mortgage Bankers during the preceding calendar year
(or, in the case of the first such report, during the period from the Closing
Date to December 31, 199__), and stating such firm's conclusions relating
thereto. Such report will also indicate that the firm is independent of the
Master Servicer within the meaning of the Code of Professional Ethics of the
American Institute of Certified Public Accountants.
SECTION 3.13. Access to Certain Documentation and Information Regarding
Home Equity Loans. The Master Servicer shall provide to the Certificateholders
and Noteholders access to the Mortgage Files in such cases where the
Certificateholders or Noteholders shall be required by applicable statutes or
regulations to review such documentation as demonstrated by evidence
satisfactory to the Master Servicer in its reasonable judgment. Access shall be
afforded
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without charge, but only upon reasonable request and during the normal business
hours at the respective offices of the Master Servicer. Nothing in this Section
3.13 shall affect the obligation of the Master Servicer to observe any
applicable law prohibiting disclosure of information regarding the Mortgagors
and the failure of the Master Servicer to provide access to information as
provided in this Section 3.13 as a result of such obligation shall not
constitute a breach of this Section 3.13.
SECTION 3.14. Master Servicer Expenses. The Master Servicer shall be
required to pay all expenses incurred by it in connection with its activities
hereunder, including fees and disbursements of independent accountants, taxes
imposed on the Master Servicer and expenses incurred in connection with
distributions and reports to Certificateholders and Noteholders.
SECTION 3.15. Advances by the Master Servicer. (a) Not later than the
close of business on the second Business Day preceding each Distribution Date,
the Master Servicer shall remit to the Trustee for deposit in the Collection
Account an amount, to be distributed on the related Distribution Date pursuant
to Section 4.5(d), equal to the sum of (a) the interest accrued on each Home
Equity Loan at the Mortgage Rate (or at such lower rate as may be in effect for
such Home Equity Loan pursuant to application of the Civil Relief Act and/or any
Debt Service Reduction) through the related Due Date, but not received as of the
close of business on the Determination Date for such Distribution Date (net of
the Servicing Fee) and (b) with respect to each REO Property which was acquired
during or prior to the related Due Period and as to which a final disposition
did not occur during the related Due Period, an amount equal to the excess, if
any, of interest on the Principal Balance of such REO Property at the Net Rate
for the most recently ended Due Period prior to the related Determination Date
for the related Home Equity Loan over the net income from the REO Property
transferred to the Collection Account for such Distribution Date pursuant to
Section 3.4; such sum being defined herein as the "Monthly Advance." The Master
Servicer may fund all or a portion of the Monthly Advance with respect to the
Home Equity Loans by instructing the Trustee on such Determination Date to use
funds deposited in the Collection Account which are not part of the Total
Distribution Amount for the related Distribution Date; provided that if such
funds are so used the Master Servicer shall replace such funds on or before any
subsequent Determination Date on which such funds are required to be part of the
Total Distribution Amount.
(b) Notwithstanding anything herein to the contrary, no Servicing
Advance or Monthly Advance shall be required to be made hereunder if the Master
Servicer determines that such Servicing Advance or Monthly Advance would, if
made, constitute a Nonrecoverable Advance.
SECTION 3.16. Optional Purchase of Defaulted Home Equity Loans. The Master
Servicer, in its sole discretion, shall have the right to elect (by written
notice sent to the Seller, the Owner Trustee and the Trustee) to purchase for
its own account from the Issuer any Home Equity Loan which is 90 days or more
delinquent in the manner and at the price specified in Section 2.2. The Purchase
Price for any Home Equity Loan purchased hereunder shall be deposited in the
Collection Account and the Trustee, upon receipt of such deposit, shall release
or cause to be released to the Master Servicer or its designee the related
Mortgage File and shall
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execute and deliver such instruments of transfer or assignment prepared by the
purchaser of such Home Equity Loan, in each case without recourse, as shall be
necessary to vest in the purchaser of such Home Equity Loan any Home Equity Loan
released pursuant hereto and the purchaser of such Home Equity Loan shall
succeed to all the Issuer's right, title and interest in and to such Home Equity
Loan and all security and documents related thereto. Such assignment shall be an
assignment outright and not for security. The purchaser of such Home Equity Loan
shall thereupon own such Home Equity Loan, and all security and documents, free
of any further obligation to the Owner Trustee, the Trustee, the Noteholders or
the Certificateholders with respect thereto.
SECTION 3.16. Superior Liens. If required in order to receive notice, the
Master Servicer shall file (or cause to be filed) of record a request for notice
of any action by a superior lienholder under a First Lien for the protection of
the Issuer's interest, where permitted by local law and whenever applicable
state law does not require that a junior lienholder be named as a party
defendant in foreclosure proceedings in order to foreclose such junior
lienholder's equity of redemption.
If the Master Servicer is notified that any superior lienholder has
accelerated or intends to accelerate the obligations secured by the First Lien,
or has declared or intends to declare a default under the mortgage or the
promissory note secured thereby, or has filed or intends to file an election to
have the Mortgaged Property sold or foreclosed, the Master Servicer shall take,
on behalf of the Trust, actions in accordance with the Master Servicer's
policies and procedures to protect the interests of the Noteholders and the
Certificateholders, and/or to preserve the security of the related Home Equity
Loan. The Master Servicer shall advance the necessary funds to cure the default
or reinstate the superior lien, if the Master Servicer reasonably believes such
advance is in the best interests of the Noteholders and the Certificateholders.
The Master Servicer shall not make such an advance except to the extent that it
determines in its reasonable good faith judgment that the advance would be
recoverable from Liquidation Proceeds on the related Home Equity Loan. The
Master Servicer shall thereafter take such action as is necessary to recover the
amount so advanced. Any expenses incurred by the Master Servicer pursuant to
this Section 3.16 shall constitute Servicing Advances.
SECTION 3.17. Reserved.
SECTION 3.18. Appointment of Subservicer. The Master Servicer hereby
appoints each Originator to initially act as subservicer with respect to the
Home Equity Loans sold by such Originator to the Seller. The Originators, as
subservicers shall service the Home Equity Loans in accordance with the terms of
this Agreement. The Master Servicer may at any time appoint any other entity to
serve as a subservicer to perform all or any portion of its obligations as
Master Servicer hereunder; provided, however, that the Rating Agency Condition
shall have been satisfied in connection therewith. In connection with the
appointment of any subservicer, the Master Servicer shall remain obligated and
be liable to the Issuer, the Owner Trustee, the Trustee, the Certificateholders
and the Noteholders for the servicing and administering of the Home Equity Loans
in accordance with the provisions hereof without diminution of such obligation
and liability by virtue of the appointment of such subservicer and to the same
extent
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and under the same terms and conditions as if the Master Servicer alone were
servicing and administering the Home Equity Loans. The fees and expenses of each
subservicer shall be as agreed between the Master Servicer and the subservicer
from time to time and none of the Issuer, the Owner Trustee, the Trustee, the
Certificateholders or the Noteholders shall have any responsibility therefor.
ARTICLE IV
Distributions; Reserve Account; Statements to
Certificateholders and Noteholders
SECTION 4.1. Establishment of Trust Accounts. (a) (i) The Master Servicer,
for the benefit of the Noteholders, shall establish and maintain in the name of
the Trustee an Eligible Deposit Account (the "Note Distribution Account"),
bearing a designation clearly indicating that the funds deposited therein are
held for the benefit of the Noteholders. The Note Distribution Account shall
initially be established with the Trustee.
(ii) The Master Servicer, for the benefit of the Noteholders
and the Certificateholders, shall establish and maintain in the name of the
Trustee an Eligible Deposit Account (the "Reserve Account"), bearing a
designation clearly indicating that the funds deposited therein are held for the
benefit of the Noteholders and the Certificateholders. The Reserve Account shall
be maintained with the Trustee as long as the Trustee is an Eligible
Institution.
(b) Funds on deposit in the Collection Account, the Note
Distribution Account and the Reserve Account (collectively, the "Trust
Accounts") and the Certificate Distribution Account shall be invested by the
Trustee with respect to Trust Accounts and by the Owner Trustee with respect to
the Certificate Distribution Account (or any custodian with respect to funds on
deposit in any such account) in Eligible Investments selected in writing by the
Master Servicer (pursuant to standing instructions or otherwise); provided,
however, it is understood and agreed that neither the Trustee nor the Owner
Trustee shall be liable for any loss arising from such investment in Eligible
Investments. All such Eligible Investments shall be held by or on behalf of the
Trustee or the Owner Trustee, as applicable, for the benefit of the Noteholders
and the Certificateholders, the Noteholders or the Certificateholders, as
applicable; provided that on each Distribution Date all interest and other
investment income (net of losses and investment expenses) on funds on deposit
therein shall be deposited into the Collection Account and shall be deemed to
constitute a portion of the Interest Distribution Amount. Other than as
permitted by the Rating Agencies, funds on deposit in the Collection Account,
the Note Distribution Account, the Certificate Distribution Account and the
Reserve Account shall be invested in Eligible Investments that will mature so
that such funds will be available at the close of business on the Transfer Date
preceding the following Distribution Date. Funds deposited in a Trust Account or
the Certificate Distribution Account on a Transfer Date which immediately
precedes a Distribution Date upon the maturity of any Eligible Investments are
not required to be invested overnight.
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(c) (i) The Trustee shall possess all right, title and interest in
all funds on deposit from time to time in the Trust Accounts and in all proceeds
thereof (including all income thereon) and all such funds, investments, proceeds
and income shall be part of the Owner Trust Estate. Except as otherwise provided
herein, the Trust Accounts shall be under the sole dominion and control of the
Trustee for the benefit of the Noteholders and the Certificateholders, or the
Noteholders, as the case may be. If, at any time, any of the Trust Accounts or
the Certificate Distribution Account ceases to be an Eligible Deposit Account,
the Trustee (or the Master Servicer on its behalf) or the Owner Trustee, as
applicable, shall within 10 Business Days (or such longer period as to which
each Rating Agency may consent) establish a new Trust Account or a new
Certificate Distribution Account, as applicable, as an Eligible Deposit Account
and shall transfer any cash and/or any investments to such new Trust Account or
a new Certificate Distribution Account, as applicable. In connection with the
foregoing, the Master Servicer agrees that, in the event that any of the Trust
Accounts are not accounts with the Trustee, the Master Servicer shall notify the
Trustee in writing promptly upon any of such Trust Accounts ceasing to be an
Eligible Deposit Account.
