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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 14, 1996
GREEN TREE FINANCIAL CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 01-08916 41-1807858
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(State or other Jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) 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.
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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 Accounting.
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Not applicable
ITEM 5. Other Events.
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On March 14, 1996, the Registrant sold approximately $93,726,023 of
Certificates for Home Improvement Loans, Series 1996-A, evidencing
beneficial ownership interests in a trust consisting primarily of a
pool of home improvement contracts and promissory notes conveyed by
Green Tree Financial Corporation.
ITEM 6. Resignations of Registrant's Directors.
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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 Bank National
Association, as Trustee, dated March 1,
1996, relating to Home Improvement Loan
Trust 1996-A.
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.
Date: March 18, 1996 GREEN TREE FINANCIAL CORPORATION
By: /s/ Robley D. Evans
------------------------
Robley D. Evans
Vice President
and Controller
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INDEX TO EXHIBITS
Exhibit
Number Page
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4.1 Pooling and Servicing Agreement between Green Tree 5
Financial Corporation, as Seller and Servicer, and First
Bank National Association, as Trustee, dated March 1,
1996, relating to Home Improvement Loan Trust
1996-A.
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Exhibit 4.1
______________________________________________________________________________
Certificates for Home Improvement Loans
Series 1996-A
POOLING AND SERVICING AGREEMENT
between
GREEN TREE FINANCIAL CORPORATION
Seller and Servicer
and
FIRST TRUST NATIONAL ASSOCIATION
not in its individual capacity but solely as Trustee
of
HOME IMPROVEMENT LOAN TRUST 1996-A
Dated as of March 1, 1996
______________________________________________________________________________
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TABLE OF CONTENTS
ARTICLE I
Definitions
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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............................ 2-2
Section 2.03. Acceptance by Trustee................................ 2-3
Section 2.04. REMIC 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......................... 3-5
Section 3.04. Representations and Warranties Regarding the
Contract Files..................................... 3-6
Section 3.05. Repurchases of Contracts for Breach of
Representations and Warranties..................... 3-6
Section 3.06. No Repurchase Under Certain Circumstances............ 3-7
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
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Section 5.03. Records.............................................. 5-1
Section 5.04. Inspection........................................... 5-1
Section 5.05. Certificate Account.................................. 5-2
Section 5.06. Enforcement.......................................... 5-4
Section 5.07. Trustee to Cooperate................................. 5-6
Section 5.08. Costs and Expenses................................... 5-7
Section 5.09. Maintenance of Insurance............................. 5-7
Section 5.10. Merger or Consolidation of Servicer.................. 5-8
ARTICLE VI
Reports and Tax Matters
Section 6.01. Monthly Reports...................................... 6-1
Section 6.02. Officer's Certificate................................ 6-1
Section 6.03. Other Data........................................... 6-2
Section 6.04. Annual Report of Accountants......................... 6-2
Section 6.05. Statements to Certificateholders and the Class C
Certificateholder.................................. 6-2
Section 6.06. Payment of Taxes..................................... 6-10
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 and the Class C
Certificateholder.................................. 7-3
Section 7.05. Effect of Transfer................................... 7-3
Section 7.06. Transfer of Certificate Account...................... 7-4
ARTICLE VIII
Payments
Section 8.01. Monthly Payments..................................... 8-1
Section 8.02. Advances............................................. 8-2
Section 8.03. Limited Guaranty..................................... 8-2
Section 8.04. Permitted Withdrawals from the Certificate
Account; Payments.................................. 8-3
Section 8.05. Reassignment of Repurchased Contracts................ 8-7
Section 8.06. Servicer's Purchase Option........................... 8-8
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ARTICLE IX
The Certificates and the Class C Certificate
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Section 9.01. The Certificates and the Class C Certificate......... 9-1
Section 9.02. Registration of Transfer and Exchange of Certificates
and the Class C Certificate........................ 9-2
Section 9.03. No Charge; Disposition of Void Certificates
or Class C Certificate............................. 9-5
Section 9.04. Mutilated, Destroyed, Lost or Stolen Certificates
or Class C Certificate............................. 9-6
Section 9.05. Persons Deemed Owners................................ 9-6
Section 9.06. Access to List of Certificateholders' and Class C
Certificateholders' Names and Addresses............ 9-6
Section 9.07. Authenticating Agents................................ 9-7
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
Section 10.06. REMIC Tax Matters.................................... 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,
the Class C Certificate or Contracts............... 11-3
Section 11.04. Trustee May Own Certificates......................... 11-3
Section 11.05. Rights of Certificateholders to Direct Trustee and to
Waive Events of Termination........................ 11-4
Section 11.06. The Servicer to Pay Trustee's Fees and Expenses...... 11-4
Section 11.07. Eligibility Requirements for Trustee................. 11-5
Section 11.08. Resignation or Removal of Trustee.................... 11-5
Section 11.09. Successor Trustee.................................... 11-6
Section 11.10. Merger or Consolidation of Trustee................... 11-7
Section 11.11. Tax Returns.......................................... 11-7
Section 11.12. Obligor Claims....................................... 11-7
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Section 11.13. Appointment of Co-Trustee or Separate Trustee........ 11-8
Section 11.14. Certain Matters Relating to FHA Insurance............ 11-9
Section 11.15. The Trustee and First Bank System, Inc............... 11-9
Section 11.16 Trustee Advances..................................... 11-10
ARTICLE XII
Miscellaneous
Section 12.01. Servicer Not to Resign; Delegation of Servicing
Duties............................................. 12-1
Section 12.02. Company Not to Engage in Certain Transactions with
Respect to the Trust............................... 12-1
Section 12.03. Maintenance of Office or Agency...................... 12-1
Section 12.04. Termination.......................................... 12-1
Section 12.05. Acts of Certificateholders and the Class C
Certificateholder.................................. 12-4
Section 12.06. Calculations......................................... 12-5
Section 12.07. Assignment or Delegation by Company.................. 12-5
Section 12.08. Amendment............................................ 12-5
Section 12.09. Notices.............................................. 12-7
Section 12.10. Merger and Integration............................... 12-8
Section 12.11. Headings............................................. 12-8
Section 12.12. Governing Law........................................ 12-8
Testimonium............................................................ 12-9
Exhibit A. Form of Class A Certificate.......................... A-1
Exhibit B. Form of Class M-1 or M-2 Certificate................. B-1
Exhibit C. Form of Class B Certificate.......................... C-1
Exhibit D. Form of Assignment................................... D-1
Exhibit E. Certificate of Officer............................... E-1
Exhibit F. Form of Opinion of Counsel for the Company........... F-1
Exhibit G. Form of Trustee's Acknowledgement.................... G-1
Exhibit H. Certificate of Servicing Officer..................... H-1
Exhibit I. Form of Class C Certificate.......................... I-1
Exhibit J. Certificate Regarding Repurchased Contracts.......... J-1
Exhibit K. Form of Representation Letter........................ K-1
Exhibit L. List of Contracts.................................... L-1
Exhibit M. List of FHA-Insured Contracts........................ M-1
Exhibit N. Monthly Report....................................... N-1
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AGREEMENT, dated as of March 1, 1996, between Green Tree Financial
Corporation, a corporation organized and existing under the laws of the State of
Delaware, 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 1996-A (the "Trust").
WHEREAS, in the regular course of its business, the Company purchases,
originates and services home improvement contracts and promissory notes, which
contracts and notes provide for installment payments by or on behalf of the
purchaser of the home improvements and grant mortgages, deeds of trust or
security deeds on the real estate that is the subject of a home improvement;
WHEREAS, the Company and the Trustee have agreed to establish the Trust;
WHEREAS, the Company and the Trustee wish to set forth the terms and
conditions pursuant to which the Trust, on behalf of the "Certificateholders"
and the "Class C Certificateholder," as hereinafter defined, will acquire the
"Contracts," as hereinafter defined, and the Company will manage and service the
Contracts;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth, the Company and the Trustee agree as provided herein:
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ARTICLE I
DEFINITIONS
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SECTION 1.01. General.
For the purpose of this Agreement, except as otherwise expressly provided or
unless the context otherwise requires, the terms defined in this Article include
the plural as well as the singular, the words "herein," "hereof" and "hereunder"
and other words of similar import refer to this Agreement as a whole and not to
any particular article, section or other subdivision, and Section references
refer to Sections of the Agreement.
SECTION 1.02. Specific Terms.
"Advance" means, with respect to any Payment Date, the amounts, if any,
deposited by the Servicer or the Trustee, as applicable, in the Certificate
Account for such Payment Date pursuant to Section 8.02.
"Advance Payment" means any payment by an Obligor in advance of the Due
Period in which it would be due under such Contract and which payment is not a
Principal Prepayment.
"Affiliate" of any specified Person means any other Person controlling or
controlled by or under common control with such specified Person. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" or "controlled" have meanings
correlative to the foregoing.
"Aggregate Certificate Principal Balance" means the sum of the Class A-1,
Class A-2, Class A-3, Class M-1, Class M-2, Class B-1 and Class B-2 Principal
Balances.
"Aggregate Principal Shortfall Amount" means, as of any Payment Date, the
excess, if any, of (a) the sum of the Class A Principal Balance, the Class M
Principal Balance and the Class B Principal Balance as of the preceding Payment
Date (after giving effect to distributions of principal thereon) over (b) the
Pool Scheduled Principal Balance for such preceding Payment Date.
"Agreement" means this Pooling and Servicing Agreement.
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"Amount Available" means, as to any Payment Date, an amount equal to (a) the
amount on deposit in the Certificate Account as of the close of business on the
last day of the preceding Due Period, reduced by (b) the sum as of the close of
business on the Business Day preceding such Payment Date of (1) the Amount Held
for Future Distribution, (2) amounts permitted to be withdrawn by the Trustee
from the Certificate Account pursuant to clauses (ii) - (v), inclusive, of
Section 8.04(a) and (3) the amount, if any, withdrawn by the Trustee from the
Certificate Account pursuant to Section 8.04(c) with respect to the immediately
preceding Payment Date.
"Amount Held for Future Distribution" means, as to any Payment Date, the
total of the amounts held in the Certificate Account on the last day of the
preceding Due Period on account of Advance Payments in respect of such month.
"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 Test" means, to be considered
"satisfied" for any Payment Date, that the arithmetic average of the Sixty-Day
Delinquency Ratios for such Payment Date and for the two immediately preceding
Payment Dates is less than or equal to 2.5%.
"Average Thirty-Day Delinquency Ratio Test" means, to be considered
"satisfied" for any Payment Date, that the arithmetic average of the Thirty-Day
Delinquency Ratios for such Payment Date and for the two immediately preceding
Payment Dates is less than or equal to 5%.
"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 1996-
A, Class A-1, Class A-2, Class A-3, Class M-1, Class M-2, Class B-1 or Class B-
2, executed and delivered by the Trustee substantially in the form of Exhibit A,
B, or C, as applicable, but does not include the Class C Certificate.
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"Certificate Account" means a separate trust account created and maintained
pursuant to Section 5.05 in the name of the Trust in an Eligible Institution.
"Certificate Owner" means the person who is the beneficial owner of a Book-
Entry Certificate or, if Definitive Certificates have been issued,
Certificateholders.
"Certificate Register" means the register maintained pursuant to Section
9.02.
"Certificate Registrar" or "Registrar" means the registrar appointed
pursuant to Section 9.02.
"Certificateholder" or "Holder" means the person in whose name a
Certificate is registered on the Certificate Register, except that, solely for
the purposes of giving any consent, waiver, request or demand pursuant to this
Agreement, any Certificate registered in the name of the Company or any
Affiliate shall be deemed not to be outstanding and the Percentage Interest
evidenced thereby shall not be taken into account in determining whether the
requisite Percentage Interest necessary to effect any such consent, request,
waiver or demand has been obtained; provided, however, that, solely for the
purpose of determining whether the Trustee is entitled to rely upon any such
consent, waiver, request or demand, only Certificates which the Trustee knows to
be so owned shall be so disregarded.
"Class," "Class A, "Class M," "Class B," or "Class C" means pertaining to
Class A Certificates, Class M Certificates, Class B Certificates, and/or the
Class C Certificate, as the case may be.
"Class A Certificates" means the Class A-1, Class A-2, and Class A-3
Certificates, collectively.
"Class A Distribution Amount" means, as to any Payment Date, the lesser of
(a) the Amount Available and (b) the Class A Formula Distribution Amount;
provided that after the Third Cross-over Date the Class A Distribution Amount
shall be zero.
"Class A Formula Distribution Amount" means, as to any Payment Date, an
amount equal to the sum of (a) one month's interest (or, as to the first Payment
Date, interest from and including the Closing Date to but excluding April 15,
1996) at (1) the Class A-1 Pass-Through Rate on the Class A-1 Principal Balance,
(2) the Class A-2 Pass-Through Rate on the Class A-2 Principal Balance, and (3)
the Class A-3 Pass-Through Rate on the Class A-3 Principal Balance, in each case
to be calculated immediately prior to such Payment Date on the basis of a 360-
day year of twelve thirty-day months, (b) the aggregate of the Unpaid Class A
Interest Shortfalls, if any, with respect to each Class of Class A Certificates,
and (c)(i) if there is no Class A Principal Deficiency Amount as to such
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Payment Date, the Senior Percentage of the Formula Principal Distribution
Amount, or (ii) if there is a Class A Principal Deficiency Amount as to such
Payment Date, the amount determined in accordance with Section 8.04(b)(3)(i);
provided, however, that the aggregate of all amounts distributed for all Payment
Dates pursuant to clause (c) shall not exceed the sum of the Original Class A-l
Principal Balance, the Original Class A-2 Principal Balance, and the Original
Class A-3 Principal Balance.
"Class A Formula Interest Distribution Amount" means, as to each Class of
Class A Certificates and any Payment Date, the sum of the amounts specified in
clause (a)(1), (a)(2), and (a)(3), as appropriate, of the definition of the term
"Class A Formula Distribution Amount" and the aggregate of the Unpaid Class A
Interest Shortfalls, if any, with respect to each such Class.
"Class A Interest Shortfall" means, as to each Class of Class A
Certificates and any Payment Date, the amount, if any, by which the Class A
Formula Interest Distribution Amount for such Class exceeds the amount
distributed to Holders of such Class on such Payment Date pursuant to Section
8.04(b)(2).
"Class A Principal Balance" means, as to any Payment Date, the sum of the
Class A-1 Principal Balance, the Class A-2 Principal Balance, and the Class A-3
Principal Balance.
"Class A Principal Deficiency Amount" means, as to any Payment Date, the
amount, if any, by which the Pool Scheduled Principal Balance is less than the
Class A Principal Balance.
"Class A-1 Certificate" means any one of the Class A-1 Certificates
executed and delivered by the Trustee and authenticated by the Certificate
Registrar substantially in the form set forth in Exhibit A and evidencing an
interest designated as a "regular interest" in the Trust for purposes of the
REMIC Provisions.
"Class A-1 Distribution Amount" means, as to any Payment Date, that portion
of the Class A Distribution Amount to be distributed to the Class A-1
Certificateholders pursuant to Section 8.04(b) on such Payment Date.
"Class A-1 Pass-Through Rate" means 5.70% per annum, computed on the basis
of a 360-day year of twelve 30-day months.
"Class A-1 Principal Balance" means, as to any Payment Date, the Original
Class A-1 Principal Balance less all amounts previously distributed to Holders
of Class A-1 Certificates in respect of principal.
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"Class A-2 Certificate" means any one of the Class A-2 Certificates
executed and delivered by the Trustee and authenticated by the Certificate
Registrar substantially in the form set forth in Exhibit A and evidencing an
interest designated as a "regular interest" in the Trust for purposes of the
REMIC Provisions.
"Class A-2 Distribution Amount" means, as to any Payment Date, that portion
of the Class A Distribution Amount to be distributed to the Class A-2
Certificateholders pursuant to Section 8.04(b) on such Payment Date.
"Class A-2 Pass-Through Rate" means 6.00% per annum, computed on the basis
of a 360-day year of twelve 30-day months.
"Class A-2 Principal Balance" means, as to any Payment Date, the Original
Class A-2 Principal Balance less all amounts previously distributed to Holders
of Class A-2 Certificates in respect of principal.
"Class A-3 Certificate" means any one of the Class A-3 Certificates
executed and delivered by the Trustee and authenticated by the Certificate
Registrar substantially in the form set forth in Exhibit A and evidencing an
interest designated as a "regular interest" in the Trust for purposes of the
REMIC Provisions.
"Class A-3 Distribution Amount" means, as to any Payment Date, that portion
of the Class A Distribution Amount to be distributed to the Class A-3
Certificateholders pursuant to Section 8.04(b) on such Payment Date.
"Class A-3 Pass-Through Rate" means 6.35% per annum, computed on the basis
of a 360-day year of twelve 30-day months.
"Class A-3 Principal Balance" means, as to any Payment Date, the Original
Class A-3 Principal Balance less all amounts previously distributed to Holders
of Class A-3 Certificates in respect of principal.
"Class B Certificates" means the Class B-1 and Class B-2 Certificates,
collectively.
"Class B Cross-over Date" means the earlier of:
(a) the Fifth Cross-over Date, and
(b) the first Payment Date on or after the Payment Date occurring in
January 1999 on which the fraction, expressed as a percentage, the
numerator of which is the Class B Principal Balance as of such Payment
Date and the denominator of
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which is the Pool Scheduled Principal Balance as of the immediately
preceding Payment Date, is equal to or greater than 24%.
"Class B Percentage" means 100% minus the Senior Percentage.
"Class B Principal Balance" means, as to any Payment Date, the sum of the
Class B-1 Principal Balance and the Class B-2 Principal Balance.
"Class B Principal Balance Test" means, to be considered "satisfied" for
any Payment Date, that the fraction, expressed as a percentage, the numerator of
which is the Class B Principal Balance as of such Payment Date and the
denominator of which is the Pool Scheduled Principal Balance as of the
immediately preceding Payment Date, is equal to or greater than 24%.
"Class B Principal Distribution Test" means, as to any Payment Date, each
of the Average Sixty-Day Delinquency Ratio Test, the Average Thirty-Day
Delinquency Ratio Test, the Cumulative Realized Losses Test, the Class B
Principal Balance Test and the Current Realized Losses Test.
"Class B-1 Certificate" means any one of the Class B-1 Certificates
executed and delivered by the Trustee and authenticated by the Certificate
Registrar substantially in the form set forth in Exhibit C and evidencing an
interest designated as a "regular interest" in the Trust for purposes of the
REMIC Provisions.
"Class B-1 Distribution Amount" means, as to any Payment Date, the lesser
of (a) the Amount Available less the sum of the Class A Distribution Amount, the
Class M-1 Distribution Amount and the Class M-2 Distribution Amount, and (b) the
Class B-1 Formula Distribution Amount; provided that after the Sixth Cross-over
Date the Class B-1 Distribution Amount shall be zero.
"Class B-1 Formula Distribution Amount" means, as to any Payment Date, an
amount equal to the sum of (a) one month's interest (or, as to the first Payment
Date, interest from and including the Closing Date to but excluding April 15,
1996) at the Class B-1 Pass-Through Rate on the excess of the Class B-1
Principal Balance over the Class B-1 Principal Shortfall Amount, to be
calculated immediately prior to such Payment Date on the basis of a 360-day year
of twelve 30-day months, (b) any Unpaid Class B-1 Interest Shortfall, and (c) if
such Payment Date is on or prior to the Sixth Cross-over Date, the Class B
Percentage of the Formula Principal Distribution Amount; provided, however, that
on the Fifth Cross-over Date, the balance of any amounts that would have been
distributable on such date pursuant to clause (c) of the definition of the term
"Class M-2 Formula Distribution Amount" (assuming a sufficient Amount Available)
but for the operation of the second proviso in such definition shall instead be
included in clause (c) of this definition; and
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provided, further, that the aggregate of all amounts distributed pursuant to
clause (c) of this definition shall not exceed the Original Class B-1 Principal
Balance.
"Class B-1 Formula Interest Distribution Amount" means, as to any Payment
Date, the sum of the amount specified in clause (a) of the definition of the
term "Class B-1 Formula Distribution Amount" and the Unpaid Class B-1 Interest
Shortfall, if any.
"Class B-1 Formula Principal Shortfall Interest Distribution Amount" means,
as to any Payment Date, the sum of (a) one month's interest (or, as to the first
Payment Date, interest from and including the Closing Date to but excluding
April 15, 1996) at the Class B-1 Pass-Through Rate on the Class B-1 Principal
Shortfall Amount, to be calculated immediately prior to such Payment Date on the
basis of a 360-day year of twelve 30-day months, and (b) the Unpaid Class B-1
Interest Shortfall on Principal Shortfall, if any.
"Class B-1 Interest Deficiency Amount" means, as to any Payment Date, the
amount, if any, by which (a) the Class B-1 Formula Interest Distribution Amount
exceeds (b) the amount available for distribution to the Class B-1
Certificateholders pursuant to Sections 8.04(b)(6)(i) and (ii) on such Payment
Date.
"Class B-1 Interest Shortfall" means, as to any Payment Date, the amount,
if any, by which (a) the Class B-1 Formula Interest Distribution Amount exceeds
(b) the sum of (1) the amount distributed to Class B-1 Certificateholders on
such Payment Date pursuant to Sections 8.04(b)(6)(i) and (ii) and (2) the amount
distributed to Class B-1 Certificateholders on such Payment Date pursuant to
Section 8.04(c).
"Class B-1 Interest Shortfall on Principal Shortfall" means, as to any
Payment Date, the amount, if any, by which (a) the Class B-1 Formula Principal
Shortfall Interest Distribution Amount exceeds (b) the amount distributed to
Class B-1 Certificateholders on such Payment Date pursuant to Section
8.04(b)(8)(iii).
"Class B-1 Pass-Through Rate" means 6.85% per annum, computed on the basis
of a 360-day year of twelve 30-day months.
"Class B-1 Principal Balance" means, as to any Payment Date, the Original
Class B-1 Principal Balance less all amounts previously distributed to Holders
of Class B-1 Certificates in respect of principal.
"Class B-1 Principal Shortfall Amount" means, as of any Payment Date, the
excess, if any, of the Aggregate Principal Shortfall Amount over the Class B-2
Principal Balance, but in no case more than the Class B-1 Principal Balance.
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"Class B-2 Certificate" means any one of the Class B-2 Certificates
executed and delivered by the Trustee and authenticated by the Certificate
Registrar substantially in the form set forth in Exhibit C and evidencing an
interest designated as a "regular interest" in the Trust for purposes of the
REMIC Provisions.
"Class B-2 Distribution Amount" means, as to any Payment Date, the lesser
of (a) the Remaining Amount Available, and (b) the Class B-2 Formula
Distribution Amount.
"Class B-2 Formula Distribution Amount" means, as to any Payment Date, an
amount equal to the sum of (a) one month's interest (or, as to the first Payment
Date, interest from and including the Closing Date to but excluding April 15,
1996) at the Class B-2 Pass-Through Rate on the excess of the Class B-2
Principal Balance over the Class B-2 Principal Shortfall Amount, to be
calculated immediately prior to such Payment Date on the basis of a 360-day year
of twelve 30-day months, (b) any Unpaid Class B-2 Interest Shortfall, and (c) if
such Payment Date is after the Sixth Cross-over Date, the Class B Percentage of
the Formula Principal Distribution Amount; provided, however, that on the Sixth
Cross-over Date, the balance of any amounts that would have been distributable
on such date pursuant to clause (c) of the definition of the term "Class B-1
Formula Distribution Amount" (assuming a sufficient Amount Available) but for
the operation of the second proviso in such definition shall instead be included
in clause (c) of this definition; and provided, further, that the aggregate of
all amounts distributed pursuant to clause (c) of this definition shall not
exceed the Original Class B-2 Principal Balance.
"Class B-2 Formula Interest Distribution Amount" means, as to any Payment
Date, the sum of the amount specified in clause (a) of the definition of the
term "Class B-2 Formula Distribution Amount" and the Unpaid Class B-2 Interest
Shortfall, if any.
"Class B-2 Formula Principal Shortfall Interest Distribution Amount" means,
as to any Payment Date, the sum of (a) one month's interest (or, as to the first
Payment Date, interest from and including the Closing Date to but excluding
April 15, 1996) at the Class B-2 Pass-Through Rate on the Class B-2 Principal
Shortfall Amount, to be calculated immediately prior to such Payment Date on the
basis of a 360-day year of twelve 30-day months, and (b) the Unpaid Class B-2
Interest Shortfall on Principal Shortfall, if any.
"Class B-2 Guaranty Payment" means, as to any Payment Date, the amount, if
any, by which (a) the sum of the Class B-2 Total Formula Distribution Amount and
the Class B-2 Principal Liquidation Loss Amount exceeds (b) the Class B-2 Total
Distribution Amount.
"Class B-2 Interest Shortfall" means, as to any Payment Date, the amount,
if any, by which (a) the Class B-2 Formula Interest Distribution Amount exceeds
(b) the sum of the amount distributed to Class B-2 Certificateholders on such
Payment Date pursuant to Sections 8.04(b)(7)(i) and (ii) and any Class B-2
Guaranty Payment.
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"Class B-2 Interest Shortfall on Principal Shortfall" means, as to any
Payment Date, the amount, if any, by which the Class B-2 Formula Principal
Shortfall Interest Distribution Amount exceeds (a) the sum of (1) the Class B-2
Total Formula Distribution Amount and (2) the Class B-2 Principal Liquidation
Loss Amount less (b) the sum of (1) the Class B-2 Total Distribution Amount and
(2) any Guaranty Payment.
"Class B-2 Pass-Through Rate" means 7.40% per annum, computed on the basis
of a 360-day year of twelve 30-day months.
"Class B-2 Principal Balance" means, as to any Payment Date, the Original
Class B-2 Principal Balance less all amounts previously distributed to Holders
of Class B-2 Certificates in respect of principal.
"Class B-2 Principal Liquidation Loss Amount" means, as to any Payment
Date, the amount, if any, by which (a) the sum of the Class A Principal Balance,
the Class M Principal Balance and the Class B Principal Balance exceeds (b) the
Pool Scheduled Principal Balance (after giving effect to all distributions of
principal on the Class A, Class M and Class B-1 Certificates on such Payment
Date, and all other distributions of principal on the Class B-2 Certificates on
such Payment Date); provided that in no event shall the Class B-2 Principal
Liquidation Loss Amount for any Payment Date, together with all other
distributions of principal on the Class B-2 Certificates on such Payment Date,
exceed the Class B-2 Principal Balance immediately prior to such Payment Date.
"Class B-2 Principal Shortfall Amount" means, as of any Payment Date, the
Aggregate Principal Shortfall Amount, but in no case more than the Class B-2
Principal Balance.
"Class B-2 Total Formula Distribution Amount" means, as to any Payment
Date, the sum of the Class B-2 Formula Distribution Amount and the Class B-2
Formula Principal Shortfall Interest Distribution Amount.
"Class B-2 Total Distribution Amount" means, as to any Payment Date, the
sum of the Class B-2 Distribution Amount and amounts distributed on such Payment
Date pursuant to Section 8.04(b)(8)(iv).
"Class C Certificate" means a certificate for Home Improvement Loans,
Series 1996-A, executed and delivered by the Trustee substantially in the form
of Exhibit I, and evidencing an interest designated as a "residual interest" in
the Trust for purposes of the REMIC Provisions.
"Class C Certificateholder" means the person in whose name a Class C
Certificate is registered on the Certificate Register.
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"Class C Distribution Amount" means, as to any Payment Date, the amount,
if any, distributable in respect of the Class C Certificate pursuant to Section
8.04(b).
"Class M Certificates" means the Class M-1 and Class M-2 Certificates,
collectively.
"Class M Principal Balance" means, as to any Payment Date, the sum of the
Class M-1 Principal Balance and the Class M-2 Principal Balance.
"Class M-1 Certificate" means any one of the Class M-1 Certificates
executed and delivered by the Trustee and authenticated by the Certificate
Registrar substantially in the form set forth in Exhibit B and evidencing an
interest designated as a "regular interest" in the Trust for purposes of the
REMIC Provisions.
"Class M-1 Distribution Amount" means, as to any Payment Date, the lesser
of (a) the Amount Available less the Class A Distribution Amount and (b) the
Class M-1 Formula Distribution Amount; provided that after the Fourth Cross-over
Date the Class M-1 Distribution Amount shall be zero.
