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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 28, 1998
GREEN TREE FINANCIAL CORPORATION
as originator of Certificates Home Equity Loans
Series 1998-C
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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
--------------
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 May 28, 1998, the Registrant sold approximately $500,000,000 of
Certificates for Home Equity Loans, Series 1998-C, evidencing
beneficial ownership interests in a trust consisting of a pool of
fixed-rate home equity loan contracts and adjustable rate home equity
loan contracts 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
2
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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
----------- -----------
4.1 Pooling and Servicing Agreement between Green Tree
Financial Corporation, as Seller and Servicer, and
U.S. Bank Trust National Association, as Trustee,
dated as of May 1, 1998, relating to Certificates
for Home Equity Loans, Series 1998-C
8.1 Tax opinion of Briggs and Morgan Professional
Association, dated May 28, 1998, relating to REMIC
matters
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GREEN TREE FINANCIAL
CORPORATION
as originator of Certificates for
Home Equity Loans Series 1998-C
By: /s/ Scott T. Young
------------------------------------
Scott T. Young
Senior Vice President and Controller
3
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INDEX TO EXHIBITS
Exhibit
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Number
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4.1 Pooling and Servicing Agreement between Green Tree
Financial Corporation, as Seller and Servicer, and
U.S. Bank Trust National Association, as Trustee,
dated as of May 1, 1998, relating to Certificates for
Home Equity Loans, Series 1998-C
8.1 Tax opinion of Briggs and Morgan, Professional
Association, dated May 28, 1998, relating to
REMIC matters
4
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EXECUTION
Certificates for Home Equity Loans
Series 1998-C
POOLING AND SERVICING AGREEMENT
between
GREEN TREE FINANCIAL CORPORATION
Seller and Servicer
and
U.S. BANK TRUST NATIONAL ASSOCIATION
not in its individual capacity but solely as Trustee
of
HOME EQUITY LOAN TRUST 1998-C
Dated as of May 1, 1998
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TABLE OF CONTENTS
ARTICLE I - DEFINITIONS......................................................1-1
SECTION 1.01. General......................................................1-1
SECTION 1.02. Specific Terms...............................................1-1
ARTICLE II - ESTABLISHMENT OF TRUST; TRANSFER OF LOANS.......................2-1
SECTION 2.01. Closing......................................................2-1
SECTION 2.02. Conditions to the Closing....................................2-1
SECTION 2.03. Conveyance of the Subsequent Loans...........................2-2
SECTION 2.04. Acceptance by Trustee........................................2-4
SECTION 2.05. REMIC Provisions.............................................2-5
ARTICLE III - REPRESENTATIONS AND WARRANTIES.................................3-1
SECTION 3.01. Representations and Warranties Regarding the Company.........3-1
SECTION 3.02. Representations and Warranties Regarding Each Loan...........3-2
SECTION 3.03. Representations and Warranties Regarding the Loans in
the Aggregate.......................................3-5
SECTION 3.04. Representations and Warranties Regarding the Loan Files......3-7
SECTION 3.05. Repurchases of Loans for Breach of Representations
and Warranties......................................3-7
SECTION 3.06. No Repurchase Under Certain Circumstances....................3-9
ARTICLE IV - PERFECTION OF TRANSFER AND PROTECTION OF
SECURITY INTERESTS.........................................................4-1
SECTION 4.01. Transfer of Loans............................................4-1
SECTION 4.02. Costs and Expenses...........................................4-2
ARTICLE V - SERVICING OF LOANS...............................................5-1
SECTION 5.01. Responsibility for Loan Administration.......................5-1
SECTION 5.02. Standard of Care.............................................5-1
SECTION 5.03. Records......................................................5-1
SECTION 5.04. Inspection...................................................5-1
SECTION 5.05. Certificate Account..........................................5-2
SECTION 5.06. Enforcement..................................................5-4
SECTION 5.07. Trustee to Cooperate.........................................5-6
SECTION 5.08. Costs and Expenses...........................................5-6
SECTION 5.09. Maintenance of Insurance.....................................5-7
SECTION 5.10. Merger or Consolidation of Servicer..........................5-7
ARTICLE VI - REPORTS AND TAX MATTERS.........................................6-1
SECTION 6.01. Monthly Reports..............................................6-1
SECTION 6.02. Officer's Certificate........................................6-1
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SECTION 6.03. Other Data...................................................6-1
SECTION 6.04. Annual Report of Accountants.................................6-2
SECTION 6.05. Statements to Certificateholders and the
Class C Certificateholders..........................6-2
SECTION 6.06. Payment of Taxes.............................................6-7
ARTICLE VII - SERVICE TRANSFER...............................................7-1
SECTION 7.01. Events of Termination........................................7-1
SECTION 7.02. Transfer.....................................................7-1
SECTION 7.03. Trustee to Act; Appointment of Successor.....................7-2
SECTION 7.04. Notification to Certificateholders and Class C
Certificateholders..................................7-3
SECTION 7.05. Effect of Transfer...........................................7-3
SECTION 7.06. Transfer of Certificate Account..............................7-3
ARTICLE VIII - PAYMENTS......................................................8-1
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 and Replaced Loans...............8-8
SECTION 8.06. Servicer's Purchase Option...................................8-9
SECTION 8.07. Pre-Funding Account.........................................8-10
SECTION 8.08. Distributions on the Subsidiary REMIC Regular Interests.....8-11
ARTICLE IX - THE CERTIFICATES AND THE CLASS C CERTIFICATES...................9-1
SECTION 9.01. The Certificates and Class C Certificates....................9-1
SECTION 9.02. Registration of Transfer and Exchange of Certificates
and the Class C Certificates........................9-2
SECTION 9.03. No Charge; Disposition of Void Certificates or
Class C Certificates................................9-5
SECTION 9.04. Mutilated, Destroyed, Lost or Stolen Certificates
or Class C Certificates.............................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.....................................................10-1
SECTION 10.01. Real Estate................................................10-1
SECTION 10.02. Liabilities to Obligors....................................10-1
SECTION 10.03. Tax Indemnification........................................10-1
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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....................................................11-1
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, Class C
Certificates or Loans......................................11-3
SECTION 11.04. Trustee May Own Certificates...............................11-3
SECTION 11.05. Rights of Certificateholders to Direct Trustee and
to Waive Events of Termination.............................11-3
SECTION 11.06. The Servicer to Pay Trustee's Fees and Expenses............11-4
SECTION 11.07. Eligibility Requirements for Trustee.......................11-4
SECTION 11.08. Resignation or Removal of Trustee..........................11-5
SECTION 11.09. Successor Trustee..........................................11-5
SECTION 11.10. Merger or Consolidation of Trustee.........................11-6
SECTION 11.11. Tax Returns................................................11-6
SECTION 11.12. Obligor Claims.............................................11-6
SECTION 11.13. Appointment of Co-Trustee or Separate Trustee..............11-7
SECTION 11.14. Reserved...................................................11-8
SECTION 11.15. Trustee and U.S. Bancorp...................................11-8
SECTION 11.16. Trustee Advances...........................................11-8
ARTICLE XII - MISCELLANEOUS.................................................12-1
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................................................12-2
SECTION 12.05. Acts of Certificateholders and Class C Certificateholders..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
EXHIBIT A - FORM OF CLASS A CERTIFICATE......................................A-1
EXHIBIT B - FORM OF CLASS A-1[A][B] ARM CERTIFICATE..........................B-1
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EXHIBIT C - FORM OF CLASS A-7 IO CERTIFICATE.................................C-1
EXHIBIT D - FORM OF CLASS M CERTIFICATE......................................D-1
EXHIBIT E - FORM OF CLASS B CERTIFICATE......................................E-1
EXHIBIT F - RESERVED.........................................................F-1
EXHIBIT G - FORM OF ASSIGNMENT...............................................G-1
EXHIBIT H - FORM OF CERTIFICATE OF OFFICER...................................H-1
EXHIBIT I - FORM OF OPINION OF COUNSEL FOR THE COMPANY.......................I-1
EXHIBIT J - FORM OF TRUSTEE'S ACKNOWLEDGMENT................................J-1
EXHIBIT K - FORM OF CERTIFICATE OF SERVICING OFFICER.........................K-1
EXHIBIT L - FORM OF CLASS C CERTIFICATE......................................L-1
EXHIBIT M-1 - FORM OF CERTIFICATE REGARDING REPURCHASED LOANS..............M-1-1
EXHIBIT M-2 - FORM OF CERTIFICATE REGARDING ELIGIBLE
SUBSTITUTE LOANS..................................................M-2-1
EXHIBIT N - FORM OF REPRESENTATION LETTER....................................N-1
EXHIBIT O-1 - LIST OF INITIAL AND ADDITIONAL FIXED-RATE LOANS..............O-1-1
EXHIBIT O-2 - LIST OF INITIAL AND ADDITIONAL ADJUSTABLE RATE LOANS.........O-2-1
EXHIBIT P - FORM OF MONTHLY REPORT...........................................P-1
EXHIBIT Q - FORM OF ADDITION NOTICE..........................................Q-1
EXHIBIT R - FORM OF SUBSEQUENT TRANSFER INSTRUMENT...........................R-1
EXHIBIT S - FORM OF OFFICER'S CERTIFICATE (SUBSEQUENT TRANSFER)..............S-1
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AGREEMENT, dated as of May 1, 1998, 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 U.S. Bank 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 Equity Loan Trust 1998-C (the "Trust").
WHEREAS, in the regular course of its business, the Company purchases,
originates and services home equity loans, which loans provide for installment
payments by or on behalf of the borrowers and grant mortgages, deeds of trust or
security deeds on certain real estate securing such loans;
WHEREAS, the Company intends to sell mortgage pass-through certificates
(collectively, the "Certificates"), to be issued hereunder in thirteen classes
(each, a "Class"), which in the aggregate will evidence the entire beneficial
ownership interest in the Trust Fund (as defined herein), consisting primarily
of the Loans (as defined herein);
WHEREAS, as provided herein, the Trustee will make an election to treat
the entire segregated pool of assets comprising the Subsidiary REMIC (as defined
herein) and subject to this Agreement as a real estate mortgage investment
conduit (a "REMIC") for federal income tax purposes and such segregated pool of
assets will be designated as the "Subsidiary REMIC";
WHEREAS, the Subsidiary REMIC Regular Interests (as defined herein)
will be "regular interests" in the Subsidiary REMIC and the Class C Subsidiary
Certificate (as defined herein) will be the sole class of "residual interests"
in the Subsidiary REMIC for purposes of the REMIC Provisions (as defined herein)
under the federal income tax law;
WHEREAS, a segregated pool of assets consisting of the Subsidiary REMIC
Regular Interests (as defined herein) will be designated as the "Master REMIC,"
and the Trustee will make a separate REMIC election with respect thereto;
WHEREAS, the Certificates will be "regular interests" in the Master
REMIC, and the Class C Master Certificate (as defined herein) will be the sole
class of "residual interests" in the Master REMIC for purposes of the REMIC
Provisions (as defined herein) under federal income tax law; and
WHEREAS, the Company and the Trustee wish to set forth the terms and
conditions on which the Trustee, on behalf of the "Certificateholders" and
"Class C Certificateholders" (as defined herein) will acquire the Loans and the
Company will service the Loans;
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
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 this Agreement.
SECTION 1.02. Specific Terms.
"Addition Notice" means with respect to the transfer of Subsequent
Loans to the Trust pursuant to Section 2.03 of this Agreement, a notice,
substantially in the form of Exhibit Q, which shall be given not later than five
Business Days prior to the related Subsequent Transfer Date, of the Company's
designation of Subsequent Loans, to be sold to the Trust and the aggregate
Cut-off Date Principal Balances of such Subsequent Loans.
"Additional Adjustable Rate Loan" means an Additional Loan that is an
Adjustable Rate Loan.
"Additional Fixed Rate Loan" means an Additional Loan that is a Fixed
Rate Loan.
"Additional Loan" means a Loan identified as such on the List of Loans
attached hereto.
"Adjustable Rate Loan" means each closed-end home equity loan
identified as such in the List of Loans, which Adjustable Rate Loan is 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 due pursuant thereto after the Cut-off Date, or
Subsequent Cut-off Date in the case of a Subsequent Loan.
"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 Loan 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,
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by contract or otherwise; and the terms "controlling" or "controlled" have
meanings correlative to the foregoing.
"Aggregate Liquidation Loss Principal Amount" means, as of any Payment
Date, the excess, if any, of (a) the Certificate Principal Balance as of the
preceding Payment Date (after giving effect to distributions of principal
thereon) over (b) the sum of the Pool Scheduled Principal Balance (excluding the
Undelivered Loans) and the Pre-Funded Amount as of such preceding Payment Date.
"Agreement" means this Pooling and Servicing Agreement, as it may be
amended from time to time.
"Amount Available" means, as to any Payment Date, an amount equal to:
(a) the sum of (1) the amount on deposit in the Certificate Account in respect
of the Loans as of the close of business on the last day of the preceding Due
Period and (2) any amount withdrawn from the Pre-Funding Account pursuant to
Section 8.07 and deposited in the Certificate Account, 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 in respect of the Loans, (2) amounts
permitted to be withdrawn by the Trustee from the Certificate Account in respect
of the Loans pursuant to clauses (ii) through (v) 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 in respect of the Loans
on the last day of the preceding Due Period on account of Advance Payments on
the Loans in respect of such Due Period.
"Applicants" has the meaning assigned in Section 9.06.
"Authenticating Agent" means any authenticating agent appointed
pursuant to Section 9.07.
"Available Funds Pass-Through Rate" means, for any Payment Date, a rate
per annum equal to the weighted average of the Expense Adjusted Loan Rates on
the then outstanding Adjustable Rate Loans.
"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 6%.
"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 12%.
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"Balloon Loan" means a Loan that provides for the payment of the
unamortized principal balance of such Loan in a single payment at the maturity
of such Loan that is greater than the preceding monthly payment.
"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.
"Calculation Agent" means the Person who establishes LIBOR with respect
to each Interest Reset Period. The Calculation Agent shall be the Trustee unless
the Trustee is unable or unwilling so to act, in which case the Calculation
Agent shall be a financial institution appointed by the Seller.
"Certificate" means a Certificate for Home Equity Loans, Series 1998-C,
Class A-1A ARM, Class A-1B ARM, Class A-1, Class A-2, Class A-3, Class A-4,
Class A-5, Class A-6, Class A-7 IO, 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, C, D or E, as applicable, but does not include the Class C Certificates.
"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 Principal Balance" means the sum of the Class A-1A ARM,
Class A-1B ARM, Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class
A-6, Class M-1, Class M-2, Class B-1, and Class B-2 Principal Balances.
"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 or Class C 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 or Class C 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
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is entitled to rely upon any such consent, waiver, request or demand, only
Certificates or Class C 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 Certificates, as the case may be.
"Class A Certificates" means the Class A-1A ARM, Class A-1B ARM, Class
A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6, and Class A-7 IO
Certificates, collectively.
"Class A Distribution Amount" means, as to any Payment Date, the lesser
of (a) the Amount Available (less any amount paid to the Servicer pursuant to
Section 8.04(b)(1)) and (b) the Class A Formula Distribution Amount; provided
that, after the Class A-6 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 the first
Payment Date) at (1) the Class A-1A ARM Pass-Through Rate on the Class A-1A ARM
Principal Balance, (2) the Class A-1B ARM Pass-Through Rate on the Class A-1B
ARM Principal Balance, (3) the Class A-1 Pass-Through Rate on the Class A-1
Principal Balance, (4) the Class A-2 Pass-Through Rate on the Class A-2
Principal Balance, (5) the Class A-3 Pass-Through Rate on the Class A-3
Principal Balance, (6) the Class A-4 Pass-Through Rate on the Class A-4
Principal Balance, (7) the Class A-5 Pass-Through Rate on the Class A-5
Principal Balance, (8) the Class A-6 Pass-Through Rate on the Class A-6
Principal Balance, and (9) the Class A-7 IO Pass-Through Rate on the Class A-7
IO Notional Principal Amount, in each case to be calculated immediately prior to
such Payment Date, (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 Liquidation Loss Principal Amount as to such Payment Date, the
Class A Formula Principal Distribution Amount, or (ii) if there is a Class A
Liquidation Loss Principal Amount as to such Payment Date, the amount determined
in accordance with Section 8.04(b)(3)(ii); provided, however, that the aggregate
of all amounts distributed for all Payment Dates pursuant to clause (c) shall
not exceed the aggregate of the Original Class Principal Balances of Class A.
"Class A Formula Interest Distribution Amount" means, as to each Class
of Class A Certificates and any Payment Date, the sum of (1) the amount
specified in clause (a)(1), (2), (3), (4), (5) (6), (7), (8) or (9), as
appropriate, of the definition of the term "Class A Formula Distribution Amount"
and (2) the Unpaid Class A Interest Shortfall, if any, with respect to such
Class.
"Class A Formula Principal Distribution Amount" means, as to any
Payment Date, the sum of the Class A-1 ARM Formula Principal Distribution Amount
and the Senior Percentage of the Formula Principal Distribution Amount.
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"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 Liquidation Loss Principal Amount" means, as to any Payment
Date, the amount, if any, by which the sum of the Pool Scheduled Principal
Balance plus the Pre-Funded Amount is less than the Class A Principal Balance.
"Class A Principal Balance" means, as to any Payment Date, the sum of
the Class A-1A ARM Principal Balance, the Class A-1B ARM Principal Balance, the
Class A-1 Principal Balance, the Class A-2 Principal Balance, the Class A-3
Principal Balance, the Class A-4 Principal Balance, the Class A-5 Principal
Balance and the Class A-6 Principal Balance.
"Class A-1 ARM Certificates" means the Class A-1A ARM Certificates and
the Class A-1B ARM Certificates, collectively.
"Class A-1 ARM Formula Principal Distribution Amount" means zero as to
any Payment Date after the Class A-1 ARM Principal Balance has been reduced to
zero, and as to any Payment Date on or before the Payment Date on which the
Class A-1 ARM Principal Balance has been reduced to zero, the lesser of (A) the
Class A-1 ARM Principal Balance, or (B) the sum of the following amounts with
respect to the related Due Period, in each case computed in accordance with the
method specified in the relevant Adjustable Rate Loan:
(i) all scheduled payments of principal due on each
outstanding Adjustable Rate Loan during the prior Due Period as
specified in the amortization schedule at the time applicable thereto
(after adjustments for previous Partial Principal Prepayments and 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
(ii) all Partial Principal Prepayments applied and all
Principal Prepayments in Full received during the prior Due Period in
respect of the Adjustable Rate Loans; plus
(iii) the aggregate Scheduled Principal Balance of all
Adjustable Rate Loans that became Liquidated Loans during the prior Due
Period plus the amount of any reduction in principal balance of any
Adjustable Rate Loans during the prior Due Period pursuant to
bankruptcy proceedings involving the related Obligor; plus
(iv) the aggregate Scheduled Principal Balance of all
Adjustable Rate Loans repurchased, and all amounts deposited in lieu of
the repurchase of any Adjustable Rate Loan, during the prior Due Period
pursuant to Section 3.05(a) or, in the event of a substitution of an
Adjustable Rate Loan in accordance with Section 3.05(b), any amount
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required to be deposited by the Company in the Certificate Account
during the prior Due Period pursuant to Section 3.05(b)(vi); plus
(v) on the Post-Funding Payment Date, the Pre-Funded ARM
Amount; plus
(vi) on each Payment Date which is on or after the Payment
Date on which the Class A Certificates (other than the Class A-1 ARM
Certificates) have been paid in full, (a) the Senior Percentage of the
Formula Principal Distribution Amount less (b) the amount, if any,
distributed in payment of principal on the Class A Certificates (other
than the Class A-1 ARM Certificates) on such Payment Date.
"Class A-1 ARM Principal Balance" means the sum of the Class A-1A ARM
Principal Balance and the Class A-1B ARM 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 Master REMIC for purposes of
the REMIC Provisions.
"Class A-1 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.
"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 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.
"Class A-1A ARM Certificate" means any one of the Class A-1A ARM
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 Master REMIC
for purposes of the REMIC Provisions.
"Class A-1A ARM Distribution Amount" means, as to any Payment Date,
that portion of the Class A Distribution Amount to be distributed to the Class
A-1A ARM Certificateholders pursuant to Section 8.04(b) on such Payment Date.
"Class A-1A ARM Percentage" means, for any Payment Date, (1) 0% prior
to the Payment Date in February 2000 (unless the Class A-1B ARM Principal
Balance has been reduced to zero), (ii) 90% on the Payment Date in February 2000
and each Payment Date thereafter (unless the Class
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A-1B ARM Principal Balance has been reduced to zero), (iii) after the Payment
Date on which the Class A-1B ARM Principal Balance has been reduced to zero
(until the Class A-1A ARM Principal Balance has been reduced to zero), 100%, and
(iv) after the Payment Date on which the Class A-1A ARM Principal Balance has
been reduced to zero, 0%.
"Class A-1A ARM Principal Balance" means, as to any Payment Date, the
Original Class A- 1A ARM Principal Balance less all amounts previously
distributed to Holders of Class A-1A ARM Certificates in respect of principal.
"Class A-1B ARM Certificate" means any one of the Class A-1B ARM
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 Master REMIC
for purposes of the REMIC Provisions.
"Class A-1B ARM Distribution Amount" means, as to any Payment Date,
that portion of the Class A Distribution Amount to be distributed to the Class
A-1B ARM Certificateholders pursuant to Section 8.04(b) on such Payment Date.
"Class A-1B ARM Percentage" means, for any Payment Date (i) on or prior
to the Payment Date on which the Class A-1B ARM Principal Balance has been
reduced to zero, 100% minus the Class A-1A ARM Percentage, and (ii) after the
Payment Date on which the Class A-1B ARM Principal Balance has been reduced to
zero, 0%.
"Class A-1B ARM Principal Balance" means, as to any Payment Date, the
Original Class A- 1B ARM Principal Balance less all amounts previously
distributed to Holders of Class A-1B ARM Certificates in respect of principal.
"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 Master REMIC for purposes of
the REMIC Provisions.
"Class A-2 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.
"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 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.
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"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 Master REMIC for purposes of
the REMIC Provisions.
"Class A-3 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.
"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 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 A-4 Certificate" means any one of the Class A-4 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 Master REMIC for purposes of
the REMIC Provisions.
"Class A-4 Cross-over Date" means the Payment Date on which the Class
A-4 Principal Balance (after giving effect to the distributions of principal on
the Class A-4 Certificates on such Payment Date) is reduced to zero.
"Class A-4 Distribution Amount" means, as to any Payment Date, that
portion of the Class A Distribution Amount to be distributed to the Class A-4
Certificateholders pursuant to Section 8.04(b) on such Payment Date.
"Class A-4 Principal Balance" means, as to any Payment Date, the
Original Class A-4 Principal Balance less all amounts previously distributed to
Holders of Class A-4 Certificates in respect of principal.
"Class A-5 Certificate" means any one of the Class A-5 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 Master REMIC for purposes of
the REMIC Provisions.
"Class A-5 Cross-over Date" means the Payment Date on which the Class
A-5 Principal Balance (after giving effect to the distributions of principal on
the Class A-5 Certificates on such Payment Date) is reduced to zero.
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"Class A-5 Distribution Amount" means, as to any Payment Date, that
portion of the Class A Distribution Amount to be distributed to the Class A-5
Certificateholders pursuant to Section 8.04(b) on such Payment Date.
"Class A-5 Principal Balance" means, as to any Payment Date, the
Original Class A-5 Principal Balance less all amounts previously distributed to
Holders of Class A-5 Certificates in respect of principal.
"Class A-6 Certificate" means any one of the Class A-6 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 Master REMIC for purposes of
the REMIC Provisions.
"Class A-6 Cross-over Date" means the latest to occur of (a) the Class
A-5 Cross-over Date or (b) the Payment Date on which the Class A-6 Principal
Balance (after giving effect to the distributions of principal on the Class A-6
Certificates on such Payment Date) is reduced to zero or (c) the Payment Date on
which the Class A-1 ARM Principal Balance (after giving effect to the
distributions of principal on the Class A-1 ARM Certificates on such Payment
Date) is reduced to zero.
"Class A-6 Distribution Amount" means, as to any Payment Date, that
portion of the Class A Distribution Amount to be distributed to the Class A-6
Certificateholders pursuant to Section 8.04(b) on such Payment Date.
"Class A-6 Lockout Percentage" means, as to any Payment Date occurring
during the periods set forth below, the percentage designated as such as
follows:
Class A-6
Period (dates inclusive) Lockout Percentage
------------------------ ------------------
June 1998 through May 2000 0%
June 2000 through May 2002 20%
June 2002 through May 2003 80%
June 2003 through May 2004 100%
June 2004 and thereafter 300%
"Class A-6 Lockout Pro Rata Distribution Amount" means, as to any
Payment Date, an amount equal to the lesser of:
(a) the product of (1) the Class A-6 Lockout Percentage, and
(2) the product of (A) a fraction, the numerator of which is the Class
A-6 Principal Balance immediately preceding such Payment Date and the
denominator of which is the Class A Principal Balance less the Class
A-1 ARM Principal Balance, immediately preceding such Payment Date, and
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(B) the Senior Percentage of the Formula Principal Distribution Amount
for such Payment Date, and
(b) the Class A-6 Principal Balance immediately preceding such
Payment Date.
"Class A-6 Principal Balance" means, as to any Payment Date, the
Original Class A-6 Principal Balance less all amounts previously distributed to
Holders of Class A-6 Certificates in respect of principal.
"Class A-7 IO Certificate" means any one of the Class A-7 IO
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 Master REMIC
for purposes of the REMIC Provisions.
"Class A-7 IO Distribution Amount" means, as to any Payment Date, that
portion of the Class A Distribution Amount to be distributed to the Class A-7 IO
Certificateholders pursuant to Section 8.04(b) on such Payment Date.
"Class A-7 IO Notional Principal Amount" means, for each of the first
36 Payment Dates, an amount equal to the lesser of (i) $25,000,000 or (ii) the
Class A Principal Balance, and for each subsequent Payment Date, zero.
"Class A-7 IO Original Notional Amount" means $25,000,000.
"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 Class M-2 Cross-over Date, and
(b) the first Payment Date on or after the Payment Date
occurring in June 2001 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 which is the Pool Scheduled
Principal Balance as of the immediately preceding Payment Date, is
equal to or greater than 12.5%.
"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 sum of the Class B
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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 12.5%.
"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 Class B Principal Balance Test, the Cumulative
Realized Losses 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 E and evidencing an
interest designated as a "regular interest" in the Master REMIC for purposes of
the REMIC Provisions.
"Class B-1 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.
"Class B-1 Distribution Amount" means, as to any Payment Date, the
lesser of (a) the Amount Available (less any amount paid to the Servicer
pursuant to Section 8.04(b)(1)) 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.