(ii) With respect to the Trust Account Property, the Trustee,
and with respect to the Certificate Distribution Account, the Owner Trustee,
agrees, by its respective acceptance hereof, that: (A) any Trust Account
Property or any property in the Certificate Distribution Account that is held in
deposit accounts shall be held solely in the Eligible Deposit Accounts subject
to the penultimate sentence of Section 4.1(c)(i); and, except as otherwise
provided herein, each such Eligible Deposit Account shall be subject to the
exclusive custody and control of the Trustee with respect to the Trust Accounts
and the Owner Trustee with respect to the Certificate Distribution Account, and
the Trustee or the Owner Trustee, as applicable, shall have sole signature
authority with respect thereto; (B) any Trust Account Property that constitutes
Physical Property shall be delivered to the Trustee in accordance with paragraph
(a) of the definition of "Delivery" and shall be held, pending maturity or
disposition, solely by the Trustee or a financial intermediary (as such term is
defined in Section 8-313(4) of the UCC) acting solely for the Trustee; (C) any
Trust Account Property that is a book-entry security held through the Federal
Reserve System pursuant to Federal book-entry regulations shall be delivered in
accordance with paragraph (b) of the definition of "Delivery" and shall be
maintained by the Trustee, pending maturity or disposition, through continued
book-entry registration of such Trust Account Property as described in such
paragraph; and (D) any Trust Account Property that is an "uncertificated
security" under Article 8 of the UCC and that is not governed by clause (C)
above shall be delivered to the Trustee in accordance with paragraph (c) of the
definition of "Delivery" and shall be maintained by the Trustee, pending
maturity or disposition, through continued registration of the Trustee's (or its
nominee's) ownership of such security.
(iii) The Master Servicer shall have the power, revocable by
the Trustee or by the Owner Trustee with the consent of the Trustee, to instruct
the Trustee to make withdrawals and payments from the Trust Accounts for the
purpose of permitting the Master Servicer or the Owner Trustee to carry out its
respective duties hereunder or permitting the Trustee to carry out its duties
under the Indenture.
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(d) (i) The Master Servicer shall establish and maintain with the
Trustee an Eligible Deposit Account (the "Payahead Account"). The Payahead
Account shall not be property of the Issuer.
(ii) The Master Servicer shall on or prior to each
Distribution Date (and prior to deposits to the Note Distribution Account or the
Certificate Distribution Account) transfer from the Collection Account to the
Payahead Account all Payaheads as described in Section 4.3 received by the
Master Servicer during the Due Period. Notwithstanding the foregoing, for so
long as the Master Servicer is permitted to make monthly remittances to the
Collection Account pursuant to Section 3.2(c), Payaheads need not be remitted to
and deposited in the Payahead Account but instead may be remitted to and held by
the Master Servicer. So long as such condition is met, the Master Servicer shall
not be required to segregate or otherwise hold separate any Payaheads remitted
to the Master Servicer as aforesaid but shall be required to remit Payaheads to
the Collection Account in accordance with the first sentence of the third
paragraph of Section 4.5(a).
SECTION 4.2. Reserved.
SECTION 4.3. Application of Collections. (a) All collections for the Due
Period shall be applied by the Master Servicer as follows: With respect to each
Home Equity Loan (other than a Purchased Home Equity Loan), payments by or on
behalf of the Mortgagor shall be applied, in the case of Actuarial Home Equity
Loans, to the Scheduled Payment and, in the case of Simple Interest Home Equity
Loans, to interest and principal in accordance with the Simple Interest Method.
With respect to Actuarial Home Equity Loans, any remaining excess shall be added
to the Payahead Balance, and shall be applied to prepay the Actuarial Home
Equity Loan, but only if the sum of such excess and the previous Payahead
Balance shall be sufficient to prepay the Home Equity Loan in full. Otherwise,
any such remaining excess payments shall constitute a Payahead and shall
increase the Payahead Balance.
(b) All Liquidation Proceeds shall be applied to the related Home
Equity Loan in accordance with the Master Servicer's customary servicing
procedures.
SECTION 4.4. Additional Deposits. The Master Servicer and the Seller shall
deposit or cause to be deposited in the Collection Account the aggregate
Purchase Price with respect to Purchased Home Equity Loans and the Seller shall
deposit therein all amounts to be paid under Section 8.1. The Master Servicer
will deposit the aggregate Purchase Price with respect to Purchased Home Equity
Loans within two Business Days after such obligations become due, unless the
Master Servicer shall not be required to make deposits within two Business Days
of receipt pursuant to Section 3.2(c) (in which case such deposit will be made
by the related Transfer Date). All such other deposits shall be made on the
Transfer Date following the end of the related Due Period. Notwithstanding the
foregoing, for so long as (i) the Master Servicer is Avco Financial Services
Management Company, (ii) no Event of Default shall have occurred and be
continuing, (iii) if the Master Servicer does not have a short term debt rating
or deposit rating as applicable, of at least A-1 from Standard & Poor's and P-1
from Moody's, a guaranty, letter of credit, surety bond or other similar
instrument is issued covering the amounts
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described in the definition of Available Funds, which is acceptable to the
Rating Agencies and issued by an entity, which has a short-term debt or deposit
rating, as applicable, of at least A-1 from Standard & Poor's and P-1 from
Moody's; and (iv) the Rating Agency Condition shall have been satisfied (and any
conditions or limitations imposed by the Rating Agencies in connection therewith
are complied with), the Servicer shall remit such collections to the Collection
Account on or before the second Business Day preceding the related Distribution
Date. The Rating Agency Condition with respect to this Section 3.2 and the
Closing Date shall be deemed to be satisfied upon the issuance to the Seller of
the rating letters on the Closing Date.
SECTION 4.5. Distributions. (a) On each Distribution Date, the Trustee
shall cause to be transferred from the Payahead Account, or from the Master
Servicer in the event the provisions of Section 4.1(d)(ii) are applicable, to
the Collection Account, in immediately available funds, the aggregate previous
Payaheads to be applied to Scheduled Payments on Actuarial Home Equity Loans for
the related Due Period or prepayments for the related Due Period, pursuant to
Sections 4.3 and 4.4, in the amounts set forth in the Master Servicer's
Certificate for such Distribution Date. A single, net transfer may be made.
(b) On each Determination Date, the Master Servicer shall calculate
all amounts required to determine the amounts to be deposited from the Reserve
Account into the Collection Account and from the Collection Account into the
Note Distribution Account and the Certificate Distribution Account.
(c) On or before each Distribution Date, the Master Servicer shall
instruct the Trustee (based on the information contained in the Master
Servicer's Certificate delivered on the related Determination Date pursuant to
Section 3.10) to withdraw from the Reserve Account and deposit in the Collection
Account and the Trustee shall so withdraw and deposit the Reserve Account
Transfer Amount for such Distribution Date.
(d) Subject to the last paragraph of this Section 4.5(c), on each
Distribution Date, the Master Servicer shall instruct the Trustee (based on the
information contained in the Master Servicer's Certificate delivered on the
related Determination Date pursuant to Section 3.10) to make, and the Trustee
shall make, the following deposits and distributions from the Collection Account
for deposit in the applicable Account by TIME , to the extent of the Total
Distribution Amount, in the following order of priority: (i) to the Master
Servicer, from the Total Distribution Amount, the Total Servicing Fee; (ii) to
the Note Distribution Account, from the Total Distribution Amount remaining
after the application of clause (i), the Noteholders' Interest Distributable
Amount; (iii) to the Owner Trustee for deposit in the Certificate Distribution
Account, from the Total Distribution Amount remaining after the application of
clause (i) and clause (ii), the Certificateholders' Interest Distributable
Amount; (iv) to the Note Distribution Account, from the Total Distribution
Amount remaining after the application of clauses (i) through (iii), the
Noteholders' Principal Distributable Amount; and (v) to the Owner Trustee for
deposit in the Certificate Distribution Account, from the Total Distribution
Amount remaining after the application of clauses (i) through (iv), the
Certificateholders' Principal Distributable Amount; provided, however, that
following the occurrence of an Event of Default pursuant to Section 5.1(i),
5.1(ii), 5.1(iv) or 5.1(v) of the Indenture, an acceleration of the Notes
pursuant to
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Section 5.2 of the Indenture, amounts on deposit in the Collection Account will
be deposited in the Note Distribution Account to the extent necessary to pay
accrued and unpaid interest on the Notes and then, to the extent funds are
available therefore, principal on the Notes until the principal balance of each
class of Notes has been reduced to zero, before any amounts are deposited in the
Certificate Distribution Account. Following the payment in full of the Notes,
amounts on deposit in the Collection Account will be deposited in the
Certificate Distribution Account to the extent necessary to pay accrued and
unpaid interest on the Certificates and then, to the extent funds are available
therefore, principal on the Certificates until the principal balance thereof has
been reduced to zero. In the event that the Collection Account is maintained
with an institution other than the Trustee, the Master Servicer shall instruct
and cause such institution to make all deposits and distributions pursuant to
this Section 4.5(c) on the related Transfer Date.
SECTION 4.6. Reserve Account. (a) On the Closing Date, the Seller shall
deposit the Reserve Account Initial Deposit into the Reserve Account.
(b) If the amount on deposit in the Reserve Account on any
Distribution Date (after giving effect to any withdrawals therefrom on such
Distribution Date) is greater than the Specified Reserve Account Balance for
such Distribution Date, the Master Servicer shall instruct the Trustee to
distribute, and the Trustee shall distribute, the amount of the excess to the
Seller. Amounts properly distributed to the Seller pursuant to Section 4.6(b)
shall be deemed released from the Trust and the security interest therein
granted to the Trustee and the Seller shall in no event thereafter be required
to refund any such distributed amounts.
SECTION 4.7. Reserved.