"Class M-1 Formula Distribution Amount" means, as to any Payment Date, an
amount equal to the sum of (a) one month's interest (or, as to the first Payment
Date, interest from and including the Closing Date to but excluding April 15,
1996) at the Class M-1 Pass-Through Rate on the excess of the Class M-1
Principal Balance over the Class M-1 Principal Shortfall Amount, to be
calculated immediately prior to such Payment Date on the basis of a 360 day year
of twelve 30-day months, (b) any Unpaid Class M-1 Interest Shortfall and (c) if
such Payment Date is after the Third Cross-over Date, but on or prior to the
Fourth Cross-over Date, the Senior Percentage of the Formula Principal
Distribution Amount; provided, however, that on the Third Cross-over Date, the
balance of any amounts that would have been distributable on such date pursuant
to clause (c) of the definition of the term "Class A Formula Distribution
Amount" (assuming a sufficient Amount Available) but for the operation of the
proviso in such definition shall instead be included in clause (c) of this
definition; and provided, further, that the aggregate of all amounts distributed
for all Payment Dates pursuant to clause (c) of this definition shall not exceed
the Original Class M-1 Principal Balance.
"Class M-1 Formula Interest Distribution Amount" means, as to any Payment
Date, the sum of the amount specified in clause (a) of the definition of the
term "Class M-1 Formula Distribution Amount" and the Unpaid Class M-1 Interest
Shortfall, if any.
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"Class M-1 Formula Principal Shortfall Interest Distribution Amount" means,
as to any Payment Date, the sum of (a) one month's interest (or, as to the first
Payment Date, interest from and including the Closing Date to but excluding
April 15, 1996) at the Class M-1 Pass-Through Rate on the Class M-1 Principal
Shortfall Amount, to be calculated immediately prior to such Payment Date on the
basis of a 360 day year of twelve 30-day months, and (b) the Unpaid Class M-1
Interest Shortfall on Principal Shortfall, if any.
"Class M-1 Interest Deficiency Amount" means, as to any Payment Date, the
amount, if any, by which (a) the Class M-1 Formula Interest Distribution Amount
exceeds (b) the amount available for distribution to the Class M-1
Certificateholders pursuant to Sections 8.04(b)(4)(i) and (ii) on such Payment
Date.
"Class M-1 Interest Shortfall" means, as to any Payment Date, the amount,
if any, by which (a) the Class M-1 Formula Interest Distribution Amount exceeds
(b) the sum of (1) the amount distributed to Class M-1 Certificateholders on
such Payment Date pursuant to Sections 8.04(b)(4)(i) and (ii), and (2) the
amount distributed to Class M-1 Certificateholders on such Payment Date pursuant
to Section 8.04(c).
"Class M-1 Interest Shortfall on Principal Shortfall" means, as to any
Payment Date, the amount, if any, by which (a) the Class M-1 Formula Principal
Shortfall Interest Distribution Amount exceeds (b) any amount distributed to
Class M-1 Certificateholders on such Payment Date pursuant to Section
8.04(b)(8)(i).
"Class M-1 Pass-Through Rate" means 6.95% per annum, computed on the basis
of a 360-day year of twelve 30-day months.
"Class M-1 Principal Balance" means, as to any Payment Date, the Original
Class M-1 Principal Balance less all amounts previously distributed to Holders
of Class M-1 Certificates in respect of principal.
"Class M-1 Principal Shortfall Amount" means, as of any Payment Date, the
excess, if any, of the Aggregate Principal Shortfall Amount over the aggregate
of the Class M-2 Principal Balance and the Class B Principal Balance, but in no
case more than the Class M-1 Principal Balance.
"Class M-2 Certificate" means any one of the Class M-2 Certificates
executed and delivered by the Trustee and authenticated by the Certificate
Registrar substantially in the form set forth in Exhibit B and evidencing an
interest designated as a "regular interest" in the Trust for purposes of the
REMIC Provisions.
"Class M-2 Distribution Amount" means, as to any Payment Date, the lesser
of (a) the Amount Available less the Class A Distribution Amount and the Class
M-1 Distribution
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Amount and (b) the Class M-2 Formula Distribution Amount; provided that after
the Fifth Cross-over Date the Class M-2 Distribution Amount shall be zero.
"Class M-2 Formula Distribution Amount" means, as to any Payment Date, an
amount equal to the sum of (a) one month's interest (or, as to the first Payment
Date, interest from and including the Closing Date to but excluding April 15,
1996) at the Class M-2 Pass-Through Rate on the excess of the Class M-2
Principal Balance over the Class M-2 Principal Shortfall Amount, to be
calculated immediately prior to such Payment Date on the basis of a 360 day year
of twelve 30-day months, (b) any Unpaid Class M-2 Interest Shortfall and (c) if
such Payment Date is after the Fourth Cross-over Date, but on or prior to the
Fifth Cross-over Date, the Senior Percentage of the Formula Principal
Distribution Amount; provided, however, that on the Fourth Cross-over Date, the
balance of any amounts that would have been distributable on such date pursuant
to clause (c) of the definition of the term "Class M-1 Formula Distribution
Amount" (assuming a sufficient Amount Available) but for the operation of the
proviso in such definition shall instead be included in clause (c) of this
definition; and provided, further, that the aggregate of all amounts distributed
for all Payment Dates pursuant to clause (c) of this definition shall not exceed
the Original Class M-2 Principal Balance.
"Class M-2 Formula Interest Distribution Amount" means, as to any Payment
Date, the sum of the amount specified in clause (a) of the definition of the
term "Class M-2 Formula Distribution Amount" and the Unpaid Class M-2 Interest
Shortfall, if any.
"Class M-2 Formula Principal Shortfall Interest Distribution Amount" means,
as to any Payment Date, the sum of (a) one month's interest (or, as to the first
Payment Date, interest from and including the Closing Date to but excluding
April 15, 1996) at the Class M-2 Pass-Through Rate on the Class M-2 Principal
Shortfall Amount, to be calculated immediately prior to such Payment Date on the
basis of a 360 day year of twelve 30-day months, and (b) the Unpaid Class M-2
Interest Shortfall on Principal Shortfall, if any.
"Class M-2 Interest Deficiency Amount" means, as to any Payment Date, the
amount, if any, by which (a) the Class M-2 Formula Interest Distribution Amount
exceeds (b) the amount available for distribution to the Class M-2
Certificateholders pursuant to Sections 8.04(b)(5)(i) and (ii) on such Payment
Date.
"Class M-2 Interest Shortfall" means, as to any Payment Date, the amount,
if any, by which (a) the Class M-2 Formula Interest Distribution Amount,
exceeds (b) the sum of (1) the amount distributed to Class M-2
Certificateholders on such Payment Date pursuant to Sections 8.04(b)(5)(i) and
(ii), and (2) the amount distributed to Class M-2 Certificateholders on such
Payment Date pursuant to Section 8.04(c).
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"Class M-2 Interest Shortfall on Principal Shortfall" means, as to any
Payment Date, the amount, if any, by which the Class M-2 Formula Principal
Shortfall Interest Distribution Amount exceeds any amount distributed to Class
M-2 Certificateholders on such Payment Date pursuant to Section 8.04(b)(8)(iv).
"Class M-2 Pass-Through Rate" means 7.30% per annum, computed on the basis
of a 360-day year of twelve 30-day months.
"Class M-2 Principal Balance" means, as to any Payment Date, the Original
Class M-2 Principal Balance less all amounts previously distributed to Holders
of Class M-2 Certificates in respect of principal.
"Class M-2 Principal Shortfall Amount" means the excess, if any, of the
Aggregate Principal Shortfall Amount over the Class B Principal Balance, but in
no case more than the Class M-2 Principal Balance.
"Class Principal Balance" means any of the Class A-1, Class A-2, Class A-3,
Class M-1, Class M-2, Class B-1 or Class B-2 Principal Balances.
"Closing Date" means March 14, 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 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, (b)
the original or a copy of the mortgage, deed of trust or security deed or
similar evidence of a lien on the related improved property and evidence of due
recording of such mortgage, deed of trust or security deed, if available, (c) if
such Contract was originated by a contractor rather than the Company, the
original or a copy of an assignment of the mortgage, deed of trust or security
deed by the contractor to the Company and (d) a sale control document.
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"Contracts" means the home improvement contracts and promissory notes
described in the List of Contracts attached hereto as Exhibit L and constituting
part of the corpus of the Trust, which Contracts are to be assigned and conveyed
by the Company to the Trust, and includes, without limitation, all related
mortgages, deeds of trust and security deeds and any and all rights to receive
payments which are due pursuant thereto on or after the Cut-off Date, but
excluding any rights to receive payments which are due pursuant thereto prior to
the Cut-off Date.
"Contract Interest Rate" means, as to any Contract, the annual rate of
interest specified in the Contract.
"Corporate Trust Office" means the office of the Trustee at which at any
particular time its corporate trust business shall be principally administered,
which office at the date of the execution of this Agreement is located at the
address set forth in Section 12.09.
"Counsel for the Company" means Briggs and Morgan, P.A. or other legal
counsel for the Company.
"Cumulative Realized Loss Ratio" means, for any Payment Date, a fraction,
expressed as a percentage, the numerator of which is the Cumulative Realized
Losses for that Payment Date, and the denominator of which is the Cut-Off Date
Pool Principal Balance.
"Cumulative Realized Losses" means, as to any Payment Date, the sum of the
Realized Losses for that Payment Date and each preceding Payment Date since the
Cut-off Date.
"Cumulative Realized Losses Test" means, to be considered "satisfied" for
any Payment Date, that the Cumulative Realized Loss Ratio as of such Payment
Date is less than or equal to 9%.
"Current Realized Loss Ratio" means, as to any Payment Date, a fraction,
expressed as a percentage, the numerator of which is the aggregate Realized
Losses for such Payment Date and each of the two immediately preceding Payment
Dates, multiplied by four, and the denominator of which is the arithmetic
average of the Pool Scheduled Principal Balance as of the third preceding
Payment Date and the Pool Scheduled Principal Balance as of such Payment Date.
"Current Realized Losses Test" means, to be considered "satisfied" for any
Payment Date, that the Current Realized Loss Ratio for such Payment Date is less
than or equal to 2.5%.
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"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
not an Affiliate of the Company, 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 S&P and P-1 by Moody's in the case of commercial paper, or
BBB+ or higher by S&P and Baa1 or higher by Moody'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 February 28, 1996 (or the date of origination of the
Contract, if later).
"Cut-off Date Pool Principal Balance" means the aggregate of the Cut-off
Date Principal Balances of the Contracts.
"Cut-off Date Principal Balance" means, as to any Contract, the unpaid
principal balance thereof at the Cut-off Date after giving effect to all
installments of principal due prior thereto.
"Defaulted Contract" means a Contract with respect to which the Servicer
commenced foreclosure proceedings, made a sale of such Contract to a third party
for foreclosure or enforcement, or, in the case of an FHA-Insured Contract,
submitted a claim to FHA, or as to which there was a Delinquent Payment 180 or
more days past due.
"Definitive Certificates" has the meaning assigned in Section 9.02(e).
"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 (i) one Class A-
1 Certificate evidencing $32,000,000 in Original Class A-1 Principal Balance,
(ii) one Class A-2 Certificate evidencing $21,000,000 in Original Class A-2
Principal Balance, (iii) one Class A-3 Certificate evidencing $17,300,000 in
Original Class A-3 Principal Balance, (iv) one Class M-1
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Certificate evidencing $6,550,000 in Original Class M-1 Principal Balance, (v)
one Class M-2 Certificate evidencing $5,625,000 in Original Class M-2 Principal
Balance, (vi) one Class B-1 Certificate evidencing $5,625,000 in Original Class
B-1 Principal Balance, and (vii) one Class B-2 Certificate evidencing $5,626,023
in Original Class B-2 Principal Balance, and any permitted successor depository.
The Depository shall at all times be a "clearing corporation" as defined in
Section 8-102(3) of the Uniform Commercial Code of the State of New York.
"Depository Participant" means a broker, dealer, bank or other financial
institution or other Person for whom from time to time a Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
"Determination Date" means the seventh Business Day following a Due Period
during the term of this Agreement.
"Due Period" means a calendar month during the term of this Agreement.
"Electronic Ledger" means the electronic master record of conditional sales
contracts and promissory notes of the Company.
"Eligible Account" means, at any time, an account which is any of the
following: (i) an account maintained with an Eligible Institution; (ii) an
account or accounts the deposits in which are fully insured by either the Bank
Insurance Fund or the Savings Association Insurance Fund of the FDIC; (iii) a
trust account (which shall be a "segregated trust account") maintained with the
corporate trust department of a federal or state chartered depository
institution or trust company with trust powers and acting in its fiduciary
capacity for the benefit of the Trustee hereunder, which depository institution
or trust company shall have capital and surplus of not less than $50,000,000; or
(iv) an account that will not cause S&P or Moody's to downgrade or withdraw its
then-current rating assigned to the Certificates, as evidenced in writing by S&P
and Moody's.
"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 deposits have been rated A-1 by S&P and P-1 by Moody's or whose unsecured
long-term debt has been rated in one of the two highest rating categories by S&P
and Moody's.
"Eligible Investments" has the meaning assigned in Section 5.05(b).
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"Eligible Servicer" means the Trustee or a Person qualified to act as
servicer of the Contracts under applicable Federal and State laws and
regulations, which is a Title I approved lender under FHA regulations and which
services not less than an aggregate of $100,000,000 in outstanding principal
amount of FHA-insured home improvement contracts and promissory notes,
manufactured housing conditional sales contracts and installment loan agreements
and home equity loans.
"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.
"FHA" means the Federal Housing Administration, or any successor thereto.
"FHA Insurance" means the credit insurance provided by FHA pursuant to
Title I of the National Housing Act, as evidenced by the Company's Contract of
Insurance.
"FHA-Insured Contracts" means those Contracts that have been or are being
reported to FHA as eligible for FHA Insurance, a list of which is attached to
this Agreement as Exhibit M.
"FHA Regulations" means the regulations promulgated by HUD relating to
Title I home improvement loans, currently found at 24 C.F.R. (S)201.
"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.
"First Cross-over Date" means the Payment Date on which the Class A-1
Principal Balance (after giving effect to the distributions of principal on the
Class A-1 Certificates on such Payment Date) is reduced to zero.
"Fifth Cross-over Date" means the Payment Date on which the Class M-2
Principal Balance (after giving effect to the distributions of principal on the
Class M-2 Certificates on such Payment Date) is reduced to zero.
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"Formula Principal Distribution Amount" means, as to any Payment Date, the
sum of:
(a) all scheduled payments of principal due on each outstanding Contract
during the prior Due Period as specified in the amortization schedule at
the time applicable thereto (after adjustments for previous Partial
Principal Prepayments but 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); plus
(b) all Partial Principal Prepayments applied and all Principal Prepayments
in Full received during the prior Due Period; plus
(c) the aggregate Scheduled Principal Balance of all Contracts that became
Liquidated Contracts during the prior Due Period; plus
(d) the aggregate Scheduled Principal Balance of all Contracts repurchased
during the prior Due Period pursuant to Section 3.05; plus
(e) any amount described in clauses (a) through (d) above that was not
previously distributed because of an insufficient amount of funds
available in the Certificate Account if (1) the Payment Date occurs on or
after the Payment Date on which the Class B-2 Principal Balance has been
reduced to zero, or (2) such amount was not covered by a Class B-2
Guaranty Payment and corresponding reduction in the Class B-2 Principal
Balance.
"Fourth Cross-over Date" means the Payment Date on which the Class M-1
Principal Balance (after giving effect to the distributions of principal on the
Class M-1 Certificates on such Payment Date) is reduced to zero.
"GNMA" means the Government National Mortgage Association, or any successor
thereto.
"HUD" means the United States Department of Housing and Urban Development,
or any successor thereto.
"Independent" means, when used with respect to any specified Person, Briggs
and Morgan, P.A. 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
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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 (a) the Servicer has received from
the Obligor, or a third party purchaser of the Contract, all amounts which
the Servicer reasonably and in good faith expects to recover from or on
account of such Contract, or (b) in the case of an FHA-Insured Contract,
either (i) FHA has paid the claim or (ii) the Servicer has determined in good
faith that FHA will not pay the claim, or
(2) a Contract (a) upon which all or a portion of the first payment of
interest due by the Obligor was added to principal, and (b) on which the
Obligor failed to pay the full amount of principal due on the Contract, as
computed by the Servicer;
provided, however, that any Contract which the Company is obligated to
repurchase pursuant to Section 3.05, 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 December 1, 2025, a Liquidated Contract also means
any Contract as to which the Servicer has commenced foreclosure proceedings,
made a sale of the Contract to a third party for foreclosure or enforcement, or,
in the case of an FHA-Insured Contract, submitted a claim to FHA.
"Liquidation Expenses" means out-of-pocket expenses (exclusive of any
overhead expenses) which are incurred by the Servicer in connection with the
liquidation of any defaulted Contract, including, without limitation, legal fees
and expenses, and any related and unreimbursed expenditures for property taxes,
property preservation or restoration of the property to marketable condition.
"Liquidation Proceeds" means cash (including insurance proceeds) received
in connection with the liquidation of defaulted Contracts, whether through
repossession, foreclosure sale or otherwise.
"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 L.
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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.
"Moody's" means Moody's Investors Service, Inc., or any successor thereto;
provided that, if Moody's no longer has a rating outstanding on any Class of the
Certificates, then references herein to "Moody's" shall be deemed to refer to
the NRSRO then rating any Class of the Certificates (or, if more than one such
NRSRO is then rating any Class of the Certificates, to such NRSRO as may be
designated by the Servicer), and references herein to ratings by or requirements
of Moody's shall be deemed to have the equivalent meanings with respect to
ratings by or requirements of such NRSRO.
"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, or, for Contracts which become Liquidated Contracts pursuant to the
last proviso in the definition of "Liquidated Contract," the estimated proceeds
to be received, as of the last day of the Due Period in which such Contract
became a Liquidated Contract, from the Obligor, from a third party purchaser of
the Contract, under FHA Insurance, under insurance other than FHA insurance, or
otherwise, net of Liquidation Expenses.
"NRSRO" means any nationally recognized statistical rating organization.
"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 Class A-1 Principal Balance" means $32,000,000.
"Original Class A-2 Principal Balance" means $21,000,000.
"Original Class A-3 Principal Balance" means $17,300,000.
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"Original Class B-1 Principal Balance" means $6,555,000.
"Original Class B-2 Principal Balance" means $5,625,000.
"Original Class M-1 Principal Balance" means $5,625,000.
"Original Class M-2 Principal Balance" means $5,626.023.
"Original Series 1996-A Certificate Principal Balance" means
$93,726,623.00.
"Partial Principal Prepayment" means (a) any Principal Prepayment other
than a Principal Prepayment in Full and (b) any cash amount deposited in the
Certificate Account pursuant to the proviso in Section 3.05(a) or pursuant to
Section 3.05(b).
"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 15, 1996.
"Percentage Interest" means, as to any Certificate or the Class C
Certificate, the percentage interest evidenced thereby in distributions made on
the related Class, such percentage interest being equal to (i) as to any
Certificate, the percentage (carried to eight places) obtained from dividing the
denomination of such Certificate by (a) in the case of a Class A-1 Certificate,
the Original Class A-1 Principal Balance, (b) in the case of a Class A-2
Certificate, the Original Class A-2 Principal Balance, (c) in the case of a
Class A-3 Certificate, the Original Class A-3 Principal Balance, (d) in the case
of a Class M-1 Certificate, the Original Class M-1 Principal Balance, (e) in the
case of a Class M-2 Certificate, the Original Class M-2 Principal Balance, (f)
in the case of a Class B-1 Certificate, the Original Class B-1 Principal
Balance, and (g) in the case of a Class B-2 Certificate, the Original Class B-2
Principal Balance, and (ii) as to any Class C Certificate, the percentage
specified on the face of such Certificate. The aggregate Percentage Interests
for each Class of Certificates and the Class C Certificate shall equal 100%.
"Permitted Transferee" means, in the case of a transfer of the Class C
Certificate, a Person that is not a Plan or a Disqualified Organization, except
as permitted by Sections 9.02(b)(2) and (3), respectively.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust (including any beneficiary thereof),
unincorporated organization or government or any agency or political subdivision
thereof.
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<PAGE>
"Plan" has the meaning assigned in Section 9.02(b)(2).
"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 1996-A 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 (exclusive of Liquidation Proceeds) 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.
"Principal Prepayment in Full" means any Principal Prepayment of the entire
principal balance of a Contract.
"Realized Losses" means, as to any Payment Date, 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.
"Remaining Amount Available" means, as to any Payment Date, the Amount
Available less the sum of the Class A Distribution Amount, the Class M-1
Distribution Amount, the Class M-2 Distribution Amount and the Class B-1
Distribution Amount.
"REMIC" means a "real estate mortgage investment conduit" as defined in
Section 860D of the Code.
"REMIC Provisions" means the provisions of the federal income tax law
relating to REMICs, which appear at Sections 860A through 860G of the Code, and
related provisions and any temporary, proposed or final regulations promulgated
thereunder, as the foregoing may be in effect from time to time.
"Repurchase Price" means, with respect to a Contract to be repurchased
pursuant to Section 3.05 or which becomes a Liquidated Contract, an amount equal
to (a) the remaining principal amount outstanding on such Contract (without
giving effect to any Advances paid by the Servicer or the Trustee, as
applicable, with respect to such Contract
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pursuant to Section 8.02), plus (b) interest at the Weighted Average Pass-
Through Rate on such Contract from the end of the Due Period with respect to
which the Obligor last made a scheduled 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 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.
"S&P" means Standard & Poor's, a division of The McGraw-Hill Companies,
Inc., or any successor thereto; provided that, if S&P no longer has a rating
outstanding on any Class of the Certificates, then references herein to "S&P"
shall be deemed to refer to the NRSRO then rating any Class of the Certificates
(or, if more than one such NRSRO is then rating any Class of the Certificates,
to such NRSRO as may be designated by the Servicer), and references herein to
ratings by or requirements of S&P shall be deemed to have the equivalent
meanings with respect to ratings by or requirements of such NRSRO.
"Scheduled Principal Balance" means, with respect to any Contract and any
Payment Date or the Cut-off Date, the principal balance of such Contract as of
the due date in the Due Period immediately preceding such Payment Date or as of
the due date immediately preceding the Cut-off Date (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.
"Second Cross-over Date" means the Payment Date on which the Class A-2
Principal Balance (after giving effect to the distributions of principal on the
Class A-2 Certificates on such Payment Date) is reduced to zero.
"Senior Percentage" means:
(a) as to any Payment Date prior to the Class B Cross-over Date, 100%;
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(b) as to any Payment Date on or after the Class B Cross-Over Date but on
or prior to the Fifth Cross-over Date, and on which any Class B
Principal Distribution Test is not satisfied, 100%;
(c) as to any Payment Date on or after the Class B Cross-over Date but on or
prior to the Fifth Cross-over Date, and on which each Class B Principal
Distribution Test is satisfied, a fraction, expressed as a percentage,
the numerator of which is the sum of the Class A Principal Balance and
the Class M Principal Balance as of such Payment Date, and the
denominator of which is the Pool Scheduled Principal Balance as of the
immediately preceding Payment Date; and
(d) as to any Payment Date after the Fifth Cross-over Date, 0%.
"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.
"Sixth Cross-over Date" means the Payment Date on which the Class B-1
Principal Balance (after giving effect to the distributions of principal on the
Class B-1 Certificates on such Payment Date) is reduced to zero.
"Sixty-Day Delinquency Ratio" means, as to any Payment Date, a fraction,
expressed as a percentage, the numerator of which is the aggregate of the
outstanding balances of all Contracts that were delinquent 60 days or more as of
the end of the prior Due Period (including Contracts in respect of which the
related real estate has been foreclosed upon but is still in inventory), and the
denominator of which is the Pool Scheduled Principal Balance as of such Payment
Date.
"Third Cross-over Date" means the Payment Date on which the Class A-3
Principal Balance (after giving effect to the distributions of principal on the
Class A-3 Certificates on such Payment Date) is reduced to zero.
"Thirty-Day Delinquency Ratio" means, as to any Payment Date, a fraction,
expressed as a percentage, the numerator of which is the aggregate of the
outstanding balances of all Contracts that were delinquent 30 days or more as of
the end of the
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<PAGE>
prior Due Period (including Contracts in respect of which the related real
estate has been foreclosed upon but is still in inventory), and the
denominator of which is the Pool Scheduled Principal Balance as of such
Payment Date.
"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 FHA Insurance in respect of each FHA-Insured Contract, (iii) all
rights under any hazard, flood or other individual insurance policy on the
real estate securing a Contract for the benefit of the creditor of such
Contract, (iv) all rights under the Errors and Omissions Protection Policy
and the Fidelity Bond as such policy and bond relate to the Contracts, (v)
all documents contained in the Contract Files, (vi) all proceeds and products
of the foregoing, (vii) the Limited Guaranty and (viii) the remittances,
deposits and payments made into the Certificate Account and amounts in the
Certificate Account (including all proceeds of investments thereof).
"Trustee Advance" has the meaning assigned in Section 11.16.
"Underwriter" means Merrill Lynch & Co.
"Unpaid Class A Interest Shortfall" means, as to each Class of Class A
Certificates and any Payment Date, the amount, if any, of the Class A
Interest Shortfall applicable to such Class for the prior Payment Date,
plus one month's interest thereon (to the extent payment thereof is legally
permissible) at the related Pass-Through Rate, computed on the basis of a
360-day year of twelve 30-day months.
"Unpaid Class B-1 Interest Shortfall" means, with respect to the Class
B-1 Certificates and any Payment Date, the amount, if any, of the Class B-1
Interest Shortfall for the prior Payment Date, plus one month's interest
thereon (to the extent payment thereof is legally permissible) at the Class
B-1 Pass-Through Rate, computed on the basis of a 360-day year of twelve 30-
day months.
"Unpaid Class B-1 Interest Shortfall on Principal Shortfall" means,
with respect to the Class B-1 Certificates and any Payment Date, the
amount, if any, of the Class B-1 Interest Shortfall on Principal Shortfall
for the prior Payment Date, plus one month's interest thereon (to the
extent payment thereof is legally permissible) at the Class B-1 Pass-
Through Rate, computed on the basis of a 360-day year of twelve 30-day
months.
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<PAGE>
"Unpaid Class B-2 Interest Shortfall" means, with respect to the Class
B-2 Certificates and any Payment Date, the amount, if any, of the Class B-2
Interest Shortfall for the prior Payment Date, plus one month's interest
thereon (to the extent payment thereof is legally permissible) at the Class
B-2 Pass-Through Rate, computed on the basis of a 360-day year of twelve
30-day months.
"Unpaid Class B-2 Interest Shortfall on Principal Shortfall" means,
with respect to the Class B-2 Certificates and any Payment Date, the
amount, if any, of the Class B-2 Interest Shortfall on Principal Shortfall
for the prior Payment Date, plus one month's interest thereon (to the
extent payment thereof is legally permissible) at the Class B-2 Pass-
Through Rate, computed on the basis of a 360-day year of twelve 30-day
months.
"Unpaid Class M-1 Interest Shortfall" means, with respect to the Class
M-1 Certificates and any Payment Date, the amount, if any, of the Class M-1
Interest Shortfall for the prior Payment Date, plus one month's interest
thereon (to the extent payment thereof is legally permissible) at the Class
M-1 Pass-Through Rate, computed on the basis of a 360-day year of twelve
30-day months.
"Unpaid Class M-1 Interest Shortfall on Principal Shortfall" means,
with respect to the Class M-1 Certificates and any Payment Date, the
amount, if any, of the Class M-1 Interest Shortfall on Principal Shortfall
for the prior Payment Date, plus one month's interest thereon (to the
extent payment thereof is legally permissible) at the Class M-1 Pass-
Through Rate, computed on the basis of a 360-day year of twelve 30-day
months.
"Unpaid Class M-2 Interest Shortfall" means, with respect to the Class
M-2 Certificates and any Payment Date, the amount, if any, of the Class M-2
Interest Shortfall for the prior Payment Date, plus one month's interest
thereon (to the extent payment thereof is legally permissible) at the Class
M-2 Pass-Through Rate, computed on the basis of a 360-day year of twelve
30-day months.
"Unpaid Class M-2 Interest Shortfall on Principal Shortfall" means,
with respect to the Class M-2 Certificates and any Payment Date, the
amount, if any, of the Class M-2 Interest Shortfall on Principal Shortfall
for the prior Payment Date, plus one month's interest thereon (to the
extent payment thereof is legally permissible) at the Class M-2 Pass-
Through Rate, computed on the basis of a 360-day year of twelve 30-day
months.
"Weighted Average Pass-Through Rate" means, with respect to any Payment
Date, the weighted average (expressed as a percentage and rounded to four
decimal places) of the Class A-1, A-2, A-3, M-1, M-2, B-1 and B-2 Pass-
Through Rates,
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<PAGE>
weighted on the basis of the respective Class A-1, A-2, A-3,
M-1, M-2, B-1 and B-2 Principal Balance immediately prior to such Payment
Date.
