Exhibit 4.3
--------------------------------------------------------------------------------
INSURANCE AND INDEMNITY AGREEMENT
by and among
FINANCIAL GUARANTY INSURANCE COMPANY,
EQUIVANTAGE ACCEPTANCE CORP.
and
EQUIVANTAGE INC.
Dated as of November 1, 1996
$80,000,000
EquiVantage Home Equity Loan Trust 1996-4
Home Equity Loan Asset-Backed Certificates
Series 1996-4, Class A
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS; LIMITED RECOURSE
Section 1.01. Definitions..................................... 1
Section 1.02. Limited Recourse................................ 1
ARTICLE II REPRESENTATIONS, WARRANTIES AND
COVENANTS
Section 2.01. Representations and Warranties of the Sponsor... 2
Section 2.02. Representations and Warranties of the Company... 5
Section 2.03. Affirmative Covenants of the Sponsor............ 8
Section 2.04. Affirmative Covenants of the Company............ 11
Section 2.05. Negative Covenants of the Sponsor............... 14
Section 2.06. Negative Covenants of the Company............... 15
ARTICLE III THE POLICY; REIMBURSEMENT; INDEMNIFICATION
Section 3.01. Issuance of the Policy.......................... 16
Section 3.02. Payment of Fees and Premium..................... 16
Section 3.03. Reimbursement and Additional Payment Obligation. 17
Section 3.04. Indemnification................................. 17
Section 3.05. Subrogation..................................... 20
ARTICLE IV FURTHER AGREEMENTS
Section 4.01. Effective Date; Term of Agreement............... 20
Section 4.02. Obligations Absolute............................ 20
Section 4.03. Assignments; Reinsurance; Third-Party Rights.... 22
Section 4.04. Liability of FGIC............................... 22
Section 4.05. Waiver of FGIC Rights........................... 23
ARTICLE V EVENTS OF DEFAULT; REMEDIES
Section 5.01. Events of Default............................... 23
Section 5.02. Remedies; Waivers............................... 24
ARTICLE VI MISCELLANEOUS
Section 6.01. Amendments, Etc................................. 25
Section 6.02. Notices......................................... 25
i
Section 6.03. Payment Procedure............................... 26
Section 6.04. Severability.................................... 27
Section 6.05. Governing Law................................... 27
Section 6.06. Consent to Jurisdiction......................... 27
Section 6.07. Consent of FGIC................................. 28
Section 6.08. Counterparts.................................... 28
Section 6.09. Trial by Jury Waived............................ 28
Section 6.10 Limited Liability............................... 29
Section 6.11. Entire Agreement................................ 29
Appendix I -- Definitions
Appendix II -- Opinions of Counsel
Annex I -- Form of Financial Guaranty Insurance Policy
Appendix A -- Conditions Precedent to Issuance of the Policy
ii
INSURANCE AND INDEMNITY AGREEMENT
INSURANCE AND INDEMNITY AGREEMENT dated as of November 1, 1996, by and
among FINANCIAL GUARANTY INSURANCE COMPANY ("FGIC"), EQUIVANTAGE ACCEPTANCE
CORP. (the "Sponsor") and EQUIVANTAGE INC.
(the "Company").
INTRODUCTORY STATEMENTS
The Sponsor intends to deposit the Mortgage Loans in the Trust, which
shall issue Home Equity Loan Asset-Backed Certificates, Series 1996-4, Class A
pursuant to a Pooling and Servicing Agreement dated as of November 1, 1996 among
the Sponsor, the Company, as servicer, and the Trustee.
The Sponsor has requested that FGIC issue a financial guaranty insurance
policy guarantying certain distributions on the Securities (including any such
distributions subsequently avoided as a preference under applicable United
States bankruptcy law) upon the terms and subject to the conditions provided
herein and subject to compliance with certain procedures set forth in the
Pooling and Servicing Agreement.
The parties hereto desire to specify the conditions precedent to the
issuance of the Policy by FGIC, the payment of premium in respect of the Policy,
the indemnity and reimbursement to be provided to FGIC in respect of amounts
paid by FGIC under the Policy or otherwise and certain other matters.
In consideration of the premises and of the agreements herein contained,
FGIC, the Sponsor and the Company hereby agree as follows:
ARTICLE I
DEFINITIONS; LIMITED RECOURSE
Section 1.01. Definitions. Capitalized terms used herein shall have the
meanings provided in Appendix I hereto unless the context otherwise requires.
Section 1.02. Limited Recourse. Notwithstanding any provision of this
Agreement to the contrary, the payment obligations set forth herein (other than
those set forth in Sections 3.02(a), 3.02(b)(i) and 3.04) shall be non-recourse
obligations with respect to the Sponsor and the Company and shall be payable
only from monies available for such payment in accordance with the provisions of
the Pooling and Servicing Agreement.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Representations and Warranties of the Sponsor. The Sponsor
represents, warrants and covenants, as of the date hereof and as of the Date of
Issuance, as follows:
(a) Due Organization and Qualification. The Sponsor is a
corporation, duly organized, validly existing and in good standing under
the laws of the State of Delaware. The Sponsor is duly qualified to do
business, is in good standing and has obtained all necessary licenses,
permits, charters, registrations and approvals (together, "approvals")
necessary for the conduct of its business as currently conducted and as
described in the Offering Document and the performance of its obligations
under the Transaction Documents, in each jurisdiction in which the failure
to be so qualified or to obtain such approvals would render any Mortgage
Loan unenforceable in any respect or would otherwise have a material
adverse effect upon the Transaction.
(b) Power and Authority. The Sponsor has all necessary corporate
power and authority to conduct its business as currently conducted and as
described in the Offering Document, to execute, deliver and perform its
obligations under the Transaction Documents and to consummate the
Transaction.
(c) Due Authorization. The execution, delivery and performance of
the Transaction Documents by the Sponsor have been duly authorized by all
necessary corporate action and do not require any additional approvals or
consents or other action by or any notice to or filing with any Person,
including, without limitation, any governmental entity or the Sponsor's
stockholders.
(d) Noncontravention. Neither the execution and delivery of the
Transaction Documents by the Sponsor, the consummation of the transactions
contemplated thereby nor the satisfaction of the terms and conditions of
the Transaction Documents,
(i) conflicts with or results in any breach or violation of
any provision of the certificate of incorporation or by-laws of the
Sponsor or any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award currently in effect
having applicability to the Sponsor or any of its properties,
including regulations issued by an administrative agency or other
governmental authority having supervisory powers over the Sponsor,
(ii) constitutes a default by the Sponsor under or a breach of
any provision of any loan agreement, mortgage, indenture or other
2
agreement or instrument to which the Sponsor is a party or by which
it or any of its properties is or may be bound or affected, or
(iii) results in or requires the creation of any Lien upon or
in respect of any of the Sponsor's assets except as otherwise
expressly contemplated by the Transaction Documents.
(e) Legal Proceedings. There is no action, proceeding or
investigation by or before any court, governmental or administrative
agency or arbitrator against or affecting all or any of the Mortgage
Loans, or the Sponsor, or any properties or rights of the Sponsor, pending
or, to the Sponsor's knowledge after reasonable inquiry, threatened,
which, in any case, if decided adversely to the Sponsor, would result in a
Material Adverse Change with respect to the Sponsor or any Mortgage Loan.
(f) Valid and Binding Obligations. The Transaction Documents, when
executed and delivered by the Sponsor, will constitute the legal, valid
and binding obligations of the Sponsor, enforceable in accordance with
their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general equitable principles.
The Securities, when executed, authenticated and delivered in accordance
with the Pooling and Servicing Agreement, will be validly issued and
outstanding and entitled to the benefits of the Pooling and Servicing
Agreement and, together with the Class R Certificates, will evidence the
entire beneficial ownership interest in the Trust Fund.
(g) Financial Statements. The Financial Statements of the Company
(which includes the Sponsor's assets and operations), copies of which have
been furnished to FGIC by the Company, (i) are, as of the dates and for
the periods referred to therein, complete and correct in all material
respects, (ii) present fairly the financial condition and results of
operations of the Company as of the dates and for the periods indicated
and (iii) have been prepared in accordance with generally accepted
accounting principles consistently applied, except as noted therein
(subject as to interim statements to normal year-end adjustments). Since
the date of the most recent Financial Statements, there has been no
material adverse change in such financial condition or results of
operations. Except as disclosed in the Financial Statements, the Company
is not subject to any contingent liabilities or commitments that,
individually or in the aggregate, have a material possibility of causing a
Material Adverse Change in respect of the Sponsor.
(h) ERISA. The Sponsor is in compliance with ERISA and has not
incurred and does not reasonably expect to incur liabilities to the PBGC
under ERISA in connection with any Plan or Multiemployer Plan.
3
(i) Accuracy of Information. None of the Provided Documents contain
any statement of a material fact with respect to the Sponsor or the
Transaction that was untrue or misleading in any material respect when
made. Since the furnishing of the Provided Documents, there has been no
change, nor any development or event involving a prospective change known
to the Sponsor, that would render any of the Provided Documents untrue or
misleading in any material respect. There is no fact known to the Sponsor
which has a material possibility of causing a Material Adverse Change with
respect to the Sponsor or the Mortgage Loans.
(j) Compliance With Securities Laws. The offer and sale of the
Securities comply in all material respects with all requirements of law,
including all registration requirements of applicable securities laws.
Without limitation of the foregoing, the Offering Document does not
contain any untrue statement of a material fact and does not omit to state
a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they
were made, not misleading. Neither the Trust nor the Trust Fund is
required to be registered as an "investment company" under the Investment
Company Act. The Pooling and Servicing Agreement is not required to be
qualified under the Trust Indenture Act.
(k) Transaction Documents. Each of the representations and
warranties of the Sponsor contained in the Transaction Documents is true
and correct in all material respects and the Sponsor hereby makes each
such representation and warranty to, and for the benefit of, FGIC as if
the same were set forth in full herein.
(l) Compliance With Law, Etc. No practice, procedure or policy
employed or proposed to be employed by the Sponsor in the conduct of its
business violates any law, regulation, judgment, agreement, order or
decree applicable to the Sponsor which, if enforced, would result in a
Material Adverse Change with respect to the Sponsor.
(m) Good Title; Absence of Liens; Security Interest. The Sponsor is
the owner of, and has good and marketable title to, the Mortgage Loans
free and clear of all Liens and Restrictions on Transferability, and has
full right, corporate power and lawful authority to assign, transfer and
pledge the Mortgage Loans. In the event that, in contravention of the
intention of the parties, the transfer of the Mortgage Loans by the
Sponsor to the Trust is characterized as other than a sale, such transfer
shall be characterized as a secured financing, and the Trustee shall, for
the benefit of the Certificateholders and FGIC, have a valid and perfected
first priority security interest in the Mortgage Loans free and clear of
all Liens and Restrictions on Transferability.
