<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 7, 1998
GREEN TREE FINANCIAL CORPORATION
as originator of Certificates
for Home Improvement and
Home Equity Loans,
Series 1998-E
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 01-08916 41-1807858
- ---------------------------- ------------------------ -------------------
(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
- -------------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (651) 293-3400
--------------
Not Applicable
- -------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 1. Changes in Control of Registrant.
- ------- --------------------------------
Not applicable.
ITEM 2. Acquisition or Disposition of Assets.
- ------- ------------------------------------
Not applicable
ITEM 3. Bankruptcy or Receivership.
- ------- --------------------------
Not applicable
ITEM 4. Changes in Registrant's Certifying Accounting.
- ------- ---------------------------------------------
Not applicable
ITEM 5. Other Events.
- ------- ------------
On December 7, 1998, the Registrant sold approximately $1,196,000,000
of Certificates for Home Improvement and Home Equity Loans, Series
1998-E evidencing beneficial ownership interests in a trust consisting
of a pool of certificates for home improvement and home equity loans
conveyed by Green Tree Financial Corporation.
ITEM 6. Resignations of Registrant's Directors.
- ------- --------------------------------------
Not applicable
ITEM 7. Financial Statements and Exhibits.
- ------- ---------------------------------
(a) Financial statements of businesses acquired.
Not applicable
(b) Pro forma financial information.
Not applicable
2
<PAGE>
(c) Exhibits.
The following is filed herewith. The exhibit numbers correspond
with Item 601(b) of Regulation S-K.
Exhibit No. Description
----------- -----------
4.1 Pooling and Servicing Agreement between Green
Tree Financial Corporation, as Seller and
Servicer, and U.S. Bank National Association as
Trustee, dated as of December 1, 1998, relating
to Certificates for Home Improvement and Home
Equity Loans, Series 1998-E
8.1 Tax opinion of Briggs and Morgan Professional
Association, dated December 7, 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
Improvement and Home Equity Loans,
Series 1998-E
By: /s/ Scott T. Young
------------------------------------
Scott T. Young
Senior Vice President and Controller
3
<PAGE>
INDEX TO EXHIBITS
Exhibit
- -------
Number
- -------
4.1 Pooling and Servicing Agreement between Green Tree
Financial Corporation, as Seller and Servicer, and
U.S. Bank National Association, as Trustee, dated as
of December 1, 1998, relating to Certificates for
Home Improvement and Home Equity Loans, Series 1998-E
8.1 Tax opinion of Briggs and Morgan, Professional
Association, dated December 7, 1998, relating to
REMIC matters
4
<PAGE>
EXHIBIT 4.1
CERTIFICATES FOR HOME IMPROVEMENT AND HOME EQUITY LOANS
SERIES 1998-E
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 IMPROVEMENT AND HOME EQUITY LOAN TRUST 1998-E
DATED AS OF DECEMBER 1, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
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 CONTRACTS ........................ 2-1
SECTION 2.01. Closing ............................................................ 2-1
SECTION 2.02. Conditions to the Closing .......................................... 2-1
SECTION 2.03. Conveyance of the Subsequent Contracts ............................. 2-3
SECTION 2.04. Acceptance by Trustee .............................................. 2-5
SECTION 2.05. REMIC Provisions ................................................... 2-5
SECTION 2.06. Company Option to Substitute for Prepaid Contracts ................. 2-9
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 Contract ............. 3-2
SECTION 3.03. Representations and Warranties Regarding the Contracts in
the Aggregate ................................................... 3-6
SECTION 3.04. Representations and Warranties Regarding the Contract Files ........ 3-9
SECTION 3.05. Repurchases of Contracts for Breach of Representations and
Warranties ...................................................... 3-10
SECTION 3.06. No Repurchase Under Certain Circumstances .......................... 3-12
ARTICLE IV - PERFECTION OF TRANSFER AND PROTECTION OF
SECURITY INTERESTS ............................................................... 4-1
SECTION 4.01. Transfer of Contracts .............................................. 4-1
SECTION 4.02. Costs and Expenses ................................................. 4-2
ARTICLE V - SERVICING OF CONTRACTS ................................................ 5-1
SECTION 5.01. Responsibility for Contract Administration ......................... 5-1
SECTION 5.02. Standard of Care ................................................... 5-1
SECTION 5.03. Records ............................................................ 5-1
SECTION 5.04. Inspection ......................................................... 5-1
SECTION 5.05. Certificate Account ................................................ 5-2
SECTION 5.06. Enforcement ........................................................ 5-4
SECTION 5.07. Trustee to Cooperate ............................................... 5-6
SECTION 5.08. Costs and Expenses ................................................. 5-7
SECTION 5.09. Maintenance of Insurance ........................................... 5-7
SECTION 5.10. Merger or Consolidation of Servicer ................................ 5-8
ARTICLE VI - REPORTS AND TAX MATTERS .............................................. 6-1
SECTION 6.01. Monthly Reports .................................................... 6-1
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SECTION 6.02. Officer's Certificate .............................................. 6-1
SECTION 6.03. Other Data ......................................................... 6-1
SECTION 6.04. Annual Report of Accountants ....................................... 6-1
SECTION 6.05. Statements to Certificateholders and the Class C
Certificateholders .............................................. 6-1
SECTION 6.06. Payment of Taxes ................................................... 6-11
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 Guaranties ................................................. 8-2
SECTION 8.04. Permitted Withdrawals from the Certificate Account; Payments ....... 8-4
SECTION 8.05. Reassignment of Repurchased and Replaced Contracts ................. 8-13
SECTION 8.06. Servicer's Purchase Option ......................................... 8-14
SECTION 8.07. Sub-Pool HI Pre-Funding Account .................................... 8-15
SECTION 8.08. Sub-Pool HE Pre-Funding Account .................................... 8-16
SECTION 8.09. Reserve Account .................................................... 8-18
SECTION 8.10. Distributions on the Subsidiary REMIC Regular Interests ............ 8-20
SECTION 8.11. Swap Reserve Account ............................................... 8-21
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
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SECTION 10.02. Liabilities to Obligors ........................................... 10-1
SECTION 10.03. Tax Indemnification ............................................... 10-1
SECTION 10.04. Servicer's Indemnities ............................................ 10-1
SECTION 10.05. Operation of Indemnities .......................................... 10-1
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 Contracts ................................................... 11-3
SECTION 11.04. Trustee May Own Certificates ...................................... 11-3
SECTION 11.05. Rights of Certificateholders to Direct Trustee and to Waive
Events of Termination .......................................... 11-3
SECTION 11.06. The Servicer to Pay Trustee's Fees and Expenses ................... 11-4
SECTION 11.07. Eligibility Requirements for Trustee .............................. 11-4
SECTION 11.08. Resignation or Removal of Trustee ................................. 11-5
SECTION 11.09. Successor Trustee ................................................. 11-5
SECTION 11.10. Merger or Consolidation of Trustee ................................ 11-6
SECTION 11.11. Tax Returns ....................................................... 11-6
SECTION 11.12. Obligor Claims .................................................... 11-6
SECTION 11.13. Appointment of Co-Trustee or Separate Trustee ..................... 11-7
SECTION 11.14. Certain Matters Relating to FHA Insurance ......................... 11-8
SECTION 11.15. Trustee and U.S. Bancorp .......................................... 11-9
SECTION 11.16. Trustee Advances .................................................. 11-9
SECTION 11.17. Reserve Account Loan Agreement .................................... 11-9
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 ........................................................... 12-8
SECTION 12.10. Merger and Integration ............................................ 12-9
SECTION 12.11. Headings .......................................................... 12-9
SECTION 12.12. Governing Law ..................................................... 12-9
EXHIBIT A - FORM OF CLASS HI: A CERTIFICATE ....................................... A-1
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
EXHIBIT B - FORM OF CLASS HI: M CERTIFICATE ....................................... B-1
EXHIBIT C - FORM OF CLASS HI: B CERTIFICATE ....................................... C-1
EXHIBIT D-1 - FORM OF CLASS HE: A CERTIFICATE .....................................D-1-1
EXHIBIT D-2 - FORM OF CLASS HE: A-1[A][B] ARM CERTIFICATE .........................D-2-1
EXHIBIT D-3 - FORM OF CLASS HE: A-5 IO CERTIFICATE ................................D-3-1
EXHIBIT E - FORM OF CLASS HE: M CERTIFICATE ....................................... E-1
EXHIBIT F - FORM OF CLASS HE: B CERTIFICATE ....................................... 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 CONTRACTS .................M-1-1
EXHIBIT M-2 - FORM OF CERTIFICATE REGARDING REPURCHASED CONTRACTS .................M-2-1
EXHIBIT M-3 - FORM OF CERTIFICATE REGARDING SUBSTITUTION FOR PREPAID CONTRACTS ....M-3-1
EXHIBIT N - FORM OF REPRESENTATION LETTER ......................................... N-1
EXHIBIT O-1 - LIST OF INITIAL HOME IMPROVEMENT CONTRACTS .......................... O-1
EXHIBIT O-2 - LIST OF INITIAL FIXED-RATE HOME EQUITY CONTRACTS .................... O-2
EXHIBIT O-3 - LIST OF INITIAL ADJUSTABLE RATE HOME EQUITY CONTRACTS ............... O-3
EXHIBIT P - LIST OF FHA-INSURED CONTRACTS ......................................... P-1
EXHIBIT Q - FORM OF MONTHLY REPORT ................................................ Q-1
EXHIBIT R - FORM OF ADDITION NOTICE ............................................... R-1
EXHIBIT S - FORM OF SUBSEQUENT TRANSFER INSTRUMENT ................................ S-1
EXHIBIT T - FORM OF OFFICER'S CERTIFICATE (SUBSEQUENT TRANSFER) ................... T-1
EXHIBIT U - FORM OF RESERVE ACCOUNT LOAN MONTHLY REPORT ........................... U-1
</TABLE>
-iv-
<PAGE>
AGREEMENT, dated as of December 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 Improvement and Home Equity Loan Trust 1998-E (the
"Trust").
WHEREAS, in the regular course of its business, the Company purchases,
originates and services home improvement contracts and promissory notes, which
contracts and notes provide for installment payments by or on behalf of the
purchasers of the home improvements and grant mortgages, deeds of trust or
security deeds on the real estate that is the subject of the home improvements;
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 nineteen 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 Contracts (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 (as defined
herein) will acquire the Contracts and the Company will service the Contracts
(as defined herein);
NOW, THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth, the Company and the Trustee agree as provided herein:
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.01. General. For the purpose of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires, the terms
defined in this Article include the plural as well as the singular, the words
"herein," "hereof" and "hereunder" and other words of similar import refer to
this Agreement as a whole and not to any particular article, section or other
subdivision, and Section references refer to Sections of this Agreement.
SECTION 1.02. Specific Terms.
"Addition Notice" means with respect to the transfer of Subsequent
Contracts to the Trust pursuant to Section 2.03 of this Agreement, a notice,
substantially in the form of Exhibit R, which shall be given not later than five
Business Days prior to the related Subsequent Transfer Date, of the Company's
designation of Subsequent Home Improvement Contracts and/or Subsequent Home
Equity Contracts, as applicable, to be sold to the Trust and the aggregate Cut-
off Date Principal Balances of such Subsequent Home Improvement Contracts and/or
Subsequent Home Equity Contracts.
"Adjustable Rate Home Equity Contract" means each closed-end home equity
loan identified as such in the List of Contracts, which Adjustable Rate Home
Equity Contract 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 Home Equity
Contract.
"Advance" means, with respect to any Payment Date, the amounts, if any,
deposited by the Servicer or the Trustee, as applicable, in the Certificate
Account for such Payment Date pursuant to Section 8.02.
"Advance Payment" means any payment by an Obligor in advance of the Due
Period in which it would be due under such Contract and which payment is not a
Principal Prepayment.
"Affiliate" of any specified Person means any other Person controlling or
controlled by or under common control with such specified Person. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" or "controlled" have meanings
correlative to the foregoing.
"Agent" means Credit Suisse First Boston, New York Branch, as Agent for the
Reserve Account Lenders, and its successors in such capacity.
1-1
<PAGE>
"Aggregate Certificate Principal Balance" means the sum of the Sub-Pool HI
Certificate Principal Balance and the Sub-Pool HE Certificate Principal Balance.
"Agreement" means this Pooling and Servicing Agreement, as it may be
amended from time to time.
"Amount Held for Future Distribution" means, as to any Payment Date, (1)
with respect to the Home Improvement Contracts, the total of the amounts held in
the Certificate Account in respect of the Home Improvement Contracts on the last
day of the preceding Due Period on account of Advance Payments on the Home
Improvement Contracts in respect of such Due Period and (2) with respect to the
Home Equity Contracts, the total of the amounts held in the Certificate Account
in respect of the Home Equity Contracts on the last day of the preceding Due
Period on account of Advance Payments on the Home Equity Contracts 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 Contract Rates on
the then outstanding Adjustable Rate Home Equity Contracts.
"Balloon Loan" means a Home Equity Contract that provides for the payment
of the unamortized principal balance of such Contract in a single payment at the
maturity of such Contract 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 Sub-Pool HI Certificate or a Sub-Pool HE Certificate.
"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.
1-2
<PAGE>
"Certificate Owner" means the Person who is the beneficial owner of a Book-
Entry Certificate or, if Definitive Certificates have been issued,
Certificateholders.
"Certificate Register" means the register maintained pursuant to Section
9.02.
"Certificate Registrar" or "Registrar" means the registrar appointed
pursuant to Section 9.02.
"Certificateholder" or "Holder" means the person in whose name a
Certificate 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 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 HI: A," "Class HI: M," "Class HI: B," "Class HE: A," "Class
HE: M," "Class HE: B," or "Class C" means pertaining to Class HI: A
Certificates, Class HI: M Certificates, Class HI: B Certificates, Class HE: A
Certificates, Class HE: M Certificates, Class HE: B Certificates, and/or the
Class C Certificates, as the case may be.
"Class C Certificates" means any one of the Class C Master Certificates 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 Master Certificate" means a certificate for Home Improvement and
Home Equity Loans, Series 1998-E, 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 Master Distribution Amount" means, as to any Payment Date, the
amounts, if any, distributable in respect of the Class C Master Certificate
pursuant to Section 8.04(c)(21).
"Class C Subsidiary Certificate" means a certificate for Home Improvement
and Home Equity Loans, Series 1998-E, 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 C Subsidiary Distribution Amount" means, as to any Payment Date,
the amounts, if any, distributable in respect of the Class C Subsidiary
Certificate pursuant to Sections 8.04(b)(23).
1-3
<PAGE>
"Class HE: A ARM Cross-over Date" means the Payment Date on which the Class
HE: A-1A NAS Principal Balance and the Class HE: A-1B ARM Principal Balance
(after giving effect to the distribution of principal on the Class HE: A-1A NAS
and Class HE: A-1B ARM Certificates on such Payment Date) are reduced to zero.
"Class HE: A ARM Portion" means as to any Payment date,
(a) if such Payment Date is on or prior to the Class HE: A ARM Cross-
over Date, an amount equal to the sum of (i) the Sub-Pool HE ARM Formula
Principal Distribution Amount and (ii) if such Payment Date is on the Class
HE: A-4 Cross-over Date and after the Class HE: A-1 (Underlying) Cross-over
Date, the Class HE: A (2, 3, 4) Surplus, and (iii) if such Payment Date is
on the Class HE: A-1 (Underlying) Cross-over Date and after the Class HE:
A-4 Cross-over Date, the Class HE: A-1 (Underlying) Surplus;
(b) if such Payment Date is on or prior to the Class HE: A ARM Cross-
over Date, and after the Class HE: A-1 (Underlying) and Class HE: A-4
Cross-over Dates, an amount equal to the Sub-Pool HE Formula Principal
Distribution Amount less the sum of the Class HE: M-1, Class HE: M-2, and
Class HE: B Formula Principal Distribution Amounts;
(c) if such Payment Date is after the Class HE: A ARM Cross-over Date,
$0.
"Class HE: A ARM Surplus" means, on the Class HE: A ARM Cross-over Date,
the amount described in subsection (a)(i), (b) or (c), as applicable, of the
definition of Class HE: A ARM Portion, less distributions of principal on the
Class HE: A ARM Certificates on such date.
"Class HE: A Certificates" means the Class HE: A-1A NAS, Class HE: A-1B
ARM, Class HE: A-1 (Underlying), Class HE: A-2, Class HE: A-3, Class HE: A-4 and
Class HE: A-5 IO Certificates, collectively.
"Class HE: A Cross-over Date" means the latest of (a) the Class HE: A-1
(Underlying) Cross-over Date or (b) the Class HE: A-4 Cross-over Date or (c) the
Class HE: A ARM Cross-over Date.
"Class HE: A Distribution Amount" means, as to any Payment Date, the lesser
of (a) the Class HE: A Formula Distribution Amount and (b) that portion of the
Sub-Pool HE Amount Available eligible for distribution in respect of such amount
in accordance with the priorities set forth in Section 8.04(c); provided that,
after the Class HE: A Cross-over Date, the Class HE: A Distribution Amount shall
be zero.
"Class HE: 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 HE: A-1A NAS Pass-Through Rate on the Class HE:
A-1A NAS Principal Balance, (2) the Class HE: A-1B ARM
1-4
<PAGE>
Pass-Through Rate on the Class HE: A-1B ARM Principal Balance, (3) the Class HE:
A-1 (Underlying) Pass- Through Rate on the Class HE: A-1 (Underlying) Principal
Balance, (4) the Class HE: A-2 Pass-Through Rate on the Class HE: A-2 Principal
Balance, (5) the Class HE: A-3 Pass-Through Rate on the Class HE: A-3 Principal
Balance, (6) the Class HE: A-4 Pass-Through Rate on the Class HE: A-4 Principal
Balance and (7) the Class HE: A-5 IO Pass-Through Rate on the Class HE: A-5 IO
Notional Principal Amount, in each case to be calculated immediately prior to
such Payment Date, (b) the aggregate of the Unpaid Class HE: A Interest
Shortfalls, if any, with respect to each Class of Class HE: A Certificates, and
(c)(i) if there is no Class HE: A Principal Deficiency Amount as to such Payment
Date, the Class HE: A Formula Principal Distribution Amount, or (ii) if there is
a Class HE: A Principal Deficiency Amount as to such Payment Date, the amount
determined in accordance with Section 8.04(c)(6)(i); 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 HE: A.
"Class HE: A Formula Interest Distribution Amount" means, as to each Class
of Class HE: A Certificates and any Payment Date, the sum of (1) the amount
specified in clause (a)(1), (2), (3), (4), (5), (6) or (7), as appropriate, of
the definition of the term "Class HE: A Formula Distribution Amount" and (2) the
Unpaid Class HE: A Interest Shortfall, if any, with respect to such Class.
"Class HE: A Formula Principal Distribution Amount" means, as to any
Payment Date, the sum of (a) the Class HE: A ARM Portion, (b) the Class HE: A-1
(Underlying) Portion and (c) the Class HE: A (2,3,4) Portion.
"Class HE: A Interest Shortfall" means, as to each Class of Class HE: A
Certificates and any Payment Date, the amount, if any, by which the Class HE: 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(c)(2).
"Class HE: A (2,3,4) Portion" means, as to any Payment Date,
(a) if such Payment Date is on or prior to the Class HE: A-4, Class
HE: A-1 (Underlying), and Class HE: A ARM Cross-over Dates, an amount equal
to the sum of (i) the Sub-Pool HE Group II Formula Principal Distribution
Amount less the product of (x) the sum of the Class HE: M-1, Class HE: M-2,
and Class HE: B Formula Principal Distribution Amounts times (y) a
fraction, the numerator of which is the Sub-Pool HE Group II Formula
Principal Distribution Amount and the denominator of which is the Sub-Pool
HE Fixed Rate Formula Principal Distribution Amount, (ii) if such Payment
Date is on the Class HE: A-1 (Underlying) Cross-over Date, the Class HE: A-
1 (Underlying) Surplus, and (iii) if such Payment Date is on the Class HE:
A ARM Cross-over Date, the Class HE: A ARM Surplus;
(b) if such Payment Date is on or prior to the Class HE: A-4 and Class
HE: A ARM Cross-over Dates but after the Class HE: A-1 (Underlying) Cross-
over Date, an amount equal to the sum of (i) the Sub-Pool HE Fixed Rate
Formula Principal Distribution Amount less
1-5
<PAGE>
the sum of the Class HE: M-1, Class HE: M-2, and Class HE: B Formula
Principal Distribution Amounts and (ii) if such Payment Date is on the
Class HE: A ARM Cross-over Date, the Class HE: A ARM Surplus;
(c) if such Payment Date is on or prior to the Class HE: A-4 and Class
HE: A-1 (Underlying) Cross-over Dates but after the Class HE: A ARM Cross-
over Date, an amount equal to the sum of (i) the Sub-Pool HE Group II
Formula Principal Distribution Amount plus the Sub-Pool HE ARM Formula
Principal Distribution Amount less the product of (x) the sum of the Class
HE: M-1, Class HE: M-2, and Class HE: B Formula Principal Distribution
Amounts times (y) a fraction, the numerator of which is the Sub-Pool HE
Group II Formula Principal Distribution Amount and the denominator of which
is the Sub-Pool HE Fixed Rate Formula Principal Distribution Amount and
(ii) if such Payment Date is on the Class HE: A-1 (Underlying) Cross-over
Date, the Class HE: A-1 (Underlying) Surplus;
(d) if such Payment Date is on or prior to the Class HE: A-4 Cross-
over Date and after the Class HE: A-1 (Underlying) and Class HE: A ARM
Cross-over Dates, an amount equal to the Sub-Pool HE Formula Principal
Distribution Amount less the sum of the Class HE: M-1, Class HE: M-2, and
Class HE: B Formula Principal Distribution Amounts;
(e) if such Payment Date is after the Class HE: A-4 Cross-over Date,
$0.
"Class HE: A (2, 3, 4) Surplus" means, on the Class HE: A (2, 3, 4) Cross-
over Date, the amount described in subsection (a)(i), (b)(i), (c)(i) or (d), as
applicable, of the definition of Class HE: A (2, 3, 4) Portion, less
distributions of principal on the Class HE: A (2, 3, 4) Certificates on such
date.
"Class HE: A Principal Balance" means, as to any Payment Date, the sum of
the Class HE: A-1A NAS Principal Balance, the Class HE: A-1B ARM Principal
Balance, the Class HE: A-1 (Underlying) Principal Balance, the Class HE: A-2
Principal Balance, the Class HE: A-3 Principal Balance, and the Class HE: A-4
Principal Balance.
"Class HE: A Principal Deficiency Amount" means, as to any Payment Date,
the amount, if any, by which the sum of the Pool Scheduled Principal Balance of
Sub-Pool HE plus the Sub-Pool HE Pre-Funded Amount plus the Reserve Account
Withdrawal Amount on such Payment Date is less than the Class HE: A Principal
Balance.
"Class HE: A-1 (Underlying) Certificate" means any one of the Class HE: A-1
(Underlying) Certificates executed and delivered by the Trustee and
authenticated by the Certificate Registrar substantially in the form set forth
in Exhibit D-1 and evidencing an interest designated as a "regular interest" in
the Master REMIC for purposes of the REMIC Provisions.
1-6
<PAGE>
"Class HE: A-1 (Underlying) Cross-over Date" means the Payment Date on
which the Class HE: A-1 (Underlying) Principal Balance (after giving effect to
the distributions of principal on the Class HE: A-1 (Underlying) Certificates on
such Payment Date) is reduced to zero.
"Class HE: A-1 (Underlying) Distribution Amount" means, as to any Payment
Date, that portion of the Class HE: A Distribution Amount to be distributed to
the Class HE: A-1 (Underlying) Certificateholders pursuant to Section 8.04(c) on
such Payment Date.
"Class HE: A-1 (Underlying) Portion" means, as to any Payment Date,
(a) if such Payment Date is on or prior to the Class HE: A-1
(Underlying) and Class HE: A-4 Cross-over Dates, an amount equal to the
sum of (i) the Sub-Pool HE Group I Formula Principal Distribution Amount
less the product of (x) the sum of the Class HE: M-1, Class HE: M-2, and
Class HE: B Formula Principal Distribution Amounts times (y) a fraction,
the numerator of which is the Sub-Pool HE Group I Formula Principal
Distribution Amount and the denominator of which is the Sub-Pool HE Fixed
Rate Formula Principal Distribution Amount and (ii) if such Payment Date is
on the Class HE: A-4 Cross-over Date, the Class HE: A (2, 3, 4) Surplus;
(b) if such Payment Date is on or prior to the Class HE: A-1
(Underlying) Cross-over Date and the Class HE: A ARM Cross-over Date but
after the Class HE: A-4 Cross-over Date, an amount equal to the sum of (i)
the Sub-Pool HE Fixed Rate Formula Principal Distribution Amount less the
sum of the Class HE: M-1, Class HE: M-2, and Class HE: B Formula Principal
Distribution Amounts and (ii) if such Payment Date is on the Class HE: A
ARM Cross-over Date, the Class HE: A ARM Surplus;
(c) if such Payment Date is on or prior to the Class HE: A-1
(Underlying) Cross-over Date and after the Class HE: A-4 and Class HE: A
ARM Cross-over Dates, an amount equal to the Sub-Pool HE Formula Principal
Distribution Amount less the sum of the Class HE: M-1, Class HE: M-2, and
Class HE: B Formula Principal Distribution Amounts;
(d) if such Payment Date is after the Class HE: A-1 (Underlying)
Cross-over Date, $0.
"Class HE: A-1 (Underlying) Principal Balance" means, as to any Payment
Date, the Original Class HE: A-1 (Underlying) Principal Balance less all amounts
previously distributed to Holders of Class HE: A-1 (Underlying) Certificates in
respect of principal.
"Class HE: A-1 (Underlying) Surplus" means, on the Class HE: A-1
(Underlying) Cross-over Date, the amount described in subsection (a)(i), (b)(i),
(c) or (d), as applicable, of the definition of Class HE: A-1 (Underlying)
Portion, less distributions of principal on the Class HE: A-1 (Underlying)
Certificates on such date.
1-7
<PAGE>
"Class HE: A-1A NAS Certificate" means any one of the Class HE: A-1A NAS
Certificates executed and delivered by the Trustee and authenticated by the
Certificate Registrar substantially in the form set forth in Exhibit D-2 and
evidencing an interest designated as a "regular interest" in the Master REMIC
for purposes of the REMIC Provisions.
"Class HE: A-1A NAS Distribution Amount" means, as to any Payment Date,
that portion of the Class HE: A ARM Distribution Amount to be distributed to the
Class HE: A-1A NAS Certificateholders pursuant to Section 8.04(c) on such
Payment Date.
"Class HE: A-1A NAS Percentage" means, as to any Payment Date, (i) 0% prior
to the Payment Date in September 2000 (unless the Class HE: A-1B ARM Principal
Balance has been reduced to zero), (ii) 90% on the Payment Date in September
2000 and thereafter (unless the Class HE: A-1B ARM Principal Balance has been
reduced to zero), and (iii) on and after any Payment Date on which the Class HE:
A-1B ARM Principal Balance has been reduced to zero (until the Class HE: A-1A
NAS Principal Balance has been reduced to zero), 100%.
"Class HE: A-1A NAS Principal Balance" means, as to any Payment Date, the
Original Class HE: A-1A NAS Principal Balance less all amounts previously
distributed to Holders of Class HE: A-1A NAS Certificates in respect of
principal.
"Class HE: A-1B ARM Available Funds Limitation Interest Amount" means, as
to any Payment Date, an amount equal to the excess, if any, 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 HE: A-1B ARM
Pass-Through Rate (determined without respect to any limitation imposed by the
Available Funds Pass-Through Rate) on the Class HE: A-1B ARM Principal Balance
over (b) the amount specified in clause (a)(2) of the definition of the term
"Class HE: A Formula Distribution Amount."
"Class HE: A-1B ARM Available Funds Limitation Interest Shortfall" means,
as to any Payment Date, the amount, if any, by which (a) the Class HE: A-1B ARM
Formula Available Funds Limitation Interest Distribution Amount exceeds (b) the
amount distributed to Class HE: A-1B ARM Certificateholders on such Payment Date
pursuant to Section 8.04(c)(14).
"Class HE: A-1B ARM Certificate" means any one of the Class HE: A-1B ARM
Certificates executed and delivered by the Trustee and authenticated by the
Certificate Registrar substantially in the form set forth in Exhibit D-2 and
evidencing an interest designated as a "regular interest" in the Master REMIC
for purposes of the REMIC Provisions.
"Class HE: A-1B ARM Distribution Amount" means, as to any Payment Date,
that portion of the Class HE: A Distribution Amount to be distributed to the
Class HE: A-1B ARM Certificateholders pursuant to Section 8.04(c) on such
Payment Date.
1-8
<PAGE>
"Class HE: A-1B ARM Formula Available Funds Limitation Interest
Distribution Amount" means, as to any Payment Date, the sum of (a) the Class HE:
A-1B ARM Available Funds Limitation Interest Amount, if any, and (b) the Unpaid
Class HE: A-1B ARM Available Funds Limitation Interest Shortfall, if any.
"Class HE: A-1B ARM Percentage" means 100% minus the Class HE: A-1A NAS
Percentage.
"Class HE: A-1B ARM Principal Balance" means, as to any Payment Date, the
Original Class HE: A-1B ARM Principal Balance less all amounts previously
distributed to Holders of Class HE: A-1B ARM Certificates in respect of
principal.
"Class HE: A-2 Certificate" means any one of the Class HE: A-2 Certificates
executed and delivered by the Trustee and authenticated by the Certificate
Registrar substantially in the form set forth in Exhibit D-1 and evidencing an
interest designated as a "regular interest" in the Master REMIC for purposes of
the REMIC Provisions.
"Class HE: A-2 Cross-over Date" means the Payment Date on which the Class
HE: A-2 Principal Balance (after giving effect to the distributions of principal
on the Class HE: A-2 Certificates on such Payment Date) is reduced to zero.
"Class HE: A-2 Distribution Amount" means, as to any Payment Date, that
portion of the Class HE: A Distribution Amount to be distributed to the Class
HE: A-2 Certificateholders pursuant to Section 8.04(c) on such Payment Date.
"Class HE: A-2 Principal Balance" means, as to any Payment Date, the
Original Class HE: A-2 Principal Balance less all amounts previously distributed
to Holders of Class HE: A-2 Certificates in respect of principal.
"Class HE: A-3 Certificate" means any one of the Class HE: A-3 Certificates
executed and delivered by the Trustee and authenticated by the Certificate
Registrar substantially in the form set forth in Exhibit D-1 and evidencing an
interest designated as a "regular interest" in the Master REMIC for purposes of
the REMIC Provisions.
"Class HE: A-3 Cross-over Date" means the Payment Date on which the Class
HE: A-3 Principal Balance (after giving effect to the distributions of principal
on the Class HE: A-3 Certificates on such Payment Date) is reduced to zero.
"Class HE: A-3 Distribution Amount" means, as to any Payment Date, that
portion of the Class HE: A Distribution Amount to be distributed to the Class
HE: A-3 Certificateholders pursuant to Section 8.04(c) on such Payment Date.
1-9
<PAGE>
"Class HE: A-3 Principal Balance" means, as to any Payment Date, the
Original Class HE: A-3 Principal Balance less all amounts previously distributed
to Holders of Class HE: A-3 Certificates in respect of principal.
"Class HE: A-4 Certificate" means any one of the Class HE: A-4 Certificates
executed and delivered by the Trustee and authenticated by the Certificate
Registrar substantially in the form set forth in Exhibit D-1 and evidencing an
interest designated as a "regular interest" in the Master REMIC for purposes of
the REMIC Provisions.
"Class HE: A-4 Cross-over Date" means the Payment Date on which the Class
HE: A-4 Principal Balance (after giving effect to the distributions of principal
on the Class HE: A-4 Certificates on such Payment Date) is reduced to zero.
"Class HE: A-4 Distribution Amount" means, as to any Payment Date, that
portion of the Class HE: A Distribution Amount to be distributed to the Class
HE: A-4 Certificateholders pursuant to Section 8.04(c) on such Payment Date.
"Class HE: A-4 Principal Balance" means, as to any Payment Date, the
Original Class HE: A-4 Principal Balance less all amounts previously distributed
to Holders of Class HE: A-4 Certificates in respect of principal.
"Class HE: A-5 IO Certificate" means any one of the Class HE: A-5 IO
Certificates executed and delivered by the Trustee and authenticated by the
Certificate Registrar substantially in the form set forth in Exhibit D-3 and
evidencing an interest designated as a "regular interest" in the Master REMIC
for purposes of the REMIC Provisions.
"Class HE: A-5 IO Distribution Amount" means, as to any Payment Date, that
portion of the Class HE: A Distribution Amount to be distributed to the Class
HE: A-5 IO Certificateholders pursuant to Section 8.04(c) on such Payment Date.
"Class HE: A-5 IO Notional Principal Amount" means, as of any Payment Date,
an amount equal to (a) for the first 24 Payment Dates, the lesser of (i) the
Class HE: A-5 IO Original Notional Principal Amount or (ii) the Class HE: A
Principal Balance for such Payment Date, and (b) thereafter, zero.
"Class HE: A-5 IO Original Notional Principal Amount" means $82,500,000.
"Class HE: B Adjusted Principal Balance" means, as of any Payment Date, the
Class HE: B Principal Balance as of that Payment Date minus the Class HE: B
Liquidation Loss Principal Amount (if any) as of the prior Payment Date.
"Class HE: B Certificates" means any one of the Class HE: B Certificates
executed and delivered by the Trustee and authenticated by the Certificate
Registrar substantially in the form set
1-10
<PAGE>
forth in Exhibit F and evidencing an interest designated as a "regular interest"
in the Master REMIC for purposes of the REMIC Provisions.
"Class HE: B Cross-over Date" means the Payment Date in or after January
2002, on which the Reserve Account Balance has been reduced to zero.
"Class HE: B Distribution Amount" means, as to any Payment Date, the lesser
of (a) the Class HE: B Formula Distribution Amount and (b) that portion of the
Sub-Pool HE Amount Available eligible for distribution in respect of such amount
in accordance with the priorities set forth in Section 8.04(c).
"Class HE: B 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 HE: B Pass-Through Rate on the Class HE: B Principal
Balance, (b) any Unpaid Class HE: B Interest Shortfall, and (c) the Class HE: B
Formula Principal Distribution Amount; plus, on the Payment Date on which the
Class HE: A and Class HE: M Certificates are paid in full, the sum of the Class
HE:A, Class HE: M-1 and Class HE: M-2 Formula Principal Distribution Amounts
less principal paid on such Certificates on such Payment Date; provided that
the aggregate of all amounts distributed pursuant to clause (c) of this
definition shall not exceed the Original Class HE: B Principal Balance.
"Class HE: B 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 HE: B Formula Distribution Amount" and (b) the Unpaid Class HE: B
Interest Shortfall, if any.
"Class HE: B Formula Principal Distribution Amount" means, as to any
Payment Date,
(a) if such Payment Date is before the January 2002 Payment Date or on
or before the Class HE: B Cross-over Date or any Class HE: Subordinate
Principal Distribution Test is not satisfied (unless the Class HE: A and
Class HE: M Certificates have been paid in full), zero;
(b) if such Payment Date is after the January 2002 Payment Date, after
the Class HE: B Cross-over Date and on or before either the Class HE: A or
Class HE: M-2 Cross-over Dates and each Class HE: Subordinate Principal
Distribution Test is satisfied, the amount by which the Class HE: B
Adjusted Principal Balance exceeds the greater of (i) $5,500,000 or (ii)
the product of 16% and the Pool Scheduled Principal Balance of Sub-Pool HE
as of such Payment Date; and
(c) if such Payment Date is after the Class HE: A, Class HE: M-1 and
Class HE: M-2 Cross-over Dates, the Sub-Pool HE Formula Principal
Distribution Amount.
1-11
<PAGE>
"Class HE: B Guaranty Fee" means, as of any Payment Date, the lesser of (a)
one-twelfth of the product of 3.00% and the sum of the Pool Scheduled Principal
Balance of Sub-Pool HE for the immediately preceding Payment Date (or, in the
case of the first Payment Date, the Cut-off Date), and the Sub-Pool HE Pre-
Funded Amount as of the immediately preceding Payment Date (or, in the case of
the first Payment Date, the Closing Date), or (b) the Sub-Pool HE Amount
Available less the amounts payable under Sections 8.04(c)(1)-(19).
"Class HE: B Guaranty Payment" means, as to any Payment Date, the amount,
if any, by which (a) the sum of the Class HE: B Formula Distribution Amount and
the Class HE: B Liquidation Loss Principal Amount exceeds (b) the Class HE: B
Distribution Amount; provided that the Class HE: B Guaranty Payment shall not
exceed the amount necessary to reduce the Class HE: B Principal Balance to zero.
"Class HE: B Interest Shortfall" means, as to any Payment Date, the amount,
if any, by which (a) the Class HE: B Formula Interest Distribution Amount
exceeds (b) the sum of the amounts distributed to Class HE: B Certificateholders
on such Payment Date pursuant to Sections 8.04(c)(13)(i) and (ii) and any Class
HE: B Guaranty Payment.
"Class HE: B Limited Guaranty" means the limited guaranty of the Company
provided pursuant to Section 8.03(b).
"Class HE: B Liquidation Loss Principal Amount" means, as to any Payment
Date, the lesser of (a) the Class HE: B Principal Balance (after giving effect
to all distributions of principal on the Class HE: B Certificates on such
Payment Date) and (b) the Sub-Pool HE Aggregate Liquidation Loss Principal
Amount.
"Class HE: B Principal Balance" means, as to any Payment Date, the Original
Class HE: B Principal Balance less all amounts previously distributed to Holders
of Class HE: B Certificates in respect of principal.
"Class HE: M Certificates" means the Class HE: M-1 and Class HE: M-2
Certificates, collectively.
"Class HE: M Principal Balance" means, as to any Payment Date, the sum of
the Class HE: M-1 Principal Balance and the Class HE: M-2 Principal Balance.
"Class HE: M-1 Adjusted Principal Balance" means, as of any Payment Date,
the Class HE: M-1 Principal Balance as of that Payment Date minus the Class HE:
M-1 Liquidation Loss Principal Amount (if any) as of the prior Payment Date.
"Class HE: M-1 Certificate" means any one of the Class HE: M-1 Certificates
executed and delivered by the Trustee and authenticated by the Certificate
Registrar substantially in the form set
1-12
<PAGE>
forth in Exhibit E and evidencing an interest designated as a "regular interest"
in the Master REMIC for purposes of the REMIC Provisions.
"Class HE: M-1 Cross-over Date" means the Payment Date on which the Class
HE: M-1 Principal Balance (after giving effect to the distributions of principal
on the Class HE: M-1 Certificates on such Payment Date) is reduced to zero.
"Class HE: M-1 Distribution Amount" means, as to any Payment Date, the
lesser of (a) the Class HE: M-1 Formula Distribution Amount and (b) that
portion of the Sub-Pool HE Amount Available eligible for distribution in respect
of such amount in accordance with the priorities set forth in Section 8.04(c);
provided that after the Class HE: M-1 Cross-over Date the Class HE: M-1
Distribution Amount shall be zero.
"Class HE: 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 HE: M-1 Pass-Through Rate on the Class HE: M-1
Adjusted Principal Balance as of such Payment Date, (b) any Unpaid Class HE: M-1
Interest Shortfall, (c) the Class HE: M-1 Formula Principal Distribution Amount;
and (d) any Class HE: M-1 Formula Liquidation Loss Interest Distribution Amount;
provided, however, that on the Class HE: A 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 HE: A Formula Distribution Amount"
(assuming a sufficient Sub-Pool HE 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 HE: M-1 Principal Balance.
"Class HE: 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 HE: M-1 Formula Distribution Amount" and (b) the
Unpaid Class HE: M-1 Interest Shortfall, if any.
"Class HE: M-1 Formula Liquidation Loss Interest Distribution Amount"
means, as to any Payment Date, the sum of (a) the Class HE: M-1 Liquidation Loss
Interest Amount, if any, and (b) the Unpaid Class HE: M-1 Liquidation Loss
Interest Shortfall, if any.
"Class HE: M-1 Formula Principal Distribution Amount" means, as to any
Payment Date,
(a) if such Payment Date is prior to the January 2002 Payment Date, or
if such Payment Date is on or prior to the Class HE: A Cross-over Date and
any Class HE: Subordinate Principal Distribution Test is not satisfied, $0;
(b) if such Payment Date is on or after the January 2002 Payment Date
and on or prior to the Class HE: A Cross-over Date and each Class HE:
Subordinate Principal
1-13
<PAGE>
Distribution Test is satisfied, the amount, if any, by which (i) the sum of
(x) the Class HE: M-1, Class HE: M-2, and Class HE: B Adjusted Principal
Balances and the Reserve Account Balance less (y) the sum of the Class HE:
M-2 Formula Principal Distribution Amount, the Class HE: B Formula
Principal Distribution Amount, any Reserve Account Withdrawal Amount, and
any Reserve Account Step-down Amount on such Payment Date, exceeds (ii) the
product of 38% and the Pool Scheduled Principal Balance of Sub-Pool HE as
of such Payment Date;
(c) if such Payment Date is after the Class HE: A Cross-over Date, the
Sub-Pool HE Formula Principal Distribution Amount less the sum of the Class
HE: M-2 Formula Principal Distribution Amount and the Class HE: B Formula
Principal Distribution Amount; and
(d) if such Payment Date is after the Class HE: M-1 Cross-over Date,
zero.
"Class HE: M-1 Interest Shortfall" means, as to any Payment Date, the
amount, if any, by which (a) the Class HE: M-1 Formula Interest Distribution
Amount exceeds (b) the amount distributed to Class HE: M-1 Certificateholders on
such Payment Date pursuant to Section 8.04(c)(3).
"Class HE: M-1 Liquidation Loss Interest Amount" means, as to any Payment
Date, an amount equal to 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 HE: M-1 Pass-Through Rate on the Class HE: M-1 Liquidation
Loss Principal Amount (if any) for the immediately preceding Payment Date.
"Class HE: M-1 Liquidation Loss Interest Shortfall" means, as to any
Payment Date, the amount, if any, by which (a) the Class HE: M-1 Formula
Liquidation Loss Interest Distribution Amount exceeds (b) any amount distributed
to Class HE: M-1 Certificateholders on such Payment Date pursuant to Section
8.04(c)(10).
"Class HE: M-1 Liquidation Loss Principal Amount" means, as to any Payment
Date, the lesser of (a) the Class HE: M-1 Principal Balance (after giving effect
to all distributions of principal on the Class HE: M-1 Certificates on such
Payment Date) and (b) the excess, if any, of the Sub-Pool HE Aggregate
Liquidation Loss Principal Amount over the aggregate of the Class HE: M-2
Principal Balance and the Class HE: B Principal Balance (after giving effect to
all distributions of principal on the Class HE: M-2 and Class HE: B Certificates
on such Payment Date).
"Class HE: M-1 Principal Balance" means, as to any Payment Date, the
Original Class HE: M-1 Principal Balance less all amounts previously distributed
to Holders of Class HE: M-1 Certificates in respect of principal.
1-14
<PAGE>
"Class HE: M-2 Adjusted Principal Balance" means, as of any Payment Date,
the Class HE: M-2 Principal Balance as of that Payment Date minus the Class HE:
M-2 Liquidation Loss Principal Amount (if any) as of the prior Payment Date.
"Class HE: M-2 Certificate" means any one of the Class HE: M-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 HE: M-2 Cross-over Date" means the Payment Date on which the Class
HE: M-2 Principal Balance (after giving effect to the distributions of principal
on the Class HE: M-2 Certificates on such Payment Date) is reduced to zero.
"Class HE: M-2 Distribution Amount" means, as to any Payment Date, the
lesser of (a) the Class HE: M-2 Formula Distribution Amount and (b) that
portion of the Sub-Pool HE Amount Available eligible for distribution in respect
of such amount in accordance with the priorities set forth in Section 8.04(c);
provided that after the Class HE: M-2 Cross-over Date the Class HE: M-2
Distribution Amount shall be zero.
"Class HE: 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 HE: M-2 Pass-Through Rate on the Class HE: M-2
Adjusted Principal Balance as of such Payment Date, (b) any Unpaid Class HE: M-2
Interest Shortfall, (c) the Class HE: M-2 Formula Principal Distribution Amount
and (d) any Class HE: M-2 Formula Liquidation Loss Interest Distribution Amount;
provided, however, that on the Payment Date on which the Class HE:A and Class
HE: M-1 Certificates are paid in full, the balance of any amounts that would
have been distributable on such date pursuant to clause (c) of the definition of
the term "Class HE: M-1 Formula Distribution Amount" (assuming a sufficient Sub-
Pool HE 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 HE: M-2 Principal Balance.
"Class HE: 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 HE: M-2 Formula Distribution Amount" and (b) the
Unpaid Class HE: M-2 Interest Shortfall, if any.
"Class HE: M-2 Formula Liquidation Loss Interest Distribution Amount"
means, as to any Payment Date, the sum of (a) the Class HE: M-2 Liquidation Loss
Interest Amount, if any, and (b) the Unpaid Class HE: M-2 Liquidation Loss
Interest Shortfall, if any.