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<PAGE>
ARTICLE II
ESTABLISHMENT OF TRUST; TRANSFER OF CONTRACTS
---------------------------------------------
SECTION 2.01. Closing.
a. There is hereby created, by the Company as settlor, a separate trust
which shall be known as Home Improvement Loan Trust 1996-A. By the
execution and delivery of this Agreement, the Company has agreed that it
will elect or will cause an election to be made to treat the pool of assets
comprising the Trust as a REMIC. The Trust shall be administered pursuant
to the provisions of this Agreement for the benefit of the
Certificateholders and the Class C Certificateholder.
b. The Company hereby transfers, assigns, sets over and otherwise conveys to
the Trustee on behalf of the Trust, by execution of an assignment substantially
in the form of Exhibit D hereto, (i) all the right, title and interest of the
Company in and to the Contracts, including all interest and principal received
by the Company on or with respect to the Contracts (other than principal and
interest due on the Contracts before the Cut-off Date), (ii) all rights under
FHA Insurance as such insurance relates to the FHA-Insured Contracts, (iii) all
rights under hazard insurance, if applicable, on the properties described in the
Contracts and, as to FHA-Insured Contracts secured by properties located in
special flood areas designated by HUD, all rights under flood insurance policies
as such insurance relates to the Contracts, (iv) all rights under the Errors and
Omissions Protection Policy and the Fidelity Bond as such policy and bond relate
to the Contracts, (v) all documents contained in the Contract Files, and (vi)
all proceeds and products of the foregoing.
c. Although the parties intend that the conveyance of the Company's right,
title and interest in and to the Contracts pursuant to this Agreement shall
constitute a purchase and sale and not a loan, if such conveyances are deemed to
be a loan, the parties intend that the rights and obligations of the parties to
such loan shall be established pursuant to the terms of this Agreement. 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)(vi) above, and that this
Agreement shall constitute a security agreement under applicable law. If the
trust created by this Agreement terminates prior to the satisfaction of the
claims of any Person under any Certificate, or the Class C Certificate, 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.
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<PAGE>
SECTION 2.02. Conditions to the Closing.
On or before the Closing Date, the Company shall deliver or cause to be
delivered the following documents to the Trustee:
a. The List of Contracts, certified by the Chairman of the Board,
President or any Vice President of the Company.
b. A certificate of an officer of the Company substantially in the form
of Exhibit E hereto.
c. An Opinion of Counsel for the Company substantially in the form of
Exhibit F hereto.
d. A letter from 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 Delaware.
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
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<PAGE>
File, that each Contract and Contract File conforms in all material respects
with the List of Contracts and that each Contract File is complete.
k. Assignments in recordable form to the Trustee of the mortgages,
deeds of trust and security deeds relating to the Contracts.
SECTION 2.03. Acceptance by Trustee.
a. On the Closing Date, if the conditions set forth in Section 2.02
have been satisfied, the Trustee shall deliver a certificate to the Company
substantially in the form of Exhibit G hereto acknowledging conveyance of
the Contracts and Contract Files to the Trustee and declaring that the
Trustee, directly or through a Custodian, will hold all Contracts that have
been delivered in trust, upon the trusts herein set forth, for the use and
benefit of all Certificateholders and the Class C Certificateholder, and
shall issue, to or upon the order of the Company, the Certificates and the
Class C Certificate representing, in the aggregate, ownership of the entire
beneficial interest in the Trust.
b. The Trustee or a Custodian shall review each Contract File, as
described in Exhibit G, within 60 days of the Closing Date or the receipt
by it of the Contract File, whichever is later. If, in its review of the
Contract Files as described in Exhibit G, the Trustee or a Custodian
discovers a breach of the representations or warranties set forth in
Sections 3.02, 3.03 or 3.04 of this Agreement, or in the Officer's
Certificate delivered pursuant to Section 2.02(j) of this Agreement, the
Trustee or Custodian, as the case may be, shall notify the Company and the
Company shall cure such breach or repurchase such Contract pursuant to
Section 3.05.
SECTION 2.04. REMIC Provisions.
a. The Company, as Servicer, and the Class C Certificateholder, by
acceptance thereof, each agrees that, in accordance with the requirements
of Section 860D(b)(1) of the Code, the federal tax return of the Trust for
its first taxable year shall provide that the Trust elects to be treated as
a REMIC for such taxable year and all subsequent taxable years. In
furtherance of the foregoing, the Trustee (at the direction of the Company
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 REMIC under the REMIC Provisions of the Code, including, but not
limited to, the taking of such action as is necessary to cure any
inadvertent termination of REMIC status.
b. The Certificates are being issued in seven classes and are hereby
designated by the Company as constituting the "regular interests" in the
Trust for
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<PAGE>
purposes of Section 860G(a)(1) of the Code. The following terms of the
Certificates are irrevocably established as of the Closing Date: the Class A-1
Pass-Through Rate is 5.70% per annum, the Class A-2 Pass-Through Rate is 6.00%
per annum, the Class A-3 Pass-Through Rate is 6.35% per annum, the Class M-1
Pass-Through Rate is 6.95% per annum, the Class M-2 Pass-Through Rate is 7.30%
per annum, the Class B-1 Pass-Through Rate is 6.85% per annum, the Class B-2
Pass-Through Rate is 7.40% per annum, the initial aggregate principal balance of
the Class A-1 Certificates is $32,000,000 the initial aggregate principal
balance of the Class A-2 Certificates is $21,000,000 the initial aggregate
principal balance of the Class A-3 Certificates is $17,300,000 the initial
aggregate principal balance of the Class M-1 Certificates is $6,550,000 the
initial aggregate principal balance of the Class M-2 Certificates is $5,625,000
the initial aggregate principal balance of the Class B-1 Certificates is
$5.625,000 the initial aggregate principal balance of the Class B-2 Certificates
is $5,623,023 and the latest possible maturity date of the Certificates is in
January 2026 (calculated using a prepayment assumption of 0% and assuming no
defaults or delinquencies on the Contracts). The Class C Certificate is being
issued in a single class and is hereby designated by the Company as constituting
the sole class of "residual interests" in the Trust for purposes of Section
860G(a)(2) of the Code.
c. The Closing Date, which is the day on which the Trust will issue all
of its regular and residual interests, is hereby designated as the "startup
day" of the REMIC constituted by the Trust within the meaning of Section
860G(a)(9) of the Code.
d. After the Closing Date, neither the Trustee, the Company nor any
Servicer shall (i) accept any contribution of assets to the Trust, (ii)
dispose of any portion of the Trust other than as provided in Sections
3.05, 3.06 and 8.06, (iii) engage in any "prohibited transaction," as
defined in Sections 860F(a)(2) and (5) of the Code, (iv) accept any
contribution after the Closing Date that is subject to the tax imposed by
Section 860G(d) of the Code or (v) engage in any activity or enter into any
agreement that would result in the receipt by the Trust of any "net income
from foreclosure property" as defined in Section 860G(c)(2) of the Code,
unless, prior to any such action set forth in clauses (i), (ii), (iii),
(iv) or (v), the Trustee shall have received an unqualified Opinion of
Counsel, which opinion shall not be an expense of the Trust, stating that
such action will not, directly or indirectly, (A) adversely affect the
status of the Trust as a REMIC or the status of the Certificates as
"regular interests" therein or of the Class C Certificate as the sole class
of "residual interests" therein, (B) affect the distributions payable
hereunder to the Certificateholders or the Class C Certificateholder or (C)
result in the imposition of any lien, charge or encumbrance upon the Trust.
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<PAGE>
e. Upon the acquisition of any real property (including interests in real
property), or any personal property incident thereto, in connection with the
default of a Contract, the Servicer and the Trustee (at the direction of the
Servicer) shall take, or cause to be taken, such action as is necessary to sell
or otherwise dispose of such property within such period as is then required by
the Code in order for such property to qualify as "foreclosure property" within
the meaning of Section 860G(a)(8) of the Code, unless the Servicer and the
Trustee receive an Opinion of Counsel to the effect that the holding by the
Trust of such property subsequent to the period then permitted by the Code will
not result in the imposition of any taxes on "prohibited transactions" of the
Trust, as defined in Section 860F of the Code, or cause the Trust to fail to
qualify as a REMIC at any time that the Certificates or Class C Certificate are
outstanding. The Servicer shall manage, conserve, protect and operate such real
property, or any personal property incident thereto, so that such property will
not fail to qualify as "foreclosure property," as defined in Section 860G(a)(8)
of the Code, and that the management, conservation, protection and operation of
such property will not result in the receipt by the Trust of any "income from
nonpermitted assets," within the meaning of Section 860F(a)(2)(B) of the Code.
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<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
The Company makes the following representations and warranties, effective as
of the Closing Date, on which the Trustee will rely in accepting the Contracts
in trust and issuing the Certificates and the Class C Certificate 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, the
Certificateholders or the Class C Certificateholder for a breach of a
representation or warranty of the Company set forth in Section 3.02, 3.03 or
3.04 of this Agreement or in the Officer's Certificate delivered pursuant to
Section 2.02(j) of this Agreement.
SECTION 3.01. Representations and Warranties Regarding the Company.
The Company represents and warrants to the Certificateholders and the Class C
Certificateholder 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,
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<PAGE>
or registration or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery, performance, validity or
enforceability of this Agreement.
d. No Violations. The execution, delivery and performance of this Agreement
by the Company will not violate any provision of any existing law or regulation
or any order or decree of any court or the Certificate of Incorporation or
Bylaws of the Company, or constitute a material breach of any mortgage,
indenture, contract or other agreement to which the Company is a party or by
which the Company may be bound.
e. Litigation. No litigation or administrative proceeding of or before any
court, tribunal or governmental body is currently pending, or to the knowledge
of the Company threatened, against the Company or any of its properties or with
respect to this Agreement, the Certificates or the Class C Certificate which, if
adversely determined, would in the opinion of the Company have a material
adverse effect on the transactions contemplated by this Agreement.
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 and the Class C
Certificateholder 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, closing and perfecting the lien of the Contract have been paid. The
subject real property has not been released from the lien of such Contract.
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d. Binding Obligation. The Contract is the legal, valid and binding
obligation of the Obligor thereunder and is enforceable in accordance with its
terms, except as such enforceability may be limited by laws affecting the
enforcement of creditors' rights generally.
e. No Defenses. The Contract is not subject to any right of rescission,
setoff, counterclaim or defense, including the defense of usury, and the
operation of any of the terms of the Contract or the exercise of any right
thereunder will not render the Contract unenforceable in whole or in part or
subject to any right of rescission, setoff, counterclaim or defense, including
the defense of usury, and no such right of rescission, setoff, counterclaim or
defense has been asserted with respect thereto.
f. Insurance Coverage. The Company has been named as an additional insured
party under any hazard insurance on the property described in the Contract, to
the extent required by the Company's underwriting guidelines. If the property
described in the Contract is located in a special flood area designated by HUD,
the property is covered by a flood insurance policy of the nature and, if such
Contract is an FHA-Insured Contract, in the amount required by the FHA
Regulations.
g. FHA Insurance. If the Contract is an FHA-Insured Contract, such Contract
was originated in compliance with FHA Regulations and is insured, without set-
off, surcharge or defense, by FHA Insurance. Following the assignment of such
FHA-Insured Contract to the Trustee, the Trustee on behalf of the Trust will be
entitled to the full benefits of the FHA Insurance.
h. Lawful Assignment. The Contract was not originated in and is not subject
to the laws of any jurisdiction whose laws would make the transfer of the
Contract under this Agreement or pursuant to transfers of the Certificates or
Class C Certificate unlawful or render the Contract unenforceable. The Company
has duly executed a valid blanket assignment of the Contracts transferred to the
Trust, and has transferred all its right, title and interest in such Contracts,
including all rights the Company may have against the originating contractor-
seller with respect to Contracts originated by a contractor-seller rather than
the Company, to the Trust. The blanket assignment, any and all documents
executed by the Company pursuant to Section 2.01(b) hereof, and this Agreement
each constitute the legal, valid and binding obligation of the Company
enforceable in accordance with their respective terms.
i. Compliance with Law. At the date of origination of the Contract, all
requirements of any federal and state laws, rules and regulations applicable to
the Contract, including, without limitation, usury and truth in lending laws and
(if such Contract is an FHA-Insured Contract) the FHA Regulations have been
complied with, and the Company shall for at least the period of this Agreement,
maintain in
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its possession, available for the Trustee's inspection, and shall deliver to the
Trustee upon demand, evidence of compliance with all such requirements.
j. Contract in Force. The Contract has not been satisfied or subordinated in
whole or in part or rescinded, and the real estate securing such Contract has
not been released from the lien of such Contract in whole or in part.
k. Valid Lien. The Contract has been duly executed and delivered by the
Obligor, and the lien created thereby has been duly recorded, or has been
delivered to the appropriate governmental authority for recording and will be
duly recorded within 180 days, and constitutes a valid and perfected first,
second or third priority lien on the real estate described in such Contract.
l. Capacity of Parties. The signature(s) of the Obligor(s) on the Contract
are genuine and all parties to the Contract had full legal capacity to execute
the Contract.
m. Good Title. The Company is the sole owner of the Contract and, if such
Contract is an FHA-Insured Contract, because the Trustee is a lender approved by
HUD to originate and purchase Title I loans under a valid Title I contract of
insurance, has the authority to sell, transfer and assign such Contract to the
Trust under the terms of this Agreement. There has been no assignment, sale or
hypothecation of the Contract by the Company except the usual past hypothecation
of the Contract in connection with the Company's normal banking transactions in
the conduct of its business, which hypothecation terminates upon sale of the
Contract to the Trust. The Company has good and marketable title to the
Contract, free and clear of any encumbrance, equity, loan, pledge, charge,
claim, lien or encumbrance of any type and has full right to transfer the
Contract to the Trust.
n. No Defaults. As of the Cut-off Date, there was no default, breach,
violation or event permitting acceleration existing under the Contract and no
event which, with notice and the expiration of any grace or cure period, would
constitute such a default, breach, violation or event permitting acceleration
under such Contract (except payment delinquencies permitted by clause (b)
above). The Company has not waived any such default, breach, violation or event
permitting acceleration except payment delinquencies permitted by clause (b)
above.
o. Equal Installments. The Contract has a fixed Contract Interest Rate and
provides for level monthly payments which fully amortize the loan over its term.
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p. Enforceability. Each Contract contains customary and enforceable
provisions so as to render the rights and remedies of the holder thereof
adequate for the realization against the collateral of the benefits of the lien
provided thereby.
q. One Original. There is only one original executed Contract, which
Contract has been delivered to the Trustee or its Custodian on or before the
Closing Date.
r. Genuine Documents. All documents submitted are genuine, and all other
representations as to each Contract, including the List of Contracts delivered
to the Trustee, are true and correct. Any copies of documents provided by the
Company are accurate and complete (except that, with respect to each Contract
that was originated by a contractor-seller rather than the Company, the Company
makes such representation and warranty only to the best of the Company's
knowledge).
s. Origination. The Contract was originated by a home improvement contractor
in the ordinary course of such contractor's business or was originated by the
Company directly.
t. Underwriting Guidelines. Each Contract was originated or purchased in
accordance with the Company's then-current underwriting guidelines.
u. Good Repair. The property described in the Contract is, to the best of
the Company's knowledge, free of damage and in good repair.
v. Qualified Mortgage. The Contract represents a "qualified mortgage" within
the meaning of Section 860G(a)(3) of the Code. The Company represents and
warrants that, either as of the date or origination (or, in the case of a non-
default modification, the modification date) or the Closing Date, the fair
market value of the property securing each Contract was not less than 80% of the
"adjusted issue price" (within the meaning of the REMIC Provisions) of such
Contract.
SECTION 3.03. Representations and Warranties Regarding the Contracts in
the Aggregate.
The Company represents and warrants to the Certificateholders and the Class C
Certificateholder that:
a. Amounts. The Cut-off Date Pool Principal Balance equals at least the
Original Series 1996-A Certificate Principal Balance.
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b. Characteristics. The Contracts have the following characteristics: (i)
100% of the Contracts (by Cut-off Date Principal Balance) are secured by a
mortgage, deed of trust or security deed on the related real estate; (ii) no
Contract has a remaining maturity of more than 359 months; (iii) the final
scheduled payment date on the Contract with the latest maturity is in January
2026; (iv) no Contract was originated before July, 1996; (v) no Contract has a
Contract Interest Rate less than 5.99%; (vi) no more than 5% of the Contracts
(by Cut-off Date Principal Balance) are 30 or more days delinquent; and (vii)
each of the Contracts has a Contract Interest Rate of at least 8.75% except one
Contract, which has a Contract Interest Rate of 5.99%.
c. Geographic Concentrations. By Cut-off Date Principal Balance, 12.65% of
the Contracts are secured by property located in California, 7.70% in New York,
6.47% in Florida, 6.30% in New Jersey, 6.19% in Pennsylvania, and 5.24% in
Texas. 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 are
secured by 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.
f. Contractor Concentration. No more than 2% of the Contracts, by Cut-off
Date Principal Balance, were originated by any one contractor.
SECTION 3.04. Representations and Warranties Regarding the Contract
Files.
The Company represents and warrants to the Certificateholders and the Class C
Certificateholder 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.
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b. Bulk Transfer Laws. The transfer, assignment and conveyance of the
Contracts and the Contract Files by the Company pursuant to this Agreement is
not subject to the bulk transfer or any similar statutory provisions in effect
in any applicable jurisdiction.
SECTION 3.05. Repurchases of Contracts for Breach of Representations
and Warranties.
a. Subject to Section 3.06, the Company shall repurchase a Contract, at its
Repurchase Price, not later than 90 days after the day on which the Company, the
Servicer or the Trustee first discovers or should have discovered a breach of a
representation or warranty of the Company set forth in Sections 3.02, 3.03 or
3.04 of this Agreement or in the Officer's Certificate delivered pursuant to
Section 2.02(j) of this Agreement that materially adversely affects the Trust's,
the Certificateholders' or the Class C Certificateholder's 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 Cut-off Date
Principal Balance, which the Company would otherwise be required to repurchase
pursuant to this Section, the Company may, in lieu of repurchasing such
Contract, deposit in the Certificate Account within 90 days from the date of
such discovery cash in an amount sufficient to cure such deficiency or
discrepancy. Any such cash so deposited shall be distributed to
Certificateholders and the Class C Certificateholder on the immediately
following Payment Date as a collection of principal or interest on such
Contract, according to the nature of the deficiency or discrepancy.
Notwithstanding any other provision of this Agreement, the obligation of the
Company under this Section shall not terminate upon a Service Transfer pursuant
to Article VII.
b. Notwithstanding subparagraph (a) above, and subject to Section 3.06, the
Company shall repurchase any Contract, at its respective Repurchase Price, if
the Company has failed to deliver the related Contract File, except for an
evidence of lien on the related improved property and evidence of due recording
of such mortgage, deed of trust or security deed, if available, to the Trustee
within 30 days of the Closing Date.
c. The Company shall defend and indemnify the Trustee, the
Certificateholders, and the Class C Certificateholder against all costs,
expenses, losses, damages, claims and liabilities, including reasonable fees and
expenses of counsel, which may be asserted against or incurred by any of them as
a result of any third-party action arising out of any breach of any such
representation and warranty.
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SECTION 3.06. No Repurchase Under Certain Circumstances.
Notwithstanding any provision of this Agreement to the contrary, no
repurchase pursuant to Section 3.05 shall be made unless the Company (at its own
expense) obtains for the Trustee an Opinion of Counsel addressed to the Trustee
that any such repurchase would not, under the REMIC Provisions, (i) cause the
Trust to fail to qualify as a REMIC while any regular interest in the REMIC is
outstanding, (ii) result in a tax on prohibited transactions within the meaning
of Section 860F(a)(2) of the Code or (iii) constitute a contribution after the
startup day subject to tax under Section 860G(d) of the Code. The Company
diligently shall attempt to obtain such Opinion of Counsel. Notwithstanding the
absence of such opinion as to the imposition of any tax as the result of such
purchase or deposit, the Company shall purchase such Contract (or deposit cash
in the Certificate Account as provided in the preceding section) and shall
guarantee the payment of such tax by paying to the Trustee the amount of such
tax not later than five Business Days before such tax shall be due and payable
to the extent that amounts previously paid over to and then held by the Trustee
pursuant to Section 6.06 hereof are insufficient to pay such tax and all other
taxes chargeable under Section 6.06. Pursuant to Section 6.06, the Servicer is
hereby directed to withhold, and shall withhold and pay over to the Trustee, an
amount sufficient to pay such tax and any other taxes imposed on "prohibited
transactions" under Section 860F(a)(i) of the Code or imposed on "contributions
after startup date" under Section 860G(d) of the Code from amounts otherwise
distributable to the Class C Certificateholder. The Servicer shall give notice
to the Trustee at the time of such repurchase of the amounts due from the
Company pursuant to the guarantee of the Company described above and give notice
as to who should receive such payment.
The Trustee shall have no obligation to pay any such amounts pursuant to this
Section other than from moneys provided to it by the Company or from moneys held
in the funds and accounts created under this Agreement. The Trustee shall be
deemed conclusively to have complied with this Section if it follows the
directions of the Company.
In the event any tax that is guaranteed by the Company pursuant to this
Section 3.06 is refunded to the Trust or otherwise is determined not to be
payable, the Company shall be repaid the amount of such refund or that portion
of any guarantee payment made by the Company that is not applied to the payment
of such tax.
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ARTICLE IV
PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS
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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, who shall act as the agent of the
Trustee on behalf of the Certificateholders. 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 of BBB- or higher from S&P and Baa3 or
higher from Moody's, (i) the Company shall promptly execute and deliver to the
Trustee (if it has not previously done so) endorsements of each Contract and
assignments in recordable form of each mortgage, deed of trust or security deed
securing a Contract, and (ii) the Trustee, at the Company's expense, shall file
promptly in the appropriate recording offices the assignments to the Trustee on
behalf of the Trust of each mortgage, deed of trust or security deed securing a
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 (including, without limitation, the mortgage or
deed of trust on the related real estate granted thereby).
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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 Company, if it is the Servicer, may delegate some or all of its
servicing duties to a wholly owned subsidiary of the Company, for so long as
such subsidiary remains, directly or indirectly, a wholly owned subsidiary of
the Company. Notwithstanding any such delegation the Company shall retain all of
the rights and obligations of the Servicer hereunder. The Trustee, at the
request of a Servicing Officer, shall furnish the Servicer with any powers of
attorney or other documents necessary or appropriate to enable the Servicer to
carry out its servicing and administrative duties hereunder. The Company is
hereby appointed the Servicer until such time as any Service Transfer shall be
effected under Article VII.
SECTION 5.02. Standard of Care.
In managing, administering, servicing and making collections on the Contracts
pursuant to this Agreement, the Servicer will exercise that degree of skill and
care required by FHA (in the case of FHA-Insured Contracts) and otherwise
consistent with the highest degree of skill and care that the Servicer exercises
with respect to similar contracts (including manufactured housing contracts)
serviced by the Servicer; provided, however, that such degree of skill and care
shall be at least as favorable as the degree of skill and care generally applied
by 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
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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.
b. At all times during the term hereof, the Servicer shall keep available a
copy of the List of Contracts at its principal executive office for inspection
by Certificateholders.
c. A Certificateholder holding Certificates representing in the aggregate at
least 5% of the Aggregate Certificate Principal Balance shall have the rights of
inspection afforded to the Trustee pursuant to this Section 5.04.
SECTION 5.05. Certificate Account.
a. On or before the Closing Date, the Company shall establish the
Certificate Account on behalf of the Trust, which shall be an Eligible Account.
The Servicer shall pay into the Certificate Account, as promptly as practicable
(not later than the next Business Day) following receipt thereof, all amounts
received with respect to the Contracts, including all proceeds of FHA Insurance
claims received by the Servicer, other than extension fees and assumption fees,
which fees shall be retained by the Servicer as compensation for servicing the
Contracts, and other than Liquidation Expenses permitted by Section 5.08. The
Trustee shall pay into the Certificate Account as promptly as practicable all
proceeds of FHA Insurance claims with respect to FHA-Insured Contracts received
by the Trustee. All amounts paid into the Certificate Account under this
Agreement shall be held in trust for the Trustee, the Certificateholders and the
Class C Certificateholder until payment of any such amounts is authorized under
this Agreement. Only the Trustee may withdraw funds from the Certificate
Account.
b. If the Servicer so directs, the 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. Any investment
of funds in the Certificate Account shall be made in Eligible Investments held
by a financial institution in accordance with the following requirements: (1)
all Eligible Investments shall be held in an account with such financial
institution in the name of the Trustee, and the agreement governing such account
shall be governed by the laws of the State
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of Minnesota, (2) with respect to securities held in such account, such
securities shall be (i) certificated securities (as such term is used in N.Y.
U.C.C. (S) 8-313(d)(i)), securities deemed to be certificated securities under
applicable regulations of the United States government, or uncertificated
securities issued by an issuer organized under the laws of the State of New York
or the State of Delaware, (ii) either (A) in the possession of such institution,
(B) in the possession of a clearing corporation (as such term is used in Minn.
Stat. (S) 336.8-313(g)) in the State of New York, registered in the name of such
clearing corporation or its nominee, not endorsed for collection or surrender or
any other purpose not involving transfer, not containing any evidence of a right
or interest inconsistent with the Trustee's security interest therein, and held
by such clearing corporation in an account of such institution, (C) held in an
account of such institution with the Federal Reserve Bank of New York or the
Federal Reserve Bank of Minneapolis, or (D) in the case of uncertificated
securities, issued in the name of such institution, and (iii) identified, by
book entry or otherwise, as held for the account of, or pledged to, the Trustee
on the records of such institution, and such institution shall have sent the
Trustee a confirmation thereof, and (3) with respect to repurchase obligations
held in such account, such repurchase obligations shall be identified by such
institution, by book entry or otherwise, as held for the account of, or pledged
to, the Trustee on the records of such institution, and the related securities
shall be held in accordance with the requirements of clause (2) above. Once such
funds are invested, such institution shall not change the investment of such
funds. All income and gain from such investments shall be added to the
Certificate Account and distributed on such Payment Date pursuant to Section
8.04(b). Losses, if any, realized on amounts in the Certificate Account invested
pursuant to this paragraph shall first be credited against undistributed
investment earnings on amounts in the Certificate Account invested pursuant to
this paragraph, and shall thereafter be deemed to reduce the amount on deposit
in the Certificate Account and otherwise available for distribution to
Certificateholders and the Class C Certificateholder pursuant to Section 8.01.
The Company, the Servicer 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, 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
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commercial capacity) incorporated under the laws of the United States of
America or any state thereof and subject to supervision and examination by
federal and/or state authorities, so long as, at the time of such investment
or contractual commitment providing for such investment, the commercial paper
or other short-term debt obligations of such depository institution or trust
company are rated at least at least A-1 by S&P and P-1 by Moody's and (B) any
other demand or time deposit or certificate of deposit which is fully insured
by the Federal Deposit Insurance Corporation;
(iii) shares of an investment company registered under the Investment
Company Act of 1940, whose shares are registered under the Securities Act
of 1933 and have a rating of AAA by S&P and Aaa from Moody'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 AA from S&P and at
least Aa2 from Moody'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 S&P and at
least P-1 from Moody's at the time of such investment.
The Trustee may trade with itself or an Affiliate in the purchase or sale of
such Eligible Investments.
c. If at any time the Trustee receives notice (from Moody's, S&P the
Servicer or otherwise) that the Certificate Account has ceased to be an Eligible
Account, the Trustee shall, as soon as practicable but in no event later than
five Business Days of the Trustee's receipt of such notice, transfer the
Certificate Account and all funds and Eligible Investments therein to an
Eligible Account. Following any such transfer, the Trustee shall notify Moody's,
S&P and the Servicer of the location of the Certificate Account.
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SECTION 5.06. Enforcement.
a. The Servicer shall, consistent with customary servicing procedures, act
with respect to the Contracts in such manner as will maximize the receipt of
principal and interest on such Contracts and Liquidation Proceeds with respect
to Liquidated Contracts. The Company shall pay all FHA Insurance premiums
required by FHA Regulations in respect of FHA-Insured Contracts; if the Company
is no longer the Servicer and fails to pay such FHA Insurance premiums, the
successor Servicer shall pay such premiums and shall be entitled to
reimbursement therefor in accordance with Section 8.04. The Servicer shall
comply with FHA Regulations in servicing FHA-Insured Contracts so that the
related FHA Insurance remains in full force and effect, except for good-faith
disputes relating to FHA Regulations or such FHA Insurance.
b. In accordance with the standard of care specified in Paragraph 5.02, the
Servicer may, in its own name, if possible, or as agent for the Trust, commence
proceedings for the foreclosure of any subject real estate, and may (with
respect to an FHA-Insured Contract) submit a claim to FHA in lieu of commencing
foreclosure proceedings, or may take such other steps that in the Servicer's
reasonable judgment will maximize Liquidation Proceeds with respect to the
Contract, including, for example, the sale of the Contract to a third party for
foreclosure or enforcement and, in the case of any default on a related prior
mortgage loan, the advancing of funds to correct such default and the advancing
of funds to pay off a related prior mortgage loan, which advances are
Liquidation Expenses that will be reimbursed to the Servicer out of related
Liquidation Proceeds before the related Net Liquidation Proceeds are paid to
Certificateholders and the Class C Certificateholder. The Servicer shall also
deposit in the Certificate Account any Net Liquidation Proceeds received in
connection with any Contract which became a Liquidated Contract in a prior Due
Period.
c. The Servicer may sue to enforce or collect upon Contracts, in its own
name, if possible, or as agent for the Trust. If the Servicer elects to commence
a legal proceeding to enforce a Contract, the act of commencement shall be
deemed to be an automatic assignment of the Contract to the Servicer for
purposes of collection only. If, however, in any enforcement suit or legal
proceeding it is held that the Servicer may not enforce a Contract on the ground
that it is not a real party in interest or a holder entitled to enforce the
Contract, the Trustee on behalf of the Trust shall, at the Servicer's expense,
take such steps as the Servicer deems necessary to enforce the Contract,
including bringing suit in its name or the names of the Certificateholders and
the Class C Certificateholder.