SECTION 4.8. Statements to Certificateholders and Noteholders. On each
Determination Date, the Master Servicer shall provide to the Trustee (with a
copy to the Rating Agencies) for the Trustee to forward to each Noteholder of
record, to each Paying Agent, if any, and to the Owner Trustee for the Owner
Trustee to forward to each Certificateholder of record, a statement
substantially in the form of Exhibit B and Exhibit C, respectively, setting
forth at least the following information as to the Notes and the Certificates to
the extent applicable: (i) the amount of such distribution allocable to
principal of each class of Notes and to the Certificate Balance of the
Certificates; (ii) the amount of such distribution allocable to interest on or
with respect to each class of Notes and to the Certificates; (iii) the aggregate
outstanding principal balance of each class of the Notes and the Certificate
Balance after giving effect to payments allocated to principal reported under
(i) above; (iv) the amount of the Total Servicing Fee paid to the Master
Servicer with respect to the related Due Period; (v) The amount of the Monthly
Advances payment to be made on the Determination Date; (vi) the amount of the
aggregate Realized Losses, if any, for such Due Period; (vii) the Reserve
Account Transfer Amount, if any, for such Distribution Date, the average of the
Charge-off Rates and the Delinquency Percentages for the three preceding Due
Periods, the Specified Reserve Account Balance for such Distribution Date, the
amount distributed to the Seller from the Reserve Account on such Distribution
Date, and the balance of the Reserve Account (if any) on such Distribution Date,
after giving effect to changes therein on such Distribution Date; (viii) the
Noteholders' Interest Carryover Shortfall, the Certificateholders' Interest
Carryover Shortfall, the Noteholders'
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Principal Carryover Shortfall, and the Certificateholders' Principal Carryover
Shortfall; (ix) the amounts which are reimbursable to the Master Servicer for
Reimbursable Amounts and Nonrecoverable Advances; (x) the amount of Servicing
Advances for the preceding Due Period; and (xi) the aggregate Purchase Price
paid by the Seller or the Master Servicer with respect to the related Due
Period. Each amount set forth pursuant to paragraph (i), (ii), (vi) or (xi)
above shall be expressed as a dollar amount per $1,000 of the initial principal
balance of the Notes (or class thereof) or the initial Certificate Balance, as
applicable.
SECTION 4.9. Net Deposits. As an administrative convenience, unless the
Master Servicer is required to remit collections within two Business Days of
receipt thereof, the Master Servicer will be permitted to make the deposit of
collections on the Home Equity Loans and Purchase Prices for or with respect to
the Due Period net of distributions to be made to the Master Servicer with
respect to the Due Period. The Master Servicer, however, will account to the
Owner Trustee, the Trustee, the Noteholders and the Certificateholders as if all
deposits, distributions and transfers were made individually.
ARTICLE V
The Seller, the Representative and the Originators
SECTION 5.1. Representations of Seller. The Seller represents and warrants
to the Issuer as follows:
(i) The Seller is a corporation duly organized, validly
existing and in good standing under the laws governing its creation and
existence and is in good standing as a foreign corporation in each
jurisdiction in which the nature of its business, or the properties owned
or leased by it make such qualification necessary. The Seller has all
requisite corporate power and authority to own and operate its properties,
to carry out its business as presently conducted and as proposed to be
conducted and to enter into and discharge its obligations under this
Agreement;
(ii) This Agreement constitutes a legal, valid and binding
obligation of the Seller, enforceable against the Seller in accordance
with its terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect affecting the enforcement of creditors' rights
in general and except as such enforcement may be limited by general
principles of equity (whether considered in a proceeding at law or in
equity);
(iii) Immediately prior to the sale and assignment by the
Seller to the Trustee of each Home Equity Loan, the Seller was the sole
beneficial owner of each Home Equity Loan (insofar as such title was
conveyed to it by the applicable Originator) subject to no prior lien,
claim, participation interest, mortgage, security interest, pledge, charge
or other encumbrance or other interest of any nature;
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(iv) As of the Closing Date, the Seller has transferred all
right, title and interest in the Home Equity Loans to the Trustee; and
(v) The Seller has not transferred the Home Equity Loans to
the Trustee with any intent to hinder, delay or defraud any of its
creditors.
SECTION 5.2. Corporate Existence. (a) During the term of this Agreement,
the Seller will keep in full force and effect its existence, rights and
franchises as a corporation under the laws of the jurisdiction of its
incorporation and will obtain and preserve its qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, the Basic Documents
and each other instrument or agreement necessary or appropriate to the proper
administration of this Agreement and the transactions contemplated hereby.
(b) During the term of this Agreement, the Seller shall observe the
applicable legal requirements for the recognition of the Seller as a legal
entity separate and apart from its Affiliates, including as follows: (i) the
Seller shall maintain corporate records and books of account separate from those
of its Affiliates; (ii) except as otherwise provided in this Agreement, the
Seller shall not commingle its assets and funds with those of its Affiliates;
(iii) the Seller shall hold such appropriate meetings of its Board of Directors
as are necessary to authorize all the Seller's corporate actions required by law
to be authorized by the Board of Directors, shall keep minutes of such meetings
and of meetings of its stockholder(s) and observe all other customary corporate
formalities (and any successor Seller not a corporation shall observe similar
procedures in accordance with its governing documents and applicable law); (iv)
the Seller shall at all times hold itself out to the public under the Seller's
own name as a legal entity separate and distinct from its Affiliates; and (v)
all transactions and dealings between the Seller and its Affiliates will be
conducted on an arm's-length basis.
SECTION 5.3 Liability of Seller; Indemnities. The Seller shall be liable
in accordance herewith only to the extent of the obligations specifically
undertaken by the Seller under this Agreement.
(a) The Seller shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee and the Trustee and their respective officers, directors,
employees and agents from and against any taxes that may at any time be asserted
against any such Person with respect to the transactions contemplated in this
Agreement and any of the Basic Documents (except any income taxes arising out of
fees paid to the Owner Trustee or the Trustee and except any taxes to which the
Owner Trustee or the Trustee may otherwise be subject to), including any sales,
gross receipts, general corporation, tangible personal property, privilege or
license taxes (but, in the case of the Issuer, not including any taxes asserted
with respect to, and as of the date of, the sale of the Home Equity Loans to the
Owner Trustee on behalf of the Issuer or the issuance and original sale of the
Certificates and the Notes, or asserted with respect to ownership of the Home
Equity Loans or Federal or other income taxes arising out of distributions on
the Certificates and
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the Notes) and costs and expenses in defending against the same or in connection
with any application relating to the Notes or Certificates under any state
securities laws.
(b) The Seller shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee, the Trustee, the Certificateholders and the Noteholders and
the officers, directors, employees and agents of the Issuer, the Owner Trustee
and the Trustee from and against any and all costs, expenses, losses, claims,
damages and liabilities to the extent arising out of, or imposed upon such
Person through (i) the Seller's willful misfeasance, bad faith or negligence in
the performance of its duties under this Agreement, or by reason of reckless
disregard of its obligations and duties under this Agreement and (ii) the
Seller's or the Issuer's violation of Federal or state securities laws in
connection with the offering and sale of the Notes and the Certificates or in
connection with any application relating to the Notes or Certificates under any
state securities laws.
(c) The Seller shall be liable as primary obligor for, and shall
indemnify, defend and hold harmless the Owner Trustee and its officers,
directors, employees and agents from and against any and all costs, expenses,
losses, claims, damages and liabilities arising out of, or incurred in
connection with, this Agreement or any of the Basic Documents, the Owner Trust
Estate, the acceptance or performance of the trusts and duties set forth herein
and in the Trust Agreement or the action or the inaction of the Owner Trustee
hereunder and under the Trust Agreement, except to the extent that such cost,
expense, loss, claim, damage or liability: (i) shall be due to the willful
misfeasance, bad faith or negligence of the Owner Trustee, (ii) shall arise from
any breach by the Owner Trustee of its covenants under this Agreement or any of
the Basic Documents; or (iii) shall arise from the breach by the Owner Trustee
of any of its representations or warranties set forth in Section 7.3 of the
Trust Agreement. Such liability shall survive the termination of the Trust. In
the event of any claim, action or proceeding for which indemnity will be sought
pursuant to this paragraph, the Owner Trustee's choice of legal counsel shall be
subject to the approval of the Seller, which approval shall not be unreasonably
withheld.
(d) The Seller shall pay any and all taxes levied or assessed upon
all or any part of the Trust Estate (other than those taxes expressly excluded
from the Seller's responsibilities pursuant to the parentheticals in paragraph
(a) above). Indemnification under this Section shall survive the resignation or
removal of the Owner Trustee or the Trustee and the termination of this
Agreement or the Indenture or the Trust Agreement, as applicable, and shall
include reasonable fees and expenses of counsel and other expenses of
litigation. If the Seller shall have made any indemnity payments pursuant to
this Section and the Person to or on behalf of whom such payments are made
thereafter shall collect any of such amounts from others, such Person shall
promptly repay such amounts to the Seller, without interest.
SECTION 5.4. Merger or Consolidation of, or Assumption of the Obligations
of, Seller. Any Person (a) into which the Seller may be merged or consolidated,
(b) which may result from any merger or consolidation to which the Seller shall
be a party or (c) which may succeed to the properties and assets of the Seller
substantially as a whole, shall be the successor to the Seller without the
execution or filing of any document or any further act by any of the parties to
this Agreement; provided, however, that the Seller hereby covenants that it will
not
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consummate any of the foregoing transactions except upon satisfaction of the
following: (i) the surviving Seller if other than Avco ABS Receivables Corp.,
executes an agreement of assumption to perform every obligation of the Seller
under this Agreement, (ii) immediately after giving effect to such transaction,
no representation or warranty made pursuant to Section 2.4 or 5.1 shall have
been breached, (iii) the Seller shall have delivered to the Owner Trustee and
the Trustee an Officers' Certificate and an Opinion of Counsel each stating that
such consolidation, merger or succession and such agreement of assumption comply
with this Section and that all conditions precedent, if any, provided for in
this Agreement relating to such transaction have been complied with, and that
the Rating Agency Condition shall have been satisfied with respect to such
transaction, (iv) the surviving Seller shall have a consolidated net worth at
least equal to that of the predecessor Seller, (v) such transaction will not
result in a material adverse federal or state tax consequence to the Issuer, the
Noteholders or the Certificateholders and (vi) unless Avco ABS Receivables
Corp., is the surviving entity, the Seller shall have delivered to the Owner
Trustee and the Trustee an Opinion of Counsel either (A) stating that, in the
opinion of such counsel, all financing statements and continuation statements
and amendments thereto have been executed and filed that are necessary fully to
preserve and protect the interest of the Owner Trustee and Trustee,
respectively, in the Home Equity Loans and reciting the details of such filings,
or (B) stating that, in the opinion of such counsel, no such action shall be
necessary to preserve and protect such interests.