"Class HE: M-2 Formula Principal Distribution Amount" means, as to any
Payment Date,
1-15
<PAGE>
(a) if such Payment Date is prior to the January 2002 Payment Date, or
on or prior to the Class HE: M-1 Cross-over Date and any Class HE:
Subordinate Principal Distribution Test is not satisfied, zero;
(b) if such Payment Date is on or after the January 2002 Payment Date
and on or prior to either the Class HE: A Cross-over Date or the Class HE:
M-1 Cross-over Date and each Class HE: Subordinate Principal Distribution
Test is satisfied, the amount, if any, by which (i) the sum of (x) the
Class HE: M-2 and Class HE: B Adjusted Principal Balances and the Reserve
Account Balance less the sum of (y) the Class HE: B Formula Principal
Distribution Amount, any Reserve Account Withdrawal Amount, and any Reserve
Account Step-down Amount, exceeds (ii) the product of 26% and the Pool
Scheduled Principal Balance of Sub-Pool HE as of such Payment Date; or
(c) if such Payment Date is after the Class HE: A Cross-over Date and
the Class M-1 Cross-over Date, the Sub-Pool HE Formula Principal
Distribution Amount less the Class HE: B Formula Principal Distribution
Amount.
"Class HE: M-2 Interest Shortfall" means, as to any Payment Date, the
amount, if any, by which (a) the Class HE: M-2 Formula Interest Distribution
Amount, exceeds (b) the amount distributed to Class HE: M-2 Certificateholders
on such Payment Date pursuant to Section 8.04(c)(4).
"Class HE: M-2 Liquidation Loss Interest Amount" means, as to any Payment
Date, an amount equal to 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 HE: M-2 Pass-Through Rate on the Class HE: M-2 Liquidation
Loss Principal Amount (if any) for the immediately preceding Payment Date.
"Class HE: M-2 Liquidation Loss Interest Shortfall" means, as to any
Payment Date, the amount, if any, by which the Class HE: M-2 Formula Liquidation
Loss Interest Distribution Amount exceeds any amount distributed to Class HE: M-
2 Certificateholders on such Payment Date pursuant to Section 8.04(c)(11).
"Class HE: M-2 Liquidation Loss Principal Amount" means, as to any Payment
Date, the lesser of (a) the Class HE: M-2 Principal Balance (after giving effect
to all distributions of principal on the Class HE: M-2 Certificates on such
Payment Date) and (b) the excess, if any, of the Sub-Pool HE Aggregate
Liquidation Loss Principal Amount over the Class HE: B Principal Balance (after
giving effect to all distributions of principal on the Class HE: B Certificates
on such Payment Date).
"Class HE: M-2 Principal Balance" means, as to any Payment Date, the
Original Class HE: M-2 Principal Balance less all amounts previously distributed
to Holders of Class HE: M-2 Certificates in respect of principal.
1-16
<PAGE>
"Class HE: Subordinate Principal Distribution Test" means, as to any
Payment Date, each of the Sub-Pool HE Average Sixty-Day Delinquency Ratio Test,
the Sub-Pool HE Average Thirty-Day Delinquency Ratio Test, the Sub-Pool HE
Cumulative Realized Losses Test and the Sub-Pool HE Current Realized Losses
Test.
"Class HI: A Certificates" means the Class HI: A-1 Certificates, Class HI:
A-2 Certificates and Class HI: A-3 Certificates, collectively.
"Class HI: A Distribution Amount" means, as to any Payment Date, the lesser
of (a) the Class HI: A Formula Distribution Amount and (b) that portion of the
Sub-Pool HI Amount Available eligible for distribution in respect of such amount
in accordance with the priorities set forth in Section 8.04(b); provided that,
after the Class HI: A-3 Cross-over Date, the Class HI: A Distribution Amount
shall be zero.
"Class HI: 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 HI: A-1 Pass-Through Rate on the Class HI: A-1
Principal Balance, (2) the Class HI: A-2 Pass-Through Rate on the Class HI: A-2
Principal Balance, and (3) the Class HI: A-3 Pass-Through Rate on the Class HI:
A-3 Principal Balance, in each case to be calculated immediately prior to such
Payment Date, (b) the aggregate of the any Unpaid Class HI: A Interest
Shortfalls, if any, with respect to each Class of Class HI: A Certificates, and
(c)(i) if there is no Class HI: A Principal Deficiency Amount as to such Payment
Date, the Class HI: Senior Formula Principal Distribution Amount, or (ii) if
there is a Class HI: A Principal Deficiency Amount as to such Payment Date, the
amount determined in accordance with Section 8.04(b)(6)(i); provided, however,
that the aggregate of all amounts distributed for all Payment Dates pursuant to
clause (c) shall not exceed the sum of the Original Class HI: A Principal
Balance.
"Class HI: A Formula Interest Distribution Amount" means, as to each Class
of Class HI: A Certificates and any Payment Date, the sum of (a) the amount
specified in clause (a)(1), (2), or (3), as appropriate, of the definition of
the term "Class HI: A Formula Distribution Amount" and (2) the Unpaid Class HI:
A Interest Shortfall, if any, with respect to such Class.
"Class HI: A Interest Shortfall" means, as to each Class of Class HI: A
Certificates and any Payment Date, the amount, if any, by which the Class HI: 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 HI: A Principal Balance" means, as to any Payment Date, the sum of
the Class HI: A-1 Principal Balance, the Class HI: A-2 Principal Balance, and
the Class HI: A-3 Principal Balance.
1-17
<PAGE>
"Class HI: A Principal Deficiency Amount" means, as to any Payment Date,
the amount, if any, by which the sum of the Pool Scheduled Principal Balance of
Sub-Pool HI plus the Sub-Pool HI Pre-Funded Amount is less than the Class HI: A
Principal Balance.
"Class HI: A-1 Certificate" means any one of the Class HI: 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 HI: A-1 Cross-over Date" means the Payment Date on which the Class
HI: A-1 Principal Balance (after giving effect to the distributions of principal
on the Class HI: A-1 Certificates on such Payment Date) is reduced to zero.
"Class HI: A-1 Distribution Amount" means, as to any Payment Date, that
portion of the Class HI: A Distribution Amount to be distributed to the Class
HI: A-1 Certificateholders pursuant to Section 8.04(b) on such Payment Date.
"Class HI: A-1 Principal Balance" means, as to any Payment Date, the
Original Class HI: A-1 Principal Balance less all amounts previously distributed
to Holders of Class HI: A-1 Certificates in respect of principal.
"Class HI: A-2 Certificate" means any one of the Class HI: 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 HI: A-2 Cross-over Date" means the Payment Date on which the Class
HI: A-2 Principal Balance (after giving effect to the distributions of principal
on the Class HI: A-2 Certificates on such Payment Date) is reduced to zero.
"Class HI: A-2 Distribution Amount" means, as to any Payment Date, that
portion of the Class HI: A Distribution Amount to be distributed to the Class
HI: A-2 Certificateholders pursuant to Section 8.04(b) on such Payment Date.
"Class HI: A-2 Principal Balance" means, as to any Payment Date, the
Original Class HI: A-2 Principal Balance less all amounts previously distributed
to Holders of Class HI: A-2 Certificates in respect of principal.
"Class HI: A-3 Certificate" means any one of the Class HI: 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.
1-18
<PAGE>
"Class HI: A-3 Cross-over Date" means the Payment Date on which the Class
HI: A-3 Principal Balance (after giving effect to the distributions of principal
on the Class HI: A-3 Certificates on such Payment Date) is reduced to zero.
"Class HI: A-3 Distribution Amount" means, as to any Payment Date, that
portion of the Class HI: A Distribution Amount to be distributed to the Class
HI: A-3 Certificateholders pursuant to Section 8.04(b) on such Payment Date.
"Class HI: A-3 Principal Balance" means, as to any Payment Date, the
Original Class HI: A-3 Principal Balance less all amounts previously distributed
to Holders of Class HI: A-3 Certificates in respect of principal.
"Class HI: B Certificates" means the Class HI: B-1 Certificates and Class
HI: B-2 Certificates, collectively.
"Class HI: B Cross-over Date" means the earlier of:
(a) the Class HI: M-2 Cross-over Date, and
(b) the first Payment Date on or after the Payment Date occurring in
January 2002 on which the fraction, expressed as a percentage, the numerator of
which is the Class HI: B Principal Balance as of such Payment Date and the
denominator of which is the Pool Scheduled Principal Balance of Sub-Pool HI as
of the immediately preceding Payment Date, is equal to or greater than 20%.
"Class HI: B Floor Reduction Amount" means, as to any Payment Date on or
prior to the Class HI: M-2 Cross-over Date, the amount, if any, by which the
Class HI: B Percentage of the Sub-Pool HI Formula Principal Distribution Amount
exceeds (a) the Class HI: B Principal Balance less (b) $1,250,000, and, as to
any Payment Date after the Class HI: M-2 Cross-over Date, zero.
"Class HI: B Formula Principal Distribution Amount" means, as to any
Payment Date, the Class HI: B Percentage of the Sub-Pool HI Formula Principal
Distribution Amount less the Class HI: B Floor Reduction Amount.
"Class HI: B Percentage" means 100% minus the Sub-Pool HI Senior
Percentage.
"Class HI: B Principal Balance" means, as to any Payment Date, the sum of
the Class HI: B-1 Principal Balance and the Class HI: B-2 Principal Balance.
"Class HI: 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 HI: B-1 Principal Balance and the
Class HI: B-2 Principal Balance as of such Payment Date and the
1-19
<PAGE>
denominator of which is the Pool Scheduled Principal Balance of Sub-Pool HI as
of the immediately preceding Payment Date, is equal to or greater than 20%.
"Class HI: B Principal Distribution Test" means, as to any Payment Date,
each of the Sub-Pool HI Average Sixty-Day Delinquency Ratio Test, the Sub-Pool
HI Average Thirty-Day Delinquency Ratio Test, the Class HI: B Principal Balance
Test, the Sub-Pool HI Cumulative Realized Losses Test and the Sub-Pool HI
Current Realized Losses Test.
"Class HI: B-1 Adjusted Principal Balance" means, as of any Payment Date,
the Class HI: B-1 Principal Balance as of that Payment Date minus the Class HI:
B-1 Liquidation Loss Principal Amount (if any) as of the prior Payment Date.
"Class HI: B-1 Certificate" means any one of the Class HI: B-1 Certificates
executed and delivered by the Trustee and authenticated by the Certificate
Registrar substantially in the form set forth in Exhibit C and evidencing an
interest designated as a "regular interest" in the Master REMIC for purposes of
the REMIC Provisions.
"Class HI: B-1 Cross-over Date" means the Payment Date on which the Class
HI: B-1 Principal Balance (after giving effect to the distributions of principal
on the Class HI: B-1 Certificates on such Payment Date) is reduced to zero.
"Class HI: B-1 Distribution Amount" means, as to any Payment Date, the
lesser of (a) the Class HI: B-1 Formula Distribution Amount and (b) that
portion of the Sub-Pool HI Amount Available eligible for distribution in respect
of such amount in accordance with the priorities set forth in Section 8.04(b);
provided that after the Class HI: B-1 Cross-over Date the Class HI: B-1
Distribution Amount shall be zero.
"Class HI: 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 HI: B-1 Pass-Through Rate on the Class HI: B-1
Adjusted Principal Balance as of such Payment Date, (b) any Unpaid Class HI: B-1
Interest Shortfall, (c) if such Payment Date is on or prior to the Class HI: B-1
Cross-over Date, the Class HI: B Formula Principal Distribution Amount and (d)
any Class HI: B-1 Formula Liquidation Loss Interest Distribution Amount;
provided, however, that on the Class HI: 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 HI: M-2 Formula Distribution Amount"
(assuming a sufficient Sub-Pool HI 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 HI: B-1 Principal Balance.
1-20
<PAGE>
"Class HI: 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 HI: B-1 Formula Distribution Amount" and (b) the
Unpaid Class HI: B-1 Interest Shortfall, if any.
"Class HI: B-1 Formula Liquidation Loss Interest Distribution Amount"
means, as to any Payment Date, the sum of (a) the Class HI: B-1 Liquidation Loss
Interest Amount, if any, and (b) the Unpaid Class HI: B-1 Liquidation Loss
Interest Shortfall, if any.
"Class HI: B-1 Interest Shortfall" means, as to any Payment Date, the
amount, if any, by which (a) the Class HI: B-1 Formula Interest Distribution
Amount exceeds (b) the amount distributed to Class HI: B-1 Certificateholders on
such Payment Date pursuant to Section 8.04(b)(5).
"Class HI: B-1 Liquidation Loss Interest Amount" means, as to any Payment
Date, an amount equal to 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 HI: B-1 Pass-Through Rate on the Class HI: B-1 Liquidation
Loss Principal Amount (if any) for the immediately preceding Payment Date.
"Class HI: B-1 Liquidation Loss Interest Shortfall" means, as to any
Payment Date, the amount, if any, by which (a) the Class HI: B-1 Formula
Liquidation Loss Interest Distribution Amount exceeds (b) the amount distributed
to Class HI: B-1 Certificateholders on such Payment Date pursuant to Section
8.04(b)(13).
"Class HI: B-1 Liquidation Loss Principal Amount" means, as to any Payment
Date, the lesser of (a) the Class HI: B-1 Principal Balance (after giving effect
to all distributions of principal on the Class HI: B-1 Certificates on such
Payment Date) and (b) the excess, if any, of the Sub-Pool HI Aggregate
Liquidation Loss Principal Amount over the Class HI: B-2 Principal Balance
(after giving effect to all distributions of principal on the Class HI: B-2
Certificates on such Payment Date).
"Class HI: B-1 Principal Balance" means, as to any Payment Date, the
Original Class HI: B-1 Principal Balance less all amounts previously distributed
to Holders of Class HI: B-1 Certificates in respect of principal.
"Class HI: B-2 Certificate" means any one of the Class HI: B-2 Certificates
executed and delivered by the Trustee and authenticated by the Certificate
Registrar substantially in the form set forth in Exhibit C and evidencing an
interest designated as a "regular interest" in the Master REMIC for purposes of
the REMIC Provisions.
"Class HI: B-2 Distribution Amount" means, as to any Payment Date, the
lesser of (a) the Class HI: B-2 Formula Distribution Amount and (b) that
portion of the Sub-Pool HI Amount Available eligible for distribution in respect
of such amount in accordance with the priorities set forth in Section 8.04(b).
1-21
<PAGE>
"Class HI: 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 HI: B-2 Pass-Through Rate on the Class HI: B-2
Principal Balance, (b) any Unpaid Class HI: B-2 Interest Shortfall and (c) if
such Payment Date is after the Class HI: B-1 Cross-over Date, the Class HI: B
Principal Distribution Amount; provided, however, that on the Class HI: 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 HI: B-1
Formula Distribution Amount" (assuming a sufficient Sub-Pool HI 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 HI: B-2 Principal Balance.
"Class HI: 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 HI: B-2 Formula Distribution Amount" and (b) the
Unpaid Class HI: B-2 Interest Shortfall, if any.
"Class HI: B-2 Guaranty Fee" means, as of any Payment Date, the lesser of
(a) one-twelfth of the product of 3.00% and the sum of the Pool Scheduled
Principal Balance for Sub-Pool HI for the immediately preceding Payment Date
(or, in the case of the first Payment Date, the Cut-off Date) and the Sub-Pool
HI Pre-Funded Amount as of the immediately preceding Payment Date (or, in the
case of the first Payment Date, the Closing Date), or (b) the Sub-Pool HI Amount
Available less the amounts payable under Sections 8.04(b)(1)-(21).
"Class HI: B-2 Guaranty Payment" means, as to any Payment Date, the amount,
if any, by which (a) the sum of the Class HI: B-2 Formula Distribution Amount
and the Class HI: B-2 Liquidation Loss Principal Amount exceeds (b) the Class
HI: B-2 Distribution Amount; provided that the Class HI: B-2 Guaranty Payment
shall not exceed the amount necessary to reduce the Class HI: B-2 Principal
Balance to zero.
"Class HI: B-2 Interest Shortfall" means, as to any Payment Date, the
amount, if any, by which (a) the Class HI: B-2 Formula Interest Distribution
Amount exceeds (b) the sum of the amounts distributed to Class HI: B-2
Certificateholders on such Payment Date pursuant to Sections 8.04(b)(14)(i) and
(ii) and any Class HI: B-2 Guaranty Payment.
"Class HI: B-2 Limited Guaranty" means the limited guaranty of the Company
provided pursuant to Section 8.03(a).
"Class HI: B-2 Liquidation Loss Principal Amount" means, as to any Payment
Date, the lesser of (a) the Class HI: B-2 Principal Balance (after giving effect
to all distributions of principal on the Class HI: B-2 Certificates on such
Payment Date) and (b) the Sub-Pool HI Aggregate Liquidation Loss Principal
Amount.
1-22
<PAGE>
"Class HI: B-2 Principal Balance" means, as to any Payment Date, the
Original Class HI: B-2 Principal Balance less all amounts previously distributed
to Holders of Class HI: B-2 Certificates in respect of principal.
"Class HI: M Certificates" means the Class HI: M-1 Certificates and Class
HI: M-2 Certificates, collectively.
"Class HI: M Principal Balance" means, as to any Payment Date, the sum of
the Class HI: M-1 Principal Balance and the Class HI: M-2 Principal Balance.
"Class HI: M-1 Adjusted Principal Balance" means, as of any Payment Date,
the Class HI: M-1 Principal Balance as of that Payment Date minus the Class HI:
M-1 Liquidation Loss Principal Amount (if any) as of the prior Payment Date.
"Class HI: M-1 Certificate" means any one of the Class HI: M-1 Certificates
executed and delivered by the Trustee and authenticated by the Certificate
Registrar substantially in the form set forth in Exhibit B and evidencing an
interest designated as a "regular interest" in the Master REMIC for purposes of
the REMIC Provisions.
"Class HI: M-1 Cross-over Date" means the Payment Date on which the Class
HI: M-1 Principal Balance (after giving effect to the distributions of principal
on the Class HI: M-1 Certificates on such Payment Date) is reduced to zero.
"Class HI: M-1 Distribution Amount" means, as to any Payment Date, the
lesser of (a) the Class HI: M-1 Formula Distribution Amount and (b) that
portion of the Sub-Pool HI Amount Available eligible for distribution in respect
of such amount in accordance with the priorities set forth in Section 8.04(b);
provided that after the Class HI: M-1 Cross-over Date the Class HI: M-1
Distribution Amount shall be zero.
"Class HI: 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 HI: M-1 Pass-Through Rate on the Class HI: M-1
Adjusted Principal Balance as of such Payment Date, (b) any Unpaid Class HI: M-1
Interest Shortfall, (c) if such Payment Date is after the Class HI: A-3 Cross-
over Date, but on or prior to the Class HI: M-1 Cross-over Date, the Sub-Pool HI
Senior Formula Principal Distribution Amount and (d) any Class HI: M-1 Formula
Liquidation Loss Interest Distribution Amount; provided, however, that on the
Class HI: A-3 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 HI: A Formula Distribution Amount" (assuming a sufficient Sub-Pool HI
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 HI: M-1
Principal Balance.
1-23
<PAGE>
"Class HI: 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 HI: M-1 Formula Distribution Amount" and (b) the
Unpaid Class HI: M-1 Interest Shortfall, if any.
"Class HI: M-1 Formula Liquidation Loss Interest Distribution Amount"
means, as to any Payment Date, the sum of (a) the Class HI: M-1 Liquidation Loss
Interest Amount, if any, and (b) the Unpaid Class HI: M-1 Liquidation Loss
Interest Shortfall, if any.
"Class HI: M-1 Interest Shortfall" means, as to any Payment Date, the
amount, if any, by which (a) the Class HI: M-1 Formula Interest Distribution
Amount exceeds (b) the amount distributed to Class HI: M-1 Certificateholders on
such Payment Date pursuant to Section 8.04(b)(3).
"Class HI: M-1 Liquidation Loss Interest Amount" means, as to any Payment
Date, an amount equal to 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 HI: M-1 Pass-Through Rate on the Class HI: M-1 Liquidation
Loss Principal Amount (if any) for the immediately preceding Payment Date.
"Class HI: M-1 Liquidation Loss Interest Shortfall" means, as to any
Payment Date, the amount, if any, by which (a) the Class HI: M-1 Formula
Liquidation Loss Interest Distribution Amount exceeds (b) any amount distributed
to Class HI: M-1 Certificateholders on such Payment Date pursuant to Section
8.04(b)(11).
"Class HI: M-1 Liquidation Loss Principal Amount" means, as of any Payment
Date, the lesser of (a) the Class HI: M-1 Principal Balance (after giving effect
to all distributions of principal on the Class HI: M-1 Certificates on such
Payment Date) and (b) the excess, if any, of the Sub-Pool HI Aggregate
Liquidation Loss Principal Amount over the aggregate of the Class HI: M-2
Principal Balance and the Class HI: B Principal Balance (after giving effect to
all distributions of principal on the Class HI: M-2 and Class HI: B Certificates
on such Payment Date).
"Class HI: M-1 Principal Balance" means, as to any Payment Date, the
Original Class HI: M-1 Principal Balance less all amounts previously distributed
to Holders of Class HI: M-1 Certificates in respect of principal.
"Class HI: M-2 Certificate" means any one of the Class HI: M-2 Certificates
executed and delivered by the Trustee and authenticated by the Certificate
Registrar substantially in the form set forth in Exhibit B and evidencing an
interest designated as a "regular interest" in the Master REMIC for purposes of
the REMIC Provisions.
"Class HI: M-2 Adjusted Principal Balance" means, as of any Payment Date,
the Class HI: M-2 Principal Balance as of that Payment Date minus the Class HI:
M-2 Liquidation Loss Principal Amount (if any) as of the prior Payment Date.
1-24
<PAGE>
"Class HI: M-2 Cross-over Date" means the Payment Date on which the Class
HI: M-2 Principal Balance (after giving effect to the distributions of principal
on the Class HI: M-2 Certificates on such Payment Date) is reduced to zero.
"Class HI: M-2 Distribution Amount" means, as to any Payment Date, the
lesser of (a) the Class HI: M-2 Formula Distribution Amount and (b) that
portion of the Sub-Pool HI Amount Available eligible for distribution in respect
of such amount in accordance with the priorities set forth in Section 8.04(b);
provided that after the Class HI: M-2 Cross-over Date the Class HI: M-2
Distribution Amount shall be zero.
"Class HI: 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 HI: M-2 Pass-Through Rate on the Class HI: M-2
Adjusted Principal Balance as of such Payment Date, (b) any Unpaid Class HI: M-2
Interest Shortfall, (c) if such Payment Date is after the Class HI: M-1 Cross-
over Date, but on or prior to the Class HI: M-2 Cross-over Date, the Sub-Pool HI
Senior Formula Principal Distribution Amount and (d) any Class HI: M-2 Formula
Liquidation Loss Interest Distribution Amount; provided, however, that on the
Class HI: 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 HI: M-1 Formula Distribution Amount" (assuming a sufficient Sub-Pool HI
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 HI: M-2
Principal Balance.
"Class HI: 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 HI: M-2 Formula Distribution Amount" and (b) the
Unpaid Class HI: M-2 Interest Shortfall, if any.
"Class HI: M-2 Formula Liquidation Loss Interest Distribution Amount"
means, as to any Payment Date, the sum of (a) the Class HI: M-2 Liquidation Loss
Interest Amount, if any, and (b) the Unpaid Class HI: M-2 Liquidation Loss
Interest Shortfall, if any.
"Class HI: M-2 Interest Shortfall" means, as to any Payment Date, the
amount, if any, by which (a) the Class HI: M-2 Formula Interest Distribution
Amount, exceeds (b) the amount distributed to Class HI: M-2 Certificateholders
on such Payment Date pursuant to Section 8.04(b)(4).
"Class HI: M-2 Liquidation Loss Interest Amount" means, as to any Payment
Date, an amount equal to 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 HI: M-2 Pass-Through Rate on the Class HI: M-2 Liquidation
Loss Principal Amount (if any) for the immediately preceding Payment Date.
1-25
<PAGE>
"Class HI: M-2 Liquidation Loss Interest Shortfall" means, as to any
Payment Date, the amount, if any, by which the Class HI: M-2 Formula Liquidation
Loss Interest Distribution Amount exceeds any amount distributed to Class HI: M-
2 Certificateholders on such Payment Date pursuant to Section 8.04(b)(12).
"Class HI: M-2 Liquidation Loss Principal Amount" means, as of any Payment
Date, the lesser of (a) the Class HI: M-2 Principal Balance (after giving effect
to all distributions of principal on the Class HI: M-2 Certificates on such
Payment Date) and (b) the excess, if any, of the Sub-Pool HI Aggregate
Liquidation Loss Principal Amount over the Class HI: B Principal Balance (after
giving effect to all distributions of principal on the Class HI: B Certificates
on such Payment Date).
"Class HI: M-2 Principal Balance" means, as to any Payment Date, the
Original Class HI: M-2 Principal Balance less all amounts previously distributed
to Holders of Class HI: M-2 Certificates in respect of principal.
"Class HI: Senior Addition Amount" means, as to any Payment Date on or
after the Class HI: B Cross-over Date but on or prior to the Class HI: M-2
Cross-over Date, and on which each Class HI: B Principal Distribution Test is
satisfied, the Class HI: B Floor Reduction Amount.
"Class HI: Senior Formula Principal Distribution Amount" means, as to any
Payment Date, the Sub-Pool HI Senior Percentage of the Sub-Pool HI Formula
Principal Distribution Amount plus the Class HI: Senior Addition Amount.
"Class Principal Balance" means any of the Class HI: A-1, Class HI: A-2,
Class HI: A-3, Class HI: M-1, Class HI: M-2, Class HI: B-1, Class HI: B-2, Class
HE: A-1A NAS, Class HE: A-1B ARM, Class HE: A-1 (Underlying), Class HE: A-2,
Class HE: A-3, Class HE: A-4, Class HE: M-1, Class HE: M-2, or Class HE: B
Principal Balances.
"Closing Date" means December 7, 1998.
"Code" means the Internal Revenue Code of 1986, as amended.
"Computer Tape" means the computer tape generated by the Company which
provides information relating to the Contracts and which was used by the Company
in selecting the Contracts, and includes the master file and the history file.
"Contract File" means, as to each Contract, (a) the original copy of the
Contract which is comprised of the related contract and/or promissory note, (b)
the original or a copy of the mortgage, deed of trust or security deed or
similar evidence of a lien on the related improved property and evidence of due
recording of such mortgage, deed of trust or security deed, if available, and
(c) if such Contract was originated by a contractor or lender other than the
Company, the original or a copy of an assignment of the mortgage, deed of trust
or security deed by the contractor or lender to the Company.
1-26
<PAGE>
"Contract Interest Rate" means, as to any Contract, the annual rate of
interest specified in the Contract.
"Contracts" means, collectively, the Home Improvement Contracts and the
Home Equity Contracts.
"Corporate Trust Office" means the office of the Trustee at which at any
particular time its corporate trust business shall be principally administered,
which office at the date of the execution of this Agreement is located at the
address set forth in Section 12.09.
"Counsel for the Company" means Briggs and Morgan, P.A., or other legal
counsel for the Company.
"CPR" has the meaning set forth in the Prospectus.
"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 P-1 by Moody's and F-1 by Fitch in the case of commercial paper, or
Baa1 or higher by Moody's and BBB+ or higher by Fitch in the case of unsecured
long-term debt, as is acting at such time as Custodian of the Contract Files
pursuant to Section 4.01.
"Cut-off Date" means (a) with respect to each Home Equity Contract (other
than a Subsequent Home Equity Contract), September 30, 1998 (or the date of
origination, if later); or (b) with respect to each Home Improvement Contract
(other than a Subsequent Home Improvement Contract), October 31, 1998.
"Cut-off Date Pool Principal Balance" means, with respect to all Contracts
or the Contracts comprising a given Sub-Pool, the aggregate of the Cut-off Date
Principal Balances of all Contracts or the Contracts comprising such Sub-Pool,
as the case may be.
"Cut-off Date Principal Balance" means, (i) as to any Home Improvement
Contract or Home Equity Contract, the unpaid principal balance thereof at the
Cut-off Date after giving effect to all installments of principal due prior
thereto, and (ii) as to any Subsequent Home Improvement Contract or Subsequent
Home Equity Contract, the unpaid principal balance thereof at the related
Subsequent Cut-off Date, after giving effect to all installments of principal
due prior thereto.
"Defaulted Contract" means a Contract with respect to which the Servicer
commenced foreclosure proceedings, made a sale of such Contract to a third party
for foreclosure or enforcement, or, in the case of an FHA-Insured Contract,
submitted a claim to FHA, or as to which there was a Delinquent Payment 180 or
more days past due.
1-27
<PAGE>
"Definitive Certificates" has the meaning assigned in Section 9.02(e).
"Delinquent Payment" means, as to any Contract, with respect to any Due
Period, any payment or portion of a payment that was originally scheduled to be
made during such Due Period under such Contract (after giving effect to any
reduction in the principal amount deemed owed on such Contract by the Obligor)
and was not received or applied during such Due Period and deposited in the
Certificate Account, whether or not any payment extension has been granted by
the Servicer; provided, however, that with respect to any Liquidated Contract,
the payment scheduled to be made in the Due Period in which such Contract became
a Liquidated Contract shall not be deemed a Delinquent Payment.
"Depository" means the initial Depository, The Depository Trust Company,
the nominee of which is Cede & Co., as the registered Holder of (i) one Class
HI: A-1 Certificate evidencing $113,500,000 in Original Class HI: A-1 Principal
Balance, (ii) one Class HI: A-2 Certificate evidencing $40,860,000 in Original
Class HI: A-2 Principal Balance, (iii) one Class HI: A-3 Certificate evidencing
$40,640,000 in Original Class HI: A-3 Principal Balance, (iv) one Class HI: M-1
Certificate evidencing $17,500,000 in Original Class HI: M-1 Principal Balance,
(v) one Class HI: M-2 Certificate evidencing $12,500,000 in Original Class HI:
M-2 Principal Balance, (vi) one Class HI: B-1 Certificate evidencing $12,500,000
in Original Class HI: B-1 Principal Balance, (vii) one Class HI: B-2 Certificate
evidencing $12,500,000 in Original Class HI: B-2 Principal Balance, (viii) one
Class HE: A-1A NAS Certificate evidencing $30,000,000 in Original Class HE: A-1A
NAS Principal Balance, (ix) one Class HE: A-1B ARM Certificate evidencing
$200,000,000 in Original Class HE: A-1B ARM Principal Balance and one Class HE:
A-1B ARM Certificate evidencing $45,000,000 in Original Class HE: A-1B ARM
Principal Balance, (x) one Class HE: A-2 Certificate evidencing $135,150,000 in
Original Class HE: A-2 Principal Balance, (xi) one Class HE: A-3 Certificate
evidencing $48,330,000 in Original Class HE: A-3 Principal Balance, (xii) one
Class HE: A-4 Certificate evidencing $146,520,000 in Original Class HE: A-4
Principal Balance, (xiii) one Class HE: A-5 IO Certificate evidencing a Class
HE: A-5 IO Original Notional Principal Amount of $82,500,000, (xiv) one Class
HE: M-1 Certificate evidencing $66,000,000 in Original Class HE: M-1 Principal
Balance, (xv) one Class HE: M-2 Certificate evidencing $55,000,000 in Original
Class HE: M-2 Principal Balance, and (xvi) one Class HE: B Certificate
evidencing $44,000,000 in Original Class HE: B 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.
"Determination Date" means the second Business Day preceding each Payment
Date during the term of this Agreement.
"Disqualified Organization" has the meaning assigned in Section 9.02(b)(3).
1-28
<PAGE>
"Due Period" means a calendar month during the term of this Agreement
except that with respect to the first Payment Date, the related Due Period means
the period beginning on the applicable Cut-off Date and ending December 31,
1998.
"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 Moody's or Fitch to downgrade or withdraw
its then-current rating assigned to the Certificates, as evidenced in writing by
each of the Rating Agencies.
"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 P-1 by Moody's 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 Moody's 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 Contracts under applicable Federal and State laws and
regulations, which is a Title I approved lender under FHA regulations and which
services not less than an aggregate of $100,000,000 in outstanding principal
amount of FHA-insured home improvement contracts and promissory notes,
manufactured housing conditional sales contracts and installment loan agreements
and home equity loans.
"Eligible Substitute Contract" means, as to (1) any Replaced Contract for
which an Eligible Substitute Contract is being substituted pursuant to Section
3.05(b), and (2) any Prepaid Contract for which an Eligible Substitute Contract
is being substituted pursuant to Section 2.06, a Contract 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 made as of the date of its substitution rather than as of the 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 Contract or, but for such
Principal Prepayment in Full, the Scheduled
1-29
<PAGE>
Principal Balance of such Prepaid Contract, as the case may be, (c) has a
Contract Interest Rate that is at least equal to the Contract Interest Rate of
such Replaced Contract or Prepaid Contract, as the case may be, (d) has a
remaining term to scheduled maturity that is not greater than the remaining term
to scheduled maturity of the Replaced Contract or Prepaid Contract, as the case
may be, (e) is of the same type (viz., Home Improvement Contract, Fixed Rate
Home Equity Contract or Adjustable Rate Home Equity Contract) as the Replaced
Contract or Prepaid Contract, as the case may be, (f) if an Adjustable Rate Home
Equity Contract, bears interest at a Contract Interest Rate that (i) is subject
to adjustment based on the same index as the Replaced Contract or Prepaid
Contract, as the case may be, (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 Contract or Prepaid Contract, as the case may be,
and (iii) is subject to a minimum rate of interest no less than the minimum rate
of interest on the Replaced Contract or Prepaid Contract, as the case may be,
and a maximum rate of interest no more than 1.0% greater than the rate of
interest on the Replaced Contract or Prepaid Contract, as the case may be, (g)
as of the date of its origination, was identified by the Company under its
standard underwriting criteria as the same credit grade as the Replaced Contract
or Prepaid Contract, as the case may be, (h) the mortgage securing such Contract
is in a lien position that is the same or better than the mortgage securing the
Replaced Contract or Prepaid Contract, as the case may be, (i) the loan to value
ratio of such is not more than 100 basis points higher than the loan to value
ratio of the Replaced Contract or Prepaid Contract, as the case may be, and (j)
has no scheduled payment delinquent more than 30 days.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Errors and Omissions Protection Policy" means the employee errors and
omissions policy maintained by the Servicer or any similar replacement policy
covering errors and omissions by the Servicer's employees, and meeting the
requirements of Section 5.09, all as such policy relates to Contracts comprising
a portion of the corpus of the Trust.
"Event of Termination" has the meaning assigned in Section 7.01.
"Expense Adjusted Contract Rate" means, with respect to any Adjustable Rate
Home Equity Contract, the then applicable mortgage rate thereon, minus the
Expense Fee Rate.
"Expense Fee Rate" means .50%.
"Federal Bankruptcy Code" means 11 U.S.C. Section 101 et seq.
"FHA" means the Federal Housing Administration, or any successor thereto.
"FHA Insurance" means the credit insurance provided by FHA pursuant to
Title I of the National Housing Act, as evidenced by the Company's Contract of
Insurance.
1-30
<PAGE>
"FHA-Insured Contracts" means those Home Improvement Contracts that have
been or are being reported to FHA as eligible for FHA Insurance, a list of which
is attached to this Agreement as Exhibit P.
"FHA Regulations" means the regulations promulgated by HUD relating to
Title I home improvement loans, currently found at 24 C.F.R. (S)201.
"Fidelity Bond" means the fidelity bond maintained by the Servicer or any
similar replacement bond, meeting the requirements of Section 5.09, as such bond
relates to Contracts comprising a portion of the corpus of the Trust.
"Final Payment Date" means the Payment Date on which the final distribution
in respect of Certificates will be made pursuant to Section 12.04.
"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 Home Equity Contract" means each closed-end home equity loan
identified as such in the List of Contracts, which Fixed Rate Home Equity
Contract 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 Home Equity
Contract. Each Fixed Rate Home Equity Contract is either a Group I Contract or
a Group II Contract.
"GNMA" means the Government National Mortgage Association, or any successor
thereto.
"Group I Contract" means a Fixed Rate Home Equity Contract designated as
such on the List of Contracts.
"Group II Contract" means a Fixed Rate Home Equity Contract designated as
such on the List of Contracts.
"Home Equity Contract" means each Fixed Rate Home Equity Contract or
Adjustable Rate Home Equity Contract.
"Home Improvement Contract" means each home improvement contract and
promissory note described in the List of Contracts, which Home Improvement
Contract is to be assigned and conveyed by the Company to the Trust, and
includes, without limitation, all related mortgages, deeds
1-31
<PAGE>
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 Home Improvement Contract.
"HUD" means the United States Department of Housing and Urban Development,
or any successor thereto.
"Independent" means, when used with respect to any specified Person, any
Person who (i) is in fact independent of the Company and the Servicer, (ii) does
not have any direct financial interest or any material indirect financial
interest in the Company or the Servicer or in an Affiliate of either, and (iii)
is not connected with the Company or the Servicer as an officer, employee,
promoter, underwriter, trustee, partner, director or person performing similar
functions. Whenever it is provided herein that any Independent Person's opinion
or certificate shall be furnished to the Trustee, such opinion or certificate
shall state that the signatory has read this definition and is Independent
within the meaning set forth herein.
"Initial" means, with respect to a Contract, a Contract identified on the
List of Contracts attached hereto as of the Closing Date.
"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
1-32
<PAGE>
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.
"LIBOR Determination Date" means the second LIBOR Business Day prior to the
first day of the related Interest Reset Period.
"Liquidated Contract" means with respect to any Due Period, either
(1) a Defaulted Contract as to which (a) the Servicer has received
from the Obligor, or a third party purchaser of the Contract, all amounts
which the Servicer reasonably and in good faith expects to recover from or
on account of such Contract, or (b) in the case of an FHA-Insured Contract,
either (i) FHA has paid the claim or (ii) the Servicer has determined in
good faith that FHA will not pay the claim, or
(2) a Contract (a) upon which all or a portion of the first payment of
interest due by the Obligor was added to principal, and (b) on which the
Obligor failed to pay the full amount of principal due on the Contract, as
computed by the Servicer;
provided, however, that any Contract which the Company is obligated to
repurchase pursuant to Section 3.05, and did so repurchase or substitute
therefor an Eligible Substitute Contract in accordance with Section 3.05, shall
be deemed not to be a Liquidated Contract; and provided, further, that with
respect to Due Periods beginning on or after December 2022 (in the case of a
Home Improvement Contract) or October 2027 (in the case of a Home Equity
Contract), a Liquidated Contract also means any Contract as to which the
Servicer has commenced foreclosure proceedings, made a sale of the Contract to a
third party for foreclosure or enforcement, or, in the case of an FHA-Insured
Contract, submitted a claim to FHA.
"Liquidation Expenses" means out-of-pocket expenses (exclusive of any
overhead expenses) which are incurred by the Servicer in connection with the
liquidation of any Defaulted Contract, including, without limitation, legal fees
and expenses, and any related and unreimbursed expenditures for property taxes,
property preservation or restoration of the property to marketable condition.
"Liquidation Proceeds" means cash (including insurance proceeds) received
in connection with the liquidation of Defaulted Contracts, whether through
repossession, foreclosure sale or otherwise.
1-33
<PAGE>
"List of Contracts" means the lists identifying each Contract constituting
part of the Trust Fund and attached either to this Agreement as Exhibit O-1, O-
2, or O-3 or to a Subsequent Transfer Instrument as Exhibit A or B, as such
lists may be amended from time to time pursuant to Section 2.06 or Section
3.05(b) to add Eligible Substitute Contracts and delete Replaced Contracts or
Prepaid Contracts, as the case may be. Each List of Contracts shall set forth
as to each Contract identified on it (i) the Cut-off Date Principal Balance,
(ii) the amount of monthly payments due from the Obligor, (iii) the Contract
Interest Rate, (iv) the maturity date and (v) with respect to each Fixed Rate
Home Equity Contract, whether such Contract is a Group I Contract or a Group II
Contract.
"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 Contract Rate" means as to any Adjustable Rate Home Equity
Contract, the Minimum Contract Interest Rate set forth in such Contract.
"Monthly Report" has the meaning assigned in Section 6.01.
"Monthly Servicing Fee" means, as of any Payment Date, (1) with respect to
the Home Improvement Contracts, one-twelfth of the product of .50% and the sum
of the Pool Scheduled Principal Balance of Sub-Pool HI with respect to the
preceding Payment Date (or, in the case of the first Payment Date, the Cut-off
Date), and the Sub-Pool HI Pre-Funded Amount as of the preceding Payment Date
(or, in the case of the first Payment Date, the Closing Date), and (2) with
respect to the Home Equity Contracts, one-twelfth of the product of .50% and the
sum of the Pool Scheduled Principal Balance of Sub-Pool HE with respect to the
preceding Payment Date (or, in the case of the first Payment Date, the Cut-off
Date), and the Sub-Pool HE Pre-Funded Amount as of the preceding Payment Date
(or, in the case of the first Payment Date, the Closing Date).
"Moody's" means Moody's Investors Service, Inc., or any successor thereto;
provided that, if Moody's no longer has a rating outstanding on any Class of
Certificates, then references herein to "Moody's" shall be deemed to refer to
the NRSRO then rating any Class of the Certificates (or, if more than one such
NRSRO is then rating any Class of the Certificates, to such NRSRO as may be
designated by the Servicer), and references herein to ratings by or requirements
of Moody's shall be deemed to have the equivalent meanings with respect to
ratings by or requirements of such NRSRO.
"Net Liquidation Loss" means, as to a Liquidated Contract, the difference
between (a) the Repurchase Price of such Contract, and (b) the Net Liquidation
Proceeds with respect to such Liquidated Contract, where such difference is a
positive number.
"Net Liquidation Proceeds" means, as to a Liquidated Contract, the proceeds
received, or, for Contracts which become Liquidated Contracts pursuant to the
last proviso in the definition of "Liquidated Contract," the estimated proceeds
to be received, as of the last day of the Due Period in which such Contract
became a Liquidated Contract, from the Obligor, from a third party purchaser
1-34
<PAGE>
of the Contract, under FHA Insurance, under insurance other than FHA insurance,
or otherwise, net of Liquidation Expenses.
"NRSRO" means any nationally recognized statistical rating organization.
"Obligor" means the person who owes payments under a Contract.
"Officer's Certificate" means a certificate signed by the Chairman of the
Board, President or any Vice President of the Company and delivered to the
Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may, except as
expressly provided herein, be salaried counsel for the Company or the Servicer,
as applicable, acceptable to the Trustee and the Company.
"Original Class 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).
"Original Series 1998-E Certificate Principal Balance" means
$1,350,000,000.
"Original Sub-Pool HE Certificate Principal Balance" means $1,100,000,000.
"Original Sub-Pool HI Certificate Principal Balance" means $250,000,000.
"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 0.65% per annum on each Payment Date on which
the Pool Scheduled Principal Balance of all Contracts is 10% or more of the
Original Series 1998-E Certificate Principal Balance, and 0.90% per annum on
each Payment Date on which the Pool Scheduled Principal Balance of all Contracts
is less than 10% of the Original Series 1998-E 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 HE: 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.
1-35
<PAGE>
"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 January 15, 1999.
"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 Principal Balance of the
related Class or, in the case of a Class HE: A-5 IO Certificate, by the Class
HE: A-5 IO Original Notional Principal 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, limited liability
company, 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).
"Pool Scheduled Principal Balance" means, with respect to all Contracts or
the Contracts comprising a given Sub-Pool, as of any Payment Date, the aggregate
Scheduled Principal Balance of all Contracts or the Contracts comprising such
Sub-Pool, as the case may be, 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-Funding ARM Subaccount" means the account so designated, established
and maintained pursuant to Section 8.08.
"Pre-Funding Group I Subaccount" means the account so designated,
established and maintained pursuant to Section 8.08.
"Pre-Funding Group II Subaccount" means the account so designated,
established and maintained pursuant to Section 8.08.
1-36
<PAGE>
"Pre-Funding HI Subaccount" means the subaccount 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
Sub-Pool HE Pre-Funding Account is less than $10,000.00 and the amount on
deposit in the Sub-Pool HI Pre-Funding Account is less than $10,000.00, or (b)
the close of business on the date which is 60 days after the Closing Date or (c)
the date on which an Event of Termination occurs.
"Prepaid Contract" has the meaning assigned in Section 2.06.
"Principal Prepayment" means a payment or other recovery of principal on a
Contract (exclusive of Liquidation Proceeds) which is received in advance of its
scheduled due date and applied upon receipt (or, in the case of a partial
prepayment, upon the next scheduled payment date on such Contract) to reduce the
outstanding principal amount due on such Contract prior to the date or dates on
which such principal amount is due.
"Principal Prepayment in Full" means any Principal Prepayment of the entire
principal balance of a Contract.
"Prospectus" means the Prospectus dated October 9, 1998, and Prospectus
Supplement dated November 17, 1998, relating to the Certificates.
"Rating Agencies" means Moody's and Fitch.
"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 Contract" has the meaning assigned in Section 3.05(b).