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d. The Servicer may grant to the Obligor on any Contract any rebate, refund
or adjustment out of the Certificate Account that the Servicer in good faith
believes is required because of prepayment in full of the Contract. The Servicer
will not permit any rescission or cancellation of any Contract.
e. The Servicer shall enforce any due-on-sale clause in a Contract if such
enforcement is called for under its then current servicing policies for
obligations similar to the Contracts, provided that such enforcement is
permitted by applicable law and will not adversely affect any applicable
insurance policy. If an assumption of a Contract is permitted by the Servicer,
upon conveyance of the related property the Servicer shall use its best efforts
to obtain an assumption agreement in connection therewith.
f. If, following the termination of the Trust pursuant to Section 12.04, HUD
demands reimbursement of an FHA Insurance claim paid on an FHA-Insured Contract
prior to the termination of the Trust, the Servicer agrees that it will not seek
to recover any such amount from the Trustee or the Certificateholders.
g. Any provision of this Agreement to the contrary notwithstanding, the
Servicer shall not agree to the modification or waiver of any provision of a
Contract at a time when such Contract is not in default or such default is not
reasonably foreseeable, if such modification or waiver would be treated as a
taxable exchange under Section 1001 of the Code or any proposed, temporary or
final Treasury Regulations promulgated thereunder.
SECTION 5.07. Trustee to Cooperate.
a. Upon payment in full on any Contract, the Servicer will notify the
Trustee and the Company (if the Company is not the Servicer) on the next
succeeding Payment Date by certification of a Servicing Officer (which
certification shall include a statement to the effect that all amounts received
in connection with such payments which are required to be deposited in the
Certificate Account pursuant to Section 5.05 have been so deposited) and shall
request delivery of the Contract and Contract File to the Servicer. Upon receipt
of such delivery and request, the Trustee shall promptly release or cause to be
released such Contract and Contract File to the Servicer. Upon receipt of such
Contract and Contract File, each of the Company (if different from the Servicer)
and the Servicer is authorized to execute an instrument in satisfaction of such
Contract and to do such other acts and execute such other documents as the
Servicer deems necessary to discharge the Obligor thereunder and eliminate any
lien on the related real estate. The Servicer shall determine when a Contract
has been paid in full; provided that, to the extent that insufficient payments
are received on a Contract credited by the Servicer as prepaid or paid in full
and
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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.
b. If the Servicer elects to submit a claim to FHA under the FHA Insurance
in respect of an FHA-Insured Contract and payment is received from FHA, the
Servicer shall notify the Trustee and the Company (if the Company is not the
Servicer) on the next succeeding Payment Date by certification of a Servicing
Officer (which certification shall include a statement to the effect that all
amounts received in connection with such payments which are required to be
deposited in the Certificate Account pursuant to Section 5.05 have been so
deposited) and shall request delivery of the Contract and Contract File to the
Servicer. Upon receipt of such delivery and request, the Trustee shall promptly
release or cause to be released such Contract and Contract File to the Servicer.
c. From time to time as appropriate for servicing, foreclosing, and making a
claim for FHA Insurance coverage in connection with an FHA-Insured Contract, the
Trustee shall, upon written request of a Servicing Officer and delivery to the
Trustee of a receipt signed by such Servicing Officer, cause the original
Contract and the related Contract File to be released to the Servicer and shall
execute such documents as the Servicer shall deem necessary to the prosecution
of any such proceedings. Upon request of a Servicing Officer, the Trustee shall
perform such other acts as reasonably requested by the Servicer and otherwise
cooperate with the Servicer in enforcement of the Certificateholders' rights and
remedies with respect to Contracts.
d. The Servicer's receipt of a Contract and/or Contract File shall obligate
the Servicer to return the original Contract and the related Contract File to
the Trustee when its need by the Servicer has ceased unless the Contract shall
be liquidated or repurchased as described in Section 3.05 or 8.06.
SECTION 5.08. Costs and Expenses.
Except as provided in Section 8.04(b) for the reimbursement of Advances, all
costs and expenses incurred by the Servicer in carrying out its duties hereunder
(including payment of FHA Insurance premiums, payment of the Trustee's fees
pursuant to Section 11.06, fees and expenses of accountants and payments of all
fees and expenses incurred in connection with the enforcement of Contracts
(including enforcement of Contracts and foreclosures upon real estate securing
any such Contracts) and all other fees and expenses not expressly stated
hereunder to be for the account of the Trust) shall be paid by the Servicer and
the Servicer shall not (except as otherwise provided in Section 8.04(b)(10)) be
entitled to reimbursement
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hereunder, except that the Servicer shall be reimbursed out of the Liquidation
Proceeds of a Liquidated Contract (including FHA Insurance proceeds) for
customary out-of-pocket Liquidation Expenses incurred by it. The Servicer shall
not incur such Liquidation Expenses unless it determines in its good faith
business judgment that incurring such expenses will increase the Net Liquidation
Proceeds on the related Contract. The Servicer's out-of-pocket Liquidation
Expenses in connection with the submission of a claim to FHA currently do not
exceed $100 per Contract.
SECTION 5.09. Maintenance of Insurance.
The Servicer shall at all times keep in force a policy or policies of
insurance covering errors and omissions for failure to maintain insurance as
required by this Agreement, and a fidelity bond. Such policy or policies and
such fidelity bond shall be in such form and amount as is generally customary
among persons who service a portfolio of home improvement loans having an
aggregate principal amount of $10,000,000 or more, and which are generally
regarded as servicers acceptable to institutional investors. The Servicer shall
cause to be maintained with respect to any real property securing an FHA-Insured
Contract such hazard insurance and flood insurance as may be required by the FHA
Regulations, it being understood that at the Closing Date hazard insurance was
not required to be maintained under the FHA Regulations. The Servicer shall
cause to be maintained with respect to the real property securing a conventional
Contract hazard insurance (excluding flood insurance coverage) if such
conventional Contract is secured by a first priority mortgage, deed of trust or
security deed or the initial principal balance of such conventional Contract
exceeds $30,000.
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 S&P and Moody'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.
a. No later than one Business Day following each Determination Date, the
Servicer shall deliver to the Trustee, S&P and Moody's a Monthly Report,
substantially in the form of Exhibit N hereto.
b. If the applicable Monthly Report indicates that there is a Class M-1
Interest Deficiency Amount, a Class M-2 Interest Deficiency Amount and/or a
Class B-1 Interest Deficiency Amount, the Servicer shall promptly notify the
Trustee, by telephone, of the aggregate amount of such Class M-1 Interest
Deficiency Amount, Class M-2 Interest Deficiency Amount and Class B-1 Interest
Deficiency Amount. The Trustee must promptly determine the total amount of funds
in the Certificate Account on the Determination Date (or the most recent date
practicable), and promptly notify the Servicer, by telephone, of such amount. If
the Servicer determines that the total amount of funds in the Certificate
Account so reported by the Trustee (after giving effect to the withdrawal of the
Available Funds and any Class B-2 Guaranty Payment for the related Payment Date)
will be sufficient to pay in full any Class M-1 Interest Deficiency Amount,
Class M-2 Interest Deficiency Amount and Class B-1 Interest Deficiency Amount,
the Servicer shall so indicate on the Monthly Report. If the Servicer determines
that the total amount of funds in the Certificate Account so reported by the
Trustee (after giving effect to the withdrawal of the Available Funds and any
Class B-2 Guaranty Payment for the related Payment Date) will not be sufficient
to pay in full any Class M-1 Interest Deficiency Amount, Class M-2 Interest
Deficiency Amount and Class B-1 Interest Deficiency Amount, the Servicer shall
promptly notify the Trustee, by telephone, of the remaining deficiency. On the
day two Business Days prior to the related Payment Date, the Trustee shall
determine the total amount of funds in the Certificate Account available to pay
such remaining deficiency in accordance with Section 8.04(c) and shall promptly
notify the Servicer of such amount. If the total amount of funds in the
Certificate Account is not sufficient to pay the remaining deficiency, the
Trustee shall promptly notify the Servicer, and shall reflect such deficiency in
the reports delivered to Certificateholders pursuant to Section 6.05.
SECTION 6.02. Officer's Certificate.
Each Monthly Report pursuant to Section 6.01 shall be accompanied by a
certificate of a Servicing Officer substantially in the form of Exhibit H,
certifying the accuracy of the Monthly Report and that no Event of Termination
or event that with
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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, S&P or Moody's, furnish the Trustee, S&P
and/or Moody'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, S&P and Moody's to the effect that such firm has examined
certain documents and records relating to the servicing of the home improvement
contracts and promissory notes under pooling and servicing agreements
substantially similar one to another (such statement to have attached thereto a
schedule setting forth the pooling and servicing agreements covered thereby,
including this Agreement) and that, on the basis of such examination, conducted
substantially in compliance with generally accepted auditing standards, (i) such
servicing has been conducted in compliance with such pooling and servicing
agreements, and (ii) the Servicer's payment of FHA Insurance premiums and
submission of FHA Insurance claims has been conducted in compliance with FHA
Regulations, except for such significant exceptions or errors in records that,
in the opinion of such firm, generally accepted auditing standards requires it
to report.
SECTION 6.05. Statements to Certificateholders and the Class C
Certificateholder.
a. The Servicer shall prepare and furnish to the Trustee the statements
specified below relating to the Class A Certificates, the Class M Certificates
and the Class B Certificates on or before the third Business Day next preceding
each Payment Date.
b. Concurrently with each distribution to Certificateholders, the Trustee
shall, so long as it has received the Monthly Report from the Servicer, forward
or cause to be forwarded by mail to each Holder of a Class A Certificate and (if
the Company is not the Servicer) the Company a statement setting forth the
following:
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(i) the amount of such distribution to Holders of each Class of Class
A Certificates allocable to interest, separately identifying any Unpaid Class
A Interest Shortfall included in such distribution and any remaining Unpaid
Class A Interest Shortfall after giving effect to such distribution;
(ii) the amount of such distribution to Holders of each Class of Class
A Certificates allocable to principal, separately identifying the aggregate
amount of any Principal Prepayments included therein;
(iii) the amount, if any, by which the Class A Formula Distribution
Amount for such Payment Date exceeds the Class A Distribution Amount for such
Payment Date;
(iv) the Class A-1 Principal Balance, the Class A-2 Principal Balance,
and the Class A-3 Principal Balance after giving effect to the distribution
of principal on such Payment Date;
(v) the Pool Scheduled Principal Balance for such Payment Date;
(vi) the Senior Percentage for such Payment Date;
(vii) the Pool Factor;
(viii) the number and aggregate principal balances of Contracts
delinquent (a) 31-59 days and (b) 60 or more days;
(ix) the Class B Principal Balance Test (as set forth in Exhibit N
hereto);
(x) the Class B Principal Distribution Test (as set forth in Exhibit
N hereto);
(xi) the Class M-1 Interest Deficiency Amount, if any, for such
Payment Date;
(xii) the Class M-2 Interest Deficiency Amount, if any, for such
Payment Date;
(xiii) the Class B-1 Interest Deficiency Amount, if any, for such
Payment Date;
(xiv) the number of Liquidated Contracts, identifying such Contracts
and the Net Liquidation Loss on such Contracts;
(xv) the aggregate number and principal amount of FHA-Insured
Contracts on which either (i) the Servicer has submitted a claim for FHA
Insurance, HUD rejected such claim and the Servicer has determined not to
resubmit such claim, or (ii) the
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Servicer has determined not to submit a claim for FHA Insurance because such
claim would not be paid by HUD; and
(xvi) the amount in the Company's FHA Insurance reserve available to
pay FHA Insurance claims on the Contracts.
The Trustee and the Servicer shall, if any Certificateholder, Class C
Certificateholder or the Underwriter inquires by telephone, provide the
information contained in the most recent Monthly Report.
In the case of information furnished pursuant to clauses (i) through (iv)
above, the amounts shall be expressed as a dollar amount per Class A Certificate
with a 1% Percentage Interest or per $1,000 denomination of Class A Certificate.
Within 75 days after the end of each calendar year, the Certificate Registrar
shall furnish or cause to be furnished to each Person who at any time during the
calendar year was the Holder of a Class A Certificate a statement containing the
information with respect to interest accrued and principal paid on its Class A
Certificates during such calendar year. Such obligation of the Certificate
Registrar shall be deemed to have been satisfied to the extent that
substantially comparable information shall be provided by the Certificate
Registrar pursuant to any requirements of the Code as from time to time in
force.
c. On each Payment Date, the Trustee shall forward or cause to be forwarded
by mail to each Holder of a Class M-1 Certificate a copy of the monthly
statement forwarded to the Holders of Class A Certificates on such Payment Date.
The Servicer shall also furnish to the Trustee, which shall forward such
information to the Class M-1 Certificateholders as part of their monthly
statement, the following information:
(i) the amount of such distribution to Holders of Class M-1
Certificates allocable to interest, separately identifying any Unpaid
Class M-1 Interest Shortfall included in such distribution and any remaining
Unpaid Class M-1 Interest Shortfall after giving effect to such distribution;
(ii) the amount of such distribution to Holders of Class M-1
Certificates allocable to principal, separately identifying the aggregate
amount of any Principal Prepayments included therein;
(iii) the amount, if any, by which the Class M-1 Formula Distribution
Amount for such Payment Date exceeds the Amount Available less the Class A
Distribution Amount for such Payment Date;
(iv) the Class M-1 Principal Balance after giving effect to the
distribution of principal on such Payment Date;
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(v) the Unpaid Class M-1 Interest Shortfall on Principal Shortfall
after giving effect to any distribution on such Payment Date pursuant to
Section 8.04(b)(8)(i);
(vi) the Senior Percentage for such Payment Date;
(vii) the Pool Scheduled Principal Balance for such Payment Date;
(viii) the Pool Factor;
(ix) the number and aggregate principal balances of Contracts
delinquent (a) 30-59 days and (b) 60 or more days;
(x) the Class B Principal Balance Test (as set forth in Exhibit N
hereto);
(xi) the Class B Principal Distribution Test (as set forth in Exhibit
N hereto);
(xii) the number of Liquidated Contracts, identifying such Contracts
and the Net Liquidation loss on such Contracts;
(xiii) the aggregate number and principal amount of FHA-insured
Contracts on which either (i) the Servicer has submitted a claim for FHA
Insurance, HUD rejected such claim and the Servicer has determined not to
resubmit such claim, or (ii) the Servicer has determined not to submit a
claim for FHA Insurance because such claim would not be paid by HUD; and
(xiv) the amount in the Company's FHA Insurance reserve available to
pay FHA Insurance claims on the FHA-Insured Contracts.
In the case of the information in clauses (i) through (iv) above, the amounts
shall be expressed as a dollar amount per Class M-1 Certificate with a 1%
Percentage Interest or per $1,000 denomination of Class M-1 Certificate.
Within 75 days after the end of each calendar year, the Certificate Registrar
shall furnish or cause to be furnished to each Person who at any time during the
calendar year was the Holder of a Class M-1 Certificate a statement containing
the applicable distribution information provided pursuant to this Section
aggregated for such calendar year or applicable portion thereof during which
such Person was the Holder of a Class M-1 Certificate. Such obligation of the
Certificate Registrar shall be deemed to have been satisfied to the extent that
substantially comparable information shall be provided by the
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<PAGE>
Certificate Registrar pursuant to any requirements of the Code as from time to
time enforced.
d. On each Payment Date, the Trustee shall forward or cause to be forwarded
by mail to each Holder of a Class M-2 Certificate a copy of the monthly
statements forwarded to the Holders of Class A and Class M-1 Certificates on
such Payment Date. The Servicer shall also furnish to the Trustee, which shall
forward such information to the Class M-2 Certificateholders as part of their
monthly statement, the following information:
(i) the amount of such distribution to Holders of Class M-2
Certificates allocable to interest, separately identifying any Unpaid
Class M-2 Interest Shortfall included in such distribution and any remaining
Unpaid Class M-2 Interest Shortfall after giving effect to such distribution;
(ii) the amount of such distribution to Holders of Class M-2
Certificates allocable to principal, separately identifying the aggregate
amount of any Principal Prepayments included therein;
(iii) the amount, if any, by which the Class M-2 Formula Distribution
Amount for such Payment Date exceeds the Amount Available less the sum of the
Class A Distribution Amount and the Class M-1 Distribution Amount for such
Payment Date;
(iv) the Class M-2 Principal Balance after giving effect to the
distribution of principal on such Payment Date;
(v) the Unpaid Class M-2 Interest Shortfall on Principal Shortfall,
after giving effect to any distribution on such Payment Date pursuant to
Section 8.04(b)(8)(ii);
(vi) the Senior Percentage for such Payment Date;
(vii) the Pool Scheduled Principal Balance for such Payment Date;
(viii) the Pool Factor;
(ix) the number and aggregate principal balances of Contracts
delinquent (a) 30-59 days and (b) 60 or more days;
(x) the Class B Principal Balance Test (as set forth in Exhibit N
hereto);
(xi) the Class B Principal Distribution Test (as set forth in Exhibit
N hereto);
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(xii) the number of Liquidated Contracts, identifying such Contracts
and the Net Liquidation loss on such Contracts;
(xiii) the aggregate number and principal amount of FHA-insured
Contracts on which either (i) the Servicer has submitted a claim for FHA
Insurance, HUD rejected such claim and the Servicer has determined not to
resubmit such claim, or (ii) the Servicer has determined not to submit a
claim for FHA Insurance because such claim would not be paid by HUD; and
(xiv) the amount in the Company's FHA Insurance reserve available to
pay FHA Insurance claims on the FHA-Insured Contracts.
In the case of the information in clauses (i) through (iv) above, the amounts
shall be expressed as a dollar amount per Class M-2 Certificate with a 1%
Percentage Interest or per $1,000 denomination of Class M-2 Certificate.
Within 75 days after the end of each calendar year, the Certificate Registrar
shall furnish or cause to be furnished to each Person who at any time during the
calendar year was the Holder of a Class M-2 Certificate a statement containing
the applicable distribution information provided pursuant to this Section
aggregated for such calendar year or applicable portion thereof during which
such Person was the Holder of a Class M-2 Certificate. Such obligation of the
Certificate Registrar shall be deemed to have been satisfied to the extent that
substantially comparable information shall be provided by the Certificate
Registrar pursuant to any requirements of the Code as from time to time
enforced.
e. On each Payment Date, the Trustee shall forward or cause to be
forwarded by mail to each Holder of a Class B-1 Certificate a copy of the
monthly statements forwarded to the Holders of Class A and Class M Certificates
on such Payment Date. The Servicer shall also furnish to the Trustee, which
shall forward such information to the Class B-1 Certificateholders as part of
their monthly statement, the following information:
(i) the amount of such distribution to Holders of Class B-1
Certificates allocable to interest, separately identifying any Unpaid
Class B-1 Interest Shortfall included in such distribution and any remaining
Unpaid Class B-1 Interest Shortfall after giving effect to such distribution;
(ii) the amount of such distribution to Holders of Class B-1
Certificates allocable to principal, separately identifying the aggregate
amount of any Principal Prepayments included therein;
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<PAGE>
(iii) the amount, if any, by which the Class B-1 Formula Distribution
Amount for such Payment Date exceeds the Amount Available less the sum of the
Class A Distribution Amount, the Class M-1 Distribution Amount and the Class
M-2 Distribution Amount for such Payment Date;
(iv) the Class B-1 Principal Balance after giving effect to the
distribution of principal on such Payment Date;
(v) the Unpaid Class B-1 Interest Shortfall on Principal Shortfall,
after giving effect to any distribution on such Payment Date pursuant to
Section 8.04(b)(8)(iii);
(vi) the Class B Percentage for such Payment Date;
(vii) the Pool Scheduled Principal Balance for such Payment Date;
(viii) the Pool Factor;
(ix) the number and aggregate principal balances of Contracts
delinquent (a) 30-59 days and (b) 60 or more days;
(x) the Class B Principal Balance Test (as set forth in Exhibit N
hereto);
(xi) the Class B Principal Distribution Test (as set forth in Exhibit
N hereto);
(xii) the number of Liquidated Contracts, identifying such Contracts
and the Net Liquidation loss on such Contracts; and
(xiii) the aggregate number and principal amount of FHA-insured
Contracts on which either (i) the Servicer has submitted a claim for FHA
Insurance, HUD rejected such claim and the Servicer has determined not to
resubmit such claim, or (ii) the Servicer has determined not to submit a
claim for FHA Insurance because such claim would not be paid by HUD.
(xiv) the amount in the Company's FHA Insurance reserve available to
pay FHA Insurance claims on the FHA-Insured Contracts.
In the case of the information in clauses (i) through (iv) above, the amounts
shall be expressed as a dollar amount per Class B-1 Certificate with a 1%
Percentage Interest or per $1,000 denomination of Class B-1 Certificate.
Within 75 days after the end of each calendar year, the Certificate Registrar
shall furnish or cause to be furnished to each Person who at any time during the
calendar year
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<PAGE>
was the Holder of a Class B-1 Certificate a statement containing the applicable
distribution information provided pursuant to this Section aggregated for such
calendar year or applicable portion thereof during which such Person was the
Holder of a Class B-1 Certificate. Such obligation of the Certificate Registrar
shall be deemed to have been satisfied to the extent that substantially
comparable information shall be provided by the Certificate Registrar pursuant
to any requirements of the Code as from time to time enforced.
f. On each Payment Date, the Trustee shall forward or cause to be forwarded
by mail to each Holder of a Class B-2 Certificate a copy of the monthly
statements forwarded to the Holders of Class A, Class M and Class B-1
Certificates on such Payment Date. The Servicer shall also furnish to the
Trustee, which shall forward such information to the Class B-2
Certificateholders as part of their monthly statement, the following
information:
(i) the amount of such distribution to Holders of Class B-2
Certificates allocable to interest, separately identifying any Unpaid
Class B-2 Interest Shortfall included in such distribution and any remaining
Unpaid Class B-2 Interest Shortfall after giving effect to such distribution;
(ii) the amount of such distribution to Holders of Class B-2
Certificates allocable to principal, separately identifying the aggregate
amount of any Principal Prepayments included therein;
(iii) the amount, if any, by which the sum of the Class B-2 Formula
Distribution Amount and the Class B-2 Principal Liquidation Loss Amount, if
any, for such Payment Date exceeds the Class B-2 Distribution Amount for such
Payment Date;
(iv) the Class B-2 Principal Balance after giving effect to the
distribution of principal on such Payment Date;
(v) the Unpaid Class B-2 Interest Shortfall on Principal Shortfall,
after giving effect to any distribution on such Payment Date pursuant to
Section 8.04(b)(8)(iv);
(vi) the Class B Percentage for such Payment Date;
(vii) the Pool Scheduled Principal Balance for such Payment Date;
(viii) the Pool Factor;
(ix) the Class B-2 Principal Liquidation Loss Amount, if any, for such
Payment Date;
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(x) the Class B-2 Guaranty Payment, if any, for such Payment Date;
(xi) the number and aggregate principal balances of Contracts
delinquent (a) 30-59 days and (b) 60 days or more;
(xii) the Class B Principal Balance Test (as set forth in Exhibit N
hereto);
(xiii) the Class B Principal Distribution Tests (as set forth in Exhibit
N hereto);
(xiv) the number of Liquidated Contracts, identifying such Contracts
and the Net Liquidation loss on such Contracts;
(xv) the aggregate number and principal amount of FHA-insured
Contracts on which either (i) the Servicer has submitted a claim for FHA
Insurance, HUD rejected such claim and the Servicer has determined not to
resubmit such claim, or (ii) the Servicer has determined not to submit a
claim for FHA Insurance because such claim would not be paid by HUD; and
(xvi) the amount in the Company's FHA Insurance reserve available to
pay FHA Insurance claims on the FHA-Insured Contracts.
In the case of the information in clauses (i) through (iv) and (ix) above,
the amounts shall be expressed as a dollar amount per Class B-2 Certificate with
a 1% Percentage Interest or per $1,000 denomination of Class B-2 Certificate.
Within 75 days after the end of each calendar year, the Certificate Registrar
shall furnish or cause to be furnished to each Person who at any time during the
calendar year was the Holder of a Class B-2 Certificate a statement containing
the applicable distribution information provided pursuant to this Section
aggregated for such calendar year or applicable portion thereof during which
such Person was the Holder of a Class B-2 Certificate. Such obligation of the
Certificate Registrar shall be deemed to have been satisfied to the extent that
substantially comparable information shall be provided by the Certificate
Registrar pursuant to any requirements of the Code as from time to time
enforced.
g. Copies of all reports and statements provided to the Trustee for the
Certificateholders shall also be provided to S&P, Moody's and the Class C
Certificateholder.
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
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of every kind and nature whatsoever required to be made or filed by or on behalf
of the Trust pursuant to the Code and other applicable tax laws and regulations.
Each such return, statement and document shall, to the extent required by the
Code or other applicable law and at the request of the Servicer, be signed on
behalf of the Trust by the Trustee. The Trustee shall have no responsibility
whatsoever for the accuracy or completeness of any such return, statement or
document. The Servicer agrees to indemnify the Trustee and hold it harmless for,
from, against and in respect to any and all liability, loss, damage and expense
which may be incurred by the Trustee based upon or as a result of the Trustee's
execution of any and all such tax returns, statements and documents. The
Servicer, if and for so long as it is a Class C Certificateholder, shall be
designated the "tax matters person" on behalf of the Trust in the same manner as
a partnership may designate a "tax matters partner," as such term is defined in
Section 6231(a)(7) of the Code. To the extent permitted by the REMIC Provisions,
any subsequent holder of the Class C Certificate, by acceptance thereof,
irrevocably designates and appoints the Servicer as its agent to perform the
responsibilities of the "tax matters person" on behalf of the Trust if, and
during such time as, the Servicer is not the holder of the Class C Certificate.
The Servicer may, at its expense, retain such outside assistance as it deems
necessary in the performance of its obligations under this paragraph.
Each of the Holders of the Certificates or the Class C Certificate, by
acceptance thereof, agrees to file tax returns consistent with and in accordance
with any elections, decisions or other reports made or filed with regard to
federal, state or local taxes on behalf of the Trust. The Servicer, as agent for
the tax matters person, shall represent the Trust in connection with all
examinations of the Trust's affairs by tax authorities, including resulting
administrative and judicial proceedings. Each of the holders of the Certificates
and Class C Certificate, by acceptance thereof, agrees to cooperate with the
Company in such matters and to do or refrain from doing any or all things
reasonably required by the Company to conduct such proceedings, provided that no
such action shall be required by the Company of any Certificateholder that would
entail unnecessary or unreasonable expenses for such Certificateholder in the
performance of such action.
The Class C Certificateholder shall pay, on behalf of the Trust, any foreign,
federal, state or local income, property, excise, sales, receipts or any other
similar or related taxes or charges which may be imposed upon the Trust as a
REMIC or otherwise and shall, to the extent provided in Section 10.06, be
entitled to be reimbursed out of the Certificate Account or, if such tax or
charge results from a failure by the Trustee, the Company or any Servicer to
comply with the provisions of Section 2.04 or 3.06, the Trustee, the Company or
such Servicer, as the case may be, shall indemnify the Class C Certificateholder
for the payment of any such tax or charge. The Trustee shall be entitled to
withhold from amounts otherwise distributable to the Class C Certificateholder
any taxes or charges payable by the Class C Certificateholder hereunder.
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In the event the Class C Certificate is transferred to a "disqualified
organization," within the meaning of Section 860E(e)(5) of the Code, pursuant to
Section 860D(a)(6)(B) of the Code the Company shall provide to the Internal
Revenue Service and the persons specified in Sections 860(E)(e)(3) and (6) of
the Code all information necessary for the application of Section 860E(e) and
any other applicable provision of the Code with respect to the transfer of the
Class C Certificate to such a disqualified organization including, without
limitation, a computation showing the present value of the total anticipated
excess inclusions with respect to such Class C Certificate for periods after the
transfer as defined in the REMIC Provisions. In addition, to the extent required
by the REMIC Provisions, the Company shall, upon the written request of persons
designated in Section 860E(e)(3) of the Code, furnish to such requesting party
and the Internal Revenue Service information sufficient to compute the present
value of anticipated excess inclusions within 60 days of the receipt of such
written request.