4
(n) Taxes. The Sponsor has filed all federal and state tax returns
which are required to be filed and paid all taxes, including, any
assessments received by it, to the extent that such taxes have become due.
Any taxes, fees and other governmental charges payable by the Sponsor in
connection with the Transaction, the execution and delivery of the
Transaction Documents and the issuance of the Securities have been paid or
shall have been paid at or prior to the Date of Issuance.
(o) Solvency; Fraudulent Conveyance. The Sponsor is solvent and will
not be rendered insolvent by the transactions contemplated by the
Transaction Documents and, after giving effect to such transactions, the
Sponsor will not be left with an unreasonably small amount of capital with
which to engage in its business. The Sponsor does not intend to incur, or
believe that it has incurred, debts beyond its ability to pay such debts
as they mature. The Sponsor does not contemplate the commencement of
insolvency, bankruptcy, liquidation or consolidation proceedings or the
appointment of a receiver, liquidator, conservator, trustee or similar
official in respect of the Sponsor or any of its assets. The amount of
consideration being received by the Sponsor upon the sale of the
Securities to the Underwriters constitutes reasonably equivalent value and
fair consideration for the interest in the Mortgage Loans evidenced by the
Securities. The Sponsor is not transferring the Mortgage Loans to the
Trust or selling the Securities to the Underwriters, as provided in the
Transaction Documents, with any intent to hinder, delay or defraud any of
the Sponsor's creditors.
Section 2.02. Representations and Warranties of the Company. The Company
represents, warrants and covenants, as of the date hereof and as of the Date of
Issuance, as follows:
(a) Due Organization and Qualification. The Company is a
corporation, duly organized, validly existing and in good standing under
the laws of the State of Delaware. The Company and each of its
Subsidiaries is duly qualified to do business, is in good standing and has
obtained all necessary licenses, permits, charters, registrations and
approvals (together, "approvals") necessary for the conduct of its
business as currently conducted and as described in the Offering Document
and the performance of its obligations under the related Transaction
Documents, in each jurisdiction in which the failure to be so qualified or
to obtain such approvals would have a material adverse effect upon the
Transaction.
(b) Power and Authority. The Company has all necessary power and
authority to conduct its business as currently conducted, to execute,
deliver and perform its obligations under the related Transaction
Documents and to consummate the Transaction.
5
(c) Due Authorization. The execution, delivery and performance of
the related Transaction Documents by the Company have been duly authorized
by all necessary action and do not require any additional approvals or
consents or other action by or any notice to or filing with any Person,
including, without limitation, any governmental entity.
(d) Noncontravention. Neither the execution and delivery of the
related Transaction Documents by the Company, the consummation of the
transactions contemplated thereby nor the satisfaction of the terms and
conditions of the related Transaction Documents,
(i) conflicts with or results in any breach or violation of
any provision of the Certificate of Incorporation or Bylaws of the
Company or any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award currently in effect
having applicability to the Company or any of its properties,
including regulations issued by an administrative agency or other
governmental authority having supervisory powers over the Company,
(ii) constitutes a default by the Company under or a breach of
any provision of any loan agreement, mortgage, indenture or other
agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which it or any of its or their
properties is or may be bound or affected, or
(iii) results in or requires the creation of any Lien upon or
in respect of any of the Company's assets except as otherwise
expressly contemplated by the related Transaction Documents.
(e) Legal Proceedings. There is no action, proceeding or
investigation by or before any court, governmental or administrative
agency or arbitrator against or affecting all or any of the Mortgage
Loans, or the Company or any properties or rights of the Company pending
or, to the Company's knowledge after reasonable inquiry, threatened,
which, in any case, if decided adversely to the Company, would result in a
Material Adverse Change with respect to the Company or any Mortgage Loan.
(f) Valid and Binding Obligations. The related Transaction
Documents, when executed and delivered by the Company, will constitute the
legal, valid and binding obligations of the Company, enforceable in
accordance with their respective terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally and general equitable
principles.
6
(g) Financial Statements. The Financial Statements of the Company
(which includes the Sponsor's assets and operations), copies of which have
been furnished to FGIC by the Company, (i) are, as of the dates and for
the periods referred to therein, complete and correct in all material
respects, (ii) present fairly the financial condition and results of
operations of the Company as of the dates and for the periods indicated
and (iii) have been prepared in accordance with generally accepted
accounting principles consistently applied, except as noted therein
(subject as to interim statements to normal year-end adjustments). Since
the date of the most recent Financial Statements, there has been no
material adverse change in such financial condition or results of
operations. Except as disclosed in the Financial Statements, the Company
is not subject to any contingent liabilities or commitments that,
individually or in the aggregate, have a material possibility of causing a
Material Adverse Change in respect of the Company.
(h) ERISA. No Accumulated Funding Deficiency, whether or not waived,
has occurred with respect to any Plan. No Plan has been terminated, and no
Commonly Controlled Entity has withdrawn from any Multiemployer Plan which
could result in any liability under ERISA of a Commonly Controlled Entity.
No Reportable Event or other event or condition has occurred which could
result in the termination of any Plan by the PBGC. No Plan has an
Underfunding greater than $100,000. The aggregate amount of Underfunding
for all Underfunded Plans does not exceed $100,000. The liability to which
the Commonly Controlled Entities would become subject under ERISA if they
were to withdraw completely from all Multiemployer Plans as of the most
recent valuation date is not in excess of $100,000. The Multiemployer
Plans are neither in Reorganization (as defined in Section 4241 of ERISA)
nor Insolvent (as defined in Section 4245 of ERISA).
(i) Accuracy of Information. None of the Provided Documents contain
any statement of a material fact with respect to the Company or the
Transaction that was untrue or misleading in any material respect when
made. Since the furnishing of the Provided Documents, there has been no
change, nor any development or event involving a prospective change known
to the Company, that would render any of the Provided Documents untrue or
misleading in any material respect. There is no fact known to the Company
which has a material possibility of causing a Material Adverse Change with
respect to the Company or the Mortgage Loans.
(j) Transaction Documents. Each of the representations and
warranties of the Company contained in the related Transaction Documents
is true and correct in all material respects and the Company hereby makes
each such representation and warranty to, and for the benefit of, FGIC as
if the same were set forth in full herein.
7
(k) Compliance With Law, Etc. No practice, procedure or policy
employed or proposed to be employed by the Company in the conduct of its
business violates any law, regulation, judgment, agreement, order or
decree applicable to the Company which, if enforced, would result in a
Material Adverse Change with respect to the Company.
(l) Good Title; Absence of Liens; Security Interest. Immediately
prior to the sale of the Mortgage Loans to the Sponsor, the Company was
the owner of, and had good and marketable title to, the Mortgage Loans
free and clear of all Liens and Restrictions on Transferability, and had
full right, corporate power and lawful authority to assign, transfer and
pledge the Mortgage Loans to the Sponsor.
(m) Taxes. The Company, has filed all federal and state tax returns
which are required to be filed and paid all taxes, including any
assessments received by it, to the extent that such taxes have become due.
Any taxes, fees and other governmental charges payable by the Company in
connection with the Transaction, the execution and delivery of the
Transaction Documents and the issuance of the Securities have been paid or
shall have been paid at or prior to the Date of Issuance.
(n) Solvency; Fraudulent Conveyance. The Company is solvent and will
not be rendered insolvent by the transactions contemplated by the
Transaction Documents and, after giving effect to such transactions, the
Company will not be left with an unreasonably small amount of capital with
which to engage in its business. The Company does not intend to incur, or
believe that it has incurred, debts beyond its ability to pay such debts
as they mature. The Company does not contemplate the commencement of
insolvency, bankruptcy, liquidation or consolidation proceedings or the
appointment of a receiver, liquidator, conservator, trustee or similar
official in respect of the Company or any of its assets. The amount of
consideration being received by the Company upon the sale of the Mortgage
Loans to the Sponsor constitutes reasonably equivalent value and fair
consideration for the Mortgage Loans. The Company is not transferring the
Mortgage Loans to the Sponsor as provided in the Transaction Documents,
with any intent to hinder, delay or defraud any of the Company's
creditors.
Section 2.03. Affirmative Covenants of the Sponsor. The Sponsor hereby
agrees that during the Term of the Agreement, unless FGIC shall otherwise
expressly consent in writing:
(a) Compliance With Agreements and Applicable Laws. The Sponsor
shall perform each of its obligations under the Transaction Documents and
shall comply with all material requirements of, and the Securities shall
be offered and sold in accordance with, any law, rule or regulation
applicable to it or thereto,
8
or that are required in connection with its performance under any of the
Transaction Documents.
(b) Other Information.
(i) The Sponsor shall provide or cause to be provided to FGIC,
promptly upon receipt thereof, copies of all reports, statements,
certifications, schedules, or other similar items delivered to or by
the Sponsor pursuant to the terms of the Transaction Documents and,
promptly upon request, such other data as FGIC may reasonably
request; provided, however, that the Sponsor shall not be required
to deliver any such items if provision by some other party to FGIC
is required under the Transaction Documents unless such other party
wrongfully fails to deliver such item and FGIC requests the Sponsor
to deliver such item. The Sponsor shall, upon the request of FGIC,
permit FGIC or its authorized agents (A) to inspect the books and
records of the Sponsor as they may relate to the Securities, the
Mortgage Loans, the obligations of the Sponsor under the Transaction
Documents, the Transaction and the Sponsor's business; (B) to
discuss the affairs, finances and accounts of the Sponsor with the
President or Senior Vice President of the Sponsor; and (C) to
discuss the affairs, finances and accounts of the Sponsor with the
Sponsor's independent accountants, provided that the Chief Financial
Officer of the Sponsor shall have the right to be present during
such discussions. Such inspections and discussions shall be
conducted during normal business hours and shall not unreasonably
disrupt the business of the Sponsor. The books and records of the
Sponsor will be maintained at the address of the Sponsor designated
herein for receipt of notices, unless the Sponsor shall otherwise
advise the parties hereto in writing.
(ii) The Sponsor shall provide or cause to be provided to FGIC
an executed original copy of each document executed in connection
with the transaction within 30 days after the date of closing.