SECTION 5.5. Limitation on Liability of Seller and Others. The Seller and
any director or officer or employee or agent of the Seller may rely in good
faith on the advice of counsel or on any document of any kind, prima facie
properly executed and submitted by any Person respecting any matters arising
under any Basic Document (provided that such reliance shall not limit in any way
the Seller's obligations under Section 2.4(b)). The Seller shall not be under
any obligation to appear in, prosecute or defend any legal action that shall not
be incidental to its obligations under this Agreement, and that in its opinion
may involve it in any expense or liability.
SECTION 5.6. Seller May Own Certificates or Notes. The Seller and any
Affiliate thereof may in its individual or any other capacity become the owner
or pledgee of Certificates or Notes with the same rights as it would have if it
were not the Seller or an Affiliate thereof, except as expressly provided herein
or in any Basic Document.
SECTION 5.7. Representations and Warranties Regarding the Representative
and the Originators. (a) The Representative represents and warrants that, as of
the Closing Date:
(i) The Representative is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and
is in compliance with the laws of each state in which any Mortgaged
Property is located to the extent necessary to enable it to perform its
obligations hereunder and is in good standing in each jurisdiction in
which the nature of its business, or the property owned or leased by it
make such a qualification necessary. The Representative has, and had at
all relevant times, full corporate power to own its property, to carry on
its business as presently conducted and to enter into and perform its
obligations under this Agreement;
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(ii) The execution and delivery of this Agreement by the
Representative and the performance by the Representative and compliance
with the terms of this Agreement will not violate the Representative's
articles of incorporation or by-laws or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default)
under, or result in the breach or acceleration of, any material contract,
agreement or other instrument to which the Representative is a party or
which may be applicable to the Representative or any of its assets;
(iii) The Representative has the full power and authority to enter
into and consummate all transactions contemplated by this Agreement to be
consummated by it, has duly authorized the execution, delivery and
performance of this Agreement, and has duly executed and delivered this
Agreement. This Agreement, assuming due authorization, execution and
delivery by the other parties hereto, constitutes a valid, legal and
binding obligation of the Representative enforceable against it in
accordance with the terms hereof, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, receivership,
moratorium or other similar laws relating to or affecting the rights of
creditors generally, and by general equity principles (regardless of
whether such enforcement is considered in a proceeding in equity or at
law);
(iv) The Representative is not in violation of, and the execution
and delivery of this Agreement by the Representative and the performance
by the Representative and compliance with the terms of this Agreement will
not constitute a violation with respect to, any order or decree of any
court or any order or regulation of any federal, state, municipal or
governmental agency having jurisdiction, which violation would materially
and adversely affect the condition (financial or otherwise) or operations
of the Representative or any of its properties or materially and adversely
affect the performance of any of its duties hereunder;
(v) There are no actions or proceedings against, or investigations
of, the Representative pending or, to the knowledge of the Representative,
threatened, before any court, administrative agency or other tribunal (A)
that, if determined adversely, would prohibit its entering into this
Agreement, (B) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or (C) that, if determined
adversely, would prohibit or materially and adversely affect the
performance by the Representative of any of its obligations under, or the
validity or enforceability of, this Agreement;
(vi) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Representative of, or compliance by the Representative
with, this Agreement, or for the consummation of the transactions
contemplated by this Agreement, except for such consents, approvals,
authorizations and orders, if any, that have been obtained prior to the
Closing Date;
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(vii) No Officer's Certificate, statement, report or other document
prepared by the Representative and furnished or to be furnished by it
pursuant to this Agreement or in connection with the transactions
contemplated hereby contains any untrue statement of material fact or
omits to state a material fact necessary to make the statements contained
herein or therein not misleading;
(viii) The transactions contemplated by this Agreement are in the
ordinary course of business of the Representative;
(ix) The statements contained in the Registration Statement which
describe the Representative or matters or activities for which the
Representative is responsible in accordance with the Registration
Statement, this Agreement and all documents referred to therein or
delivered in connection therewith, or which are attributable to the
Representative 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 Representative and does not omit to
state a material fact necessary to make the statements contained therein
with respect to the Representative not misleading. The Representative is
not aware that the Registration Statement contains any untrue statement of
a material fact or omits to state any material fact necessary to make the
statements contained therein not misleading. There is no fact peculiar to
the Representative or the Home Equity Loans and known to the
Representative that materially adversely affects or in the future may (so
far as the Representative can now reasonably foresee) materially adversely
affect the Representative or the Home Equity Loans or the ownership
interests therein represented by the Certificates that has not been set
forth in the Registration Statement;
(x) Each Originator received fair consideration and reasonably
equivalent value in exchange for the sale of the interest in the Home
Equity Loans;
(xi) No Originator sold any interest in any Home Equity Loan,
evidenced by the Certificates, as provided in the Agreement, with any
intent to hinder, delay or defraud any of its respective creditors; and
(xii) The Originators are solvent and the Originators will not be
rendered insolvent as a result of the sale of the Home Equity Loans to the
Seller or the sale of the Certificates.
(b) Each Originator represents and warrants that, as of the Closing
Date:
(i) Such Originator is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and is licensed by and in compliance with the laws of each
state in which any Mortgaged Property relating to a Home Equity Loan
originated by it and/or to be serviced by it to the extent necessary to
enable it to perform its obligations under this Agreement and the
subservicing agreement to which it is a party and is in good standing in
each jurisdiction in which the nature of its business, or the property
owned or leased by it make such qualification necessary. Such Originator
has,
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and had at all relevant times, full corporate power to originate the Home
Equity Loans originated by it, to own its property, to carry on its
business as presently conducted and to enter into and perform its
obligations under this Agreement and the subservicing agreement to which
it is a party;
(ii) The execution and delivery of this Agreement and the
subservicing agreement to which it is a party by such Originator and the
performance by such Originator of and compliance with the terms of this
Agreement and the subservicing agreement to which it is a party will not
violate such Originator's articles of incorporation or by-laws or
constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the breach or
acceleration of, any material contract, agreement or other instrument to
which such Originator is a party or which may be applicable to the such
Originator or any of its assets;
(iii) Such Originator has the full power and authority to enter into
and consummate all transactions contemplated by this Agreement and the
subservicing agreement to which it is a party to be consummated by it, has
duly authorized the execution, delivery and performance of this Agreement
and the subservicing agreement to which it is a party, and has duly
executed and delivered this Agreement and the subservicing agreement to
which it is a party. Each of this Agreement and the subservicing agreement
to which it is a party, assuming due authorization, execution and delivery
by the other parties hereto and thereto, constitutes a valid, legal and
binding obligation of such Originator, enforceable against it in
accordance with the terms hereof, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, receivership,
moratorium or other similar laws relating to or affecting the rights of
creditors generally, and by general equity principles (regardless of
whether such enforcement is considered in a proceeding in equity or at
law);
(iv) Such Originator is not in violation of, and the execution and
delivery of this Agreement and the subservicing agreement to which it is a
party by such Originator and the performance by such Originator and
compliance with the terms of this Agreement and the subservicing agreement
to which it is a party will not constitute a violation with respect to,
any order or decree of any court or any order or regulation of any
federal, state, municipal or governmental agency having jurisdiction,
which violation would materially and adversely affect the condition
(financial or otherwise) or operations of such Originator or any of its
properties or materially and adversely affect the performance of any of
its duties hereunder or thereunder;
(v) There are no actions or proceedings against, or investigations
of, such Originator pending or, to the knowledge of such Originator,
threatened, before any court, administrative agency or other tribunal (A)
that, if determined adversely, would prohibit its entering into this
Agreement or the subservicing agreement to which it is a party, (B)
seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or the subservicing agreement to which it
is a party or (C) that, if determined adversely, would prohibit or
materially and adversely affect the performance such
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Originator of any of its obligations under, or the validity or
enforceability of, this Agreement or the subservicing agreement to which
it is a party;
(vi) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by such Originator of, or compliance by such Originator with,
this Agreement or the subservicing agreement to which it is a party, or
for the consummation of the transactions contemplated by this Agreement or
the subservicing agreement to which it is a party, except for such
consents, approvals, authorizations and orders, if any, that have been
obtained prior to the Closing Date;
(vii) No Officer's Certificate, statement, report or other document
prepared by such Originator and furnished or to be furnished by it
pursuant to this Agreement or the subservicing agreement to which it is a
party or in connection with the transactions contemplated hereby or
thereby contains any untrue statement of material fact or omits to state a
material fact necessary to make the statements contained herein or therein
not misleading;
(viii) The statements contained in the Registration Statement which
describe such Originator or matters or activities for which such
Originator is responsible in accordance with the Registration Statement,
this Agreement and all documents referred to therein or delivered in
connection therewith, or which are attributable to such Originator 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 such Originator or the Home Equity Loans and does not omit to
state a material fact necessary to make the statements contained therein
with respect to such Originator or the Home Equity Loans not misleading.
Such Originator is not aware that the Registration Statement contains any
untrue statement of a material fact or omits to state any material fact
necessary to make the statements contained therein not misleading. There
is no fact peculiar to such Originator or the Home Equity Loans and known
to such Originator that materially and adversely affects or in the future
may (so far as such Originator can now reasonably foresee) materially and
adversely affect such Originator or the Home Equity Loans or the ownership
interests therein represented by the Certificates that has not been set
forth in the Registration Statement;
(ix) Upon the receipt of each Mortgage File by the Trustee, the
Trustee will have good and marketable title on behalf of the Trust to each
Home Equity Loan and such other items comprising the corpus of the Trust
free and clear of any lien (other than liens which will be simultaneously
released);
(x) The transfer, assignment and conveyance of the Mortgage Notes
and the Mortgages by such Originator pursuant to this Agreement are not
subject to the bulk transfer laws or any similar statutory provisions in
effect in any applicable jurisdiction;
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(xi) The origination and collection practices used by such
Originator with respect to each Mortgage Note and Mortgage relating to the
Home Equity Loans have been, in all material respects, legal, and in
accordance with the Originator's policies and procedures in effect at the
time;
(xii) Each Home Equity Loan was randomly selected from among the
existing Home Equity Loans in the respective Originator's portfolio at the
date hereof;
(xiii) Such Originator received fair consideration and reasonably
equivalent value in exchange for the sale of its interest in the Home
Equity Loans evidenced by the Certificates;
(xiv) Such Originator did not sell any interest in any Home Equity
Loan evidenced by the Certificates with any intent to hinder, delay or
defraud any of its respective creditors; and
(xv) Such Originator is solvent, and such Originator will not be
rendered insolvent as a result of the sale of the Home Equity Loans to the
Seller or the sale of the Certificates.
