<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 30, 1994
GREEN TREE FINANCIAL CORPORATION
--------------------------------
(Exact name of registrant as specified in its charter)
Minnesota 0-11652 41-1263905
--------------------------------------------------------------------
(State or other (Commission (IRS employer
jurisdiction of file number) identification No.)
incorporation)
1100 Landmark Towers, 345 St. Peter Street, Saint Paul, Minnesota 55102-1639
-----------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (612) 293-3400
-----------------------
Not Applicable
--------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
<TABLE>
<CAPTION>
<C> <S>
Item 1. Changes in Control of Registrant.
--------------------------------
Not applicable.
Item 2. Acquisition or Disposition of Assets.
------------------------------------
Not applicable.
Item 3. Bankruptcy or Receivership.
--------------------------
Not applicable.
Item 4. Changes in Registrant's Certifying Accountant.
---------------------------------------------
Not applicable.
Item 5. Other Events.
------------
Not applicable.
Item 6. Resignations of Registrant's Directors.
--------------------------------------
Not applicable.
Item 7. Financial Statements and Exhibits.
---------------------------------
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
</TABLE>
2
<PAGE>
(c) Exhibits.
The following is filed herewith. The exhibit numbers
correspond with Item 601(b) of Regulation S-K.
Exhibit No. Description
---------- -----------
4.1 Pooling and Servicing Agreement between Green
Tree Financial Corporation, as Seller and
Servicer, and First Trust National Association,
as Trustee, dated as of June 1, 1994 (without
Exhibits L and M) creating a trust entitled
Home Improvement Loan Trust 1994-BI
4.2 Pooling and Servicing Agreement between Green
Tree Financial Corporation, as Seller and
Servicer, and First Trust National Association,
as Trustee, dated as of June 1, 1994 (without
Exhibits K) creating a trust entitled Home
Improvement Loan Trust 1994-BII
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
GREEN TREE FINANCIAL CORPORATION
By: /s/ John W. Brink
------------------------------------
John W. Brink
Executive Vice President, Treasurer
and Chief Financial Officer
3
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Page
- - -------------- ----
<C> <S> <C>
4.1 Pooling and Servicing Agreement between Green Tree 5
Financial Corporation, as Seller and Servicer, and
First Trust National Association, as Trustee, dated as
of June 1, 1994 (without Exhibits L and M) creating a
trust entitled Home Improvement Loan Trust 1994-BI
4.2 Pooling and Servicing Agreement between Green Tree 126
Financial Corporation, as Seller and Servicer, and
First Trust National Association, as Trustee, dated as
of June 1, 1994 (without Exhibits K) creating a trust
entitled Home Improvement Loan Trust 1994-BII
</TABLE>
4
<PAGE>
==========================================================
Certificates for Home Improvement Loans
Series 1994=BI
POOLING AND SERVICING AGREEMENT
between
GREEN TREE FINANCIAL CORPORATION
Seller and Servicer
and
FIRST TRUST NATIONAL ASSOCIATION
not in its individual capacity but solely as Trustee
of
HOME IMPROVEMENT LOAN TRUST 1994=BI
Dated as of June 1, 1994
==========================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
Definitions
<S> <C> <C>
Section 1.01. General.............................................. 1-1
Section 1.02. Specific Terms....................................... 1-1
<CAPTION>
ARTICLE II
Establishment of Trust; Transfer of Contracts
<S> <C> <C>
Section 2.01. Closing.............................................. 2-1
Section 2.02. Conditions to the Closing............................ 2-1
Section 2.03. Acceptance by Trustee................................ 2-2
Section 2.04. REMIC Provisions..................................... 2-3
<CAPTION>
ARTICLE III
Representations and Warranties
<S> <C> <C>
Section 3.01. Representations and Warranties Regarding the
Company......................................... 3-1
Section 3.02. Representations and Warranties Regarding Each
Contract........................................ 3-2
Section 3.03. Representations and Warranties Regarding the
Contracts in the Aggregate...................... 3-5
Section 3.04. Representations and Warranties Regarding the
Contract Files.................................. 3-5
Section 3.05. Repurchases of Contracts for Breach of
Representations and Warranties.................. 3-6
Section 3.06. No Repurchase Under Certain Circumstances............ 3-6
<CAPTION>
ARTICLE IV
Perfection of Transfer and Protection of Security Interests
<S> <C> <C>
Section 4.01. Transfer of Contracts................................ 4-1
Section 4.02. Costs and Expenses................................... 4-1
<CAPTION>
ARTICLE V
Servicing of Contracts
<S> <C> <C>
Section 5.01. Responsibility for Contract Administration........... 5-1
Section 5.02. Standard of Care..................................... 5-1
Section 5.03. Records.............................................. 5-1
Section 5.04. Inspection........................................... 5-1
Section 5.05. Certificate Account.................................. 5-2
Section 5.06. Enforcement.......................................... 5-3
Section 5.07. Trustee to Cooperate................................. 5-5
</TABLE>
-1-
<PAGE>
<TABLE>
<S> <C> <C>
Section 5.08. Costs and Expenses................................... 5-6
Section 5.09. Maintenance of Insurance............................. 5-6
Section 5.10. Merger or Consolidation of Servicer.................. 5-7
<CAPTION>
ARTICLE VI
Reports and Tax Matters
<S> <C> <C>
Section 6.01. Monthly Reports...................................... 6-1
Section 6.02. Officer's Certificate................................ 6-3
Section 6.03. Other Data........................................... 6-3
Section 6.04. Annual Report of Accountants......................... 6-3
Section 6.05. Statements to Certificateholders and the Class C
Certificateholder............................... 6-3
Section 6.06. Payment of Taxes..................................... 6-5
<CAPTION>
ARTICLE VII
Service Transfer
<S> <C> <C>
Section 7.01. Events of Termination................................ 7-1
Section 7.02. Transfer............................................. 7-2
Section 7.03. Trustee to Act; Appointment of Successor............. 7-2
Section 7.04. Notification to Certificateholders and the Class C
Certificateholder............................... 7-3
Section 7.05. Effect of Transfer................................... 7-3
Section 7.06. Transfer of Collection Account....................... 7-4
<CAPTION>
ARTICLE VIII
Payments
<S> <C> <C>
Section 8.01. Monthly Payments..................................... 8-1
Section 8.02. Advances............................................. 8-2
Section 8.03. Limited Guaranty..................................... 8-2
Section 8.04. Payments............................................. 8-3
Section 8.05. Reassignment of Repurchased Contacts................. 8-4
Section 8.06. Servicer's Repurchase Option......................... 8-4
<CAPTION>
ARTICLE IX
The Certificates
<S> <C> <C>
Section 9.01. The Certificates and the Class C Certificates........ 9-1
Section 9.02. Registration of Transfer and Exchange of Certificates
and the Class C Certificate..................... 9-1
Section 9.03. No Charge; Disposition of Void Certificates
or Class C Certificate.......................... 9-5
Section 9.04. Mutilated, Destroyed, Lost or Stolen Certificates
or Class C Certificate.......................... 9-5
Section 9.05. Persons Deemed Owners................................ 9-6
</TABLE>
-2-
<PAGE>
<TABLE>
<S> <C> <C>
Section 9.06. Access to List of Certificateholders' and Class C
Certificateholders' Names and Addresses......... 9-6
Section 9.07. Authenticating Agents............................... 9-6
<CAPTION>
ARTICLE X
Indemnities
<S> <C> <C>
Section 10.01. Real Estate......................................... 10-1
Section 10.02. Liabilities to Obligors............................. 10-1
Section 10.03. Tax Indemnification................................. 10-1
Section 10.04. Servicer's Indemnities.............................. 10-1
Section 10.05. Operation of Indemnities............................ 10-2
Section 10.06. REMIC Tax Matters................................... 10-2
<CAPTION>
ARTICLE XI
The Trustee
<S> <C> <C>
Section 11.01. Duties of Trustee................................... 11-1
Section 11.02. Certain Matters Affecting the Trustee............... 11-2
Section 11.03. Trustee Not Liable for Certificates,
the Class C Certificate or Contracts............ 11-3
Section 11.04. Trustee May Own Certificates........................ 11-3
Section 11.05. Rights of Certificateholders to Direct Trustee and
to Waive Events of Termination.................. 11-3
Section 11.06. The Servicer to Pay Trustee's Fees and Expenses..... 11-4
Section 11.07. Eligibility Requirements for Trustee................ 11-5
Section 11.08. Resignation or Removal of Trustee................... 11-5
Section 11.09. Successor Trustee................................... 11-6
Section 11.10. Merger or Consolidation of Trustee.................. 11-6
Section 11.11. Tax Returns......................................... 11-7
Section 11.12. Obligor Claims...................................... 11-7
Section 11.13. Appointment of Co-Trustee or Separate Trustee....... 11-8
Section 11.14. Certain Matters Relating to FHA Insurance........... 11-9
Section 11.15. The Trustee and First Bank System, Inc. ............ 11-9
Section 11.16 Trustee Advances.................................... 11-9
<CAPTION>
ARTICLE XII
Miscellaneous
<S> <C> <C>
Section 12.01. Servicer Not to Resign.............................. 12-1
Section 12.02. Company Not to Engage in Certain Transactions with
Respect to the Trust............................ 12-1
Section 12.03. Maintenance of Office or Agency..................... 12-1
Section 12.04. Termination......................................... 12-1
Section 12.05. Acts of Certificateholders and the Class C
Certificateholder............................... 12-3
Section 12.06. Calculations........................................ 12-4
Section 12.07. Assignment or Delegation by Company................. 12-4
</TABLE>
-3-
<PAGE>
<TABLE>
<S> <C> <C>
Section 12.08. Amendment........................................... 12-5
Section 12.09. Notices............................................. 12-7
Section 12.10. Merger and Integration.............................. 12-7
Section 12.11. Headings............................................ 12-8
Section 12.12. Governing Law....................................... 12-8
Testimonium........................................................... 12-8
Exhibit A. Form of Class A-1 Certificate....................... A-1
Exhibit B. Form of Class M-1 Certificate....................... B-1
Exhibit C. Form of Class B Certificate......................... C-1
Exhibit D. Form of Assignment.................................. D-1
Exhibit E. Certificate of Officer.............................. E-1
Exhibit F. Form of Opinion of Counsel for the Company.......... F-1
Exhibit G. Form of Trustee's Acknowledgement................... G-1
Exhibit H. Certificate of Servicing Officer.................... H-1
Exhibit I. Form of Class C Certificate......................... I-1
Exhibit J. Certificate Regarding Repurchased Contracts......... J-1
Exhibit K. Form of Representation Letter....................... K-1
Exhibit L. List of Contracts................................... L-1
Exhibit M. List of FHA-Insured Contracts....................... M-1
Exhibit N. Omitted............................................. N-1
Exhibit O. Monthly Report...................................... O-1
</TABLE>
-4-
<PAGE>
AGREEMENT, dated as of June 1, 1994, between Green Tree Financial
Corporation, a corporation organized and existing under the laws of the State of
Minnesota, as Seller and Servicer (the "Company"), and First Trust National
Association, a national banking association organized and existing under the
laws of the United States, not in its individual capacity but solely as Trustee
(the "Trustee") of Home Improvement Loan Trust 1994-BI (the "Trust").
WHEREAS, in the regular course of its business, the Company purchases,
originates and services home improvement contracts and promissory notes, which
contracts and notes provide for installment payments by or on behalf of the
purchaser of the home improvements and grant mortgages, deeds of trust or
security deeds on the real estate that is the subject of a home improvement;
WHEREAS, the Company and the Trustee have agreed to establish the
Trust;
WHEREAS, the Company and the Trustee wish to set forth the terms and
conditions pursuant to which the Trust, on behalf of the "Certificateholders"
and the "Class C Certificateholder," as hereinafter defined, will acquire the
"Contracts," as hereinafter defined, and the Company will manage and service the
Contracts;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the Company and the Trustee agree as provided
herein:
-i-
<PAGE>
ARTICLE I
DEFINITIONS
-----------
SECTION 1.01. General.
-------
For the purpose of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, the terms defined in this
Article include the plural as well as the singular, the words "herein," "hereof"
and "hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular article, section or other subdivision, and
Section references refer to Sections of the Agreement.
SECTION 1.02. Specific Terms.
--------------
"Advance" means, with respect to any Payment Date, the amounts, if
-------
any, deposited by the Servicer or the Trustee, as applicable, in the Certificate
Account for such Payment Date pursuant to Section 8.02.
"Advance Payment" means any payment by an Obligor in advance of the
---------------
Due Period in which it would be due under such Contract and which payment is not
a Principal Prepayment.
"Affiliate" of any specified Person means any other Person controlling
---------
or controlled by or under common control with such specified Person. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" or "controlled" have meanings
correlative to the foregoing.
"Aggregate Certificate Principal Balance" means the sum of the Class
---------------------------------------
A-1, Class M-1, Class B-1 and Class B-2 Principal Balances.
"Agreement" means this Pooling and Servicing Agreement.
---------
"Amount Available" has the meaning assigned in Section 8.04(a).
----------------
"Applicants" has the meaning assigned in Section 9.06.
----------
"Authenticating Agent" means any authenticating agent appointed
--------------------
pursuant to Section 9.07.
"Average Sixty-Day Delinquency Ratio" means, with respect to any
-----------------------------------
Payment Date, the arithmetic average of the Delinquency Ratios for such Payment
Date and for the two immediately preceding Payment Dates.
1-1
<PAGE>
"Book-Entry Certificate" means any Certificate registered in the name
----------------------
of the Depository or its nominee, ownership of which is reflected on the books
of the Depository or on the books of a person maintaining an account with such
Depository (directly or as an indirect participant in accordance with the rules
of such Depository).
"Business Day" means any day other than (a) a Saturday or a Sunday, or
------------
(b) another day on which banking institutions in the city in which the Person
taking action hereunder are authorized or obligated by law, executive order, or
governmental decree to be closed.
"Certificate" means a Certificate for Home Improvement Loans, Series
-----------
1994-BI, Class A-1, Class M-1, Class B-1 or Class B-2, executed and delivered by
the Trustee substantially in the form of Exhibit A, B, or C, respectively, but
does not include the Class C Certificate.
"Certificate Account" means a trust account created and maintained
-------------------
pursuant to Section 5.05 in the name of the Trust in an Eligible Institution.
"Certificate Owner" means the person who is the beneficial owner of a
-----------------
Book-Entry Certificate or, if Definitive Certificates have been issued,
Certificateholders.
"Certificate Register" means the register maintained pursuant to
--------------------
Section 9.02.
"Certificate Registrar" or "Registrar" means the registrar
--------------------- ---------
appointed pursuant to Section 9.02.
"Certificateholder" or "Holder" means the person in whose name a
----------------- ------
Certificate is registered on the Certificate Register, except that, solely for
the purposes of giving any consent, waiver, request or demand pursuant to this
Agreement, any Certificate registered in the name of the Company or any
Affiliate shall be deemed not to be outstanding and the Percentage Interest
evidenced thereby shall not be taken into account in determining whether the
requisite Percentage Interest necessary to effect any such consent, request,
waiver or demand has been obtained; provided, however, that, solely for the
-------- -------
purpose of determining whether the Trustee is entitled to rely upon any such
consent, waiver, request or demand, only Certificates which the Trustee knows to
be so owned shall be so disregarded.
"Class," "Class A-1," "Class M-1," "Class B-1," "Class B-2," or
--------------------------------------------------------------
"Class C" means pertaining to Class A-1 Certificates, Class M-1 Certificates,
-------
Class B-1, Class B-2 Certificates and/or Class C Certificates, as the case
may be.
"Class A-1 Certificate" means any one of the Class A-1 Certificates
---------------------
executed and delivered by the Trustee and authenticated by the Certificate
Registrar substantially in the form set forth in Exhibit A and evidencing an
interest designated as a regular interest in the Trust for purposes of the
REMIC Provisions.
1-2
<PAGE>
"Class A-1 Distribution Amount" means, with respect to any Payment
-----------------------------
Date, the amount to be distributed in respect of the Class A-1 Certificates
pursuant to Section 8.04(b) on such Payment Date.
"Class A-1 Interest Accrual Amount" means, with respect to the Class
---------------------------------
A-1 Certificates and any Payment Date, one month's interest (or, with respect to
the first Payment Date, interest due from and including the Closing Date to but
excluding July 15, 1994) at the Class A-1 Pass-Through Rate on the Class A-1
Principal Balance immediately prior to such Payment Date.
"Class A-1 Interest Shortfall" means, with respect to the Class A-1
----------------------------
Certificates and any Payment Date, the amount, if any, by which the amount
distributed to Holders of such Class A-1 Certificates on such Payment Date
pursuant to Section 8.04(b)(1) is less than the sum of the Class A-1 Interest
Accrual Amount and any Unpaid Class A-1 Interest Shortfall with respect to such
Payment Date.
"Class A-1 Principal Balance" means, with respect to any Payment Date,
---------------------------
the Original Class A-1 Principal Balance less all amounts previously distributed
to Holders of Class A-1 Certificates in respect of principal.
"Class A-1 Pass-Through Rate" means 7.15% per annum, computed on
---------------------------
the basis of a 360-day year of twelve 30-day months.
"Class M-1 Certificate" means any one of the Class M-1 Certificates
---------------------
executed and delivered by the Trustee and authenticated by the Certificate
Registrar substantially in the form set forth in Exhibit B and evidencing an
interest designated as a "regular interest "in the Trust for purposes of the
REMIC Provisions.
"Class M-1 Distribution Amount" means, with respect to any Payment
-----------------------------
Date, the amount to be distributed in respect of the Class M-1 Certificates
pursuant to Section 8.04(b) on such Payment Date.
"Class M-1 Interest Accrual Amount" means, with respect to the Class
---------------------------------
M-1 Certificates and any Payment Date, one month's interest (or, with respect to
the first Payment Date, interest due from and including the Closing Date to but
excluding July 15, 1994) at the Class M-1 Pass-Through Rate on the Class M-1
Principal Balance immediately prior to such Payment Date.
"Class M-1 Interest Shortfall" means, with respect to the Class M-1
----------------------------
Certificates and any Payment Date, the amount, if any, by which the amount
distributed to Holders of such Class M-1 Certificates on such Payment Date
pursuant to Section 8.04(b)(1) is less than the sum of Class M-1 Interest
Accrual Amount and any Unpaid Class M-1 Interest Shortfall with respect to such
Payment Date.
"Class M-1 Principal Balance" means, with respect to any Payment Date,
---------------------------
the Original Class M-1 Principal Balance less all amounts previously distributed
to Holders of Class M-1 Certificates in respect of principal.
1-3
<PAGE>
"Class M-1 Pass-Through Rate" means 8.15% per annum, computed on
---------------------------
the basis of a 360-day year of twelve 30-day months.
"Class B-1 Certificate" means any one of the Class B-1 Certificates
---------------------
executed and delivered by the Trustee and authenticated by the Certificate
Registrar substantially in the form set forth in Exhibit C and evidencing an
interest designated as a "regular interest" in the Trust for purposes of the
REMIC Provisions.
"Class B-1 Distribution Amount" means, with respect to any Payment
-----------------------------
Date, the amount to be distributed in respect of the Class B-1 Certificates
pursuant to Section 8.04(b) on such Payment Date.
"Class B-1 Interest Accrual Amount" means, with respect to the Class
---------------------------------
B-1 Certificates and any Payment Date, one month's interest (or, with respect to
the first Payment Date, interest due from and including the Closing Date to but
excluding July 15, 1994) at the Class B-1 Pass-Through Rate on the Class B-1
Principal Balance immediately prior to such Payment Date.
"Class B-1 Interest Shortfall" means, with respect to the Class B-1
----------------------------
Certificates and any Payment Date, the amount, if any, by which the amount
distributed to Holders of such Class B-1 Certificates on such Payment Date
pursuant to Section 8.04(b)(1) is less than the sum of the Class B-1 Interest
Accrual Amount and any Unpaid Class B-1 Interest Shortfall with respect to such
Payment Date.
"Class B-1 Principal Balance" means, with respect to any Payment Date,
---------------------------
the Original Class B-1 Principal Balance less all amounts previously distributed
to Holders of Class B-1 Certificates in respect of principal.
"Class B-1 Pass-Through Rate" means a floating rate equal to the
---------------------------
Weighted Average Contract Rate, but in no event greater than 8.55% per annum,
computed on the basis of a 360-day year of twelve 30-day months.
"Class B-2 Certificate" means any one of the Class B-2 Certificates
---------------------
executed and delivered by the Trustee and authenticated by the Certificate
Registrar substantially in the form set forth in Exhibit C and evidencing an
interest designated as a "regular interest "in the Trust for purposes of the
REMIC Provisions.
"Class B-2 Distribution Amount" means, with respect to any Payment
-----------------------------
Date, the amount to be distributed in respect of the Class B-2 Certificates
pursuant to Section 8.04(b) on such Payment Date.
"Class B-2 Formula Distribution Amount" means, with respect to any
-------------------------------------
Payment Date, an amount equal to the sum of (a) the Class B-2 Interest Accrual
Amount for such Payment Date, plus (b) that portion, if any, of the Monthly
Principal that would be distributable in respect of the Class B-2 Certificates
pursuant to Section 8.04(b)(2)(iv) hereof on such Payment Date (determined on
the assumption that the Amount Available is sufficient to permit such
distribution).
1-4
<PAGE>
"Class B-2 Guaranty Payment" means, with respect to any Payment Date,
--------------------------
the amount, if any, by which the sum of the Class B-2 Formula Distribution
Amount and the Class B-2 Principal Deficiency Amount for such Payment Date
exceeds the Class B-2 Distribution Amount for such Payment Date.
"Class B-2 Interest Accrual Amount" means, with respect to the Class
---------------------------------
B-2 Certificates and any Payment Date, one month's interest (or, with respect to
the first Payment Date, interest due from and including the Closing Date to but
excluding July 15, 1994) at the Class B-2 Pass-Through Rate on the Class B-2
Principal Balance immediately prior to such Payment Date.
"Class B-2 Interest Shortfall" means, with respect to the Class B-2
----------------------------
Certificates and any Payment Date, the amount, if any, by which the amount
distributed to Holders of such Class B-2 Certificates on such Payment Date
pursuant to Section 8.04(b)(1) is less than the sum of the Class B-2 Interest
Accrual Amount and any Unpaid Class B-2 Interest Shortfall with respect to such
Payment Date.
"Class B-2 Principal Balance" means, with respect to any Payment Date,
---------------------------
the Original Class B-2 Principal Balance less all amounts previously distributed
to Holders of Class B-2 Certificates in respect of principal.
"Class B-2 Principal Deficiency Amount" means, with respect to any
-------------------------------------
Payment Date, the amount, if any, by which the sum of the Class A-1 Principal
Balance, the Class M-1 Principal Balance, the Class B-1 Principal Balance and
the Class B-2 Principal Balance for such Payment Date (after giving effect to
all distributions of principal on such Payment Date) exceeds the Pool Scheduled
Principal Balance with respect to such Payment Date.
"Class B-2 Pass-Through Rate" means a floating rate equal to the
---------------------------
Weighted Average Contract Rate, but in no event greater than 8.70% per annum, in
either case computed on the basis of a 360-day year of twelve 30-day months.
"Class C Certificate" means a certificate for Home Improvement Loans,
-------------------
Series 1994-BI, executed and delivered by the Trustee substantially in the form
of Exhibit I, and evidencing an interest designated as a "residual interest" in
the Trust for purposes of the REMIC Provisions.
"Class C Certificateholder" means the person in whose name a Class C
-------------------------
Certificate is registered on the Certificate Register.
"Class C Distribution Amount" means, as to any Payment Date, the
---------------------------
amount, if any, distributable in respect of the Class C Certificate pursuant to
Section 8.04(b).
"Closing Date" means June 30, 1994.
------------
"Code" means the Internal Revenue Code of 1986, as amended.
----
1-5
<PAGE>
"Collected Amount" means, with respect to any Determination Date, the
----------------
amount of funds in the Certificate Account as of such Determination Date
including all interest earned on such funds but excluding (i) amounts
constituting Advance Payments with respect to the immediately preceding Due
Period, (ii) amounts received after the end of such immediately preceding Due
Period, (iii) any Advances that will be deposited in the Certificate Account by
the Servicer or the Trustee, as applicable, and (iv) amounts required to be
deposited by the Company following such Determination Date pursuant to Section
3.05.
"Computer Tape" means the computer tape generated by the Company which
-------------
provides information relating to the Contracts and which was used by the Company
in selecting the Contracts, and includes the master file and the history file.
"Contracts" means the home improvement contracts and promissory notes
---------
described in the List of Contracts attached hereto as Exhibit K and constituting
part of the corpus of the Trust, which Contracts are to be assigned and conveyed
by the Company to the Trust, and includes, without limitation, all related
mortgages, deeds of trust and security deeds and any and all rights to receive
payments which are due pursuant thereto on or after the Cut-off Date, but
excluding any rights to receive payments which are due pursuant thereto prior to
the Cut-off Date.
"Contract File" means, as to each Contract, (a) the original copy of
-------------
the Contract which is comprised of the related contract and/or promissory note,
(b) the original or a copy of the mortgage, deed of trust or security deed or
similar evidence of a lien on the related improved property and evidence of due
recording of such mortgage, deed of trust or security deed, if available, (c) an
original or a copy of a truth-in-lending disclosure form (either included as
part of the contract or note or as a separate document), (d) if such Contract
was originated by a contractor rather than the Company, the original or a copy
of an assignment of the mortgage, deed of trust or security deed by the
contractor to the Company and (e) a sale control document.
"Contract Interest Rate" means, as to any Contract, the annual
----------------------
rate of interest specified in the Contract.
"Corporate Trust Office" means the office of the Trustee at which at
----------------------
any particular time its corporate trust business shall be principally
administered, which office at the date of the execution of this Agreement is
located at the address set forth in Section 12.09.
"Counsel for the Company" means Dorsey & Whitney or other legal
-----------------------
counsel for the Company.
"Cumulative Loss Coverage Ratio" means, with respect to any Payment
------------------------------
Date, a fraction, the numerator of which is the sum of (i) the Loss Coverages as
of such Payment Date and the two immediately preceding Payment Dates plus (ii)
the aggregate Net Liquidation Losses on all Contracts that became Liquidated
Contracts during the immediately preceding Due Period and the two immediately
preceding Due Periods and the denominator of which is the aggregate Net
Liquidation Losses
1-6
<PAGE>
on all Contracts that became Liquidated Contracts during the immediately
preceding Due Period and the two immediately preceding Due Periods (but in no
event less than $1.00).
"Cumulative Realized Loss Ratio" for any Payment Date is a fraction,
------------------------------
expressed as a percentage, the numerator of which is the aggregate Realized
Losses for that Payment Date and all prior Payment Dates, and the denominator of
which is the Initial Principal Amount.
"Custodian" means at any time an Eligible Institution, or a financial
---------
institution organized under the laws of the United States or any State, which is
subject to supervision and examination by Federal or State authorities and whose
commercial paper, or unsecured long-term debt (or, in the case of a member of a
bank holding company system, the commercial paper or unsecured long-term debt of
such bank holding company) has been rated A-1 by Standard & Poor's in the case
of commercial paper, or BBB or higher by Standard & Poor's in the case of
unsecured long-term debt, as is acting at such time as Custodian of the Contract
Files pursuant to Section 4.01.
"Cut-off Date" means June 1, 1994.
------------
"Cut-off Date Pool Principal Balance" means the aggregate of the
-----------------------------------
Cut-off Date Principal Balances of the Contracts.
"Cut-off Date Principal Balance" means, as to any Contract, the unpaid
------------------------------
principal balance thereof at the Cut-off Date after giving effect to all
installments of principal due prior thereto.
"Defaulted Contract" means a Contract with respect to which the
------------------
Servicer commenced foreclosure proceedings, made a sale of such Contract to a
third party for foreclosure or enforcement, or, in the case of an FHA-Insured
Contract, submitted a claim to FHA, or as to which there was a Delinquent
Payment 180 or more days past due.
"Definitive Certificates" has the meaning assigned in Section
-----------------------
9.02(e).
"Delinquency Ratio" for any Payment Date is a percentage, equal to the
-----------------
aggregate outstanding principal balance of all Contracts that were delinquent 60
days or more as of the end of the immediately preceding Due Period (including
Defaulted Contracts that have not yet been liquidated, but excluding Contracts
that are current with respect to rescheduled payments following the Obligor's
bankruptcy) divided by the Principal Balance immediately following such Payment
Date.
"Delinquent Payment" means, as to any Contract, with respect to any
------------------
Due Period, any payment or portion of a payment that was originally scheduled to
be made during such Due Period under such Contract (after giving effect to any
reduction in the principal amount deemed owed on such Contract by the Obligor,
as described in Section 6.01(a)(iii)) and was not received or applied during
such Due
1-7
<PAGE>
Period and deposited in the Certificate Account, whether or not any payment
extension has been granted by the Servicer; provided, however, that with respect
to any Liquidated Contract, the payment scheduled to be made in the Due Period
in which such Contract became a Liquidated Contract shall not be deemed a
Delinquent Payment.
"Depository" means the initial Depository, The Depository Trust
----------
Company, the nominee of which is CEDE & CO., as the registered Holder of (i) one
Certificate evidencing $78,900,000 in initial principal balance of the Class A-1
Certificates, (ii) one Certificate evidencing $9,700,000 in initial principal
balance of the Class M-1 Certificates, (iii) one Certificate evidencing
$7,300,000 in initial principal balance of the Class B-1 Certificates, and (iv)
one Certificate evidencing $9,055,396 in initial principal balance of the Class
B-2 Certificates, and any permitted successor depository. The Depository shall
at all times be a "clearing corporation" as defined in Section 8-102(3) of the
Uniform Commercial Code of the State of New York.
"Depository Participant" means a broker, dealer, bank or other
----------------------
financial institution or other Person for whom from time to time a Depository
effects book-entry transfers and pledges of securities deposited with the
Depository.
"Determination Date" means the seventh Business Day following a
------------------
Due Period during the term of this Agreement.
"Due Period" means a calendar month during the term of this
----------
Agreement.
"Electronic Ledger" means the electronic master record of conditional
-----------------
sales contracts and promissory notes of the Company.
"Eligible Institution" means any depository institution (which may be
--------------------
the Trustee or an Affiliate of the Trustee) organized under the laws of the
United States or any State, the deposits of which are insured to the full extent
permitted by law by the Federal Deposit Insurance Corporation, which is subject
to supervision and examination by Federal or State authorities and whose short-
term debt (or, in the case of the principal bank in a bank holding company
system, the short-term debt of such bank or the bank holding company) has been
rated A-1 by Standard & Poor's.
"Eligible Investments" has the meaning assigned in Section
--------------------
5.05(b).
"Eligible Servicer" means the Trustee or a Person qualified to act as
-----------------
servicer of the Contracts under applicable Federal and State laws and
regulations, which is a Title I approved lender under FHA regulations and which
services not less than $100,000,000 in outstanding principal amount of
FHA-insured home improvement contracts and promissory notes and manufactured
housing conditional sales contracts and installment loan agreements.
"ERISA" means the Employee Retirement Income Security Act of 1974,
-----
as amended.
1-8
<PAGE>
"Errors and Omissions Protection Policy" means the employee errors and
--------------------------------------
omissions policy maintained by the Servicer or any similar replacement policy
covering errors and omissions by the Servicer's employees, and meeting the
requirements of Section 5.09, all as such policy relates to Contracts comprising
a portion of the corpus of the Trust.
"Event of Termination" has the meaning assigned in Section 7.01.
--------------------
"Fidelity Bond" means the fidelity bond maintained by the Servicer or
-------------
any similar replacement bond, meeting the requirements of Section 5.09, as such
bond relates to Contracts comprising a portion of the corpus of the Trust.
"Final Payment Date" means the Payment Date on which the final
------------------
distribution in respect of Certificates will be made pursuant to Section 12.04.
"FHA Insurance" means the credit insurance provided by the Federal
-------------
Housing Administration pursuant to Title I of the National Housing Act, as
evidenced by the Company's Contract of Insurance.
"FHA-Insured Contracts" means those Contracts that have been or are
---------------------
being reported to FHA as eligible for FHA Insurance, a list of which is attached
to this Agreement as Exhibit L.
"FHA Regulations" means the regulations promulgated by HUD relating to
---------------
Title I home improvement loans, currently found at 24 C.F.R. (S)201.
"GNMA" means the Government National Mortgage Association.
----
"Guaranty Fee" means, with respect to any Payment Date, the lesser of
------------
(a) the Monthly Excess Cashflow, and (b) one-twelfth of the product of 3% and
the Pool Scheduled Principal Balance with respect to the preceding Payment Date.
"HUD" means the United States Department of Housing and Urban
---
Development.
"Independent" means, when used with respect to any specified Person,
-----------
Dorsey & Whitney or any Person who (i) is in fact independent of the Company and
the Servicer, (ii) does not have any direct financial interest or any material
indirect financial interest in the Company or the Servicer or in an Affiliate of
either, and (iii) is not connected with the Company or the Servicer as an
officer, employee, promoter, underwriter, trustee, partner, director or person
performing similar functions. Whenever it is provided herein that any
Independent Person's opinion or certificate shall be furnished to the Trustee,
such opinion or certificate shall state that the signatory has read this
definition and is Independent within the meaning set forth herein.
"Limited Guaranty" means the limited guaranty of the Company
----------------
provided pursuant to Section 8.03.
1-9
<PAGE>
"Liquidated Contract" means with respect to any Due Period, either
-------------------
(1) a Defaulted Contract as to which (a) the Servicer has received
from the Obligor, or a third party purchaser of the Contract, all amounts
which the Servicer reasonably and in good faith expects to recover from or
on account of such Contract, or (b) in the case of an FHA-Insured Contract,
either (i) FHA has paid the claim or (ii) the Servicer has determined in
good faith that FHA will not pay the claim, or
(2) a Contract (a) upon which all or a portion of the first
payment of interest due by the Obligor was added to principal, and (b) on
which the Obligor failed to pay the full amount of principal due on the
Contract, as computed by the Servicer; provided, however, that any Contract
which the Company is obligated to repurchase pursuant to Section 3.05(a),
and did so repurchase, shall be deemed not to be a Liquidated Contract; and
provided further, that with respect to Due Periods beginning on or after
February 1, 2013, a Liquidated Contract also means any Contract as to which
the Servicer has commenced foreclosure proceedings, made a sale of the
Contract to a third party for foreclosure or enforcement, or, in the case
of an FHA-Insured Contract, submitted a claim to FHA.
"List of Contracts" means the list identifying each Contract
-----------------
constituting part of the corpus of the Trust, which list (a) identifies each
Contract and (b) sets forth as to each Contract (i) the unpaid principal balance
as of the Cut-off Date, (ii) the amount of monthly payments due from the
Obligor, (iii) the Contract Interest Rate and (iv) the maturity date, and which
is attached to this Agreement as Exhibit K.
"Loss Coverage" means, with respect to any Payment Date, the amount
-------------
equal to (i) the Amount Available minus (ii) the sum of the Monthly Principal
and Monthly Interest.
"Monthly Excess Cashflow" means, with respect to any Payment Date, the
-----------------------
amount, if any, by which (a) the Available Amount exceeds (b) the sum of the
amounts in Sections 8.04(b)(1) - (6) for such Payment Date.
"Monthly Interest" means the sum of the Class A-1, Class M-1, Class B-
----------------
1 and Class B-2 Interest Accrual Amounts plus any Unpaid Interest Shortfalls for
Class A-1, Class M-1, Class B-1 and Class B-2.
"Monthly Principal" means, as of any Payment Date, the amount determined
-----------------
pursuant to Section 6.01(a).
"Monthly Report" has the meaning assigned in Section 6.01.
--------------
"Monthly Servicing Fee" means, as of any Payment Date, one-twelfth of
---------------------
the product of .75% and the Pool Scheduled Principal Balance with respect to the
preceding Payment Date.
1-10
<PAGE>
"Net Liquidation Loss" means, as to a Liquidated Contract, the
--------------------
difference between (a) the Repurchase Price of such Contract, and (b) the Net
Liquidation Proceeds with respect to such Liquidated Contract, where such
difference is a positive number.
"Net Liquidation Proceeds" means, as to a Liquidated Contract, the
------------------------
proceeds, or, for Contracts which become Liquidated Contracts pursuant to the
last proviso in the definition of "Liquidated Contract," the estimated proceeds,
received as of the last day of the Due Period in which such Contract became a
Liquidated Contract, from the Obligor, from a third party purchaser of the
Contract, under FHA Insurance, under insurance other than FHA insurance, or
otherwise, net of liquidation expenses.
"Obligor" means the purchaser of the financed home improvements or
-------
other person who owes payments under a Contract.
"Officer's Certificate" means a certificate signed by the Chairman of
---------------------
the Board, President or any Vice President of the Company and delivered to the
Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may,
------------------
except as expressly provided herein, be salaried counsel for the Company,
acceptable to the Trustee and the Company.
"Original Class A-1 Principal Balance" means $78,900,000.
------------------------------------
"Original Class M-1 Principal Balance" means $9,700,000.
------------------------------------
"Original Class B-1 Principal Balance" means $7,300,000.
------------------------------------
"Original Class B-2 Principal Balance" means $9,055,396.
------------------------------------
"Paying Agent" has the meaning assigned in Section 8.01(b).
------------
"Payment Date" means the fifteenth day of each calendar month during
------------
the term of this Agreement, or if such day is not a Business Day, the next
succeeding Business Day, commencing July 15, 1994.
"Percentage Interest" means, as to any Certificate or the Class C
-------------------
Certificate, the percentage interest evidenced thereby in distributions made on
the related Class, such percentage interest being equal to (i) as to any
Certificate, the percentage (carried to eight places) obtained from dividing the
denomination of such Certificate by (a) in the case of a Class A-1 Certificate,
the Original Class A-1 Principal Balance, (b) in the case of a Class M-1
Certificate, the Original Class M-1 Principal Balance, (c) in the case of a
Class B-1 Certificate, the Original Class B-1 Principal Balance, and (d) in the
case of a Class B-2 Certificate, the Original Class B-2 Principal Balance, and
(ii) as to any Class C Certificate, the percentage specified on the face of such
Certificate. The aggregate Percentage Interests for each Class of Certificates
shall equal 100%.
1-11
<PAGE>
"Person" means any individual, corporation, partnership, joint
------
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated organization or government or any agency or political
subdivision thereof.
"Plan" has the meaning assigned in Section 9.02(b)(3).
----
"Pool Factor" means, at any time, the percentage derived from a
-----------
fraction, the numerator of which is the Principal Balance at such time and the
denominator of which is the Initial Principal Amount.
"Pool Scheduled Principal Balance" means, as of any Payment Date, the
--------------------------------
aggregate Scheduled Principal Balance of all Contracts that were outstanding
during the immediately preceding Due Period.
"Principal Prepayment" means a payment or other recovery of principal
--------------------
on a Contract which is received in advance of its scheduled due date and applied
upon receipt (or, in the case of a partial prepayment, upon the next scheduled
payment date on such Contract) to reduce the outstanding principal amount due on
such Contract prior to the date or dates on which such principal amount is due.
"Qualified Bank" means any depository institution whose unsecured
--------------
long-term debt (or in the case of the principal bank in a bank holding company
system the unsecured long-term debt of such bank holding company) is rated A or
higher by Standard & Poor's.
"Realized Losses" for any Payment Date means the aggregate Net
---------------
Liquidation Losses for all Contracts that became Liquidated Contracts during the
immediately preceding Due Period.
"Record Date" means, with respect to any Payment Date, the
-----------
Business Day immediately preceding such Payment Date.
"REMIC" means a "real esate mortgage investment conduit" as defined
-----
in Section 860D of the Code.
"REMIC Provisions" means the provisions of the federal income tax law
----------------
relating to REMICs, which appear at Sections 860A through 860G of the Code, and
related provisions and any temporary, proposed or final regulations promulgated
thereunder, as the foregoing may be in effect from time to time.
"Repurchase Price" means, with respect to a Contract to be repurchased
----------------
pursuant to Section 3.05 or which becomes a Liquidated Contract, an amount equal
to (a) the remaining principal amount outstanding on such Contract (without
giving effect to any Advances paid by the Servicer or the Trustee, as
applicable, with respect to such Contract pursuant to Section 8.02), plus (b)
interest at the Pass-Through Rate on such Contract from the end of the Due
Period with respect to
1-12
<PAGE>
which the Obligor last made a payment (without giving effect to any Advances
paid by the Servicer or the Trustee, as applicable, with respect to such
Contract pursuant to Section 8.02) through the end of the immediately
preceding Due Period.
"Responsible Officer" means, with respect to the Trustee, the chairman
-------------------
and any vice chairman of the board of directors, the president, the chairman and
vice chairman of any executive committee of the board of directors, every vice
president, assistant vice president, the secretary, every assistant secretary,
cashier or any assistant cashier, controller or assistant controller, the
treasurer, every assistant treasurer, every trust officer, assistant trust
officer and every other officer or assistant officer of the Trustee customarily
performing functions similar to those performed by persons who at the time shall
be such officers, respectively, or to whom a corporate trust matter is referred
because of knowledge of, familiarity with, and authority to act with respect to
a particular matter.
"Scheduled Principal Balance" means, with respect to any Contract and
---------------------------
any Payment Date or the Cut-off Date, the principal balance of such Contract as
of the Due Date in the Due Period immediately preceding such Payment Date or as
of the Due Date immediately preceding the Cut-off Date, as the case may be, as
specified in the amortization schedule at the time relating thereto (before any
adjustment to such amortization schedule by reason of any bankruptcy of an
Obligor or similar proceeding or any moratorium or similar waiver or grace
period) after giving effect to any previous Partial Principal Prepayments and to
the payment of principal due on such Due Date and irrespective of any
delinquency in payment by, or extension granted to, the related Obligor.
"Secured Contracts" means those Contracts secured by a mortgage, deed
-----------------
of trust or security deed on the related real estate, a list of which is
attached to this Agreement as Exhibit M.
"Service Transfer" has the meaning assigned in Section 7.02.
----------------
"Servicer" means the Company until any Service Transfer hereunder and
--------
thereafter means the new servicer appointed pursuant to Article VII.
"Servicing Officer" means any officer of the Servicer involved in, or
-----------------
responsible for, the administration and servicing of Contracts whose name
appears on a list of servicing officers appearing in an Officer's Certificate
furnished to the Trustee by the Company, as the same may be amended from time to
time.
"Standard & Poor's" means Standard & Poor's Ratings Group, a
-----------------
division of McGraw-Hill, Inc., or any successor thereto.
"Trust" means the trust created by this Agreement, the corpus of which
-----
consists of all the rights, benefits, and obligations arising from and in
connection with each Contract, all rights under FHA Insurance in respect of each
FHA-Insured Contract, all rights under any hazard, flood or other individual
insurance policy on the real estate securing a Contract for the benefit of the
creditor of such Contract,
1-13
<PAGE>
rights under the Errors and Omissions Protection Policy, the Limited Guaranty
and the remittances, deposits and payments made into the Certificate Account
and amounts in the Certificate Account (including all proceeds of investments
thereof).
"Trustee Advance" has the meaning assigned in Section 11.16.
---------------
"Uncollectible Advance" means, with respect to any Determination Date,
---------------------
the amount, if any, advanced by the Servicer or the Trustee, as applicable
pursuant to Section 8.02 or 11.16, which the Servicer or the Trustee, as
applicable, has determined in good faith will not be ultimately recoverable by
the Servicer or the Trustee, as applicable, from FHA Insurance (in the case of
an FHA-Insured Contract), the Obligor or out of Net Liquidation Proceeds. The
determination by the Servicer that it has made an Uncollectible Advance shall be
evidenced by an Officer's Certificate delivered to the Trustee.
"Unpaid Class A-1 Interest Shortfall" means, with respect to the Class
-----------------------------------
A-1 Certificates and any Payment Date, the amount, if any, of the Class A-1
Interest Shortfall for the prior Payment Date, plus accrued interest (to the
extent payment thereof is legally permissible) at the Class A-1 Pass-Through
Rate on the amount thereof from such prior Payment Date to such current Payment
Date.
"Unpaid Class M-1 Interest Shortfall" means, with respect to the Class
-----------------------------------
M-1 Certificates and any Payment Date, the amount, if any, of the Class M-1
Interest Shortfall for the prior Payment Date, plus accrued interest (to the
extent payment thereof is legally permissible) at the Class M-1 Pass-Through
Rate on the amount thereof from such prior Payment Date to such current Payment
Date.
"Unpaid Class B-1 Interest Shortfall" means, with respect to the Class
-----------------------------------
B-1 Certificates and any Payment Date, the amount, if any, of the Class B-1
Interest Shortfall for the prior Payment Date, plus accrued interest (to the
extent payment thereof is legally permissible) at the Class B-1 Pass-Through
Rate on the amount thereof from such prior Payment Date to such current Payment
Date.
"Unpaid Class B-2 Interest Shortfall" means, with respect to the Class
-----------------------------------
B-2 Certificates and any Payment Date, the amount, if any, of the Class B-2
Interest Shortfall for the prior Payment Date, plus accrued interest (to the
extent payment thereof is legally permissible) at the Class B-2 Pass-Through
Rate on the amount thereof from such prior Payment Date to such current Payment
Date.
"Unpaid Interest Shortfall" means any of the Unpaid Class A-1 Interest
-------------------------
Shortfall, the Unpaid Class M-1 Interest Shortfall, the Unpaid Class B-1
Interest Shortfall or the Unpaid Class B-2 Interest Shortfall.
"Weighted Average Contract Rate" means, with respect to any Payment
------------------------------
Date, the weighted average (expressed as a percentage and rounded to four
decimal places) of the Contract Rates of all Contracts that were outstanding as
of the respective Due Dates in the immediately preceding Due Period, weighted on
the basis of the
1-14
<PAGE>
respective Scheduled Principal Balances of such Contracts determined with
respect to the preceding Payment Date.