"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 the
first Payment Date) at the Class B-1 Pass-Through Rate on the excess of the
Class B-1 Principal Balance over the Class B-1 Liquidation Loss Principal
Amount, to be calculated immediately prior to such Payment Date, (b) any Unpaid
Class B-1 Interest Shortfall, and (c) if such Payment Date is on or prior to the
Class B-1 Cross-over Date, the Class B Percentage of the Formula Principal
Distribution Amount; provided, however, that on the Class M-2 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 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 (a) the amount specified in clause (a) of the
definition of the term "Class B-1 Formula Distribution Amount" and (b) the
Unpaid Class B-1 Interest Shortfall, if any.
"Class B-1 Formula Liquidation Loss 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 the first Payment Date) at the Class B-1 Pass-Through
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Rate on the Class B-1 Liquidation Loss Principal Amount, to be calculated
immediately prior to such Payment Date, and (b) the Unpaid Class B-1 Liquidation
Loss Interest 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 Liquidation Loss Interest Shortfall" means, as to any
Payment Date, the amount, if any, by which (a) the Class B-1 Formula Liquidation
Loss 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 Liquidation Loss Principal Amount" means, as to any Payment
Date, the lesser of (a) the excess, if any, of the Aggregate Liquidation Loss
Principal Amount, and (b) the Class B-1 Principal Balance.
"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-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 E and evidencing an
interest designated as a "regular interest" in the Master REMIC for purposes of
the REMIC Provisions.
"Class B-2 Distribution Amount" means, as to any Payment Date, the
lesser of (a) the Amount Available (less any amount paid to the Servicer
pursuant to Section 8.04(b)(1)) 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, 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 the
first Payment Date) at the Class B-2 Pass-Through Rate on the excess of the
Class B-2 Principal Balance over the Class B-2 Liquidation Loss Principal
Amount, to be calculated immediately prior to such Payment Date, (b) any Unpaid
Class B-2 Interest Shortfall,
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and (c) if such Payment Date is after the Class B-1 Cross-over Date, the Class B
Percentage of the Formula Principal Distribution Amount; provided, however, that
on the Class B-1 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 (a) the amount specified in clause (a) of the
definition of the term "Class B-2 Formula Distribution Amount" and (b) the
Unpaid Class B-2 Interest Shortfall, if any.
"Class B-2 Formula Liquidation Loss 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 the first Payment Date) at the Class B-2 Pass-Through Rate on the
Class B-2 Liquidation Loss Principal Amount, to be calculated immediately prior
to such Payment Date, and (b) the Unpaid Class B-2 Liquidation Loss Interest
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 Liquidation Loss Principal Amount exceeds (b) the Class B-2
Total Distribution Amount; provided that the Class B-2 Guaranty Payment shall
not exceed the amount necessary to reduce the Class B-2 Principal Balance to
zero.
"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 (1) the amount distributed to Class B-2
Certificateholders on such Payment Date pursuant to Sections 8.04(b)(7)(i) and
(ii), and (2) any Class B-2 Guaranty Payment.
"Class B-2 Limited Guaranty" means the limited guaranty of the Company
provided pursuant to Section 8.03.
"Class B-2 Liquidation Loss Interest Shortfall" means, as to any
Payment Date, the amount, if any, by which the Class B-2 Formula Liquidation
Loss Interest Distribution Amount exceeds (a) the sum of (1) the Class B-2 Total
Formula Distribution Amount and (2) the Class B-2 Liquidation Loss Principal
Amount less (b) the sum of (1) the Class B-2 Total Distribution Amount, (2) any
Class B-2 Guaranty Payment and (3) any Class B-2 Interest Shortfall.
"Class B-2 Liquidation Loss Principal Amount" means, as to any Payment
Date, the lesser of (a) the excess, if any, of the Aggregate Liquidation Loss
Principal Amount, and (b) the Class B-2 Principal Balance.
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<PAGE>
"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 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 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 Liquidation Loss Interest Distribution Amount.
"Class C Certificates" means any one of the Class C Master or Class C
Subsidiary Certificates.
"Class C Certificateholder" means the person in whose name a Class C
Certificate is registered on the Certificate Register.
"Class C Distribution Amount" means, as to any Payment Date, the
amount, if any, distributable in respect of the Class C Master Certificate
pursuant to Section 8.04(b).
"Class C Master Certificate" means a certificate for Home Equity Loans,
Series 1998-C, bearing the designation Class C Master, executed and delivered by
the Trustee substantially in the form of Exhibit L, and evidencing an interest
designated as a "residual interest" in the Master REMIC for purposes of the
REMIC Provisions.
"Class C Subsidiary Certificate" means a certificate for Home Equity
Loans, Series 1998-C, bearing the designation Class C Subsidiary, executed and
delivered by the Trustee substantially in the form attached hereto as Exhibit L,
and evidencing an interest designated as a "residual interest" in the Subsidiary
REMIC for purposes of the REMIC Provisions.
"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 D and evidencing an
interest designated as a "regular interest" in the Master REMIC for purposes of
the REMIC Provisions.
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"Class M-1 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.
"Class M-1 Distribution Amount" means, as to any Payment Date, the
lesser of (a) the Amount Available (less any amount paid to the Servicer
pursuant to Section 8.04(b)(1)) less the Class A Distribution Amount and (b) the
Class M-1 Formula Distribution Amount; provided that after the Class M-1
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 the
first Payment Date) at the Class M-1 Pass-Through Rate on the excess of the
Class M-1 Principal Balance over the Class M-1 Liquidation Loss Principal
Amount, to be calculated immediately prior to such Payment Date, (b) any Unpaid
Class M-1 Interest Shortfall and (c) if such Payment Date is after the Class A-6
Cross-over Date, but on or prior to the Class M-1 Cross-over Date, the Senior
Percentage of the Formula Principal Distribution Amount; provided, however, that
on the Class A-6 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 (a) the amount specified in clause (a) of the
definition of the term "Class M-1 Formula Distribution Amount" and (b) the
Unpaid Class M-1 Interest Shortfall, if any.
"Class M-1 Formula Liquidation Loss 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 the first Payment Date) at the Class M-1 Pass-Through Rate on the
Class M-1 Liquidation Loss Principal Amount, to be calculated immediately prior
to such Payment Date, and (b) the Unpaid Class M-1 Liquidation Loss Interest
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).
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"Class M-1 Liquidation Loss Interest Shortfall" means, as to any
Payment Date, the amount, if any, by which (a) the Class M-1 Formula Liquidation
Loss 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 Liquidation Loss Principal Amount" means, as to any Payment
Date, the lesser of (a) the excess, if any, of the Aggregate Liquidation Loss
Principal Amount over the aggregate of the Class M-2 Principal Balance and the
Class B Principal Balance, and (b) the Class M-1 Principal Balance.
"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-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 D and evidencing an
interest designated as a "regular interest" in the Master REMIC for purposes of
the REMIC Provisions.
"Class M-2 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.
"Class M-2 Distribution Amount" means, as to any Payment Date, the
lesser of (a) the Amount Available (less any amount paid to the Servicer
pursuant to Section 8.04(b)(1)) less the Class A Distribution Amount and the
Class M-1 Distribution Amount and (b) the Class M-2 Formula Distribution Amount;
provided that after the Class M-2 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 the
first Payment Date) at the Class M-2 Pass-Through Rate on the excess of the
Class M-2 Principal Balance over the Class M-2 Liquidation Loss Principal
Amount, to be calculated immediately prior to such Payment Date, (b) any Unpaid
Class M-2 Interest Shortfall and (c) if such Payment Date is after the Class M-1
Cross-over Date, but on or prior to the Class M-2 Cross-over Date, the Senior
Percentage of the Formula Principal Distribution Amount; provided, however, that
on the Class M-1 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 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 for all Payment Dates pursuant to
clause (c) of this definition shall not exceed the Original Class M-2 Principal
Balance.
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"Class M-2 Formula Interest Distribution Amount" means, as to any
Payment Date, the sum of (a) the amount specified in clause (a) of the
definition of the term "Class M-2 Formula Distribution Amount" and (b) the
Unpaid Class M-2 Interest Shortfall, if any.
"Class M-2 Formula Liquidation Loss 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 the first Payment Date) at the Class M-2 Pass-Through Rate on the
Class M-2 Liquidation Loss Principal Amount, to be calculated immediately prior
to such Payment Date, and (b) the Unpaid Class M-2 Liquidation Loss Interest
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).
"Class M-2 Liquidation Loss Interest Shortfall" means, as to any
Payment Date, the amount, if any, by which the Class M-2 Formula Liquidation
Loss Interest Distribution Amount exceeds any amount distributed to Class M-2
Certificateholders on such Payment Date pursuant to Section 8.04(b)(8)(ii).
"Class M-2 Liquidation Loss Principal Amount" means, as to any Payment
Date, the lesser of (a) the excess, if any, of the Aggregate Liquidation Loss
Principal Amount over the Class B Principal Balance, and (b) the Class M-2
Principal Balance.
"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 Principal Balance" means any of the Class A-1A ARM, Class A-1B
ARM, Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6, Class
M-1, Class M-2, Class B-1 or Class B-2 Principal Balance.
"Closing Date" means May 28, 1998.
"Code" means the Internal Revenue Code of 1986, as amended.
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"Computer Tape" means one or more computer tapes generated by the
Company which provides information relating to the Loans and which was used by
the Company in selecting the Loans, and includes the master file and the history
file.
"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, Professional
Association, or other legal counsel for the Company.
"Cumulative Realized Loss Ratio" means, as to 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 7.5%.
"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%.
"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 F-1 by Fitch in the case of commercial paper, or
BBB+ or higher by both S&P and Fitch in the case of unsecured long-term debt, as
is acting at such time as Custodian of the Loan Files pursuant to Section 4.01.
"Cut-off Date" means, with respect to each Loan (other than a
Subsequent Loan), April 30, 1998 or the date of origination, if later.
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"Cut-off Date Pool Principal Balance" means the aggregate of the
Cut-off Date Principal Balances of all Loans.
"Cut-off Date Principal Balance" means, as to any Loan, the unpaid
principal balance thereof at the Cut-off Date, or Subsequent Cut-off Date if a
Subsequent Loan, after giving effect to all installments of principal due prior
thereto.
"Defaulted Loan" means a Loan with respect to which the Servicer
commenced foreclosure proceedings, made a sale of such Loan to a third party for
foreclosure or enforcement, or as to which there was a Delinquent Payment 180 or
more days past due.
"Definitive Certificates" has the meaning assigned in Section 9.02(e).
"Delinquent Payment" means, as to any Loan, 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 Loan 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 Loan, the payment scheduled to be made in the Due
Period in which such Loan became a Liquidated Loan 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-1A ARM Certificate evidencing $14,000,000 in Original A-1A ARM Principal
Balance; (ii) one Class A-1B ARM Certificate evidencing $106,000,000 in Original
A-1B ARM Principal Balance, (iii) one Class A-1 Certificate evidencing
$105,000,000 in Original Class A-1 Principal Balance, (iv) one Class A-2
Certificate evidencing $79,700,000 in Original Class A-2 Principal Balance, (v)
one Class A-3 Certificate evidencing $41,900,000 in Original Class A-3 Principal
Balance, (vi) one Class A-4 Certificate evidencing $31,000,000 in Original Class
A-4 Principal Balance, (vii) one Class A-5 Certificate evidencing $19,900,000 in
Original Class A-5 Principal Balance, (viii) one Class A-6 Certificate
evidencing $20,000,000 in Original Class A-6 Principal Balance, (ix) one Class
A-7 IO Certificate evidencing a Class A-7 IO Original Notional Amount of
$25,000,000, (x) one Class M-1 Certificate evidencing $32,500,000 in Original
Class M-1 Principal Balance, (xi) one Class M-2 Certificate evidencing
$18,750,000 in Original Class M-2 Principal Balance, (xii) one Class B-1
Certificate evidencing $20,000,000 in Original Class B-1 Principal Balance, and
(xiii) one Class B-2 Certificate evidencing $11,250,000 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(5) 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.
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"Determination Date" means the second Business Day preceding each
Payment Date 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 Fitch to downgrade or withdraw its
then-current rating assigned to the Certificates, as evidenced in writing by S&P
and Fitch.
"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 F-1 by Fitch (if rated by
Fitch) or whose unsecured long-term debt has been rated in one of the two
highest rating categories by both S&P and Fitch (if rated by Fitch).
"Eligible Investments" has the meaning assigned in Section 5.05(b).
"Eligible Servicer" means the Trustee or a Person qualified to act as
servicer of the Loans under applicable Federal and State laws and regulations,
which services not less than an aggregate of $100,000,000 in outstanding
principal amount of home equity loans.
"Eligible Substitute Loan" means, as to any Replaced Loan for which
such Eligible Substitute Loan is being substituted pursuant to Section 3.05(b),
a Loan that (a) as of the date of its substitution, satisfies all of the
representations and warranties (which, except when expressly stated to be as of
origination, shall be deemed to be determined as of the date of its substitution
rather than as of the Cut-off Date, Subsequent Cut-off Date or the Closing Date)
in Section 3.02 and does not cause any of the representations and warranties in
Section 3.03, after giving effect to such substitution, to be incorrect, (b)
after giving effect to the scheduled payment due in the month of such
substitution, has a Scheduled Principal Balance that is not greater than the
Scheduled Principal Balance of such Replaced Loan, (c) has a Loan Interest Rate
that is at least equal to the Loan Interest Rate of such Replaced Loan, (d) has
a remaining term to scheduled maturity that is not greater than the remaining
term to scheduled maturity of the Replaced Loan, and (e) if an Adjustable Rate
Loan, bears interest
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at a Loan Interest Rate that (i) is subject to adjustment based on the same
index as the Replaced Loan, (ii) is calculated by adding a specified percentage
amount (the "gross margin") to the index that is no less than the gross margin
on the Replaced Loan, and (iii) is subject to a minimum rate of interest no less
than the minimum rate of interest on the Replaced Loan and a maximum rate of
interest no more than 1.0% greater than the rate of interest on the Replaced
Loan.
"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 Loans comprising a
portion of the corpus of the Trust.
"Event of Termination" has the meaning assigned in Section 7.01.
"Expense Adjusted Loan Rate" means, with respect to any Adjustable Rate
Loan, the then applicable Loan Interest Rate thereon, minus the Expense Fee
Rate.
"Expense Fee Rate" means 0.75%.
"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 Loans 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.
"Fitch" means Fitch IBCA Inc., or any successor thereto; provided that,
if Fitch no longer has a rating outstanding on any Class of the Certificates,
then references herein to "Fitch" 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 Fitch shall be
deemed to have the equivalent meanings with respect to ratings by or
requirements of such NRSRO.
"Fixed Rate Loan" means each closed-end home equity loan identified as
such in the List of Loans, which Loan is 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 due
pursuant thereto after the Cut-off Date, or Subsequent Cut-off Date with respect
to a Subsequent Loan.
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<PAGE>
"Formula Principal Distribution Amount" means, as to any Payment Date,
the sum of:
(i) all scheduled payments of principal due on each
outstanding Fixed Rate Loan during the prior Due Period as specified in
the amortization schedule at the time applicable thereto (after
adjustments for previous Partial Principal Prepayments and after 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
(ii) all Partial Principal Prepayments applied and all
Principal Prepayments in Full received during the prior Due Period in
respect of the Fixed Rate Loans; plus
(iii) the aggregate Scheduled Principal Balance of all Fixed
Rate Loans that became Liquidated Loans during the prior Due Period
plus the amount of any reduction in principal balance of any Fixed Rate
Loan during the prior Due Period pursuant to bankruptcy proceedings
involving the related Obligor; plus
(iv) the aggregate Scheduled Principal Balance of all Fixed
Rate Loans repurchased, and all amounts deposited in lieu of the
repurchase of any Fixed Rate Loan, during the prior Due Period pursuant
to Section 3.05(a) or, in the event of a substitution of a Fixed Rate
Loan in accordance with Section 3.05(b), any amount required to be
deposited by the Company in the Certificate Account during the prior
Due Period pursuant to Section 3.05(b)(vi); plus
(v) any amount described in clauses (i) through (iv) above
that was not previously distributed because of an insufficient amount
of funds available in the Certificate Account; plus
(vi) on the Post-Funding Payment Date, the Pre-Funded Fixed
Rate Amount; plus
(vii) on each Payment Date which is on or after the Payment
Date on which the Class A-1 ARM Certificates have been paid in full,
the Class A-1 ARM Formula Principal Distribution Amount less the
amount, if any, distributed in payment of principal on the Class A-1
ARM Certificates on such Payment Date.
"GNMA" means the Government National Mortgage Association, or any
successor thereto.
"Independent" means, when used with respect to any specified Person,
any Person who (i) is in fact independent of the Company and the Servicer, (ii)
does not have any direct financial interest or any material indirect financial
interest in the Company or the Servicer or in an Affiliate of either, and (iii)
is not connected with the Company or the Servicer as an officer, employee,
promoter, underwriter, trustee, partner, director or person performing similar
functions. Whenever it is provided herein that any Independent Person's opinion
or certificate shall be furnished to the
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<PAGE>
Trustee, such opinion or certificate shall state that the signatory has read
this definition and is Independent within the meaning set forth herein.
"Initial Adjustable Rate Loan" means an Initial Loan that is an
Adjustable Rate Loan.
"Initial Fixed Rate Loan" means an Initial Loan that is a Fixed Rate
Loan.
"Initial Loan" means a Loan identified as such on the List of Loans
attached hereto.
"Interest Reset Period" means, with respect to any Payment Date, the
period from and including the prior Payment Date (or, with respect to the first
Payment Date, from and including the Closing Date) to but excluding such Payment
Date.
"LIBOR" means, with respect to any Interest Reset Period, the offered
rate, as established by the Calculation Agent, for United States dollar deposits
for one month that appears on Telerate Page 3750 as of 11:00 A.M., London time,
on the LIBOR Determination Date for such Interest Reset Period. If on any LIBOR
Determination Date the offered rate does not appear on Telerate Page 3750, the
Calculation Agent will request each of the reference banks (which shall be major
banks that are engaged in transactions in the London interbank market selected
by the Calculation Agent) to provide the Trustee with its offered quotation for
United States dollar deposits for one month to prime banks in the London
interbank market as of 11:00 A.M., London time, on such date. If at least two
reference banks provide the Calculation Agent with such offered quotations,
LIBOR on such date will be the arithmetic mean, rounded upwards, if necessary,
to the nearest 1/100,000 of 1% (.0000001), with five one-millionths of a
percentage point rounded upward, of all such quotations. If on such date fewer
than two of the reference banks provide the Calculation Agent with such offered
quotations, LIBOR on such date will be the arithmetic mean, rounded upwards, if
necessary, to the nearest 1/100,000 of 1% (.0000001), with five one-millionths
of a percentage point rounded upward, of the offered per annum rates that one or
more leading banks in the City of New York selected by the Calculation Agent are
quoting as of 11:00 A.M., New York City time, on such date to leading European
banks for United States dollar deposits for one month; provided, however, that
if such banks are not quoting as described above, LIBOR for such date will be
LIBOR applicable to the Interest Reset Period immediately preceding such
Interest Reset Period; and provided, further, that if the result of the
foregoing would be for three consecutive Payment Dates to base LIBOR on the rate
applicable in the immediately preceding Interest Reset Period, for such third
consecutive Payment Date the Calculation Agent shall instead select an
alternative comparable index (over which the Calculation Agent has no control)
used for determining one-month Eurodollar lending rates that is calculated and
published (or otherwise made available) by an independent third party.
"LIBOR Business Day" as used herein means a day that is both a Business
Day and a day on which banking institutions in the City of London, England are
not required or authorized by law to be closed.
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<PAGE>
"LIBOR Determination Date" means the second LIBOR Business Day prior to
the first day of the related Interest Reset Period.
"Liquidated Loan" means with respect to any Due Period, either
(1) a Defaulted Loan as to which the Servicer has received
from the Obligor, or a third party purchaser of the Loan, all amounts
which the Servicer reasonably and in good faith expects to recover from
or on account of such Loan, or
(2) a Loan (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 Loan, as computed by the Servicer; provided, however, that any Loan
which the Company is obligated to repurchase pursuant to Section 3.05,
and did so repurchase or substitute therefor an Eligible Substitute
Loan in accordance with Section 3.05, shall be deemed not to be a
Liquidated Loan; and provided, further, that with respect to Due
Periods beginning after August, 2028, a Liquidated Loan also means any
Loan as to which the Servicer has commenced foreclosure proceedings, or
made a sale of the Loan to a third party for foreclosure or
enforcement.
"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 Loan, 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 Loans, whether through
repossession, foreclosure sale or otherwise.
"List of Loans" means the lists identifying each Loan constituting part
of the Trust Fund and attached either to this Agreement as Exhibit O-1 or O-2 or
to a Subsequent Transfer Instrument as Exhibit A or B, as such lists may be
amended from time to time pursuant to Section 3.05(b) to add Eligible Substitute
Loans and delete Replaced Loans. Each List of Loans shall set forth as to each
Loan identified on it (i) the Cut-off Date Principal Balance, (ii) the amount of
monthly payments due from the Obligor, (iii) the Loan Interest Rate and (iv) the
maturity date.
"Loan File" means, as to each Loan, (a) the original copy of the Loan
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, and
(c) if such Loan was originated by a lender other than the Company, the original
or a copy of an assignment of the mortgage, deed of trust or security deed by
the lender to the Company.
"Loan Interest Rate" means, as to any Loan, the annual rate of interest
specified in the Loan.
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<PAGE>
"Loans" means the Fixed Rate Loans and the Adjustable Rate Loans.
"Master REMIC" means the segregated pool of assets consisting of the
Subsidiary REMIC Regular Interests, with respect to which a separate REMIC
election is to be made.
"Minimum Loan Rate" means as to any Adjustable Rate Loan, the minimum
Loan Interest Rate set forth in such Loan.
"Monthly Report" has the meaning assigned in Section 6.01.
"Monthly Servicing Fee" means, as to any Payment Date, one-twelfth of
the product of .75% and the sum of the Pool Scheduled Principal Balance with
respect to the preceding Payment Date (or, in the case of the first Payment
Date, the Cut-off Date), and the Pre-Funded Amount as of the preceding Payment
Date (or, in the case of the first Payment Date, the Closing Date).
"Net Liquidation Loss" means, as to a Liquidated Loan, the difference
between (a) the Repurchase Price of such Loan, and (b) the Net Liquidation
Proceeds with respect to such Liquidated Loan, where such difference is a
positive number.
"Net Liquidation Proceeds" means, as to a Liquidated Loan, the proceeds
received, or, for Loans which become Liquidated Loans pursuant to the last
proviso in the definition of "Liquidated Loan," the estimated proceeds to be
received, as of the last day of the Due Period in which such Loan became a
Liquidated Loan, from the Obligor, from a third party purchaser of the Loan,
under insurance, or otherwise, net of Liquidation Expenses.
"NRSRO" means any nationally recognized statistical rating
organization.
"Obligor" means the person who owes payments under a Loan.
"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 Certificate Principal Balance" means $500,000,000.
"Original Class Principal Balance" means, as to each Class of
Certificates, the amount set forth with respect to such Class in Section
2.05(b).
"Original Principal Balance" means, as to each Subsidiary REMIC Regular
Interest, the amount set forth with respect to such interest in Section 2.05(c).
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<PAGE>
"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).
"Pass-Through Margin" means .18% per annum on each Payment Date on
which the Pool Scheduled Principal Balance of all Loans is 10% or more of the
Original Certificate Principal Balance, and .36% per annum on each Payment Date
on which the Pool Scheduled Principal Balance of all Loans is less than 10% of
the Original Certificate Principal Balance.
"Pass-Through Rate" means (i) with respect to each Class of
Certificates, the rate set forth for such Class in Section 2.05(b) and (ii) with
respect to each Subsidiary REMIC Regular Interest, the rate set forth for such
interest in Section 2.05(c). The Pass-Through Rate for the Class A-1B ARM
Certificates shall be computed on the basis of actual days elapsed in a year of
360 days. The Pass-Through Rate for each other Class of Certificates and each
Subsidiary REMIC Regular Interest shall be computed on the basis of a 360-day
year of twelve 30-day months.
"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 June 1998.
"Percentage Interest" means, as to any Certificate or the Class C
Certificates, 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 the Original Class Principal Balance of the
related Class or, in the case of a Class A-7 IO Certificate, by the Class A-7 IO
Original Notional Amount, 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, the Class C Master Certificates and Class C
Subsidiary Certificates shall equal 100%, respectively.
"Permitted Transferee" means, in the case of a transfer of the Class C
Certificates, 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.
"Plan" has the meaning assigned in Section 9.02(b)(2).
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<PAGE>
"Pool Factor" means, at any time, the percentage derived from a
fraction, the numerator of which is the Certificate Principal Balance at such
time and the denominator of which is the Original Certificate Principal Balance.
"Pool Scheduled Principal Balance" means, as of any Payment Date, the
aggregate Scheduled Principal Balance of all Loans that were outstanding during
the immediately preceding Due Period.
"Post-Funding Payment Date" means the Payment Date on, or the first
Payment Date after, the last day of the Pre-Funding Period.
"Pre-Funded Amount" means, with respect to any date of determination,
the sum of the Pre- Funded ARM Amount and the Pre-Funded Fixed Rate Amount.
"Pre-Funded ARM Amount" means, with respect to any date of
determination, the sum of (i) the amount then on deposit in the Pre-Funding ARM
Subaccount, after giving effect to any sale of Subsequent Adjustable Rate Loans
to the Trust on such date, and (ii) the amount then on deposit in the
Undelivered ARM Loan Subaccount, after giving effect to any release of funds to
the Company on that date pursuant to Section 8.07(c)(i), in each case exclusive
of any investment earnings.
"Pre-Funded Fixed Rate Amount" means, with respect to any date of
determination, the sum of (i) the amount then on deposit in the Pre-Funding
Fixed Rate Subaccount, after giving effect to any sale of Subsequent Fixed Rate
Loans to the Trust on such date, and (ii) the amount then on deposit in the
Undelivered Fixed Rate Loan Subaccount, after giving effect to any release of
funds to the Company on that date pursuant to Section 8.07(c)(ii), in each case
exclusive of investment earnings.
"Pre-Funding Account" means the account so designated, established and
maintained pursuant to Section 8.07.
"Pre-Funding ARM Subaccount" means the account so designated,
established and maintained pursuant to Section 8.07.
"Pre-Funding Fixed Rate Subaccount" means the account so designated,
established and maintained pursuant to Section 8.07.
"Pre-Funding Period" means the period beginning on the Closing Date and
ending on the earliest of (a) the date on which the amount on deposit in the
Pre-Funding Account is less than $10,000.00 or (b) the close of business on the
date which is 90 days after the Closing Date or (c) the date on which an Event
of Termination occurs.
"Principal Prepayment" means a payment or other recovery of principal
on a Loan (exclusive of Liquidation Proceeds) which is received in advance of
its scheduled due date and applied upon
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<PAGE>
receipt (or, in the case of a partial prepayment, upon the next scheduled
payment date on such Loan) to reduce the outstanding principal amount due on
such Loan 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 Loan.