"Repurchase Price" means, with respect to a Contract to be repurchased
pursuant to Section 3.05 or which becomes a Liquidated Contract, an amount equal
to (a) the remaining principal amount outstanding on such Contract (without
giving effect to any Advances paid by the Servicer or the Trustee, as
applicable, with respect to such Contract pursuant to Section 8.02), plus (b)
interest at the Weighted Average Pass-Through Rate on such Contract from the end
of the Due Period
1-37
<PAGE>
with respect to which the Obligor last made a scheduled payment (without giving
effect to any Advances paid by the Servicer or the Trustee, as applicable, with
respect to such Contract pursuant to Section 8.02) through the date of such
repurchase or liquidation.
"Reserve Account" means the segregated trust account established pursuant
to Section 8.09.
"Reserve Account Balance" means, as to any Payment Date, amounts on deposit
in the Reserve Account, excluding investment earnings, and before withdrawals
from or deposits to the Reserve Account on such Payment Date.
"Reserve Account Lenders" means the lenders named in the Reserve Account
Loan Agreement.
"Reserve Account Loan" means the extension of credit under the Reserve
Account Loan Agreement initially in the amount of $44,000,000, the proceeds of
which the Reserve Account Lenders have deposited in the Reserve Account.
"Reserve Account Loan Agreement" means the Loan Agreement dated as of
December 1, 1998 among the Agent, the Trustee, the Company, the Servicer and the
lenders named therein.
"Reserve Account Loan Balance" means, as to any Payment Date, $44,000,000
less the aggregate of all Reserve Account Step-Down Amounts paid to the Agent
and Reserve Account Loan Distribution Amounts on prior Payment Dates.
"Reserve Account Loan Distribution Amount" means, as to any Payment Date,
the Sub-Pool HE Amount Available with respect to such Payment Date remaining
after payments pursuant to clauses (1) through (11) of Section 8.04(c).
"Reserve Account Loan Fee" means, as to any Payment Date, the fee payable
under the Reserve Account Loan Agreement, generally calculated on the Reserve
Account Loan Balance at a per annum rate of 1.5% until December 7, 2005 and 2.5%
thereafter, as specified by the Agent in a notice delivered to the Trustee and
the Servicer on or before the related Determination Date in the form of Exhibit
U.
"Reserve Account Loan Interest" means, as to any Payment Date, with respect
to the "Risk Rate Based Portion" and the "Standard Rate Based Portion" of the
Reserve Account Loan, the respective amounts so specified by the Agent in a
notice delivered to the Trustee and the Servicer on or before the related
Determination Date in the form of Exhibit U.
"Reserve Account Loan-Other Fees" means as to any Payment Date the fees and
expenses owing to the Agent and the Reserve Account Lenders under the Reserve
Account Loan Agreement (other than the Reserve Account Loan Fee), as specified
by the Agent in a notice delivered to the Trustee and the Servicer on the
related Determination Date in the form of Exhibit U.
1-38
<PAGE>
"Reserve Account Loan Termination Date" means the earliest to occur of (a)
the December 2005 Payment Date, (b) any Payment Date on which the Sub-Pool HE
Quarterly Monthly Excess Flow Percentage is less than or equal to zero, (c) any
Payment Date on which the Sub-Pool HE Sixty-Day Delinquency Ratio is greater
than 14% and has been greater than 14% for the preceding two Payment Dates, (d)
the occurrence of an Event of Termination, (e) the occurrence of an Event of
Default as defined in the Reserve Account Loan Agreement, (f) the date on which
the Servicer exercises its option to purchase the Contracts pursuant to Section
8.06, and (g) the date of the termination of the Trust pursuant to Section
12.04.
"Reserve Account Loan Trigger Event" shall mean the occurrence of any of
the following:
(a) on any Payment Date (i) the quotient, expressed as a percentage,
of (A) the sum of (I) the Class HE: B Adjusted Principal Balance and (II)
the amount, if any, by which the Reserve Account Balance, less any Reserve
Account Step-Down Amount on such Payment Date, exceeds the Reserve Account
Loan Balance divided by (B) the Sub-Pool HE Pool Scheduled Principal
Balance, is less than (ii) 0.65 times the Sub-Pool HE Sixty-Day Delinquency
Ratio with respect to such Payment Date;
(b) on any Payment Date, the Sub-Pool HE Semi-Annual Monthly Excess
Cash Flow Percentage with respect to such Payment Date is less than 1.25%;
or
(c) on any Payment Date in any month after December 2001, the
cumulative rolling average prepayment speed with respect to Sub-Pool HE is
less than 16% CPR.
"Reserve Account Step-Down Amount" means, on any Payment Date on or after
the January 2002 Payment Date on which each Class HE: Subordinate Principal
Distribution Test is satisfied, the amount, if any, by which (a) the sum of the
Class HE: B Adjusted Principal Balance and the Reserve Account Balance exceeds
(b) the product of 16% and the Pool Scheduled Principal Balance of Sub-Pool HE
as of such Payment Date.
"Reserve Account Withdrawal Amount" means, with respect to any Payment
Date, the lesser of (a) the Reserve Account Balance or (b) the amount, if any,
by which (i) the sum of the Class HE: A Principal Balance and the Class HE: M-1
and Class HE: M-2 Adjusted Principal Balances exceeds (ii) the sum of the Pool
Scheduled Principal Balance of Sub-Pool HE (excluding the Undelivered Home
Equity Contracts) plus the amount (if any) on deposit in the Sub-Pool HE Pre-
Funding Account.
"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
1-39
<PAGE>
persons who at the time shall be such officers, respectively, or to whom a
corporate trust matter is referred because of knowledge of, familiarity with,
and authority to act with respect to a particular matter.
"S&P" means Standard & Poor's, a division of The McGraw-Hill Companies,
Inc., or any successor thereto.
"Scheduled Principal Balance" means, with respect to any Contract and any
Payment Date, the Cut-off Date or any Subsequent Cut-off Date, the principal
balance of such Contract 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 Contract the Cut-off Date is the date of
origination of the Contract, its Scheduled Principal Balance as of the Cut-off
Date is the principal balance of the Contract on its date of origination.
"Service Transfer" has the meaning assigned in Section 7.02.
"Servicer" means the Company until any Service Transfer hereunder and
thereafter means the new servicer appointed pursuant to Article VII.
"Servicing Officer" means any officer of the Servicer involved in, or
responsible for, the administration and servicing of Contracts whose name
appears on a list of servicing officers appearing in an Officer's Certificate
furnished to the Trustee by the Company, as the same may be amended from time to
time.
"Step-up Rate Contract" means any Fixed Rate Home Equity Contract bearing
interest during an initial period or periods at a fixed rate or fixed rates that
are lower than the fixed rate borne thereafter.
"Sub-Pool" means Sub-Pool HI or Sub-Pool HE.
"Sub-Pool HE" means the Sub-Pool comprised of the Home Equity Contracts.
"Sub-Pool HE Aggregate Liquidation Loss Principal Amount" means, as of any
Payment Date, the excess, if any, of (a) the Sub-Pool HE 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
of Sub-Pool HE (excluding the Undelivered Home Equity Contracts) plus the amount
(if any) on deposit in the Sub-Pool HE Pre-Funding Account.
1-40
<PAGE>
"Sub-Pool HE 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 Home Equity Contracts as of the close of business on the last day
of the preceding Due Period and (2) that portion of the Sub-Pool HI Amount
Available (determined without regard to clause (a)(2) of the definition thereof)
remaining after payment of the amounts provided for in clauses (1) through (14)
of Section 8.04(b) and (3) any amount withdrawn from the Sub-Pool HE Pre-Funding
Account pursuant to Section 8.08 and deposited in the Certificate Account and
(4) any Reserve Account Withdrawal Amount on such Payment Date, reduced by (b)
any Amount Held for Future Distribution in respect of the Home Equity Contracts.
"Sub-Pool HE: ARM Formula Principal Distribution Amount" means, as to any
Payment Date, 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 Home Equity Contract:
(a) all scheduled payments of principal due on each outstanding
Adjustable Rate Home Equity Contract 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
(b) all Partial Principal Prepayments applied and all Principal
Prepayments in Full received during the prior Due Period in respect of the
Adjustable Rate Home Equity Contracts; plus
(c) the aggregate Scheduled Principal Balance of all Adjustable Rate
Home Equity Contracts that became Liquidated Contracts during the prior Due
Period plus the amount of any reduction in principal balance of any
Adjustable Rate Home Equity Contracts during the prior Due Period pursuant
to bankruptcy proceedings involving the related Obligor; plus
(d) the aggregate Scheduled Principal Balance of all Adjustable Rate
Home Equity Contracts repurchased, and all amounts deposited in lieu of the
repurchase of any Adjustable Rate Home Equity Contract, during the prior
Due Period pursuant to Section 3.05(a) or, in the event of a substitution
of an Adjustable Rate Home Equity Contract 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
(e) on the Post-Funding Payment Date, the amount (if any) then on
deposit in the Pre-Funding ARM Subaccount.
"Sub-Pool HE Average Sixty-Day Delinquency Ratio Test" means, to be
considered "satisfied" for any Payment Date, that the arithmetic average of the
Sub-Pool HE Sixty-Day
1-41
<PAGE>
Delinquency Ratios for such Payment Date and for the two immediately preceding
Payment Dates is less than or equal to 10%.
"Sub-Pool HE Average Thirty-Day Delinquency Ratio Test" means, to be
considered "satisfied" for any Payment Date, that the arithmetic average of the
Sub-Pool HE Thirty-Day Delinquency Ratios for such Payment Date and for the two
immediately preceding Payment Dates is less than or equal to 12%.
"Sub-Pool HE Certificate" means a Certificate for Home Improvement and Home
Equity Loans, Series 1998-E, Class HE: A-1A NAS, Class HE: A-1B ARM, Class HE:
A-1 (Underlying), Class HE: A-2, Class HE: A-3, Class HE: A-4, Class HE: A-5 IO,
Class HE: M-1, Class HE: M-2, or Class HE: B, executed and delivered by the
Trustee substantially in the form of Exhibit D-1, D-2, D-3, E or F, as
applicable, but does not include the Class C Certificates.
"Sub-Pool HE Certificate Principal Balance" means the sum of the Class HE:
A-1A NAS, Class HE: A-1B ARM, Class HE: A-1 (Underlying), Class HE: A-2, Class
HE: A-3, Class HE: A-4, Class HE: M-1, Class HE: M-2, and Class HE: B Principal
Balances.
"Sub-Pool HE Cumulative Realized Loss Ratio" means, for any Payment Date, a
fraction, expressed as a percentage, the numerator of which is the Sub-Pool HE
Cumulative Realized Losses for that Payment Date, and the denominator of which
is the Cut-off Date Pool Principal Balance of Sub-Pool HE.
"Sub-Pool HE Cumulative Realized Losses" means, as to any Payment Date, the
sum of the Sub-Pool HE Realized Losses for that Payment Date and each preceding
Payment Date since the Cut-off Date.
"Sub-Pool HE Cumulative Realized Losses Test" means, to be considered
"satisfied" for any Payment Date, that the Sub-Pool HE Cumulative Realized Loss
Ratio as of such Payment Date is less than or equal to 7.5%.
"Sub-Pool HE Current Realized Loss Ratio" means, as to any Payment Date, a
fraction, expressed as a percentage, the numerator of which is the aggregate
Sub-Pool HE Realized Losses for such Payment Date and each of the five
immediately preceding Payment Dates, multiplied by two, and the denominator of
which is the arithmetic average of the Pool Scheduled Principal Balance of Sub-
Pool HE as of the sixth preceding Payment Date and the Pool Scheduled Principal
Balance of Sub-Pool HE as of such Payment Date.
"Sub-Pool HE Current Realized Losses Test" means, to be considered
"satisfied" for any Payment Date, that the Sub-Pool HE Current Realized Loss
Ratio for such Payment Date is less than or equal to 2%.
1-42
<PAGE>
"Sub-Pool HE Fixed Rate Formula Principal Distribution Amount" means, as to
any Payment Date, the sum of the Sub-Pool HE Group I Formula Principal
Distribution Amount and the Sub-Pool HE Group II Formula Principal Distribution
Amount.
"Sub-Pool HE Formula Principal Distribution Amount" means, as to any
Payment Date, the sum of the Sub-Pool HE: ARM Formula Principal Distribution
Amount and the Sub-Pool HE Fixed Rate Formula Principal Distribution Amount.
"Sub-Pool HE Group I Formula Principal Distribution Amount" means, as to
any Payment Date, the sum of:
(a) all scheduled payments of principal due on each outstanding Group
I Contract 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
(b) all Partial Principal Prepayments applied and all Principal Prepayments
in Full received during the prior Due Period with respect to the Group I
Contracts; plus
(c) the aggregate Scheduled Principal Balance of all Group I Contracts that
became Liquidated Contracts during the prior Due Period plus the amount of any
reduction in principal balance of any Group I Contract during the prior Due
Period pursuant to bankruptcy proceedings involving the related Obligor; plus
(d) the aggregate Scheduled Principal Balance of all Group I Contracts
repurchased, and all amounts deposited in lieu of the repurchase of any Group I
Contract, during the prior Due Period pursuant to Section 3.05(a) or, in the
event of a substitution of a Group I Contract 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
(e) any amount described in clauses (a) through (d) above that was not
previously distributed because of an insufficient amount of funds available in
the Certificate Account if (1) the Payment Date occurs on or after the Payment
Date on which the Class HE: B Principal Balance has been reduced to zero, or (2)
such amount was not covered by a Class HE: B Guaranty Payment and corresponding
reduction in the Class HE: B Principal Balance; plus
(f) on the Post-Funding Payment Date, the Sub-Pool HE Pre-Funded Group I
Amount.
1-43
<PAGE>
"Sub-Pool HE Group II Formula Principal Distribution Amount" means, as to
any Payment Date, the sum of:
(a) all scheduled payments of principal due on each outstanding Group II
Contract 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
(b) all Partial Principal Prepayments applied and all Principal Prepayments
in Full received during the prior Due Period with respect to the Group II
Contracts; plus
(c) the aggregate Scheduled Principal Balance of all Group II Contracts
that became Liquidated Contracts during the prior Due Period plus the amount of
any reduction in principal balance of any Group II Contract during the prior Due
Period pursuant to bankruptcy proceedings involving the related Obligor; plus
(d) the aggregate Scheduled Principal Balance of all Group II Contracts
repurchased, and all amounts deposited in lieu of the repurchase of any Group II
Contract, during the prior Due Period pursuant to Section 3.05(a) or, in the
event of a substitution of a Group II Contract 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
(e) any amount described in clauses (a) through (d) above that was not
previously distributed because of an insufficient amount of funds available in
the Certificate Account if (1) the Payment Date occurs on or after the Payment
Date on which the Class HE: B Principal Balance has been reduced to zero, or (2)
such amount was not covered by a Class HE: B Guaranty Payment and corresponding
reduction in the Class HE: B Principal Balance; plus
(f) on the Post-Funding Payment Date, the Sub-Pool HE Pre-Funded Group II
Amount.
"Sub-Pool HE Monthly Excess Cash Flow Percentage" means, with respect to
any Payment Date, an amount equal to the percentage equivalent of a fraction,
(A) the numerator of which is the product of (x) the Sub-Pool HE Amount
Available remaining after distributions paid pursuant to clauses (1) through
(11) of Section 8.04(c) on such Payment Date and (y) twelve, and (B) the
denominator of which is the sum of the Class HE: A, the Class HE: M and Class
HE: B Principal Balances (before distributions on such Payment Date).
1-44
<PAGE>
"Sub-Pool HE Pool Factor" means, at any time, the percentage derived from a
fraction, the numerator of which is the Sub-Pool HE Certificate Principal
Balance at such time and the denominator of which is the Original Sub-Pool HE
Certificate Principal Balance.
"Sub-Pool HE Pre-Funded Amount" means with respect to any date of
determination, the sum of the Sub-Pool HE Pre-Funded ARM Amount and the Sub-Pool
HE Pre-Funded Fixed Rate Amount.
"Sub-Pool HE 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 Home
Equity Contracts to the Trust on such date, and (ii) the amount then on deposit
in the Undelivered ARM Subaccount, after giving effect to any release of funds
to the Company on that date pursuant to Section 8.08(c).
"Sub-Pool HE 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
Group I Subaccount and the Pre-Funding Group II Subaccount, after giving effect
to any sale of Subsequent Fixed Rate Home Equity Contracts to the Trust on such
date, and (ii) the amount then on deposit in the Undelivered Group I Subaccount
and the Undelivered Group II Subaccount, after giving effect to any release of
funds to the Company on that date pursuant to Section 8.08(c).
"Sub-Pool HE Pre-Funding Account" means the account so designated,
established and maintained pursuant to Section 8.08.
"Sub-Pool HE Quarterly Monthly Excess Cash Flow Percentage" means, with
respect to any Payment Date, the arithmetic mean of the Sub-Pool HE Monthly
Excess Cash Flow Percentages for such Payment Date and the two preceding Payment
Dates (or such lesser number of Payment Dates as shall have occurred since the
Closing Date).
"Sub-Pool HE Realized Losses" means, as to any Payment Date, the aggregate
Net Liquidation Losses for all Home Equity Contracts that became Liquidated
Contracts during the immediately preceding Due Period.
"Sub-Pool HE Semi-Annual Monthly Excess Cash Flow Percentage" shall mean,
with respect to any Payment Date, the arithmetic mean of the Sub-Pool HE Monthly
Excess Cash Flow Percentages for such Payment Date and the five preceding
Payment Dates (or such lesser number of Payment Dates as shall have occurred
since the Closing Date).
"Sub-Pool HE 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 Home Equity Contracts that were delinquent 60
days or more as of the end of the prior Due Period (including Home Equity
Contracts in respect of which the related real estate has been
1-45
<PAGE>
foreclosed upon but is still in inventory), and the denominator of which is the
Pool Scheduled Principal Balance of Sub-Pool HE as of such Payment Date.
"Sub-Pool HE 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 Home Equity Contracts that were delinquent 30
days or more as of the end of the prior Due Period (including Home Equity
Contracts in respect of which the related real estate has been foreclosed upon
but is still in inventory), and the denominator of which is the Pool Scheduled
Principal Balance of Sub-Pool HE as of such Payment Date.
"Sub-Pool HI" means the Sub-Pool comprised of the Home Improvement
Contracts.
"Sub-Pool HI Aggregate Liquidation Loss Principal Amount" means, as of any
Payment Date, the excess, if any, of (a) the Sub-Pool HI Certificate Principal
Balance as of the preceding Payment Date (after giving effect to distributions
of principal thereon) over (b) the Pool Scheduled Principal Balance of Sub-Pool
HI (excluding the Undelivered Home Improvement Contracts) plus the amount (if
any) on deposit in the Sub-Pool HI Pre-Funding Account as of such preceding
Payment Date for such preceding Payment Date.
"Sub-Pool HI 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 Home Improvement Contracts as of the close of business on the
last day of the preceding Due Period, and (2) that portion of the Sub-Pool HE
Amount Available (determined without regard to clause (a)(2) of the definition
thereof) remaining after payment of the amounts provided for in clauses (1)
through (13) of Section 8.04(c), reduced by (b) any Amount Held for Future
Distribution in respect of the Home Improvement Contracts.
"Sub-Pool HI Average Sixty-Day Delinquency Ratio Test" means, to be
considered "satisfied" for any Payment Date, that the arithmetic average of the
Sub-Pool HI Sixty-Day Delinquency Ratios for such Payment Date and for the two
immediately preceding Payment Dates is less than or equal to 2.5%.
"Sub-Pool HI Average Thirty-Day Delinquency Ratio Test" means, to be
considered "satisfied" for any Payment Date, that the arithmetic average of the
Sub-Pool HI Thirty-Day Delinquency Ratios for such Payment Date and for the two
immediately preceding Payment Dates is less than or equal to 5%.
"Sub-Pool HI Certificate" means a Certificate for Home Improvement and Home
Equity Loans, Series 1998-E, Class HI: A-1, Class HI: A-2, Class HI: A-3, Class
HI: M-1, Class HI: M-2, Class HI: B-1 or Class HI: B-2, executed and delivered
by the Trustee substantially in the form of Exhibit A, B, or C, as applicable,
but does not include the Class C Certificate.
1-46
<PAGE>
"Sub-Pool HI Certificate Principal Balance" means the sum of the Class HI:
A-1, Class HI: A-2, Class HI: A-3, Class HI: M-1, Class HI: M-2, Class HI: B-1
and Class HI: B-2 Principal Balances.
"Sub-Pool HI Cumulative Realized Loss Ratio" means, for any Payment Date, a
fraction, expressed as a percentage, the numerator of which is the Sub-Pool HI
Cumulative Realized Losses for that Payment Date, and the denominator of which
is the Cut-off Date Pool Principal Balance of Sub-Pool HI.
"Sub-Pool HI Cumulative Realized Losses" means, as to any Payment Date, the
sum of the Sub-Pool HI Realized Losses for that Payment Date and each preceding
Payment Date since the Cut-off Date.
"Sub-Pool HI Cumulative Realized Losses Test" means, to be considered
"satisfied" for any Payment Date, that the Sub-Pool HI Cumulative Realized Loss
Ratio as of such Payment Date is less than or equal to 10%.
"Sub-Pool HI Current Realized Loss Ratio" means, as to any Payment Date, a
fraction, expressed as a percentage, the numerator of which is the aggregate
Sub-Pool HI 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 of Sub-
Pool HI as of the third preceding Payment Date and the Pool Scheduled Principal
Balance of Sub-Pool HI as of such Payment Date.
"Sub-Pool HI Current Realized Losses Test" means, to be considered
"satisfied" for any Payment Date, that the Sub-Pool HI Current Realized Loss
Ratio for such Payment Date is less than or equal to 2.5%.
"Sub-Pool HI Formula Principal Distribution Amount" means, as to any
Payment Date, the sum of:
(a) all scheduled payments of principal due on each outstanding Home
Improvement Contract 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
(b) all Partial Principal Prepayments applied and all Principal
Prepayments in Full received during the prior Due Period with respect to
the Home Improvement Contracts; plus
(c) the aggregate Scheduled Principal Balance of all Home Improvement
Contracts that became Liquidated Contracts during the prior Due Period plus
the amount of
1-47
<PAGE>
any reduction in principal balance of any Home Improvement Contract during
the prior Due Period pursuant to bankruptcy proceedings involving the
related Obligor; plus
(d) the aggregate Scheduled Principal Balance of all Home Improvement
Contracts repurchased during the prior Due Period pursuant to Section
3.05(a) or, in the event of a substitution of a Home Improvement Contract
in accordance with Section 3.05(b), any amount required to be deposited by
the Company in the Certificate Account pursuant to Section 3.05(b)(vi);
plus
(e) on the Post-Funding Payment Date, the Sub-Pool HI Pre-Funded
Amount; plus
(f) any amount described in clauses (a) through (d) above that was
not previously distributed because of an insufficient amount of funds
available in the Certificate Account if (1) the Payment Date occurs on or
after the Payment Date on which the Class HI: B-2 Principal Balance has
been reduced to zero, or (2) such amount was not covered by a Class HI: B-2
Guaranty Payment and corresponding reduction in the Class HI: B-2 Principal
Balance; minus
(g) any Sub-Pool HI Over-Collateralization Adjustment Amount.
"Sub-Pool HI Over-Collateralization Adjustment Amount" means, for any
Payment Date, the amount, if any, by which (a) the Pool Scheduled Principal
Balance of Sub-Pool HI less the sum of the Class HI: A Principal Balance, the
Class HI: M Principal Balance and the Class HI: B Principal Balance exceeds (b)
2% of the Pool Scheduled Principal Balance of Sub-Pool HI.
"Sub-Pool HI Pool Factor" means, at any time, the percentage derived from a
fraction, the numerator of which is the Sub-Pool HI Certificate Principal
Balance at such time and the denominator of which is the Original Sub-Pool HI
Certificate Principal Balance.
"Sub-Pool HI Pre-Funded Amount" means with respect to any date of
determination, the sum of (i) the amount then on deposit in the Pre-Funding HI
Subaccount, after giving effect to any sale of Subsequent Home Improvement
Contracts to the Trust on such date, and (ii) the amount then on deposit in the
Undelivered HI Subaccount, after giving effect to any release of funds to the
Company on that date pursuant to Section 8.07(c).
"Sub-Pool HI Pre-Funding Account" means the account so designated,
established and maintained pursuant to Section 8.07.
"Sub-Pool HI Realized Losses" means, as to any Payment Date, the aggregate
Net Liquidation Losses for all Home Improvement Contracts that became Liquidated
Contracts during the immediately preceding Due Period.
1-48
<PAGE>
"Sub-Pool HI Senior Percentage" means, with respect to the Sub-Pool HI
Certificates:
(a) as to any Payment Date prior to the Class HI: B Cross-over Date,
100%;
(b) as to any Payment Date on or after the Class HI: B Cross-over
Date but on or prior to the Class HI: M-2 Cross-over Date, and on which any
Class HI: B Principal Distribution Test is not satisfied, 100%;
(c) as to any Payment Date on or after the Class HI: B Cross-over
Date but on or prior to the Class HI: M-2 Cross-over Date, and on which
each Class HI: B Principal Distribution Test is satisfied, a fraction,
expressed as a percentage, the numerator of which is the sum of the Class
HI: A Principal Balance and the Class HI: M Principal Balance as of such
Payment Date, and the denominator of which is the Pool Scheduled Principal
Balance of Sub-Pool HI as of the immediately preceding Payment Date; and
(d) as to any Payment Date after the Class HI: M-2 Cross-over Date,
0%.
"Sub-Pool HI 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 Home Improvement Contracts that were delinquent
60 days or more as of the end of the prior Due Period (including Home
Improvement Contracts in respect of which the related real estate has been
foreclosed upon but is still in inventory), and the denominator of which is the
Pool Scheduled Principal Balance of Sub-Pool HI as of such Payment Date.
"Sub-Pool HI Supplementary Principal Distribution Amount" means, on the
first (if any) Payment Date occurring after December 2001 on which:
a. the Sub-Pool HI Current Realized Losses Test has not been met, and
b. the ratio of (i) the Net Liquidation Losses on all FHA-Insured Contracts
that became Liquidated Contracts in any Due Period preceding such
Payment Date to (ii) the aggregate Repurchase Price of all such
Liquidated Contracts is 50% or more,
an amount equal to clause (b) of the definition of the Sub-Pool HI Over-
Collateralization Adjustment Amount on such Payment Date.
"Sub-Pool HI 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 Home Improvement Contracts that were delinquent
30 days or more as of the end of the prior Due Period (including Home
Improvement Contracts in respect of which the related real estate has been
foreclosed upon but is still in inventory), and the denominator of which is the
Pool Scheduled Principal Balance of Sub-Pool HI as of such Payment Date.
1-49
<PAGE>
"Subsequent Cut-off Date" means, with respect to a Subsequent Contract, the
related Subsequent Transfer Date.
"Subsequent" means, with respect to a Contract, a Contract sold by the
Company to the Trust pursuant to Section 2.03, such Contract being identified on
Exhibit A, B or C, as applicable, attached to a Subsequent Transfer Instrument.
"Subsequent Transfer Date" means, with respect to each Subsequent Transfer
Instrument, the date on which the related Subsequent Contracts 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 S, by which the Company sells Subsequent
Contracts to the Trust.
"Subsidiary REMIC" means the segregated pool of assets comprising the Trust
Fund, but excluding the Sub-Pool HE Pre-Funding Account, the Sub-Pool HI Pre-
Funding Account, the Reserve Account, the Swap Reserve 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 Pass-Through Rate" means, with respect to a subsidiary
REMIC Regular Interest Designation, the applicable rates set forth in Section
2.05(c).
"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 8.09.
"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 HE: A-1 Distribution Amount, Subsidiary REMIC
Regular Interest HE: A-2 Distribution Amount, Subsidiary REMIC Regular Interest
HE: MB Distribution Amount, Subsidiary REMIC Regular Interest HI: A-1
Distribution Amount, Subsidiary REMIC Regular Interest HI: A-2 Distribution
Amount, Subsidiary REMIC Regular Interest HI: A-3 Distribution Amount,
Subsidiary REMIC Regular Interest HI: M-1 Distribution Amount, Subsidiary REMIC
Regular Interest HI: M-2 Distribution Amount, Subsidiary REMIC Regular Interest
HI: B-1 Distribution Amount and Subsidiary REMIC Regular Interest HI: B-2
Distribution Amount.
1-50
<PAGE>
"Subsidiary REMIC Regular Interest HE: A-1" 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 HE: 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 HE: 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 HI: A-1" 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 HI: 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 HI: A-3" 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 HI: B-1" 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 HI: B-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 HI: M-1" means an uncertificated partial
undivided beneficial ownership interest designated as a "regular interest" in
the Subsidiary REMIC having the
1-51
<PAGE>
related Subsidiary REMIC Principal Balance and bearing interest at the related
Subsidiary REMIC Pass-Through Rate.
"Subsidiary REMIC Regular Interest HI: M-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 HE: 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 HE: A-1 for such Payment Date pursuant to
Section 8.09.
"Subsidiary REMIC Regular Interest HE: 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 HE: A-2 for such Payment Date pursuant to
Section 8.09.
"Subsidiary REMIC Regular Interest HE: 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 HE: MB for such Payment Date pursuant to
Section 8.09.
"Subsidiary REMIC Regular Interest HI: 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 HI: A-1 for such Payment Date pursuant to
Section 8.09.
"Subsidiary REMIC Regular Interest HI: 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 HI: A-2 for such Payment Date pursuant to
Section 8.09.
"Subsidiary REMIC Regular Interest HI: A-3 Distribution Amount" means with
respect to any Payment Date, the sum of the amounts deemed to be distributed on
the Subsidiary REMIC Regular Interest HI: A-3 for such Payment Date pursuant to
Section 8.09.
"Subsidiary REMIC Regular Interest HI: B-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 HI: B-1 for such Payment Date pursuant to
Section 8.09.
"Subsidiary REMIC Regular Interest HI: B-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 HI: B-2 for such Payment Date pursuant to
Section 8.09.
"Subsidiary REMIC Regular Interest HI: M-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 HI: M-1 for such Payment Date pursuant to
Section 8.09.
1-52
<PAGE>
"Subsidiary REMIC Regular Interest HI: M-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 HI: M-2 for such Payment Date pursuant to
Section 8.09.
"Subsidiary REMIC Regular Interests" means Subsidiary REMIC Regular
Interest HE: A-1, Subsidiary REMIC Regular Interest HE: A-2, Subsidiary REMIC
Regular Interest HE: MB, Subsidiary REMIC Regular Interest HI: A-1, Subsidiary
REMIC Regular Interest HI: A-2, Subsidiary REMIC Regular Interest HI: A-3,
Subsidiary REMIC Regular Interest HI: M-1, Subsidiary REMIC Regular Interest HI:
M-2, Subsidiary REMIC Regular Interest HI: B-1, and Subsidiary REMIC Regular
Interest HI: B-2.
"Swap Reserve Account" means the segregated trust account established
pursuant to Section 8.11.
"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).
"Termination Date" shall mean the earliest to occur of (a) the December
2005 Payment Date, (b) any Payment Date on which the Quarterly Monthly Excess
Flow Percentage is less than or equal to zero, (c) any Payment Date on which the
Sixty-Day Delinquency Ratio is greater than 14% and has been greater than 14%
for the preceding two Payment Dates, (d) the occurrence of an Event of
Termination, (e) the occurrence of an Event of Default, (f) the Early
Termination Date and (g) the date of the termination of the Trust pursuant to
Section 12.04 of the Pooling and Servicing Agreement.
"Trust" means Home Improvement and Home Equity Loan Trust 1998-E.
"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 Contracts, 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 Contracts due after the Cut-off Date, or
Subsequent Cut-off Date with respect to Subsequent Home Equity Contracts and
Subsequent Home Improvement Contracts, (ii) all rights under FHA Insurance in
respect of each FHA-Insured Contract, (iii) all rights under any hazard, flood
or other individual insurance policy on the real estate securing a Contract for
the benefit of the creditor of such Contract, (iv) all rights the Company may
have against the originating contractor or lender with respect to Contracts
originated by a contractor or lender other than the Company, (v) all rights
under the Errors and Omissions Protection Policy and the Fidelity Bond as such
policy and bond relate to the Contracts, (vi) all rights under any title
insurance policies, if applicable, on any of the properties securing Contracts,
(vii) all documents contained in the Contract Files, (viii) the Class HI: B-2
Limited Guaranty and the Class HE: B Limited Guaranty, (ix) amounts in the
Certificate Account, Sub-Pool HE Pre-Funding Account, Sub-Pool HI Pre-Funding
1-53
<PAGE>
Account and Reserve Account, excluding all proceeds of investments of funds in
the Reserve Account, and (x) all proceeds and products of the foregoing.
"Trustee Advance" has the meaning assigned in Section 11.16.
"Undelivered" means, with respect to a Contract, as of any date of
determination an Initial Contract identified on the exception report attached to
the Acknowledgement delivered by the Trustee under Section 2.04 as a Contract as
to which the Trustee did not receive the related Contract File as of the Closing
Date and has not received the related Contract File and remitted payment to the
Company pursuant to Section 8.07(c) or Section 8.08(c), as applicable.
"Undelivered ARM Subaccount" means the subaccount so designated,
established and maintained pursuant to Section 8.08.
"Undelivered Group I Subaccount" means the subaccount so designated,
established and maintained pursuant to Section 8.08.
"Undelivered Group II Subaccount" means the subaccount so designated,
established and maintained pursuant to Section 8.08.
"Undelivered HI Subaccount" means the account so designated, established
and maintained pursuant to Section 8.07.
"Underwriters" means Credit Suisse First Boston Corporation, Chase
Securities Inc., First Union Capital Markets, Lehman Brothers Inc., and Merrill
Lynch & Co.
"Underwriting Agreement" means the Underwriting Agreement and Related Terms
Agreement, each dated as of November 17, 1998, among the Company and the
Underwriters relating to the sale of the Certificates.
"Unpaid Class HE: A Interest Shortfall" means, as to each Class of Class
HE: A Certificates and any Payment Date, the amount, if any, of the Class HE: 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 HE: A-1B ARM Available Funds Limitation Interest Shortfall"
means, with respect to the Class HE: A-1B ARM Certificates and any Payment Date,
the amount, if any, of the Class HE: A-1B ARM Available Funds Limitation
Interest Shortfall for the prior Payment Date, plus one month's interest thereon
(to the extent payment thereof is legally permissible) at the Class HE: A-1B ARM
Pass-Through Rate.
"Unpaid Class HE: B Interest Shortfall" means, with respect to the Class
HE: B Certificates and any Payment Date, the amount, if any, of the Class HE: B
Interest Shortfall for the prior Payment
1-54
<PAGE>
Date, plus one month's interest thereon (to the extent payment thereof is
legally permissible) at the Class HE: B Pass- Through Rate.
"Unpaid Class HE: B Liquidation Loss Interest Shortfall" means, with
respect to the Class HE: B Certificates and any Payment Date, the amount, if
any, of the Class HE: B 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 HE: B Pass-Through Rate.
"Unpaid Class HE: M-1 Interest Shortfall" means, with respect to the Class
HE: M-1 Certificates and any Payment Date, the amount, if any, of the Class HE:
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 HE:
M-1 Pass-Through Rate.
"Unpaid Class HE: M-1 Liquidation Loss Interest Shortfall" means, with
respect to the Class HE: M-1 Certificates and any Payment Date, the amount, if
any, of the Class HE: 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 HE: M-1 Pass-Through Rate.
"Unpaid Class HE: M-2 Interest Shortfall" means, with respect to the Class
HE: M-2 Certificates and any Payment Date, the amount, if any, of the Class HE:
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 HE:
M-2 Pass-Through Rate.
"Unpaid Class HE: M-2 Liquidation Loss Interest Shortfall" means, with
respect to the Class HE: M-2 Certificates and any Payment Date, the amount, if
any, of the Class HE: 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 HE: M-2 Pass-Through Rate.
"Unpaid Class HI: A Interest Shortfall" means, as to each Class of Class
HI: A Certificates and any Payment Date, the amount, if any, of the Class HI: 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 HI: B-1 Interest Shortfall" means, with respect to the Class
HI: B-1 Certificates and any Payment Date, the amount, if any, of the Class HI:
B-1 Interest Shortfall for the prior Payment Date, plus one month's interest
thereon (to the extent payment thereof is legally permissible) at the Class HI:
B-1 Pass-Through Rate.
"Unpaid Class HI: B-1 Liquidation Loss Interest Shortfall" means, with
respect to the Class HI: B-1 Certificates and any Payment Date, the amount, if
any, of the Class HI: 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 HI: B-1 Pass-Through Rate.
1-55
<PAGE>
"Unpaid Class HI: B-2 Interest Shortfall" means, with respect to the Class
HI: B-2 Certificates and any Payment Date, the amount, if any, of the Class HI:
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 HI:
B-2 Pass-Through Rate.
"Unpaid Class HI: M-1 Interest Shortfall" means, with respect to the Class
HI: M-1 Certificates and any Payment Date, the amount, if any, of the Class HI:
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 HI:
M-1 Pass-Through Rate.
"Unpaid Class HI: M-1 Liquidation Loss Interest Shortfall" means, with
respect to the Class HI: M-1 Certificates and any Payment Date, the amount, if
any, of the Class HI: 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 HI: M-1 Pass-Through Rate.
"Unpaid Class HI: M-2 Interest Shortfall" means, with respect to the Class
HI: M-2 Certificates and any Payment Date, the amount, if any, of the Class HI:
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 HI:
M-2 Pass-Through Rate.
"Unpaid Class HI: M-2 Liquidation Loss Interest Shortfall" means, with
respect to the Class HI: M-2 Certificates and any Payment Date, the amount, if
any, of the Class HI: 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 HI: M-2 Pass-Through Rate.
"Weighted Average Home Equity Contract Rate" means, as to any Payment Date,
the weighted average (determined by Scheduled Principal Balance) of the Contract
Interest Rates for all Home Equity Contracts that were outstanding during the
immediately preceding month.
"Weighted Average Home Improvement Contract Rate" means, as to any Payment
Date, the weighted average (determined by Scheduled Principal Balance) of the
Contract Interest Rates for all Home Improvement Contracts that were outstanding
during the immediately preceding month.
"Weighted Average Pass-Through Rate" means, as to any Payment Date,
(a) with respect to any Home Improvement Contract, the weighted average
(expressed as a percentage and rounded to four decimal places) of the Class HI:
A-1, Class HI: A-2, Class HI: A-3, Class HI: M-1, Class HI: M-2, Class HI: B-1
and Class HI: B-2 Pass-Through Rates, weighted on the basis of the respective
Class HI: A-1, Class HI: A-2, Class HI: A-3, Class HI: M-1, Class HI: M-2, Class
HI: B-1 and Class HI: B-2 Principal Balances immediately prior to such Payment
Date, and (b) with respect to any Home Equity Contract, the sum of (i) the
weighted average (expressed as a percentage and rounded to four decimal places)
of the Class HE: A-1A NAS, Class HE: A-1B ARM, Class HE: A-1 (Underlying), Class
HE: A-2, Class HE: A-3, Class HE: A-4, Class HE: M-1, Class HE: M-2, and Class
HE: B Pass-Through Rates, weighted on the basis of the respective Class HE: A-1A
NAS,
1-56
<PAGE>
Class HE: A-1B ARM, Class HE: A-1 (Underlying), Class HE: A-2, Class HE: A- 3,
Class HE: A-4, Class HE: M-1, Class HE: M-2, Class HE: B Principal Balances,
plus (ii) if such Payment Date occurs prior to January 1, 2001, a rate equal to
the fraction, expressed as a percentage, equal to (A) one year's interest (or,
if less, interest for such number of months as remain prior to the Payment Date
occurring in January 1, 2001) on the Class HE: A-5 IO Notional Principal Amount
at the Class HE: A-5 IO Pass-Through Rate, divided by (B) the Sub-Pool HE
Certificate Principal Balance.
1-57
<PAGE>
ARTICLE II
ESTABLISHMENT OF TRUST; TRANSFER OF CONTRACTS
SECTION 2.01. Closing.
a. There is hereby created, by the Company as settlor, a separate trust
which shall be known as Home Improvement and Home Equity Loan Trust 1998-E. 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 Contracts, including all rights to
receive payments on or with respect to the Contracts due after the Cut-off Date,
or Subsequent Cut-off Date in respect of the Subsequent Contracts, 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. Each such transfer and assignment is intended by the
Company to be a sale of such assets for all purposes, including, without
limitation, the Federal Bankruptcy Code, to the end that all such assets will
hereafter cease to be the property of the Company and would not be includable in
the estate of the Company for purposes of Section 541 of the Federal Bankruptcy
Code.
c. Although the parties intend that each conveyance pursuant to this
Agreement of the Company's right, title and interest in and to the Contracts
(including the Subsequent Contracts) 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 Contracts attached to this Agreement as Exhibits O-1, O-2
and O-3, certified by the Chairman of the Board, President or any Vice President
of the Company.
2-1
<PAGE>
b. A certificate of an officer of the Company substantially in the form
of Exhibit H hereto.
c. An Opinion of Counsel for the Company substantially in the form of
Exhibit I hereto.
d. A letter from KPMG Peat Marwick LLP or another nationally recognized
accounting firm, stating that such firm has reviewed the Initial Contracts (as
defined in the Prospectus) on a statistical sampling basis and, based on such
sampling, concluding that the Initial Contracts conform in all material respects
to the List of Contracts attached hereto as Exhibits O-1, O-2, and O-3, to a
confidence level of 97.5%, with an error rate not in excess of 1.8%, specifying
those Contracts which do not so conform.
e. Copies of resolutions of the board of directors of the Company or of
the executive committee of the board of directors of the Company approving the
execution, delivery and performance of this Agreement and the transactions
contemplated hereunder, certified in each case by the secretary or an assistant
secretary of the Company.
f. Officially certified recent evidence of due incorporation and good
standing of the Company under the laws of the State of Delaware.
g. An Officer's Certificate listing the Servicer's Servicing Officers.
h. Evidence of continued coverage of the Company under the Errors and
Omissions Protection Policy.
i. Evidence of deposit in the Certificate Account of all funds received
with respect to the Contracts from the Cut-off Date to the Closing Date, other
than principal due on or before the Cut-off Date, together with an Officer's
Certificate to the effect that such amount is correct.
j. An Officer's Certificate confirming that the Company has reviewed the
original or a copy of each Initial Contract and each related Contract File, that
each such Contract and Contract File conforms in all material respects with the
List of Contracts and that each such Contract File is complete.
k. Assignments in recordable form to the Trustee of the mortgages, deeds
of trust and security deeds relating to the Initial Contracts.
l. Evidence of the deposit of $13,512,665.88 in the Pre-Funding ARM
Subaccount, $115,520,684.92 in the Pre-Funding Group I Subaccount,
$115,529,684.01 in the Pre-Funding Group II Subaccount and $42,608,609.31 in the
Pre-Funding HI Subaccount.
2-2
<PAGE>
m. Evidence of the deposit (a) in the Undelivered ARM Subaccount of an
amount equal to the aggregate of the Cut-off Date Principal Balances of the
Initial Contracts that are Undelivered Adjustable Rate Home Equity Contracts,
(b) in the Undelivered Group I Subaccount of an amount equal to the aggregate of
the Cut-off Date Principal Balances of the Initial Contracts that are
Undelivered Group I Contracts, (c) in the Undelivered Group II Subaccount of an
amount equal to the aggregate of the Cut-off Date Principal Balances of the
Initial Contracts that are Undelivered Group II Contracts, and (d) in the
Undelivered HI Subaccount of an amount equal to the aggregate of the Cut-off
Date Principal Balances of the Initial Contracts that are Undelivered Home
Improvement Contracts.
n. An executed copy of the Reserve Account Loan Agreement.
o. Evidence of the deposit of $44,000,000 in the Reserve Account.
SECTION 2.03. Conveyance of the Subsequent Contracts.
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 all or a portion of the balance of funds
in the Sub-Pool HE Pre-Funding Account and the Sub-Pool HI Pre-Funding Account,
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 Contracts identified on the List of Contracts attached to the
Subsequent Transfer Instrument, including all rights to receive payments on or
with respect to the Subsequent Contracts due after the related Subsequent Cut-
off Date, and all items with respect to such Subsequent Contracts in the related
Contract Files. The transfer to the Trustee by the Company of the Subsequent
Contracts shall be absolute and is intended by the Company, the Trustee, and the
Certificateholders to constitute and to be treated as a sale of the Subsequent
Contracts 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 Contracts.
The purchase price of Subsequent Group I Contracts shall be paid solely with
amounts in the Pre-Funding Group I Subaccount. The purchase price of Subsequent
Group II Contracts shall be paid solely with amounts in the Pre-Funding Group II
Subaccount. The purchase price of Subsequent Adjustable Rate Home Equity
Contracts shall be paid solely with amounts in the Pre-Funding ARM Subaccount.