1-15
<PAGE>
ARTICLE II
ESTABLISHMENT OF TRUST; TRANSFER OF CONTRACTS
---------------------------------------------
SECTION 2.01. Closing.
-------
a. There is hereby created, by the Company as settlor, a separate
trust which shall be known as Home Improvement Loan Trust 1994-BI. By the
execution and delivery of this Agreement, the Company has agreed that it will
elect or will cause an election to be made to treat the pool of assets
comprising the Trust as a REMIC. The Trust shall be administered pursuant to
the provisions of this Agreement for the benefit of the Certificateholders and
the Class C Certificateholder.
b. The Company hereby transfers, assigns, sets over and otherwise
conveys to the Trustee on behalf of the Trust, by execution of an assignment
substantially in the form of Exhibit B hereto, (i) all the right, title and
interest of the Company in and to the Contracts, including all interest and
principal received by the Company on or with respect to the Contracts (other
than principal and interest due on the Contracts before the Cut-off Date), (ii)
all rights under FHA Insurance as such insurance relates to the FHA Insured
Contracts, (iii) all rights under hazard insurance, if applicable, on the
properties described in the Contracts and, as to FHA Insured Contracts secured
by properties located in special flood areas designated by HUD, all rights under
flood insurance policies as such insurance relates to the Contracts, (iv) all
rights under the Errors and Omissions Protection Policy and the Fidelity Bond as
such policy and bond relate to the Contracts, (v) all documents contained in the
Contract Files, and (vi) all proceeds and products of the foregoing.
c. Although the parties intend that the conveyance of the
Company's right, title and interest in and to the Contracts pursuant to this
Agreement shall constitute a purchase and sale and not a loan, if such
conveyances are deemed to be a loan, the parties intend that the rights and
obligations of the parties to such loan shall be established pursuant to the
terms of this Agreement. The parties also intend and agree that the Company
shall be deemed to have granted to the Trustee, and the Company does hereby
grant to the Trustee, a perfected first-priority security interest in the items
designated in Section 2.01(b)(i) through 2.01(b)(vi) above, and that this
Agreement shall constitute a security agreement under applicable law. If the
trust created by this Agreement terminates prior to the satisfaction of the
claims of any Person under any Certificates, the security interest created
hereby shall continue in full force and effect and the Trustee shall be deemed
to be the collateral agent for the benefit of such Person.
2-1
<PAGE>
SECTION 2.02. Conditions to the Closing.
-------------------------
On or before the Closing Date, the Company shall deliver or cause to
be delivered the following documents to the Trustee:
a. The List of Contracts, certified by the Chairman of the Board,
President or any Vice President of the Company.
b. A certificate of an officer of the Company substantially in
the form of Exhibit E hereto.
c. An Opinion of Counsel for the Company substantially in the
form of Exhibit F hereto.
d. A letter from KPMG Peat Marwick, or another nationally
recognized accounting firm, stating that such firm has reviewed the
Contracts on a statistical sampling basis and, based on such sampling,
concluding that the Contracts conform in all material respects to the List
of Contracts, to a confidence level of 97.5%, with an error rate not in
excess of 1.8%, specifying those Contracts which do not so conform.
e. Copies of resolutions of the board of directors of the Company
or of the executive committee of the board of directors of the Company
approving the execution, delivery and performance of this Agreement and the
transactions contemplated hereunder, certified in each case by the
secretary or an assistant secretary of the Company.
f. Officially certified recent evidence of due incorporation and
good standing of the Company under the laws of the State of Minnesota.
g. An Officer's Certificate listing the Servicer's Servicing
Officers.
h. Evidence of continued coverage of the Company under the Errors
and Omissions Protection Policy.
i. Evidence of deposit in the Certificate Account of all funds
received with respect to the Contracts from the Cut-off Date to the Closing
Date, other than amounts due before the Cut-off Date, together with an
Officer's Certificate to the effect that such amount is correct.
j. An Officer's Certificate confirming that the Company's
internal audit department has reviewed the original or a copy of each
Contract and each Contract File, that each Contract and Contract File
conforms in all material respects with the List of Contracts and that each
Contract File is complete.
2-2
<PAGE>
k. Assignments in recordable form to the Trustee of the
mortgages, deeds of trust and security deeds relating to the Secured
Contracts.
SECTION 2.03. Acceptance by Trustee.
---------------------
a. On the Closing Date, if the conditions set forth in Section
2.02 have been satisfied, the Trustee shall deliver a certificate to the Company
substantially in the form of Exhibit G hereto acknowledging conveyance of the
Contracts and Contract Files to the Trustee and declaring that the Trustee,
directly or through a custodian, will hold all Contracts that have been
delivered in trust, upon the trusts herein set forth, for the use and benefit of
all Certificateholders and the Class C Certificateholder, and shall issue, to or
upon the order of the Company, the Certificates and the Class C Certificate
representing, in the aggregate, ownership of the entire beneficial interest in
the Trust.
b. If, in its review of the Contract Files as described in
Exhibit G, the Trustee or a custodian discovers a breach of the representations
or warranties set forth in Sections 3.02, 3.03 or 3.04 of this Agreement, or in
the Officer's Certificate delivered pursuant to Section 2.02(j) of this
Agreement, the Company shall cure such breach or repurchase such Contract
pursuant to Section 3.05.
SECTION 2.04. REMIC Provisions.
----------------
a. The Company, as Servicer, and the Class C Certificateholder,
by acceptance thereof, each agrees that, in accordance with the requirements of
Section 860D(b)(1) of the Code, the federal tax return of the Trust for its
first taxable year shall provide that the Trust elects to be treated as a REMIC
for such taxable year and all subsequent taxable years. In furtherance of the
foregoing, the Trustee (at the direction of the Company) and the Company shall
take, or refrain from taking, all such action as is necessary to maintain the
status of the Trust as a REMIC under the REMIC Provisions of the Code,
including, but not limited to, the taking of such action as is necessary to cure
any inadvertent termination of REMIC status.
b. The Certificates are being issued in four classes and are
hereby designated by the Company as constituting the "regular interests" in the
Trust for purposes of Section 860G(a)(1) of the Code. The following terms of
the Certificates are irrevocably established as of the Closing Date: the Class
A-1 Pass-Through Rate is 7.15%, the Class M-1 Pass-Through Rate is 8.15%, the
Class B-1 is a floating rate equal to the Weighted Average Contract Rate
(subject to a maximum rate of 8.55%), the Class B-2 Pass-Through Rate is a
floating rate equal to the Weighted Average Contract Rate (subject to a maximum
rate of 8.70%), the initial aggregate principal balance of the Class A-1
Certificates is $78,900,000, the initial aggregate principal balance of the
Class M-1 Certificates is $9,700,000, the initial aggregate principal balance of
the Class B-1 Certificates is $7,300,000, the initial aggregate principal
balance of the Class B-2 Certificates is $9,055,396 and the latest possible
maturity date of the Certificates is in July 2014 (calculated using a prepayment
assumption of 0% and including the grace period and possible extensions thereof
with respect to "foreclosure property" provided under Sections 856(e)(2) and (3)
of the Code). The
2-3
<PAGE>
Class C Certificate is being issued in a single class and is hereby designated
by the Company as constituting the sole class of "residual interests" in the
Trust for purposes of Section 860G(a)(2) of the Code.
c. The Closing Date, which is the day on which the Trust will
issue all of its regular and residual interests, is hereby designated as the
"startup day" of the REMIC constituted by the Trust within the meaning of
Section 860G(a)(9) of the Code.
d. After the Closing Date, neither the Trustee, the Company nor
any Servicer shall (i) accept any contribution of assets to the Trust, (ii)
dispose of any portion of the Trust other than as provided in Sections 3.05,
3.06 and 8.06, (iii) engage in any "prohibited transaction," as defined in
Sections 860F(a)(2) and (5) of the Code, (iv) accept any contribution after the
Closing Date that is subject to the tax imposed by Section 860G(d) of the Code
or (v) engage in any activity or enter into any agreement that would result in
the receipt by the Trust of any "net income from foreclosure property" as
defined in Section 860G(c)(2) of the Code, unless, prior to any such action set
forth in clauses (i), (ii), (iii), (iv) or (v), the Trustee shall have received
an unqualified Opinion of Counsel, which opinion shall not be an expense of the
Trust, stating that such action will not, directly or indirectly, (A) adversely
affect the status of the Trust as a REMIC or the status of the Certificates as
"regular interests" therein or of the Class C Certificates as the sole class of
"residual interests" therein, (B) affect the distributions payable hereunder to
the Certificateholders or the Class C Certificateholders or (C) result in the
imposition of any lien, charge or encumbrance upon the Trust.
e. Upon the acquisition of any real property (including interests
in real property), or any personal property incident thereto, in connection with
the default of a Contract, the Servicer and the Trustee (at the direction of the
Servicer) shall take, or cause to be taken, such action as is necessary to sell
or otherwise dispose of such property within such period as is then required by
the Code in order for such property to qualify as "foreclosure property" within
the meaning of Section 860G(a)(8) of the Code, unless the Servicer and the
Trustee receive an Opinion of Counsel to the effect that the holding by the
Trust of such property subsequent to the period then permitted by the Code will
not result in the imposition of any taxes on "prohibited transactions" of the
Trust, as defined in Section 860F of the Code, or cause the Trust to fail to
qualify as a REMIC at any time that the Certificates or Class C Certificates are
outstanding. The Servicer shall manage, conserve, protect and operate such real
property, or any personal property incident thereto, so that such property will
not fail to qualify as "foreclosure property," as defined in Section 860G(a)(8)
of the Code, and that the management, conservation, protection and operation of
such property will not result in the receipt by the Trust of any "income from
nonpermitted assets," within the meaning of Section 860F(a)(2)(B) of the Code.
2-4
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
The Company makes the following representations and warranties,
effective as of the Closing Date, on which the Trustee will rely in accepting
the Contracts in trust and issuing the Certificates on behalf of the Trust. The
repurchase obligation of the Company set forth in Section 3.05 constitutes the
sole remedy available to the Trust, the Certificateholders or the Class C
Certificateholder for a breach of a representation or warranty of the Company
set forth in Section 3.02, 3.03 or 3.04 of this Agreement or in the Officer's
Certificate delivered pursuant to Section 2.02(j) of this Agreement.
SECTION 3.01. Representations and Warranties Regarding the Company
----------------------------------------------------
The Company represents and warrants to the Certificateholders that:
a. Organization and Good Standing. The Company is a corporation
------------------------------
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has the corporate power to own its
assets and to transact the business in which it is currently engaged. The
Company is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which the character of the business
transacted by it or properties owned or leased by it requires such
qualification and in which the failure so to qualify would have a material
adverse effect on the business, properties, assets, or condition (financial
or other) of the Company.
b. Authorization; Binding Obligations. The Company has the power
----------------------------------
and authority to make, execute, deliver and perform this Agreement and all
of the transactions contemplated under this Agreement, and to create the
Trust and cause it to make, execute, deliver and perform its obligations
under this Agreement and has taken all necessary corporate action to
authorize the execution, delivery and performance of this Agreement and to
cause the Trust to be created. When executed and delivered, this Agreement
will constitute the legal, valid and binding obligation of the Company
enforceable in accordance with its terms, except as enforcement of such
terms may be limited by bankruptcy, insolvency or similar laws affecting
the enforcement of creditors' rights generally and by the availability of
equitable remedies.
c. No Consent Required. The Company is not required to obtain
-------------------
the consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Agreement.
d. No Violations. The execution, delivery and performance of
-------------
this Agreement by the Company will not violate any provision of any
existing law
3-1
<PAGE>
or regulation or any order or decree of any court or the Articles of
Incorporation or Bylaws of the Company, or constitute a material breach
of any mortgage, indenture, contract or other agreement to which the
Company is a party or by which the Company may be bound.
e. Litigation. No litigation or administrative proceeding of or
----------
before any court, tribunal or governmental body is currently pending, or to
the knowledge of the Company threatened, against the Company or any of its
properties or with respect to this Agreement, the Certificates or the Class
C Certificate which, if adversely determined, would in the opinion of the
Company have a material adverse effect on the transactions contemplated by
this Agreement.
SECTION 3.02. Representations and Warranties Regarding Each
---------------------------------------------
Contract.
- - --------
The Company represents and warrants to the Certificateholders as
to each Contract:
a. List of Contracts. The information set forth in the List of
-----------------
Contracts is true and correct as of its date.
b. Payments. As of the Cut-off Date, the most recent scheduled
--------
payment was made by or on behalf of the Obligor or was not delinquent for
more than 59 days.
c. Costs Paid and No Waivers. The terms of the Contract have not
-------------------------
been waived, altered or modified in any respect, except by instruments or
documents identified in the Contract File. All costs, fees and expenses
incurred in making, closing and perfecting the lien of the Contract have
been paid. The subject real property has not been released from the lien
of such Secured Contract.
d. Binding Obligation. The Contract is the legal, valid and
------------------
binding obligation of the Obligor thereunder and is enforceable in
accordance with its terms, except as such enforceability may be limited by
laws affecting the enforcement of creditors' rights generally.
e. No Defenses. The Contract is not subject to any right of
-----------
rescission, setoff, counterclaim or defense, including the defense of
usury, and the operation of any of the terms of the Contract or the
exercise of any right thereunder will not render the Contract unenforceable
in whole or in part or subject to any right of rescission, setoff,
counterclaim or defense, including the defense of usury, and no such right
of rescission, setoff, counterclaim or defense has been asserted with
respect thereto.
f. Insurance Coverage. The Company has been named as an
------------------
additional insured party under any hazard insurance on the property
described in the Contract, to the extent required by the Company's
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<PAGE>
underwriting guidelines. If the property described in the Contract is
located in a special flood area designated by HUD, the property is covered
by a flood insurance policy of the nature and, if such Contract is an FHA-
Insured Contract, in the amount required by the FHA Regulations.
g. FHA Insurance. If the Contract is an FHA-Insured Contract,
-------------
such Contract was originated in compliance with FHA Regulations and is
insured, without set-off, surcharge or defense, by FHA Insurance.
Following the assignment of such FHA-Insured Contract to the Trustee, the
Trustee on behalf of the Trust will be entitled to the full benefits of the
FHA Insurance.
h. Lawful Assignment. The Contract was not originated in and is
-----------------
not subject to the laws of any jurisdiction whose laws would make the
transfer of the Contract under this Agreement or pursuant to transfers of
Certificates unlawful or render the Contract unenforceable. The Company
has duly executed a valid blanket assignment of the Contracts transferred
to the Trust, and has transferred all its right, title and interest in such
Contracts, including all rights the Company may have against the
originating contractor-seller with respect to Contracts originated by a
contractor-seller rather than the Company, to the Trust. The blanket
assignment, any and all documents executed by the Company pursuant to
Section 2.01(b) hereof, and this Agreement each constitute the legal, valid
and binding obligation of the Company enforceable in accordance with their
respective terms.
i. Compliance with Law. At the date of origination of the
-------------------
Contract, all requirements of any federal and state laws, rules and
regulations applicable to the Contract, including, without limitation,
usury and truth in lending laws and (if such Contract is an FHA-Insured
Contract) the FHA Regulations have been complied with, and the Company
shall for at least the period of this Agreement, maintain in its
possession, available for the Trustee's inspection, and shall deliver to
the Trustee upon demand, evidence of compliance with all such requirements.
j. Contract in Force. The Contract has not been satisfied or
-----------------
subordinated in whole or in part or rescinded, and the real estate securing
such Contract has not been released from the lien of such Contract in whole
or in part.
k. Valid Lien. The Contract has been duly executed and
----------
delivered by the Obligor, and the lien created thereby has been duly
recorded, or has been delivered to the appropriate governmental authority
for recording and will be duly recorded within 180 days, and constitutes a
valid and perfected first, second or third-priority lien on the real estate
described in such Contract.
l. Capacity of Parties. The signature(s) of the Obligor(s) on
-------------------
the Contract are genuine and all parties to the Contract had full legal
capacity to execute the Contract.
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<PAGE>
m. Good Title. The Company is the sole owner of the Contract
----------
and, if such Contract is an FHA-Insured Contract, because the Trustee is a
lender approved by HUD to originate and purchase Title I loans under a
valid Title I contract of insurance, has the authority to sell, transfer
and assign such Contract to the Trust under the terms of this Agreement.
There has been no assignment, sale or hypothecation of the Contract by the
Company except the usual past hypothecation of the Contract in connection
with the Company's normal banking transactions in the conduct of its
business, which hypothecation terminates upon sale of the Contract to the
Trust. The Company has good and marketable title to the Contract, free and
clear of any encumbrance, equity, loan, pledge, charge, claim, lien or
encumbrance of any type and has full right to transfer the Contract to the
Trust.
n. No Defaults. As of the Cut-off Date, there was no default,
-----------
breach, violation or event permitting acceleration existing under the
Contract and no event which, with notice and the expiration of any grace or
cure period, would constitute such a default, breach, violation or event
permitting acceleration under such Contract (except payment delinquencies
permitted by clause (b) above). The Company has not waived any such
default, breach, violation or event permitting acceleration except payment
delinquencies permitted by clause (b) above.
o. Equal Installments. The Contract has a fixed Contract
------------------
Interest Rate and provides for level monthly payments which fully amortize
the loan over its term.
p. Enforceability. Each Contract contains customary and
--------------
enforceable provisions so as to render the rights and remedies of the
holder thereof adequate for the realization against the collateral of the
benefits of the lien provided thereby.
q. One Original. There is only one original executed Contract,
------------
which Contract has been delivered to the Trustee or its custodian on or
before the Closing Date.
r. Genuine Documents. All documents submitted are genuine, and
-----------------
all other representations as to each Contract, including the List of
Contracts delivered to the Trustee, are true and correct. Any copies of
documents provided by the Company are accurate and complete (except that,
with respect to each Contract that was originated by a contractor-seller
rather than the Company, the Company makes such representation and warranty
only to the best of the Company's knowledge).
s. Origination. The Contract was originated by a home
-----------
improvement contractor in the ordinary course of such contractor's business
or was originated by the Company directly.
3-4
<PAGE>
t. Underwriting Guidelines. Each Contract was originated or
-----------------------
purchased in accordance with the Company's then-current underwriting
guidelines.
SECTION 3.03. Representations and Warranties Regarding the Contracts
------------------------------------------------------
in the Aggregate.
- - ----------------
The Company represents and warrants to the Certificateholders that:
a. Amounts. The aggregate principal amounts payable by Obligors
-------
under the Contracts as of the Cut-off Date equal the Cut-Off Date Pool
Principal Balance.
b. Characteristics. The Contracts have the following
---------------
characteristics: (i) 100% of the Contracts (by principal balance as of the
Cut-off Date) are Secured Contracts; (ii) no Contract has a remaining
maturity of more than 240 months; and (iii) the final scheduled payment
date on the Contract with the latest maturity is in June, 2014. No
Contract was originated before January 1, 1993. No Contract has a Contract
Interest Rate less than 8.24%.
c. Geographic Concentrations. 18.50% of the Contracts by
-------------------------
principal balance as of the Cut-off Date are secured by property located in
(or, in the case of Contracts that are not Secured Contracts, otherwise
relate to improvements to property located in) California, 11.75% in
Florida, 7.90% in Texas, 6.01% in New Jersey, and 5.31% in New York. No
other state represents more than 5% of the aggregate principal balance of
the Contracts as of the Cut-off Date. No more than 1% of the Contracts by
remaining principal balance as of the Cut-off Date are secured by property
located in (or, in the case of Contracts that are not Secured Contracts,
otherwise relate to improvements to property located in) an area with the
same five-digit zip code.
d. Marking Records. By the Closing Date, the Company has caused
---------------
the portions of the Electronic Ledger relating to the Contracts to be
clearly and unambiguously marked to indicate that such Contracts constitute
part of the Trust and are owned by the Trust in accordance with the terms
of the trust created hereunder.
e. No Adverse Selection. No adverse selection procedures have
--------------------
been employed in selecting the Contracts.
SECTION 3.04. Representations and Warranties Regarding the Contract Files.
-----------------------------------------------------------
The Company represents and warrants that:
a. Possession. Immediately prior to the Closing Date, the
----------
Company will have possession of each original Contract and the related
Contract File, and there are and there will be no custodial agreements in
effect materially
3-5
<PAGE>
and adversely affecting the rights of the Company to make, or cause
to be made, any delivery required hereunder.
b. Bulk Transfer Laws. The transfer, assignment and conveyance
------------------
of the Contracts and the Contract Files by the Company pursuant to
this Agreement is not subject to the bulk transfer or any similar
statutory provisions in effect in any applicable jurisdiction.
SECTION 3.05. Repurchases of Contracts for Breach of Representations
------------------------------------------------------
and Warranties.
- - ---------------
a. Subject to Section 3.06, the Company shall repurchase a
Contract, at its Repurchase Price, not later than 90 days after the day on
which the Company, the Servicer or the Trustee first discovers or should have
discovered a breach of a representation or warranty of the Company set forth
in Sections 3.02, 3.03 or 3.04 of this Agreement or in the Officer's
Certificate delivered pursuant to Section 2.02(j) of this Agreement that
materially adversely affects the Trust's or the Certificateholders' interest
in such Contract and which breach has not been cured; provided, however, that
-------- -------
(i) in the event that a party other than the Company first becomes aware of
such breach, such discovering party shall notify the Company in writing within
5 Business Days of the date of such discovery and (ii) with respect to any
Contract incorrectly described on the List of Contracts with respect to unpaid
principal balance, which the Company would otherwise be required to repurchase
pursuant to this Section, the Company may, in lieu of repurchasing such
Contract, deposit in the Certificate Account within 90 days from the date of
such discovery cash in an amount sufficient to cure such deficiency or
discrepancy. Any such cash so deposited shall be distributed to
Certificateholders and the Class C Certificateholder on the immediately
following Payment Date as a collection of principal or interest on such
Contract, according to the nature of the deficiency or discrepancy.
Notwithstanding any other provision of this Agreement, the obligation of the
Company under this Section shall not terminate upon a Service Transfer
pursuant to Article VII.
b. The Company shall defend and indemnify the Trustee, the
Certificateholders, and the Class C Certificateholder against all costs,
expenses, losses, damages, claims and liabilities, including reasonable fees and
expenses of counsel, which may be asserted against or incurred by any of them as
a result of any third-party action arising out of any breach of any such
representation and warranty.
SECTION 3.06. No Repurchase Under Certain Circumstances.
-----------------------------------------
Notwithstanding any provision of this Agreement to the contrary, no
repurchase pursuant to Section 3.05 shall be made unless the Company obtains for
the Trustee an Opinion of Counsel addressed to the Trustee that any such
repurchase would not, under the REMIC Provisions, (i) cause the Trust to fail to
qualify as a REMIC while any regular interest in the REMIC is outstanding, (ii)
result in a tax on prohibited transactions within the meaning of Section
860F(a)(2) of the Code or (iii) constitute a contribution after the startup day
subject to tax under
3-6
<PAGE>
Section 860G(d) of the Code. The Servicer shall attempt to obtain such Opinion
of Counsel. Notwithstanding the absence of such opinion as to the imposition
of any tax as the result of such purchase or deposit, the Company shall
purchase such Contract (or deposit cash in the Certificate Account as provided
in the preceding section) and shall guarantee the payment of such tax by
paying to the Trustee the amount of such tax not later than five Business Days
before such tax shall be due and payable to the extent that amounts previously
paid over to and then held by the Trustee pursuant to Section 6.06 hereof are
insufficient to pay such tax and all other taxes chargeable under Section
6.06. Pursuant to Section 6.06, the Servicer is hereby directed to withhold,
and shall withhold and pay over to the Trustee, an amount sufficient to pay
such tax and any other taxes imposed on prohibited transactions under Section
860F(a)(i) of the Code or imposed on contributions after start up date under
Section 860G(d) of the Code from amounts otherwise distributable to Class C
Certificateholder. The Servicer shall give notice to the Trustee at the time
of such repurchase of the amounts due from the Company pursuant to the
guarantee of the Company described above and give notice as to who should
receive such payment.
The Trustee shall have no obligation to pay any such amounts pursuant
to this Section other than from moneys provided to it by the Company or from
moneys held in the funds and accounts created under this Agreement. The Trustee
shall be deemed conclusively to have complied with this Section if it follows
the directions of the Company.
In the event any tax that is guaranteed by the Company pursuant to
this Section 3.06 is refunded to the Trust or otherwise is determined not to be
payable, the Company shall be repaid the amount of such refund or that portion
of any guarantee payment made by the Company that is not applied to the payment
of such tax.
3-7
<PAGE>
ARTICLE IV
PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS
-----------------------------------------------------------
SECTION 4.01. Transfer of Contracts.
---------------------
On or prior to the Closing Date, the Company shall deliver the Contract
Files to the Trustee. The Trustee shall maintain the Contract Files at its
office or with a duly appointed Custodian. The Trustee may release a Contract
File to the Servicer pursuant to Section 5.07. The Company has filed a form
UCC-1 financing statement regarding the sale of the Contracts to the Trustee,
and shall file continuation statements in respect of such UCC-1 financing
statement as if such financing statement were necessary to perfect such sale.
The Company shall take any other actions necessary to maintain the perfection
of the sale of the Contracts to the Trustee.
SECTION 4.02. Costs and Expenses.
------------------
The Servicer agrees to pay all reasonable costs and disbursements in
connection with the perfection and the maintenance of perfection, as against
all third parties, of the Certificateholders' right, title and interest in and
to the Contracts (including, without limitation, the mortgage or deed of trust
on the related real estate granted thereby).
4-1
<PAGE>
ARTICLE V
SERVICING OF CONTRACTS
----------------------
SECTION 5.01. Responsibility for Contract Administration.
------------------------------------------
The Servicer will have the sole obligation to manage, administer, service
and make collections on the Contracts and perform or cause to be performed all
contractual and customary undertakings of the holder of the Contracts to the
Obligor. The Trustee, at the request of a Servicing Officer, shall furnish the
Servicer with any powers of attorney or other documents necessary or
appropriate to enable the Servicer to carry out its servicing and
administrative duties hereunder. The Company is hereby appointed the Servicer
until such time as any Service Transfer shall be effected under Article VII.
SECTION 5.02. Standard of Care.
----------------
In managing, administering, servicing and making collections on the
Contracts pursuant to this Agreement, the Servicer will exercise that degree
of skill and care required by FHA (in the case of FHA-Insured Contracts) and
otherwise consistent with the highest degree of skill and care that the
Servicer exercises with respect to similar contracts (including manufactured
housing contracts) serviced by the Servicer; provided, however, that such
-------- -------
degree of skill and care shall be at least as favorable as the degree of skill
and care generally applied by servicers of home improvement contracts and
promissory notes for institutional investors.
SECTION 5.03. Records.
-------
The Servicer shall, during the period it is servicer hereunder, maintain
such books of account and other records as will enable the Trustee to
determine the status of each Contract.
SECTION 5.04. Inspection.
----------
a. At all times during the term hereof, the Servicer shall afford the
Trustee and its authorized agents reasonable access during normal business
hours to the Servicer's records relating to the Contracts, which have not
previously been provided to the Trust, and will cause its personnel to assist
in any examination of such records by the Trustee. The examination referred to
in this Section will be conducted in a manner which does not unreasonably
interfere with the Servicer's normal operations or customer or employee
relations. Without otherwise limiting the scope of the examination the Trustee
may make, the Trustee may, using generally accepted audit procedures, verify
the status of each Contract and review the Electronic Ledger and records
relating thereto for conformity to Monthly Reports prepared pursuant to
Article VI and compliance with the standards represented to exist as to each
Contract in this Agreement.
5-1
<PAGE>
b. At all times during the term hereof, the Servicer shall keep
available a copy of the List of Contracts at its principal executive office
for inspection by Certificateholders.
c. A Certificateholder holding Certificates representing in the
aggregate at least 5% of the Aggregate Certificate Principal Balance shall
have the rights of inspection afforded to the Trustee pursuant to this Section
5.04.
SECTION 5.05. Certificate Account.
-------------------
a. On or before the Closing Date, the Company shall establish the
Certificate Account on behalf of the Trust with an Eligible Institution. The
Servicer shall pay into the Certificate Account, as promptly as practicable
(not later than the next Business Day) following receipt thereof, all amounts
received with respect to the Contracts, including all proceeds of FHA
Insurance claims received by the Servicer, other than extension fees and
assumption fees, which fees shall be retained by the Servicer as compensation
for servicing the Contracts. The Trustee shall pay into the Certificate
Account as promptly as practicable all proceeds of FHA Insurance claims with
respect to FHA-Insured Contracts received by the Trustee. All amounts paid
into the Certificate Account under this Agreement shall be held in trust for
the Trustee, the Certificateholders and the Class C Certificateholder until
payment of any such amounts is authorized under this Agreement. Only the
Trustee may withdraw funds from the Certificate Account.
b. If the Servicer so directs, the Eligible Institution maintaining the
Certificate Account shall, in the name of the Trustee in its capacity as such,
invest the amounts in the Certificate Account in Eligible Investments that
mature not later than one Business Day prior to the next succeeding Payment
Date. Once such funds are invested, such Eligible Institution shall not change
the investment of such funds. All income and gain from such investments shall
be added to the Certificate Account and distributed on such Payment Date
pursuant to Section 8.04(b). Losses, if any, realized on amounts in the
Certificate Account invested pursuant to this paragraph shall first be
credited against undistributed investment earnings on amounts in the
Certificate Account invested pursuant to this paragraph, and shall thereafter
be deemed to reduce the amount on deposit in the Certificate Account and
otherwise available for distribution to Certificateholders and the Class C
Certificateholder pursuant to Section 8.01. The Company and the Trustee shall
in no way be liable for losses on amounts invested in accordance with the
provisions hereof. Funds in the Certificate Account not so invested must be
insured to the extent permitted by law by the Federal Deposit Insurance
Corporation. "Eligible Investments" are any of the following:
--------------------
(i) direct obligations of, and obligations fully guaranteed by, the
United States of America, the Federal Home Loan Mortgage Corporation, the
Federal National Mortgage Association, or any agency or instrumentality
of the United States of America the obligations of which are backed by
the full faith and credit of the United States of America;
5-2
<PAGE>
(ii) (A) demand and time deposits in, certificates of deposit of,
bankers' acceptances issued by, or federal funds sold by any depository
institution or trust company (including the Trustee or any Affiliate of
the Trustee, acting in its commercial capacity) incorporated under the
laws of the United States of America or any state thereof and subject to
supervision and examination by federal and/or state authorities, so long
as, at the time of such investment or contractual commitment providing
for such investment, the commercial paper or other short-term debt
obligations of such depository institution or trust company (or, in the
case of a depository institution which is the principal subsidiary of a
holding company, the commercial paper or other short-term debt
obligations of such holding company) are rated at least A-1 by Standard &
Poor's and (B) any other demand or time deposit or certificate of deposit
which is fully insured by the Federal Deposit Insurance Corporation;
(iii) shares of an investment company registered under the Investment
Company Act of 1940, whose shares are registered under the Securities Act
of 1933 and have the highest credit rating then available from Standard &
Poor's, and whose only investments are in securities described in clauses
(i) and (ii) above;
(iv) repurchase obligations with respect to (A) any security
described in clause (i) above or (B) any other security issued or
guaranteed by an agency or instrumentality of the United States of
America, in either case entered into with a depository institution or
trust company (acting as principal) described in clause (ii)(A) above;
(v) securities bearing interest or sold at a discount issued by
any corporation incorporated under the laws of the United States of
America or any State thereof which have a credit rating of at least A
from Standard & Poor's at the time of such investment; provided, however,
-------- -------
that securities issued by any particular corporation will not be Eligible
Investments to the extent that investment therein will cause the then
outstanding principal amount of securities issued by such corporation and
held as part of the corpus of the Trust to exceed 10% of amounts held in
the Certificate Account; and
(vi) commercial paper having a rating of at least A-1 from Standard
& Poor's at the time of such investment or pledge as security.
The Trustee may trade with itself or an Affiliate in the purchase or sale
of such Eligible Investments.
SECTION 5.06. Enforcement.
-----------
a. The Servicer shall, consistent with customary servicing procedures,
act with respect to the Contracts in such manner as will maximize the receipt
of principal and interest on such Contracts and liquidation proceeds with
respect to Liquidated Contracts. The Company shall pay all FHA Insurance
premiums
5-3
<PAGE>
required by FHA Regulations in respect of FHA-Insured Contracts; if the
Company is no longer the Servicer and fails to pay such FHA Insurance
premiums, the successor Servicer shall pay such premiums and shall be entitled
to reimbursement therefor in accordance with Section 8.04. The Servicer shall
comply with FHA Regulations in servicing FHA-Insured Contracts so that the
related FHA Insurance remains in full force and effect, except for good-faith
disputes relating to FHA Regulations or such FHA Insurance.
b. In accordance with the standard of care specified in Paragraph 5.02,
the Servicer may, in its own name, if possible, or as agent for the Trust,
commence proceedings for the foreclosure of any subject real estate, and may
(with respect to an FHA-Insured Contract) submit a claim to FHA in lieu of
commencing foreclosure proceedings, or may take such other steps that in the
Servicer's reasonable judgment will maximize liquidation proceeds with respect
to the Contract, including, for example, the sale of the Contract to a third
party for foreclosure or enforcement and, in the case of any default on a
related prior mortgage loan, the advancing of funds to correct such default
and the advancing of funds to pay off a related prior mortgage loan, which
advances are liquidation expenses that will be reimbursed to the Servicer out
of related liquidation proceeds before the related Net Liquidation Proceeds
are paid to Certificateholders and the Class C Certificateholder. The Servicer
shall also deposit in the Certificate Account any Net Liquidation Proceeds
received in connection with any Contract which became a Liquidated Contract in
a prior Due Period.
c. The Servicer may sue to enforce or collect upon Contracts, in its own
name, if possible, or as agent for the Trust. If the Servicer elects to
commence a legal proceeding to enforce a Contract, the act of commencement
shall be deemed to be an automatic assignment of the Contract to the Servicer
for purposes of collection only. If, however, in any enforcement suit or legal
proceeding it is held that the Servicer may not enforce a Contract on the
ground that it is not a real party in interest or a holder entitled to enforce
the Contract, the Trustee on behalf of the Trust shall, at the Servicer's
expense, take such steps as the Servicer deems necessary to enforce the
Contract, including bringing suit in its name or the names of the
Certificateholders and the Class C Certificateholder.
d. The Servicer may grant to the Obligor on any Contract any rebate,
refund or adjustment out of the Certificate Account that the Servicer in good
faith believes is required because of prepayment in full of the Contract. The
Servicer will not permit any rescission or cancellation of any Contract.
e. The Servicer may enforce any due-on-sale clause in a Contract if such
enforcement is called for under its then current servicing policies for
obligations similar to the Contracts, provided that such enforcement is
permitted by applicable law and will not adversely affect any applicable
insurance policy. If an assumption of a Contract is permitted by the Servicer,
upon conveyance of the related property the Servicer shall use its best
efforts to obtain an assumption agreement in connection therewith.
5-4
<PAGE>
f. If, following the termination of the Trust pursuant to Section 12.04,
HUD demands reimbursement of an FHA Insurance claim paid on an FHA-Insured
Contract prior to the termination of the Trust, the Servicer agrees that it
will not seek to recover any such amount from the Trustee or the
Certificateholders.
g. Any provision of this Agreement to the contrary notwithstanding, the
Servicer shall not agree to the modification or waiver of any provision of a
Contract at a time when such Contract is not in default or such default is not
reasonably foreseeable, if such modification or waiver would be treated as a
taxable exchange under Section 1001 of the Code or any proposed, temporary or
final Treasury Regulations promulgated thereunder.
SECTION 5.07. Trustee to Cooperate.
--------------------
a. Upon payment in full on any Contract, the Servicer will notify the
Trustee and the Company (if the Company is not the Servicer) on the next
succeeding Payment Date by certification of a Servicing Officer (which
certification shall include a statement to the effect that all amounts
received in connection with such payments which are required to be deposited
in the Certificate Account pursuant to Section 5.05 have been so deposited)
and shall request delivery of the Contract and Contract File to the Servicer.
Upon receipt of such delivery and request, the Trustee shall promptly release
or cause to be released such Contract and Contract File to the Servicer. Upon
receipt of such Contract and Contract File, each of the Company (if different
from the Servicer) and the Servicer is authorized to execute an instrument in
satisfaction of such Contract and to do such other acts and execute such other
documents as the Servicer deems necessary to discharge the Obligor thereunder
and eliminate any lien on the related real estate. The Servicer shall
determine when a Contract has been paid in full; to the extent that
insufficient payments are received on a Contract credited by the Servicer as
prepaid or paid in full and satisfied, the shortfall shall be paid by the
Servicer out of its own funds and deposited in the Certificate Account.
b. If the Servicer elects to submit a claim to FHA under the FHA
Insurance in respect of an FHA-Insured Contract and payment is received from
FHA, the Servicer shall notify the Trustee and the Company (if the Company is
not the Servicer) on the next succeeding Payment Date by certification of a
Servicing Officer (which certification shall include a statement to the effect
that all amounts received in connection with such payments which are required
to be deposited in the Certificate Account pursuant to Section 5.05 have been
so deposited) and shall request delivery of the Contract and Contract File to
the Servicer. Upon receipt of such delivery and request, the Trustee shall
promptly release or cause to be released such Contract and Contract File to
the Servicer.
c. From time to time as appropriate for servicing, foreclosing, and
making a claim for FHA Insurance coverage in connection with an FHA-Insured
Contract, the Trustee shall, upon written request of a Servicing Officer and
delivery to the Trustee of a receipt signed by such Servicing Officer, cause
the original Contract and the related Contract File to be released to the
Servicer and shall execute
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<PAGE>
such documents as the Servicer shall deem necessary to the prosecution of any
such proceedings. Upon request of a Servicing Officer, the Trustee shall
perform such other acts as reasonably requested by the Servicer and otherwise
cooperate with the Servicer in enforcement of the Certificateholders' rights
and remedies with respect to Contracts.
d. The Servicer's receipt of a Contract and/or Contract File shall
obligate the Servicer to return the original Contract and the related Contract
File to the Trustee when its need by the Servicer has ceased unless the
Contract shall be liquidated or repurchased as described in Section 3.05 or
8.06.
SECTION 5.08. Costs and Expenses.
------------------
Except as provided in Section 8.04(b) for the reimbursement of Advances,
all costs and expenses incurred by the Servicer in carrying out its duties
hereunder (including payment of FHA Insurance premiums, payment of the
Trustee's fees pursuant to Section 11.06, fees and expenses of accountants and
payments of all fees and expenses incurred in connection with the enforcement
of Contracts (including enforcement of Contracts and foreclosures upon real
estate securing any such Contracts) and all other fees and expenses not
expressly stated hereunder to be for the account of the Trust) shall be paid
by the Servicer and the Servicer shall not be entitled to reimbursement
hereunder, except that the Servicer shall be reimbursed out of the liquidation
proceeds of a Liquidated Contract (including FHA Insurance proceeds) for
customary out-of-pocket liquidation expenses incurred by it. The Servicer
shall not incur such liquidation expenses unless it determines in its good
faith business judgment that incurring such expenses will increase the Net
Liquidation Proceeds on the related Contract. The Servicer's out-of-pocket
liquidation expenses in connection with the submission of a claim to FHA
currently do not exceed $100 per Contract.
SECTION 5.09. Maintenance of Insurance.
------------------------
The Servicer shall at all times keep in force a policy or policies of
insurance covering errors and omissions for failure to maintain insurance as
required by this Agreement, and a fidelity bond. Such policy or policies and
such fidelity bond shall be in such form and amount as is generally customary
among persons who service a portfolio of home improvement loans having an
aggregate principal amount of $10,000,000 or more, and which are generally
regarded as servicers acceptable to institutional investors. The Servicer
shall cause to be maintained with respect to any real property securing an FHA-
Insured Contract such hazard insurance and flood insurance as may be required
by the FHA Regulations, it being understood that at the Closing Date hazard
insurance was not required to be maintained under the FHA Regulations. The
Servicer shall cause to be maintained with respect to the real property
securing a conventional Contract hazard insurance (excluding flood insurance
coverage) if such conventional Contract is secured by a first priority
mortgage, deed of trust or security deed or the initial principal balance of
such conventional Contract exceeds $20,000.
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SECTION 5.10 Merger or Consolidation of Servicer.
-----------------------------------
Any Person into which the Servicer may be merged or converted or with
which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which the Servicer shall be a party shall be
the successor of the Servicer hereunder, provided such Person shall be an
Eligible Servicer, without the execution or filing of any paper or any further
act on the part of any of the parties hereto, anything herein to the contrary
notwithstanding. The Servicer shall promptly notify Standard & Poor's in the
event it is a party to any merger, conversion or consolidation.
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ARTICLE VI
REPORTS AND TAX MATTERS
-----------------------
SECTION 6.01. Monthly Reports.
---------------
No later than one Business Day following each Determination Date, the
Servicer shall deliver to the Trustee and Standard & Poor's a Monthly Report,
--------------
substantially in the form of Exhibit N hereto, which report shall include the
following information with respect to the immediately following Payment Date:
a. The amount of Monthly Principal distributed on such Payment
-----------------
Date pursuant to Section 8.04, which shall be:
(i) The amount of regular principal payments on Contracts
paid or applied during the prior Due Period (other than the amount
attributable to principal of any payment received during such Due
Period and due in a previous Due Period, if such payment was
previously advanced as a Delinquent Payment pursuant to Section
8.02); plus
(ii) The amount of Principal Prepayments received during the
prior Due Period; plus
(iii) The amount of any Delinquent Payments that is
attributable to principal on the related Contracts, whether or not
such Delinquent Payments will be advanced pursuant to Section 8.02;
plus
(iv) The aggregate remaining principal balance of all
Contracts that became Liquidated Contracts during the prior Due
Period; plus
(v) The aggregate Repurchase Price paid by the Company for
any Contracts repurchased during the prior Due Period as described
in Section 3.05(a) that is attributable to the principal amount
outstanding on such Contracts; plus
(vi) The amount of any reduction in the principal amount
deemed owed by the Obligor as a result of the Obligor's bankruptcy;
plus
(vii) Any principal amount described in clauses (i) through
(vi) above that was not previously distributed because of an
insufficient amount of funds available in the Certificate Account to
the extent either (a) such Payment Date occurs after the Class B-2
Principal Balance has been reduced to zero, or (b) such principal
amount was not covered by a Class B-2 Guaranty Payment and
corresponding reduction in the Class B-2 Principal Balance;
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b. the amount of Monthly Interest paid on such Payment Date;
c. the remaining Principal Balance after giving effect to the
payment of Monthly Principal on such Payment Date (on which Monthly
Interest will be calculated on the next succeeding Payment Date);
d. the total amount of Advances to be made by the Servicer;
e. the total amount of Advances made by the Servicer on prior
Payment Dates for which the Servicer is now entitled to reimbursement due
to recoveries on the related Contracts;
f. the total amount of Advances made by the Servicer on prior
Payment Dates that the Servicer has now determined are Uncollectible
Advances;
g. the Collected Amount for the prior Due Period;
h. the amounts of fees paid to the Servicer by the Trust on such
Payment Date, separately identifying the Monthly Servicing Fee paid
during the prior Due Period;
i. the Pool Factor immediately before and immediately after such
Payment Date;
j. the Pool Scheduled Principal Balance and Weighted Average
Contract Rate for such Payment Date;
k. the number of Contracts with Delinquent Payments, identifying
such Contracts and the amount of such Delinquent Payments, and the number
of and aggregate unpaid principal balance of Contracts with payments
delinquent 31-59, 60-89 and 90+ days, respectively;
l. the number of Liquidated Contracts, identifying such Contracts
and the Net Liquidation Loss on such Contracts;
m. the Average Sixty-Day Delinquency Ratio and the Cumulative
Realized Loss Ratio;
n. the aggregate number and principal amount of FHA-Insured
Contracts on which either (i) the Servicer has submitted a claim for FHA
Insurance, HUD rejected such claim and the Servicer has determined not to
resubmit such claim, or (ii) the Servicer has determined not to submit a
claim for FHA Insurance because such claim would not be paid by HUD;
o. the amount in the Company's FHA Insurance reserve available to
pay FHA Insurance claims on the FHA-Insured Contracts; and
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<PAGE>
p. the Class B-2 Deficiency Amount, if any, and the expected Class
B-2 Guaranty Payment, if any, on such Payment Date.
SECTION 6.02. Officer's Certificate.
---------------------
Each Monthly Report pursuant to Section 6.01 shall be accompanied by a
certificate of a Servicing Officer substantially in the form of Exhibit H,
certifying the accuracy of the Monthly Report and that no Event of Termination
or event that with notice or lapse of time or both would become an Event of
Termination has occurred, or if such event has occurred and is continuing,
specifying the event and its status.
SECTION 6.03. Other Data.
----------
In addition, the Company and (if different from the Company) the Servicer
shall, on request of the Trustee or Standard & Poor's, furnish the Trustee
and/or Standard & Poor's such underlying data as may be reasonably requested.
SECTION 6.04. Annual Report of Accountants.
----------------------------
On or before May 1 of each year, commencing May 1, 1995, the Servicer at
its expense shall cause a firm of independent public accountants which is a
member of the American Institute of Certified Public Accountants to furnish a
statement to the Trustee and Standard & Poor's to the effect that such firm has
examined certain documents and records relating to the servicing of the home
improvement contracts and promissory notes under pooling and servicing
agreements substantially similar one to another (such statement to have attached
thereto a schedule setting forth the pooling and servicing agreements covered
thereby, including this Agreement) and that, on the basis of such examination,
conducted substantially in compliance with generally accepted auditing
standards, (i) such servicing has been conducted in compliance with such pooling
and servicing agreements, and (ii) the Servicer's payment of FHA Insurance
premiums and submission of FHA Insurance claims has been conducted in compliance
with FHA Regulations, except for such significant exceptions or errors in
records that, in the opinion of such firm, generally accepted auditing standards
requires it to report.