"Realized Losses" means, as to any Payment Date, the aggregate Net
Liquidation Losses for all Loans that became Liquidated Loans during the
immediately preceding Due Period.
"Record Date" means, with respect to any Payment Date, the Business Day
immediately preceding such Payment Date.
"REMIC" means a "real 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.
"Replaced Loan" has the meaning assigned in Section 3.05(b).
"Repurchase Price" means, with respect to a Loan to be repurchased
pursuant to Section 3.05 or which becomes a Liquidated Loan, an amount equal to
(a) the remaining principal amount outstanding on such Loan (without giving
effect to any Advances paid by the Servicer or the Trustee, as applicable, with
respect to such Loan pursuant to Section 8.02), plus (b) interest at the
Weighted Average Pass-Through Rate on such Loan 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 Loan 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.
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<PAGE>
"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 Loan and any
Payment Date, the Cut-off Date or any Subsequent Cut-off Date, the principal
balance of such Loan as of the due date in the Due Period immediately preceding
such Payment Date, Cut-off Date or Subsequent Cut-off Date, as the case may be,
as specified in the amortization schedule at the time relating thereto (before
any adjustment to such amortization schedule by reason of any bankruptcy of an
Obligor or similar proceeding or any moratorium or similar waiver or grace
period) after giving effect to any previous partial Principal Prepayments and to
the payment of principal due on such due date and irrespective of any
delinquency in payment by, or extension granted to, the related Obligor. If for
any Loan the Cut-off Date is the date of origination of the Loan, its Scheduled
Principal Balance as of the Cut-off Date is the principal balance of the Loan on
its date of origination.
"Senior Percentage" means,
(a) as to any Payment Date on which the Class B Principal
Distribution Test is not satisfied, 100%; and
(b) as to any Payment Date on which the Class B Principal
Distribution Test is satisfied, the lesser of (i) 100% or (ii) a
fraction, expressed as a percentage, the numerator of which is the sum
of the Class A Principal Balance (excluding the Class A-1 ARM Principal
Balance) and the Class M Principal Balance as of such Payment Date, and
the denominator of which is the Pool Scheduled Principal Balance of the
Fixed Rate Loans as of the immediately preceding Payment Date.
"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 Loans 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.
"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 Loans that
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were delinquent 60 days or more as of the end of the prior Due Period (including
Loans 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.
"Step-up Rate Loan" means any Fixed Rate Loan bearing interest during
an initial period or periods at a fixed rate or fixed rates that are lower than
the fixed rate borne thereafter.
"Subsequent Cut-off Date" means, with respect to a Subsequent Loan, the
related Subsequent Transfer Date.
"Subsequent Loan" means a Fixed Rate Loan or an Adjustable Rate Loan
sold by the Company to the Trust pursuant to Section 2.03, such Loan being
identified on Exhibit A or Exhibit B, respectively, attached to a Subsequent
Transfer Instrument.
"Subsequent Adjustable Rate Loan" means a Subsequent Loan that is an
Adjustable Rate Loan.
"Subsequent Fixed Rate Loan" means a Subsequent Loan that is a Fixed
Rate Loan.
"Subsequent Transfer Date" means, with respect to each Subsequent
Transfer Instrument, the date on which the related Subsequent Loans are sold to
the Trust.
"Subsequent Transfer Instrument" means each Subsequent Transfer
Instrument dated as of a Subsequent Transfer Date executed by the Trustee and
the Company substantially in the form of Exhibit R, by which the Company sells
Subsequent Loans to the Trust.
"Subsidiary REMIC" means the segregated pool of assets comprising the
Trust Fund, but excluding the Pre-Funding Account and the Subsidiary REMIC
Regular Interests.
"Subsidiary REMIC Accrued Interest" means, with respect to each Payment
Date and each Subsidiary REMIC Regular Interest, an amount equal to one month's
interest (or, with respect to the first Payment Date, interest accrued from and
including the Closing Date to but excluding the first Payment Date) on the
related Subsidiary REMIC Principal Balance at the related Subsidiary REMIC
Pass-Through Rate.
"Subsidiary REMIC Principal Balance" means, with respect to each
Subsidiary REMIC Regular Interest on any date of determination, the related
Original Principal Balance minus the aggregate of all amounts previously deemed
distributed with respect to principal thereof pursuant to Section 8.08.
"Subsidiary REMIC Regular Interest A-1" means an uncertificated partial
undivided beneficial ownership interest designated as a "regular interest" in
the Subsidiary REMIC having the
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related Subsidiary REMIC Principal Balance and bearing interest at the related
Subsidiary REMIC Pass-Through Rate.
"Subsidiary REMIC Regular Interest A-1 Distribution Amount" means, with
respect to any Payment Date, the sum of the amounts deemed to be distributed on
the Subsidiary REMIC Regular Interest A-1 for such Payment Date pursuant to
Section 8.08.
"Subsidiary REMIC Regular Interest A-2" means an uncertificated partial
undivided beneficial ownership interest designated as a "regular interest" in
the Subsidiary REMIC having the related Subsidiary REMIC Principal Balance and
bearing interest at the related Subsidiary REMIC Pass-Through Rate.
"Subsidiary REMIC Regular Interest A-2 Distribution Amount" means, with
respect to any Payment Date, the sum of the amounts deemed to be distributed on
the Subsidiary REMIC Regular Interest A-2 for such Payment Date pursuant to
Section 8.08.
"Subsidiary REMIC Regular Interest Designation" means the designations
set forth in Section 2.05(c).
"Subsidiary REMIC Regular Interest Distribution Amounts" means the
Subsidiary REMIC Regular Interest A-1 Distribution Amount, Subsidiary REMIC
Regular Interest A-2 Distribution Amount, and Subsidiary REMIC Regular Interest
MB Distribution Amount.
"Subsidiary REMIC Regular Interest MB" means an uncertificated partial
undivided beneficial ownership interest designated as a "regular interest" in
the Subsidiary REMIC having the related Subsidiary REMIC Principal Balance and
bearing interest at the related Subsidiary REMIC Pass-Through Rate.
"Subsidiary REMIC Regular Interest MB Distribution Amount" means, with
respect to any Payment Date, the sum of the amounts deemed to be distributed on
the Subsidiary REMIC Regular Interest MB for such Payment Date pursuant to
Section 8.08.
"Subsidiary REMIC Regular Interests" means Subsidiary REMIC Regular
Interest A-1, Subsidiary REMIC Regular Interest A-2 and Subsidiary REMIC Regular
Interest MB.
"Telerate Page 3750" means the display page so designated on the Dow
Jones Telerate Service (or such other page as may replace that page on that
service, or such other service as may be nominated as the information vendor by
the Calculation Agent, for the purpose of displaying London interbank offered
rates of major banks).
"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 Loans that were delinquent 30 days or more as of
the end of the prior Due Period (including Loans in respect
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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 Home Equity Loan Trust 1998-C.
"Trust Fund" means the corpus of the Trust created by this Agreement
which consists of (i) all the rights, benefits and obligations arising from and
in connection with the Loans, including without limitation all related
mortgages, deeds of trust and security deeds and any and all rights to receive
payments on or with respect to the Loans due after the Cut-off Date, or
Subsequent Cut-off Date with respect to Subsequent Loans, (ii) all rights under
any hazard, flood or other individual insurance policy on the real estate
securing a Loan for the benefit of the creditor of such Loan, (iii) all rights
the Company may have against the originating lender with respect to Loans
originated by a lender other than the Company, (iv) all rights under the Errors
and Omissions Protection Policy and the Fidelity Bond as such policy and bond
relate to the Loans, (v) all rights under any title insurance policies, if
applicable, on any of the properties securing Loans, (vi) all documents
contained in the Loan Files, (vii) amounts in the Certificate Account and
Pre-Funding Account (excluding all proceeds of investments of funds in the
Pre-Funding Account) and (viii) all proceeds and products of the foregoing.
"Trustee Advance" has the meaning assigned in Section 11.16.
"Undelivered ARM Loan Subaccount" means the subaccount so designated
and established and maintained pursuant to Section 8.07.
"Undelivered Fixed Rate Loan Subaccount" means the subaccount so
designated and established and maintained pursuant to Section 8.07.
"Undelivered Loan" means, as of any date of determination, an Initial
or Additional Loan identified on the exception report attached to the
acknowledgement delivered by the Trustee or a Custodian under Section 2.04, as a
Loan as to which the Trustee, directly or through a Custodian, did not receive
the related Loan File as of the Closing Date and has not received the related
Loan File and remitted payment to the Company pursuant to Section 8.07(c).
"Underwriters" means Lehman Brothers Inc., First Union Capital Markets,
a division of Wheat First Securities Corp., and Merrill Lynch, Pierce, Fenner &
Smith Incorporated.
"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.
"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,
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plus one month's interest thereon (to the extent payment thereof is legally
permissible) at the Class B-1 Pass-Through Rate.
"Unpaid Class B-1 Liquidation Loss Interest Shortfall" means, with
respect to the Class B-1 Certificates and any Payment Date, the amount, if any,
of the Class B-1 Liquidation Loss 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.
"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.
"Unpaid Class B-2 Liquidation Loss Interest Shortfall" means, with
respect to the Class B-2 Certificates and any Payment Date, the amount, if any,
of the Class B-2 Liquidation Loss 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.
"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.
"Unpaid Class M-1 Liquidation Loss Interest Shortfall" means, with
respect to the Class M-1 Certificates and any Payment Date, the amount, if any,
of the Class M-1 Liquidation Loss 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.
"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.
"Unpaid Class M-2 Liquidation Loss Interest Shortfall" means, with
respect to the Class M-2 Certificates and any Payment Date, the amount, if any,
of the Class M-2 Liquidation Loss 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.
"Weighted Average Loan Rate" means, as to any Payment Date, the
weighted average (determined by Scheduled Principal Balance) of the Loan
Interest Rates for all Loans that were outstanding during the immediately
preceding month.
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<PAGE>
"Weighted Average Pass-Through Rate" means, as to any Payment Date,
with respect to any Loan, the weighted average (expressed as a percentage and
rounded to four decimal places) of the Class A-1A ARM, A-1B ARM, A-1, A-2, A-3,
A-4, A-5, A-6, A-7 IO, M-1, M-2, B-1 and B-2 Pass- Through Rates, weighted on
the basis of the respective Class A-1A ARM, A-1B ARM, A-1, A-2, A-3, A-4, A-5,
A-6, A-7 IO, M-1, M-2, B-1 and B-2 Principal Balances (or Class A-7 IO Notional
Principal Amount, as the case may be) immediately prior to such Payment Date.
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<PAGE>
ARTICLE II
ESTABLISHMENT OF TRUST; TRANSFER OF LOANS
SECTION 2.01. Closing.
a. There is hereby created, by the Company as settlor, a separate trust
which shall be known as Home Equity Loan Trust 1998-C. The Trust shall be
administered pursuant to the provisions of this Agreement for the benefit of the
Certificateholders and the Class C Certificateholders.
b. The Company hereby transfers, assigns, sets over and otherwise
conveys to the Trustee on behalf of the Trust, by execution and delivery of an
assignment substantially in the form of Exhibit G hereto, all the right, title
and interest of the Company in and to the Loans, including all rights to receive
payments on or with respect to the Loans due after the Cut-off Date, or
Subsequent Cut-off Date in respect of the Subsequent Loans, and all other assets
now or hereafter included in the Trust Fund. The Company concurrently hereby
assigns without recourse all the right, title and interest of the Company in and
to the Subsidiary REMIC Regular Interests to the Trustee for the benefit of the
Certificateholders.
c. Although the parties intend that each conveyance pursuant to this
Agreement of the Company's right, title and interest in and to the Loans
(including the Subsequent Loans) and in the Subsidiary REMIC Regular Interests
shall constitute a purchase and sale and not a loan, if such conveyances are
deemed to be loans, the parties intend that the rights and obligations of the
parties to such loans shall be established pursuant to the terms of this
Agreement. If the conveyances are deemed to be loans, 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 Trust Fund and in the Subsidiary REMIC Regular
Interests, 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 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.
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 Loans attached to this Agreement as Exhibits O-1 and
O-2, 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 H hereto.
c. An Opinion of Counsel for the Company substantially in the form of
Exhibit I hereto.
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d. A letter from KPMG Peat Marwick LLP, or another nationally
recognized accounting firm, stating that such firm has reviewed the Initial
Loans on a statistical sampling basis and, based on such sampling, concluding
that the Initial Loans conform in all material respects to the List of Loans
attached hereto as Exhibits O-1 and O-2, to a confidence level of 97.5%, with an
error rate not in excess of 1.8%, specifying those Loans 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 Loans from the Cut-off Date to the Closing Date, other than
principal due on or before the Cutoff Date, together with an Officer's
Certificate to the effect that such amount is correct.
j. An Officer's Certificate confirming that the Company has reviewed
the original or a copy of each Initial and Additional Loan and each related Loan
File, that each such Loan and Loan File conforms in all material respects with
the List of Loans and that each such Loan File is complete.
k. Assignments in recordable form to the Trustee of the mortgages,
deeds of trust and security deeds relating to the Initial and Additional Loans.
l. Evidence of the deposit of $ -0- in the Pre-Funding ARM Subaccount
and $ -0- in the Pre-Funding Fixed Rate Subaccount.
m. Evidence of the deposit (a) in the Undelivered ARM Loan Subaccount
of an amount equal to the aggregate Cut-off Date Principal Balances of the
Undelivered ARM Loans and (b) in the Undelivered Fixed Rate Loan Subaccount of
an amount equal to the aggregate Cut-off Date Principal Balances of the
Undelivered Fixed Rate Loans.
SECTION 2.03. Conveyance of the Subsequent Loans.
a. Subject to the conditions set forth in paragraph (b) below, in
consideration of the Trustee's delivery on the related Subsequent Transfer Dates
to or upon the order of the Company of
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all or a portion of the balance of funds in the Pre-Funding ARM Subaccount and
Pre-Funding Fixed Rate Subaccount, the Company shall on any Subsequent Transfer
Date sell, transfer, assign, set over and convey to the Trust, by execution and
delivery of a Subsequent Transfer Instrument, all the right, title and interest
of the Company in and to the Subsequent Loans identified on the List of Loans
attached to the Subsequent Transfer Instrument, including all rights to receive
payments on or with respect to the Subsequent Loans due after the related
Subsequent Cut-off Date, and all items with respect to such Subsequent Loans in
the related Loan Files. The transfer to the Trustee by the Company of the
Subsequent Loans shall be absolute and is intended by the Company, the Trustee,
the Certificateholders and the Class C Certificateholders to constitute and to
be treated as a sale of the Subsequent Loans by the Company to the Trust.
The purchase price paid by the Trustee shall be one-hundred percent
(100%) of the aggregate Cut-off Date Principal Balances of such Subsequent
Loans. The purchase price of Subsequent Fixed Rate Loans shall be paid solely
with amounts in the Pre-Funding Fixed Rate Subaccount. The purchase price of
Subsequent Adjustable Rate Loans shall be paid solely with amounts in the Pre-
Funding ARM Subaccount. This Agreement shall constitute a fixed price contract
in accordance with Section 860G(a)(3)(A)(ii) of the Code.
b. The Company shall transfer the Subsequent Loans to the Trustee and
the Trustee shall release funds from the Pre-Funding ARM Subaccount and
Pre-Funding Fixed Rate Subaccount, as applicable, only upon the satisfaction of
each of the following conditions on or prior to the related Subsequent Transfer
Date:
(i) the Company shall have provided the Trustee with an
Addition Notice at least five Business Days prior to the Subsequent
Transfer Date and shall have provided any information reasonably
requested by the Trustee with respect to the Subsequent Loans;
(ii) the Company shall have delivered the related Loan File
for each Subsequent Loan to the Trustee at least two Business Days
prior to the Subsequent Transfer Date;
(iii) the Company shall have delivered to the Trustee a duly
executed Subsequent Transfer Instrument substantially in the form of
Exhibit R, which shall include a List of Loans identifying the related
Subsequent Loans;
(iv) as of each Subsequent Transfer Date, as evidenced by
delivery of the Subsequent Transfer Instrument, the Company shall not
be insolvent nor shall it have been made insolvent by such transfer nor
shall it be aware of any pending insolvency;
(v) such sale and transfer shall not result in a material
adverse tax consequence to the Trust (including the Master REMIC and
the Subsidiary REMIC) or the Certificateholders or Class C
Certificateholders;
(vi) the Pre-Funding Period shall not have ended;
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(vii) the Company shall have delivered to the Trustee an
Officer's Certificate, substantially in the form attached hereto as
Exhibit S, confirming the satisfaction of each condition precedent and
the representations specified in this Section 2.03 and in Sections
3.01, 3.02, 3.03 and 3.04; and
(viii) the Company shall have delivered to the Trustee
Opinions of Counsel addressed to the Rating Agencies and the Trustee
with respect to the transfer of the Subsequent Loans substantially in
the form of the Opinions of Counsel delivered to the Trustee on the
Closing Date regarding certain bankruptcy, corporate and tax matters.
c. Before the last day of the Pre-Funding Period, the Company shall
deliver to the Trustee:
(i) A letter from KPMG Peat Marwick LLP or another nationally
recognized accounting firm retained by the Company (with copies
provided to S&P, Fitch, the Underwriters and the Trustee) that is in
form, substance and methodology the same as that delivered under
Section 2.02(d) of this Agreement, except that it shall address the
Subsequent Loans and their conformity in all material respects to the
characteristics described in Section 3.03(b) of this Agreement.
(ii) Evidence that as a result of the purchase by the Trust of
the Subsequent Loans the Certificates shall not receive from S&P or
Fitch a lower credit rating than the rating assigned to such
Certificates as of the Closing Date.
(iii) Evidence that the aggregate Cut-off Date Principal
Balances of the Subsequent Loans, not specifically identified as
Subsequent Loans as of the Closing Date, do not exceed 25% of the
Original Certificate Principal Balance.
SECTION 2.04. Acceptance by Trustee.
a. On the Closing Date and each Subsequent Transfer Date, if the
conditions set forth in Section 2.02 and 2.03, respectively, have been
satisfied, the Trustee shall deliver a certificate to the Company substantially
in the form of Exhibit J hereto acknowledging conveyance of the Loans identified
on the applicable List of Loans and the related Loan Files to the Trustee and
declaring that the Trustee, directly or through a Custodian, will hold all Loans
that have been delivered in trust, upon the trusts herein set forth, for the use
and benefit of all Certificateholders and the Class C Certificateholders. The
Trustee acknowledges the assignment to it of the Subsidiary REMIC Regular
Interests and declares that it holds and will hold the Subsidiary REMIC Regular
Interests in trust for the exclusive use and benefit of the Certificateholders.
In consideration of the assignment to it of the Subsidiary REMIC Regular
Interests, the Trustee has issued on the Closing Date, to or upon the order of
the Company, the Certificates and the Class C Certificates representing, in the
aggregate, ownership of the entire beneficial interest in the Master REMIC.
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<PAGE>
b. The Trustee or a Custodian shall review each Loan File, as described
in Exhibit J, within 60 days of the Closing Date or later receipt by it of the
Loan File. If, in its review of the Loan Files as described in Exhibit J, the
Trustee or a Custodian discovers a breach of the representations or warranties
set forth in Sections 2.03, 3.02, 3.03 or 3.04 of this Agreement, or in the
Officer's Certificates delivered pursuant to Section 2.02(j) or 2.03(b)(vii) 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 or replace such
Loan pursuant to Section 3.05.
SECTION 2.05. REMIC Provisions.
a. The Company, as Servicer, and the Class C Certificateholders, 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 segregated pools of assets comprising
the Master REMIC and the Subsidiary REMIC, respectively, each elect to be
treated as a REMIC under the Code for such taxable year and all subsequent
taxable years, and the Trustee shall sign such return. 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 each of the Master REMIC and Subsidiary
REMIC 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. For purposes of the REMIC election in respect of
the Subsidiary REMIC, (i) the Subsidiary REMIC Regular Interests shall be
designated as the "regular interests" in the Subsidiary REMIC and (ii) the Class
C Subsidiary Certificate shall be designated as the sole class of "residual
interests" in the Subsidiary REMIC. For purposes of the REMIC election in
respect of the Master REMIC, (i) the Certificates shall be designated as the
"regular interests" in the Master REMIC and (ii) the Class C Master Certificate
shall be designated as the sole Class of "residual interests" in the Master
REMIC. The Trustee shall not permit the creation of any "interests" in the
Master REMIC or Subsidiary REMIC (within the meaning of Section 860G of the
Code) other than the Subsidiary REMIC Regular Interests and the interests
represented by the Certificates and the Class C Certificates.
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b. The Certificates are being issued in thirteen classes. The following
terms of the Certificates are irrevocably established as of the Closing Date:
ORIGINAL CLASS
PASS-THROUGH RATE PRINCIPAL BALANCE
CLASS PER ANNUM (OR NOTIONAL AMOUNT)
----- --------- --------------------
Class A-1A ARM 6.00% $14,000,000
Class A-1B ARM a floating rate per annum $106,000,000
equal to the lesser of (a) LIBOR
plus the Pass-Through Margin, (b) until the
Scheduled Principal Balance of all
Adjustable Rate Loans is 0, the Available
Funds Pass-Through Rate, or (c) 14%
Class A-1 5.95% $105,000,000
Class A-2 6.03% $ 79,700,000
Class A-3 6.18% $ 41,900,000
Class A-4 6.30% $31,000,000
Class A-5 6.39% $19,900,000
Class A-6 6.29% $20,000,000
Class A-7 IO 10.00% Original Notional
Amount: $25,000,000
Class M-1 6.80% $32,500,000
Class M-2 7.14% $18,750,000
Class B-1 7.77% $20,000,000
Class B-2 8.06% $11,250,000
c. The following terms of the Subsidiary REMIC Regular Interests are
irrevocably established as of the Closing Date:
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<PAGE>
SUBSIDIARY REMIC
REGULAR INTEREST SUBSIDIARY REMIC ORIGINAL CLASS
DESIGNATION: PASS-THROUGH RATE: PRINCIPAL BALANCE:
- ------------ ------------------ ------------------
A-1 Weighted Average
Loan Rate $392,500,000
A-2 Weighted Average
Loan Rate $25,000,000
MB Weighted Average
Loan Rate $82,500,000
The final maturity date for the Class A-7 IO Certificates is May 15, 2001. The
latest possible maturity date of all other Certificates and the Subsidiary REMIC
Regular Interests is July 2029 (calculated using a prepayment assumption of 0%
and assuming no defaults or delinquencies on the Loans).
d. The Closing Date, which is the day on which each of the Master REMIC
and Subsidiary REMIC will issue all of their respective regular and residual
interests, is hereby designated as the "startup day" of the Master REMIC and
Subsidiary REMIC within the meaning of Section 860G(a)(9) of the Code.
e. 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
8.07, (iii) engage in any transaction that would result in the imposition of tax
on "prohibited transactions," as defined in Sections 860F(a)(1) 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 Master REMIC or
Subsidiary REMIC as a REMIC, the status of the Certificates and Class C Master
Certificate as "regular interests" and the sole class of "residual interests,"
respectively, in the Master REMIC, or of the Subsidiary REMIC Regular Interests
or Class C Subsidiary Certificate as the "regular interests" and sole class of
"residual interests," respectively, in the Subsidiary REMIC, in each case for
federal income tax purposes, (B) affect the distributions payable hereunder to
the Certificateholders or the Class C Certificateholders or (C) result in the
imposition of any lien, charge or encumbrance upon the Trust.
f. 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 Loan, the Servicer and the
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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 Master REMIC or Subsidiary REMIC to fail to qualify as a
REMIC at any time that the Certificates or Class C Certificates are outstanding.
The Servicer shall manage, conserve, protect and operate such real property, or
any personal property incident thereto, so that such property will not fail to
qualify as "foreclosure property," as defined in Section 860G(a)(8) of the Code,
and that the management, conservation, protection and operation of such property
will not result in the receipt by the Master REMIC or Subsidiary REMIC of any
income attributable to any asset which is neither a qualified mortgage nor a
permitted investment within the meaning of the REMIC Provisions.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Company makes the following representations and warranties. The
Trustee will rely on the representations and warranties in accepting the Loans
in trust and issuing the Certificates and the Class C Certificates on behalf of
the Trust. The repurchase or substitution 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 Certificateholders for a breach of
a representation or warranty of the Company set forth in Sections 2.03, 3.02,
3.03 or 3.04 of this Agreement, or in the Officer's Certificates delivered
pursuant to Sections 2.02(j) or 2.03(b)(vii) of this Agreement.
SECTION 3.01. Representations and Warranties Regarding the Company. The
Company represents and warrants to the Certificateholders and the Class C
Certificateholders, effective on the Closing Date and each Subsequent Transfer
Date, that:
a. Organization and Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has the corporate power to own its assets
and to transact the business in which it is currently engaged. The Company is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction in which the character of the business transacted by it or
properties owned or leased by it requires such qualification and in which the
failure so to qualify would have a material adverse effect on the business,
properties, assets, or condition (financial or other) of the Company.
b. Authorization; Binding Obligations. The Company has the power and
authority to make, execute, deliver and perform this Agreement and all of the
transactions contemplated under this Agreement, and to create the Trust and
cause it to make, execute, deliver and perform its obligations under this
Agreement and has taken all necessary corporate action to authorize the
execution, delivery and performance of this Agreement and to cause the Trust to
be created. When executed and delivered, this Agreement will constitute the
legal, valid and binding obligation of the Company enforceable in accordance
with its terms, except as enforcement of such terms may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally and by the availability of equitable remedies.
c. No Consent Required. The Company is not required to obtain the
consent of any other party or any consent, license, approval or authorization
from, or registration or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery, performance, validity or
enforceability of this Agreement.
d. No Violations. The execution, delivery and performance of this
Agreement by the Company will not violate any provision of any existing law or
regulation or any order or decree of any court or the Certificate of
Incorporation or Bylaws of the Company, or constitute a material
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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
Certificates which, if adversely determined, would in the opinion of the Company
have a material adverse effect on the transactions contemplated by this
Agreement.
f. Licensing. The Company is duly licensed in each state in which Loans
were originated to the extent the Company is required to be licensed by
applicable law in connection with the origination and servicing of the Loans.