The purchase price of Subsequent Home Improvement Contracts shall be paid solely
with amounts in the Pre-Funding HI 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 to the Trustee for Sub-Pool HE the
Subsequent Home Equity Contracts and for Sub-Pool HI the Subsequent Home
Improvement Contracts, and the Trustee shall release funds from the applicable
pre-funding subaccount, only upon the satisfaction of each of the following
conditions on or prior to the related Subsequent Transfer Date:
2-3
<PAGE>
(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 Contracts;
(ii) the Company shall have delivered the related Contract File for each
Subsequent Contract 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 S, which
shall include a List of Contracts identifying the related Subsequent Home Equity
Contracts (and of those, the Adjustable Rate Home Equity Contracts, Group I
Contracts and Group II Contracts, as applicable) and Subsequent Home Improvement
Contracts;
(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;
(vii) the Company shall have delivered to the Trustee an Officer's
Certificate, substantially in the form attached hereto as Exhibit T, 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 Contracts 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 the Rating
Agencies, 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 Contracts and their conformity (and
the conformity of Sub-Pool HE or Sub-Pool
2-4
<PAGE>
HI, as applicable) 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 Contracts, neither the Class HI: A Certificates nor the Class HE: A
Certificates shall receive from either of the Rating Agencies 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 Home Equity Contracts, not specifically identified as Subsequent
Home Equity Contracts as of the Closing Date, do not exceed 25% of the Original
Sub-Pool HE Certificate Principal Balance, and evidence that the aggregate Cut-
off Date Principal Balances of the Subsequent Home Improvement Contracts, not
specifically identified as Subsequent Home Improvement Contracts as of the
Closing Date, do not exceed 25% of the Original Sub-Pool HI 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 Contracts
identified on the applicable List of Contracts and the related Contract Files to
the Trustee and declaring that the Trustee, directly or through a Custodian,
will hold all Contracts that have been delivered in trust, upon the trusts
herein set forth, for the use and benefit of all Certificateholders and the
Class C 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.
b. The Trustee or a Custodian shall review each Contract File, as
described in Exhibit J, within 60 days of the Closing Date or later receipt by
it of the Contract File. If, in its review of the Contract Files as described
in Exhibit J, the Trustee or a Custodian discovers a breach of the
representations or warranties set forth in Sections 3.02, 3.03 or 3.04 of this
Agreement, or in the Officer's 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 Contract 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
2-5
<PAGE>
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.
b. The Certificates are being issued in nineteen classes. The following
terms of the Certificates are irrevocably established as of the Closing Date:
ORIGINAL CLASS
PRINCIPAL BALANCE
PASS-THROUGH RATE (OR NOTIONAL
CLASS PER ANNUM PRINCIPAL AMOUNT)
- ----- ----------------- -----------------
Class HE: A-1A NAS 5.9600% $ 30,000,000
Class HE: A-1B ARM a floating rate per annum $245,000,000
equal to the lesser of (a) LIBOR
plus the Pass-Through Margin,
or (b) the Available Funds
Pass-Through Rate, but in
no case more than 14.0%
Class HE: A-1
(Underlying) 6.2375% until the Payment Date $330,000,000
on which the Pool Scheduled Principal
Balance is less
than 10% of the Original Certificate
Principal Balance; 6.490975% from
and after such Payment Date
Class HE: A-2 5.8290% $135,150,000
Class HE: A-3 6.0100% $ 48,330,000
2-6
<PAGE>
Class HE: A-4 A floating rate equal to the $146,520,000
Weighted Average Home
Equity Contract Rate, but in
no event greater than 6.6200%
Class HE: A-5 IO 6.7500% Original Notional
Principal Amount:
$ 82,500,000
Class HE: M-1 6.9300% $ 66,000,000
Class HE: M-2 A floating rate equal to the
Weighted Average Home
Equity Contract Rate,
but in no event greater than 7.2700% $ 55,000,000
Class HE: B A floating rate equal to the
Weighted Average Home
Equity Contract Rate,
but in no event greater than 8.5% $ 44,000,000
Class HI: A-1 5.9070% $113,500,000
Class HI: A-2 6.0800% $ 40,860,000
Class HI: A-3 6.6600% $ 40,640,000
Class HI: M-1 7.0200% $ 17,500,000
Class HI: M-2 A floating rate equal to the $ 12,500,000
Weighted Average Home
Equity Contract Rate,
but in no event greater than 7.4500%
Class HI: B-1 7.7900% $ 12,500,000
Class HI: B-2 A floating rate equal to the
Weighted Average Home
Improvement Contract Rate,
but in no event greater than 8.5% $ 12,500,000
2-7
<PAGE>
c. The following terms of the Subsidiary REMIC Regular Interests are
irrevocably established as of the Closing Date:
SUBSIDIARY REMIC
REGULAR INTEREST SUBSIDIARY REMIC ORIGINAL CLASS
DESIGNATION: PASS-THROUGH RATE: PRINCIPAL BALANCE:
- ----------------- ------------------ -----------------
HE: A-1 Weighted Average Home
Equity Contract Rate $935,000,000
HE: A-2 Weighted Average Home
Equity Contract Rate $ 82,500,000
HE: MB Weighted Average Home
Equity Contract Rate $165,000,000
HI: A-1 5.9070% $113,500,000
HI: A-2 6.0800% $ 40,860,000
HI: A-3 6.6600% $ 40,640,000
HI: M-1 7.0200% $ 17,500,000
Class HI: M-2 A floating rate equal to the $ 12,500,000
Weighted Average Home
Equity Contract Rate,
but in no event greater than 7.4500%
HI: B-1 7.7900% $ 12,500,000
HI: B-2 A floating rate equal to the
Weighted Average Home
Improvement Contract Rate,
but in no event greater than
8.5% $ 12,500,000
The latest possible maturity of the Subsidiary REMIC Regular Interests bearing
the designation "HE" is December 15, 2028 and the latest possible maturity of
the Subsidiary REMIC Regular Interests bearing the designation "HI" is November
15, 2023 (calculated using a prepayment assumption of 0% and assuming no
defaults or delinquencies on the Contracts).
2-8
<PAGE>
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
8.06, (iii) engage in any transaction that would result in the imposition of tax
on "prohibited transactions," as defined in Section 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 class of "sole
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 Contract, the Servicer and the Trustee (at the direction of the
Servicer) shall take, or cause to be taken, such action as is necessary to sell
or otherwise dispose of such property within such period as is then required by
the Code in order for such property to qualify as "foreclosure property" within
the meaning of Section 860G(a)(8) of the Code, unless the Servicer and the
Trustee receive an Opinion of Counsel to the effect that the holding by the
Trust of such property subsequent to the period then permitted by the Code will
not result in the imposition of any taxes on "prohibited transactions" of the
Trust, as defined in Section 860F of the Code, or cause the 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.
SECTION 2.06. Company Option to Substitute for Prepaid Contracts. The
Company may, at its option, substitute new contracts for Contracts as to which a
Principal Prepayment in Full has
2-9
<PAGE>
been received by the Servicer prior to February 1, 1999 ("Prepaid Contracts"),
up to a maximum of 5% of the Cut-Off Date Pool Principal Balance, upon
satisfaction of the following conditions:
(i) the Company shall have conveyed to the Trustee the Contract to be
substituted for the Prepaid Contract and the Contract File related to such
Contract and the Company shall have marked the Electronic Ledger indicating that
such Contract constitutes part of the Trust;
(ii) the Contract to be substituted is an Eligible Substitute Contract and
the Company delivers an Officers' Certificate, substantially in the form of
Exhibit M-3 hereto, to the Trustee certifying that such Contract is an Eligible
Substitute Contract;
(iii) [Reserved];
(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 Contract to be substituted;
(v) such substitution shall be accomplished prior to the Determination Date
immediately following the calendar month in which the Principal Prepayment in
Full was received by the Servicer, and no such substitution shall take place
after February 28, 1999;
(vi) the Company shall have delivered to the Trustee an Opinion of Counsel
(a) to the effect that the substitution of such Contract for such Prepaid
Contract 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
(vii) if the Principal Prepayment received in respect of such Prepaid
Contract is greater than the Scheduled Principal Balance of the Contract to be
substituted, such excess shall be distributed to Certificateholders on the
related Payment Date as a prepayment of principal.
Upon satisfaction of such conditions, the Trustee shall add such Contract
to be substituted to the List of Contracts.
Any substitutions pursuant to this Section 2.06 may be accomplished on a
contract-by-contract basis or on an aggregate basis as to all Prepaid Contracts
with respect to a given calendar month.
2-10
<PAGE>
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 Contracts 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 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.
3-1
<PAGE>
d. No Violations. The execution, delivery and performance of this
Agreement by the Company will not violate any provision of any existing law
or regulation or any order or decree of any court or the Certificate of
Incorporation or Bylaws of the Company, or constitute a material breach of
any mortgage, indenture, contract or other agreement to which the Company
is a party or by which the Company may be bound.
e. Litigation. No litigation or administrative proceeding of or before
any court, tribunal or governmental body is currently pending, or to the
knowledge of the Company threatened, against the Company or any of its
properties or with respect to this Agreement, the Certificates or the Class
C Certificates which, if adversely determined, would in the opinion of the
Company have a material adverse effect on the transactions contemplated by
this Agreement.
f. Licensing. The Company is duly licensed in each state in which
Contracts were originated to the extent the Company is required to be
licensed by applicable law in connection with the origination and servicing
of the Contracts.
SECTION 3.02. Representations and Warranties Regarding Each Contract. The
Company represents and warrants to the Certificateholders and the Class C
Certificateholders, as of the Closing Date with respect to each Contract
identified on the List of Contracts attached to this Agreement as Exhibits O-1,
O-2, and O-3 and as of each Subsequent Transfer Date with respect to each
Subsequent Contract identified on the List of Contracts attached to the related
Subsequent Transfer Instrument:
a. List of Contracts. The information set forth in the List of
Contracts is true and correct as of its date.
b. Payments. No scheduled payment due under the Contract was
delinquent over 59 days as of the Cut-off Date or as of the related
Subsequent Cut-off Date if a Subsequent Contract.
c. Costs Paid and No Waivers. The terms of the Contract have not been
waived, altered or modified in any respect, except by instruments or
documents identified in the Contract File. All costs, fees and expenses
incurred in making, closing and perfecting the lien of the Contract have
been paid. The subject real property has not been released from the lien of
such Contract.
d. Binding Obligation. The Contract is the legal, valid and binding
obligation of the Obligor thereunder and is enforceable in accordance with
its terms, except as such enforceability may be limited by laws affecting
the enforcement of creditors' rights generally.
e. No Defenses. The Contract is not subject to any right of
rescission, setoff, counterclaim or defense, including the defense of
usury, and the operation of any of the terms
3-2
<PAGE>
of the Contract or the exercise of any right thereunder will not render the
Contract unenforceable in whole or in part or subject to any right of
rescission, setoff, counterclaim or defense, including the defense of
usury, and no such right of rescission, setoff, counterclaim or defense has
been asserted with respect thereto.
f. Insurance Coverage. The Company has been named as an additional
insured party under any hazard insurance on the property described in the
Contract, to the extent required by the Company's underwriting guidelines.
If upon origination of the Contract, the property securing the Contract 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 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. FHA Insurance. If the Contract is an FHA-Insured Contract, such
Contract was originated in compliance with FHA Regulations and is insured,
without setoff, surcharge or defense, by FHA Insurance. Following the
assignment of such FHA-Insured Contract to the Trustee, the Trustee on
behalf of the Trust will be entitled to the full benefits of the FHA
Insurance. If the Contract is an FHA-Insured Contract purchased from Empire
Funding Corp., as of the Closing Date no claim for FHA Insurance has been
made with respect to the Contract.
h. Lawful Assignment. The Contract was not originated in and is not
subject to the laws of any jurisdiction whose laws would make the transfer
of the Contract under this Agreement or pursuant to transfers of the
Certificates or Class C Certificates unlawful or render the Contract
unenforceable. The Company has duly executed a valid blanket assignment of
the Contracts transferred to the Trust, and has transferred all its right,
title and interest in such Contracts, including all rights the Company may
have against the originating contractor or lender with respect to Contracts
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.
i. Compliance with Law. At the date of origination of the Contract,
all requirements of any federal and state laws, rules and regulations
applicable to the Contract, including, without limitation, usury and truth
in lending laws and (if such Contract is an FHA-Insured Contract) the FHA
Regulations have been complied with, and the Company shall for at least the
period of this Agreement, maintain in its possession, available for the
Trustee's inspection, and shall deliver to the Trustee upon demand,
evidence of compliance with all such requirements.
3-3
<PAGE>
j. Contract in Force. The Contract has not been satisfied or
subordinated in whole or in part or rescinded, and the real estate securing
such Contract has not been released from the lien of such Contract in whole
or in part.
k. Valid Lien. The Contract has been duly executed and delivered by
the Obligor, and the lien created thereby has been duly recorded, or has
been delivered to the appropriate governmental authority for recording and
will be duly recorded within 180 days, and constitutes a valid and
perfected first, second, third or fourth priority lien on the real estate
described in such Contract.
l. Capacity of Parties. The signature(s) of the Obligor(s) on the
Contract are genuine and all parties to the Contract had full legal
capacity to execute the Contract.
m. Good Title. The Company is the sole owner of the Contract and, if
such Contract is an FHA-Insured Contract, because the Trustee is a lender
approved by HUD to originate and purchase Title I loans under a valid Title
I contract of insurance, has the authority to sell, transfer and assign
such Contract to the Trust under the terms of this Agreement. There has
been no assignment, sale or hypothecation of the Contract by the Company
except the usual past hypothecation of the Contract in connection with the
Company's normal banking transactions in the conduct of its business, which
hypothecation terminates upon sale of the Contract to the Trust. The
Company has good and marketable title to the Contract, free and clear of
any encumbrance, equity, loan, pledge, charge, claim, lien or encumbrance
of any type and has full right to transfer the Contract to the Trust.
n. No Defaults. As of the Cut-off Date or Subsequent Cut-off Date, as
applicable, there was no default, breach, violation or event permitting
acceleration existing under the Contract and no event which, with notice
and the expiration of any grace or cure period, would constitute such a
default, breach, violation or event permitting acceleration under such
Contract (except payment delinquencies permitted by clause (b) above). The
Company has not waived any such default, breach, violation or event
permitting acceleration except payment delinquencies permitted by clause
(b) above.
o. Equal Installments. The Contract, unless it is a Step-up Rate
Contract or an Adjustable Rate Home Equity Contract, has a fixed Contract
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.
p. Enforceability. The Contract contains customary and enforceable
provisions so as to render the rights and remedies of the holder thereof
adequate for the realization against the collateral of the benefits of the
lien provided thereby.
3-4
<PAGE>
q. One Original. There is only one original executed Contract, which
Contract has been delivered to the Trustee or its Custodian on or before
the Closing Date or Subsequent Transfer Date if a Subsequent Contract.
r. Genuine Documents. All documents submitted are genuine, and all
other representations as to the Contract, including the List of Contracts,
are true and correct. Any copies of documents provided by the Company are
accurate and complete (except that, with respect to any Contract 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).
s. Origination. Each Initial Home Improvement Contract was originated
by a home improvement contractor in the ordinary course of such
contractor's business, was originated by the Company directly or was
purchased by the Company from Empire Funding Corp. Each Subsequent Home
Improvement Contract was originated by the Company directly or by a home
improvement contractor in the ordinary course of such contractor's
business. No Subsequent Contract was purchased from Empire Funding Corp.
Each Home Equity Contract was originated by a home equity lender in the
ordinary course of such lender's business or was originated by the Company
directly.
t. Underwriting Guidelines. The Contract was originated or purchased
in accordance with the Company's then-current underwriting guidelines.
u. Good Repair. The property described in the Contract is, to the best
of the Company's knowledge, free of damage and in good repair.
v. Qualified Mortgage. The Contract represents a "qualified mortgage"
within the meaning of 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 (iii) if a Subsequent
Contract, the Subsequent Transfer Date, the fair market value of the
interest in real property securing the Contract was not less than 80% of
the "adjusted issue price" (in each case within the meaning of the REMIC
Provisions) of such Contract.
w. Interest Rate and Payment Amount Adjustments. If the Contract does
not provide for a fixed interest rate over the life of the Contract, the
Contract Interest Rate and monthly payment have been adjusted in accordance
with the terms of the Contract. 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
Contract Interest Rate adjustments have been made in strict compliance with
state and federal law and the terms of the related Contract.
x. Adjustable Rate Home Equity Contracts. If an Adjustable Rate Home
Equity Contract, 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
3-5
<PAGE>
of ALTA Form 6.0 or 6.1. The applicable terms of the Adjustable Rate Home
Equity Contract pertaining to adjustments of the Contract 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 Contract Interest Rate and monthly payment on the Adjustable
Rate Home Equity Contract 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 Contracts 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
Contracts and each Sub-Pool, as applicable, and as of each Subsequent Transfer
Date with respect to the related Subsequent Contracts and related Sub- Pool, as
applicable, that:
a. Amounts. The sum of the Cut-off Date Pool Principal Balance of Sub- Pool
HI, plus the Sub-Pool HI Pre-Funded Amount as of the Closing Date, equals at
least the Original Sub-Pool HI Certificate Principal Balance. As of the Closing
Date, the sum of the Cut-off Date Pool Principal Balance of Sub-Pool HE, plus
the Original Sub-Pool HE Pre-Funded Amount, equals at least the Original
Sub-Pool HE Certificate Principal Balance. By Cut-off Date Principal Balance,
the Initial Home Equity Contracts plus the Subsequent Home Equity Contracts
specifically identified as of the Closing Date represent at least 75% of the
Original Sub-Pool HE Certificate Principal Balance and the Initial Home
Improvement Contracts plus the Subsequent Home Improvement Contracts
specifically identified as of the Closing Date represent at least 75% of the
Original Sub-Pool HI Certificate Principal Balance.
b. Characteristics.
Home Improvement Contracts. The Home Improvement Contracts have the
following characteristics: (i) 100% are secured by a mortgage, deed of trust or
security deed on the related real estate; and (ii) none has a remaining maturity
of more than 300 months; and (iii) of the Initial Home Improvement Contracts,
none has a final scheduled payment date later than December 2023; none has a
Contract Interest Rate less than 8.00%; and none was originated before May 1989.
The weighted average (by Scheduled Principal Balance) of the Contract
Interest Rates of Sub-Pool HI as of the Post-Funding Payment Date is at least
12.75%. None of the Subsequent Home Improvement Contracts has a Contract
Interest Rate less than 8.00%. No scheduled payment on any Subsequent Home
Improvement Contract is more than 30 days delinquent as of the related
Subsequent Cut-off Date.
Fixed Rate Home Equity Contracts. The Fixed Rate Home Equity Contracts have
the following characteristics:
(i) 100% are secured by a mortgage, deed of trust or security deed on
the related real estate.
3-6
<PAGE>
(ii) None has a remaining maturity of more than 360 months.
(iii) Of the Initial Fixed Rate Home Equity Contracts, none has a
final scheduled payment date later than December 2028 and none has a
Contract Interest Rate less than 6.30%.
(iv) If a Group I Contract: the original principal balance, plus the
unpaid principal balance of any prior mortgage on the related property,
does not exceed $227,150; if a junior lien, the original principal balance
did not exceed $113,575; and the combined loan to value of the Contract and
any prior lien on the related property does not exceed 100%.
(v) As of the Post-Funding Payment Date, the weighted average (by
Scheduled Principal Balance) combined loan to value ratio (CLTV) is not
more than 89.50% and no more than 86% (by Scheduled Principal Balance) has
a CLTV in excess of 80%. No Subsequent Fixed Rate Home Equity Contract has
a CLTV greater than 100%.
(vi) No scheduled payment on any Subsequent Fixed Rate Home Equity
Contract is more than 30 days delinquent as of the related Subsequent Cut-
off Date.
(vii) The weighted average (by Scheduled Principal Balance) of the
Contract Interest Rates as of the Post-Funding Payment Date is at least
11.10%. No Subsequent Fixed Rate Home Equity Contract has a Contract
Interest Rate less than 6.30%.
(viii) As of the Post-Funding Payment Date, the percentage (by
Scheduled Principal Balance) which are identified by the Company under its
standard underwriting criteria as "B," "C," and "D" credits is not more
than 24% and no more than 6% (by Scheduled Principal Balance) is identified
as a "C" or "D" credit.
(ix) As of the Post-Funding Payment Date, the percentage (by Scheduled
Principal Balance) secured by a first lien is at least 80%, the related
property type of which is owner-occupied is at least 97%, and the related
property type of which is single family is at least 97%.
(x) As of the Post-Funding Payment Date, the weighted average (by
Scheduled Principal Balance) debt to income ratio of the related Obligors
is not more than 40% and no more than 56% (by Scheduled Principal Balance)
of the related Obligors has a debt to income ratio in excess of 40%.
Adjustable Rate Home Equity Contracts. The Adjustable Rate Home Equity
Contracts have the following characteristics:
(i) 100% are secured by a mortgage, deed of trust or security deed on
the related real estate.
3-7
<PAGE>
(ii) None has a remaining maturity of more than 360 months.
(iii) The Contract 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, or the one-year treasury index, plus (B) a fixed percentage amount
specified in the related Contract (the "gross margin"), provided that the
Contract 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 Contract.
(iv) Of the Initial Adjustable Rate Home Equity Contracts, none has a
final scheduled payment date later than November 2028; none has a gross
margin of less than 4.30% or more than 11.45%; none has a Contract Interest
Rate less than 6.25%; and none has a Minimum Contract Rate of less than
3.80%.
(v) As of the Post-Funding Payment Date, the weighted average (by
Scheduled Principal Balance) loan to value ratio (LTV) is not more than
89.50% and no more than 82% (by Scheduled Principal Balance) has a LTV in
excess of 80%. No Subsequent Adjustable Rate Home Equity Contract has a LTV
ratio greater than 100%.
(vi) No scheduled payment on any Subsequent Adjustable Rate Home
Equity Contract is more than 30 days delinquent as of the related
Subsequent Cut-off Date.
(vii) As of the Post-Funding Payment Date, the weighted average (by
Scheduled Principal Balance) of the Contract Interest Rates is at least
9.00%. None of the Subsequent Adjustable Rate Home Equity Contracts has a
Minimum Contract Rate of less than 6.25%.
(viii) As of the Post-Funding Payment Date, the percentage (by
Scheduled Principal Balance) which are identified by the Company under its
standard underwriting criteria as "B", "C," and "D" credits is not more 15%
and no more than 3.5% (by Scheduled Principal Balance) is identified as a
"C" or "D" credit.
(ix) As of the Post-Funding Payment Date, the percentage (by Scheduled
Principal Balance) secured by a first lien is 100% and the related property
type of which is owner-occupied single family is 100%.
(x) As of the Post-Funding Payment Date, the weighted average (by
Scheduled Principal Balance) debt to income ratio of the related Obligors
is not more 43% and no more than 61% (by Scheduled Principal Balance) of
the related Obligors has a debt to income ratio in excess of 40%.
3-8
<PAGE>
c. Geographic Concentrations.
Home Improvement Contracts. By Cut-off Date Principal Balance, 17.82% of
the Initial Home Improvement Contracts are secured by property located in
California, 7.51% in Texas, 7.74% in New York and 6.27% in Michigan. No other
state represents more than 5% of the aggregate Cut-off Date Principal Balances
of the Initial Home Improvement Contracts.
No more than 1% of the Home Improvement Contracts by Cut-off Date Principal
Balance are secured by property located in an area with the same five-digit zip
code.
Fixed Rate Home Equity Contracts. By Cut-off Date Principal Balance, 9.66%
of the Initial Fixed Rate Home Equity Contracts are secured by property located
in California, 5.39% in Ohio, and 5.02% in Michigan. No other state represents
more than 5% of the aggregate Cut-off Date Principal Balances of the Initial
Fixed Rate Home Equity Contracts.
No more than 1% of Fixed Rate Home Equity Contracts by Cut-off Date
Principal Balance are secured by property located in an area with the same five-
digit zip code.
Adjustable Rate Home Equity Contracts. By Cut-off Date Principal Balance,
11.53% of the Initial Adjustable Rate Home Equity Contracts are secured by
property located in Maryland, 5.27% in Ohio, 12.40% in California, 6.06% in
North Carolina and 4.76% in Illinois. No other state represents more than 5% of
the aggregate Cut-off Date Principal Balances of the Initial Adjustable Rate
Home Equity Contracts.
No more than 1% of the Adjustable Rate Home Equity Contracts by Cut-off
Date Principal Balance are secured by property located in an area with the same
five-digit zip code.
d. Marking Records. The Company has caused the portions of the Electronic
Ledger relating to the Contracts to be clearly and unambiguously marked to
indicate that such Contracts constitute part of the Trust and are owned by the
Trust in accordance with the terms of the Trust created hereunder.
e. No Adverse Selection. No adverse selection procedures have been employed
in selecting the Contracts.
f. Contractor/Lender Concentration. $67,592,193.20 in Cut-off Date
Principal Balance of Home Improvement Contracts were purchased from Empire
Funding Corp. No more than 5.0% of the Home Improvement Contracts and no more
than 5.0% of the Home Equity Contracts, by Cut-off Date Principal Balance, were
originated by any one other contractor or lender (other than the Company).
SECTION 3.04. Representations and Warranties Regarding the Contract Files.
The Company represents and warrants to the Certificateholders and the Class C
Certificateholders that:
3-9
<PAGE>
a. Possession. Immediately prior to the Closing Date, the Company will have
possession of each original Initial Home Improvement Contract and Initial Home
Equity Contract and the related Contract File. Immediately prior to each
Subsequent Transfer Date, the Company will have possession of each original
Subsequent Contract and the related Contract 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
Contracts and the Contract Files by the Company pursuant to this Agreement is
not subject to the bulk transfer or any similar statutory provisions in effect
in any applicable jurisdiction.
SECTION 3.05. Repurchases of Contracts for Breach of Representations and
Warranties.
a. Subject to Section 3.06, the Company shall repurchase a Contract, at its
Repurchase Price, not later than 90 days after the day on which the Company, the
Servicer or the Trustee first discovers or should have discovered a breach of a
representation or warranty of the Company set forth in Sections 3.02, 3.03 or
3.04, or in the Officer's Certificates delivered pursuant to Sections 2.02(j) or
2.03(b) (vii), that materially and adversely affects the Trust's, the
Certificateholders' or the Class C Certificateholders' interest in such Contract
and which breach has not been cured; provided, however, that (i) in the event
that a party other than the Company first becomes aware of such breach, such
discovering party shall notify the Company in writing within 5 Business Days of
the date of such discovery and (ii) with respect to any Contract incorrectly
described on the List of Contracts with respect to Cut-off Date Principal
Balance, which the Company would otherwise be required to repurchase pursuant to
this Section, the Company may, in lieu of repurchasing such Contract, deposit in
the Certificate Account within 90 days from the date of such discovery cash in
an amount sufficient to cure such deficiency or discrepancy. Any such cash so
deposited shall be distributed to Certificateholders and the Class C
Certificateholders on the immediately following Payment Date as a collection of
principal or interest on such Contract, according to the nature of the
deficiency or discrepancy. Notwithstanding any other provision of this
Agreement, the obligation of the Company under this Section shall not terminate
upon a Service Transfer pursuant to Article VII.
b. 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
Contract for a Contract that it is obligated to repurchase pursuant to Section
3.05(a) (such Contract being referred to as the "Replaced Contract") upon
satisfaction of the following conditions:
(i) the Company shall have conveyed to the Trustee the Contract to be
substituted for the Replaced Contract and the Contract File related to such
Contract and the Company shall have marked the Electronic Ledger indicating
that such Contract constitutes part of the Trust;
3-10
<PAGE>
(ii) the Contract to be substituted is an Eligible Substitute Contract
and the Company delivers an Officers' Certificate, substantially in the
form of Exhibit M-2 hereto, to the Trustee certifying that such Contract is
an Eligible Substitute Contract;
(iii) [Reserved];
(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 Contract 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 Contract for such
Replaced Contract 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 Contract is
greater than the Scheduled Principal Balance of the Contract 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.
Upon satisfaction of such conditions, the Trustee shall add such Contract
to be substituted to, and delete such Replaced Contract from, the List of
Contracts. 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
Contract, the Company shall give written notice of such substitution to the
Rating Agencies.
c. If the Company is required to repurchase a Contract under Section
3.05(a) or has elected to substitute an Eligible Substitute Contract for a
Contract 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
Contract File for the Contract 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
Contract, at its respective Repurchase Price, within 30 days of the Closing
Date, or (ii) substitute an Eligible Substitute Contract for the Contract 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
3-11
<PAGE>
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 shall, notwithstanding the absence of such
opinion as to the imposition of any tax as the result of such purchase or
deposit, repurchase such Contract 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 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 give notice to the Trustee at the
time of such repurchase of the amounts due from the Company pursuant to the
guarantee of the Company described above and give notice as to who should
receive such payment.
The Trustee shall have no obligation to pay any such amounts pursuant to
this Section other than from moneys provided to it by the Company or from moneys
held in the funds and accounts created under this Agreement. The Trustee shall
be deemed conclusively to have complied with this Section if it follows the
directions of the Company.
In the event any tax that is guaranteed by the Company pursuant to this
Section 3.06 is refunded to the Trust or otherwise is determined not to be
payable, the Company shall be repaid the amount of such refund or that portion
of any guarantee payment made by the Company that is not applied to the payment
of such tax.
3-12
<PAGE>
ARTICLE IV
PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS
SECTION 4.01. Transfer of Contracts.
a. On or prior to the Closing Date, or the Subsequent Transfer Date in the
case of Subsequent Contracts, the Company shall deliver the Contract Files to
the Trustee. The Trustee shall maintain the Contract Files at its office or with
a duly appointed Custodian, who shall act as the agent of the Trustee on behalf
of the Certificateholders. The Trustee may release a Contract File to the
Servicer pursuant to Section 5.07. The Company has filed a form UCC-1 financing
statement regarding the sale of the Contracts to the Trustee, and shall file
continuation statements in respect of such UCC-1 financing statement as if such
financing statement were necessary to perfect such sale. The Company shall take
any other actions necessary to maintain the perfection of the sale of the
Contracts to the Trustee.
b. If at any time during the term of this Agreement the Company does not
have a long-term senior debt rating of A3 or higher from Moody's and BBB+ or
higher from 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 Home Improvement Contract and assignments in recordable
form of each mortgage, deed of trust or security deed securing a Home
Improvement Contract, 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 Home Improvement Contract; provided, however, 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 serving
each Home Improvement Contract.
c. If at any time during the term of this Agreement the Company does not
have a long-term senior debt rating of A3 or higher from Moody's and A- or
higher from 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 Home Equity Contract and assignments in recordable form of
each mortgage, deed of trust or security deed securing a Home Equity Contract,
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 Home Equity
Contract; provided, however, that such execution and filing of the assignments
with respect to the Home Equity Contracts shall not be required if the Trustee
receives written confirmation from both Rating Agencies that the ratings of the
Certificates would not be reduced or withdrawn by the failure to execute and
file such assignments; provided further, however, 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 serving
each Home Equity Contract.
4-1
<PAGE>
SECTION 4.02. Costs and Expenses. The Servicer agrees to pay all reasonable
costs and disbursements in connection with the vesting (including the perfection
and the maintenance of perfection, as against all third parties) in the Trust of
all right, title and interest in and to the Contracts (including, without
limitation, the mortgage or deed of trust on the related real estate granted
thereby).
4-2
<PAGE>
ARTICLE V
SERVICING OF CONTRACTS
SECTION 5.01. Responsibility for Contract Administration. The Servicer will
have the sole obligation to manage, administer, service and make collections on
the Contracts and perform or cause to be performed all contractual and customary
undertakings of the holder of the Contracts to the Obligor. The 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 Contract which does not provide
for a fixed interest rate over the life of the Contract, make adjustments to the
interest rate and the payments due on such Contract in compliance with
applicable regulatory adjustable mortgage loan requirements and the terms of the
Contract. 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
Contracts regarding such interest rate adjustments and payment adjustments.
SECTION 5.02. Standard of Care. In managing, administering, servicing and
making collections on the Contracts pursuant to this Agreement, the Servicer
will exercise that degree of skill and care required by FHA (in the case of FHA-
Insured Contracts) and otherwise consistent with the highest degree of skill and
care that the Servicer exercises with respect to similar contracts (including
manufactured housing contracts) serviced by the Servicer; provided, however,
that such degree of skill and care shall be at least as favorable as the degree
of skill and care generally applied by prudent servicers of home improvement
contracts and 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 Contract.
SECTION 5.04. Inspection.
a. At all times during the term hereof, the Servicer shall afford the
Trustee and its authorized agents reasonable access during normal business hours
to the Servicer's records relating to the Contracts, which have not previously
been provided to the Trust, and will cause its personnel
5-1
<PAGE>
to assist in any examination of such records by the Trustee. The examination
referred to in this Section will be conducted in a manner which does not
unreasonably interfere with the Servicer's normal operations or customer or
employee relations. Without otherwise limiting the scope of the examination the
Trustee may make, the Trustee may, using generally accepted audit procedures,
verify the status of each Contract and review the Electronic Ledger and records
relating thereto for conformity to Monthly Reports prepared pursuant to Article
VI and compliance with the standards represented to exist as to each Contract in
this Agreement.
b. At all times during the term hereof, the Servicer shall keep available a
copy of the List of Contracts at its principal executive office for inspection
by Certificateholders.
c. A Certificateholder holding Certificates representing in the aggregate
at least 5% of the Aggregate Certificate Principal Balance shall have the rights
of inspection afforded to the Trustee pursuant to this Section 5.04.
SECTION 5.05. Certificate Account.
a. On or before the Closing Date, the Company shall establish the
Certificate Account on behalf of the Trust, which shall be an Eligible Account.
The Servicer shall pay into the Certificate Account, as promptly as practicable
(but not later than the next Business Day) following receipt thereof, all
amounts received with respect to the Contracts, including all proceeds of FHA
Insurance claims received by the Servicer, other than extension fees and
assumption fees, which fees shall be retained by the Servicer as compensation
for servicing the Contracts, and other than Liquidation Expenses permitted by
Section 5.08. The Trustee shall pay into the Certificate Account as promptly as
practicable all proceeds of FHA Insurance claims with respect to FHA-Insured
Contracts received by the Trustee. 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. (S) 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. (S) 8- 102(5)) in the State of
New York, registered in the name of such
5-2
<PAGE>
clearing corporation or its nominee, not endorsed for collection or surrender or
any other purpose not involving transfer, not containing any evidence of a right
or interest inconsistent with the Trustee's security interest therein, and held
by such clearing corporation in an account of such institution, (C) held in an
account of such institution with the Federal Reserve Bank of New York or the
Federal Reserve Bank of Minneapolis, or (D) in the case of uncertificated
securities, issued in the name of such institution, and (iii) identified, by
book entry or otherwise, as held for the account of, or pledged to, the Trustee
on the records of such institution, and such institution shall have sent the
Trustee a confirmation thereof, and (3) with respect to repurchase obligations
held in such account, such repurchase obligations shall be identified by such
institution, by book entry or otherwise, as held for the account of, or pledged
to, the Trustee on the records of such institution, and the related securities
shall be held in accordance with the requirements of clause (2) above. Once such
funds are invested, such institution shall not change the investment of such
funds. All income and gain from such investments shall be added to the
Certificate Account and distributed on such Payment Date pursuant to Sections
8.04(b) and (c). 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 P-1 by
Moody's, at least A-1 by S&P and at least 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 Moody's and AAA by both S&P and Fitch,
and whose only investments are in securities described in clauses (i) and
(ii) above;
5-3
<PAGE>
(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 Aa2 from Moody's
and 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 P-1 from Moody's, 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
Rating Agencies as an Eligible Investment hereunder and will not reduce the
rating assigned to any Class of Certificates by both Rating Agencies below
the lower of the then-current rating or the rating assigned to such
Certificates as of the Closing Date by both Rating Agencies, 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 either of the Rating
Agencies, 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
the Rating Agencies 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 Contracts in such manner as will maximize the receipt of
principal and interest on such Contracts and Liquidation Proceeds with respect
to Liquidated Contracts. The Company shall pay all FHA Insurance premiums
required by FHA Regulations in respect of FHA-Insured Contracts; if the Company
is no longer the Servicer and fails to pay such FHA Insurance premiums, the
successor
5-4
<PAGE>
Servicer shall pay such premiums and shall be entitled to reimbursement therefor
in accordance with Section 8.04. The Servicer shall comply with FHA Regulations
in servicing FHA-Insured Contracts so that the related FHA Insurance remains in
full force and effect, except for good-faith disputes relating to FHA
Regulations or such FHA Insurance.
b. In accordance with the standard of care specified in Paragraph 5.02, the
Servicer may, in its own name, if possible, or as agent for the Trust, commence
proceedings for the foreclosure of any subject real estate, or may take such
other steps that in the Servicer's reasonable judgment will maximize Liquidation
Proceeds with respect to the Contract, including, for example, the sale of the
Contract to a third party for foreclosure or enforcement and, in the case of any
default on a related prior mortgage loan, the advancing of funds to correct such
default and the advancing of funds to pay off a related prior mortgage loan,
which advances are Liquidation Expenses that will be reimbursed to the Servicer
out of related Liquidation Proceeds before the related Net Liquidation Proceeds
are paid to Certificateholders and the Class C Certificateholders. The Servicer
shall also deposit in the Certificate Account any Net Liquidation Proceeds
received in connection with any Contract which became a Liquidated Contract in a
prior Due Period.
c. The Servicer may sue to enforce or collect upon Contracts, in its own
name, if possible, or as agent for the Trust. If the Servicer elects to commence
a legal proceeding to enforce a Contract, the act of commencement shall be
deemed to be an automatic assignment of the Contract to the Servicer for
purposes of collection only. If, however, in any enforcement suit or legal
proceeding it is held that the Servicer may not enforce a Contract on the ground
that it is not a real party in interest or a holder entitled to enforce the
Contract, the Trustee on behalf of the Trust shall, at the Servicer's expense,
take such steps as the Servicer deems necessary to enforce the Contract,
including bringing suit in its name or the names of the Certificateholders and
the Class C Certificateholders.
d. The Servicer may grant to the Obligor on any Contract any rebate, refund
or adjustment out of the Certificate Account that the Servicer in good faith
believes is required because of Principal Prepayment in Full of the Contract.
The Servicer will not permit any rescission or cancellation of any Contract.
e. The Servicer shall enforce any due-on-sale clause in a Contract if such
enforcement is called for under its then current servicing policies for
obligations similar to the Contracts, provided that such enforcement is
permitted by applicable law and will not adversely affect any applicable
insurance policy. If an assumption of a Contract is permitted by the Servicer,
upon conveyance of the related property the Servicer shall use its best efforts
to obtain an assumption agreement in connection therewith.
f. If, following the termination of the Trust pursuant to Section 12.04,
HUD demands reimbursement of an FHA Insurance claim paid on an FHA-Insured
Contract prior to the termination of the Trust, the Servicer agrees that it will
not seek to recover any such amount from the Trustee or the Certificateholders.
5-5
<PAGE>
g. Any provision of this Agreement to the contrary notwithstanding, the
Servicer shall not agree to the modification or waiver of any provision of a
Contract at a time when such Contract is not in default or such default is not
reasonably foreseeable, if such modification or waiver would 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.
SECTION 5.07. Trustee to Cooperate.
a. Upon payment in full on any Contract, the Servicer will notify the
Trustee and the Company (if the Company is not the Servicer) on the next
succeeding Payment Date by certification of a Servicing Officer (which
certification shall include a statement to the effect that all amounts received
in connection with such payments which are required to be deposited in the
Certificate Account pursuant to Section 5.05 have been so deposited) and shall
request delivery of the Contract and Contract File to the Servicer. Upon receipt
of such delivery and request, the Trustee shall promptly release or cause to be
released such Contract and Contract File to the Servicer. Upon receipt of such
Contract and Contract File, each of the Company (if different from the Servicer)
and the Servicer is authorized to execute an instrument in satisfaction of such
Contract and to do such other acts and execute such other documents as the
Servicer deems necessary to discharge the Obligor thereunder and eliminate any
lien on the related real estate. The Servicer shall determine when a Contract
has been paid in full; provided that, to the extent that insufficient payments
are received on a Contract credited by the Servicer as prepaid or paid in full
and satisfied, the shortfall shall be paid by the Servicer out of its own funds,
without any right of reimbursement therefor (except from additional amounts
recovered from the related Obligor or otherwise in respect of such Contract),
and deposited in the Certificate Account.
b. If the Servicer elects to submit a claim to FHA under the FHA Insurance
in respect of an FHA-Insured Contract and payment is received from FHA, the
Servicer shall notify the Trustee and the Company (if the Company is not the
Servicer) on the next succeeding Payment Date by certification of a Servicing
Officer (which certification shall include a statement to the effect that all
amounts received in connection with such payments which are required to be
deposited in the Certificate Account pursuant to Section 5.05 have been so
deposited) and shall request delivery of the Contract and Contract File to the
Servicer. Upon receipt of such delivery and request, the Trustee shall promptly
release or cause to be released such Contract and Contract File to the Servicer.
c. From time to time as appropriate for servicing, foreclosing, and making
a claim for FHA Insurance coverage in connection with an FHA-Insured Contract,
the Trustee shall, upon written request of a Servicing Officer and delivery to
the Trustee of a receipt signed by such Servicing Officer, cause the original
Contract and the related Contract File to be released to the Servicer and shall
execute such documents as the Servicer shall deem necessary to the prosecution
of any such proceedings. Upon request of a Servicing Officer, the Trustee shall
perform such other
5-6
<PAGE>
acts as reasonably requested by the Servicer and otherwise cooperate with the
Servicer in enforcement of the Certificateholders' rights and remedies with
respect to Contracts.
d. The Servicer's receipt of a Contract and/or Contract File shall obligate
the Servicer to return the original Contract and the related Contract File to
the Trustee when its need by the Servicer has ceased unless the Contract shall
be liquidated or repurchased or replaced as described in Section 3.05 or 8.06.
SECTION 5.08. Costs and Expenses. Except as provided in Sections 8.04(b)
and (c) for the reimbursement of Advances, all costs and expenses incurred by
the Servicer in carrying out its duties hereunder (including payment of FHA
Insurance premiums, payment of the Trustee's fees pursuant to Section 11.06,
fees and expenses of accountants and payments of all fees and expenses incurred
in connection with the enforcement of Contracts (including enforcement of
Contracts and foreclosures upon real estate securing any such Contracts) and all
other fees and expenses not expressly stated hereunder to be for the account of
the Trust) shall be paid by the Servicer and the Servicer shall not (except as
otherwise provided in Section 8.04(b)(16) or Section 8.04(c)(16), as applicable)
be entitled to reimbursement hereunder, except that the Servicer shall be
reimbursed out of the Liquidation Proceeds of a Liquidated Contract (including
FHA Insurance proceeds) for customary out-of-pocket Liquidation Expenses
incurred by it. The Servicer shall not incur such Liquidation Expenses unless it
determines in its good faith business judgment that incurring such expenses will
increase the Net Liquidation Proceeds on the related Contract. The Servicer's
out-of-pocket Liquidation Expenses in connection with the submission of a claim
to FHA currently do not exceed $100 per Contract.
If the Servicer fails to make a timely interest rate or monthly payment
adjustment on a Contract which does not provide for a fixed interest rate over
the life of the Contract, 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 Contract with respect to
such adjustments.
SECTION 5.09. Maintenance of Insurance. The Servicer shall at all times
keep in force a policy or policies of insurance covering errors and omissions
for failure to maintain insurance as required by this Agreement, and a fidelity
bond. Such policy or policies and such fidelity bond shall be in such form and
amount as is generally customary among persons who service a portfolio of home
improvement contracts and 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 any real property securing an FHA-Insured Contract such hazard
insurance and flood insurance as may be required by the FHA Regulations, it
being understood that at the Closing Date hazard insurance was not required to
be maintained under the FHA Regulations. The Servicer shall cause to be
maintained with respect to the real property securing a conventional Contract
hazard insurance (excluding flood insurance coverage) if such conventional
Contract is secured by a first priority mortgage, deed of trust or security deed
or the initial principal balance of such conventional Contract exceeds $30,000.
5-7
<PAGE>
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 each of the Rating Agencies in the event it is a party to any merger,
conversion or consolidation.
5-8
<PAGE>
ARTICLE VI
REPORTS AND TAX MATTERS
SECTION 6.01. Monthly Reports. No later than one Business Day following
each Determination Date, the Servicer shall deliver to the Trustee, the Rating
Agencies and the Agent, a Monthly Report, substantially in the form of Exhibit Q
hereto. With respect to information relating to Reserve Account Loan Interest,
Reserve Account Loan Fee, and Reserve Account Loan-Other Fees, the Servicer may
rely solely upon the monthly report received from the Agent in the form of
Exhibit U hereto, which the Agent is obligated to deliver pursuant to Section
2.02(c) of the Reserve Account Loan Agreement. If the Company is not the
Servicer, the Servicer shall be deemed to have notice of the existence of an
Event of Default under the Reserve Account Loan Agreement only if it has
received written notice thereof from the Agent or otherwise has actual knowledge
thereof.
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, or either of the
Rating Agencies, furnish the requesting party such underlying data as may be
reasonably requested.
SECTION 6.04. Annual Report of Accountants. On or before May 1 of each
year, commencing May 1, 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 HI: A Certificates, the Class HI: M
Certificates, the Class HI: B Certificates, the Class HE: A Certificates, the
Class HE: M Certificates and the Class HE: B Certificates on or before the third
Business Day next preceding each Payment Date.