SECTION 6.05. Statements to Certificateholders and the Class C
------------------------------------------------
Certificateholder.
- - -----------------
a. Concurrently with each distribution to Certificateholders pursuant to
Article VIII, the Trustee, in its capacity as Certificate Registrar and Paying
Agent, shall cause to be mailed to Standard & Poor's and to each
Certificateholder and the Class C Certificateholder at the address appearing on
the Certificate Register a statement as of the related Payment Date prepared by
the Servicer setting forth:
(i) the amount of such distribution to the Holders of each Class of
Certificates which constitutes Monthly Principal, specifying the amounts
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<PAGE>
attributable to scheduled payments by Obligors, to Principal Prepayments
by Obligors, and to other payments with respect to principal;
(ii) the amount of such distribution to the Holders of each Class
of Certificates which constitutes Monthly Interest;
(iii) the Class A-1 Principal Balance, the Class M-1 Principal
Balance, the Class B-1 Principal Balance and the Class B-2 Principal
Balance (after giving effect to the distribution of principal on such
Payment Date);
(iv) the Company's FHA Insurance reserve amount (as of the most
recent date available);
(v) the Average Sixty-Day Delinquency Ratio and the Cumulative
Realized Loss Ratio;
(vi) the amount of fees payable out of the Trust separately
identifying each such fee;
(vii) the Pool Scheduled Principal Balance and Weighted Average
Contract Rate of the Contracts for such Payment Date;
(viii) the Pool Factor immediately before and immediately after such
Payment Date;
(ix) the number and aggregate principal balance of Contracts
delinquent 31-59, 60-89 and 90+ days, respectively;
(x) the number of Contracts that became Liquidated Contracts
during the immediately preceding Due Period;
(xi) such other customary factual information as is available to
the Company or the Servicer (if different from the Company) to enable
Certificateholders and the Class C Certificateholder to prepare their tax
returns, including information required with respect to computing the
accrual of market discount;
(xii) such other customary factual information as is available to
the Company or the Servicer (if different from the Company) as the
Servicer can reasonably obtain from its existing data base to enable
Certificateholders and the Class C Certificateholder to comply with
regulatory requirements;
(xiii) as to the Class B-1 and the Class B-2 Certificates, the
Weighted Average Contract Rate for such Payment Date;
(xiv) as to the Class B-2 Certificates, the Class B-2 Formula
Distribution Amount;
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<PAGE>
(xv) as to the Class B-2 Certificates, the Class B-2 Deficiency
Amount, if any, for such Payment Date;
(xvi) as to the Class B-2 Certificates, the Class B-2 Guaranty
Payment, if any, on such Payment Date;
(xvii) the Guaranty Payment and any other amounts payable to the
Company pursuant to Section 8.04(b)(6) for such Payment Date; and
(xviii)the Class C Distribution Amount for such Payment Date.
b. Within 75 days after the end of each calendar year, the Certificate
Registrar shall mail to each Certificateholder and the Class C Certificateholder
of record at any time during such year a report prepared by the Servicer as to
the aggregate amounts of interest accrued and principal paid to such
Certificateholder or Class C Certificateholder, and any additional information
reported pursuant to subsections (a)(xi) and (a)(xii) of this Section 6.05,
attributable to such Certificateholder.
c. A Certificateholder holding Certificates representing in the aggregate
at least 5% of the Fractional Interest in the Trust shall, upon written request
to the Trustee, be entitled to receive copies of all reports provided to the
Trustee.
SECTION 6.06. Payment of Taxes.
------- -- -----
The Servicer shall be responsible for and agrees to prepare, make and file
all federal, state, local or other tax returns, information statements and other
returns and documents of every kind and nature whatsoever required to be made or
filed by or on behalf of the Trust pursuant to the Code and other applicable tax
laws and regulations. Each such return, statement and document shall, to the
extent required by the Code or other applicable law and at the request of the
Servicer, be signed on behalf of the Trust by the Trustee. The Trustee shall
have no responsibility whatsoever for the accuracy or completeness of any such
return, statement or document. The Servicer agrees to indemnify the Trustee and
hold it harmless for, from, against and in respect to any and all liability,
loss, damage and expense which may be incurred by the Trustee based upon or as a
result of the Trustee's execution of any and all such tax returns, statements
and documents. The Servicer, if and for so long as it is a Class C
Certificateholder, shall be designated the "tax matters person" on behalf of the
Trust in the same manner as a partnership may designate a "tax matters partner,"
as such term is defined in Section 6231(a)(7) of the Code. To the extent
permitted by the REMIC Provisions, any subsequent holder of the Class C
Certificate, by acceptance thereof, irrevocably designates and appoints the
Servicer as its agent to perform the responsibilities of the "tax matters
person" on behalf of the Trust if, and during such time as, the Servicer is not
the holder of the Class C Certificate. The Servicer may, at its expense, retain
such outside assistance as it deems necessary in the performance of its
obligations under this paragraph.
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<PAGE>
Each of the Holders of the Certificates or the Class C Certificate, by
acceptance thereof, agrees to file tax returns consistent with and in accordance
with any elections, decisions or other reports made or filed with regard to
federal, state or local taxes on behalf of the Trust. The Servicer, as agent
for the tax matters person, shall represent the Trust in connection with all
examinations of the Trust's affairs by tax authorities, including resulting
administrative and judicial proceedings. Each of the holders of the
Certificates and Class C Certificates, by acceptance thereof, agrees to
cooperate with the Company in such matters and to do or refrain from doing any
or all things reasonably required by the Company to conduct such proceedings,
provided that no such action shall be required by the Company of any
- - --------
Certificateholder that would entail unnecessary or unreasonable expenses for
such Certificateholder in the performance of such action.
The Class C Certificateholder shall pay, on behalf of the Trust, any
foreign, federal, state or local income, property, excise, sales, receipts or
any other similar or related taxes or charges which may be imposed upon the
Trust as a REMIC or otherwise and shall, to the extent provided in Section
10.06, be entitled to be reimbursed out of the Certificate Account or, if such
tax or charge results from a failure by the Trustee, the Company or any Servicer
to comply with the provisions of Section 2.04 or 3.06, the Trustee, the Company
or such Servicer, as the case may be, shall indemnify the Class C
Certificateholder for the payment of any such tax or charge. The Trustee shall
be entitled to withhold from amounts otherwise distributable to the Class C
Certificateholder any taxes or charges payable by the Class C Certificateholder
hereunder.
In the event the Class C Certificate is transferred to a "disqualified
organization," within the meaning of Section 860E(e)(5) of the Code, pursuant to
Section 860D(a)(6)(B) of the Code the Company shall provide to the Internal
Revenue Service and the persons specified in Sections 860(E)(e)(3) and (6) of
the Code all information necessary for the application of Section 860E(e) and
any other applicable provision of the Code with respect to the transfer of the
Class C Certificate to such a disqualified organization including, without
limitation, a computation showing the present value of the total anticipated
excess inclusions with respect to such Class C Certificate for periods after the
transfer as defined in the REMIC Provisions. In addition, to the extent
required by the REMIC Provisions, the Company shall, upon the written request of
persons designated in Section 860E(e)(3) of the Code, furnish to such requesting
party and the Internal Revenue Service information sufficient to compute the
present value of anticipated excess inclusions within 60 days of the receipt of
such written request.
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<PAGE>
ARTICLE VII
SERVICE TRANSFER
SECTION 7.01. Events of Termination.
---------------------
"Event of Termination" means the occurrence of any of the following:
--------------------
a. Any failure by the Servicer to make any payment or deposit
required to be made hereunder (including an Advance) and the continuance
of such failure for a period of four Business Days;
b. Failure on the Servicer's part to observe or perform in any
material respect any covenant or agreement in this Agreement (other than
a covenant or agreement which is elsewhere in this Section specifically
dealt with) which continues unremedied for 30 days;
c. Any assignment by the Servicer of its duties or rights hereunder
except as specifically permitted hereunder, or any attempt to make such
an assignment;
d. A court having jurisdiction in the premises shall have entered a
decree or order for relief in respect of the Servicer in an involuntary
case under any applicable bankruptcy, insolvency or other similar law now
or hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of the Servicer,
as the case may be, or for any substantial liquidation of its affairs;
e. The Servicer shall have commenced a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, or shall have consented to the entry of an order for relief in
an involuntary case under any such law, or shall have consented to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian or sequestrator (or other similar official) of the
Servicer or for any substantial part of its property, or shall have made
any general assignment for the benefit of its creditors, or shall have
failed to, or admitted in writing its inability to, pay its debts as they
become due, or shall have taken any corporate action in furtherance of
the foregoing;
f. The failure of the Servicer to be an Eligible Servicer; or
g. If the Company is the Servicer, the Company's servicing rights
under its master seller-servicer agreement with GNMA are terminated by
GNMA.
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<PAGE>
SECTION 7.02. Transfer.
--------
a. If an Event of Termination has occurred and is continuing, either the
Trustee or Certificateholders, in the aggregate, representing 25% or more of
the Aggregate Certificate Principal Balance, by notice in writing to the
Servicer (and to the Trustee if given by the Certificateholders) may terminate
all (but not less than all) of the Servicer's management, administrative,
servicing and collection functions (such termination being herein called a
"Service Transfer"). On receipt of such notice (or, if later, on a date
----------------
designated therein), all authority and power of the Servicer under this
Agreement, whether with respect to the Contracts, the Contract Files or
otherwise (except with respect to the Certificate Account, the transfer of
which shall be governed by Section 7.06), shall pass to and be vested in the
Trustee pursuant to and under this Section 7.02; and, without limitation, the
Trustee is authorized and empowered to execute and deliver on behalf of the
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments, and to do any and all acts or things necessary or appropriate to
effect the purposes of such notice of termination. The Trustee shall cause all
assignments of mortgages, deeds of trust or security deeds securing Secured
Contracts to be duly recorded. If the Servicer was the lender of record for
purposes of the FHA Insurance relating to FHA-Insured Contracts, the Trustee
shall notify HUD of such termination and shall request that HUD transfer the
FHA Insurance reserves allocable to such Contracts to the successor Servicer;
provided, however, that if the Trustee is the successor Servicer, the Trustee
shall request such transfer of reserves if and to the extent it is legally
able to do so, and the Trustee shall use its best efforts to obtain any
approvals that may be required for the Trustee to receive such transfer of
reserves. Each of the Company and the Servicer agrees to cooperate with the
Trustee in effecting the termination of the responsibilities and rights of the
Servicer hereunder, including, without limitation, the transfer to the Trustee
for administration by it of all cash amounts which shall at the time be held
by the Servicer for deposit, or have been deposited by the Servicer, in the
Certificate Account, or for its own account in connection with its services
hereafter or thereafter received with respect to the Contracts, and the
transfer of all rights under FHA Insurance relating to FHA-Insured Contracts.
The Servicer shall transfer to the new servicer (i) the Servicer's records
relating to the Contracts in such electronic form as the new servicer may
reasonably request and (ii) any Contract Files in the Servicer's possession.
SECTION 7.03. Trustee to Act; Appointment of Successor.
----------------------------------------
On and after the time the Servicer receives a notice of termination
pursuant to Section 7.02, the Trustee shall be the successor in all respects
to the Servicer in its capacity as servicer under this Agreement and the
transactions set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the
Servicer by the terms and provisions hereof, and the Servicer shall be
relieved of such responsibilities, duties and liabilities arising after such
Service Transfer; provided, however, that (i) the Trustee will not assume any
-------- -------
obligations of the Company pursuant to Section 3.05, and (ii) the Trustee
shall not be liable for any acts or omissions of the Servicer occurring prior
to such Service Transfer or for any breach by the Servicer of any of its
obligations contained herein
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<PAGE>
or in any related document or agreement. As compensation therefor, the Trustee
shall be entitled to receive reasonable compensation out of the Monthly
Servicing Fee. Notwithstanding the above, the Trustee may, if it shall be
unwilling so to act, or shall, if it is legally unable so to act, appoint, or
petition a court of competent jurisdiction to appoint, an Eligible Servicer as
the successor to the Servicer hereunder in the assumption of all or any part
of the responsibilities, duties or liabilities of the Servicer hereunder.
Pending appointment of a successor to the Servicer hereunder, unless the
Trustee is prohibited by law from so acting, the Trustee shall act in such
capacity as hereinabove provided. In connection with such appointment and
assumption, the Trustee may make such arrangements for the compensation of
such successor out of payments on Contracts as it and such successor shall
agree; provided, however, that no such monthly compensation shall, without the
-------- -------
written consent of 100% of the Certificateholders, exceed 1/12 of .75% of the
Pool Scheduled Principal Balance with respect to the preceding Payment Date.
The Trustee and such successor shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession.
SECTION 7.04. Notification to Certificateholders and the Class C
--------------------------------------------------
Certificateholder.
- - -----------------
a. Promptly following the occurrence of any Event of Termination, the
Servicer shall give written notice thereof to the Trustee, to Standard &
Poor's, to the Certificateholders and to the Class C Certificateholder at
their respective addresses appearing on the Certificate Register.
b. Within 10 days following any termination or appointment of a
successor to the Servicer pursuant to this Article VII, the Trustee shall give
written notice thereof to Standard & Poor's and to Certificateholders and the
Class C Certificateholder at their respective addresses appearing on the
Certificate Register.
SECTION 7.05. Effect of Transfer.
------------------
a. After the Service Transfer, the Trustee or new Servicer may notify
Obligors to make payments directly to the new Servicer that are due under the
Contracts after the effective date of the Service Transfer.
b. After the Service Transfer, the replaced Servicer shall have no
further obligations with respect to the management, administration, servicing
or collection of the Contracts and the new Servicer shall have all of such
obligations, except that the replaced Servicer will transmit or cause to be
------
transmitted directly to the new Servicer for its own account, promptly on
receipt and in the same form in which received, any amounts (properly endorsed
where required for the new Servicer to collect them) received as payments upon
or otherwise in connection with the Contracts.
c. A Service Transfer shall not affect the rights and duties of the
parties hereunder (including but not limited to the indemnities of the
Servicer and the Company pursuant to Article X and Sections 3.05, 11.06 and
11.12(f)) other than
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those relating to the management, administration, servicing or collection of
the Contracts.
SECTION 7.06. Transfer of Certificate Account.
-------------------------------
Notwithstanding the provisions of Section 7.02, if the Certificate Account
shall be maintained with the Servicer and an Event of Termination shall occur
and be continuing, the Servicer shall, after five days' written notice from the
Trustee, or in any event within ten days after the occurrence of the Event of
Termination, establish a new account or accounts in trust for the
Certificateholders and the Class C Certificateholder conforming with the
requirements of this Agreement at the trust department of the Trustee or with an
Eligible Institution other than the Servicer and promptly transfer all funds in
the Certificate Account to such new account, which shall thereafter be deemed
the Certificate Account for the purposes hereof.
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<PAGE>
ARTICLE VIII
PAYMENTS
--------
SECTION 8.01. Monthly Payments.
----------------
a. Subject to the terms of this Article VIII, each holder of a
Certificate as of a Record Date shall be paid on the next succeeding Payment
Date by check mailed to such Certificateholder at the address for such
Certificateholder appearing on the Certificate Register (or, if such
Certificateholder holds Certificates with an aggregate Percentage Interest of at
least 5% and so requests, by wire transfer pursuant to instructions delivered to
the Trustee at least 10 days prior to such Payment Date), the sum equal to such
Certificateholder's Percentage Interest of the Class A-1 Distribution Amount,
the Class M-1 Distribution Amount, the Class B-1 Distribution Amount, the Class
B-2 Distribution Amount, any Class B-2 Guaranty Payment or the Class C
Distribution Amount, as applicable. Final payment of any Certificate or the
Class C Certificate shall be made only upon presentation of such Certificate or
the Class Certificate at the office or agency of the Paying Agent.
b. Each distribution with respect to a Book-Entry Certificate shall be
paid to the Depository, which shall credit the amount of such distribution to
the accounts of its Depository Participants in accordance with its normal
procedures. Each Depository Participant shall be responsible for disbursing
such distribution to the Certificate Owners that it represents and to each
indirect participating brokerage firm (a "brokerage firm" or "indirect
participating firm") for which it acts as agent. Each brokerage firm shall be
responsible for disbursing funds to the Certificate Owners that it represents.
All such credits and disbursements with respect to a Book-Entry Certificate are
to be made by the Depository and the Depository Participants in accordance with
the provisions of the Book-Entry Certificates. Neither the Trustee, the
Certificate Registrar nor the Company shall have any responsibility therefor
except as otherwise provided by applicable law. To the extent applicable and
not contrary to the rules of the Depository, the Trustee shall comply with the
provisions of the form of the Certificates as set forth in Exhibits A through C
hereto, and the Class C Certificate as set forth in Exhibit I hereto.
c. The Trustee shall appoint an Eligible Institution to be the paying
agent (the "Paying Agent") and cause it to make the payments to the
------------
Certificateholders required hereunder. The Trustee initially appoints its
corporate trust operations department, with an office at 180 East 5th Street,
Third Floor, St. Paul, Minnesota 55101, Attention: Corporate Trust Operations,
as such Paying Agent. The Trustee shall require the Paying Agent (if other than
the Trustee) to agree in writing that all amounts held by the Paying Agent for
payment hereunder will be held in trust for the benefit of the
Certificateholders and that it will notify the Trustee of any failure by the
Servicer to make funds available to the Paying Agent for the payment of amounts
due on the Certificates.
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<PAGE>
SECTION 8.02. Advances.
--------
a. Not later than one Business Day following the Determination Date, the
Servicer shall advance all Delinquent Payments for the immediately preceding Due
Period by depositing the aggregate amount of such Delinquent Payments in the
Certificate Account; provided, however, that the Servicer shall be obligated to
advance Delinquent Payments only to the extent that the Servicer, in its sole
discretion, expects to be able to recover such advances from subsequent
collections, including Net Liquidation Proceeds and (in the case of FHA-Insured
Contracts) proceeds of FHA Insurance, on the related Contracts. If the Servicer
fails to advance all Delinquent Payments required under this Section 8.02, the
Trustee shall be obligated to advance such Delinquent Payments pursuant to
Section 11.16.
b. The Servicer shall be entitled to reimbursement of an Advance from
subsequent collections on the related Contract, including Net Liquidation
Proceeds and (in the case of FHA-Insured Contracts) proceeds of FHA Insurance,
in accordance with Section 8.04(b). If the Servicer determines in good faith
that any Advance has become an Uncollectible Advance, the Servicer will be
entitled to reimbursement of such Uncollectible Advance from the Collected
Amount in accordance with Section 8.04(b).
SECTION 8.03. Limited Guaranty.
----------------
a. No later than the third Business Day prior to each Payment Date, the
Servicer (if other than the Company) shall notify the Company of the amount of
the Class B-2 Guaranty Payment (if any) for such Payment Date. Not later than
the Business Day preceding each Payment Date, the Company shall deposit the
Class B-2 Guaranty Payment, if any, for such Payment Date into the Certificate
Account. Any Class B-2 Guaranty Payment shall be distributable to Class B-2
Certificateholders pursuant to Section 8.01.
b. The obligations of the Company under this Section 8.03 shall not
terminate upon or otherwise be affected by a Service Transfer pursuant to
Article VII of this Agreement.
c. The obligation of the Company to provide the Limited Guaranty under
this Agreement shall terminate on the Final Payment Date.
d. The obligation of the Company to make the Class B-2 Guaranty Payments
described in subsection (a) above shall be unconditional and irrevocable. The
Company acknowledges that its obligation to make the Class B-2 Guaranty Payments
described in subsection (a) above shall be deemed a guaranty by the Company of
indebtedness of the Trust for money borrowed from the Class B-2
Certificateholders.
8-2
<PAGE>
e. If the Company fails to make a Class B-2 Guaranty Payment in whole or
in part, the Company shall promptly notify the Trustee, and the Trustee shall
promptly notify Standard & Poor's.
SECTION 8.04. Payments.
--------
a. On each Determination Date the Servicer shall determine the following
amount of funds (the "Amount Available"): (i) the Collected Amount as of such
----------------
Determination Date; plus (ii) an amount equal to the sum of (1) the aggregate
amount of Advances that will be deposited in the Certificate Account by the
Servicer or the Trustee, as applicable, pursuant to Section 8.02 or 11.16, and
(2) the aggregate of the Repurchase Prices for Contracts to be repurchased by
the Company in respect of such Determination Date pursuant to Section 3.05.
b. On each Payment Date the Trustee shall apply the Amount Available (as
determined on the immediately preceding Determination Date) in the Certificate
Account to make payment in the following order of priority:
1. to pay Monthly Interest to the Certificateholders in the
following order of priority:
(i) Class A-1 Interest Accrual Amount;
(ii) Unpaid Class A-1 Interest Shortfall, if any;
(iii) Class M-1 Interest Accrual Amount;
(iv) Unpaid Class M-1 Interest Shortfall, if any;
(v) Class B-1 Interest Accrual Amount;
(vi) Unpaid Class B-1 Interest Shortfall, if any;
(vii) Class B-2 Interest Accrual Amount; and
(viii) Unpaid Class B-2 Interest Shortfall, if any;
2. to pay Monthly Principal to the Certificateholders in the
following order of priority:
(i) to the Class A-1 Certificateholders until the Class A-1
Principal Balance has been reduced to zero;
(ii) to the Class M-1 Certificateholders until the Class M-1
Principal Balance has been reduced to zero;
(iii) to the Class B-1 Certificateholders until the Class B-1
Principal Balance has been reduced to zero; and
(iv) to the Class B-2 Certificateholders until the Class B-2
Principal Balance has been reduced to zero;
3. to pay the Servicer the Monthly Servicing Fee or such other
compensation owed to the Servicer pursuant to Section 7.03;
4. to reimburse the Trustee or any successor Servicer for any
payments of FHA Insurance premiums in respect of FHA-Insured Contracts
not paid by the
8-3
<PAGE>
Company and for which the Trustee or such successor Servicer has not been
reimbursed by the Company;
5. to reimburse the Servicer or the Trustee, as applicable, for
prior Advances that have been recovered and for any Uncollectible
Advances;
6. to reimburse the Class C Certificateholder for expenses
incurred by and reimbursable to it pursuant to Section 10.06;
7. to pay the Guaranty Fee to the Company and to reimburse the
Company for any prior unreimbursed Class B-2 Guaranty Payments; and
8. to pay the remainder, if any, of the Amount Available to the
Class C Certificateholder.
c. If the Trustee shall not have received the applicable Monthly Report
by any Payment Date, the Trustee shall distribute all funds then in the
Certificate Account to Certificateholders as Monthly Interest and then Monthly
Principal, to the extent of such funds, on such Payment Date.
SECTION 8.05. Reassignment of Repurchased Contracts.
-------------------------------------
Upon receipt by the Trust, by deposit in the Certificate Account, of the
Repurchase Price under Section 3.05, and upon receipt of a certificate of a
Servicing Officer in the form attached hereto as Exhibit H, the Trustee shall
convey and assign to the Company all of the Certificateholders' and the Class C
Certificateholder's right, title and interest in the repurchased Contract
without recourse, representation or warranty, except as to the absence of liens,
charges or encumbrances created by or arising as a result of actions of the
Trustee. Upon such deposit of the Repurchase Price, the Servicer shall be
deemed to have released any claims to such Contract as a result of Advances with
respect to such Contract.
SECTION 8.06. Servicer's Repurchase Option.
----------------------------
a. The Trust created hereby and the respective obligations and
responsibilities of the Company, the Servicer and the Trustee created hereby
(other than the responsibility of the Trustee to make any final distributions to
Certificateholders as set forth below) shall terminate upon the earlier of (1)
the later of the final payment or other liquidation of the last Contract
remaining in the Trust or the Termination of the Trust pursuant to Section
12.04, or (2) the purchase by the Servicer of all of the Contracts and all
property acquired in respect of any Contract remaining in the Trust at a price
equal to the greatest of:
A. the sum of (x) 100% of the principal balance of each Contract
(other than any Contract as to which title to the underlying property has
been acquired and whose fair market value is included pursuant to clause
(y) below), together with accrued and unpaid interest on each such
Contract at
8-4
<PAGE>
the Pass-Through Rate, plus (y) the fair market value of such acquired
property (as determined by the Servicer as of the close of business on
the third Business Day next preceding the date upon which notice of any
such termination is furnished to Certificateholders pursuant to Section
12.04),
B. the aggregate fair market value (as determined by the Servicer
as of the close of business on such third Business Day) of all of the
assets of the Trust, and
C. the remaining Principal Balance as of the close of business on
such third Business Day;
b. The purchase by the Servicer of all of the Contracts pursuant to
Section 8.06(a)(2) above shall be at the option of the Servicer, but shall be
conditioned upon (1) the Pool Scheduled Principal Balance, at the time of any
such purchase, aggregating less than 10% of the Cut-off Date Pool Principal
Balance, (2) such purchase constituting a plan of complete liquidation in
accordance with Section 860F of the Code, and (3) the Servicer having provided
the Trustee and the Depository (if any) with at least 30 days' written notice.
If such option is exercised, the Servicer shall provide to the Trustee the
certification required by Section 12.04, which certificate shall constitute a
plan of complete liquidation within the meaning of Section 860F of the Code, and
the Trustee shall promptly sign such certification and release to the Servicer
the Contract Files pertaining to the Contracts being repurchased.
8-5
<PAGE>
ARTICLE IX
THE CERTIFICATES AND THE CLASS C CERTIFICATE
SECTION 9.01. The Certificates and Class C Certificates.
-----------------------------------------
The Class A-1, the Class M-1, the Class B-1, the Class B-2 and the Class
C Certificates shall be substantially in the forms set forth in Exhibits A, B,
C and I, as applicable, and shall, on original issue, be executed by the
Trustee on behalf of the Trust to or upon the order of the Company. The
Certificates shall be evidenced by (i) one or more Class A-1 Certificates
representing $78,900,000 initial aggregate principal balance, (ii) one or more
Class M-1 Certificates representing $9,700,000 initial aggregate principal
balance, (iii) one or more Class B-1 Certificates representing $7,300,000
initial aggregate principal balance, and (iv) one or more Class B-2
Certificates representing $9,055,396 initial aggregate principal balance,
beneficial ownership of such Classes of Certificates to be held through Book-
Entry Certificates in minimum dollar denominations of $1,000. The Class C
Certificate shall be evidenced by a single Class C Certificate issued on the
Closing Date to the Company and shall represent 100% of the Percentage
Interest of Class C.
The Certificates and the Class C Certificate shall be executed by manual
signature on behalf of the Trustee by a duly authorized Responsible Officer or
authorized signatory. Certificates or the Class C Certificate bearing the
signatures of individuals who were at any time the proper officers of the
Trustee shall bind the Trustee, notwithstanding that such individuals or any
of them have ceased to hold such offices prior to the execution and delivery
of such Certificate, or did not hold such offices at the date of such
Certificates. No Certificate or Class C Certificate shall be entitled to any
benefit under this Agreement, or be valid for any purpose, unless such
Certificate has been executed by manual signature in accordance with this
Section, and such signature upon any Certificate shall be conclusive evidence,
and the only evidence, that such Certificate has been duly executed and
delivered hereunder. All Certificates and the Class C Certificate shall be
dated the date of their execution, except for those Certificates and the Class
C Certificate executed on the Closing Date, which shall be dated the Closing
Date.
SECTION 9.02. Registration of Transfer and Exchange of Certificates and
---------------------------------------------------------
the Class C Certificate.
- - -----------------------
a. The Trustee shall keep at the office or agency to be maintained in
accordance with Section 12.02 a "Certificate Register" in which the Trustee
--------------------
shall provide for the registration of Certificates and the Class C Certificate
and of transfers and exchanges of Certificates and the Class C Certificate as
herein provided. The Trustee initially appoints itself to be the "Certificate
-----------
Registrar" and transfer agent for the purpose of registering Certificates and
- - ---------
the Class C Certificate and transfers and exchanges of Certificates and the
Class C Certificate as provided herein. The Trustee will give prompt written
notice to Certificateholders, the Class C Certificateholder and the Servicer of
any change in the Certificate Registrar.
9-1
<PAGE>
b. (1) Subject to clauses (2) and (3) below, no transfer of a Class C
Certificate shall be made by the Company or any other Person unless such
transfer is exempt from the registration requirements of the Securities
Act of 1933 (the "Act"), as amended, and any applicable state securities
laws or is made in accordance with the Act and laws. In the event that
any such transfer is to be made, (A) the Company may require a written
Opinion of Counsel acceptable to and in form and substance satisfactory
to the Company that such transfer may be made pursuant to an exemption,
describing the applicable exemption and the basis therefor, from the Act
and laws or is being made pursuant to the Act and laws, which Opinion of
Counsel shall not be an expense of the Trustee or the Company, and (B)
the Trustee shall require the transferee to execute an investment letter
substantially in the form of Exhibit K attached hereto, which investment
letter shall not be an expense of the Trustee or the Company. The Class C
Certificateholder desiring to effect such transfer shall, and does hereby
agree to, indemnify the Trustee, the Company and the Certificate
Registrar against any liability that may result if the transfer is not so
exempt or is not made in accordance with such federal and state laws.
(2) No transfer of a Class M-1, Class B-1 or Class B-2 Certificate
or a Class C Certificate or any interest therein shall be made to any
employee benefit plan, trust or account that is subject to ERISA, or that
is described in Section 4975(e)(1) of the Code (each, a "Plan"), unless
the prospective transferee of a Certificate or interest therein provides
the Servicer and the Trustee with a certification of facts and, at its
own expense, an Opinion of Counsel which establish to the satisfaction of
the Servicer and the Trustee that such transfer will not result in a
violation of Section 406 of ERISA or Section 4975 of the Code or cause
the Servicer, the Company or the Trustee to be deemed a fiduciary of such
Plan or result in the imposition of an excise tax under Section 4975 of
the Code.
(3) Notwithstanding anything to the contrary contained herein, (A)
neither the Class C Certificate, nor any interest therein, shall be
transferred, sold or otherwise disposed of to a "disqualified
organization," within the meaning of Section 860E(e)(5) of the Code (a
"Disqualified Organization"), including, but not limited to, (i) the
-------------------------
United States, a state or political subdivision thereof, a foreign
government, an international organization or an agency or instrumentality
of any of the foregoing, (ii) an organization (other than a cooperative
described in Section 521 of the Code) which is exempt from the taxes
imposed by Chapter 1 of the Code and not subject to the tax imposed on
unrelated business income by Section 511 of the Code, or (iii) a
cooperative described in Section 1381(a)(2)(C) of the Code, and (B) prior
to any registration of any transfer, sale or other disposition of the
Class C Certificate, the proposed transferee shall deliver to the
Trustee, under penalties of perjury, an affidavit that such transferee is
not a Disqualified Organization, with respect to which the Trustee shall
have no actual knowledge that such affidavit is false, and the transferor
and the proposed transferee shall each deliver for the Trustee an
affidavit with respect to any other information reasonably required by
the Trustee pursuant
9-2
<PAGE>
to the REMIC Provisions, including, without limitation, information
regarding the transfer of noneconomic residual interests and transfers of
any residual interest to or by a foreign person; provided, however, that,
-------- -------
upon the delivery to the Trustee of an Opinion of Counsel, in form and
substance satisfactory to the Trustee and rendered by Independent
counsel, to the effect that the beneficial ownership of the Class C
Certificate by any Disqualified Organization will not result in the
imposition of federal income tax upon the Trust or any Certificateholder
or any other person or otherwise adversely affect the status of the Trust
as a REMIC, the foregoing prohibition on transfers, sales and other
dispositions, as well as the foregoing requirement to deliver a
certificate prior to any registration thereof, shall, with respect to
such Disqualified Organization, terminate. Notwithstanding any transfer,
sale or other disposition of the Class C Certificate, or any interest
therein, to a Disqualified Organization or the registration thereof in
the Certificate Register, such transfer, sale or other disposition and
any registration thereof, unless accompanied by the Opinion of Counsel
described in the preceding sentence, shall be deemed to be void and of no
legal force or effect whatsoever and such Disqualified Organization shall
be deemed to not be the Class C Certificateholder for any purpose
hereunder, including, but not limited to, the receipt of distributions on
the Class C Certificate, and shall be deemed to have no interest
whatsoever in the Class C Certificate. Each Class C Certificateholder, by
his acceptance thereof, shall be deemed for all purposes to have
consented to the provisions of this Section 9.02(b)(3).
(4) Any transfer, sale or other disposition not in compliance with
the provisions of this Section 9.02(b) shall be deemed to be void and of
no legal force or effect whatsoever and such transferee shall be deemed
to not be the Certificateholder or Class C Certificateholder, as
applicable, for any purpose hereunder, including, but not limited to, the
receipt of distributions on the Certificate or Class C Certificate, and
shall be deemed to have no interest whatsoever in the Certificate or
Class C Certificate.
(5) The Trustee shall give notice to Standard & Poor's promptly
following any transfer, sale or other disposition of the Class C
Certificate.
c. At the option of a Certificateholder or the Class C
Certificateholder, Certificates and the Class C Certificate may be exchanged
for other Certificates or Class C Certificates of authorized denominations of
a like aggregate original denomination, upon surrender of such Certificates or
the Class C Certificate to be exchanged at such office. Whenever any
Certificates or the Class C Certificate are so surrendered for exchange, the
Trustee shall execute and deliver the Certificates or Class C Certificates
which the Certificateholder making the exchange is entitled to receive. Every
Certificate or Class C Certificate presented or surrendered for transfer or
exchange shall be duly endorsed by, or shall be accompanied by a written
instrument of transfer in form satisfactory to the Trustee and the Certificate
Registrar duly executed by the holder thereof or his or her attorney duly
authorized in writing.
9-3
<PAGE>
d. Except as provided in paragraph (e) below, the Book-Entry
Certificates shall at all times remain registered in the name of the
Depository or its nominee and at all times: (i) registration of the
Certificates may not be transferred by the Trustee except to another
Depository; (ii) the Depository shall maintain book-entry records with respect
to the Certificate Owners and with respect to ownership and transfers of such
Certificates; (iii) ownership and transfers of registration of the
Certificates on the books of the Depository shall be governed by applicable
rules established by the Depository; (iv) the Depository may collect its usual
and customary fees, charges and expenses from its Depository Participants; (v)
the Trustee shall deal with the Depository, Depository Participants and
indirect participating firms as representatives of the Certificate Owners of
the Certificates for purposes of exercising the rights of Holders under this
Agreement, and requests and directions for and votes of such representatives
shall not be deemed to be inconsistent if they are made with respect to
different Certificate Owners; and (vi) the Trustee may rely and shall be fully
protected in relying upon information furnished by the Depository with respect
to its Depository Participants and furnished by the Depository Participants
with respect to indirect participating firms and persons shown on the books of
such indirect participating firms as direct or indirect Certificate Owners.
All transfers by Certificate Owners of Book-Entry Certificates shall be
made in accordance with the procedures established by the Depository
Participant or brokerage firm representing such Certificate Owner. Each
Depository Participant shall only transfer Book-Entry Certificates of
Certificate Owners it represents or of brokerage firms for which it acts as
agent in accordance with the Depository's normal procedures.
e. If (x)(i) the Company or the Depository advises the Trustee in
writing that the Depository is no longer willing or able properly to discharge
its responsibilities as Depository and (ii) the Trustee or the Company is
unable to locate a qualified successor or (y) the Company at its sole option
advises the Trustee in writing that it elects to terminate the book-entry
system through the Depository, the Trustee shall notify all Certificate
Owners, through the Depository, of the occurrence of any such event and of the
availability of definitive, fully registered Certificates (the "Definitive
Certificates") to Certificate Owners requesting the same. Upon surrender to
the Trustee of the Certificates by the Depository, accompanied by registration
instructions from the Depository for registration, the Trustee shall issue the
Definitive Certificates. Neither the Company nor the Trustee shall be liable
for any delay in delivery of such instructions and may conclusively rely on,
and shall be protected in relying on, such instructions. Upon the issuance of
Definitive Certificates all references herein to obligations imposed upon or
to be performed by the Depository shall be deemed to be imposed upon and
performed by the Trustee, to the extent applicable with respect to such
Definitive Certificates and the Trustee shall recognize the Holders of the
Definitive Certificates as Certificateholders hereunder.
9-4
<PAGE>
f. On or prior to the Closing Date, there shall be delivered to the
Depository one Class A-1 Certificate, one Class M-1 Certificate, one Class B-1
Certificate, and one Class B-2 Certificate each in registered form registered
in the name of the Depository's nominee, Cede & Co., the total face amount of
which represents 100% of the Original Class A-1 Principal Balance, the
Original Class M-1 Principal Balance, the Original Class B-1 Principal
Balance, and the Original Class B-2 Principal Balance, respectively. Each such
Certificate registered in the name of the Depositary's nominee shall bear the
following legend:
"Unless this Certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC") to the Trustee or
its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other
name as requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein."
SECTION 9.03. No Charge; Disposition of Void Certificates or Class C
------------------------------------------------------
Certificate.
- - -----------
No service charge shall be made to a Certificateholder or Class C
Certificateholder for any transfer or exchange of Certificates or the Class C
Certificate, but the Certificate Registrar may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed
in connection with any transfer or exchange of Certificates or the Class C
Certificate. All Certificates or the Class C Certificate surrendered for
transfer and exchange shall be disposed of in a manner approved by the
Trustee.
SECTION 9.04. Mutilated, Destroyed, Lost or Stolen Certificates or Class
----------------------------------------------------------
C Certificate.
- - -------------
If (a) any mutilated Certificate or Class C Certificate is surrendered to
the Certificate Registrar, or the Certificate Registrar receives evidence to
its satisfaction of the destruction, loss or theft of any Certificate or Class
C Certificate, and (b) there is delivered to the Certificate Registrar and the
Trustee such security or indemnity as may be required by each to save it
harmless, then in the absence of notice to the Certificate Registrar or the
Trustee that such Certificate or Class C Certificate has been acquired by a
bona fide purchaser, the Trustee shall execute and deliver, in exchange for or
in lieu of any such mutilated, destroyed, lost or stolen Certificate or Class
C Certificate, a new Certificate or Class C Certificate of like tenor and
original denomination. Upon the issuance of any new Certificate or Class C
Certificate under this Section 9.04, the Trustee may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses connected therewith. Any
duplicate Certificate or Class C Certificate issued pursuant to this Section
9.04 shall constitute complete and indefeasible evidence of ownership of the
Percentage Interest, as if originally issued,
9-5
<PAGE>
whether or not the mutilated, destroyed, lost or stolen Certificate or Class C
Certificate shall be found at any time.
SECTION 9.05. Persons Deemed Owners.
---------------------
Prior to due presentation of a Certificate or Class C Certificate for
registration of transfer, the Servicer, the Company, the Trustee, the Paying
Agent and the Certificate Registrar may treat the person in whose name any
Certificate or Class C Certificate is registered as the owner of such
Certificate or Class C Certificate for the purpose of receiving remittances
pursuant to Section 8.01 and for all other purposes whatsoever, and none of
the Servicer, the Company, the Trustee, the Certificate Registrar, the Paying
Agent or any agent of the Servicer, the Company, the Trustee, the Paying Agent
or the Certificate Registrar shall be affected by notice to the contrary.
SECTION 9.06. Access to List of Certificateholders' and Class C
-------------------------------------------------
Certificateholder's Names and Addresses.
- - ---------------------------------------
The Certificate Registrar will furnish to the Trustee and the Servicer,
within five days after receipt by the Certificate Registrar of a request
therefor from the Trustee in writing, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Certificateholders and
the Class C Certificateholder as of the most recent Record Date. If Holders of
Certificates representing, in the aggregate, 25% or more of the Aggregate
Certificate Principal Balance (hereinafter referred to as "Applicants") apply
----------
in writing to the Trustee, and such application states that the Applicants
desire to communicate with other Certificateholders or the Class C
Certificateholder with respect to their rights under this Agreement or under
the Certificates or the Class C Certificate and is accompanied by a copy of
the communication which such Applicants propose to transmit, then the Trustee
shall, within five Business Days after the receipt of such application, afford
such Applicants access during normal business hours to the most recent list of
Certificateholders and the Class C Certificateholder held by the Trustee. If
such list is as of a date more than 90 days prior to the date of receipt of
such Applicants' request, the Trustee shall promptly request from the
Certificate Registrar a current list as provided above, and shall afford such
Applicants access to such list promptly upon receipt. Every Certificateholder
and the Class C Certificateholder, by receiving and holding a Certificate or
the Class C Certificate, agrees with the Certificate Registrar and the Trustee
that none of the Company, the Certificate Registrar or the Trustee shall be
held accountable by reason of the disclosure of any such information as to the
names and addresses of the Certificateholders or the Class C Certificateholder
hereunder, regardless of the source from which such information was derived.
SECTION 9.07. Authenticating Agents.
---------------------
The Trustee may appoint one or more Authenticating Agents with power to
act on its behalf and subject to its direction in the execution and delivery
of the Certificates or the Class C Certificate. For all purposes of this
Agreement, the execution and delivery of Certificates or the Class C
Certificate by the Authenticating
9-6
<PAGE>
Agent pursuant to this Section shall be deemed to be the execution and
delivery of Certificates or the Class C Certificate "by the Trustee."
9-7
<PAGE>
ARTICLE X
INDEMNITIES
-----------
SECTION 10.01. Real Estate.
-----------
The Company will defend and indemnify the Trust, the Trustee (including the
Custodian and any other agents of the Trustee) and the Certificateholders and
the Class C Certificateholder against any and all costs, expenses, losses,
damages, claims and liabilities, including reasonable fees and expenses of
counsel and expenses of litigation arising out of or resulting from the use or
ownership of any real estate related to a Contract by the Company or the
Servicer or any Affiliate of either. Notwithstanding any other provision of
this Agreement, the obligation of the Company under this Section shall not
terminate upon a Service Transfer pursuant to Article VII, except that the
obligation of the Company under this Section shall not relate to the actions of
any subsequent Servicer after a Service Transfer.
SECTION 10.02. Liabilities to Obligors.
-----------------------
No obligation or liability to any Obligor under any of the Contracts is
intended to be assumed by the Trust, the Certificateholders or the Class C
Certificateholder under or as a result of this Agreement and the transactions
contemplated hereby and, to the maximum extent permitted and valid under
mandatory provisions of law, the Trust, the Certificateholders and the Class C
Certificateholder expressly disclaim such assumption.
SECTION 10.03. Tax Indemnification.
-------------------
The Company agrees to pay, and to indemnify, defend and hold harmless the
Trust, the Trustee (including the Custodian and any other agents of the
Trustee), the Certificateholders and the Class C Certificateholder from, any
taxes which may at any time be asserted with respect to, and as of the date of,
the transfer of the Contracts to the Trust, including, without limitation, any
sales, gross receipts, general corporation, personal property, privilege or
license taxes (but not including any federal, state or other taxes arising out
of the creation of the Trust and the issuance of the Certificates and the Class
C Certificate) and costs, expenses and reasonable counsel fees in defending
against the same, whether arising by reason of the acts to be performed by the
Company, the Servicer or the Trustee under this Agreement or imposed against the
Trust, a Certificateholder, the Class C Certificateholder or otherwise.
SECTION 10.04. Servicer's Indemnities.
----------------------
The Servicer shall defend and indemnify the Trust, the Trustee (including
the Custodian and any other agents of the Trustee), the Certificateholders and
the Class C Certificateholder against any and all costs, expenses, losses,
damages, claims and liabilities, including any failure to comply with FHA
Regulations in enforcing
10-1
<PAGE>
an FHA-Insured Contract, including reasonable fees and expenses of counsel and
expenses of litigation, in respect of any action taken or omitted to be taken
by the Servicer with respect to any Contract. This indemnity shall survive any
Service Transfer (but the original Servicer's obligations under this Section
10.04 shall not relate to any actions of any subsequent Servicer after a
Service Transfer) and any payment of the amount owing under, or any repurchase
by the Company of, any such Contract.
SECTION 10.05. Operation of Indemnities.
------------------------
Indemnification under this Article shall include, without limitation,
reasonable fees and expenses of counsel and expenses of litigation. If the
Company or the Servicer has made any indemnity payments to the Trustee pursuant
to this Article and the Trustee thereafter collects any of such amounts from
others, the Trust will repay such amounts collected to the Company or the
Servicer, as the case may be, without interest.
SECTION 10.06. REMIC Tax Matters.
-----------------
If the Class C Certificateholder, pursuant to Section 6.06, pays any taxes
or charges imposed upon the Trust as a REMIC or otherwise, such taxes or
charges, except to the extent set forth in the following proviso, shall be
expenses and costs of the Trust and the Class C Certificateholder shall be
entitled to be reimbursed therefor out of the Certificate Account as provided in
Section 8.04; provided, however, that any such taxes or charges shall not be
expenses or costs of the Trust, nor will the Class C Certificateholder be
entitled to reimbursement therefor out of the Certificate Account, if and to the
extent that such taxes or charges resulted from a failure by the Company, the
Trustee or any Servicer to comply with the provisions of Section 2.04.
10-2
<PAGE>
ARTICLE XI
THE TRUSTEE
SECTION 11.01. Duties of Trustee.
-----------------
The Trustee, prior to the occurrence of an Event of Termination and after
the curing of all Events of Termination which may have occurred, undertakes to
perform such duties and only such duties as are specifically set forth in this
Agreement. If an Event of Termination has occurred (which has not been cured),
the Trustee shall exercise such of the rights and powers vested in it by this
Agreement, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform as to form to the requirements of this Agreement.
