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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 20, 1998
GREEN TREE FINANCIAL CORPORATION
as originator of Home Improvement and
Home Equity Loan Trust 1998-D
-----------------------------
(Exact name of registrant as specified in its charter)
333-46457
Delaware 333-49951 41-1859796
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(State or other jurisdiction (Commission (IRS employer
of incorporation) file number) identification No.)
1100 Landmark Towers, 345 St. Peter Street, Saint Paul, Minnesota 55102-1639
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(Address of principal executive offices)
Registrant's telephone number, including area code: (612) 293-3400
Not Applicable
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(Former name or former address, if changed since last report)
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Item 1. Changes in Control of Registrant.
Not applicable.
Item 2. Acquisition or Disposition of Assets.
Not applicable.
Item 3. Bankruptcy or Receivership.
Not applicable.
Item 4. Changes in Registrant's Certifying Accountant.
Not applicable.
Item 5. Other Events.
On August 20, 1998, the Registrant sold approximately $1,346,450,000 of
Certificates for Home Improvement and Home Equity Loans, Series 1998-D
(the "Certificates"), evidencing beneficial ownership interests in Home
Improvement and Home Equity Loan Trust 1998-D (the "Trust"). The Trust
property consists primarily of a pool consisting of two sub-pools, one
of which is comprised of home improvement 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"), including the right to receive payments due on the
Contracts on and after the applicable Cut-off Date as described in the
Pooling and Servicing Agreement dated as of August 1, 1998.
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.
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(c) Exhibits.
The following is filed herewith. The exhibit numbers correspond
with Item 601(b) of Regulation S-K.
Exhibit No. Description
4.1 Pooling and Servicing Agreement between
Green Tree Financial Corporation, as Seller
and Servicer, and U.S. Bank Trust National
Association, as Trustee, dated as of August
1, 1998 (without Exhibits O-1, O- 2, O-3 and
P) creating a trust entitled Home
Improvement and Home Equity Loan Trust
1998-D.
5.1 Opinion of Dorsey & Whitney LLP with respect
to legality
8.1 Opinion and Consent of Dorsey & Whitney LLP
with respect to tax matters.
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
GREEN TREE FINANCIAL CORPORATION
as originator of Home Improvement
and Home Equity Loan Trust 1998-D
By: /s/ Joel H. Gottesman
----------------------------------------
Joel H. Gottesman
Senior Vice President, General Counsel
and Secretary
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INDEX TO EXHIBITS
Exhibit
Number Page
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4.1 Pooling and Servicing Agreement between Filed Electronically
Green Tree Financial Corporation, as Seller
and Servicer, and U.S. Bank Trust National
Association, as Trustee, dated as of August 1,
1998 (without Exhibits O-1, O-2, O-3 and P)
creating a trust entitled Home Improvement and
Home Equity Loan Trust 1998-D
5.1 Opinion of Dorsey & Whitney LLP with respect Filed Electronically
to legality
8.1 Opinion and Consent of Dorsey & Whitney LLP Filed Electronically
with respect to tax matters.
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<PAGE>
CERTIFICATES FOR HOME IMPROVEMENT AND HOME EQUITY LOANS
SERIES 1998-D
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-D
DATED AS OF AUGUST 1, 1998
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TABLE OF CONTENTS
ARTICLE I Definitions.....................................................1-1
Section 1.01. General..................................................1-1
Section 1.02. Specific Terms...........................................1-1
ARTICLE II Establishment of Trust; Transfer of 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.........................................2-6
Section 2.06. Company Option to Substitute for Prepaid Contracts.......2-6
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......................................3-10
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...............................................5-2
Section 5.05. Certificate Account......................................5-2
Section 5.06. Enforcement..............................................5-5
Section 5.07. Trustee to Cooperate.....................................5-6
Section 5.08. Costs and Expenses.......................................5-7
Section 5.09. Maintenance of Insurance.................................5-8
Section 5.10. Merger or Consolidation of Servicer......................5-8
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ARTICLE VI Reports and Tax Matters.........................................6-1
Section 6.01. Monthly Reports..........................................6-1
Section 6.02. Officer's Certificate....................................6-2
Section 6.03. Other Data...............................................6-2
Section 6.04. Annual Report of Accountants.............................6-2
Section 6.05. Statements to Certificateholders and the Class C
Certificateholders.......................................6-3
Section 6.06. Payment Of Taxes........................................6-14
ARTICLE VII Service Transfer................................................7-1
Section 7.01. Events of Termination....................................7-1
Section 7.02. Transfer.................................................7-2
Section 7.03. Trustee to Act; Appointment of Successor.................7-2
Section 7.04. Notification to Certificateholders and Class C
Certificateholders.......................................7-3
Section 7.05. Effect of Transfer.......................................7-3
Section 7.06. Transfer of Certificate Account..........................7-4
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......8-14
Section 8.06. Servicer's Purchase Option..............................8-15
Section 8.07. Sub-Pool HI Pre-Funding Account.........................8-16
Section 8.08. Sub-Pool HE Pre-Funding Account.........................8-17
Section 8.09. Distributions on the Subsidiary REMIC
Regular Interests.......................................8-19
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.............................................9-6
Section 9.04. Mutilated, Destroyed, Lost or Stolen Certificates or
Class 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..................9-7
Section 9.07. Authenticating Agents....................................9-7
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ARTICLE X Indemnities....................................................10-1
Section 10.01. Real Estate.............................................10-1
Section 10.02. Liabilities To Obligors.................................10-1
Section 10.03. Tax Indemnification.....................................10-1
Section 10.04. Servicer's Indemnities..................................10-1
Section 10.05. Operation Of Indemnities................................10-2
Section 10.06. REMIC Tax Matters.......................................10-2
ARTICLE XI The Trustee....................................................11-1
Section 11.01. Duties of Trustee.......................................11-1
Section 11.02. Certain Matters Affecting the Trustee...................11-2
Section 11.03. Trustee Not Liable for Certificates, Class C
Certificates or Contracts..........................11-3
Section 11.04. Trustee May Own Certificates............................11-3
Section 11.05. Rights of Certificateholders to Direct Trustee and to
Waive Events of Termination........................11-4
Section 11.06. The Servicer to Pay Trustee's Fees and Expenses.........11-4
Section 11.07. Eligibility Requirements for Trustee....................11-5
Section 11.08. Resignation or Removal of Trustee.......................11-5
Section 11.09. Successor Trustee.......................................11-6
Section 11.10. Merger or Consolidation of Trustee......................11-6
Section 11.11. Tax Returns.............................................11-7
Section 11.12. Obligor Claims..........................................11-7
Section 11.13. Appointment of Co-Trustee or Separate Trustee...........11-8
Section 11.14. Certain Matters Relating to FHA Insurance...............11-9
Section 11.15. Trustee and U.S. Bancorp................................11-9
Section 11.16. Trustee Advances........................................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.............................................12-1
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...............................................12-6
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
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Exhibit A -- Form of Class HI: A Certificate
Exhibit B -- Form of Class HI: M Certificate
Exhibit C -- Form of Class HI: B Certificate
Exhibit D-1 -- Form of Class HE: A Certificate
Exhibit D-2 -- Form of Class HE: A-1 ARM Certificate
Exhibit D-3 -- Form of Class HE: A-7 IO Certificate
Exhibit E -- Form of Class HE: M Certificate
Exhibit F -- Form of Class HE: B Certificate
Exhibit G -- Form of Assignment
Exhibit H -- Form of Certificate of Officer
Exhibit I -- Form of Opinion of Counsel for the Company
Exhibit J -- Form of Trustee's Acknowledgment
Exhibit K -- Form of Certificate of Servicing Officer
Exhibit L -- Form of Class C [Master] [Subsidiary] Certificate
Exhibit M-1 -- Form of Certificate Regarding Repurchased Contracts
Exhibit M-2 -- Form of Certificate Regarding Repurchased Contracts
Exhibit M-3 -- Form of Certificate Regarding Substitution for Prepaid Contracts
Exhibit N -- Form of Representation Letter
Exhibit O-1 -- List of Home Improvement Contracts
Exhibit O-2 -- List of Fixed Rate Home Equity Contracts
Exhibit O-3 -- List of Adjustable Rate Home Equity Contracts
Exhibit P -- List of FHA-Insured Contracts
Exhibit Q -- Form of Monthly Report
Exhibit R -- Form of Addition Notice
Exhibit S -- Form of Subsequent Transfer Instrument
Exhibit T -- Form of Officer's Certificate (Subsequent Transfer)
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<PAGE>
AGREEMENT, dated as of August 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-D (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 twenty-two 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
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interests" in the Master REMIC for purposes of the REMIC Provisions (as defined
herein) under federal income tax law; and
WHEREAS, the Company and the Trustee wish to set forth the terms and
conditions on which the Trustee, on behalf of the Certificateholders and Class C
Certificateholders (as defined herein) will acquire the 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:
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ARTICLE I
DEFINITIONS
SECTION 1.01. General. For the purpose of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires, the terms
defined in this Article include the plural as well as the singular, the words
"herein," "hereof" and "hereunder" and other words of similar import refer to
this Agreement as a whole and not to any particular article, section or other
subdivision, and Section references refer to Sections of this Agreement.
SECTION 1.02. Specific Terms.
"Addition Notice" means with respect to the transfer of Subsequent Home
Improvement Contracts or Subsequent Home Equity 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
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otherwise; and the terms "controlling" or "controlled" have meanings correlative
to the foregoing.
"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.
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"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.
"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.
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"Class C Master Certificate" means a certificate for Home Improvement and
Home Equity Loans, Series 1998-D, bearing the designation Class C Master,
executed and delivered by the Trustee substantially in the form of Exhibit L,
and evidencing an interest designated as a "residual interest" in the Master
REMIC for purposes of the REMIC Provisions.
"Class C Subsidiary Certificate" means a certificate for Home Improvement
and Home Equity Loans, Series 1998-D, 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) and (c).
"Class HE: A Certificates" means the Class HE: A-1A ARM, Class HE: A-1B
ARM, Class HE: A-1, Class HE: A-2, Class HE: A-3, Class HE: A-4, Class HE: A-5,
Class HE: A-6 and Class HE: A-7 IO Certificates, collectively.
"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-6 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 September
15, 1998) at (1) the Class HE: A-1A ARM Pass-Through Rate on the Class HE: A-1A
ARM Principal Balance, (2) the Class HE: A-1B ARM Pass-Through Rate on the Class
HE: A-1B ARM Principal Balance, (3) the Class HE: A-1 Pass-Through Rate on the
Class HE: A-1 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, (7) the Class HE: A-5 Pass-Through Rate on the
Class HE: A-5 Principal Balance, (8) the Class HE: A-6 Pass-Through Rate on the
Class HE: A-6 Principal Balance and (9) the Class HE: A-7 IO Pass-Through Rate
on the Class HE: A-7 IO Notional Principal Amount, in each case to be calculated
immediately prior to such Payment Date, (b) the aggregate of the Unpaid Class
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
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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), (7), (8) or (9), 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 the Class HE: A-1 ARM Formula Principal Distribution
Amount and the Sub-Pool HE Senior Percentage of the Sub-Pool HE Formula
Principal Distribution Amount.
"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 Principal Balance" means, as to any Payment Date, the sum of
the Class HE: A-1A ARM Principal Balance, the Class HE: A-1B ARM Principal
Balance, the Class HE: A-1 Principal Balance, the Class HE: A-2 Principal
Balance, the Class HE: A-3 Principal Balance, the Class HE: A-4 Principal
Balance, the Class HE: A-5 Principal Balance and the Class HE: A-6 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 is less than the Class HE: A
Principal Balance.
"Class HE: A-1 ARM Formula Principal Distribution Amount" means, as to any
Payment Date, the lesser of (A) the sum of the Class HE: A-1A ARM Principal
Balance and the Class HE: A-1B ARM Principal Balance, or (B) the sum of the
following amounts with respect to the related Due Period, in each case computed
in accordance with the method specified in the relevant Adjustable Rate Home
Equity Contract:
(i) 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
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to such amortization schedule by reason of any bankruptcy of an Obligor or
similar proceeding or any moratorium or similar waiver or grace period);
plus
(ii) all Partial Principal Prepayments applied and all Principal
Prepayments in Full received during the prior Due Period in respect of the
Adjustable Rate Home Equity Contracts; plus
(iii) 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
(iv) 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
(v) on the Payment Date which is on or after the last day of the
Pre-Funding Period, the amount (if any) then on deposit in the Sub-Pool HE
Pre-Funding ARM Subaccount; plus
(vi) on each Payment Date which is on or after the Payment Date on
which the Class HE: A Certificates other than the Class HE: A-1A ARM
Certificates and the Class HE: A-1B ARM Certificates have been paid in
full, (a) the Sub-Pool HE Senior Percentage of (A) the sum of the amounts
described in clauses (i) through (v) of the definition of Sub-Pool HE
Formula Principal Distribution Amount less (B) the sum of the amounts
described in clauses (i) through (iv) above, less (b) the amount, if any,
distributed in payment of principal on the Class HE: A Certificates other
than the Class HE: A-1A ARM Certificates and the Class HE: A-1B ARM
Certificates on such Payment Date.
"Class HE: A-1 Certificate" means any one of the Class HE: A-1 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.
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"Class HE: A-1 Cross-over Date" means the Payment Date on which the Class
HE: A-1 Principal Balance (after giving effect to the distributions of principal
on the Class HE: A-1 Certificates on such Payment Date) is reduced to zero.
"Class HE: A-1 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 Certificateholders pursuant to Section 8.04(c) on such Payment Date.
"Class HE: A-1 Principal Balance" means, as to any Payment Date, the
Original Class HE: A-1 Principal Balance less all amounts previously distributed
to Holders of Class HE: A-1 Certificates in respect of principal.
"Class HE: A-1A ARM Certificate" means any one of the Class HE: A-1A 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-1A 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-1A ARM Certificateholders pursuant to Section 8.04(c) on such
Payment Date.
"Class HE: A-1A ARM Percentage" means, as to any Payment Date, (i) 0% prior
to the Payment Date in May 2000 (unless the Class HE: A-1B ARM Principal Balance
has been reduced to zero), (ii) 90% on the Payment Date in May 2000 and
thereafter (unless the Class HE: A-1B ARM Principal Balance has been reduced to
zero), the (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 ARM
Principal Balance has been reduced to zero), 100%.
"Class HE: A-1A ARM Principal Balance" means, as to any Payment Date, the
Original Class HE: A-1A ARM Principal Balance less all amounts previously
distributed to Holders of Class HE: A-1A ARM 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 September 15, 1998) 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."
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"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.
"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 ARM
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.
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<PAGE>
"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.
"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 Certificate" means any one of the Class HE: A-5 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
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designated as a "regular interest" in the Master REMIC for purposes of the REMIC
Provisions.
"Class HE: A-5 Cross-over Date" means the Payment Date on which the Class
HE: A-5 Principal Balance (after giving effect to the distributions of principal
on the Class HE: A-5 Certificates on such Payment Date) is reduced to zero.
"Class HE: A-5 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 Certificateholders pursuant to Section 8.04(c) on such Payment Date.
"Class HE: A-5 Principal Balance" means, as to any Payment Date, the
Original Class HE: A-5 Principal Balance less all amounts previously distributed
to Holders of Class HE: A-5 Certificates in respect of principal.