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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.
a. If an Event of Termination has occurred and is continuing, either the
Trustee or Certificateholders, in the aggregate, representing 25% or more of the
Aggregate Certificate Principal Balance, by notice in writing to the Servicer
(and to the Trustee if given by the Certificateholders) may terminate all (but
not less than all) of the Servicer's management, administrative, servicing and
collection functions (such termination being herein called a "Service
Transfer"). On receipt of such notice (or, if later, on a date designated
therein), all authority and power of the Servicer under this Agreement, whether
with respect to the Contracts, the Contract Files or otherwise (except with
respect to the Certificate Account, the transfer of which shall be governed by
Section 7.06), shall pass to and be vested in the Trustee pursuant to and under
this Section 7.02; and, without limitation, the Trustee is authorized and
empowered to execute and deliver on behalf of the Servicer, as attorney-in-fact
or otherwise, any and all documents and other instruments, and to do any and all
acts or things necessary or appropriate to effect the purposes of such notice of
termination. The Trustee shall cause all assignments of mortgages, deeds of
trust or security deeds securing the Contracts to be duly recorded. If the
Servicer was the lender of record for purposes of the FHA Insurance relating to
FHA-Insured Contracts, the Trustee shall notify HUD of such termination and
shall request that HUD transfer the FHA Insurance reserves allocable to such
Contracts to the successor Servicer; provided, however, that if the Trustee is
the successor Servicer, the Trustee shall request such transfer of reserves if
and to the extent it is legally able to do so, and the Trustee shall use its
best efforts to obtain any approvals that may be required for the Trustee to
receive such transfer of reserves. Each of the Company and the Servicer agrees
to cooperate with the Trustee in effecting the termination of the
responsibilities and rights of the Servicer hereunder, including, without
limitation, the transfer to the Trustee for administration by it of all cash
amounts which shall at the time be held by the Servicer for deposit, or have
been deposited by the Servicer, in the Certificate Account, or for its own
account in connection with its services hereafter or thereafter received with
respect to the Contracts, and the transfer of all rights under FHA Insurance
relating to FHA-Insured Contracts. The Servicer shall transfer to the new
servicer (i) the Servicer's records relating to the Contracts in such electronic
form as the new servicer may reasonably request and (ii) any Contract Files in
the Servicer's possession.
SECTION 7.03. Trustee to Act; Appointment of Successor.
On and after the time the Servicer receives a notice of termination pursuant
to Section 7.02, the Trustee shall be the successor in all respects to the
Servicer in its capacity as servicer under this Agreement and the transactions
set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Servicer
by the terms and provisions hereof, and the Servicer shall be relieved of such
responsibilities, duties and liabilities arising after such Service Transfer;
provided, however, that (i) the Trustee will not assume any obligations of the
Company pursuant to Section 3.05,
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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
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 and the Class C
Certificateholder.
a. Promptly following the occurrence of any Event of Termination, the
Servicer shall give written notice thereof to the Trustee, to S&P, to Moody's,
to the Certificateholders and to the Class C Certificateholder at their
respective addresses appearing on the Certificate Register.
b. Within 10 days following any termination or appointment of a successor to
the Servicer pursuant to this Article VII, the Trustee shall give written notice
thereof to S&P, to Moody's and to Certificateholders and the Class C
Certificateholder at their respective addresses appearing on the Certificate
Register.
SECTION 7.05. Effect of Transfer.
a. After the Service Transfer, the Trustee or new Servicer 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.
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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 Class C Certificateholder conforming with the
requirements of this Agreement at the corporate trust department of the Trustee
or with an 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
or Class C Certificate as of a Record Date shall be paid on the next succeeding
Payment Date by check mailed to such Certificateholder or Class C
Certificateholder at the address for such Certificateholder or Class C
Certificateholder appearing on the Certificate Register (or, if such
Certificateholder holds Certificates of a Class with an aggregate Percentage
Interest of at least 5% of such Class 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 or Class C Certificateholder's
Percentage Interest of the Class A-1 Distribution Amount, the Class A-2
Distribution Amount, the Class A-3 Distribution Amount, the Class M-1
Distribution Amount plus any amounts distributable pursuant to Sections
8.04(b)(8)(i) and 8.04(c), the Class M-2 Distribution Amount plus any amounts
distributable pursuant to Sections 8.04(b)(8)(ii) and 8.04(c), the Class B-1
Distribution Amount plus any amounts distributable pursuant to Sections
8.04(b)(8)(iii) and 8.04(c), the Class B-2 Distribution Amount plus any amounts
distributable pursuant to Section 8.04(b)(8)(iv), any Class B-2 Guaranty Payment
or the Class C Distribution Amount, as applicable. Final payment of any
Certificate or the Class C Certificate shall be made only upon presentation of
such Certificate or the Class C Certificate at the office or agency of the
Paying Agent.
b. Each distribution with respect to a Book-Entry Certificate shall be paid
to the Depository, which shall credit the amount of such distribution to the
accounts of its Depository Participants in accordance with its normal
procedures. Each Depository Participant shall be responsible for disbursing
such distribution to the Certificate Owners that it represents and to each
indirect participating brokerage firm (a "brokerage firm" or "indirect
participating firm") for which it acts as agent. Each brokerage firm shall be
responsible for disbursing funds to the Certificate Owners that it represents.
All such credits and disbursements with respect to a Book-Entry Certificate are
to be made by the Depository and the Depository Participants in accordance with
the provisions of the Book-Entry Certificates. Neither the Trustee, the
Certificate Registrar nor the Company shall have any responsibility therefor
except as otherwise provided by applicable law. To the extent applicable and
not contrary to the rules of the Depository, the Trustee shall comply with the
provisions of the form of the Certificates as set forth in Exhibits A through C
hereto, and the Class C Certificate as set forth in Exhibit I hereto.
c. The Trustee shall either act as the paying agent or appoint an Eligible
Institution to be the paying agent (in either such case, the "Paying Agent") to
make the payments to
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the Certificateholders and the Class C Certificateholder required hereunder. The
Trustee's corporate trust operations department, with an office at 180 East 5th
Street, Third Floor, St. Paul, Minnesota 55101, Attention: Kathi Mohammadzadah,
shall initially act as 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 the Class C Certificateholder 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 and the Class C
Certificate.
SECTION 8.02. Advances.
a. Not later than one Business Day following the Determination Date, the
Servicer shall advance all Delinquent Payments for the immediately preceding Due
Period by depositing the aggregate amount of such Delinquent Payments in the
Certificate Account; provided, however, that the Servicer shall be obligated to
advance Delinquent Payments only to the extent that the Servicer, in its sole
discretion, expects to be able to recover such advances from funds subsequently
available therefor in the Certificate Account in accordance with Section
8.04(b). If the Servicer fails to advance all Delinquent Payments required
under this Section 8.02, the Trustee shall be obligated to advance such
Delinquent Payments pursuant to Section 11.16.
b. The Servicer shall be entitled to reimbursement of an Advance from
subsequent funds available therefor in the Certificate Account in accordance
with Section 8.04(b).
SECTION 8.03. Limited Guaranty.
a. No later than the third Business Day prior to each Payment Date, the
Servicer (if other than the Company) shall notify the Company of the amount of
the Class B-2 Guaranty Payment (if any) for such Payment Date. Not later than
the Business Day preceding each Payment Date, the Company shall deposit the
Class B-2 Guaranty Payment, if any, for such Payment Date into the Certificate
Account. Any Class B-2 Guaranty Payment shall be distributable to Class B-2
Certificateholders pursuant to Section 8.01.
b. The obligations of the Company under this Section 8.03 shall not
terminate upon or otherwise be affected by a Service Transfer pursuant to
Article VII of this Agreement.
c. The obligation of the Company to provide the Limited Guaranty under this
Agreement shall terminate on the Final Payment Date.
d. The obligation of the Company to make the Class B-2 Guaranty Payments
described in subsection (a) above shall be unconditional and irrevocable. The
Company acknowledges that its obligation to make the Class B-2 Guaranty Payments
described in
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subsection (a) above shall be deemed a guaranty by the Company of indebtedness
of the Trust for money borrowed from the Class B-2 Certificateholders.
e. If the Company fails to make a Class B-2 Guaranty Payment in whole or in
part, the Company shall promptly notify the Trustee, and the Trustee shall
promptly notify S&P and Moody's.
SECTION 8.04. Permitted Withdrawals from the Certificate Account; Payments.
a. The Trustee may, from time to time as provided herein, make withdrawals
from the Certificate Account of amounts deposited in said account pursuant to
Section 5.05 that are attributable to the Contracts for the following purposes:
i. to make payments in the amounts and in the manner provided for in
Section 8.04(b);
ii. to pay to the Company with respect to each Contract or property
acquired in respect thereof that has been repurchased or replaced pursuant to
Section 3.05, all amounts received thereon and not required to be distributed
to Certificateholders as of the date on which the related Scheduled Principal
Balance or Repurchase Price is determined;
iii. to reimburse the Servicer out of Liquidation Proceeds for
Liquidation Expenses incurred by it and not otherwise reimbursed, to the
extent such reimbursement is permitted pursuant to Section 5.08;
iv. to withdraw any amount deposited in the Certificate Account that
was not required to be deposited therein; or
v. to make any rebates or adjustments deemed necessary by the Servicer
pursuant to Section 5.06(d).
Since, in connection with withdrawals pursuant to clause (iii), the Company's
entitlement thereto is limited to collections or other recoveries on the related
Contract, the Servicer shall keep and maintain separate accounting, on a
Contract by Contract basis, for the purpose of justifying any withdrawal from
the Certificate Account pursuant to such clause.
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:
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1. if neither the Company nor a wholly owned subsidiary of the Company
is the Servicer, to pay the Monthly Servicing Fee and any other compensation
owed to the Servicer pursuant to Section 7.03;
2. to pay the Class A Formula Interest Distribution Amount as follows
(and in the following order of priority):
(i) the amount in clause (a)(1) of the definition of Class A
Formula Distribution Amount to the Class A-1 Certificateholders; the
amount in clause (a)(2) of the definition of Class A Formula Distribution
Amount to the Class A-2 Certificateholders; the amount in clause (a)(3)
of the definition of Class A Formula Distribution Amount to the Class A-3
Certificateholders; or, if the Amount Available is less than the Class A
Formula Interest Distribution Amount, pro rata to each Class of Class A
Certificates in accordance with their respective entitlements to
interest; and
(ii) the Unpaid Class A Interest Shortfall, to each Class of Class
A Certificates in the amount, if any, of the Class A Interest Shortfall
of such Class, or, if the remaining Amount Available is less than the
aggregate of the Unpaid Class A Interest Shortfall with respect to each
Class of Class A Certificates, pro rata to each Class of Class A
Certificates based on the Unpaid Class A Interest Shortfall of each such
Class;
3. after payment of the amounts specified in clauses (1) and (2) above,
to pay principal in respect of the Class A Certificates as follows:
(i) if there is a Class A Principal Deficiency Amount as to such
Payment Date, the remaining Amount Available, pro rata to each Class of
Class A Certificates based on the Class Principal Balance of each Class
(but in no event shall such amount exceed the Class Principal Balance of
any such Class); and
(ii) if there is no Class A Principal Deficiency Amount as to such
Payment Date:
(A) if such Payment Date is on or prior to the First Cross-
over Date, the Senior Percentage of the Formula Principal
Distribution Amount to the Class A-1 Certificateholders, but in no
event more than is necessary to reduce the Class A-1 Principal
Balance to zero;
(B) if such Payment Date is on or after the First Cross-over
Date, but on or prior to the Second Cross-over Date, the Senior
Percentage of the Formula Principal Distribution Amount to the
Class
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A-2 Certificateholders (reduced, if such Payment Date is on the First
Cross-over Date, by that portion of the Senior Percentage of the
Formula Principal Distribution Amount to be distributed to the Class
A-1 Certificateholders on such date in accordance with clause (A)
above), but in no event more than is necessary to reduce the Class
A-2 Principal Balance to zero; and
(C) if such Payment Date is on or after the Second Cross-over
Date, but on or prior to the Third Cross-over Date, the Senior
Percentage of the Formula Principal Distribution Amount to the Class
A-3 Certificateholders (reduced, if such Payment Date is on the
Second Cross-over Date, by that portion of the Senior Percentage of
the Formula Principal Distribution Amount to be distributed to the
Class A-2 Certificateholders on such date in accordance with clause
(B) above), but in no event more than is necessary to reduce the
Class A-3 Principal Balance to zero.
4. after payment of the amounts specified in clauses (1) - (3) above, to
the Class M-1 Certificateholders as follows (and in the following order of
priority):
(i) the amount in clause (a) of the definition of Class M-1 Formula
Distribution Amount;
(ii) any Unpaid Class M-1 Interest Shortfall; and
(iii) the amount in clause (c) of the definition of Class M-1
Formula Distribution Amount;
5. after payment of the amounts specified in clauses (1) - (4) above, to
the Class M-2 Certificateholders as follows (and in the following order of
priority):
(i) the amount in clause (a) of the definition of Class M-2
Formula Distribution Amount;
(ii) any Unpaid Class M-2 Interest Shortfall; and
(iii) the amount in clause (c) of the definition of Class M-2
Formula Distribution Amount;
6. after payment of the amounts specified in clauses (1) - (5) above, to
the Class B-1 Certificateholders as follows (and in the following order of
priority):
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(i) the amount in clause (a) of the definition of Class B-1
Formula Distribution Amount;
(ii) any Unpaid Class B-1 Interest Shortfall; and
(iii) the amount in clause (c) of the definition of Class B-1
Formula Distribution Amount;
7. after payment of the amounts specified in clauses (1) - (6) above, to
the Class B-2 Certificateholders as follows (and in the following order of
priority):
(i) the amount in clause (a) of the definition of Class B-2
Formula Distribution Amount;
(ii) any Unpaid Class B-2 Interest Shortfall; and
(iii) the amount in clause (c) of the definition of Class B-2
Formula Distribution Amount;
8. after payment of the amounts specified in clauses (1) - (7) above, to
the Class M and Class B Certificateholders as follows (and in the following
order of priority):
(i) to the Class M-1 Certificateholders, first an amount equal to
the amount specified in clause (a) of the definition of the term "Class
M-1 Formula Principal Shortfall Interest Distribution Amount" and then to
any Unpaid Class M-1 Interest Shortfall on Principal Shortfall;
(ii) to the Class M-2 Certificateholders, first an amount equal to
the amount specified in clause (a) of the definition of the term "Class
M-2 Formula Principal Shortfall Interest Distribution Amount" and then to
any Unpaid Class M-2 Interest Shortfall on Principal Shortfall;
(iii) to the Class B-1 Certificateholders, first an amount equal
to the amount specified in clause (a) of the definition of the term
"Class B-1 Formula Principal Shortfall Interest Distribution Amount" and
then to any Unpaid Class B-1 Interest Shortfall on Principal Shortfall;
and
(iv) to the Class B-2 Certificateholders, first an amount equal to
the amount specified in clause (a) of the definition of the term "Class
B-2 Formula Principal Shortfall Interest Distribution Amount" and then to
any Unpaid Class B-2 Interest Shortfall on Principal Shortfall.
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9. if the Company or a wholly owned subsidiary of the Company is the
Servicer, to pay the Servicer the Monthly Servicing Fee;
10. to reimburse the Trustee or any successor Servicer for any payments
of FHA Insurance premiums in respect of FHA-Insured Contracts not paid by the
Company and for which the Trustee or such successor Servicer has not been
reimbursed by the Company;
11. to reimburse the Servicer or the Trustee, as applicable, for any
unreimbursed Advances made in respect of current or prior Payment Dates;
12. to reimburse the Class C Certificateholder for expenses incurred by
and reimbursable to it pursuant to Section 10.06;
13. to reimburse the Company for any prior unreimbursed Class B-2
Guaranty Payments; and
14. to pay the remainder, if any, of the Amount Available to the Class C
Certificateholder.
c. If the applicable Monthly Report indicates a Class M-1 Interest
Deficiency Amount, a Class M-2 Interest Deficiency Amount and/or a Class B-1
Interest Deficiency Amount for such Payment Date, the Trustee shall withdraw
from the Certificate Account (to the extent of funds on deposit therein two
Business Days prior to such Payment Date, after taking into account the
distribution of the Amount Available pursuant to Section 8.04(b) and any Class
B-2 Guaranty Payment to be distributed on such Payment Date) an amount equal to
the lesser of (i) the excess of such funds, after giving effect to any payment
required as of the next succeeding Payment Date under Section 8.04(b)(1), over
the amount payable to Class A Certificateholders on the next succeeding Payment
Date under clauses (a) and (b) of the definition of Class A Formula Distribution
Amount and (ii) the sum of the Class M-1 Interest Deficiency Amount, the Class
M-2 Interest Deficiency Amount and the Class B-1 Interest Deficiency Amount, and
distribute such amount, first, to the Class M-1 Certificateholders up to the
amount of any Class M-1 Interest Deficiency Amount, then to the Class M-2
Certificateholders up to the amount of any Class M-2 Interest Deficiency Amount,
and then to the Class B-1 Certificateholders up to the amount of any Class B-1
Interest Deficiency Amount.
d. If the Trustee shall not have received the applicable Monthly Report by
any Payment Date, the Trustee shall, in accordance with Section 8.04(b),
distribute all funds then in the Certificate Account to Certificateholders and
the Class C Certificateholders, to the extent of such funds, on such Payment
Date.
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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 J, the Trustee shall
convey and assign to the Company all of the Certificateholders' and the Class C
Certificateholder's right, title and interest in the repurchased Contract
without recourse, representation or warranty, except as to the absence of liens,
charges or encumbrances created by or arising as a result of actions of the
Trustee. Upon such deposit of the Repurchase Price, the Servicer shall be deemed
to have released any claims to such Contract as a result of Advances with
respect to such Contract.
SECTION 8.06. Servicer's 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 (x) 100% of the principal balance of each Contract (other
than any Contract as to which title to the underlying property has been
acquired and whose fair market value is included pursuant to clause (y)
below), together with accrued and unpaid interest on each such Contract at
the Weighted Average Pass-Through Rate, plus (y) the fair market value of
such acquired property (as reasonably determined by the Servicer as of the
close of business on the third Business Day preceding the date of such
purchase),
B. the aggregate fair market value (as reasonably determined by the
Servicer as of the close of business on such third Business Day) of all of
the assets of the Trust, and
C. the 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 Class A Formula Interest
Distribution Amount, the Class M-1 Formula Interest Distribution Amount, the
Class M-1 Formula Principal Shortfall Interest Distribution Amount, the Class
M-2 Formula Interest Distribution Amount, the Class M-2 Formula Principal
Shortfall Interest Distribution Amount, the Class B-1 Formula Interest
Distribution Amount, the Class B-1 Formula Principal Shortfall Interest
Distribution Amount, the Class B-2 Formula Interest Distribution Amount, and
the Class B-2 Formula Principal Shortfall Interest Distribution Amount, 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
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payments of interest in respect of the Contracts at the Weighted Average
Pass-Through Rate).
b. The purchase by the Servicer of all of the Contracts pursuant to this
Section 8.06 shall be conditioned upon (1) the Pool Scheduled Principal Balance,
at the time of any such purchase, aggregating less than 10% of the Cut-off Date
Pool Principal Balance, (2) such purchase constituting a plan of complete
liquidation in accordance with Section 860F of the Code, and (3) the Servicer
having provided the Trustee and the Depository (if any) with at least 30 days'
written notice. If such option is exercised, the Servicer shall provide to the
Trustee (at the Servicer's expense) the certification required by Section 12.04,
which certificate shall constitute a plan of complete liquidation within the
meaning of Section 860F of the Code, and the Trustee shall promptly sign such
certification and release to the Servicer the Contract Files pertaining to the
Contracts being purchased.
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ARTICLE IX
THE CERTIFICATES AND THE CLASS C CERTIFICATE
--------------------------------------------
SECTION 9.01. The Certificates and Class C Certificate.
The Class A-1, the Class A-2, the Class A-3, the Class M-1, the Class M-2,
the Class B-1, the Class B-2 and the Class C Certificates shall be substantially
in the forms set forth in Exhibits A, B, C and I, as applicable, and shall, on
original issue, be executed by the Trustee on behalf of the Trust to or upon the
order of the Company. The Certificates shall be evidenced by (i) one or more
Class A-1 Certificates representing $32,000,000 in Original Class A-1 Principal
Balance, (ii) one or more Class A-2 Certificates representing $21,000,000 in
Original Class A-2 Principal Balance, (iii) one or more Class A-3 Certificates
representing $17,300,000 in Original Class A-3 Principal Balance, (iv) one or
more Class M-1 Certificates representing $6,550,000 in Original Class M-1
Principal Balance, (v) one or more Class M-2 Certificates representing
$5,625,000 in Original Class M-2 Principal Balance, (vi) one or more Class B-1
Certificates representing $5,625,000 in Original Class B-1 Principal Balance,
and (vii) one or more Class B-2 Certificates representing $5,626,023 in Original
Class B-2 Principal Balance, beneficial ownership of such Classes of
Certificates to be held through Book-Entry Certificates in minimum dollar
denominations of $1,000. The Class C Certificate shall be evidenced by a single
Class C Certificate issued on the Closing Date to the Company and shall
represent 100% of the Percentage Interest of Class C.
The Certificates and the Class C Certificate shall be executed by manual
signature on behalf of the Trustee by a duly authorized Responsible Officer or
authorized signatory. Certificates or the Class C Certificate bearing the
signatures of individuals who were at any time the proper officers of the
Trustee shall bind the Trustee, notwithstanding that such individuals or any of
them have ceased to hold such offices prior to the execution and delivery of
such Certificate or Class C Certificate, or did not hold such offices at the
date of such Certificates or Class C Certificate. No Certificate or Class C
Certificate shall be entitled to any benefit under this Agreement, or be valid
for any purpose, unless such Certificate or Class C Certificate has been
executed by manual signature in accordance with this Section, and such signature
upon any Certificate or Class C Certificate shall be conclusive evidence, and
the only evidence, that such Certificate or Class C Certificate has been duly
executed and delivered hereunder. All Certificates and the Class C Certificate
shall be dated the date of their execution, except for those Certificates and
the Class C Certificate executed on the Closing Date, which shall be dated the
Closing Date.
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SECTION 9.02. Registration of Transfer and Exchange of Certificates and the
Class C Certificate.
a. The Trustee shall keep at the office or agency to be maintained in
accordance with Section 12.02 a "Certificate Register" in which the Trustee
shall provide for the registration of Certificates and the Class C Certificate
and of transfers and exchanges of Certificates and the Class C Certificate as
herein provided. The Trustee initially appoints itself to be the "Certificate
Registrar" and transfer agent for the purpose of registering Certificates and
the Class C Certificate and transfers and exchanges of Certificates and the
Class C Certificate as provided herein. The Trustee will give prompt written
notice to Certificateholders, the Class C Certificateholder and the Servicer of
any change in the Certificate Registrar.
b. (1) Subject to clauses (2) and (3) below, no transfer of a Class C
Certificate shall be made by the Company or any other Person unless such
transfer is exempt from the registration requirements of the Securities Act of
1933 (the "Act"), as amended, and any applicable state securities laws or is
made in accordance with the Act and laws. In the event that any such transfer
is to be made, (A) the Company may require a written Opinion of Counsel
acceptable to and in form and substance satisfactory to the Company that such
transfer may be made pursuant to an exemption, describing the applicable
exemption and the basis therefor, from the Act and laws or is being made
pursuant to the Act and laws, which Opinion of Counsel shall not be an expense
of the Trustee or the Company, and (B) the Trustee shall require the transferee
to execute an investment letter substantially in the form of Exhibit K attached
hereto, which investment letter shall not be an expense of the Trustee or the
Company. The Class C Certificateholder desiring to effect such transfer shall,
and does hereby agree to, indemnify the Trustee, the Company and the Certificate
Registrar against any liability that may result if the transfer is not so exempt
or is not made in accordance with such federal and state laws.
(2) No transfer of a Class M-1, Class M-2, Class B-1 or Class B-2 Certificate
or the Class C Certificate or any interest therein shall be made to any employee
benefit plan, trust or account that is subject to ERISA, or that is described in
Section 4975(e)(1) of the Code (each, a "Plan"), unless the prospective
transferee of a Certificate or interest therein provides the Servicer and the
Trustee with a certification of facts and, at its own expense, an Opinion of
Counsel which establish to the satisfaction of the Servicer and the Trustee that
such transfer will not result in a violation of Section 406 of ERISA or Section
4975 of the Code or cause the Servicer, the Company or the Trustee to be deemed
a fiduciary of such Plan or result in the imposition of an excise tax under
Section 4975 of the Code. Unless such opinion is delivered, each person
acquiring such 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, subject to ERISA or to Section 4975 of the Code.
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(3) Notwithstanding anything to the contrary contained herein, (A) neither
the Class C Certificate, nor any interest therein, shall be transferred, sold or
otherwise disposed of to a "disqualified organization," within the meaning of
Section 860E(e)(5) of the Code (a "Disqualified Organization"), including, but
not limited to, (i) the United States, a state or political subdivision thereof,
a foreign government, an international organization or an agency or
instrumentality of any of the foregoing, (ii) an organization (other than a
cooperative described in Section 521 of the Code) which is exempt from the taxes
imposed by Chapter 1 of the Code and not subject to the tax imposed on unrelated
business income by Section 511 of the Code, or (iii) a cooperative described in
Section 1381(a)(2)(C) of the Code, and (B) prior to any registration of any
transfer, sale or other disposition of the Class C Certificate, the proposed
transferee shall deliver to the Trustee, under penalties of perjury, an
affidavit that such transferee is not a Disqualified Organization, with respect
to which the Trustee shall have no actual knowledge that such affidavit is
false, and the transferor and the proposed transferee shall each deliver for the
Trustee an affidavit with respect to any other information reasonably required
by the Trustee pursuant to the REMIC Provisions, including, without limitation,
information regarding the transfer of noneconomic residual interests and
transfers of any residual interest to or by a foreign person; provided, however,
that, upon the delivery to the Trustee of an Opinion of Counsel, in form and
substance satisfactory to the Trustee and rendered by Independent counsel, to
the effect that the beneficial ownership of the Class C Certificate by any
Disqualified Organization will not result in the imposition of federal income
tax upon the Trust or any Certificateholder or any other person or otherwise
adversely affect the status of the Trust as a REMIC, the foregoing prohibition
on transfers, sales and other dispositions, as well as the foregoing requirement
to deliver a certificate prior to any registration thereof, shall, with respect
to such Disqualified Organization, terminate. Notwithstanding any transfer,
sale or other disposition of the Class C Certificate, or any interest therein,
to a Disqualified Organization or the registration thereof in the Certificate
Register, such transfer, sale or other disposition and any registration thereof,
unless accompanied by the Opinion of Counsel described in the preceding
sentence, shall be deemed to be void and of no legal force or effect whatsoever
and such Disqualified Organization shall be deemed to not be the Class C
Certificateholder for any purpose hereunder, including, but not limited to, the
receipt of distributions on the Class C Certificate, and shall be deemed to have
no interest whatsoever in the Class C Certificate. Each Class C
Certificateholder, by his acceptance thereof, shall be deemed for all purposes
to have consented to the provisions of this Section 9.02(b)(3).
(4) Any transfer, sale or other disposition not in compliance with the
provisions of this Section 9.02(b) shall be deemed to be void and of no legal
force or effect whatsoever and such transferee shall be deemed to not be the
Certificateholder or Class C Certificateholder, as applicable, for any purpose
hereunder, including, but not limited to, the receipt of distributions on the
Certificate or Class C Certificate, and shall be deemed to have no interest
whatsoever in the Certificate or Class C Certificate.