Subject to Section 11.03, no provision of this Agreement shall be construed
to relieve the Trustee from liability for its own negligent action, its own
negligent failure to act or its own misconduct; provided, however, that:
-------- -------
a. Prior to the occurrence of an Event of Termination, and after the
curing of all such Events of Termination which may have occurred, the duties and
obligations of the Trustee shall be determined solely by the express provisions
of this Agreement, the Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this Agreement, no
implied covenants or obligations shall be read into this Agreement against the
Trustee and, in the absence of bad faith on the part of the Trustee, the Trustee
may conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or opinions furnished to
the Trustee and conforming to the requirements of this Agreement;
b. The Trustee shall not be liable for an error of judgment made in good
faith by a Responsible Officer of the Trustee, unless it shall be proved that
the Trustee was negligent in ascertaining the pertinent facts;
c. The Trustee shall not be personally liable with respect to any action
taken, suffered or omitted to be taken by it in good faith in accordance with
the direction of the Certificateholders representing, in the aggregate, 25% or
more of the Aggregate Certificate Principal Balance relating to the time, method
and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred upon the Trustee, under this
Agreement;
11-1
<PAGE>
d. The Trustee shall not be charged with knowledge of any event referred
to in Section 7.01 unless a Responsible Officer of the Trustee at the Corporate
Trust Office obtains actual knowledge of such event or the Trustee receives
written notice of such event from the Servicer or the Certificateholders
representing, in the aggregate, 25% or more of the Aggregate Certificate
Principal Balance; and
e. The Trustee may rely and shall be protected in acting or refraining
from taking any action in reliance on the advice of the Servicer in all matters
with respect to FHA Insurance. The Trustee shall not be liable for any actions
taken by the Servicer with respect to FHA Insurance, including but not limited
to the maintenance of such insurance and the submission of claims to FHA.
None of the provisions contained in this Agreement shall in any event
require the Trustee to perform, or be responsible for the manner of performance
of, any of the obligations of the Company or the Servicer under this Agreement,
except during such time, if any, as the Trustee shall be the successor to, and
be vested with the rights, duties, powers and privileges of, the Servicer in
accordance with the terms of this Agreement. The Trustee shall not be required
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if there is reasonable ground for believing that the repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
SECTION 11.02. Certain Matters Affecting the Trustee.
-------------------------------------
Except as otherwise provided in Section 11.01:
a. The Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, Officer's Certificate, certificate of a
Servicing Officer, certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, request, consent, order, appraisal, bond or
other paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
b. The Trustee may consult with counsel and any opinion of any counsel
for the Company or the Servicer shall be full and complete authorization and
protection in respect of any action taken or suffered or omitted by the Trustee
hereunder in good faith and in accordance with such Opinion of Counsel;
c. The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Agreement, or to institute, conduct or defend any
litigation hereunder or in relation hereto, at the request, order or direction
of any of the Certificateholders, pursuant to the provisions of this Agreement,
unless such Certificateholders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which may be
incurred therein or thereby; provided, however, that nothing contained herein
-------- -------
shall relieve the Trustee of the obligations, upon the occurrence of an Event of
Termination (which has not been cured), to exercise such of the rights and
powers vested in it by this Agreement, and
11-2
<PAGE>
to use the same degree of care and skill in their exercise as a prudent man
would exercise or use under the circumstances in the conduct of his own
affairs;
d. Prior to the occurrence of an Event of Termination and after the
curing of all Events of Termination which may have occurred, the Trustee shall
not be bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, bond or other paper or document, unless
requested in writing so to do by Certificateholders representing, in the
aggregate, 25% or more of the Aggregate Certificate Principal Balance; provided,
--------
however, that if the payment within a reasonable time to the Trustee of the
- - -------
costs, expenses or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured to the
Trustee by the security afforded to it by the terms of this Agreement, the
Trustee may require reasonable indemnity against such cost, expense or liability
as a condition to so proceeding. The reasonable expense of every such
examination shall be paid by the Servicer or, if paid by the Trustee, shall be
reimbursed by the Servicer upon demand; and
e. The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys or a custodian and shall not be liable for any acts or omissions of
such agents, attorneys or custodians if appointed by it with due care hereunder.
SECTION 11.03. Trustee Not Liable for Certificates, the Class C Certificate
------------------------------------------------------------
or Contracts.
- - ------------
The Trustee assumes no responsibility for the correctness of the recitals
contained herein, in the Certificates or in the Class C Certificate (other than
the Trustee's execution thereof). The Trustee makes no representations as to
the validity or sufficiency of this Agreement, of the Certificates or of the
Class C Certificate (other than its execution thereof) or of any Contract,
Contract File or related document. The Trustee shall not be accountable for the
use or application by the Servicer or the Company of funds paid to the Company
in consideration of conveyance of the Contracts to the Trust by the Company or
deposited in or withdrawn from the Certificate Account by the Servicer.
SECTION 11.04. Trustee May Own Certificates.
----------------------------
The Trustee in its individual or other capacity may become the owner or
pledgee of Certificates representing less than all the beneficial interest in
the Trust with the same rights as it would have if it were not Trustee.
SECTION 11.05. Rights of Certificateholders to Direct Trustee and to Waive
-----------------------------------------------------------
Events of Termination.
- - ---------------------
Holders of Certificates representing, in the aggregate, 25% or more of the
Aggregate Certificate Principal Balance shall have the right to direct the time,
11-3
<PAGE>
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee; provided,
--------
however, that, subject to Section 11.01, the Trustee shall have the right to
- - -------
decline to follow any such direction if the Trustee being advised by counsel
determines that the action so directed may not lawfully be taken, or if the
Trustee in good faith shall, by a Responsible Officer or Officers of the
Trustee, determine that the proceedings so directed would be illegal or involve
it in personal liability or be unduly prejudicial to the rights of
Certificateholders not parties to such direction; and provided further that
-------- -------
nothing in this Agreement shall impair the right of the Trustee to take any
action deemed proper by the Trustee and which is not inconsistent with such
direction by the Certificateholders. Holders of the Certificates representing,
in the aggregate, 51% or more of the Aggregate Certificate Principal Balance may
on behalf of Certificateholders waive any past Event of Termination hereunder
and its consequences, except a default in respect of a covenant or provision
------
hereof which under Section 12.08 cannot be modified or amended without the
consent of all Certificateholders, and upon any such waiver, such Event of
Termination shall cease to exist and shall be deemed to have been cured for
every purpose of this Agreement; but no such waiver shall extend to any
subsequent or other Event of Termination or impair any right consequent thereon.
SECTION 11.06. The Servicer to Pay Trustee's Fees and Expenses.
-----------------------------------------------
The Servicer agrees:
a. to pay to the Trustee reasonable compensation for all services
rendered by it hereunder (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust);
b. except as otherwise expressly provided herein, to reimburse the
Trustee, to the extent requested by the Trustee, for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Agreement (including the reasonable
compensation and the expenses and disbursements of its agents and counsel),
except any such expense, disbursement or advance as may be attributable to
its negligence or bad faith; and
c. to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration
of this trust and its duties hereunder, including the costs and expenses of
defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder.
The covenants in this Section 11.06 shall be for the benefit of the Trustee
in its capacities as Trustee, Paying Agent and Certificate Registrar hereunder,
and shall survive the termination of this Agreement.
11-4
<PAGE>
SECTION 11.07. Eligibility Requirements for Trustee.
------------------------------------
The Trustee hereunder shall at all times be a financial institution
organized and doing business under the laws of the United States of America or
any State, authorized under such laws to exercise corporate trust powers and a
Title I approved lender pursuant to FHA Regulations, whose long-term debt (or,
in the case of First Trust National Association, its parent company) is rated
BBB or higher by Standard & Poor's, and shall have a combined capital and
surplus of at least $50,000,000 or shall be a member of a bank holding system
the aggregate combined capital and surplus of which is $50,000,000, provided
--------
that the Trustee's separate capital and surplus shall at all times be at least
the amount required by Section 310(a)(2) of the Trust Indenture Act of 1939, as
amended. If such Person publishes reports of condition at least annually,
pursuant to law or to the requirements of a supervising or examining authority,
then for the purposes of this Section 11.07, the combined capital and surplus of
such Person shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. In case at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section 11.07, the Trustee shall resign immediately in the manner and with the
effect specified in Section 11.08.
SECTION 11.08. Resignation or Removal of Trustee.
---------------------------------
The Trustee may at any time resign and be discharged from the trusts hereby
created by giving written notice thereof to the Servicer and the Company. Upon
receiving such notice of resignation, the Company shall promptly appoint a
successor Trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to each of the Servicer and the Company and one
copy to the successor Trustee. If no successor Trustee shall have been so
appointed and shall have accepted appointment within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
If at any time the Trustee shall cease to be eligible in accordance with
the provisions of Section 11.07 and shall fail to resign after written request
therefor by the Company, or if at any time the Trustee shall be legally unable
to act, or shall be adjudged a bankrupt or insolvent, or a receiver of the
Trustee or of its property shall be appointed, or any public officer shall take
charge or control of the Trustee or of its property or affairs for the purpose
of rehabilitation, conservation or liquidation, then the Company may remove the
Trustee. If the Company shall have removed the Trustee under the authority of
the immediately preceding sentence, the Company shall promptly appoint a
successor Trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the Trustee so removed and one copy to the
successor trustee.
Any resignation or removal of the Trustee and appointment of a successor
Trustee pursuant to any of the provisions of this Section 11.08 shall not become
effective until acceptance of appointment by the successor Trustee as provided
in Section 11.09.
11-5
<PAGE>
SECTION 11.09. Successor Trustee.
-----------------
Any successor Trustee appointed as provided in Section 11.08 shall execute,
acknowledge and deliver to the Servicer, the Company and to its predecessor
Trustee an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the predecessor Trustee shall become effective and
such successor trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with like effect as if originally named as Trustee. The
predecessor Trustee shall deliver or cause to be delivered to the successor
Trustee the Contracts and the Contract Files and any related documents and
statements held by it hereunder; and, if the Contracts are then held by a
custodian pursuant to a custodial agreement, the predecessor Trustee and the
custodian shall amend such custodial agreement to make the successor Trustee the
successor to the predecessor Trustee thereunder; and the Servicer, the Company
and the predecessor Trustee shall execute and deliver such instruments and do
such other things as may reasonably be required for fully and certainly vesting
and confirming in the successor Trustee all such rights, powers, duties and
obligations. If the predecessor Trustee is then the lender of record for
purposes of FHA Insurance (due to an Event of Termination), the predecessor
Trustee shall submit a report to FHA describing the transfer of the FHA-Insured
Contracts without recourse, in such form as is then required under FHA
Regulations to cause HUD to transfer to the successor Trustee the FHA insurance
reserves applicable to the FHA-Insured Contracts.
No successor Trustee shall accept appointment as provided in this Section
11.09 unless at the time of such acceptance such successor Trustee shall be
eligible under the provisions of Section 11.07.
Upon acceptance of appointment by a successor Trustee as provided in this
Section 11.09, the Servicer shall cause notice of the succession of such Trustee
hereunder to be mailed to Standard & Poor's and to each Certificateholder and
the Class C Certificateholder at their addresses as shown in the Certificate
Register. If the Servicer fails to mail such notice within ten days after
acceptance of appointment by the successor Trustee, the successor Trustee shall
cause such notice to be mailed at the expense of the Servicer.
SECTION 11.10. Merger or Consolidation of Trustee.
----------------------------------
Any Person into which the Trustee may be merged or converted or with which
it may be consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding to
the corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such Person shall be eligible under the provisions
of Section 11.07, without the execution or filing of any paper or any further
act on the part of any of the parties hereto, anything herein to the contrary
notwithstanding. The Trustee shall promptly notify Standard & Poor's in the
event it is a party to any merger, conversion or consolidation.
11-6
<PAGE>
SECTION 11.11. Tax Returns.
-----------
Upon the Servicer's request, the Trustee will furnish the Servicer with all
such information as the Servicer may reasonably require in connection with
preparing all tax returns of the Trust and the Trustee shall execute such
returns.
SECTION 11.12. Obligor Claims.
--------------
In connection with any offset defenses, or affirmative claims for recovery,
asserted in legal actions brought by Obligors under one or more Contracts based
upon provisions therein complying with, or upon other rights or remedies arising
from, any legal requirements applicable to the Contracts, including, without
limitation, the Federal Trade Commission's Trade Regulation Rule Concerning
Preservation of Consumers' Claims and Defenses (16 C.F.R. (S) 433) as amended
from time to time:
a. The Trustee is not, and shall not be deemed to be, either in any
individual capacity, as trustee hereunder or otherwise, a creditor, or a
joint venturer with or an Affiliate of, or acting in concert or cooperation
with, any seller of home improvements, in the arrangement, origination or
making of Contracts. The Trustee is the holder of the Contracts only as
trustee on behalf of the Certificateholders and the Class C
Certificateholder, and not as a principal or in any individual or personal
capacity;
b. The Trustee shall not be personally liable for or obligated to pay
Obligors any affirmative claims asserted thereby, or responsible to
Certificateholders or the Class C Certificateholder for any offset defense
amounts applied against Contract payments, pursuant to such legal actions;
c. The Trustee will pay, solely from available Trust monies,
affirmative claims for recovery by Obligors only pursuant to final judicial
orders or judgments, or judicially approved settlement agreements,
resulting from such legal actions;
d. The Trustee will comply with judicial orders and judgments which
require its actions or cooperation in connection with Obligors' legal
actions to recover affirmative claims against Certificateholders and the
Class C Certificateholder;
e. The Trustee will cooperate with and assist Certificateholders and
the Class C Certificateholder in their defense of legal actions by Obligors
to recover affirmative claims if such cooperation and assistance is not
contrary to the interests of the Trustee as a party to such legal actions
and if the Trustee is satisfactorily indemnified for all liability, costs
and expenses arising therefrom; and
11-7
<PAGE>
f. The Company hereby agrees to indemnify, hold harmless and defend
the Trustee, Certificateholders and the Class C Certificateholder from and
against any and all liability, loss, costs and expenses of the Trustee,
Certificateholders and the Class C Certificateholder resulting from any
affirmative claims for recovery asserted or collected by Obligors under the
Contracts. Notwithstanding any other provision of this Agreement, the
obligation of the Company under this Section 11.12(f) shall not terminate
upon a Service Transfer pursuant to Article VII.
SECTION 11.13. Appointment of Co-Trustee or Separate Trustee.
---------------------------------------------
Notwithstanding any other provisions hereof, at any time, for the purpose
of meeting any legal requirements of any jurisdiction having authority over the
Trust, the Contracts or the Obligors, the Company and Trustee acting jointly
shall have the power and shall execute and deliver all instruments to appoint
one or more Persons approved by the Trustee to act as co-trustee or co-trustees,
jointly with the Trustee, or separate trustee or separate trustees, of all or
any part of the Trust, and to vest in such Person or Persons, in such capacity,
such title to the Trust, or any part thereof, and, subject to the other
provisions of this Section 11.13, such powers, duties, obligations, rights and
trusts as the Company and the Trustee may consider necessary or desirable. If
the Company shall not have joined in such appointment within 15 days after the
receipt by it of a request to do so, or in case an Event of Termination shall
have occurred and be continuing, the Trustee alone shall have the power to make
such appointment. No co-trustee or separate trustee hereunder shall be required
to meet the terms of eligibility as a successor trustee under Section 11.07
hereunder and no notice to Certificateholders or the Class C Certificateholder
of the appointment of co-trustee(s) or separate trustee(s) shall be required
under Section 11.09 hereof.
In the case of any appointment of a co-trustee or separate trustee pursuant
to this Section 11.13 all rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and exercised or
performed by the Trustee and such co-trustee or separate trustee jointly, except
to the extent that under any law of any jurisdiction in which any particular act
or acts are to be performed (whether as Trustee hereunder or as successor to the
Servicer hereunder), the Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such rights, powers, duties and obligations
(including the holding of title to the Trust or any portion thereof in any such
jurisdiction) shall be exercised and performed by such co-trustee or separate
trustee at the direction of the Trustee.
Any notice, request or other writing given to the Trustee shall be deemed
to have been given to each of the then co-trustees and separate trustees, as
effectively as if given to each of them. Every instrument appointing any co-
trustee or separate trustee shall refer to this Agreement and the conditions of
this Article XI. Each co-trustee and separate trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the
11-8
<PAGE>
provisions of this Agreement, specifically including every provision of this
Agreement relating to the conduct of, affecting the liability of, or affording
protection to, the Trustee. Every such instrument shall be filed with the
Trustee.
Any co-trustee or separate trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any co-trustee or separate trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
SECTION 11.14. Certain Matters Relating to FHA Insurance.
-----------------------------------------
a. In the event the Company and the successor Servicer, if any, shall
fail to pay all FHA Insurance premiums with respect to the FHA-Insured Contracts
required by FHA Regulations, the Trustee shall pay such FHA Insurance premiums
and shall be entitled to reimbursement for such amounts pursuant to Section
8.04(b)(4).
b. If, following the termination of the Trust pursuant to Section 12.04,
HUD demands reimbursement from the Trustee of an FHA Insurance claim paid on an
FHA-Insured Contract prior to the termination of the Trust, the Trustee agrees
that it will not seek to recover any such amount from any Person other than the
Company or successor Servicer.
SECTION 11.15. Trustee and First Bank System, Inc.
----------------------------------
In the event the Trustee ceases to be a direct, wholly owned subsidiary of
First Bank System, Inc., the Trustee shall promptly notify Standard & Poor's.
SECTION 11.16 Trustee Advances.
----------------
a. If the Servicer fails to deposit into the Certificate Account Advances
as required by Section 8.02, then the Trustee shall, subject to the provisions
of paragraph (b) below, from its own funds, deposit into the Certificate Account
the amount not so deposited by the Servicer on or before the Business Day
preceding the related Payment Date (a "Trustee Advance").
---------------
b. The Trustee shall not be required to make any Trustee Advance (i) if
and to the extent that it determines in good faith that the funds, if advanced,
would not be recoverable by it from subsequent collections, including Net
Liquidation Proceeds, or (in the case of FHA-Insured Contracts) from FHA
Insurance, or (ii) if the Trustee is prohibited by law from making any such
Trustee Advance, as evidenced by an Opinion of Counsel.
c. The Trustee shall be entitled to reimbursement of a Trustee Advance
from subsequent collections on the related Contract, including Net Liquidation
11-9
<PAGE>
Proceeds and (in the case of FHA-Insured Contracts) proceeds of FHA Insurance,
in accordance with Section 8.04(b). If the Trustee determines in good faith
that any Trustee Advance has become an Uncollectible Advance, the Trustee will
be entitled to reimbursement of such Uncollectible Advance from the Collected
Amount in accordance with Section 8.04(b).
11-10
<PAGE>
ARTICLE XII
MISCELLANEOUS
-------------
SECTION 12.01. Servicer Not to Resign.
----------------------
The Servicer shall not resign from the obligations and duties hereby
imposed on it except upon determination that the performance of its duties
hereunder is no longer permissible under applicable law. Any such determination
permitting the resignation of the Servicer shall be evidenced by an Opinion of
Counsel for the Servicer to such effect delivered to the Trustee. No such
resignation shall become effective until the Trustee or a successor servicer
shall have assumed the responsibilities and obligations of the Servicer in
accordance with Section 7.03.
SECTION 12.02. Company Not to Engage in Certain Transactions with Respect
----------------------------------------------------------
to the Trust.
- - ------------
The Company shall not:
a. Provide credit to any Certificateholder for the purpose of
enabling such Certificateholder to purchase Certificates;
b. Purchase any Certificates in an agency or trustee capacity; or
c. Loan any money to the Trust.
SECTION 12.03. Maintenance of Office or Agency.
-------------------------------
The Trustee will maintain in Minneapolis or St. Paul, Minnesota, an office
or agency where Certificates or the Class C Certificate may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Trustee in respect of the Certificates, the Class C Certificate and this
Agreement may be served. On the date hereof the Trustee's office for such
purposes is located at 180 East 5th Street, Third Floor, St. Paul, Minnesota
55101. The Trustee will give prompt written notice to Certificateholders and
the Class C Certificateholder of any change in the location of the Certificate
Register or any such office or agency.
SECTION 12.04. Termination.
-----------
a. This Agreement shall terminate (after distribution of all Monthly
Principal and Monthly Interest due to Certificateholders pursuant to Sections
8.01 and 8.04) on the earlier of (a) the Payment Date on which the Pool
Scheduled Principal Balance is reduced to zero; or (b) the Payment Date on which
the Servicer repurchases the Contracts pursuant to Section 8.06; provided, that
--------
in no event shall the trust created hereby continue beyond the expiration of 21
years from the death of the last survivor of the descendants of Joseph P.
Kennedy, the late Ambassador of the United States to the Court of St. James,
living on the date hereof, and provided,
--------
12-1
<PAGE>
further, that the Servicer's and the Company's representations and warranties
- - -------
and indemnities by the Company and the Servicer shall survive termination.
b. Notice of any termination, specifying the Final Payment Date (which
shall be a date that would otherwise be a Payment Date) upon which all
Certificateholders or the Class C Certificateholder may surrender their
Certificates or the Class C Certificate to the Servicer for payment of the final
distribution and cancellation, shall be given promptly by the Trustee (upon
direction by the Servicer ten days prior to the date such notice is to be
mailed) by letter to Standard & Poor's and to Certificateholders and the Class C
Certificateholder mailed no later than the fifth Business Day of the month of
the Final Payment Date specifying (1) the Final Payment Date upon which final
payment on the Certificates and the Subordinated Certificate will be made upon
presentation and surrender of Certificates and the Subordinated Certificate at
the office or agency of the Servicer therein designated; (2) the amount of any
such final payment; and (3) that the Record Date otherwise applicable to such
Payment Date is not applicable, payments being made only upon presentation and
surrender of the Certificates and the Subordinated Certificate at the office or
agency of the Servicer therein specified. Any notice of purchase of Contracts
by the Company pursuant to Section 8.06 shall constitute the adoption by the
Trustee on behalf of the Certificateholders of a plan of complete liquidation
within the meaning of Section 860F of the Code on the date such notice is given
when signed by the Trustee. Each such notice shall, to the extent required by
the REMIC Provisions or other applicable law, be signed on behalf of the Trust
by the Trustee. The Trustee shall give such notice to the Certificate Registrar
at the time such notice is given to the Certificateholders and the Class C
Certificateholder. In the event such notice is given in connection with the
Servicer's election to purchase the Contracts, the Servicer shall deposit in the
Certificate Account on the Final Payment Date in immediately available funds an
amount equal to the above-described purchase price and upon such deposit
Certificateholders and the Class C Certificateholder will be entitled to the
amount of such purchase price but not amounts in excess thereof, all as provided
herein. Upon certification to the Trustee by a Servicing Officer, following
such final deposit the Trustee shall promptly release to the Servicer the
Contract Files for the remaining Contracts, and the Trustee shall execute all
assignments, endorsements and other instruments necessary to effectuate such
transfer.
c. Upon presentation and surrender of the Certificates, the Trustee shall
cause to be distributed to Certificateholders and the Class C Certificateholder
on the Final Payment Date in proportion to their respective Percentage
Interests, (1) as to the Certificates, (a) to the extent of Amount Available, in
the following order of priority:
(i) to pay interest to the Certificateholders in the following order
of priority;
(A) Class A-1 Interest Accrual Amount;
(B) Unpaid Class A-1 Interest Shortfall, if any;
(C) Class M-1 Interest Accrual Amount;
12-2
<PAGE>
(D) Unpaid Class M-1 Interest Shortfall, if any;
(E) Class B-1 Interest Accrual Amount;
(F) Unpaid Class B-1 Interest Shortfall, if any;
(G) Class B-2 Interest Accrual Amount; and
(H) Unpaid Class B-2 Interest Shortfall, if any; and
(ii) to pay principal to the Certificateholders in the following
order of priority;
(A) to the Class A-1 Certificateholders until the Class A-1
Principal Balance has been reduced to zero;
(B) to the Class M-1 Certificateholders until the Class M-1
Principal Balance has been reduced to zero;
(C) to the Class B-1 Certificateholders until the Class B-1
Principal Balance has been reduced to zero;
(D) to the Class B-2 Certificateholders until the Class B-2
Principal Balance has been reduced to zero; and
(E) to the Class B-2 Certificates, any Class B-2 Guaranty Amount;
and
(2) as to the Class C Certificates, the amount which remains on deposit in the
Certificate Account (other than amounts retained to meet claims) after
application pursuant to the preceding clause (1). The distribution on the Final
Payment Date pursuant to this Section 12.04 shall be in lieu of the distribution
otherwise required to be made on such Payment Date in respect of the
Certificates and the Class C Certificate.
d. In the event that all of the Certificateholders and the Class C
Certificateholder do not surrender their Certificates and the Class C
Certificate for cancellation within three months after the time specified in the
above-mentioned written notice, the Company shall give a second written notice
to the remaining Certificateholders and the Class C Certificateholder to
surrender their Certificates and the Class C Certificate for cancellation and
receive the final distribution with respect thereto. If within three months
after the second notice all the Certificates and the Class C Certificate shall
not have been surrendered for cancellation, the Company shall transfer to itself
all amounts remaining on deposit in the Certificate Account, to hold in trust
for Certificateholders and the Class C Certificateholder who have not
surrendered their Certificates or the Class C Certificate, as the case may be,
for cancellation, together with the final record list of Certificateholders and
the Class C Certificateholder, and the Company shall take appropriate steps, or
may appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates and to contact the
Class C Certificateholder concerning its surrender of its Class C Certificate,
and the cost thereof shall be paid out of the funds and other assets which
remain in trust hereunder.
12-3
<PAGE>
SECTION 12.05. Acts of Certificateholders and the Class C
------------------------------------------
Certificateholder.
- - -----------------
a. Except as otherwise specifically provided herein, whenever
Certificateholder approval, authorization, direction, notice, consent, waiver,
or other action is required hereunder, such approval, authorization, direction,
notice, consent, waiver or other action shall be deemed to have been given or
taken on behalf of, and shall be binding upon, all Certificateholders if agreed
to by Holders of Certificates representing, in the aggregate, 51% or more of the
Aggregate Certificate Principal Balance.
b. Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Agreement to be given or taken by
Certificateholders or the Class C Certificateholder may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Certificateholders or the Class C Certificateholder in person or by agent
duly appointed in writing; and except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Trustee and, where required, to the Servicer. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Agreement and (subject to Section 11.01)
conclusive in favor of the Trustee, the Servicer and the Company if made in the
manner provided in this Section.
c. The fact and date of the execution by any Certificateholder or the
Class C Certificateholder of any such instrument or writing may be proved in any
reasonable manner which the Trustee deems sufficient.
d. The ownership of Certificates and the Class C Certificate shall be
proved by the Certificate Register.
e. Any request, demand, authorization, direction, notice, consent, waiver
or other act by a Certificateholder or the Class C Certificateholder shall bind
every holder of every Certificate or the Class C Certificate, as applicable,
issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof, in respect of anything done, or omitted to be done by the Trustee,
the Servicer or the Company in reliance thereon, whether or not notation of such
action is made upon such Certificates or Class C Certificate.
f. The Trustee may require such additional proof of any matter referred
to in this Section as it shall deem necessary.
SECTION 12.06. Calculations.
------------
Except as otherwise provided in this Agreement, all interest rate and basis
point calculations under this Agreement will be made on the basis of a 360-day
year and twelve 30-day months and will be carried out to at least three decimal
places.
12-4
<PAGE>
SECTION 12.07. Assignment or Delegation by Company.
-----------------------------------
Except as specifically authorized hereunder, and except for its obligations
as Servicer which are dealt with under Article V and Article VII, the Company
may not convey and assign or delegate any of its rights or obligations hereunder
absent the prior written consent of Holders of Certificates representing, in the
aggregate, 66 2/3% or more of the Aggregate Certificate Principal Balance, and
any attempt to do so without such consent shall be void.
SECTION 12.08. Amendment.
---------
a. This Agreement may be amended from time to time by the Company, the
Servicer and the Trustee, without the consent of any of the Certificateholders
or the Class C Certificateholder, to correct manifest error, to cure any
ambiguity, to correct or supplement any provisions herein which may be
inconsistent with any other provisions herein, as the case may be, to make such
changes as are necessary to maintain the status of the Trust as a "real estate
mortgage investment conduit" under the REMIC Provisions of the Code or to
otherwise effectuate the benefits of such status to the Trust, the
Certificateholders or the Class C Certificateholder, including, without
limitation, to implement any provision permitted by law that would enable a
REMIC to avoid the imposition of any tax, or to make any other provisions with
respect to matters or questions arising under this Agreement that shall not be
inconsistent with the provisions of this Agreement; provided, however, that such
-------- -------
action shall not, as evidenced by an Opinion of Counsel for the Company,
adversely affect in any material respect the interests of any Certificateholder.
b. This Agreement may also be amended by agreement of the Trustee and the
Company at any time without the consent of the Certificateholders or the Class C
Certificateholder to effect the transfer of FHA Insurance reserves to another
entity in compliance with revisions to FHA Regulations, provided that prior to
any such amendment Standard & Poor's has confirmed in writing that the rating of
the Certificates will not be lowered or withdrawn following such amendment.
c. This Agreement may also be amended from time to time by the Servicer,
the Company and the Trustee, with the consent of Holders of Certificates
representing, in the aggregate, 66 2/3% or more of the Aggregate Certificate
Principal Balance, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of such Certificateholders; provided,
--------
however, that no such amendment shall (a) reduce in any manner the amount of, or
- - -------
delay the timing of, collections of payments on the Contracts or distributions
which are required to be made on any Certificate, (b) reduce the aforesaid
percentage required to consent to any such amendment, without the consent of the
holders of all Certificates then outstanding, (c) result in the disqualification
of the Trust as a REMIC under the Code, (d) adversely affect the status of the
Trust as a REMIC or the status of the Certificates as "regular interests"
therein or (e) cause any tax (other than any tax imposed on
12-5
<PAGE>
"net income from foreclosure property" under Section 860G(c)(1) of the Code
that would be imposed without regard to such amendment) to be imposed on the
Trust, including, without limitation, any tax imposed on "prohibited
transactions" under Section 860F(a)(1) of the Code or on "contributions after
the startup date" under Section 860G(d)(1) of the Code. This Agreement may not
be amended without the consent of the Class C Certificateholder, for the
purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Agreement which would modify in any manner the
rights of the Class C Certificateholder.
d. This Agreement shall not be amended under this Section without the
consent of 100% of Certificateholders and the Class C Certificateholder if such
amendment would result in the disqualification of the Trust as a REMIC under the
Code.
e. Concurrently with the solicitation of any consent pursuant to this
Section 12.08, the Trustee shall furnish written notification to Standard &
Poor's. Promptly after the execution of any amendment or consent pursuant to
this Section 12.08, the Trustee shall furnish written notification of the
substance of such amendment to Standard & Poor's and each Certificateholder and
the Class C Certificateholder.
f. It shall not be necessary for the consent of Certificateholders and
the Class C Certificateholder under this Section 12.08 to approve the particular
form of any proposed amendment, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents and of
evidencing the authorization of the execution thereof by Certificateholders and
the Class C Certificateholder shall be subject to such reasonable requirements
as the Trustee may prescribe.
g. The Trustee may, but shall not be obligated to, enter into any such
amendment which affects the Trustee's own rights, duties or immunities under
this Agreement or otherwise.
h. In connection with any amendment pursuant to this Section, the Trustee
shall be entitled to receive an Opinion of Counsel to the Servicer to the effect
that such amendment is authorized or permitted by this Agreement.
i. Upon the execution of any amendment or consent pursuant to this
Section 12.08, this Agreement shall be modified in accordance therewith, and
such amendment or consent shall form a part of this Agreement for all purposes,
and every Certificateholder or the Class C Certificateholder hereunder shall be
bound thereby.
j. In the absence of the consent described in subsection (d) of this
Section, in connection with any amendment pursuant to this Section, the Trustee
shall have received an unqualified Opinion of Counsel, the expense of which
shall not be an expense of the Trust, stating that any such amendment (i) will
not adversely affect the status of the Trust as a REMIC or the status of the
Certificates as "regular
12-6
<PAGE>
interests" therein, and (ii) will not cause any tax (other than any tax
imposed on "net income from foreclosure property" under Section 860G(c)(1) of
the Code that would be imposed without regard to such amendment) to be imposed
on the Trust, including, without limitation, any tax imposed on "prohibited
transactions" under Section 860F(a)(1) of the Code or on "contributions after
the startup date" under Section 860G(d)(1) of the Code.
SECTION 12.09. Notices.
-------
All communications and notices pursuant hereto to the Servicer, the
Company, and the Trustee shall be in writing and delivered or mailed to it at
the appropriate following address:
If to the Company or the Servicer:
Green Tree Financial Corporation
1100 Landmark Towers
345 St. Peter Street
St. Paul, Minnesota 55102-1639
Attention: Chief Financial Officer
Telecopier Number: (612) 293-5746
If to the Trustee:
First Trust National Association
Corporate Trust Department
180 East 5th Street,
Second Floor
St. Paul, Minnesota 55101
Attention: Kathi Barth
Telecopier Number: (612) 244-0089
If to Standard & Poor's:
Standard & Poor's Rating's Group
25 Broadway
New York, NY 10004
Attention: Mortgage Surveillance Department
Telecopier Number: (212) 412-0224
or at such other address as the party may designate by notice to the other
parties hereto, which notice shall be effective when received.
All communications and notices pursuant hereto to a Certificateholder or
the Class C Certificateholder shall be in writing and delivered or mailed at the
address shown in the Certificate Register.
12-7
<PAGE>
SECTION 12.10. Merger and Integration.
----------------------
Except as specifically stated otherwise herein, this Agreement sets forth
the entire understanding of the parties relating to the subject matter hereof,
and all prior understandings, written or oral, are superseded by this Agreement.
This Agreement may not be modified, amended, waived or supplemented except as
provided herein.
SECTION 12.11. Headings.
--------
The headings herein are for purposes of reference only and shall not
otherwise affect the meaning or interpretation of any provision hereof.
SECTION 12.12. Governing Law.
-------------
This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Minnesota.
12-8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized this 30th day of
June, 1994.
GREEN TREE FINANCIAL CORPORATION
By /s/ John W. Brink
-----------------------------------------
Attest: John W. Brink
Executive Vice President, Treasurer
and Chief Financial Officer
/s/ Richard G. Evans
- - ------------------------
Richard G. Evans
Secretary
FIRST TRUST NATIONAL ASSOCIATION,
not in its individual capacity
but solely as Trustee
By /s/ Kathi Barth
----------------------------------------
Its Trust Officer
Attest:
By /s/ Christina Hatfield
------------------------------
Its Assistant Vice President
12-9
<PAGE>
STATE OF MINNESOTA )
) ss.
COUNTY OF RAMSAY )
The foregoing instrument was acknowledged before me this 30th day of
----
June, 1994, by John W. Brink, of Green Tree Financial Corporation, a Minnesota
- - ---- -------------
corporation, on behalf of the corporation.
Wanda J. Lamb-Lindow
/s/ Wanda Lamb Lindow [Seal] Notary Public - Minnesota
- - ------------------------- Goodhue County
Notary Public My Comm. Expires Nov. 11, 1998
STATE OF MINNESOTA )
) ss.
COUNTY OF RAMSAY )
The foregoing instrument was acknowledged before me this 30th day of
----
June, 1994, by Tina Hatfield and Kathi Barth, of First Trust National
- - ---- ------------- -----------
Association, a Natl Bk Asoc corporation, on behalf of the First Trust National
------------
Association.
Tammy Brusehaver-Derby
/s/ Tammy Brusehaver-Derby [Seal] Notary Public - Minnesota
- - ----------------------------- Dakota County
Notary Public My Commission expires May 18, 1999
12-10
<PAGE>
EXHIBIT A
------- -
Final Scheduled Payment Date
July 15, 2014
FORM OF CLASS A-1 CERTIFICATE
-----------------------------
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR
INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE.
Class A-1 No.
(Senior)
Date of Pooling and Servicing Pass-Through Rate: ___%
Agreement and Cut-off Date: Denomination: $________
June 1, 1994
First Payment Date: Aggregate Denomination of
July 15, 1994 All Class A-1
Certificates: $__________
Servicer: Payment Date After Latest
Green Tree Financial Corporation Due Date: July 15, 2014
(or if such day is not a
Business Day, then the next
succeeding Business Day)
CUSIP: ________
CERTIFICATE FOR HOME IMPROVEMENT LOANS
--------------------------------------
SERIES 1994-BI, CLASS A-1 (SENIOR)
----------------------------------
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN
GREEN TREE FINANCIAL CORPORATION OR ANY AFFILIATE THEREOF, EXCEPT TO THE EXTENT
SET FORTH IN THE AGREEMENT.
This certifies that ____________________ is the registered owner of the
undivided Percentage Interest represented by the original principal amount set
forth above in the Certificates for Home Improvement Loans, Series 1994-BI,
Class A-1 issued by Home Improvement Loan Trust 1994-BI (the "Trust"), which
includes among its assets a pool of home improvement loan contracts and
promissory notes
A-1
<PAGE>
(including, without limitation, all related mortgages, deeds of
trust and security deeds and any and all rights to receive payments which are
due pursuant thereto on or after June 1, 1994). The Trust has been created
pursuant to a Pooling and Servicing Agreement (the "Agreement"), dated as of
June 1, 1994, between Green Tree Financial Corporation, as Seller and Servicer
(the "Company"), and First Trust National Association, as Trustee of the Trust
(the "Trustee"). This Certificate is one of the Certificates described in the
Agreement and is issued pursuant and subject to the Agreement. By acceptance of
this Certificate the holder assents to and becomes bound by the Agreement. To
the extent not defined herein, all capitalized terms have the meanings assigned
to such terms in the Agreement.
The Agreement contemplates, subject to its terms, payment on the fifteenth
day (or if such day is not a Business Day, the next succeeding Business Day)
(the "Payment Date") of each calendar month commencing July 15, 1994, so long as
the Agreement has not been terminated, by check (or, if such Certificateholder
holds Class A-1 Certificates with an aggregate Percentage Interest of at least
5% and so desires, by wire transfer pursuant to instructions delivered to the
Trustee at least 10 days prior to such Payment Date) to the registered
Certificateholder at the address appearing on the Certificate Register as of the
Business Day immediately preceding such Payment Date, in an amount equal to the
Certificateholder's Percentage Interest of the Class A-1 Distribution Amount for
such Payment Date. The final scheduled Payment Date of this Certificate is July
15, 2014 or the next succeeding Business Day if such July 15 is not a Business
Day.
The Certificateholder, by its acceptance of this Certificate, agrees that
it will look solely to the funds in the Certificate Account to the extent
available for distribution to the Certificateholder as provided in the Agreement
for payment hereunder and that the Trustee in its individual capacity is not
personally liable to the Certificateholder for any amounts payable under this
Certificate or the Agreement or, except as expressly provided in the Agreement,
subject to any liability under the Agreement. By acceptance of this
Certificate, the Certificateholder agrees to disclosure of his, her or its name
and address to other Certificateholders under the conditions specified in the
Agreement.
This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for information with respect to the interests, rights,
benefits, obligations, proceeds and duties evidenced hereby and the rights,
duties and immunities of the Trustee. Copies of the Agreement and all
amendments thereto will be provided to any Certificateholder free of charge upon
a written request to the Trustee.
As provided in the Agreement and subject to the limitations set forth
therein, the transfer of this Certificate is registrable in the Certificate
Register of the Certificate Registrar upon surrender of this Certificate for
registration of transfer at the office or agency maintained by the Trustee in
Minneapolis or St. Paul, Minnesota, accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Certificate Registrar duly
executed by the holder hereof or his or her attorney duly authorized in writing,
and thereupon one or more new
A-2
<PAGE>
Certificates evidencing the same aggregate Percentage Interest will be issued
to the designated transferee or transferees.
[Unless this Certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC") to the Trustee or
its agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL in as much as the registered owner
hereof, Cede & Co., has an interest herein.]
A-3
<PAGE>
IN WITNESS WHEREOF, Home Improvement Loan Trust 1994-BI has caused this
Certificate to be duly executed by the manual signature of a duly authorized
officer of the Trustee.
Dated: HOME IMPROVEMENT LOAN
TRUST 1994-BI
By FIRST TRUST NATIONAL
ASSOCIATION
By
--------------------------
Authorized Signatory
A-4
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ______________________________ the within Certificate for Home Improvement
Loans, Series 1994-BI, and does hereby irrevocably constitute and appoint
______________________________ Attorney to transfer the said certificate on the
Certificate Register maintained by the Trustee, with full power of substitution
in the premises.
Dated: By
---------------------------
Signature
A-5
<PAGE>
EXHIBIT B
------- -
FORM OF CLASS M-1 CERTIFICATE
-----------------------------
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR
INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE.
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A-1
CERTIFICATES AS DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO
HEREIN.
Class M-1 No.
(Subordinate)
Date of Pooling and Servicing Pass-Through Rate: ___%
Agreement and Cut-off Date: Denomination: $________
June 1, 1994
First Payment Date: Aggregate Denomination of
July 15, 1994 all Class M-1 Certificates:
$________
Servicer: Payment Date After Latest
Green Tree Financial Corporation Due Date: July 15, 2014
(or if such day is not a Business
Day, then the next succeeding
Business Day)
CUSIP: ________
CERTIFICATE FOR HOME IMPROVEMENT LOANS
--------------------------------------
SERIES 1994-BI, CLASS M-1 (SUBORDINATE)
---------------------------------------
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN
GREEN TREE FINANCIAL CORPORATION OR ANY AFFILIATE THEREOF, EXCEPT TO THE EXTENT
SET FORTH IN THE AGREEMENT.
This certifies that ____________________ is the registered owner of the
undivided Percentage Interest represented by the original principal amount set
forth above in the Certificates for Home Improvement Loans, Series 1994-BI,
Class M-1 issued by Home Improvement Loan Trust 1994-BI (the "Trust"), which
includes among its assets a pool of home improvement loan contracts and
promissory notes
B-1
<PAGE>
(including, without limitation, all related mortgages, deeds of
trust and security deeds and any and all rights to receive payments which are
due pursuant thereto on or after June 1, 1994). The Trust has been created
pursuant to a Pooling and Servicing Agreement (the "Agreement"), dated as of
June 1, 1994, between Green Tree Financial Corporation, as Seller and Servicer
(the "Company"), and First Trust National Association, as Trustee of the Trust
(the "Trustee"). This Certificate is one of the Certificates described in the
Agreement and is issued pursuant and subject to the Agreement. By acceptance of
this Certificate the holder assents to and becomes bound by the Agreement. To
the extent not defined herein, all capitalized terms have the meanings assigned
to such terms in the Agreement.
The Agreement contemplates, subject to its terms, payment on the fifteenth
day (or if such day is not a Business Day, the next succeeding Business Day)
(the "Payment Date") of each calendar month commencing July 15, 1994, so long as
the Agreement has not been terminated, by check (or, if such Certificateholder
holds Class M-1 Certificates with an aggregate Percentage Interest of at least
5% and so desires, by wire transfer pursuant to instructions delivered to the
Trustee at least 10 days prior to such Payment Date) to the registered
Certificateholder at the address appearing on the Certificate Register as of the
Business Day immediately preceding such Payment Date, in an amount equal to the
Certificateholder's Percentage Interest of the Class M-1 Distribution Amount for
such Payment Date. The final scheduled Payment Date of this Certificate is July
15, 2014 or the next succeeding Business Day if such July 15 is not a Business
Day.
The Certificateholder, by its acceptance of this Certificate, agrees that
it will look solely to the funds in the Certificate Account to the extent
available for distribution to the Certificateholder as provided in the
Agreement, for payment hereunder and that the Trustee in its individual capacity
is not personally liable to the Certificateholder for any amounts payable under
this Certificate or the Agreement or, except as expressly provided in the
Agreement, subject to any liability under the Agreement. By acceptance of this
Certificate, the Certificateholder agrees to disclosure of his, her or its name
and address to other Certificateholders under the conditions specified in the
Agreement.
This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for information with respect to the interests, rights,
benefits, obligations, proceeds and duties evidenced hereby and the rights,
duties and immunities of the Trustee. Copies of the Agreement and all
amendments thereto will be provided to any Certificateholder free of charge upon
a written request to the Trustee.
As provided in the Agreement and subject to the limitations set forth
therein, the transfer of this Certificate is registrable in the Certificate
Register of the Certificate Registrar upon surrender of this Certificate for
registration of transfer at the office or agency maintained by the Trustee in
Minneapolis or St. Paul, Minnesota, accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Certificate Registrar duly
executed by the holder hereof or his or her attorney duly authorized in writing,
and thereupon one or more new
B-2
<PAGE>
Certificates evidencing the same aggregate Percentage Interest will be issued
to the designated transferee or transferees.
[Unless this Certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC") to the Trustee or
its agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL in as much as the registered owner
hereof, Cede & Co., has an interest herein.]
The Company, the Servicer, the Trustee, the Paying Agent and the
Certificate Registrar and any agent of the Company, the Servicer, the Trustee,
the Paying Agent or the Certificate Registrar may treat the person in whose name
this Certificate is registered as the owner hereof for all purposes, and neither
the Company, the Servicer, the Trustee, the Paying Agent, the Certificate
Registrar nor any such agent shall be affected by any notice to the contrary.
IN WITNESS WHEREOF, Home Improvement Loan Trust 1994-BI has caused this
Certificate to be duly executed by the manual signature of a duly authorized
officer of the Trustee.
Dated: HOME IMPROVEMENT LOAN
TRUST 1994-BI
By FIRST TRUST NATIONAL
ASSOCIATION
By
--------------------------
Authorized Officer
B-3
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ______________________________ the within Certificate for Home Improvement
Loans, Series 1994-BI, and does hereby irrevocably constitute and appoint
______________________________ Attorney to transfer the said certificate on the
Certificate Register maintained by the Trustee, with full power of substitution
in the premises.
Dated: By
------------------------
Signature
B-4
<PAGE>
EXHIBIT C
------- -
FORM OF CLASS B CERTIFICATE
---------------------------
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR
INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE.