"Class HE: A-6 Certificate" means any one of the Class HE: A-6 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-6 Cross-over Date" means the latest to occur of (a) the Class
HE: A-5 Cross-over Date or (b) the Payment Date on which the Class HE: A-6
Principal Balance (after giving effect to the distributions of principal on the
Class HE: A-6 Certificates on such Payment Date) is reduced to zero or (c) the
Payment Date on which the Class HE: A-1A ARM Principal Balance and the Class HE:
A-1B ARM Principal Balance (after giving effect to the distributions of
principal on the Class HE: A-1A ARM Certificates and Class HE: A-1B ARM
Certificates, respectively, on such Payment Date) are reduced to zero.
"Class HE: A-6 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-6 Certificateholders pursuant to Section 8.04(c) on such Payment Date.
"Class HE: A-6 Principal Balance" means, as to any Payment Date, the
Original Class HE: A-6 Principal Balance less all amounts previously distributed
to Holders of Class HE: A-6 Certificates in respect of principal.
"Class HE: A-6 Lockout Percentage" means, as to any Payment Date occurring
during the periods set forth below, the percentage designated as such as
follows:
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Class HE: A-6
Period (dates inclusive) Lockout Percentage
------------------------ ------------------
September 1998 through August 2000 0%
September 2000 through August 2002 20%
September 2002 through August 2003 80%
September 2003 through August 2004 100%
September 2004 and thereafter 300%
"Class HE: A-6 Lockout Pro Rata Distribution Amount" means, as to any
Payment Date, an amount equal to the lesser of:
(a) the product of (1) the applicable Class HE: A-6 Lockout
Percentage, and (2) the product of (A) a fraction, the numerator of which
is the Class HE: A-6 Principal Balance immediately preceding such Payment
Date and the denominator of which is the Class HE: A Principal Balance less
the sum of the Class HE: A-1A ARM Principal Balance and the Class HE: A-1B
ARM Principal Balance, immediately preceding such Payment Date, and (B) the
Sub-Pool HE Senior Percentage of the Sub-Pool HE Formula Principal
Distribution Amount for such Payment Date, and
(b) the Class HE: A-6 Principal Balance immediately preceding such
Payment Date.
"Class HE: A-7 IO Certificate" means any one of the Class HE: A-7 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-7 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-7 IO Certificateholders pursuant to Section 8.04(c) on such Payment Date.
"Class HE: A-7 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-7 IO Original Notional Principal Amount or (ii) the Class HE: A
Principal Balance for such Payment Date, and (b) thereafter,zero.
"Class HE: A-7 IO Original Notional Principal Amount" means $110,000,000.
"Class HE: B Certificates" means the Class HE: B-1 and Class HE: B-2
Certificates, collectively.
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"Class HE: B Cross-over Date" means the earlier of:
(a) the Class HE: M-2 Cross-over Date, and
(b) the first Payment Date on or after the Payment Date occurring in
September 2001 on which the fraction, expressed as a percentage, the
numerator of which is the Class HE: B Principal Balance as of such Payment
Date and the denominator of which is the Pool Scheduled Principal Balance
of Sub-Pool HE as of the immediately preceding Payment Date, is equal to or
greater than 14.6%.
"Class HE: B Percentage" means 100% minus the Sub-Pool HE Senior
Percentage.
"Class HE: B Principal Balance" means, as to any Payment Date, the sum of
the Class HE: B-1 Principal Balance and the Class HE: B-2 Principal Balance.
"Class HE: B Principal Balance Test" means, to be considered "satisfied"
for any Payment Date, that the fraction, expressed as a percentage, the
numerator of which is the Class HE: B Principal Balance as of such Payment Date
and the denominator of which is the Pool Scheduled Principal Balance of Sub-Pool
HE as of the immediately preceding Payment Date, is equal to or greater than
14.6%.
"Class HE: B 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 Class HE: B Principal Balance
Test, the Sub-Pool HE Cumulative Realized Losses Test and the Sub-Pool HE
Current Realized Losses Test.
"Class HE: B-1 Adjusted Principal Balance" means, as of any Payment Date,
the Class HE: B-1 Principal Balance as of that Payment Date minus the Class HE:
B-1 Liquidation Loss Principal Amount (if any) as of the prior Payment Date.
"Class HE: B-1 Certificate" means any one of the Class HE: B-1 Certificates
executed and delivered by the Trustee and authenticated by the Certificate
Registrar substantially in the form set 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-1 Cross-over Date" means the Payment Date on which the Class
HE: B-1 Principal Balance (after giving effect to the distributions of principal
on the Class HE: B-1 Certificates on such Payment Date) is reduced to zero.
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<PAGE>
"Class HE: B-1 Distribution Amount" means, as to any Payment Date, the
lesser of (a) the Class HE: B-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: B-1 Cross-over Date the Class HE: B-1 Distribution
Amount shall be zero.
"Class HE: 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
September 15, 1998) at the Class HE: B-1 Pass-Through Rate on the Class HE: B-1
Adjusted Principal Balance as of such Payment Date, (b) any Unpaid Class HE: B-1
Interest Shortfall, (c) if such Payment Date is on or prior to the Class HE: B-1
Cross-over Date, the Class HE: B Percentage of the Sub-Pool HE Formula Principal
Distribution Amount and (d) any Class HE: B-1 Formula Liquidation Loss Interest
Distribution Amount; provided, however, that on the Class HE: 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 HE: M-2 Formula
Distribution Amount" (assuming a sufficient Sub-Pool HE 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 HE: B-1 Principal Balance.
"Class HE: 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 HE: B-1 Formula Distribution Amount" and (b) the
Unpaid Class HE: B-1 Interest Shortfall, if any.
"Class HE: B-1 Formula Liquidation Loss Interest Distribution Amount"
means, as to any Payment Date, the sum of (a) the Class HE: B-1 Liquidation Loss
Interest Amount, if any, and (b) the Unpaid Class HE: B-1 Liquidation Loss
Interest Shortfall, if any.
"Class HE: B-1 Interest Shortfall" means, as to any Payment Date, the
amount, if any, by which (a) the Class HE: B-1 Formula Interest Distribution
Amount exceeds (b) the amount distributed to Class HE: B-1 Certificateholders on
such Payment Date pursuant to Section 8.04(c)(5).
"Class HE: 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 September 15,
1998) at
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<PAGE>
the Class HE: B-1 Pass-Through Rate on the Class HE: B-1 Liquidation Loss
Principal Amount (if any) for the immediately preceding Payment Date.
"Class HE: B-1 Liquidation Loss Interest Shortfall" means, as to any
Payment Date, the amount, if any, by which (a) the Class HE: B-1 Formula
Liquidation Loss Interest Distribution Amount exceeds (b) the amount distributed
to Class HE: B-1 Certificateholders on such Payment Date pursuant to Section
8.04(c)(12).
"Class HE: B-1 Liquidation Loss Principal Amount" means, as to any Payment
Date, the lesser of (a) the Class HE: B-1 Principal Balance (after giving effect
to all distributions of principal on the Class HE: B-1 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-2 Principal Balance
(after giving effect to all distributions of principal on the Class HE: B-2
Certificates on such Payment Date).
"Class HE: B-1 Principal Balance" means, as to any Payment Date, the
Original Class HE: B-1 Principal Balance less all amounts previously distributed
to Holders of Class HE: B-1 Certificates in respect of principal.
"Class HE: B-2 Certificate" means any one of the Class HE: B-2 Certificates
executed and delivered by the Trustee and authenticated by the Certificate
Registrar substantially in the form set 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-2 Distribution Amount" means, as to any Payment Date, the
lesser of (a) the Class HE: B-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).
"Class HE: 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
September 15, 1998) at the Class HE: B-2 Pass-Through Rate on the Class HE: B-2
Principal Balance, (b) any Unpaid Class HE: B-2 Interest Shortfall, and (c) if
such Payment Date is after the Class HE: B-1 Cross-over Date, the Class HE: B
Percentage of the Sub-Pool HE Formula Principal Distribution Amount; provided,
however, that on the Class HE: 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 HE: B-1 Formula Distribution Amount" (assuming a
sufficient Sub-Pool HE 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,
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<PAGE>
further, that the aggregate of all amounts distributed pursuant to clause (c) of
this definition shall not exceed the Original Class HE: B-2 Principal Balance.
"Class HE: 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 HE: B-2 Formula Distribution Amount" and (b) the
Unpaid Class HE: B-2 Interest Shortfall, if any.
"Class HE: 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 of Sub-Pool HE for the immediately preceding Payment Date (or,
in the case of the September 1998 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 September 1998 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-2 Guaranty Payment" means, as to any Payment Date, the amount,
if any, by which (a) the sum of the Class HE: B-2 Formula Distribution Amount
and the Class HE: B-2 Liquidation Loss Principal Amount exceeds (b) the Class
HE: B-2 Distribution Amount; provided that the Class HE: B-2 Guaranty Payment
shall not exceed the amount necessary to reduce the Class HE: B-2 Principal
Balance to zero.
"Class HE: B-2 Interest Shortfall" means, as to any Payment Date, the
amount, if any, by which (a) the Class HE: B-2 Formula Interest Distribution
Amount exceeds (b) the sum of the amounts distributed to Class HE: B-2
Certificateholders on such Payment Date pursuant to Sections 8.04(c)(13)(i) and
(ii) and any Class HE: B-2 Guaranty Payment.
"Class HE: B-2 Limited Guaranty" means the limited guaranty of the Company
provided pursuant to Section 8.03(b).
"Class HE: B-2 Liquidation Loss Principal Amount" means, as to any Payment
Date, the lesser of (a) the Class HE: B-2 Principal Balance (after giving effect
to all distributions of principal on the Class HE: B-2 Certificates on such
Payment Date) and (b) the Sub-Pool HE Aggregate Liquidation Loss Principal
Amount.
"Class HE: B-2 Principal Balance" means, as to any Payment Date, the
Original Class HE: B-2 Principal Balance less all amounts previously distributed
to Holders of Class HE: B-2 Certificates in respect of principal.
"Class HE: M Certificates" means the Class HE: M-1 and Class HE: M-2
Certificates, collectively.
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<PAGE>
"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 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
September 15, 1998) 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) if such Payment Date is after the Class HE: A-6
Cross-over Date, but on or prior to the Class HE: M-1 Cross-over Date, the
Sub-Pool HE Senior Percentage of the Sub-Pool HE 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-6 Cross-over Date, the
balance of any amounts that would have been distributable on such date pursuant
to clause (c) of the definition of the term "Class 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.
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<PAGE>
"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 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 September 15,
1998) 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.
"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.
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<PAGE>
"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
September 15, 1998) 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) if such Payment Date is after the Class HE: M-1
Cross-over Date, but on or prior to the Class HE: M-2 Cross-over Date, the
Sub-Pool HE Senior Percentage of the Sub-Pool HE Formula Principal Distribution
Amount and (d) any Class HE: M-2 Formula Liquidation Loss Interest Distribution
Amount; provided, however, that on the Class HE: 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 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.
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<PAGE>
"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 September 15,
1998) 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.
"Class HI: A Certificates" means the Class HI: A-1 Certificates, Class HI:
A-2
Certificates, Class HI: A-3 Certificates, Class HI: A-4 Certificates and
Class HI: A-5 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-5 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 September
15, 1998) 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
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<PAGE>
Balance, (3) the Class HI: A-3 Pass-Through Rate on the Class HI: A-3 Principal
Balance, (4) the Class HI: A-4 Pass-Through Rate on the Class HI: A-4 Principal
Balance and (5) the Class HI: A-5 Pass-Through Rate on the Class HI: A-5
Principal Balance, in each case to be calculated immediately prior to such
Payment Date, (b) the aggregate of the 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
Sub-Pool HI Senior Percentage of the Sub-Pool HI 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), (3), (4) or (5), 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, the
Class HI: A-3 Principal Balance, the Class HI: A-4 Principal Balance and the
Class HI: A-5 Principal Balance.
"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.
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<PAGE>
"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.
"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.
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<PAGE>
"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: A-4 Certificate" means any one of the Class HI: A-4 Certificates
executed and delivered by the Trustee and authenticated by the Certificate
Registrar substantially in the form set forth in Exhibit A and evidencing an
interest designated as a "regular interest" in the Master REMIC for purposes of
the REMIC Provisions.
"Class HI: A-4 Cross-over Date" means the Payment Date on which the Class
HI: A-4 Principal Balance (after giving effect to the distributions of principal
on the Class HI: A-4 Certificates on such Payment Date) is reduced to zero.
"Class HI: A-4 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-4 Certificateholders pursuant to Section 8.04(b) on such Payment Date.
"Class HI: A-4 Principal Balance" means, as to any Payment Date, the
Original Class HI: A-4 Principal Balance less all amounts previously distributed
to Holders of Class HI: A-4 Certificates in respect of principal.
"Class HI: A-5 Certificate" means any one of the Class HI: A-5 Certificates
executed and delivered by the Trustee and authenticated by the Certificate
Registrar substantially in the form set forth in Exhibit A and evidencing an
interest designated as a "regular interest" in the Master REMIC for purposes of
the REMIC Provisions.
"Class HI: A-5 Cross-over Date" means the Payment Date on which the Class
HI: A-5 Principal Balance (after giving effect to the distributions of principal
on the Class HI: A-5 Certificates on such Payment Date) is reduced to zero.
"Class HI: A-5 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-5 Certificateholders pursuant to Section 8.04(b) on such Payment Date.
"Class HI: A-5 Principal Balance" means, as to any Payment Date, the
Original Class HI: A-5 Principal Balance less all amounts previously distributed
to Holders of Class HI: A-5 Certificates in respect of principal.
"Class HI: B Certificates" means the Class HI: B-1 Certificates and Class
HI: B-2 Certificates, collectively.
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<PAGE>
"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
September 2001 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 15.4%.
"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 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
15.4%.
"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.
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<PAGE>
"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
September 15, 1998) 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 Percentage of the Sub-Pool HI 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.
"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 September 15,
1998) at
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<PAGE>
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).
"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
September 15, 1998) 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, (c) if such
Payment Date is after the Class HI: B-1 Cross-over Date, the Class HI: B
Percentage of the Sub-Pool HI Formula Principal Distribution Amount and (d) any
Class HI: B-1 Formula Liquidation Loss Interest 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
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<PAGE>
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 September 1998 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 September 1998 Payment Date, the Closing Date), or (b) the
Sub-Pool HI Amount Available less the amounts payable under Sections
8.04(b)(1)-(20).
"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.
"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.
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<PAGE>
"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
September 15, 1998) 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-5
Cross-over Date, but on or prior to the Class HI: M-1 Cross-over Date, the
Sub-Pool HI Senior Percentage of the Sub-Pool HI 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-5 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.
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<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 September 15,
1998) 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.
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<PAGE>
"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.
"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
September 15, 1998) 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 Percentage of the Sub-Pool HI 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.
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<PAGE>
"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 September 15,
1998) 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.
"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 Principal Balance" means any of the Class HI: A-1, Class HI: A-2,
Class
HI: A-3, Class HI: A-4, Class HI: A-5, Class HI: M-1, Class HI: M-2, Class
HI: B-1, Class HI: B-2, Class HE: A-1A ARM, Class HE: A-1B ARM, Class HE: A-1,
Class HE: A-2, Class HE: A-3, Class HE: A-4, Class HE: A-5, Class HE: A-6, Class
HE: M-1, Class HE: M-2, Class HE: B-1 or Class HE: B-2 Principal Balances.
"Closing Date" means August 20, 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
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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.
"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 Dorsey & Whitney LLP, or other legal
counsel for the Company.
