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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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): March 23, 1995
GREEN TREE FINANCIAL CORPORATION
as originator of Home Improvement Loan Trust 1995-B
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(Exact name of registrant as specified in its charter)
33-53449
Minnesota 33-55853 41-6395347
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(State or other jurisdiction (Commission (IRS employer
of incorporation) file number) identification No.)
1100 Landmark Towers, 345 St. Peter Street, Saint Paul, Minnesota 55102-1639
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(Address of principal executive offices)
Registrant's telephone number, including area code: (612) 293-3400
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Not Applicable
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(Former name or former address, if changed since last report)
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Item 1. Changes in Control of Registrant.
---------------------------------
Not applicable.
Item 2. Acquisition or Disposition of Assets.
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Not applicable.
Item 3. Bankruptcy or Receivership.
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Not applicable.
Item 4. Changes in Registrant's Certifying Accountant.
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Not applicable.
Item 5. Other Events.
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On March 23, 1995, the Registrant sold approximately $12,179,469 of
Certificates for Home Improvement Loans, Series 1995-B (the
"Certificates"), evidencing beneficial ownership interests in Home
Improvement Loan Trust 1995-B (the "Trust"). The Trust property
consists primarily of a pool of home improvement contracts and
promissory notes (the "Contracts"), including the right to receive
payments due on the Contracts on and after March 1, 1995 (or the date
of origination thereof, if later).
Item 6. Resignations of Registrant's Directors.
---------------------------------------
Not applicable.
Item 7. Financial Statements and Exhibits.
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(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
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(c) Exhibits.
The following is filed herewith. The exhibit numbers correspond
with Item 601(b) of Regulation S-K.
Exhibit No. Description
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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 March 1, 1995 (without
Exhibit H) creating a trust entitled Home
Improvement Loan Trust 1995-B
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
as originator of Home Improvement
Loan Trust 1995-B
By: /s/ John W. Brink
-----------------------------------
John W. Brink
Executive Vice President, Treasurer
and Chief Financial Officer
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INDEX TO EXHIBITS
Exhibit Number Page
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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 March 1, 1995 (without Exhibit H) creating a
trust entitled Home Improvement Loan Trust 1995-B
4
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CONFORMED
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Certificates for Home Improvement Loans
Series 1995-B
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
HOME IMPROVEMENT LOAN TRUST 1995-B
Dated as of March 1, 1995
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TABLE OF CONTENTS
Page
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ARTICLE I
Definitions
Section 1.01. General................................................ 1-1
Section 1.02. Specific Terms......................................... 1-1
ARTICLE II
Establishment of Trust; Transfer of Contracts
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
ARTICLE III
Representations and Warranties
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
ARTICLE IV
Perfection of Transfer and Protection of Security Interests
Section 4.01. Transfer of Contracts.................................. 4-1
Section 4.02. Costs and Expenses..................................... 4-1
ARTICLE V
Servicing of Contracts
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
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Section 5.09. Maintenance of Insurance............................... 5-5
Section 5.10. Merger or Consolidation of Servicer.................... 5-5
ARTICLE VI
Reports and Tax Matters
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....................... 6-3
Section 6.06. Payment of Taxes....................................... 6-4
ARTICLE VII
Service Transfer
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
ARTICLE VIII
Payments
Section 8.01. Monthly Payments....................................... 8-1
Section 8.02. Advances............................................... 8-1
Section 8.03. Limited Guaranty....................................... 8-2
Section 8.04. Payments............................................... 8-3
Section 8.05. Reassignment of Repurchased Contacts................... 8-4
Section 8.06. Servicer's Purchase Option............................. 8-4
ARTICLE IX
The Certificates
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............ 9-3
Section 9.04. Mutilated, Destroyed, Lost or Stolen Certificates...... 9-3
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
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ARTICLE X
Indemnities
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
ARTICLE XI
The Trustee
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..................................... 11-5
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
ARTICLE XII
Miscellaneous
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
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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. Form of Trustee's Acknowledgement....................... E-1
Exhibit F. Certificate of Servicing Officer........................ F-1
Exhibit G. Certificate Regarding Repurchased Contracts............. G-1
Exhibit H. List of Contracts....................................... H-1
Exhibit I. Form of Monthly Report.................................. I-1
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AGREEMENT, dated as of March 1, 1995, 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 1995-B (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:
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ARTICLE I
DEFINITIONS
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SECTION 1.01. General.