6-1
<PAGE>
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 HI: 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
HI: A Certificates allocable to interest, separately identifying any Unpaid
Class HI: A Interest Shortfall included in such distribution and any
remaining Unpaid Class HI: A Interest Shortfall after giving effect to such
distribution;
(ii) the amount of such distribution to Holders of each Class of Class
HI: A Certificates allocable to principal, separately identifying the
aggregate amount of any Principal Prepayments and any Sub-Pool HI
Supplementary Principal Distribution Amount included therein;
(iii) the amount, if any, by which the Class HI: A Formula
Distribution Amount for such Payment Date exceeds the Class HI: A
Distribution Amount for such Payment Date;
(iv) the Class HI: A-1 Principal Balance, the Class HI: A-2 Principal
Balance, and the Class HI: A-3 Principal Balance after giving effect to the
distribution of principal on such Payment Date;
(v) the Pool Scheduled Principal Balance of Sub-Pool HI for such
Payment Date;
(vi) the Sub-Pool HI Senior Percentage for such Payment Date;
(vii) the Sub-Pool HI Pool Factor;
(viii) the number and aggregate principal balances of Home Improvement
Contracts (a) delinquent (i) 31-59 days, (ii) 60-89 days, (iii) 90-179 days
and (iv) 180 or more days; (b) in foreclosure; and (c) constituting "real
estate owned" of the Servicer;
(ix) the Class HI: B Principal Balance Test (as set forth in Exhibit Q
hereto);
(x) the Class HI: B Principal Distribution Test (as set forth in
Exhibit Q hereto);
(xi) the number of Liquidated Contracts that are Home Improvement
Contracts, identifying such Contracts and the Net Liquidation Loss on such
Contracts;
(xii) the aggregate number and principal amount of FHA-Insured
Contracts on which either (i) the Servicer has submitted a claim for FHA
Insurance, HUD rejected such claim and the Servicer has determined not to
resubmit such claim, or (ii) the Servicer has
6-2
<PAGE>
determined not to submit a claim for FHA Insurance because such claim would
not be paid by HUD;
(xiii) the Net Liquidation Losses on all FHA-Insured Contracts that
became Liquidated Contracts in any prior Due Period and the aggregate
Repurchase Price of all such Liquidated Contracts;
(xiv) the amount in the Company's FHA Insurance reserve available to
pay FHA Insurance claims on the FHA-Insured Contracts; and
(xv) the Sub-Pool HI Pre-Funded 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 HI: A
Certificate with a 1% Percentage Interest or per $1,000 denomination of Class
HI: 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 HI: A Certificate a statement
containing the information with respect to interest accrued and principal paid
on its Class HI: A Certificates during such calendar year. Such obligation of
the Certificate Registrar shall be deemed to have been satisfied to the extent
that substantially comparable information shall be provided by the Certificate
Registrar pursuant to any requirements of the Code as from time to time in
force.
c. On each Payment Date, the Trustee shall forward or cause to be
forwarded by mail to each Holder of a Class HI: M-1 Certificate a copy of the
monthly statement forwarded to the Holders of Class HI: A Certificates on such
Payment Date. The Servicer shall also furnish to the Trustee, which shall
forward such information to the Class HI: M-1 Certificateholders as part of
their monthly statement, the following information:
(i) the amount of such distribution to Holders of Class HI: M-1
Certificates allocable to interest, separately identifying any Unpaid Class
HI: M-1 Interest Shortfall included in such distribution and any remaining
Unpaid Class HI: M-1 Interest Shortfall after giving effect to such
distribution;
(ii) the amount of such distribution to Holders of Class HI: M-1
Certificates allocable to principal, separately identifying the aggregate
amount of any Principal Prepayments and any Sub-Pool HI Supplementary
Principal Distribution Amount included therein;
6-3
<PAGE>
(iii) the amount, if any, by which the Class HI: M-1 Formula
Distribution Amount for such Payment Date exceeds the Class HI: M-1
Distribution Amount for such Payment Date;
(iv) the Class HI: M-1 Principal Balance after giving effect to the
distribution of principal on such Payment Date;
(v) the Unpaid Class HI: M-1 Liquidation Loss Interest Shortfall after
giving effect to any distribution on such Payment Date pursuant to Section
8.04(b)(9); 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 (v) above, the
amounts shall be expressed as a dollar amount per Class HI: M-1 Certificate with
a 1% Percentage Interest or per $1,000 denomination of Class HI: 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 HI: 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 HI: 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 HI: M-2 Certificate a copy of the monthly
statements forwarded to the Holders of Class HI: A and Class HI: M-1
Certificates on such Payment Date. The Servicer shall also furnish to the
Trustee, which shall forward such information to the Class HI: M-2
Certificateholders as part of their monthly statement, the following
information:
(i) the amount of such distribution to Holders of Class HI: M-2
Certificates allocable to interest, separately identifying any Unpaid Class
HI: M-2 Interest Shortfall included in such distribution and any remaining
Unpaid Class HI: M-2 Interest Shortfall after giving effect to such
distribution;
(ii) the amount of such distribution to Holders of Class HI: M-2
Certificates allocable to principal, separately identifying the aggregate
amount of any Principal Prepayments and any Sub-Pool HI Supplementary
Principal Distribution Amount included therein;
6-4
<PAGE>
(iii) the amount, if any, by which the Class HI: M-2 Formula
Distribution Amount for such Payment Date exceeds the Class HI: M-2
Distribution Amount for such Payment Date;
(iv) the Class HI: M-2 Principal Balance after giving effect to the
distribution of principal on such Payment Date;
(v) the Unpaid Class HI: M-2 Liquidation Loss Interest Shortfall,
after giving effect to any distribution on such Payment Date pursuant to
Section 8.04(b)(10); 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 (v) above, the
amounts shall be expressed as a dollar amount per Class HI: M-2 Certificate with
a 1% Percentage Interest or per $1,000 denomination of Class HI: 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 HI: 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 HI: 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 HI: B-1 Certificate a copy of the monthly
statements forwarded to the Holders of Class HI: A and Class HI: M Certificates
on such Payment Date. The Servicer shall also furnish to the Trustee, which
shall forward such information to the Class HI: B-1 Certificateholders as part
of their monthly statement, the following information:
(i) the amount of such distribution to Holders of Class HI: B-1
Certificates allocable to interest, separately identifying any Unpaid Class
HI: B-1 Interest Shortfall included in such distribution and any remaining
Unpaid Class HI: B-1 Interest Shortfall after giving effect to such
distribution;
(ii) the amount of such distribution to Holders of Class HI: 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 HI: B-1 Formula
Distribution Amount for such Payment Date exceeds the Class HI: B-1
Distribution Amount for such Payment Date;
6-5
<PAGE>
(iv) the Class HI: B-1 Principal Balance after giving effect to the
distribution of principal on such Payment Date;
(v) the Unpaid Class HI: B-1 Liquidation Loss Interest Shortfall,
after giving effect to any distribution on such Payment Date pursuant to
Section 8.04(b)(13);
(vi) the Class HI: 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 (v) above, the
amounts shall be expressed as a dollar amount per Class HI: B-1 Certificate with
a 1% Percentage Interest or per $1,000 denomination of Class HI: 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 HI: 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 HI: 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 HI: B-2 Certificate a copy of the monthly
statements forwarded to the Holders of Class HI: A, Class HI: M and Class HI:
B-1 Certificates on such Payment Date. The Servicer shall also furnish to the
Trustee, which shall forward such information to the Class HI: B- 2
Certificateholders as part of their monthly statement, the following
information:
(i) the amount of such distribution to Holders of Class HI: B-2
Certificates allocable to interest, separately identifying any Unpaid Class
HI: B-2 Interest Shortfall included in such distribution and any remaining
Unpaid Class HI: B-2 Interest Shortfall after giving effect to such
distribution;
(ii) the amount of such distribution to Holders of Class HI: 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 HI: B-2
Formula Distribution Amount and the Class HI: B-2 Liquidation Loss
Principal Amount, if any, for such Payment Date exceeds the Class HI: B-2
Distribution Amount for such Payment Date;
6-6
<PAGE>
(iv) the Class HI: B-2 Principal Balance after giving effect to the
distribution of principal on such Payment Date;
(v) the Class HI: B Percentage for such Payment Date; 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 HI: B-2 Certificate with
a 1% Percentage Interest or per $1,000 denomination of Class HI: 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 HI: 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 HI: 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. 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 HE: 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
HE: A Certificates allocable to interest, separately identifying any Unpaid
Class HE: A Interest Shortfall included in such distribution and any
remaining Unpaid Class HE: A Interest Shortfall after giving effect to such
distribution;
(ii) the amount of such distribution to Holders of each Class of Class
HE: A Certificates allocable to principal, separately identifying the
aggregate amount of any Principal Prepayments included therein;
(iii) the amount, if any, by which the Class HE: A Formula
Distribution Amount for such Payment Date exceeds the Class HE: A
Distribution Amount for such Payment Date;
(iv) the Class HE: A-1A NAS Principal Balance, the Class HE: A-1B ARM
Principal Balance, the Class HE: A-1 (Underlying) Principal Balance, the
Class HE: A-2 Principal Balance, the Class HE: A-3 Principal Balance, the
Class HE: A- 4 Principal Balance and the Class HE: A-5 IO Notional
Principal Amount after giving effect to the distribution of principal on
such Payment Date;
6-7
<PAGE>
(v) the Pool Scheduled Principal Balance of Sub-Pool HE, and of that
amount the aggregate Scheduled Principal Balance of the Adjustable Rate
Home Equity Contracts, Group I Contracts and Group II Contracts, for such
Payment Date;
(vi) [RESERVED];
(vii) the Sub-Pool HE Pool Factor;
(viii) the number and aggregate principal balances of Home Equity
Contracts, identifying separately the Adjustable Rate Home Equity
Contracts, Group I Contracts and Group II Contracts, (a) delinquent (i)
31-59 days, (ii) 60-89 days, (iii) 90-179 days and (iv) 180 or more days;
(b) in foreclosure; and (c) constituting "real estate owned" of the
Servicer;
(ix) any Reserve Account Withdrawal Amount or Reserve Account
Step-Down Amount and the Reserve Account Balance after giving effect
thereto;
(x) the Class HE: B Principal Distribution Test (as set forth in
Exhibit Q hereto);
(xi) the number of Liquidated Contracts that are Home Equity
Contracts, identifying such Contracts (including those which are Adjustable
Rate Home Equity Contracts, Group I Contracts and Group II Contracts) and
the Net Liquidation Loss on such Contracts; and
(xii) the Sub-Pool HE Pre-Funded ARM Amount, the Sub-Pool HE
Pre-Funded Fixed Rate Amount (by Group I and Group II) 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 HE: A
Certificate with a 1% Percentage Interest or per $1,000 denomination of Class
HE: 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 HE: A Certificate a statement
containing the information with respect to interest accrued and principal paid
on its Class HE: 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.
6-8
<PAGE>
h. On each Payment Date, the Trustee shall forward or cause to be forwarded
by mail to each Holder of a Class HE: M-1 Certificate a copy of the monthly
statement forwarded to the Holders of Class HE: A Certificates on such Payment
Date. The Servicer shall also furnish to the Trustee, which shall forward such
information to the Class HE: M-1 Certificateholders as part of their monthly
statement, the following information:
(i) the amount of such distribution to Holders of Class HE: M-1
Certificates allocable to interest, separately identifying any Unpaid Class
HE: M-1 Interest Shortfall included in such distribution and any remaining
Unpaid Class HE: M-1 Interest Shortfall after giving effect to such
distribution;
(ii) the amount of such distribution to Holders of Class HE: 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 HE: M-1 Formula
Distribution Amount for such Payment Date exceeds the Class HE: M-1
Distribution Amount for such Payment Date;
(iv) the Class HE: M-1 Principal Balance after giving effect to the
distribution of principal on such Payment Date;
(v) the Unpaid Class HE: M-1 Liquidation Loss Interest Shortfall after
giving effect to any distribution on such Payment Date pursuant to Section
8.04(c)(9); and
(vi) the information set forth in clauses (v) through (xii) of Section
6.05(g).
In the case of the information in clauses (i) through (v) above, the
amounts shall be expressed as a dollar amount per Class HE: M-1 Certificate with
a 1% Percentage Interest or per $1,000 denomination of Class HE: 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 HE: 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 HE: 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.
i. On each Payment Date, the Trustee shall forward or cause to be forwarded
by mail to each Holder of a Class HE: M-2 Certificate a copy of the monthly
statements forwarded to the Holders of Class HE: A and Class HE: M-1
Certificates on such Payment Date. The Servicer shall
6-9
<PAGE>
also furnish to the Trustee, which shall forward such information to the Class
HE: M-2 Certificateholders as part of their monthly statement, the following
information:
(i) the amount of such distribution to Holders of Class HE: M-2
Certificates allocable to interest, separately identifying any Unpaid Class
HE: M-2 Interest Shortfall included in such distribution and any remaining
Unpaid Class HE: M-2 Interest Shortfall after giving effect to such
distribution;
(ii) the amount of such distribution to Holders of Class HE: 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 HE: M-2 Formula
Distribution Amount for such Payment Date exceeds the Class HE: M-2
Distribution Amount for such Payment Date;
(iv) the Class HE: M-2 Principal Balance after giving effect to the
distribution of principal on such Payment Date;
(v) the Unpaid Class HE: M-2 Liquidation Loss Interest Shortfall,
after giving effect to any distribution on such Payment Date pursuant to
Section 8.04(c)(10); and
(vi) the information set forth in clauses (v) through (xii) of Section
6.05(g).
In the case of the information in clauses (i) through (v) above, the
amounts shall be expressed as a dollar amount per Class HE: M-2 Certificate with
a 1% Percentage Interest or per $1,000 denomination of Class HE: 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 HE: 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 HE: 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.
j. On each Payment Date, the Trustee shall forward or cause to be forwarded
by mail to each Holder of a Class HE: B Certificate a copy of the monthly
statements forwarded to the Holders of Class HE: A and Class HE: M Certificates
on such Payment Date. The Servicer shall also furnish to the Trustee, which
shall forward such information to the Class HE: B Certificateholders as part of
their monthly statement, the following information:
6-10
<PAGE>
(i) the amount of such distribution to Holders of Class HE: B
Certificates allocable to interest, separately identifying any Unpaid Class
HE: B Interest Shortfall included in such distribution and any remaining
Unpaid Class HE: B Interest Shortfall after giving effect to such
distribution;
(ii) the amount of such distribution to Holders of Class HE: B
Certificates allocable to principal, separately identifying the aggregate
amount of any Principal Prepayments included therein;
(iii) the amount, if any, by which the Class HE: B Formula
Distribution Amount for such Payment Date exceeds the Class HE: B
Distribution Amount for such Payment Date;
(iv) the Class HE: B Principal Balance after giving effect to the
distribution of principal on such Payment Date;
(v) the Unpaid Class HE: B Liquidation Loss Interest Shortfall, after
giving effect to any distribution on such Payment Date pursuant to Section
8.04(c)(12);
(vi) [RESERVED]; and
(vii) the information set forth in clauses (v) through (xii) of
Section 6.05(g).
In the case of the information in clauses (i) through (v) above, the
amounts shall be expressed as a dollar amount per Class HE: B Certificate with a
1% Percentage Interest or per $1,000 denomination of Class HE: B 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 HE: B 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 HE: B 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.
k. Copies of all reports and statements provided to the Trustee for the
Certificateholders shall also be provided to the Rating Agencies 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 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
6-11
<PAGE>
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.
Holders of the Class C Certificates 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.
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
6-12
<PAGE>
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.
6-13
<PAGE>
ARTICLE VII
SERVICE TRANSFER
SECTION 7.01. Events of Termination. "Event of Termination" means the
occurrence of any of the following:
a. Any failure by the Servicer to make any payment or deposit required
to be made hereunder (including an Advance) and the continuance of such
failure for a period of four Business Days;
b. Failure on the Servicer's part to observe or perform in any
material respect any covenant or agreement in this Agreement (other than a
covenant or agreement which is elsewhere in this Section specifically dealt
with) which continues unremedied for 30 days;
c. Any assignment by the Servicer of its duties or rights hereunder
except as specifically permitted hereunder, or any attempt to make such an
assignment;
d. A court having jurisdiction in the premises shall have entered a
decree or order for relief in respect of the Servicer in an involuntary
case under any applicable bankruptcy, insolvency or other similar law now
or hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of the Servicer, as
the case may be, or for any substantial liquidation of its affairs;
e. The Servicer shall have commenced a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or shall have consented to the entry of an order for relief in an
involuntary case under any such law, or shall have consented to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian or sequestrator (or other similar official) of the
Servicer or for any substantial part of its property, or shall have made
any general assignment for the benefit of its creditors, or shall have
failed to, or admitted in writing its inability to, pay its debts as they
become due, or shall have taken any corporate action in furtherance of the
foregoing;
f. The failure of the Servicer to be an Eligible Servicer; or
g. If the Company is the Servicer, the Company's servicing rights
under its master seller-servicer agreement with GNMA are terminated by
GNMA.
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 Aggregate Certificate Principal Balance, by
notice in writing to the Servicer (and to the Trustee if given by the
Certificateholders) may terminate all (but not less than all) of the Servicer's
management, administrative, servicing and collection functions (such termination
being herein called a "Service
7-1
<PAGE>
Transfer"). On receipt of such notice (or, if later, on a date designated
therein), all authority and power of the Servicer under this Agreement, whether
with respect to the Contracts, the Contract Files or otherwise (except with
respect to the Certificate Account, the transfer of which shall be governed by
Section 7.06), shall pass to and be vested in the Trustee pursuant to and under
this Section 7.02; and, without limitation, the Trustee is authorized and
empowered to execute and deliver on behalf of the Servicer, as attorney-in-fact
or otherwise, any and all documents and other instruments, and to do any and all
acts or things necessary or appropriate to effect the purposes of such notice of
termination. The Trustee shall cause all assignments of mortgages, deeds of
trust or security deeds securing the Contracts to be duly recorded. If the
Servicer was the lender of record for purposes of the FHA Insurance relating to
FHA-Insured Contracts, the Trustee shall notify HUD of such termination and
shall request that HUD transfer the FHA Insurance reserves allocable to such
FHA-Insured Contracts to the successor Servicer; provided, however, that if the
Trustee is the successor Servicer, the Trustee shall request such transfer of
reserves if and to the extent it is legally able to do so, and the Trustee shall
use its best efforts to obtain any approvals that may be required for the
Trustee to receive such transfer of reserves. Each of the Company and the
Servicer agrees to cooperate with the Trustee in effecting the termination of
the responsibilities and rights of the Servicer hereunder, including, without
limitation, the transfer to the Trustee for administration by it of all cash
amounts which shall at the time be held by the Servicer for deposit, or have
been deposited by the Servicer, in the Certificate Account, or for its own
account in connection with its services hereafter or thereafter received with
respect to the Contracts, and the transfer of all rights under FHA Insurance
relating to FHA-Insured Contracts. The Servicer shall transfer to the new
servicer (i) the Servicer's records relating to the Contracts in such electronic
form as the new servicer may reasonably request and (ii) any Contract Files in
the Servicer's possession.
SECTION 7.03. Trustee to Act; Appointment of Successor. On and after the
time the Servicer receives a notice of termination pursuant to Section 7.02, the
Trustee shall be the successor in all respects to the Servicer in its capacity
as servicer under this Agreement and the transactions set forth or provided for
herein and shall be subject to all the responsibilities, duties and liabilities
relating thereto placed on the Servicer by the terms and provisions hereof, and
the Servicer shall be relieved of such responsibilities, duties and liabilities
arising after such Service Transfer; provided, however, that (i) the Trustee
will not assume any obligations of the Company pursuant to Section 3.05, and
(ii) the Trustee shall not be liable for any acts or omissions of the Servicer
occurring prior to such Service Transfer or for any breach by the Servicer of
any of its obligations contained herein or in any related document or agreement.
As compensation therefor, the Trustee shall be entitled to receive reasonable
compensation out of the Monthly Servicing Fee. Notwithstanding the above, the
Trustee may, if it shall be unwilling so to act, or shall, if it is legally
unable so to act, appoint, or petition a court of competent jurisdiction to
appoint, an Eligible Servicer as the successor to the Servicer hereunder in the
assumption of all or any part of the responsibilities, duties or liabilities of
the Servicer hereunder. Pending appointment of a successor to the Servicer
hereunder, unless the Trustee is prohibited by law from so acting, the Trustee
shall act in such capacity as hereinabove provided. In connection with such
appointment and assumption, the Trustee may make such arrangements for the
compensation of such successor out of payments on Contracts as it and such
successor shall agree; provided, however, that no such monthly compensation
shall, without the
7-2
<PAGE>
written consent of 100% of the Certificateholders, exceed the Monthly Servicing
Fee. The Trustee and such successor shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession.
SECTION 7.04. Notification to Certificateholders and Class C
Certificateholders.
a. Promptly following the occurrence of any Event of Termination, the
Servicer shall give written notice thereof to the Trustee, the Rating Agencies,
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 the Rating Agencies, 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
Contracts after the effective date of the Service Transfer.
b. After the Service Transfer, the replaced Servicer shall have no further
obligations with respect to the management, administration, servicing or
collection of the Contracts and the new Servicer shall have all of such
obligations, except that the replaced Servicer will transmit or cause to be
transmitted directly to the new Servicer for its own account, promptly on
receipt and in the same form in which received, any amounts (properly endorsed
where required for the new Servicer to collect them) received as payments upon
or otherwise in connection with the Contracts.
c. A Service Transfer shall not affect the rights and duties of the parties
hereunder (including but not limited to the indemnities of the Servicer and the
Company pursuant to Article X and Sections 3.05, 11.06 and 11.12(f)) other than
those relating to the management, administration, servicing or collection of the
Contracts after the Service Transfer.
SECTION 7.06. Transfer of Certificate Account. Notwithstanding the
provisions of Section 7.02, if the Certificate Account shall be maintained with
the Servicer and an Event of Termination shall occur and be continuing, the
Servicer shall, after five days' written notice from the Trustee, or in any
event within ten days after the occurrence of the Event of Termination,
establish a new account or accounts in trust for the Certificateholders and the
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.
7-3
<PAGE>
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 HI: A-1 Distribution Amount, the Class HI: A-2
Distribution Amount, the Class HI: A-3 Distribution Amount, the Class HI: M-1
Distribution Amount, the Class HI: M-2 Distribution Amount, the Class HI: B-1
Distribution Amount, the Class HI: B-2 Distribution Amount, any Class HI: B-2
Guaranty Payment, the Class HE: A-1A NAS Distribution Amount, the Class HE: A-1B
ARM Distribution Amount, the Class HE: A-1 (Underlying) Distribution Amount, the
Class HE: A-2 Distribution Amount, the Class HE: A-3 Distribution Amount, the
Class HE: A-4 Distribution Amount, the Class HE: A-5 IO Distribution Amount, the
Class HE: M-1 Distribution Amount, the Class HE: M-2 Distribution Amount, the
Class HE: B Distribution Amount, any Class HE: B Guaranty Payment, the Class C
Master Distribution Amount, or the Class C Subsidiary 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 F 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
8-1
<PAGE>
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)
or Section 8.04(c), as applicable. 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) or Section 8.04(c), as applicable.
SECTION 8.03. Limited Guaranties.
a. Class HI: B-2 Limited Guaranty
(i) 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 HI: 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 HI: B-2 Guaranty Payment, if any, for such
Payment Date into the Certificate Account. Any Class HI: B-2 Guaranty
Payment shall be distributable to Class HI: B-2 Certificateholders pursuant
to Section 8.01.
(ii) The obligations of the Company under this Section 8.03(a) shall
not terminate upon or otherwise be affected by a Service Transfer pursuant
to Article VII of this Agreement.
(iii) The obligation of the Company to provide the Class HI: B-2
Limited Guaranty under this Agreement shall terminate on the Final Payment
Date.
8-2
<PAGE>
(iv) The obligation of the Company to make the Class HI: B-2 Guaranty
Payments described in subsection (i) above shall be unconditional and
irrevocable. The Company acknowledges that its obligation to make the Class
HI: B-2 Guaranty Payments described in subsection (i) above shall be deemed
a guaranty by the Company of indebtedness of the Trust for money borrowed
from the Class HI: B-2 Certificateholders.
(v) If the Company fails to make a Class HI: B-2 Guaranty Payment in
whole or in part, the Company shall promptly notify the Trustee, and the
Trustee shall promptly notify the Rating Agencies.
(vi) In consideration of providing the Class HI: B-2 Limited Guaranty,
the Company shall be entitled to the Class HI: B-2 Guaranty Fee payable in
accordance with Section 8.04(b)(21).
b. Class HE: B Limited Guaranty
(i) 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 HE: B Guaranty Payment (if any) for such Payment Date.
Not later than the Business Day preceding each Payment Date, the Company
shall deposit the Class HE: B Guaranty Payment, if any, for such Payment
Date into the Certificate Account. Any Class HE: B Guaranty Payment shall
be distributable to Class HE: B Certificateholders pursuant to Section
8.01.
(ii) The obligations of the Company under this Section 8.03(b) shall
not terminate upon or otherwise be affected by a Service Transfer pursuant
to Article VII of this Agreement.
(iii) The obligation of the Company to provide the Class HE: B Limited
Guaranty under this Agreement shall terminate on the Final Payment Date.
(iv) The obligation of the Company to make the Class HE: B Guaranty
Payments described in subsection (i) above shall be unconditional and
irrevocable. The Company acknowledges that its obligation to make the Class
HE: B Guaranty Payments described in subsection (i) above shall be deemed a
guaranty by the Company of indebtedness of the Trust for money borrowed
from the Class HE: B Certificateholders.
(v) If the Company fails to make a Class HE: B Guaranty Payment in
whole or in part, the Company shall promptly notify the Trustee, and the
Trustee shall promptly notify the Rating Agencies.
8-3
<PAGE>
(vi) In consideration of providing the Class HE: B Limited Guaranty,
the Company shall be entitled to the Class HE: B Guaranty Fee payable in
accordance with Section 8.04(c)(20).
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 Contracts for the
following purposes:
(i) to make payments in the amounts and in the manner provided for in
Sections 8.04(b) and 8.04(c);
(ii) to pay to the Company with respect to each Contract or property
acquired in respect thereof that has been repurchased or replaced pursuant
to Section 3.05, all amounts received thereon and not required to be
distributed to Certificateholders as of the date on which the related
Scheduled Principal Balance or Repurchase Price is determined;
(iii) to reimburse the Servicer out of Liquidation Proceeds for
Liquidation Expenses incurred by it and not otherwise reimbursed, to the
extent such reimbursement is permitted pursuant to Section 5.08;
(iv) to withdraw any amount deposited in the Certificate Account that
was not required to be deposited therein; or
(v) to make any rebates or adjustments deemed necessary by the
Servicer pursuant to Section 5.06(d).
Since, in connection with withdrawals pursuant to clause (iii), the
Company's entitlement thereto is limited to collections or other recoveries on
the related Contract, the Servicer shall keep and maintain separate accounting,
on a Contract by Contract basis, for the purpose of justifying any withdrawal
from the Certificate Account pursuant to such clause.
b. On each Payment Date, the Trustee shall apply the Sub-Pool HI Amount
Available (as determined on the immediately preceding Determination Date) in the
Certificate Account to make payment in the following order of priority, subject
to the last sentence of this Section 8.04(b):
(1) if neither the Company nor a wholly owned subsidiary of the
Company is the Servicer, to pay, with respect to the Home Improvement
Contracts, the Monthly Servicing Fee and any other compensation owed to the
Servicer pursuant to Section 7.03;
(2) to pay the Class HI: A Formula Interest Distribution Amount as
follows (and in the following order of priority):
8-4
<PAGE>
(i) the amount in clause (a)(1) of the definition of Class HI: A
Formula Distribution Amount to the Class HI: A-1 Certificateholders;
the amount in clause (a)(2) of the definition of Class HI: A Formula
Distribution Amount to the Class HI: A-2 Certificateholders; the
amount in clause (a)(3) of the definition of Class HI: A Formula
Distribution Amount to the Class HI: A-3 Certificateholders; or, if
the Sub-Pool HI Amount Available is less than the amount necessary to
pay all Class HI: A Formula Interest Distribution Amounts, pro rata to
each Class of Class HI: A Certificates in accordance with their
respective entitlements to interest; and
(ii) to each Class of Class HI: A Certificates the amount, if
any, of the Unpaid Class HI: A Interest Shortfall of such Class, or,
if the remaining Sub-Pool HI Amount Available is less than the amount
necessary to pay all Unpaid Class HI: A Interest Shortfalls, pro rata
to each Class of Class HI: A Certificates based on the Unpaid Class
HI: A Interest Shortfall of each such Class;
(3) after payment of the amounts specified in clauses (1) and (2)
above, to the Class HI: M-1 Certificateholders as follows (and in the
following order of priority):
(i) the amount in clause (a) of the definition of Class HI: M-1
Formula Distribution Amount; and
(ii) any Unpaid Class HI: M-1 Interest Shortfall;
(4) after payment of the amounts specified in clauses (1) through (3)
above, to the Class HI: M-2 Certificateholders as follows (and in the
following order of priority):
(i) the amount in clause (a) of the definition of Class HI: M-2
Formula Distribution Amount; and
(ii) any Unpaid Class HI: M-2 Interest Shortfall;
(5) after payment of the amounts specified in clauses (1) through (4)
above, to the Class HI: B-1 Certificateholders as follows (and in the
following order of priority):
(i) the amount in clause (a) of the definition of Class HI: B-1
Formula Distribution Amount; and
(ii) any Unpaid Class HI: B-1 Interest Shortfall;
(6) after payment of the amounts specified in clauses (1) through (5)
above, to pay principal in respect of the Class HI: A Certificates as
follows:
8-5
<PAGE>
(i) if there is a Class HI: A Principal Deficiency Amount as to
such Payment Date, the remaining Sub-Pool HI Amount Available, pro
rata to each Class of Class HI: A 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
(ii) if there is no Class HI: A Principal Deficiency Amount as to
such Payment Date:
(A) if such Payment Date is on or prior to the Class HI: A-1
Cross-over Date, the Sub-Pool HI Senior Formula Principal
Distribution Amount to the Class HI: A-1 Certificateholders, but
in no event more than is necessary to reduce the Class HI: A-1
Principal Balance to zero;
(B) if such Payment Date is on or after the Class HI: A-1
Cross-over Date, but on or prior to the Class HI: A-2 Cross-over
Date, the Sub-Pool HI Senior Formula Principal Distribution
Amount to the Class HI: A-2 Certificateholders (reduced, if such
Payment Date is on the Class HI: A-1 Cross-over Date, by that
portion of the Sub-Pool HI Senior Formula Principal Distribution
Amount to be distributed to the Class HI: A-1 Certificateholders
on such date in accordance with clause (A) above), but in no
event more than is necessary to reduce the Class HI: A-2
Principal Balance to zero; and
(C) if such Payment Date is on or after the Class HI: A-2
Cross-over Date, but on or prior to the Class HI: A-3 Cross-over
Date, the Sub-Pool HI Senior Formula Principal Distribution
Amount to the Class HI: A-3 Certificateholders (reduced, if such
Payment Date is on the Class HI: A-2 Cross-over Date, by that
portion of the Sub-Pool HI Senior Formula Principal Distribution
Amount to be distributed to the Class HI: A-2 Certificateholders
on such date in accordance with clause (B) above), but in no
event more than is necessary to reduce the Class HI: A-3
Principal Balance to zero;
(7) after payment of the amounts specified in clauses (1) through (6)
above, to the Class HI: M-1 Certificateholders the amount in clause (c) of
the definition of Class HI: M-1 Formula Distribution Amount;
(8) after payment of the amounts specified in clauses (1) through (7)
above, to the Class HI: M-2 Certificateholders the amount in clause (c) of
the definition of Class HI: M-2 Formula Distribution Amount;
(9) after payment of the amounts specified in clauses (1) through (8)
above, to the Class HI: B-1 Certificateholders the amount in clause (c) of
the definition of Class HI: B-1 Formula Distribution Amount;
8-6
<PAGE>
(10) after payment of the amounts specified in clauses (1) through (9)
above, to pay principal in respect of the Class HI: A Certificates and the
Class HI: M Certificates as follows (and in the following order of
priority) until the cumulative amount distributed pursuant to this clause
(10) on all Payment Dates equals the Sub-Pool HI Supplementary Principal
Distribution Amount, if any:
(i) to the Class HI: A-1 Certificateholders, until the Class HI:
A-1 Principal Balance has been reduced to zero;
(ii) to the Class HI: A-2 Certificateholders, until the Class HI:
A-2 Principal Balance has been reduced to zero;
(iii) to the Class HI: A-3 Certificateholders, until the
Class HI: A-3 Principal Balance has been reduced to zero;
(iv) to the Class HI: M-1 Certificateholders, until the Class HI:
M-1 Principal Balance has been reduced to zero; and
(v) to the Class HI: M-2 Certificateholders, until the Class HI:
M-2 Principal Balance has been reduced to zero;
(11) after payment of the amounts specified in clauses (1) through
(10) above, to the Class HI: M-1 Certificateholders as follows (and in the
following order of priority):
(i) any Class HI: M-1 Liquidation Loss Interest Amount; and
(ii) any Unpaid Class HI: M-1 Liquidation Loss Interest
Shortfall;
(12) after payment of the amounts specified in clauses (1) through
(11) above, to the Class HI: M-2 Certificateholders as follows (and in the
following order of priority):
(i) any Class HI: M-2 Liquidation Loss Interest Amount; and
(ii) any Unpaid Class HI: M-2 Liquidation Loss Interest
Shortfall;
(13) after payment of the amounts specified in clauses (1) through
(12) above, to the Class HI: B-1 Certificateholders as follows (and in the
following order of priority):
(i) any Class HI: B-1 Liquidation Loss Interest Amount; and
(ii) any Unpaid Class HI: B -1 Liquidation Loss Interest
Shortfall;
8-7
<PAGE>
(14) after payment of the amounts specified in clauses (1) through
(13) above, to the Class HI: B-2 Certificateholders as follows (and in the
following order of priority):
(i) the amount in clause (a) of the definition of Class HI: B-2
Formula Distribution Amount;
(ii) any Unpaid Class HI: B-2 Interest Shortfall; and
(iii) the amount in clause (c) of the definition of Class HI: B-2
Formula Distribution Amount;
(15) after payment of the amounts specified in clauses (1) through
(14) above, if the Sub-Pool HE Amount Available for such Payment Date
(determined without regard to clause (a)(2) of the definition thereof) is
less than the amounts provided for in clauses (1) through (14) of Section
8.04(c), to add to the Sub-Pool HE Amount Available the amount of such
deficiency (or the remaining Sub-Pool HI Amount Available, if less);
(16) if the Company or a wholly owned subsidiary of the Company is the
Servicer, to pay the Servicer the Monthly Servicing Fee with respect to the
Home Improvement Contracts;
(17) to reimburse the Trustee or any successor Servicer for any
payments of FHA Insurance premiums in respect of FHA-Insured Contracts not
paid by the Company and for which the Trustee or such successor Servicer
has not been reimbursed by the Company;
(18) to reimburse the Servicer or the Trustee, as applicable, for any
unreimbursed Advances made with respect to the Home Improvement Contracts
in respect of current or prior Payment Dates;
(19) to reimburse the Class C Subsidiary Certificateholder for
expenses incurred by and reimbursable to it pursuant to Section 10.06;
(20) to the extent not reimbursed pursuant to 8.04(c), to the Agent
the Reserve Account Loan Interest with respect to the "Risk Rate Based
Portion" and the Reserve Account Loan-Other Fees;
(21) to reimburse the Company for any prior unreimbursed Class HI: B-2
Guaranty Payments;
(22) to pay the Class HI: B-2 Guaranty Fee to the Company; and
(23) to pay the remainder, if any, of the Sub-Pool HI Amount Available
to the Holder of the Class C Subsidiary Certificate.
8-8
<PAGE>
c. On each Payment Date, the Trustee shall apply the Sub-Pool HE Amount
Available in the Certificate Account to make payment in the following order of
priority, subject to the last sentence of this Section 8.04(c):
(1) if neither the Company nor a wholly owned subsidiary of the
Company is the Servicer, to pay, with respect to the Home Equity Contracts,
the Monthly Servicing Fee and any other compensation owed to the Servicer
pursuant to Section 7.03;
(2) to pay the Class HE: 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 HE: A
Formula Distribution Amount to the Class HE: A-1A NAS
Certificateholders; the amount in clause (a)(2) of the definition of
Class HE: A Formula Distribution Amount to the Class HE: A-1B ARM
Certificateholders; the amount in clause (a)(3) of the definition of
Class HE: A Formula Distribution Amount to the Class HE: A-1
(Underlying) Certificateholders; the amount in clause (a)(4) of the
definition of Class HE: A Formula Distribution Amount to the Class HE:
A-2 Certificateholders; the amount in clause (a)(5) of the definition
of Class HE: A Formula Distribution Amount to the Class HE: A-3
Certificateholders; the amount in clause (a)(6) of the definition of
Class HE: A Formula Distribution Amount to the Class HE: A-4
Certificateholders; the amount in clause (a)(7) of the definition of
Class HE: A Formula Distribution Amount to the Class HE: A-5 IO
Certificateholders; or, if the Sub-Pool HE Amount Available is less
than the amount necessary to pay all Class HE: A Formula Interest
Distribution Amounts, pro rata to each Class of Class HE: A
Certificates in accordance with their respective entitlements to
interest; and
(ii) to each Class of Class HE: A Certificates the amount, if
any, of the Unpaid Class HE: A Interest Shortfall of such Class or, if
the remaining Sub- Pool HE Amount Available is less than the amount
necessary to pay all Unpaid Class HE: A Interest Shortfalls, pro rata
to each Class of Class HE: A Certificates based on the Unpaid Class
HE: A Interest Shortfall of each such Class;
(3) after payment of the amounts specified in clauses (1) and (2)
above, to the Class HE: M-1 Certificateholders as follows (and in the
following order of priority):
(i) the amount in clause (a) of the definition of Class HE: M-1
Formula Distribution Amount; and
(ii) any Unpaid Class HE: M-1 Interest Shortfall;
8-9
<PAGE>
(4) after payment of the amounts specified in clauses (1) through (3)
above, to the Class HE: M-2 Certificateholders as follows (and in the
following order of priority):
(i) the amount in clause (a) of the definition of Class HE: M-2
Formula Distribution Amount; and
(ii) any Unpaid Class HE: M-2 Interest Shortfall;
(5) after payment of the amounts specified in clauses (1) through (4)
above, to the Agent the Reserve Account Loan Interest with respect to the
"Standard Rate Based Portion" of the Reserve Account Loan and the Reserve
Account Loan Fee;
(6) after payment of the amounts specified in clauses (1) through (5)
above, to pay principal in respect of the Class HE: A Certificates as
follows:
(i) if there is a Class HE: A Principal Deficiency Amount as to
such Payment Date, the remaining Sub-Pool HE Amount Available, pro
rata to each Class of Class HE: A Certificates (other than the Class
HE: A-5 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
(ii) if there is no Class HE: A Principal Deficiency Amount as to
such Payment Date, and if such Payment Date is on or prior to the
Class HE: A Cross- over Date, the remaining Sub-Pool HE Amount
Available, up to the Class HE: A Formula Principal Distribution Amount
as follows:
(A) if the remaining Sub-Pool HE Amount Available is less
than the Class HE: A Formula Principal Distribution Amount, then
pro rata to each Class of Class HE: A Certificates (other than
the Class HE: A-5 IO Certificates) based upon the amounts that
would have been distributed pursuant to clause (B), below, had
the remaining Sub-Pool HE Amount Available been equal to the
Class HE: A Formula Principal Distribution Amount;
(B) if the remaining Sub-Pool HE Amount Available is not
less than the Class HE: A Formula Principal Distribution Amount,
then
(a) (i) to the Class HE: A-1B ARM Certificateholders,
the Class HE: A ARM Portion less an amount equal to the
lesser of the Class HE: A-1A NAS Principal Balance and the
Class HE: A-1A NAS Percentage of the Class HE: A ARM
Portion, but in no event more than is necessary to reduce
the Class HE: A-1B ARM Principal
8-10
<PAGE>
Balance to zero; and (ii) the remainder of the Class HE: A
ARM Portion to the Class HE: A-1A NAS Certificateholders;
(b) to the Class HE: A-1 (Underlying)
Certificateholders, the Class HE: A-1 (Underlying) Portion,
but in no event more than is necessary to reduce the Class
HE: A-1 (Underlying) Principal Balance to zero;
(c) if such Payment Date is on or prior to the Class
HE: A-2 Cross-over Date, to the Class HE: A-2
Certificateholders, the Class HE: A (2,3,4) Portion, but in
no event more than is necessary to reduce the Class HE: A-2
Principal Balance to zero;
(d) if such Payment Date is on or after the Class HE:
A-2 Cross-over Date, but on or prior to the Class HE: A-3
Cross-over Date, the Class HE: A (2,3,4) Portion, to the
Class HE: A-3 Certificateholders, but in no event more than
is necessary to reduce the Class HE: A-3 Principal Balance
to zero;
(e) if such Payment Date is on or after the Class HE:
A-3 Cross-over Date, but on or prior to the Class HE: A-4
Cross-over Date, the Class HE: A (2,3,4) Portion to the
Class HE: A-4 Certificateholders, but in no event more than
is necessary to reduce the Class HE: A-4 Principal Balance
to zero;
(7) after payment of the amounts specified in clauses (1) through (6)
above, to the Class HE: M-1 Certificateholders the amount in clause (c) of
the definition of Class HE: M-1 Formula Principal Distribution Amount;
(8) after payment of the amounts specified in clauses (1) through (7)
above, to the Class HE: M-2 Certificateholders the amount in clause (c) of
the definition of Class HE: M-2 Formula Principal Distribution Amount;
(9) after payment of the amounts specified in clauses (1) through (8)
above, to the Class HE: M-1 Certificateholders as follows (and in the
following order of priority):
(i) any Class HE: M-1 Liquidation Loss Interest Amount; and
(ii) any Unpaid Class HE: M-1 Liquidation Loss Interest
Shortfall;
(10) after payment of the amounts specified in clauses (1) through (9)
above, to the Class HE: M-2 Certificateholders as follows (and in the
following order of priority):
8-11
<PAGE>
(i) any Class HE: M-2 Liquidation Loss Interest Amount; and
(ii) any Unpaid Class HE: M-2 Liquidation Loss Interest
Shortfall;
(11) after payment of the amounts specified in clauses (1) through
(10) above, to the Agent the Reserve Account Loan Interest with respect to
the "Risk Rate Based Portion" and the Reserve Account Loan-Other Fees;
(12) after payment of the amounts specified in clauses (1) through
(11) above, to the Reserve Account, on any Payment Date on which a Reserve
Account Loan Trigger Event exists, or which is on or after the Reserve
Account Loan Termination Date, the Reserve Account Loan Distribution
Amount, but in no event more than is required to reduce the Reserve Account
Loan Balance to zero;
(13) after payment of the amounts specified in clauses (1) through
(12) above, to the Class HE: B Certificateholders as follows (and in the
following order of priority):
(i) the amount in clause (a) of the definition of Class HE: B
Formula Distribution Amount;
(ii) any Unpaid Class HE: B Interest Shortfall; and
(iii) the Class HE: B Formula Principal Distribution Amount.
(14) after payment of the amounts specified in clauses (1) through
(13) above, to the Class HE: A-1B ARM Certificateholders as follows (and in
the following order of priority):
(i) any Class HE: A-1B ARM Available Funds Limitation Interest
Amount; and
(ii) any Unpaid Class HE: A-1B ARM Available Funds Limitation
Interest Shortfall;
(15) after payment of the amounts specified in clauses (1) through
(14) above, if the Sub-Pool HI Amount Available for such Payment Date
(determined without regard to clause (a)(2) of the definition thereof) is
less than the amounts provided for in clauses (1) through (14) of Section
8.04(b), to add to the Sub-Pool HI Amount Available the amount of such
deficiency (or the remaining Sub-Pool HE Amount Available, if less);
(16) if the Company or a wholly owned subsidiary of the Company is the
Servicer, to pay the Servicer the Monthly Servicing Fee with respect to the
Home Equity Contracts;
8-12
<PAGE>
(17) to reimburse the Servicer or the Trustee, as applicable, for any
unreimbursed Advances made with respect to the Home Equity Contracts in
respect of current or prior Payment Dates and to reimburse the Servicer for
any unreimbursed Advances made pursuant to Section 8.02(b);
(18) to reimburse the Class C Certificateholders for expenses incurred
by and reimbursable to them pursuant to Section 10.06;
(19) to reimburse the Company for any prior unreimbursed Class HE: B
Guaranty Payments;
(20) to pay the Class HE: B Guaranty Fee to the Swap Reserve Account;
and
(21) to pay the remainder, if any, of the Sub-Pool HE Amount Available
to the Class C Master Certificateholder.
Notwithstanding the order of priority of payment set out in this Section
8.04(c), (i) amounts transferred to the Certificate Account from the Reserve
Account may only be used to pay the amounts specified in clauses (6), (7) and
(8) of Section 8.04(c), and (ii) any amount deposited in the Certificate Account
that was withdrawn from the Sub-Pool HE Pre-Funding Account in respect of
Adjustable Rate Home Equity Contracts, Group I Contracts and Group II Contracts
may only be used to pay principal in respect of the Class HE: A-1 ARM
Certificates, Class HE: A-1 (Underlying) Certificates and Class HE: A-2
Certificates, respectively. Since certain Certificateholders' entitlement to
amounts withdrawn from the Certificate Account may be limited by the preceding
sentence, depending on the source of such amounts in the Certificate Account,
the Trustee shall keep and maintain a separate accounting of amounts deposited
in the Certificate Account from the Reserve Account and the Sub-Pool HE Pre-
Funding Account for the purpose of justifying any withdrawal of such amounts
from the Certificate Account.
d. If the Trustee shall not have received the applicable Monthly Report by
any Payment Date, the Trustee shall, in accordance with Sections 8.04(b) and
(c), distribute all funds then in the Certificate Account to Certificateholders
and the Agent, to the extent of such funds, on such Payment Date.