"Custodian" means at any time an Eligible Institution, or a financial
institution organized under the laws of the United States or any State, which is
not an Affiliate of the Company, which is subject to supervision and examination
by Federal or State authorities and whose commercial paper or unsecured
long-term debt (or, in the case of a member of a bank holding company system,
the commercial paper or unsecured long-term debt of such bank holding company)
has been rated A-1 by S&P and F-1 by Fitch in the case of commercial paper, or
BBB+ or higher by both S&P and Fitch in the case of unsecured long-term debt, as
is acting at such time as Custodian of the 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), June 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), July 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
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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.
"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 $83,000,000 in Original Class HI: A-1 Principal
Balance, (ii) one Class HI: A-2 Certificate evidencing $67,000,000 in Original
Class HI: A-2 Principal Balance, (iii) one Class HI: A-3 Certificate evidencing
$25,000,000 in Original Class HI: A-3 Principal Balance, (iv) one Class HI: A-4
Certificate evidencing $33,500,000 in Original Class HI: A-4 Principal Balance,
(v) one Class HI: A-5 Certificate evidencing $30,750,000 in Original Class HI:
A-5 Principal Balance, (vi) one Class HI: M-1 Certificate evidencing $24,750,000
in Original Class HI: M-1 Principal Balance, (vii) one Class HI: M-2 Certificate
evidencing $12,900,000 in Original Class HI: M-2 Principal Balance, (viii) one
Class HI: B-1 Certificate evidencing $9,150,000 in Original Class HI: B-1
Principal Balance, (ix) one Class HE: A-1A ARM Certificate evidencing
$30,000,000 in Original Class HE: A-1A ARM Principal Balance, (x) 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, (xi) one Class HE: A-1
Certificate evidencing $200,000,000 in Original Class HE: A-1 Principal Balance
and one Class HE: A-1 Certificate evidencing $70,000,000 in Original Class HE:
A-1 Principal Balance, (xii) one Class HE: A-2 Certificate evidencing
$117,000,000 in Original Class HE: A-2 Principal Balance, (xiii) one Class
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HE: A-3 Certificate evidencing $107,000,000 in Original Class HE: A-3 Principal
Balance, (xiv) one Class HE: A-4 Certificate evidencing $28,000,000 in Original
Class HE: A-4 Principal Balance, (xv) one Class HE: A-5 Certificate evidencing
$36,250,000 in Original Class HE: A-5 Principal Balance, (xvi) one Class HE: A-6
Certificate evidencing $82,500,000 in Original Class HE: A-6 Principal Balance,
(xvii) one Class HE: A-7 IO Certificate evidencing a Class HE: A-7 IO Original
Notional Principal Amount of $110,000,000, (xviii) one Class HE: M-1 Certificate
evidencing $51,150,000 in Original Class HE: M-1 Principal Balance, (xix) one
Class HE: M-2 Certificate evidencing $52,800,000 in Original Class HE: M-2
Principal Balance, and (xx) one Class HE: B-1 Certificate evidencing $40,700,000
in Original Class HE: B-1 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).
"Due Period" means a calendar month during the term of this Agreement.
"Electronic Ledger" means the electronic master record of conditional sales
contracts and promissory notes of the Company.
"Eligible Account" means, at any time, an account which is any of the
following: (i) an account maintained with an Eligible Institution; (ii) an
account or accounts the deposits in which are fully insured by either the Bank
Insurance Fund or the Savings Association Insurance Fund of the FDIC; (iii) a
trust account (which shall be a "segregated trust account") maintained with the
corporate trust department of a federal or state chartered depository
institution or trust company with trust powers and acting in its fiduciary
capacity for the benefit of the Trustee hereunder, which depository institution
or trust company shall have capital and surplus of not less than $50,000,000; or
(iv) an account that will not cause S&P or Fitch to downgrade or withdraw its
then-current rating assigned to the Certificates, as evidenced in writing by S&P
and Fitch.
"Eligible Institution" means any depository institution (which may be the
Trustee or an Affiliate of the Trustee) organized under the laws of the United
States or any State, the deposits of which are insured to the full extent
permitted by law by
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the Federal Deposit Insurance Corporation, which is subject to supervision and
examination by Federal or State authorities and whose short-term deposits have
been rated A-1 by S&P and F-1 by Fitch (if rated by Fitch) or whose unsecured
long-term debt has been rated in one of the two highest rating categories by
both S&P and Fitch (if rated by Fitch).
"Eligible Investments" has the meaning assigned in Section 5.05(b).
"Eligible Servicer" means the Trustee or a Person qualified to act as
servicer of the 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 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
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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, and (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.
"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.
"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. ss.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.
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"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 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 with respect to a Subsequent Home Equity Contract.
"GNMA" means the Government National Mortgage Association, or any successor
thereto.
"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 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
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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 Adjustable Rate Home Equity Contract" means an Initial Home Equity
Contract that is an Adjustable Rate Home Equity Contract.
"Initial Contract" means a Home Equity Contract or Home Improvement
Contract identified on the List of Contracts attached hereto as of the Closing
Date.
"Initial Fixed Rate Home Equity Contract" means an Initial Home Equity
Contract that is a Fixed Rate Home Equity Contract.
"Initial Home Equity Contract" means an Initial Contract that is a Home
Equity Contract.
"Initial Home Improvement Contract" means an Initial Contract that is a
Home Improvement Contract.
"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,
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LIBOR for such date will be LIBOR applicable to the Interest Reset Period
immediately preceding such Interest Reset Period; and provided, further, that if
the result of the foregoing would be for three consecutive Payment Dates to base
LIBOR on the rate applicable in the immediately preceding Interest Reset Period,
for such third consecutive Payment Date the Calculation Agent shall instead
select an alternative comparable index (over which the Calculation Agent has no
control) used for determining one-month Eurodollar lending rates that is
calculated and published (or otherwise made available) by an independent third
party.
"LIBOR Business Day" as used herein means a day that is both a Business Day
and a day on which banking institutions in the City of London, England are not
required or authorized by law to be closed.
"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 May 2027 (in the case of a Home
Improvement Contract) or July 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
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expenses, and any related and unreimbursed expenditures for property taxes,
property preservation or restoration of the property to marketable condition.
"Liquidation Proceeds" means cash (including insurance proceeds) received
in connection with the liquidation of defaulted Contracts, whether through
repossession, foreclosure sale or otherwise.
"List of Contracts" means the 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 and (iv) the maturity date.
"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).
"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.
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"Net Liquidation Proceeds" means, as to a Liquidated Contract, the proceeds
received, or, for Contracts which become Liquidated Contracts pursuant to the
last proviso in the definition of "Liquidated Contract," the estimated proceeds
to be received, as of the last day of the Due Period in which such Contract
became a Liquidated Contract, from the Obligor, from a third party purchaser of
the Contract, under FHA Insurance, under insurance other than FHA insurance, or
otherwise, net of Liquidation Expenses.
"NRSRO" means any nationally recognized statistical rating organization.
"Obligor" means the 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-D Certificate Principal Balance" means
$1,400,000,000.
"Original Sub-Pool HE Certificate Principal Balance" means $1,100,000,000.
"Original Sub-Pool HI Certificate Principal Balance" means $300,000,000.
"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 .17% 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-D Certificate Principal Balance, and .34% 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-D Certificate Principal Balance.
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"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.
"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 September 1998.
"Percentage Interest" means, as to any Certificate or the Class C
Certificates, the percentage interest evidenced thereby in distributions made on
the related Class, such percentage interest being equal to: (i) as to any
Certificate, the percentage (carried to eight places) obtained from dividing the
denomination of such Certificate by the Original Principal Balance of the
related Class or, in the case of a Class HE: A-7 IO Certificate, by the Class
HE: A-7 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, 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.
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"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.
"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 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.
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"Responsible Officer" means, with respect to the Trustee, the chairman and
any vice chairman of the board of directors, the president, the chairman and
vice chairman of any executive committee of the board of directors, every vice
president, assistant vice president, the secretary, every assistant secretary,
cashier or any assistant cashier, controller or assistant controller, the
treasurer, every assistant treasurer, every trust officer, assistant trust
officer and every other officer or assistant officer of the Trustee customarily
performing functions similar to those performed by persons who at the time shall
be such officers, respectively, or to whom a corporate trust matter is referred
because of knowledge of, familiarity with, and authority to act with respect to
a particular matter.
"S&P" means Standard & Poor's, a division of The McGraw-Hill Companies,
Inc., or any successor thereto; provided that, if S&P no longer has a rating
outstanding on any Class of the Certificates, then references herein to "S&P"
shall be deemed to refer to the NRSRO then rating any Class of the Certificates
(or, if more than one such NRSRO is then rating any Class of the Certificates,
to such NRSRO as may be designated by the Servicer), and references herein to
ratings by or requirements of S&P shall be deemed to have the equivalent
meanings with respect to ratings by or requirements of such NRSRO.
"Scheduled Principal Balance" means, with respect to any Contract and any
Payment Date, 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.
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"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.
"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,
reduced by (b) any Amount Held for Future Distribution in respect of the Home
Equity Contracts.
"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 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-D, Class HE: A-1A ARM, Class HE: A-1B ARM, Class HE:
A-1, Class HE: A-2, Class HE: A-3, Class HE: A-4, Class HE: A-5, Class HE: A-6,
Class HE: A-7 IO, Class HE: M-1, Class HE: M-2, Class HE: B-1 or Class HE: B-2,
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.
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"Sub-Pool HE Certificate Principal Balance" means the sum of the Class HE:
A-1A ARM, Class HE: A-1B ARM, Class HE: A-1, Class HE: A-2, Class HE: A-3, Class
HE: A-4, Class HE: A-5, Class HE: A-6, Class HE: M-1, Class HE: M-2, Class HE:
B-1 and Class HE: B-2 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%.
"Sub-Pool HE Formula Principal Distribution Amount" means, as to any
Payment Date, the sum of:
(a) all scheduled payments of principal due on each outstanding 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 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 Equity Contracts; plus
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(c) the aggregate Scheduled Principal Balance of all Home Equity
Contracts that became Liquidated Contracts during the prior Due Period plus
the amount of any reduction in principal balance of any Home Equity
Contract during the prior Due Period pursuant to bankruptcy proceedings
involving the related Obligor; plus
(d) the aggregate Scheduled Principal Balance of all Home Equity
Contracts repurchased, and all amounts deposited in lieu of the repurchase
of any Home Equity Contract, during the prior Due Period pursuant to
Section 3.05(a) or, in the event of a substitution of a 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) 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-2 Principal Balance has been reduced
to zero, or (2) such amount was not covered by a Class HE: B-2 Guaranty
Payment and corresponding reduction in the Class HE: B-2 Principal Balance;
plus
(f) on the Payment Date on or after the last day of the Pre-Funding
Period, the Sub-Pool HE Pre-Funded Fixed Rate Amount; minus
(g) the Class HE: A-1 ARM Formula Principal Distribution Amount.
"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 Sub-Pool HE
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 Home Equity Contract
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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 Sub-Pool HE
Pre-Funding Fixed Rate 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 Fixed Rate Home Equity Contract 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 Pre-Funding ARM Subaccount" means the account so designated,
established and maintained pursuant to Section 8.08.
"Sub-Pool HE Pre-Funding Fixed Rate Subaccount" means the account so
designated, established and maintained pursuant to Section 8.08.
"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 Senior Percentage" means, with respect to the Sub-Pool HE
Certificates:
(a) as to any Payment Date prior to the Class HE: B Cross-over Date,
100%;
(b) as to any Payment Date on or after the Class HE: B Cross-over Date
but on or prior to the Class HE: M-2 Cross-over Date, and on which any
Class HE: B Principal Distribution Test is not satisfied, 100%;
(c) as to any Payment Date on or after the Class HE: B Cross-over Date
but on or prior to the Class HE: M-2 Cross-over Date, and on which each
Class HE: B Principal Distribution Test is satisfied, a fraction, expressed
as a percentage, the numerator of which is the sum of the Class HE: A
Principal Balance (excluding the Class HE: A-1A ARM Principal Balance and
the Class HE: A-1B ARM Principal Balance), and the Class HE: M Principal
Balance as of such Payment Date, and the denominator of which is the Pool
Scheduled Principal Balance of Sub-Pool HE as of the immediately preceding
Payment
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Date less the Scheduled Principal Balance of the Adjustable Rate Home
Equity Contracts as of the immediately preceding Payment Date; and
(d) as to any Payment Date after the Class HE: M-2 Cross-over Date,
0%.
"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 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 (14) of Section 8.04(c), reduced by (b) any Amount Held for Future
Distribution in respect of the Home Improvement Contracts.
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"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-D, Class HI: A-1, Class HI: A-2, Class HI: A-3, Class
HI: A-4, Class HI: A-5, 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.
"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: A-4, Class HI: A-5, 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.
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"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 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.
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"Sub-Pool HI One Hundred Twenty-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 120 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 Over-Collateralization Adjustment Amount" means, for any
Payment Date occurring after September 1, 2004, the excess, if any, of the Pool
Scheduled Principal Balance of Sub-Pool HI over the sum of the Class HI: A
Principal Balance, the Class HI: M Principal Balance and the Class HI: B
Principal Balance.
"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 Sub-Pool HI
Pre-Funding Home Improvement 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 Home Improvement Contract 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.
"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%;
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(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 Pre-Funding Home Improvement Subaccount" means the subaccount
so designated, established and maintained pursuant to Section 8.07.
"Sub-Pool HI Supplementary Principal Distribution Amount" means, on any
Payment Date occurring prior to September 1, 2001 as of which the Sub-Pool HI
One Hundred Twenty-Day Delinquency Ratio is 3% or more, the balance, if any, of
the Sub-Pool HI Amount Available in the Certificate Account, after payment of
all amounts described in Sections 8.04(b)(1) through (9), to the extent
necessary to reduce the Class HI: M-2 Principal Balance to zero in accordance
with Section 8.04(b)(10).
"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.
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"Subsequent Adjustable Rate Home Equity Contract" means a Subsequent Home
Equity Contract that is an Adjustable Rate Home Equity Contract.
"Subsequent Cut-off Date" means, with respect to a Subsequent Home Equity
Contract or Subsequent Home Improvement Contract, the related Subsequent
Transfer Date.
"Subsequent Fixed Rate Home Equity Contract" means a Subsequent Home Equity
Contract that is a Fixed Rate Home Equity Contract.
"Subsequent Home Equity Contract" means a Fixed Rate Home Equity Contract
or an Adjustable Rate Home Equity Contract sold by the Company to the Trust
pursuant to Section 2.03, such Contract being identified on Exhibit A or Exhibit
B, respectively, attached to a Subsequent Transfer Instrument.
"Subsequent Home Improvement Contract" means a Home Improvement Contract
sold by the Company to the Trust pursuant to Section 2.03, such Contract being
identified on Exhibit C attached to a Subsequent Transfer Instrument.
"Subsequent Transfer Date" means, with respect to each Subsequent Transfer
Instrument, the date on which the related Subsequent Home Equity Contracts
and/or Subsequent Home Improvement 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
Home Equity Contracts and/or Subsequent Home Improvement 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, 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 September 15, 1998); 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).
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"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: A-4 Distribution Amount, Subsidiary REMIC
Regular Interest HI: A-5 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.
"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
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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: A-4" 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-5" 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 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.
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"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: A-4 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-4 for such Payment Date pursuant to
Section 8.09.
"Subsidiary REMIC Regular Interest HI: A-5 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-5 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
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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.
"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: A-4, Subsidiary REMIC Regular Interest HI:
A-5, 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.