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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.
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"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.
"Aggregate Certificate Principal Balance" means at any time the Original
Series 1995-B Certificate Principal Balance minus all payments of Monthly
Principal made to the Certificateholders since the Closing Date.
"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.
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"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
1995-B, 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 March 23, 1995.
"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
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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.
"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 and
(b) a sale control document.
"Contract Interest Rate" means, as to any Contract, the annual rate of
interest specified in the Contract.
"Contracts" means the home improvement contracts and promissory notes
described in the List of Contracts attached hereto as Exhibit H 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.
"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 P.L.L.P. or other legal
counsel for the Company.
"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 Cut-off Date Pool Principal Balance.
"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 March 1, 1995 (or the date of origination of the
Contract, if later).
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"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 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 fraction, expressed as 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 Pool Scheduled
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)(ii)) 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 $12,179,469 in Original Series 1995-B Certificate 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.
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"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, or any successor
thereto.
"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,
or any successor thereto.
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"Independent" means, when used with respect to any specified Person, Dorsey
& Whitney P.L.L.P. 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.
"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, 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, 2015, 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 Cut-off Date Principal Balance, (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 H.
"Monthly Interest" means, as of any Payment Date, (a) one month's interest
(or, with respect to the first Payment Date, interest from and including the
Closing Date to but excluding April 15, 1995) at the Pass-Through Rate on the
Aggregate Certificate Principal Balance immediately prior to such Payment Date,
computed on the basis of a 360-day year of twelve 30-day months, plus (b) any
Unpaid Interest Shortfall.
"Monthly Principal" means, as of any Payment Date, the amount determined
pursuant to Section 6.01(a).
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"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
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 or the Servicer,
as applicable, acceptable to the Trustee and the Company.
"Original Series 1995-B Certificate Principal Balance" means
$12,179,469.37, which is the aggregate principal balance of the Certificates as
of the Closing Date.
"Pass-Through Rate" means 8.15% 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 April 17, 1995.
"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 shall 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 Original Series 1995-B
Certificate Principal Balance. The aggregate of all Percentage Interests for the
Certificates shall equal 100%.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust (including any beneficiary thereof),
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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 Aggregate Certificate Principal Balance at such
time and the denominator of which is the Original Series 1995-B Certificate
Principal Balance.
"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.
"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 date of such
repurchase or liquidation.
"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
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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 (or as of the Cut-off Date if the
Cut-off Date is the date of origination of such Contract), 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 (i) all the rights, benefits and obligations arising from and in
connection with the Contracts, including all interest and principal received 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, (iv) all
proceeds and products of the foregoing, (v) the Limited Guaranty and (vi) 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 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
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Trustee, as applicable, from 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 one month's interest
thereon (to the extent payment thereof is legally permissible) at the Pass-
Through Rate, computed on the basis of a 360-day year of twelve 30-day months.
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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 1995-B. 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. If the conveyance is deemed to be a loan, the parties further 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.
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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 Coopers & Lybrand, 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 E 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.
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b. If, in its review of the Contract Files as described in Exhibit E, 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 or the Servicer),
the Company and the Servicer 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.
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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 and indemnification obligations of the Company set forth in Section
3.05 constitute the sole remedies 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
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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 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.
f. Licensing. The Company is duly licensed in each state in which
Contracts were originated to the extent the Company is required to be
licensed by applicable law in connection with the origination and servicing
of the Contracts.
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 due under the Contract 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 and closing 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.