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A-1
CERTIFICATES AND THE CLASS M-1 CERTIFICATES [AND THE CLASS B-1 CERTIFICATES] AS
DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
Class B-1[2] No.
(Subordinate)
Date of Pooling and Servicing Pass-Through Rate: __ % Floating
Agreement and Cut-off Date: Rate equal to the Weighted Contract
June 1, 1994 Rate (subject to a maximum rate of
__%)
Denomination: $_____________
First Payment Date: Aggregate Denomination of
July 15, 1994 all Class B-[1][2] Certificates:
$________
Servicer: Payment Date After Latest
Green Tree Financial Corporation Due Date: July 15, 2014
(or if such day is not a Business
Day, then the next succeeding
Business Day)
CUSIP: ________
CERTIFICATES FOR HOME IMPROVEMENT LOANS
---------------------------------------
SERIES 1994-BI, CLASS B-1[2] (SUBORDINATE)
------------------------------------------
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN
GREEN TREE FINANCIAL CORPORATION OR ANY AFFILIATE THEREOF, EXCEPT TO THE EXTENT
SET FORTH IN THE AGREEMENT.
This certifies that ____________________ is the registered owner of the
undivided Percentage Interest represented by the original principal amount set
forth
C-1
<PAGE>
above in the Certificates for Home Improvement Loans, Series 1994-BI,
Class B-1[B-2], issued by Home Improvement Loan Trust 1994-BI (the "Trust"),
which includes among its assets a pool of home improvement loan contracts and
promissory notes (including, without limitation, all related mortgages, deeds of
trust and security deeds and any and all rights to receive payments which are
due pursuant thereto on or after June 1, 1994)[and the Limited Guaranty]. The
Trust has been created pursuant to a Pooling and Servicing Agreement (the
"Agreement"), dated as of June 1, 1994, between Green Tree Financial
Corporation, as Seller and Servicer (the "Company"), and First Trust National
Association, as Trustee of the Trust (the "Trustee"). This Certificate is one
of the Certificates described in the Agreement and is issued pursuant and
subject to the Agreement. By acceptance of this Certificate the holder assents
to and becomes bound by the Agreement. To the extent not defined herein, all
capitalized terms have the meanings assigned to such terms in the Agreement.
The Agreement contemplates, subject to its terms, payment on the fifteenth
day (or if such day is not a Business Day, the next succeeding Business Day)
(the "Payment Date") of each calendar month commencing July 15, 1994, so long as
the Agreement has not been terminated, by check (or, if such Certificateholder
holds a Class B-1[B-2] Certificate with an aggregate Percentage Interest of at
least 5% and so desires, by wire transfer pursuant to instructions delivered to
the Trustee at least 10 days prior to such Remittance Date) to the registered
Certificateholder at the address appearing on the Certificate Register as of the
Business Day immediately preceding such Payment Date, in an amount equal to the
Certificateholder's Percentage Interest of the Class B-1[B-2] Distribution
Amount [and any Class B-2 Guaranty Payment] for such Payment Date. The final
scheduled Payment Date of this Certificate is July 15, 2014 or the next
succeeding Business Day if such July 15 is not a Business Day.
The Certificateholder, by its acceptance of this Certificate, agrees that
it will look solely to the funds in the Certificate Account [and the Limited
Guaranty of the Company], to the extent available for distribution to the
Certificateholder as provided in the Agreement, for payment hereunder and that
the Trustee in its individual capacity is not personally liable to the
Certificateholder for any amounts payable under this Certificate or the
Agreement or, except as expressly provided in the Agreement, subject to any
liability under the Agreement. By acceptance of this Certificate, the
Certificateholder agrees to disclosure of his, her or its name and address to
other Certificateholders under the conditions specified in the Agreement.
This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for information with respect to the interests, rights,
benefits, obligations, proceeds and duties evidenced hereby and the rights,
duties and immunities of the Trustee. Copies of the Agreement and all
amendments thereto will be provided to any Certificateholder free of charge upon
a written request to the Trustee.
As provided in the Agreement and subject to the limitations set forth
therein, the transfer of this Certificate is registrable in the Certificate
Register of the Certificate Registrar upon surrender of this Certificate for
registration of transfer at
C-2
<PAGE>
the office or agency maintained by the Trustee in Minneapolis or St. Paul,
Minnesota, accompanied by a written instrument of transfer in form
satisfactory to the Trustee and the Certificate Registrar duly executed by the
holder thereof or his or her attorney duly authorized in writing, and
thereupon one or more new Certificates evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or
transferees.
[Unless this Certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC") to the Trustee or
its agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL in as much as the registered owner
hereof, Cede & Co., has an interest herein.]
The Company, the Servicer, the Trustee, the Paying Agent and the
Certificate Registrar and any agent of the Company, the Servicer, the Trustee,
the Paying Agent or the Certificate Registrar may treat the person in whose name
this Certificate is registered as the owner hereof for all purposes, and neither
the Company, the Servicer, the Trustee, the Paying Agent, the Certificate
Registrar nor any such agent shall be affected by any notice to the contrary.
IN WITNESS WHEREOF, Home Improvement Loan Trust 1994-BI has caused this
Certificate to be duly executed by the manual signature of a duly authorized
officer of the Trustee.
Dated: HOME IMPROVEMENT LOAN
TRUST 1994-BI
By FIRST TRUST NATIONAL
ASSOCIATION
By
-------------------------
Authorized Officer
C-3
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ______________________________ the within Certificate for Home Improvement
Loans, Series 1994-BI, and does hereby irrevocably constitute and appoint
______________________________ Attorney to transfer the said certificate on the
Certificate Register maintained by the Trustee, with full power of substitution
in the premises.
Dated: By
-------------------------
Signature
C-4
<PAGE>
EXHIBIT D
------- -
FORM OF ASSIGNMENT
In accordance with the Pooling and Servicing Agreement (the "Agreement")
dated as of June 1, 1994, between the undersigned and First Trust National
Association, as Trustee (the "Trustee"), the undersigned does hereby transfer,
convey and assign, set over and otherwise convey, without recourse, to Home
Improvement Loan Trust 1994-BI, created by the Agreement, to be held in trust as
provided in the Agreement, (i) all right, title and interest in the home
improvement contracts and installment notes (including, without limitation, all
related mortgages and deeds of trust and any and all rights to receive payments
which are due pursuant thereto on or after June 1, 1994 but excluding any rights
to receive payments which were due pursuant thereto prior to June 1, 1994)
identified in the List of Contracts delivered pursuant to Section 2.02(a) of the
Agreement, (ii) all rights under FHA Insurance as such insurance relates to the
Contracts, (iii) all rights under hazard insurance on the properties described
in the Contracts and, as to Contracts pertaining to properties located in
special flood areas designated by HUD, all rights under flood insurance policies
as such insurance relates to the Contracts, (iv) all rights under the Errors and
Omissions Protection Policy (as defined in Section 1.02 of the Agreement), (v)
all documents contained in the Contract Files (as defined in Section 1.02 of the
Agreement), and (vi) all proceeds and products of the foregoing.
This Assignment is made pursuant to and upon the representation and
warranties on the part of the undersigned contained in Article III of the
Agreement and no others.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be duly
executed this _____ day of ____________________, 1994.
GREEN TREE FINANCIAL CORPORATION
[Seal] By
-----------------------------
[Name]
[Title]
D-1
<PAGE>
EXHIBIT E
------- -
GREEN TREE FINANCIAL CORPORATION
CERTIFICATE OF OFFICER
The undersigned certifies that he is a [title] of Green Tree Financial
Corporation, a Minnesota corporation (the "Company"), and that as such he is
duly authorized to execute and deliver this certificate on behalf of the Company
in connection with the Pooling and Servicing Agreement dated as of June 1, 1994
(the "Agreement") between the Company and First Trust National Association, as
Trustee (all capitalized terms used herein without definition having the
respective meanings specified in the Agreement), and further certifies that:
(i) attached hereto as Exhibit I is a true and correct copy of the
Articles of Incorporation of the Company, together with all amendments
thereto as in effect on the date hereof;
(ii) attached hereto as Exhibit II is a true and correct copy of the
Bylaws of the Company, as amended, as in effect on the date hereof;
(iii) the representations and warranties of the Company contained in
Sections 3.01 and 3.04 of the Agreement are true and correct on and as of
the date hereof and, to the best of his knowledge, the representations and
warranties of the Company contained in Sections 3.02 and 3.03 of the
Agreement are true and correct on and as of the date hereof;
(iv) no event with respect to the Company has occurred and is
continuing which would constitute an Event of Termination or an event that
with notice or lapse of time or both would become an Event of Termination
under the Agreement; and
(v) each of the agreements and conditions of the Company to be
performed on or before the date hereof pursuant to the Agreement have been
performed in all material respects.
IN WITNESS WHEREOF, I have affixed hereunto my signature this _____ day of
________,1994.
--------------------------------------
[Name]
[Title]
E-1
<PAGE>
EXHIBIT F
------- -
FORM OF OPINION OF COUNSEL FOR THE COMPANY
The opinion of Dorsey & Whitney shall be to the effect that (capitalized
terms have the meanings set forth in the Pooling and Servicing Agreement):
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Minnesota, with corporate power
to execute, deliver and perform its obligations under the Pooling and Servicing
Agreement (including the Limited Guaranty contained therein), the Certificates
and the Class C Certificate. The Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which the
performance of its duties under the Pooling and Servicing Agreement, the
Certificates and the Class C Certificate would require such qualification.
2. The Pooling and Servicing Agreement has been duly authorized by all
requisite corporate action, duly executed and delivered by the Company, and
constitute the valid and binding obligations of the Company enforceable in
accordance with their terms. The Certificates have been duly authorized by all
requisite corporate action and, when duly and validly executed by the Trustee 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.
3. No consent, approval, authorization or order of any state or federal
court or governmental agency or body is required to be obtained by the Company
for the consummation of the transactions contemplated by the Pooling and
Servicing Agreement, except such as may be required under blue sky laws under
any jurisdiction in connection with the offering of the Certificates by
Underwriter pursuant to the Underwriting Agreement.
4. The Pooling and Servicing Agreement is not required to be qualified
under the Trust Indenture Act of 1939, as now in effect, and the Trust is not
required to be registered as an investment company under the Investment Company
Act of 1940.
5. Neither the transfer of the Contracts to the Trustee acting on behalf
of the Trust, nor the assignment of the Company's lien on the related real
estate which is the subject of a home improvement loan, nor the issuance or sale
of the Certificates and the Class C Certificate, nor the execution and delivery
of the Pooling and Servicing Agreement (including the Limited Guaranty contained
therein), nor the consummation of any other of the transactions contemplated in
the Pooling and Servicing Agreement, nor the fulfillment of the terms of the
Certificates, the Class C Certificate or the Pooling and Servicing Agreement by
the Company will conflict with, or result in a breach, violation or acceleration
of, or constitute a default under, any term or provision of the Restated
Articles of Incorporation or Bylaws of the
F-1
<PAGE>
Company or of any indenture or other agreement or instrument known to us to
which the Company is a party or by which it is bound, or result in a violation
of, or contravene the terms of any statute, order or regulation, applicable to
the Company, of any court, regulatory body, administrative agency or
governmental body having jurisdiction over it.
6. There are no actions or proceedings pending or, to the best of our
knowledge, actions, proceedings or investigations pending or overtly threatened
against the Company before any court, administrative agency or other tribunal
(A) asserting the invalidity of the Pooling and Servicing Agreement, the
Certificates, the Class C Certificate, the hazard or flood insurance policies
applicable to any Contracts or the Errors and Omissions Protection Policy, (B)
seeking to prevent the issuance of the Certificates or the Class C Certificate
or the consummation of any of the transactions contemplated by the Pooling and
Servicing Agreement, (C) which is likely materially and adversely to affect the
performance by the Company of its obligations under, or the validity or
enforceability of the Pooling and Servicing Agreement, the Certificates or the
Class C Certificate, or (D) seeking adversely to affect the federal income tax
attributes of the Certificates or the Class C Certificate described in the
Prospectus and the Prospectus Supplement under the heading "Certain Federal
Income Tax Consequences."
7. The Company is duly registered as a finance company in each state in
which Contracts were originated, to the extent such registration is required by
applicable law.
8. The transfer of the Contracts to the Trust in accordance with Section
2.01 of the Pooling and Servicing Agreement would not be avoidable as a
preferential transfer under Section 547 of the United States Bankruptcy Code (11
U.S.C. (S) 547), as in effect on the date hereof, in the event that the Company
became a debtor under the United States Bankruptcy Code.
9. Pursuant to the Pooling and Servicing Agreement the Company has
transferred to the Trustee acting on behalf of the Trust all of the Company's
right, title and interest in the Contracts, free and clear of any and all other
assignments, encumbrances, options, rights, claims, liens or security interests
(except tax or possessory liens) that may affect the right of the Trustee in and
to such Contracts, and has delivered the Contract Files to the Trustee or its
custodian. No filing or other action, other than the filing of a financing
statement on Form UCC-1 with the Secretary of State of the State of Minnesota
identifying the Contracts as collateral and naming the Company as debtor and the
Trust as secured party, and the filing of continuation statements as required by
Section 4.02 of the Pooling and Servicing Agreement, is necessary to perfect as
against third parties the assignment of the Contracts by the Company to the
Trust. We have separately provided you with our opinion concerning whether such
assignment could be recharacterized as a pledge rather than a sale in the event
the Company became a debtor under the United States Bankruptcy Code. However,
in the event such assignment were characterized as a pledge securing a loan from
the Certificateholders to the Company, it is our opinion that the Trustee would
be deemed to have a valid and perfected security
F-2
<PAGE>
interest in the Contracts and the proceeds thereof, which security interest
would be prior to any other security interest that may be perfected under the
Uniform Commercial Code as in effect in the State of Minnesota and over any
"lien creditor" (as defined in Minn. Stat. (S)336.9-301(3)) who becomes such
after the Closing Date, except that a subsequent purchaser of any Contract who
gives new value and takes possession thereof in the ordinary course of his
business would have priority over the Trustee's security interest in such
Contract, if such purchaser acts without knowledge that such Contract was
subject to a security interest. We have assumed for the purposes of this
opinion that during the term of the Pooling and Servicing Agreement the
Trustee, or its custodian, shall maintain possession of the Contract Files for
the purpose of perfecting the assignment to the Trustee of the Contracts. We
express no opinion with respect to the enforceability of any individual
Contract or the existence of any claims, rights or other matters in favor of
any Obligor or the owner of any financed home improvement.
10. In reliance upon certain representations and warranties set forth in
the Pooling and Servicing Agreement and assuming that the Company and the
Trustee comply with the requirements of the Pooling and Servicing Agreement,
including the filing of a proper election, as of the date hereof the Trust
created pursuant to the Pooling and Servicing Agreement will qualify as a REMIC.
Further, the Certificates will evidence ownership of the "regular interests" and
the Class C Certificate will evidence ownership of the single class of "residual
interest" in such REMIC. For Minnesota income tax purposes, and subject to the
foregoing assumptions, and the provisions of Minnesota law as of the date
hereof, such Trust will not be subject to tax and the income of such Trust will
be taxable to the holders of interests therein, all in accordance with the
provisions of the Code concerning REMICs as amended through December 31, 1993.
Moreover, ownership of a Certificate will not be a factor in determining whether
such owner is subject to Minnesota income taxes. Therefore, if the owner of a
Certificate is not otherwise subject to Minnesota income or franchise taxes in
the State of Minnesota, such owner will not become subject to such Minnesota
taxes solely by virtue of owning a Certificate.
11. The transfer of the Contracts and the proceeds thereof by the Company
to the Trustee on the date hereof pursuant to the Pooling and Servicing
Agreement would not be avoidable as a fraudulent transfer under the Uniform
Fraudulent Transfer Act as in effect in Minnesota on the date hereof (Minn.
Stat. (S)(S) 513.41 through 513.51), nor, should the Company become a debtor
under the United States Bankruptcy Code, as a fraudulent transfer under Section
548 of the United States Bankruptcy Code (11 U.S.C. (S) 548) as in effect on the
date hereof.
E-3
<PAGE>
EXHIBIT G
------- -
FORM OF TRUSTEE'S ACKNOWLEDGMENT
First Trust National Association, a national banking association organized
under the laws of the United States, acting as trustee (the "Trustee") of Home
Improvement Loan Trust 1994-BI (the "Trust") created pursuant to the Pooling and
Servicing Agreement dated as of June 1, 1994 between Green Tree Financial
Corporation and the Trustee (the "Agreement") (all capitalized terms used herein
without definition having the respective meanings specified in the Agreement)
acknowledges, pursuant to Section 2.03 of the Agreement, that the Trustee has
received the following: (i) all right, title and interest in the home
improvement contracts and promissory notes (including, without limitation, all
mortgages, deeds of trust and security deeds relating to Secured Contracts and
any and all rights to receive payments which are due pursuant thereto on or
after June 1, 1994 but excluding any rights to receive payments which were due
pursuant thereto prior to June 1, 1994) identified in the List of Contracts
delivered pursuant to Section 2.02 of the Agreement, (ii) all rights under FHA
Insurance as such insurance relates to the FHA-Insured Contracts, (iii) all
rights under hazard, flood or other individual insurance on the properties
described in the Contracts and, as to Contracts pertaining to properties located
in special flood areas designated by HUD, all rights under flood insurance
policies as such insurance relates to the Contracts, (iv) all rights under the
Errors and Omissions Protection Policy, as such policy relates to the Contracts,
(v) all documents contained in the Contract Files (as defined in Section 1.02 of
the Agreement), (vi) the Limited Guaranty, and (vii) all proceeds and products
of the foregoing; and declares that, directly or through a Custodian, it will
hold all Contract Files that have been delivered in trust, upon the trusts set
forth in the Agreement for the use and benefit of all Certificateholders and the
holder of the Class C Certificate. The Trustee acknowledges that it has
conducted a cursory review of the Contract Files and hereby confirms that except
as noted on the document exception listing attached hereto, each Contract File
contained (a) an original contract or promissory note, (b) with respect to each
Secured Contract, an original or a copy of the mortgage or deed of trust or
similar evidence of a lien on the related improved real estate, (c) an original
or a copy of a truth-in-lending disclosure form (either included as part of the
contract or note or as a separate document), (d) in the case of Secured
Contracts originated by a contractor, an original or a copy of an assignment of
the mortgage, deed of trust or security deed by the contractor to Green Tree,
and (e) a sale control document. The Trustee has not otherwise reviewed the
Contracts and Contract Files for compliance with the terms of the Pooling and
Servicing Agreement.
G-1
<PAGE>
IN WITNESS WHEREOF, First Trust National Association, as Trustee, has
caused this acknowledgment to be executed by its duly authorized officer and its
corporate seal affixed hereto as of this __ day of ____________________,
1994.
FIRST TRUST NATIONAL ASSOCIATION,
as Trustee
[Seal] By
---------------------------
[Name]
[Title]
G-2
<PAGE>
EXHIBIT H
------- -
GREEN TREE FINANCIAL CORPORATION
CERTIFICATE OF SERVICING OFFICER
The undersigned certifies that he is a [title] of Green Tree Financial
-----
Corporation, a Minnesota corporation (the "Company"), and that as such he is
duly authorized to execute and deliver this certificate on behalf of the Company
pursuant to Section 6.02 of the Pooling and Servicing Agreement (the
"Agreement") dated as of June 1, 1994 between the Company and First Trust
National Association, as Trustee of Home Improvement Loan Trust 1994-BI (all
capitalized terms used herein without definition having the respective meanings
specified in the Agreement), and further certifies that:
1. The Monthly Report for the period from _______________ to ___________
attached to this certificate is complete and accurate in accordance with the
requirements of Sections 6.01 and 6.02 of the Agreement; and
2. As of the date hereof, no Event of Termination or event that with
notice or lapse of time or both would become an Event of Termination has
occurred.
IN WITNESS WHEREOF, I have affixed hereunto my signature this _____ day of
________________, 19__.
GREEN TREE FINANCIAL CORPORATION
By
----------------------------------------
[Name]
[Title]
H-1
<PAGE>
EXHIBIT I
------- -
FORM OF CLASS C CERTIFICATE
---------------------------
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A-1
CERTIFICATES, THE CLASS M-1 CERTIFICATES AND THE CLASS B CERTIFICATES AS
DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT AND
LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM
REGISTRATION UNDER SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN
ACCORDANCE WITH THE PROVISIONS OF SECTION 9.02 OF THE POOLING AND SERVICING
AGREEMENT REFERRED TO HEREIN.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G and 860D OF THE INTERNAL
REVENUE CODE. THIS CERTIFICATE MAY ONLY BE TRANSFERRED TO A PERMITTED
TRANSFEREE (AS DEFINED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO
HEREIN); ANY SUCH TRANSFER MUST ALSO SATISFY THE OTHER REQUIREMENTS OF SECTION
9.02 OF SUCH POOLING AND SERVICING AGREEMENT.
Class C No.
(Subordinate)
Date of Pooling and Servicing Percentage Interest:
Agreement and Cut-off Date:
June 1, 1994
First Payment Date:
July 15, 1994
CERTIFICATE FOR HOME IMPROVEMENT LOANS
--------------------------------------
SERIES 1994-BI
--------------
Initial Principal Amount of the Trust: $__________
This certifies that ___________________________________________________ is
the registered owner of the Residual Interest represented by this Certificate,
and entitled to certain distributions out of Home Improvement Loan Trust 1994-BI
(the "Trust"), which includes among its assets a pool of home improvement loan
contracts and promissory notes
I-1
<PAGE>
(including, without limitation, all related mortgages, deeds of trust and
security deeds and any and all rights to receive payments which are due
pursuant thereto on or after June 1, 1994) (the "Contracts"). The Trust has
been created pursuant to a Pooling and Servicing Agreement (the "Agreement"),
dated as of June 1, 1994, between Green Tree Financial Corporation, as Seller
and Servicer (the "Company"), and First Trust National Association, as Trustee
of the Trust (the "Trustee"). This Class C Certificate is described in the
Agreement and is issued pursuant and subject to the Agreement. By acceptance
of this Class C Certificate the holder assents to and becomes bound by the
Agreement. To the extent not defined herein, all capitalized terms have the
meanings assigned to such terms in the Agreement.
The Agreement contemplates, subject to its terms, payment on the fifteenth
day (or if such day is not a Business Day, the next succeeding Business Day)
(the "Payment Date") of each calendar month commencing July 15, 1994, so long as
the Agreement has not been terminated, by check to the registered Class C
Certificateholder at the address appearing on the Certificate Register as of the
Business Day immediately preceding such Payment Date, in an amount equal to the
difference between (A) the Amount Available, and (B) the sum of (i) the Class
A-1 Distribution Amount, (ii) the Class M-1 Distribution Amount, (iii) the
Class B-1 Distribution Amount, (iv) the Class B-2 Distribution Amount, (v) the
Monthly Servicing Fee, (vi) amounts to reimburse the Trustee or any successor
Servicer for any payments of FHA Insurance premiums not paid by the Company,
as Servicer, and for which the Trustee or such successor Servicer has not been
reimbursed by the Company, (vii) amounts to reimburse the Servicer or the
Trustee, as applicable, for Uncollectible Advances and prior Advances that
have been recovered, and (viii) the Guaranty Fee and amounts necessary to
reimburse the Company for any previous unreimbursed Class B-2 Guaranty
Payments. The final scheduled Payment Date of this Class C Certificate is July
15, 2014 or the next succeeding Business Day if such July 15 is not a Business
Day.
The Class C Certificateholder, by its acceptance of this Certificate,
agrees that it will look solely to the funds in the Certificate Account to the
extent available for distribution to the Class C Certificateholder as provided
in the Agreement for payment hereunder and that the Trustee in its individual
capacity is not personally liable to the Class C Certificateholder for any
amounts payable under this Certificate or the Agreement or, except as expressly
provided in the Agreement, subject to any liability under the Agreement. By
acceptance of this Certificate, the Class C Certificateholder agrees to
disclosure of his, her or its name and address to other Certificateholders under
the conditions specified in the Agreement.
This Class C Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds and duties evidenced hereby
and the rights, duties and immunities of the Trustee. Copies of the Agreement
and all amendments thereto will be provided to any Class C Certificateholder
free of charge upon a written request to the Trustee.
I-2
<PAGE>
As provided in the Agreement and subject to the limitations set forth
therein, the transfer of this Class C Certificate is registrable in the
Certificate Register of the Certificate Registrar upon surrender of this Class C
Certificate for registration of transfer at the office or agency maintained by
the Trustee in Minneapolis or St. Paul, Minnesota, accompanied by a written
instrument of transfer in form satisfactory to the Trustee and the Certificate
Registrar duly executed by the holder thereof or his or her attorney duly
authorized in writing, and thereupon one or more new Class C Certificates
evidencing the same aggregate amount of Class C Certificates will be issued to
the designated transferee or transferees.
As provided in the Agreement and subject to certain limitations therein set
forth, this Class C Certificate is exchangeable for new Class C Certificates of
authorized denominations evidencing the same aggregate Percentage Interest as
requested by the holder surrendering the same.
The Company, the Servicer, the Trustee, the Paying Agent and the
Certificate Registrar and any agent of the Company, the Servicer, the Trustee,
the Paying Agent or the Certificate Registrar may treat the person in whose name
this Class C Certificate is registered as the owner hereof for all purposes, and
neither the Company, the Servicer, the Trustee, the Paying Agent, the
Certificate Registrar nor any such agent shall be affected by any notice to the
contrary.
The holder of this Class C Certificate, by acceptance hereof, agrees that,
in accordance with the requirements of Section 860D(b)(1) of the Code, the
federal tax return of the Trust for its first taxable year shall provide that
the Trust elects to be treated as a "real estate mortgage investment conduit" (a
"REMIC") under the Code for such taxable year and all subsequent taxable years.
The Certificates shall be "regular interests" in the REMIC and the Class C
Certificates shall be the "residual interest" in the REMIC. In addition, the
holder of this Class C Certificate, by acceptance hereof, (i) agrees to file tax
returns consistent with and in accordance with any elections, decisions or other
reports made or filed with regard to federal, state or local taxes on behalf of
the Trust, and (ii) agrees to cooperate with the Company in connection with
examinations of the Trust's affairs by tax authorities, including administrative
and judicial proceedings, and (iii) makes the additional agreements,
designations and appointments, and undertakes the responsibilities, set forth in
Section 6.06 of the Agreement.
I-3
<PAGE>
IN WITNESS WHEREOF, Home Improvement Loan Trust 1994-BI has caused this
Certificate to be duly executed by the manual signature of a duly authorized
officer of the Trustee.
Dated: HOME IMPROVEMENT LOAN
TRUST 1994-BI
By FIRST TRUST NATIONAL
ASSOCIATION
By
-------------------------
Authorized Officer
I-4
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto __________________________________________________ the within Certificates
for Home Improvement Loans, and does hereby irrevocably constitute and appoint
______________________ Attorney to transfer the said certificate on the
Certificate Register maintained by the Trustee, with full power of
substitution in the premises.
Dated: By
---------------------------------
Signature
I-5
<PAGE>
EXHIBIT J
------- -
GREEN TREE FINANCIAL CORPORATION
CERTIFICATE REGARDING REPURCHASED CONTRACTS
The undersigned certifies that he is a [title] of Green Tree Financial
-----
Corporation, a Minnesota corporation (the "Company"), and that as such he is
duly authorized to execute and deliver this certificate on behalf of the Company
pursuant to Sections 3.05 and 8.06 of the Pooling and Servicing Agreement (the
"Agreement") dated as of June 1, 1994 between the Company and First Trust
National Association, as Trustee of Home Improvement Loan Trust 1994-BI (all
capitalized terms used herein without definition having the respective meanings
specified in the Agreement), and further certifies that:
1. The Contracts on the attached schedule are to be repurchased by the
Company on the date hereof pursuant to Section 3.05 of the Agreement.
2. Upon deposit of the Repurchase Price for such Contracts, such
Contracts may, pursuant to Section 8.06 of the Agreement, be assigned by the
Trustee to the Company.
IN WITNESS WHEREOF, I have affixed hereunto my signature this
___ day of _________________, 19__.
GREEN TREE FINANCIAL CORPORATION
By
--------------------------
[Name]
[Title]
J-1
<PAGE>
EXHIBIT K
------- -
FORM OF REPRESENTATION LETTER
-----------------------------
First Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Green Tree Financial Corporation
1100 Landmark Towers
345 St. Peter Street
St. Paul, Minnesota 55102-1639
RE: Certificates for Home Improvement Loans, Series 1994-BI, Class C
The undersigned purchaser (the "Purchaser") understands that the purchase
of the above-referenced certificates (the "Certificates") may be made only by
institutions which are "Accredited Investors" under Regulation D, as promulgated
under the Securities Act of 1933, as amended (the "1933 Act"), which includes
banks, savings and loan associations, registered brokers and dealers, insurance
companies, investment companies, and organizations described in Section
501(c)(3) of the Internal Revenue Code, corporations, business trusts and
partnerships, not formed for the specific purpose of acquiring the Certificates
offered, with total assets in excess of $5,000,000. The undersigned represents
on behalf of the Purchaser that the Purchaser is an "Accredited Investor" within
the meaning of such definition. The Purchaser is urged to review carefully the
responses, representations and warranties it is making herein.
Representations and Warranties
- - ------------------------------
The Purchaser makes the following representations and warranties in order
to permit the Trustee, Green Tree Financial Corporation, and Lehman Brothers
Inc. to determine its suitability as a purchaser of Certificates and to
determine that the exemption from registration relied upon by Green Tree
Financial Corporation under Section 4(2) of the 1933 Act is available to it.
1. The Purchaser understands that the Certificates have not been and will
not be registered under the 1933 Act and may be resold (which resale is not
currently contemplated) only if registered pursuant to the provisions of the
1933 Act or if an exemption from registration is available, that Green Tree
Financial Corporation is not required to register the Certificates and that any
transfer must comply with Section 9.02 of the Pooling and Servicing Agreement
relating to the Certificates.
2. The Purchaser will comply with all applicable federal and state
securities laws in connection with any subsequent resale of the Certificates.
3. The Purchaser is a sophisticated institutional investor and has
knowledge and experience in financial and business matters and is capable of
evaluating the merits and risks of its investment in the Certificates and is
able to bear the economic risk of such investment. The Purchaser has reviewed
the Prospectus Supplement dated June __, to the Prospectus dated June 7, 1994
(the "Prospectus") with respect to the Certificates, and has been given such
information concerning the Certificates, the underlying installment sale
contracts and Green Tree Financial Corporation as it has requested.
4. The Purchaser is acquiring the Certificates as principal for its own
account (or for the account of one or more other institutional investors for
which it is acting as duly authorized fiduciary or agent) for the purpose of
investment and not with a view to or for sale in connection with any
K-1
<PAGE>
distribution thereof, subject nevertheless to any requirement of law that the
disposition of the Purchaser's property shall at all times be and remain
within its control.
5. The Purchaser does not qualify as (i) an employee benefit plan (a
"Plan") as defined in section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), whether or not it is subject to the
provisions of Title I of ERISA, (ii) a plan described in section 4975(e)(1) of
the Internal Revenue Code of 1986 (also a "Plan"), or (iii) an entity whose
underlying assets are deemed to be assets of a Plan by reason of such Plan's
investment in the entity (as determined under Department of Labor Regulations,
29 C.F.R. (S)2510.3-101 (1990)).
6. The Purchaser understands that such Certificate will bear a legend
substantially as set forth in the form of Certificate included in the Pooling
and Servicing Agreement.
7. The Purchaser, as holder of the Class C Certificate, acknowledges (i)
it may incur tax liabilities in excess of any cash flows generated by the
interest and (ii) it intends to pay the taxes associated with holding the Class
C Certificate as they become due.
8. The Purchaser agrees that it will obtain from any purchaser of the
Certificates from it the same representations, warranties and agreements
contained in the foregoing paragraphs 1 through 7 and in this paragraph 8.
The representations and warranties contained herein shall be binding upon
the heirs, executors, administrators and other successors of the undersigned.
If there is more than one signatory hereto, the obligations, representations,
warranties and agreements of the undersigned are made jointly and severally.
Executed at _______________________,________,this____day of__________,____.
-----------------------------------------
Purchaser's Name (Print)
By
---------------------------------------
Signature
Its
--------------------------------------
-----------------------------------------
Address of Purchaser
-----------------------------------------
Purchaser's Taxpayer
Identification Number
K-2
<PAGE>
EXHIBIT L
------- -
LIST OF CONTRACTS
[To Be Supplied]
L-1
<PAGE>
EXHIBIT M
------- -
LIST OF FHA-INSURED CONTRACTS
[To Be Supplied]
M-1
<PAGE>
EXHIBIT N
------- -
LIST OF SECURED CONTRACTS
[To Be Supplied]
N-1
<PAGE>
EXHIBIT O
------- -
FORM OF MONTHLY REPORT
----------------------
CERTIFICATES FOR HOME IMPROVEMENT LOANS
SERIES 1994-BI
Distribution Date:
_____________
Class A-1 Certificates
- - ----------------------
1. Amount Available
(including Monthly
Servicing Fee) __________
Interest
- - --------
2. Class A-1 Interest __________
3. Amount applied to Unpaid Class A-1 Interest Shortfall __________
4. Remaining Unpaid Class A-1 Interest Shortfall __________
Principal
- - ---------
5. Principal Distribution Amount: __________
(a) Scheduled principal __________
(b) Principal Prepayments __________
(c) Liquidated Contracts __________
(d) Repurchases __________
6. Pool Scheduled Principal Balance __________
7. Unpaid Class A-1 Principal Shortfall
(if any) following prior Payment Date __________
8. Class A-1 principal distribution __________
9. Class A-1 Principal Balance __________
10. Unpaid Class A-1 Principal Shortfall
(if any) following current
Payment Date __________
O-1
<PAGE>
Class M-1 Certificates
- - ----------------------
11. Amount Available less the Class A-1
Distribution Amount
(including Monthly Servicing Fee) __________
Interest
- - --------
12. Class M-1 Pass-Through Rate __________
13. Current interest __________
14. Amount applied to Unpaid
Class M-1 Interest Shortfall __________
15. Remaining Unpaid Class M-1
Interest Shortfall __________
Principal
- - ---------
16. Unpaid Class M-1 Principal Shortfall
(if any) following prior Payment Date __________
17. Current Principal __________
18. Class M-1 Principal Shortfall __________
Unpaid Class M-1 Principal Shortfall __________
19. Class M-1 Principal Balance __________
Class B-1 Certificates
- - ----------------------
20. Amount Available less the Class A-1
and Class M-1 Distribution Amounts
(including Monthly Servicing Fee) __________
Interest
- - --------
21. Class B-1 Pass-Through Rate __________
22. Current interest __________
23. Amount applied to Unpaid
Class B-1 Interest Shortfall __________
O-2
<PAGE>
24. Remaining Unpaid Class B-1
Interest Shortfall __________
Principal
- - ---------
25. Unpaid Class B-1 Principal Shortfall
(if any) following prior Payment Date __________
26. Current Principal __________
27. Class B-1 Principal Shortfall __________
Unpaid Class B-1 Principal Shortfall __________
28. Class B-1 Principal Balance __________
Class B-2 Certificates
- - ----------------------
29. Remaining Amount Available __________
Interest
- - --------
30. Class B-2 Pass-Through Rate __________
(__%, unless Weighted Average
Contract Rate is less than __%)
31. Current interest
32. Amount applied to Unpaid Class
B-2 Interest Shortfall __________
33. Remaining Unpaid Class B-2
Interest Shortfall __________
Principal
- - ---------
34. Unpaid Class B-2 Principal Shortfall
(if any) following prior Payment Date __________
35. Class B-2 Principal Liquidation Loss
Amount __________
36. Current principal __________
37. Class B-2 Guaranty Payment __________
O-3
<PAGE>
38. Class B-2 Principal Balance __________
Class A-1, Class M-1, Class B-1 and Class B-2 Certificates
- - ----------------------------------------------------------
Aggregate Scheduled Balances of Delinquent Contracts as of Determination Date
39. 30-59 days __________
40. 60 days or more __________
41. Liquidated Contracts __________
42. Number of Loans Remaining __________
Number and Principal Balance of Contracts
with FHA claims finally rejected, or no FHA
claim was submitted because FHA Insurance
was unavailable __________
43. Weighted Average Contract Rate
of all outstanding Contracts __________
44. Monthly Servicing Fee __________
45. Guarantee Fee and reimbursement to Company
for prior Class B-2 Guaranty Payments __________
Class C Certificate
- - -------------------
46. Class C Residual Payment __________
Please contact the Bondholder Relations Department of First Trust National
Association at (612) 223-7900 with any questions regarding this Statement or
your Distribution.
O-4
<PAGE>
- - --------------------------------------------------------------------------------
Certificates for Home Improvement Loans
Series 1994-BII
POOLING AND SERVICING AGREEMENT
between
GREEN TREE FINANCIAL CORPORATION
Seller and Servicer
and
FIRST TRUST NATIONAL ASSOCIATION
not in its individual capacity but solely as Trustee
of
HOME IMPROVEMENT LOAN TRUST 1994-BII
Dated as of June 1, 1994
- - --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
Definitions
<C> <S> <C>
Section 1.01. General.............................................. 1-1
Section 1.02. Specific Terms....................................... 1-1
<CAPTION>
ARTICLE II
Establishment of Trust; Transfer of Contracts
<C> <S> <C>
Section 2.01. Closing.............................................. 2-1
Section 2.02. Conditions to the Closing............................ 2-1
Section 2.03. Acceptance by Trustee................................ 2-2
Section 2.04. Grantor Trust Provisions............................. 2-3
<CAPTION>
ARTICLE III
Representations and Warranties
<C> <S> <C>
Section 3.01. Representations and Warranties Regarding the
Company.......................................... 3-1
Section 3.02. Representations and Warranties Regarding Each
Contract......................................... 3-2
Section 3.03. Representations and Warranties Regarding the
Contracts in the Aggregate....................... 3-4
Section 3.04. Representations and Warranties Regarding the
Contract Files................................... 3-5
Section 3.05. Repurchases of Contracts for Breach of
Representations and Warranties................... 3-5
<CAPTION>
ARTICLE IV
Perfection of Transfer and Protection of Security Interests
<C> <S> <C>
Section 4.01. Transfer of Contracts................................ 4-1
Section 4.02. Costs and Expenses................................... 4-1
<CAPTION>
ARTICLE V
Servicing of Contracts
<C> <S> <C>
Section 5.01. Responsibility for Contract Administration........... 5-1
Section 5.02. Standard of Care..................................... 5-1
Section 5.03. Records.............................................. 5-1
Section 5.04. Inspection........................................... 5-1
Section 5.05. Certificate Account.................................. 5-2
Section 5.06. Enforcement.......................................... 5-3
Section 5.07. Trustee to Cooperate................................. 5-4
Section 5.08. Costs and Expenses................................... 5-5
</TABLE>
-1-
<PAGE>
<TABLE>
<C> <S> <C>
Section 5.09. Maintenance of Insurance............................. 5-5
Section 5.10. Merger or Consolidation of Servicer.................. 5-5
<CAPTION>
ARTICLE VI
Reports and Tax Matters
<C> <S> <C>
Section 6.01. Monthly Reports...................................... 6-1
Section 6.02. Officer's Certificate................................ 6-2
Section 6.03. Other Data........................................... 6-3
Section 6.04. Annual Report of Accountants......................... 6-3
Section 6.05. Statements to Certificateholders..................... 6-3
Section 6.06. Payment of Taxes..................................... 6-4
<CAPTION>
ARTICLE VII
Service Transfer
<C> <S> <C>
Section 7.01. Events of Termination................................ 7-1
Section 7.02. Transfer............................................. 7-2
Section 7.03. Trustee to Act; Appointment of Successor............. 7-2
Section 7.04. Notification to Certificateholders................... 7-3
Section 7.05. Effect of Transfer................................... 7-3
Section 7.06. Transfer of Certificate Account...................... 7-3
<CAPTION>
ARTICLE VIII
Payments
<C> <S> <C>
Section 8.01. Monthly Payments..................................... 8-1
Section 8.02. Advances............................................. 8-1
Section 8.03. Limited Guaranty..................................... 8-2
Section 8.04. Payments............................................. 8-2
Section 8.05. Reassignment of Repurchased Contacts................. 8-3
Section 8.06. Servicer's Repurchase Option......................... 8-3
<CAPTION>
ARTICLE IX
The Certificates
<C> <S> <C>
Section 9.01. The Certificates..................................... 9-1
Section 9.02. Registration of Transfer and Exchange of Certificates 9-1
Section 9.03. No Charge; Disposition of Void Certificates.......... 9-4
Section 9.04. Mutilated, Destroyed, Lost or Stolen Certificates.... 9-4
Section 9.05. Persons Deemed Owners................................ 9-4
Section 9.06. Access to List of Certificateholders' Names
and Addresses.................................... 9-4
Section 9.07. Authenticating Agents................................ 9-5
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
ARTICLE X
Indemnities
<C> <S> <C>
Section 10.01. Real Estate.......................................... 10-1
Section 10.02. Liabilities to Obligors.............................. 10-1
Section 10.03. Tax Indemnification.................................. 10-1
Section 10.04. Servicer's Indemnities............................... 10-1
Section 10.05. Operation of Indemnities............................. 10-2
<CAPTION>
ARTICLE XI
The Trustee
<C> <S> <C>
Section 11.01. Duties of Trustee.................................... 11-1
Section 11.02. Certain Matters Affecting the Trustee................ 11-2
Section 11.03. Trustee Not Liable for Certificates or Contracts..... 11-3
Section 11.04. Trustee May Own Certificates......................... 11-3
Section 11.05. Rights of Certificateholders to Direct Trustee and to
Waive Events of Termination..................... 11-3
Section 11.06. The Servicer to Pay Trustee's Fees and Expenses...... 11-4
Section 11.07. Eligibility Requirements for Trustee................. 11-4
Section 11.08. Resignation or Removal of Trustee.................... 11-5
Section 11.09. Successor Trustee.................................... 11-6
Section 11.10. Merger or Consolidation of Trustee................... 11-6
Section 11.11. Tax Returns.......................................... 11-6
Section 11.12. Obligor Claims....................................... 11-6
Section 11.13. Appointment of Co-Trustee or Separate Trustee........ 11-7
Section 11.14. The Trustee and First Bank System, Inc............... 11-8
Section 11.15. Trustee Advances..................................... 11-9
<CAPTION>
ARTICLE XII
Miscellaneous
<C> <S> <C>
Section 12.01. Servicer Not to Resign............................... 12-1
Section 12.02. Company Not to Engage in Certain Transactions with
Respect to the Trust.............................. 12-1
Section 12.03. Maintenance of Office or Agency...................... 12-1
Section 12.04. Termination.......................................... 12-1
Section 12.05. Acts of Certificateholders........................... 12-3
Section 12.06. Calculations......................................... 12-3
Section 12.07. Assignment or Delegation by Company.................. 12-4
Section 12.08. Amendment............................................ 12-4
Section 12.09. Notices.............................................. 12-5
Section 12.10. Merger and Integration............................... 12-6
Section 12.11. Headings............................................. 12-6
Section 12.12. Governing Law........................................ 12-6
Testimonium........................................................... 12-7
</TABLE>
-3-
<PAGE>
<TABLE>
<C> <S> <C>
Exhibit A. Certificate for Home Improvement Loans............... A-1
Exhibit B. Form of Assignment................................... B-1
Exhibit C. Certificate of Officer............................... C-1
Exhibit D. Form of Opinion of Counsel for the Company........... D-1
Exhibit E. Omitted.............................................. E-1
Exhibit F. Form of Trustee's Acknowledgement.................... F-1
Exhibit G. Certificate of Servicing Officer..................... G-1
Exhibit H. Omitted.............................................. H-1
Exhibit I. Certificate Regarding Repurchased Contracts.......... I-1
Exhibit J. Omitted.............................................. J-1
Exhibit K. List of Contracts.................................... K-1
Exhibit L. Omitted.............................................. L-1
Exhibit M. Omitted.............................................. M-1
Exhibit N. Form of Monthly Report............................... N-1
</TABLE>
-4-
<PAGE>
AGREEMENT, dated as of June 1, 1994, between Green Tree Financial
Corporation, a corporation organized and existing under the laws of the State
of Minnesota, as Seller and Servicer (the "Company"), and First Trust National
Association, a national banking association organized and existing under the
laws of the United States, not in its individual capacity but solely as
Trustee (the "Trustee") of Home Improvement Loan Trust 1994-BII (the "Trust").
WHEREAS, in the regular course of its business, the Company purchases,
originates and services home improvement contracts and promissory notes, which
contracts and notes provide for installment payments by or on behalf of the
purchaser of the home improvements;
WHEREAS, the Company and the Trustee have agreed to establish the Trust;
WHEREAS, the Company and the Trustee wish to set forth the terms and
conditions pursuant to which the Trust, on behalf of the "Certificateholders",
as hereinafter defined, will acquire the "Contracts," as hereinafter defined,
and the Company will manage and service the Contracts;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the Company and the Trustee agree as
provided herein:
-i-
<PAGE>
ARTICLE I
DEFINITIONS
-----------
SECTION 1.01. General.
-------
For the purpose of this Agreement, except as otherwise expressly provided
or unless the context otherwise requires, the terms defined in this Article
include the plural as well as the singular, the words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular article, section or other subdivision, and
Section references refer to Sections of the Agreement.
SECTION 1.02. Specific Terms.
--------------
"Advance" means, with respect to any Payment Date, the amounts, if any,
-------
deposited by the Servicer or the Trustee, as applicable, in the Certificate
Account for such Payment Date pursuant to Section 8.02.
"Advance Payment" means any payment by an Obligor in advance of the Due
---------------
Period in which it would be due under such Contract and which payment is not a
Principal Prepayment.