"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).
"Trust" means Home Improvement and Home Equity Loan Trust 1998-D.
"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
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documents contained in the Contract Files, (viii) the Class HI: B-2 Limited
Guaranty and the Class HE: B-2 Limited Guaranty, (ix) amounts in the Certificate
Account, Sub-Pool HE Pre-Funding Account and Sub-Pool HI Pre-Funding Account
(including all proceeds of investments of funds in the Certificate Account) and
(x) all proceeds and products of the foregoing.
"Trustee Advance" has the meaning assigned in Section 11.16.
"Undelivered Contract" means as of any date of determination an Initial
Home Improvement Contract or Initial Home Equity 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 Home Equity Contract Subaccount" means the subaccount so
designated and established and maintained pursuant to Section 8.08.
"Undelivered Fixed Rate Home Equity Contract Subaccount" means the
subaccount so designated and established and maintained pursuant to Section
8.08.
"Undelivered Home Improvement Contract Subaccount" means the subaccount so
designated and established and maintained pursuant to Section 8.07.
"Underwriters" means Lehman Brothers Inc., Credit Suisse First Boston
Corporation, First Union Capital Markets, Merrill Lynch & Co. and NationsBanc
Montgomery Securities LLC.
"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.
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"Unpaid Class HE: B-1 Interest Shortfall" means, with respect to the Class
HE: B-1 Certificates and any Payment Date, the amount, if any, of the Class HE:
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 HE:
B-1 Pass-Through Rate.
"Unpaid Class HE: B-1 Liquidation Loss Interest Shortfall" means, with
respect to the Class HE: B-1 Certificates and any Payment Date, the amount, if
any, of the Class HE: 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 HE: B-1 Pass-Through Rate.
"Unpaid Class HE: B-2 Interest Shortfall" means, with respect to the Class
HE: B-2 Certificates and any Payment Date, the amount, if any, of the Class HE:
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 HE:
B-2 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.
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"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.
"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.
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"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
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 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: A-4, Class HI: A-5, 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: A-4,
Class HI: A-5, 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 ARM, Class
HE: A-1B ARM, Class HE: A-1, Class HE: A-2, Class HE: A-3, Class HE: A-4, Class
HE: A-5, Class HE: A-6, Class HE: M-1, Class HE: M-2, Class HE: B-1 and Class
HE: B-2 Pass-Through Rates, weighted on the basis of the respective Class HE:
A-1A ARM, Class HE: A-1B ARM, Class HE: A-1, Class HE: A-2, Class HE: A-3, Class
HE: A-4, Class HE: A-5, Class HE: A-6, Class HE: A-7 IO, Class HE: M-1, Class
HE: M-2, Class HE: B-1 and Class HE: B-2 Principal Balances immediately prior to
such Payment Date, plus (ii) if such Payment Date occurs prior to August 1,
2000, a rate equal to the expressed as a percentage (A) one year's interest (or,
if less, interest for such number of months as remain prior to the Payment Date
occurring in August 2000) on the Class HE: A-7 IO Notional Principal Amount at
the Class HE: A-7 IO Pass-Through Rate, by (B) the Sub-Pool HE Certificate
Principal Balance.
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ARTICLE II
ESTABLISHMENT OF TRUST; TRANSFER OF CONTRACTS
SECTION 2.01. Closing.
a. There is hereby created, by the Company as settlor, a separate trust
which shall be known as Home Improvement and Home Equity Loan Trust 1998-D. 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 Home Equity Contracts
and the Subsequent Home Improvement 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 Home Equity Contracts and the Subsequent Home
Improvement 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.
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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.
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 PriceWaterhouseCoopers LLP or another
nationally recognized accounting firm, stating that such firm has
reviewed the Initial Contracts 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.
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<PAGE>
j. An Officer's Certificate confirming that the Company has
reviewed the original or a copy of each Initial Home Improvement
Contract and Initial Home Equity 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
Home Improvement Contracts and Initial Home Equity Contracts.
l. Evidence of the deposit of $51,360,086 in the Sub-Pool HE
Pre-Funding ARM Subaccount, $179,915,839 in the Sub-Pool HE Pre-Funding
Fixed Rate Subaccount, and $26,393,505 in the Sub-Pool HI Pre-Funding
Subaccount.
m. Evidence of the deposit (a) in the Undelivered ARM Home
Equity Contract Subaccount of an amount equal to the aggregate of the
Cut-off Date Principal Balances of the Initial Adjustable Rate Home
Equity Contracts that constitute Undelivered Adjustable Rate Home
Equity Contracts, (b) in the Undelivered Fixed Rate Home Equity
Contract Subaccount of an amount equal to the aggregate of the Cut-off
Date Principal Balances of the Initial Fixed Rate Home Equity Contracts
that constitute Undelivered Fixed Rate Home Equity Contracts, and (c)
in the Undelivered Home Improvement Contract Subaccount of an amount
equal to the aggregate of the Cut-off Date Principal Balances of the
Initial Home Improvement Contracts that constitute Undelivered Home
Improvement Contracts.
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 ARM Subaccount, Sub-Pool HE Pre-Funding Fixed
Rate Subaccount and Sub-Pool HI Pre-Funding Subaccount, the Company shall on any
Subsequent Transfer Date sell, transfer, assign, set over and convey to the
Trust by execution and delivery of a Subsequent Transfer Instrument, all the
right, title and interest of the Company in and to the Subsequent Home Equity
Contracts and/or Subsequent Home Improvement 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 Home Equity Contracts
and/or Subsequent Home Improvement Contracts due after the related Subsequent
Cut-off Date, and all items with respect to such Subsequent Home Equity
Contracts and/or Subsequent Home Improvement Contracts in the related Contract
Files. The
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transfer to the Trustee by the Company of the Subsequent Home Equity Contracts
and/or Subsequent Home Improvement Contracts shall be absolute and is intended
by the Company, the Trustee, the Certificateholders and the Class C
Certificateholders to constitute and to be treated as a sale of the Subsequent
Home Equity Contracts and/or Subsequent Home Improvement 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 Home
Equity Contracts and/or Subsequent Home Improvement Contracts. The purchase
price of Subsequent Fixed Rate Home Equity Contracts shall be paid solely with
amounts in the Sub-Pool HE Pre-Funding Fixed Rate Subaccount. The purchase price
of Subsequent Adjustable Rate Home Equity Contracts shall be paid solely with
amounts in the Sub-Pool HE Pre-Funding ARM Subaccount. The purchase price of
Subsequent Home Improvement Contracts shall be paid solely with amounts in the
Sub-Pool HI Pre-Funding 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 Sub-Pool HE
Pre-Funding ARM Subaccount, Sub-Pool HE Pre-Funding Fixed Rate Subaccount or
Sub-Pool HI Pre-Funding Subaccount, as applicable, only upon the satisfaction of
each of the following conditions on or prior to the related Subsequent Transfer
Date:
(i) the Company shall have provided the Trustee with an
Addition Notice at least five Business Days prior to the Subsequent
Transfer Date and shall have provided any information reasonably
requested by the Trustee with respect to the Subsequent Home Equity
Contracts and Subsequent Home Improvement Contracts;
(ii) the Company shall have delivered the related Contract
File for each Subsequent Home Equity Contract and each Subsequent Home
Improvement 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 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
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<PAGE>
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;
(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 Home Equity Contracts
and Subsequent Home Improvement 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; and
(ix) No Subsequent Home Equity Contract will have a
loan-to-value ratio greater than 100%.
c. Before the last day of the Pre-Funding Period, the Company shall
deliver to the Trustee:
(i) A letter from PriceWaterhouseCoopers LLP or another
nationally recognized accounting firm retained by the Company (with
copies provided to S&P and Fitch, the Underwriters and the Trustee)
that is in form, substance and methodology the same as that dated
August , 1998 and delivered under Section 2.02(d) of this Agreement,
except that it shall address the Subsequent Home Equity Contracts and
Subsequent Home Improvement Contracts and their conformity (and the
conformity of Sub-Pool HE or Sub-Pool HI, as applicable) in all
material respects to the characteristics described in Sections 2.03
(b)(ix) and 3.03(b) of this Agreement.
(ii) Evidence that as a result of the purchase by the Trust of
the Subsequent Home Equity Contracts and Subsequent Home Improvement
Contracts, neither the Class HI: A Certificates nor the Class HE: A
Certificates shall receive from S&P or Fitch a lower credit rating than
the rating assigned to such Certificates as of the Closing Date.
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<PAGE>
(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 Balance
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 2.03, 3.02, 3.03 or 3.04 of this Agreement,
or in the Officer's Certificates delivered pursuant to Section 2.02(j) or
2.03(b)(vii) of this Agreement, the Trustee or Custodian, as the case may be,
shall notify the Company and the Company shall cure such breach or repurchase or
replace such 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 comprising
the Master REMIC and the Subsidiary REMIC, respectively, each elect to be
treated as a REMIC under the
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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 twenty-two classes. The
following terms of the Certificates are irrevocably established as of the
Closing Date:
ORIGINAL CLASS
PASS-THROUGH RATE PRINCIPAL BALANCE
CLASS PER ANNUM (OR NOTIONAL PRINCIPAL AMOUNT)
----- --------- ------------------------------
Class HE: A-1A ARM 5.89% $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 5.98% $270,000,000
Class HE: A-2 5.96% $117,000,000
Class HE: A-3 6.13% $107,000,000
Class HE: A-4 6.25% $28,000,000
Class HE: A-5 6.32% $36,250,000
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Class HE: A-6 6.15% $82,500,000
Class HE: A-7 IO 6.75% Original Notional
Principal Amount:
$110,000,000
Class HE: M-1 6.71% $51,150,000
Class HE: M-2 A floating rate equal to the
Weighted Average Home
Equity Contract Rate,
but in no event greater than 7.10% $52,800,000
Class HE: B-1 7.80% $40,700,000
Class HE: B-2 A floating rate equal to the
Weighted Average Home
Equity Contract Rate,
but in no event greater than 7.78% $39,600,000
Class HI: A-1 5.97% $83,000,000
Class HI: A-2 5.94% $67,000,000
Class HI: A-3 6.08% $25,000,000
Class HI: A-4 6.20% $33,500,000
Class HI: A-5 6.35% $30,750,000
Class HI: M-1 6.61% $24,750,000
Class HI: M-2 7.00% $12,900,000
Class HI: B-1 7.70% $9,150,000
Class HI: B-2 A floating rate equal to the
Weighted Average Home
Improvement Contract Rate,
but in no event greater than
7.79% $13,950,000
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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 $805,750,000
HE: A-2 Weighted Average Home
Equity Contract Rate $110,000,000
HE: MB Weighted Average Home
Equity Contract Rate $184,250,000
HI: A-1 5.97% $83,000,000
HI: A-2 5.94% $67,000,000
HI: A-3 6.08% $25,000,000
HI: A-4 6.20% $33,500,000
HI: A-5 6.35% $30,750,000
HI: M-1 6.61% $24,750,000
HI: M-2 7.00% $12,900,000
HI: B-1 7.70% $9,150,000
HI: B-2 A floating rate equal to the
Weighted Average Home
Improvement Contract Rate,
but in no event greater than
7.79% $13,950,000
The latest possible maturity of the Subsidiary REMIC Regular Interests bearing
the designation "HE" is August 2029 and the latest possible maturity of the
Subsidiary REMIC Regular Interests bearing the designation "HI" is in June 2029
(calculated
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using a prepayment assumption of 0% and assuming no defaults or delinquencies
on the Contracts).
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
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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 been received by the Servicer prior to October
1, 1998 ("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) the Company shall have delivered to the Trustee evidence
of filing of a UCC-1 financing statement executed by the Company as
debtor, naming the Trustee as secured party and filed in Minnesota,
listing such Contract to be substituted as collateral;
(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 October 31, 1998;
(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
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(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.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Company makes the following representations and warranties. The
Trustee will rely on the representations and warranties in accepting the
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 2.03, 3.02, 3.03 or 3.04 of this Agreement, or in the
Officer's Certificates delivered pursuant to Sections 2.02(j) or 2.03(b)(vii) of
this Agreement.
SECTION 3.01. Representations and Warranties Regarding the Company. The
Company represents and warrants to the Certificateholders and the Class C
Certificateholders, effective on the Closing Date and each Subsequent Transfer
Date, that:
a. Organization and Good Standing. The Company is a
corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization and has the corporate
power to own its assets and to transact the business in which it is
currently engaged. The Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in
which the character of the business transacted by it or properties
owned or leased by it requires such qualification and in which the
failure so to qualify would have a material adverse effect on the
business, properties, assets, or condition (financial or other) of the
Company.
b. Authorization; Binding Obligations. The Company has the
power and authority to make, execute, deliver and perform this
Agreement and all of the transactions contemplated under this
Agreement, and to create the Trust and cause it to make, execute,
deliver and perform its obligations under this Agreement and has taken
all necessary corporate action to authorize the execution, delivery and
performance of this Agreement and to cause the Trust to be created.
When executed and delivered, this Agreement will constitute the legal,
valid and binding obligation of the Company enforceable in accordance
with its terms, except as enforcement of such terms may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally and by the availability of equitable
remedies.
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<PAGE>
c. No Consent Required. The Company is not required to obtain
the consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any
governmental authority, bureau or agency in connection with the
execution, delivery, performance, validity or enforceability of this
Agreement.
d. No Violations. The execution, delivery and performance of
this Agreement by the Company will not violate any provision of any
existing law or regulation or any order or decree of any court or the
Certificate of Incorporation or Bylaws of the Company, or constitute a
material 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 Home Equity Contract and each Subsequent Home Improvement 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 Home Equity Contract or
Subsequent Home Improvement Contract.
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<PAGE>
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 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.
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
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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.
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
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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. Each Contract contains customary and
enforceable provisions so as to render the rights and remedies of the
holder thereof adequate for the realization against the collateral of
the benefits of the lien provided thereby.
q. One Original. There is only one original executed Contract,
which Contract has been delivered to the Trustee or its Custodian on or
before the Closing Date or Subsequent Transfer Date if a Subsequent
Home Equity Contract or Subsequent Home Improvement Contract.
r. Genuine Documents. All documents submitted are genuine, and
all other representations as to each 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
each 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 Home Improvement Contract was originated
by a home improvement contractor in the ordinary course of such
contractor's business or was originated by the Company directly. 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.
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t. Underwriting Guidelines. Each Contract was originated or
purchased in accordance with the Company's then-current underwriting
guidelines.
u. Good Repair. The property described in the Contract is, to
the best of the Company's knowledge, free of damage and in good repair.
v. Qualified Mortgage. The Contract represents a "qualified
mortgage" within the meaning of the REMIC Provisions. The Company
represents and warrants that, either as of (i) the date of origination
(within the meaning of the REMIC Provisions) or (ii) the Closing Date
or, if a Subsequent Home Equity Contract or Subsequent Home Improvement
Contract, the Subsequent Transfer Date, the fair market value of the
interest in real property securing each 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. With respect
to each Contract which 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 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
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with respect to the related Subsequent Contracts and related Sub-Pool, as
applicable, that:
a. Amounts. 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
will have the following characteristics: (i) 100% are secured by a
mortgage, deed of trust or security deed on the related real estate;
(ii) none has a remaining maturity of more than 360 months; (iii) none
has a final scheduled payment date later than May 2028; (iv) none of
the Initial Home Improvement Contracts has a Contract Interest Rate
less than 6.99%; and (v) none was originated before June 9, 1980.