(c) Compliance Certificate. The Sponsor shall deliver to FGIC,
concurrently with the Company's compliance certificate delivered pursuant
to Section 2.04(c), a certificate signed by the President or a Senior Vice
President of the Sponsor stating that:
(i) a review of the Sponsor's performance under the
Transaction Documents during such period has been made under such
officer's supervision; and
(ii) to the best of such individual's knowledge following
reasonable inquiry, no Trigger Event, Default or Event of Default
has occurred, or if a Trigger Event, Default or Event of Default has
occurred,
9
specifying the nature thereof and, if the Sponsor has a right to
cure any such Default or Event of Default pursuant to Section 5.01,
stating in reasonable detail the steps, if any, being taken by the
Sponsor to cure such Default or Event of Default or to otherwise
comply with the terms of the agreement to which such Default or
Event of Default relates.
(d) Notice of Material Events. The Sponsor shall promptly inform
FGIC in writing of the occurrence of any of the following:
(i) the submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation (A)
against the Sponsor pertaining to the Mortgage Loans in general, (B)
with respect to a material portion of the Mortgage Loans or (C) in
which a request has been made for certification as a class action
(or equivalent relief) that would involve a material portion of the
Mortgage Loans;
(ii) any change in the location of the Sponsor's principal
office or any change in the location of the Sponsor's books and
records;
(iii) the occurrence of any Trigger Event, Default or Event of
Default;
(iv) any other event, circumstance or condition that has
resulted, or has a material possibility of resulting, in a Material
Adverse Change in respect of the Sponsor; or
(v) a change of (A) ownership or (B) executive management of
the Sponsor.
(e) Further Assurances. The Sponsor shall, upon the request of FGIC,
from time to time, execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, within thirty (30) days of such
request, such amendments hereto and such further instruments and take such
further action as may be reasonably necessary to effectuate the intention,
performance and provisions of the Transaction Documents or to protect the
interest of the Trustee, for the benefit of the Certificateholders and
FGIC, in the Mortgage Loans, free and clear of all Liens and Restrictions
on Transferability except those in favor of the Trustee, for the benefit
of the Certificateholders and FGIC, imposed by the Pooling and Servicing
Agreement. In addition, the Sponsor agrees to cooperate with S&P and
Moody's in connection with any review of the Transaction which may be
undertaken by S&P and Moody's after the date hereof.
(f) Retirement of Securities. The Sponsor shall cause the Trustee,
upon retirement of the Securities pursuant to the Pooling and Servicing
Agreement or otherwise, to furnish to FGIC a notice of such retirement,
and,
10
upon retirement of the Securities and the expiration of the term of the
Policy, to surrender the Policy to FGIC for cancellation.
(g) Corporate Existence. The Sponsor shall maintain its corporate
existence and shall at all times continue to be duly organized under the
laws of the State of Delaware and duly qualified and duly authorized (as
described in Sections 2.01(a), (b) and (c) hereof) and shall conduct its
business in accordance with the terms of its certificate of incorporation
and by-laws.
(h) Third-Party Beneficiary. The Sponsor agrees that FGIC shall have
all rights of a third-party beneficiary in respect of the Pooling and
Servicing Agreement and hereby incorporates and restates its
representations, warranties and covenants as set forth therein for the
benefit of FGIC.
Section 2.04. Affirmative Covenants of the Company. The Company hereby
agrees that during the Term of the Agreement, unless FGIC shall otherwise
expressly consent in writing:
(a) Compliance With Agreements and Applicable Laws. The Company
shall perform each of its obligations under the Transaction Documents and
any credit agreements and shall comply with all material requirements of
any law, rule or regulation applicable to it or thereto, or that are
required in connection with its performance under any of the Transaction
Documents.
(b) Financial Statements; Accountants' Reports; Other Information.
The Company shall keep or cause to be kept in reasonable detail books and
records of account of the Company's assets and business. The Company shall
furnish or cause to be furnished to FGIC:
(i) Annual Financial Statements. As soon as available, and in
any event within 90 days after the close of each year of the
Company, the audited balance sheet of the Company and the audited
profit and loss statement and statement of cash flows of the Company
for such year, all in reasonable detail and stating in comparative
form the respective figures for the corresponding date and period in
the preceding year, prepared in accordance with generally accepted
accounting principles, consistently applied, and accompanied by the
certificate of the Company's independent accountants (who shall be a
nationally recognized firm or otherwise acceptable to FGIC).
(ii) Quarterly Financial Statements. As soon as available, and
in any event within 45 days after the close of each of the first
three quarters of each year of the Company, unaudited balance sheet
of the Company and the unaudited profit and loss statement and
statement of cash flows of the Company for the portion of the year
then ended, all in
11
reasonable detail and stating in comparative form the respective
figures for the corresponding date and period in the preceding year,
prepared in accordance with generally accepted accounting
principles, consistently applied (subject to normal year-end
adjustments).
(iii) Accountants' Reports. If a Trigger Event has occurred,
copies of any reports submitted to the Company by its independent
accountants in connection with any examination of the financial
statements of the Company, promptly upon receipt thereof.
(iv) Other Information. Promptly upon receipt thereof, copies
of all reports, statements, certifications, schedules, or other
similar items delivered to or by the Company pursuant to the terms
of the Transaction Documents and, promptly upon request, such other
data as FGIC may reasonably request; provided, however, that the
Company shall not be required to deliver any such items if provision
by some other party to FGIC is required under the Transaction
Documents unless such other party wrongfully fails to deliver such
item and FGIC requests the Company to deliver such item. The Company
shall, upon the request of FGIC, permit FGIC or its authorized
agents (A) to inspect the books and records of the Company as they
may relate to the obligations of the Company under the Transaction
Documents, the Transaction and the Company's business; (B) to
discuss the affairs, finances and accounts of the Company with the
President or Senior Vice President of the Company, no more
frequently than annually; and (C) to discuss the affairs, finances
and accounts of the Company with the Company's independent
accountants, provided that the Chief Financial Officer of the
Company shall have the right to be present during such discussions.
Such inspections and discussions shall be conducted during normal
business hours and shall not unreasonably disrupt the business of
the Company. In addition, the Company shall promptly (but in no case
more than 30 days following issuance or receipt by the Commonly
Controlled Entity) provide to FGIC a copy of all correspondence
between a Commonly Controlled Entity and the PBGC, IRS, Department
of Labor or the administrators of a Multiemployer Plan relating to
any Reportable Event or the underfunded status, termination or
possible termination of a Plan or a Multiemployer Plan. The books
and records of the Company will be maintained at the address of the
Company designated herein for receipt of notices, unless the Company
shall otherwise advise the parties hereto in writing.
(v) The Company shall provide or cause to be provided to FGIC
an executed original copy of each document executed in connection
with the Transaction within 30 days after the date of closing.
12
(vi) The Company shall promptly inform FGIC in writing (A) if
the Company's current shareholders of the Company's voting common
stock cease to own 51% or a greater share of such stock or (B) of
the occurrence of a change of executive management of the Company.
All financial statements specified in clauses (i) and (ii) above shall be
furnished in consolidated form for the Company and all Subsidiaries in the
event the Company shall consolidate its financial statements with its
Subsidiaries.
(c) Compliance Certificate. The Company shall deliver to FGIC
concurrently with the delivery of the financial statements required
pursuant to Section 2.04(b)(i) hereof (and concurrently with the delivery
of the financial statements required pursuant to Section 2.04(b)(ii)
hereof, if a Trigger Event has occurred), a certificate signed by the
President or Senior Vice President of the Company stating that:
(i) a review of the Company's performance under the
Transaction Documents during such period has been made under such
officer's supervision;
(ii) to the best of such individual's knowledge following
reasonable inquiry, no Trigger Event, Default or Event of Default
has occurred, or if a Trigger Event, Default or Event of Default has
occurred, specifying the nature thereof and, if the Company has a
right to cure any such Default or Event of Default pursuant to
Section 5.01, stating in reasonable detail the steps, if any, being
taken by the Company to cure such Default or Event of Default or to
otherwise comply with the terms of the agreement to which such
Default or Event of Default relates; and
(iii) the attached financial reports submitted in accordance
with Section 2.04(b)(i) or (ii) hereof, as applicable, are complete
and correct in all material respects and present fairly the
financial condition and results of operations of the Company as of
the dates and for the periods indicated, in accordance with
generally accepted accounting principles consistently applied
(subject as to interim statements to normal year-end adjustments).
(d) Notice of Material Events. The Company shall promptly inform
FGIC in writing of the occurrence of any of the following:
(i) any change in the location of the Company's principal
office or any change in the location of the Company's books and
records;
(ii) the occurrence of any Trigger Event, Default or Event of
Default; or
13
(iii) any other event, circumstance or condition that has
resulted, or has a material possibility of resulting, in a Material
Adverse Change in respect of the Company.
(e) Further Assurances. The Company shall, upon the request of FGIC,
from time to time, execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, within thirty (30) days of such
request, such amendments hereto and such further instruments and take such
further action as may be reasonably necessary to effectuate the intention,
performance and provisions of the Transaction Documents or to protect the
interest of the Trustee, for the benefit of the Certificateholders and
FGIC, in the Mortgage Loans, free and clear of all Liens and Restrictions
on Transferability except those in favor of the Trustee, for the benefit
of the Certificateholders and FGIC, imposed by the Pooling and Servicing
Agreement. In addition, the Company agrees to cooperate with S&P and
Moody's in connection with any review of the Transaction which may be
undertaken by S&P and Moody's after the date hereof.
(f) Existence. The Company shall maintain its corporate existence
and shall at all times continue to be duly organized under the laws of the
State of Delaware and duly qualified and duly authorized (as described in
Sections 2.02(a), (b) and (c) hereof) and shall conduct its business in
accordance with the terms of its certificate of incorporation and by-laws.
(g) Third-Party Beneficiary. The Company agrees that FGIC shall have
all rights of a third-party beneficiary in respect of the Pooling and
Servicing Agreement and hereby incorporates and restates its
representations, warranties and covenants as set forth therein for the
benefit of FGIC.
(h) Maintenance of Equity. The Company has and shall maintain equity
of at least $10,000,000, as determined in accordance with generally
accepted accounting principles, for the term of this Agreement.
(i) Management Changes. If Xxxx X. Xxxxx should cease to serve as an
executive officer of the Company, within 30 days thereafter the Company
shall appoint as his replacement a person who is (i) qualified and
experienced in the Servicer's type of business, (ii) experienced in a
similar executive position and (iii) competent to serve in such capacity.