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<PAGE>
f. Underwriting Guidelines. Each Contract was originated or
purchased in accordance with the Company's then-current underwriting
guidelines.
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
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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.
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. Good Repair. The property described in the Contract is, to the
best of the Company's knowledge, free of damage and in good repair.
r. No Flood Damage. No property described in a Contract has suffered
flood damage.
SECTION 3.03. Representations and Warranties Regarding the Contracts in
---------------------------------------------------------
the Aggregate.
- -------------
The Company represents and warrants to the Certificateholders that:
a. Amounts. The Cut-off Date Pool Principal Balance equals the
Original Series 1995-B Certificate Principal Balance, 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 240 months; and (iii) the
final scheduled payment date on the Contract with the latest maturity is in
February 2015. No Contract was originated before January, 1994. No Contract
has a Contract Interest Rate less than 11.12%.
c. Geographic Concentrations. By Cut-off Date Principal Balance,
14.05% of the Contracts relate to improvements to property located in
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Massachusetts, 7.05% in Pennsylvania, 6.69% in New York, 5.39% in Michigan,
5.27% in Texas and 5.27% in California. No other state represents more than
5% of the Cut-off Date Pool Principal Balance. No more than 1% of the
Contracts by Cut-off Date Principal Balance 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 to the Certificateholders 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 or servicing
contracts 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 (other than a breach of
the representation set forth in subsection (r) thereof that is discovered in the
manner contemplated by Section 3.05(c), the remedy for which is specified in
Section 3.05(c)), 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
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<PAGE>
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 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. Notwithstanding subparagraph (a) above, the Company shall repurchase
any Contract, at its respective Repurchase Price, if the Company has failed to
deliver the related Contract File to the Trustee within 30 days of the Closing
Date.
c. If the Company, acting reasonably, has reason to believe that any
property described in a Contract that is located in any one of the 39 counties
in the State of California that have been declared federal disaster areas due to
flooding that occurred in January, February and March of 1995 (the "Flooding")
has been affected by the Flooding (an "Affected Property"), the Company shall
contact the related Obligor regarding the condition of such Affected Property.
If any such Obligor indicates to the Company that exterior damage has occurred
to the Affected Property as a result of the Flooding and the Company believes
such damage to be material, the Company shall perform, or cause to be performed,
a drive-by inspection of the Affected Property. All of the foregoing shall be
completed by the Company within 120 days after the Closing Date. If, as a result
of the foregoing, the Company concludes that the representation and warranty
contained in Section 3.02(r) has been breached with respect to a Contract and
that such breach materially adversely affects the Trust's, the
Certificateholders' or the Class C Certificateholder's interest in such
Contract, the Company shall so notify the Trustee and shall repurchase such
Contract, at its Repurchase Price, not later than March 23, 1996.
d. 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.
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ARTICLE IV
PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS
-----------------------------------------------------------
SECTION 4.01. Transfer of Contracts.
---------------------
a. 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.
b. If at any time during the term of this Agreement the Company does not
have a long-term senior debt rating from Standard & Poor's of BBB- or higher,
the Company shall promptly execute and deliver to the Trustee (if it has not
previously done so) endorsements of each Contract.
SECTION 4.02. Costs and Expenses.
------------------
The Servicer agrees to pay all reasonable costs and disbursements in
connection with the vesting (including the perfection and the maintenance of
perfection, as against all third parties) in the Trust of all right, title and
interest in and to the Contracts.
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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 prudent servicers of home improvement contracts and
promissory notes for prudent 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.
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<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
5-2
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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 rated AAAm or AAAm-G by 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
AAA 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. 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
grounds 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. 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 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.
The Servicer shall determine when a Contract has been paid in full; provided
that, 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, without any right of
reimbursement therefor (except from additional amounts recovered from the
related Obligor or otherwise in respect of such Contract), and deposited in the
Certificate Account.