"Affiliate" of any specified Person means any other Person controlling or
---------
controlled by or under common control with such specified Person. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" or "controlled" have
meanings correlative to the foregoing.
"Agreement" means this Pooling and Servicing Agreement.
---------
"Amount Available" has the meaning assigned in Section 8.04(a).
----------------
"Applicants" has the meaning assigned in Section 9.06.
----------
"Authenticating Agent" means any authenticating agent appointed pursuant
--------------------
to Section 9.07.
"Average Sixty-Day Delinquency Ratio" means, with respect to any Payment
-----------------------------------
Date, the arithmetic average of the Delinquency Ratios for such Payment Date
and for the two immediately preceding Payment Dates.
"Book-Entry Certificate" means any Certificate registered in the name of
----------------------
the Depository or its nominee, ownership of which is reflected on the books of
the Depository or on the books of a person maintaining an account with such
Depository (directly or as an indirect participant in accordance with the
rules of such Depository).
1-1
<PAGE>
"Business Day" means any day other than (a) a Saturday or a Sunday, or
------------
(b) another day on which banking institutions in the city in which the Person
taking action hereunder are authorized or obligated by law, executive order,
or governmental decree to be closed.
"Certificate" means a Certificate for Home Improvement Loans, Series 1994-
-----------
BII, Class A-2, evidencing a Percentage Interest executed and delivered by the
Trustee substantially in the form of Exhibit A.
"Certificate Account" means a trust account created and maintained
-------------------
pursuant to Section 5.05 in the name of the Trust in an Eligible Institution.
"Certificate Owner" means the person who is the beneficial owner of a
-----------------
Book-Entry Certificate or, if Definitive Certificates have been issued,
Certificateholders.
"Certificate Register" means the register maintained pursuant to Section
--------------------
9.02.
"Certificate Registrar" or "Registrar" means the registrar appointed
---------------------
pursuant to Section 9.02.
"Certificateholder" means the person in whose name a Certificate is
-----------------
registered on the Certificate Register, except that, solely for the purposes
of giving any consent, waiver, request or demand pursuant to this Agreement,
any Certificate registered in the name of the Company or any Affiliate shall
be deemed not to be outstanding and the Percentage Interest evidenced thereby
shall not be taken into account in determining whether the requisite
Percentage Interest necessary to effect any such consent, request, waiver or
demand has been obtained; provided, however, that, solely for the purpose of
-------- -------
determining whether the Trustee is entitled to rely upon any such consent,
waiver, request or demand, only Certificates which the Trustee knows to be so
owned shall be so disregarded.
"Closing Date" means June 30, 1994.
------------
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Collected Amount" means, with respect to any Determination Date, the
----------------
amount of funds in the Certificate Account as of such Determination Date,
including all interest earned on such funds but excluding (i) amounts
constituting Advance Payments with respect to the immediately preceding Due
Period, (ii) amounts received after the end of such immediately preceding Due
Period, (iii) any Advances that will be deposited in the Certificate Account
by the Servicer or the Trustee, as applicable, and (iv) amounts required to be
deposited by the Company following such Determination Date pursuant to Section
3.05.
1-2
<PAGE>
"Computer Tape" means the computer tape generated by the Company which
-------------
provides information relating to the Contracts and which was used by the
Company in selecting the Contracts, and includes the master file and the
history file.
"Contracts" means the home improvement contracts and promissory notes
---------
described in the List of Contracts attached hereto as Exhibit K and
constituting part of the corpus of the Trust, which Contracts are to be
assigned and conveyed by the Company to the Trust, and includes, without
limitation, any and all rights to receive payments which are due pursuant
thereto on or after the Cut-off Date, but excluding any rights to receive
payments which are due pursuant thereto prior to the Cut-off Date.
"Contract File" means, as to each Contract, (a) the original copy of the
-------------
Contract which is comprised of the related contract and/or promissory note,
(b) an original or a copy of a truth-in-lending disclosure form (either
included as part of the contract or note or as a separate document), and (c) a
sale control document.
"Contract Interest Rate" means, as to any Contract, the annual rate of
----------------------
interest specified in the Contract.
"Corporate Trust Office" means the office of the Trustee at which at any
----------------------
particular time its corporate trust business shall be principally
administered, which office at the date of the execution of this Agreement is
located at the address set forth in Section 12.09.
"Counsel for the Company" means Dorsey & Whitney or other legal counsel
-----------------------
for the Company.
"Cumulative Loss Coverage Ratio" means, with respect to any Payment Date,
------------------------------
a fraction, the numerator of which is the sum of (i) the Loss Coverages as of
such Payment Date and the two immediately preceding Payment Dates plus (ii)
the aggregate Net Liquidation Losses on all Contracts that became Liquidated
Contracts during the immediately preceding Due Period and the two immediately
preceding Due Periods and the denominator of which is the aggregate Net
Liquidation Losses on all Contracts that became Liquidated Contracts during
the immediately preceding Due Period and the two immediately preceding Due
Periods (but in no event less than $1.00).
"Cumulative Realized Loss Ratio" for any Payment Date is a fraction,
------------------------------
expressed as a percentage, the numerator of which is the aggregate Realized
Losses for that Payment Date and all prior Payment Dates, and the denominator
of which is the Initial Principal Amount.
"Custodian" means at any time an Eligible Institution, or a financial
---------
institution organized under the laws of the United States or any State, which
is subject to supervision and examination by Federal or State authorities and
whose commercial paper, or unsecured long-term debt (or, in the case of a
member of a bank holding company system, the commercial paper or unsecured
long-term debt
1-3
<PAGE>
of such bank holding company) has been rated A-1 by Standard &
Poor's in the case of commercial paper, or BBB or higher by Standard & Poor's
in the case of unsecured long-term debt, as is acting at such time as
Custodian of the Contract Files pursuant to Section 4.01.
"Cut-off Date" means June 1, 1994.
------------
"Defaulted Contract" means a Contract with respect to which the Servicer
------------------
commenced foreclosure proceedings, made a sale of such Contract to a third
party for foreclosure or enforcement, or as to which there was a Delinquent
Payment 180 or more days past due.
"Definitive Certificates" has the meaning assigned in Section 9.02(e).
-----------------------
"Delinquency Ratio" for any Payment Date is a percentage, equal to the
-----------------
aggregate outstanding principal balance of all Contracts that were delinquent
60 days or more as of the end of the immediately preceding Due Period
(including Defaulted Contracts that have not yet been liquidated, but
excluding Contracts that are current with respect to rescheduled payments
following the Obligor's bankruptcy) divided by the Principal Balance
immediately following such Payment Date.
"Delinquent Payment" means, as to any Contract, with respect to any Due
------------------
Period, any payment or portion of a payment that was originally scheduled to
be made during such Due Period under such Contract (after giving effect to any
reduction in the principal amount deemed owed on such Contract by the Obligor,
as described in Section 6.01(a)(iii)) and was not received or applied during
such Due Period and deposited in the Certificate Account, whether or not any
payment extension has been granted by the Servicer; provided, however, that
with respect to any Liquidated Contract, the payment scheduled to be made in
the Due Period in which such Contract became a Liquidated Contract shall not
be deemed a Delinquent Payment.
"Depository" means the initial Depository, The Depository Trust Company,
----------
the nominee of which is CEDE & CO., as the registered Holder of one
Certificate evidencing $15,180,940 in initial principal balance of the
Certificates, and any permitted successor depository. The Depository shall at
all times be a "clearing corporation" as defined in Section 8-102(3) of the
Uniform Commercial Code of the State of New York.
"Depository Participant" means a broker, dealer, bank or other financial
----------------------
institution or other Person for whom from time to time a Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
"Determination Date" means the seventh Business Day following a Due
------------------
Period during the term of this Agreement.
"Due Period" means a calendar month during the term of this Agreement.
----------
1-4
<PAGE>
"Electronic Ledger" means the electronic master record of conditional
-----------------
sales contracts and promissory notes of the Company.
"Eligible Institution" means any depository institution (which may be the
--------------------
Trustee or an Affiliate of the Trustee) organized under the laws of the United
States or any State, the deposits of which are insured to the full extent
permitted by law by the Federal Deposit Insurance Corporation, which is
subject to supervision and examination by Federal or State authorities and
whose short-term debt (or, in the case of the principal bank in a bank holding
company system, the short-term debt of such bank or the bank holding company)
has been rated A-1 by Standard & Poor's.
"Eligible Investments" has the meaning assigned in Section 5.05(b).
--------------------
"Eligible Servicer" means the Trustee or a Person qualified to act as
-----------------
servicer of the Contracts under applicable Federal and State laws and
regulations.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"Errors and Omissions Protection Policy" means the employee errors and
--------------------------------------
omissions policy maintained by the Servicer or any similar replacement policy
covering errors and omissions by the Servicer's employees, and meeting the
requirements of Section 5.09, all as such policy relates to Contracts
comprising a portion of the corpus of the Trust.
"Event of Termination" has the meaning assigned in Section 7.01.
--------------------
"Fidelity Bond" means the fidelity bond maintained by the Servicer or
-------------
any similar replacement bond, meeting the requirements of Section 5.09, as such
bond relates to Contracts comprising a portion of the corpus of the Trust.
"Final Payment Date" means the Payment Date on which the final
------------------
distribution in respect of Certificates will be made pursuant to Section
12.04.
"GNMA" means the Government National Mortgage Association.
----
"Grantor Trust" means a trust which is classified as a grantor trust
-------------
under the provisions of Sections 671 through 679 of the Code and related
provisions and any temporary, proposed or final regulations promulgated
thereunder, as the foregoing may be in effect from time to time.
"Guaranty Amount" has the meaning assigned in Section 8.03(b).
---------------
"HUD" means the United States Department of Housing and Urban
---
Development.
"Independent" means, when used with respect to any specified Person,
-----------
Dorsey & Whitney or any Person who (i) is in fact independent of the Company
and
1-5
<PAGE>
the Servicer, (ii) does not have any direct financial interest or any material
indirect financial interest in the Company or the Servicer or in an Affiliate
of either, and (iii) is not connected with the Company or the Servicer as an
officer, employee, promoter, underwriter, trustee, partner, director or person
performing similar functions. Whenever it is provided herein that any
Independent Person's opinion or certificate shall be furnished to the Trustee,
such opinion or certificate shall state that the signatory has read this
definition and is Independent within the meaning set forth herein.
"Initial Principal Amount" means $15,180,940.54, which is the aggregate
------------------------
unpaid principal balance of the Contracts as of the Cut-off Date.
"Limited Guaranty" means the limited guaranty of the Company provided
----------------
pursuant to Section 8.03.
"Liquidated Contract" means with respect to any Due Period, either
-------------------
(1) a Defaulted Contract as to which the Servicer has received from
the Obligor, or a third party purchaser of the Contract, all amounts
which the Servicer reasonably and in good faith expects to recover from
or on account of such Contract, or
(2) a Contract (a) upon which all or a portion of the first payment
of interest due by the Obligor was added to principal, and (b) on which
the Obligor failed to pay the full amount of principal due on the
Contract, as computed by the Servicer;
provided, however, that any Contract which the Company is obligated to
repurchase pursuant to Section 3.05(a), and did so repurchase, shall be deemed
not to be a Liquidated Contract; and provided further, that with respect to
Due Periods beginning on or after June 1, 2009, a Liquidated Contract also
means any Contract as to which the Servicer has commenced foreclosure
proceedings, or made a sale of the Contract to a third party for foreclosure
or enforcement.
"List of Contracts" means the list identifying each Contract constituting
-----------------
part of the corpus of the Trust, which list (a) identifies each Contract and
(b) sets forth as to each Contract (i) the unpaid principal balance as of the
Cut-off Date, (ii) the amount of monthly payments due from the Obligor, (iii)
the Contract Interest Rate and (iv) the maturity date, and which is attached
to this Agreement as Exhibit K.
"Loss Coverage" means, with respect to any Payment Date, the amount equal
-------------
to (i) the Amount Available minus (ii) the sum of the Monthly Principal and
Monthly Interest.
"Monthly Interest" means, as of any Payment Date, one-twelfth of the
----------------
product of the Pass-Through Rate times the Principal Balance immediately
following the preceding Payment Date, plus any Unpaid Interest Shortfall.
1-6
<PAGE>
"Monthly Principal" means, as of any Payment Date, the amount determined
-----------------
pursuant to Section 6.01(a).
"Monthly Report" has the meaning assigned in Section 6.01.
--------------
"Monthly Servicing Fee" means, as of any Payment Date, one-twelfth of the
---------------------
product of .75% and the Pool Scheduled Principal Balance with respect to the
preceding Payment Date.
"Net Liquidation Loss" means, as to a Liquidated Contract, the difference
--------------------
between (a) the Repurchase Price of such Contract, and (b) the Net Liquidation
Proceeds with respect to such Liquidated Contract, where such difference is a
positive number.
"Net Liquidation Proceeds" means, as to a Liquidated Contract, the
------------------------
proceeds, or, for Contracts which become Liquidated Contracts pursuant to the
last proviso in the definition of "Liquidated Contract," the estimated
proceeds, received as of the last day of the Due Period in which such Contract
became a Liquidated Contract, from the Obligor, from a third party purchaser
of the Contract, under insurance or otherwise, net of liquidation expenses.
"Obligor" means the purchaser of the financed home improvements or other
-------
person who owes payments under a Contract.
"Officer's Certificate" means a certificate signed by the Chairman of the
---------------------
Board, President or any Vice President of the Company and delivered to the
Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may, except
------------------
as expressly provided herein, be salaried counsel for the Company, acceptable
to the Trustee and the Company.
"Pass-Through Rate" means 7.85% per annum.
-----------------
"Paying Agent" has the meaning assigned in Section 8.01(c).
------------
"Payment Date" means the fifteenth day of each calendar month during the
------------
term of this Agreement, or if such day is not a Business Day, the next
succeeding Business Day, commencing July 15, 1994.
"Percentage Interest" means an undivided interest in the Trust and, as to
-------------------
a particular Certificateholder, means the undivided interest in the Trust
owned by that Certificateholder, the amount of such interest to equal, in the
case of the Certificates, a fraction (which may be expressed as a percentage
rounded to eight decimal places) the numerator of which is the denomination of
the Certificate and the denominator of which is the Initial Principal Amount.
The aggregate of all Percentage Interests for the Certificates shall equal
100%.
1-7
<PAGE>
"Person" means any individual, corporation, partnership, joint venture,
------
association, joint stock company, trust (including any beneficiary thereof),
unincorporated organization or government or any agency or political
subdivision thereof.
"Plan" has the meaning assigned in Section 9.02(b).
----
"Pool Factor" means, at any time, the percentage derived from a fraction,
-----------
the numerator of which is the Principal Balance at such time and the
denominator of which is the Initial Principal Amount.
"Pool Scheduled Principal Balance" means, as of any Payment Date, the
--------------------------------
aggregate Scheduled Principal Balance of all Contracts that were outstanding
during the immediately preceding Due Period.
"Principal Balance" means at any time the Initial Principal Amount minus
-----------------
all payments of Monthly Principal made to the Certificateholders since the
Closing Date.
"Principal Prepayment" means a payment or other recovery of principal on
--------------------
a Contract which is received in advance of its scheduled due date and applied
upon receipt (or, in the case of a partial prepayment, upon the next scheduled
payment date on such Contract) to reduce the outstanding principal amount due
on such Contract prior to the date or dates on which such principal amount is
due.
"Qualified Bank" means any depository institution whose unsecured long-
--------------
term debt (or in the case of the principal bank in a bank holding company
system the unsecured long-term debt of such bank holding company) is rated A
or higher by Standard & Poor's.
"Realized Losses" for any Payment Date means the aggregate Net
---------------
Liquidation Losses for all Contracts that became Liquidated Contracts during
the immediately preceding Due Period.
"Record Date" means, with respect to any Payment Date, the Business Day
-----------
immediately preceding such Payment Date.
"Repurchase Price" means, with respect to a Contract to be repurchased
----------------
pursuant to Section 3.05 or which becomes a Liquidated Contract, an amount
equal to (a) the remaining principal amount outstanding on such Contract
(without giving effect to any Advances paid by the Servicer or the Trustee, as
applicable, with respect to such Contract pursuant to Section 8.02), plus (b)
interest at the Pass-Through Rate on such Contract from the end of the Due
Period with respect to which the Obligor last made a payment (without giving
effect to any Advances paid by the Servicer or the Trustee, as applicable,
with respect to such Contract pursuant to Section 8.02) through the end of the
immediately preceding Due Period.
1-8
<PAGE>
"Responsible Officer" means, with respect to the Trustee, the chairman
-------------------
and any vice chairman of the board of directors, the president, the chairman
and vice chairman of any executive committee of the board of directors, every
vice president, assistant vice president, the secretary, every assistant
secretary, cashier or any assistant cashier, controller or assistant
controller, the treasurer, every assistant treasurer, every trust officer,
assistant trust officer and every other officer or assistant officer of the
Trustee customarily performing functions similar to those performed by persons
who at the time shall be such officers, respectively, or to whom a corporate
trust matter is referred because of knowledge of, familiarity with, and
authority to act with respect to a particular matter.
"Scheduled Principal Balance" means, as to any Contract and any Payment
---------------------------
Date or the Cut-off Date, the principal balance of such Contract as of the Due
Date in the Due Period immediately preceding such Payment Date or as of the
Due Date immediately preceding the Cut-off Date, as the case may be, as
specified in the amortization schedule at the time relating thereto (before
any adjustment to such amortization schedule by reason of any bankruptcy of an
Obligor or similar proceeding or any moratorium or similar waiver or grace
period) after giving effect to any previous partial Principal Prepayments and
to the payment of principal due on such Due Date and irrespective of any
delinquency in payment by, or extension granted to, the related Obligor.
"Service Transfer" has the meaning assigned in Section 7.02.
----------------
"Servicer" means the Company until any Service Transfer hereunder and
--------
thereafter means the new servicer appointed pursuant to Article VII.
"Servicing Officer" means any officer of the Servicer involved in, or
-----------------
responsible for, the administration and servicing of Contracts whose name
appears on a list of servicing officers appearing in an Officer's Certificate
furnished to the Trustee by the Company, as the same may be amended from time
to time.
"Shortfall" has the meaning assigned in Section 8.03.
---------
"Standard & Poor's" means Standard & Poor's Ratings Group, a division of
-----------------
McGraw-Hill, Inc., or any successor thereto.
"Trust" means the trust created by this Agreement, the corpus of which
-----
consists of all the rights, benefits, and obligations arising from and in
connection with each Contract, rights under the Errors and Omissions
Protection Policy, the Limited Guaranty and the remittances, deposits and
payments made into the Certificate Account and amounts in the Certificate
Account (including all proceeds of investments thereof).
"Trustee Advance" has the meaning assigned in Section 11.15.
---------------
"Uncollectible Advance" means, with respect to any Determination Date,
---------------------
the amount, if any, advanced by the Servicer or the Trustee, as applicable
pursuant to
1-9
<PAGE>
Section 8.02 and Section 11.15, which the Servicer or the Trustee, as
applicable, has determined in good faith will not be ultimately recoverable by
the Servicer or the Trustee, as applicable, the Obligor or out of Net
Liquidation Proceeds. The determination by the Servicer that it has made an
Uncollectible Advance shall be evidenced by an Officer's Certificate delivered
to the Trustee.
"Unpaid Interest Shortfall" means, with respect to any Payment Date, the
-------------------------
amount, if any, by which the Monthly Interest for the immediately preceding
Payment Date exceeded the amount distributed to Certificateholders on such
preceding Payment Date pursuant to Section 8.04(b), plus accrued interest (to
the extent payment thereof is legally permissible) thereon at the Pass-Through
Rate.
1-10
<PAGE>
ARTICLE II
ESTABLISHMENT OF TRUST; TRANSFER OF CONTRACTS
---------------------------------------------
SECTION 2.01. Closing.
-------
a. There is hereby created, by the Company as settlor, a separate trust
which shall be known as Home Improvement Loan Trust Series 1994-BII. The Trust
shall be administered pursuant to the provisions of this Agreement for the
benefit of the Certificateholders.
b. The Company hereby transfers, assigns, sets over and otherwise
conveys to the Trustee on behalf of the Trust, by execution of an assignment
substantially in the form of Exhibit B hereto, (i) all the right, title and
interest of the Company in and to the Contracts, including all interest and
principal received by the Company on or with respect to the Contracts (other
than principal and interest due on the Contracts before the Cut-off Date),
(ii) all rights under the Errors and Omissions Protection Policy and the
Fidelity Bond as such policy and bond relate to the Contracts, (iii) all
documents contained in the Contract Files, and (iv) all proceeds and products
of the foregoing. Although the Company and the Trustee agree that such
transfer is intended to be a sale, rather than a pledge, of all of the
Company's right, title and interest to such items, in the event such transfer
is deemed to be a pledge to secure indebtedness, the Company shall be deemed
to have granted to the Trustee a perfected first priority security interest in
such items.
c. Although the parties intend that the conveyance of the Company's
right, title and interest in and to the Contracts pursuant to this Agreement
shall constitute a purchase and sale and not a loan, if such conveyances are
deemed to be a loan, the parties intend that the rights and obligations of the
parties to such loan shall be established pursuant to the terms of this
Agreement. The parties also intend and agree that the Company shall be deemed
to have granted to the Trustee, and the Company does hereby grant to the
Trustee, a perfected first-priority security interest in the items designated
in Section 2.01(b)(i) through 2.01(b)(iv) above, and that this Agreement shall
constitute a security agreement under applicable law. If the trust created by
this Agreement terminates prior to the satisfaction of the claims of any
Person under any Certificates, the security interest created hereby shall
continue in full force and effect and the Trustee shall be deemed to be the
collateral agent for the benefit of such Person.
SECTION 2.02. Conditions to the Closing.
-------------------------
On or before the Closing Date, the Company shall deliver or cause to be
delivered the following documents to the Trustee:
a. The List of Contracts, certified by the Chairman of the Board,
President or any Vice President of the Company.
2-1
<PAGE>
b. A certificate of an officer of the Company substantially in the
form of Exhibit C hereto.
c. An Opinion of Counsel for the Company substantially in the form
of Exhibit D hereto.
d. A letter from KPMG Peat Marwick, or another nationally
recognized accounting firm, stating that such firm has reviewed the
Contracts on a statistical sampling basis and, based on such sampling,
concluding that the Contracts conform in all material respects to the
List of Contracts, to a confidence level of 97.5%, with an error rate not
in excess of 1.8%, specifying those Contracts which do not so conform.
e. Copies of resolutions of the board of directors of the Company
or of the executive committee of the board of directors of the Company
approving the execution, delivery and performance of this Agreement and
the transactions contemplated hereunder, certified in each case by the
secretary or an assistant secretary of the Company.
f. Officially certified recent evidence of due incorporation and
good standing of the Company under the laws of the State of Minnesota.
g. An Officer's Certificate listing the Servicer's Servicing
Officers.
h. Evidence of continued coverage of the Company under the Errors
and Omissions Protection Policy.
i. Evidence of deposit in the Certificate Account of all funds
received with respect to the Contracts from the Cut-off Date to the
Closing Date, other than amounts due before the Cut-off Date, together
with an Officer's Certificate to the effect that such amount is correct.
j. An Officer's Certificate confirming that the Company's internal
audit department has reviewed the original or a copy of each Contract and
each Contract File, that each Contract and Contract File conforms in all
material respects with the List of Contracts and that each Contract File
is complete.
SECTION 2.03. Acceptance by Trustee.
---------------------
a. On the Closing Date, if the conditions set forth in Section 2.02 have
been satisfied, the Trustee shall deliver a certificate to the Company
substantially in the form of Exhibit F hereto acknowledging conveyance of the
Contracts and Contract Files to the Trustee and declaring that the Trustee,
directly or through a custodian, will hold all Contracts that have been
delivered in trust, upon the trusts herein set forth, for the use and benefit
of all Certificateholders, and shall issue, to or upon the order of the
Company, the Certificates representing, in the aggregate, ownership of the
entire beneficial interest in the Trust.
2-2
<PAGE>
b. If, in its review of the Contract Files as described in Exhibit F,
the Trustee or a custodian discovers a breach of the representations or
warranties set forth in Sections 3.02, 3.03 or 3.04 of this Agreement, or in
the Officer's Certificate delivered pursuant to Section 2.02(j) of this
Agreement, the Company shall cure such breach or repurchase such Contract
pursuant to Section 3.05.
SECTION 2.04. Grantor Trust Provisions.
------------------------
The Company, as Servicer, the Trustee and the Certificateholders, by
acceptance of the Certificates, each agree that the Trust is intended to be
treated as a Grantor Trust for federal income tax purposes. In furtherance of
the foregoing, the Trustee (at the direction of the Company) and the Company
shall take, or refrain from taking, all such action as is necessary to
maintain the status of the Trust as a Grantor Trust. After the Closing Date,
neither the Trustee, the Company nor any Servicer shall (i) accept any
contribution of assets to the Trust other than advances pursuant to Section
8.02, (ii) dispose of any portion of the Trust other than as provided in
Sections 3.05 and 8.06, or (iii) engage in any activity which would, directly
or indirectly, adversely affect the status of the Trust as a Grantor Trust.
2-3
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
The Company makes the following representations and warranties, effective
as of the Closing Date, on which the Trustee will rely in accepting the
Contracts in trust and issuing the Certificates on behalf of the Trust. The
repurchase obligation of the Company set forth in Section 3.05 constitutes the
sole remedy available to the Trust or the Certificateholders for a breach of a
representation or warranty of the Company set forth in Section 3.02, 3.03 or
3.04 of this Agreement or in the Officer's Certificate delivered pursuant to
Section 2.02(j) of this Agreement.
SECTION 3.01. Representations and Warranties Regarding the Company.
----------------------------------------------------
The Company represents and warrants to the Certificateholders that:
a. Organization and Good Standing. The Company is a corporation
------------------------------
duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization and has the corporate power to own
its assets and to transact the business in which it is currently engaged.
The Company is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction in which the character of the
business transacted by it or properties owned or leased by it requires
such qualification and in which the failure so to qualify would have a
material adverse effect on the business, properties, assets, or condition
(financial or other) of the Company.
b. Authorization; Binding Obligations. The Company has the power
----------------------------------
and authority to make, execute, deliver and perform this Agreement and
all of the transactions contemplated under this Agreement, and to create
the Trust and cause it to make, execute, deliver and perform its
obligations under this Agreement and has taken all necessary corporate
action to authorize the execution, delivery and performance of this
Agreement and to cause the Trust to be created. When executed and
delivered, this Agreement will constitute the legal, valid and binding
obligation of the Company enforceable in accordance with its terms,
except as enforcement of such terms may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors' rights
generally and by the availability of equitable remedies.
c. No Consent Required. The Company is not required to obtain the
-------------------
consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Agreement.
d. No Violations. The execution, delivery and performance of this
-------------
Agreement by the Company will not violate any provision of any existing
law or regulation or any order or decree of any court or the Articles of
3-1
<PAGE>
Incorporation or Bylaws of the Company, or constitute a material breach
of any mortgage, indenture, contract or other agreement to which the
Company is a party or by which the Company may be bound.
e. Litigation. No litigation or administrative proceeding of or
----------
before any court, tribunal or governmental body is currently pending, or
to the knowledge of the Company threatened, against the Company or any of
its properties or with respect to this Agreement or the Certificates
which, if adversely determined, would in the opinion of the Company have
a material adverse effect on the transactions contemplated by this
Agreement.
SECTION 3.02. Representations and Warranties Regarding Each Contract.
------------------------------------------------------
The Company represents and warrants to the Certificateholders as to each
Contract:
a. List of Contracts. The information set forth in the List of
-----------------
Contracts is true and correct as of its date.
b. Payments. As of the Cut-off Date, the most recent scheduled
--------
payment was made by or on behalf of the Obligor or was not delinquent for
more than 59 days.
c. Costs Paid and No Waivers. The terms of the Contract have not
-------------------------
been waived, altered or modified in any respect, except by instruments or
documents identified in the Contract File. All costs, fees and expenses
incurred in making, closing and perfecting the lien of the Contract have
been paid.
d. Binding Obligation. The Contract is the legal, valid and
------------------
binding obligation of the Obligor thereunder and is enforceable in
accordance with its terms, except as such enforceability may be limited
by laws affecting the enforcement of creditors' rights generally.
e. No Defenses. The Contract is not subject to any right of
-----------
rescission, setoff, counterclaim or defense, including the defense of
usury, and the operation of any of the terms of the Contract or the
exercise of any right thereunder will not render the Contract
unenforceable in whole or in part or subject to any right of rescission,
setoff, counterclaim or defense, including the defense of usury, and no
such right of rescission, setoff, counterclaim or defense has been
asserted with respect thereto.
f. Insurance Coverage. The Company has been named as an additional
------------------
insured party under any hazard insurance on the property described in the
Contract, to the extent required by the Company's underwriting
guidelines.
3-2
<PAGE>
g. Lawful Assignment. The Contract was not originated in and is
-----------------
not subject to the laws of any jurisdiction whose laws would make the
transfer of the Contract under this Agreement or pursuant to transfers of
Certificates unlawful or render the Contract unenforceable. The Company
has duly executed a valid blanket assignment of the Contracts transferred
to the Trust, and has transferred all its right, title and interest in
such Contracts, including all rights the Company may have against the
originating contractor-seller with respect to Contracts originated by a
contractor-seller rather than the Company, to the Trust. The blanket
assignment, any and all documents executed by the Company pursuant to
Section 2.01(b) hereof, and this Agreement each constitute the legal,
valid and binding obligation of the Company enforceable in accordance
with their respective terms.
h. Compliance with Law. At the date of origination of the
-------------------
Contract, all requirements of any federal and state laws, rules and
regulations applicable to the Contract, including, without limitation,
usury and truth in lending laws have been complied with, and the Company
shall for at least the period of this Agreement, maintain in its
possession, available for the Trustee's inspection, and shall deliver to
the Trustee upon demand, evidence of compliance with all such
requirements.
i. Contract in Force. The Contract has not been satisfied or
-----------------
subordinated in whole or in part or rescinded.
j. Capacity of Parties. The signature(s) of the Obligor(s) on the
-------------------
Contract are genuine and all parties to the Contract had full legal
capacity to execute the Contract.
k. Good Title. The Company is the sole owner of the Contract and
----------
has the authority to sell, transfer and assign such Contract to the Trust
under the terms of this Agreement. There has been no assignment, sale or
hypothecation of the Contract by the Company except the usual past
hypothecation of the Contract in connection with the Company's normal
banking transactions in the conduct of its business, which hypothecation
terminates upon sale of the Contract to the Trust. The Company has good
and marketable title to the Contract, free and clear of any encumbrance,
equity, loan, pledge, charge, claim, lien or encumbrance of any type and
has full right to transfer the Contract to the Trust.
l. No Defaults. As of the Cut-off Date, there was no default,
-----------
breach, violation or event permitting acceleration existing under the
Contract and no event which, with notice and the expiration of any grace
or cure period, would constitute such a default, breach, violation or
event permitting acceleration under such Contract (except payment
delinquencies permitted by clause (b) above). The Company has not waived
any such default, breach, violation or event permitting acceleration
except payment delinquencies permitted by clause (b) above.
3-3
<PAGE>
m. Equal Installments. The Contract has a fixed Contract Interest
------------------
Rate and provides for level monthly payments which fully amortize the
loan over its term.
n. One Original. There is only one original executed Contract,
------------
which Contract has been delivered to the Trustee or its custodian on or
before the Closing Date.
o. Genuine Documents. All documents submitted are genuine, and all
-----------------
other representations as to each Contract, including the List of
Contracts delivered to the Trustee, are true and correct. Any copies of
documents provided by the Company are accurate and complete (except that,
with respect to each Contract that was originated by a contractor-seller
rather than the Company, the Company makes such representation and
warranty only to the best of the Company's knowledge).
p. Origination. The Contract was originated by a home improvement
-----------
contractor in the ordinary course of such contractor's business or was
originated by the Company directly.
q. Underwriting Guidelines. Each Contract was originated or
-----------------------
purchased in accordance with the Company's then-current underwriting
guidelines.
SECTION 3.03. Representations and Warranties Regarding the Contracts in
---------------------------------------------------------
the Aggregate.
- - -------------
The Company represents and warrants to the Certificateholders that:
a. Amounts. The aggregate principal amounts payable by Obligors
-------
under the Contracts as of the Cut-off Date equal the Principal Balance on
the Closing Date, and each Contract has a Contract Interest Rate greater
than the Pass-Through Rate.
b. Characteristics. The Contracts have the following
---------------
characteristics: (i) all Contracts are unsecured contracts; (ii) no
Contract has a remaining maturity of more than 180 months; and (iii) the
final scheduled payment date on the Contract with the latest maturity is
in June, 2009. No Contract was originated before January 1, 1992. No
Contract has a Contract Interest Rate less than 9.81%.
c. Geographic Concentrations. 11.04% of the Contracts by principal
-------------------------
balance as of the Cut-off Date relate to improvements to property located
in Massachusetts, 9.06% in North Carolina, 7.61% in Texas, 6.78% in
Pennsylvania, 6.31% in Michigan, and 5.05% in Virginia. No other state
represents more than 5% of the aggregate principal balance of the
Contracts as of the Cut-off Date. No more than 1% of the Contracts by
remaining principal
3-4
<PAGE>
balance as of the Cut-off Date relate to improvements to property located
in an area with the same five-digit zip code.
d. Marking Records. By the Closing Date, the Company has caused
---------------
the portions of the Electronic Ledger relating to the Contracts to be
clearly and unambiguously marked to indicate that such Contracts
constitute part of the Trust and are owned by the Trust in accordance
with the terms of the trust created hereunder.
e. No Adverse Selection. No adverse selection procedures have been
--------------------
employed in selecting the Contracts.
SECTION 3.04. Representations and Warranties Regarding the Contract
-----------------------------------------------------
Files.
- - -----
The Company represents and warrants that:
a. Possession. Immediately prior to the Closing Date, the Company
----------
will have possession of each original Contract and the related Contract
File, and there are and there will be no custodial agreements in effect
materially and adversely affecting the rights of the Company to make, or
cause to be made, any delivery required hereunder.
b. Bulk Transfer Laws. The transfer, assignment and conveyance of
------------------
the Contracts and the Contract Files by the Company pursuant to this
Agreement is not subject to the bulk transfer or any similar statutory
provisions in effect in any applicable jurisdiction.
SECTION 3.05. Repurchases of Contracts for Breach of Representations
------------------------------------------------------
and Warranties.
- - --------------
a. The Company shall repurchase a Contract, at its Repurchase Price, not
later than 90 days after the day on which the Company, the Servicer or the
Trustee first discovers or should have discovered a breach of a representation
or warranty of the Company set forth in Sections 3.02, 3.03 or 3.04 of this
Agreement or in the Officer's Certificate delivered pursuant to Section
2.02(j) of this Agreement that materially adversely affects the Trust's or the
Certificateholders' interest in such Contract and which breach has not been
cured; provided, however, that (i) in the event that a party other than the
-------- -------
Company first becomes aware of such breach, such discovering party shall
notify the Company in writing within 5 Business Days of the date of such
discovery and (ii) with respect to any Contract incorrectly described on the
List of Contracts with respect to unpaid principal balance, which the Company
would otherwise be required to repurchase pursuant to this Section, the
Company may, in lieu of repurchasing such Contract, deposit in the Certificate
Account within 90 days from the date of such discovery cash in an amount
sufficient to cure such deficiency or discrepancy. Any such cash so deposited
shall be distributed to Certificateholders on the immediately following
Payment Date as a collection of principal or interest on such Contract,
according to the nature of the deficiency or
3-5
<PAGE>
discrepancy. Notwithstanding any other provision of this Agreement, the
obligation of the Company under this Section shall not terminate upon a
Service Transfer pursuant to Article VII.
b. The Company shall defend and indemnify the Trustee and the
Certificateholders against all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel, which may be
asserted against or incurred by any of them as a result of any third-party
action arising out of any breach of any such representation and warranty.
3-6
<PAGE>
ARTICLE IV
PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS
-----------------------------------------------------------
SECTION 4.01. Transfer of Contracts.
---------------------
On or prior to the Closing Date, the Company shall deliver the Contract
Files to the Trustee. The Trustee shall maintain the Contract Files at its
office or with a duly appointed Custodian. The Trustee may release a Contract
File to the Servicer pursuant to Section 5.07. The Company has filed a form
UCC-1 financing statement regarding the sale of the Contracts to the Trustee,
and shall file continuation statements in respect of such UCC-1 financing
statement as if such financing statement were necessary to perfect such sale.
The Company shall take any other actions necessary to maintain the perfection
of the sale of the Contracts to the Trustee.
SECTION 4.02. Costs and Expenses.
------------------
The Servicer agrees to pay all reasonable costs and disbursements in
connection with the perfection and the maintenance of perfection, as against
all third parties, of the Certificateholders' right, title and interest in and
to the Contracts
4-1
<PAGE>
ARTICLE V
SERVICING OF CONTRACTS
----------------------
SECTION 5.01. Responsibility for Contract Administration.
------------------------------------------
The Servicer will have the sole obligation to manage, administer, service
and make collections on the Contracts and perform or cause to be performed all
contractual and customary undertakings of the holder of the Contracts to the
Obligor. The Trustee, at the request of a Servicing Officer, shall furnish the
Servicer with any powers of attorney or other documents necessary or
appropriate to enable the Servicer to carry out its servicing and
administrative duties hereunder. The Company is hereby appointed the Servicer
until such time as any Service Transfer shall be effected under Article VII.
SECTION 5.02. Standard of Care.
----------------
In managing, administering, servicing and making collections on the
Contracts pursuant to this Agreement, the Servicer will exercise that degree
of skill and care consistent with the highest degree of skill and care that
the Servicer exercises with respect to similar contracts (including
manufactured housing contracts) serviced by the Servicer; provided, however,
-------- -------
that such degree of skill and care shall be at least as favorable as the
degree of skill and care generally applied by servicers of home improvement
contracts and promissory notes for institutional investors.
SECTION 5.03. Records.
-------
The Servicer shall, during the period it is servicer hereunder, maintain
such books of account and other records as will enable the Trustee to
determine the status of each Contract.
SECTION 5.04. Inspection.
----------
a. At all times during the term hereof, the Servicer shall afford the
Trustee and its authorized agents reasonable access during normal business
hours to the Servicer's records relating to the Contracts, which have not
previously been provided to the Trust, and will cause its personnel to assist
in any examination of such records by the Trustee. The examination referred to
in this Section will be conducted in a manner which does not unreasonably
interfere with the Servicer's normal operations or customer or employee
relations. Without otherwise limiting the scope of the examination the Trustee
may make, the Trustee may, using generally accepted audit procedures, verify
the status of each Contract and review the Electronic Ledger and records
relating thereto for conformity to Monthly Reports prepared pursuant to
Article VI and compliance with the standards represented to exist as to each
Contract in this Agreement.
5-1
<PAGE>
b. At all times during the term hereof, the Servicer shall keep
available a copy of the List of Contracts at its principal executive office
for inspection by Certificateholders.
c. A Certificateholder holding Certificates representing in the
aggregate at least 5% of the Percentage Interest in the Trust shall have the
rights of inspection afforded to the Trustee pursuant to this Section 5.04.
SECTION 5.05. Certificate Account.
-------------------
a. On or before the Closing Date, the Company shall establish the
Certificate Account on behalf of the Trust with an Eligible Institution. The
Servicer shall pay into the Certificate Account as promptly as practicable
(not later than the next Business Day) following receipt thereof all amounts
received with respect to the Contracts, other than extension fees and
assumption fees, which fees shall be retained by the Servicer as compensation
for servicing the Contracts. All amounts paid into the Certificate Account
under this Agreement shall be held in trust for the Trustee and the
Certificateholders until payment of any such amounts is authorized under this
Agreement. Only the Trustee may withdraw funds from the Certificate Account.
b. If the Servicer so directs, the Eligible Institution maintaining the
Certificate Account shall, in the name of the Trustee in its capacity as such,
invest the amounts in the Certificate Account in Eligible Investments that
mature not later than one Business Day prior to the next succeeding Payment
Date. Once such funds are invested, such Eligible Institution shall not change
the investment of such funds. All income and gain from such investments shall
be added to the Certificate Account and distributed on such Payment Date
pursuant to Section 8.04(b). Losses, if any, realized on amounts in the
Certificate Account invested pursuant to this paragraph shall first be
credited against undistributed investment earnings on amounts in the
Certificate Account invested pursuant to this paragraph, and shall thereafter
be deemed to reduce the amount on deposit in the Certificate Account and
otherwise available for distribution to Certificateholders pursuant to Section
8.01. The Company and the Trustee shall in no way be liable for losses on
amounts invested in accordance with the provisions hereof. Funds in the
Certificate Account not so invested must be insured to the extent permitted by
law by the Federal Deposit Insurance Corporation. "Eligible Investments" are
--------------------
any of the following:
(i) direct obligations of, and obligations fully guaranteed by, the
United States of America, the Federal Home Loan Mortgage Corporation, the
Federal National Mortgage Association, or any agency or instrumentality
of the United States of America the obligations of which are backed by
the full faith and credit of the United States of America;
(ii) (A) demand and time deposits in, certificates of deposit of,
bankers' acceptances issued by, or federal funds sold by any depository
institution or trust company (including the Trustee or any Affiliate of
the Trustee, acting in its commercial capacity) incorporated under the
laws of the
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United States of America or any state thereof and subject to supervision
and examination by federal and/or state authorities, so long as, at the
time of such investment or contractual commitment providing for such
investment, the commercial paper or other short-term debt obligations of
such depository institution or trust company (or, in the case of a
depository institution which is the principal subsidiary of a holding
company, the commercial paper or other short-term debt obligations of
such holding company) are rated at least A-1 by Standard & Poor's and (B)
any other demand or time deposit or certificate of deposit which is fully
insured by the Federal Deposit Insurance Corporation;
(iii) shares of an investment company registered under the
Investment Company Act of 1940, whose shares are registered under the
Securities Act of 1933 and have the highest credit rating then available
from Standard & Poor's, and whose only investments are in securities
described in clauses (i) and (ii) above;
(iv) repurchase obligations with respect to (A) any security
described in clause (i) above or (B) any other security issued or
guaranteed by an agency or instrumentality of the United States of
America, in either case entered into with a depository institution or
trust company (acting as principal) described in clause (ii)(A) above;
(v) securities bearing interest or sold at a discount issued by
any corporation incorporated under the laws of the United States of
America or any State thereof which have a credit rating of at least A
from Standard & Poor's at the time of such investment; provided, however,
-------- -------
that securities issued by any particular corporation will not be Eligible
Investments to the extent that investment therein will cause the then
outstanding principal amount of securities issued by such corporation and
held as part of the corpus of the Trust to exceed 10% of amounts held in
the Certificate Account; and
(vi) commercial paper having a rating of at least A-1 from
Standard & Poor's at the time of such investment or pledge as security.
The Trustee may trade with itself or an Affiliate in the purchase or sale
of such Eligible Investments.
SECTION 5.06. Enforcement.
-----------
a. The Servicer shall, consistent with customary servicing procedures,
act with respect to the Contracts in such manner as will maximize the receipt
of principal and interest on such Contracts and liquidation proceeds with
respect to Liquidated Contracts.
b. In accordance with the standard of care specified in Paragraph 5.02,
the Servicer may, in its own name, if possible, or as agent for the Trust,
take such steps that in the Servicer's reasonable judgment will maximize
liquidation proceeds with
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respect to the Contract, including, for example, the sale of the Contract to a
third party for enforcement and, in the case of any default on a related prior
mortgage loan, the advancing of funds to correct such default and the
advancing of funds to pay off a related prior mortgage loan, which advances
are liquidation expenses that will be reimbursed to the Servicer out of
related liquidation proceeds before the related Net Liquidation Proceeds are
paid to Certificateholders. The Servicer shall also deposit in the Certificate
Account any Net Liquidation Proceeds received in connection with any Contract
which became a Liquidated Contract in a prior Due Period.
c. The Servicer may sue to enforce or collect upon Contracts, in its own
name, if possible, or as agent for the Trust. If the Servicer elects to
commence a legal proceeding to enforce a Contract, the act of commencement
shall be deemed to be an automatic assignment of the Contract to the Servicer
for purposes of collection only. If, however, in any enforcement suit or legal
proceeding it is held that the Servicer may not enforce a Contract on the
ground that it is not a real party in interest or a holder entitled to enforce
the Contract, the Trustee on behalf of the Trust shall, at the Servicer's
expense, take such steps as the Servicer deems necessary to enforce the
Contract, including bringing suit in its name or the names of the
Certificateholders.
d. The Servicer may grant to the Obligor on any Contract any rebate,
refund or adjustment out of the Certificate Account that the Servicer in good
faith believes is required because of prepayment in full of the Contract. The
Servicer will not permit any rescission or cancellation of any Contract.
e. The Servicer may enforce any due-on-sale clause in a Contract if such
enforcement is called for under its then current servicing policies for
obligations similar to the Contracts, provided that such enforcement is
permitted by applicable law and will not adversely affect any applicable
insurance policy. If an assumption of a Contract is permitted by the Servicer,
upon conveyance of the related property the Servicer shall use its best
efforts to obtain an assumption agreement in connection therewith.
f. Any provision of this Agreement to the contrary notwithstanding, the
Servicer shall not agree to the modification or waiver of any provision of a
Contract, if such modification or waiver would be treated as a taxable
exchange under Section 1001 of the Code or any proposed, temporary or final
Treasury Regulations promulgated thereunder.
SECTION 5.07. Trustee to Cooperate.
--------------------
a. Upon payment in full on any Contract, the Servicer will notify the
Trustee and the Company (if the Company is not the Servicer) on the next
succeeding Payment Date by certification of a Servicing Officer (which
certification shall include a statement to the effect that all amounts
received in connection with such payments which are required to be deposited
in the Certificate Account pursuant to Section 5.05 have been so deposited)
and shall request delivery of the Contract and Contract File to the Servicer.