Section 2.05. Negative Covenants of the Sponsor. The Sponsor hereby agrees
that during the Term of the Agreement, unless FGIC shall otherwise expressly
consent in writing:
(a) Restrictions on Liens. The Sponsor shall not (i) create, incur
or suffer to exist, or agree to create, incur or suffer to exist, or
consent to cause or permit in the future (upon the happening of a
contingency or otherwise) the
14
creation, incurrence or existence of any Lien or Restriction on
Transferability on the Mortgage Loans except for those in favor of the
Trustee, for the benefit of the Certificateholders and FGIC, imposed by
the Pooling and Servicing Agreement or (ii) sign or file under the Uniform
Commercial Code of any jurisdiction any financing statement which names
the Sponsor as a debtor, or sign any security agreement authorizing any
secured party thereunder to file such financing statement, with respect to
the Mortgage Loans, except in each case any such instrument solely
securing the rights and preserving the Lien of the Trustee, for the
benefit of the Certificateholders and FGIC.
(b) Impairment of Rights. The Sponsor shall not take any action, or
fail to take any action, except with the prior written approval of FGIC,
if such action or failure to take action is likely to (i) interfere with
the enforcement of any rights under the Transaction Documents that are
material to the rights, benefits or obligations of the Trustee, the
Certificateholders or FGIC, (ii) result in a Material Adverse Change in
respect of any Mortgage Loan or (iii) impair the ability of the Sponsor to
perform its obligations under the Transaction Documents.
(c) Waiver, Amendments, Etc. The Sponsor shall not waive, modify or
amend, or consent to any waiver, modification or amendment of, any of the
provisions of any of the Transaction Documents, except with the prior
written approval of FGIC.
Section 2.06. Negative Covenants of the Company. The Company hereby agrees
that during the Term of the Agreement, unless FGIC shall otherwise expressly
consent in writing:
(a) Restrictions on Liens. The Company shall not (i) create, incur
or suffer to exist, or agree to create, incur or suffer to exist, or
consent to cause or permit in the future (upon the happening of a
contingency or otherwise) the creation, incurrence or existence of any
Lien or Restriction on Transferability on the Mortgage Loans except for
the Lien in favor of the Trustee, for the benefit of the
Certificateholders and FGIC, and the Restrictions on Transferability
imposed by the Pooling and Servicing Agreement or (ii) sign or file under
the Uniform Commercial Code of any jurisdiction any financing statement
which names the Company as a debtor, or sign any security agreement
authorizing any secured party thereunder to file such financing statement,
with respect to the Mortgage Loans, except in each case any such
instrument solely securing the rights and preserving the Lien of the
Trustee, for the benefit of the Certificateholders and FGIC.
(b) Impairment of Rights. The Company shall not take any action, or
fail to take any action, except with the prior written approval of FGIC,
if such action or failure to take action is likely to (i) interfere with
the enforcement of
15
any rights under the Transaction Documents that are material to the
rights, benefits or obligations of the Trustee, the Certificateholders or
FGIC, (ii) result in a Material Adverse Change in respect of any Mortgage
Loan or (iii) impair the ability of the Company to perform its obligations
under the Transaction Documents, including any consolidation, merger with
any Person or any transfer of all or any material amount of the Company's
assets to any other Person if such consolidation, merger or transfer would
materially impair the net worth of the Company or any successor Person
obligated, after such event, to perform the Company's obligations under
the Transaction Documents.
(c) Waiver, Amendments, Etc. The Company shall not waive, modify or
amend, or consent to any waiver, modification or amendment of, any of the
provisions of any of the Transaction Documents, except with the prior
written approval of FGIC.
(d) Successor Sub-Servicer. The Company shall not terminate or
designate, or consent to the termination or designation of, a sub-servicer
or any successor thereto without the prior written consent of FGIC.
ARTICLE III
THE POLICY; REIMBURSEMENT; INDEMNIFICATION
Section 3.01. Issuance of the Policy. FGIC agrees to issue the Policy
subject to satisfaction of the conditions precedent set forth in Appendix A
hereto.
Section 3.02. Payment of Fees and Premium.
(a) Inducement Letter Fees and Expenses. On the Date of Issuance,
the Company shall pay or cause to be paid the amounts specified with
respect to fees, expenses and disbursements in the Inducement Letter,
unless otherwise agreed between the Company and FGIC. All periodic and
subsequent fees of S&P or Moody's with respect to, and directly allocable
to, the Securities shall be for the account of, and shall be billed to,
the Company. The fees for any other rating agency shall be paid by the
party requesting such other agency's rating, unless such other agency is a
substitute for S&P or Moody's in the event that S&P or Xxxxx'x is no
longer rating the Securities, in which case the cost for such agency shall
be paid by the Company.
(b) Premium. In consideration of the issuance by FGIC of the Policy,
FGIC shall be entitled to receive the Premium as and when due in
accordance with the terms of the Inducement Letter (i) in the case of
Premium due on or before the Date of Issuance, directly from the Company
and (ii) in the case of the Premium due after the Date of Issuance,
pursuant to Section 7.5(b)(i) of the
16
Pooling and Servicing Agreement. The Premium paid hereunder or under the
Pooling and Servicing Agreement shall be nonrefundable without regard to
whether FGIC makes any payment under the Policy or any other circumstances
relating to the Securities or provision being made for payment of the
Securities prior to maturity.
Section 3.03. Reimbursement and Additional Payment Obligation. The Sponsor
and the Company agree to pay to FGIC the following amounts as and when incurred:
(a) a sum equal to the total of all amounts paid by FGIC under the
Policy;
(b) any and all out-of-pocket charges, fees, costs and expenses
which FGIC may reasonably pay or incur, including, but not limited to,
attorneys' and accountants' fees and expenses, in connection with (i) in
the event of payments under the Policy, any accounts established to
facilitate payments under the Policy, to the extent FGIC has not been
immediately reimbursed on the date that any amount is paid by FGIC under
the Policy, or other administrative expenses relating to such payments
under the Policy, (ii) the enforcement, defense or preservation of any
rights in respect of any of the Transaction Documents, including
defending, monitoring or participating in any litigation or proceeding
(including any insolvency or bankruptcy proceeding in respect of any
Transaction participant or any affiliate thereof) relating to any of the
Transaction Documents, any party to any of the Transaction Documents or
the Transaction, (iii) any amendment, waiver or other action with respect
to, or related to, any Transaction Document whether or not executed or
completed, (iv) any review or investigation made by FGIC in those
circumstances where its approval or consent is sought under any of the
Transaction Documents;
(c) interest on any and all amounts described in Section 3.03(a)
from the date due to FGIC pursuant to the provisions hereof until payment
thereof in full, payable to FGIC at the Late Payment Rate per annum; and
(d) any payments made by FGIC on behalf of, or advanced to, the
Sponsor or the Company, including, without limitation, any amounts payable
by the Sponsor or the Company pursuant to the Securities or any other
Transaction Documents; and any payments made by FGIC as, or in lieu of,
any servicing, management, trustee, custodial or administrative fees
payable, in the sole discretion of FGIC to third parties in connection
with the Transaction.
Section 3.04. Indemnification.
(a) Indemnification by the Sponsor. In addition to any and all
rights of reimbursement, indemnification, subrogation and any other rights
pursuant hereto or under law or in equity, the Sponsor agrees to pay, and
to protect,
17
indemnify and save harmless, FGIC and its officers, directors,
shareholders, employees, agents and each Person, if any, who controls FGIC
within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act from and against any and all claims, losses,
liabilities (including penalties), actions, suits, judgments, demands,
damages, costs or expenses (including, without limitation, fees and
expenses of attorneys, consultants and auditors and reasonable costs of
investigations) of any nature arising out of or relating to the
transactions contemplated by the Transaction Documents by reason of:
(i) the negligence, bad faith, willful misconduct,
misfeasance, malfeasance or theft committed by any director,
officer, employee or agent of the Sponsor;
(ii) the breach by the Sponsor of any representation, warranty
or covenant under any of the Transaction Documents or the
occurrence, in respect of the Sponsor, under any of the Transaction
Documents of any "event of default" or any event which, with the
giving of notice or the lapse of time or both, would constitute any
"event of default"; or
(iii) any untrue statement or alleged untrue statement of a
material fact contained in any Offering Document or any omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, except insofar as such claims arise out of or are based
upon any untrue statement or omission in information included in an
Offering Document and furnished by FGIC in writing expressly for use
therein (all such information so furnished being referred to herein
as "FGIC Information"), it being understood that, in respect of the
initial Offering Document, the FGIC Information is limited to the
information included under the caption "The Certificate Insurer" and
the financial statements of FGIC appended thereto.
(b) Indemnification by the Company. In addition to any and all
rights of reimbursement, indemnification, subrogation and any other rights
pursuant hereto or under law or in equity, the Company agrees to pay, and
to protect, indemnify and save harmless, FGIC and its officers, directors,
shareholders, employees, agents and each Person, if any, who controls FGIC
within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act from and against any and all claims, losses,
liabilities (including penalties), actions, suits, judgments, demands,
damages, costs or expenses (including, without limitation, fees and
expenses of attorneys, consultants and auditors and reasonable costs of
investigations) of any nature arising out of or relating to the
transactions contemplated by the Transaction Documents by reason of:
18
(i) the negligence, bad faith, willful misconduct,
misfeasance, malfeasance or theft committed by any director,
officer, employee or agent of the Company;
(ii) the breach by the Company of any representation, warranty
or covenant under any of the Transaction Documents or the
occurrence, in respect of the Company, under any of the Transaction
Documents of any "event of default" or any event which, with the
giving of notice or the lapse of time or both, would constitute any
"event of default"; or
(iii) any untrue statement or alleged untrue statement of a
material fact contained in any Offering Document or any omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, except insofar as such claims arise out of or are based
upon any untrue statement or omission in the FGIC Information.