The weighted average (by Scheduled Principal Balance) of the
Contract Interest Rates of Sub-Pool HI as of the Post-Funding Payment
Date will not be more than 25 basis points less than the weighted
average of the Contract Interest Rates of the Initial Home Improvement
Contracts. None of the Subsequent Home Improvement Contracts will have
a Contract Interest Rate less than 7.79%.
Fixed Rate Home Equity Contracts. The Fixed Rate Home Equity
Contracts will have the following characteristics: (i) 100% are secured
by a mortgage, deed of trust or security deed on the related real
estate; (ii) none has a remaining maturity of more than 360 months;
(iii) none has a final scheduled payment date later than July 2028; and
(iv) none of the Initial Fixed Rate Home Equity Contracts has a
Contract Interest Rate less than 7.00%.
The weighted average (by Scheduled Principal Balance) loan to
value ratio of the Fixed Rate Home Equity Contracts as of the
Post-Funding Payment
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Date will not be more than 200 basis points more than such ratio with
respect to the Initial Fixed Rate Home Equity Contracts.
The weighted average (by Scheduled Principal Balance) of the
Contract Interest Rates of the Fixed Rate Home Equity Contracts as of
the Post-Funding Payment Date will not be more than 25 basis points
less than the weighted average of the Contract Interest Rates of the
Initial Fixed Rate Home Equity Contracts. None of the Subsequent Fixed
Rate Home Equity Contracts will have a Contract Interest Rate less than
7.80%.
The percentage (by Scheduled Principal Balance) of the Fixed
Rate Home Equity Contracts as of the Post-Funding Payment Date which
are identified by the Company under its standard underwriting criteria
as "B," "C," and "D" credits will not be more than 300 basis points,
200 basis points, and 100 basis points, respectively, more than the
percentage of Initial Fixed Rate Home Equity Contracts identified as B,
C, and D credits.
Adjustable Rate Home Equity Contracts. The Adjustable Rate
Home Equity Contracts will have the following characteristics: (i) 100%
are secured by a mortgage, deed of trust or security deed on the
related real estate; (ii) none has a remaining maturity of more than
360 months; (iii) none has a final scheduled payment date later than
July 2028; (iv) 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, 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; (v) none has a gross margin of
less than 2.0% or more than 10.0%; and (vi) none of the Initial
Adjustable Rate Home Equity Contracts have a Contract Interest Rate
less than 6.50%.
None of the Initial Adjustable Rate Home Equity Contracts has
a Minimum Contract Rate of less than 6.50%. None of the Subsequent
Adjustable Rate Home Equity Contracts will have a Minimum Contract Rate
of less than 5.89%.
The weighted average (by Scheduled Principal Balance) loan to
value ratio of the Adjustable Rate Home Equity Contracts as of the
Post-Funding Payment Date will not be more than 200 basis points more
than such ratio with respect to the Initial Adjustable Rate Home Equity
Contracts.
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The weighted average (by Scheduled Principal Balance) of the
Contract Interest Rates of the Adjustable Rate Home Equity Contracts as
of the Post-Funding Payment Date will not be more than 25 basis points
less than the weighted average of the Contract Interest Rates of the
Initial Adjustable Rate Home Equity Contracts.
The percentage (by Scheduled Principal Balance) of the
Adjustable Rate Home Equity Contracts as of the Post-Funding Payment
Date which are identified by the Company under its standard
underwriting criteria as "B," "C," and "D" credits will not be more
than 300 basis points, 200 basis points, and 100 basis points,
respectively, more than the percentage of Initial Adjustable Rate Home
Equity Contracts identified as B, C, and D credits.
c. Geographic Concentrations.
Home Improvement Contracts. By Cut-off Date Principal Balance,
% of the Initial Home Improvement Contracts are secured by property
located in California, 8.63% in New York, 6.40% in New Jersey, 5.43% in
Texas, 5.12% in Florida and 5.11% 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, 6.74% of the Initial Fixed Rate Home Equity Contracts are
secured by property located in Michigan, 6.34% in Illinois 6.33%, in
California and 5.92% in Ohio. 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, 16.02% of the Initial Adjustable Rate Home Equity
Contracts are secured by property located in California, 10.79% in
Washington, 8.47% in Ohio and 7.01% in Maryland. No other state
represents more than 5% of the aggregate Cut-off Date Principal
Balances of the Initial Adjustable Rate Home Equity Contracts.
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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. 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 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:
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 Home Improvement
Contract and Subsequent Home Equity 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
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Servicer or the Trustee first discovers or should have discovered a breach of a
representation or warranty of the Company set forth in Sections 2.03, 3.02, 3.03
or 3.04, or in the Officer's Certificates delivered pursuant to Sections 2.02(j)
or 2.03(b) (vii), that materially 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;
(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) the Company shall have delivered to the Trustee evidence
of filing of a UCC-1 financing statement executed by the Company as
debtor, naming the Trustee as secured party and filed in Minnesota,
listing such Contract to be substituted as collateral;
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(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 S&P and Fitch.
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 of them as
a result of any third-party action arising out of any breach of any such
representation and warranty.
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SECTION 3.06. No Repurchase Under Certain Circumstances.
Notwithstanding any provision of this Agreement to the contrary, no repurchase
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 Certificateholder. The Servicer shall give notice to the Trustee at the
time of such repurchase of the amounts due from the Company pursuant to the
guarantee of the Company described above and give notice as to who should
receive such payment.
The Trustee shall have no obligation to pay any such amounts pursuant
to this Section other than from moneys provided to it by the Company or from
moneys held in the funds and accounts created under this Agreement. The Trustee
shall be deemed conclusively to have complied with this Section if it follows
the directions of the Company.
In the event any tax that is guaranteed by the Company pursuant to this
Section 3.06 is refunded to the Trust or otherwise is determined not to be
payable, the Company shall be repaid the amount of such refund or that portion
of any guarantee payment made by the Company that is not applied to the payment
of such tax.
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ARTICLE IV
PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS
SECTION 4.01. Transfer of Contracts.
a. On or prior to the Closing Date, or the Subsequent Transfer Date in
the case of Subsequent Home Improvement Contracts and Subsequent Home Equity
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 BBB+ or higher from both S&P and
Fitch (if rated by Fitch), (i) the Company shall within 30 days execute and
deliver to the Trustee (if it has not previously done so) endorsements of each
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 A- or higher from both S&P and Fitch
(if rated by Fitch), (i) the Company shall within 30 days execute and deliver to
the Trustee (if it has not previously done so) endorsements of each 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 S&P
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and Fitch that the ratings of the Certificates would not be reduced or withdrawn
by the failure to execute and file such assignments; 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 Equity Contract.
d. If, as of the Post-Funding Payment Date, the aggregate Scheduled
Principal Balance of Contracts secured by real property located in Maryland
("Maryland Contracts") exceeds 10% of the Pool Scheduled Principal Balance, the
Company shall, within sixty (60) days, submit to the appropriate recording
offices the assignments to the Trustee on behalf of the Trust of the number of
mortgages, deeds of trust or security deeds required to reduce to less than 10%
of the Pool Scheduled Principal Balance the aggregate Scheduled Principal
Balance of Maryland Contracts as to which such assignments are not recorded.
SECTION 4.02. Costs and Expenses. The Servicer agrees to pay all
reasonable costs and disbursements in connection with the vesting (including the
perfection and the maintenance of perfection, as against all third parties) in
the Trust of all right, title and interest in and to the Contracts (including,
without limitation, the mortgage or deed of trust on the related real estate
granted thereby).
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ARTICLE V
SERVICING OF CONTRACTS
SECTION 5.01. Responsibility for Contract Administration. The Servicer
will have the sole obligation to manage, administer, service and make
collections on the Contracts and perform or cause to be performed all
contractual and customary undertakings of the holder of the Contracts to the
Obligor. The Company, if it is the Servicer, may delegate some or all of its
servicing duties to a wholly owned subsidiary of the Company, for so long as
such subsidiary remains, directly or indirectly, a wholly owned subsidiary of
the Company. Notwithstanding any such delegation the Company shall retain all of
the rights and obligations of the Servicer hereunder. The Trustee, at the
request of a Servicing Officer, shall furnish the Servicer with any powers of
attorney or other documents necessary or appropriate to enable the Servicer to
carry out its servicing and administrative duties hereunder. The Company is
hereby appointed the Servicer until such time as any Service Transfer shall be
effected under Article VII.
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.
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SECTION 5.04. Inspection.
a. At all times during the term hereof, the Servicer shall afford the
Trustee and its authorized agents reasonable access during normal business hours
to the Servicer's records relating to the Contracts, which have not previously
been provided to the Trust, and will cause its personnel to assist in any
examination of such records by the Trustee. The examination referred to in this
Section will be conducted in a manner which does not unreasonably interfere with
the Servicer's normal operations or customer or employee relations. Without
otherwise limiting the scope of the examination the Trustee may make, the
Trustee may, using generally accepted audit procedures, verify the status of
each Contract and review the Electronic Ledger and records relating thereto for
conformity to Monthly Reports prepared pursuant to Article VI and compliance
with the standards represented to exist as to each Contract in this Agreement.
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
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Business Day prior to the next succeeding Payment Date. Any investment of funds
in the Certificate Account shall be made in Eligible Investments held by a
financial institution in accordance with the following requirements: (1) all
Eligible Investments shall be held in an account with such financial institution
in the name of the Trustee, and the agreement governing such account shall be
governed by the laws of the State of Minnesota, (2) with respect to securities
held in such account, such securities shall be (i) certificated securities (as
such term is used in N.Y. U.C.C. ss. 8-102(4)(i)), securities deemed to be
certificated securities under applicable regulations of the United States
government, or uncertificated securities issued by an issuer organized under the
laws of the State of New York or the State of Delaware, (ii) either (A) in the
possession of such institution, (B) in the possession of a clearing corporation
(as such term is used in Minn. Stat. ss. 8-102(5)) in the State of New York,
registered in the name of such clearing corporation or its nominee, not endorsed
for collection or surrender or any other purpose not involving transfer, not
containing any evidence of a right or interest inconsistent with the Trustee's
security interest therein, and held by such clearing 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
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States of America the obligations of which are backed by the full faith
and credit of the United States of America;
(ii) (A) demand and time deposits in, certificates of deposit
of, bankers' acceptances issued by, or federal funds sold by any
depository institution or trust company (including the Trustee or any
Affiliate of the Trustee, acting in its commercial capacity)
incorporated under the laws of the United States of America or any
state thereof and subject to supervision and examination by federal
and/or state authorities, so long as, at the time of such investment or
contractual commitment providing for such investment, the commercial
paper or other short-term debt obligations of such depository
institution or trust company are rated at least A-1 by S&P and F-1 by
Fitch (if rated by Fitch) and (B) any other demand or time deposit or
certificate of deposit which is fully insured by the Federal Deposit
Insurance Corporation;
(iii) shares of an investment company registered under the
Investment Company Act of 1940, whose shares are registered under the
Securities Act of 1933 and have a rating of AAA by both S&P and Fitch,
and whose only investments are in securities described in clauses (i)
and (ii) above;
(iv) repurchase obligations with respect to (A) any security
described in clause (i) above or (B) any other security issued or
guaranteed by an agency or instrumentality of the United States of
America, in either case entered into with a depository institution or
trust company (acting as principal) described in clause (ii)(A) above;
(v) securities bearing interest or sold at a discount issued
by any corporation incorporated under the laws of the United States of
America or any State thereof which have a credit rating of at least AA
from both S&P and Fitch (if rated by Fitch) at the time of such
investment; provided, however, that securities issued by any particular
corporation will not be Eligible Investments to the extent that
investment therein will cause the then outstanding principal amount of
securities issued by such corporation and held as part of the corpus of
the Trust to exceed 10% of amounts held in the Certificate Account;
(vi) commercial paper having a rating of at least A-1+ from
S&P and at least F-1+ from Fitch (if rated by Fitch) at the time of
such investment; and
(vii) other obligations or securities that are acceptable to
both S&P and Fitch as an Eligible Investment hereunder and will not
reduce the rating assigned to any Class of Certificates by both S&P and
Fitch below the lower of
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the then-current rating or the rating assigned to such Certificates as
of the Closing Date by both S&P and Fitch, as evidence in writing;
provided that any such investment must constitute a "cash flow investment"
within the meaning of the REMIC Provisions.
The Trustee may trade with itself or an Affiliate in the purchase or
sale of such Eligible Investments.
c. If at any time the Trustee receives notice (from S&P, Fitch, the
Servicer or otherwise) that the Certificate Account has ceased to be an Eligible
Account, the Trustee shall, as soon as practicable but in no event later than
five Business Days of the Trustee's receipt of such notice, transfer the
Certificate Account and all funds and Eligible Investments therein to an
Eligible Account. Following any such transfer, the Trustee shall notify S&P,
Fitch and the Servicer of the location of the Certificate Account.
SECTION 5.06. Enforcement.
a. The Servicer shall, consistent with customary servicing procedures,
act with respect to the Contracts in such manner as will maximize the receipt of
principal and interest on such Contracts and Liquidation Proceeds with respect
to Liquidated Contracts. The Company shall pay all FHA Insurance premiums
required by FHA Regulations in respect of FHA-Insured Contracts; if the Company
is no longer the Servicer and fails to pay such FHA Insurance premiums, the
successor Servicer shall pay such premiums and shall be entitled to
reimbursement therefor in accordance with Section 8.04. The Servicer shall
comply with FHA Regulations in servicing FHA-Insured Contracts so that the
related FHA Insurance remains in full force and effect, except for good-faith
disputes relating to FHA Regulations or such FHA Insurance.
b. In accordance with the standard of care specified in Paragraph 5.02,
the Servicer may, in its own name, if possible, or as agent for the Trust,
commence proceedings for the foreclosure of any subject real estate, or may take
such other steps that in the Servicer's reasonable judgment will maximize
Liquidation Proceeds with respect to the Contract, including, for example, the
sale of the Contract to a third party for foreclosure or enforcement and, in the
case of any default on a related prior mortgage loan, the advancing of funds to
correct such default and the advancing of funds to pay off a related prior
mortgage loan, which advances are Liquidation Expenses that will be reimbursed
to the Servicer out of related Liquidation Proceeds before the related Net
Liquidation Proceeds are paid to Certificateholders and the Class C
Certificateholder. The Servicer shall also deposit
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in the Certificate Account any Net Liquidation Proceeds received in connection
with any Contract which became a Liquidated Contract in a prior Due Period.
c. The Servicer may sue to enforce or collect upon Contracts, in its
own name, if possible, or as agent for the Trust. If the Servicer elects to
commence a legal proceeding to enforce a Contract, the act of commencement shall
be deemed to be an automatic assignment of the Contract to the Servicer for
purposes of collection only. If, however, in any enforcement suit or legal
proceeding it is held that the Servicer may not enforce a Contract on the ground
that it is not a real party in interest or a holder entitled to enforce the
Contract, the Trustee on behalf of the Trust shall, at the Servicer's expense,
take such steps as the Servicer deems necessary to enforce the Contract,
including bringing suit in its name or the names of the Certificateholders and
the Class C Certificateholder.
d. The Servicer may grant to the Obligor on any Contract any rebate,
refund or adjustment out of the Certificate Account that the Servicer in good
faith believes is required because of 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.
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.
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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 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.
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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
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property securing a conventional Contract hazard insurance (excluding flood
insurance coverage) if such conventional Contract is secured by a first priority
mortgage, deed of trust or security deed or the initial principal balance of
such conventional Contract exceeds $30,000.