SECTION 3.02. Representations and Warranties Regarding Each Loan. The
Company represents and warrants to the Certificateholders and the Class C
Certificateholders, as of the Closing Date with respect to each Loan identified
on the List of Loans attached to this Agreement as Exhibits O-1 and O-2 and as
of each Subsequent Transfer Date with respect to each Subsequent Loan identified
on the List of Loans attached to the related Subsequent Transfer Instrument:
a. List of Loans. The information set forth in the List of Loans is
true and correct as of its date.
b. Payments. No scheduled payment due under the Loan was delinquent
over 59 days as of the Cut-off Date or as of the related Subsequent Cut-off Date
if a Subsequent Loan.
c. Costs Paid and No Waivers. The terms of the Loan have not been
waived, altered or modified in any respect, except by instruments or documents
identified in the Loan File. All costs, fees and expenses incurred in making,
closing and perfecting the lien of the Loan have been paid. The subject real
property has not been released from the lien of such Loan.
d. Binding Obligation. The Loan 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 Loan 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 Loan or the exercise of any right
thereunder will not render the Loan 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 Loan,
to the extent required by the Company's underwriting guidelines. If upon
origination of the Loan, the property securing the Loan
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was in an area identified in the Federal Register by the Federal Emergency
Management Agency as having special flood hazards (and if flood insurance was
required by federal regulation and such flood insurance has been made available
in the locale where the Mortgaged Property is located), the property is covered
by a flood insurance policy of the nature and in an amount which is consistent
with the servicing standard set forth in Section 5.02.
g. Lawful Assignment. The Loan was not originated in and is not subject
to the laws of any jurisdiction whose laws would make the transfer of the Loan
under this Agreement or pursuant to transfers of the Certificates or Class C
Certificates unlawful or render the Loan unenforceable. The Company has duly
executed a valid blanket assignment of the Loans transferred to the Trust, and
has transferred all its right, title and interest in such Loans, including all
rights the Company may have against the originating contractor or lender with
respect to Loans originated by a contractor or lender other than the Company, to
the Trust. The blanket assignment, any and all documents executed and delivered
by the Company pursuant to Sections 2.01(b) and 2.03(b)(ii), and this Agreement
each constitutes the legal, valid and binding obligation of the Company
enforceable in accordance with its respective terms.
h. Compliance with Law. At the date of origination of the Loan, all
requirements of any federal and state laws, rules and regulations applicable to
the Loan, including, without limitation, usury and truth in lending laws, have
been complied with and the Company shall for at least the period of this
Agreement, maintain in its possession, available for the Trustee's inspection,
and shall deliver to the Trustee upon demand, evidence of compliance with all
such requirements.
i. Loan in Force. The Loan has not been satisfied or subordinated in
whole or in part or rescinded, and the real estate securing such Loan has not
been released from the lien of such Loan in whole or in part.
j. Valid Lien. The Loan 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, third or fourth priority lien on the real estate described in such Loan.
k. Capacity of Parties. The signature(s) of the Obligor(s) on the Loan
are genuine and all parties to the Loan had full legal capacity to execute the
Loan.
l. Good Title. The Company is the sole owner of the Loan and has the
authority to sell, transfer and assign such Loan to the Trust under the terms of
this Agreement. There has been no assignment, sale or hypothecation of the Loan
by the Company except the usual past hypothecation of the Loan in connection
with the Company's normal banking transactions in the conduct of its business,
which hypothecation terminates upon sale of the Loan to the Trust. The Company
has good and marketable title to the Loan, free and clear of any encumbrance,
equity, loan, pledge, charge, claim, lien or encumbrance of any type and has
full right to transfer the Loan to the Trust.
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m. No Defaults. As of the Cut-off Date or Subsequent Cut-off Date, as
applicable, there was no default, breach, violation or event permitting
acceleration existing under the Loan 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 Loan (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.
n. Equal Installments. The Loan, unless it is a Step-up Rate Loan or an
Adjustable Rate Loan, has a fixed Loan Interest Rate and provides for monthly
payments (except, in the case of a Balloon Loan, for the final monthly payment
of such loan) which fully amortize the loan over its term.
o. Enforceability. Each Loan 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.
p. One Original. There is only one original executed Loan, which Loan
has been delivered to the Trustee or its Custodian on or before the Closing Date
or Subsequent Transfer Date if a Subsequent Loan.
q. Genuine Documents. All documents submitted are genuine, and all
other representations as to each Loan, including the List of Loans, are true and
correct. Any copies of documents provided by the Company are accurate and
complete (except that, with respect to each Loan that was originated by a
contractor or lender other than the Company, the Company makes such
representation and warranty only to the best of the Company's knowledge).
r. Origination. Each Loan was originated by a home equity lender in the
ordinary course of such lender's business or was originated by the Company
directly.
s. Underwriting Guidelines. Each Loan was originated or purchased in
accordance with the Company's then-current underwriting guidelines.
t. Good Repair. The property described in the Loan is, to the best of
the Company's knowledge, free of damage and in good repair.
u. Qualified Mortgage. The Loan represents a "qualified mortgage"
within the meaning of the REMIC Provisions. The Company represents and warrants
that, either as of (i) the date of origination (within the meaning of the REMIC
Provisions) or (ii) the Closing Date or, if a Subsequent Loan, the Subsequent
Transfer Date, the fair market value of the interest in real property securing
each Loan was not less than 80% of the "adjusted issue price" (in each case
within the meaning of the REMIC Provisions) of such Loan.
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v. Interest Rate and Payment Amount Adjustments. With respect to each
Loan which does not provide for a fixed interest rate over the life of the Loan,
the Loan Interest Rate and monthly payment have been adjusted in accordance with
the terms of the Loan. All required notices of interest rate and payment amount
adjustments have been sent to the Obligor on a timely basis and the computations
of such adjustments were properly calculated. All Loan Interest Rate adjustments
have been made in strict compliance with state and federal law and the terms of
the related Loan.
w. Adjustable Rate Loans. If an Adjustable Rate Loan, it is covered by
an American Land Title Association lender's title insurance policy, with an
adjustable rate mortgage endorsement, such endorsement substantially in the form
of ALTA Form 6.0 or 6.1. The applicable terms of the Adjustable Rate Loan
pertaining to adjustments of the Loan Interest Rate and the monthly payment, and
payment adjustments in connection therewith, are enforceable and will not affect
the priority of the lien of the related mortgage. The Loan Interest Rate and
monthly payment on the Adjustable Rate Loan have been timely and appropriately
adjusted, if such adjustment is required, and the respective Obligor timely and
appropriately advised.
SECTION 3.03. Representations and Warranties Regarding the Loans in the
Aggregate. The Company represents and warrants to the Certificateholders and the
Class C Certificateholders, as of the Closing Date with respect to the Initial
and Additional Loans and as of each Subsequent Transfer Date with respect to the
related Subsequent Loans that:
a. Amounts. As of the Closing Date, the sum of the Cut-off Date Pool
Principal Balance plus the Pre-Funded Amount equals at least the Original
Certificate Principal Balance. By Cut-off Date Principal Balance, the Initial
Loans, Additional Loans, and Subsequent Loans specifically identified as of the
Closing Date, represent at least 75% of the Original Certificate Principal
Balance.
b. Characteristics.
Fixed Rate Loans. The Fixed Rate Loans have the following
characteristics: (i) 100% are secured by a mortgage, deed of trust or security
deed on the related real estate; (ii) none has a remaining maturity of more than
360 months; (iii) no Initial or Additional Fixed Rate Loan has a final scheduled
payment date later than May 15, 2028; and (iv) no Initial or Additional Fixed
Rate Loan has a Loan Interest Rate less than 5.95%.
The weighted average (by Scheduled Principal Balance) loan to value
ratio of the Fixed Rate Loans as of the Post-Funding Payment Date will not be
more than 200 basis points more than such ratio with respect to the Initial
Fixed Rate Loans.
The weighted average (by Scheduled Principal Balance) of the Loan
Interest Rates of the Fixed Rate Loans as of the Post-Funding Payment Date will
not be more than 25 basis points less than the weighted average of the Loan
Interest Rates of the Initial Fixed Rate Loans. No Subsequent Fixed Rate Loan
has a Loan Interest Rate less than N/A%.
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The percentage (by Scheduled Principal Balance) of the Fixed Rate Loans
as of the Post- Funding Payment Date which are identified by the Company under
its standard underwriting criteria as "B," "C," and "D" credits will not be more
than 300 basis points, 200 basis points, and 100 basis points, respectively,
more than the percentage of Initial Fixed Rate Loans identified as B, C, and D
credits.
Adjustable Rate Loans. The Adjustable Rate Loans have the following
characteristics: (i) 100% are secured by a mortgage, deed of trust or security
deed on the related real estate; (ii) none has a remaining maturity of more than
360 months; (iii) no Initial or Additional Adjustable Rate Loan has a final
scheduled payment date later than May 2028; (iv) the Loan Interest Rate on each
is subject to annual or semiannual adjustment, after an initial period of up to
36 months, to equal the sum of (A) the per annum rate equal to the average of
interbank offered rates for six-month U.S. dollar-denominated deposits in the
London market based on quotations of major banks, as published in THE WALL
STREET JOURNAL, plus (B) a fixed percentage amount specified in the related Loan
(the "gross margin"), provided that the Loan Interest Rate will not increase or
decrease on any adjustment date by more than 3% per annum and will not exceed a
maximum rate specified in the related Loan; (v) except for two Loans, none has a
gross margin of less than 4.0% or more than 9.749%; and (vi) no Subsequent
Adjustable Rate Loan has a minimum Loan Interest Rate less than N/A%.
The weighted average (by Scheduled Principal Balance) loan to value
ratio of the Adjustable Rate Loans as of the Post-Funding Payment Date will not
be more than 200 basis points more than such ratio with respect to the Initial
Adjustable Rate Loans.
The weighted average (by Scheduled Principal Balance) of the Loan
Interest Rates of the Adjustable Rate Loans as of the Post-Funding Payment Date
will not be more than 25 basis points less than the weighted average of the Loan
Interest Rates of the Initial Adjustable Rate Loans.
The percentage (by Scheduled Principal Balance) of the Adjustable Rate
Loans as of the Post- Funding Payment Date which are identified by the Company
under its standard underwriting criteria as "B," "C," and "D" credits will not
be more than 300 basis points, 200 basis points, and 100 basis points,
respectively, more than the percentage of Initial Adjustable Rate Loans
identified as B, C, and D credits.
c. Geographic Concentrations.
Fixed Rate Loans. By Cut-off Date Principal Balance, 6.79% of the
Initial and Additional Fixed Rate Loans are secured by property located in Ohio,
6.31% in Illinois, 6.18 in Pennsylvania, 6.10% in Michigan, 5.53% in California,
and 5.34% in North Carolina. No other state represents more than 5% of the
aggregate Cut-off Date Principal Balances of the Initial and Additional Fixed
Rate Loans.
No more than 1% of Fixed Rate Loans by Cut-off Date Principal Balance
are secured by property located in an area with the same five-digit zip code.
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Adjustable Rate Loans. By Cut-off Date Principal Balance, 15.17% of the
Initial and Additional Adjustable Rate Loans are secured by property located in
California, 10.49% in Ohio, 9.50% in Washington, and 7.03 % in Maryland. No
other state represents more than 5% of the aggregate Cut-off Date Principal
Balances of the Initial and Additional Adjustable Rate Loans.
No more than 1% of the Adjustable Rate Loans by Cut-off Date Principal
Balance are secured by property located in an area with the same five-digit zip
code.
d. Marking Records. The Company has caused the portions of the
Electronic Ledger relating to the Loans to be clearly and unambiguously marked
to indicate that such Loans 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 Loans.
f. Lender Concentration. No more than 5% of the Loans, by Cut-off Date
Principal Balance, were originated by any one lender (other than the Company).
SECTION 3.04. Representations and Warranties Regarding the Loan Files.
The Company represents and warrants to the Certificateholders and the Class C
Certificateholders that:
a. Possession. Immediately prior to the Closing Date, the Company will
have possession of each original Initial and Additional Loan and the related
Loan File. Immediately prior to each Subsequent Transfer Date, the Company will
have possession of each original Subsequent Loan and the related Loan File.
There are and there will be no custodial agreements or servicing contracts in
effect materially and adversely affecting the rights of the Company to make, or
cause to be made, any delivery required hereunder.
b. Bulk Transfer Laws. The transfer, assignment and conveyance of the
Loans and the Loan 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 Loans for Breach of Representations and
Warranties.
a. Subject to Section 3.06, the Company shall repurchase a Loan, 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 2.03, 3.02, 3.03
or 3.04, or in the Officer's Certificates delivered pursuant to Sections 2.02(j)
or 2.03(b) (vii), that materially adversely affects the Trust's, the
Certificateholders' or the Class C Certificateholders' interest in such Loan 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
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the date of such discovery and (ii) with respect to any Loan incorrectly
described on the List of Loans 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 Loan, 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
Certificateholders on the immediately following Payment Date as a collection of
principal or interest on such Loan, 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. On or prior to the date that is the second anniversary of the
Closing Date, the Company may, at its election, substitute an Eligible
Substitute Loan for a Loan that it is obligated to repurchase pursuant to
Section 3.05(a) (such Loan being referred to as the "Replaced Loan") upon
satisfaction of the following conditions:
(i) the Company shall have conveyed to the Trustee the Loan to
be substituted for the Replaced Loan and the Loan File related to such
Loan and the Company shall have marked the Electronic Ledger indicating
that such Loan constitutes part of the Trust;
(ii) the Loan to be substituted is an Eligible Substitute Loan
and the Company delivers an Officers' Certificate, substantially in the
form of Exhibit M-2 hereto, to the Trustee certifying that such Loan is
an Eligible Substitute Loan;
(iii) the Company shall have delivered to the Trustee evidence
of filing of a UCC- 1 financing statement executed by the Company as
debtor, naming the Trustee as secured party and filed in Minnesota,
listing such Loan to be substituted as collateral, or shall have
delivered to the Trustee an amendment to the List of Loans;
(iv) the Company shall have delivered to the Trustee an
executed assignment to the Trustee on behalf of the Trust in recordable
form for the mortgage securing such Loan to be substituted;
(v) the Company shall have delivered to the Trustee an Opinion
of Counsel (a) to the effect that the substitution of such Loan for
such Replaced Loan will not cause the Master REMIC or Subsidiary REMIC
to fail to qualify as a REMIC at any time under then applicable REMIC
Provisions or cause any "prohibited transaction" that will result in
the imposition of a tax under such REMIC Provisions and (b) to the
effect of paragraph 9 of Exhibit I hereto; and
(vi) if the Scheduled Principal Balance of such Replaced Loan
is greater than the Scheduled Principal Balance of the Loan to be
substituted, the Company shall have deposited in the Certificate
Account the amount of such excess and shall have included in the
Officers' Certificate required by clause (ii) above a certification
that such deposit has been made.
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Upon satisfaction of such conditions, the Trustee shall add such Loan
to be substituted to, and delete such Replaced Loan from, the List of Loans.
Such substitution shall be effected prior to the first Determination Date that
occurs more than 90 days after the Company becomes aware, or should have become
aware, or receives written notice from the Trustee, of the breach referred to in
Section 3.05(a). Promptly after any such substitution of a Loan, the Company
shall give written notice of such substitution to S&P and Fitch.
c. If the Company is required to repurchase a Loan under Section
3.05(a) or has elected to substitute an Eligible Substitute Loan for a Loan
under Section 3.05(b), and if the reason for such repurchase or substitution is
that the Company has failed to deliver to the Trustee the Loan File for the Loan
to be repurchased or substituted for (except in the case of a failure to deliver
evidence of the lien on the related improved property and evidence of due
recording of such mortgage, deed of trust or security deed, if available), then,
notwithstanding the time periods set out in Sections 3.05(a) and 3.05(b), the
Company shall either (i) repurchase such Loan, at its respective Repurchase
Price, within 30 days of the Closing Date, or (ii) substitute an Eligible
Substitute Loan for the Loan within 90 days of the Closing Date.
d. The Company shall defend and indemnify the Trustee, the
Certificateholders, and the Class C Certificateholders against all costs,
expenses, losses, damages, claims and liabilities, including reasonable fees and
expenses of counsel, which may be asserted against or incurred by any of them as
a result of any third-party action arising out of any breach of any such
representation and warranty.
SECTION 3.06. No Repurchase Under Certain Circumstances.
Notwithstanding any provision of this Agreement to the contrary, no repurchase
or substitution 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 or substitution would not, under the REMIC
Provisions, (i) cause the Master REMIC or Subsidiary REMIC to fail to qualify as
a REMIC while any regular interest in such 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. In the case of a repurchase or deposit pursuant
to Section 3.05(a) or 3.05(b), the Company, notwithstanding the absence of such
opinion as to the imposition of any tax as the result of such purchase or
deposit, shall repurchase such Loan or make such deposit 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 Certificateholders. The Servicer shall
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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 3.06 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 3.06 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
SECTION 4.01. Transfer of Loans.
a. On or prior to the Closing Date, or the Subsequent Transfer Date in
the case of Subsequent Loans, the Company shall deliver the Loan Files to the
Trustee. The Trustee shall maintain the Loan 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 Loan File to the Servicer pursuant
to Section 5.07. The Company has filed a form UCC-1 financing statement
regarding the sale of the Loans 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 Loans 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 A- or higher from both S&P and Fitch
(if rated by Fitch), (i) the Company shall within 30 days execute and deliver to
the Trustee (if it has not previously done so) endorsements of each Loan and
assignments in recordable form of each mortgage, deed of trust or security deed
securing a Loan, and (ii) the Trustee, at the Company's expense, shall within 60
days file 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
Loan; provided, however, that such execution and filing of the assignments with
respect to the Loans shall not be required if the Trustee receives written
confirmation from both S&P and Fitch that the ratings of the Certificates would
not be reduced or withdrawn by the failure to execute and file such assignments;
provided, further, that such execution and filing shall not be required if the
Company delivers an Opinion of Counsel to the effect that such assignment and
recordation is not necessary to effect the assignment to the Trustee of the
Company's lien on the real property securing each Loan.
c. If, as of the Post-Funding Payment Date, the aggregate Scheduled
Principal Balance of Loans secured by real property located in Maryland
("Maryland Loans") exceeds 10% of the Pool Scheduled Principal Balance, the
Company shall, within sixty (60) days, submit to the appropriate recording
offices the assignments to the Trustee on behalf of the Trust of the number of
mortgages, deeds of trust or security deeds required to reduce to less than 10%
of the Pool Scheduled Principal Balance the aggregate Scheduled Principal
Balance of Maryland Loans as to which such assignments are not recorded.
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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 Loans (including,
without limitation, the mortgage or deed of trust on the related real estate
granted thereby).
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ARTICLE V
SERVICING OF LOANS
SECTION 5.01. Responsibility for Loan Administration. The Servicer will
have the sole obligation to manage, administer, service and make collections on
the Loans and perform or cause to be performed all contractual and customary
undertakings of the holder of the Loans 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.
The Servicer shall, with respect to each Loan which does not provide
for a fixed interest rate over the life of the Loan, make adjustments to the
interest rate and the payments due on such Loan in compliance with applicable
regulatory adjustable mortgage loan requirements and the terms of the Loan. The
Servicer shall establish procedures to monitor the interest rate adjustment
dates and the interest rate in order to assure that it correctly calculates any
applicable interest rate change, and it will comply with those procedures. The
Servicer shall execute and deliver all appropriate notices required by the
applicable adjustable mortgage loan laws and regulations and the Loans regarding
such interest rate adjustments and payment adjustments.
SECTION 5.02. Standard of Care. In managing, administering, servicing
and making collections on the Loans pursuant to this Agreement, the Servicer
will exercise that degree of skill and care consistent with the highest degree
of skill and care that the Servicer exercises with respect to similar loans
(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
equity loans 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 Loan.
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 Loans, which have not previously been
provided to the Trust, and will cause its personnel to assist in any examination
of such records by the Trustee. The examination referred
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to in this Section 5.04 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 Loan 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 Loan in
this Agreement.
b. At all times during the term hereof, the Servicer shall keep
available a copy of the List of Loans at its principal executive office for
inspection by Certificateholders.
c. A Certificateholder holding Certificates representing in the
aggregate at least 5% of the 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 Loans, other than extension fees and assumption
fees, which fees shall be retained by the Servicer as compensation for servicing
the Loans, and other than Liquidation Expenses permitted by Section 5.08. The
Trustee shall hold all amounts paid into the Certificate Account under this
Agreement in trust for the Trustee, the Certificateholders and the Class C
Certificateholders until payment of any such amounts is authorized under this
Agreement. Only the Trustee may withdraw funds from the Certificate Account.
b. If the Servicer so directs, the 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 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. ss.
8-102(4)(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. ss.
8-102(5)) 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
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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 Certificateholders 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 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 A-1 by S&P and F-1 by
Fitch (if rated by Fitch) 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 both S&P and Fitch,
and whose only investments are in securities described in clauses (i)
and (ii) above;
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(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 both S&P and Fitch (if rated by Fitch) 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;
(vi) commercial paper having a rating of at least A-1+ from
S&P and at least F-1+ from Fitch (if rated by Fitch) at the time of
such investment; and
(vii) other obligations or securities that are acceptable to
both S&P and Fitch as an Eligible Investment hereunder and will not
reduce the rating assigned to any Class of Certificates by both S&P and
Fitch below the lower of the then-current rating or the rating assigned
to such Certificates as of the Closing Date by both S&P and Fitch, as
evidenced in writing;
provided that any such investment must constitute a "cash flow investment"
within the meaning of the REMIC Provisions.
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 S&P, Fitch, 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 S&P,
Fitch and the Servicer of the location of the Certificate Account.
SECTION 5.06. Enforcement.
a. The Servicer shall, consistent with customary servicing procedures,
act with respect to the Loans in such manner as will maximize the receipt of
principal and interest on such Loans and Liquidation Proceeds with respect to
Liquidated Loans.
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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, or may take
such other steps that in the Servicer's reasonable judgment will maximize
Liquidation Proceeds with respect to the Loan, including, for example, the sale
of the Loan 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 Certificateholders. The
Servicer shall also deposit in the Certificate Account any Net Liquidation
Proceeds received in connection with any Loan which became a Liquidated Loan in
a prior Due Period.
c. The Servicer may sue to enforce or collect upon Loans, in its own
name, if possible, or as agent for the Trust. If the Servicer elects to commence
a legal proceeding to enforce a Loan, the act of commencement shall be deemed to
be an automatic assignment of the Loan 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 Loan on the ground that it is not a
real party in interest or a holder entitled to enforce the Loan, the Trustee on
behalf of the Trust shall, at the Servicer's expense, take such steps as the
Servicer deems necessary to enforce the Loan, including bringing suit in its
name or the names of the Certificateholders and the Class C Certificateholders.
d. The Servicer may grant to the Obligor on any Loan any rebate, refund
or adjustment out of the Certificate Account that the Servicer in good faith
believes is required because of Principal Prepayment in Full of the Loan. The
Servicer will not permit any rescission or cancellation of any Loan.
e. The Servicer shall enforce any due-on-sale clause in a Loan if such
enforcement is called for under its then current servicing policies for
obligations similar to the Loans, provided that such enforcement is permitted by
applicable law and will not adversely affect any applicable insurance policy. If
an assumption of a Loan is permitted by the Servicer, upon conveyance of the
related property the Servicer shall use its best efforts to obtain an assumption
agreement in connection therewith.
f. Any provision of this Agreement to the contrary notwithstanding, the
Servicer shall not agree to the modification or waiver of any provision of a
Loan at a time when such Loan is not in default or such default is not
reasonably foreseeable, if such modification or waiver would both (i) be treated
as a taxable exchange under Section 1001 of the Code or any proposed, temporary
or final Treasury Regulations promulgated thereunder and (ii) cause the Trust to
fail to qualify as a REMIC or cause the imposition of any tax on "prohibited
transactions" or "contributions after the startup date" under the REMIC
Provisions.
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SECTION 5.07. Trustee to Cooperate.
a. Upon payment in full on any Loan, 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 Loan and Loan File to the Servicer. Upon receipt of such
delivery and request, the Trustee shall promptly release or cause to be released
such Loan and Loan File to the Servicer. Upon receipt of such Loan and Loan
File, each of the Company (if different from the Servicer) and the Servicer is
authorized to execute an instrument in satisfaction of such Loan 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 Loan has been paid in full; provided
that, to the extent that insufficient payments are received on a Loan credited
by the Servicer as prepaid or paid in full and satisfied, the shortfall shall be
paid by the Servicer out of its own funds, without any right of reimbursement
therefor (except from additional amounts recovered from the related Obligor or
otherwise in respect of such Loan), and deposited in the Certificate Account.
b. The Servicer's receipt of a Loan and/or Loan File shall obligate the
Servicer to return the original Loan and the related Loan File to the Trustee
when the Servicer's need for the Loan and/or Loan File has ceased, unless the
Loan shall be liquidated or repurchased or replaced as described in Section 3.05
or 8.06.
SECTION 5.08. Costs and Expenses. Except as provided in Section 8.02(b)
for the reimbursement of Advances, all costs and expenses incurred by the
Servicer in carrying out its duties hereunder (including payment of the
Trustee's fees pursuant to Section 11.06, fees and expenses of accountants and
payments of all fees and expenses incurred in connection with the enforcement of
Loans (including enforcement of Loans and foreclosures upon real estate securing
any such Loans) 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 hereunder, except that the Servicer shall be
reimbursed out of the Liquidation Proceeds of a Liquidated Loan 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 Loan.
If the Servicer fails to make a timely interest rate or monthly payment
adjustment on a Loan which does not provide for a fixed interest rate over the
life of the Loan, the Servicer shall use its own funds to satisfy any shortage
in the Obligor's remittance so long as such shortage shall continue; any such
amount paid by the Servicer shall be reimbursable to it from any subsequent
amounts collected on account of the related Loan with respect to such
adjustments.
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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
equity 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 the real property
securing a conventional Loan hazard insurance (excluding flood insurance
coverage) if such conventional Loan is secured by a first priority mortgage,
deed of trust or security deed or the initial principal balance of such
conventional Loan 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 Fitch 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 Fitch a Monthly Report,
substantially in the form of Exhibit P 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 in respect of the Loans 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 Amount Available 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 Amount Available 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 available in
accordance with Section 8.04(c) 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 K, certifying the accuracy of the Monthly
Report and that no Event of Termination or event that with notice or lapse of
time or both would become an Event of Termination has occurred, or if such event
has occurred and is continuing, specifying the event and its status.
SECTION 6.03. Other Data. In addition, the Company and (if different
from the Company) the Servicer shall, on request of the Trustee, S&P or Fitch,
furnish the Trustee, S&P and/or Fitch such underlying data as may be reasonably
requested.
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SECTION 6.04. Annual Report of Accountants. On or before May 1 of each
year, commencing May 1, 1999, 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 issue to the Servicer a report that such firm
has examined selected documents, records and management's assertions relating to
loans serviced by the Servicer and stating that, on the basis of such
examination, such servicing has been conducted in compliance with the minimum
servicing standards identified in the Mortgage Bankers Association of America's
UNIFORM SINGLE ATTESTATION PROGRAM FOR MORTGAGE BANKERS, or any successor
uniform program, except for such significant exceptions or errors in records
that, in the opinion of such firm, generally accepted attestation standards
requires it to report.
SECTION 6.05. Statements to Certificateholders and the Class C
Certificateholders.