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(5) The Trustee shall give notice to S&P and Moody's promptly following any
transfer, sale or other disposition of the Class C Certificate.
c. At the option of a Certificateholder or the Class C Certificateholder,
Certificates and the Class C Certificate may be exchanged for other Certificates
or Class C Certificate of authorized denominations of a like aggregate original
denomination, upon surrender of such Certificates or the Class C Certificate to
be exchanged at such office. Whenever any Certificates or the Class C
Certificate are so surrendered for exchange, the Trustee shall execute and
deliver the Certificates or Class C Certificate which the Certificateholder or
Class C Certificateholder making the exchange is entitled to receive. Every
Certificate or Class C Certificate presented or surrendered for transfer or
exchange shall be duly endorsed by, or shall be accompanied by a written
instrument of transfer in form satisfactory to the Trustee and the Certificate
Registrar duly executed by the holder thereof or his or her attorney duly
authorized in writing.
d. Except as provided in paragraph (e) below, the Book-Entry Certificates
shall at all times remain registered in the name of the Depository or its
nominee and at all times: (i) registration of the Certificates may not be
transferred by the Trustee except to another Depository; (ii) the Depository
shall maintain book-entry records with respect to the Certificate Owners and
with respect to ownership and transfers of such Certificates; (iii) ownership
and transfers of registration of the Certificates on the books of the Depository
shall be governed by applicable rules established by the Depository; (iv) the
Depository may collect its usual and customary fees, charges and expenses from
its Depository Participants; (v) the Trustee shall deal with the Depository,
Depository Participants and indirect participating firms as representatives of
the Certificate Owners of the Certificates for purposes of exercising the rights
of Holders under this Agreement, and requests and directions for and votes of
such representatives shall not be deemed to be inconsistent if they are made
with respect to different Certificate Owners; and (vi) the Trustee may rely and
shall be fully protected in relying upon information furnished by the Depository
with respect to its Depository Participants and furnished by the Depository
Participants with respect to indirect participating firms and persons shown on
the books of such indirect participating firms as direct or indirect Certificate
Owners.
All transfers by Certificate Owners of Book-Entry Certificates shall be made
in accordance with the procedures established by the Depository Participant or
brokerage firm representing such Certificate Owner. Each Depository Participant
shall only transfer Book-Entry Certificates of Certificate Owners it represents
or of brokerage firms for which it acts as agent in accordance with the
Depository's normal procedures.
e. If (x)(i) the Company or the Depository advises the Trustee in writing
that the Depository is no longer willing or able properly to discharge its
responsibilities as Depository and (ii) the Trustee or the Company is unable to
locate a qualified successor or (y) the
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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 Class A-1 Certificate, one Class A-2 Certificate, one Class A-3
Certificate, one Class M-1 Certificate, one Class M-2 Certificate, one Class B-1
Certificate and one Class B-2 Certificate each in registered form registered in
the name of the Depository's nominee, Cede & Co., the total face amount of which
represents 100% of the Original Class A-1 Principal Balance, the Original Class
A-2 Principal Balance, the Original Class A-3 Principal Balance, the Original
Class M-1 Principal Balance, the Original Class M-2 Principal Balance, the
Original Class B-1 Principal Balance and the Original Class B-2 Principal
Balance, respectively. Each such Certificate registered in the name of the
Depositary's nominee shall bear the following legend:
"Unless this Certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC") to the Trustee or its
agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein."
SECTION 9.03. No Charge; Disposition of Void Certificates or Class C
Certificate.
No service charge shall be made to a Certificateholder or Class C
Certificateholder for any transfer or exchange of Certificates or the Class C
Certificate, but the Certificate Registrar may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of Certificates or the Class C
Certificate. All Certificates or the Class C Certificate surrendered for
transfer and exchange shall be disposed of in a manner approved by the Trustee.
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SECTION 9.04. Mutilated, Destroyed, Lost or Stolen Certificates or Class C
Certificate.
If (a) any mutilated Certificate or Class C Certificate is surrendered to the
Certificate Registrar, or the Certificate Registrar receives evidence to its
satisfaction of the destruction, loss or theft of any Certificate or Class C
Certificate, and (b) there is delivered to the Certificate Registrar and the
Trustee such security or indemnity as may be required by each to save it
harmless, then in the absence of notice to the Certificate Registrar or the
Trustee that such Certificate or Class C Certificate has been acquired by a bona
fide purchaser, the Trustee shall execute and deliver, in exchange for or in
lieu of any such mutilated, destroyed, lost or stolen Certificate or Class C
Certificate, a new Certificate or Class C Certificate of like tenor and original
denomination. Upon the issuance of any new Certificate or Class C Certificate
under this Section 9.04, the Trustee may require the payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses connected therewith. Any duplicate Certificate
or Class C Certificate issued pursuant to this Section 9.04 shall constitute
complete and indefeasible evidence of ownership of the Percentage Interest, as
if originally issued, whether or not the mutilated, destroyed, lost or stolen
Certificate or Class C Certificate shall be found at any time.
SECTION 9.05. Persons Deemed Owners.
Prior to due presentation of a Certificate or Class C Certificate for
registration of transfer, the Servicer, the Company, the Trustee, the Paying
Agent and the Certificate Registrar may treat the person in whose name any
Certificate or Class C Certificate is registered as the owner of such
Certificate or Class C Certificate for the purpose of receiving remittances
pursuant to Section 8.01 and for all other purposes whatsoever, and none of the
Servicer, the Company, the Trustee, the Certificate Registrar, the Paying Agent
or any agent of the Servicer, the Company, the Trustee, the Paying Agent or the
Certificate Registrar shall be affected by notice to the contrary.
SECTION 9.06. Access to List of Certificateholders' and Class C
Certificateholder's Names and Addresses.
The Certificate Registrar will furnish to the Trustee and the Servicer,
within five days after receipt by the Certificate Registrar of a request
therefor from the Trustee in writing, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Certificateholders and the
Class C Certificateholder as of the most recent Record Date. If Holders of
Certificates representing, in the aggregate, 25% or more of the Aggregate
Certificate Principal Balance apply in writing to the Trustee (hereinafter
referred to as "Applicants"), and such application states that the Applicants
desire to communicate with other Certificateholders or the Class C
Certificateholder with respect to their rights under this Agreement or under the
Certificates or the Class C Certificate and is accompanied by
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a copy of the communication which such Applicants propose to transmit, then the
Trustee shall, within five Business Days after the receipt of such application,
afford such Applicants access during normal business hours to the most recent
list of Certificateholders and the Class C Certificateholder held by the
Trustee. If such list is as of a date more than 90 days prior to the date of
receipt of such Applicants' request, the Trustee shall promptly request from the
Certificate Registrar a current list as provided above, and shall afford such
Applicants access to such list promptly upon receipt. Every Certificateholder
and the Class C Certificateholder, by receiving and holding a Certificate or the
Class C Certificate, agrees with the Certificate Registrar and the Trustee that
none of the Company, the Certificate Registrar or the Trustee shall be held
accountable by reason of the disclosure of any such information as to the names
and addresses of the Certificateholders or the Class C Certificateholder
hereunder, regardless of the source from which such information was derived.
SECTION 9.07. Authenticating Agents.
The Trustee may appoint one or more Authenticating Agents with power to act
on its behalf and subject to its direction in the execution and delivery of the
Certificates or the Class C Certificate. For all purposes of this Agreement,
the execution and delivery of Certificates or the Class C Certificate by the
Authenticating Agent pursuant to this Section shall be deemed to be the
execution and delivery of Certificates or the Class C Certificate "by the
Trustee."
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ARTICLE X
INDEMNITIES
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SECTION 10.01. Real Estate.
The Company will defend and indemnify the Trust, the Trustee (including the
Custodian and any other agents of the Trustee) and the Certificateholders and
the Class C Certificateholder against any and all costs, expenses, losses,
damages, claims and liabilities, including reasonable fees and expenses of
counsel and expenses of litigation arising out of or resulting from the use or
ownership of any real estate related to a Contract by the Company or the
Servicer or any Affiliate of either. Notwithstanding any other provision of
this Agreement, the obligation of the Company under this Section shall not
terminate upon a Service Transfer pursuant to Article VII, except that the
obligation of the Company under this Section shall not relate to the actions of
any subsequent Servicer after a Service Transfer.
SECTION 10.02. Liabilities to Obligors.
No obligation or liability to any Obligor under any of the Contracts is
intended to be assumed by the Trust, the Certificateholders or the Class C
Certificateholder under or as a result of this Agreement and the transactions
contemplated hereby and, to the maximum extent permitted and valid under
mandatory provisions of law, the Trust, the Certificateholders and the Class C
Certificateholder expressly disclaim such assumption.
SECTION 10.03. Tax Indemnification.
The Company agrees to pay, and to indemnify, defend and hold harmless the
Trust, the Trustee (including the Custodian and any other agents of the
Trustee), the Certificateholders and the Class C Certificateholder from, any
taxes which may at any time be asserted with respect to, and as of the date of,
the transfer of the Contracts to the Trust, including, without limitation, any
sales, gross receipts, general corporation, personal property, privilege or
license taxes (but not including any federal, state or other taxes arising out
of the creation of the Trust and the issuance of the Certificates and the Class
C Certificate) and costs, expenses and reasonable counsel fees in defending
against the same, whether arising by reason of the acts to be performed by the
Company, the Servicer or the Trustee under this Agreement or imposed against the
Trust, a Certificateholder, the Class C Certificateholder or otherwise.
SECTION 10.04. Servicer's Indemnities.
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The Servicer shall defend and indemnify the Trust, the Trustee (including the
Custodian and any other agents of the Trustee), the Certificateholders and the
Class C Certificateholder against any and all costs, expenses, losses, damages,
claims and liabilities, including any failure to comply with FHA Regulations in
enforcing an FHA-Insured Contract, including reasonable fees and expenses of
counsel and expenses of litigation, in respect of any action taken or omitted to
be taken by the Servicer with respect to any Contract. This indemnity shall
survive any Service Transfer (but the original Servicer's obligations under this
Section 10.04 shall not relate to any actions of any subsequent Servicer after a
Service Transfer) and any payment of the amount owing under, or any repurchase
by the Company of, any such Contract.
SECTION 10.05. Operation of Indemnities.
Indemnification under this Article shall include, without limitation,
reasonable fees and expenses of counsel and expenses of litigation. If the
Company or the Servicer has made any indemnity payments to the Trustee pursuant
to this Article and the Trustee thereafter collects any of such amounts from
others, the Trust will repay such amounts collected to the Company or the
Servicer, as the case may be, without interest.
SECTION 10.06. REMIC Tax Matters.
If the Class C Certificateholder, pursuant to Section 6.06, pays any taxes or
charges imposed upon the Trust as a REMIC or otherwise, such taxes or charges,
except to the extent set forth in the following proviso, shall be expenses and
costs of the Trust and the Class C Certificateholder shall be entitled to be
reimbursed therefor out of the Certificate Account as provided in Section 8.04;
provided, however, that any such taxes or charges shall not be expenses or costs
of the Trust, nor will the Class C Certificateholder be entitled to
reimbursement therefor out of the Certificate Account, if and to the extent that
such taxes or charges resulted from a failure by the Company, the Trustee or any
Servicer to comply with the provisions of Section 2.04.
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ARTICLE XI
THE TRUSTEE
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SECTION 11.01. Duties of Trustee.
The Trustee, prior to the occurrence of an Event of Termination and after the
curing of all Events of Termination which may have occurred, undertakes to
perform such duties and only such duties as are specifically set forth in this
Agreement. If an Event of Termination has occurred (which has not been cured),
the Trustee shall exercise such of the rights and powers vested in it by this
Agreement, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform as to form to the requirements of this Agreement.
Subject to Section 11.03, no provision of this Agreement shall be construed
to relieve the Trustee from liability for its own negligent action, its own
negligent failure to act or its own misconduct; provided, however, that:
a. Prior to the occurrence of an Event of Termination, and after the curing
of all such Events of Termination which may have occurred, the duties and
obligations of the Trustee shall be determined solely by the express provisions
of this Agreement, the Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this Agreement, no
implied covenants or obligations shall be read into this Agreement against the
Trustee and, in the absence of bad faith on the part of the Trustee, the Trustee
may conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or opinions furnished to
the Trustee and conforming to the requirements of this Agreement;
b. The Trustee shall not be liable for an error of judgment made in good
faith by a Responsible Officer of the Trustee, unless it shall be proved that
the Trustee was negligent in ascertaining the pertinent facts;
c. The Trustee shall not be personally liable with respect to any action
taken, suffered or omitted to be taken by it in good faith in accordance with
the direction of the Certificateholders representing, in the aggregate, 25% or
more of the Aggregate Certificate Principal Balance relating to the time, method
and place of conducting any proceeding for
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any remedy available to the Trustee, or exercising any trust or power conferred
upon the Trustee, under this Agreement;
d. The Trustee shall not be charged with knowledge of any event referred to
in Section 7.01 unless a Responsible Officer of the Trustee at the Corporate
Trust Office obtains actual knowledge of such event or the Trustee receives
written notice of such event from the Servicer or the Certificateholders
representing, in the aggregate, 25% or more of the Aggregate Certificate
Principal Balance; and
e. The Trustee may rely and shall be protected in acting or refraining from
taking any action in reliance on the advice of the Servicer in all matters with
respect to FHA Insurance. The Trustee shall not be liable for any actions taken
by the Servicer with respect to FHA Insurance, including but not limited to the
maintenance of such insurance and the submission of claims to FHA.
None of the provisions contained in this Agreement shall in any event require
the Trustee to perform, or be responsible for the manner of performance of, any
of the obligations of the Company or the Servicer under this Agreement, except
during such time, if any, as the Trustee shall be the successor to, and be
vested with the rights, duties, powers and privileges of, the Servicer in
accordance with the terms of this Agreement. The Trustee shall not be required
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if there is reasonable ground for believing that the repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
SECTION 11.02. Certain Matters Affecting the Trustee.
Except as otherwise provided in Section 11.01:
a. The Trustee may rely and shall be protected in acting or refraining from
acting upon any resolution, Officer's Certificate, certificate of a Servicing
Officer, certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, request, consent, order, appraisal, bond or
other paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
b. The Trustee may consult with counsel and any opinion of any counsel for
the Company or the Servicer shall be full and complete authorization and
protection in respect of any action taken or suffered or omitted by the Trustee
hereunder in good faith and in accordance with such Opinion of Counsel;
c. The Trustee shall be under no obligation to exercise any of the rights or
powers vested in it by this Agreement, or to institute, conduct or defend any
litigation hereunder or
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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, certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, bond or other paper or document, unless
requested in writing so to do by Certificateholders representing, in the
aggregate, 25% or more of the Aggregate Certificate Principal Balance; provided,
however, that if the payment within a reasonable time to the Trustee of the
costs, expenses or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured to the
Trustee by the security afforded to it by the terms of this Agreement, the
Trustee may require reasonable indemnity against such cost, expense or liability
as a condition to so proceeding. The reasonable expense of every such
examination shall be paid by the Servicer or, if paid by the Trustee, shall be
reimbursed by the Servicer upon demand; and
e. The Trustee may execute any of the trusts or powers hereunder or perform
any duties hereunder either directly or by or through agents or attorneys or a
custodian and shall not be liable for any acts or omissions of such agents,
attorneys or custodians if appointed by it with due care hereunder.
SECTION 11.03. Trustee Not Liable for Certificates, the Class C Certificate
or Contracts.
The Trustee assumes no responsibility for the correctness of the recitals
contained herein, in the Certificates or in the Class C Certificate (other than
the Trustee's execution thereof). The Trustee makes no representations as to
the validity or sufficiency of this Agreement, of the Certificates or of the
Class C Certificate (other than its execution thereof) or of any Contract,
Contract File or related document. The Trustee shall not be accountable for the
use or application by the Servicer or the Company of funds paid to the Company
in consideration of conveyance of the Contracts to the Trust by the Company or
deposited in or withdrawn from the Certificate Account by the Servicer.
SECTION 11.04. Trustee May Own Certificates.
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The Trustee in its individual or other capacity may become the owner or
pledgee of Certificates representing less than all the beneficial interest in
the Trust with the same rights as it would have if it were not Trustee.
SECTION 11.05. Rights of Certificateholders to Direct Trustee and to Waive
Events of Termination.
Holders of Certificates representing, in the aggregate, 25% or more of the
Aggregate Certificate Principal Balance shall have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee; provided,
however, that, subject to Section 11.01, the Trustee shall have the right to
decline to follow any such direction if the Trustee being advised by counsel
determines that the action so directed may not lawfully be taken, or if the
Trustee in good faith shall, by a Responsible Officer or Officers of the
Trustee, determine that the proceedings so directed would be illegal or involve
it in personal liability or be unduly prejudicial to the rights of
Certificateholders not parties to such direction; and provided further that
nothing in this Agreement shall impair the right of the Trustee to take any
action deemed proper by the Trustee and which is not inconsistent with such
direction by the Certificateholders. Holders of the Certificates representing,
in the aggregate, 51% or more of the Aggregate Certificate Principal Balance may
on behalf of Certificateholders waive any past Event of Termination hereunder
and its consequences, except a default in respect of a covenant or provision
hereof which under Section 12.08 cannot be modified or amended without the
consent of all Certificateholders, and upon any such waiver, such Event of
Termination shall cease to exist and shall be deemed to have been cured for
every purpose of this Agreement; but no such waiver shall extend to any
subsequent or other Event of Termination or impair any right consequent thereon.
SECTION 11.06. The Servicer to Pay Trustee's Fees and Expenses.
The Servicer agrees:
a. to pay to the Trustee reasonable compensation for all services rendered
by it hereunder (which compensation shall not be limited by any provision of law
in regard to the compensation of a trustee of an express trust);
b. except as otherwise expressly provided herein, to reimburse the Trustee,
to the extent requested by the Trustee, for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any provision of this Agreement (including the reasonable compensation and the
expenses and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad faith;
and
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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 and a Title I
approved lender pursuant to FHA Regulations, and shall have a combined capital
and surplus of at least $50,000,000 or shall be a member of a bank holding
system the aggregate combined capital and surplus of which is $50,000,000,
provided that the Trustee's separate capital and surplus shall at all times be
at least the amount required by Section 310(a)(2) of the Trust Indenture Act of
1939, as amended. If such Person publishes reports of condition at least
annually, pursuant to law or to the requirements of a supervising or examining
authority, then for the purposes of this Section 11.07, the combined capital and
surplus of such Person shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. In addition, the
Trustee (or, if the Trustee is First Trust National Association, the parent
company of First Trust National Association) shall at all times have a long-term
deposit rating from S&P of at least BBB or as shall be otherwise acceptable to
S&P and have a long-term deposit rating from Moody's of at least Baa3 or as
shall be otherwise acceptable to Moody's. In case at any time the Trustee shall
cease to be eligible in accordance with the provisions of this Section 11.06,
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.
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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 hereunder, with like effect as if originally named as Trustee. The
predecessor Trustee shall deliver or cause to be delivered to the successor
Trustee the Contracts and the Contract Files and any related documents and
statements held by it hereunder; and, if the Contracts are then held by a
Custodian pursuant to a custodial agreement, the predecessor Trustee and the
Custodian shall amend such custodial agreement to make the successor Trustee the
successor to the predecessor Trustee thereunder; and the Servicer, the Company
and the predecessor Trustee shall execute and deliver such instruments and do
such other things as may reasonably be required for fully and certainly vesting
and confirming in the successor Trustee all such rights, powers, duties and
obligations. If the predecessor Trustee is then the lender of record for
purposes of FHA Insurance (due to an Event of Termination), the predecessor
Trustee shall submit a report to FHA describing the transfer of the FHA-Insured
Contracts without recourse, in such form as is then required under FHA
Regulations to cause HUD to transfer to the successor Trustee the FHA insurance
reserves applicable to the FHA-Insured Contracts.
No successor Trustee shall accept appointment as provided in this Section
11.09 unless at the time of such acceptance such successor Trustee shall be
eligible under the provisions of Section 11.07.
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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 S&P, to Moody's and to each Certificateholder and the
Class C Certificateholder at their addresses as shown in the Certificate
Register. If the Servicer fails to mail such notice within ten days after
acceptance of appointment by the successor Trustee, the successor Trustee shall
cause such notice to be mailed at the expense of the Servicer.
SECTION 11.10. Merger or Consolidation of Trustee.
Any Person into which the Trustee may be merged or converted or with which it
may be consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding to
the corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such Person shall be eligible under the provisions
of Section 11.07, without the execution or filing of any paper or any further
act on the part of any of the parties hereto, anything herein to the contrary
notwithstanding. The Trustee shall promptly notify S&P and Moody'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
Preservation of Consumers' Claims and Defenses (16 C.F.R. (S) 433) as amended
from time to time:
a. The Trustee is not, and shall not be deemed to be, either in any
individual capacity, as trustee hereunder or otherwise, a creditor, or a joint
venturer with or an Affiliate of, or acting in concert or cooperation with, any
seller of home improvements, in the arrangement, origination or making of
Contracts. The Trustee is the holder of the Contracts only as trustee on behalf
of the Certificateholders and the Class C Certificateholder, and not as a
principal or in any individual or personal capacity;
b. The Trustee shall not be personally liable for or obligated to pay
Obligors any affirmative claims asserted thereby, or responsible to
Certificateholders or the Class C
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Certificateholder for any offset defense amounts applied against Contract
payments, pursuant to such legal actions;
c. The Trustee will pay, solely from available Trust monies, affirmative
claims for recovery by Obligors only pursuant to final judicial orders or
judgments, or judicially approved settlement agreements, resulting from such
legal actions;
d. The Trustee will comply with judicial orders and judgments which require
its actions or cooperation in connection with Obligors' legal actions to recover
affirmative claims against Certificateholders and the Class C Certificateholder;
e. The Trustee will cooperate with and assist Certificateholders and the
Class C Certificateholder in their defense of legal actions by Obligors to
recover affirmative claims if such cooperation and assistance is not contrary to
the interests of the Trustee as a party to such legal actions and if the Trustee
is satisfactorily indemnified for all liability, costs and expenses arising
therefrom; and
f. The Company hereby agrees to indemnify, hold harmless and defend the
Trustee, Certificateholders and the Class C Certificateholder from and against
any and all liability, loss, costs and expenses of the Trustee,
Certificateholders and the Class C Certificateholder resulting from any
affirmative claims for recovery asserted or collected by Obligors under the
Contracts. Notwithstanding any other provision of this Agreement, the
obligation of the Company under this Section 11.12(f) shall not terminate upon a
Service Transfer pursuant to Article VII.
SECTION 11.13. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions hereof, at any time, for the purpose of
meeting any legal requirements of any jurisdiction having authority over the
Trust, the Contracts or the Obligors, the Company and Trustee acting jointly
shall have the power and shall execute and deliver all instruments to appoint
one or more Persons approved by the Trustee to act as co-trustee or co-trustees,
jointly with the Trustee, or separate trustee or separate trustees, of all or
any part of the Trust, and to vest in such Person or Persons, in such capacity,
such title to the Trust, or any part thereof, and, subject to the other
provisions of this Section 11.13, such powers, duties, obligations, rights and
trusts as the Company and the Trustee may consider necessary or desirable. If
the Company shall not have joined in such appointment within 15 days after the
receipt by it of a request to do so, or in case an Event of Termination shall
have occurred and be continuing, the Trustee alone shall have the power to make
such appointment. No co-trustee or separate trustee hereunder shall be required
to meet the terms of eligibility as a successor trustee under Section 11.07
hereunder and no notice to Certificateholders or the Class C Certificateholder
of the appointment of co-trustee(s) or separate trustee(s) shall be required
under Section 11.09 hereof.
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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. Certain Matters Relating to FHA Insurance.
a. In the event the Company and the successor Servicer, if any, shall fail
to pay all FHA Insurance premiums with respect to the FHA-Insured Contracts
required by FHA Regulations, the Trustee shall pay such FHA Insurance premiums
and shall be entitled to reimbursement for such amounts pursuant to Section
8.04(b)(9).
b. If, following the termination of the Trust pursuant to Section 12.04, HUD
demands reimbursement from the Trustee of an FHA Insurance claim paid on an FHA-
Insured Contract prior to the termination of the Trust, the Trustee agrees that
it will not seek to recover any such amount from any Person other than the
Servicer that submitted such claim.
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SECTION 11.15. Trustee and First Bank System, Inc.
In the event the Trustee ceases to be a direct, wholly owned subsidiary of
First Bank System, Inc., the Trustee shall promptly notify S&P and Moody's.
SECTION 11.16 Trustee Advances.
a. If the Servicer fails to deposit into the Certificate Account Advances as
required by Section 8.02, then the Trustee shall, subject to the provisions of
paragraph (b) below, from its own funds, deposit into the Certificate Account
the amount not so deposited by the Servicer on or before the Business Day
preceding the related Payment Date (a "Trustee Advance").
b. The Trustee shall not be required to make any Trustee Advance if and to
the extent that it determines in good faith that the funds, if advanced, would
not be recoverable by it from subsequent amounts available in the Certificate
Account in accordance with Section 8.04(b).
c. The Trustee shall be entitled to reimbursement of a Trustee Advance from
funds subsequently available therefor in the Certificate Account in accordance
with Section 8.04(b).
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ARTICLE XII
MISCELLANEOUS
-------------
SECTION 12.01. Servicer Not to Resign; Delegation of Servicing Duties.
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.
Notwithstanding the foregoing, the Company, if it is the Servicer, may
delegate some or all of its servicing duties to a wholly owned subsidiary of the
Company, for so long as said subsidiary remains, directly or indirectly, a
wholly owned subsidiary of the Company. Notwithstanding any such delegation,
the Company shall retain all of the rights and obligations of the Servicer
hereunder.
SECTION 12.02. Company Not to Engage in Certain Transactions with Respect to
the Trust.
The Company shall not:
a. Provide credit to any Certificateholder for the purpose of enabling such
Certificateholder to purchase Certificates;
b. Purchase any Certificates in an agency or trustee capacity; or
c. Loan any money to the Trust.
SECTION 12.03. Maintenance of Office or Agency.
The Trustee will maintain in Minneapolis or St. Paul, Minnesota, an office or
agency where Certificates or the Class C Certificate may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Trustee in respect of the Certificates, the Class C Certificate and this
Agreement may be served. On the date hereof the Trustee's office for such
purposes is located at 180 East 5th Street, Second Floor, St. Paul, Minnesota
55101. The Trustee will give prompt written notice to the Company, the
Servicer, the Certificateholders and the Class C Certificateholder of any change
in the location of the Certificate Register or any such office or agency.
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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 and the Class C Certificateholder as set forth below) shall
terminate on the earlier of (a) the Payment Date on which the principal balance
of all of the Contracts 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 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 or the Class C Certificateholder may surrender their
Certificates or the Class C Certificate to the Servicer for payment of the final
distribution and cancellation, shall be given promptly by the Trustee (upon
direction by the Servicer ten days prior to the date such notice is to be
mailed) by letter to S&P, to Moody's and to Certificateholders and the Class C
Certificateholder mailed no later than the fifth Business Day of the month of
the Final Payment Date specifying (1) the Final Payment Date upon which final
payment on the Certificates and the Class C Certificate will be made upon
presentation and surrender of Certificates and the Class C Certificate at the
office or agency of the Servicer therein designated; (2) the amount of any such
final payment; and (3) that the Record Date otherwise applicable to such Payment
Date is not applicable, payments being made only upon presentation and surrender
of the Certificates and the Class C Certificate at the office or agency of the
Servicer therein specified. Any notice of purchase of Contracts by the Servicer
pursuant to Section 8.06 shall constitute the adoption by the Trustee on behalf
of the Certificateholders and the Class C Certificateholder of a plan of
complete liquidation within the meaning of Section 860F of the Code on the date
such notice is given when signed by the Trustee. Each such notice shall, to the
extent required by the REMIC Provisions or other applicable law, be signed on
behalf of the Trust by the Trustee. The Trustee shall give such notice to the
Certificate Registrar at the time such notice is given to the Certificateholders
and the Class C Certificateholder. In the event such notice is given in
connection with the Servicer's election to purchase the Contracts, the Servicer
shall deposit in the Certificate Account on the Final Payment Date in
immediately available funds an amount equal to the above-described purchase
price and upon such deposit Certificateholders and the Class C Certificateholder
will be entitled to the amount of such purchase price but not amounts in excess
thereof, all as provided herein. Upon certification to the Trustee by a
Servicing Officer following such final deposit, the Trustee shall promptly
release to the Servicer the
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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 and the Class C
Certificate, the Trustee shall cause to be distributed from the Certificate
Account, in the following order of priority, to Certificateholders and the Class
C Certificateholder on the final Payment Date in proportion to their respective
Percentage Interests an amount equal to (i) as to Class A Certificates, the
Class A-1 Principal Balance, the Class A-2 Principal Balance, and the Class A-3
Principal Balance, together with any Unpaid Class A Interest Shortfall and one
month's interest at the Class A-1 Pass-through Rate, the Class A-2 Pass-through
Rate and the Class A-3 Pass-through Rate on the Class A-l Principal Balance, the
Class A-2 Principal Balance and the Class A-3 Principal Balance, respectively,
(ii) as to Class M-1 Certificates, the Class M-1 Principal Balance, together
with any Unpaid Class M-1 Interest Shortfall and one month's interest at the
Class M-1 Pass-through Rate on the Class M-1 Principal Balance, (iii) as to
Class M-2 Certificates, the Class M-2 Principal Balance, together with any
Unpaid Class M-2 Interest Shortfall and one month's interest at the Class M-2
Pass-through Rate on the Class M-2 Principal Balance, (iv) as to Class B-1
Certificates, the Class B-1 Principal Balance, together with any Unpaid Class B-
1 Interest Shortfall and one month's interest at the Class B-1 Pass-through Rate
on the Class B-1 Principal Balance, (v) as to Class B-2 Certificates, the Class
B-2 Principal Balance, together with any Unpaid Class B-2 Interest Shortfall and
one month's interest at the Class B-2 Pass-through Rate on the Class B-2
Principal Balance, (vi) as to the Class M and Class B Certificates, the amounts
specified in Section 8.04(b)(8), in the order specified therein, and (vii) as to
the Class C Certificate, the amount which remains on deposit in the Certificate
Account (other than amounts retained to meet claims) after application pursuant
to clauses (i) - (vi) above; provided that, any Class B-2 Guaranty Payment
deposited in the Certificate Account shall be distributed only to the Class B-2
Certificateholders. 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 each Class of Certificates and the Class C
Certificate.
d. In the event that all of the Certificateholders and the Class C
Certificateholder do not surrender their Certificates and the Class C
Certificate for cancellation within three months after the time specified in the
above-mentioned written notice, the Company shall give a second written notice
to the remaining Certificateholders and the Class C Certificateholder to
surrender their Certificates and the Class C Certificate for cancellation and
receive the final distribution with respect thereto. If within three months
after the second notice all the Certificates and the Class C Certificate shall
not have been surrendered for cancellation, the Company shall transfer to itself
all amounts remaining on deposit in the Certificate Account, to hold in trust
for Certificateholders and the Class C Certificateholder who have not
surrendered their Certificates or the Class C Certificate, as the case may be,
for cancellation, together with the final record list of Certificateholders and
the Class C Certificateholder, and the Company shall take appropriate steps, or
may appoint an agent
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to take appropriate steps, to contact the remaining
Certificateholders concerning surrender
of their Certificates and to contact the Class C Certificateholder concerning
its surrender of its Class C Certificate, and the cost thereof shall be paid out
of the funds and other assets which remain in trust hereunder.