(c) Conduct of Actions or Proceedings. If any action or proceeding
(including any governmental investigation) shall be brought or asserted
against FGIC, any officer, director, shareholder, employee or agent of
FGIC or any Person controlling FGIC (individually, an "Indemnified Party"
and, collectively, the "Indemnified Parties") in respect of which
indemnity may be sought from the Sponsor or the Company (the "Indemnifying
Party") hereunder, FGIC shall promptly notify the Indemnifying Party in
writing, and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to FGIC and
the payment of all expenses. An Indemnified Party shall have the right to
employ separate counsel in any such action and to participate in the
defense thereof at the expense of the Indemnified Party; provided,
however, that the fees and expenses of such separate counsel shall be at
the expense of the Indemnifying Party only if (i) the Indemnifying Party
has agreed to pay such fees and expenses, (ii) the Indemnifying Party
shall have failed to assume the defense of such action or proceeding and
employ counsel satisfactory to FGIC in any such action or proceeding or
(iii) the named parties to any such action or proceeding (including any
impleaded parties) include both the Indemnified Party and the Indemnifying
Party, and the Indemnified Party shall have been advised by counsel that
(A) there may be one or more legal defenses available to it which are
different from or additional to those available to the Indemnifying Party
and (B) the representation of the Indemnifying Party and the Indemnified
Party by the same counsel would be inappropriate or contrary to prudent
practice (in which case, if the Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not
have the right to assume the defense of such action or proceeding on
behalf of such Indemnified Party, it being understood, however, that the
Indemnifying Party shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings
19
in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys at any time for the Indemnified Parties,
which firm shall be designated in writing by FGIC). The Indemnifying Party
shall not be liable for any settlement of any such action or proceeding
effected without its written consent to the extent that any such
settlement shall be prejudicial to the Indemnifying Party, but, if settled
with its written consent, or if there be a final judgment for the
plaintiff in any such action or proceeding with respect to which the
Indemnifying Party shall have received notice in accordance with this
subsection (c), the Indemnifying Party agrees to indemnify and hold the
Indemnified Parties harmless from and against any loss or liability by
reason of such settlement or judgment.
(d) Contribution. To provide for just and equitable contribution if
the indemnification provided by the Indemnifying Party is determined to be
unavailable for any Indemnified Party (other than due to application of
this Section), the Indemnifying Party shall contribute to the losses
incurred by the Indemnified Party on the basis of the relative fault of
the Indemnifying Party, on the one hand, and the Indemnified Party, on the
other hand.
Section 3.05. Subrogation. Subject only to the priority of payment
provisions of the Pooling and Servicing Agreement, the Sponsor and the Company
acknowledge that, to the extent of any payment made by FGIC pursuant to the
Policy, the rights of FGIC are to be fully subrogated to the extent of such
payment and any additional interest due on any late payment, to the rights of
the Certificateholders to any moneys paid or payable in respect of the
Securities under the Transaction Documents or otherwise. The Sponsor and the
Company agree to such subrogation and, further, agree to execute such
instruments and to take such actions as, in the sole judgment of FGIC, are
necessary to evidence such subrogation and to perfect the rights of FGIC to
receive any moneys paid or payable in respect of the Securities under the
Transaction Documents or otherwise.
ARTICLE IV
FURTHER AGREEMENTS
Section 4.01. Effective Date; Term of Agreement. This Agreement shall take
effect on the Date of Issuance and shall remain in effect until the later of (a)
such time as FGIC is no longer subject to a claim under the Policy and the
Policy shall have been surrendered to FGIC for cancellation and (b) all amounts
payable to FGIC and the Certificateholders under the Transaction Documents and
under the Securities have been paid in full; provided, however, that the
provisions of Sections 3.02, 3.03 and 3.04 hereof shall survive any termination
of this Agreement.
Section 4.02. Obligations Absolute.
20
(a) The payment obligations of the Sponsor and the Company
hereunder shall be absolute and unconditional, and shall be paid strictly
in accordance with this Agreement under all circumstances irrespective of
(i) any lack of validity or enforceability of, or any amendment or other
modifications of, or waiver with respect to, any of the Transaction
Documents, the Securities or the Policy; (ii) any exchange or release of
any other obligations hereunder; (iii) the existence of any claim, setoff,
defense, reduction, abatement or other right which the Sponsor or the
Company may have at any time against FGIC or any other Person; (iv) any
document presented in connection with the Policy proving to be forged,
fraudulent, invalid or insufficient in any respect, including any failure
to strictly comply with the terms of the Policy, or any statement therein
being untrue or inaccurate in any respect; (v) any failure of the Sponsor
to receive the proceeds from the sale of the Securities; (vi) any breach
by the Sponsor or the Company of any representation, warranty or covenant
contained in any of the Transaction Documents; or (vii) any other
circumstances, other than payment in full, which might otherwise
constitute a defense available to, or discharge of, the Sponsor or the
Company in respect of any Transaction Document.
(b) The Sponsor and the Company and any and all others who are now
or may become liable for all or part of the obligations of the Sponsor or
the Company under this Agreement agree to be bound by this Agreement and
(i) to the extent permitted by law, waive and renounce any and all
redemption and exemption rights and the benefit of all valuation and
appraisement privileges against the indebtedness, if any, and obligations
evidenced by any Transaction Document or by any extension or renewal
thereof; (ii) waive presentment and demand for payment, notices of
nonpayment and of dishonor, protest of dishonor and notice of protest;
(iii) waive all notices in connection with the delivery and acceptance
hereof and all other notices in connection with the performance, default
or enforcement of any payment hereunder except as required by the
Transaction Documents; (iv) waive all rights of abatement, diminution,
postponement or deduction, or to any defense other than payment, or to any
right of setoff or recoupment arising out of any breach under any of the
Transaction Documents, by any party thereto or any beneficiary thereof, or
out of any obligation at any time owing to the Sponsor or the Company; (v)
agree that any consent, waiver or forbearance hereunder with respect to an
event shall operate only for such event and not for any subsequent event;
(vi) consent to any and all extensions of time that may be granted by FGIC
with respect to any payment hereunder or other provisions hereof and to
the release of any security at any time given for any payment hereunder,
or any part thereof, with or without substitution, and to the release of
any Person or entity liable for any such payment; and (vii) consent to the
addition of any and all other makers, endorsers, guarantors and other
obligors for any payment hereunder, and to the acceptance of any and all
other security for any payment hereunder, and agree that the addition of
any such obligors or security shall not affect the liability of the
parties hereto for any payment hereunder.
21
(c) Nothing herein shall be construed as prohibiting the Sponsor or
the Company from pursuing any rights or remedies it may have against any
Person other than FGIC in a separate legal proceeding.
Section 4.03. Assignments; Reinsurance; Third-Party Rights.
(a) This Agreement shall be a continuing obligation of the parties
hereto and shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Neither the
Sponsor nor the Company may assign its rights under this Agreement, or
delegate any of its duties hereunder, without the prior written consent of
FGIC. Any assignment made in violation of this Agreement shall be null and
void.
(b) FGIC shall have the right to give participations in its rights
under this Agreement and to enter into contracts of reinsurance with
respect to the Policy upon such terms and conditions as FGIC may in its
discretion determine; provided, however, that no such participation or
reinsurance agreement or arrangement shall relieve FGIC of any of its
obligations hereunder or under the Policy.
(c) In addition, FGIC shall be entitled to assign or pledge to any
bank or other lender providing liquidity or credit with respect to the
Transaction or the obligations of FGIC in connection therewith any rights
of FGIC under the Transaction Documents or with respect to any real or
personal property or other interests pledged to FGIC, or in which FGIC has
a security interest, in connection with the Transaction.
(d) Except as provided herein with respect to participants and
reinsurers, nothing in this Agreement shall confer any right, remedy or
claim, express or implied, upon any Person, including, particularly, any
Certificateholder, other than FGIC, against the Sponsor or the Company,
and all the terms, covenants, conditions, promises and agreements
contained herein shall be for the sole and exclusive benefit of the
parties hereto and their successors and permitted assigns. Neither the
Trustee nor any Certificateholder shall have any right to payment from any
premiums paid or payable hereunder or from any other amounts paid by the
Sponsor or the Company pursuant to Section 3.02, 3.03 or 3.04 hereof.
Section 4.04. Liability of FGIC. Neither FGIC nor any of its officers,
directors or employees shall be liable or responsible for: (a) the use which may
be made of the Policy by the Trustee or for any acts or omissions of the Trustee
in connection therewith or (b) the validity, sufficiency, accuracy or
genuineness of documents delivered to FGIC (or its Fiscal Agent) in connection
with any claim under the Policy, or of any signatures thereon, even if such
documents or signatures should in fact prove to be in any or all respects
invalid, insufficient, fraudulent or forged (unless FGIC had actual knowledge
22
thereof). In furtherance and not in limitation of the foregoing, FGIC (or its
Fiscal Agent) may accept documents that appear on their face to be in order,
without responsibility for further investigation.
Section 4.05. Waiver of FGIC Rights. With respect to its rights under any
of the Transaction Documents, FGIC shall give notice to each of the Rating
Agencies of any intent by FGIC to waive: (i) any Servicer Event of Default, (ii)
any rights to require a repurchase of Mortgage Loans, (iii) its right to give
consent. In the event of any such waiver by FGIC, each Rating Agency shall have
confirmed in writing that no additional capital requirement is necessary as a
result of such waiver.
ARTICLE V
EVENTS OF DEFAULT; REMEDIES
Section 5.01. Events of Default. The occurrence of any of the following
events shall constitute an Event of Default hereunder with respect to the
Sponsor or the Company, severally and not jointly:
(a) any representation or warranty made by the Sponsor or the
Company under any of the Transaction Documents, or in any certificate or
report furnished under any of the Transaction Documents, shall prove to be
untrue or incorrect in any material respect; provided, however, that if
the Sponsor or the Company effectively cures any such defect in any
representation or warranty under any Transaction Document, or certificate
or report furnished under any Transaction Document, within the time period
specified in the relevant Transaction Document as the cure period
therefor, such defect shall not in and of itself constitute an Event of
Default hereunder;
(b)(i) the Sponsor or the Company shall fail to pay when due any
amount payable by the Sponsor under any of the Transaction Documents
unless such amounts are paid in full within any applicable cure period
explicitly provided for under the relevant Transaction Document; (ii) the
Sponsor or the Company shall have asserted that any of the Transaction
Documents to which it is a party is not valid and binding on the parties
thereto; or (iii) any court, governmental authority or agency having
jurisdiction over any of the parties to any of the Transaction Documents
or any property thereof shall find or rule that any material provision of
any of the Transaction Documents is not valid and binding on the parties
thereto;
(c) the Sponsor or the Company shall fail to perform or observe any
other covenant or agreement contained in any of the Transaction Documents
(except for the obligations described under clause (b) above) and such
failure shall
23
continue for a period of 30 days after written notice given to it;
provided, however, that, if such failure shall be of a nature that it
cannot be cured within 30 days, such failure shall not constitute an Event
of Default hereunder if within such 30-day period the Sponsor or the
Company, as the case may be, shall have given notice to FGIC of corrective
action it proposes to take, which corrective action is agreed in writing
by FGIC to be satisfactory and the Sponsor or the Company shall thereafter
pursue such corrective action diligently until such default is cured;
(d) the Sponsor or the Company shall fail to pay its debts generally
as they come due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of
creditors, or shall institute any proceeding seeking to adjudicate the
Sponsor or the Company insolvent or seeking a liquidation, or shall take
advantage of any insolvency act, or shall commence a case or other
proceeding naming the Sponsor or the Company as debtor under the United
States Bankruptcy Code or similar law, domestic or foreign, or a case or
other proceeding shall be commenced against the Sponsor or the Company
under the United States Bankruptcy Code or similar law, domestic or
foreign, or any proceeding shall be instituted against the Sponsor or the
Company seeking liquidation of the Sponsor's or the Company's assets and
the Sponsor or the Company, as the case may be, shall fail to take
appropriate action resulting in the withdrawal or dismissal of such
proceeding within 60 days or there shall be appointed or the Sponsor or
the Company, as the case may be, shall consent to, or acquiesce in, the
appointment of a receiver, liquidator, conservator, trustee or similar
official in respect of the Sponsor or the Company or the whole or any
substantial part of its properties or assets or the Sponsor shall take any
corporate action in furtherance of any of the foregoing;
(e) the occurrence of an "event of default" under any of the
Transaction Documents; and
(f) with respect to the Company, a breach of the covenant set forth
in Section 2.04(h) hereof, that is not cured within 15 days after the
Company becomes aware of such breach.