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:
(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
(A) the aggregate amount of any Principal Prepayments included therein
and (B) that portion of any such distribution to Class A-6
Certificateholders constituting the Class A-6 Lockout Pro Rata
Distribution Amount;
(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-1A ARM Principal Balance, the Class A-1B ARM
Principal Balance, the Class A-1 Principal Balance, the Class A-2
Principal Balance, the Class A-3 Principal Balance, the Class A-4
Principal Balance, the Class A-5 Principal Balance, the Class A-6
Principal Balance and the Class A-7 IO Notional Principal Amount after
giving effect to the distribution of principal on such Payment Date;
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(v) the Pool Scheduled Principal Balance and the aggregate
Scheduled Principal Balance of the Adjustable Rate Loans, for such
Payment Date;
(vi) the Senior Percentage and the Class A-6 Lockout
Percentage for such Payment Date;
(vii) the Pool Factor;
(viii) the number and aggregate principal balances of Loans,
identifying separately the Adjustable Rate Loans, delinquent (a) 30-59
days and (b) 60 or more days;
(ix) the Class B Principal Balance Test (as set forth in
Exhibit P hereto);
(x) the Class B Principal Distribution Test (as set forth in
Exhibit P 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 Loans, identifying such Loans
(including those which are Adjustable Rate Loans) and the Net
Liquidation Loss on such Loans; and
(xv) the Pre-Funded ARM Amount and the Pre-Funded Fixed Rate
Amount as of such Payment Date.
The Trustee and the Servicer shall, if any Certificateholder, Class C
Certificateholder or 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.
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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;
(v) the Unpaid Class M-1 Liquidation Loss Interest Shortfall
after giving effect to any distribution on such Payment Date pursuant
to Section 8.04(b)(8)(i); and
(vi) the information set forth in clauses (v) through (xv) of
Section 6.05(b).
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 Certificate
Registrar pursuant to any requirements of the Code as from time to time in
force.
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
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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 Liquidation Loss Interest Shortfall,
after giving effect to any distribution on such Payment Date pursuant
to Section 8.04(b)(8)(ii); and
(vi) the information set forth in clauses (v) through (xv) of
Section 6.05(b).
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 in
force.
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:
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(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;
(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 Liquidation Loss Interest 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; and
(vii) the information set forth in clauses (v) through (xv) of
Section 6.05(b).
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 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 in
force.
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:
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(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 Liquidation Loss
Principal 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 Liquidation Loss Interest Shortfall,
after giving effect to any distribution on such Payment Date pursuant
to Section 8.04(b)(8)(iv);
(vi) the amount, if any, of the Class B-2 Guaranty Payment;
(vii) the Class B Percentage for such Payment Date; and
(viii) the information set forth in clauses (v) through (xv)
of Section 6.05(b).
In the case of the information in clauses (i) through (iv) 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 in
force.
g. Copies of all reports and statements provided to the Trustee for the
Certificateholders shall also be provided to S&P, Fitch and the Class C
Certificateholders.
SECTION 6.06. Payment of Taxes. The Servicer shall be responsible for
and agrees to prepare, make and timely file all federal, state, local or other
tax returns, information
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statements and other returns and documents of every kind and nature whatsoever
required to be made or filed by or on behalf of the Trust pursuant to the Code
and other applicable tax laws and regulations. Each such return, statement and
document shall, to the extent required by the Code or other applicable law and
at the request of the Servicer, be signed on behalf of the Trust by the Trustee.
The Trustee shall have no responsibility whatsoever for the accuracy or
completeness of any such return, statement or document. The Servicer agrees to
indemnify the Trustee and hold it harmless for, from, against and in respect to
any and all liability, loss, damage and expense which may be incurred by the
Trustee based upon or as a result of the Trustee's execution of any and all such
tax returns, statements and documents. The Servicer, if and for so long as it is
a Class C Certificateholder, shall be designated the "tax matters person" on
behalf of the Trust in the same manner as a partnership may designate a "tax
matters partner," as such term is defined in Section 6231(a)(7) of the Code. To
the extent permitted by the REMIC Provisions, any subsequent holder of the Class
C Certificate, by acceptance thereof, irrevocably designates and appoints the
Servicer as its agent to perform the responsibilities of the "tax matters
person" on behalf of the Trust if, and during such time as, the Servicer is not
the holder of the Class C Certificate. The Servicer may, at its expense, retain
such outside assistance as it deems necessary in the performance of its
obligations under this paragraph. The Servicer shall provide to the Internal
Revenue Service the name, title, address and telephone number of the person who
will serve as the representative of the REMIC.
Each of the Holders of the Certificates or the Class C Certificates, 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 tax
matters person or as agent for the tax matters person, shall represent the Trust
in connection with all examinations of the Trust's affairs by tax authorities,
including resulting administrative and judicial proceedings. Each of the Holders
of the Certificates and Class C Certificates, by acceptance thereof, agrees to
cooperate with the Servicer in such matters and to do or refrain from doing any
or all things reasonably required by the Servicer to conduct such proceedings,
provided that no such action shall be required by the Servicer of any
Certificateholder that would entail unnecessary or unreasonable expenses for
such Certificateholder in the performance of such action.
The Class C Master Certificateholders and Class C Subsidiary
Certificateholders 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 Master REMIC or
Subsidiary REMIC, respectively, 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,
or a failure by any Servicer to comply with the provisions of Section 6.06, the
Trustee, the Company or such Servicer, as the case may be, shall indemnify the
Class C Certificateholders for the payment of any such tax or charge. The
Trustee shall be entitled to withhold from amounts otherwise distributable to
the Class C Certificateholders any taxes or charges payable by the Class C
Certificateholders hereunder.
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In the event a 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)(5) 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)(5) 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.
SECTION 7.02. Transfer. If an Event of Termination has occurred and is
continuing, either the Trustee or Certificateholders, in the aggregate,
representing 25% or more of the 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
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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 Loans, the Loan 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 Loans to be duly
recorded in accordance with the terms of this Agreement. 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 Loans. The Servicer shall transfer to the new servicer (i) the
Servicer's records relating to the Loans in such electronic form as the new
servicer may reasonably request and (ii) any Loan Files in the Servicer's
possession.
SECTION 7.03. Trustee to Act; Appointment of Successor. On and after
the time the Servicer receives a notice of termination pursuant to Section 7.02,
the Trustee shall be the successor in all respects to the Servicer in its
capacity as servicer under this Agreement and the transactions set forth or
provided for herein and shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Servicer by the terms and provisions
hereof, and the Servicer shall be relieved of such responsibilities, duties and
liabilities arising after such Service Transfer; provided, however, that (i) the
Trustee will not assume any obligations of the Company pursuant to Section 3.05,
and (ii) the Trustee shall not be liable for any acts or omissions of the
Servicer occurring prior to such Service Transfer or for any breach by the
Servicer of any of its obligations contained herein or in any related document
or agreement. As compensation therefor, the Trustee shall be entitled to receive
reasonable compensation out of the Monthly Servicing Fee. Notwithstanding the
above, the Trustee may, if it shall be unwilling so to act, or shall, if it is
legally unable so to act, appoint, or petition a court of competent jurisdiction
to appoint, an Eligible Servicer as the successor to the Servicer hereunder in
the assumption of all or any part of the responsibilities, duties or liabilities
of the Servicer hereunder. Pending appointment of a successor to the Servicer
hereunder, unless the Trustee is prohibited by law from so acting, the Trustee
shall act in such capacity as hereinabove provided. In connection with such
appointment and assumption, the Trustee may make such arrangements for the
compensation of such successor out of payments on Loans 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.
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SECTION 7.04. Notification to Certificateholders and Class C
Certificateholders.
a. Promptly following the occurrence of any Event of Termination, the
Servicer shall give written notice thereof to the Trustee, S&P, Fitch, the
Certificateholders and the Class C Certificateholders at their respective
addresses appearing on the Certificate Register.
b. Within 10 days following any termination or appointment of a
successor to the Servicer pursuant to this Article VII, the Trustee shall give
written notice thereof to S&P, Fitch, the Certificateholders and the Class C
Certificateholders at their respective addresses appearing on the Certificate
Register.
SECTION 7.05. Effect of Transfer.
a. After the Service Transfer, the Trustee or new Servicer shall notify
Obligors to make payments directly to the new Servicer that are due under the
Loans 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 Loans 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 Loans.
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 Loans 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 Certificateholders 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-1A ARM Distribution Amount, the Class A-1B
ARM Distribution Amount, the Class A-1 Distribution Amount, the Class A-2
Distribution Amount, the Class A-3 Distribution Amount, the Class A-4
Distribution Amount, the Class A-5 Distribution Amount, the Class A-6
Distribution Amount, the Class A-7 IO 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 Sections 8.03, 8.04(b)(8)(iv) and 8.04(c), or the
Class C Distribution Amount, as applicable. Final payment of any Certificate or
a Class C Certificate shall be made only upon presentation and surrender of such
Certificate or 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 E hereto, and the
Class C Certificates as set forth in Exhibit L 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 the Certificateholders and the Class C
Certificateholders required hereunder. The Trustee's corporate
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trust operations department, with an office at 180 East Fifth Street, Third
Floor, St. Paul, Minnesota 55101, Attention: Tamara Schultz-Fugh, 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 Certificateholders and that it will notify
the Trustee of any failure by the Servicer to make funds available to the Paying
Agent for the payment of amounts due on the Certificates and the Class C
Certificates.
SECTION 8.02. Advances.
a. Not later than one Business Day following the Determination Date,
the Servicer shall advance all Delinquent Payments for the immediately preceding
Due Period by depositing the aggregate amount of such Delinquent Payments in the
Certificate Account; provided, however, that the Servicer shall be obligated to
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 Class B-2 Limited
Guaranty under this Agreement shall terminate on the Final Payment Date.
d. The obligation of the Company to make the Class B-2 Guaranty
Payments described in subsection (a) above shall be unconditional and
irrevocable. The Company acknowledges that its obligation to make the Class B-2
Guaranty Payments described in subsection (a) above shall be deemed a guaranty
by the Company of indebtedness of the Trust for money borrowed from the Class
B-2 Certificateholders.
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SECTION 8.04. Permitted Withdrawals from the Certificate Account;
Payments.
a. The Trustee shall, 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 Loans for the following
purposes:
(i) to make payments in the amounts and in the manner provided
for in Sections 8.04(b);
(ii) to pay to the Company with respect to each Loan 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 Loan, the Servicer shall keep and maintain separate accounting, on a
Loan by Loan 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:
(1) if neither the Company nor a wholly owned subsidiary of
the Company is the Servicer, to pay, with respect to the Loans, 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-1A ARM
Certificateholders; the amount in
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clause (a)(2) of the definition of Class A Formula
Distribution Amount to the Class A-1B ARM Certificateholders;
the amount in clause (a)(3) of the definition of Class A
Formula Distribution Amount to the Class A-1
Certificateholders; the amount in clause (a)(4) of the
definition of Class A Formula Distribution Amount to the Class
A-2 Certificateholders; the amount in clause (a)(5) of the
definition of Class A Formula Distribution Amount to the Class
A-3 Certificateholders; the amount in clause (a)(6) of the
definition of Class A Formula Distribution Amount to the Class
A-4 Certificateholders; the amount in clause (a)(7) of the
definition of Class A Formula Distribution Amount to the Class
A-5 Certificateholders; the amount in clause (a)(8) of the
definition of Class A Formula Distribution Amount to the Class
A-6 Certificateholders; the amount in clause (a)(9) of the
definition of Class A Formula Distribution Amount to the Class
A-7 IO Certificateholders; or, if the Amount Available is less
than the amount necessary to pay all Class A Formula Interest
Distribution Amounts, pro rata to each Class of Class A
Certificates in accordance with their respective entitlements
to interest; and
(ii) to each Class of Class A Certificates the
amount, if any, of the Unpaid Class A Interest Shortfall of
such Class or, if the remaining Amount Available is less than
the amount necessary to pay all Unpaid Class A Interest
Shortfalls, 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) any Pre-Funded ARM Amount to the Class A-1B ARM
Certificates and any Pre-Funded Fixed Rate Amount to the Class
A-1 Certificates;
(ii) if there is a Class A Liquidation Loss Principal
Amount as to such Payment Date, the remaining Amount
Available, pro rata to each Class of Class A Certificates
(other than the Class A-7 IO Certificates) based on the Class
Principal Balance of each Class (but in no event shall such
amount for any Class exceed the Class Principal Balance of any
such Class); and
(iii) if there is no Class A Liquidation Loss
Principal Amount as to such Payment Date, and if such Payment
Date is on or prior to the Class A-6 Cross-over Date, the
remaining Amount Available up to the Class A Formula Principal
Distribution Amount as follows:
(A) if the remaining Amount Available is
less than the Class A Formula Principal Distribution
Amount, then pro rata to each Class of Class A
Certificates (other than the Class A-7 IO
Certificates) based upon the amounts that would have
been distributed pursuant to clause (B),
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below, had the remaining Amount Available been equal
to the Class A Formula Principal Distribution Amount;
(B) if the remaining Amount Available is not
less than the Class A Formula Principal Distribution
Amount, then
(a) (i) to the Class A-1B ARM
Certificateholders, the Class A-1 ARM
Formula Principal Distribution Amount less
an amount equal to the lesser of the Class
A-1A ARM Principal Balance and the Class
A-1A ARM Percentage of the Class A-1 ARM
Formula Principal Distribution Amount, but
in no event more than is necessary to reduce
the Class A-1B ARM Principal Balance to
zero, and (ii) the remainder to the Class
A-1A ARM Certificateholders, but in no event
more than is necessary to reduce the Class
A-1A ARM Principal Balance to zero;
(b) to the Class A-6
Certificateholders, the Class A-6 Lockout
Pro Rata Distribution Amount, if any, but in
no event more than is necessary to reduce
the Class A-6 Principal Balance to zero;
(c) if such Payment Date is on or
prior to the Class A-1 Cross-over Date, to
the Class A-1 Certificateholders, but in no
event more than is necessary to reduce the
Class A-1 Principal Balance to zero;
(d) if such Payment Date is on or
after the Class A-1 Cross-over Date, but on
or prior to the Class A-2 Cross-over Date,
to the Class A-2 Certificateholders, but in
no event more than is necessary to reduce
the Class A-2 Principal Balance to zero;
(e) if such Payment Date is on or
after the Class A-2 Cross-over Date, but on
or prior to the Class A-3 Cross-over Date,
to the Class A-3 Certificateholders, but in
no event more than is necessary to reduce
the Class A-3 Principal Balance to zero;
(f) if such Payment Date is on or
after the Class A-3 Cross-over Date, but on
or prior to the Class A-4 Cross-over Date,
to the Class A-4 Certificateholders, but in
no event more than is necessary to reduce
the Class A-4 Principal Balance to zero;
(g) if such Payment Date is on or
after the Class A-4 Cross-over Date, but on
or prior to the Class A-5 Cross-over Date,
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to the Class A-5 Certificateholders, but in
no event more than is necessary to reduce
the Class A-5 Principal Balance to zero; and
(h) if such Payment Date is on or
after the Class A-5 Cross-over Date, but on
or prior to the Class A-6 Cross-over Date,
to the Class A-6 Certificateholders, but in
no event more than is necessary (after
taking into account any distribution to the
Class A- 6 Certificateholders pursuant to
clause (b) above) to reduce the Class A-6
Principal Balance to zero.
(4) after payment of the amounts specified in clauses (1)
through (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)
through (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)
through (5) above, to the Class B-1 Certificateholders as follows (and
in the following order of priority):
(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;
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(7) after payment of the amounts specified in clauses (1)
through (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)
through (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 Liquidation Loss
Interest Distribution Amount" and then to any Unpaid Class M-1
Liquidation Loss Interest 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 Liquidation Loss
Interest Distribution Amount" and then to any Unpaid Class M-2
Liquidation Loss Interest 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 Liquidation Loss
Interest Distribution Amount" and then to any Unpaid Class B-1
Liquidation Loss Interest 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 Liquidation Loss
Interest Distribution Amount" and then to any Unpaid Class B-2
Liquidation Loss Interest Shortfall.
(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 Servicer or the Trustee, as applicable,
for any unreimbursed Advances made with respect to the Loans in respect
of current or prior Payment Dates;
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(11) to reimburse the Class C Certificateholders for expenses
incurred by and reimbursable to them pursuant to Section 10.06;
(12) to reimburse the Company for any prior unreimbursed Class
B-2 Guaranty Payments; and
(13) to pay the remainder, if any, of the Amount Available to
the Class C Master Certificateholders.
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, provided
that there is no Class A Interest Shortfall for such Payment Date, 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) 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, and 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, to
the extent of such funds, on such Payment Date.
SECTION 8.05. Reassignment of Repurchased and Replaced Loans. Upon
receipt by the Trust, by deposit in the Certificate Account, of the Repurchase
Price under Section 3.05(a), or upon receipt by the Trust of an Eligible
Substitute Loan under Section 3.05(b) and receipt by the Trust, by deposit in
the Certificate Account, of any additional amount under Section 3.05(b)(vii),
and upon receipt of a certificate of a Servicing Officer in the form attached
hereto as Exhibit M-1 or M-2, as applicable, the Trustee shall convey and assign
to the Company all of the Certificateholders' right, title and interest in the
repurchased Loan or Replaced Loan 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
or receipt of such Eligible Substitute Loan and related deposit of any
additional amount under Section 3.05(b)(vii), the Servicer shall be deemed to
have released any claims to such Loan as a result of Advances with respect to
such Loan.
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SECTION 8.06. Servicer's Purchase Option.
a. The Servicer shall, subject to subsection (b) hereof, have the
option to purchase all of the Loans and all property acquired in respect of any
Loan remaining in the Trust at a price equal to the greatest of:
(i) the sum of (x) 100% of the principal balance of each Loan
(other than any Loan 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 Loan 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),
(ii) 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
(iii) the 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 Loans) 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 Liquidation Loss Interest Distribution
Amount, the Class M-2 Formula Interest Distribution Amount, the Class
M-2 Formula Liquidation Loss Interest Distribution Amount, the Class
B-1 Formula Interest Distribution Amount, the Class B-1 Formula
Liquidation Loss Interest Distribution Amount, the Class B-2 Formula
Interest Distribution Amount, and the Class B-2 Formula Liquidation
Loss 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 payments of interest in respect of the Loans at the
Weighted Average Pass-Through Rate).
b. The purchase by the Servicer of all of the Loans pursuant to this
Section 8.06 shall be conditioned upon (1) the Pool Scheduled Principal Balance
of all Loans, at the time of any such purchase, aggregating less than 10% of the
Cut-off Date Pool Principal Balance of all Loans, (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 Loan Files pertaining to
the Loans being purchased.
SECTION 8.07. Pre-Funding Account.
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a. On or before the Closing Date, the Trustee shall establish the
Pre-Funding Account on behalf of the Trust, which must be an Eligible Account,
and shall deposit therein the amounts received from the Company pursuant to
Sections 2.02(l) and (m). The Pre-Funding Account shall be entitled "Pre-Funding
Account, U.S. Bank Trust National Association as Trustee for the benefit of
holders of Home Equity Loan Certificates, Series 1998-C." The Trustee shall
maintain within the Pre-Funding Account four subaccounts: the "Pre-Funding ARM
Subaccount" and the "Pre-Funding Fixed Rate Subaccount" which pertain to the
pre-funded Subsequent Loans; and the "Undelivered ARM Loan Subaccount" and the
"Undelivered Fixed Rate Loan Subaccount" which pertain to those Loans
transferred to the Trust on the Closing Date that are Undelivered Loans. Funds
deposited in the Pre-Funding Account shall be held in trust by the Trustee for
the Holders of the Certificates and the Class C Certificates for the uses and
purposes set forth herein.
b. On or before the Closing Date the Company shall deposit, in the
Pre-Funding ARM Subaccount and the Pre-Funding Fixed Rate Subaccount, the
respective amounts specified in Section 2.02(l). Amounts on deposit in such
subaccounts shall be withdrawn by the Trustee as follows:
(i) On any Subsequent Transfer Date, the Trustee shall
withdraw an amount equal to 100% of the Cut-off Date Principal Balance
of each Subsequent Adjustable Rate Loan transferred and assigned to the
Trustee on such Subsequent Transfer Date and pay such amount to or upon
the order of the Company upon satisfaction of the conditions set forth
in Section 2.03(b) with respect to such transfer and assignment.
(ii) On any Subsequent Transfer Date, the Trustee shall
withdraw an amount equal to 100% of the Cut-off Date Principal Balance
of each Subsequent Fixed Rate Loan transferred and assigned to the
Trustee on such Subsequent Transfer Date and pay such amount to or upon
the order of the Company upon satisfaction of the conditions set forth
in Section 2.03(b) with respect to such transfer and assignment.
(iii) On the Business Day immediately preceding the
Post-Funding Payment Date, the Trustee shall deposit into the
Certificate Account any amounts remaining in the Pre-Funding ARM
Subaccount and Pre-Funding Fixed Rate Subaccount, net of investment
earnings.
c. On or before the Closing Date the Company shall deposit in the
Undelivered ARM Loan Subaccount and the Undelivered Fixed Rate Loan Subaccount
the respective amounts specified in Section 2.02(m). Amounts on deposit in such
subaccounts shall be withdrawn by the Trustee as follows:
(i) If the Company delivers the related Loan File for an
Undelivered Adjustable Rate Loan to the Trustee at least two Business
Days before the last day of the Pre-Funding Period, the Trustee shall
withdraw an amount equal to 100% of the Cut-off
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<PAGE>
Date Principal Balance of such Loan and pay such amount to or upon the
order of the Company.
(ii) If the Company delivers the related Loan File for an
Undelivered Fixed Rate Loan to the Trustee at least two Business Days
before the last day of the Pre-Funding Period, the Trustee shall
withdraw an amount equal to 100% of the Cut-off Date Principal Balance
of such Loan and pay such amount to or upon the order of the Company.
(iii) The Company shall give the Trustee telephonic notice of
its intended delivery of Loan Files. The Trustee will use reasonable
efforts to process Loan Files and remit any amount payable for them to
the Company in a timely manner.
(iv) On the Business Day immediately preceding the
Post-Funding Payment Date, the Trustee shall deposit into the
Certificate Account any amounts remaining in the Undelivered ARM Loan
Subaccount and Undelivered Fixed Rate Loan Subaccount, net of
investment earnings.
d. The Pre-Funding Account shall be part of the Trust but not part of
the Master REMIC or Subsidiary REMIC. The Trustee on behalf of the Trust shall
be the legal owner of the Pre-Funding Account. The Company, shall be the
beneficial owner of the Pre-Funding Account, subject to the foregoing power of
the Trustee to transfer amounts in the Pre-Funding Account to the Certificate
Account. Funds in the Pre-Funding Account shall, at the direction of the
Servicer, be invested in Eligible Investments of the kind described in clauses
(i) and (ii)(A) of the definition of "Eligible Investments" and that mature no
later than the Business Day prior to the next succeeding Payment Date. All
amounts earned on deposits in the Pre-Funding Account shall be taxable to the
Company. The Trustee shall release to the Company all investment earnings in the
Pre-Funding Account on the first Payment Date after the end of the Pre-Funding
Period.
SECTION 8.08. Distributions on the Subsidiary REMIC Regular Interests.
a. On each Payment Date the Trustee shall be deemed to distribute to
itself, as the holder of the Subsidiary REMIC Regular Interests, the Subsidiary
REMIC Regular Interest Distribution Amounts in the following order of priority
to the extent of the Amount Available and amounts described in Section 8.04(c):
(i) Subsidiary REMIC Accrued Interest on the Subsidiary REMIC
Regular Interests A-1 and A-2 for such Payment Date, plus any
Subsidiary REMIC Accrued Interest thereon remaining unpaid from any
previous Payment Date;
(ii) Principal equal to the Class A Formula Principal
Distribution Amount, first on the Subsidiary REMIC Regular Interest A-1
until the related Subsidiary REMIC
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Principal Balance is reduced to zero, and then on the Subsidiary REMIC
Regular Interest A-2 until the related Subsidiary REMIC Principal
Balance is reduced to zero;
(iii) Subsidiary REMIC Accrued Interest on the Subsidiary
REMIC Regular Interest MB for such Payment Date, plus any Subsidiary
REMIC Accrued Interest thereon remaining unpaid from any previous
Payment Date; and
(iv) Principal on the Subsidiary REMIC Regular Interest MB
equal to the remaining Amount Available, Class B-2 Guaranty Payment and
amounts described in Section 8.04(c).
b. On each Payment Date the Trustee shall be deemed to distribute from
the Master REMIC, to the holders of the Certificates in the priority set forth
in Section 8.04, the Subsidiary REMIC Regular Interest Distribution Amounts
deemed to have been received by the Master REMIC from the Subsidiary REMIC under
this Section 8.08.
c. Notwithstanding the deemed distributions on the Subsidiary REMIC
Regular Interests described in this Section 8.08, distributions of funds from
the Certificate Account shall be made only in accordance with Section 8.04.
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ARTICLE IX
THE CERTIFICATES AND THE CLASS C CERTIFICATES
---------------------------------------------
SECTION 9.01. The Certificates and Class C Certificates. The Class A, the
Class M, the Class B and the Class C Certificates shall be substantially in the
forms set forth in Exhibits A, B, C, D, E and L, 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-1A ARM Certificates representing $14,000,000 in Original Class A-1 A ARM
Principal Balance, (ii) one or more Class A-1B ARM Certificates representing
$106,000,000 in Original Class A-1 B ARM Principal Balance, (iii) one or more
Class A-1 Certificates representing $105,000,000 in Original Class A-1 Principal
Balance, (iv) one or more Class A-2 Certificates representing $79,700,000 in
Original Class A-2 Principal Balance, (v) one or more Class A-3 Certificates
representing $41,900,000 in Original Class A-3 Principal Balance, (vi) one or
more Class A-4 Certificates representing $31,000,000 in Original Class A-4
Principal Balance, (vii) one or more Class A-5 Certificates representing
$19,900,000 in Original Class A-5 Principal Balance, (viii) one or more Class A-
6 Certificates representing $20,000,000 in Original Class A-6 Principal Balance,
(ix) one or more Class A-7 IO Certificates representing $25,000,000 in Class A-7
IO Original Notional Principal Amount, (x) one or more Class M-1 Certificates
representing $32,500,000 in Original Class M-1 Principal Balance, (xi) one or
more Class M-2 Certificates representing $18,750,000 in Original Class M-2
Principal Balance, (xii) one or more Class B-1 Certificates representing
$20,000,000 in Original Class B-1 Principal Balance, and (xiii) one or more
Class B-2 Certificates representing $11,250,000 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
Subsidiary 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 the Class C Subsidiary Certificates. The Class C Master 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 the Class C
Master Certificates.
The Certificates and the Class C Certificates 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 Certificates bearing the
signatures of individuals who were at any time the proper officers of the
Trustee shall bind the Trustee, notwithstanding that such individuals or any of
them have ceased to hold such offices prior to the execution and delivery of
such Certificate or Class C Certificates, or did not hold such offices at the
date of such Certificates or Class C Certificates. No Certificate or Class C
Certificate shall be entitled to any benefit under this Agreement, or be valid
for any purpose, unless such Certificate 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 Certificates
shall be dated the date of their execution, except for
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<PAGE>
those Certificates and the Class C Certificates executed on the Closing Date,
which shall be dated the Closing Date.