SECTION 8.05. Reassignment of Repurchased and Replaced Contracts. 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 Contract 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)(vi),
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 Contract or Replaced Contract without recourse, representation or
warranty, except as to the absence of liens, charges or encumbrances created by
or arising as a result of actions of the Trustee. Upon such deposit of the
Repurchase Price or receipt
8-13
<PAGE>
of such Eligible Substitute Contract and related deposit of any additional
amount under Section 3.05(b)(vi), the Servicer shall be deemed to have released
any claims to such Contract as a result of Advances with respect to such
Contract.
SECTION 8.06. Servicer's Purchase Option.
a. The Servicer shall, subject to subsection (b) hereof, have the option to
purchase all of the Contracts and all property acquired in respect of any
Contract remaining in the Trust at a price equal to the greatest of:
(i) the sum of (x) 100% of the principal balance of each Contract
(other than any Contract as to which title to the underlying property has
been acquired and whose fair market value is included pursuant to clause
(y) below), together with accrued and unpaid interest on each such Contract
at the Weighted Average Pass-Through Rate, plus (y) the fair market value
of such acquired property (as reasonably determined by the Servicer as of
the close of business on the third Business Day preceding the date of such
purchase),
(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 Aggregate Certificate Principal Balance as of the date of
such purchase (less any amounts on deposit in the Certificate Account on
such purchase date and representing payments of principal in respect of the
Contracts) plus an amount necessary to pay the Class HI: A Formula Interest
Distribution Amount, the Class HI: M-1 Formula Interest Distribution
Amount, the Class HI: M-1 Formula Liquidation Loss Interest Distribution
Amount, the Class HI: M-2 Formula Interest Distribution Amount, the Class
HI: M-2 Formula Liquidation Loss Interest Distribution Amount, the Class
HI: B-1 Formula Interest Distribution Amount, the Class HI: B-1 Formula
Liquidation Loss Interest Distribution Amount, the Class HI: B-2 Formula
Interest Distribution Amount, the Class HE: A Formula Interest Distribution
Amount, the Class HE: A-1B ARM Formula Available Funds Limitation Interest
Distribution Amount, the Class HE: M-1 Formula Interest Distribution
Amount, the Class HE: M-1 Formula Liquidation Loss Interest Distribution
Amount, the Class HE: M-2 Formula Interest Distribution Amount, the Class
HE: M-2 Formula Liquidation Loss Interest Distribution Amount, the Class
HE: B Formula Interest Distribution Amount, the Class HE: B Formula
Liquidation Loss Interest Distribution Amount and the Class HE: B Formula
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 Contracts at the Weighted Average Pass- Through
Rate).
b. The purchase by the Servicer of all of the Contracts pursuant to this
Section 8.06 shall be conditioned upon (1) the Pool Scheduled Principal Balance
of all Contracts, at the time of any such purchase, aggregating less than 10% of
the Cut-off Date Pool Principal Balance of all Contracts,
8-14
<PAGE>
(2) such purchase constituting a plan of complete liquidation in accordance with
Section 860F of the Code, and (3) the Servicer having provided the Trustee and
the Depository (if any) with at least 30 days' written notice. If such option is
exercised, the Servicer shall provide to the Trustee (at the Servicer's expense)
the certification required by Section 12.04, which certificate shall constitute
a plan of complete liquidation within the meaning of Section 860F of the Code,
and the Trustee shall promptly sign such certification and release to the
Servicer the Contract Files pertaining to the Contracts being purchased.
c. The Servicer agrees at the request of the Agent to exercise its option
to purchase the Contracts as described above. If the Servicer shall for any
reason be unable at such time to exercise its option, the Agent shall have the
right to purchase the Contracts for its own account on the terms set forth
above.
SECTION 8.07. Sub-Pool HI Pre-Funding Account.
a. On or before the Closing Date, the Trustee shall establish the Sub- Pool
HI 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 Sub-Pool HI Pre-Funding Account shall
be entitled "Sub-Pool HI Pre-Funding Account, U.S. Bank Trust National
Association as Trustee for the benefit of holders of Home Improvement and Home
Equity Loan Certificates, Series 1998-E." The Trustee shall maintain within the
Sub-Pool HI Pre-Funding Account two subaccounts as follows: the "Pre-Funding HI
Subaccount," which pertains to the pre-funded Subsequent Home Improvement
Contracts, and the "Undelivered HI Subaccount," which pertains to those
Contracts transferred to the Trust on the Closing Date that are Undelivered Home
Improvement Contracts. Funds deposited in the Sub-Pool HI 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 HI Subaccount the amount specified in Section 2.02(l). Amounts on
deposit in the Pre-Funding HI Subaccount 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 Home Improvement Contract 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 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 HI Subaccount, net of investment
earnings.
8-15
<PAGE>
c. On or before the Closing Date the Company shall deposit in the
Undelivered HI Subaccount the amount specified in Section 2.02(m). Amounts on
deposit in such subaccount shall be withdrawn by the Trustee as follows:
(i) If the Company delivers the related Contract File for an
Undelivered Home Improvement Contract 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 Contract and pay such amount to or upon the order of the Company.
(ii) The Company shall give the Trustee telephonic notice of its
intended delivery of Contract Files. The Trustee will use reasonable
efforts to process Contract Files and remit any amount payable for them to
the Company in a timely manner.
(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 Undelivered HI Subaccount, net of investment
earnings.
d. The Sub-Pool HI 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 Sub-Pool HI Pre-Funding Account. The Company
shall be the beneficial owner of the Sub-Pool HI Pre-Funding Account, subject to
the foregoing power of the Trustee to transfer amounts in the Sub- Pool HI
Pre-Funding Account to the Certificate Account. Funds in the Sub-Pool HI
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 Investment" and that mature no later than the Business
Day prior to the next succeeding Payment Date. All amounts earned on deposits in
the Sub-Pool HI Pre-Funding Account shall be taxable to the Company. The Trustee
shall release to the Company all investment earnings in the Sub-Pool HI
Pre-Funding Account on the Post-Funding Payment Date.
SECTION 8.08. Sub-Pool HE Pre-Funding Account.
a. On or before the Closing Date, the Trustee shall establish the Sub- Pool
HE 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 Sub-Pool HE Pre-Funding Account shall
be entitled "Sub-Pool HE Pre-Funding Account, U.S. Bank Trust National
Association as Trustee for the benefit of holders of Home Improvement and Home
Equity Loan Certificates, Series 1998-E." The Trustee shall maintain within the
Sub-Pool HE Pre-Funding Account six subaccounts as follows: the "Pre-Funding ARM
Subaccount," the "Pre-Funding Group I Subaccount" and the "Pre-Funding Group II
Subaccount" which pertain to the pre-funded Subsequent Home Equity Contracts,
and the "Undelivered ARM Subaccount," the "Undelivered Group I Subaccount" and
the "Undelivered Group II Subaccount" which pertain to those Contracts
transferred to the Trust on the Closing Date that are Undelivered Home Equity
Contracts. Funds
8-16
<PAGE>
deposited in the Sub-Pool HE 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, the Pre-Funding Group I Subaccount, and the Pre-Funding
Group II 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 from
the Pre-Funding ARM Subaccount an amount equal to 100% of the Cut-off Date
Principal Balance of each Subsequent Adjustable Rate Home Equity Contract
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 from
the Pre-Funding Group I Subaccount an amount equal to 100% of the Cut-off
Date Principal Balance of each Subsequent Group I Contract 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 any Subsequent Transfer Date, the Trustee shall withdraw from
the Pre-Funding Group II Subaccount an amount equal to 100% of the Cut-off
Date Principal Balance of each Subsequent Group II Contract 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.
(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 Pre-Funding ARM Subaccount, Pre-Funding Group I
Subaccount, and Pre-Funding Group II Subaccount, net of investment
earnings.
c. On or before the Closing Date the Company shall deposit in the
Undelivered ARM Subaccount, Undelivered Group I Subaccount and Undelivered Group
II 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 Contract File for an
Undelivered Contract to the Trustee at least two Business Days before the
last day of the Pre-Funding Period, the Trustee shall withdraw from the
applicable subaccount an amount equal to 100% of the Cut-
8-17
<PAGE>
off Date Principal Balance of such Contract and pay such amount to or upon
the order of the Company.
(ii) The Company shall give the Trustee telephonic notice of its
intended delivery of Contract Files. The Trustee will use reasonable
efforts to process Contract Files and remit any amount payable for them to
the Company in a timely manner.
(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 Undelivered ARM Subaccount, Undelivered Group I
Subaccount and Undelivered Group II Subaccount, net of investment earnings.
d. The Sub-Pool HE 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 Sub-Pool HE Pre-Funding Account. The Company
shall be the beneficial owner of the Sub-Pool HE Pre-Funding Account, subject to
the foregoing power of the Trustee to transfer amounts in the Sub- Pool HE
Pre-Funding Account to the Certificate Account. Funds in the Sub-Pool HE
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 Sub-Pool HE Pre-Funding Account shall be taxable to the Company. The Trustee
shall release to the Company all investment earnings in the Sub-Pool HE
Pre-Funding Account on the Post-Funding Payment Date.
SECTION 8.09. Reserve Account.
a. Establishment of Reserve Account. On or prior to the Closing Date, the
Trustee shall establish for the benefit of the holders of the Class HE: A and
Class HE: M Certificates, the Agent and the Reserve Account Lenders, as their
interests may appear herein, a segregated trust account referred to in this
Agreement as the "Reserve Account" bearing a designation clearly indicating that
the funds deposited therein are held in trust for the benefit of the holders of
the Class HE: A and Class HE: M Certificates, the Agent and the Reserve Account
Lenders. The Reserve Account shall be an Eligible Account. The Reserve Account
shall be under the sole dominion and control of the Trustee. Except as otherwise
provided in this Agreement, the Trustee shall possess all right, title and
interest in all funds on deposit from time to time in the Reserve Account and in
all proceeds thereof. The Reserve Account shall be maintained in the name of the
Trustee and designated "U.S. Bank Trust National Association, as Trustee, on
behalf of (1) the holders of the Class HE: A Certificates and Class HE: M
Certificates issued by Home Improvement and Home Equity Loan Trust, Series
1998-E and (2) the Agent and the Reserve Account Lenders (Reserve Account, Green
Tree Finance Corp.-Two)." Amounts shall be withdrawn from the Reserve Account
only in accordance with the provisions of this Section 8.09. No passbook,
certificate of deposit or other similar instrument evidencing the Reserve
Account shall be issued, and all contracts, receipts and other papers governing
or evidencing the Reserve Account or any of the
8-18
<PAGE>
Eligible Investments of funds therein shall be delivered to the Trustee. The
Trustee on behalf of the Class HE: A and Class HE: M Certificates and for the
benefit of the Agent and the Reserve Account Lenders shall be the legal owner of
the Reserve Account. The Holder of the Class C Master Certificate shall be the
beneficial owner of the Reserve Account, subject to the power of the Trustee to
release funds from the Reserve Account pursuant to the terms of this Agreement.
All amounts earned on deposits in the Reserve Account shall be taxable to the
Holder of the Class C Master Certificate. On termination of this Agreement, as
provided in Section 8.09(g), any amount remaining in the Reserve Account shall
be released to the Holder of the Class C Master Certificate.
b. Deposit to Reserve Account. On the Closing Date the Reserve Account
Lenders shall deposit the proceeds of the Reserve Account Loan in the Reserve
Account.
c. Investment of Reserve Account. The Trustee shall at the written
direction of the Agent, until the Reserve Account Loan Balance has been reduced
to zero and thereafter the Servicer, invest the funds in the Reserve Account in
Eligible Investments. Funds in the Reserve Account shall be invested in
investments that mature on or before the Business Day prior to each Payment
Date. Until the Reserve Account Loan Balance has been reduced to zero, all
income and gain realized from any such investments as well as any interest
earned on deposits in the Reserve Account shall be paid to the Agent for the
account of the Reserve Account Lenders on each Payment Date. Losses, if any,
realized on amounts in the Reserve Account invested pursuant to this paragraph
shall first be credited against undistributed investment earnings on amounts in
the Reserve Account invested pursuant to this paragraph, and shall thereafter be
deemed to reduce the amount on deposit in the Reserve Account. The Company, the
Servicer and the Trustee shall not be liable for the amount of any loss incurred
in respect of any investment, or lack of investment, of funds held in the
Reserve Account.
To the extent a Reserve Account Lender's pro rata share of funds in the
Reserve Account is invested in Eligible Investments issued by such Reserve
Account Lender, such Reserve Account Lender shall be entitled to retain the
earnings on such Eligible Investments when paid, which amounts shall be applied
by such Reserve Account Lender to pay, and such retention shall constitute (to
the extent of such retention) a payment and discharge of, accrued interest on
the outstanding "Standard Rate Based Portion" of the Reserve Account Loan of
such Reserve Account Lender as contemplated by clause (i) of subsection 2.02(c)
of the Reserve Account Loan Agreement
d. Reserve Account Withdrawal Amount. Not later than the Business Day prior
to each Payment Date, if the information set forth in the related Monthly Report
discloses a Reserve Account Withdrawal Amount, the Trustee shall withdraw such
amount (to the extent of funds on deposit) from the Reserve Account for deposit
in the Certificate Account on the Payment Date.
e. Reserve Account Step-Down Amount. If on any Payment Date the information
set forth in the related Monthly Report discloses a Reserve Account Step-Down
Amount, the Trustee shall withdraw such amount from the Reserve Account and
distribute such amount to the Agent for the ratable benefit of the Reserve
Account Lenders, until the Reserve
8-19
<PAGE>
Account Loan Balance has been reduced to zero, and thereafter to the Holder of
the Class C Master Certificate.
f. Release of Reserve Account Deposit Requirement. On any Payment Date on
which the Reserve Account Loan Distribution Amount has been deposited in the
Reserve Account pursuant to Section 8.04(c)(12), the Trustee shall distribute an
equal amount from the Reserve Account to the Agent for the benefit of the
Reserve Account Lenders.
g. Termination. On the Final Payment Date, any amount remaining in the
Reserve Account, after payment of any amounts into the Certificate Account
pursuant to Section 8.09(d), shall be distributed, first, to the Agent to the
extent of any amounts owing to the Agent and the Reserve Account Lenders under
the Reserve Account Loan Agreement, and then to the Holder of the Class C Master
Certificate.
h. Characterization. The Reserve Account shall be part of the Trust but not
part of the Master REMIC or Subsidiary REMIC. For all federal tax purposes, all
Reserve Account Loan Distribution Amounts deposited in the Reserve Account shall
be treated as amounts distributed by the Master REMIC to the holder of the Class
C Master Certificate.
SECTION 8.10. 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 Class HI Subsidiary REMIC Regular Interests, the
Class HI Subsidiary REMIC Regular Interest Distribution Amounts in the following
order of priority to the extent of the Sub-Pool HI Amount Available and Class
HI: B-2 Guaranty Payments:
(i) Subsidiary REMIC Accrued Interest on the Class HI Subsidiary REMIC
Regular Interests for such Payment Date, plus any Subsidiary REMIC Accrued
Interest thereon remaining unpaid from any previous Payment Date; and
(ii) In accordance with the priority set forth in Section 8.04(b), an
amount equal to the sum of the amounts in respect of principal
distributable on the Class HI Certificates under Section 8.04, as allocated
thereto pursuant to Section 8.04.
b. The amounts described in Section 8.10(a) shall be deemed distributed to
the Class HI Subsidiary REMIC Regular Interests in the following amounts:
AN AMOUNT EQUAL TO AND AN AMOUNT EQUAL
TO THE SUBSIDIARY INTEREST DISTRIBUTED TO TO PRINCIPAL DISTRIBUTED
REMIC REGULAR INTEREST THE CERTIFICATES TO THE CERTIFICATES
IDENTIFIED BELOW: IDENTIFIED BELOW: IDENTIFIED BELOW:
HI: A-1 Class HI: A-1 Class HI: A-1
8-20
<PAGE>
HI: A-2 Class HI: A-2 Class HI: A-2
HI: A-3 Class HI: A-3 Class HI: A-3
HI: M-1 Class HI: M-1 Class HI: M-1
HI: M-2 Class HI: M-2 Class HI: M-2
HI: B-1 Class HI: B-1 Class HI: B-1
HI: B-2 Class HI: B-2 Class HI: B-2
c. On each Payment Date the Trustee shall be deemed to distribute to
itself, as the holder of the Class HE Subsidiary REMIC Regular Interests, the
Class HE Subsidiary REMIC Regular Interest Distribution Amounts in the following
order of priority to the extent of the Sub-Pool HE Amount Available and Class
HE: B Guaranty Payments:
(i) Subsidiary REMIC Accrued Interest on the Subsidiary REMIC Regular
Interests HE: A-1 and HE: 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 HE: A Formula Principal Distribution
Amount, first on the Subsidiary REMIC Regular Interest HE: A-1 until the
related Subsidiary REMIC Principal Balance is reduced to zero, and then on
the Subsidiary REMIC Regular Interest HE: A-2 until the related Subsidiary
REMIC Principal Balance is reduced to zero;
(iii) Subsidiary REMIC Accrued Interest on the Subsidiary REMIC
Regular Interest HE: 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 HE: MB equal
to the remaining Sub-Pool HE Amount Available.
d. 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 8.10.
e. Notwithstanding the deemed distributions on the Subsidiary REMIC Regular
Interests described in this Section 8.10, distributions of funds from the
Certificate Account shall be made only in accordance with Section 8.04.
SECTION 8.11. Swap Reserve Account.
a. Establishment of Swap Reserve Account. On or prior to the first Payment
Date, the Trustee shall establish for the benefit of Credit Suisse First Boston
Management Corporation, a segregated trust account referred to in this Agreement
as the "Swap Reserve Account" bearing a designation clearly indicating that the
funds deposited therein are held in trust. The Swap Reserve
8-21
<PAGE>
Account shall be an Eligible Account. Except as otherwise provided in this
Agreement, the Trustee shall possess all right, title and interest in all funds
on deposit from time to time in the Swap Reserve Account and in all proceeds
thereof. The Swap Reserve Account shall be maintained in the name of the Trustee
and designated "U.S. Bank Trust National Association, as Trustee, on behalf of
the Holder of the Class C Master Certificate issued by Home Improvement and Home
Equity Loan Trust, Series 1998-E (Swap Reserve Account, Green Tree Finance
Corp.-Two)." Amounts shall be withdrawn from the Swap Reserve Account only in
accordance with the provisions of this Section 8.11. No passbook, certificate of
deposit or other similar instrument evidencing the Swap Reserve Account shall be
issued, and all contracts, receipts and other papers governing or evidencing the
Swap Reserve Account shall be delivered to the Trustee. The Holder of the Class
C Master Certificate shall be the beneficial owner of the Swap Reserve Account,
subject to the power of the Trustee to release funds from the Swap Reserve
Account pursuant to the terms of this Agreement.
b. Deposit to Swap Reserve Account. On each Payment Date the Trustee shall
deposit any Class HE:B Guaranty Fee paid under Section 8.04(c)(20) in the Swap
Reserve Account.
c. Investment of Swap Reserve Account. The Trustee shall not invest the
funds in the Swap Reserve Account. The Company, the Servicer and the Trustee
shall not be liable for the amount of any loss incurred in respect of any
investment, or lack of investment, of funds held in the Swap Reserve Account.
d. Swap Reserve Account Withdrawal Amount. On each Payment Date prior to
the February 2014 Payment Date, if the information set forth in the related
Monthly Report discloses a swap payment amount to be made from the Class HE:B
Guaranty Fee (the "Swap Reserve Account Withdrawal Amount"), the Trustee shall
withdraw such amount (to the extent of funds on deposit) from the Swap Reserve
Account for remittance to Credit Suisse First Boston Management Corporation on
such date to the address identified in Section 12.09.
e. Release of Swap Reserve Account Deposit Requirement. On each Payment
Date, after payment of the Swap Reserve Account Withdrawal Amount pursuant to
Section 8.11(d), the Trustee shall distribute any remaining amounts in the Swap
Reserve Account to the Holder of the Class C Master Certificate.
f. Characterization. The Swap Reserve Account shall be part of the Trust
but not part of the Master REMIC or Subsidiary REMIC. For all federal tax
purposes, all amounts deposited in the Swap Reserve Account shall be treated as
amounts distributed by the Master REMIC to the holder of the Class C Master
Certificate.
8-22
<PAGE>
ARTICLE IX
THE CERTIFICATES AND THE CLASS C CERTIFICATES
SECTION 9.01. The Certificates and Class C Certificates. The Class HI: A,
the Class HI: M-1, the Class HI: M-2, the Class HI: B-1, the Class HI: B-2, the
Class HE: A, the Class HE: M-1, the Class HE: M-2, the Class HE: B and the Class
C Certificates shall be substantially in the forms set forth in Exhibits A, B,
C, D-1, D-2, D-3, E, F 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 HI: A-1
Certificates representing $113,550,000 in Original Class HI: A-1 Principal
Balance, (ii) one or more Class HI: A-2 Certificates representing $40,860,000 in
Original Class HI: A-2 Principal Balance, (iii) one or more Class HI: A-3
Certificates representing $40,640,000 in Original Class HI: A-3 Principal
Balance, (iv) one or more Class HI: M-1 Certificates representing $17,500,000 in
Original Class HI: M-1 Principal Balance, (v) one or more Class HI: M-2
Certificates representing $12,500,000 in Original Class HI: M-2 Principal
Balance, (vi) one or more Class HI: B-1 Certificates representing $12,500,000 in
Original Class HI: B-1 Principal Balance, (vii) one or more Class HI: B-2
Certificates representing $12,500,000 in Original Class HI: B-2 Principal
Balance, (viii) one or more Class HE: A-1A NAS Certificates representing
$30,000,000 in Original Class HE: A-1A NAS Principal Balance, (ix) one or more
Class HE: A-1B ARM Certificates representing $245,000,000 in Original Class HE:
A-1B ARM Principal Balance, (x) one or more Class HE: A-1 Certificates
representing $330,000,000 in Original Class HE: A-1 Principal Balance, (xi) one
or more Class HE: A-2 Certificates representing $135,150,000 in Original Class
HE: A-2 Principal Balance, (xii) one or more Class HE: A-3 Certificates
representing $48,330,000 in Original Class HE: A-3 Principal Balance, (xiii) one
or more Class HE: A-4 Certificates representing $146,520,000 in Original Class
HE: A-4 Principal Balance, (xiv) one or more Class HE: A-5 IO Certificates
representing $82,500,000 in Class HE: A-5 IO Original Notional Principal Amount,
(xv) one or more Class HE: M-1 Certificates representing $66,000,000 in Original
Class HE: M-1 Principal Balance, (xvi) one or more Class HE: M-2 Certificates
representing $55,000,000 in Original Class HE: M-2 Principal Balance, and (xvii)
one or more Class HE: B Certificates representing $44,000,000 in Original Class
HE: B Principal Balance, beneficial ownership of such Classes of Certificates
(other than the Class HI: B Certificates and the Class HE: B 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 Certificates or Class C
9-1
<PAGE>
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 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 do 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 HI: M-1, Class HI: M-2, Class HI: B-1, Class HI:
B-2, Class HE: M-1, Class HE: M-2, Class HE: B 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
9-2
<PAGE>
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 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 this 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 an "electing large partnership" within the meaning of 775 of the
Code, or 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).
9-3
<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 the Rating Agencies 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 Certificates of Certificate Owners it
represents or of brokerage firms for which it acts as agent in accordance with
the Depository's normal procedures.
9-4
<PAGE>
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 HI: A-1 Certificate, one Class HI: A-2 Certificate, one
Class HI: A-3 Certificate, one Class HI: M-1 Certificate, one Class HI: M-2
Certificate, one Class HI: B-1 Certificate, one Class HI: B-2 Certificate, one
Class HE: A-1A NAS Certificate, two Class HE: A-1B ARM Certificates, one Class
HE: A-2 Certificate, one Class HE: A-3 Certificate, one Class HE: A-4
Certificate, one Class HE: A-5 IO Certificate, one Class HE: M-1 Certificate,
one Class HE: M-2 Certificate and one Class HE: B 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 (or, in the case of the Class HE: A-5 IO Certificates, the Class HE: A-5
IO Original Notional Principal Amount) of each Class, respectively, excluding
the Class HE: A-1 (Underlying) Certificates. 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 that may be imposed in
connection with any transfer or exchange of Certificates or Class C
Certificates. All Certificates and Class C
9-5
<PAGE>
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 Aggregate Certificate Principal Balance apply in writing to
the Trustee (hereinafter referred to as "Applicants"), and such application
states that the Applicants desire to communicate with other Certificateholders
or the Class C 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 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
9-6
<PAGE>
Applicants access to such list promptly upon receipt. Every Certificateholder
and the Class C Certificateholders, by receiving and holding a Certificate or
the Class C Certificate, agrees with the Certificate Registrar and the Trustee
that none of the Company, the Certificate Registrar or the Trustee shall be held
accountable by reason of the disclosure of any such information as to the names
and addresses of the Certificateholders or the Class C 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 the Class C Certificates by the Authenticating Agent pursuant to
this Section shall be deemed to be the execution and delivery of Certificates or
the Class C Certificates "by the Trustee."
9-7
<PAGE>
ARTICLE X
INDEMNITIES
SECTION 10.01. Real Estate. The Company will defend and indemnify the
Trust, the Trustee (including the Custodian and any other agents of the Trustee)
and the Certificateholders and the Class C Certificateholders against any and
all costs, expenses, losses, damages, claims and liabilities, including
reasonable fees and expenses of counsel and expenses of litigation arising out
of or resulting from the use or ownership of any real estate related to a
Contract by the Company or the Servicer or any Affiliate of either.
Notwithstanding any other provision of this Agreement, the obligation of the
Company under this Section shall not terminate upon a Service Transfer pursuant
to Article VII, except that the obligation of the Company under this Section
shall not relate to the actions of any subsequent Servicer after a Service
Transfer.
SECTION 10.02. Liabilities to Obligors. No obligation or liability to any
Obligor under any of the Contracts is intended to be assumed by the Trust, 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 Contracts to the
Trust, including, without limitation, any sales, gross receipts, general
corporation, personal property, privilege or license taxes (but not including
any federal, state or other taxes arising out of the creation of the Trust and
the issuance of the Certificates and the Class C 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 any failure to comply with FHA Regulations in enforcing an FHA-Insured
Contract, including reasonable fees and expenses of counsel and expenses of
litigation, in respect of any action taken or omitted to be taken by the
Servicer with respect to any Contract. This indemnity shall survive any Service
Transfer (but the original Servicer's obligations under this Section 10.04 shall
not relate to any actions of any subsequent Servicer after a Service Transfer)
and any payment of the amount owing under, or any repurchase by the Company of,
any such Contract.
SECTION 10.05. Operation of Indemnities. Indemnification under this Article
shall include, without limitation, reasonable fees and expenses of counsel and
expenses of litigation. If the
10-1
<PAGE>
Company or the Servicer has made any indemnity payments to the Trustee pursuant
to this Article and the Trustee thereafter collects any of such amounts from
others, the Trust will repay such amounts collected to the Company or the
Servicer, as the case may be, without interest.
SECTION 10.06. REMIC Tax Matters. If 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.
10-2
<PAGE>
ARTICLE XI
THE TRUSTEE
SECTION 11.01. Duties of Trustee. The Trustee, prior to the occurrence of
an Event of Termination and after the curing of all Events of Termination which
may have occurred, undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement. If an Event of Termination has
occurred (which has not been cured), the Trustee shall exercise such of the
rights and powers vested in it by this Agreement, and use the same degree of
care and skill in their exercise, as a prudent man would exercise or use under
the circumstances in the conduct of his own affairs.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement.
Subject to Section 11.03, no provision of this Agreement shall be construed
to relieve the Trustee from liability for its own negligent action, its own
negligent failure to act or its own misconduct; provided, however, that:
a. Prior to the occurrence of an Event of Termination, and after the
curing of all such Events of Termination which may have occurred, the
duties and obligations of the Trustee shall be determined solely by the
express provisions of this Agreement, the Trustee shall not be liable
except for the performance of such duties and obligations as are
specifically set forth in this Agreement, no implied covenants or
obligations shall be read into this Agreement against the Trustee and, in
the absence of bad faith on the part of the Trustee, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or opinions furnished
to the Trustee and conforming to the requirements of this Agreement;
b. The Trustee shall not be liable for an error of judgment made in
good faith by a Responsible Officer of the Trustee, unless it shall be
proved that the Trustee was negligent in ascertaining the pertinent facts;
c. The Trustee shall not be personally liable with respect to any
action taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of the Certificateholders representing, in
the aggregate, 25% or more of the Aggregate Certificate Principal Balance
relating to the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred
upon the Trustee, under this Agreement;
11-1
<PAGE>
d. The Trustee shall not be charged with knowledge of any event
referred to in Section 7.01 unless a Responsible Officer of the Trustee at
the Corporate Trust Office obtains actual knowledge of such event or the
Trustee receives written notice of such event from the Servicer or the
Certificateholders representing, in the aggregate, 25% or more of the
Aggregate Certificate Principal Balance; and
e. The Trustee may rely and shall be protected in acting or refraining
from taking any action in reliance on the advice of the Servicer in all
matters with respect to FHA Insurance. The Trustee shall not be liable for
any actions taken by the Servicer with respect to FHA Insurance, including
but not limited to the maintenance of such insurance and the submission of
claims to FHA.
None of the provisions contained in this Agreement shall in any event
require the Trustee to perform, or be responsible for the manner of performance
of, any of the obligations of the Company or the Servicer under this Agreement,
except during such time, if any, as the Trustee shall be the successor to, and
be vested with the rights, duties, powers and privileges of, the Servicer in
accordance with the terms of this Agreement. The Trustee shall not be required
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if there is reasonable ground for believing that the repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
SECTION 11.02. Certain Matters Affecting the Trustee. Except as otherwise
provided in Section 11.01:
a. The Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, Officer's Certificate, certificate of a
Servicing Officer, certificate of auditors, notice from the Agent, 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
11-2
<PAGE>
occurrence of an Event of Termination (which has not been cured), to
exercise such of the rights and powers vested in it by this Agreement, and
to use the same degree of care and skill in their exercise as a prudent man
would exercise or use under the circumstances in the conduct of his own
affairs;
d. Prior to the occurrence of an Event of Termination and after the
curing of all Events of Termination which may have occurred, the Trustee
shall not be bound to make any investigation into the facts or matters
stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, approval, bond or other paper or
document, unless requested in writing so to do by Certificateholders
representing, in the aggregate, 25% or more of the Aggregate Certificate
Principal Balance; provided, however, that if the payment within a
reasonable time to the Trustee of the costs, expenses or liabilities likely
to be incurred by it in the making of such investigation is, in the opinion
of the Trustee, not reasonably assured to the Trustee by the security
afforded to it by the terms of this Agreement, the Trustee may require
reasonable indemnity against such cost, expense or liability as a condition
to so proceeding. The reasonable expense of every such examination shall be
paid by the Servicer or, if paid by the Trustee, shall be reimbursed by the
Servicer upon demand; and
e. The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys or a custodian and shall not be liable for any acts or omissions
of such agents, attorneys or custodians if appointed by it with due care
hereunder.
SECTION 11.03. Trustee Not Liable for Certificates, Class C Certificates or
Contracts. 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 Contract, Contract File or related document. The Trustee shall not be
accountable for the use or application by the Servicer or the Company of funds
paid to the Company in consideration of conveyance of the Contracts to the Trust
by the Company or deposited in or withdrawn from the Certificate Account by the
Servicer.
SECTION 11.04. Trustee May Own Certificates. The Trustee in its individual
or other capacity may become the owner or pledgee of Certificates representing
less than all the beneficial interest in the Trust with the same rights as it
would have if it were not Trustee.
SECTION 11.05. Rights of Certificateholders to Direct Trustee and to Waive
Events of Termination. Holders of Certificates representing, in the aggregate,
25% or more of the Aggregate Certificate Principal Balance shall have the right
to direct the time, 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
11-3
<PAGE>
the action so directed may not lawfully be taken, or if the Trustee in good
faith shall, by a Responsible Officer or Officers of the Trustee, determine that
the proceedings so directed would be illegal or involve it in personal liability
or be unduly prejudicial to the rights of Certificateholders not parties to such
direction; and provided, further that nothing in this Agreement shall impair the
right of the Trustee to take any action deemed proper by the Trustee and which
is not inconsistent with such direction by the Certificateholders. Holders of
the Certificates representing, in the aggregate, 51% or more of the Aggregate
Certificate Principal Balance may on behalf of all Certificateholders waive any
past Event of Termination hereunder and its consequences, except a default in
respect of a covenant or provision hereof which under Section 12.08 cannot be
modified or amended without the consent of all Certificateholders, and upon any
such waiver, such Event of Termination shall cease to exist and shall be deemed
to have been cured for every purpose of this Agreement; but no such waiver shall
extend to any subsequent or other Event of Termination or impair any right
consequent thereon.
SECTION 11.06. The Servicer to Pay Trustee's Fees and Expenses. The
Servicer agrees:
a. to pay to the Trustee reasonable compensation for all services
rendered by it hereunder (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust);
b. except as otherwise expressly provided herein, to reimburse the
Trustee, to the extent requested by the Trustee, for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Agreement (including the reasonable
compensation and the expenses and disbursements of its agents and counsel),
except any such expense, disbursement or advance as may be attributable to
its negligence or bad faith; and
c. to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration
of this trust and its duties hereunder, including the costs and expenses of
defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder or under
the Reserve Account Loan Agreement.
The covenants in this Section 11.06 shall be for the benefit of the Trustee
in its capacities as Trustee, Paying Agent and Certificate Registrar hereunder,
and shall survive the termination of this Agreement.
SECTION 11.07. Eligibility Requirements for Trustee. The Trustee hereunder
shall at all times be a financial institution organized and doing business under
the laws of the United States of America or any State, authorized under such
laws to exercise corporate trust powers and a Title I approved lender pursuant
to FHA Regulations, and shall have a combined capital and surplus of at least
$50,000,000 or shall be a member of a bank holding system the aggregate combined
capital and
11-4
<PAGE>
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) shall at all times have a long-term deposit rating from
Moody's of at least Baa3 or as shall be otherwise acceptable to Moody's 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 Contracts
11-5
<PAGE>
and the Contract Files and any related documents and statements held by it
hereunder; and, if the Contracts are then held by a Custodian pursuant to a
custodial agreement, the predecessor Trustee and the Custodian shall amend such
custodial agreement to make the successor Trustee the successor to the
predecessor Trustee thereunder; and the Servicer, the Company and the
predecessor Trustee shall execute and deliver such instruments and do such other
things as may reasonably be required for fully and certainly vesting and
confirming in the successor Trustee all such rights, powers, duties and
obligations. If the predecessor Trustee is then the lender of record for
purposes of FHA Insurance (due to an Event of Termination), the predecessor
Trustee shall submit a report to FHA describing the transfer of the FHA-Insured
Contracts without recourse, in such form as is then required under FHA
Regulations to cause HUD to transfer to the successor Trustee the FHA insurance
reserves applicable to the FHA-Insured Contracts.
No successor Trustee shall accept appointment as provided in this Section
11.09 unless at the time of such acceptance such successor Trustee shall be
eligible under the provisions of Section 11.07.
Upon acceptance of appointment by a successor Trustee as provided in this
Section 11.09, the Servicer shall cause notice of the succession of such Trustee
hereunder to be mailed to the Rating Agencies and to each Certificateholder and
the Class C Certificateholders 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 the Rating Agencies in the event it is a party to
any merger, conversion or consolidation.
SECTION 11.11. Tax Returns. Upon the Servicer's request, the Trustee will
furnish the Servicer with all such information as the Servicer may reasonably
require in connection with preparing all tax returns of the Trust and the
Trustee shall execute such returns.
SECTION 11.12. Obligor Claims. In connection with any offset defenses, or
affirmative claims for recovery, asserted in legal actions brought by Obligors
under one or more Contracts based upon provisions therein complying with, or
upon other rights or remedies arising from, any legal requirements applicable to
the Contracts, including, without limitation, the Federal Trade Commission's
Trade Regulation Rule Concerning Preservation of Consumers' Claims and Defenses
(16 C.F.R. (S) 433) as amended from time to time:
11-6
<PAGE>
a. The Trustee is not, and shall not be deemed to be, either in any
individual capacity, as trustee hereunder or otherwise, a creditor, or a
joint venturer with or an Affiliate of, or acting in concert or cooperation
with, any seller of home improvements, in the arrangement, origination or
making of Contracts. The Trustee is the holder of the Contracts only as
trustee on behalf of the Certificateholders and the Class C
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 Certificateholders for any offset defense
amounts applied against Contract payments, pursuant to such legal actions;
c. The Trustee will pay, solely from available Trust monies,
affirmative claims for recovery by Obligors only pursuant to final judicial
orders or judgments, or judicially approved settlement agreements,
resulting from such legal actions;
d. The Trustee will comply with judicial orders and judgments which
require its actions or cooperation in connection with Obligors' legal
actions to recover affirmative claims against Certificateholders 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
Contracts. Notwithstanding any other provision of this Agreement, the
obligation of the Company under this Section 11.12(f) shall not terminate
upon a Service Transfer pursuant to Article VII.
SECTION 11.13. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions hereof, at any time, for the purpose of
meeting any legal requirements of any jurisdiction having authority over the
Trust, the Contracts or the Obligors, the Company and 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
11-7
<PAGE>
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.
In the case of any appointment of a co-trustee or separate trustee pursuant
to this Section 11.13 all rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and exercised or
performed by the Trustee and such co-trustee or separate trustee jointly, except
to the extent that under any law of any jurisdiction in which any particular act
or acts are to be performed (whether as Trustee hereunder or as successor to the
Servicer hereunder), the Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such rights, powers, duties and obligations
(including the holding of title to the Trust or any portion thereof in any such
jurisdiction) shall be exercised and performed by such co-trustee or separate
trustee at the direction of the Trustee.
Any notice, request or other writing given to the Trustee shall be deemed
to have been given to each of the then co-trustees and separate trustees, as
effectively as if given to each of them. Every instrument appointing any co-
trustee or separate trustee shall refer to this Agreement and the conditions of
this Article XI. Each co-trustee and separate trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee.
Any co-trustee or separate trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any co-trustee or separate trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
SECTION 11.14. Certain Matters Relating to FHA Insurance.
a. In the event the Company and the successor Servicer, if any, shall fail
to pay all FHA Insurance premiums with respect to the FHA-Insured Contracts
required by FHA Regulations, the Trustee shall pay such FHA Insurance premiums
and shall be entitled to reimbursement for such amounts pursuant to Section
8.04(b)(17).
b. If, following the termination of the Trust pursuant to Section 12.04,
HUD demands reimbursement from the Trustee of an FHA Insurance claim paid on an
FHA-Insured Contract prior
11-8
<PAGE>
to the termination of the Trust, the Trustee agrees that it will not seek to
recover any such amount from any Person other than the Servicer that submitted
such claim.
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 the Rating Agencies.
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) or Section 8.04(c), as applicable.
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) or Section 8.04(c), as applicable.
SECTION 11.17. Reserve Account Loan Agreement. The Trustee is hereby
authorized and directed to execute, deliver, and perform its duties under, the
Reserve Account Loan Agreement, and cause the Reserve Account Lenders to deposit
in the Reserve Account the proceeds of the Reserve Account Loan.
11-9
<PAGE>
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. Servicer Not to Resign; Delegation of Servicing Duties.
The Servicer shall not resign from the obligations and duties hereby imposed on
it except upon determination that the performance of its duties hereunder is no
longer permissible under applicable law. Any such determination permitting the
resignation of the Servicer shall be evidenced by an Opinion of Counsel for the
Servicer to such effect delivered to the Trustee. No such resignation shall
become effective until the Trustee or a successor servicer shall have assumed
the responsibilities and obligations of the Servicer in accordance with Section
7.03.
Notwithstanding the foregoing, the Company, if it is the Servicer, may
delegate some or all of its servicing duties to a wholly owned subsidiary of the
Company, for so long as said subsidiary remains, directly or indirectly, a
wholly owned subsidiary of the Company. Notwithstanding any such delegation,
the Company shall retain all of the rights and obligations of the Servicer
hereunder.
SECTION 12.02. Company Not to Engage in Certain Transactions with Respect
to the Trust. The Company shall not:
a. Provide credit to any Certificateholder for the purpose of enabling
such Certificateholder to purchase Certificates;
b. Purchase any Certificates in an agency or trustee capacity; or
c. Loan any money to the Trust (other than Advances pursuant to
Section 8.02).
The Reserve Account Loan does not constitute a loan of money by the Company to
the Trust.
SECTION 12.03. Maintenance of Office or Agency. The Trustee will maintain
in Minneapolis or St. Paul, Minnesota, an office or agency where Certificates or
the Class C 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.
12-1
<PAGE>
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 Contracts is reduced to zero; or (b) the Payment Date occurring in
the month following the Servicer's purchase of the Contracts pursuant to Section
8.06; provided, that in no event shall the trust created hereby continue beyond
the expiration of 21 years from the death of the last survivor of the
descendants of Joseph P. Kennedy, the late Ambassador of the United States to
the Court of St. James, living on the date hereof, and provided, further, that
the Servicer's and the Company's representations and warranties and indemnities
by the Company and the Servicer shall survive termination. 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 the Rating Agencies, 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 Contracts by the Servicer
pursuant to Section 8.06 shall constitute the adoption by the Trustee on behalf
of the Certificateholders and the Class C 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 Contracts, 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 Contract Files for the remaining Contracts,
and the Trustee shall execute all assignments, endorsements and other
instruments necessary to effectuate such transfer.
12-2
<PAGE>
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 Sub-Pool HI Amount
Available (and, to the extent provided in Section 8.04(c)(14), the Sub-Pool HE
Amount Available) is sufficient therefor, and in the order of priority provided
for in Section 8.04(b), an amount equal to (i) as to Class HI: A Certificates,
the Class HI: A-1 Principal Balance, the Class HI: A-2 Principal Balance and the
Class HI: A-3 Principal Balance, together with any Unpaid Class HI: A Interest
Shortfall and one month's interest at the Class HI: A-1 Pass-Through Rate, the
Class HI: A-2 Pass-Through Rate, and the Class A-3 Pass-Through Rate on the
Class HI: A-l Principal Balance, the Class HI: A-2 Principal Balance, and the
Class HI: A-3 Principal Balance, respectively, (ii) as to Class HI: M-1
Certificates, the Class HI: M-1 Principal Balance, together with any Unpaid
Class HI: M-1 Interest Shortfall, any Unpaid Class HI: M-1 Liquidation Loss
Interest Shortfall and one month's interest at the Class HI: M-1 Pass-Through
Rate on the Class HI: M-1 Principal Balance, (iii) as to Class HI: M-2
Certificates, the Class HI: M-2 Principal Balance, together with any Unpaid
Class HI: M-2 Interest Shortfall, any Unpaid Class HI: M-2 Liquidation Loss
Interest Shortfall and one month's interest at the Class HI: M-2 Pass-Through
Rate on the Class HI: M-2 Principal Balance, (iv) as to Class HI: B-1
Certificates, the Class HI: B-1 Principal Balance, together with any Unpaid
Class HI: B-1 Interest Shortfall, any Unpaid Class HI: B-1 Liquidation Loss
Interest Shortfall and one month's interest at the Class HI: B-1 Pass-Through
Rate on the Class HI: B-1 Principal Balance, and (v) as to Class HI: B-2
Certificates, the Class HI: B-2 Principal Balance, together with any Unpaid
Class HI: B-2 Interest Shortfall and one month's interest at the Class HI: B-2
Pass-Through Rate on the Class HI: B-2 Principal Balance; (2) to the extent the
Sub-Pool HE Amount Available (and, to the extent provided in Section
8.04(b)(15), the Sub-Pool HI Amount Available) is sufficient therefor, and in
the order of priority provided for in Section 8.04(c), an amount equal to (i) as
to Class HE: A Certificates, the Class HE: A-1A NAS Principal Balance, the Class
HE: A-1B ARM Principal Balance, the Class HE: A-1 (Underlying) Principal
Balance, the Class HE: A-2 Principal Balance, the Class HE: A-3 Principal
Balance, the Class HE A-4 Principal Balance, and together with any Unpaid Class
HE: A Interest Shortfall, any Class HE: A-1B ARM Formula Available Funds
Limitation Interest Distribution Amount and one month's interest at the Class
HE: A-1A NAS Pass-Through Rate, the Class HE: A-1B ARM Pass-Through Rate, the
Class HE: A-1 (Underlying) Pass-Through Rate, the Class HE: A-2 Pass-Through
Rate, the Class HE: A-3 Pass-Through Rate, the Class HE: A-4 Pass-Through Rate,
and the Class HE: A-5 IO Pass-Through Rate, on the Class HE: A-1A NAS Principal
Balance, the Class HE: A-1B ARM Principal Balance, the Class HE: A-l Principal
Balance, the Class HE: A-2 Principal Balance, the Class HE: A-3 Principal
Balance, the Class HE: A-4 Principal Balance and the Class HE: A-5 IO Notional
Principal Amount, respectively, (ii) as to Class HE: M-1 Certificates, the Class
HE: M-1 Principal Balance, together with any Unpaid Class HE: M-1 Interest
Shortfall, any Unpaid Class HE: M-1 Liquidation Loss Interest Shortfall and one
month's interest at the Class HE: M-1 Pass-Through Rate on the Class HE: M-1
Principal Balance, (iii) as to Class HE: M-2 Certificates, the Class HE: M-2
Principal Balance, together with any Unpaid Class HE: M-2 Interest Shortfall,
any Unpaid Class HE: M-2 Liquidation Loss Interest Shortfall and one month's
interest at the Class HE: M-2 Pass-Through Rate on the Class HE: M-2 Principal
Balance, and (iv) as to Class HE: B Certificates, the Class HE: B Principal
12-3
<PAGE>
Balance, together with any Unpaid Class HE: B Interest Shortfall, any Unpaid
Class HE: B Liquidation Loss Interest Shortfall and one month's interest at the
Class HE: B Pass-Through Rate on the Class HE: B Principal Balance, and (3) as
to the Class C Certificates, the amount which remains on deposit in the
Certificate Account (other than amounts retained to meet claims) after
application pursuant to clauses (1) and (2) above; provided, that, any Class HI:
B-2 Guaranty Payment deposited in the Certificate Account shall be distributed
only to the Class HI: B-2 Certificateholders and any Class HE: B Guaranty
Payment deposited in the Certificate Account shall be distributed only to the
Class HE: B Certificateholders. The distribution on the Final Payment Date
pursuant to this Section 12.04 shall be in lieu of the distribution otherwise
required to be made on such Payment Date in respect of each Class of
Certificates and the Class C 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 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
Aggregate Certificate Principal Balance.
b. Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Agreement to be given or taken by
Certificateholders or the Class C 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
12-4
<PAGE>
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.