SECTION 12.05. Acts of Certificateholders and the Class C Certificateholder.
a. Except as otherwise specifically provided herein, whenever
Certificateholder approval, authorization, direction, notice, consent, waiver,
or other action is required hereunder, such approval, authorization, direction,
notice, consent, waiver or other action shall be deemed to have been given or
taken on behalf of, and shall be binding upon, all Certificateholders if agreed
to by Holders of Certificates representing, in the aggregate, 51% or more of the
Aggregate Certificate Principal Balance.
b. Any request, demand, authorization, direction, notice, consent, waiver or
other action provided by this Agreement to be given or taken by
Certificateholders or the Class C Certificateholder may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Certificateholders or the Class C Certificateholder in person or by agent
duly appointed in writing; and except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Trustee and, where required, to the Servicer. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Agreement and (subject to Section 11.01)
conclusive in favor of the Trustee, the Servicer and the Company if made in the
manner provided in this Section.
c. The fact and date of the execution by any Certificateholder or the Class
C Certificateholder of any such instrument or writing may be proved in any
reasonable manner which the Trustee deems sufficient.
d. The ownership of Certificates and the Class C Certificate shall be proved
by the Certificate Register.
e. Any request, demand, authorization, direction, notice, consent, waiver or
other act by a Certificateholder or the Class C Certificateholder shall bind
every holder of every Certificate or the Class C Certificate, as applicable,
issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof, in respect of anything done, or omitted to be done by the Trustee,
the Servicer or the Company in reliance thereon, whether or not notation of such
action is made upon such Certificates or Class C Certificate.
f. The Trustee may require such additional proof of any matter referred to
in this Section as it shall deem necessary.
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<PAGE>
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.
SECTION 12.07. Assignment or Delegation by Company.
Except as specifically authorized hereunder, and except for its obligations
as Servicer which are dealt with under Article V and Article VII, the Company
may not convey and assign or delegate any of its rights or obligations hereunder
absent the prior written consent of Holders of Certificates representing, in the
aggregate, 66-2/3% or more of the Aggregate Certificate Principal Balance, and
any attempt to do so without such consent shall be void. Notwithstanding the
foregoing, the Company may not delegate its obligations under Section 8.03
hereof absent (a) the prior written consent of Certificateholders with aggregate
Percentage Interests representing 66-2/3% or more of the Trust and the prior
written confirmation of S&P and Moody's that the rating of the Certificates will
not be lowered or withdrawn following such delegation, or (b) the prior written
consent of all of the Certificateholders, and any attempt to do so without such
consent shall be void.
SECTION 12.08. Amendment.
a. This Agreement may be amended from time to time by the Company, the
Servicer and the Trustee, without the consent of any of the Certificateholders
or the Class C Certificateholder, to correct manifest error, to cure any
ambiguity, to correct or supplement any provisions herein which may be
inconsistent with any other provisions herein, as the case may be, to make such
changes as are necessary to maintain the status of the Trust as a "real estate
mortgage investment conduit" under the REMIC Provisions of the Code or to
otherwise effectuate the benefits of such status to the Trust, the
Certificateholders or the Class C Certificateholder, including, without
limitation, to implement any provision permitted by law that would enable a
REMIC to avoid the imposition of any tax, or to make any other provisions with
respect to matters or questions arising under this Agreement that shall not be
inconsistent with the provisions of this Agreement; provided, however, that such
action shall not, as evidenced by an Opinion of Counsel for the Servicer,
adversely affect in any material respect the interests of any Certificateholder.
b. This Agreement may also be amended by agreement of the Trustee, the
Servicer and the Company at any time without the consent of the
Certificateholders or the Class C Certificateholder to effect the transfer of
FHA Insurance reserves to another entity in compliance with revisions to FHA
Regulations, provided that prior to any such amendment S&P and Moody's have each
confirmed in writing that the rating of the Certificates will not be lowered or
withdrawn following such amendment.
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<PAGE>
c. This Agreement may also be amended from time to time by the Servicer, the
Company and the Trustee, with the consent of Holders of Certificates
representing, in the aggregate, 66-2/3% or more of the Aggregate Certificate
Principal Balance, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of such Certificateholders; provided,
however, that no such amendment shall (a) reduce in any manner the amount of, or
delay the timing of, collections of payments on the Contracts or distributions
which are required to be made on any Certificate, (b) reduce the aforesaid
percentage required to consent to any such amendment, without the consent of the
holders of all Certificates then outstanding, (c) result in the disqualification
of the Trust as a REMIC under the Code, (d) adversely affect the status of the
Trust as a REMIC or the status of the Certificates as "regular interests"
therein or (e) cause any tax (other than any tax imposed on "net income from
foreclosure property" under Section 860G(c)(1) of the Code that would be imposed
without regard to such amendment) to be imposed on the Trust, including, without
limitation, any tax imposed on "prohibited transactions" under Section
860F(a)(1) of the Code or on "contributions after the startup date" under
Section 860G(d)(1) of the Code. This Agreement may not be amended without the
consent of the Class C Certificateholder, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement which would modify in any manner the rights of the Class C
Certificateholder.
d. This Agreement shall not be amended under this Section without the
consent of 100% of the Certificateholders and the Class C Certificateholder if
such amendment would result in the disqualification of the Trust as a REMIC
under the Code.
e. Concurrently with the solicitation of any consent pursuant to this
Section 12.08, the Trustee shall furnish written notification to S&P and
Moody's. Promptly after the execution of any amendment or consent pursuant to
this Section 12.08, the Trustee shall furnish written notification of the
substance of such amendment to S&P, Moody's, each Certificateholder and the
Class C Certificateholder.
f. It shall not be necessary for the consent of Certificateholders and the
Class C Certificateholder under this Section 12.08 to approve the particular
form of any proposed amendment, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents and of
evidencing the authorization of the execution thereof by Certificateholders and
the Class C Certificateholder shall be subject to such reasonable requirements
as the Trustee may prescribe.
g. The Trustee may, but shall not be obligated to, enter into any such
amendment which affects the Trustee's own rights, duties or immunities under
this Agreement or otherwise.
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<PAGE>
h. In connection with any amendment pursuant to this Section, the Trustee
shall be entitled to receive an Opinion of Counsel to the Servicer to the effect
that such amendment is authorized or permitted by this Agreement.
i. Upon the execution of any amendment or consent pursuant to this Section
12.08, this Agreement shall be modified in accordance therewith, and such
amendment or consent shall form a part of this Agreement for all purposes, and
every Certificateholder or the Class C Certificateholder hereunder shall be
bound thereby.
j. In the absence of the consent described in subsection (d) of this
Section, in connection with any amendment pursuant to this Section, the Trustee
shall have received an unqualified Opinion of Counsel, the expense of which
shall not be an expense of the Trust, stating that any such amendment (i) will
not adversely affect the status of the Trust as a REMIC or the status of the
Certificates as "regular interests" therein, and (ii) will not cause any tax
(other than any tax imposed on "net income from foreclosure property" under
Section 860G(c)(1) of the Code that would be imposed without regard to such
amendment) to be imposed on the Trust, including, without limitation, any tax
imposed on "prohibited transactions" under Section 860F(a)(1) of the Code or on
"contributions after the startup date" under Section 860G(d)(1) of the Code.
SECTION 12.09. Notices.
All communications and notices pursuant hereto to the Servicer, the Company,
the Trustee, S&P and Moody's 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
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Telecopier Number: (612) 244-0089
If to Moody's:
Moody's Investors Service, Inc.
Residential Mortgage Monitoring Department
99 Church Street
New York, NY 10007
If to S&P:
Standard & Poor's
25 Broadway
New York, NY 10004
Attention: _____________________________________
or at such other address as the party may designate by notice to the other
parties hereto, which notice shall be effective when received.
All communications and notices pursuant hereto to a Certificateholder or the
Class C Certificateholder shall be in writing and delivered or mailed at the
address shown in the Certificate Register.
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.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized this 14th day of
March, 1996.
GREEN TREE FINANCIAL CORPORATION
By /s/ John W. Brink
-------------------------------
John W. Brink
Executive Vice President
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
12-9
<PAGE>
STATE OF MINNESOTA )
) ss.
COUNTY OF RAMSEY )
The foregoing instrument was acknowledged before me this 14th day of
March, 1996, by John W. Brink, of Green Tree Financial Corporation, a Delaware
corporation, on behalf of the corporation.
/s/ Wanda Lamb-Lindow
--------------------------------
Notary Public
STATE OF MINNESOTA )
) ss.
COUNTY OF RAMSEY )
The foregoing instrument was acknowledged before me this 14th day of
December, 1995, by March, 1996, by Kathi Mohammadzadah, of First Trust National
Association, a national banking association, on behalf of the national banking
association.
/s/ Tammy Brusehaver-Derby
--------------------------------
Notary Public
12-10
<PAGE>
EXHIBIT A
-
FORM OF CLASS A CERTIFICATE
---------------------------
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR
INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE.
Class A-[1][2][3] No.
(Senior)
Cut-off Date: Pass-Through Rate: _____%
February 28, 1996: Denomination: $__________
First Payment Date: Aggregate Denomination of
April 15, 1996 All Class A-[1][2][3]
Certificates: $__________
Servicer: Payment Date After Latest
Green Tree Financial Corporation Due Date: January 15, 2026
(or if such day is not a
Business Day, then the next
succeeding Business Day)
CUSIP: ________
CERTIFICATE FOR HOME IMPROVEMENT LOANS
SERIES 1996-A, CLASS A-[1][2][3] (SENIOR)
-----------------------------------------
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN
GREEN TREE FINANCIAL CORPORATION OR ANY AFFILIATE THEREOF, EXCEPT TO THE EXTENT
SET FORTH IN THE AGREEMENT.
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 the Certificates for Home Improvement Loans, Series 1996-A, Class
A-[1][2][3] issued by Home Improvement Loan Trust 1996-A (the "Trust"), which
includes among its assets a pool of home improvement loan contracts and
promissory notes (including, without limitation, all related mortgages, deeds of
trust and security deeds and any and all rights to receive payments which are
due pursuant thereto on or after March 1, 1996). The Trust has been created
pursuant to a Pooling and Servicing Agreement (the "Agreement"), dated as of
March 1, 1996, 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 15, 1996, so long
as the Agreement has not been terminated, by check (or, if such
Certificateholder holds Class A-[1][2][3] Certificates with an aggregate
Percentage Interest of at least 5% of the Class A-[1][2][3] Certificates and so
desires, by wire transfer pursuant to instructions delivered to the Trustee at
least 10 days prior to such Payment Date) to the registered Certificateholder at
the address appearing on the Certificate Register as of the Business Day
immediately preceding such Payment Date, in an amount equal to the
Certificateholder's Percentage Interest of the Class A-[1][2][3][4] Distribution
Amount for such Payment Date. The final scheduled Payment Date of this
Certificate is January 15, 2026 or the next succeeding Business Day if such
January 15 is not a Business Day.
The Certificateholder, by its acceptance of this Certificate, agrees that
it will look solely to the funds in the Certificate Account to the extent
available for distribution to the Certificateholder as provided in the Agreement
for payment hereunder and that the Trustee in its individual capacity is not
personally liable to the Certificateholder for any amounts payable under this
Certificate or the Agreement or, except as expressly provided in the Agreement,
subject to any liability under the Agreement. By acceptance of this
Certificate, the Certificateholder agrees to disclosure of his, her or its name
and address to other Certificateholders under the conditions specified in the
Agreement.
This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for information with respect to the interests, rights,
benefits, obligations, proceeds and duties evidenced hereby and the rights,
duties and immunities of the Trustee. Copies of the Agreement and all
amendments thereto will be provided to any Certificateholder free of charge upon
a written request to the Trustee.
A-2
<PAGE>
As provided in the Agreement and subject to the limitations set forth
therein, the transfer of this Certificate is registrable in the Certificate
Register of the Certificate Registrar upon surrender of this Certificate for
registration of transfer at the office or agency maintained by the Trustee in
Minneapolis or St. Paul, Minnesota, accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Certificate Registrar duly
executed by the holder hereof or his or her attorney duly authorized in writing,
and thereupon one or more new Certificates evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.
[Unless this Certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC") to the Trustee or
its agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL in as much as the registered owner
hereof, Cede & Co., has an interest herein.]
The Company, the Servicer, the Trustee, the Paying Agent and the
Certificate Registrar and any agent of the Company, the Servicer, the Trustee,
the Paying Agent or the Certificate Registrar may treat the person in whose name
this Certificate is registered as the owner hereof for all purposes, and neither
the Company, the Servicer, the Trustee, the Paying Agent, the Certificate
Registrar nor any such agent shall be affected by any notice to the contrary.
A-3
<PAGE>
IN WITNESS WHEREOF, Home Improvement Loan Trust 1996-A has caused this
Certificate to be duly executed by the manual signature of a duly authorized
officer of the Trustee.
Dated: March 14, 1996 HOME IMPROVEMENT LOAN
TRUST 1996-A
By FIRST TRUST NATIONAL
ASSOCIATION
By__________________________________
Authorized Signatory
A-4
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ______________________________ the within Certificate for Home Improvement
Loans, Series 1996-A, and does hereby irrevocably constitute and appoint
______________________________ Attorney to transfer the said certificate on the
Certificate Register maintained by the Trustee, with full power of substitution
in the premises.
Dated: By_________________________________
Signature
A-5
<PAGE>
EXHIBIT B
---------
FORM OF CLASS M-1 OR M-2 CERTIFICATE
------------------------------------
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR
INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE.
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A-1
CERTIFICATES, CLASS A-2 CERTIFICATES[,] [AND] CLASS A-3 CERTIFICATES [AND CLASS
M-1 CERTIFICATES] AS DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED
TO HEREIN.
Class M-[1][2] No.
(Subordinate)
Cut-off Date: Pass-Through Rate: _____%
February 28, 1996 Denomination: $__________
First Payment Date: Aggregate Denomination of all
April 15, 1996 Class M-[1][2] Certificates:
$__________
Servicer: Payment Date After Latest Due Date:
Green Tree Financial Corporation January 15, 2026 (or if such day is
not a Business Day, then the next
succeeding Business Day)
CUSIP: __________
B-1
<PAGE>
CERTIFICATE FOR HOME IMPROVEMENT LOANS
SERIES 1996-A, CLASS M-[1][2] (SUBORDINATE)
-------------------------------------------
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN GREEN
TREE FINANCIAL CORPORATION OR ANY AFFILIATE THEREOF, EXCEPT TO THE EXTENT SET
FORTH IN THE AGREEMENT.
This certifies that ____________________ is the registered owner of the
undivided Percentage Interest represented by the original principal amount set
forth above in the Certificates for Home Improvement Loans, Series 1996-A, Class
M-[1][2] issued by Home Improvement Loan Trust 1996-A (the "Trust"), which
includes among its assets a pool of home improvement loan contracts and
promissory notes (including, without limitation, all related mortgages, deeds of
trust and security deeds and any and all rights to receive payments which are
due pursuant thereto on or after March 1, 1996). The Trust has been created
pursuant to a Pooling and Servicing Agreement (the "Agreement"), dated as of
March 1, 1996, 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 15, 1996, so long
as the Agreement has not been terminated, by check (or, if such
Certificateholder holds Class M-[1][2] Certificates with an aggregate Percentage
Interest of at least 5% of the Class M-[1][2] Certificates and so desires, by
wire transfer pursuant to instructions delivered to the Trustee at least 10 days
prior to such Payment Date) to the registered Certificateholder at the address
appearing on the Certificate Register as of the Business Day immediately
preceding such Payment Date, in an amount equal to the Certificateholder's
Percentage Interest of the Class M-[1][2] Distribution Amount (plus the Class M-
[1][2] Interest Deficiency Amount, if any) for such Payment Date. The final
scheduled Payment Date of this Certificate is January 15, 2026 or the next
succeeding Business Day if such January 15 is not a Business Day.
The Certificateholder, by its acceptance of this Certificate, agrees that it
will look solely to the funds in the Certificate Account to the extent available
for distribution to the Certificateholder as provided in the Agreement, for
payment hereunder and that the Trustee in its individual capacity is not
personally liable to the Certificateholder for any amounts payable under this
Certificate or the Agreement or, except as expressly provided in the
B-2
<PAGE>
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 this Certificate or any interest herein 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 and
the Servicer an opinion of counsel (satisfactory to the Trustee and the
Servicer) that such transfer will not result in a violation of Section 406 of
ERISA or Section 4975 of the Code or cause the Servicer, the Company or the
Trustee to be deemed to be a fiduciary of such Plan or result in the imposition
of an excise tax under Section 4975 of the Code. 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, subject to ERISA or to Section 4975 of the Code.
This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for information with respect to the interests, rights,
benefits, obligations, proceeds and duties evidenced hereby and the rights,
duties and immunities of the Trustee. Copies of the Agreement and all
amendments thereto will be provided to any Certificateholder free of charge upon
a written request to the Trustee.
As provided in the Agreement and subject to the limitations set forth
therein, the transfer of this Certificate is registrable in the Certificate
Register of the Certificate Registrar upon surrender of this Certificate for
registration of transfer at the office or agency maintained by the Trustee in
Minneapolis or St. Paul, Minnesota, accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Certificate Registrar duly
executed by the holder hereof or his or her attorney duly authorized in writing,
and thereupon one or more new Certificates evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.
[Unless this Certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC") to the Trustee or
its agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL in as much as the registered owner
hereof, Cede & Co., has an interest herein.]
B-3
<PAGE>
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.
B-4
<PAGE>
IN WITNESS WHEREOF, Home Improvement Loan Trust 1996-A has caused this
Certificate to be duly executed by the manual signature of a duly authorized
officer of the Trustee.
Dated: March 14, 1996 HOME IMPROVEMENT LOAN TRUST 1996-A
By FIRST TRUST NATIONAL ASSOCIATION
By __________________________________
Authorized Officer
B-5
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ______________________________ the within Certificate for Home Improvement
Loans, Series 1996-A, and does hereby irrevocably constitute and appoint
______________________________ Attorney to transfer the said certificate on the
Certificate Register maintained by the Trustee, with full power of substitution
in the premises.
Dated: By ___________________________________
Signature
B-6
<PAGE>
EXHIBIT C
---------
FORM OF CLASS B CERTIFICATE
---------------------------
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR
INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE.
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A-1
CERTIFICATES, THE CLASS A-2 CERTIFICATES, THE CLASS A-3 CERTIFICATES, THE CLASS
M-1 CERTIFICATES[,] [AND] THE CLASS M-2 CERTIFICATES [AND THE CLASS B-1
CERTIFICATES] AS DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO
HEREIN.
Class B-[1][2] No.
(Subordinate)
Cut-off Date: Pass-Through Rate: _____%
February 28, 1996 Denomination: $__________
First Payment Date: Aggregate Denomination of all
April 15, 1996 Class B-[1][2] Certificates:
$__________
Servicer: Payment Date After Latest Due Date
Green Tree Financial Corporation January 15, 2026 (or if such day is
not a Business Day, then the next
succeeding Business Day)
CUSIP: __________
C-1
<PAGE>
CERTIFICATES FOR HOME IMPROVEMENT LOANS
SERIES 1996-A, CLASS B-[1][2] (SUBORDINATE)
-------------------------------------------
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN
GREEN TREE FINANCIAL CORPORATION OR ANY AFFILIATE THEREOF, EXCEPT TO THE EXTENT
SET FORTH IN THE AGREEMENT.
This certifies that ____________________ is the registered owner of the
undivided Percentage Interest represented by the original principal amount set
forth above in the Certificates for Home Improvement Loans, Series 1996-A, Class
B-[1][2], issued by Home Improvement Loan Trust 1996-A (the "Trust"), which
includes among its assets a pool of home improvement loan contracts and
promissory notes (including, without limitation, all related mortgages, deeds of
trust and security deeds and any and all rights to receive payments which are
due pursuant thereto on or after March 1, 1996) and the Limited Guaranty. The
Trust has been created pursuant to a Pooling and Servicing Agreement (the
"Agreement"), dated as of March 1, 1996, 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 15, 1996, so long
as the Agreement has not been terminated, by check (or, if such
Certificateholder holds Class B-[1][2] Certificates with an aggregate
Percentage Interest of at least 5% of the Class B-[1][2] Certificates and so
desires, by wire transfer pursuant to instructions delivered to the Trustee at
least 10 days prior to such Payment Date) to the registered Certificateholder at
the address appearing on the Certificate Register as of the Business Day
immediately preceding such Payment Date, in an amount equal to the
Certificateholder's Percentage Interest of the Class B-[1][2] Distribution
Amount [(plus the Class B-1 Interest Deficiency Amount, if any)][and any Class
B-2 Guaranty Payment] for such Payment Date. The final scheduled Payment Date
of this Certificate is January 15, 2026 or the next succeeding Business Day if
such January 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
C-2
<PAGE>
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 this Certificate or any interest herein 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 and
the Servicer an opinion of counsel (satisfactory to the Trustee and the
Servicer) that such transfer will not result in a violation of Section 406 of
ERISA or Section 4975 of the Code or cause the Servicer, the Company or the
Trustee to be deemed to be a fiduciary of such Plan or result in the imposition
of an excise tax under Section 4975 of the Code. 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, subject to ERISA or to Section 4975 of the Code.
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.
[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.]
C-3
<PAGE>
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.
C-4
<PAGE>
IN WITNESS WHEREOF, Home Improvement Loan Trust 1996-A has caused this
Certificate to be duly executed by the manual signature of a duly authorized
officer of the Trustee.
Dated: March 14, 1996 HOME IMPROVEMENT LOAN TRUST 1996-A
By __________________________________
By __________________________________
Authorized Officer
C-5
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ______________________________ the within Certificate for Home Improvement
Loans, Series 1996-A, and does hereby irrevocably constitute and appoint
______________________________ Attorney to transfer the said certificate on the
Certificate Register maintained by the Trustee, with full power of substitution
in the premises.
Dated: By __________________________________
Signature
C-6
<PAGE>
EXHIBIT D
------- -
FORM OF ASSIGNMENT
In accordance with the Pooling and Servicing Agreement (the "Agreement")
dated as of March 1, 1996, 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 1996-A, created by the Agreement, to be held in trust as
provided in the Agreement, (i) all right, title and interest in the home
improvement contracts and installment notes (including, without limitation, all
related mortgages and deeds of trust and any and all rights to receive payments
which are due pursuant thereto on or after March 1, 1996 but excluding any
rights to receive payments which were due pursuant thereto prior to March 1,
1996) identified in the List of Contracts delivered pursuant to Section 2.02(a)
of the Agreement, (ii) all rights under FHA Insurance as such insurance relates
to the Contracts, (iii) all rights under hazard insurance on the properties
described in the Contracts and, as to Contracts pertaining to properties located
in special flood areas designated by HUD, all rights under flood insurance
policies as such insurance relates to the Contracts, (iv) all rights under the
Errors and Omissions Protection Policy (as defined in Section 1.02 of the
Agreement), (v) all documents contained in the Contract Files (as defined in
Section 1.02 of the Agreement), and (vi) all proceeds and products of the
foregoing.
This Assignment is made pursuant to and upon the representation and
warranties on the part of the undersigned contained in Article III of the
Agreement and no others.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be duly
executed this 14th day March, 1996.
GREEN TREE FINANCIAL
CORPORATION
[Seal] By_________________________________
[Name]
[Title]
D-1
<PAGE>
EXHIBIT E
------- -
GREEN TREE FINANCIAL CORPORATION
CERTIFICATE OF OFFICER
The undersigned certifies that he is a [title] of Green Tree Financial
Corporation, a Delaware 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, 1996
(the "Agreement") between the Company and First Trust National Association as
Trustee (all capitalized terms used herein without definition having the
respective meanings specified in the Agreement), and further certifies that:
(i) attached hereto as Exhibit I is a true and correct copy of the
Certificate 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
____________________, 1996.
--------------------------------------
[Name]
[Title]
E-1
<PAGE>
EXHIBIT F
------- -
FORM OF OPINION OF COUNSEL FOR THE COMPANY
The opinion of Briggs and Morgan, P.A. shall be to the effect that
(capitalized terms have the meanings set forth in the Pooling and Servicing
Agreement):
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware, with corporate power
to execute, deliver and perform its obligations under the Pooling and Servicing
Agreement (including the Limited Guaranty contained therein), the Certificates
and the Class C Certificate.
2. The Pooling and Servicing Agreement (including the Limited Guaranty
contained therein) has been duly authorized by all requisite corporate action,
duly executed and delivered by the Company, and constitutes the valid and
binding obligation of the Company enforceable in accordance with its terms. The
Certificates have been duly authorized by all requisite corporate action and,
when duly and validly executed by the Trustee in accordance with the Pooling and
Servicing Agreement, will be validly issued and outstanding and entitled to the
benefits of the Pooling and Servicing Agreement.
3. No consent, approval, authorization or order of any state or federal
court or governmental agency or body is required to be obtained by the Company
for the consummation of the transactions contemplated by the Pooling and
Servicing Agreement, except such as may be required under blue sky laws under
any jurisdiction in connection with the offering of the Certificates by 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 acting on behalf
of the Trust, nor the assignment of the Company's lien on the related real
estate which is the subject of a home improvement loan, nor the issuance or sale
of the Certificates and the Class C Certificate, nor the execution and delivery
of the Pooling and Servicing Agreement, nor the consummation of any other of the
transactions contemplated in the Pooling and Servicing Agreement, nor the
fulfillment of the terms of the Certificates, the Class C Certificate or the
Pooling and Servicing Agreement by the Company will conflict with, or result in
a breach, violation or acceleration of, or constitute a default under, any term
or provision of the Restated Certificate of Incorporation or Bylaws of the
Company or of any indenture or other agreement or instrument known to us to
which the Company is a party
F-1
<PAGE>
or by which it is bound, or result in a violation of, or contravene the terms of
any statute, order or regulation, applicable to the Company, of any court,
regulatory body, administrative agency or governmental body having jurisdiction
over it.
6. There are no actions or proceedings pending or, to the best of our
knowledge, actions, proceedings or investigations pending or overtly threatened
against the Company before any court, administrative agency or other tribunal
(A) asserting the invalidity of the Pooling and Servicing Agreement, the
Certificates, the Class C Certificate, the hazard or flood insurance policies
applicable to any Contracts or the Errors and Omissions Protection Policy, (B)
seeking to prevent the issuance of the Certificates or the Class C Certificate
or the consummation of any of the transactions contemplated by the Pooling and
Servicing Agreement, (C) which is likely materially and adversely to affect the
performance by the Company of its obligations under, or the validity or
enforceability of the Pooling and Servicing Agreement, the Certificates or the
Class C Certificate, or (D) seeking adversely to affect the federal income tax
attributes of the Certificates or the Class C Certificate described in the
Prospectus and the Prospectus Supplement under the heading "Certain Federal
Income Tax Consequences."