The representations and warranties set forth in this Section 2.04 shall survive
the sale and assignment of the Home Equity Loans to the Issuer. Upon discovery
of a breach of any representations and warranties which materially and adversely
affects the interests of the Certificateholders or the Noteholders, the Person
discovering such breach shall give prompt written notice to the other parties.
Within 60 days of its discovery or its receipt of notice of such breach, or,
with the prior written consent of a Responsible Officer of the Trustee, such
longer period specified in such consent, the Representative or the applicable
Originator shall cure such breach in all material respects.
ARTICLE VI
The Master Servicer
SECTION 6.1. Representations of Master Servicer. The Master Servicer
represents and warrants to the Issuer as follows:
(i) The Master Servicer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and
is in compliance with the laws of each state in which any Mortgaged
Property is located and is in good standing in each jurisdiction in which
the nature of its business, or the properties owned or leased by it make
such qualification necessary. The Master Servicer has, and had at all
relevant times, full corporate power, to own its property, to carry on its
business as presently conducted and to enter into and perform its
obligations under this Agreement and each subservicing agreement.
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(ii) The execution and delivery of this Agreement and each
subservicing agreement by the Master Servicer and the performance by the
Master Servicer of and compliance with the terms of this Agreement and
each subservicing agreement will not violate the Master Servicer's
articles of incorporation or by-laws or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default)
under, or result in the breach or acceleration of, any material contract,
agreement or other instrument to which the Master Servicer is a party or
which may be applicable to the Master Servicer or any of its assets;
(iii) The Master Servicer has the full power and authority to enter
into and consummate all transactions contemplated by this Agreement and
each subservicing agreement to be consummated by it, has duly authorized
the execution, delivery and performance of this Agreement and each
subservicing agreement, and has duly executed and delivered this Agreement
and each subservicing agreement. This Agreement and each subservicing
agreement, assuming due authorization, execution and delivery by the other
parties hereto and thereto, constitutes a valid, legal and binding
obligation of the Master Servicer, enforceable against it in accordance
with the terms hereof and thereof, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, receivership,
moratorium or other similar laws relating to or affecting the rights of
creditors generally, and by general equity principles (regardless of
whether such enforcement is considered in a proceeding in equity or at
law);
(iv) The Master Servicer is not in violation of, and the execution
and delivery of this Agreement and each subservicing agreement by the
Master Servicer and the performance by the Master Servicer and compliance
with the terms of this Agreement and each subservicing agreement will not
constitute a violation with respect to, any order or decree of any court
or any order or regulation of any federal, state, municipal or
governmental agency having jurisdiction, which violation would materially
and adversely affect the condition (financial or otherwise) or operations
of the Master Servicer or any of its properties or materially and
adversely affect the performance of any of its duties hereunder or
thereunder;
(v) There are no actions or proceedings against, or investigations
of, the Master Servicer pending or, to the knowledge of the Master
Servicer, threatened, before any court, administrative agency or other
tribunal (A) that, if determined adversely, would prohibit its entering
into this Agreement or any subservicing agreement, (B) seeking to prevent
the consummation of any of the transactions contemplated by this Agreement
or any subservicing agreement or (C) that, if determined adversely, would
prohibit or materially and adversely affect the performance by the Master
Servicer of any of its obligations under, or the validity or
enforceability of, this Agreement or any subservicing agreement;
(vi) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Master Servicer of, or compliance by the Master
Servicer with, this Agreement and each subservicing agreement, or for the
consummation of the transactions contemplated by this
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Agreement and each subservicing agreement, except for such consents,
approvals, authorizations and orders, if any, that have been obtained
prior to the Closing Date;
(vii) The collection practices used by the Master Servicer with
respect to the Home Equity Loans have been, in all material respects,
legal, proper, prudent and customary in the non-conforming mortgage
servicing business;
(viii) No Officer's Certificate, statement, report or other document
prepared by the Master Servicer and furnished or to be furnished by it
pursuant to this Agreement or any subservicing agreement or in connection
with the transactions contemplated hereby or thereby contains any untrue
statement of material fact or omits to state a material fact necessary to
make the statements contained herein or therein not misleading;
(ix) The Master Servicer believes that the Servicing Fee Rate
provides a reasonable level of base compensation to the Master Servicer
for master servicing the Home Equity Loans on the terms set forth herein;
(x) The transactions contemplated by this Agreement and each
subservicing Agreement are in the ordinary course of business of the
Master Servicer; and
(xi) The statements contained in the Registration Statement which
describe the Master Servicer or matters or activities for which the Master
Servicer is responsible in accordance with the Registration Statement,
this Agreement and all documents referred to therein or delivered in
connection therewith, or which are attributable to the Master 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 Master Servicer and does not omit to state a
material fact necessary to make the statements contained therein with
respect to the Master Servicer not misleading. The Master Servicer is not
aware that the Registration Statement contains any untrue statement of a
material fact or omits to state any material fact necessary to make the
statements contained therein not misleading. There is no fact peculiar to
the Master Servicer or the Home Equity Loans and known to the Master
Servicer that materially adversely affects or in the future may (so far as
the Master Servicer can now reasonably foresee) materially adversely
affect the Master Servicer or the Home Equity Loans or the ownership
interests therein represented by the Certificates that has not been set
forth in the Registration Statement; and
(xii) The Master Servicer has caused or hereby agrees to 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 the
Home Equity Loans, including, without limitation, any necessary
notifications of insurers, assignments of policies or interests therein,
and establishments of co-insured, joint loss payee and mortgagee rights in
favor of the Trustee.
The representations and warranties set forth in this Section 6.1 shall survive
the sale and assignment of the Home Equity Loans to the Issuer. Upon discovery
of a breach of any representations and
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warranties which materially and adversely affects the interests of the
Certificateholders or the Noteholders, the Person discovering such breach shall
give prompt written notice to the other parties. Within 60 days of its discovery
or its receipt of notice of such breach, or, with the prior written consent of a
Responsible Officer of the Trustee, such longer period specified in such
consent, the Master Servicer shall cure such breach in all material respects.
SECTION 6.2. Indemnities of Master Servicer. (a) The Master Servicer shall
be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Master Servicer under this Agreement. The Master
Servicer shall indemnify, defend and hold harmless the Issuer, the Owner
Trustee, the Trustee, the Representative, the Seller, the Certificateholders and
the Noteholders and any of the officers, directors, employees and agents of the
Issuer, the Owner Trustee, the Trustee or the Seller from any and all costs,
expenses, losses, claims, damages and liabilities (including reasonable
attorneys' fees and expenses) to the extent arising out of, or imposed upon any
such Person through, the negligence, willful misfeasance or bad faith of the
Master Servicer in the performance of its obligations and duties under this
Agreement or in the performance of the obligations and duties of any subservicer
under any subservicing agreement or by reason of the reckless disregard of its
obligations and duties under this Agreement or by reason of the reckless
disregard of the obligations of any subservicer under any subservicing
agreement, where the final determination that any such cost, expense, loss,
claim, damage or liability arose out of, or was imposed upon any such Person
through, any such negligence, willful misfeasance, bad faith or recklessness on
the part of the Master Servicer or any subservicer, is established by a court of
law, by an arbitrator or by way of settlement agreed to by the Master Servicer.
Notwithstanding the foregoing, if the Master Servicer is rendered unable, in
whole or in part, by virtue of an act of God, act of war, fires, earthquake or
other natural disasters, to satisfy its obligations under this Agreement, the
Master Servicer shall not be deemed to have breached any such obligation upon
the sending of written notice of such event to the other parties hereto, for so
long as the Master Servicer remains unable to perform such obligation as a
result of such event. This provision shall not be construed to limit the Master
Servicer's or any other party's rights, obligations, liabilities, claims or
defenses which arise as a matter of law or pursuant to any other provision of
this Agreement. The Master Servicer shall indemnify, defend and hold harmless
the Issuer, the Owner Trustee, the Trustee, the Seller, the Certificateholders
and the Noteholders or any of the officers, directors, employees and agents of
the Issuer, the Owner Trustee, the Trustee or the Seller from any and all costs,
expenses, losses, claims, damages and liabilities (including reasonable
attorneys' fees and expenses) to the extent arising out of or imposed upon any
such Person as a result of any compensation payable to any subservicer
(including any fees payable in connection with the termination of the servicing
activities of such subservicer with respect to any Home Equity Loan) whether
pursuant to the terms of any subservicing agreement or otherwise.
SECTION 6.3. Merger or Consolidation of, or Assumption of the Obligations
of, Master Servicer. Any Person (a) into which the Master Servicer may be merged
or consolidated, (b) which may result from any merger or consolidation to which
the Master Servicer shall be a party or (c) which may succeed to the properties
and assets of the Master Servicer, substantially as a whole, shall be the
successor to the Master Servicer without the execution or filing of any document
or any further act by any of the parties to this Agreement; provided, however,
that the
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Master Servicer hereby covenants that it will not consummate any of the
foregoing transactions except upon satisfaction of the following: (i) the
surviving Master Servicer if other than Avco Financial Services Management
Company, executes an agreement of assumption to perform every obligation of the
Master Servicer under this Agreement, (ii) immediately after giving effect to
such transaction, no representation or warranty made pursuant to Section 6.1
shall have been breached and no Master Servicer Default, and no event that,
after notice or lapse of time, or both, would become a Master Servicer Default
shall have occurred and be continuing, (iii) the Master Servicer shall have
delivered to the Owner Trustee and the Trustee an Officers' Certificate and an
Opinion of Counsel each stating that such consolidation, merger or succession
and such agreement of assumption comply with this Section and that all
conditions precedent, if any, provided for in this Agreement relating to such
transaction have been complied with, and that the Rating Agency Condition shall
have been satisfied with respect to such transaction, (iv) the surviving Master
Servicer shall have a consolidated net worth at least equal to that of the
predecessor Master Servicer, and (v) such transaction will not result in a
material adverse Federal or state tax consequence to the Issuer, the Noteholders
or the Certificateholders.
SECTION 6.4. Limitation on Liability of Master Servicer and Others.