SECTION 5.10. Merger or Consolidation of Servicer. Any Person into
which the Servicer may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Servicer shall be a party shall be the successor of
the Servicer hereunder, provided such Person shall be an Eligible Servicer,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, anything herein to the contrary notwithstanding. The
Servicer shall promptly notify S&P and Fitch in the event it is a party to any
merger, conversion or consolidation.
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ARTICLE VI
REPORTS AND TAX MATTERS
SECTION 6.01. Monthly Reports. No later than one Business Day following
each Determination Date, the Servicer shall deliver to the Trustee, S&P and
Fitch a Monthly Report, substantially in the form of Exhibit Q hereto.
SECTION 6.02. Officer's Certificate. Each Monthly Report pursuant to
Section 6.01 shall be accompanied by a certificate of a Servicing Officer
substantially in the form of Exhibit K, certifying the accuracy of the Monthly
Report and that no Event of Termination or event that with notice or lapse of
time or both would become an Event of Termination has occurred, or if such event
has occurred and is continuing, specifying the event and its status.
SECTION 6.03. Other Data. In addition, the Company and (if different
from the Company) the Servicer shall, on request of the Trustee, S&P or Fitch,
furnish the Trustee, S&P and/or Fitch such underlying data as may be reasonably
requested.
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.
b. Concurrently with each distribution to Certificateholders, the
Trustee shall, so long as it has received the Monthly Report from the Servicer,
forward or
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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, the Class HI: A-3 Principal Balance, the Class HI:
A-4 Principal Balance and the Class HI: A-5 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 delinquent (a)31-59 days and (b)60 or more days;
(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;
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(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 determined not to
submit a claim for FHA Insurance because such claim would not be paid
by HUD;
(xiii) the amount in the Company's FHA Insurance reserve
available to pay FHA Insurance claims on the FHA-Insured Contracts; and
(xiv) 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
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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: 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)(11); and
(vi) the information set forth in clauses (v) through (xiv) 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;
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(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;
(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)(12); and
(vi) the information set forth in clauses (v) through (xiv) 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:
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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;
(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 (xiv)
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:
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(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;
(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 (xiv) 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:
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(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 (A) the aggregate amount of any Principal Prepayments
included therein, and (B) that portion of any such distribution to
Class HE: A-6 Certificateholders constituting Class HE: A-6 Lockout Pro
Rata Distribution Amount;
(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 ARM Principal Balance, the Class HE:
A-1B ARM Principal Balance, the Class HE: A-1 Principal Balance, the
Class HE: A-2 Principal Balance, the Class HE: A-3 Principal Balance,
the Class HE: A-4 Principal Balance, the Class HE: A-5 Principal
Balance, the Class HE: A-6 Principal Balance and the Class HE: A-7 IO
Notional Principal Amount after giving effect to the distribution of
principal on such Payment Date;
(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, for such Payment Date;
(vi) the Sub-Pool HE Senior Percentage and the Class HE: A-6
Lockout Percentage for such Payment Date;
(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, delinquent (a)30-59 days and (b)60 or more days;
(ix) the Class HE: B Principal Balance Test (as set forth in
Exhibit Q hereto)
(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
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Rate Home Equity Contracts) and the Net Liquidation Loss on such
Contracts; and
(xii) the Sub-Pool HE Pre-Funded ARM Amount and the Sub-Pool
HE Pre-Funded Fixed Rate Amount as of such Payment Date.
The Trustee and the Servicer shall, if any Certificateholder, Class C
Certificateholder or Underwriter inquires by telephone, provide the information
contained in the most recent Monthly Report.
In the case of information furnished pursuant to clauses (i) through
(iv) above, the amounts shall be expressed as a dollar amount per Class 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.
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;
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(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)(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-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 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;
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(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)(11); 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-1 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-1
Certificateholders as part of their monthly statement, the following
information:
(i) the amount of such distribution to Holders of Class HE:
B-1 Certificates allocable to interest, separately identifying any
Unpaid Class HE: B-1 Interest Shortfall included in such distribution
and any remaining Unpaid Class HE: B-1 Interest Shortfall after giving
effect to such distribution;
(ii) the amount of such distribution to Holders of Class HE:
B-1 Certificates allocable to principal, separately identifying the
aggregate amount of any Principal Prepayments included therein;
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(iii) the amount, if any, by which the Class HE: B-1 Formula
Distribution Amount for such Payment Date exceeds the Class HE: B-1
Distribution Amount for such Payment Date;
(iv) the Class HE: B-1 Principal Balance after giving effect
to the distribution of principal on such Payment Date;
(v) the Unpaid Class HE: B-1 Liquidation Loss Interest
Shortfall, after giving effect to any distribution on such Payment Date
pursuant to Section 8.04(c)(12);
(vi) the Class HE: B Percentage for such Payment Date; 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-1 Certificate with
a 1% Percentage Interest or per $1,000 denomination of Class HE: 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 HE: 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 HE: 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.
k. On each Payment Date, the Trustee shall forward or cause to be
forwarded by mail to each Holder of a Class HE: B-2 Certificate a copy of the
monthly statements forwarded to the Holders of Class HE: A, Class HE: M and
Class HE: B-1 Certificates on such Payment Date. The Servicer shall also furnish
to the Trustee, which shall forward such information to the Class HE: B-2
Certificateholders as part of their monthly statement, the following
information:
(i) the amount of such distribution to Holders of Class HE:
B-2 Certificates allocable to interest, separately identifying any
Unpaid Class HE: B-2 Interest Shortfall included in such distribution
and any remaining Unpaid Class HE: B-2 Interest Shortfall after giving
effect to such distribution;
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(ii) the amount of such distribution to Holders of Class HE:
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 HE:
B-2 Formula Distribution Amount and the Class HE: B-2 Liquidation Loss
Principal Amount, if any, for such Payment Date exceeds the Class HE:
B-2 Distribution Amount for such Payment Date;
(iv) the Class HE: B-2 Principal Balance after giving effect
to the distribution of principal on such Payment Date;
(v) the Class HE: B Percentage for such Payment Date; 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 (iv) above, the
amounts shall be expressed as a dollar amount per Class HE: B-2 Certificate with
a 1% Percentage Interest or per $1,000 denomination of Class HE: 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 HE: 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 HE: 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.
l. Copies of all reports and statements provided to the Trustee for the
Certificateholders shall also be provided to S&P, Fitch and the Class C
Certificateholders.
SECTION 6.06. Payment of Taxes. The Servicer shall be responsible for
and agrees to prepare, make and timely file all federal, state, local or other
tax returns, information statements and other returns and documents of every
kind and nature whatsoever required to be made or filed by or on behalf of the
Trust pursuant to the Code and other applicable tax laws and regulations. Each
such return, statement and document shall, to the extent required by the Code or
other applicable law and at the request of the Servicer, be signed on behalf of
the Trust by the Trustee. The Trustee shall have no responsibility whatsoever
for the accuracy or completeness of any
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such return, statement or document. The Servicer agrees to indemnify the Trustee
and hold it harmless for, from, against and in respect to any and all liability,
loss, damage and expense which may be incurred by the Trustee based upon or as a
result of the Trustee's execution of any and all such tax returns, statements
and documents. The Servicer, if and for so long as it is a Class C
Certificateholder, shall be designated the "tax matters person" on behalf of the
Trust in the same manner as a partnership may designate a "tax matters partner,"
as such term is defined in Section 6231(a)(7) of the Code. To the extent
permitted by the REMIC Provisions, any subsequent holder of the Class C
Certificate, by acceptance thereof, irrevocably designates and appoints the
Servicer as its agent to perform the responsibilities of the "tax matters
person" on behalf of the Trust if, and during such time as, the Servicer is not
the holder of the Class C Certificate. The Servicer may, at its expense, retain
such outside assistance as it deems necessary in the performance of its
obligations under this paragraph. The Servicer shall provide to the Internal
Revenue Service the name, title, address and telephone number of the person who
will serve as the representative of the REMIC.
Each of the Holders of the Certificates or the Class C Certificates, by
acceptance thereof, agrees to file tax returns consistent with and in accordance
with any elections, decisions or other reports made or filed with regard to
federal, state or local taxes on behalf of the Trust. The Servicer, as tax
matters person or as agent for the tax matters person, shall represent the Trust
in connection with all examinations of the Trust's affairs by tax authorities,
including resulting administrative and judicial proceedings. Each of the Holders
of the Certificates and Class C Certificates, by acceptance thereof, agrees to
cooperate with the Servicer in such matters and to do or refrain from doing any
or all things reasonably required by the Servicer to conduct such proceedings,
provided that no such action shall be required by the Servicer of any
Certificateholder that would entail unnecessary or unreasonable expenses for
such Certificateholder in the performance of such action.
The Class C Master Certificateholders and Class C Subsidiary
Certificateholders shall pay, on behalf of the Trust, any foreign, federal,
state or local income, property, excise, sales, receipts or any other similar or
related taxes or charges which may be imposed upon the Master REMIC or
Subsidiary REMIC, respectively, as a REMIC or otherwise and shall, to the extent
provided in Section 10.06, be entitled to be reimbursed out of the Certificate
Account or, if such tax or charge results from a failure by the Trustee, the
Company or any Servicer to comply with the provisions of Section 2.04 or 3.06,
or a failure by any Servicer to comply with the provisions of Section 6.06, the
Trustee, the Company or such Servicer, as the case may be, shall indemnify the
Class C Certificateholders for the payment of any such tax or charge. The
Trustee shall be entitled to withhold from amounts otherwise distributable to
the Class C Certificateholders any taxes or charges payable by the Class C
Certificateholders hereunder.
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In the event a Class C Certificate is transferred to a "disqualified
organization," within the meaning of Section 860E(e)(5) of the Code, pursuant to
Section 860D(a)(6)(B) of the Code the Company shall provide to the Internal
Revenue Service and the persons specified in Sections 860(E)(e)(5) and (6) of
the Code all information necessary for the application of Section 860E(e) and
any other applicable provision of the Code with respect to the transfer of the
Class C Certificate to such a disqualified organization including, without
limitation, a computation showing the present value of the total anticipated
excess inclusions with respect to such Class C Certificate for periods after the
transfer as defined in the REMIC Provisions. In addition, to the extent required
by the REMIC Provisions, the Company shall, upon the written request of persons
designated in Section 860E(e)(5) of the Code, furnish to such requesting party
and the Internal Revenue Service information sufficient to compute the present
value of anticipated excess inclusions within 60 days of the receipt of such
written request.
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ARTICLE VII
SERVICE TRANSFER
SECTION 7.01. Events of Termination. "Event of Termination" means the
occurrence of any of the following:
a. Any failure by the Servicer to make any payment or deposit
required to be made hereunder (including an Advance) and the
continuance of such failure for a period of four Business Days;
b. Failure on the Servicer's part to observe or perform in any
material respect any covenant or agreement in this Agreement (other
than a covenant or agreement which is elsewhere in this Section
specifically dealt with) which continues unremedied for 30 days;
c. Any assignment by the Servicer of its duties or rights
hereunder except as specifically permitted hereunder, or any attempt to
make such an assignment;
d. A court having jurisdiction in the premises shall have
entered a decree or order for relief in respect of the Servicer in an
involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of the Servicer, as the case may be, or for any substantial
liquidation of its affairs;
e. The Servicer shall have commenced a voluntary case under
any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or shall have consented to the entry of an order
for relief in an involuntary case under any such law, or shall have
consented to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian or sequestrator (or other
similar official) of the Servicer or for any substantial part of its
property, or shall have made any general assignment for the benefit of
its creditors, or shall have failed to, or admitted in writing its
inability to, pay its debts as they become due, or shall have taken any
corporate action in furtherance of the foregoing;
f. The failure of the Servicer to be an Eligible Servicer; or
g. If the Company is the Servicer, the Company's servicing
rights under its master seller-servicer agreement with GNMA are
terminated by GNMA.
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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 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
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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 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, to S&P, to Fitch, to
the Certificateholders and to the Class C Certificateholder at their respective
addresses appearing on the Certificate Register.
b. Within 10 days following any termination or appointment of a
successor to the Servicer pursuant to this Article VII, the Trustee shall give
written notice thereof to S&P, to Fitch, to the Certificateholders and to the
Class C Certificateholder at their respective addresses appearing on the
Certificate Register.
SECTION 7.05. Effect of Transfer.
a. After the Service Transfer, the Trustee or new Servicer shall notify
Obligors to make payments directly to the new Servicer that are due under the
Contracts after the effective date of the Service Transfer.
b. After the Service Transfer, the replaced Servicer shall have no
further obligations with respect to the management, administration, servicing or
collection of the Contracts and the new Servicer shall have all of such
obligations, except that the replaced Servicer will transmit or cause to be
transmitted directly to the new
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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 Certificateholder conforming with the requirements of this Agreement at
the corporate trust department of the Trustee or with an institution other than
the Servicer and promptly cause the Trustee to transfer all funds in the
Certificate Account to such new account, which shall thereafter be deemed the
Certificate Account for the purposes hereof.
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ARTICLE VIII
PAYMENTS
SECTION 8.01. Monthly Payments.
a. Subject to the terms of this Article VIII, each Holder of a
Certificate or Class C Certificate as of a Record Date shall be paid on the next
succeeding Payment Date by check mailed to such Certificateholder or Class C
Certificateholder at the address for such Certificateholder or Class C
Certificateholder appearing on the Certificate Register (or, if such
Certificateholder holds Certificates of a Class with an aggregate Percentage
Interest of at least 5% of such Class and so requests, by wire transfer pursuant
to instructions delivered to the Trustee at least 10 days prior to such Payment
Date), the sum equal to such Certificateholder's or Class C Certificateholder's
Percentage Interest of the Class HI: A-1 Distribution Amount, the Class HI: A-2
Distribution Amount, the Class HI: A-3 Distribution Amount, the Class HI: A-4
Distribution Amount, the Class HI: A-5 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 ARM Distribution Amount, the Class HE: A-1B
ARM Distribution Amount, the Class HE: A-1 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 Distribution Amount, the Class HE:
A-6 Distribution Amount, the Class HE: A-7 IO Distribution Amount, the Class HE:
M-1 Distribution Amount, the Class HE: M-2 Distribution Amount, the Class HE:
B-1 Distribution Amount, the Class HE: B-2 Distribution Amount, any Class HE:
B-2 Guaranty Payment or the Class C Distribution Amount, as applicable. Final
payment of any Certificate or a Class C Certificate shall be made only upon
presentation and surrender of such Certificate or Class C Certificate at the
office or agency of the Paying Agent.
b. Each distribution with respect to a Book-Entry Certificate shall be
paid to the Depository, which shall credit the amount of such distribution to
the accounts of its Depository Participants in accordance with its normal
procedures. Each Depository Participant shall be responsible for disbursing such
distribution to the Certificate Owners that it represents and to each indirect
participating brokerage firm (a "brokerage firm" or "indirect participating
firm") for which it acts as agent. Each brokerage firm shall be responsible for
disbursing funds to the Certificate Owners that it represents. All such credits
and disbursements with respect to a Book-Entry Certificate are to be made by the
Depository and the Depository Participants in accordance with the provisions of
the Book-Entry Certificates. Neither the Trustee, the Certificate Registrar nor
the Company shall have any responsibility therefor except as otherwise provided
by applicable law. To the extent applicable and not
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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
Certificateholder required hereunder. The Trustee's corporate 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
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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.
(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 S&P and Fitch.