SECTION 9.02. Registration of Transfer and Exchange of Certificates and
the Class C Certificates.
a. The Trustee shall keep at the office or agency to be maintained in
accordance with Section 12.03 a "Certificate Register" in which the Trustee
shall provide for the registration of Certificates and the Class C Certificates
and of transfers and exchanges of Certificates and the Class C Certificates 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 Certificates and transfers and exchanges of Certificates and the
Class C Certificates as provided herein. The Trustee will give prompt written
notice to Certificateholders, the Class C Certificateholders 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 N attached hereto, which investment letter shall not be an
expense of the Trustee or the Company. The Class C Certificateholders
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 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 Plan delivers to the Company and the Trustee, at its own
expense, an opinion of counsel in form satisfactory to the Company and the
Trustee that the purchase and holding of the Certificate by such Plan will
not result in the assets of the Trust being deemed to be "plan assets" and
subject to the prohibited transaction provisions of ERISA and the Code and
will not subject the Trustee, the Company or the Servicer to any obligation
or liability in addition to those undertaken in this Agreement. Unless such
opinion is delivered, each person acquiring such a Certificate will be
deemed to represent to the Trustee, the Company and the Servicer either (i)
that such person is neither a Plan, nor acting on behalf of a Plan, subject
to ERISA or to Section 4975 of the
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<PAGE>
Code or (ii) that the purchase and holding of the Certificate by such Plan
will not result in the assets of the Trust being deemed to be Plan assets
and subject to the prohibited transaction provisions of ERISA and the Code
and will not subject the Trustee, the Company or the Servicer to any
obligation or liability in addition to those undertaken in the Agreement..
(3) Notwithstanding anything to the contrary contained herein, (A) no
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 a
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 to 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 a Class
C Certificate by any Disqualified Organization will not result in the
imposition of federal income tax upon the Trust or any Certificateholder or
Class C 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 a 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 not to be a Class C Certificateholder for any
purpose hereunder, including, but not limited to, the receipt of
distributions on a Class C Certificate, and shall be deemed to have no
interest whatsoever in a 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).
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<PAGE>
(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 not to
be the Certificateholder or Class C Certificateholder, as applicable, for
any purpose hereunder, including, but not limited to, the receipt of
distributions on the Certificate or Class C Certificate, and shall be
deemed to have no interest whatsoever in the Certificate or Class C
Certificate.
(5) The Trustee shall give notice to S&P and Fitch promptly following
any transfer, sale or other disposition of a Class C Certificate.
c. At the option of a Certificateholder or a Class C Certificateholder,
Certificates and the Class C Certificates may be exchanged for other
Certificates or Class C Certificates of authorized denominations of a like
aggregate original denomination, upon surrender of such Certificates or the
Class C Certificates to be exchanged at the Corporate Trust Office. Whenever
any Certificates or the Class C Certificates are so surrendered for exchange,
the Trustee shall execute and deliver the Certificates or Class C Certificates
which the Certificateholder or Class C Certificateholders 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
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<PAGE>
Certificates of Certificate Owners it represents or of brokerage firms for which
it acts as agent in accordance with the Depository's normal procedures.
e. If (x)(i) the Company or the Depository advises the Trustee in writing
that the Depository is no longer willing or able properly to discharge its
responsibilities as Depository and (ii) the Trustee or the Company is unable to
locate a qualified successor or (y) the Company at its sole option advises the
Trustee in writing that it elects to terminate the book-entry system through the
Depository, the Trustee shall notify all Certificate Owners, through the
Depository, of the occurrence of any such event and of the availability of
definitive, fully registered Certificates (the "Definitive Certificates") to
Certificate Owners requesting the same. Upon surrender to the Trustee of the
Certificates by the Depository, accompanied by registration instructions from
the Depository for registration, the Trustee shall issue the Definitive
Certificates. Neither the Company nor the Trustee shall be liable for any delay
in delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of Definitive
Certificates all references herein to obligations imposed upon or to be
performed by the Depository shall be deemed to be imposed upon and performed by
the Trustee, to the extent applicable with respect to such Definitive
Certificates and the Trustee shall recognize the Holders of the Definitive
Certificates as Certificateholders hereunder.
f. On or prior to the Closing Date, there shall be delivered to the
Depository one Class A-1A ARM Certificate, one Class A-1B ARM Certificate, one
Class A-1 Certificate, one Class A-2 Certificate, one Class A-3 Certificate, one
Class A-4 Certificate, one Class A-5 Certificate, one Class A-6 Certificate, one
Class A-7 IO 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 Principal Balance of each
Class, 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
Certificates. 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
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<PAGE>
that may be imposed in connection with any transfer or exchange of Certificates
or Class C Certificates. All Certificates and Class C Certificates surrendered
for transfer and exchange shall be disposed of in a manner approved by the
Trustee.
SECTION 9.04. Mutilated, Destroyed, Lost or Stolen Certificates or Class C
Certificates. 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
Certificateholders' Names and Addresses. The Certificate Registrar will furnish
to the Trustee and the Servicer, within five days after receipt by the
Certificate Registrar of a request therefor from the Trustee in writing, a list,
in such form as the Trustee may reasonably require, of the names and addresses
of the Certificateholders and the Class C Certificateholders as of the most
recent Record Date. If Holders of Certificates representing, in the aggregate,
25% or more of the 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
Certificateholders with respect to their rights under this Agreement or under
the Certificates or the Class C Certificates and is accompanied by a copy of the
communication which such Applicants propose to transmit, then the Trustee shall,
within five Business Days after the receipt of such application, afford such
Applicants access during normal business hours to the most recent list of
Certificateholders and the Class C Certificateholders held by the
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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 Certificateholders, by receiving and holding a Certificate or
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 Certificateholders
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
Certificates. For all purposes of this Agreement, the execution and delivery of
Certificates or Class C Certificates by the Authenticating Agent pursuant to
this Section shall be deemed to be the execution and delivery of Certificates or
Class C Certificates "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 Certificateholders against any and
all costs, expenses, losses, damages, claims and liabilities, including
reasonable fees and expenses of counsel and expenses of litigation arising out
of or resulting from the use or ownership of any real estate related to a Loan
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 Loans is intended to be assumed by the Trust, the
Certificateholders or the Class C Certificateholders under or as a result of
this Agreement and the transactions contemplated hereby and, to the maximum
extent permitted and valid under mandatory provisions of law, the Trust, the
Certificateholders and the Class C Certificateholders expressly disclaim such
assumption.
SECTION 10.03. Tax Indemnification. The Company agrees to pay, and to
indemnify, defend and hold harmless the Trust, the Trustee (including the
Custodian and any other agents of the Trustee), the Certificateholders and the
Class C Certificateholders from, any taxes which may at any time be asserted
with respect to, and as of the date of, the transfer of the Loans 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 Certificates) and costs, expenses and
reasonable counsel fees in defending against the same, whether arising by reason
of the acts to be performed by the Company, the Servicer or the Trustee under
this Agreement or imposed against the Trust, a Certificateholder, the Class C
Certificateholders or otherwise.
SECTION 10.04. Servicer's Indemnities. The Servicer shall defend and
indemnify the Trust, the Trustee (including the Custodian and any other agents
of the Trustee), the Certificateholders and the Class C Certificateholders
against any and all costs, expenses, losses, damages, claims and liabilities,
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 Loan. 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 Loan.
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SECTION 10.05. Operation of Indemnities. Indemnification under this Article
X 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 X 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 a Class C Certificateholder, pursuant
to Section 6.06, pays any taxes or charges imposed upon the Trust, the Master
REMIC or the Subsidiary REMIC 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 Certificateholders 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 Certificateholders be entitled to
reimbursement therefor out of the Certificate Account, if and to the extent that
such taxes or charges resulted from a failure (i) by the Company, the Trustee or
any Servicer to comply with the provisions of Section 2.05, (ii) by any Servicer
to comply with the provisions of Section 6.06, or (iii) by the Trustee to
execute any tax returns pursuant to Section 11.11.
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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 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 Certificate Principal Balance relating to the time, method and place
of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this Agreement;
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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 Certificate Principal
Balance.
None of the provisions contained in this Agreement shall in any event
require the Trustee to perform, or be responsible for the manner of performance
of, any of the obligations of the Company or the Servicer under this Agreement,
except during such time, if any, as the Trustee shall be the successor to, and
be vested with the rights, duties, powers and privileges of, the Servicer in
accordance with the terms of this Agreement. The Trustee shall not be required
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if there is reasonable ground for believing that the repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
SECTION 11.02. Certain Matters Affecting the Trustee. Except as otherwise
provided in Section 11.01:
a. The Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, Officer's Certificate, certificate of a
Servicing Officer, certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, request, consent, order, appraisal, bond or
other paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
b. The Trustee may consult with counsel and any opinion of any counsel
for the Company or the Servicer shall be full and complete authorization and
protection in respect of any action taken or suffered or omitted by the Trustee
hereunder in good faith and in accordance with such Opinion of Counsel;
c. The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Agreement, or to institute, conduct or defend any
litigation hereunder or in relation hereto, at the request, order or direction
of any of the Certificateholders, pursuant to the provisions of this Agreement,
unless such Certificateholders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which may be
incurred therein or thereby; provided, however, that nothing contained herein
shall relieve the Trustee of the obligations, upon the occurrence of an Event of
Termination (which has not been cured), to exercise such of the rights and
powers vested in it by this Agreement, and to use the same degree of care and
skill in their exercise as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs;
d. Prior to the occurrence of an Event of Termination and after the
curing of all Events of Termination which may have occurred, the Trustee shall
not be bound to make any
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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
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, Class C Certificates or
Loans. The Trustee assumes no responsibility for the correctness of the recitals
contained herein, in the Certificates or in the Class C Certificates (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
Certificates (other than its execution thereof) or of any Loan, Loan 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 Loans to the Trust by the Company or
deposited in or withdrawn from the Certificate Account by the Servicer.
SECTION 11.04. Trustee May Own Certificates. The Trustee in its individual
or other capacity may become the owner or pledgee of Certificates representing
less than all the beneficial interest in the Trust with the same rights as it
would have if it were not Trustee.
SECTION 11.05. Rights of Certificateholders to Direct Trustee and to Waive
Events of Termination. Holders of Certificates representing, in the aggregate,
25% or more of the 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 Certificate Principal Balance may
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on behalf of the Certificateholders waive any past Event of Termination
hereunder and its consequences, except a default in respect of a covenant or
provision hereof which under Section 12.08 cannot be modified or amended without
the consent of all Certificateholders, and upon any such waiver, such Event of
Termination shall cease to exist and shall be deemed to have been cured for
every purpose of this Agreement; but no such waiver shall extend to any
subsequent or other Event of Termination or impair any right consequent thereon.
SECTION 11.06. The Servicer to Pay Trustee's Fees and Expenses. The
Servicer agrees:
a. to pay to the Trustee reasonable compensation for all services
rendered by it hereunder (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust);
b. except as otherwise expressly provided herein, to reimburse the
Trustee, to the extent requested by the Trustee, for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any provision of this Agreement (including the reasonable compensation and the
expenses and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad faith;
and
c. to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration of the
trust created hereby 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 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 U.S. Bank Trust
National Association, the parent company of U.S. Bank Trust National
Association)
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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
Fitch of at least BBB or as shall be otherwise acceptable to Fitch. In case at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 11.07, the Trustee shall resign immediately in the
manner and with the effect specified in Section 11.08.
SECTION 11.08. Resignation or Removal of Trustee. The Trustee may at any
time resign and be discharged from the trusts hereby created by giving written
notice thereof to the Servicer and the Company. Upon receiving such notice of
resignation, the Company shall promptly appoint a successor Trustee by written
instrument, in duplicate, one copy of which instrument shall be delivered to
each of the Servicer and the Company and one copy to the successor Trustee. If
no successor Trustee shall have been so appointed and shall have accepted
appointment within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If at any time the Trustee shall cease to be eligible in accordance with
the provisions of Section 11.07 and shall fail to resign after written request
therefor by the Company, or if at any time the Trustee shall be legally unable
to act, or shall be adjudged a bankrupt or insolvent, or a receiver of the
Trustee or of its property shall be appointed, or any public officer shall take
charge or control of the Trustee or of its property or affairs for the purpose
of rehabilitation, conservation or liquidation, then the Company may remove the
Trustee. If the Company shall have removed the Trustee under the authority of
the immediately preceding sentence, the Company shall promptly appoint a
successor Trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the Trustee so removed and one copy to the
successor trustee.
Any resignation or removal of the Trustee and appointment of a successor
Trustee pursuant to any of the provisions of this Section 11.08 shall not become
effective until acceptance of appointment by the successor Trustee as provided
in Section 11.09.
SECTION 11.09. Successor Trustee. Any successor Trustee appointed as
provided in Section 11.08 shall execute, acknowledge and deliver to the
Servicer, the Company and to its predecessor Trustee an instrument accepting
such appointment hereunder, and thereupon the resignation or removal of the
predecessor Trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become fully vested with all the
rights, powers, duties and obligations of its predecessor 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 Loans and the Loan Files
and any related documents and statements held by it hereunder; and, if the Loans
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
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other things as may reasonably be required for fully and certainly vesting and
confirming in the successor Trustee all such rights, powers, duties and
obligations.
No successor Trustee shall accept appointment as provided in this Section
11.09 unless at the time of such acceptance such successor Trustee shall be
eligible under the provisions of Section 11.07.
Upon acceptance of appointment by a successor Trustee as provided in this
Section 11.09, the Servicer shall cause notice of the succession of such Trustee
hereunder to be mailed to S&P, Fitch, each Certificateholder and 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 Fitch 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 Loans based upon provisions therein complying with, or upon
other rights or remedies arising from, any legal requirements applicable to the
Loans, 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
lender, in the arrangement, origination or making of Loans. The Trustee is the
holder of the Loans only as trustee on behalf of the Certificateholders and the
Class C Certificateholders, and not as a principal or in any individual or
personal capacity;
b. The Trustee shall not be personally liable for or obligated to pay
Obligors any affirmative claims asserted thereby, or responsible to
Certificateholders or the Class C
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Certificateholders for any offset defense amounts applied against Loan 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
Certificateholders;
e. The Trustee will cooperate with and assist Certificateholders and the
Class C Certificateholders in their defense of legal actions by Obligors to
recover affirmative claims if such cooperation and assistance is not contrary to
the interests of the Trustee as a party to such legal actions and if the Trustee
is satisfactorily indemnified for all liability, costs and expenses arising
therefrom; and
f. The Company hereby agrees to indemnify, hold harmless and defend the
Trustee, Certificateholders and the Class C Certificateholders from and against
any and all liability, loss, costs and expenses of the Trustee,
Certificateholders and the Class C Certificateholders resulting from any
affirmative claims for recovery asserted or collected by Obligors under the
Loans. 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 Loans or the Obligors, the Company and the 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 Certificateholders
of the appointment of co-trustee(s) or separate trustee(s) shall be required
under Section 11.09 hereof.
In the case of any appointment of a co-trustee or separate trustee pursuant
to this Section 11.13 all rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and exercised or
performed by the Trustee and such co-trustee or
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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. Reserved.
SECTION 11.15. Trustee and U.S. Bancorp. In the event the Trustee ceases to
be a direct, wholly owned subsidiary of U.S. Bancorp., the Trustee shall
promptly notify S&P and Fitch.
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).
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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
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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 (other than Advances pursuant to Section
8.02).
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 Certificates may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Trustee in respect of the
Certificates, the Class C Certificates and this Agreement may be served. On the
date hereof the Trustee's office for such purposes is located at 180 East 5th
Street, Second Floor, St. Paul, Minnesota 55101. The Trustee will give prompt
written notice to the Company, the Servicer, the Certificateholders and the
Class C Certificateholders 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 Certificateholders as set forth below) shall
terminate on the earlier of (a) the Payment Date on which the principal balance
of all of the Loans is reduced to zero; or (b) the Payment Date occurring in the
month following the Servicer's purchase of the Loans 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. Any termination of the Trust must be
conducted so as to qualify as a "qualified liquidation" of the Master REMIC and
Subsidiary REMIC within the meaning of the REMIC Provisions.
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 Certificateholders may surrender their
Certificates or the Class C Certificates to the Servicer for payment of the
final distribution and cancellation, shall be given promptly by the Trustee
(upon direction by the Servicer ten days prior to the date such notice is to be
mailed) by letter to S&P, Fitch, the Certificateholders and the Class C
Certificateholders mailed no later than the fifth Business Day of the month of
the Final Payment Date specifying (1) the Final Payment Date upon which final
payment on the Certificates and the Class C Certificates will be made upon
presentation and surrender of Certificates and the Class C Certificates at the
office or agency of the Servicer therein designated; (2) the amount of any such
final payment; and (3) that the Record Date otherwise applicable to such Payment
Date is not applicable, payments being made only upon presentation and surrender
of the Certificates and the Class C Certificates at the office or agency of the
Servicer therein specified. Any notice of purchase of Loans by the Servicer
pursuant to Section 8.06 shall constitute the adoption by the Trustee on behalf
of the Certificateholders and the Class C Certificateholders of a plan of
complete liquidation within the meaning of Section 860F of the Code on the date
such notice is given when signed by the Trustee. Each such notice shall, to the
extent required by the REMIC Provisions or other applicable law, be signed on
behalf of the Trust by the Trustee. The Trustee shall give such notice to the
Certificate Registrar at the time such notice is given to the Certificateholders
and the Class C Certificateholders. In the event such notice is given in
connection with the Servicer's election to purchase the Loans, the Servicer
shall deposit in the Certificate Account on the Final Payment Date in
immediately available funds an amount equal to the purchase price specified in
Section 8.06 and upon such deposit the Certificateholders and the Class C
Certificateholders will be entitled to the amount of such purchase price but not
amounts in excess thereof, all as provided herein. Upon certification to the
Trustee by a Servicing Officer following such final deposit, the Trustee shall
promptly release to the Servicer the Loan Files for the remaining Loans,
12-2
<PAGE>
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
Certificates, the Trustee shall cause to be distributed from the Certificate
Account, in the following order of priority, to the Certificateholders and the
Class C Certificateholders on the Final Payment Date in proportion to their
respective Percentage Interests: (1) to the extent the Amount Available is
sufficient therefor, an amount equal to (i) as to Class A Certificates, the
Class A-1A ARM Principal Balance, the Class A-1B ARM Principal Balance, the
Class A-1 Principal Balance, the Class A-2 Principal Balance, the Class A-3
Principal Balance, the Class A-4 Principal Balance, the Class A-5 Principal
Balance, the Class A-6 Principal Balance, and together with any Unpaid Class A
Interest Shortfall and one month's interest at the Class A-1A ARM Pass-Through
Rate, the Class A-1B ARM Pass-Through Rate, the Class A-1 Pass-Through Rate, the
Class A-2 Pass-Through Rate, the Class A-3 Pass-Through Rate, the Class A-4
Pass-Through Rate, the Class A-5 Pass-Through Rate, the Class A-6 Pass-Through
Rate, and the Class A-7 IO Pass-Through Rate, on the Class A-1A ARM Principal
Balance, the Class A-1B ARM Principal Balance, the Class A-l Principal Balance,
the Class A-2 Principal Balance, the Class A-3 Principal Balance, the Class A-4
Principal Balance, the Class A-5 Principal Balance, the Class A-6 Principal
Balance, and the Class A-7 IO Notional Principal Amount, 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,
and (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 (2) as to the Class C
Master Certificates, the amount which remains on deposit in the Certificate
Account (other than amounts retained to meet claims) after application pursuant
to clause (1) above. 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 Certificates.
d. In the event that all of the Certificateholders and the Class C
Certificateholders do not surrender their Certificates and the Class C
Certificates for cancellation within three months after the time specified in
the above-mentioned written notice, the Company shall give a second written
notice to the remaining Certificateholders and the Class C Certificateholders to
surrender their Certificates and the Class C Certificates 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 Certificates shall
not have been surrendered for cancellation, the Company shall transfer to itself
all amounts remaining on deposit in the Certificate Account, to hold in trust
for
12-3
<PAGE>
Certificateholders and the Class C Certificateholders who have not surrendered
their Certificates or the Class C Certificates, as the case may be, for
cancellation, together with the final record list of Certificateholders and the
Class C Certificateholders, and the Company shall take appropriate steps, or may
appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates and to contact the
Class C Certificateholders concerning their surrender of their Class C
Certificates, 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 Class C Certificateholders.
a. Except as otherwise specifically provided herein, whenever
Certificateholder approval, authorization, direction, notice, consent, waiver,
or other action is required hereunder, such approval, authorization, direction,
notice, consent, waiver or other action shall be deemed to have been given or
taken on behalf of, and shall be binding upon, all Certificateholders if agreed
to by Holders of Certificates representing, in the aggregate, 51% or more of the
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 Certificateholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Certificateholders or the Class C Certificateholders in person or by an
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 Certificateholders 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 Certificates 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 Certificateholders shall bind
every holder of every Certificate or the Class C Certificates, 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 Certificates.
12-4
<PAGE>
f. The Trustee may require such additional proof of any matter referred
to in this Section as it shall deem necessary.
SECTION 12.06. Calculations. Except as otherwise provided in this
Agreement, all interest rate and basis point calculations under this Agreement
will be made on the basis of a 360-day year and twelve 30-day months and will be
carried out to at least three decimal places.
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 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 Holders of Certificates representing, in the aggregate, 66 2/3% or
more of the Certificate Principal Balance, and the prior written confirmation of
S&P and Fitch 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 Certificateholders, 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 Certificateholders, 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 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 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 Loans 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
12-5
<PAGE>
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 either of the Master REMIC or the Subsidiary REMIC as a REMIC or
the status of the Certificates or the Subsidiary REMIC Regular Interests as
"regular interests" in the Master REMIC or Subsidiary REMIC, respectively, 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 Certificateholders, 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
Certificateholders.
c. This Agreement shall not be amended under this Section without the
consent of 100% of the Certificateholders and the Class C Certificateholders if
such amendment would result in the disqualification of the Trust as a REMIC
under the Code.
d. Concurrently with the solicitation of any consent pursuant to this
Section 12.08, the Trustee shall furnish written notification to S&P and Fitch.
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, Fitch, each Certificateholder and the Class C
Certificateholders.
e. It shall not be necessary for the consent of Certificateholders and
the Class C Certificateholders under this Section 12.08 to approve the
particular form of any proposed amendment, but it shall be sufficient if such
consent shall approve the substance thereof. The manner of obtaining such
consents and of evidencing the authorization of the execution thereof by
Certificateholders and the Class C Certificateholders shall be subject to such
reasonable requirements as the Trustee may prescribe.
f. The Trustee may, but shall not be obligated to, enter into any such
amendment which affects the Trustee's own rights, duties or immunities under
this Agreement or otherwise.
g. In connection with any amendment pursuant to this Section, the Trustee
shall be entitled to receive an Opinion of Counsel to the Servicer to the effect
that such amendment is authorized or permitted by this Agreement.
h. Upon the execution of any amendment or consent pursuant to this
Section 12.08, this Agreement shall be modified in accordance therewith, and
such amendment or consent shall form a part of this Agreement for all purposes,
and every Certificateholder or the Class C Certificateholders hereunder shall be
bound thereby.
12-6
<PAGE>
i. 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 either of the Master REMIC or the Subsidiary
REMIC as a REMIC or the status of the Certificates or the Subsidiary REMIC
Regular Interests 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 Fitch 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:
U.S. Bank Trust National Association
Corporate Trust Department
180 East Fifth Street
Second Floor
St. Paul, Minnesota 55101
Attention: Tamara Schultz-Fugh
Telecopier Number: (612) 244-0089
If to S&P:
Standard & Poor's
26 Broadway, 10th Floor
New York, New York 10004
Attention: Ernestine Warner, Mortgage Surveillance
12-7
<PAGE>
If to Fitch:
Fitch IBCA Inc.
One State Street Plaza
New York, New York 10004
Attention: Jenine Potolsky
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 Certificateholders shall be in writing and delivered or mailed at
the address shown in the Certificate Register.
SECTION 12.10. Merger and Integration. Except as specifically stated
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived or supplemented except as provided herein.
SECTION 12.11. Headings. The headings herein are for purposes of reference
only and shall not otherwise affect the meaning or interpretation of any
provision hereof.
SECTION 12.12. Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Minnesota.
12-8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized this 28/th/ day
of May, 1998.
GREEN TREE FINANCIAL CORPORATION
By
------------------------------
Attest: Scott T. Young
Senior Vice President and Controller
- ------------------------------
U.S. BANK TRUST NATIONAL ASSOCIATION,
not in its individual capacity
but solely as Trustee
By
------------------------------
Tamara Schultz-Fugh
Assistant Vice President
Attest:
By
-----------------------------
Its: Vice President
12-9
<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][4][5][6] No.
(Senior)
Cut-off Date: as defined in the Pass-Through Rate: ___%
Pooling and Servicing Agreement
dated May 1, 1998 Denomination: $________
First Payment Date: Aggregate Denomination of
June 15, 1998 All Class A-[1][2][3][4][5][6]
Certificates: $__________
Servicer: Final Scheduled Payment Date:
Green Tree Financial Corporation [July 15, 2029] (or if such day is not a
Business Day, then the
next succeeding Business Day)
CUSIP:
--------
A-1
<PAGE>
CERTIFICATE FOR HOME EQUITY LOANS
SERIES 1998-C, CLASS A-[1][2][3][4][5][6] (SENIOR)
--------------------------------------------------
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN
GREEN TREE FINANCIAL CORPORATION OR ANY AFFILIATE THEREOF, EXCEPT TO THE EXTENT
SET FORTH IN THE AGREEMENT.
This certifies that ____________ is the registered owner of the undivided
Percentage Interest represented by the original principal amount set forth above
in the Certificates for Home Equity Loans, Series 1998-C, Class A-
[1][2][3][4][5][6] issued by Home Equity Loan Trust 1998-C (the "Trust"), which
includes among its assets a pool of closed-end home equity loans (collectively,
the "Loans") (including, without limitation, all mortgages, deeds of trust and
security deeds relating to such Loans and any and all rights to receive payments
due on the Loans after the applicable Cut-off Date or Subsequent Cut-off Date.
The Trust has been created pursuant to a Pooling and Servicing Agreement (the
"Agreement"), dated as of May 1, 1998, between Green Tree Financial Corporation,
as Seller and Servicer (the "Company"), and U.S. Bank 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 June 15, 1998, so long as
the Agreement has not been terminated, by check (or, if such Certificateholder
holds Class A-[1][2][3][4][5][6] Certificates with an aggregate Percentage
Interest of at least 5% of the Class A-[1][2][3][4][5][6] 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][5][6]
Distribution Amount for such Payment Date. Distributions of interest and
principal on the Class A-[1][2][3][4][5][6] Certificates will be made primarily
from amounts available in respect of the Loans. The final scheduled Payment
Date of this Certificate is July 15, 2029 or the next succeeding Business Day if
such July 15 is not a Business Day.