Upon receipt of such delivery and
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request, the Trustee shall promptly release or cause to be released such
Contract and Contract File to the Servicer. Upon receipt of such Contract and
Contract File, each of the Company (if different from the Servicer) and the
Servicer is authorized to execute an instrument in satisfaction of such
Contract and to do such other acts and execute such other documents as the
Servicer deems necessary to discharge the Obligor thereunder and eliminate any
lien on the related real estate. The Servicer shall determine when a Contract
has been paid in full; to the extent that insufficient payments are received
on a Contract credited by the Servicer as prepaid or paid in full and
satisfied, the shortfall shall be paid by the Servicer out of its own funds
and deposited in the Certificate Account.
b. The Servicer's receipt of a Contract and/or Contract File shall
obligate the Servicer to return the original Contract and the related Contract
File to the Trustee when its need by the Servicer has ceased unless the
Contract shall be liquidated or repurchased as described in Section 3.05 or
8.06.
SECTION 5.08. Costs and Expenses.
------------------
Except as provided in Section 8.04(b) for the reimbursement of Advances,
all costs and expenses incurred by the Servicer in carrying out its duties
hereunder (including, payment of the Trustee's fees pursuant to Section 11.06,
fees and expenses of accountants and payments of all fees and expenses
incurred in connection with the enforcement of Contracts and all other fees
and expenses not expressly stated hereunder to be for the account of the
Trust) shall be paid by the Servicer and the Servicer shall not be entitled to
reimbursement hereunder, except that the Servicer shall be reimbursed out of
the liquidation proceeds of a Liquidated Contract for customary out-of-pocket
liquidation expenses incurred by it. The Servicer shall not incur such
liquidation expenses unless it determines in its good faith business judgment
that incurring such expenses will increase the Net Liquidation Proceeds on the
related Contract.
SECTION 5.09. Maintenance of Insurance.
------------------------
The Servicer shall at all times keep in force a policy or policies of
insurance covering errors and omissions for failure to maintain insurance as
required by this Agreement, and a fidelity bond. Such policy or policies and
such fidelity bond shall be in such form and amount as is generally customary
among persons who service a portfolio of home improvement loans having an
aggregate principal amount of $10,000,000 or more, and which are generally
regarded as servicers acceptable to institutional investors.
SECTION 5.10 Merger or Consolidation of Servicer.
-----------------------------------
Any Person into which the Servicer may be merged or converted or with
which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which the Servicer shall be a party shall be
the successor of the Servicer hereunder, provided such Person shall be an
Eligible Servicer, without the execution or filing of any paper or any further
act on the part of any of the parties
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hereto, anything herein to the contrary notwithstanding. The Servicer shall
promptly notify Standard & Poor's in the event it is a party to any merger,
conversion or consolidation.
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ARTICLE VI
REPORTS AND TAX MATTERS
-----------------------
SECTION 6.01. Monthly Reports.
---------------
No later than one Business Day following each Determination Date, the
Servicer shall deliver to the Trustee and Standard & Poor's a Monthly Report,
substantially in the form of Exhibit N hereto, which report shall include the
following information with respect to the immediately following Payment Date:
a. The amount of Monthly Principal distributed on such Payment Date
pursuant to Section 8.01, which shall be:
(i) The amount of regular principal payments on Contracts paid
or applied during the prior Due Period (other than the amount
attributable to principal of any payment received during such Due
Period and due in a previous Due Period, if such payment was
previously advanced as a Delinquent Payment pursuant to Section
8.02); plus
(ii) The amount of Principal Prepayments received during the
prior Due Period; plus
(iii) The amount of any Delinquent Payments that is attributable
to principal on the related Contracts, whether or not such Delinquent
Payments will be advanced pursuant to Section 8.02; plus
(iv) The aggregate remaining principal balance of all Contracts
that became Liquidated Contracts during the prior Due Period; plus
(v) The aggregate Repurchase Price paid by the Company for any
Contracts repurchased during the prior Due Period as described in
Section 3.05(a) that is attributable to the principal amount
outstanding on such Contracts; plus
(vi) The amount of any reduction in the principal amount deemed
owed by the Obligor as a result of the Obligor's bankruptcy; plus
(vii) The aggregate principal amount specified in clauses (i)
through (vi) above, for all prior Payment Dates that was not
previously distributed because of an insufficient amount available
in the Certificate Account (after taking into account amounts
deposited therein pursuant to the Limited Guaranty).
b. the amount of Monthly Interest paid on such Payment Date;
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c. the remaining Principal Balance after giving effect to the payment
of Monthly Principal on such Payment Date (on which Monthly Interest will
be calculated on the next succeeding Payment Date);
d. the total amount of Advances to be made by the Servicer;
e. the total amount of Advances made by the Servicer on prior
Payment Dates for which the Servicer is now entitled to reimbursement due
to recoveries on the related Contracts;
f. the total amount of Advances made by the Servicer on prior
Payment Dates that the Servicer has now determined are Uncollectible
Advances;
g. the Collected Amount for the prior Due Period and the Shortfall
(if any) for such Payment Date;
h. the amounts of fees paid to the Servicer by the Trust on such
Payment Date, separately identifying the Monthly Servicing Fee paid during
the prior Due Period;
i. the Pool Factor immediately before and immediately after such
Payment Date;
j. the Pool Scheduled Principal Balance for such Payment Date;
k. the number of Contracts with Delinquent Payments, identifying such
Contracts and the amount of such Delinquent Payments, and the number of and
aggregate unpaid principal balance of Contracts with payments delinquent
31-59, 60-89 and 90+ days, respectively;
l. the number of Liquidated Contracts, identifying such Contracts and
the Net Liquidation Loss on such Contracts;
m. the Average Sixty-Day Delinquency Ratio and the Cumulative
Realized Loss Ratio; and
n. the Guaranty Amount and the payment to be made by the Company, if
any, relating to such Payment Date pursuant to the Limited Guaranty.
SECTION 6.02. Officer's Certificate.
---------------------
Each Monthly Report pursuant to Section 6.01 shall be accompanied by a
certificate of a Servicing Officer substantially in the form of Exhibit G,
certifying the accuracy of the Monthly Report and that no Event of Termination
or event that with notice or lapse of time or both would become an Event of
Termination has
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occurred, or if such event has occurred and is continuing, specifying the
event and its status.
SECTION 6.03. Other Data.
----------
In addition, the Company and (if different from the Company) the Servicer
shall, on request of the Trustee or Standard & Poor's, furnish the Trustee
and/or Standard & Poor's such underlying data as may be reasonably requested.
SECTION 6.04. Annual Report of Accountants.
----------------------------
On or before May 1 of each year, commencing May 1, 1995, the Servicer at
its expense shall cause a firm of independent public accountants which is a
member of the American Institute of Certified Public Accountants to furnish a
statement to the Trustee and Standard & Poor's to the effect that such firm has
examined certain documents and records relating to the servicing of the home
improvement contracts and promissory notes under pooling and servicing
agreements substantially similar one to another (such statement to have attached
thereto a schedule setting forth the pooling and servicing agreements covered
thereby, including this Agreement) and that, on the basis of such examination,
conducted substantially in compliance with generally accepted auditing
standards, such servicing has been conducted in compliance with such pooling and
servicing agreements.
SECTION 6.05. Statements to Certificateholders.
--------------------------------
a. Concurrently with each distribution to Certificateholders pursuant to
Article VIII, the Trustee, in its capacity as Certificate Registrar and Paying
Agent, shall cause to be mailed to Standard & Poor's and to each
Certificateholder at the address appearing on the Certificate Register a
statement as of the related Payment Date prepared by the Servicer setting forth:
(i) the amount of the aggregate distribution to the
Certificateholders which constitutes Monthly Principal, specifying the
amounts attributable to scheduled payments by Obligors, to Principal
Prepayments by Obligors, and to other payments with respect to principal;
(ii) the amount of the aggregate distribution to the
Certificateholders which constitutes Monthly Interest;
(iii) the remaining Principal Balance;
(iv) the Average Sixty-Day Delinquency Ratio and the Cumulative
Realized Loss Ratio;
(v) the amount of fees payable out of the Trust, separately
identifying each such fee;
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(vi) the Pool Factor immediately before and immediately after such
Payment Date;
(vii) the number and aggregate principal balance of Contracts
delinquent 31-59, 60-89 and 90+ days, respectively;
(viii) the number of Contracts that became Liquidated Contracts
during the immediately preceding Due Period;
(ix) the Guaranty Amount and the payment to be made by the Company,
if any, relating to such Payment Date pursuant to the Limited Guaranty;
(x) such other customary factual information as is available to the
Company or the Servicer (if different from the Company) to enable
Certificateholders to prepare their tax returns, including information
required with respect to computing the accrual of market discount; and
(xi) such other customary factual information as is available to the
Company or the Servicer (if different from the Company) as the Servicer can
reasonably obtain from its existing data base to enable Certificateholders
to comply with regulatory requirements.
b. Within 75 days after the end of each calendar year, the Certificate
Registrar shall mail to each Certificateholder of record at any time during such
year a report prepared by the Servicer as to the aggregate amounts of interest
accrued and principal paid to such Certificateholder, and any additional
information reported pursuant to subsections (a)(x) and (a)(xi) of this Section
6.05, attributable to such Certificateholder.
c. A Certificateholder holding Certificates representing in the aggregate
at least 5% of the Percentage Interest in the Trust shall, upon written request
to the Trustee, be entitled to receive copies of all reports provided to the
Trustee.
SECTION 6.06. Payment of Taxes.
----------------
The Servicer shall be responsible for and agrees to prepare, make and file
all federal, state, local or other tax returns, information statements and other
returns and documents of every kind and nature whatsoever required to be made or
filed by or on behalf of the Trust pursuant to the Code and other applicable tax
laws and regulations. Each such return, statement and document shall, to the
extent required by the Code or other applicable law and at the request of the
Servicer, be signed on behalf of the Trust by the Trustee. The Trustee shall
have no responsibility whatsoever for the accuracy or completeness of any such
return, statement or document. The Servicer agrees to indemnify the Trustee and
hold it harmless for, from, against and in respect to any and all liability,
loss, damage and expense which may be incurred by the Trustee based upon or as a
result of the Trustee's execution of any and all such tax returns, statements
and documents.
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ARTICLE VII
SERVICE TRANSFER
----------------
SECTION 7.01. Events of Termination.
---------------------
"Event of Termination" means the occurrence of any of the following:
--------------------
a. Any failure by the Servicer to make any payment or deposit
required to be made hereunder (including an Advance) and the continuance of
such failure for a period of four Business Days;
b. Failure on the Servicer's part to observe or perform in any
material respect any covenant or agreement in this Agreement (other than a
covenant or agreement which is elsewhere in this Section specifically dealt
with) which continues unremedied for 30 days;
c. Any assignment by the Servicer of its duties or rights hereunder
except as specifically permitted hereunder, or any attempt to make such an
assignment;
d. A court having jurisdiction in the premises shall have entered a
decree or order for relief in respect of the Servicer in an involuntary
case under any applicable bankruptcy, insolvency or other similar law now
or hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of the Servicer, as
the case may be, or for any substantial liquidation of its affairs;
e. The Servicer shall have commenced a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or shall have consented to the entry of an order for relief in an
involuntary case under any such law, or shall have consented to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian or sequestrator (or other similar official) of the
Servicer or for any substantial part of its property, or shall have made
any general assignment for the benefit of its creditors, or shall have
failed to, or admitted in writing its inability to, pay its debts as they
become due, or shall have taken any corporate action in furtherance of the
foregoing;
f. The failure of the Servicer to be an Eligible Servicer; or
g. If the Company is the Servicer, the Company's servicing rights
under its master seller-servicer agreement with GNMA are terminated by
GNMA.
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SECTION 7.02. Transfer.
--------
If an Event of Termination has occurred and is continuing, either the
Trustee or Certificateholders with aggregate Percentage Interests representing
25% or more of the Trust, by notice in writing to the Servicer (and to the
Trustee if given by the Certificateholders) may terminate all (but not less than
all) of the Servicer's management, administrative, servicing and collection
functions (such termination being herein called a "Service Transfer"). On
----------------
receipt of such notice (or, if later, on a date designated therein), all
authority and power of the Servicer under this Agreement, whether with respect
to the Contracts, the Contract Files or otherwise (except with respect to the
Certificate Account, the transfer of which shall be governed by Section 7.06),
shall pass to and be vested in the Trustee pursuant to and under this Section
7.02; and, without limitation, the Trustee is authorized and empowered to
execute and deliver on behalf of the Servicer, as attorney-in-fact or otherwise,
any and all documents and other instruments, and to do any and all acts or
things necessary or appropriate to effect the purposes of such notice of
termination. Each of the Company and the Servicer agrees to cooperate with the
Trustee in effecting the termination of the responsibilities and rights of the
Servicer hereunder, including, without limitation, the transfer to the Trustee
for administration by it of all cash amounts which shall at the time be held by
the Servicer for deposit, or have been deposited by the Servicer, in the
Certificate Account, or for its own account in connection with its services
hereafter or thereafter received with respect to the Contracts. The Servicer
shall transfer to the new servicer (i) the Servicer's records relating to the
Contracts in such electronic form as the new servicer may reasonably request and
(ii) any Contract Files in the Servicer's possession.
SECTION 7.03. Trustee to Act; Appointment of Successor.
----------------------------------------
On and after the time the Servicer receives a notice of termination
pursuant to Section 7.02, the Trustee shall be the successor in all respects to
the Servicer in its capacity as servicer under this Agreement and the
transactions set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Servicer
by the terms and provisions hereof, and the Servicer shall be relieved of such
responsibilities, duties and liabilities arising after such Service Transfer;
provided, however, that (i) the Trustee will not assume any obligations of the
- - -------- -------
Company pursuant to Section 3.05, and (ii) the Trustee shall not be liable for
any acts or omissions of the Servicer occurring prior to such Service Transfer
or for any breach by the Servicer of any of its obligations contained herein or
in any related document or agreement. As compensation therefor, the Trustee
shall be entitled to receive reasonable compensation out of the Monthly
Servicing Fee. Notwithstanding the above, the Trustee may, if it shall be
unwilling so to act, or shall, if it is legally unable so to act, appoint, or
petition a court of competent jurisdiction to appoint, an Eligible Servicer as
the successor to the Servicer hereunder in the assumption of all or any part of
the responsibilities, duties or liabilities of the Servicer hereunder. Pending
appointment of a successor to the Servicer hereunder, unless the Trustee is
prohibited by law from so acting, the Trustee shall act in such capacity as
hereinabove provided. In connection with such
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appointment and assumption, the Trustee may make such arrangements for the
compensation of such successor out of payments on Contracts as it and such
successor shall agree; provided, however, that no such monthly compensation
-------- -------
shall, without the written consent of 100% of the Certificateholders, exceed
1/12 of .75% of the Pool Scheduled Principal Balance. The Trustee and such
successor shall take such action, consistent with this Agreement, as shall be
necessary to effectuate any such succession.
SECTION 7.04. Notification to Certificateholders
----------------------------------
a. Promptly following the occurrence of any Event of Termination, the
Servicer shall give written notice thereof to the Trustee, to Standard & Poor's
and to the Certificateholders at their respective addresses appearing on the
Certificate Register.
b. Within 10 days following any termination or appointment of a successor
to the Servicer pursuant to this Article VII, the Trustee shall give written
notice thereof to Standard & Poor's and to Certificateholders at their
respective addresses appearing on the Certificate Register.
SECTION 7.05. Effect of Transfer.
------------------
a. After the Service Transfer, the Trustee or new Servicer may notify
Obligors to make payments directly to the new Servicer that are due under the
Contracts after the effective date of the Service Transfer.
b. After the Service Transfer, the replaced Servicer shall have no
further obligations with respect to the management, administration, servicing or
collection of the Contracts and the new Servicer shall have all of such
obligations, except that the replaced Servicer will transmit or cause to be
transmitted directly to the new Servicer for its own account, promptly on
receipt and in the same form in which received, any amounts (properly endorsed
where required for the new Servicer to collect them) received as payments upon
or otherwise in connection with the Contracts.
c. A Service Transfer shall not affect the rights and duties of the
parties hereunder (including but not limited to the indemnities of the Servicer
and the Company pursuant to Article X and Sections 3.05, 11.06 and 11.12(f))
other than those relating to the management, administration, servicing or
collection of the Contracts.
SECTION 7.06. Transfer of Certificate Account.
-------------------------------
Notwithstanding the provisions of Section 7.02, if the Certificate Account
shall be maintained with the Servicer and an Event of Termination shall occur
and be continuing, the Servicer shall, after five days' written notice from the
Trustee, or in any event within ten days after the occurrence of the Event of
Termination, establish a new account or accounts in trust for the
Certificateholders and the
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conforming with the requirements of this Agreement at the trust department of
the Trustee or with an Eligible Institution other than the Servicer and
promptly transfer all funds in the Certificate Account to such new account,
which shall thereafter be deemed the Certificate Account for the purposes
hereof.
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ARTICLE VIII
PAYMENTS
--------
SECTION 8.01. Monthly Payments.
----------------
a. Subject to the terms of this Article VIII, each holder of a
Certificate as of a Record Date shall be paid on the next succeeding Payment
Date by check mailed to such Certificateholder at the address for such
Certificateholder appearing on the Certificate Register (or, if such
Certificateholder holds Certificates with an aggregate Percentage Interest of at
least 5% and so requests, by wire transfer pursuant to instructions delivered to
the Trustee at least 10 days prior to such Payment Date), the sum equal to such
Certificateholder's Percentage Interest of Monthly Interest and Monthly
Principal. Final payment of any Certificate shall be made only upon
presentation of such Certificate at the office or agency of the Paying Agent.
b. Each distribution with respect to a Book-Entry Certificate shall be
paid to the Depository, which shall credit the amount of such distribution to
the accounts of its Depository Participants in accordance with its normal
procedures. Each Depository Participant shall be responsible for disbursing
such distribution to the Certificate Owners that it represents and to each
indirect participating brokerage firm (a "brokerage firm" or "indirect
participating firm") for which it acts as agent. Each brokerage firm shall be
responsible for disbursing funds to the Certificate Owners that it represents.
All such credits and disbursements with respect to a Book-Entry Certificate are
to be made by the Depository and the Depository Participants in accordance with
the provisions of the Book-Entry Certificates. Neither the Trustee, the
Certificate Registrar nor the Company shall have any responsibility therefor
except as otherwise provided by applicable law. To the extent applicable and
not contrary to the rules of the Depository, the Trustee shall comply with the
provisions of the form of the Certificates as set forth in Exhibit A hereto.
c. The Trustee shall appoint an Eligible Institution to be the paying
agent (the "Paying Agent") and cause it to make the payments to the
------------
Certificateholders required hereunder. The Trustee initially appoints its
corporate trust operations department, with an office at 180 East 5th Street,
Third Floor, St. Paul, Minnesota 55101, Attention: Corporate Trust Operations,
as such Paying Agent. The Trustee shall require the Paying Agent (if other than
the Trustee) to agree in writing that all amounts held by the Paying Agent for
payment hereunder will be held in trust for the benefit of the
Certificateholders and that it will notify the Trustee of any failure by the
Servicer to make funds available to the Paying Agent for the payment of amounts
due on the Certificates.
SECTION 8.02. Advances.
--------
a. Not later than one Business Day following the Determination Date, the
Servicer shall advance all Delinquent Payments for the immediately preceding Due
Period by depositing the aggregate amount of such Delinquent Payments in the
Certificate Account; provided, however, that the Servicer shall be obligated to
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advance Delinquent Payments only to the extent that the Servicer, in its sole
discretion, expects to be able to recover such advances from subsequent
collections, including Net Liquidation Proceeds on the related Contracts. If
the Servicer fails to advance all Delinquent Payments required under this
Section 8.02, the Trustee shall be obligated to advance such Delinquent Payments
pursuant to Section 11.15.
b. The Servicer shall be entitled to reimbursement of an Advance from
subsequent collections on the related Contract, including Net Liquidation
Proceeds in accordance with Section 8.04(b). If the Servicer determines in good
faith that any Advance has become an Uncollectible Advance, the Servicer will be
entitled to reimbursement of such Uncollectible Advance from the Collected
Amount in accordance with Section 8.04(b).
SECTION 8.03. Limited Guaranty.
----------------
a. If the Monthly Report as of any Determination Date indicates that (a)
the sum of (i) the Collected Amount plus (ii) any Advances that will be
deposited in the Certificate Account by the Servicer or the Trustee, as
applicable, plus (iii) the aggregate of the Repurchase Prices for Contracts to
be repurchased by the Company in respect of such Determination Date pursuant to
Section 3.05, is less than (b) the aggregate amount payable on the immediately
following Payment Date pursuant to Section 8.04(b)(1)-(4) (such difference being
hereinafter referred to as a "Shortfall"), then, if the Company is the Servicer,
---------
the Company shall pay into the Certificate Account not later than one Business
Day after such Determination Date the lesser of (a) such Shortfall, or (b) the
Guaranty Amount. If the Company is not the Servicer, the Servicer shall deliver
to the Company, no later than one Business Day after such Determination Date, a
written demand that the Company pay under the Limited Guaranty the amount
specified in the preceding sentence; upon receipt of such demand, the Company
shall pay such amount into the Certificate Account not later than two Business
Days before the related Payment Date. Notwithstanding any other provision of
this Agreement, the obligation of the Company under this Section shall be
irrevocable, unconditional and not terminate upon a Service Transfer pursuant to
Article VII.
b. On any Payment Date the Company shall be obligated pursuant to the
Limited Guaranty only up to the Guaranty Amount. The "Guaranty Amount" shall
---------------
equal:
(i) $1,518,095 prior to the first Payment Date under this Agreement.
(ii) Thereafter, on any Payment Date, $1,518,095 minus all Net
Liquidation Losses realized on the Contracts since the Cut-off date.
c. The obligation of the Company to provide the Limited Guaranty under
this Agreement shall terminate on the Final Payment Date.
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<PAGE>
d. If the Company fails to make any payment required under the Limited
Guaranty, the Company shall promptly notify the Trustee, and the Trustee shall
promptly notify Standard & Poor's.
SECTION 8.04. Payments.
--------
a. On each Determination Date the Servicer shall determine the following
amount of funds (the "Amount Available"): (i) the Collected Amount as of such
----------------
Determination Date; plus (ii) an amount equal to the sum of (1) the aggregate
amount of Advances that will be deposited in the Certificate Account by the
Servicer or the Trustee, as applicable, pursuant to Section 8.02 or 11.15, (2)
the amount to be deposited by the Company in the Certificate Account pursuant to
the Limited Guaranty in accordance with Section 8.03, and (3) the aggregate of
the Repurchase Prices for Contracts to be repurchased by the Company in respect
of such Determination Date pursuant to Section 3.05.
b. On each Payment Date the Trustee shall apply the Amount Available (as
determined on the immediately preceding Determination Date) in the Certificate
Account to make payment in the following order of priority:
1. to pay Monthly Interest to the Certificateholders; provided that
the portion of the Amount Available to be applied to the payment of such
Monthly Interest shall in no event exceed the sum of (a) amounts received
in respect of interest on the Contracts, plus (b) any payments received in
respect of the Limited Guaranty other than payments with respect to amounts
included in Monthly Principal;
2. to pay Monthly Principal to the Certificateholders;
3. to pay the Servicer the Monthly Servicing Fee or such other
compensation owed to the Servicer pursuant to Section 7.03;
4. to reimburse the Servicer or the Trustee, as applicable, for prior
Advances that have been recovered and for any Uncollectible Advances; and
5. to pay the remainder, if any, of the Amount Available to the
Company as the fee for providing the Limited Guaranty.
c. If the Trustee shall not have received the applicable Monthly Report
by any Payment Date, the Trustee shall distribute all funds then in the
Certificate Account to Certificateholders as Monthly Interest and then Monthly
Principal, to the extent of such funds, on such Payment Date.
SECTION 8.05. Reassignment of Repurchased Contracts.
-------------------------------------
Upon receipt by the Trust by deposit in the Certificate Account of the
Repurchase Price under Section 3.05, and upon receipt of a certificate of a
Servicing Officer in the form attached hereto as Exhibit I, the Trustee shall
convey and assign
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to the Company all of the Certificateholders' right, title and interest in the
repurchased Contract without recourse, representation or warranty, except as
to the absence of liens, charges or encumbrances created by or arising as a
result of actions of the Trustee. Upon such deposit of the Repurchase Price,
the Servicer shall be deemed to have released any claims to such Contract as a
result of Advances with respect to such Contract.
SECTION 8.06. Servicer's Repurchase Option.
----------------------------
a. The Trust created hereby and the respective obligations and
responsibilities of the Company, the Servicer and the Trustee created hereby
(other than the responsibility of the Trustee to make any final distributions to
Certificateholders as set forth below) shall terminate upon the earlier of (1)
the later of the final payment or other liquidation of the last Contract
remaining in the Trust or the Termination of the Trust pursuant to Section
12.04, or (2) the purchase by the Servicer of all of the Contracts and all
property acquired in respect of any Contract remaining in the Trust at a price
equal to the greatest of:
A. the sum of (x) 100% of the principal balance of each Contract
(other than any Contract as to which title to the underlying property has
been acquired and whose fair market value is included pursuant to clause
(y) below), together with accrued and unpaid interest on each such Contract
at the Pass-Through Rate, plus (y) the fair market value of such acquired
property (as determined by the Servicer as of the close of business on the
third Business Day next preceding the date upon which notice of any such
termination is furnished to Certificateholders pursuant to Section 12.04),
B. the aggregate fair market value (as determined by the Servicer as
of the close of business on such third Business Day) of all of the assets
of the Trust, and
C. the remaining Principal Balance as of the close of business on
such third Business Day;
b. The purchase by the Servicer of all of the Contracts pursuant to
Section 8.06(a)(2) above shall be at the option of the Servicer, but shall be
conditioned upon (1) the Pool Scheduled Principal Balance, at the time of any
such purchase, aggregating less than 10% of the Initial Principal Balance, and
(2) the Servicer having provided the Trustee and the Depository (if any) with at
least 30 days' written notice. If such option is exercised, the Servicer shall
provide to the Trustee the certification required by Section 12.04, and the
Trustee shall promptly sign such certification and release to the Servicer the
Contract Files pertaining to the Contracts being repurchased.
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ARTICLE IX
THE CERTIFICATES
----------------
SECTION 9.01. The Certificates.
----------------
The Certificates shall be substantially in the forms set forth in Exhibits
A, and shall, on original issue, be executed by manual or facsimile signature of
the Company by any one of its President, Vice Presidents, Secretary, Treasurer
or other authorized officers and authenticated by the Trustee to or upon the
order of the Company upon receipt. The Certificates shall be evidenced by (i)
one or more Certificates representing $15,180,940.00 initial aggregate principal
balance, beneficial ownership of such Certificates to be held through Book-Entry
Certificates in minimum dollar denominations of $1,000, and (ii) a single
Certificate representing $.54 in initial principal balance.
The Certificates shall be authenticated by manual signature on behalf of
the Trustee by a duly authorized Responsible Officer or authorized signatory.
Certificates bearing the signatures of individuals who were at any time the
proper officers of the Trustee shall bind the Trustee, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
authentication and delivery of such Certificate or did not hold such offices at
the date of such Certificates. No Certificate shall be entitled to any benefit
under this Agreement, or be valid for any purpose, unless such Certificate has
been authenticated by manual signature in accordance with this Section, and such
signature upon any Certificate shall be conclusive evidence, and the only
evidence, that such Certificate has been duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their authentication,
except for those Certificates authenticated on the Closing Date, which shall be
dated the Closing Date.
SECTION 9.02. Registration of Transfer and Exchange of Certificates.
-----------------------------------------------------
a. The Trustee shall keep at the office or agency to be maintained in
accordance with Section 12.02 a "Certificate Register" in which the Trustee
--------------------
shall provide for the registration of Certificates and of transfers and
exchanges of Certificates as herein provided. The Trustee initially appoints
itself to be the "Certificate Registrar" and transfer agent for the purpose of
---------------------
registering Certificates and transfers and exchanges of Certificates as provided
herein. The Trustee will give prompt written notice to Certificateholders and
the Servicer of any change in the Certificate Registrar.
b. No transfer of a Certificate by, on behalf of or with plan assets of
any employee benefit plan, trust or account that is subject to ERISA, or that is
described in Section 4975(e)(i) of the Code (each, a "Plan") will be registered
----
unless the transferee, at its expense, delivers to the Trustee, the Servicer and
the Company an opinion of counsel (satisfactory to the Trustee, the Servicer and
the Company) that the purchase and holding of a Certificate by, on behalf of, or
with Plan assets of such Plan is permissible under applicable law, will not
result in the assets of the Trust
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being deemed to be Plan assets and subject to the prohibited transaction
provisions of ERISA and the Code and will not subject the Trustee, the Trust,
the Company or the Servicer to any obligation or liability in addition to
those undertaken in this Agreement. Unless such opinion is delivered, each
person acquiring a Certificate will be deemed to represent to the Trustee, the
Company and the Servicer that such person is neither a Plan, nor acting on
behalf of a Plan, nor purchasing with Plan assets of any Plan.
c. At the option of a Certificateholder, Certificates may be exchanged
for other Certificates of authorized denominations of a like aggregate original
denomination, upon surrender of such Certificates to be exchanged at such
office. Whenever any Certificates are so surrendered for exchange, the Trustee
shall execute and deliver the Certificates which the Certificateholder making
the exchange is entitled to receive. Every Certificate presented or surrendered
for transfer or exchange shall be duly endorsed by, or shall be accompanied by a
written instrument of transfer in form satisfactory to the Trustee and the
Certificate Registrar duly executed by, the holder thereof or his or her
attorney duly authorized in writing.
d. Except as provided in paragraph (e) below the Book-Entry Certificates
shall at all times remain registered in the name of the Depository or its
nominee and at all times: (i) registration of the Certificates may not be
transferred by the Trustee except to another Depository; (ii) the Depository
shall maintain book-entry records with respect to the Certificate Owners and
with respect to ownership and transfers of such Certificates; (iii) ownership
and transfers of registration of the Certificates on the books of the Depository
shall be governed by applicable rules established by the Depository; (iv) the
Depository may collect its usual and customary fees, charges and expenses from
its Depository Participants; (v) the Trustee shall deal with the Depository,
Depository Participants and indirect participating firms as representatives of
the Certificate Owners of the Certificates for purposes of exercising the rights
of Holders under this Agreement, and requests and directions for and votes of
such representatives shall not be deemed to be inconsistent if they are made
with respect to different Certificate Owners; and (vi) the Trustee may rely and
shall be fully protected in relying upon information furnished by the Depository
with respect to its Depository Participants and furnished by the Depository
Participants with respect to indirect participating firms and persons shown on
the books of such indirect participating firms as direct or indirect Certificate
Owners.
All transfers by Certificate Owners of Book-Entry Certificates shall be
made in accordance with the procedures established by the Depository Participant
or brokerage firm representing such Certificateholder. Each Depository
Participant shall only transfer Book-Entry Certificates of Certificate Owners it
represents or of brokerage firms for which it acts as agent in accordance with
the Depository's normal procedures.
e. If (x)(i) the Company or the Depository advises the Trustee in writing
that the Depository is no longer willing or able properly to discharge its
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responsibilities as Depository, and (ii) the Trustee or the Company is unable to
locate a qualified successor, or (y) the Company at its sole option advises the
Trustee in writing that it elects to terminate the book-entry system through the
Depository, the Trustee shall notify all Certificate Owners, through the
Depository, of the occurrence of any such event and of the availability of
definitive, fully registered Certificates (the "Definitive Certificates") to
Certificate Owners requesting the same. Upon surrender to the Trustee of the
Certificates by the Depository, accompanied by registration instructions from
the Depository for registration, the Trustee shall issue the Definitive
Certificates. Neither the Company nor the Trustee shall be liable for any delay
in delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of Definitive
Certificates all references herein to obligations imposed upon or to be
performed by the Depository shall be deemed to be imposed upon and performed by
the Trustee, to the extent applicable with respect to such Definitive
Certificates and the Trustee shall recognize the Holders of the Definitive
Certificates as Certificateholders hereunder.
f. On or prior to the Closing Date, there shall be delivered to the
Depository one Certificate, in registered form, registered in the name of the
Depository's nominee, Cede & Co., the total face amount of which represents
$15,180,940.00. Such Certificate shall bear the following legend:
"Unless this Certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to the Trustee or
its agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein."
SECTION 9.03. No Charge; Disposition of Void Certificates.
-------------------------------------------
No service charge shall be made to a Certificateholder for any transfer or
exchange of Certificates, but the Certificate Registrar may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any transfer or exchange of Certificates. All Certificates
surrendered for transfer and exchange shall be disposed of in a manner approved
by the Trustee.
SECTION 9.04. Mutilated, Destroyed, Lost or Stolen Certificates.
-------------------------------------------------
If (a) any mutilated Certificate is surrendered to the Certificate
Registrar, or the Certificate Registrar receives evidence to its satisfaction of
the destruction, loss or theft of any Certificate, and (b) there is delivered to
the Certificate Registrar and the Trustee such security or indemnity as may be
required by each to save it harmless, then in the absence of notice to the
Certificate Registrar or the Trustee that
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<PAGE>
such Certificate has been acquired by a bona fide purchaser, the Trustee shall
execute and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate a new Certificate of like tenor and
original denomination. Upon the issuance of any new Certificate under this
Section 9.04, the Trustee may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto
and any other expenses connected therewith. Any duplicate Certificate issued
pursuant to this Section 9.04 shall constitute complete and indefeasible
evidence of ownership of the Percentage Interest, as if originally issued,
whether or not the mutilated, destroyed, lost or stolen Certificate shall be
found at any time.
SECTION 9.05. Persons Deemed Owners.
---------------------
Prior to due presentation of a Certificate for registration of transfer,
the Servicer, the Company, the Trustee, the Paying Agent and the Certificate
Registrar may treat the person in whose name any Certificate is registered as
the owner of such Certificate for the purpose of receiving remittances pursuant
to Section 8.01 and for all other purposes whatsoever, and none of the Servicer,
the Company, the Trustee, the Certificate Registrar, the Paying Agent or any
agent of the Servicer, the Company, the Trustee, the Paying Agent or the
Certificate Registrar shall be affected by notice to the contrary.
SECTION 9.06. Access to List of Certificateholders' Names and Addresses.
---------------------------------------------------------
The Certificate Registrar will furnish to the Trustee and the Servicer,
within five days after receipt by the Certificate Registrar of a request
therefor from the Trustee in writing, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Certificateholders as of
the most recent Record Date. If Holders of Certificates evidencing, as to any
Class, Percentage Interests representing 25% or more (hereinafter referred to as
"Applicants") apply in writing to the Trustee, and such application states that
----------
the Applicants desire to communicate with other Certificateholders with respect
to their rights under this Agreement or under the Certificates and is
accompanied by a copy of the communication which such Applicants propose to
transmit, then the Trustee shall, within five Business Days after the receipt of
such application, afford such Applicants access during normal business hours to
the most recent list of Certificateholders held by the Trustee. If such list is
as of a date more than 90 days prior to the date of receipt of such Applicants'
request, the Trustee shall promptly request from the Certificate Registrar a
current list as provided above, and shall afford such Applicants access to such
list promptly upon receipt. Every Certificateholder, by receiving and holding a
Certificate, agrees with the Certificate Registrar and the Trustee that none of
the Company, the Certificate Registrar or the Trustee shall be held accountable
by reason of the disclosure of any such information as to the names and
addresses of the Certificateholders hereunder, regardless of the source from
which such information was derived.
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<PAGE>
SECTION 9.07. Authenticating Agents.
---------------------
The Trustee may appoint one or more Authenticating Agents with power to act
on its behalf and subject to its direction in the execution and delivery of the
Certificates. For all purposes of this Agreement, the execution and delivery of
Certificates by the Authenticating Agent pursuant to this Section shall be
deemed to be the execution and delivery of Certificates "by the Trustee."
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<PAGE>
ARTICLE X
INDEMNITIES
SECTION 10.01. Real Estate.
-----------
The Company will defend and indemnify the Trust, the Trustee (including the
Custodian and any other agents of the Trustee) and the Certificateholders
against any and all costs, expenses, losses, damages, claims and liabilities,
including reasonable fees and expenses of counsel and expenses of litigation
arising out of or resulting from the use or ownership of any real estate related
to a Contract by the Company or the Servicer or any Affiliate of either.
Notwithstanding any other provision of this Agreement, the obligation of the
Company under this Section shall not terminate upon a Service Transfer pursuant
to Article VII, except that the obligation of the Company under this Section
shall not relate to the actions of any subsequent Servicer after a Service
Transfer.
SECTION 10.02. Liabilities to Obligors.
-----------------------
No obligation or liability to any Obligor under any of the Contracts is
intended to be assumed by the Trust or the Certificateholders under or as a
result of this Agreement and the transactions contemplated hereby and, to the
maximum extent permitted and valid under mandatory provisions of law, the Trust
and the Certificateholders expressly disclaim such assumption.
SECTION 10.03. Tax Indemnification.
-------------------
The Company agrees to pay, and to indemnify, defend and hold harmless the
Trust, the Trustee (including the Custodian and any other agents of the Trustee)
and the Certificateholders from, any taxes which may at any time be asserted
with respect to, and as of the date of, the transfer of the Contracts to the
Trust, including, without limitation, any sales, gross receipts, general
corporation, personal property, privilege or license taxes (but not including
any federal, state or other taxes arising out of the creation of the Trust and
the issuance of the Certificates) and costs, expenses and reasonable counsel
fees in defending against the same, whether arising by reason of the acts to be
performed by the Company, the Servicer or the Trustee under this Agreement or
imposed against the Trust, a Certificateholder or otherwise.
SECTION 10.04. Servicer's Indemnities.
----------------------
The Servicer shall defend and indemnify the Trust, the Trustee (including
the Custodian and any other agents of the Trustee) and the Certificateholders
against any and all costs, expenses, losses, damages, claims and liabilities in
respect of any action taken or omitted to be taken by the Servicer with respect
to any Contract. This indemnity shall survive any Service Transfer (but the
original Servicer's obligations under this Section 10.04 shall not relate to any
actions of any subsequent Servicer after a Service Transfer) and any payment of
the amount owing under, or any repurchase by the Company of, any such Contract.
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<PAGE>
SECTION 10.05. Operation of Indemnities.
------------------------
Indemnification under this Article shall include, without limitation,
reasonable fees and expenses of counsel and expenses of litigation. If the
Company or the Servicer has made any indemnity payments to the Trustee pursuant
to this Article and the Trustee thereafter collects any of such amounts from
others, the Trust will repay such amounts collected to the Company or the
Servicer, as the case may be, without interest.
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<PAGE>
ARTICLE XI
THE TRUSTEE
SECTION 11.01. Duties of Trustee.
-----------------
The Trustee, prior to the occurrence of an Event of Termination and after
the curing of all Events of Termination which may have occurred, undertakes to
perform such duties and only such duties as are specifically set forth in this
Agreement. If an Event of Termination has occurred (which has not been cured),
the Trustee shall exercise such of the rights and powers vested in it by this
Agreement, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform as to form to the requirements of this Agreement.
Subject to Section 11.03, no provision of this Agreement shall be construed
to relieve the Trustee from liability for its own negligent action, its own
negligent failure to act or its own misconduct; provided, however, that:
-------- -------
a. Prior to the occurrence of an Event of Termination, and after the
curing of all such Events of Termination which may have occurred, the duties and
obligations of the Trustee shall be determined solely by the express provisions
of this Agreement, the Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this Agreement, no
implied covenants or obligations shall be read into this Agreement against the
Trustee and, in the absence of bad faith on the part of the Trustee, the Trustee
may conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or opinions furnished to
the Trustee and conforming to the requirements of this Agreement;
b. The Trustee shall not be liable for an error of judgment made in good
faith by a Responsible Officer of the Trustee, unless it shall be proved that
the Trustee was negligent in ascertaining the pertinent facts;
c. The Trustee shall not be personally liable with respect to any action
taken, suffered or omitted to be taken by it in good faith in accordance with
the direction of the Certificateholders with aggregate Percentage Interests
representing 25% or more of the Trust relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred upon the Trustee, under this Agreement; and
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<PAGE>
d. The Trustee shall not be charged with knowledge of any event referred
to in Section 7.01 unless a Responsible Officer of the Trustee at the Corporate
Trust Office obtains actual knowledge of such event or the Trustee receives
written notice of such event from the Servicer or the Certificateholders with
aggregate Percentage Interests representing 25% or more of the Trust.
None of the provisions contained in this Agreement shall in any event
require the Trustee to perform, or be responsible for the manner of performance
of, any of the obligations of the Company or the Servicer under this Agreement,
except during such time, if any, as the Trustee shall be the successor to, and
be vested with the rights, duties, powers and privileges of, the Servicer in
accordance with the terms of this Agreement. The Trustee shall not be required
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if there is reasonable ground for believing that the repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
SECTION 11.02. Certain Matters Affecting the Trustee.
-------------------------------------
Except as otherwise provided in Section 11.01:
a. The Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, Officer's Certificate, certificate of a
Servicing Officer, certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, request, consent, order, appraisal, bond or
other paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
b. The Trustee may consult with counsel and any opinion of any counsel
for the Company or the Servicer shall be full and complete authorization and
protection in respect of any action taken or suffered or omitted by the Trustee
hereunder in good faith and in accordance with such Opinion of Counsel;
c. The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Agreement, or to institute, conduct or defend any
litigation hereunder or in relation hereto, at the request, order or direction
of any of the Certificateholders, pursuant to the provisions of this Agreement,
unless such Certificateholders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which may be
incurred therein or thereby; provided, however, that nothing contained herein
-------- -------
shall relieve the Trustee of the obligations, upon the occurrence of an Event of
Termination (which has not been cured), to exercise such of the rights and
powers vested in it by this Agreement, and to use the same degree of care and
skill in their exercise as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs;
d. Prior to the occurrence of an Event of Termination and after the
curing of all Events of Termination which may have occurred, the Trustee shall
not be bound to make any investigation into the facts or matters stated in any
resolution,
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certificate, statement, instrument, opinion, report, notice, request, consent,
order, approval, bond or other paper or document, unless requested in writing
so to do by Certificateholders with aggregate Percentage Interests
representing 25% or more of the Trust; provided, however, that if the payment
-------- -------
within a reasonable time to the Trustee of the costs, expenses or liabilities
likely to be incurred by it in the making of such investigation is, in the
opinion of the Trustee, not reasonably assured to the Trustee by the security
afforded to it by the terms of this Agreement, the Trustee may require
reasonable indemnity against such cost, expense or liability as a condition to
so proceeding. The reasonable expense of every such examination shall be paid
by the Servicer or, if paid by the Trustee, shall be reimbursed by the
Servicer upon demand; and
e. The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys or a custodian and shall not be liable for any acts or omissions of
such agents, attorneys or custodians if appointed by it with due care hereunder.
SECTION 11.03. Trustee Not Liable for Certificates or Contracts.
------------------------------------------------
The Trustee assumes no responsibility for the correctness of the recitals
contained herein or in the Certificates (other than the Trustee's execution
thereof). The Trustee makes no representations as to the validity or
sufficiency of this Agreement or of the Certificates (other than its execution
thereof) or of any Contract, Contract File or related document. The Trustee
shall not be accountable for the use or application by the Servicer or the
Company of funds paid to the Company in consideration of conveyance of the
Contracts to the Trust by the Company or deposited in or withdrawn from the
Certificate Account by the Servicer.
SECTION 11.04. Trustee May Own Certificates.
----------------------------
The Trustee in its individual or other capacity may become the owner or
pledgee of Certificates representing less than all the beneficial interest in
the Trust with the same rights as it would have if it were not Trustee.
SECTION 11.05. Rights of Certificateholders to Direct Trustee and to Waive
-----------------------------------------------------------
Events of Termination.
- - ---------------------
Certificateholders with aggregate Percentage Interests representing 25% or
more of the Trust shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee; provided, however, that, subject to
-------- -------
Section 11.01, the Trustee shall have the right to decline to follow any such
direction if the Trustee being advised by counsel determines that the action so
directed may not lawfully be taken, or if the Trustee in good faith shall, by a
Responsible Officer or Officers of the Trustee, determine that the proceedings
so directed would be illegal or involve it in personal liability or be unduly
prejudicial to the rights of Certificateholders not parties to such direction;
and provided further that nothing in
-------- -------
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<PAGE>
this Agreement shall impair the right of the Trustee to take any action deemed
proper by the Trustee and which is not inconsistent with such direction by the
Certificateholders. Certificateholders with aggregate Percentage Interests
representing 51% or more of the Trust may on behalf of Certificateholders
waive any past Event of Termination hereunder and its consequences, except a
default in respect of a covenant or provision hereof which under Section 12.08
cannot be modified or amended without the consent of all Certificateholders,
and upon any such waiver, such Event of Termination shall cease to exist and
shall be deemed to have been cured for every purpose of this Agreement; but no
such waiver shall extend to any subsequent or other Event of Termination or
impair any right consequent thereon.
SECTION 11.06. The Servicer to Pay Trustee's Fees and Expenses.
-----------------------------------------------
The Servicer agrees:
a. to pay to the Trustee reasonable compensation for all services
rendered by it hereunder (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust);
b. except as otherwise expressly provided herein, to reimburse the
Trustee, to the extent requested by the Trustee, for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Agreement (including the reasonable
compensation and the expenses and disbursements of its agents and counsel),
except any such expense, disbursement or advance as may be attributable to
its negligence or bad faith; and
c. to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration
of this trust and its duties hereunder, including the costs and expenses of
defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder.
The covenants in this Section 11.06 shall be for the benefit of the Trustee
in its capacities as Trustee, Paying Agent and Certificate Registrar hereunder,
and shall survive the termination of this Agreement.