(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-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 HE: 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 HE: B-2 Guaranty Payment, if
any, for such Payment Date into the Certificate Account. Any Class HE:
B-2 Guaranty Payment shall be distributable to Class HE: B-2
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.
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(iii) The obligation of the Company to provide the Class HE:
B-2 Limited Guaranty under this Agreement shall terminate on the Final
Payment Date.
(iv) The obligation of the Company to make the Class HE: B-2
Guaranty Payments described in subsection (i) above shall be
unconditional and irrevocable. The Company acknowledges that its
obligation to make the Class HE: 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 HE: B-2
Certificateholders.
(v) If the Company fails to make a Class HE: B-2 Guaranty
Payment in whole or in part, the Company shall promptly notify the
Trustee, and the Trustee shall promptly notify S&P and Fitch.
(vi) In consideration of providing the Class HE: B-2 Limited
Guaranty, the Company shall be entitled to the Class HE: B-2 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
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(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):
(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; the amount in clause
(a)(4) of the definition of Class HI: A Formula Distribution
Amount to the Class HI: A-4 Certificateholders; the amount in
clause (a)(5) of the definition of Class HI: A Formula
Distribution Amount to the Class HI: A-5 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;
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(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:
(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 Percentage of the Sub-Pool HI Formula
Principal Distribution Amount to the
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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
Percentage of the Sub-Pool HI 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 Percentage of the Sub-Pool
HI 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;
(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
Percentage of the Sub-Pool HI 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 Percentage of the Sub-Pool
HI 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;
(D) if such Payment Date is on or after the
Class HI: A-3 Cross-over Date, but on or prior to the
Class HI: A-4 Cross-over Date, the Sub-Pool HI Senior
Percentage of the Sub-Pool HI Formula Principal
Distribution Amount to the Class HI: A-4
Certificateholders (reduced, if such Payment Date is
on the Class HI: A-3 Cross-over Date, by that portion
of the Sub-Pool HI Senior Percentage of the Sub-Pool
HI Formula Principal Distribution Amount to be
distributed to the Class HI: A-3 Certificateholders
on such date in accordance with clause (C) above),
but in no event more than is necessary to reduce the
Class HI: A-4 Principal Balance to zero; and
(E) if such Payment Date is on or after the
Class HI: A-4 Cross-over Date, but on or prior to the
Class HI: A-5 Cross-over Date, the Sub-Pool HI Senior
Percentage of the Sub-Pool HI Formula Principal
Distribution Amount to the Class HI: A-5
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<PAGE>
Certificateholders (reduced, if such Payment Date is
on the Class HI: A-4 Cross-over Date, by that portion
of the Sub-Pool HI Senior Percentage of the Sub-Pool
HI Formula Principal Distribution Amount to be
distributed to the Class HI: A-4 Certificateholders
on such date in accordance with clause (D) above),
but in no event more than is necessary to reduce the
Class HI: A-5 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;
(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 to the extent of any
Sub-Pool HI Supplementary Principal Distribution Amount as follows (and
in the following order of priority):
(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: A-4 Certificateholders, until
the Class HI: A-4 Principal Balance has been reduced to zero;
(v) to the Class HI: A-5 Certificateholders, until
the Class HI: A-5 Principal Balance has been reduced to zero;
(vi) to the Class HI: M-1 Certificateholders, until
the Class HI: M -1 Principal Balance has been reduced to zero;
and
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<PAGE>
(vii) 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;
(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;
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<PAGE>
(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 reimburse the Company for any prior unreimbursed Class
HI: B-2 Guaranty Payments;
(21) to pay the Class HI: B-2 Guaranty Fee to the Company; and
(22) to pay the remainder, if any, of the Sub-Pool HI Amount
Available to the Class C Subsidiary Certificateholder.
c. On each Payment Date, the Trustee shall apply the Sub-Pool HE 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(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):
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<PAGE>
(i) the amount in clause (a)(1) of the definition of
Class HE: A Formula Distribution Amount to the Class HE: A-1A
ARM 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 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 Certificateholders; the amount in clause
(a)(8) of the definition of Class HE: A Formula Distribution
Amount to the Class HE: A-6 Certificateholders; the amount in
clause (a)(9) of the definition of Class HE: A Formula
Distribution Amount to the Class HE: A-7 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;
(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):
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<PAGE>
(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 Class HE: B-1 Certificateholders as follows
(and in the following order of priority):
(i) the amount in clause (a) of the definition of
Class HE: B-1 Formula Distribution Amount; and
(ii) any Unpaid Class HE: B-1 Interest Shortfall;
(6) after payment of the amounts specified in clauses (1) and
(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-7 IO Certificates)
based on the Class Principal Balance of each Class (but in no
event shall such amount for any Class exceed the Class
Principal Balance of any such Class); and
(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-6 Cross-over Date, the remaining
Sub-Pool HE AmountAvailable 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-7 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
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<PAGE>
(a) (i) to the Class HE: A-1B ARM
Certificateholders, the Class HE: A-1 ARM
Formula Principal Distribution Amount less
an amount equal to the lesser of the Class
A-1A ARM Principal Balance and the Class
A-1A ARM Percentage of the Class HE: A-1 ARM
Formula Principal Distribution Amount and
(ii) the remainder of the Class HE: A-1 ARM
Formula Principal Distribution Amount to the
Class HE: A-1A ARM Certificateholders;
(b) to the Class HE: A-6
Certificateholders, the Class HE: A-6
Lockout Pro Rata Distribution Amount, if
any, but in no event more than is necessary
to reduce the Class HE: A-6 Principal
Balance to zero;
(c) if such Payment Date is on or
prior to the Class HE: A-1 Cross-over Date,
to the Class HE: A-1 Certificateholders, but
in no event more than is necessary to reduce
the Class HE: A-1 Principal Balance to zero;
(d) if such Payment Date is on or
after the Class HE: A-1 Cross-over Date, but
on or prior to the Class HE: A-2 Cross-over
Date, to the Class HE: A-2
Certificateholders, but in no event more
than is necessary to reduce the Class HE:
A-2 Principal Balance to zero;
(e) 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, 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;
(f) 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, 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;
(g) if such Payment Date is on or
after the Class HE: A-4 Cross-over Date, but
on or prior to the Class HE: A-5 Cross-over
Date, to the Class HE: A-5
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<PAGE>
Certificateholders, but in no event more
than is necessary to reduce the Class HE:
A-5 Principal Balance to zero; and
(h) if such Payment Date is on or
after the Class HE: A-5 Cross-over Date, but
on or prior to the Class HE: A-6 Cross-over
Date, to the Class HE: A-6
Certificateholders, but in no event more
than is necessary (after taking into account
any distribution to the Class HE: A-6
Certificateholders pursuant to clause (b)
above) to reduce the Class HE: A-6 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 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 Distribution
Amount;
(9) after payment of the amounts specified in clauses (1)
through (8) above, to the Class HE: B-1 Certificateholders the amount
in clause (c) of the definition of Class HE: B-1 Formula Distribution
Amount;
(10) after payment of the amounts specified in clauses (1)
through (9) 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;
(11) after payment of the amounts specified in clauses (1)
through (10) above, to the Class HE: M-2 Certificateholders as follows
(and in the following order of priority):
(i) any Class HE: M-2 Liquidation Loss Interest
Amount; and
(ii) any Unpaid Class HE: M-2 Liquidation Loss
Interest Shortfall;
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<PAGE>
(12) after payment of the amounts specified in clauses (1)
through (11) above, to the Class HE: B-1 Certificateholders as follows
(and in the following order of priority):
(i) any Class HE: B-1 Liquidation Loss Interest
Amount; and
(ii) any Unpaid Class HE: B -1 Liquidation Loss
Interest Shortfall;
(13) after payment of the amounts specified in clauses (1)
through (12) above, to the Class HE: B-2 Certificateholders as follows
(and in the following order of priority):
(i) the amount in clause (a) of the definition of
Class HE: B-2 Formula Distribution Amount;
(ii) any Unpaid Class HE: B-2 Interest Shortfall; and
(iii) the amount in clause (c) of the definition of
Class HE: B-2 Formula 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;
8-15
<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 Company for any unreimbursed advances made pursuant to Section
8.02(c);
(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-2 Guaranty Payments;
(20) to pay the Class HE: B-2 Guaranty Fee to the Company; and
(21) to pay the remainder, if any, of the Sub-Pool HE Amount
Available to the Class C Master Certificateholder.
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,
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 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:
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<PAGE>
(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-1 Formula Interest
Distribution Amount, the Class HE: B-1 Formula Liquidation Loss
Interest Distribution Amount and the Class HE: B-2 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, (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
8-17
<PAGE>
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.
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-D." The Trustee shall maintain
within the Sub-Pool HI Pre-Funding Account two subaccounts as follows: the
"Sub-Pool HI Pre-Funding Home Improvement Subaccount," which pertains to the
pre-funded Subsequent Home Improvement Contracts, and the "Undelivered Home
Improvement Contract 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. Amounts on deposit in the Sub-Pool HI Pre-Funding 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 Sub-Pool HI
Pre-Funding Subaccount, net of investment earnings.
c. On or before the Closing Date the Company shall deposit in the
Undelivered Home Improvement Contract Subaccount the amount specified in
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<PAGE>
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 Home
Improvement Contract 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-D." The Trustee shall maintain
within the Sub-Pool HE Pre-Funding Account four subaccounts as follows: the
"Sub-Pool HE Pre-Funding
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<PAGE>
ARM Subaccount" and the "Sub-Pool HE Pre-Funding Fixed Rate Subaccount" which
pertain to the pre-funded Subsequent Home Equity Contracts, and the Undelivered
ARM Home Equity Contract Subaccount and the Undelivered Fixed Rate Home Equity
Contract Subaccount which pertain to those Contracts transferred to the Trust on
the Closing Date that are Undelivered Home Equity Contracts. Funds 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
Sub-Pool HE Pre-Funding ARM Subaccount and the Sub-Pool HE Pre-Funding Fixed
Rate Subaccount, the respective amounts specified in Section 2.02(l). Amounts on
deposit in such subaccounts shall be withdrawn by the Trustee as follows:
(i) On any Subsequent Transfer Date, the Trustee shall
withdraw an amount equal to 100% of the Cut-off Date Principal Balance
of each Subsequent Adjustable Rate 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 an amount equal to 100% of the Cut-off Date Principal Balance
of each Subsequent Fixed 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.
(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 Sub-Pool HE
Pre-Funding ARM Subaccount and Sub-Pool HE Pre-Funding Fixed Rate
Subaccount, net of investment earnings.
c. On or before the Closing Date the Company shall deposit in the
Undelivered ARM Home Equity Contract Subaccount and the Undelivered Fixed Rate
Home Equity Contract 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 an
amount equal
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<PAGE>
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 ARM Home
Equity Contract Subaccount and Undelivered Fixed Rate Home Equity
Contract 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 first Payment Date after the end of
the Pre-Funding Period.
SECTION 8.09. 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
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on the Class HI Certificates under Section 8.04, as allocated thereto
pursuant to Section 8.04.
b. The amounts described in Section 8.09(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
HI: A-2 Class HI: A-2 Class HI: A-2
HI: A-3 Class HI: A-3 Class HI: A-3
HI: A-4 Class HI: A-4 Class HI: A-4
HI: A-5 Class HI: A-5 Class HI: A-5
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-2 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
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(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 8.09.
e. Notwithstanding the deemed distributions on the Subsidiary REMIC
Regular Interests described in this Section 8.09, distributions of funds from
the Certificate Account shall be made only in accordance with Section 8.04.
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ARTICLE IX
THE CERTIFICATES AND THE CLASS C CERTIFICATES
SECTION 9.01. The Certificates and Class C Certificates. The Class 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-1, the Class
HE: B-2 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 $83,000,000 in Original Class HI: A-1
Principal Balance, (ii) one or more Class HI: A-2 Certificates representing
$67,000,000 in Original Class HI: A-2 Principal Balance, (iii) one or more Class
HI: A-3 Certificates representing $25,000,000 in Original Class HI: A-3
Principal Balance, (iv) one or more Class HI: A-4 Certificates representing
$33,500,000 in Original Class HI: A-4 Principal Balance, (v) one or more Class
HI: A-5 Certificates representing $30,750,000 in Original Class HI: A-5
Principal Balance, (vi) one or more Class HI: M-1 Certificates representing
$24,750,000 in Original Class HI: M-1 Principal Balance, (vii) one or more Class
HI: M-2 Certificates representing $12,900,000 in Original Class HI: M-2
Principal Balance, (viii) one or more Class HI: B-1 Certificates representing
$9,150,000 in Original Class HI: B-1 Principal Balance, (ix) one or more Class
HI: B-2 Certificates representing $13,950,000 in Original Class HI: B-2
Principal Balance, (x) one or more Class HE: A-1A ARM Certificates representing
$30,000,000 in Original Class HE: A-1A ARM Principal Balance, (xi) one or more
Class HE: A-1B ARM Certificates representing $245,000,000 in Original Class HE:
A-1B ARM Principal Balance, (xii) one or more Class HE: A-1 Certificates
representing $270,000,000 in Original Class HE: A-1 Principal Balance, (xiii)
one or more Class HE: A-2 Certificates representing $117,000,000 in Original
Class HE: A-2 Balance, (xiv) one or more Class HE: A-3 Certificates representing
$107,000,000 in Original Class HE: A-3 Principal Balance, (xv) one or more Class
HE: A-4 Certificates representing $28,000,000 in Original Class HE: A-4
Principal Balance, (xvi) one or more Class HE: A-5 Certificates representing
$36,250,000 in Original Class HE: A-5 Principal Balance, (xvii) one or more
Class HE: A-6 Certificates representing $82,500,000 in Original Class HE: A-6
Principal Balance, (xviii) one or more Class HE: A-7 IO Certificates
representing $110,000,000 in Class HE: A-7 IO Original Notional Principal
Amount, (xix) one or more Class HE: M-1 Certificates representing $51,150,000 in
Original Class HE: M-1 Principal Balance, (xx) one or more Class HE: M-2
Certificates representing $52,800,000 in Original Class HE: M-2 Principal
Balance, (xxi) one or more Class HE: B-1 Certificates representing $40,700,000
in Original Class HE: B-1 Principal Balance, and (xxii) one or more Class HE:
B-2 Certificates representing $39,600,000 in Original Class HE: B-2 Principal
Balance, beneficial ownership of such Classes of Certificates (other than the
Class HI: B-2 Certificates and the Class HE: B-2 Certificates) to be
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held through Book-Entry Certificates in minimum dollar denominations of $1,000.
The Class C Subsidiary Certificate shall be evidenced by a single Class C
Certificate issued on the Closing Date to the Company and shall represent 100%
of the Percentage Interest of the Class C Subsidiary Certificates. The Class C
Master Certificate shall be evidenced by a single Class C Certificate issued on
the Closing Date to the Company and shall represent 100% of the Percentage
Interest of the Class C Master Certificates.