The Certificateholder, by its acceptance of this Certificate, agrees that
it will look solely to the funds in the Certificate Account to the extent
available for distribution to the Certificateholder as provided in the Agreement
for payment hereunder and that the Trustee in its individual capacity is not
personally liable to the Certificateholder for any amounts payable under this
Certificate or the Agreement or, except as expressly provided in the Agreement,
subject to any liability under the Agreement. By acceptance of this
Certificate, the Certificateholder agrees
A-2
<PAGE>
to disclosure of his, her or its name and address to other Certificateholders
under the conditions specified in the Agreement.
This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for information with respect to the interests, rights,
benefits, obligations, proceeds and duties evidenced hereby and the rights,
duties and immunities of the Trustee. Copies of the Agreement and all
amendments thereto will be provided to any Certificateholder free of charge upon
a written request to the Trustee.
As provided in the Agreement and subject to the limitations set forth
therein, the transfer of this Certificate is registrable in the Certificate
Register of the Certificate Registrar upon surrender of this Certificate for
registration of transfer at the office or agency maintained by the Trustee in
Minneapolis or St. Paul, Minnesota, accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Certificate Registrar duly
executed by the holder hereof or his or her attorney duly authorized in writing,
and thereupon one or more new 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 Equity Loan Trust 1998-C has caused this
Certificate to be duly executed by the manual signature of a duly authorized
officer of the Trustee.
Dated: _____________ HOME EQUITY LOAN TRUST 1998-C
By: U.S. BANK TRUST NATIONAL ASSOCIATION
By:
-------------------------------------
Authorized Officer
A-4
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ______________________________ the within Certificate for Home Equity
Loans, Series 1998-C, 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 A-1[A][B] ARM 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[A][B] ARM No.
(Senior)
Cut-off Date: Pass-Through Rate: [_______%]
as defined in the Pooling and [Variable equal to Class A-1B ARM
Servicing Agreement dated Pass-Through Rate]
May 1, 1998
Denomination: $________
First Payment Date: Aggregate Denomination of
June 15, 1998 All Class A-1[A][B] ARM
Certificates: $________
Servicer: Final Scheduled Payment Date:
Green Tree Financial Corporation July 15, 2029 (or if such day is not a
Business Day, then the
next succeeding Business Day)
CUSIP: ________
B-1
<PAGE>
CERTIFICATE FOR HOME EQUITY LOANS
SERIES 1998-C, CLASS A-1[A][B] ARM (SENIOR)
-------------------------------------------
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN GREEN
TREE FINANCIAL CORPORATION OR ANY AFFILIATE THEREOF, EXCEPT TO THE EXTENT SET
FORTH IN THE AGREEMENT.
This certifies that _________________ is the registered owner of the undivided
Percentage Interest represented by the original principal amount set forth above
in the Certificates for Home Equity Loans, Series 1998-C, Class A-1[A][B] ARM
issued by Home Equity Loan Trust 1998-C (the "Trust"), which includes among its
assets a pool of closed-end home equity loans (collectively, the "Loans")
(including, without limitation, all mortgages, deeds of trust and security deeds
relating to such Loans and any and all rights to receive payments due on the
Loans after the applicable Cut-off Date or Subsequent Cut-off Date. The Trust
has been created pursuant to a Pooling and Servicing Agreement (the
"Agreement"), dated as of May 1, 1998, between Green Tree Financial Corporation,
as Seller and Servicer (the "Company"), and U.S. Bank 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 June 15, 1998, so long as
the Agreement has not been terminated, by check (or, if such Certificateholder
holds Class A-1[A][B] ARM Certificates with an aggregate Percentage Interest of
at least 5% of the Class A-1[A][B] ARM 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[A][B] ARM Distribution Amount for such
Payment Date. Distributions of interest and principal on the Class A-1[A][B]
ARM Certificates will be made primarily from amounts available in respect of the
Adjustable Rate Loans. The final scheduled Payment Date of this Certificate is
July 15, 2029 or the next succeeding Business Day if such July 15 is not a
Business Day.
The Certificateholder, by its acceptance of this Certificate, agrees that
it will look solely to the funds in the Certificate Account to the extent
available for distribution to the Certificateholder as provided in the Agreement
for payment hereunder and that the Trustee in its individual capacity is not
personally liable to the Certificateholder for any amounts payable under this
Certificate or the Agreement or, except as expressly provided in the Agreement,
subject to any liability under the Agreement. By acceptance of this
Certificate, the Certificateholder agrees
B-2
<PAGE>
to disclosure of his, her or its name and address to other Certificateholders
under the conditions specified in the Agreement.
This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for information with respect to the interests, rights,
benefits, obligations, proceeds and duties evidenced hereby and the rights,
duties and immunities of the Trustee. Copies of the Agreement and all
amendments thereto will be provided to any Certificateholder free of charge upon
a written request to the Trustee.
As provided in the Agreement and subject to the limitations set forth
therein, the transfer of this Certificate is registrable in the Certificate
Register of the Certificate Registrar upon surrender of this Certificate for
registration of transfer at the office or agency maintained by the Trustee in
Minneapolis or St. Paul, Minnesota, accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Certificate Registrar duly
executed by the holder hereof or his or her attorney duly authorized in writing,
and thereupon one or more new 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.
B-3
<PAGE>
IN WITNESS WHEREOF, Home Equity Loan Trust 1998-C has caused this
Certificate to be duly executed by the manual signature of a duly authorized
officer of the Trustee.
Dated: ________ HOME EQUITY LOAN TRUST 1998-C
By: U.S. BANK TRUST NATIONAL ASSOCIATION
By:
-----------------------------------
Authorized Officer
B-4
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ____________________________ the within Certificate for Home Equity Loans,
Series 1998-C, 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-5
<PAGE>
EXHIBIT C
----------
FORM OF CLASS A-7 IO 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.
The issue date (the "Issue Date") of this Certificate is May 28, 1998. The
rate at which interest is payable as of the Issue Date with respect to this
Certificate is 10.0%. Assuming that the Fixed Rate Loans prepay at the
Prepayment Assumption used by the issuer in pricing this Certificate (i.e. 125%
of the "100% Prepayment Assumption" as described in the related Prospectus
Supplement dated May 20, 1998), this Certificate has been issued with original
issue discount ("OID") of no more than $_____ per $1,000 of Class A-7 IO
Original Notional Amount, the yield to maturity is _____%, and the amount of OID
attributable to the short period is not more than $____ per $1,000 of Class A-7
IO Original Notional Amount, computed under the approximate method. No
representation is made that the Fixed Rate Loans will prepay at a rate based on
the Prepayment Assumption or any other rate.
Class A-7 IO No.
(Senior)
Cut-off Date: Pass-Through Rate: ___%
as defined in the Pooling and Original Notional Amount: $25,000,000
Servicing Agreement dated
May 1, 1998
Aggregate Notional Amount of all
First Payment Date: Class A-7 IO Certificates: $25,000,000
June 15, 1998
Final Scheduled Payment Date:
May 15, 2001 (or if such day is not a
Business Day, then the next
succeeding Business Day)
Servicer:
Green Tree Financial Corporation CUSIP: ______________
C-1
<PAGE>
CERTIFICATE FOR HOME EQUITY LOANS
SERIES 1998-C, CLASS A-7 IO (SENIOR)
------------------------------------
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN
GREEN TREE FINANCIAL CORPORATION OR ANY AFFILIATE THEREOF, EXCEPT TO THE EXTENT
SET FORTH IN THE AGREEMENT.
This certifies that ______________ is the registered owner of the undivided
Percentage Interest represented by the Original Notional Amount set forth above
in the Certificates for Home Equity Loans, Series 1998-C, Class A-7 IO issued by
Home Equity Loan Trust 1998-C (the "Trust"), which includes among its assets a
pool of closed-end home equity loans (collectively, the "Loans") (including,
without limitation, all mortgages, deeds of trust and security deeds relating to
such Loans and any and all rights to receive payments due on the Loans after the
applicable Cut-off Date or Subsequent Cut-off Date. The Trust has been created
pursuant to a Pooling and Servicing Agreement (the "Agreement"), dated as of May
1, 1998, between Green Tree Financial Corporation, as Seller and Servicer (the
"Company"), and U.S. Bank 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 June 15, 1998, so long as
the Agreement has not been terminated, by check (or, if such Certificateholder
holds Class A-7 IO Certificates with an aggregate Percentage Interest of at
least 5% of the Class A-7 IO 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-7 IO Distribution Amount for such Payment Date. Distributions of
interest on the Class A-7 IO Certificates will be made primarily from amounts
available in respect of the Loans. The final scheduled Payment Date of this
Certificate is May 15, 2001 or the next succeeding Business Day if such May 15
is not a Business Day.
This Certificate is an interest only Certificate. THE HOLDER OF THIS
CERTIFICATE SHALL NOT BE ENTITLED TO ANY DISTRIBUTIONS OF PRINCIPAL WITH RESPECT
TO THE LOANS.
The Certificateholder, by its acceptance of this Certificate, agrees that
it will look solely to the funds in the Certificate Account to the
C-2
<PAGE>
extent available for distribution to the Certificateholder as provided in the
Agreement for payment hereunder and that the Trustee in its individual capacity
is not personally liable to the Certificateholder for any amounts payable under
this Certificate or the Agreement or, except as expressly provided in the
Agreement, subject to any liability under the Agreement. By acceptance of this
Certificate, the Certificateholder agrees to disclosure of his, her or its name
and address to other Certificateholders under the conditions specified in the
Agreement.
This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for information with respect to the interests, rights,
benefits, obligations, proceeds and duties evidenced hereby and the rights,
duties and immunities of the Trustee. Copies of the Agreement and all
amendments thereto will be provided to any Certificateholder free of charge upon
a written request to the Trustee.
As provided in the Agreement and subject to the limitations set forth
therein, the transfer of this Certificate is registrable in the Certificate
Register of the Certificate Registrar upon surrender of this Certificate for
registration of transfer at the office or agency maintained by the Trustee in
Minneapolis or St. Paul, Minnesota, accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Certificate Registrar duly
executed by the holder hereof or his or her attorney duly authorized in writing,
and thereupon one or more new 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.
C-3
<PAGE>
IN WITNESS WHEREOF, Home Equity Loan Trust 1998-C has caused this
Certificate to be duly executed by the manual signature of a duly authorized
officer of the Trustee.
Dated: ________ HOME EQUITY LOAN TRUST 1998-C
By: U.S. BANK TRUST NATIONAL ASSOCIATION
By:
-------------------------------------
Authorized Officer
C-4
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ______________________________ the within Certificate for Home Equity
Loans, Series 1998-C, 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-5
<PAGE>
EXHIBIT D
---------
FORM OF CLASS M 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
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: as defined in the Pass-Through Rate: ___%
Pooling and Servicing Agreement
dated May 1, 1998 Denomination: $________
First Payment Date: Aggregate Denomination of
June 15, 1998 all Class M-[1][2] Certificates:
$________
Servicer: Final Scheduled Payment Date:
Green Tree Financial Corporation July 15, 2029 (or if such day is not a
Business Day, then the next succeeding
Business Day)
CUSIP: ________
D-1
<PAGE>
CERTIFICATE FOR HOME EQUITY LOANS
SERIES 1998-C, 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 Equity Loans, Series 1998-C, Class M-[1][2] issued
by Home Equity Loan Trust 1998-C (the "Trust"), which includes among its assets
a pool of closed-end home equity loans (collectively, the "Loans") (including,
without limitation, all mortgages, deeds of trust and security deeds relating to
such Loans and any and all rights to receive payments due on the Loans after the
applicable Cut-off Date or Subsequent Cut-off Date. The Trust has been created
pursuant to a Pooling and Servicing Agreement (the "Agreement"), dated as of May
1, 1998, between Green Tree Financial Corporation, as Seller and Servicer (the
"Company"), and U.S. Bank 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 June 15, 1998, 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. Distributions of interest and
principal on the Class M-[1][2] Certificates will be made primarily from amounts
available in respect of the Loans. The final scheduled Payment Date of this
Certificate is July 15, 2029 or the next succeeding Business Day if such July 15
is not a Business Day.
The Certificateholder, by its acceptance of this Certificate, agrees that
it will look solely to the funds in the Certificate Account to the extent
available for distribution to the Certificateholder as provided in the Agreement
for payment hereunder and that the Trustee in its individual capacity is not
personally liable to the Certificateholder for any amounts payable under this
Certificate or the Agreement or, except as expressly provided in the Agreement,
subject to any liability under the Agreement. By acceptance of this
Certificate, the Certificateholder agrees
D-2
<PAGE>
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 Company and
the Trustee at its own expense an opinion of counsel (satisfactory to the
Company and the Trustee) that the purchase and holding of the Certificate by
such Plan will not result in the assets of the Trust being deemed to be "plan
assets" and subject to the prohibited transaction provisions of ERISA and the
Code and will not subject the Trustee, the Company or the Servicer to any
obligation or liability in addition to those undertaken in the Agreement.
Unless such opinion is delivered, each person acquiring this Certificate will be
deemed to represent to the Trustee, the Company and the Servicer either (i) that
such person is neither a Plan, nor acting on behalf of a Plan, subject to ERISA
or to Section 4975 of the Code or (ii) that the purchase and holding of the
Certificate by such Plan will not result in the assets of the Trust being deemed
to be Plan assets and subject to the prohibited transaction provisions of ERISA
and the Code and will not subject the Trustee, the Company or the Servicer to
any obligation or liability in addition to those undertaken in the Agreement.
This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for information with respect to the interests, rights,
benefits, obligations, proceeds and duties evidenced hereby and the rights,
duties and immunities of the Trustee. Copies of the Agreement and all
amendments thereto will be provided to any Certificateholder free of charge upon
a written request to the Trustee.
As provided in the Agreement and subject to the limitations set forth
therein, the transfer of this Certificate is registrable in the Certificate
Register of the Certificate Registrar upon surrender of this Certificate for
registration of transfer at the office or agency maintained by the Trustee in
Minneapolis or St. Paul, Minnesota, accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Certificate Registrar duly
executed by the holder hereof or his or her attorney duly authorized in writing,
and thereupon one or more new 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.]
D-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.
IN WITNESS WHEREOF, Home Equity Loan Trust 1998-C has caused this
Certificate to be duly executed by the manual signature of a duly authorized
officer of the Trustee.
Dated: ________ HOME EQUITY LOAN TRUST 1998-C
By: U.S. BANK TRUST NATIONAL ASSOCIATION
By:
-------------------------------------
Authorized Officer
D-4
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ___________________________ the within Certificate for Home Equity Loans,
Series 1998-C, 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
D-5
<PAGE>
EXHIBIT E
----------
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, THE
CLASS M 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: as defined in the Pass-Through Rate: ___%
Pooling and Servicing Agreement
dated May 1, 1998 Denomination: $________
First Payment Date: Aggregate Denomination of
June 15, 1998 all Class B[1][2] Certificates:
$________
Servicer: Final Scheduled Payment Date:
Green Tree Financial Corporation July 15, 2029 (or if such day is not a
Business Day, then the next succeeding
Business Day)
CUSIP: ________
E-1
<PAGE>
CERTIFICATES FOR HOME EQUITY LOANS
SERIES 1998-C, 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 Equity Loans, Series 1998-C, Class B[1][2], issued
by Home Equity Loan Trust 1998-C (the "Trust"), which includes among its assets
a pool of closed-end home equity loans (collectively, the "Loans") (including,
without limitation, all mortgages, deeds of trust and security deeds relating to
such Loans and any and all rights to receive payments due on the Loans after the
applicable Cut-off Date or Subsequent Cut-off Date [and the Class B-2 Limited
Guaranty]. The Trust has been created pursuant to a Pooling and Servicing
Agreement (the "Agreement"), dated as of May 1, 1998, between Green Tree
Financial Corporation, as Seller and Servicer (the "Company"), and U.S. Bank
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 June 15, 1998, 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. Distributions of interest and principal on the Class B[1][2]
Certificates will be made primarily from amounts available in respect of the
Loans. The final scheduled Payment Date of this Certificate is July 15, 2029 or
the next succeeding Business Day if such July 15 is not a Business Day.
The Certificateholder, by its acceptance of this Certificate, agrees that
it will look solely to the funds in the Certificate Account [and the Class B-2
Limited Guaranty of the Company], to the extent available for distribution to
the Certificateholder as provided in the Agreement, for payment hereunder and
that the Trustee in its individual capacity is not personally liable to the
Certificateholder for any amounts payable under this Certificate or the
Agreement or, except as expressly provided in the Agreement, subject to any
liability under the Agreement. By
E-2
<PAGE>
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 Company and
the Trustee at its own expense an opinion of counsel (satisfactory to the
Company and the Trustee) that the purchase and holding of the Certificate by
such Plan will not result in the assets of the Trust being deemed to be "plan
assets" and subject to the prohibited transaction provisions of ERISA and the
Code and will not subject the Trustee, the Company or the Servicer to any
obligation or liability in addition to those undertaken in the Agreement.
Unless such opinion is delivered, each person acquiring this Certificate will be
deemed to represent to the Trustee, the Company and the Servicer either (i) that
such person is neither a Plan, nor acting on behalf of a Plan, subject to ERISA
or to Section 4975 of the Code or (ii) that the purchase and holding of the
Certificate by such Plan will not result in the assets of the Trust being deemed
to be Plan assets and subject to the prohibited transaction provisions of ERISA
and the Code and will not subject the Trustee, the Company or the Servicer to
any obligation or liability in addition to those undertaken in the Agreement.
This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for information with respect to the interests, rights,
benefits, obligations, proceeds and duties evidenced hereby and the rights,
duties and immunities of the Trustee. Copies of the Agreement and all
amendments thereto will be provided to any Certificateholder free of charge upon
a written request to the Trustee.
As provided in the Agreement and subject to the limitations set forth
therein, the transfer of this Certificate is registrable in the Certificate
Register of the Certificate Registrar upon surrender of this Certificate for
registration of transfer at the office or agency maintained by the Trustee in
Minneapolis or St. Paul, Minnesota, accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Certificate Registrar duly
executed by the holder 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.]
E-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.
E-4
<PAGE>
IN WITNESS WHEREOF, Home Equity Loan Trust 1998-C has caused this
Certificate to be duly executed by the manual signature of a duly authorized
officer of the Trustee.
Dated: ________ HOME EQUITY LOAN TRUST 1998-C
By: U.S. BANK TRUST NATIONAL ASSOCIATION
By:
----------------------------------
Authorized Officer
E-5
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto __________________________ the within Certificate for Home Equity Loans,
Series 1998-C, 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
E-6
<PAGE>
EXHIBIT F
----------
RESERVED
F-1
<PAGE>
EXHIBIT G
----------
FORM OF ASSIGNMENT
------------------
In accordance with the Pooling and Servicing Agreement (the "Agreement")
dated as of May 1, 1998, between the undersigned and U.S. Bank Trust National
Association as Trustee (the "Trustee"), the undersigned does hereby transfer,
convey and assign, set over and otherwise convey, without recourse, to Home
Equity Loan Trust 1998-C, created by the Agreement, to be held in trust as
provided in the Agreement, (i) all right, title and interest in the home equity
loans identified in the List of Loans attached to the Agreement and each
Subsequent Transfer Instrument (including, without limitation, all related
mortgages, deeds of trust and security deeds and any and all rights to receive
payments on or with respect to the Initial Loans due after the applicable Cut-
off Date, or Subsequent Cut-off Date with respect to Subsequent Loans, (ii) all
rights under any hazard, flood or other individual insurance policy on the real
estate securing a Loan for the benefit of the creditor of such Loan, (iii) all
rights the Company may have against the originating lender with respect to Loans
originated by a lender other than the Company, (iv) all rights under the Errors
and Omissions Protection Policy and the Fidelity Bond as such policy and bond
relate to the Loans, (v) all rights under any title insurance policies, if
applicable, on any of the properties securing Loans, (vi) all documents
contained in the Loan Files, (vii) amounts in the Certificate Account and Pre-
Funding Account (excluding proceeds of investments of funds in the Pre-Funding
Account) and (viii) all proceeds and products of the foregoing.
This Assignment is made pursuant to and upon the representations and
warranties on the part of the undersigned contained in Article III of the
Agreement and no others. All undefined capitalized terms used in this
Assignment have the meanings given them in the Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be duly
executed this ____ day of May, 1998.
GREEN TREE FINANCIAL CORPORATION
[Seal] By:
---------------------------------
[Name]
[Title]
G-1
<PAGE>
EXHIBIT H
----------
FORM OF CERTIFICATE OF OFFICER
------------------------------
GREEN TREE FINANCIAL CORPORATION
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 May 1, 1998 (the
"Agreement") between the Company and U.S. Bank 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
May, 1998.
-------------------------------------
[Name]
[Title]
H-1
<PAGE>
EXHIBIT I
----------
FORM OF OPINION OF COUNSEL FOR THE COMPANY
------------------------------------------
The opinion of Briggs and Morgan, Professional Association, 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, the Certificates and the Class C Certificates.
2. The Pooling and Servicing Agreement 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
Underwriters 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 Loans 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 equity loan, nor the issuance or sale of the
Certificates and the Class C Certificates, 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 Certificates 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 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 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.
I-1
<PAGE>
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 Certificates, the hazard or flood insurance policies
applicable to any Loans or the Errors and Omissions Protection Policy, (B)
seeking to prevent the issuance of the Certificates or the Class C Certificates
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 Certificates, or (D) seeking adversely to affect the federal income tax
attributes of the Certificates or the Class C Certificates described in the
Prospectus and the Prospectus Supplement under the heading "Certain Federal
Income Tax Consequences."
7. The transfer of the Loans 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 Loans, 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 Loans, and has delivered the Loan 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
Loans as collateral and naming the Company as debtor and the Trust as secured
party, and the filing of continuation statements as required by Section 4.01 of
the Pooling and Servicing Agreement, is necessary to perfect as against third
parties the assignment of the Loans 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 Loans and the
proceeds thereof, which security interest would be prior to any other security
interest that may be perfected under the Uniform Commercial Code as in effect in
the State of Minnesota and over any "lien creditor" (as defined in Minn. Stat.
(S)336.9-301(3)) who becomes such after the Closing Date, except that a
subsequent purchaser of any Loan 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 Loan, if such purchaser acts without
knowledge that such Loan 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 Loan Files for the purpose of perfecting the assignment to the Trustee of
the Loans. We express no opinion with
I-2
<PAGE>
respect to the enforceability of any individual Loan or the existence of any
claims, rights or other matters in favor of any Obligor or the owner of any home
encumbered by a Loan.
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 on behalf of each of the Master REMIC and Subsidiary REMIC
of a proper election to be taxed as a REMIC, as of the date hereof the Master
REMIC and Subsidiary REMIC created pursuant to the Pooling and Servicing
Agreement will each qualify as a REMIC. Further, the Certificates will evidence
ownership of the "regular interests" in the Master REMIC and the Class C Master
Certificates and Class C Subsidiary Certificates will evidence ownership of the
single class of "residual interest" in the Master REMIC and Subsidiary REMIC
respectively. For Minnesota income tax purposes, and subject to the foregoing
assumptions, and the provisions of Minnesota law as of the date hereof, the
Trust (excluding the Pre-Funding Account) will not be subject to tax and the
income of the Trust will be taxable to the holders of interests therein, all in
accordance with the provisions of the Code concerning REMICs. Moreover,
ownership of Certificates will not be a factor in determining whether such owner
is subject to Minnesota income taxes. Therefore, if the owner of Certificates
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 Certificates.
10. The transfer of the Loans 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.
I-3
<PAGE>
EXHIBIT J
----------
FORM OF TRUSTEE'S ACKNOWLEDGMENT
--------------------------------
U.S. Bank Trust National Association, a national banking association
organized under the laws of the United States, acting as trustee (the "Trustee")
of Home Equity Loan Trust 1998-C (the "Trust") created pursuant to the Pooling
and Servicing Agreement dated as of May 1, 1998 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 2.04 of the Agreement, that the Trustee has
received the following: (i) all right, title and interest in the home equity
loans identified in the List of Loans attached to the [Agreement] [Subsequent
Transfer Instrument of even date herewith] (the "Loans"), including, without
limitation, all related mortgages and deeds of trust and any and all rights to
receive payments on or with respect to the Loans (due after the [Cut-off Date]
[Subsequent Cut-off Date]), (ii) all rights under any hazard, flood or other
individual insurance policy on the real estate securing a Loan for the benefit
of the creditor of such Loan, (iii) all rights the Company may have against the
originating lender with respect to Loans originated by a lender other than the
Company, (iv) all rights under the Errors and Omissions Protection Policy and
the Fidelity Bond as such policy and bond relate to the Loans, (v) all rights
under any title insurance policies, if applicable, on any of the properties
securing the Loans, (vi) all documents contained in the Loan Files, (vii)
amounts in the Certificate Account and Pre-Funding Account (excluding all
proceeds of investments of funds in the Pre-Funding Account) and (viii) all
proceeds and products of the foregoing; and declares that, directly or through a
Custodian, it will hold all Loan 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 holders of the Class C Certificates.
[From Trustee or Custodian as applicable]: The Trustee acknowledges that
it has conducted a cursory review of the Loan Files and hereby confirms that
except as noted on the document exception listing attached hereto, each Loan
File contained (a) an original contract or promissory note, (b) with respect to
each Loan, 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 Loans
originated by a lender other than the Company, an original or a copy of an
assignment of the mortgage, deed of trust or security deed by the lender to the
Company, and (d) any extension, modification or waiver agreement(s). The
Trustee has not otherwise reviewed the Loans and Loan Files for compliance with
the terms of the Pooling and Servicing Agreement.
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 May, 1998.
J-1
<PAGE>
U.S. BANK TRUST NATIONAL ASSOCIATION
as Trustee
[Seal] By:
--------------------------------------
[Name]
[Title]
J-2
<PAGE>
EXHIBIT K
----------
FORM OF CERTIFICATE OF SERVICING OFFICER
----------------------------------------
GREEN TREE FINANCIAL CORPORATION
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 May 1, 1998 between the Company and U.S. Bank Trust
National Association, as Trustee of Home Equity Loan Trust 1998-C (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
____________.
GREEN TREE FINANCIAL CORPORATION
By:
-------------------------------------
[Name]
[Title]
K-1
<PAGE>
EXHIBIT L
----------
FORM OF CLASS C CERTIFICATE
---------------------------
[MASTER] [SUBSIDIARY]
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A
CERTIFICATES, THE CLASS M CERTIFICATES, AND THE CLASS B CERTIFICATES AS
DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT AND
LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM
REGISTRATION UNDER SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN
ACCORDANCE WITH THE PROVISIONS OF SECTION 9.02 OF THE POOLING AND SERVICING
AGREEMENT REFERRED TO HEREIN.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE. THIS CERTIFICATE MAY ONLY BE TRANSFERRED TO A PERMITTED
TRANSFEREE (AS DEFINED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO
HEREIN); ANY SUCH TRANSFER MUST ALSO SATISFY THE OTHER REQUIREMENTS OF SECTION
9.02 OF SUCH POOLING AND SERVICING AGREEMENT.
L-1
<PAGE>
Class C [Master] [Subsidiary] No.