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 Aggregate Certificate Principal Balance, and any attempt to do so
without such consent shall be void. Notwithstanding the foregoing, the Company
may not delegate its obligations under Section 8.03 absent (a) the prior written
consent of Holders of Certificates representing, in the aggregate, 66 2/3% or
more of the Aggregate Certificate Principal Balance, and the prior written
confirmation of the Rating Agencies 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. It is understood that the foregoing does not prohibit the
pledge or assignment by the Company of any right to payment pursuant to Article
VIII.
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
12-5
<PAGE>
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 by agreement of the Trustee, the
Servicer and the Company at any time without the consent of the
Certificateholders or the Class C Certificateholders to effect the transfer of
FHA Insurance reserves to another entity in compliance with revisions to FHA
Regulations, provided that prior to any such amendment the Rating Agencies have
each confirmed in writing that the rating of the Certificates will not be
lowered or withdrawn following such amendment.
c. This Agreement may also be amended from time to time by the Servicer,
the Company and the Trustee, with the consent of Holders of Certificates
representing, in the aggregate, 66 2/3% or more of the Aggregate Certificate
Principal Balance, and with the consent of the Agent, who shall not unreasonably
withhold its consent, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of such Certificateholders; provided,
however, that no such amendment shall (a) reduce in any manner the amount of, or
delay the timing of, collections of payments on the Contracts or distributions
which are required to be made on any Certificate, (b) reduce the aforesaid
percentage required to consent to any such amendment, without the consent of the
holders of all Certificates then outstanding, (c) result in the disqualification
of the Trust as a REMIC under the Code, (d) adversely affect the status of
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.
d. 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.
12-6
<PAGE>
e. Concurrently with the solicitation of any consent pursuant to this
Section 12.08, the Trustee shall furnish written notification to each of the
Rating Agencies. 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 each of the Rating Agencies, each
Certificateholder and the Class C Certificateholders.
f. 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.
g. The Trustee may, but shall not be obligated to, enter into any such
amendment which affects the Trustee's own rights, duties or immunities under
this Agreement or otherwise.
h. In connection with any amendment pursuant to this Section, the Trustee
shall be entitled to receive an Opinion of Counsel to the Servicer to the effect
that such amendment is authorized or permitted by this Agreement.
i. Upon the execution of any amendment or consent pursuant to this
Section 12.08, this Agreement shall be modified in accordance therewith, and
such amendment or consent shall form a part of this Agreement for all purposes,
and every Certificateholder or the Class C Certificateholders hereunder shall be
bound thereby.
j. In the absence of the consent described in subsection (d) of this
Section, in connection with any amendment pursuant to this Section, the Trustee
shall have received an unqualified Opinion of Counsel, the expense of which
shall not be an expense of the Trust, stating that any such amendment (i) will
not adversely affect the status of 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.
12-7
<PAGE>
SECTION 12.09. Notices. All communications and notices pursuant hereto
to the Servicer, the Company, the Trustee, the Rating Agencies, the Agent or
Credit Suisse First Boston Management Corporation shall be in writing and
delivered or mailed to 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: (651) 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: (651) 244-0089
If to Moody's:
Moody's Investors Service, Inc.
99 Church Street
New York, New York 10007
Attention: ABS Monitoring Department
If to Fitch:
Fitch IBCA, Inc.
One State Street Plaza
New York, New York 10004
Attention: Jenine Potolsky
If to the Agent:
Credit Suisse First Boston, New York Branch
Eleven Madison Avenue
New York, New York 10010
Attention: David Shrenzel
Asset Finance Department
Telecopier Number: (212) 325-4519
12-8
<PAGE>
If to Credit Suisse First Boston Management Corporation:
Credit Suisse First Boston Management Corporation
Eleven Madison Avenue
New York, New York 10010
Attn: Secretary
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.
12-9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized this 7/th/ day
of December, 1998.
GREEN TREE FINANCIAL CORPORATION
By
--------------------------------
Phyllis A. Knight
Its Senior Vice President and
Treasurer
Attest:
- ----------------------------------
Its
------------------------------
U.S. BANK TRUST NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Trustee
By
--------------------------------
Tamara Schultz-Fugh
Its Assistant Vice President
Attest:
- ----------------------------------
Its
------------------------------
12-10
<PAGE>
EXHIBIT A
FORM OF CLASS HI: 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 HI: A-[1][2][3] No.
(Senior)
Cut-off Date: as defined in the Pass-Through Rate: ___%
Pooling and Servicing Agreement
dated December 1, 1998 Denomination: $________
First Payment Date: Aggregate Denomination of
January 15, 1999 All Class HI: A-[1][2][3]
Certificates: $_________
Servicer: Final Scheduled Payment Date:
Green Tree Financial Corporation December 15, 2024 (or if such day is
not a Business Day, then the next
succeeding Business Day)
CUSIP: _______
CERTIFICATE FOR HOME IMPROVEMENT AND HOME EQUITY LOANS
SERIES 1998-E, CLASS HI: A-[1][2][3] (SENIOR)
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN
GREEN TREE FINANCIAL CORPORATION OR ANY AFFILIATE THEREOF, EXCEPT TO THE EXTENT
SET FORTH IN THE AGREEMENT.
This certifies that ____________________ is the registered owner of the
undivided Percentage Interest represented by the original principal amount set
forth above in the Certificates for Home Improvement and Home Equity Loans,
Series 1998-E, Class HI: A-[1][2][3] issued by Home Improvement and Home Equity
Loan Trust 1998-E (the "Trust"), which includes among its assets two sub-pools,
one of which is comprised of home improvement loan contracts and promissory
notes (the "Home Improvement Contracts") and the other of which is comprised of
closed-end home equity loans (the "Home Equity Contracts" and, together with the
Home
A-11
<PAGE>
Improvement Contracts, collectively, the "Contracts") (including, without
limitation, all mortgages, deeds of trust and security deeds relating to such
Contracts and any and all rights to receive payments due on such Contracts 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 December 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 January 1999, so long as
the Agreement has not been terminated, by check (or, if such Certificateholder
holds Class HI: A-[1][2][3] Certificates with an aggregate Percentage Interest
of at least 5% of the Class HI: A-[1][2][3] Certificates and so desires, by wire
transfer pursuant to instructions delivered to the Trustee at least 10 days
prior to such Payment Date) to the registered Certificateholder at the address
appearing on the Certificate Register as of the Business Day immediately
preceding such Payment Date, in an amount equal to the Certificateholder's
Percentage Interest of the Class HI: A-[1][2][3] Distribution Amount for such
Payment Date. Distributions of interest and principal on the Class HI: A-
[1][2][3] Certificates will be made primarily from amounts available in respect
of the Home Improvement Contracts. The final scheduled Payment Date of this
Certificate is December 15, 2024 or the next succeeding Business Day if such
December 15 is not a Business Day.
The Certificateholder, by its acceptance of this Certificate, agrees that
it will look solely to the funds in the Certificate Account to the extent
available for distribution to the Certificateholder as provided in the Agreement
for payment hereunder and that the Trustee in its individual capacity is not
personally liable to the Certificateholder for any amounts payable under this
Certificate or the Agreement or, except as expressly provided in the Agreement,
subject to any liability under the Agreement. By acceptance of this
Certificate, the Certificateholder agrees to disclosure of his, her or its name
and address to other Certificateholders under the conditions specified in the
Agreement.
This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for information with respect to the interests, rights,
benefits, obligations, proceeds and duties evidenced hereby and the rights,
duties and immunities of the Trustee. Copies of the Agreement and all
amendments thereto will be provided to any Certificateholder free of charge upon
a written request to the Trustee.
As provided in the Agreement and subject to the limitations set forth
therein, the transfer of this Certificate is registrable in the Certificate
Register of the Certificate Registrar upon surrender of this Certificate for
registration of transfer at the office or agency maintained by the Trustee in
Minneapolis or St. Paul, Minnesota, accompanied by a written instrument of
transfer in form
A-12
<PAGE>
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-13
<PAGE>
IN WITNESS WHEREOF, Home Improvement and Home Equity Loan Trust 1998-E has
caused this Certificate to be duly executed by the manual signature of a duly
authorized officer of the Trustee.
Dated: __________ HOME IMPROVEMENT AND HOME
EQUITY LOAN TRUST 1998-E
By: U.S. BANK TRUST NATIONAL
ASSOCIATION
By:
--------------------------------
Authorized Officer
A-14
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ______________________________ the within Certificate for Home Improvement
and Home Equity Loans, Series 1998-E, 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-15
<PAGE>
EXHIBIT B
FORM OF CLASS HI: 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 HI: A
CERTIFICATES [AND CLASS HI: M-1 CERTIFICATES] AS DESCRIBED IN THE POOLING AND
SERVICING AGREEMENT REFERRED TO HEREIN.
Class HI: M-[1][2] No.
(Subordinate)
Cut-off Date: as defined in the Pass-Through Rate: ___%
Pooling and Servicing Agreement [(or, if less, the Weighted Average
dated December 1, 1998 Home Improvement Contract Rate)]
First Payment Date:
January 15, 1999 Denomination: $________
Servicer: Aggregate Denomination of
Green Tree Financial Corporation All Class HI: M-[1][2]
Certificates:
$________
Final Scheduled Payment Date:
December 15, 2024 (or if such day is not
a Business Day, then the next
succeeding Business Day)
CUSIP: ________
CERTIFICATE FOR HOME IMPROVEMENT AND HOME EQUITY LOANS
SERIES 1998-E, CLASS HI: M-[1][2] (SUBORDINATE)
B-1
<PAGE>
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN
GREEN TREE FINANCIAL CORPORATION OR ANY AFFILIATE THEREOF, EXCEPT TO THE EXTENT
SET FORTH IN THE AGREEMENT.
This certifies that ____________________ is the registered owner of the
undivided Percentage Interest represented by the original principal amount set
forth above in the Certificates for Home Improvement and Home Equity Loans,
Series 1998-E, Class HI: M-[1][2] issued by Home Improvement and Home Equity
Loan Trust 1998-E (the "Trust"), which includes among its assets two sub-pools,
one of which is comprised of home improvement loan contracts and promissory
notes (the "Home Improvement Contracts") and the other of which is comprised of
closed-end home equity loans (the "Home Equity Contracts" and, together with the
Home Improvement Contracts, collectively, the "Contracts") (including, without
limitation, all mortgages, deeds of trust and security deeds relating to such
Contracts and any and all rights to receive payments due on such Contracts 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 December 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 January 1999, so long as
the Agreement has not been terminated, by check (or, if such Certificateholder
holds Class HI: M-[1][2] Certificates with an aggregate Percentage Interest of
at least 5% of the Class HI: 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 HI: M-[1][2] Distribution Amount for such
Payment Date. Distributions of interest and principal on the Class HI: M-[1][2]
Certificates will be made primarily from amounts available in respect of the
Home Improvement Contracts. The final scheduled Payment Date of this Certificate
is December 15, 2024 or the next succeeding Business Day if such December 15 is
not a Business Day.
The Certificateholder, by its acceptance of this Certificate, agrees that
it will look solely to the funds in the Certificate Account to the extent
available for distribution to the Certificateholder as provided in the
Agreement, for payment hereunder and that the Trustee in its individual capacity
is not personally liable to the Certificateholder for any amounts payable under
this Certificate or the Agreement or, except as expressly provided in the
Agreement, subject to any liability under the Agreement. By acceptance of this
Certificate, the Certificateholder agrees to disclosure of his, her or its name
and address to other Certificateholders under the conditions specified in the
Agreement.
B-2
<PAGE>
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 an opinion of counsel (satisfactory to the Company and the Trustee)
that the purchase and holding of this 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 this 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.]
B-3
<PAGE>
The Company, the Servicer, the Trustee, the Paying Agent and the
Certificate Registrar and any agent of the Company, the Servicer, the Trustee,
the Paying Agent or the Certificate Registrar may treat the person in whose name
this Certificate is registered as the owner hereof for all purposes, and neither
the Company, the Servicer, the Trustee, the Paying Agent, the Certificate
Registrar nor any such agent shall be affected by any notice to the contrary.
B-4
<PAGE>
IN WITNESS WHEREOF, Home Improvement and Home Equity Loan Trust 1998-E has
caused this Certificate to be duly executed by the manual signature of a duly
authorized officer of the Trustee.
Dated: HOME IMPROVEMENT AND HOME
----------- EQUITY LOAN TRUST 1998-E
By: U.S. BANK TRUST NATIONAL
ASSOCIATION
By:
--------------------------------
Authorized Officer
B-5
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ___________________________ the within Certificate for Home Improvement and
Home Equity Loans, Series 1998-E, and does hereby irrevocably constitute and
appoint ___________________________ Attorney to transfer the said certificate on
the Certificate Register maintained by the Trustee, with full power of
substitution in the premises.
Dated: By:
----------- --------------------------------
Signature
B-6
<PAGE>
EXHIBIT C
FORM OF CLASS HI: 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 HI: A
CERTIFICATES, THE CLASS HI: M CERTIFICATES [AND THE CLASS HI: B-1 CERTIFICATES]
AS DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
Class HI: B-[1][2] No.
(Subordinate)
Cut-off Date: as defined in the Pass-Through Rate: ____%
Pooling and Servicing Agreement [(or, if less, the Weighted Average
dated December 1, 1998 Home Improvement Contract Rate)]
Denomination: $__________
Aggregate Denomination of all
First Payment Date: Class HI: B-[1][2] Certificates:
January 15, 1999 $__________
Final Scheduled Payment Date:
Servicer: December 15, 2024 (or if such day is
Green Tree Financial Corporation not a Business Day, then the next
succeeding Business Day)
CUSIP: _______________
CERTIFICATES FOR HOME IMPROVEMENT AND HOME EQUITY LOANS
SERIES 1998-E, CLASS HI: 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.
C-1
<PAGE>
This certifies that _______________ is the registered owner of the
undivided Percentage Interest represented by the original principal amount set
forth above in the Certificates for Home Improvement and Home Equity Loans,
Series 1998-E, Class HI: B-[1][2], issued by Home Improvement and Home Equity
Loan Trust 1998-E (the "Trust"), which includes among its assets two sub-pools,
one of which is comprised of home improvement loan contracts and promissory
notes (the "Home Improvement Contracts") and the other of which is comprised of
closed-end home equity loans (the "Home Equity Contracts" and, together with the
Home Improvement Contracts, collectively, the "Contracts") (including, without
limitation, all mortgages, deeds of trust and security deeds relating to such
Contracts and any and all rights to receive payments due on the Contracts after
the applicable Cut-off Date or Subsequent Cut-off Date [and the Class HI: B-2
Limited Guaranty].) The Trust has been created pursuant to a Pooling and
Servicing Agreement (the "Agreement"), dated as of December 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 January 1999, so long as
the Agreement has not been terminated, by check (or, if such Certificateholder
holds Class HI: B-[1][2] Certificates with an aggregate Percentage Interest of
at least 5% of the Class HI: 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 HI: B-[1][2] Distribution Amount [and any Class
HI: B-2 Guaranty Payment] for such Payment Date. Distributions of interest and
principal on the Class HI: B-[1][2] Certificates will be made primarily from
amounts available in respect of the Home Improvement Contracts. The final
scheduled Payment Date of this Certificate is December 15, 2024 or the next
succeeding Business Day if such December 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 HI:
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 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
C-2
<PAGE>
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 an opinion
of counsel (satisfactory to the Company and the Trustee) that the purchase and
holding of this 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 this 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.]
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 Improvement and Home Equity Loan Trust 1998-E has
caused this Certificate to be duly executed by the manual signature of a duly
authorized officer of the Trustee.
Dated: HOME IMPROVEMENT AND HOME
----------- EQUITY LOAN TRUST 1998-E
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 Improvement
and Home Equity Loans, Series 1998-E, 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-1
FORM OF CLASS HE: 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 HE: A-[1 [(Underlying)][2][3][4] No.
(Senior)
Cut-off Date: as defined in the Pass-Through Rate: ___%
Pooling and Servicing Agreement [Class HE: A-1 (Underlying) Pass-Through
dated December 1, 1998 Rate]
[or, if less, the Weighted Average Home
Equity Contract Rate]
Denomination: $________
First Payment Date: Aggregate Denomination of
January 15, 1999 all Class HE: A-[1 [(Underlying)]
[2][3][4]
Certificates: $________
Servicer: Final Scheduled Payment Date:
Green Tree Financial Corporation November 15, 2029 (or if such day is
not a Business Day, then the next
succeeding Business Day)
CUSIP: ________
CERTIFICATE FOR HOME IMPROVEMENT AND HOME EQUITY LOANS
SERIES 1998-E, CLASS HE: A-[1 [(Underlying)][2][3][4] (SENIOR)
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN
GREEN TREE FINANCIAL CORPORATION OR ANY AFFILIATE THEREOF, EXCEPT TO THE EXTENT
SET FORTH IN THE AGREEMENT.
This certifies that ____________ is the registered owner of the undivided
Percentage Interest represented by the original principal amount set forth above
in the Certificates for Home Improvement and Home Equity Loans, Series 1998-E,
Class HE: A-[1 [(Underlying)][2][3][4]
D-1-1
<PAGE>
issued by Home Improvement and Home Equity Loan Trust 1998-E (the "Trust"),
which includes among its assets two sub- pools, one of which is comprised of
home improvement loan contracts and promissory notes (the "Home Improvement
Contracts") and the other of which is comprised of closed-end home equity loans
(the "Home Equity Contracts" and, together with the Home Improvement Contracts,
collectively, the "Contracts") (including, without limitation, all mortgages,
deeds of trust and security deeds relating to such Contracts and any and all
rights to receive payments due on the Contracts 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 December 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 January 1999, so long as the
Agreement has not been terminated, by check (or, if such Certificateholder holds
Class HE: A-[1 [(Underlying)][2][3][4] Certificates with an aggregate Percentage
Interest of at least 5% of the Class HE: A-[1 [(Underlying)][2][3][4]
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 HE: A-[1 [(Underlying)]
[2][3][4] Distribution Amount for such Payment Date. Distributions of interest
and principal on the Class HE: A-[1 [(Underlying)][2][3][4] Certificates will be
made primarily from amounts available in respect of the Home Equity Contracts.
The final scheduled Payment Date of this Certificate is November 15, 2029 or the
next succeeding Business Day if such November 15 is not a Business Day.
The Certificateholder, by its acceptance of this Certificate, agrees that
it will look solely to the funds in the Certificate Account to the extent
available for distribution to the Certificateholder as provided in the Agreement
for payment hereunder and that the Trustee in its individual capacity is not
personally liable to the Certificateholder for any amounts payable under this
Certificate or the Agreement or, except as expressly provided in the Agreement,
subject to any liability under the Agreement. By acceptance of this Certificate,
the Certificateholder agrees to disclosure of his, her or its name and address
to other Certificateholders under the conditions specified in the Agreement.
This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for information with respect to the interests, rights,
benefits, obligations, proceeds and duties evidenced hereby and the rights,
duties and immunities of the Trustee. Copies of the Agreement and all amendments
thereto will be provided to any Certificateholder free of charge upon a written
request to the Trustee.
D-1-2
<PAGE>
As provided in the Agreement and subject to the limitations set forth
therein, the transfer of this Certificate is registrable in the Certificate
Register of the Certificate Registrar upon surrender of this Certificate for
registration of transfer at the office or agency maintained by the Trustee in
Minneapolis or St. Paul, Minnesota, accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Certificate Registrar duly
executed by the holder hereof or his or her attorney duly authorized in writing,
and thereupon one or more new Certificates evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.
[Unless this Certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC") to the Trustee or
its agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL in as much as the registered owner
hereof, Cede & Co., has an interest herein.]
The Company, the Servicer, the Trustee, the Paying Agent and the
Certificate Registrar and any agent of the Company, the Servicer, the Trustee,
the Paying Agent or the Certificate Registrar may treat the person in whose name
this Certificate is registered as the owner hereof for all purposes, and neither
the Company, the Servicer, the Trustee, the Paying Agent, the Certificate
Registrar nor any such agent shall be affected by any notice to the contrary.
D-1-3
<PAGE>
IN WITNESS WHEREOF, Home Improvement and Home Equity Loan Trust 1998-E has
caused this Certificate to be duly executed by the manual signature of a duly
authorized officer of the Trustee.
Dated: HOME IMPROVEMENT AND HOME
----------- EQUITY LOAN TRUST 1998-E
By: U.S. BANK TRUST NATIONAL
ASSOCIATION
By:
--------------------------------
Authorized Officer
D-1-4
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ______________________________ the within Certificate for Home Improvement
and Home Equity Loans, Series 1998-E, 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-1-5
<PAGE>
EXHIBIT D-2
FORM OF Class HE: A-1 [A NAS][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 HE: A-1 [A NAS][B ARM] No.
(Senior)
Cut-off Date: as defined in the Pass-Through Rate: [ ___%]
Pooling and Servicing Agreement [Variable rate equal to Class
dated December 1, 1998 HE: A-1B ARM Pass-Through Rate]
Denomination: $________
First Payment Date: Aggregate Denomination of
January 15, 1999 all Class HE: A-1 [A NAS][B ARM]
Certificates: $________
Servicer: Final Scheduled Payment Date:
Green Tree Financial Corporation November 15, 2029 (or if such day is
not a Business Day, then the next
succeeding Business Day)
CUSIP: ________
CERTIFICATE FOR HOME IMPROVEMENT AND HOME EQUITY LOANS
SERIES 1998-E, CLASS HE: A-1[A NAS][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 Improvement and Home Equity Loans,
Series 1998-E, Class HE: A-1 [A NAS][B ARM] issued by
D-2-1
<PAGE>
Home Improvement and Home Equity Loan Trust 1998-E (the "Trust"), which includes
among its assets two sub- pools, one of which is comprised of home improvement
loan contracts and promissory notes (the "Home Improvement Contracts") and the
other of which is comprised of closed-end home equity loans (the "Home Equity
Contracts" and, together with the Home Improvement Contracts, collectively, the
"Contracts") (including, without limitation, all mortgages, deeds of trust and
security deeds relating to such Contracts and any and all rights to receive
payments due on the Contracts after the applicable Cut-off Date or the
Subsequent Cut-off Date.) The Trust has been created pursuant to a Pooling and
Servicing Agreement (the "Agreement"), dated as of December 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 January 1999, so long as
the Agreement has not been terminated, by check (or, if such Certificateholder
holds Class HE: A-1 [A NAS][B ARM] Certificates with an aggregate Percentage
Interest of at least 5% of the Class HE: A-1 [A NAS][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 HE: A-1 [A NAS][B ARM]
Distribution Amount for such Payment Date. Distributions of interest and
principal on the Class HE: A-1 [A NAS] [B ARM] Certificates will be made
primarily from amounts available in respect of the Adjustable Rate Home Equity
Contracts. The final scheduled Payment Date of this Certificate is November 15,
2029 or the next succeeding Business Day if such November 15 is not a Business
Day.
The Certificateholder, by its acceptance of this Certificate, agrees that
it will look solely to the funds in the Certificate Account to the extent
available for distribution to the Certificateholder as provided in the Agreement
for payment hereunder and that the Trustee in its individual capacity is not
personally liable to the Certificateholder for any amounts payable under this
Certificate or the Agreement or, except as expressly provided in the Agreement,
subject to any liability under the Agreement. By acceptance of this Certificate,
the Certificateholder agrees to disclosure of his, her or its name and address
to other Certificateholders under the conditions specified in the Agreement.
This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for information with respect to the interests, rights,
benefits, obligations, proceeds and duties evidenced hereby and the rights,
duties and immunities of the Trustee. Copies of the Agreement and all amendments
thereto will be provided to any Certificateholder free of charge upon a written
request to the Trustee.
D-2-2
<PAGE>
As provided in the Agreement and subject to the limitations set forth
therein, the transfer of this Certificate is registrable in the Certificate
Register of the Certificate Registrar upon surrender of this Certificate for
registration of transfer at the office or agency maintained by the Trustee in
Minneapolis or St. Paul, Minnesota, accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Certificate Registrar duly
executed by the holder hereof or his or her attorney duly authorized in writing,
and thereupon one or more new Certificates evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.
[Unless this Certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC") to the Trustee or
its agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL in as much as the registered owner
hereof, Cede & Co., has an interest herein.]
The Company, the Servicer, the Trustee, the Paying Agent and the
Certificate Registrar and any agent of the Company, the Servicer, the Trustee,
the Paying Agent or the Certificate Registrar may treat the person in whose name
this Certificate is registered as the owner hereof for all purposes, and neither
the Company, the Servicer, the Trustee, the Paying Agent, the Certificate
Registrar nor any such agent shall be affected by any notice to the contrary.
D-2-3
<PAGE>
IN WITNESS WHEREOF, Home Improvement and Home Equity Loan Trust 1998-E has
caused this Certificate to be duly executed by the manual signature of a duly
authorized officer of the Trustee.
Dated: HOME IMPROVEMENT AND HOME
----------- EQUITY LOAN TRUST 1998-E
By: U.S. BANK TRUST NATIONAL
ASSOCIATION
By:
-------------------------------
Authorized Officer
D-2-4
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ____________________________ the within Certificate for Home Improvement
and Home Equity Loans, Series 1998-E, 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-2-5
<PAGE>
EXHIBIT D-3
FORM OF CLASS HE: A-5 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.
Class HE: A-5 IO No.
(Senior)
Cut-off Date: as defined in the Pass-Through Rate: ___%
Pooling and Servicing Agreement
dated December 1, 1998 Denomination: $_____ (Original
Notional Principal Amount)
Aggregate Original Notional Principal
First Payment Date: Amount of All Class HE: A-5 IO
January 15, 1999 Certificates: $82,500,000
Servicer:
Green Tree Financial Corporation
Final Scheduled Payment Date:
November 15, 2029 (or if such day is
not a Business Day, then the next
succeeding Business Day)
CUSIP: _________
CERTIFICATE FOR HOME IMPROVEMENT AND HOME EQUITY LOANS
SERIES 1998-E, CLASS HE: A-5 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 Class HE: A-5 IO Original Notional
Principal Amount set forth above in the Certificates for Home Improvement and
Home Equity Loans, Series 1998-E, Class HE: A-5 IO issued by Home Improvement
and Home Equity Loan Trust 1998-E (the "Trust"), which includes
D-3-1
<PAGE>
among its assets two sub-pools, one of which is comprised of home improvement
loan contracts and promissory notes (the "Home Improvement Contracts") and the
other of which is comprised of closed-end home equity loans (the "Home Equity
Contracts" and, together with the Home Improvement Contracts, collectively, the
"Contracts") (including, without limitation, all mortgages, deeds of trust and
security deeds relating to such Contracts and any and all rights to receive
payments due on the Contracts after the applicable Cut-off Date or the
Subsequent Cut-off Date.) The Trust has been created pursuant to a Pooling and
Servicing Agreement (the "Agreement"), dated as of December 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 January 1999, so long as
the Agreement has not been terminated, by check (or, if such Certificateholder
holds Class HE: A-5 IO Certificates with an aggregate Percentage Interest of at
least 5% of the Class HE: A-5 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 HE: A-5 IO Distribution Amount for such Payment Date. Distributions
of interest on the Class HE: A-5 IO Certificates will be made primarily from
amounts available in respect of the Home Equity Contracts. The final scheduled
Payment Date of this Certificate is November 15, 2029 or the next succeeding
Business Day if such November 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 CONTRACTS.
The Certificateholder, by its acceptance of this Certificate, agrees that
it will look solely to the funds in the Certificate Account to the extent
available for distribution to the Certificateholder as provided in the Agreement
for payment hereunder and that the Trustee in its individual capacity is not
personally liable to the Certificateholder for any amounts payable under this
Certificate or the Agreement or, except as expressly provided in the Agreement,
subject to any liability under the Agreement. By acceptance of this Certificate,
the Certificateholder agrees to disclosure of his, her or its name and address
to other Certificateholders under the conditions specified in the Agreement.
This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for information with respect to the interests, rights,
benefits, obligations, proceeds and duties evidenced hereby and the rights,
duties and immunities of the Trustee. Copies of the
D-3-2
<PAGE>
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.
D-3-3
<PAGE>
IN WITNESS WHEREOF, Home Improvement and Home Equity Loan Trust 1998-E has
caused this Certificate to be duly executed by the manual signature of a duly
authorized officer of the Trustee.
Dated: HOME IMPROVEMENT AND HOME
----------- EQUITY LOAN TRUST 1998-E
By: U.S. BANK TRUST NATIONAL
ASSOCIATION
By:
--------------------------------
Authorized Officer
D-3-4
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ____________ the within Certificate for Home Improvement and Home Equity
Loans, Series 1998-E, 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-3-5
<PAGE>
EXHIBIT E
FORM OF CLASS HE: 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 HE: A
CERTIFICATES [AND CLASS HE: M-1 CERTIFICATES] AS DESCRIBED IN THE POOLING AND
SERVICING AGREEMENT REFERRED TO HEREIN.
Class HE: M-[1][2] No.
(Subordinate)
Cut-off Date: as defined in the Pass-Through Rate: ___%
Pooling and Servicing Agreement [(or, if less, the Weighted Average
dated December 1, 1998 Home Equity Contract Rate)]
First Payment Date: Denomination: $________
January 15, 1999
Servicer: Aggregate Denomination of
Green Tree Financial Corporation all Class HE: M-[1][2] Certificates:
$________
Final Scheduled Payment Date:
November 15, 2029 (or if such day is not
a Business Day, then the next succeeding
Business Day)
CUSIP: ________
E-1
<PAGE>
CERTIFICATE FOR HOME IMPROVEMENT AND HOME EQUITY LOANS
SERIES 1998-E, CLASS HE: M-[1][2] (SUBORDINATE)
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN
GREEN TREE FINANCIAL CORPORATION OR ANY AFFILIATE THEREOF, EXCEPT TO THE EXTENT
SET FORTH IN THE AGREEMENT.
This certifies that ______________ is the registered owner of the undivided
Percentage Interest represented by the original principal amount set forth above
in the Certificates for Home Improvement and Home Equity Loans, Series 1998-E,
Class HE: M-[1][2] issued by Home Improvement and Home Equity Loan Trust 1998-E
(the "Trust"), which includes among its assets two sub-pools, one of which is
comprised of home improvement loan contracts and promissory notes (the "Home
Improvement Contracts") and the other of which is comprised of closed-end home
equity loans (the "Home Equity Contracts" and, together with the Home
Improvement Contracts, collectively, the "Contracts") (including, without
limitation, all mortgages, deeds of trust and security deeds relating to such
Contracts and any and all rights to receive payments due on the Contracts after
the applicable Cut-off Date or the Subsequent Cut-off Date.) The Trust has been
created pursuant to a Pooling and Servicing Agreement (the "Agreement"), dated
as of December 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 January 1999, so long as
the Agreement has not been terminated, by check (or, if such Certificateholder
holds Class HE: M-[1][2] Certificates with an aggregate Percentage Interest of
at least 5% of the Class HE: 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 HE: M-[1][2] Distribution Amount for such
Payment Date. Distributions of interest and principal on the Class HE: M-[1][2]
Certificates will be made primarily from amounts available in respect of the
Home Equity Contracts. The final scheduled Payment Date of this Certificate is
November 15, 2029 or the next succeeding Business Day if such November 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
E-2
<PAGE>
is not personally liable to the Certificateholder for any amounts payable under
this Certificate or the Agreement or, except as expressly provided in the
Agreement, subject to any liability under the Agreement. By acceptance of this
Certificate, the Certificateholder agrees to disclosure of his, her or its name
and address to other Certificateholders under the conditions specified in the
Agreement.
No transfer of 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 an opinion of counsel (satisfactory to the Company and the Trustee)
that the purchase and holding of this 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 this 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.]
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 Improvement and Home Equity Loan Trust 1998-E has
caused this Certificate to be duly executed by the manual signature of a duly
authorized officer of the Trustee.
Dated: HOME IMPROVEMENT AND HOME
----------- EQUITY LOAN TRUST 1998-E
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 Improvement and
Home Equity Loans, Series 1998-E, 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
FORM OF CLASS HE: 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 HE: A AND
THE CLASS HE: M CERTIFICATES AS DESCRIBED IN THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN.
Class HE: B No.
(Subordinate)
Cut-off Date: as defined in the Pass-Through Rate: ___%
Pooling and Servicing Agreement [(or, if less, the Weighted Average
dated December 1, 1998 Home Equity Contract
Rate)]
First Payment Date: Denomination: $________
January 15, 1999
Servicer: Aggregate Denomination of
Green Tree Financial Corporation all Class HE: B Certificates:
$________
Final Scheduled Payment Date:
November 15, 2029 (or if such day is not
a Business Day, then the next succeeding
Business Day)
CUSIP: ________
F-1
<PAGE>
CERTIFICATES FOR HOME IMPROVEMENT AND HOME EQUITY LOANS
SERIES 1998-E, CLASS HE: B (SUBORDINATE)
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN
GREEN TREE FINANCIAL CORPORATION OR ANY AFFILIATE THEREOF, EXCEPT TO THE EXTENT
SET FORTH IN THE AGREEMENT.
This certifies that ______________ is the registered owner of the undivided
Percentage Interest represented by the original principal amount set forth above
in the Certificates for Home Improvement and Home Equity Loans, Series 1998-E,
Class HE: B, issued by Home Improvement and Home Equity Loan Trust 1998-E (the
"Trust"), which includes among its assets two sub-pools, one of which is
comprised of home improvement loan contracts and promissory notes (the "Home
Improvement Contracts") and the other of which is comprised of closed-end home
equity loans (the "Home Equity Contracts" and, together with the Home
Improvement Contracts, collectively, the "Contracts") (including, without
limitation, all mortgages, deeds of trust and security deeds relating to such
Contracts and any and all rights to receive payments due on the Contracts after
the applicable Cut-off Date or the Subsequent Cut-off Date and the Class HE: B
Limited Guaranty.) The Trust has been created pursuant to a Pooling and
Servicing Agreement (the "Agreement"), dated as of December 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 January 1999, so long as
the Agreement has not been terminated, by check (or, if such Certificateholder
holds Class HE: B Certificates with an aggregate Percentage Interest of at least
5% of the Class HE: B 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 HE: B Distribution Amount and any Class HE: B Guaranty Payment for such
Payment Date. Distributions of interest and principal on the Class HE: B
Certificates will be made primarily from amounts available in respect of the
Home Equity Contracts. The final scheduled Payment Date of this Certificate is
November 15, 2029 or the next succeeding Business Day if such November 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 HE: B
Limited Guaranty of the Company, to the extent available for distribution to the
Certificateholder as provided in the Agreement, for payment
F-2
<PAGE>
hereunder and that the Trustee in its individual capacity is not personally
liable to the Certificateholder for any amounts payable under this Certificate
or the Agreement or, except as expressly provided in the Agreement, subject to
any liability under the Agreement. By acceptance of this Certificate, the
Certificateholder agrees to disclosure of his, her or its name and address to
other Certificateholders under the conditions specified in the Agreement.
No transfer of 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 an opinion of counsel (satisfactory to the Company and the Trustee)
that the purchase and holding of this 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 this 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
F-3
<PAGE>
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.
F-4
<PAGE>
IN WITNESS WHEREOF, Home Improvement and Home Equity Loan Trust 1998-E has
caused this Certificate to be duly executed by the manual signature of a duly
authorized officer of the Trustee.
Dated: HOME IMPROVEMENT AND HOME
------------ EQUITY LOAN TRUST 1998-E
By: U.S. BANK TRUST NATIONAL
ASSOCIATION
By:
--------------------------------
Authorized Officer
F-5
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto __________________________ the within Certificate for Home Improvement and
Home Equity Loans, Series 1998-E, 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
F-6
<PAGE>
EXHIBIT G
FORM OF ASSIGNMENT
In accordance with the Pooling and Servicing Agreement (the "Agreement")
dated as of December 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 Improvement and Home Equity Loan Trust 1998-E, created by the Agreement, to
be held in trust as provided in the Agreement, (i) all right, title and interest
in the home improvement contracts and promissory notes and home equity loans
identified in the List of Contracts 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 Contracts due after the applicable Cut-off
Date or Subsequent Cut-off Date), (ii) all rights under FHA Insurance in respect
of each FHA-Insured Contract, (iii) all rights under any hazard, flood or other
individual insurance policy on the real estate securing a Contract for the
benefit of the creditor of such Contract, (iv) all rights the Company may have
against the originating contractor or lender with respect to Contracts
originated by a contractor or lender other than the Company, (v) all rights
under the Errors and Omissions Protection Policy and the Fidelity Bond as such
policy and bond relate to the Contracts, (vi) all rights under any title
insurance policies, if applicable, on any of the properties securing Contracts,
(vii) all documents contained in the related Contract Files, (viii) amounts in
the Certificate Account, Sub-Pool HI Pre-Funding Account, and Sub-Pool HE Pre-
Funding Account (including all proceeds of investments of the Certificate
Account), and (ix) 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 December, 1998.
GREEN TREE FINANCIAL
CORPORATION
[Seal] By:
--------------------------------
[Name]
[Title]
<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 December 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
December, 1998.
By:
--------------------------------
[Name]
[Title]
<PAGE>
EXHIBIT I
FORM OF OPINION OF COUNSEL FOR THE COMPANY
The opinion of Briggs and Morgan, P.A. shall be to the effect that
(capitalized terms have the meanings set forth in the Pooling and Servicing
Agreement):
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware, with corporate power
to execute, deliver and perform its obligations under the Pooling and Servicing
Agreement (including the Class HI: B-2 Limited Guaranty and the Class HE: B
Limited Guaranty contained therein), the Certificates and the Class C
Certificates.
2. The Pooling and Servicing Agreement (including the Class HI: B-2
Limited Guaranty and the Class HE: B Limited Guaranty contained therein) has
been duly authorized by all requisite corporate action, duly executed and
delivered by the Company, and constitutes the valid and binding obligation of
the Company enforceable in accordance with its terms. The Certificates have
been duly authorized by all requisite corporate action and, when duly and
validly executed by the Trustee in accordance with the Pooling and Servicing
Agreement, will be validly issued and outstanding and entitled to the benefits
of the Pooling and Servicing Agreement.
3. No consent, approval, authorization or order of any state or federal
court or governmental agency or body is required to be obtained by the Company
for the consummation of the transactions contemplated by the Pooling and
Servicing Agreement, except such as may be required under blue sky laws under
any jurisdiction in connection with the offering of the Certificates by the
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 Contracts to the Trustee acting on behalf
of the Trust, nor the assignment of the Company's lien on the related real
estate which is the subject of a home improvement loan or 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 Restated Certificate of
Incorporation or Bylaws of the Company or of any indenture or other agreement or
instrument known to us to which the Company is a party 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 Contracts 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 Contracts to the Trust in accordance with Section
2.01 of the Pooling and Servicing Agreement would not be voidable as a
preferential transfer under Section 547 of the United States Bankruptcy Code (11
U.S.C. (S) 547), as in effect on the date hereof, in the event that the Company
became a debtor under the United States Bankruptcy Code.
8. Pursuant to the Pooling and Servicing Agreement the Company has
transferred to the Trustee acting on behalf of the Trust all of the Company's
right, title and interest in the Contracts, free and clear of any and all other
assignments, encumbrances, options, rights, claims, liens or security interests
(except tax or possessory liens) that may affect the right of the Trustee in and
to such Contracts, and has delivered the Contract Files to the Trustee or its
custodian. No filing or other action, other than the filing of a financing
statement on Form UCC-1 with the Secretary of State of the State of Minnesota
identifying the Contracts as collateral and naming the Company as debtor and the
Trust as secured party, and the filing of continuation statements as required by
Section 4.01 of the Pooling and Servicing Agreement, is necessary to perfect as
against third parties the assignment of the Contracts by the Company to the
Trust. We have separately provided you with our opinion concerning whether such
assignment could be recharacterized as a pledge rather than a sale in the event
the Company became a debtor under the United States Bankruptcy Code. However, in
the event such assignment were characterized as a pledge securing a loan from
the Certificateholders to the Company, it is our opinion that the Trustee would
be deemed to have a valid and perfected security interest in the Contracts and
the proceeds thereof, which security interest would be prior to any other
security interest that may be perfected under the Uniform Commercial Code as in
effect in the State of Minnesota and over any "lien creditor" (as defined in
Minn. Stat. (S)336.9-301(3)) who becomes such after the Closing Date, except
that a subsequent purchaser of any Contract who gives new value and takes
possession thereof in the ordinary course of his business would have priority
over the Trustee's security interest in such Contract, if such purchaser acts
without knowledge that such Contract was subject to a security interest. We have
assumed for the purposes of this opinion that during the term of the Pooling and
Servicing Agreement the Trustee, or its custodian, shall maintain possession of
the Contract Files for the purpose of perfecting the assignment to the Trustee
of the Contracts. We express no opinion with respect to the enforceability
I-2
<PAGE>
of any individual Contract or the existence of any claims, rights or other
matters in favor of any Obligor or the owner of any financed home improvement.
9. In reliance upon certain representations and warranties set forth in the
Pooling and Servicing Agreement and assuming that the Company and the Trustee
comply with the requirements of the Pooling and Servicing Agreement, including
the filing 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 Excess Proceeds Account and the Sub-Pool HE 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 Contracts and the proceeds thereof by the Company
to the Trustee on the date hereof pursuant to the Pooling and Servicing
Agreement would not be voidable 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 Improvement and Home Equity Loan Trust 1998-E (the "Trust") created
pursuant to the Pooling and Servicing Agreement dated as of December 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 improvement contracts and promissory notes and home
equity loans identified in the List of Contracts attached to the [Agreement]
[Subsequent Transfer Instrument of even date herewith] (the "Contracts",
including, without limitation, all related mortgages and deeds of trust and any
and all rights to receive payments on or with respect to the Contracts (due
after the [Cut-off Date[ [or Subsequent Cut-off Date]), (ii) all rights under
FHA Insurance in respect of each FHA-Insured Contract, (iii) all rights under
any hazard, flood or other individual insurance policy on the real estate
securing a Contract for the benefit of the creditor of such Contract, (iv) all
rights the Company may have against the originating contractor or lender with
respect to Contracts originated by a contractor or lender other than the
Company, (v) all rights under the Errors and Omissions Protection Policy and the
Fidelity Bond as such policy and bond relate to the Contracts, (vi) all rights
under any title insurance policies, if applicable, on any of the properties
securing Contracts, (vii) all documents contained in the related Contract Files,
(viii) amounts in the Certificate Account, Sub-Pool HI Pre-Funding Account, and
Sub-Pool HE Pre-Funding Account (including all proceeds of investments of the
Certificate Account), (ix) the Class HI: B-2 Limited Guaranty and the Class HE:
B Limited Guaranty,] and (viii) [(x)] all proceeds and products of the
foregoing; and declares that, directly or through a Custodian, it will hold all
Contract Files that have been delivered in trust, upon the trusts set forth in
the Agreement for the use and benefit of all Certificateholders and the holders
of the Class C Certificates.
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 December, 1998.