Neither the Master Servicer nor any of its directors, officers, employees or
agents shall be under any liability to the Issuer, the Noteholders or the
Certificateholders, except as provided under this Agreement, for any action
taken or for refraining from the taking of any action by the Master Servicer or
any subservicer pursuant to this Agreement or for errors in judgment; provided,
however, that this provision shall not protect the Master Servicer or any such
person against any liability that would otherwise be imposed by reason of
willful misfeasance, bad faith or negligence in the performance of duties or by
reason of reckless disregard of obligations and duties under this Agreement. The
Master Servicer or any subservicer and any of their respective directors,
officers, employees or agents may rely in good faith on any document of any kind
prima facie properly executed and submitted by any Person respecting any matters
arising under this Agreement Except as provided in this Agreement the Master
Servicer shall not be under any obligation to appear in, prosecute or defend any
legal action that shall be incidental to its duties to service the Home Equity
Loans in accordance with this Agreement, and that in its opinion may involve it
in any expense or liability; provided, however, that the Master Servicer, may
(but shall not be required to) undertake any reasonable action that it may deem
necessary or desirable in respect of the Basic Documents to protect the
interests of the Certificateholders under this Agreement and the Noteholders
under the Indenture.
SECTION 6.5. Avco Financial Services Management Company Not To Resign as
Master Servicer. Subject to the provisions of Section 6.3, Avco Financial
Services Management Company, hereby agrees not to resign from the obligations
and duties hereby imposed on it as Master Servicer under this Agreement except
upon determination that the performance of its duties hereunder shall no longer
be permissible under applicable law or if such resignation is required by
regulatory authorities. Notice of any such determination permitting the
resignation of Avco Financial Services Management Company, as Master Servicer
shall be communicated to the Owner Trustee and the Trustee at the earliest
practicable time (and, if such communication is not in writing, shall be
confirmed in writing at the earliest practicable time) and any such
determination shall be evidenced by an Opinion of Counsel to such effect
delivered to the Owner
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Trustee and the Trustee concurrently with or promptly after such notice. No such
resignation shall become effective until the earlier of the Trustee or a
Successor Master Servicer having assumed the responsibilities and obligations of
the resigning Master Servicer in accordance with Section 7.2 or the date upon
which any regulatory authority requires such resignation.
ARTICLE VII
Default
SECTION 7.1. Master Servicer Default. If any one of the following events
(a "Master Servicer Default") shall occur and be continuing:
(a) any failure by the Master Servicer to deliver to the Trustee for
deposit in any of the Trust Accounts or the Certificate Distribution
Account any required payment or to direct the Trustee to make any required
distributions therefrom (other than a Monthly Advance required to be made
from its own funds) that shall continue unremedied for a period of five
Business Days after written notice of such failure is received by the
Master Servicer from the Owner Trustee or the Trustee or after discovery
of such failure by an Authorized Officer of the Master Servicer; or
(b) failure by the Master Servicer to make any required Servicing
Advance which failure continues unremedied for a period of 30 days, or
failure on the part of the Master Servicer duly to observe or to perform
in any material respect any other covenants or agreements of the Master
Servicer set forth in this Agreement or any other Basic Document, which
failure shall (i) materially and adversely affect the rights of either the
Certificateholders or Noteholders and (ii) continue unremedied for a
period of 60 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given (A) to the Master
Servicer by the Owner Trustee or the Trustee or (B) to the Master Servicer
and to the Owner Trustee and the Trustee by the Holders of Notes
evidencing not less than 25% of the Outstanding Amount of the Notes or
Holders of Certificates evidencing not less than 25% of the outstanding
Certificate Balance, as applicable (or for such longer period, not in
excess of 120 days, as may be reasonably necessary to remedy such default;
provided that such default is capable of remedy within 120 days and the
Master Servicer delivers an Officers' Certificate to the Owner Trustee and
the Trustee to such effect and to the effect that the Master Servicer has
commenced or will promptly commence, and will diligently pursue, all
reasonable efforts to remedy such default); or
(c) any failure of the Master Servicer to pay any Monthly Advance
required to be made from its own funds pursuant to Section 3.15 that
continues unremedied for a period of one Business Day; or
(d) an Insolvency Event occurs with respect to the Master Servicer
or any successor; then, and in each and every case, so long as the Master
Servicer Default shall not have been remedied, either the Trustee, or the
Holders of Notes evidencing not less
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than 25% of the Outstanding Amount of the Notes, by notice then given in
writing to the Master Servicer and the Owner Trustee (and to the Trustee
if given by the Noteholders) may terminate all the rights and obligations
(other than the obligations set forth in Section 6.2) of the Master
Servicer under this Agreement.
On or after the receipt by the Master Servicer of such written notice, all
authority and power of the Master Servicer under this Agreement, whether with
respect to the Notes, the Certificates or the Home Equity Loans or otherwise,
shall, without further action, pass to and be vested in the Trustee or such
successor Master Servicer as may be appointed under Section 7.2; and, without
limitation, the Trustee and the Owner Trustee are hereby authorized and
empowered to execute and deliver, on behalf of the predecessor Master Servicer,
as attorney-in-fact or otherwise, any and all documents and other instruments,
and to do or accomplish all other acts or things necessary or appropriate to
effect the purposes of such notice of termination, whether to complete the
transfer and endorsement of the Home Equity Loans and related documents, or
otherwise. The predecessor Master Servicer shall cooperate with the successor
Master Servicer, the Trustee and the Owner Trustee in effecting the termination
of the responsibilities and rights of the predecessor Master Servicer under this
Agreement, including the transfer to the successor Master Servicer for
administration by it of all cash amounts that shall at the time be held by the
predecessor Master Servicer for deposit, or shall thereafter be received by it
with respect to a Home Equity Loan. All reasonable costs and expenses (including
attorneys' fees) incurred in connection with transferring the Mortgage Files to
the successor Master Servicer and amending this Agreement to reflect such
succession as Master Servicer pursuant to this Section shall be paid by the
predecessor Master Servicer upon presentation of reasonable documentation of
such costs and expenses. Upon receipt of notice of the occurrence of a Master
Servicer Default, the Owner Trustee shall give notice thereof to the Rating
Agencies.
SECTION 7.2. Appointment of Successor. (a) Upon the Master Servicer's
receipt of notice of termination, pursuant to Section 7.1 or the Master
Servicer's resignation in accordance with the terms of this Agreement, the
predecessor Master Servicer shall continue to perform its functions as Master
Servicer under this Agreement, in the case of termination, only until the date
specified in such termination notice or, if no such date is specified in a
notice of termination, until receipt of such notice and, in the case of
resignation, until the earlier of (x) the date 45 days from the delivery to the
Owner Trustee and the Trustee of written notice of such resignation (or written
confirmation of such notice) in accordance with the terms of this Agreement and
(y) the date upon which the predecessor Master Servicer shall become unable to
act as Master Servicer, as specified in the notice of resignation and
accompanying Opinion of Counsel. In the event of the Master Servicer's
termination hereunder, the Trustee shall appoint a successor Master Servicer,
and the successor Master Servicer shall accept its appointment by a written
assumption in form acceptable to the Owner Trustee and the Trustee. In the event
that a successor Master Servicer has not been appointed at the time when the
predecessor Master Servicer has ceased to act as Master Servicer in accordance
with this Section, the Trustee without further action shall automatically be
appointed the successor Master Servicer and the Trustee shall be entitled to the
Servicing Fee. Notwithstanding the above, the Trustee shall, if it shall be
unwilling or unable so to act, appoint or petition a court of competent
jurisdiction to appoint, any established institution, having a net worth of not
less than $50,000,000 and whose regular business shall include the
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servicing of Home Equity Loans and REO Property, as the successor to the Master
Servicer under this Agreement.
(b) Upon appointment, the successor Master Servicer (including the
Trustee acting as successor servicer) shall be the successor in all respects to
the predecessor Master Servicer and shall be subject to all the
responsibilities, duties and liabilities arising thereafter relating thereto
placed on the predecessor Master Servicer and shall be entitled to the Servicing
Fee and all the rights granted to the predecessor Master Servicer by the terms
and provisions of this Agreement. No successor Master Servicer shall be liable
for any acts or omissions of any predecessor Master Servicer.
(c) The Master Servicer may not resign unless it is prohibited from
serving as such by law or by requirement of any regulatory authority.
SECTION 7.3. Payment of Servicing Fee. If the Master Servicer shall
change, the predecessor Master Servicer shall be entitled to receive any accrued
and unpaid Servicing Fees through the date of the successor Master Servicer's
acceptance hereunder in accordance with Section 3.9.
SECTION 7.4. Notification to Noteholders and Certificateholders. Upon any
termination of, or appointment of a successor to, the Master Servicer pursuant
to this Article VII, the Owner Trustee shall give prompt written notice thereof
to Certificateholders and the Trustee shall give prompt written notice thereof
to Noteholders subject to the Rating Agency Condition.
SECTION 7.5. Waiver of Past Defaults. The Holders of Notes evidencing not
less than a majority of the Outstanding Amount of the Notes (or the Holders (as
defined in the Trust Agreement) of Certificates evidencing not less than a
majority of the outstanding Certificate Balance, as applicable, in the case of
any default which does not adversely affect the Trustee or the Noteholders) may,
on behalf of all Noteholders and Certificateholders, waive in writing any
default by the Master Servicer in the performance of its obligations hereunder
and its consequences, except a default in making any required deposits to or
payments from any of the Trust Accounts in accordance with this Agreement. Upon
any such waiver of a past default, such default shall cease to exist, and any
Master Servicer Default arising therefrom shall be deemed to have been remedied
for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereto.
ARTICLE VIII
Termination
SECTION 8.1. Optional Purchase of All Home Equity Loans. (a) On the last
day of any Due Period immediately preceding a Determination Date as of which the
then outstanding Pool Balance is __% or less of the Original Pool Balance, the
Seller shall have the option to purchase the Owner Trust Estate, other than the
Trust Accounts and the Certificate Distribution Account. To exercise such
option, the Seller shall deposit pursuant to Section 4.4 in the
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Collection Account an amount which, when added to the amounts on deposit in the
Collection Account for such Distribution Date, equals the sum of (a) the unpaid
principal amount of the then outstanding Class A-__ Notes, plus accrued and
unpaid interest thereon, plus (b) the Certificate Balance plus accrued and
unpaid interest thereon. The Class A-__ Notes and the Certificates will be
redeemed concurrently therewith.