Section 5.02. Remedies; Waivers.
(a) Upon the occurrence of an Event of Default, FGIC may exercise
any one or more of the rights and remedies set forth below:
(i) exercise any rights and remedies available under the
Transaction Documents in its own capacity or in its capacity as the
Person entitled to exercise the rights of the Certificateholders in
respect of the Securities; or
24
(ii) take whatever action at law or in equity may appear
necessary or desirable in its judgment to enforce performance of any
obligation of the Sponsor under the Transaction Documents.
(b) Unless otherwise expressly provided, no remedy herein conferred
upon or reserved is intended to be exclusive of any other available
remedy, but each remedy shall be cumulative and shall be in addition to
other remedies given under the Transaction Documents or existing at law or
in equity. No delay or failure to exercise any right or power accruing
under any Transaction Document upon the occurrence of any Event of Default
or otherwise shall impair any such right or power or shall be construed to
be a waiver thereof, but any such right and power may be exercised from
time to time and as often as may be deemed expedient. In order to entitle
FGIC to exercise any remedy reserved to FGIC in this Article, it shall not
be necessary to give any notice, other than such notice as may be
expressly required in this Article.
(c) If any proceeding has been commenced to enforce any right or
remedy under this Agreement and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to FGIC, then
and in every such case the parties hereto shall, subject to any
determination in such proceeding, be restored to their respective former
positions hereunder, and, thereafter, all rights and remedies of FGIC
shall continue as though no such proceeding had been instituted.
(d) FGIC shall have the right, to be exercised in its complete
discretion, to waive any covenant, Default or Event of Default by a
writing setting forth the terms, conditions and extent of such waiver
signed by FGIC and delivered to the Sponsor. Any such waiver may only be
effected in writing duly executed by FGIC, and no other course of conduct
shall constitute a waiver of any provision hereof. Unless such writing
expressly provides to the contrary, any waiver so granted shall extend
only to the specific event or occurrence so waived and not to any other
similar event or occurrence.
ARTICLE VI
MISCELLANEOUS
Section 6.01. Amendments, Etc. This Agreement may be amended, modified or
terminated only by written instrument or written instruments signed by the
parties hereto. No act or course of dealing shall be deemed to constitute an
amendment, modification or termination hereof.
Section 6.02. Notices. All demands, notices and other communications to be
given hereunder shall be in writing (except as otherwise specifically provided
herein) and
25
shall be mailed by registered mail or personally delivered or telecopied to the
recipient as follows:
(a) To FGIC: Financial Guaranty Insurance Company
000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Research and Risk
Management Department
Re: EquiVantage Acceptance Corp.
Home Equity Loan Trust 1996-4
Confirmation: (000) 000-0000
Fax: (000) 000-0000
(b) To the Sponsor: EquiVantage Acceptance Corp.
00000 Xxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
(c) To the Company: EquiVantage Inc.
00000 Xxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Chief Financial Officer
Tel: (000) 000-0000
Fax: (000) 000-0000
(d) To the Trustee: Norwest Bank Minnesota,
National Association
Xxxxx Xxxxxx xxx Xxxxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Attention: Corporate Trust Department
Re: EquiVantage Home Equity Loan
Trust 1996-4
Tel: (000) 000-0000
Fax: (000) 000-0000
A party may specify an additional or different address or addresses by
writing mailed or delivered to the other party as aforesaid. All such notices
and other communications shall be effective upon receipt.
Section 6.03. Payment Procedure. In the event of any payment by FGIC for
which it is entitled to be reimbursed or indemnified as provided above, each of
the Sponsor and the Company agrees to accept the voucher or other evidence of
payment as
26
prima facie evidence of the propriety thereof and the liability therefor to
FGIC. All payments to be made to FGIC under this Agreement shall be made to FGIC
in lawful currency of the United States of America in immediately available
funds to the account number provided in the Inducement Letter before 1:00 p.m.
(New York, New York time) on the date when due or as FGIC shall otherwise direct
by written notice to the Sponsor or the Company. In the event that the date of
any payment to FGIC or the expiration of any time period hereunder occurs on a
day which is not a Business Day, then such payment or expiration of time period
shall be made or occur on the next succeeding Business Day with the same force
and effect as if such payment was made or time period expired on the scheduled
date of payment or expiration date. Payments to be made to FGIC under this
Agreement shall bear interest at the Late Payment Rate from the date due to the
date paid.
Section 6.04. Severability. In the event that any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, the parties hereto agree that such holding shall not invalidate or
render unenforceable any other provision hereof. The parties hereto further
agree that the holding by any court of competent jurisdiction that any remedy
pursued by any party hereto is unavailable or unenforceable shall not affect in
any way the ability of such party to pursue any other remedy available to it.
Section 6.05. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 6.06. Consent to Jurisdiction.
(a) THE PARTIES HERETO HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION
OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
AND ANY COURT IN THE STATE OF NEW YORK LOCATED IN THE CITY AND COUNTY OF
NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION, SUIT OR
PROCEEDING BROUGHT AGAINST IT AND TO OR IN CONNECTION WITH ANY OF THE
TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREUNDER OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND THE PARTIES HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY AGREE THAT ALL CLAIMS IN RESPECT OF ANY
SUCH ACTION OR PROCEEDING MAY BE HEARD OR DETERMINED IN SUCH NEW YORK
STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. THE
PARTIES HERETO AGREE THAT A FINAL JUDGMENT IN ANY SUCH ACTION, SUIT OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS
BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. TO THE
EXTENT PERMITTED BY APPLICABLE LAW, THE
27
PARTIES HERETO HEREBY WAIVE AND AGREE NOT TO ASSERT BY WAY OF MOTION, AS A
DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM
THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, THAT
THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT
THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER OR THAT THE
TRANSACTION DOCUMENTS OR THE SUBJECT MATTER THEREOF MAY NOT BE LITIGATED
IN OR BY SUCH COURTS.
(b) To the extent permitted by applicable law, the parties hereto
shall not seek and hereby waive the right to any review of the judgment of
any such court by any court of any other nation or jurisdiction which may
be called upon to grant an enforcement of such judgment.
(c) Each of the Sponsor and the Company hereby irrevocably appoints
and designates Xxxxxxxx-Xxxx Corporation System, Inc., whose address is 00
Xxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, as its true and lawful attorney
and duly authorized agent for acceptance of service of legal process. Each
of the Sponsor and the Company agrees that service of such process upon
such Person shall constitute personal service of such process upon it.
(d) Nothing contained in this Agreement shall limit or affect FGIC's
right to serve process in any other manner permitted by law or to start
legal proceedings relating to any of the Transaction Documents against the
Sponsor or its property in the courts of any jurisdiction.
Section 6.07. Consent of FGIC. In the event that FGIC's consent is
required under any of the Transaction Documents, the determination whether to
grant or withhold such consent shall be made by FGIC in its sole discretion
without any implied duty towards any other Person, except as otherwise expressly
provided therein and herein.
Section 6.08. Counterparts. This Agreement may be executed in counterparts
by the parties hereto, and all such counterparts shall constitute one and the
same instrument.
Section 6.09. Trial by Jury Waived. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION
WITH ANY OF THE TRANSACTION DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREUNDER. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT IT
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
28
(B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THE TRANSACTION
DOCUMENTS TO WHICH IT IS A PARTY BY, AMONG OTHER THINGS, THIS WAIVER.
Section 6.10 Limited Liability. No recourse under any Transaction Document
shall be had against, and no personal liability shall attach to, any officer,
employee, director, affiliate or shareholder of any party hereto, as such, by
the enforcement of any assessment or by any legal or equitable proceeding, by
virtue of any statute or otherwise in respect of any of the Transaction
Documents, the Securities or the Policy, it being expressly agreed and
understood that each Transaction Document is solely a corporate obligation of
each party hereto, and that any and all personal liability, either at common law
or in equity, or by statute or constitution, of every such officer, employee,
director, affiliate or shareholder for breaches by any party hereto of any
obligations under any Transaction Document is hereby expressly waived as a
condition of and in consideration for the execution and delivery of this
Agreement.
Section 6.11. Entire Agreement. This Agreement, the Inducement Letter, the
Inducement Letter and the Policy set forth the entire agreement between the
parties with respect to the subject matter thereof, and this Agreement
supersedes and replaces any agreement or understanding that may have existed
between the parties prior to the date hereof in respect of such subject matter.
29
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement, all as of the day and year first above written.
FINANCIAL GUARANTY INSURANCE
COMPANY
By __________________________________
Name:
Title:
EQUIVANTAGE ACCEPTANCE CORP.
By __________________________________
Name: Xxxx X. Xxxxx
Title: President
EQUIVANTAGE INC.
By __________________________________
Name: Xxxxx X. Xxxxxxxx
Title: Senior Vice President
[Insurance and Indemnity Agreement]
APPENDIX I
DEFINITIONS
"Accumulated Funding Deficiency" shall have the meaning provided in
Section 412 of the Code and Section 302 of ERISA, whether or not waived.
"Base Subordinated Amount" means (i) with respect to the first six Payment
Dates immediately following the Startup Day, $500,000 and (ii) with respect to
each Payment Date thereafter, an amount equal to the product of (a) the Original
Aggregate Loan Balance, as defined in the Pooling and Servicing Agreement, and
(b) 2.70%.
"Business Day" means any day other than (a) a Saturday or Sunday or (b) a
day on which banking institutions in New York, New York, Houston, Texas, or
Minneapolis, Minnesota are authorized or obligated by law or executive order to
be closed.