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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 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 I hereto, which report shall include the
following information with respect to the immediately following Payment Date:
a. The amount of Monthly Principal to be distributed on such Payment Date
pursuant to Section 8.01, which, subject to the Amount Available therefor
in accordance with Section 8.04(b), 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 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).
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b. the amount of Monthly Interest to be paid on such Payment Date,
subject to the Amount Available therefor in accordance with Section 8.04(b);
c. the remaining Aggregate Certificate 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 and for
which the Servicer is now entitled to reimbursement from the Collected Amount in
accordance with Section 8.04(b);
g. the Collected Amount for the prior Due Period and the Shortfall (if
any) for such Payment Date;
h. the amounts of fees previously paid or to be paid on such Payment Date
by the Trust in respect of the prior Due Period, 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.
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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 F,
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, 1996, 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, 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.
--------------------------------
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;
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(iii) the remaining Aggregate Certificate Principal Balance (after
giving effect to the payment of Monthly Principal on such Payment Date);
(iv) the Average Sixty-Day Delinquency Ratio and the Cumulative
Realized Loss Ratio;
(v) the amount of fees paid out of the Trust, separately identifying
each such fee;
(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
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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 the
Monthly Servicing Fee. 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 shall 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 after the Service Transfer.
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 conforming with the requirements of this Agreement at
the trust department of the
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Trustee or with an Eligible Institution other than the Servicer and promptly
cause the Trustee to 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 in the Trust 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
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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 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), (2), (3) and, if the
Company is not the Servicer, (5) (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) on the first Payment Date, $1,217,947.
(ii) on any Payment Date thereafter, the lesser of (A) $1,217,947 minus
all amounts paid by the Company pursuant to the Limited Guaranty with respect to
previous Payment Dates, and (B) the Aggregate Certificate Principal Balance on
such Payment Date.
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c. The obligation of the Company to provide the Limited Guaranty under this
Agreement shall terminate on the earlier of the Final Payment Date and the date
on which the Guaranty Amount is reduced to zero.
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. if the Company is not the Servicer, to pay the Monthly Servicing Fee
and any other compensation owed to the Servicer pursuant to Section 7.03;
2. 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;
3. to pay Monthly Principal to the Certificateholders;
4. if the Company is the Servicer, to pay the Servicer the Monthly
Servicing Fee;
5. to reimburse the Servicer or the Trustee, as applicable, for prior
Advances that have been recovered and for any Uncollectible Advances; and
6. 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
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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 G, the Trustee shall
convey and assign 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 Purchase Option.
--------------------------
a. The Servicer shall, subject to subsection (b) hereof, have the option to
purchase 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 100% of the principal balance of each Contract, together
with accrued and unpaid interest on each such Contract at the Pass-Through
Rate,
B. the aggregate fair market value (as determined by the Servicer as of
the close of business on the third Business Day preceding the date of such
purchase) of all of the assets of the Trust, and
C. the Aggregate Certificate Principal Balance as of the date of such
purchase (less any amounts on deposit in the Certificate Account on such
purchase date and representing payments of principal in respect of the
Contracts) plus an amount necessary to pay the Monthly Interest due on the
Payment Date occurring in the calendar month following such purchase date
(less any amounts on deposit in the Certificate Account on such purchase
date and representing payments of interest in respect of the Contracts at
the Pass-Through Rate).
b. The purchase by the Servicer of all of the Contracts pursuant to this
Section 8.06 above 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, 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 purchased.
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ARTICLE IX
THE CERTIFICATES
----------------
SECTION 9.01. The Certificates.
----------------
The Certificates shall be substantially in the forms set forth in Exhibit
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 $12,179,469.00 in Original Series 1995-B
Certificate Principal Balance, beneficial ownership of such Certificates to be
held through Book-Entry Certificates, and (ii) a single Certificate representing
$.37 in Original Series 1995-B Certificate 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 12.03 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)(1) 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
$12,179,469 in Original Series 1995-B Certificate Principal Balance. 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
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harmless, then in the absence of notice to the Certificate Registrar or the
Trustee that 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 Percentage
Interests representing 25% or more of the Trust apply in writing to the Trustee
(hereinafter referred to as "Applicants"), 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."