7. The transfer of the Contracts to the Trust in accordance with Section
2.01 of the Pooling and Servicing Agreement would not be avoidable as a
preferential transfer under Section 547 of the United States Bankruptcy Code (11
U.S.C. (S) 547), as in effect on the date hereof, in the event that the Company
became a debtor under the United States Bankruptcy Code.
8. Pursuant to the Pooling and Servicing Agreement the Company has
transferred to the Trustee acting on behalf of the Trust all of the Company's
right, title and interest in the Contracts, free and clear of any and all other
assignments, encumbrances, options, rights, claims, liens or security interests
(except tax or possessory liens) that may affect the right of the Trustee in and
to such Contracts, and has delivered the Contract Files to the Trustee or its
custodian. No filing or other action, other than the filing of a financing
statement on Form UCC-1 with the Secretary of State of the State of Minnesota
identifying the Contracts as collateral and naming the Company as debtor and the
Trust as secured party, and the filing of continuation statements as required by
Section 4.02 of the Pooling and Servicing Agreement, is necessary to perfect as
against third parties the assignment of the Contracts by the Company to the
Trust. We have separately provided you with our opinion concerning whether such
assignment could be recharacterized as a pledge rather than a sale in the event
the Company became a debtor under the United States Bankruptcy Code. However,
in the event such assignment were characterized as a pledge securing a loan from
the Certificateholders to the Company, it is our opinion that the Trustee would
be deemed to have a valid and perfected security interest in the Contracts and
the proceeds thereof, which security interest would be prior to any other
security interest that may be perfected under the Uniform Commercial Code as in
effect in the State of Minnesota and over any "lien
F-2
<PAGE>
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. In reliance upon certain representations and warranties set forth in
the Pooling and Servicing Agreement and assuming that the Company and the
Trustee comply with the requirements of the Pooling and Servicing Agreement,
including the filing of a proper election, as of the date hereof the Trust
created pursuant to the Pooling and Servicing Agreement will qualify as a REMIC.
Further, the Certificates will evidence ownership of the "regular interests" and
the Class C Certificate will evidence ownership of the single class of "residual
interest" in such REMIC. For Minnesota income tax purposes, and subject to the
foregoing assumptions, and the provisions of Minnesota law as of the date
hereof, such Trust will not be subject to tax and the income of such Trust will
be taxable to the holders of interests therein, all in accordance with the
provisions of the Code concerning REMICs as amended through April 15, 1995.
Moreover, ownership of a Certificate will not be a factor in determining whether
such owner is subject to Minnesota income taxes. Therefore, if the owner of a
Certificate is not otherwise subject to Minnesota income or franchise taxes in
the State of Minnesota, such owner will not become subject to such Minnesota
taxes solely by virtue of owning a Certificate.
10. The transfer of the Contracts and the proceeds thereof by the Company
to the Trustee on the date hereof pursuant to the Pooling and Servicing
Agreement would not be avoidable as a fraudulent transfer under the Uniform
Fraudulent Transfer Act as in effect in Minnesota on the date hereof (Minn.
Stat. (S)(S) 513.41 through 513.51), nor, should the Company become a debtor
under the United States Bankruptcy Code, as a fraudulent transfer under Section
548 of the United States Bankruptcy Code (11 U.S.C. (S) 548) as in effect on the
date hereof.
F-3
<PAGE>
EXHIBIT G
------- -
FORM OF TRUSTEE'S ACKNOWLEDGMENT
First Trust National Association, national banking association organized
under the laws of the United States, acting as trustee (the "Trustee") of Home
Improvement Loan Trust 1996-A (the "Trust") created pursuant to the Pooling and
Servicing Agreement dated as of March 1, 1996 between Green Tree Financial
Corporation and the Trustee (the "Agreement") (all capitalized terms used herein
without definition having the respective meanings specified in the Agreement)
acknowledges, pursuant to Section 2.03 of the Agreement, that the Trustee has
received the following: (i) all right, title and interest in the home
improvement contracts and promissory notes (including, without limitation, all
mortgages, deeds of trust and security deeds relating to the Contracts and any
and all rights to receive payments which are due pursuant thereto on or after
March 1, 1996 but excluding any rights to receive payments which were due
pursuant thereto prior to March 1, 1996) identified in the List of Contracts
delivered pursuant to Section 2.02 of the Agreement, (ii) all rights under FHA
Insurance as such insurance relates to the FHA-Insured Contracts, (iii) all
rights under hazard, flood or other individual insurance on the properties
described in the Contracts and, as to Contracts pertaining to properties located
in special flood areas designated by HUD, all rights under flood insurance
policies as such insurance relates to the Contracts, (iv) all rights under the
Errors and Omissions Protection Policy, as such policy relates to the Contracts,
(v) all documents contained in the Contract Files (as defined in Section 1.02 of
the Agreement), (vi) the Limited Guaranty, and (vii) all proceeds and products
of the foregoing; and declares that, directly or through a Custodian, it will
hold all Contract Files that have been delivered in trust, upon the trusts set
forth in the Agreement for the use and benefit of all Certificateholders and the
holder of the Class C Certificate. The Trustee acknowledges that it has
conducted a cursory review of the Contract Files and hereby confirms that except
as noted on the document exception listing attached hereto, each Contract File
contained (a) an original contract or promissory note, (b) with respect to each
Contract, an original or a copy of the mortgage or deed of trust or similar
evidence of a lien on the related improved real estate, (c) in the case of
Contracts originated by a contractor, an original or a copy of an assignment of
the mortgage, deed of trust or security deed by the contractor to Green Tree,
and (d) a sale control document. The Trustee has not otherwise reviewed the
Contracts and Contract Files for compliance with the terms of the Pooling and
Servicing Agreement.
G-1
<PAGE>
IN WITNESS WHEREOF, _______________________________, 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 ____________________,
1996.
FIRST TRUST NATIONAL ASSOCIATION
as Trustee
[Seal] By_________________________________
[Name]
[Title]
G-2
<PAGE>
EXHIBIT H
------- -
GREEN TREE FINANCIAL CORPORATION
CERTIFICATE OF SERVICING OFFICER
The undersigned certifies that he is a [title] of Green Tree Financial
Corporation, a Delaware 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, 1996 between the Company and First Trust
National Association, as Trustee of Home Improvement Loan Trust 1996-A (all
capitalized terms used herein without definition having the respective meanings
specified in the Agreement), and further certifies that:
1. The Monthly Report for the period from _________________________ to
_________________________ attached to this certificate is complete and accurate
in accordance with the requirements of Sections 6.01 and 6.02 of the Agreement;
and
2. As of the date hereof, no Event of Termination or event that with
notice or lapse of time or both would become an Event of Termination has
occurred.
IN WITNESS WHEREOF, I have affixed hereunto my signature this _____ day of
_______________________, 19_____.
GREEN TREE FINANCIAL CORPORATION
By__________________________________
[Name]
[Title]
H-1
<PAGE>
EXHIBIT I
------- -
FORM OF CLASS C CERTIFICATE
---------------------------
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A-1
CERTIFICATES, THE CLASS A-2 CERTIFICATES, THE CLASS A-3 CERTIFICATES, THE CLASS
M-1 CERTIFICATES, THE CLASS M-2 CERTIFICATES, THE CLASS B-1 CERTIFICATES AND THE
CLASS B-2 CERTIFICATES AS DESCRIBED IN THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT AND
LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM
REGISTRATION UNDER SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN
ACCORDANCE WITH THE PROVISIONS OF SECTION 9.02 OF THE POOLING AND SERVICING
AGREEMENT REFERRED TO HEREIN.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G and 860D OF THE INTERNAL
REVENUE CODE. THIS CERTIFICATE MAY ONLY BE TRANSFERRED TO A PERMITTED
TRANSFEREE (AS DEFINED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO
HEREIN); ANY SUCH TRANSFER MUST ALSO SATISFY THE OTHER REQUIREMENTS OF SECTION
9.02 OF SUCH POOLING AND SERVICING AGREEMENT.
I-1
<PAGE>
Class C No.
(Subordinate)
Cut-off Date: Percentage Interest:
February 28, 1996
First Payment Date:
April 15, 1996
CERTIFICATE FOR HOME IMPROVEMENT LOANS
- --------------------------------------
SERIES 1996-A
- -------------
Original Series 1996-A Certificate Principal Balance of the Trust:
$93,726,623.00
- --------------
This certifies that ___________________________________________________ is
the registered owner of the Residual Interest represented by this Certificate,
and entitled to certain distributions out of Home Improvement Loan Trust 1996-A
(the "Trust"), which includes among its assets a pool of home improvement loan
contracts and promissory notes (including, without limitation, all related
mortgages, deeds of trust and security deeds and any and all rights to receive
payments which are due pursuant thereto on or after March 1, 1996) (the
"Contracts"). The Trust has been created pursuant to a Pooling and Servicing
Agreement (the "Agreement"), dated as of March 1, 1996, between Green Tree
Financial Corporation, as Seller and Servicer (the "Company"), and First Trust
National Association, as Trustee of the Trust (the "Trustee"). This Class C
Certificate is described in the Agreement and is issued pursuant and subject to
the Agreement. By acceptance of this Class C Certificate the holder assents to
and becomes bound by the Agreement. To the extent not defined herein, all
capitalized terms have the meanings assigned to such terms in the Agreement.
The Agreement contemplates, subject to its terms, payment on the fifteenth
day (or if such day is not a Business Day, the next succeeding Business Day)
(the "Payment Date") of each calendar month commencing April 15, 1996, so long
as the Agreement has not been terminated, by check to the registered Class C
Certificateholder at the address appearing on the Certificate Register as of the
Business Day immediately preceding such Payment Date, in an amount equal to the
difference between (A) the Amount Available, and (B) the sum of (i) the Class A
Distribution Amount, (ii) the Class M-1 Distribution Amount, (iii) the Class M-2
Distribution Amount, (iv) the Class B-1 Distribution Amount, (v) the Class B-2
Distribution Amount, (vi) the Monthly Servicing Fee, (vii) amounts to reimburse
the Trustee or any successor Servicer for any payments of FHA Insurance premiums
not paid
I-2
<PAGE>
by the Company, as Servicer, and for which the Trustee or such successor
Servicer has not been reimbursed by the Company, (viii) amounts to reimburse the
Servicer or the Trustee, as applicable, for prior Advances, and (ix) amounts
necessary to reimburse the Company for any previous unreimbursed Class B-2
Guaranty Payments. The final scheduled Payment Date of this Class C Certificate
is January 15, 2026 or the next succeeding Business Day if such January 15 is
not a Business Day.
The Class C Certificateholder, by its acceptance of this Certificate,
agrees that it will look solely to the funds in the Certificate Account to the
extent available for distribution to the Class C Certificateholder as provided
in the Agreement for payment hereunder and that the Trustee in its individual
capacity is not personally liable to the Class C Certificateholder for any
amounts payable under this Certificate or the Agreement or, except as expressly
provided in the Agreement, subject to any liability under the Agreement. By
acceptance of this Certificate, the Class C Certificateholder agrees to
disclosure of his, her or its name and address to other Certificateholders under
the conditions specified in the Agreement.
No transfer of this Certificate or any interest herein 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 and
the Servicer an opinion of counsel (satisfactory to the Trustee and the
Servicer) that such transfer will not result in a violation of Section 406 of
ERISA or Section 4975 of the Code or cause the Servicer, the Company or the
Trustee to be deemed to be a fiduciary of such Plan or result in the imposition
of an excise tax under Section 4975 of the Code. 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, subject to ERISA or to Section 4975 of the Code.
This Class C Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds and duties evidenced hereby
and the rights, duties and immunities of the Trustee. Copies of the Agreement
and all amendments thereto will be provided to any Class C Certificateholder
free of charge upon a written request to the Trustee.
As provided in the Agreement and subject to the limitations set forth
therein, the transfer of this Class C Certificate is registrable in the
Certificate Register of the Certificate Registrar upon surrender of this Class C
Certificate for registration of transfer at the office or agency maintained by
the Trustee in Minneapolis or St. Paul, Minnesota, accompanied by a written
instrument of transfer in form satisfactory to the Trustee and the Certificate
Registrar duly executed by the holder thereof or his or her attorney duly
authorized in
I-3
<PAGE>
writing, and thereupon a new Class C Certificate evidencing the same Class C
Certificate 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 Class C Certificate is registered as the owner hereof for all purposes, and
neither the Company, the Servicer, the Trustee, the Paying Agent, the
Certificate Registrar nor any such agent shall be affected by any notice to the
contrary.
The holder of this Class C Certificate, by acceptance hereof, agrees that,
in accordance with the requirements of Section 860D(b)(1) of the Code, the
federal tax return of the Trust for its first taxable year shall provide that
the Trust elects to be treated as a "real estate mortgage investment conduit" (a
"REMIC") under the Code for such taxable year and all subsequent taxable years.
The Certificates shall be "regular interests" in the REMIC and the Class C
Certificate shall be the "residual interest" in the REMIC. In addition, the
holder of this Class C Certificate, by acceptance hereof, (i) agrees to file tax
returns consistent with and in accordance with any elections, decisions or other
reports made or filed with regard to federal, state or local taxes on behalf of
the Trust, and (ii) agrees to cooperate with the Company in connection with
examinations of the Trust's affairs by tax authorities, including administrative
and judicial proceedings, and (iii) makes the additional agreements,
designations and appointments, and undertakes the responsibilities, set forth in
Section 6.06 of the Agreement.
I-4
<PAGE>
IN WITNESS WHEREOF, Home Improvement Loan Trust 1996-A has caused this
Certificate to be duly executed by the manual signature of a duly authorized
officer of the Trustee.
Dated: March 14, 1996 HOME IMPROVEMENT LOAN
TRUST 1996-A
By FIRST TRUST NATIONAL ASSOCIATION
By___________________________________
Authorized Officer
I-5
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto __________________________________________________ the within Certificates
for Home Improvement Loans, Series 1996-A, and does hereby irrevocably
constitute and appoint __________________________________________________
Attorney to transfer the said certificate on the Certificate Register maintained
by the Trustee, with full power of substitution in the premises.
Dated: By________________________
Signature
I-6
<PAGE>
EXHIBIT J
------- -
GREEN TREE FINANCIAL CORPORATION
CERTIFICATE REGARDING REPURCHASED CONTRACTS
The undersigned certifies that he is a [title] of Green Tree Financial
Corporation, a Delaware 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, 1996 between the Company and First Trust
National Association, as Trustee of Home Improvement Loan Trust 1996-A (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]
J-1
<PAGE>
EXHIBIT K
------- -
FORM OF REPRESENTATION LETTER
-----------------------------
First Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Green Tree Financial Corporation
1100 Landmark Towers
345 St. Peter Street
St. Paul, Minnesota 55102-1639
RE: Certificates for Home Improvement Loans, Series 1996-A, Class C
The undersigned purchaser (the "Purchaser") understands that the purchase
of the above-referenced certificates (the "Certificates") may be made only by
institutions which are "Accredited Investors" under Regulation D, as promulgated
under the Securities Act of 1933, as amended (the "1933 Act"), which includes
banks, savings and loan associations, registered brokers and dealers, insurance
companies, investment companies, and organizations described in Section
501(c)(3) of the Internal Revenue Code, corporations, business trusts and
partnerships, not formed for the specific purpose of acquiring the Certificates
offered, with total assets in excess of $5,000,000. The undersigned represents
on behalf of the Purchaser that the Purchaser is an "Accredited Investor" within
the meaning of such definition. The Purchaser is urged to review carefully the
responses, representations and warranties it is making herein.
Representations and Warranties
The Purchaser makes the following representations and warranties in order
to permit the Trustee, Green Tree Financial Corporation, and
_________________________ to determine its suitability as a purchaser of
Certificates and to determine that the exemption from registration relied upon
by Green Tree Financial Corporation under Section 4(2) of the 1933 Act is
available to it.
1. The Purchaser understands that the Certificates have not been and will
not be registered under the 1933 Act and may be resold (which resale is not
currently contemplated) only if registered pursuant to the provisions of the
1933 Act or if an exemption from registration is available, that Green Tree
Financial Corporation is not required to register the Certificates and that any
transfer must comply with Section 9.02 of the Pooling and Servicing Agreement
relating to the Certificates.
K-1
<PAGE>
2. The Purchaser will comply with all applicable federal and state
securities laws in connection with any subsequent resale of the Certificates.
3. The Purchaser is a sophisticated institutional investor and has
knowledge and experience in financial and business matters and is capable of
evaluating the merits and risks of its investment in the Certificates and is
able to bear the economic risk of such investment. The Purchaser has reviewed
the Prospectus Supplement dated March 7, 1996, to the Prospectus dated March 7,
1996 (the "Prospectus") with respect to the Certificates, and has been given
such information concerning the Certificates, the underlying installment sale
contracts and Green Tree Financial Corporation as it has requested.
4. The Purchaser is acquiring the Certificates as principal for its own
account (or for the account of one or more other institutional investors for
which it is acting as duly authorized fiduciary or agent) for the purpose of
investment and not with a view to or for sale in connection with any
distribution thereof, subject nevertheless to any requirement of law that the
disposition of the Purchaser's property shall at all times be and remain within
its control.
5. The Purchaser does not qualify as (i) an employee benefit plan (a
"Plan") as defined in section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), whether or not it is subject to the
provisions of Title I of ERISA, (ii) a plan described in section 4975(e)(1) of
the Internal Revenue Code of 1986 (also a "Plan"), or (iii) an entity whose
underlying assets are deemed to be assets of a Plan by reason of such Plan's
investment in the entity (as determined under Department of Labor Regulations,
29 C.F.R. (S)2510.3-101 (1990)).
6. The Purchaser understands that such Certificate will bear a legend
substantially as set forth in the form of Certificate included in the Pooling
and Servicing Agreement.
7. The Purchaser, as holder of the Class C Certificate, acknowledges (i)
it may incur tax liabilities in excess of any cash flows generated by the
interest and (ii) it intends to pay the taxes associated with holding the Class
C Certificate as they become due.
8. The Purchaser agrees that it will obtain from any purchaser of the
Certificates from it the same representations, warranties and agreements
contained in the foregoing paragraphs 1 through 7 and in this paragraph 8.
K-2
<PAGE>
The representations and warranties contained herein shall be binding upon
the heirs, executors, administrators and other successors of the undersigned.
If there is more than one signatory hereto, the obligations, representations,
warranties and agreements of the undersigned are made jointly and severally.
Executed at ____________________________________________________________,
_________________________, this __________ day of ____________________,
__________.
Purchaser's Name (Print)
By__________________________________________
Signature
Its_________________________________________
Address of Purchaser
Purchaser's Taxpayer
Identification Number
K-3
<PAGE>
EXHIBIT L
------- -
LIST OF CONTRACTS
[To Be Supplied]
L-1
<PAGE>
EXHIBIT M
------- -
LIST OF FHA-INSURED CONTRACTS
[To Be Supplied]
M-1
<PAGE>
EXHIBIT N
---------
FORM OF MONTHLY REPORT
----------------------
CERTIFICATES FOR HOME IMPROVEMENT LOANS
SERIES 1996-A
Distribution Date: _________
Class A Certificates
- --------------------
1(a) Amount Available (including Monthly
Servicing Fee) _______
(b) Class M-1 Interest Deficiency Amount (if
any), Class M-2 Interest Deficiency Amount
(if any) and Class B-1 Interest Deficiency
Amount (if any) withdrawn for prior
Payment Date _______
(c) Amount Available after giving effect to
withdrawal of any Class M-1 Interest
Deficiency Amount, Class M-2 Interest
Deficiency Amount and Class B-1
Interest Deficiency Amount for prior
Payment Date _______
Interest
2. Aggregate interest
(a) Class A-1 Pass-through Rate (____%)
(b) Class A-l Interest _______
(c) Class A-2 Pass-through Rate (____%)
(d) Class A-2 Interest _______
(e) Class A-3 Pass-through Rate (____%)
(f) Class A-3 Interest _______
3. Amount applied to Unpaid Class A Interest Shortfall _______
N-1
<PAGE>
4. Remaining Unpaid Class A Interest Shortfall _______
Principal
5. Formula Principal Distribution Amount:
(a) Scheduled principal _______
(b) Principal Prepayments _______
(c) Liquidated Contracts _______
(d) Repurchases _______
(e) Previously undistributed (a)-(d) amounts _______
6. Pool Scheduled Principal Balance _______
7. Senior Percentage for such
Payment Date _______
8. Class A principal distribution:
(a) Class A-1 _______
(b) Class A-2 _______
(c) Class A-3 _______
9. (a) Class A-1 Principal Balance _______
(b) Class A-2 Principal Balance _______
(c) Class A-3 Principal Balance _______
Class M-1 Certificates
- ----------------------
10. Amount Available less the Class A
Distribution Amount (including
Monthly Servicing Fee) _______
Interest on Class M-1 Principal Balance less
Class M-1 Principal Shortfall Amount
11. Current interest
(a) Class M-1 Pass-through Rate (____%)
(b) Class M-1 Interest _______
N-2
<PAGE>
12. Amount applied to Unpaid Class M-1
Interest Shortfall _______
13. Amount applied to Class M-1 Interest
Deficiency Amount _______
14. Remaining unpaid Class M-1 Interest
Deficiency Amount _______
15. Remaining Unpaid Class M-1
Interest Shortfall _______
Principal
16. Formula Principal Distribution Amount: _______
(a) Scheduled principal _______
(b) Principal Prepayments _______
(c) Liquidated Contracts _______
(d) Repurchases _______
(e) Previously undistributed (a) - (d) amounts _______
17. Pool Scheduled Principal Balance _______
18. Senior Percentage for such
Payment Date _______
19. Class M-1 principal distribution _______
20. Class M-1 Principal Balance _______
Interest on Principal Shortfall
21. Aggregate Principal Shortfall Amount _______
22. Class M-1 Principal Shortfall Amount _______
23. Interest at Class M-1 Pass-Through Rate on:
(a) Class M-1 Principal Shortfall Amount _______
(b) Unpaid Class M-1 Interest Shortfall on
Principal Shortfall _______
N-3
<PAGE>
24. Amount applied to such interest _______
25. Principal Shortfall interest remaining unpaid _______
Class M-2 Certificates
- ----------------------
26. Amount Available less the Class A
Distribution Amount and Class M-1
Distribution Amount (including
Monthly Servicing Fee) _______
Interest on Class M-2 Principal Balance less
Class M-2 Principal Shortfall Amount
27. Current interest
(a) Class M-2 Pass-through Rate (____%)
(b) Class M-2 Interest _______
28. Amount applied to Unpaid Class M-2
Interest Shortfall _______
29. Amount applied to Class M-2 Interest
Deficiency Amount _______
30. Remaining unpaid Class M-2 Interest
Deficiency Amount _______
31. Remaining Unpaid Class M-2
Interest Shortfall _______
Principal
32. Formula Principal Distribution Amount: _______
(a) Scheduled principal _______
(b) Principal Prepayments _______
(c) Liquidated Contracts _______
(d) Repurchases _______
(e) Previously undistributed (a) - (d) amounts _______
33. Pool Scheduled Principal Balance
N-4
<PAGE>
34. Senior Percentage for such
Payment Date _______
35. Class M-2 Principal Distribution _______
36. Class M-2 principal balance _______
Interest on Principal Shortfall
37. Aggregate Principal Shortfall Amount _______
38. Class M-2 Principal Shortfall Amount _______
39. Interest at Class M-2 Pass-Through Rate on:
(a) Class M-2 Principal Shortfall Amount _______
(b) Unpaid Class M-2 Interest Shortfall on
Principal Shortfall _______
40. Amount applied to such interest _______
41. Principal Shortfall interest remaining unpaid _______
Class B Principal Distribution Tests (tests must be satisfied on and after the
- ------------------------------------
Payment Date occurring in April 1999)
42. Average Sixty-Day Delinquency Ratio Test
(a) Sixty-Day Delinquency Ratio for
current Payment Date _______
(b) Average Sixty-Day Delinquency Ratio Test
(arithmetic average of ratios for this
month and two preceding months;
may not exceed 2.5%) _______
43. Average Thirty-Day Delinquency Ratio Test
(a) Thirty-Day Delinquency Ratio for
current Payment Date _______
(b) Average Thirty-Day Delinquency Ratio
Test (arithmetic average of ratios
for this month and two preceding _______
N-5
<PAGE>
months; may not exceed 5%) _______
44. Cumulative Realized Losses Test
Cumulative Realized Losses
for current Payment Date
(as a percentage of Cut-off Date
Pool Principal Balance may not
exceed 9%) _______
45. Current Realized Losses Test
(a) Current Realized Losses
for current Payment Date _______
(b) Current Realized Loss Ratio (total
Realized Losses for most recent
three months, multiplied by 4,
divided by arithmetic
average of Pool Scheduled Principal
Balances for third preceding
Remittance and for current Remittance
Date; may not exceed 2.5%) _______
46. Class B Principal Balance Test
Class B Principal Balance (before
any distributions on current
Payment Date) divided by Pool
Scheduled Principal Balance for
prior Payment Date (must equal
or exceed 24%) _______
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Class B-1 Certificates
- ----------------------
47. Amount Available less the Class A
Distribution Amount and Class M
Distribution Amount (including
Monthly Servicing Fee) _______
Interest on Class B-1 Principal Balance less
Class B-1 Principal Shortfall Amount
48. Class B-1 Pass-through Rate (____%) _______
49. Current interest _______
50. Amount applied to Unpaid
Class B-1 Interest Shortfall _______
51. Amount applied to Class B-1 Interest
Deficiency Amount _______
52. Remaining unpaid Class B-1 Interest
Deficiency Amount _______
53. Remaining Unpaid Class B-1
Interest Shortfall _______
Principal
54. Formula Principal Distribution Amount: _______
(a) Scheduled principal _______
(b) Principal Prepayments _______
(c) Liquidated Contracts _______
(d) Repurchases _______
(e) Previously undistributed (a) - (d) amounts _______
55. Pool Scheduled Principal Balance _______
56. Class B Percentage for such
Payment Date _______
57. Class B Percentage of Formula
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<PAGE>
Principal Distribution Amount _______
58. Class B Principal Balance _______
59. Class B-1 Principal Balance _______
Interest on Principal Shortfall
60. Aggregate Principal Shortfall Amount _______
61. Class B-1 Principal Shortfall Amount _______
62. Interest at Class B-1 Pass-Through Rate on:
(a) Class B-1 Principal Shortfall Amount _______
(b) Unpaid Class B-1 Interest Shortfall on
Principal Shortfall _______
63. Amount applied to such interest _______
64. Principal Shortfall interest remaining unpaid _______
Class B-2 Certificates
- ----------------------
65. Remaining Amount Available _______
Interest on Class B-2 Principal Balance less
Principal Shortfall Amount
66. Class B-2 Pass-through Rate (____%)
67. Current interest _______
68. Amount applied to Unpaid Class
B-2 Interest Shortfall _______
69. Remaining Unpaid Class B-2
Interest Shortfall _______
Principal
70. Formula Principal Distribution Amount: _______
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<PAGE>
(a) Scheduled principal _______
(b) Principal Prepayments _______
(c) Liquidated Contracts _______
(d) Repurchases _______
(e) Previously undistributed (a) - (d) amounts _______
71. Pool Scheduled Principal Balance _______
72. Class B Percentage for such
Payment Date _______
73. Class B Percentage of Formula
Principal Distribution Amount _______
74. Current principal (Class B Percentage of Formula
Principal Distribution Amount less
Class B-1 Principal Balance) _______
75. Class B-2 Principal Liquidation Loss
Amount _______
76. Class B-2 Limited Guaranty Payment _______
77. Class B-2 Principal Balance _______
Interest on Principal Shortfall
78. Aggregate Principal Shortfall Amount _______
79. Class B-2 Principal Shortfall Amount _______
80. Interest at Class B-2 Pass-Through Rate on:
(a) Class B-2 Principal Shortfall Amount _______
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<PAGE>
(b) Unpaid Class B-2 Interest Shortfall on
Principal Shortfall _______
81. Amount applied to such interest _______
82. Principal Shortfall interest remaining unpaid _______
Class A, Class M and Class B Certificates
- ------------------------------------------
83. Pool Factor _______
84. Contracts Delinquent:
31 - 59 days _______
60 or more days _______
85. Principal Balance of Defaulted Contracts _______
86. Number of Liquidated Contracts and
Net Liquidated Loss _______
87. Number of Loans Remaining _______
88. Number and Principal Balance of Contracts
with FHA claims finally rejected, or no FHA
claim was submitted because FHA Insurance
was unavailable _______
89. FHA Insurance reserve amount _______
90. Amount received from FHA Insurance _______
Class C Certificates
- --------------------
91. Monthly Servicing Fee _______
92. Class C Residual Payment _______
Please contact the Bondholder Relations Department of First Trust National
Association at (612) 224-0444 with any questions regarding this Statement or
your Distribution.
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