"Certificateholders" means registered holders of the Securities.
"Class R Certificates" means the Home Equity Loan Asset-Backed
Certificates, Series 1996-4, Class R Certificates issued under the Pooling and
Servicing Agreement together with the Securities.
"Code" means the Internal Revenue Code of 1986, including, unless the
context otherwise requires, the rules and regulations thereunder, as amended
from time to time.
"Commission" means the Securities and Exchange Commission.
"Commonly Controlled Entity" means the Company and each entity, whether or
not incorporated, which is affiliated with the Sponsor pursuant to Section
414(b), (c), (m) or (o) of the Code.
"Company" or "Servicer" means EquiVantage Inc.
"Date of Issuance" means the date on which the Policy is issued as
specified therein.
"Default" means any event which results, or which with the giving of
notice or the lapse of time or both would result, in an Event of Default.
"ERISA" means the Employee Retirement Income Security Act of 1974,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"Event of Default" means any event of default specified in Section 5.01 of
this Insurance Agreement.
I-1
"Exchange Act" means the Exchange Act of 1934, including, unless the
context otherwise requires, the rules and regulations thereunder, as amended
from time to time.
"Expiration Date" means the final date of the Term of the Policy, as
specified in the Policy.
"FGIC" means Financial Guaranty Insurance Company, a New York stock
insurance company, its successors and assigns.
"Financial Statements" means with respect to the Company, the audited
balance sheets as of December 31, 1995 and the notes thereto.
"Fiscal Agent" means the Fiscal Agent, if any, designated pursuant to the
terms of the Policy.
"Indemnification Agreement" means the Indemnification Agreement dated as
of November 1, 1996 among FGIC, the Sponsor and the Representative, as the same
may be amended from time to time.
"Inducement Letter" means the letter dated November 22, 1996 from FGIC to
EquiVantage Inc. .
"Insurance Agreement" means this Insurance and Indemnity Agreement dated
as of November 1, 1996, by and among FGIC, the Sponsor and the Company, as the
same may be amended from time to time.
"Investment Company Act" means the Investment Company Act of 1940,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"IRS" means the Internal Revenue Service.
"Late Payment Rate" means the lesser of (a) the greater of (x) the then
applicable highest rate of interest on the Securities or (y) the prime rate as
published in the Wall Street Journal on the related due date of amounts owned to
FGIC under the Insurance Agreement (including such amounts owed pursuant to
Section 3.03(c) thereof) and (b) the maximum rate permissible under applicable
usury or similar laws limiting interest rates. The Late Payment Rate shall be
computed on the basis of the actual number of days elapsed over a year of 360
days.
"Lien" means, as applied to the property or assets (or the income or
profits therefrom) of any Person, in each case whether the same is consensual or
nonconsensual or arises by contract, operation of law, legal process or
otherwise: (a) any mortgage, lien, pledge, attachment, charge, lease,
conditional sale or other title retention agreement, or other security interest
or encumbrance of any kind or (b) any arrangement, express
I-2
or implied, under which such property or assets are transferred, sequestered or
otherwise identified for the purpose of subjecting or making available the same
for the payment of debt or performance of any other obligation in priority to
the payment of the general, unsecured creditors of such Person.
"Master Loan Transfer Agreement" means the Master Loan Transfer Agreement
between the Sponsor and the Company dated as of November 1, 1996.
"Material Adverse Change" means, (a) in respect of any Person, a material
adverse change in (i) the business, financial condition, results of operations
or properties of such Person or any of its Subsidiaries or (ii) the ability of
such Person to perform its obligations under any of the Transaction Documents to
which it is a party and (b) in respect of any Mortgage Loan, a material adverse
change in (i) the value or marketability of such Mortgage Loan or (ii) the
probability that amounts now or hereafter due in respect of such Mortgage Loan
will be collected on a timely basis.
"Moody's" means Xxxxx'x Investors Service, Inc., a Delaware corporation,
and any successor thereto, and, if such corporation shall for any reason no
longer perform the functions of a securities rating agency, "Moody's" shall be
deemed to refer to any other nationally recognized rating agency designated by
FGIC.
"Mortgage Documents" means the Mortgage Notes, Mortgages, assignments of
Mortgages and other related documents required to be delivered to the Trustee
pursuant to Section 3.5 of the Pooling and Servicing Agreement.
"Mortgage Loan" has the meaning provided in the Pooling and Servicing
Agreement.
"Multiemployer Plan" means a multiemployer plan (within the meaning of
Section 4001(a)(3) of ERISA) in respect of which a Commonly Controlled Entity
makes contributions or has liability.
"Notice of Claim" means a Notice of Claim and Certificate in the form
attached to the Policy.
"Offering Document" means the Prospectus, dated May 7, 1996, of the
Sponsor, in respect of the Securities and any amendment or supplement thereto in
respect of the Securities and any other offering document in respect of the
Securities that makes reference to the Policy.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
agency, corporation or instrumentality of the United States to which the duties
and powers of the Pension Benefit Guaranty Corporation are transferred.
I-3
"Person" means an individual, joint stock company, trust, unincorporated
association, joint venture, corporation, business or owner trust, partnership or
other organization or entity (whether governmental or private).
"Plan" means any pension plan (other than a Multiemployer Plan) covered by
Title IV of ERISA, which is maintained by a Commonly Controlled Entity or in
respect of which a Commonly Controlled Entity has liability.
"Policy" means the financial guaranty insurance policy, including any
endorsements thereto, issued by FGIC with respect to the Securities,
substantially in the form attached as Annex I to this Agreement.
"Pooling and Servicing Agreement" means the Pooling and Servicing
Agreement dated as of November 1, 1996 among the Sponsor, as sponsor, the
Company, as servicer, and the Trustee on behalf of FGIC and the
Certificateholders, pursuant to which the Securities are to be issued and the
Mortgage Loans are to be serviced and administered, as the same may be amended
from time to time.
"Premium" means the premium payable in accordance with Section 3.02 of the
Insurance Agreement.
"Premium Percentage" 0.16% per annum.
"Prospectus" means the form of prospectus, as supplemented, relating to
the Securities, as first filed with the Commission pursuant to Rule 424 under
the Securities Act.
"Provided Documents" means the Transaction Documents together with all
exhibits and schedules attached thereto, the portfolio data tape and the
Financial Statements furnished to FGIC by or on behalf of the Sponsor or the
Company with respect to itself or the Transaction.
"Registration Statement" means the registration statement on Form S-3 (No.
33-99364), including a form of prospectus, relating to the Securities, as
amended to the date hereof.
"Rating Agency" has the meaning set forth in the Pooling and Servicing
Agreement.
"Reportable Event" means any of the events set forth in Section 4043(b) of
ERISA or the regulations thereunder.
"Representative" means Prudential Securities Incorporated as
representative of itself and Salomon Brothers Inc collectively as Underwriters.
I-4
"Restrictions on Transferability" means, as applied to the property or
assets (or the income or profits therefrom) of any Person, in each case whether
the same is consensual or nonconsensual or arises by contract, operation of law,
legal process or otherwise, any material condition to, or restriction on, the
ability of such Person or any transferee therefrom to sell, assign, transfer or
otherwise liquidate such property or assets in a commercially reasonable time
and manner or which would otherwise materially deprive such Person or any
transferee therefrom of the benefits of ownership of such property or assets.
"S&P" means Standard & Poor's Ratings Services, a division of The
XxXxxx-Xxxx Companies, Inc., and any successor thereto, and, if such corporation
shall for any reason no longer perform the functions of a securities rating
agency, "S&P" shall be deemed to refer to any other nationally recognized rating
agency designated by FGIC.
"Securities" means the $80,000,000 of Home Equity Loan Asset-Backed
Certificates, Series 1996-4, Class A, issued by the EquiVantage Home Equity Loan
Trust 1996-4 pursuant to the Pooling and Servicing Agreement.
"Securities Act" means the Securities Act of 1933, including, unless the
context otherwise requires, the rules and regulations thereunder, as amended
from time to time.
"Servicer Prior 12 Month Loss Test" means the event as set forth in
Section 8.20(x) of the Pooling and Servicing Agreement.
"Servicer Termination Delinquency Test" means the events as set forth in
Section 8.20(ix) of the Pooling and Servicing Agreement.
"Servicer Termination Event" means the Servicer Termination Delinquency
Test, the Servicer Termination Loss Test and the Servicer Prior 12 Month Loss
Test.
"Servicer Termination Loss Test" means the events as set forth in Section
8.20(xi) of the Pooling and Servicing Agreement.
"Specified Subordinated Amount" means:
(a) each of the first 36 Payment Dates following the Startup Day,
the greater of (i) the Base Subordinated Amount and (ii) the product of
(x) the excess, if any, of (1) the Rolling Three Month Delinquency Rate
for such Payment Date over (2) 5.40% and (y) the Aggregate Loan Balance as
of the close of business on the last day of the preceding Remittance
Period; and
(b) after the first 36 Payment Dates following the Startup Day, the
greatest of (i) the lesser of (x) the Base Subordinated Amount and (y) the
product of (a) 5.40% and (b) the Aggregate Loan Balance as of the close of
business on the last day of the preceding Remittance Period, (ii) the
product of (x) the excess,
I-5
if any, of (1) the Rolling Three Month Delinquency Rate for such Payment
Date over (2) 2% and (y) the Aggregate Loan Balance as of the close of
business on the last day of the preceding Remittance Period and (iii) 1%
times the Original Aggregate Loan Balance;
provided, however, that the Specified Subordinated Amount will not be
reduced on any Payment Date pursuant to the operation of clause (b) (i)(y)
above if either (I) aggregate Cumulative Loss Amounts over the prior
twelve month period exceed 1% of the average Aggregate Loan Balance during
such period or (II) aggregate Cumulative Loss Amounts for all prior
Remittance Periods since the Startup Day exceed 4% of the Original
Aggregate Loan Balance.
"Sponsor" means EquiVantage Acceptance Corp.
"Startup Day" means November 22, 1996.
"Subsidiary" means, with respect to any Person, any corporation of which a
majority of the outstanding shares of capital stock having ordinary voting power
for the election of directors is at the time owned by such Person directly or
through one or more Subsidiaries.
"Term of the Agreement" shall be determined as provided in Section 4.01 of
the Insurance Agreement.
"Term of the Policy" has the meaning provided in the Policy.
"Transaction" means the transactions contemplated by the Transaction
Documents, including the transactions described in the Offering Document.
"Transaction Documents" means the Insurance Agreement, the Indemnification
Agreement, the Pooling and Servicing Agreement, the Underwriting Agreement, the
Inducement Letter, the Master Loan Transfer Agreement and the Conveyance
Agreement.