9-5
<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, except to the extent such taxes are imposed
due to a breach by the Company of its obligations under this Agreement) 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
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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.
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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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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
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<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 the
Company, the Servicer and the Certificateholders of any change in the location
of the Certificate Register or any such office or agency.
SECTION 12.04. Termination.
-----------
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 on the earlier of (a) the
Payment Date on which the Aggregate Certificate Principal Balance is reduced to
zero; or (b) the Payment Date occurring in the month following the Servicer's
purchase of 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
12-1
<PAGE>
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.
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 the 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 Servicer, 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 51% or more
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 the 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 Mohammadzadah
Telecopier Number: (612) 244-0089
12-5
<PAGE>
If to Standard & Poor's:
Standard & Poor's Ratings 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 23rd day of
March, 1995.
GREEN TREE FINANCIAL CORPORATION
By /s/ John W. Brink
-----------------------------------------
John W. Brink
Executive Vice President, Treasurer
and Chief Financial Officer
Attest:
/s/ Karen J. Bond
- ------------------------------
Karen J. Bond
Assistant Secretary
FIRST TRUST NATIONAL ASSOCIATION,
not in its individual capacity
but solely as Trustee
By /s/ Kathi Mohammadzadah
-----------------------------------------
Its Trust Officer
Attest:
/s/ Christina Hatfield
- ------------------------------
Its Assistant Secretary
12-7
<PAGE>
STATE OF MINNESOTA )
) ss.
COUNTY OF RAMSEY )
The foregoing instrument was acknowledged before me this 23rd day of March,
1995, by John W. Brink, of Green Tree Financial Corporation, a Minnesota
corporation, on behalf of the corporation.
Wanda J. Lamb-Lindow
/s/ Wanda J. Lamb-Lindow [Seal] Notary Public - Minnesota
- -------------------------------- Hennepin County
Notary Public My Comm. Expires Jan. 31, 2000
STATE OF MINNESOTA )
) ss.
COUNTY OF RAMSEY )
The foregoing instrument was acknowledged before me this 23rd day of
March, 1995, by Kathi Mohammadzadah, of First Trust National Association, a
national banking association, on behalf of the national banking association.
Arlene W. Kosek
/s/ Arlene W. Kosek [Seal] Notary Public - Minnesota
- -------------------------------- Hennepin County
Notary Public My Comm. Expires Jan. 31, 2000
12-8
<PAGE>
EXHIBIT A
---------
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 1995-B
Home Improvement Loan Trust 1995-B
Original Series 1995-B Certificate Principal Balance of the Trust: $____________
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.
Date of Pooling and Servicing Pass-Through Rate: ___%
Agreement and Cut-off Date: Denomination: $________
March 1, 1995
First Payment Date: Aggregate Denomination of
April 17, 1995 All Certificates: $__________
Servicer: Payment Date After Latest
Green Tree Financial Corporation Due Date: March 15, 2015
(or if such day is not a
Business Day, then the next
succeeding Business Day)
CUSIP: ___________
A-1
<PAGE>
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 1995-B
(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 March 1, 1995) and
the Limited Guaranty. The Trust has been created pursuant to a Pooling and
Servicing Agreement (the "Agreement"), dated as of March 1, 1995, 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 April 17, 1995, 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 March 15, 2015 or the next
succeeding Business Day if such March 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)(1) 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
A-2
<PAGE>
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,
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 1995-B has caused this
Certificate to be duly executed by the manual signature of a duly authorized
officer of the Trustee.
Dated: March _______, 1995 HOME IMPROVEMENT LOAN TRUST 1995-B
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 1995-B, Home Improvement Loan
Trust 1995-B, 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 March 1, 1995, 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 1995-B, 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
March 1, 1995 but excluding any rights to receive payments which were due
pursuant thereto prior to March 1, 1995) 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 ____________________, 1995.