SECTION 11.07. Eligibility Requirements for Trustee.
------------------------------------
The Trustee hereunder shall at all times be a financial institution
organized and doing business under the laws of the United States of America or
any State, authorized under such laws to exercise corporate trust powers, whose
long-term debt (or, in the case of First Trust National Association, its parent
company) is rated BBB or higher by Standard & Poor's, and shall have a combined
capital and surplus of at least $50,000,000 or shall be a member of a bank
holding system the aggregate
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combined capital and surplus of which is $50,000,000, provided that the
--------
Trustee's separate capital and surplus shall at all times be at least the
amount required by Section 310(a)(2) of the Trust Indenture Act of 1939, as
amended. If such Person publishes reports of condition at least annually,
pursuant to law or to the requirements of a supervising or examining
authority, then for the purposes of this Section 11.07, the combined capital
and surplus of such Person shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 11.07, the Trustee shall resign immediately in the
manner and with the effect specified in Section 11.08.
SECTION 11.08. Resignation or Removal of Trustee.
---------------------------------
The Trustee may at any time resign and be discharged from the trusts hereby
created by giving written notice thereof to the Servicer and the Company. Upon
receiving such notice of resignation, the Company shall promptly appoint a
successor Trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to each of the Servicer and the Company and one
copy to the successor Trustee. If no successor Trustee shall have been so
appointed and shall have accepted appointment within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
If at any time the Trustee shall cease to be eligible in accordance with
the provisions of Section 11.07 and shall fail to resign after written request
therefor by the Company, or if at any time the Trustee shall be legally unable
to act, or shall be adjudged a bankrupt or insolvent, or a receiver of the
Trustee or of its property shall be appointed, or any public officer shall take
charge or control of the Trustee or of its property or affairs for the purpose
of rehabilitation, conservation or liquidation, then the Company may remove the
Trustee. If the Company shall have removed the Trustee under the authority of
the immediately preceding sentence, the Company shall promptly appoint a
successor Trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the Trustee so removed and one copy to the
successor trustee.
Any resignation or removal of the Trustee and appointment of a successor
Trustee pursuant to any of the provisions of this Section 11.08 shall not become
effective until acceptance of appointment by the successor Trustee as provided
in Section 11.09.
SECTION 11.09. Successor Trustee.
-----------------
Any successor Trustee appointed as provided in Section 11.08 shall execute,
acknowledge and deliver to the Servicer, the Company and to its predecessor
Trustee an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the predecessor Trustee shall become effective and
such successor trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor
11-5
<PAGE>
hereunder, with like effect as if originally named as Trustee. The
predecessor Trustee shall deliver or cause to be delivered to the successor
Trustee the Contracts and the Contract Files and any related documents and
statements held by it hereunder; and, if the Contracts are then held by a
custodian pursuant to a custodial agreement, the predecessor Trustee and the
custodian shall amend such custodial agreement to make the successor Trustee the
successor to the predecessor Trustee thereunder; and the Servicer, the Company
and the predecessor Trustee shall execute and deliver such instruments and do
such other things as may reasonably be required for fully and certainly vesting
and confirming in the successor Trustee all such rights, powers, duties and
obligations.
No successor Trustee shall accept appointment as provided in this Section
11.09 unless at the time of such acceptance such successor Trustee shall be
eligible under the provisions of Section 11.07.
Upon acceptance of appointment by a successor Trustee as provided in this
Section 11.09, the Servicer shall cause notice of the succession of such Trustee
hereunder to be mailed to Standard & Poor's and to each Certificateholder at
their addresses as shown in the Certificate Register. If the Servicer fails to
mail such notice within ten days after acceptance of appointment by the
successor Trustee, the successor Trustee shall cause such notice to be mailed at
the expense of the Servicer.
SECTION 11.10. Merger or Consolidation of Trustee.
----------------------------------
Any Person into which the Trustee may be merged or converted or with which
it may be consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding to
the corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such Person shall be eligible under the provisions
of Section 11.07, without the execution or filing of any paper or any further
act on the part of any of the parties hereto, anything herein to the contrary
notwithstanding. The Trustee shall promptly notify Standard & Poor's in the
event it is a party to any merger, conversion or consolidation.
SECTION 11.11. Tax Returns.
-----------
Upon the Servicer's request, the Trustee will furnish the Servicer with all
such information as the Servicer may reasonably require in connection with
preparing all tax returns of the Trust and the Trustee shall execute such
returns.
SECTION 11.12. Obligor Claims.
--------------
In connection with any offset defenses, or affirmative claims for recovery,
asserted in legal actions brought by Obligors under one or more Contracts based
upon provisions therein complying with, or upon other rights or remedies arising
from, any legal requirements applicable to the Contracts, including, without
limitation, the Federal Trade Commission's Trade Regulation Rule Concerning
11-6
<PAGE>
Preservation of Consumers' Claims and Defenses (16 C.F.R. (S) 433) as amended
from time to time:
a. The Trustee is not, and shall not be deemed to be, either in any
individual capacity, as trustee hereunder or otherwise, a creditor, or a
joint venturer with or an Affiliate of, or acting in concert or cooperation
with, any seller of home improvements, in the arrangement, origination or
making of Contracts. The Trustee is the holder of the Contracts only as
trustee on behalf of the Certificateholders, and not as a principal or in
any individual or personal capacity;
b. The Trustee shall not be personally liable for or obligated to pay
Obligors any affirmative claims asserted thereby, or responsible to
Certificateholders for any offset defense amounts applied against Contract
payments, pursuant to such legal actions;
c. The Trustee will pay, solely from available Trust monies,
affirmative claims for recovery by Obligors only pursuant to final judicial
orders or judgments, or judicially approved settlement agreements,
resulting from such legal actions;
d. The Trustee will comply with judicial orders and judgments which
require its actions or cooperation in connection with Obligors' legal
actions to recover affirmative claims against Certificateholders;
e. The Trustee will cooperate with and assist Certificateholders in
their defense of legal actions by Obligors to recover affirmative claims if
such cooperation and assistance is not contrary to the interests of the
Trustee as a party to such legal actions and if the Trustee is
satisfactorily indemnified for all liability, costs and expenses arising
therefrom; and
f. The Company hereby agrees to indemnify, hold harmless and defend
the Trustee and Certificateholders from and against any and all liability,
loss, costs and expenses of the Trustee and Certificateholders resulting
from any affirmative claims for recovery asserted or collected by Obligors
under the Contracts. Notwithstanding any other provision of this
Agreement, the obligation of the Company under this Section 11.12(f) shall
not terminate upon a Service Transfer pursuant to Article VII.
SECTION 11.13. Appointment of Co-Trustee or Separate Trustee.
---------------------------------------------
Notwithstanding any other provisions hereof, at any time, for the purpose
of meeting any legal requirements of any jurisdiction having authority over the
Trust, the Contracts or the Obligors, the Company and Trustee acting jointly
shall have the power and shall execute and deliver all instruments to appoint
one or more Persons approved by the Trustee to act as co-trustee or co-trustees,
jointly with the Trustee, or separate trustee or separate trustees, of all or
any part of the Trust, and to vest in such Person or Persons, in such capacity,
such title to the Trust, or any part thereof,
11-7
<PAGE>
and, subject to the other provisions of this Section 11.13, such powers,
duties, obligations, rights and trusts as the Company and the Trustee may
consider necessary or desirable. If the Company shall not have joined in such
appointment within 15 days after the receipt by it of a request to do so, or
in case an Event of Termination shall have occurred and be continuing, the
Trustee alone shall have the power to make such appointment. No co-trustee or
separate trustee hereunder shall be required to meet the terms of eligibility
as a successor trustee under Section 11.07 hereunder and no notice to
Certificateholders of the appointment of co-trustee(s) or separate trustee(s)
shall be required under Section 11.09 hereof.
In the case of any appointment of a co-trustee or separate trustee pursuant
to this Section 11.13 all rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and exercised or
performed by the Trustee and such co-trustee or separate trustee jointly, except
to the extent that under any law of any jurisdiction in which any particular act
or acts are to be performed (whether as Trustee hereunder or as successor to the
Servicer hereunder), the Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such rights, powers, duties and obligations
(including the holding of title to the Trust or any portion thereof in any such
jurisdiction) shall be exercised and performed by such co-trustee or separate
trustee at the direction of the Trustee.
Any notice, request or other writing given to the Trustee shall be deemed
to have been given to each of the then co-trustees and separate trustees, as
effectively as if given to each of them. Every instrument appointing any co-
trustee or separate trustee shall refer to this Agreement and the conditions of
this Article XI. Each co-trustee and separate trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee.
Any co-trustee or separate trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any co-trustee or separate trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
SECTION 11.14. Trustee and First Bank System, Inc.
----------------------------------
In the event the Trustee ceases to be a direct, wholly owned subsidiary of
First Bank System, Inc., the Trustee shall promptly notify Standard & Poor's.
11-8
<PAGE>
SECTION 11.15 Trustee Advances.
----------------
a. If the Servicer fails to deposit into the Certificate Account Advances
as required by Section 8.02, then the Trustee shall, subject to the provisions
of paragraph (b) below, from its own funds, deposit into the Certificate Account
the amount not so deposited by the Servicer on or before the Business Day
preceding the related Payment Date (a "Trustee Advance").
---------------
b. The Trustee shall not be required to make any Trustee Advance (i) if
and to the extent that it determines in good faith that the funds, if advanced,
would not be recoverable by it from subsequent collections, including Net
Liquidation Proceeds, or (ii) if the Trustee is prohibited by law from making
any such Trustee Advance, as evidenced by an Opinion of Counsel.
c. The Trustee shall be entitled to reimbursement of a Trustee Advance
from subsequent collections on the related Contract, including Net Liquidation
Proceeds, in accordance with Section 8.04(b). If the Trustee determines in good
faith that any Trustee Advance has become an Uncollectible Advance, the Trustee
will be entitled to reimbursement of such Uncollectible Advance from the
Collected Amount.
11-9
<PAGE>
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. Servicer Not to Resign.
----------------------
The Servicer shall not resign from the obligations and duties hereby
imposed on it except upon determination that the performance of its duties
hereunder is no longer permissible under applicable law. Any such determination
permitting the resignation of the Servicer shall be evidenced by an Opinion of
Counsel for the Servicer to such effect delivered to the Trustee. No such
resignation shall become effective until the Trustee or a successor servicer
shall have assumed the responsibilities and obligations of the Servicer in
accordance with Section 7.03.
SECTION 12.02. Company Not to Engage in Certain Transactions with Respect
----------------------------------------------------------
to the Trust.
- - ------------
The Company shall not:
a. Provide credit to any Certificateholder for the purpose of
enabling such Certificateholder to purchase Certificates;
b. Purchase any Certificates in an agency or trustee capacity; or
c. Loan any money to the Trust.
SECTION 12.03. Maintenance of Office or Agency.
-------------------------------
The Trustee will maintain in Minneapolis or St. Paul, Minnesota, an office
or agency where Certificates may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Trustee in respect of the
Certificates and this Agreement may be served. On the date hereof the Trustee's
office for such purposes is located at 180 East 5th Street, Third Floor, St.
Paul, Minnesota 55101. The Trustee will give prompt written notice to
Certificateholders of any change in the location of the Certificate Register or
any such office or agency.
SECTION 12.04. Termination.
-----------
a. This Agreement shall terminate (after distribution of all Monthly
Principal and Monthly Interest due to Certificateholders pursuant to Sections
8.01 and 8.04) on the earlier of (a) the Payment Date on which the Principal
Balance is reduced to zero; or (b) the Payment Date on which the Servicer
repurchases the Contracts pursuant to Section 8.08; provided, that in no event
--------
shall the trust created hereby continue beyond the expiration of 21 years from
the death of the last survivor of the descendants of Joseph P. Kennedy, the late
Ambassador of the United States to the Court of St. James, living on the date
hereof, and provided, further, that the Servicer's and the Company's
-------- -------
representations and warranties and indemnities by the Company and the Servicer
shall survive termination.
12-1
<PAGE>
b. Notice of any termination, specifying the Final Payment Date (which
shall be a date that would otherwise be a Payment Date) upon which all
Certificateholders may surrender their Certificates to the Servicer for payment
of the final distribution and cancellation, shall be given promptly by the
Trustee (upon direction by the Servicer ten days prior to the date such notice
is to be mailed) by letter to Standard & Poor's and to Certificateholders mailed
no later than the fifth Business Day of the month of the Final Payment Date
specifying (1) the Final Payment Date upon which final payment on the
Certificates will be made upon presentation and surrender of Certificates at the
office or agency of the Servicer therein designated; (2) the amount of any such
final payment; and (3) that the Record Date otherwise applicable to such Payment
Date is not applicable, payments being made only upon presentation and surrender
of the Certificates at the office or agency of the Servicer therein specified.
The Trustee shall give such notice to the Certificate Registrar at the time such
notice is given to the Certificateholders. In the event such notice is given in
connection with the Servicer's election to purchase the Contracts, the Servicer
shall deposit in the Certificate Account on the Final Payment Date in
immediately available funds an amount equal to the above-described purchase
price and upon such deposit Certificateholders will be entitled to the amount of
such purchase price but not amounts in excess thereof, all as provided herein.
Upon certification to the Trustee by a Servicing Officer, following such final
deposit the Trustee shall promptly release to the Servicer the Contract Files
for the remaining Contracts, and the Trustee shall execute all assignments,
endorsements and other instruments necessary to effectuate such transfer.
c. Upon presentation and surrender of the Certificates, the Trustee shall
cause to be distributed to Certificateholders on the Final Payment Date in
proportion to their respective Percentage Interests, to the extent of Amount
Available, an amount equal to Monthly Interest and Monthly Principal. The
distribution on the Final Payment Date pursuant to this Section 12.04 shall be
in lieu of the distribution otherwise required to be made on such Payment Date
in respect of the Certificates.
d. In the event that all of the Certificateholders do not surrender their
Certificates for cancellation within three months after the time specified in
the above-mentioned written notice, the Company shall give a second written
notice to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
three months after the second notice all the Certificates shall not have been
surrendered for cancellation, the Company shall transfer to itself all amounts
remaining on deposit in the Certificate Account, to hold in trust for
Certificateholders who have not surrendered their Certificates for cancellation,
together with the final record list of Certificateholders, and the Company shall
take appropriate steps, or may appoint an agent to take appropriate steps, to
contact the remaining Certificateholders concerning surrender of their
Certificates, and the cost thereof shall be paid out of the funds and other
assets which remain in trust hereunder.
12-2
<PAGE>
SECTION 12.05. Acts of Certificateholders.
--------------------------
a. Except as otherwise specifically provided herein, whenever
Certificateholder approval, authorization, direction, notice, consent, waiver,
or other action is required hereunder, such approval, authorization, direction,
notice, consent, waiver or other action shall be deemed to have been given or
taken on behalf of, and shall be binding upon, all Certificateholders if agreed
to by Certificateholders with aggregate Percentage Interests representing 51% or
more of the Trust.
b. Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Agreement to be given or taken by
Certificateholders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Certificateholders in person or by
agent duly appointed in writing; and except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Trustee and, where required, to the Servicer. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Agreement and (subject to Section 11.01)
conclusive in favor of the Trustee, the Servicer and the Company if made in the
manner provided in this Section.
c. The fact and date of the execution by any Certificateholder of any
such instrument or writing may be proved in any reasonable manner which the
Trustee deems sufficient.
d. The ownership of Certificates shall be proved by the Certificate
Register.
e. Any request, demand, authorization, direction, notice, consent, waiver
or other act by a Certificateholder shall bind every holder of every Certificate
issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof, in respect of anything done, or omitted to be done by the Trustee,
the Servicer or the Company in reliance thereon, whether or not notation of such
action is made upon such Certificates.
f. The Trustee may require such additional proof of any matter referred
to in this Section as it shall deem necessary.
SECTION 12.06. Calculations.
------------
Except as otherwise provided in this Agreement, all interest rate and basis
point calculations under this Agreement will be made on the basis of a 360-day
year and twelve 30-day months and will be carried out to at least three decimal
places.
12-3
<PAGE>
SECTION 12.07. Assignment or Delegation by Company.
-----------------------------------
Except as specifically authorized hereunder, and except for its obligations
as Servicer which are dealt with under Article V and Article VII, the Company
may not convey and assign or delegate any of its rights or obligations hereunder
absent the prior written consent of Certificateholders with aggregate Percentage
Interests representing 66-2/3% or more of the Trust, and any attempt to do so
without such consent shall be void.
SECTION 12.08. Amendment.
---------
a. This Agreement may be amended from time to time by the Company, the
Servicer and the Trustee, without the consent of any of the Certificateholders
to correct manifest error, to cure any ambiguity, to correct or supplement any
provisions herein or therein which may be inconsistent with any other provisions
herein or therein, as the case may be; provided, however, that such action shall
-------- -------
not, as evidenced by an Opinion of Counsel for the Company, adversely affect in
any material respect the interests of any Certificateholder.
b. This Agreement may also be amended from time to time by the Servicer,
the Company and the Trustee, with the consent of Certificateholders with
aggregate Percentage Interests representing 66-2/3% or more of the Trust, for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Agreement or of modifying in any manner the rights
of the Certificateholders and any Event of Termination may be waived by
Certificateholders with aggregate Percentage Interests representing 100% of the
Trust; provided, however, that no such amendment or waiver shall (a) reduce in
-------- -------
any manner the amount of, or delay the timing of, collections of payments on the
Contracts or distributions which are required to be made on any Certificate, or
(b) reduce the aforesaid percentage required to consent to any such amendment,
without the consent of the holders of all Certificates then outstanding or (c)
cause any tax to be imposed on the Trust.
c. This Agreement shall not be amended under this Section without the
consent of 100% of Certificateholders if such amendment would result in the
disqualification of the Trust as a Grantor Trust under the Code.
d. Concurrently with the solicitation of any consent pursuant to this
Section 12.08, the Trustee shall furnish written notification to Standard &
Poor's of such solicitation. Promptly after the execution of any amendment or
consent pursuant to this Section 12.08, the Trustee shall furnish written
notification of the substance of such amendment to Standard & Poor's and each
Certificateholder.
e. It shall not be necessary for the consent of Certificateholders under
this Section 12.08 to approve the particular form of any proposed amendment, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution
12-4
<PAGE>
thereof by Certificateholders shall be subject to such reasonable requirements
as the Trustee may prescribe.
f. The Trustee may, but shall not be obligated to, enter into any such
amendment which affects the Trustee's own rights, duties or immunities under
this Agreement or otherwise.
g. In connection with any amendment pursuant to this Section, the Trustee
shall be entitled to receive an Opinion of Counsel to the Servicer to the effect
that such amendment is authorized or permitted by the Agreement.
h. Upon the execution of any amendment or consent pursuant to this
Section 12.08, this Agreement shall be modified in accordance therewith, and
such amendment or consent shall form a part of this Agreement for all purposes,
and every Certificateholder hereunder shall be bound thereby.
i. In the absence of the consent described in subsection (c) of this
Section, in connection with any amendment pursuant to this Section, the Trustee
shall have received an unqualified Opinion of Counsel, the expense of which
shall not be an expense of the Trust, stating that any such amendment will not
adversely affect the status of the Trust as a Grantor Trust.
SECTION 12.09. Notices.
-------
All communications and notices pursuant hereto to the Servicer, the
Company, and the Trustee shall be in writing and delivered or mailed to it at
the appropriate following address:
If to the Company or the Servicer:
Green Tree Financial Corporation
1100 Landmark Towers
345 St. Peter Street
St. Paul, Minnesota 55102-1639
Attention: Chief Financial Officer
Telecopier Number: (612) 293-5746
If to the Trustee:
First Trust National Association
Corporate Trust Department
180 East 5th Street,
Second Floor
St. Paul, Minnesota 55101
Attention: Kathi Barth
Telecopier Number: (612) 244-0089
12-5
<PAGE>
If to Standard & Poor's:
Standard & Poor's Rating's Group
25 Broadway
New York, NY 10004
Attention: Mortgage Surveillance Department
Telecopier Number: (212) 208-1582
or at such other address as the party may designate by notice to the other
parties hereto, which notice shall be effective when received.
All communications and notices pursuant hereto to a Certificateholder shall
be in writing and delivered or mailed at the address shown in the Certificate
Register.
SECTION 12.10. Merger and Integration.
----------------------
Except as specifically stated otherwise herein, this Agreement sets forth
the entire understanding of the parties relating to the subject matter hereof,
and all prior understandings, written or oral, are superseded by this Agreement.
This Agreement may not be modified, amended, waived or supplemented except as
provided herein.
SECTION 12.11. Headings.
--------
The headings herein are for purposes of reference only and shall not
otherwise affect the meaning or interpretation of any provision hereof.
SECTION 12.12. Governing Law.
-------------
This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Minnesota.
12-6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized this 30th day of
June, 1994.
GREEN TREE FINANCIAL CORPORATION
By /s/ John W. Brink
-----------------------------------------
Attest: John W. Brink
Executive Vice President, Treasurer
and Chief Financial Officer
/s/ Richard G. Evans
- - ------------------------------
Richard G. Evans
Secretary
FIRST TRUST NATIONAL ASSOCIATION,
not in its individual capacity
but solely as Trustee
By /s/ Kathi Barth
------------------------------------------
Its Trust Officer
Attest:
By /s/ Christina Hatfield
-----------------------------
Its Assistant Vice President
12-7
<PAGE>
STATE OF MINNESOTA )
)ss.
COUNTY OF )
The foregoing instrument was acknowledged before me this 30th day
----
of June, 1994, by John W. Brink, of Green Tree Financial Corporation, a
-------------
Minnesota corporation, on behalf of the corporation.
Wanda J. Lamb-Lindow
/s/ Wanda Lamb Lindow [Seal] Notary Public - Minnesota
- - -----------------------------
Notary Public Goodhue County
My Comm. Expires Nov. 11, 1998
STATE OF MINNESOTA )
)ss.
COUNTY OF )
The foregoing instrument was acknowledged before me this 30th day of
----
June, 1994, by Tina Hatfield and Kathi Barth, of First Trust National
- - ---- ------------- -----------
Association, a Natl Bk Asoc corporation, on behalf of the First Trust National
------------
Association.
Tammy Brusehaver-Derby
/s/ Tammy Brusehaver-Derby [Seal] Notary Public - Minnesota
- - -----------------------------
Notary Public Dakota County
My Commission expires May 18, 1999
12-8
<PAGE>
EXHIBIT A
------- -
Final Scheduled Payment Date
June 15, 2014
FORM OF CERTIFICATE
-------------------
[Unless this Certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC") to the Trustee or
its agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL in as much as the registered owner
hereof, Cede & Co., has an interest herein.]
CERTIFICATE FOR HOME IMPROVEMENT LOANS
SERIES 1994-BII
Home Improvement Loan Trust 1994-BII
Initial Principal Amount of the Trust: $15,180,840.
---
% Pass-Through Rate
----
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN
GREEN TREE FINANCIAL CORPORATION OR ANY AFFILIATE THEREOF, EXCEPT TO THE EXTENT
SET FORTH IN THE AGREEMENT.
THE PRINCIPAL REPRESENTED BY THIS CERTIFICATE IS PAYABLE IN INSTALLMENTS,
AS DESCRIBED HEREIN AND IN THE AGREEMENT. ACCORDINGLY, THE UNPAID PRINCIPAL
AMOUNT OF THE TRUST MAY BE LESS THAN THAT SET FORTH ABOVE. ANYONE ACQUIRING
THIS CERTIFICATE MAY ASCERTAIN THE CURRENT UNPAID PRINCIPAL AMOUNT REPRESENTED
BY THIS CERTIFICATE BY INQUIRY OF THE TRUSTEE.
No. $
----- -------
This certifies that is the registered owner of the
----------------------
undivided Percentage Interest represented by the original principal amount set
forth above in Home Improvement Loan Trust 1994-BII (the "Trust"), which
includes among its assets a pool of home improvement installment sales
contracts and promissory notes (and any and all rights to receive payments
which are due pursuant thereto on or after June 1, 1994) and the Limited
Guaranty. The Trust has been created pursuant to a Pooling and Servicing
Agreement (the "Agreement"), dated as of June 1, 1994, between Green Tree
Financial Corporation, as Seller and
A-1
<PAGE>
Servicer (the "Company"), and First Trust National Association, as Trustee of
the Trust (the "Trustee"). This Certificate is one of the Certificates
described in the Agreement and is issued pursuant and subject to the
Agreement. By acceptance of this Certificate the holder assents to and becomes
bound by the Agreement. To the extent not defined herein, all capitalized
terms have the meanings assigned to such terms in the Agreement.
The Agreement contemplates, subject to its terms, payment on the fifteenth
day (or if such day is not a Business Day, the next succeeding Business Day)
(the "Payment Date") of each calendar month commencing July 15, 1994, so long as
the Agreement has not been terminated, by check (or, if such Certificateholder
holds Certificates with an aggregate Percentage Interest of at least 5% and so
desires, by wire transfer pursuant to instructions delivered to the Trustee at
least 10 days prior to such Payment Date) from funds drawn from the Certificate
Account to the registered Certificateholder at the address appearing on the
Certificate Register as of the Business Day immediately preceding such Payment
Date, an amount equal to the Certificateholder's Percentage Interest of Monthly
Principal and Monthly Interest. The final scheduled Payment Date of this
Certificate is 15, or the next succeeding Business Day if
--------- ----
such July 15 is not a Business Day.
The Certificateholder, by its acceptance of this Certificate, agrees that
it will look solely to the funds in the Certificate Account and the Limited
Guaranty of the Company, to the extent available for distribution to the
Certificateholder as provided in the Agreement for payment hereunder and that
the Trustee in its individual capacity is not personally liable to the
Certificateholder for any amounts payable under this Certificate or the
Agreement or, except as expressly provided in the Agreement, subject to any
liability under the Agreement. By acceptance of this Certificate, the
Certificateholder agrees to disclosure of his, her or its name and address to
other Certificateholders under the conditions specified in the Agreement.
No transfer of a Certificate by, on behalf of or with plan assets of any
employee benefit plan, trust or account that is subject to the Employment
Retirement Income Security Act of 1974, as amended ("ERISA"), or that is
described in Section 4975(e)(i) of the Code (each, a "Plan") will be registered
----
unless the transferee, at its expense, delivers to the Trustee, the Servicer and
the Company an opinion of counsel (satisfactory to the Trustee, the Servicer and
the Company) that the purchase and holding of a Certificate by, on behalf of, or
with Plan assets of such Plan is permissible under applicable law, will not
result in the assets of the Trust being deemed to be Plan assets and subject to
the prohibited transaction provisions of ERISA and the Code and will not subject
the Trustee, the Trust, the Company or the Servicer to any obligation or
liability in addition to those undertaken in this Agreement. Unless such
opinion is delivered, each person acquiring this Certificate will be deemed to
represent to the Trustee, the Company and the Servicer that such person is
neither a Plan, nor acting on behalf of a Plan, nor purchasing with Plan assets
of any Plan.
This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for information with respect to the interests, rights,
A-2
<PAGE>
benefits, obligations, proceeds and duties evidenced hereby and the rights,
duties and immunities of the Trustee. Copies of the Agreement and all
amendments thereto will be provided to any Certificateholder free of charge upon
a written request to the Trustee.
As provided in the Agreement and subject to the limitations set forth
therein, the transfer of this Certificate is registrable in the Certificate
Register of the Certificate Registrar upon surrender of this Certificate for
registration of transfer at the office or agency maintained by the Trustee in
Minneapolis or St. Paul, Minnesota, accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Certificate Registrar duly
executed by the holder thereof or his or her attorney duly authorized in
writing, and thereupon one or more new Certificates evidencing the same
aggregate Percentage Interest will be issued to the designated transferee or
transferees.
The Company, the Servicer, the Trustee, the Paying Agent and the
Certificate Registrar and any agent of the Company, the Servicer, the Trustee,
the Paying Agent or the Certificate Registrar may treat the person in whose name
this Certificate is registered as the owner hereof for all purposes, and neither
the Company, the Servicer, the Trustee, the Paying Agent, the Certificate
Registrar nor any such agent shall be affected by any notice to the contrary.
A-3
<PAGE>
IN WITNESS WHEREOF, Home Improvement Loan Trust 1994 BII has caused this
Certificate to be duly executed by the manual signature of a duly authorized
officer of the Trustee.
HOME IMPROVEMENT LOAN TRUST 1994-BII
Dated: By FIRST TRUST NATIONAL ASSOCIATION
By
----------------------------------
Authorized Officer
A-4
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto the within Certificate for Home Improvement
-----------------------------
Loans, Series 1994-BII, Home Improvement Loan Trust 1994-BII, and does hereby
irrevocably constitute and appoint Attorney to
--------------------------
transfer the said certificate on the Certificate Register maintained by the
Trustee, with full power of substitution in the premises.
Dated: By
--------------------------------------------
Signature
A-5
<PAGE>
EXHIBIT B
------- -
FORM OF ASSIGNMENT
In accordance with the Pooling and Servicing Agreement (the "Agreement")
dated as of June 1, 1994, between the undersigned and First Trust National
Association, as Trustee (the "Trustee"), the undersigned does hereby transfer,
convey and assign, set over and otherwise convey, without recourse, to Home
Improvement Loan Trust 1994-BII, created by the Agreement, to be held in trust
as provided in the Agreement, (i) all right, title and interest in the home
improvement contracts and installment notes (including, without limitation, any
and all rights to receive payments which are due pursuant thereto on or after
June 1, 1994 but excluding any rights to receive payments which were due
pursuant thereto prior to June 1, 1994) identified in the List of Contracts
delivered pursuant to Section 2.02(a) of the Agreement, (ii) all rights under
hazard insurance on the properties described in the Contracts and, as to
Contracts pertaining to properties located in special flood areas designated by
HUD, all rights under flood insurance policies as such insurance relates to the
Contracts, (iii) all rights under the Errors and Omissions Protection Policy (as
defined in Section 1.02 of the Agreement), (iv) all documents contained in the
Contract Files (as defined in Section 1.02 of the Agreement), and (v) all
proceeds and products of the foregoing.
This Assignment is made pursuant to and upon the representation and
warranties on the part of the undersigned contained in Article III of the
Agreement and no others.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be duly
executed this day of , 1994.
------- ----------------
GREEN TREE FINANCIAL CORPORATION
[Seal] By
--------------------------------------------
[Name]
[Title]
B-1
<PAGE>
EXHIBIT C
------- -
GREEN TREE FINANCIAL CORPORATION
CERTIFICATE OF OFFICER
The undersigned certifies that he is a [title] of Green Tree Financial
Corporation, a Minnesota corporation (the "Company"), and that as such he is
duly authorized to execute and deliver this certificate on behalf of the Company
in connection with the Pooling and Servicing Agreement dated as of June 1, 1994
(the "Agreement") relating to the Home Improvement Loan Trust 1994-BII between
the Company and First Trust National Association, as Trustee (all capitalized
terms used herein without definition having the respective meanings specified in
the Agreement), and further certifies that:
(i) attached hereto as Exhibit I is a true and correct copy of the
Articles of Incorporation of the Company, together with all amendments
thereto as in effect on the date hereof;
(ii) attached hereto as Exhibit II is a true and correct copy of the
Bylaws of the Company, as amended, as in effect on the date hereof;
(iii) the representations and warranties of the Company contained in
Sections 3.01 and 3.04 of the Agreement are true and correct on and as of
the date hereof and, to the best of his knowledge, the representations and
warranties of the Company contained in Sections 3.02 and 3.03 of the
Agreement are true and correct on and as of the date hereof;
(iv) no event with respect to the Company has occurred and is
continuing which would constitute an Event of Termination or an event that
with notice or lapse of time or both would become an Event of Termination
under the Agreement; and
(v) each of the agreements and conditions of the Company to be
performed on or before the date hereof pursuant to the Agreement have been
performed in all material respects.
IN WITNESS WHEREOF, I have affixed hereunto my signature this day of
, 1994. -----
- - -----------------
-------------------------------------------
[Name]
[Title]
C-1
<PAGE>
EXHIBIT D
------- -
FORM OF OPINION OF COUNSEL FOR THE COMPANY
The opinion of Dorsey & Whitney shall be to the effect that (capitalized
terms have the meanings set forth in the Pooling and Servicing Agreement):
1. Green Tree is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Minnesota, with corporate power to
execute, deliver and perform its obligations under the Pooling and Servicing
Agreement, the Underwriting Agreement and the Certificates. Green Tree is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which the performance of its duties under the Pooling and
Servicing Agreement, the Underwriting Agreement and the Certificates would
require such qualification.
2. The Pooling and Servicing Agreement and the Underwriting Agreement
have been duly authorized by all requisite corporate action, duly executed and
delivered by Green Tree, and constitute the valid and binding obligations of
Green Tree enforceable in accordance with their terms. The Certificates have
been duly authorized by all requisite corporate action and, when duly and
validly executed by the Trustee 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. Lehman Brothers Inc. is now the
registered owner of the Certificates and, assuming that Lehman Brothers Inc.
purchased the Certificates for value in good faith and without notice of any
adverse claim, Lehman Brothers Inc. has acquired all the rights of Green Tree in
the Certificates free of any adverse claim.
3. No consent, approval, authorization or order of any state or federal
court or governmental agency or body is required to be obtained by Green Tree
for the consummation of the transactions contemplated by the Pooling and
Servicing Agreement and the Underwriting Agreement except such as may be
required under blue sky laws under any jurisdiction in connection with the
offering of the Certificates by Lehman Brothers Inc. pursuant to the
Underwriting Agreement.
4. The Pooling and Servicing Agreement is not required to be qualified
under the Trust Indenture Act of 1939, as now in effect, and the Trust is not
required to be registered as an investment company under the Investment Company
Act of 1940.
5. Neither the transfer of the Contracts to the Trustee, nor the issuance
or sale of the Certificates, nor the execution and delivery of the Pooling and
Servicing Agreement or the Underwriting Agreement, nor the consummation of any
other of the transactions
D-1
<PAGE>
contemplated in the Pooling and Servicing Agreement or the Underwriting
Agreement, or the consummation of any other of the transactions contemplated
in the Pooling and Servicing Agreement or the Underwriting Agreement, nor the
fulfillment of the terms of the Certificates, the Pooling and Servicing
Agreement or the Underwriting Agreement by Green Tree will conflict with, or
result in a breach, violation or acceleration of, or constitute a default
under, any term or provision of the Restated Articles of Incorporation or
Bylaws of Green Tree or of any indenture or other agreement or instrument
known to us to which Green Tree is a party or by which it is bound, or result
in a violation of, or contravene the terms of any statute, order or
regulation, applicable to Green Tree, of any court, regulatory body,
administrative agency or governmental body having jurisdiction over it.
6. There are no actions or proceedings pending or, to the best of our
knowledge, actions, proceedings or investigations pending or overtly threatened
against Green Tree before any court, administrative agency or other tribunal (A)
asserting the invalidity of the Underwriting Agreement, the Pooling and
Servicing Agreement, the Certificates, the hazard or flood insurance policies
applicable to any Contracts or the Errors and Omissions Protection Policy, (B)
seeking to prevent the issuance of the Certificates or the consummation of any
of the transactions contemplated by the Underwriting Agreement or the Pooling
and Servicing Agreement, (C) which is likely materially and adversely to affect
the performance by Green Tree of its obligations under, or the validity or
enforceability of, the Underwriting Agreement, the Pooling and Servicing
Agreement or the Certificates or (D) seeking adversely to affect the federal
income tax attributes of the Certificates described in the Prospectus and the
Prospectus Supplement under the heading "Certain Federal Income Tax
Consequences."
7. Green Tree is duly registered as a finance company in each state in
which Contracts were originated, to the extent such registration is required by
applicable law.
8. The transfer of the Contracts to the Trust in accordance with Section
2.01 of the Pooling and Servicing Agreement would not be avoidable as a
preferential transfer under Section 547 of the United States Bankruptcy Code (11
U.S.C. (S) 547), as in effect on the date hereof, in the event that Green Tree
became a debtor under the United States Bankruptcy Code.
9. Pursuant to the Pooling and Servicing Agreement Green Tree has
transferred to the Trustee acting on behalf of the Trust all of Green Tree's
right, title and interest in the Contracts, free and clear of any and all other
assignments, encumbrances, options, rights, claims, liens or security interests
(except tax or possessory liens) that may affect the right of the Trustee in and
to such Contracts, and has delivered the Contract Files to the Trustee or its
custodian. No filing or other action, other than the filing of a financing
statement on Form UCC-1 with the Secretary of State of the State of Minnesota
identifying the Contracts as collateral and naming Green Tree as debtor and the
Trust as secured party, and the filing of continuation statements as required by
Section 4.02 of the Pooling and Servicing Agreement, is necessary to perfect as
against third parties the assignment of the Contracts by Green Tree to the
Trust. We have separately provided you with our
D-2
<PAGE>
opinion concerning whether such assignment could be recharacterized as a
pledge rather than a sale in the event Green Tree became a debtor under the
United States Bankruptcy Code. However, in the event such assignment were
characterized as a pledge securing a loan from the Certificateholders to Green
Tree, it is our opinion that the Trustee would be deemed to have a valid and
perfected first priority security interest in the Contracts and the proceeds
thereof, which security interest would be prior to any other security interest
that may be perfected under the Uniform Commercial Code as in effect in the
State of Minnesota and over any "lien creditor" (as defined in Minn. Stat.
(S)336.9 301(3)) who becomes such after the Closing Date, except that a
subsequent purchaser of any Contract who gives new value and takes possession
thereof in the ordinary course of his business would have priority over the
Trustee's security interest in such Contract, if such purchaser acts without
knowledge that such Contract was subject to a security interest. We have
assumed for the purposes of this opinion that during the term of the Pooling
and Servicing Agreement the Trustee, or its custodian, shall maintain
possession of the Contract Files for the purpose of perfecting the assignment
to the Trustee of the Contracts. We express no opinion with respect to the
enforceability of any individual Contract or the existence of any claims,
rights or other matters in favor of any Obligor or the owner of any financed
home improvement.
10. For federal income tax purposes, the Trust created pursuant to the
Pooling and Servicing Agreement will be treated as a grantor trust under Subpart
E, Part I, of Subchapter J of the Internal Revenue Code of 1986, as amended (the
"Code") and not as an association taxable as a corporation under the Code, and
under Section 671 of the Code, each Certificateholder will be treated as the
owner of an undivided pro rata interest in each of the Contracts in the Trust.
11. The transfer of the Contracts and the proceeds thereof by Green Tree
to the Trustee on the date hereof pursuant to the Pooling and Servicing
Agreement would not be avoidable as fraudulent transfers under the Uniform
Fraudulent Transfer Act as in effect in Minnesota on the date hereof (Minn.
Stat. (S)(S) 513.41 through 513.51), nor, should Green Tree become a debtor
under the United States Bankruptcy Code, as fraudulent transfers under Section
548 of the United States Bankruptcy Code (11 U.S.C. (S) 548) as in effect on the
date hereof.
D-3
<PAGE>
EXHIBIT E
------- -
OMITTED
-------
E-1
<PAGE>
EXHIBIT F
------- -
FORM OF TRUSTEE'S ACKNOWLEDGMENT
First Trust National Association, a national banking association organized
under the laws of the United States, acting as trustee (the "Trustee") of Home
Improvement Loan Trust 1994-BII (the "Trust") created pursuant to the Pooling
and Servicing Agreement dated as of June 1, 1994 between Green Tree Financial
Corporation and the Trustee (the "Agreement") (all capitalized terms used herein
without definition having the respective meanings specified in the Agreement)
acknowledges, pursuant to Section 2.03 of the Agreement, that the Trustee has
received the following: (i) all right, title and interest in the home
improvement contracts and promissory notes (including, without limitation, any
and all rights to receive payments which are due pursuant thereto on or after
June 1, 1994 but excluding any rights to receive payments which were due
pursuant thereto prior to June 1, 1994) identified in the List of Contracts
delivered pursuant to Section 2.02 of the Agreement, (ii) all rights under
hazard, flood or other individual insurance on the properties described in the
Contracts, (iii) all rights under the Errors and Omissions Protection Policy, as
such policy relates to the Contracts, (iv) all documents contained in the
Contract Files (as defined in Section 1.02 of the Agreement), (v) the Limited
Guaranty, and (vi) all proceeds and products of the foregoing; and declares
that, directly or through a Custodian, it will hold all Contract Files that have
been delivered in trust, upon the trusts set forth in the Agreement for the use
and benefit of all Certificateholders. The Trustee acknowledges that it has
conducted a cursory review of the Contract Files and hereby confirms that except
as noted on the document exception listing attached hereto, each Contract File
contained (a) an original contract or promissory note, (b) an original or a copy
of a truth-in-lending disclosure form (either included as part of the contract
or note or as a separate document), and (c) a sale control document. The
Trustee has not otherwise reviewed the Contracts and Contract Files for
compliance with the terms of the Pooling and Servicing Agreement.
F-1
<PAGE>
IN WITNESS WHEREOF, First Trust National Association, as Trustee, has
caused this acknowledgment to be executed by its duly authorized officer and its
corporate seal affixed hereto as of this day of , 1994.
---- --------------------
FIRST TRUST NATIONAL ASSOCIATION,
as Trustee
[Seal] By
----------------------------------
[Name]
[Title]
F-2
<PAGE>
EXHIBIT G
------- -
GREEN TREE FINANCIAL CORPORATION
CERTIFICATE OF SERVICING OFFICER
The undersigned certifies that he is a [title] of Green Tree Financial
-----
Corporation, a Minnesota corporation (the "Company"), and that as such he is
duly authorized to execute and deliver this certificate on behalf of the Company
pursuant to Section 6.02 of the Pooling and Servicing Agreement (the
"Agreement") dated as of June 1, 1994 between the Company and First Trust
National Association, as Trustee of Home Improvement Loan Trust 1994-BII (all
capitalized terms used herein without definition having the respective meanings
specified in the Agreement), and further certifies that:
1. The Monthly Report for the period from to
------------- --------------
attached to this certificate is complete and accurate in accordance with the
requirements of Sections 6.01 and 6.02 of the Agreement; and
2. As of the date hereof, no Event of Termination or event that with
notice or lapse of time or both would become an Event of Termination has
occurred.
IN WITNESS WHEREOF, I have affixed hereunto my signature this day of
-----
, 19 .
- - ----------------------- --
GREEN TREE FINANCIAL CORPORATION
By
-------------------------------------------
[Name]
[Title]
G-1
<PAGE>
EXHIBIT H
------- -
OMITTED
-------
G-1
<PAGE>
EXHIBIT I
------- -
GREEN TREE FINANCIAL CORPORATION
CERTIFICATE REGARDING REPURCHASED CONTRACTS
The undersigned certifies that he is a [title] of Green Tree Financial
-----
Corporation, a Minnesota corporation (the "Company"), and that as such he is
duly authorized to execute and deliver this certificate on behalf of the Company
pursuant to Sections 3.05 and 8.06 of the Pooling and Servicing Agreement (the
"Agreement") dated as of June 1, 1994 between the Company and First Trust
National Association, as Trustee of Home Improvement Loan Trust 1994-BII (all
capitalized terms used herein without definition having the respective meanings
specified in the Agreement), and further certifies that:
1. The Contracts on the attached schedule are to be repurchased by the
Company on the date hereof pursuant to Section 3.05 of the Agreement.
2. Upon deposit of the Repurchase Price for such Contracts, such
Contracts may, pursuant to Section 8.06 of the Agreement, be assigned by the
Trustee to the Company.
IN WITNESS WHEREOF, I have affixed hereunto my signature this
----
day of , 19 .
------------------ --
GREEN TREE FINANCIAL CORPORATION
By
---------------------------------------
[Name]
[Title]
I-1
<PAGE>
EXHIBIT J
------- -
OMITTED
-------
J-1
<PAGE>
EXHIBIT K
------- -
LIST OF CONTRACTS
[To Be Supplied]
K-1
<PAGE>
EXHIBIT L
------- -
OMITTED
-------
L-1
<PAGE>
EXHIBIT M
------- -
OMITTED
-------
M-1
<PAGE>
EXHIBIT N
------- -
HOME IMPROVEMENT LOAN
CERTIFICATES for HOME IMPROVEMENT LOANS %
-------
GREEN TREE TRUST
1994-BII Distribution Date:
MONTHLY REPORT ------
Trust Account
/ / ------------
---- ---- ----
<TABLE>
<S> <C> <C>
A. Monthly Principal
(1) Regular Principal Payments $
-------
(2) Principal Prepayments $
-------
(3) Delinquent Payments Advanced $
-------
(4) Net Losses $
-------
(5) Contracts Repurchased due to
Breach of Representations
and Warranties (see attached) $
-------
(6) Bankruptcy Write-down $
-------
(7) Delinquent Payments Recovered $
-------
Total Principal $
-------
B. Monthly Interest $
-------
C. Remaining Principal Balance $
-------
D. Collected Amount $
-------
E. Monthly Servicing Fee $
-------
F. Advances Reimbursed
(1) Prior Advances that have been
recovered $
-------
(2) Uncollectible Advances $
-------
G. Excess Cashflow $
-------
</TABLE>
N-1
<PAGE>
HOME IMPROVEMENT LOAN
CERTIFICATES for HOME IMPROVEMENT LOANS %
-------
GREEN TREE TRUST
1994-BII Distribution Date:
MONTHLY REPORT ------
PAGE 2 Trust Account
/ / ------------
---- ---- ----
<TABLE>
<S> <C> <C>
H. Shortfall $
-------
I. Pool Factor
Previous Month Pool Factor
-------
Current Month Pool Factor
-------
J. Aggregate Scheduled Balances and
Number of Delinquent Contracts
(1) 31-59 $
------- -------
(2) 60-89 $
------- -------
(3) 90 days or more $
------- -------
K. Liquidated Contracts $
-------
L. Number of Loans Remaining
-------
</TABLE>
N-2