(b) Upon any sale of the assets of the Trust pursuant to Section 9.2
of the Trust Agreement, the Master Servicer shall instruct the Trustee to
deposit the proceeds from such sale after all payments and reserves therefrom
(including the expenses of such sale) have been made (the "Insolvency Proceeds")
in the Collection Account. On the Distribution Date on which the Insolvency
Proceeds are deposited in the Collection Account (or, if such proceeds are not
so deposited on a Distribution Date, on the Distribution Date immediately
following such deposit), the Master Servicer shall instruct the Trustee to make,
and the Trustee shall make, the following deposits and distributions (after the
application on such Distribution Date of the Total Distribution Amount pursuant
to Section 4.5) from the Insolvency Proceeds and any funds remaining on deposit
in the Reserve Account (including the proceeds of any sale of investments
therein): (i) to the Note Distribution Account, any portion of the Noteholders'
Interest Distributable Amount not otherwise deposited into the Note Distribution
Account on such Distribution Date; (ii) to the Note Distribution Account, the
outstanding principal balance of the Notes (after giving effect to the reduction
in the outstanding principal balance of the Notes to result from the deposits
made in the Note Distribution Account on such Distribution Date); (iii) to the
Owner Trustee for deposit in the Certificate Distribution Account, any portion
of the Certificateholders' Interest Distributable Amount not otherwise deposited
into the Certificate Distribution Account on such Distribution Date; and (iv) to
the Owner Trustee for deposit in the Certificate Distribution Account, the
Certificate Balance and any Certificateholders' Principal Carryover Shortfall
Amount (after giving effect to the reduction in the Certificate Balance to
result from the deposits made in the Certificate Distribution Account on such
Distribution Date). Any Insolvency Proceeds remaining after the deposits
described above shall be paid to the GP Holder.
(c) Notice of any termination of the Trust shall be given by the
Master Servicer to the Owner Trustee, the Trustee and the Rating Agencies as
soon as practicable after the Master Servicer has received notice thereof.
(d) Following the satisfaction and discharge of the Indenture and
the payment in full of the principal of and interest on the Notes, the
Certificateholders will succeed to the rights of the Noteholders hereunder and
the Owner Trustee will succeed to the rights of, and assume the obligations of,
the Trustee pursuant to this Agreement.
ARTICLE IX
Administrative Duties of the Master Servicer
SECTION 9.1. Administrative Duties. (a) The Master Servicer shall perform
all its duties and the duties of the Issuer under the Depository Agreements. In
addition, the Master
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Servicer shall consult with the Owner Trustee as the Master Servicer deems
appropriate regarding the duties of the Issuer under the Indenture and the
Depository Agreements. The Master Servicer shall monitor the performance of the
Issuer and shall advise the Owner Trustee when action is necessary to comply
with the Issuer's duties under the Indenture and the Depository Agreements. The
Master Servicer shall prepare for execution by the Issuer or shall cause the
preparation by other appropriate Persons of all such documents, reports,
filings, instruments, certificates and opinions as it shall be the duty of the
Issuer to prepare, file or deliver pursuant to the Indenture and the Depository
Agreements. In furtherance of the foregoing, the Master Servicer shall take all
appropriate action that is the duty of the Issuer to take pursuant to the
Indenture.
(b) (i) In addition to the duties of the Master Servicer set forth
in this Agreement or any of the Basic Documents, the Master Servicer shall
perform such calculations and shall prepare for execution by the Issuer or the
Owner Trustee or shall cause the preparation by other appropriate Persons of all
such documents, reports, filings, instruments, certificates and opinions as it
shall be the duty of the Issuer or the Owner Trustee to prepare, file or deliver
pursuant to this Agreement or any of the Basic Documents, and at the request of
the Owner Trustee shall take all appropriate action that it is the duty of the
Issuer to take pursuant to this Agreement or any of the Basic Documents. Subject
to Section 9.4, and in accordance with the directions of the Owner Trustee, the
Master Servicer shall administer, perform or supervise the performance of such
other activities in connection with the Collateral (including the Basic
Documents) as are not covered by any of the foregoing provisions and as are
expressly requested by the Owner Trustee and are reasonably within the
capability of the Master Servicer.
(ii) Notwithstanding anything in this Agreement or any of the
Basic Documents to the contrary, the Master Servicer shall be responsible for
promptly notifying the Owner Trustee in the event that any withholding tax is
imposed on the Issuer's payments (or allocations of income) to an Owner (as
defined in the Trust Agreement) as contemplated in Section 5.2(c) of the Trust
Agreement. Any such notice shall specify the amount of any withholding tax
required to be withheld by the Owner Trustee pursuant to such provision.
(iii) Notwithstanding anything in this Agreement or the Basic
Documents to the contrary, the Master Servicer shall be responsible for
performance of the duties of the Owner Trustee set forth in Section 5.6(a), (b),
(c) and (d) of the Trust Agreement with respect to, among other things,
accounting and reports to Owners (as defined in the Trust Agreement); provided,
however, that the Owner Trustee shall retain responsibility for the distribution
of the Schedule K is necessary to enable each Certificateholder to prepare its
federal and state income tax returns.
(iv) The Master Servicer shall perform the duties of the
Master Servicer specified in Section 10.2 of the Trust Agreement required to be
performed in connection with the resignation or removal of the Owner Trustee,
and any other duties expressly required to be performed by the Master Servicer
under this Agreement or any of the Basic Documents.
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(v) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Master Servicer may enter into
transactions with or otherwise deal with any of its Affiliates; provided,
however, that the terms of any such transactions or dealings shall be in
accordance with any directions received from the Issuer and shall be, in the
Master Servicer's opinion, no less favorable to the Issuer in any material
respect.
(c) The Master Servicer shall prepare and file, on behalf of the
Seller, all tax returns, tax elections, financial statements and such annual or
other reports of the Issuer as are necessary for preparation of tax reports as
provided in Article V of the Trust Agreement, including without limitation forms
1099 and 1066. All tax returns will be signed by the Seller.
(d) With respect to matters that in the reasonable judgment of the
Master Servicer are non-ministerial, the Master Servicer shall not take any
action pursuant to this Article X unless within a reasonable time before the
taking of such action, the Master Servicer shall have notified the Owner Trustee
and the Trustee of the proposed action and the Owner Trustee and, with respect
to items (A), (B), (C) and (D) below, the Trustee shall not have withheld
consent or provided an alternative direction. For the purpose of the preceding
sentence, "non-ministerial matters" shall include: (A) the amendment of or any
supplement to the Indenture; (B) the initiation of any claim or lawsuit by the
Issuer and the compromise of any action, claim or lawsuit brought by or against
the Issuer (other than in connection with the collection of the Home Equity
Loans); (C) the amendment, change or modification of this Agreement or any of
the Basic Documents; (D) the appointment of successor Note Registrars, successor
Paying Agents and successor Trustees pursuant to the Indenture or the
appointment of Successor Master Servicers or the consent to the assignment by
the Note Registrar, Paying Agent or Trustee of its obligations under the
Indenture; and (E) the removal of the Trustee.
(e) Notwithstanding anything to the contrary in this Agreement,
except as expressly provided herein or in the other Basic Documents, the Master
Servicer, in its capacity hereunder, shall not be obligated to, and shall not,
(1) make any payments to the Noteholders or Certificateholders under the Basic
Documents, (2) sell the Indenture Trust Estate pursuant to Section 5.4 of the
Indenture, (3) take any other action that the Issuer directs the Master Servicer
not to take on its behalf or (4) in connection with its duties hereunder assume
any indemnification obligation of any other Person.
SECTION 9.2. Records. The Master Servicer shall maintain appropriate books
of account and records relating to services performed under this Agreement,
which books of account and records shall be accessible for inspection by the
Issuer at any time during normal business hours.
SECTION 9.3. Additional Information To Be Furnished to the Issuer. The
Master Servicer shall furnish to the Issuer from time to time such additional
information regarding the Collateral as the Issuer shall reasonably request.
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ARTICLE X
Miscellaneous Provisions
SECTION 10.1. Amendment. This Agreement may be amended by the Seller, the
Originators, the Representative, the Master Servicer and the Owner Trustee, with
the consent of the Trustee (which consent may not be unreasonably withheld), but
without the consent of any of the Noteholders or the Certificateholders, to cure
any ambiguity or defect, to correct or supplement any provisions in this
Agreement or for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions in this Agreement or of modifying in
any manner the rights of the Noteholders or the Certificateholders; provided,
however, that such action shall not, as evidenced by an Opinion of Counsel
delivered to the Owner Trustee and the Trustee, adversely affect in any material
respect the interests of any Noteholder or Certificateholder. This Agreement may
also be amended from time to time by the Seller, the Originators, the
Representative, the Master Servicer and the Owner Trustee, with the consent of
the Trustee, the consent of the Holders of Notes evidencing not less than a
majority of the Outstanding Amount of the Notes and the consent of the Holders
(as defined in the Trust Agreement) of Certificates evidencing not less than a
majority of the Certificate Balance for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of this Agreement
or of modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, that no such amendment shall (a) increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on Home Equity Loans or distributions that shall be
required to be made for the benefit of the Noteholders or the Certificateholders
or (b) reduce the aforesaid percentage of the Outstanding Amount of the Notes
and the Certificate Balance, the Holders of which are required to consent to any
such amendment, without the consent of the Holders of all the outstanding Notes
and the Holders (as defined in the Trust Agreement) of all the outstanding
Certificates of each class affected thereby. Prior to the execution of any such
amendment or consent, the Owner Trustee shall furnish written notification of
the substance of such amendment or consent to the Rating Agencies. Promptly
after the execution of any such amendment or consent, the Owner Trustee shall
furnish written notification of the substance of such amendment or consent to
each Certificateholder and the Trustee. It shall not be necessary for the
consent of Certificateholders or Noteholders pursuant to this Section to approve
the particular form of any proposed amendment or consent, but it shall be
sufficient if such consent shall approve the substance thereof. Prior to the
execution of any amendment to this Agreement, the Owner Trustee and the Trustee
shall be entitled to receive and rely upon an Opinion of Counsel stating that
the execution of such amendment is authorized or permitted by this Agreement and
that all conditions precedent to the execution and delivery of such amendment
have been satisfied and the Opinion of Counsel referred to in Section 10.2(i)(1)
has been delivered. The Owner Trustee and the Trustee may, but shall not be
obligated to, enter into any such amendment which affects the Owner Trustee's or
the Trustee's, as applicable, own rights, duties or immunities under this
Agreement or otherwise.
SECTION 10.2. Protection of Title to Trust. (a) The Seller shall execute
and file such financing statements and cause to be executed and filed such
continuation statements, all in such manner and in such places as may be
required by law fully to preserve, maintain and protect the interest of the
Issuer and the interests of the Trustee in the Home Equity Loans and in the
proceeds thereof. The Seller shall deliver (or cause to be delivered) to the
Owner Trustee and the
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Trustee file-stamped copies of, or filing receipts for, any document filed as
provided above, as soon as available following such filing.