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 March 1, 1995
(the "Agreement") relating to the Home Improvement Loan Trust 1995-B 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
____________________, 1995.
___________________________________
[Name]
[Title]
C-1
<PAGE>
EXHIBIT D
---------
FORM OF OPINION OF COUNSEL FOR THE COMPANY
The opinion of Dorsey & Whitney P.L.L.P. 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.
2. The Pooling and Servicing Agreement (including the Limited Guaranty
contained therein) 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.
The participants to whose accounts The Depository Trust Company has credited the
Certificates have acquired all the Trust's rights in the Certificates free of
any adverse claim, assuming that such participants purchased the Certificates
for value and without notice 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 the 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, 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 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
D-1
<PAGE>
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. 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.
8. 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 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
D-2
<PAGE>
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.
9. 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.
10. 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
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 1995-B (the "Trust") created pursuant to the Pooling and
Servicing Agreement dated as of March 1, 1995 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
March 1, 1995 but excluding any rights to receive payments which were due
pursuant thereto prior to March 1, 1995) 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, and (b) 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.
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 ____________________,
1995.
FIRST TRUST NATIONAL ASSOCIATION,
as Trustee
[Seal] By
---------------------------------------
[Name]
[Title]
E-1
<PAGE>
EXHIBIT F
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 March 1, 1995 between the Company and First Trust
National Association, as Trustee of Home Improvement Loan Trust 1995-B (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]
F-1
<PAGE>
EXHIBIT G
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 8.05 of the Pooling and Servicing Agreement (the
"Agreement") dated as of March 1, 1995 between the Company and First Trust
National Association, as Trustee of Home Improvement Loan Trust 1995-B (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 8.05 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 H
LIST OF CONTRACTS
[To Be Supplied]
H-1
<PAGE>
EXHIBIT I
---------
FORM OF MONTHLY REPORT
CERTIFICATES FOR HOME IMPROVEMENT LOANS
SERIES 1995-B
Distribution Date:
-----------
A. Collected Amount
-----------
B. Delinquent Payments Advanced
-----------
C. Aggregate Repurchase Price for
Contracts to be Repurchased
-----------
D. Amount Available (A + B + C)
-----------
E. Monthly Interest
-----------
F. Monthly Principal
(1) Regular Principal Payments
-----------
(2) Principal Prepayments
-----------
(3) Delinquent Principal Advanced
-----------
(4) Net Losses
-----------
(5) Contracts Repurchased due to
Breach of Representations
and Warranties (see attached)
-----------
(6) Bankruptcy Write-down
-----------
(7) Unpaid Principal from Prior Months
-----------
Total Principal
-----------
G. Monthly Servicing Fee
-----------
H. Advances Reimbursed
(1) Prior Advances that have been
recovered
-----------
(2) Uncollectible Advances
-----------
I. Guaranty Fee
-----------
J. Shortfall [(E + F + (if Company is
not the Servicer) G) - D]
-----------
I-1
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C> <C>
K. Guaranty Payment (lesser of J or
Guaranty Amount from prior month) ------------
L. Aggregate Certificate Principal Balance ------------
M. New Guaranty Amount (lesser of (1) Guaranty
Amount from prior month - K, or (2) L) ------------
N. Current Month Pool Factor ------------
Previous Month Pool Factor ------------
O. Aggregate Scheduled Balances and
Number of Delinquent Contracts
(1) 31-59 days ------------ ------------
(2) 60-89 days ------------ ------------
(3) 90 days or more ------------ ------------
P. Liquidated Contracts ------------ ------------
Q. Number of Loans Remaining ------------ ------------
</TABLE>
Please contact the Bondholder Relations Department of First Trust National
Association at (612) 223-7900 with any questions regarding this Statement or
your Distribution.
N-2