"Trigger Event" means the occurrence of any one of the following: (a) an
Event of Default under the Insurance Agreement has occurred and is continuing,
(b) any legal proceeding or binding arbitration is instituted with respect to
the Transaction or (c) any governmental or administrative investigation, action
or proceeding is instituted that would, if adversely decided, result in a
Material Adverse Change in respect of the Sponsor, the Company or of a material
portion of the Mortgage Loans.
"Trust" means the EquiVantage Home Equity Loan Trust 1996-4 created under
the Pooling and Servicing Agreement.
I-6
"Trustee" means Norwest Bank Minnesota, National Association, as trustee
under the Pooling and Servicing Agreement, and any successor thereto as trustee
under the Pooling and Servicing Agreement.
"Trust Fund" has the meaning provided in the Pooling and Servicing
Agreement.
"Trust Indenture Act" means the Trust Indenture Act of 1939, including,
unless the context otherwise requires, the rules and regulations thereunder, as
amended from time to time.
"Underfunded Plan" means any Plan that has an Underfunding.
"Underfunding" means, with respect to any Plan, the excess, if any, of (a)
the present value of all benefits under the Plan (based on the assumptions used
to fund the Plan pursuant to Section 412 of the Code) as of the most recent
valuation date over (b) the fair market value of the assets of such Plan as of
such valuation date.
"Underwriters" means Prudential Securities Incorporated and Salomon
Brothers Inc.
"Underwriting Agreement" means the Underwriting Agreement between the
Sponsor, the Company and the Representative with respect to the offer and sale
of the Securities, as the same may be amended from time to time.
I-7
APPENDIX II
OPINIONS OF COUNSEL
There shall be delivered to FGIC, Xxxxx'x and S&P opinions of counsel as
follows:
(i) opinions to the effect that the Securities have been duly issued, and
the Transaction Documents have been duly executed and delivered, and each
constitutes legal, valid and binding obligations, enforceable in accordance with
their respective terms;
(ii) opinions as to compliance with applicable securities laws, including,
but not limited to, opinions to the effect that:
(A) to the best of counsel's knowledge, no filing or registration
with or notice to or consent, approval, authorization or order of any
court or governmental authority or agency is required for the consummation
of the Transaction, except such as may be required and have been obtained
under the Securities Act and state securities or "blue sky" laws;
(B) the Registration Statement is effective under the Securities Act
and, to the best of counsel's knowledge and information, no stop order
suspending the effectiveness of the Registration Statement has been issued
under the Securities Act or proceedings therefor initiated or threatened
by the Commission;
(C) neither the Trust nor the Trust Fund is required to be
registered under the Investment Company Act; and
(D) the Pooling and Servicing Agreement is not required to be
qualified under the Trust Indenture Act;
(iii) an opinion to the effect that (A) the Trustee is the owner of the
Mortgage Loans, holding good and marketable title thereto; (B) the Mortgage
Loans would not be included as part of the estate of the Sponsor in the event of
any receivership or insolvency proceedings in respect thereof; and (C) the
transfer of the Mortgage Loans would be characterized by a court of competent
jurisdiction as a sale of such Mortgage Loans and not as a borrowing by the
Sponsor or a relationship of joint ownership, partnership, joint venture or
similar arrangement; and
(iv) an opinion to the effect that (A) the Trust Fund qualifies as a REMIC
for federal income tax purposes and for state and local tax purposes; and (B)
the Trust Fund will not be subject to income, franchise or tangible or
intangible personal property taxes in the State of Delaware.
II-1
ANNEX I
TO
INSURANCE AND INDEMNITY AGREEMENT
FORM OF FINANCIAL GUARANTY INSURANCE POLICY
APPENDIX A
TO INSURANCE AND INDEMNITY AGREEMENT
CONDITIONS PRECEDENT TO ISSUANCE OF THE POLICY
(a) Payment of Initial Premium and Expenses; Inducement Letter. FGIC shall
have been paid, by or on behalf of Sponsor, a nonrefundable Premium and shall
have been reimbursed, by or on behalf of the Sponsor, for other fees and
expenses identified in Section 3.02 of the Insurance Agreement as payable at
closing and FGIC shall have received a fully executed copy of the Inducement
Letter.
(b) Transaction Documents. FGIC shall have received a copy of each of the
Transaction Documents, in form and substance satisfactory to FGIC, duly
authorized, executed and delivered by each party thereto. Without limiting the
foregoing, the provisions of the Pooling and Servicing Agreement relating to the
payment to FGIC of Premium due on the Policy and the reimbursement to FGIC of
amounts paid under the Policy shall be in form and substance acceptable to FGIC
in its sole discretion.
(c) Certified Documents, Resolutions and Consents. FGIC shall have
received a copy of (i) the certificate of incorporation and bylaws of the
Sponsor, (ii) the resolutions of the Sponsor's Board of Directors authorizing
the issuance of the Securities and the execution, delivery and performance by
the Sponsor of the Transaction Documents and the transactions contemplated
thereby, certified by the Secretary or an Assistant Secretary of the Sponsor
(which certificate shall state that such certificate of incorporation, bylaws
and resolutions are in full force and effect without modification on the Date of
Issuance), (iii) the certificate of incorporation and bylaws of the Company,
(iv) written consents of the Company's shareholders authorizing the sale of the
Mortgage Loans to the Sponsor and the execution, delivery and performance by the
Company of the Transaction Documents and the transactions contemplated thereby,
certified by a Secretary or Assistant Secretary of the Company (which
certificate shall state that such certificate of incorporation, bylaws and
written consents are in full force and effect without modification on the Date
of Issuance).
(d) Incumbency Certificates. FGIC shall have received a certificate of the
Secretary or an Assistant Secretary of the Sponsor certifying the name and
signatures of the officers of the Sponsor authorized to execute and deliver the
Transaction Documents and that shareholder consent to the execution and delivery
of such documents is not necessary.
(e) Representations and Warranties; Certificate. The representations and
warranties of the Sponsor and the Company in the Insurance Agreement shall be
true and correct as of the Date of Issuance as if made on the Date of Issuance
and FGIC shall have received a certificate of appropriate officers of each of
the Sponsor and the Company to that effect.
III-1
(f) Opinions of Counsel. FGIC shall have received opinions of counsel
addressed to FGIC, Xxxxx'x and S&P in respect of the Sponsor, the Company, the
other parties to the Transaction Documents and the Transaction in form and
substance satisfactory to FGIC, addressing such matters as FGIC may reasonably
request, including without limitation, the items set forth in Appendix II
hereto, and the counsel providing each such opinion shall have been instructed
by its client to deliver such opinion to the addressees thereof.
(g) Approvals, Etc. FGIC shall have received true and correct copies of
all approvals, licenses and consents, if any, including, without limitation, the
approval of the shareholders of the Sponsor and shareholders of the Company
required in connection with the Transaction.
(h) No Litigation, Etc. No suit, action or other proceeding,
investigation, or injunction or final judgment relating thereto, shall be
pending or threatened before any court or governmental agency in which it is
sought to restrain or prohibit or to obtain damages or other relief in
connection with any of the Transaction Documents or the consummation of the
Transaction.
(i) Legality. No statute, rule, regulation or order shall have been
enacted, entered or deemed applicable by any government or governmental or
administrative agency or court which would make the transactions contemplated by
any of the Transaction Documents illegal or otherwise prevent the consummation
thereof.
(j) Satisfaction of Conditions of Underwriting Agreement. All conditions
in the Underwriting Agreement relating to the Underwriters' obligation to
purchase the Securities shall have been satisfied.
(k) Issuance of Ratings. FGIC shall have received confirmation that the
risk secured by the Policy constitutes an investment grade risk by S&P and
Xxxxx'x and that the Securities, when issued, will be rated "AAA" by S&P and
"Aaa" by Xxxxx'x.
(l) Delivery of Mortgage Documents. FGIC shall have received evidence
satisfactory to it that: (i) delivery has been made to the Trustee or to a
Custodian of the Mortgage Documents required to be so delivered pursuant to
Section 3.5 of the Pooling and Servicing Agreement; and (ii) each Mortgage Note
is endorsed as provided in Section 3.5 of the Pooling and Servicing Agreement.
(m) No Default. No Default or Event of Default shall have occurred.
(n) Additional Items. FGIC shall have received such other documents,
instruments, approvals or opinions requested by FGIC as may be reasonably
necessary to effect the Transaction, including but not limited to evidence
satisfactory to FGIC that all conditions precedent, if any, in the Transaction
Documents have been satisfied.
III-2
CERTIFICATE OF OFFICER
The undersigned, Xxxxxxxxx Xxxx, Senior Vice President and Chief Financial
Officer of EquiVantage Acceptance Corp., a Delaware corporation (the "Sponsor"),
hereby certifies as follows:
1. A review of the Sponsor's performance under the Transaction Documents
has been made under my supervision; and
2. To the best of my knowledge, following reasonable inquiry, no Trigger
Event or Event of Default has occurred; and
3. The attached financial reports submitted in accordance with Section
2.03(b)(i) or (ii) hereof, as applicable, are complete and correct in all
material respects and present fairly the financial condition and results of
operations of the Sponsor as of the dates and for the periods indicated, in
accordance with generally accepted accounting principles consistently applied
(subject as to interim statements to normal year-end adjustments).
Executed this ____ of _______________, ____.
___________________________________
Name:
Title:
EquiVantage Acceptance Corp.
III-3
[SLIP SHEET -- EQUIVANTAGE ACCEPTANCE CORP. FINANCIAL REPORTS]
III-4
CERTIFICATE OF OFFICER
The undersigned, Xxxxxxxxx Xxxx, Senior Vice President and Chief Financial
Officer of EquiVantage Inc., a Delaware corporation (the "Corporation"), hereby
certifies as follows:
1. A review of the Corporation's performance under the Transaction
Documents has been made under my supervision; and
2. To the best of my knowledge, following reasonable inquiry, no Trigger
Event or Event of Default has occurred; and
3. The attached financial reports submitted in accordance with Section
2.04(b)(i) or (ii) hereof, as applicable, are complete and correct in all
material respects and present fairly the financial condition and results of
operations of the Corporation as of the dates and for the periods indicated, in
accordance with generally accepted accounting principles consistently applied
(subject as to interim statements to normal year-end adjustments).
Executed this ____ of ________________, ____.
___________________________________
Name:
Title:
EquiVantage Acceptance Corp.
III-5
[SLIP SHEET -- EQUIVANTAGE INC. FINANCIAL REPORTS]
III-6