(Subordinate)
Cut-off Date:
as defined in the Pooling and Servicing
Agreement dated May 1, 1998 Percentage Interest: 100%
First Payment Date:
June 15, 1998
CERTIFICATE FOR
HOME EQUITY LOANS SERIES 1998-C
Original Series 1998-C Certificate Principal Balance of the Trust: $500,000,000
This certifies that Green Tree Finance Corp.--Two is the registered owner
of the Residual Interest represented by this Certificate, and entitled to
certain distributions out of Home Equity Loan Trust 1998-C (the "Trust"), which
includes among its assets a pool of closed-end home equity loans (the "Loans")
(including, without limitation, all mortgages, deeds of trust and security deeds
relating to such Loans and any and all rights to receive payments due on the
Loans after the applicable Cut-off Date or Subsequent Cut-off Date). The Trust
has been created pursuant to a Pooling and Servicing Agreement (the
"Agreement"), dated as of May 1, 1998, between Green Tree Financial Corporation,
as Seller and Servicer (the "Company"), and U.S. Bank Trust National
Association, as Trustee of the Trust (the "Trustee"). This Class C [Master]
[Subsidiary] Certificate is described in the Agreement and is issued pursuant
and subject to the Agreement. By acceptance of this Class C [Master]
[Subsidiary] 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 June 15, 1998, so long as
the Agreement has not been terminated, [by check to the registered Class C
[Master] [Subsidiary] Certificateholder at the address appearing on the
Certificate Register as of the Business Day immediately preceding such Payment
Date, in an amount equal to (1) 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 with respect to the Loans, (vii) amounts to reimburse the Servicer
or the Trustee, as applicable, for prior Advances with respect to the Loans, and
(viii) amounts to reimburse the Class C Certificateholders for certain expenses
incurred by them]. The final scheduled Payment Date of this Class C [Master]
[Subsidiary]
L-2
<PAGE>
Certificate is July 15, 2029 or the next succeeding Business Day if such July 15
is not a Business Day.
The Class C [Master] [Subsidiary] 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
[Master] [Subsidiary] 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 [Master] [Subsidiary] 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 [Master] [Subsidiary] Certificateholder agrees
to disclosure of his, her or its name and address to other Certificateholders
and Class C 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 Company and
the Trustee at its own expense an opinion of counsel (satisfactory to the
Company and the Trustee) that the purchase and holding of the Certificate by
such Plan will not result in the assets of the Trust being deemed to be "plan
assets" and subject to the prohibited transaction provisions of ERISA and the
Code and will not subject the Trustee, the Company or the Servicer to any
obligation or liability in addition to those undertaken in the Agreement.
Unless such opinion is delivered, each person acquiring this Certificate will be
deemed to represent to the Trustee, the Company and the Servicer either (i) that
such person is neither a Plan, nor acting on behalf of a Plan, subject to ERISA
or to Section 4975 of the Code or (ii) that the purchase and holding of the
Certificate by such Plan will not result in the assets of the Trust being deemed
to be Plan assets and subject to the prohibited transaction provisions of ERISA
and the Code and will not subject the Trustee, the Company or the Servicer to
any obligation or liability in addition to those undertaken in the Agreement.
This Class C [Master] [Subsidiary] 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 [Master] [Subsidiary] 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 [Master] [Subsidiary] Certificate is
registrable in the Certificate Register of the Certificate Registrar upon
surrender of this Class C [Master] [Subsidiary] 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
L-3
<PAGE>
Trustee and the Certificate Registrar duly executed by the holder thereof or his
or her attorney duly authorized in writing, and thereupon a new Class C [Master]
[Subsidiary] Certificate evidencing the same Class C [Master] [Subsidiary]
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 [Master] [Subsidiary] 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 [Master] [Subsidiary] 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 segregated pools of assets comprising the Master REMIC
and the Subsidiary REMIC, respectively, each 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 Master REMIC and the Class C [Master] [Subsidiary] Certificate
shall be the "residual interest" in the [Master] [Subsidiary] REMIC. In
addition, the holder of this Class C [Master] [Subsidiary] 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.
IN WITNESS WHEREOF, Home Equity Loan Trust 1998-C has caused this
Certificate to be duly executed by the manual signature of a duly authorized
officer of the Trustee.
Dated: ________ HOME EQUITY LOAN TRUST 1998-C
By: U.S. BANK TRUST NATIONAL ASSOCIATION
By:
--------------------------------------
Authorized Officer
L-4
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto __________________________ the within Certificate for Home Equity Loans,
Series 1998-C, 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
L-5
<PAGE>
EXHIBIT M-1
------------
FORM OF CERTIFICATE REGARDING REPURCHASED LOANS
-----------------------------------------------
GREEN TREE FINANCIAL CORPORATION
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 May 1, 1998 between the Company and U.S. Bank Trust
National Association, as Trustee of Home Equity Loan Trust 1998-C (all
capitalized terms used herein without definition having the respective meanings
specified in the Agreement), and further certifies that:
1. The Loans 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 Loans, such Loans 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
_____________.
GREEN TREE FINANCIAL CORPORATION
By:
--------------------------------
[Name]
[Title]
M-1-1
<PAGE>
EXHIBIT M-2
------------
FORM OF CERTIFICATE REGARDING ELIGIBLE SUBSTITUTE LOANS
-------------------------------------------------------
GREEN TREE FINANCIAL CORPORATION
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 3.05(b) of the Pooling and Servicing Agreement (the
"Agreement") dated as of May 1, 1998 between the Company and U.S. Bank Trust
National Association, as Trustee of Home Equity Loan Trust 1998-C (all
capitalized terms used herein without definition having the respective meanings
specified in the Agreement), and further certifies that:
1. The Loan and Loan File for each such Eligible Substitute Loan [are being
held by the Company, as Servicer] [have been delivered to [the Trustee] [the
Custodian] the successor Servicer].
2. The Loans on the attached schedule are to be substituted on the date
hereof pursuant to Section 3.05(b) of the Agreement and each such Loan is an
Eligible Substitute Loan.
3. The UCC-1 financing statements in respect of the Loans to be
substituted, in the form required by Section 3.05(b)(iii) of the Agreement, if
any, have been filed with the appropriate offices.
4. The Company has delivered to the Trustee an executed assignment to the
Trustee on behalf of the Trust in recordable form for each mortgage securing
such Eligible Substitute Loans.
[5. There has been deposited in the Certificate Account the amounts listed
on the schedule attached hereto as the amount by which the Scheduled Principal
Balance of each Replaced Loan exceeds the Scheduled Principal Balance of each
Loan being substituted therefor.]
M-2-1
<PAGE>
IN WITNESS WHEREOF, I have affixed hereunto my signature this ____ day of
___________________.
GREEN TREE FINANCIAL CORPORATION
By:
--------------------------------
[Name]
[Title]
M-2-2
<PAGE>
EXHIBIT N
----------
FORM OF REPRESENTATION LETTER
-----------------------------
U.S. Bank 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 Equity Loans,
Series 1998-C, 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.
N-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 May 20, 1998, to the Prospectus dated May 20,
1998 (the "Prospectus") with respect to the Certificates, and has been given
such information concerning the Certificates, the underlying installment loans
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.
N-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
N-3
<PAGE>
EXHIBIT O-1
-----------
LIST OF INITIAL FIXED-RATE LOANS
LIST OF ADDITIONAL FIXED RATE LOANS
[To Be Supplied]
O-1-1
<PAGE>
EXHIBIT O-2
-----------
LIST OF INITIAL ADJUSTABLE RATE LOANS
LIST OF ADDITIONAL ADJUSTABLE RATE LOANS
[To Be Supplied]
O-2-1
<PAGE>
EXHIBIT P
---------
FORM OF MONTHLY REPORT
----------------------
CERTIFICATES FOR
HOME EQUITY LOANS SERIES 1998-C
Payment Date: _________
---------
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 _______
2. Formula Principal Distribution Amount _______
Fixed Rate Loans:
(a) Scheduled principal _______
(b) Principal Prepayments _______
(c) Liquidated Loans _______
(d) Repurchases _______
(e) Previously undistributed (a)-(d) amounts _______
(f) Pre-Funded Fixed Rate Amount, if any _______
(g) Class A-1 ARM Formula Principal
Distribution Amount, if applicable _______
P-1
<PAGE>
3. Class A-1 ARM Formula Principal
Distribution Amount (lesser of
Class A-1 ARM Principal Balance
or sum of (a)-(f)) _______
(a) Scheduled principal _______
(b) Principal Prepayments _______
(c) Liquidated Loans _______
(d) Repurchases _______
(e) Pre-Funded ARM Amount, if any _______
(f) Clause (vi) of definition _______
4. Senior Percentage _______
5. Class B Percentage _______
CLASS A CERTIFICATES
INTEREST
6. Aggregate interest
(a) Class A-1A ARM Pass-Through Rate (6.00%)
(b) Class A-1A ARM Interest _______
(c) Class A-1B ARM Pass-Through Rate (____%)
(d) Class A-1B ARM Interest _______
(e) Class A-1 Pass-Through Rate (5.95%)
(f) Class A-l Interest _______
(g) Class A-2 Pass-Through Rate (6.03%)
(h) Class A-2 Interest _______
(i) Class A-3 Pass-Through Rate (6.18%)
(j) Class A-3 Interest _______
(i) Class A-4 Pass-Through Rate (6.30%)
(j) Class A-4 Interest _______
(k) Class A-5 Pass-Through Rate (6.39%)
(l) Class A-5 Interest _______
(m) Class A-6 Pass-Through Rate (6.29%)
(n) Class A-6 Interest _______
(o) Class A-7 IO Pass-Through Rate (10.00%)
(p) Class A-7 IO Interest _______
7. Amount applied to Unpaid Class A Interest Shortfall _______
P-2
<PAGE>
8. Remaining Unpaid Class A Interest Shortfall _______
PRINCIPAL
9. Class A-6 Lockout Percentage for such
Payment Date _______
10. Class A principal distribution:/1/
(a) Class A-1B ARM _______
(b) Class A-1A ARM _______
(c) Class A-6 Lockout Pro Rata Distribution Amount _______
(d) Balance of Formula Principal Distribution Amount:
(i) Class A-1 _______
(ii) Class A-2 _______
(iii) Class A-3 _______
(iv) Class A-4 _______
(v) Class A-5 _______
(vi) Class A-6 _______
11. (a) Class A-1A ARM Principal Balance _______
(b) Class A-1B ARM Principal Balance _______
(c) Class A-1 Principal Balance _______
(d) Class A-2 Principal Balance _______
(e) Class A-3 Principal Balance _______
(f) Class A-4 Principal Balance _______
(g) Class A-5 Principal Balance _______
(h) Class A-6 Principal Balance _______
(i) Class A-7 IO Notional Principal Amount _______
12. Amount, if any, by which Class A Formula Distribution
Amount exceeds Class A Distribution Amount _______
- ---------------------
/1/ If a Class A Liquidation Loss Principal Amount, the remaining Amount
Available, pro rata to each Class of Class A Certificates (other than Class A-7
IO) based on the Class Principal Balance of each Class; If remaining Amount
Available is less than Class A Formula Principal Distribution Amount, then such
remaining Amount Available pro rata to each Class of Class A Certificates (other
than Class A-7 IO) based on amount distributable had such remaining Amount
Available not been less than Class A Formula Principal Distribution Amount;
Otherwise, the Class A-1 ARM Formula Principal Distribution Amount and the
Senior Percentage of the Formula Principal Distribution Amount sequentially as
described in item 10.
P-3
<PAGE>
CLASS M-1 CERTIFICATES
- ----------------------
13. Amount Available less the Class A
Distribution Amount (including
Monthly Servicing Fee) _______
INTEREST ON CLASS M-1 PRINCIPAL BALANCE LESS
CLASS M-1 LIQUIDATION LOSS PRINCIPAL AMOUNT
14. Current interest
(a) Class M-1 Pass-Through Rate (6.80%)
(b) Class M-1 Interest _______
15. Amount applied to Unpaid Class M-1
Interest Shortfall _______
16. Remaining Unpaid Class M-1
Interest Shortfall _______
17. Class M-1 Interest Deficiency Amount _______
18. Class M-1 Interest Deficiency Amount unpaid _______
PRINCIPAL
19. Class M-1 principal distribution _______
20. Class M-1 Principal Balance _______
21. Amount, if any, by which Class M-1 Formula
Principal Distribution Amount exceeds
Class M-1 Distribution Amount _______
CLASS M-2 CERTIFICATES
- ----------------------
22. Amount Available less the Class A
Distribution Amount and Class M-1
Distribution Amount (including
Monthly Servicing Fee) _______
P-4
<PAGE>
INTEREST ON CLASS M-2 PRINCIPAL BALANCE LESS
CLASS M-2 LIQUIDATION LOSS PRINCIPAL AMOUNT
23. Current interest
(a) Class M-2 Pass-Through Rate (7.14%)
(b) Class M-2 Interest _______
24. Amount applied to Unpaid Class M-2
Interest Shortfall _______
25. Remaining Unpaid Class M-2
Interest Shortfall _______
26. Class M-2 Interest Deficiency Amount _______
27. Class M-2 Interest Deficiency Amount unpaid _______
PRINCIPAL
28. Class M-2 principal distribution _______
29. Class M-2 Principal Balance _______
30. Amount, if any, by which Class M-2
Formula Principal Distribution Amount
exceeds Class M-2 Distribution Amount _______
CLASS B PRINCIPAL DISTRIBUTION TESTS (tests must be satisfied
on and after the Payment Date occurring in June 2001)
31. 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 6.0%) _______
P-5
<PAGE>
32. 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
months; may not exceed 12%) _______
33. Cumulative Realized Losses Test
Cumulative Realized Losses
for current Payment Date
(as a percentage of Cut-off Date
Pool Principal Balance may not
exceed 7.5%) _______
34. 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 2.0%) _______
35. Class B Principal Balance Test
Percentage equal to (a) Class B
Principal Balance (before any
distributions on current Payment
Date) divided by (b) Pool
Scheduled Principal Balance for
prior Payment Date (must equal
or exceed 12.5%) _______
P-6
<PAGE>
CLASS B-1 CERTIFICATES
36. 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 LIQUIDATION LOSS PRINCIPAL AMOUNT
37. Current Interest
(a) Class B-1 Pass-Through Rate (7.77%)
(b) Class B-1 Interest _______
38. Amount applied to Unpaid
Class B-1 Interest Shortfall _______
39. Remaining Unpaid Class B-1
Interest Shortfall _______
40. Class B-1 Interest Deficiency Amount _______
41. Class B-1 Interest Deficiency Amount unpaid _______
PRINCIPAL
42. Class B-1 principal distribution _______
43. Class B-1 Principal Balance _______
44. Amount, if any, by which Class B-1
Formula Distribution Amount exceeds
Class B Distribution Amount _______
CLASS B-2 CERTIFICATES
- ----------------------
45. Remaining Amount Available _______
P-7
<PAGE>
46. Current interest
(a) Class B-2 Pass-Through Rate (8.06%)
(b) Class B-2 Interest _______
47. Amount applied to Unpaid Class
B-2 Interest Shortfall _______
48. Remaining Unpaid Class B-2
Interest Shortfall _______
PRINCIPAL
49. Class B-2 principal distribution _______
50. Class B-2 Guaranty Payment _______
51. Class B-2 Principal Balance _______
52. Amount, if any, by which Class B-2 Formula
Distribution Amount and Class B-2 Liquidation
Loss Principal Amount exceeds Class B-2
Distribution Amount _______
INTEREST ON CLASS M-1, M-2, B-1, B-2 LIQUIDATION LOSS PRINCIPAL AMOUNT
53. CLASS M-1
(a) Class M-1 Liquidation Loss Principal Amount _______
(b) Interest at Class M-1 Pass-Through Rate on
Class M-1 Liquidation Loss Principal Amount _______
(c) Amount applied to Unpaid Class M-1 Liquidation
Loss Interest Shortfall _______
(d) Remaining Unpaid Class M-1 Liquidation Loss
Interest Shortfall _______
P-8
<PAGE>
54. CLASS M-2
(a) Class M-2 Liquidation Loss Principal Amount _______
(b) Interest at Class M-2 Pass-Through Rate on
Class M-2 Liquidation Loss Principal Amount _______
(c) Amount applied to Unpaid Class M-2
Liquidation Loss Interest Shortfall _______
(d) Remaining Unpaid Class M-2 Liquidation Loss
Interest Shortfall _______
55. CLASS B-1
(a) Class B-1 Liquidation Loss Principal Amount _______
(b) Interest at Class B-1 Pass-Through Rate on
Class B-1 Liquidation Loss Principal Amount _______
(c) Amount applied to Unpaid Class B-1 Liquidation
Loss Interest Shortfall _______
(d) Remaining Unpaid Class B-1 Liquidation Loss
Interest Shortfall _______
56. CLASS B-2
(a) Class B-2 Liquidation Loss Principal Amount _______
(b) Interest at Class B-2 Pass-Through Rate on
Class B-2 Liquidation Loss Principal Amount _______
(c) Amount applied to Unpaid Class B-2 Liquidation
Loss Interest Shortfall _______
(d) Remaining Unpaid Class B-2 Liquidation Loss
Interest Shortfall _______
CLASS A, CLASS M AND CLASS B CERTIFICATES
- -----------------------------------------
57. Pool Scheduled Principal Balance _______
P-9
<PAGE>
(a) Fixed Rate Loans _______
(b) Adjustable Rate Loans _______
58. Pool Factor _______
59. Loans Delinquent:
30 - 59 days
Fixed Rate _______
Adjustable Rate _______
60 or more days
Fixed Rate _______
Adjustable Rate _______
60. Principal Balance of Defaulted Loans
Fixed Rate _______
Adjustable Rate _______
61. Number of Liquidated Loans and
Net Liquidation Loss _______
Fixed Rate _______
Adjustable Rate _______
62. Number of Loans Remaining
Fixed Rate _______
Adjustable Rate _______
63. Pre-Funded ARM Amount _______
64. Pre-Funded Fixed Rate Amount _______
P-10
<PAGE>
CLASS C SUBSIDIARY CERTIFICATES
- -------------------------------
65. Monthly Servicing Fee _______
66. Class C Master Residual Payment _______
Please contact the Bondholder Relations Department of U.S. Bank Trust National
Association at (612) 224-0444 with any questions regarding this Statement or
your Distribution.
P-11
<PAGE>
EXHIBIT Q
----------
FORM OF ADDITION NOTICE
-----------------------
______________, 1997
U.S. Bank Trust National Association
180 East Fifth Street
St. Paul, MN 55101
Re: Pooling and Servicing Agreement (the "Agreement"), dated as of May 1,
1998, between Green Tree Financial Corporation (the "Company") and
U.S. Bank Trust National Association as Trustee (the "Trustee")
relating to Certificates for Home Equity Loans, Series 1998-C
Ladies and Gentlemen:
Capitalized terms not otherwise defined in this Notice have the meanings
given them in the Agreement. The Company hereby notifies the Trustee of an
assignment to the Trust of Subsequent Loans on the date and in the amounts set
forth below:
Subsequent Transfer Date: __________________
Cut-off Date Principal Balance of Subsequent Loans to be assigned to Trust
on Subsequent Transfer Date:
Fixed Rate: $_____________
Adjustable Rate: $_____________
Q-1
<PAGE>
Please acknowledge your receipt of this notice by countersigning the
enclosed copy in the space indicated below and returning it to the attention of
the undersigned.
Very truly yours,
GREEN TREE FINANCIAL CORPORATION
By:
-------------------------------------
Name:
Title:
ACKNOWLEDGED AND AGREED:
U.S. BANK TRUST NATIONAL ASSOCIATION
By:
-----------------------------------
Name:
Title:
Q-2
<PAGE>
EXHIBIT R
----------
FORM OF SUBSEQUENT TRANSFER INSTRUMENT
--------------------------------------
In accordance with the Pooling and Servicing Agreement (the "Agreement")
dated as of May 1, 1998, between the undersigned and U.S. Bank Trust National
Association as Trustee (the "Trustee"), the undersigned does hereby transfer,
assign, set over and otherwise convey, without recourse, to Home Equity Loan
Trust 1998-C, created by the Agreement, to be held in trust as provided in the
Agreement, (i) all right, title and interest in the home equity loans identified
in the List of Loans attached hereto (including, without limitation, all related
mortgages, deeds of trust, security deeds and any and all rights to receive
payments on or with respect to the Subsequent Loans (excluding principal due
before the Subsequent Cut-off Date), (ii) all rights under any hazard, flood or
other individual insurance policy on the real estate securing a Subsequent Loan
for the benefit of the creditor of such Loan, (iii) all rights the Company may
have against the originating lender with respect to the Subsequent Loans
originated by a lender other than the Company, (iv) all rights under the Errors
and Omissions Protection Policy and the Fidelity Bond as such policy and bond
relate to the Subsequent Loans, (v) all rights under any title insurance
policies, if applicable, on any of the properties securing Subsequent Loans,
(vi) all documents contained in the related Loan Files, and (vii) 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 Section 2.03 and Article
III of the Agreement and no others. All undefined capitalized terms used in this
Assignment have the meanings given them in the Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be duly
executed this ____ day of May ___, 1998.
GREEN TREE FINANCIAL CORPORATION
[Seal] By:
---------------------------------
Name:
Title:
R-1
<PAGE>
EXHIBIT S
----------
FORM OF OFFICER'S CERTIFICATE (SUBSEQUENT TRANSFER)
---------------------------------------------------
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 May 1, 1998 (the
"Agreement") between the Company and U.S. Bank Trust National Association as
Trustee. All capitalized terms used herein without definition have the
respective meanings specified in the Agreement. The undersigned further
certifies that:
1. This Certificate is delivered in connection with the sale to the Trust
on __________________ (the "Subsequent Transfer Date") of Loans (the "Subsequent
Loans") identified in the List of Loans attached to the Subsequent Transfer
Instrument of even date herewith.
2. As of the Subsequent Transfer Date, all representations and warranties
in Section 3.01 of the Agreement are true and correct; all representations and
warranties in Sections 2.03(b), 3.02, and 3.03 of the Agreement with respect to
the Subsequent Loans are true to the best of his knowledge; and all
representations in Section 3.04 of the Agreement with respect to the Subsequent
Loans are true and correct.
3. All conditions precedent to the sale of the Subsequent Loans to the
Trust under Section 2.03 of the Agreement have been satisfied.
IN WITNESS WHEREOF, I have affixed hereunto my signature this ____ day of
__________, 1998.
By:
-------------------------------------
Name:
Title:
S-1
<PAGE>
May 28, 1998
U.S. Bank Trust National Association Merrill Lynch, Pierce, Fenner & Smith
180 East Fifth Street Incorporated
St. Paul, Minnesota 55101 North Tower, Tenth Floor
World Financial Center
Lehman Brothers Inc. New York, New York 10281
Three World Financial Center
New York, New York 10285 Fitch IBCA Inc.
One State Street Plaza
First Union Capital Markets, New York, New York 10004
a division of Wheat First Securities
Corp. Standard & Poor's Rating Services
1 First Union Center, Sixth Floor 25 Broadway
Charlotte, North Carolina 28288 New York, New York 10004
Re: Green Tree Financial Corporation
Certificates for Home Equity Loans, Series 1998-C
Gentlemen:
We have acted as counsel for Green Tree Financial Corporation, a
Delaware corporation ("Green Tree"), in connection with its execution of a
Pooling and Servicing Agreement, dated as of May 1, 1998 (the "Pooling and
Servicing Agreement"), between Green Tree and U.S. Bank Trust National
Association, as Trustee, and its establishment, pursuant to the Pooling and
Servicing Agreement, of Home Equity Loan Trust 1998-C (the "Trust"). All
undefined capitalized terms used in this opinion have the meanings given them in
the Pooling and Servicing Agreement.
Pursuant to the Pooling and Servicing Agreement, Green Tree will
transfer to the Trust the Loans and certain related property and Green Tree will
act as Servicer of the Loans.
Green Tree has requested that we provide to you our opinion whether
the Master REMIC and Subsidiary REMIC will each be treated as a real estate
mortgage investment conduit ("REMIC") under the Internal Revenue Code of 1986,
as amended through the date hereof (the
<PAGE>
U.S. Bank Trust National Association
Lehman Brothers Inc.
First Union Capital Markets
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Fitch IBCA Inc.
Standard & Poor's Rating Services
May 28, 1998
Page 2
"Code"), under certain Treasury Regulations concerning REMICs promulgated by the
Treasury Department on December 23, 1992 (the "REMIC Regulations"), and under
Minnesota law.
In rendering our opinion, we have examined the Pooling and Servicing
Agreement and such additional related documents, and we have reviewed such
questions of law, as we have considered necessary and appropriate for the
purposes of the opinion expressed herein.
Our opinion is based upon existing law and currently applicable
Treasury Department regulations, current published administrative positions of
the Internal Revenue Service contained in revenue rulings and revenue
procedures, and judicial decisions, all of which are subject to change, either
prospectively or retroactively, and to possibly differing interpretations, and
is also based on the representations and warranties set forth in the Pooling and
Servicing Agreement and the assumptions that Green Tree and the Trustee will at
all times comply with the requirements of the Pooling and Servicing Agreement,
including, without limitation, the requirement that a proper election to be
taxed as a REMIC is made for each of the Master REMIC and Subsidiary REMIC in
accordance with the Pooling and Servicing Agreement and the Code, and that the
certificates representing interests in the Trust will be issued as described in
the Prospectus Supplement relating to the Certificates.
Based upon the foregoing, as of the date hereof it is our opinion
that:
1. The Master REMIC and Subsidiary REMIC created pursuant to the Pooling
and Servicing Agreement will each qualify as a REMIC under the Code and under
the REMIC Regulations. The Certificates will evidence ownership of the "regular
interests" in the Master REMIC. The Class C Master Certificate will evidence
ownership of the single class of "residual interests" in the Master REMIC. The
Subsidiary REMIC Regular Interests will evidence ownership of the "regular
interests" in the Subisidary REMIC. The Class C Subsidiary Certificate will
evidence ownership of the single class of "residual interests" in the Subsidiary
REMIC.
2. For Minnesota income and franchise tax purposes, the Trust (excluding
the Pre-Funding Account) will not be subject to tax and the income of the Trust
will be taxable to the holders
<PAGE>
U.S. Bank Trust National Association
Lehman Brothers Inc.
First Union Capital Markets
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Fitch IBCA Inc.
Standard & Poor's Rating Services
May 28, 1998
Page 3
of interests therein, all in accordance with the provisions of the Code
concerning REMICs as amended through December 31, 1997.
3. Ownership of a Certificate will not be a factor in determining whether
the owner is subject to Minnesota income or franchise 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.
We express no opinion as to the laws of any jurisdiction other than
the federal laws of the United States of America and the laws of the state of
Minnesota. This opinion is being delivered to you at Green Tree's request only
for your use. It may not be circulated or republished to, or relied upon by,
any other person without our prior written consent.
Very truly yours,