(b) None of the Originators, the Seller nor the Master Servicer
shall change its name, identity or corporate structure in any manner that would,
could or might make any financing statement or continuation statement filed in
accordance with paragraph (a) above seriously misleading within the meaning of
Section 9-402(7) of the UCC, unless it shall have given the Owner Trustee and
the Trustee at least five days' prior written notice thereof and shall have
promptly filed appropriate amendments to all previously filed financing
statements or continuation statements.
(c) Each of the Originators, the Seller and the Master Servicer
shall have an obligation to give the Owner Trustee and the Trustee at least 60
days' prior written notice of any relocation of its principal executive office
if, as a result of such relocation, the applicable provisions of the UCC would
require the filing of any amendment of any previously filed financing or
continuation statement or of any new financing statement and shall promptly file
any such amendment. The Master Servicer shall at all times maintain each office
from which it shall service Home Equity Loans, and its principal executive
office, within the United States of America.
(d) The Master Servicer shall maintain accounts and records as to
each Home Equity Loan accurately and in sufficient detail to permit (i) the
reader thereof to know at any time the status of such Home Equity Loan,
including payments and recoveries made and payments owing (and the nature of
each) and (ii) reconciliation between payments or recoveries on (or with respect
to) each Home Equity Loan and the amounts from time to time deposited in the
Collection Account in respect of such Home Equity Loan.
(e) The Master Servicer shall maintain its computer systems so that,
from and after the time of sale under this Agreement of the Home Equity Loans,
the Master Servicer's master computer records (including any backup archives)
that refer to a Home Equity Loan shall indicate clearly the interest of the
Issuer and the Trustee in such Home Equity Loan and that such Home Equity Loan
is owned by the Issuer and has been pledged to the Trustee. Indication of the
Issuer's and the Trustee's interest in a Home Equity Loan shall be deleted from
or modified on the Master Servicer's computer systems when, and only when, the
related Home Equity Loan shall have been paid in full or repurchased by the
Seller or purchased by the Master Servicer.
(f) If at any time the Seller or the Master Servicer shall propose
to sell, grant a security interest in or otherwise transfer any interest in
mortgage loans to any prospective purchaser, lender or other transferee, the
Master Servicer shall give to such prospective purchaser, lender or other
transferee computer tapes, records or printouts (including any restored from
backup archives) that, if they shall refer in any manner whatsoever to any Home
Equity Loan, shall indicate clearly that such Home Equity Loan has been sold and
is owned by the Issuer and has been pledged to the Trustee.
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(g) The Master Servicer shall permit the Trustee and its agents at
any time during normal business hours to inspect, audit and make copies of and
abstracts from the Master Servicer's records regarding any Home Equity Loan.
(h) Upon request at any time the Owner Trustee or the Trustee shall
have reasonable grounds to believe that such request is necessary in connection
with the performance of its duties under this Agreement or any of the Basic
Documents, the Master Servicer shall furnish to the Owner Trustee or to the
Trustee, within five Business Days, a list of all Home Equity Loans (by contract
number and name of Mortgagor) then held as part of the Trust, together with a
reconciliation of such list to the Home Equity Loan Schedule and to each of the
Master Servicer's Certificates furnished before such request indicating removal
of Home Equity Loans from the Trust.
(i) The Master Servicer shall deliver to the Owner Trustee and
the Trustee: (1) promptly after the execution and delivery of this Agreement and
of each amendment thereto, an Opinion of Counsel either (A) stating that, in the
opinion of such counsel, all financing statements and continuation statements
have been executed and filed that are necessary fully to preserve and protect
the interest of the Owner Trustee and the Trustee in the Home Equity Loans, and
reciting the details of such filings or referring to prior Opinions of Counsel
in which such details are given, or (B) stating that, in the opinion of such
counsel, no such action shall be necessary to preserve and protect such
interest; and (2) within 120 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three months after
the Cutoff Date, an Opinion of Counsel, dated as of a date during such 120-day
period, either (A) stating that, in the opinion of such counsel, all financing
statements and continuation statements have been executed and filed that are
necessary fully to preserve and protect the interest of the Owner Trustee and
the Trustee in the Home Equity Loans, and reciting the details of such filings
or referring to prior Opinions of Counsel in which such details are given, or
(B) stating that, in the opinion of such counsel, no such action shall be
necessary to preserve and protect such interest. Each Opinion of Counsel
referred to in clause (l) or (2) above shall specify any action necessary (as of
the date of such opinion) to be taken in the following year to preserve and
protect such interest.
(i) The Seller shall, to the extent required by applicable law,
cause the Certificates and the Notes to be registered with the Commission
pursuant to Section 12(b) or Section 12(g) of the Exchange Act within the time
periods specified in such sections.
SECTION 10.3. Notices. All demands, notices and communications upon or to
the Seller, the Master Servicer, the Owner Trustee, the Trustee or the Rating
Agencies under this Agreement shall be in writing, personally delivered, sent by
overnight courier or mailed by certified mail, return receipt requested, and
shall be deemed to have been duly given upon receipt (a) in the case of the
Seller to Avco ABS Receivables Corp., ___________________________, Attention:
__________________________________, (b) in the case of the Master Servicer to
Avco Financial Services Management Company., (c) ___________________________,
Attention: _____________, in the case of the Originators or the Representative
to Avco Financial Services, Inc. ., ___________________________, Attention:
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____________________,(b) in the case of the Issuer or the Owner Trustee, at the
Corporate Trust Office (as defined in the Trust Agreement), (c) in the case of
the Trustee, at the Corporate Trust Office, (d) in the case of Moody's, to
Xxxxx'x Investors Service, Inc., to 00 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention of Asset Backed Securities Group, (e) in the case of Standard &
Poor's, to Standard & Poor's Ratings Group, 00 Xxxxxxxx (00xx Xxxxx), Xxx Xxxx,
Xxx Xxxx 00000, Attention of Asset Backed Surveillance Department and (f) in the
case of Fitch, to Fitch Investors Service, L.P., Xxx Xxxxx Xxxxxx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000 Attention of ___________________.
SECTION 10.4. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 5.4 and 6.3 and as provided in
the provisions of this Agreement concerning the resignation of the Master
Servicer, this Agreement may not be assigned by the Seller or the Master
Servicer.
SECTION 10.5. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Seller, the Master Servicer, the
Issuer, the Owner Trustee and for the benefit of the Certificateholders, the
Trustee and the Noteholders, as third-party beneficiaries, and nothing in this
Agreement, whether express or implied, shall be construed to give to any other
Person any legal or equitable right, remedy or claim in the Owner Trust Estate
or under or in respect of this Agreement or any covenants, conditions or
provisions contained herein.
SECTION 10.6. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 10.7. Separate Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 10.8. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 10.9. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK , WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 10.10. Assignment to Trustee. The Seller hereby acknowledges and
consents to any mortgage, pledge, assignment and grant of a security interest by
the Issuer to the Trustee pursuant to the Indenture for the benefit of the
Noteholders of all right, title and interest of the
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Issuer in, to and under the Home Equity Loans and/or the assignment of any or
all of the Issuer's rights and obligations hereunder to the Trustee.
SECTION 10.11. Nonpetition Covenant. Notwithstanding any prior termination
of this Agreement, the Master Servicer and the Seller shall not, prior to the
date which is one year and one day after the termination of this Agreement with
respect to the Issuer, acquiesce, petition or otherwise invoke or cause the
Issuer to invoke the process of any court or government authority for the
purpose of commencing or sustaining a case against the Issuer under any Federal
or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Issuer or any substantial part of its property, or ordering the winding
up or liquidation of the affairs of the Issuer.
SECTION 10.12. Limitation of Liability of Owner Trustee and Trustee. (a)
Notwithstanding anything contained herein to the contrary, this Agreement has
been countersigned by Name of Owner Trustee not in its individual capacity but
solely in its capacity as Owner Trustee of the Issuer and in no event shall Name
of Owner Trustee in its individual capacity or, except as expressly provided in
the Trust Agreement, as Owner Trustee have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Issuer hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto, as to all of which recourse shall be had solely to the assets
of the Issuer. For all purposes of this Agreement, in the performance of its
duties or obligations hereunder or in the performance of any duties or
obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and
entitled to the benefits of, the terms and provisions of Articles VI, VII and
VIII of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been accepted by not in its individual capacity but solely as
Trustee and in no event shall have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer hereunder
or in any of the certificates, notices or agreements delivered pursuant hereto,
as to all of which recourse shall be had solely to the assets of the Issuer.
SECTION 10.13. Independence of the Master Servicer. For all purposes of
this Agreement, the Master Servicer shall be an independent contractor and shall
not be subject to the supervision of the Issuer or the Owner Trustee with
respect to the manner in which it accomplishes the performance of its
obligations hereunder. Unless expressly authorized by the Issuer, the Master
Servicer shall have no authority to act for or represent the Issuer or the Owner
Trustee in any way and shall not otherwise be deemed an agent of the Issuer or
the Owner Trustee.
SECTION 10.14. No Joint Venture. Nothing contained in this Agreement (i)
shall constitute the Master Servicer and either of the Issuer or the Owner
Trustee as members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) shall be construed to
impose any liability as such on any of them or (iii) shall be deemed to confer
on any of them any express, implied or apparent authority to incur any
obligation or liability on behalf of the others.
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WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their respective duly authorized officers as of the
day and year first above written.
AVCO HOME EQUITY LOAN TRUST 199_-_
By: ______________________, not in its
individual capacity but solely as Owner
Trustee on behalf of the Trust,
By:
-----------------------------------------
Name:
Title:
AVCO FINANCIAL SERVICES MANAGEMENT
COMPANY, Master Servicer
By:
-----------------------------------------
Name:
Title:
AVCO FINANCIAL SERVICES, INC.,
Representative
By:
-----------------------------------------
Name:
Title:
AVCO ABS RECEIVABLES CORP.
By:
-----------------------------------------
Name:
Title:
EACH OF THE ORIGINATORS LISTED ON EXHIBIT
__ HERETO
By:
-----------------------------------------
Name:
Title:
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Acknowledged and Accepted:
_______________ , not in its individual
capacity but solely as Trustee,
By:
------------------------------------
Name:
Title:
Acknowledged and Accepted:
_______________, not in its individual
capacity but solely as Owner Trustee,
By:
------------------------------------
Name:
Title:
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