U.S. BANK TRUST NATIONAL
ASSOCIATION
as Trustee
[Seal] By:
--------------------------------
[Name]
[Title]
<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 December 1, 1998 between the Company and U.S. Bank
Trust National Association, as Trustee of Home Improvement and Home Equity Loan
Trust 1998-E (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
__________, 1998.
GREEN TREE FINANCIAL
CORPORATION
By:
--------------------------------
[Name]
[Title]
<PAGE>
EXHIBIT L
FORM OF CLASS C CERTIFICATE
[MASTER] [SUBSIDIARY]
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS HI: A
CERTIFICATES, THE CLASS HI: M-1 CERTIFICATES, THE CLASS HI: M-2 CERTIFICATES,
THE CLASS HI: B-1 CERTIFICATES, THE CLASS HI: B-2 CERTIFICATES, THE CLASS HE: A
CERTIFICATES, THE CLASS HE: M-1 CERTIFICATES, THE CLASS HE: M-2 CERTIFICATES AND
THE CLASS HE: B CERTIFICATES AS DESCRIBED IN THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT AND
LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM
REGISTRATION UNDER SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN
ACCORDANCE WITH THE PROVISIONS OF SECTION 9.02 OF THE POOLING AND SERVICING
AGREEMENT REFERRED TO HEREIN.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE. THIS CERTIFICATE MAY ONLY BE TRANSFERRED TO A PERMITTED
TRANSFEREE (AS DEFINED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO
HEREIN); ANY SUCH TRANSFER MUST ALSO SATISFY THE OTHER REQUIREMENTS OF SECTION
9.02 OF SUCH POOLING AND SERVICING AGREEMENT.
Class C [Master] [Subsidiary] No.
(Subordinate)
Cut-off Date: Percentage Interest:
as defined in the Pooling
and Servicing Agreement
First Payment Date:
January 15, 1999
L-1
<PAGE>
CERTIFICATE FOR HOME IMPROVEMENT
AND HOME EQUITY LOANS SERIES 1998-E
Original Series 1998-E Certificate Principal Balance of the
Trust: $__________
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 Improvement and Home Equity Loan Trust 1998-E
(the "Trust"), which includes among its assets two sub-pools, one of which is
comprised of home improvement loan contracts and promissory notes (the "Home
Improvement Contracts") and the other of which is comprised of closed-end home
equity loans (the "Home Equity Contracts" and, together with the Home
Improvement Contracts, collectively the "Contracts") (including, without
limitation, all mortgages, deeds of trust and security deeds relating to such
Contracts and any and all rights to receive payments due on the Contracts 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 December 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 January 1999, 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 the sum of (1) the Sub-Pool HI Amount Available
remaining after payment of all amounts described in Section 8.04(b), clauses (1)
through ([21]), of the Agreement and (2) the Sub-Pool HE Amount Available
remaining after payment of all amounts described in Section 8.04(c), clauses (1)
through ([20]), of the Agreement. The final scheduled Payment Date of this Class
C [Master] [Subsidiary] Certificate is November 15, 2029 or the next succeeding
Business Day if such November 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 [and Reserve 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]
L-2
<PAGE>
[Subsidiary] Certificateholders 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 this 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 this
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] Certificateholders 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 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 Trust elects to be treated as a "real estate
L-3
<PAGE>
mortgage investment conduit" (a "REMIC") under the Code for such taxable year
and all subsequent taxable years. The Certificates shall be "regular interests"
in the REMIC and the Class C [Master] [Subsidiary] Certificate shall be the
"residual interest" in the 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.
L-4
<PAGE>
IN WITNESS WHEREOF, Home Improvement and Home Equity Loan Trust 1998-E has
caused this Certificate to be duly executed by the manual signature of a duly
authorized officer of the Trustee.
Dated: HOME IMPROVEMENT AND HOME
------------ EQUITY LOAN TRUST 1998-E
By: U.S. BANK TRUST NATIONAL
ASSOCIATION
By:
--------------------------------
Authorized Officer
L-5
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
__________________________ the within Certificate for Home Improvement and Home
Equity Loans, Series 1998-E, 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-6
<PAGE>
EXHIBIT M-1
FORM OF CERTIFICATE REGARDING REPURCHASED CONTRACTS
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 December 1, 1998 between the Company and U.S. Bank
Trust National Association, as Trustee of Home Improvement and Home Equity Loan
Trust 1998-E (all capitalized terms used herein without definition having the
respective meanings specified in the Agreement), and further certifies that:
1. The Contracts on the attached schedule are to be repurchased by the
Company on the date hereof pursuant to Section 3.05 of the Agreement.
2. Upon deposit of the Repurchase Price for such Contracts, such
Contracts may, pursuant to Section 8.05 of the Agreement, be assigned by the
Trustee to the Company.
IN WITNESS WHEREOF, I have affixed hereunto my signature this __ day of
_______________, 199_.
GREEN TREE FINANCIAL
CORPORATION
By:
--------------------------------
[Name]
[Title]
M-1-1
<PAGE>
EXHIBIT M-2
FORM OF CERTIFICATE REGARDING REPURCHASED CONTRACTS
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(b) and 8.05 of the Pooling and Servicing Agreement
(the "Agreement") dated as of December 1, 1998 between the Company and U.S. Bank
Trust National Association, as Trustee of Home Improvement and Home Equity Loan
Trust 1998-E (all capitalized terms used herein without definition having the
respective meanings specified in the Agreement), and further certifies that:
1. The Contract and Contract File for each such Eligible Substitute
Contract [are being held by the Company, as Servicer] [have been delivered to
the successor Servicer].
2. The Contracts on the attached schedule are to be substituted on the date
hereof pursuant to Section 3.05(b) of the Agreement and each such Contract is an
Eligible Substitute Contract.
3. The UCC-1 financing statements in respect of the Contracts 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 Contracts.
[5. There have 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 Contract exceeds the Scheduled Principal Balance of
each Contract being substituted therefor.]
M-2-1
<PAGE>
IN WITNESS WHEREOF, I have affixed hereunto my signature this _____ day of
_______________, 199_.
GREEN TREE FINANCIAL
CORPORATION
By:
--------------------------------
[Name]
[Title]
M-2-2
<PAGE>
EXHIBIT M-3
FORM OF CERTIFICATE REGARDING SUBSTITUTION FOR PREPAID CONTRACTS
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 2.06 of the Pooling and Servicing Agreement (the
"Agreement") dated as of December 1, 1998 between the Company and U.S. Bank
Trust National Association, as Trustee of Home Improvement and Home Equity Loan
Trust 1998-E (all capitalized terms used herein without definition having the
respective meanings specified in the Agreement), and further certifies that:
1. The Contract and Contract File for each such Eligible Substitute
Contract [are being held by the Company, as Servicer] [have been delivered to
the successor Servicer].
2. The Contracts on the attached schedule are to be substituted on the date
hereof pursuant to Section 2.06 of the Agreement and each such Contract is an
Eligible Substitute Contract.
3. The UCC-1 financing statements in respect of the Contracts to be
substituted, in the form required by Section 2.06(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 Contracts.
IN WITNESS WHEREOF, I have affixed hereunto my signature this ___ day of
____________, 199_.
GREEN TREE FINANCIAL
CORPORATION
By:
--------------------------------
[Name]
[Title]
M-3-1
<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 Improvement and Home Equity Loans,
Series 1998-E, Class C [Master][Subsidiary]
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 November 17, 1998, to the Prospectus dated
November 17, 1998 (the "Prospectus") with respect to the Certificates, and has
been given such information concerning the Certificates, the underlying
installment sale contracts and Green Tree Financial Corporation as it has
requested.
4. The Purchaser is acquiring the Certificates as principal for its own
account (or for the account of one or more other institutional investors for
which it is acting as duly authorized fiduciary or agent) for the purpose of
investment and not with a view to or for sale in connection with any
distribution thereof, subject nevertheless to any requirement of law that the
disposition of the Purchaser's property shall at all times be and remain within
its control.
5. The Purchaser understands that such Certificate will bear a legend
substantially as set forth in the form of Certificate included in the Pooling
and Servicing Agreement.
6. The Purchaser, as holder of the Class C [Master][Subsidiary]
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 [Master][Subsidiary] Certificate as they become due.
7. 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 6 and in this paragraph 7.
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.
N-2
<PAGE>
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 HOME IMPROVEMENT CONTRACTS
[To Be Supplied]
O-1
<PAGE>
EXHIBIT O-2
LIST OF INITIAL FIXED-RATE HOME EQUITY CONTRACTS
GROUP I AND GROUP II
[To Be Supplied]
O-2
<PAGE>
EXHIBIT O-3
LIST OF INITIAL ADJUSTABLE RATE HOME EQUITY CONTRACTS
[To Be Supplied]
O-3
<PAGE>
EXHIBIT P
LIST OF FHA-INSURED CONTRACTS
[To Be Supplied]
P-1
<PAGE>
EXHIBIT Q
FORM OF MONTHLY REPORT
CERTIFICATES FOR HOME IMPROVEMENT AND
HOME EQUITY LOANS SERIES 1998-E
Payment Date: _________
SUB-POOL HI
1. Sub-Pool HI Amount Available (including Monthly ____________
Servicing Fee)
2. Sub-Pool HI Formula Principal Distribution Amount: ____________
(a) Scheduled principal ____________
(b) Principal Prepayments ____________
(c) Liquidated Contracts ____________
(d) Repurchases ____________
(e) Previously undistributed (a)-(d) amounts ____________
(f) Sub-Pool HI Pre-Funded Amount, if any
(Post-Funding Payment Date) ____________
(g) minus any Sub-Pool HI Over-Collateralization
Adjustment Amount ____________
3. (a) Sub-Pool HI Senior Percentage ____________
(b) Class HI: Senior Addition Amount ____________
4. (a) Class HI: B Percentage ____________
(b) Class HI: B Subordinate Floor Amount ____________
CLASS HI: A CERTIFICATES
INTEREST
5. Aggregate current interest
(a) Class HI: A-1 Pass-through Rate (5.907%)
(b) Class HI: A-l Interest ____________
(c) Class HI: A-2 Pass-through Rate (6.08%)
(d) Class HI: A-2 Interest ____________
Q-1
<PAGE>
(e) Class HI: A-3 Pass-through Rate (6.66%)
(f) Class HI: A-3 Interest ____________
6. Amount applied to Unpaid Class HI: A Interest Shortfall ____________
7. Remaining Unpaid Class HI: A Interest Shortfall ____________
CLASS HI: M-1 CERTIFICATES
8. Sub-Pool HI Amount Available less all preceding
distributions ____________
INTEREST ON CLASS HI: M-1 ADJUSTED PRINCIPAL BALANCE
9. Class HI: M-1 Adjusted Principal Balance ____________
10. Current Interest
(a) Class HI: M-1 Pass-through Rate (7.02%)
(b) Class HI: M-1 Interest ____________
11. Amount applied to Unpaid Class HI: M-1
Interest Shortfall ____________
12. Remaining Unpaid Class HI: M-1
Interest Shortfall ____________
CLASS HI: M-2 CERTIFICATES
13. Sub-Pool HI Amount Available less all preceding
distributions ____________
INTEREST ON CLASS HI: M-2 ADJUSTED PRINCIPAL BALANCE
14. Class HI: M-2 Adjusted Principal Balance ____________
Q-2
<PAGE>
15. Current Interest
(a) Class HI: M-2 Pass-through Rate (floating rate
equal to the Weighted Average Home Improvement
Contract Rate, but in no event greater than 7.45%)
(b) Class HI: M-2 Interest ____________
16. Amount applied to Unpaid Class HI: M-2
Interest Shortfall ____________
17. Remaining Unpaid Class HI: M-2
Interest Shortfall ____________
CLASS HI: B-1 CERTIFICATES
18. Sub-Pool HI Amount Available less all preceding
distributions ____________
INTEREST ON CLASS HI: B-1 ADJUSTED PRINCIPAL BALANCE
19. Class HI: B-1 Adjusted Principal Balance __
20. Current Interest
(a) Class HI: B-1 Pass-through Rate (7.79%)
(b) Class HI: B-1 Interest ____________
21. Amount applied to Unpaid Class HI: B-1
Interest Shortfall ____________
22. Remaining Unpaid Class HI: B-1
Interest Shortfall ____________
CLASS HI: A CERTIFICATES
23. Sub-Pool HI Amount Available less all preceding
distributions ____________
Q-3
<PAGE>
PRINCIPAL
24. Class HI: A principal distribution:/1/
(a) Class HI: A-1 ____________
(b) Class HI: A-2 ____________
(c) Class HI: A-3 ____________
25. (a) Class HI: A-1 Principal Balance ____________
(b) Class HI: A-2 Principal Balance ____________
(c) Class HI: A-3 Principal Balance ____________
26. Amount, if any, by which the Class HI: A Formula Principal
Distribution Amount exceeds amounts distributed pursuant
to item (24) ____________
CLASS HI: M-1 CERTIFICATES
27. Sub-Pool HI Amount Available less all preceding
distributions ____________
PRINCIPAL
28. Class HI: M-1 principal distribution ____________
29. Class HI: M-1 Principal Balance ____________
30. Amount, if any, by which the Class HI: M-1 Formula Principal
Distribution Amount exceeds the amount distributed pursuant
to item (28) ____________
- ----------------------
/1/ If a Class HI: A Principal Deficiency Amount exists, the remaining Sub-Pool
HI Amount Available is to be distributed pro rata to each Class of Class HI: A
Certificates based on the Class Principal Balance of each such Class. If the
remaining Sub-Pool HI Amount Available is less than the Class HI: A Formula
Principal Distribution Amount, then such remaining Sub-Pool HI Amount Available
is to be distributed pro rata to each Class of Class HI: A Certificates based on
the amount distributable had there been no deficiency. Otherwise, the remaining
Sub-Pool HI Amount Available is to be distributed sequentially as described in
this item 24.
Q-4
<PAGE>
CLASS HI: M-2 CERTIFICATES
31. Sub-Pool HI Amount Available less all preceding
distributions ____________
PRINCIPAL
32. Class HI: M-2 principal distribution ____________
33. Class HI: M-2 Principal Balance ____________
34. Amount, if any, by which the Class HI: M-2 Formula Principal
Distribution Amount exceeds the amount distributed pursuant
to item (32) ____________
CLASS HI: B PRINCIPAL DISTRIBUTION TESTS (tests must be satisfied
on and after the Payment Date occurring in January 2002)
35. Sub-Pool HI Average Sixty-Day Delinquency Ratio Test
(a) Sixty-Day Delinquency Ratio for
current Payment Date ____________
(b) Sub-Pool HI Average Sixty-Day Delinquency Ratio Test
(arithmetic average of ratios for this
month and two preceding months;
may not exceed 2.5%) ____________
36. Sub-Pool HI Average Thirty-Day Delinquency Ratio Test
(a) Thirty-Day Delinquency Ratio for
current Payment Date ____________
(b) Sub-Pool HI Average Thirty-Day Delinquency Ratio
Test (arithmetic average of ratios
for this month and two preceding
months; may not exceed 5%) ____________
37. Sub-Pool HI Cumulative Realized Losses Test
Cumulative Realized Losses
for current Payment Date
(as a percentage of Cut-off Date
Pool Principal Balance may not
exceed 10%) ____________
Q-5
<PAGE>
38. Sub-Pool HI 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
Balance for third preceding
Payment Date and for current Payment
Date; may not exceed 2.5%) ____________
39. Class HI: B Principal Balance Test
Class HI: B Principal Balance (before
any distributions on current
Payment Date) divided by Pool
Scheduled Principal Balance for
prior Payment Date (must equal
or exceed 20%) ____________
CLASS HI: B-1 CERTIFICATES
40. Sub-Pool HI Amount Available less all preceding
distributions ____________
PRINCIPAL
41. Class HI: B-1 principal distribution ____________
42. Class HI: B-1 Principal Balance ____________
43. Amount, if any, by which the Class HI: B-1 Formula Principal
Distribution Amount exceeds the amount distributed pursuant
to item (41) ____________
SUB-POOL HI SUPPLEMENTARY PRINCIPAL DISTRIBUTION
CLASS HI: A CERTIFICATES
44. Sub-Pool HI Supplementary Principal Distribution Amount ____________
Q-6
<PAGE>
45. Class HI: A principal distribution:
(a) Class HI: A-1 ____________
(b) Class HI: A-2 ____________
(c) Class HI: A-3 ____________
46. (a) Class HI: A-1 Principal Balance ____________
(b) Class HI: A-2 Principal Balance ____________
(c) Class HI: A-3 Principal Balance ____________
CLASS HI: M-1 CERTIFICATES
47. Sub-Pool HI Supplementary Principal Distribution Amount less
any distributions pursuant to item (45) ____________
48. Class HI: M-1 principal distribution ____________
49. Class HI: M-1 Principal Balance ____________
CLASS HI: M-2 CERTIFICATES
50. Sub-Pool HI Supplementary Principal Distribution Amount less
any distributions pursuant to items (45) and (48) ____________
51. Class HI: M-2 principal distribution ____________
52. Class HI: M-2 Principal Balance ____________
CLASS HI: M-1 CERTIFICATES
53. Sub-Pool HI Amount Available less all preceding
distributions ____________
LIQUIDATION LOSS INTEREST
Q-7
<PAGE>
54. Class HI: M-1 Formula Liquidation Loss Interest Distribution
Amount ____________
55. Amount applied to Unpaid Class HI: M-1 Liquidation Loss
Interest Shortfall ____________
56. Remaining Unpaid Class HI: M-1 Liquidation Loss
Interest Shortfall ____________
CLASS HI: M-2 CERTIFICATES
57. Sub-Pool HI Amount Available less all preceding
distributions ____________
LIQUIDATION LOSS INTEREST
58. Class HI: M-2 Formula Liquidation Loss Interest Distribution
Amount ____________
59. Amount applied to Unpaid Class HI: M-2 Liquidation Loss
Interest Shortfall ____________
60. Remaining Unpaid Class HI: M-2 Liquidation Loss
Interest Shortfall ____________
CLASS HI: B-1 CERTIFICATES
61. Sub-Pool HI Amount Available less all preceding
distributions ____________
LIQUIDATION LOSS INTEREST
62. Class HI: B-1 Formula Liquidation Loss Interest Distribution
Amount ____________
63. Amount applied to Unpaid Class HI: B-1 Liquidation Loss
Interest Shortfall ____________
64. Remaining Unpaid Class HI: B -1 Liquidation Loss
Interest Shortfall ____________
Q-8
<PAGE>
CLASS HI: B-2 CERTIFICATES
65. Sub-Pool HI Amount Available less all preceding
distributions ____________
INTEREST
66. Current interest
(a) Class HI: B-2 Pass-through Rate (floating rate equal
to the Weighted Average Home Improvement Contract Rate,
but in no event greater than 8.50%)
(b) Class HI: B-2 Interest ____________
67. Amount applied to Unpaid Class
HI: B-2 Interest Shortfall ____________
68. Remaining Unpaid Class HI: B-2
Interest Shortfall ____________
PRINCIPAL
69. Class HI: B-2 principal distribution ____________
70. Class HI: B-2 Guaranty Payment ____________
71. Class HI: B-2 Principal Balance ____________
72. Amount, if any, by which Class HI: B-2
Formula Principal Distribution Amount plus Class HI: B-2
Liquidation Loss Principal Amount exceeds
Class HI: B-2 Distribution Amount ____________
73. ADDITION TO SUB-POOL HE AMOUNT AVAILABLE ____________
CLASS HI: A, CLASS HI: M AND CLASS HI: B CERTIFICATES
74. Pool Scheduled Principal Balance of Sub-Pool HI ____________
75. Sub-Pool HI Pool Factor ____________
Q-9
<PAGE>
76. Home Improvement Contracts Delinquent:
30 - 59 days ____________
60 - 89 days ____________
90 - 179 days ____________
77. Principal Balance of Defaulted Home
Improvement Contracts
180 or more days delinquent ____________
In foreclosure ____________
REO ____________
78. Number of Liquidated Home Improvement
Contracts and Net Liquidation Loss ____________
79. Number of Home Improvement Contracts Remaining ____________
80. Number and Principal Balance of Home
Improvement Contracts with FHA claims finally
rejected, or no FHA claim submitted
because FHA Insurance unavailable ____________
81. FHA Insurance reserve amount ____________
82. Amount received from FHA Insurance ____________
83. (a) Net Liquidation Losses on all FHA-Insured Home
Improvement Contracts that became Liquidated Contracts
in any prior Due Period ____________
(b) Aggregate Repurchase Price of all such
Liquidated Contracts ____________
(c) Ratio of (a) to (b) ___________%
84. Sub-Pool HI Pre-Funded Amount ____________
COMPANY, SERVICER, TRUSTEE AND CLASS C SUBSIDIARY
CERTIFICATES
85. Monthly Servicing Fee ____________
86. Reimbursement for unreimbursed
(a) FHA premiums ____________
(b) Advances ____________
Q-10
<PAGE>
(c) Class C Certificateholder (S)10.06 expenses ____________
(d) Class HI: B-2 Guaranty Payments ____________
87. Class HI: B-2 Guaranty Fee ____________
88. Class C Subsidiary Residual Payment ____________
Q-11
<PAGE>
SUB-POOL HE
1. Sub-Pool HE Amount Available (including Monthly
Servicing Fee and Reserve Account Withdrawal Amount) ____________
2. Reserve Account Withdrawal Amount ____________
3. Sub-Pool HE Group I Formula Principal Distribution Amount ____________
(a) Scheduled principal ____________
(b) Principal Prepayments ____________
(c) Liquidated Contracts ____________
(d) Repurchases ____________
(e) Previously undistributed (a)-(d) amounts ____________
(f) Pre-Funded Group I Amount, if any
(Post-Funding Payment Date) ____________
4. Sub-Pool HE Group II Formula Principal Distribution Amount ____________
(a) Scheduled principal ____________
(b) Principal Prepayments ____________
(c) Liquidated Contracts ____________
(d) Repurchases ____________
(e) Previously undistributed (a)-(d) amounts ____________
(f) Pre-Funded Group II Amount, if any
(Post-Funding Payment Date) ____________
5. Sub-Pool HE: ARM Formula Principal Distribution Amount
(a) Scheduled principal ____________
(b) Principal Prepayments ____________
(c) Liquidated Contracts ____________
(d) Repurchases ____________
(e) Pre-Funded ARM Amount, if any
(Post-Funding Payment Date) ____________
6. (a) LIBOR ____________
(b) Pass-Through Margin (.65% or .90%) ____________
(c) Available Funds Pass-Through Rate ____________
7. Class HE: A-5 IO Notional Principal Amount ____________
Q-12
<PAGE>
CLASS HE: A CERTIFICATES
INTEREST
8. Aggregate current interest
(a) Class HE: A-1A NAS Pass-through Rate (5.96%)
(b) Class HE: A-1A NAS Interest ____________
(c) Class HE: A-1B ARM Pass-through Rate (a floating rate
per annum equal to the lesser of (a) LIBOR plus the
Pass-Through Margin, or (b) the Available Funds
Pass-Through Rate, but in no case more than 14%)
(d) Class HE: A-1B ARM Interest ____________
(e) Class HE: A-1 (Underlying) Pass-through Rate (6.2375%) or
(6.490975%)
(f) Class HE: A-l (Underlying) Interest ____________
(g) Class HE: A-2 Pass-through Rate (6.829%)
(h) Class HE: A-2 Interest ____________
(i) Class HE: A-3 Pass-through Rate (6.01%)
(j) Class HE: A-3 Interest ____________
(k) Class HE: A-4 Pass-through Rate (floating rate equal to
the Weighted Average Home Equity Contract Rate but in
no event greater than 6.62%)
(l) Class HE: A-4 Interest ____________
9. Amount applied to Unpaid Class HE: A Interest Shortfall ____________
10. Remaining Unpaid Class HE: A Interest Shortfall ____________
CLASS HE: M-1 CERTIFICATES
11. Sub-Pool HE Amount Available less all preceding
distributions ____________
INTEREST ON CLASS HE: M-1 ADJUSTED PRINCIPAL BALANCE
12. Class HI: M-1 Adjusted Principal Balance ____________
13. Current Interest
(a) Class HE: M-1 Pass-through Rate (6.93%)
(b) Class HE: M-1 Interest ____________
Q-13
<PAGE>
14. Amount applied to Unpaid Class HE: M-1
Interest Shortfall ____________
15. Remaining Unpaid Class HE: M-1
Interest Shortfall ____________
CLASS HE: M-2 CERTIFICATES
16. Sub-Pool HE Amount Available less all preceding
distributions ____________
INTEREST ON CLASS HE: M-2 ADJUSTED PRINCIPAL BALANCE
17. Class HE: M-2 Adjusted Principal Balance ____________
18. Current Interest
(a) Class HE: M-2 Pass-through Rate (floating rate equal to
the Weighted Average Home Equity Contract Rate,
but in no event greater than 7.27%)
(b) Class HE: M-2 Interest ____________
19. Amount applied to Unpaid Class HE: M-2
Interest Shortfall ____________
20. Remaining Unpaid Class HE: M-2
Interest Shortfall ____________
RESERVE ACCOUNT LOAN
21. (a) Interest on Standard Rate Based Portion ____________
(b) Reserve Account Loan Fee ____________
Class HE: A Certificates
22. Sub-Pool HE Amount Available less all preceding distributions ____________
PRINCIPAL
Q-14
<PAGE>
23. Class HE: A principal distribution:/2/
(a) Class HE: A-1A NAS ____________
(b) Class HE: A-1B ARM ____________
(c) Class HE: A-1 (Underlying) ____________
(d) Class HE: A-2 ____________
(e) Class HE: A-3 ____________
(f) Class HE: A-4 ____________
24. (a) Class HE: A-1A NAS Principal Balance ____________
(b) Class HE: A-1B ARM Principal Balance ____________
(c) Class HE: A-1 (Underlying) Principal Balance ____________
(d) Class HE: A-2 Principal Balance ____________
(e) Class HE: A-3 Principal Balance ____________
(f) Class HE: A-4 Principal Balance ____________
25. Amount, if any, by which Class HE: A Formula Principal
Distribution Amount exceeds amounts distributed pursuant
to item (23) ____________
CLASS HE: SUBORDINATE PRINCIPAL DISTRIBUTION TESTS (tests must
be satisfied on and after the Payment Date occurring in January 2002)
26. Sub-Pool HE Average Sixty-Day Delinquency Ratio Test
(a) Sixty-Day Delinquency Ratio for
current Payment Date ____________
(b) Sub-Pool HE Average Sixty-Day Delinquency
Ratio Test (arithmetic average of ratios for this
month and two preceding months;
may not exceed 10%) ____________
- --------------------
/2/If a Class HE: A Principal Deficiency Amount exists, the remaining Sub-Pool
HE Amount Available is to be distributed pro rata to each Class of Class HE: A
Certificates (other than the Class HE: A-5 IO Certificates) based on the Class
Principal Balance of each such Class. If the remaining Sub-Pool HE Amount
Available is less than the Class HE: A Formula Principal Distribution Amount,
then pro rata to each Class of Class HE: A Certificates (other than the Class
HE: A-5 IO Certificates) based on the amount distributable had the Sub-Pool HE
Amount Available not been less than the Class HE: A Formula Principal
Distribution Amount. Otherwise, the Class HE: A ARM Portion, the Class HE: A-1
(Underlying) Portion and the Class HE: A (2,3,4) Portion are to be distributed
sequentially as described in this item 23.
Q-15
<PAGE>
27. Sub-Pool HE Average Thirty-Day Delinquency Ratio Test
(a) Thirty-Day Delinquency Ratio for
current Payment Date ____________
(b) Sub-Pool HE Average Thirty-Day Delinquency Ratio
Test (arithmetic average of ratios
for this month and two preceding
months; may not exceed 12%) ____________
28. Sub-Pool HE 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%) ____________
29. Sub-Pool HE Current Realized Losses Test
(a) Current Realized Losses
for current Payment Date ____________
(b) Current Realized Loss Ratio (total
Realized Losses for most recent
six months, multiplied by 2,
divided by arithmetic
average of Pool Scheduled Principal
Balance for sixth preceding
Payment Date and for current Payment
Date; may not exceed 2.0%) ____________
CLASS HE: M-1 CERTIFICATES
30. Sub-Pool HE Amount Available less all preceding distributions ____________
PRINCIPAL
31. Class HE: M-1 principal distribution ____________
32. Class HE: M-1 Principal Balance ____________
Q-16
<PAGE>
33. Amount, if any, by which the Class HE: M-1 Formula Principal
Distribution Amount exceeds the amount distributed pursuant
to item (31) ____________
CLASS HE: M-2 CERTIFICATES
34. Sub-Pool HE Amount Available less all preceding distributions ____________
PRINCIPAL
35. Class HE: M-2 principal distribution ____________
36. Class HE: M-2 Principal Balance ____________
37. Amount, if any, by which the Class HE: M-2 Formula Principal
Distribution Amount exceeds the amount distributed pursuant
to item (35)
LIQUIDATION LOSS INTEREST
38. Remaining Sub-Pool HE Amount Available ____________
CLASS HE: M-1 CERTIFICATES
39. Class HE: M-1 Formula Liquidation Loss Interest Distribution
Amount ____________
40. Amount applied to Unpaid Class HE: M-1 Liquidation Loss
Interest Shortfall ____________
41. Remaining Unpaid Class HE: M-1 Liquidation Loss
Interest Shortfall ____________
CLASS HE: M-2 CERTIFICATES
42. Class HE: M-2 Formula Liquidation Loss Interest Distribution
Amount ____________
Q-17
<PAGE>
43. Amount applied to Unpaid Class HE: M-2 Liquidation Loss
Interest Shortfall ____________
44. Remaining Unpaid Class HE: M-2 Liquidation Loss
Interest Shortfall ____________
RESERVE ACCOUNT LOAN
45. (a) Interest on Risk Rate Based Portion ____________
(b) Reserve Account Loan - Other Fees ____________
(c) Reserve Account Loan Distribution Amount ____________
CLASS HE: B CERTIFICATES
46. Remaining Sub-Pool HE Amount Available ____________
INTEREST
47. Current interest
(a) Class HE: B Pass-through Rate (floating rate equal to the
Weighted Average Home Equity Contract Rate,
but in no event greater than 8.50%)
(b) Class HE: B Interest ____________
48. Amount applied to Unpaid Class
HE: B Interest Shortfall ____________
49. Remaining Unpaid Class HE: B
Interest Shortfall ____________
PRINCIPAL
50. Class HE: B principal distribution ____________
51. Class HE: B Guaranty Payment ____________
52. Class HE: B Principal Balance ____________
Q-18
<PAGE>
53. Amount, if any, by which (a) Class HE: B
Formula Distribution Amount plus Class HE: B
Liquidation Loss Principal Amount exceeds (b) Class
HE: B Distribution Amount plus Guaranty Payment ____________
54. Class HE: B Adjusted Principal Balance ____________
CLASS HE: A-1B ARM CERTIFICATES
55. Remaining Sub-Pool HE Amount Available ____________
AVAILABLE FUNDS LIMITATION INTEREST
56. Class HE: A-1B ARM Formula Available Funds Limitation
Interest Distribution Amount ____________
57. Amount applied to Unpaid Class HE: A-1B ARM
Available Funds Limitation Shortfall ____________
58. Remaining Unpaid Class HE: A-1B ARM
Available Funds Limitation Shortfall ____________
59. ADDITION TO SUB-POOL HI AMOUNT AVAILABLE ____________
CLASS HE: A, CLASS HE: M AND CLASS HE: B CERTIFICATES
60. Pool Scheduled Principal Balance of Sub-Pool HE ____________
(a) Group I Contracts ____________
(b) Group II Contracts ____________
(c) Adjustable Rate Home Equity Contracts ____________
61. Sub-Pool HE Pool Factor ____________
Q-19
<PAGE>
62. Home Equity Contracts Delinquent:
30 - 59 days
Group I ____________
Group II ____________
Adjustable Rate ____________
60 - 89 days
Group I ____________
Group II ____________
Adjustable Rate ____________
90 - 179 days
Group I ____________
Group II ____________
Adjustable Rate ____________
63. Principal Balance of Defaulted Home Equity Contracts
Group I ____________
180 or more days delinquent ____________
In foreclosure ____________
REO ____________
Group II ____________
180 or more days delinquent ____________
In foreclosure ____________
REO ____________
Adjustable Rate ____________
180 or more days delinquent ____________
In foreclosure ____________
REO ____________
64. Number of Liquidated Home Equity Contracts and
Net Liquidation Loss ____________
Group I ____________
Group II ____________
Adjustable Rate ____________
65. Number of Home Equity Contracts Remaining
Group I ____________
Group II ____________
Adjustable Rate ____________
Q-20
<PAGE>
66. Sub-Pool HE Pre-Funded:
ARM Amount ____________
Group I Amount ____________
Group II Amount ____________
RESERVE ACCOUNT
67. Reserve Account Step-Down Amount ____________
68. Reserve Account Balance (after any Reserve Account Withdrawal
Amount and Step-Down Amount on current Payment Date) ____________
RESERVE ACCOUNT LOAN1
69. Class HE B Adjusted Principal Balance PLUS
amount by which Reserve Account Loan Balance exceeds
Reserve Account Balance (after giving effect to Reserve
Account Withdrawal Amount and Reserve Account Step-Down
Amount on current Payment Date)
DIVIDED by Sub-Pool HE Pool Scheduled Principal Balance ____________
70. (a) Sub-Pool HE Sixty Day Delinquency Ratio ____________
(b) 0.65% line (a) ____________
71. Sub-Pool HE Monthly Excess Cash Flow Percentage ____________
72. Sub-Pool HE Quarterly Monthly Excess Cash Flow Percentage ____________
73. Sub-Pool HE Semi-Annual Monthly Excess Cash Flow Percentage ____________
74. Sub-Pool HE Cumulative CPR ____________
<TABLE>
<CAPTION>
<S> <C>
- --------------------------
/3/ Reserve Account Loan Trigger Events Reserve Account Loan Termination Date
(a) line 69 less than line 70(b) (a) December 2005 Payment Date
(b) line 73 less than 1.25% (b) Line 72 Greater Than 0
(c) line 74 less than 16% (c) Line 70(a) Less Than 14% 3 consecutive Payment Dates
(d) Event of Termination (ss. 7.01)
(e) Event of Default under Reserve Account Loan
Agreement
(f) Servicer purchases Contracts (ss. 8.06)
(g) Trust terminates (ss. 12.04)
</TABLE>
Q-21
<PAGE>
75. Reserve Account Loan Balance
(a) Before distributions on current Payment Date
Reserve Account Loan Interest: Standard Rate Based
Portion ____________
Risk Rate Based Portion ____________
Reserve Account Loan Fee ____________
Reserve Account Loan Balance ____________
Reserve Account Loan - Other Fees ____________
(b) After distributions and Step-Down Amount on current
Payment Date
Reserve Account Loan Interest: Standard Rate Based
Portion ____________
Risk Rate Based Portion ____________
Reserve Account Loan Fee ____________
Reserve Account Loan Balance ____________
Reserve Account Loan - Other Fees ____________
COMPANY, TRUSTEE, SERVICER AND CLASS C SUBSIDIARY CERTIFICATES
76. Monthly Servicing Fee ____________
77. Reimbursement for unreimbursed:
(a) Advances ____________
(b) Class C Certificateholder ss.10.06 expenses ____________
(c) Class HE: B Guaranty Payments ____________
78. Class HE: B Guaranty Fee to Swap Reserve Account ____________
Swap Payment to Credit Suisse First Boston Management
Corporation ____________
Balance to Class C Master Certificateholder ____________
79. Class C Master Distribution Amount ____________
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.
Q-22
<PAGE>
EXHIBIT R
FORM OF ADDITION NOTICE
--------------, -----
U.S. Bank Trust National Association
180 East Fifth Street
St. Paul, MN 55101
Re: Pooling and Servicing Agreement (the "Agreement"), dated as of
December 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 Improvement and Home
Equity Loans, Series 1998-E
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 Home Equity Contracts and/or Subsequent
Home Improvement Contracts on the date and in the amounts set forth below:
Subsequent Transfer Date: __________________
Cut-off Date Principal Balance of Subsequent Home Equity Contracts to be
assigned to Trust on Subsequent Transfer Date:
Group I: $_____________
Group II: $_____________
Adjustable Rate: $_____________
Cut-off Date Principal Balance of Subsequent Home Improvement Contracts to be
assigned to Trust on Subsequent Transfer Date: $________
R-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:
----------------------------
R-2
<PAGE>
EXHIBIT S
FORM OF SUBSEQUENT TRANSFER INSTRUMENT
In accordance with the Pooling and Servicing Agreement (the "Agreement")
dated as of December 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
Improvement and Home Equity Loan Trust 1998-E, created by the Agreement, to be
held in trust as provided in the Agreement, (i) all right, title and interest in
the home improvement contracts and promissory notes and home equity loans
identified in the List of Contracts attached hereto (the "Subsequent Contracts")
(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 Contracts excluding principal due before the Subsequent Cut-off Date,
(ii) all rights under FHA Insurance in respect of each Subsequent Contract that
is an FHA-Insured Contract, (iii) all rights under any hazard, flood or other
individual insurance policy on the real estate securing a Subsequent Contract
for the benefit of the creditor of such Contract, (iv) all rights the Company
may have against the originating contractor or lender with respect to the
Subsequent Contracts originated by a contractor or lender other than the
Company, (v) all rights under the Errors and Omissions Protection Policy and the
Fidelity Bond as such policy and bond relate to the Subsequent Contracts, (vi)
all rights under any title insurance policies, if applicable, on any of the
properties securing Subsequent Contracts, (vii) all documents contained in the
related Contract Files, and (viii) all proceeds and products of the foregoing.
This Assignment is made pursuant to and upon the representation and
warranties on the part of the undersigned contained in Article III of the
Agreement and no others. 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 __________, _____.
GREEN TREE FINANCIAL
CORPORATION
[Seal] By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
S-1
<PAGE>
EXHIBIT T
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 December 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 Contracts (the
"Subsequent Contracts") identified in the List of Contracts 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 3.02 and 3.03 of the Agreement with respect to the
Subsequent Contracts are true to the best of his knowledge; and all
representations in Section 3.04 of the Agreement with respect to the Subsequent
Contracts are true and correct.
3. All conditions precedent to the sale of the Subsequent Contracts 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
__________, _____.
By:
--------------------------------
Name:
------------------------------
Title:
----------------------------
T-1
<PAGE>
EXHIBIT U
RESERVE ACCOUNT LOAN
MONTHLY REPORT
[Servicer]
[Trustee]
Re: Green Tree Certificates for Home Improvement and Home Equity Loans, Series
1998-E Reserve Account Loan
Payment Date: _________________
The undersigned, as Agent for the Reserve Account Lenders, certifies to the
Servicer and Trustee that the following information is accurate and complete and
the amounts set forth below under items 2, 3 and 4 are due and payable under the
Reserve Account Loan Agreement and clauses (5) and (11) of Section 8.04(c) of
the Pooling and Servicing Agreement.
1. Reserve Account Loan Balance (before application of
payments on current Payment Date):
a. Standard Rate Based Portion of the
Reserve Account Loan $___________
b. Risk Rate Based Portion of the Reserve Account Loan $___________
$___________
2. Reserve Account Loan Interest with respect to Standard
Rate Based Portion and Reserve Account Loan Fee:
Interest calculated in accordance with Section 2.03 of
Reserve Account Loan Agreement, net of earnings on
Reserve Account $___________
Loan Fee [generally 1.5% per annum on Reserve Account Loan
Balance until 7th anniversary of Closing Date and
2.5% thereafter] $___________
$
============
<PAGE>
3. Reserve Account Loan Interest with respect
to Risk Rate Based Portion:
Interest calculated in accordance with Section 2.03
of Reserve Account Loan Agreement, net of earnings
on Reserve Account $___________
4. Reserve Account Loan - Other Fees
Section 2.07 [itemize] $___________
Section 2.08 [itemize] $___________
Section 2.10 [itemize] $___________
Section 8.04 [itemize]
$___________
[5. An Event of Default exists under the Reserve Account
Loan Agreement.]
All undefined capitalized terms used in this Report have the meanings given
them in the Pooling and Servicing Agreement dated as of December 1, 1998 by and
between U.S. Bank Trust National Association as Trustee and Green Tree Financial
Corporation as Seller and Servicer.
Credit Suisse First Boston, as
Agent for the Reserve Account Lenders
By
---------------------------------
Its
--------------------------------
Dated:
-----------------------------
U-2
<PAGE>
EXHIBIT 8.1
December 7, 1998
Credit Suisse First Boston Corporation Merrill Lynch, Pierce, Fenner
11 Madison Avenue, 6th Floor & Smith
New York, NY 10004 North Tower
World Financial Center
Chase Securities Inc. New York, New York 10201
270 Park Avenue, 7th Floor
New York, NY 10017 U.S. Bank Trust National Association
180 East Fifth Street
First Union Capital Markets St. Paul, Minnesota 55101
a division of Wheat First Securities Corp.
1 First Union Center, Sixth Floor Fitch IBCA, Inc.
Charlotte, NC 28288 One State Street Plaza
New York, New York 10004
Lehman Brothers Inc.
Three World Financial Center Moody's Investors Services, Inc.
New York, New York 10285 99 Church Street
New York, NY 10007
Re: Green Tree Financial Corporation
Certificates for Home Improvement and Home Equity Loans, Series 1998-E
Gentlemen:
We have acted as counsel for Green Tree Financial Corporation ("Green
Tree") in connection with:
1. its execution of a Pooling and Servicing Agreement, dated
as of December 1, 1998 (the "Pooling and Servicing Agreement"), between
Green Tree as seller and servicer and U.S. Bank Trust National
Association, as Trustee (the "Trustee"), and its establishment,
pursuant to the Pooling and Servicing Agreement, of Home Improvement
and Home Equity Loan Trust 1998-E (the "Trust"); and
2. its execution of a Grantor Trust Agreement dated as of
December 1, 1998 between Green Tree as depositor and servicer and U.S.
Bank National Association as Trustee (the "Grantor Trustee") and its
establishment of Grantor Trust 1998-E (the "Grantor Trust").
<PAGE>
Credit Suisse First Boston Corporation
Chase Securities Inc.
First Union Capital Markets
Lehman Brothers Inc.
Merrill Lynch, Pierce, Fenner
& Smith Incorporated
U.S. Bank Trust National Association
Fitch IBCA, Inc.
Moody's Investor Service, Inc.
December 7, 1998
Page 2
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 Contracts and certain related property and Green Tree
will act as Servicer of the Contracts and provide a Limited Guaranty in respect
of the Class HI:B-2 Certificates and a Limited Guaranty in respect of the Class
HE:B Certificates against losses on the Contracts.
Pursuant to the Grantor Trust Agreement, Green Tree will transfer to
the Grantor Trust the Class HE:A-1 (Underlying) Certificates issued by the
Trust. The assets of the Grantor Trust will also include a Swap Agreement dated
as of December 1, 1998 (the "Swap Agreement") between the Grantor Trustee and
Westdeutsche Landesbank Girozentrale.
Green Tree has requested that we provide to you our opinion (a) 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 "Code"), under certain Treasury
Regulations concerning REMICs promulgated by the Treasury Department on December
23, 1992 (the "REMIC Regulations"), and under Minnesota law and (b) whether the
Grantor Trust will be classified as a grantor trust under subpart E, Part I of
Subchapter J of the Code and under Minnesota law.
In rendering our opinion, we have examined the Pooling and Servicing
Agreement, the Grantor Trust 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
<PAGE>
Credit Suisse First Boston Corporation
Chase Securities Inc.
First Union Capital Markets
Lehman Brothers Inc.
Merrill Lynch, Pierce, Fenner
& Smith Incorporated
U.S. Bank Trust National Association
Fitch IBCA, Inc.
Moody's Investor Service, Inc.
December 7, 1998
Page 3
the representations and warranties set forth in the Pooling and Servicing
Agreement, the Grantor Trust Agreement and the assumptions that Green Tree, the
Trustee and the Grantor Trustee will at all times comply with the requirements
of the Pooling and Servicing Agreement and the Grantor Trust 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 and the Grantor Trust will be
issued as described in the Prospectus Supplement relating to the Certificates
and the Class HE:A-1 Certificates (as defined in the Grantor Trust Agreement).
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 Subsidiary 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 Excess Proceeds Account and the Sub-Pool HE Pre-Funding Account,
the Sub-Pool HI Pre-Funding Account and the Reserve 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 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.
<PAGE>
Credit Suisse First Boston Corporation
Chase Securities Inc.
First Union Capital Markets
Lehman Brothers Inc.
Merrill Lynch, Pierce, Fenner
& Smith Incorporated
U.S. Bank Trust National Association
Fitch IBCA, Inc.
Moody's Investor Service, Inc.
December 7, 1998
Page 4
4. For federal income tax purposes, the Grantor Trust will not be
classified as an association taxable as a corporation, but rather will be
classified as a grantor trust under Subpart I, Part I of Subchapter J of the
Internal Revenue Code of 1986, as amended (the "Code"). Under Section 671 of the
code, each holder of a Class HE:A-1 Certificate will be treated as the owner of
a PRO RATA undivided interest in the ordinary income and corpus portions of the
Grantor Trust and will be considered the equitable owner of a pro rata undivided
interest in the Class HE:A-1 Underlying Certificate, the Swap Agreement and
other assets held by the Grantor Trust.
5. For Minnesota income, franchise and excise tax purposes, the Grantor
Trust will not be classified as an association taxable as a corporation.
6. Ownership of a Class HE:A-1 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 Class HE:A-1 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
Class HE:A-1 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,