The Certificates and the Class C Certificates shall be executed by
manual signature on behalf of the Trustee by a duly authorized Responsible
Officer or authorized signatory. Certificates or the Class C Certificates
bearing the signatures of individuals who were at any time the proper officers
of the Trustee shall bind the Trustee, notwithstanding that such individuals or
any of them have ceased to hold such offices prior to the execution and delivery
of such Certificate or Class C Certificates, or did not hold such offices at the
date of such Certificates or Class C Certificates. No Certificate or Class C
Certificate shall be entitled to any benefit under this Agreement, or be valid
for any purpose, unless such Certificate or Class C Certificate has been
executed by manual signature in accordance with this Section, and such signature
upon any Certificate or Class C Certificate shall be conclusive evidence, and
the only evidence, that such Certificate or Class C Certificate has been duly
executed and delivered hereunder. All Certificates and the Class C Certificates
shall be dated the date of their execution, except for 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 Certificateholder and the Servicer of
any change in the Certificate Registrar.
b. (1) Subject to clauses (2) and (3) below, no transfer of a Class C
Certificate shall be made by the Company or any other Person unless such
transfer is exempt from the registration requirements of the Securities Act of
1933 (the "Act"), as amended, and any applicable state securities laws or is
made in accordance with the Act and laws. In the event that any such transfer is
to be made, (A) the Company may require a written Opinion of Counsel acceptable
to and in form and
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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
Certificateholder desiring to effect such transfer shall, and does hereby agree
to, indemnify the Trustee, the Company and the Certificate Registrar against any
liability that may result if the transfer is not so exempt or is not made in
accordance with such federal and state laws.
(2) No transfer of a Class HI: M-1, Class HI: M-2, Class HI:
B-1, Class HI: B-2 Certificate, Class HE: M-1, Class HE: M-2, Class HE: B-1 or
Class HE: B-2 Certificate or Class C Certificate or any interest therein shall
be made to any employee benefit plan, trust or account that is subject to ERISA,
or that is described in Section 4975(e)(1) of the Code (each, a "Plan"), unless
the Plan delivers to the Company and the Trustee, at its own expense, an Opinion
of Counsel in form satisfactory to the Company and the Trustee that the purchase
and holding of the Certificate by such Plan will not result in the assets of the
Trust being deemed to be "plan assets" and subject to the prohibited transaction
provisions of ERISA and the Code and will not subject the Trustee, the Company
or the Servicer to any obligation or liability in addition to those undertaken
in this Agreement. Unless such opinion is delivered, each person acquiring such
a Certificate will be deemed to represent to the Trustee, the Company and the
Servicer either (i) that such person is neither a Plan, nor acting on behalf of
a Plan, subject to ERISA or to Section 4975 of the 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 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
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<PAGE>
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).
(4) Any transfer, sale or other disposition not in compliance
with the provisions of this Section 9.02(b) shall be deemed to be void and of no
legal force or effect whatsoever and such transferee shall be deemed not to be
the Certificateholder or Class C Certificateholder, as applicable, for any
purpose hereunder, including, but not limited to, the receipt of distributions
on the Certificate or Class C Certificate, and shall be deemed to have no
interest whatsoever in the Certificate or Class C Certificate.
(5) The Trustee shall give notice to S&P and Fitch promptly
following any transfer, sale or other disposition of a Class C Certificate.
c. At the option of a Certificateholder or a Class C Certificateholder,
Certificates and the Class C Certificates may be exchanged for other
Certificates or Class C Certificates of authorized denominations of a like
aggregate original denomination, upon surrender of such Certificates or the
Class C Certificates to be exchanged at the Corporate Trust Office. Whenever any
Certificates or the Class C
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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.
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
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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: A-4 Certificate, one Class HI: A-5
Certificate, one Class HI: M-1 Certificate, one Class HI: M-2 Certificate, one
Class HI: B-1 Certificate, one Class HE: A-1A ARM Certificate, two Class HE:
A-1B ARM Certificates, two Class HE: A-1 Certificates, one Class HE: A-2
Certificate, one Class HE: A-3 Certificate, one Class HE: A-4 Certificate, one
Class HE: A-5 Certificate, one Class HE: A-6 Certificate, one Class HE: A-7 IO
Certificate, one Class HE: M-1 Certificate, one Class HE: M-2 Certificate and
one Class HE: B-1 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-7 IO Certificates, the Class HE: A-7 IO Original Notional Principal Amount) of
each Class, respectively. Each such Certificate registered in the name of the
Depositary's nominee shall bear the following legend:
"Unless this Certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC") to the Trustee
or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein."
SECTION 9.03. No Charge; Disposition of Void Certificates or Class C
Certificates. No service charge shall be made to a Certificateholder or Class C
Certificateholder for any transfer or exchange of Certificates or the Class C
Certificate, but the Certificate Registrar may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of Certificates or a Class C
Certificate. All Certificates and Class
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C Certificates surrendered for transfer and exchange shall be disposed of in a
manner approved by the Trustee.
SECTION 9.04. Mutilated, Destroyed, Lost or Stolen Certificates or
Class C Certificates. If (a) any mutilated Certificate or Class C Certificate is
surrendered to the Certificate Registrar, or the Certificate Registrar receives
evidence to its satisfaction of the destruction, loss or theft of any
Certificate or Class C Certificate, and (b) there is delivered to the
Certificate Registrar and the Trustee such security or indemnity as may be
required by each to save it harmless, then in the absence of notice to the
Certificate Registrar or the Trustee that such Certificate or Class C
Certificate has been acquired by a bona fide purchaser, the Trustee shall
execute and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate or Class C Certificate, a new Certificate
or Class C Certificate of like tenor and original denomination. Upon the
issuance of any new Certificate or Class C Certificate under this Section 9.04,
the Trustee may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses connected therewith. Any duplicate Certificate or Class C Certificate
issued pursuant to this Section 9.04 shall constitute complete and indefeasible
evidence of ownership of the Percentage Interest, as if originally issued,
whether or not the mutilated, destroyed, lost or stolen Certificate or Class C
Certificate shall be found at any time.
SECTION 9.05. Persons Deemed Owners. Prior to due presentation of a
Certificate or Class C Certificate for registration of transfer, the Servicer,
the Company, the Trustee, the Paying Agent and the Certificate Registrar may
treat the person in whose name any Certificate or Class C Certificate is
registered as the owner of such Certificate or Class C Certificate for the
purpose of receiving remittances pursuant to Section 8.01 and for all other
purposes whatsoever, and none of the Servicer, the Company, the Trustee, the
Certificate Registrar, the Paying Agent or any agent of the Servicer, the
Company, the Trustee, the Paying Agent or the Certificate Registrar shall be
affected by notice to the contrary.
SECTION 9.06. Access to List of Certificateholders' and Class C
Certificateholders' Names and Addresses. The Certificate Registrar will furnish
to the Trustee and the Servicer, within five days after receipt by the
Certificate Registrar of a request therefor from the Trustee in writing, a list,
in such form as the Trustee may reasonably require, of the names and addresses
of the Certificateholders and the Class C Certificateholders as of the most
recent Record Date. If Holders of Certificates representing, in the aggregate,
25% or more of the 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
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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 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."
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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
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action taken or omitted to be taken by the Servicer with respect to any
Contract. This indemnity shall survive any Service Transfer (but the original
Servicer's obligations under this Section 10.04 shall not relate to any actions
of any subsequent Servicer after a Service Transfer) and any payment of the
amount owing under, or any repurchase by the Company of, any such Contract.
SECTION 10.05. Operation of Indemnities. Indemnification under this
Article shall include, without limitation, reasonable fees and expenses of
counsel and expenses of litigation. If the Company or the Servicer has made any
indemnity payments to the Trustee pursuant to this Article and the Trustee
thereafter collects any of such amounts from others, the Trust will repay such
amounts collected to the Company or the Servicer, as the case may be, without
interest.
SECTION 10.06. REMIC Tax Matters. If a Class C Certificateholder,
pursuant to Section 6.06, pays any taxes or charges imposed upon the Trust, the
Master REMIC or the Subsidiary REMIC as a REMIC or otherwise, such taxes or
charges, except to the extent set forth in the following proviso, shall be
expenses and costs of the Trust and the Class C Certificateholders shall be
entitled to be reimbursed therefor out of the Certificate Account as provided in
Section 8.04; provided, however, that any such taxes or charges shall not be
expenses or costs of the Trust, nor will the Class C Certificateholders be
entitled to reimbursement therefor out of the Certificate Account, if and to the
extent that such taxes or charges resulted from a failure (i) by the Company,
the Trustee or any Servicer to comply with the provisions of Section 2.05, (ii)
by any Servicer to comply with the provisions of Section 6.06, or (iii) by the
Trustee to execute any tax returns pursuant to Section 11.11.
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ARTICLE XI
THE TRUSTEE
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,
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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;
d. The Trustee shall not be charged with knowledge of any event
referred to in Section 7.01 unless a Responsible Officer of the Trustee at
the Corporate Trust Office obtains actual knowledge of such event or the
Trustee receives written notice of such event from the Servicer or the
Certificateholders representing, in the aggregate, 25% or more of the
Aggregate Certificate Principal Balance; and
e. The Trustee may rely and shall be protected in acting or refraining
from taking any action in reliance on the advice of the Servicer in all
matters with respect to FHA Insurance. The Trustee shall not be liable for
any actions taken by the Servicer with respect to FHA Insurance, including
but not limited to the maintenance of such insurance and the submission of
claims to FHA.
None of the provisions contained in this Agreement shall in any event
require the Trustee to perform, or be responsible for the manner of performance
of, any of the obligations of the Company or the Servicer under this Agreement,
except during such time, if any, as the Trustee shall be the successor to, and
be vested with the rights, duties, powers and privileges of, the Servicer in
accordance with the terms of this Agreement. The Trustee shall not be required
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if there is reasonable ground for believing that the repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
SECTION 11.02. Certain Matters Affecting the Trustee. Except as
otherwise provided in Section 11.01:
a. The Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, Officer's Certificate, certificate of a
Servicing Officer, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, consent, order,
appraisal, bond or other paper or document believed by it to be genuine and
to have been signed or presented by the proper party or parties;
b. The Trustee may consult with counsel and any opinion of any counsel
for the Company or the Servicer shall be full and complete authorization
and protection in respect of any action taken or suffered or
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omitted by the Trustee hereunder in good faith and in accordance with such
Opinion of Counsel;
c. The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement, or to institute, conduct
or defend any litigation hereunder or in relation hereto, at the request,
order or direction of any of the Certificateholders, pursuant to the
provisions of this Agreement, unless such Certificateholders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which may be incurred therein or thereby;
provided, however, that nothing contained herein shall relieve the Trustee
of the obligations, upon the occurrence of an Event of Termination (which
has not been cured), to exercise such of the rights and powers vested in it
by this Agreement, and to use the same degree of care and skill in their
exercise as a prudent man would exercise or use under the circumstances in
the conduct of his own affairs;
d. Prior to the occurrence of an Event of Termination and after the
curing of all Events of Termination which may have occurred, the Trustee
shall not be bound to make any investigation into the facts or matters
stated in any resolution, 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
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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 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);
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b. except as otherwise expressly provided herein, to reimburse the
Trustee, to the extent requested by the Trustee, for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Agreement (including the reasonable
compensation and the expenses and disbursements of its agents and counsel),
except any such expense, disbursement or advance as may be attributable to
its negligence or bad faith; and
c. to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration
of this trust and its duties hereunder, including the costs and expenses of
defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder.
The covenants in this Section 11.06 shall be for the benefit of the
Trustee in its capacities as Trustee, Paying Agent and Certificate Registrar
hereunder, and shall survive the termination of this Agreement.
SECTION 11.07. Eligibility Requirements for Trustee. The Trustee
hereunder shall at all times be a financial institution organized and doing
business under the laws of the United States of America or any State, authorized
under such laws to exercise corporate trust powers and a Title I approved lender
pursuant to FHA Regulations, and shall have a combined capital and surplus of at
least $50,000,000 or shall be a member of a bank holding system the aggregate
combined capital and surplus of which is $50,000,000, provided that the
Trustee's separate capital and surplus shall at all times be at least the amount
required by Section 310(a)(2) of the Trust Indenture Act of 1939, as amended. If
such Person publishes reports of condition at least annually, pursuant to law or
to the requirements of a supervising or examining authority, then for the
purposes of this Section 11.07, the combined capital and surplus of such Person
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. In addition, the Trustee (or, if the
Trustee is 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 S&P of at least BBB or as shall be otherwise acceptable to S&P and have a
long-term deposit rating from Fitch of at least BBB or as shall be otherwise
acceptable to Fitch. In case at any time the Trustee shall cease to be eligible
in accordance with the provisions of this Section 11.07, the Trustee shall
resign immediately in the manner and with the effect specified in Section 11.08.
SECTION 11.08. Resignation or Removal of Trustee. The Trustee may at
any time resign and be discharged from the trusts hereby created by giving
written notice thereof to the Servicer and the Company. Upon receiving such
notice of
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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 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
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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 S&P, to Fitch and to each Certificateholder
and the Class C Certificateholder at their addresses as shown in the Certificate
Register. If the Servicer fails to mail such notice within ten days after
acceptance of appointment by the successor Trustee, the successor Trustee shall
cause such notice to be mailed at the expense of the Servicer.
SECTION 11.10. Merger or Consolidation of Trustee. Any Person into
which the Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding to
the corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such Person shall be eligible under the provisions
of Section 11.07, without the execution or filing of any paper or any further
act on the part of any of the parties hereto, anything herein to the contrary
notwithstanding. The Trustee shall promptly notify S&P and Fitch in the event it
is a party to any merger, conversion or consolidation.
SECTION 11.11. Tax Returns. Upon the Servicer's request, the Trustee
will furnish the Servicer with all such information as the Servicer may
reasonably require in connection with preparing all tax returns of the Trust and
the Trustee shall execute such returns.
SECTION 11.12. Obligor Claims. In connection with any offset defenses,
or affirmative claims for recovery, asserted in legal actions brought by
Obligors under one or more 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. ss. 433) as amended from time to time:
a. The Trustee is not, and shall not be deemed to be, either in any
individual capacity, as trustee hereunder or otherwise, a creditor, or a
joint venturer with or an Affiliate of, or acting in concert or cooperation
with, any
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seller of home improvements, in the arrangement, origination or making of
Contracts. The Trustee is the holder of the Contracts only as trustee on
behalf of the Certificateholders and the Class C Certificateholder, and not
as a principal or in any individual or personal capacity;
b. The Trustee shall not be personally liable for or obligated to pay
Obligors any affirmative claims asserted thereby, or responsible to
Certificateholders or the Class C Certificateholder for any offset defense
amounts applied against Contract payments, pursuant to such legal actions;
c. The Trustee will pay, solely from available Trust monies,
affirmative claims for recovery by Obligors only pursuant to final judicial
orders or judgments, or judicially approved settlement agreements,
resulting from such legal actions;
d. The Trustee will comply with judicial orders and judgments which
require its actions or cooperation in connection with Obligors' legal
actions to recover affirmative claims against Certificateholders and the
Class C Certificateholder;
e. The Trustee will cooperate with and assist Certificateholders and
the Class C Certificateholder in their defense of legal actions by Obligors
to recover affirmative claims if such cooperation and assistance is not
contrary to the interests of the Trustee as a party to such legal actions
and if the Trustee is satisfactorily indemnified for all liability, costs
and expenses arising therefrom; and
f. The Company hereby agrees to indemnify, hold harmless and defend
the Trustee, Certificateholders and the Class C Certificateholder from and
against any and all liability, loss, costs and expenses of the Trustee,
Certificateholders and the Class C Certificateholder resulting from any
affirmative claims for recovery asserted or collected by Obligors under the
Contracts. Notwithstanding any other provision of this Agreement, the
obligation of the Company under this Section 11.12(f) shall not terminate
upon a Service Transfer pursuant to Article VII.
SECTION 11.13. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions hereof, at any time, for the purpose of
meeting any legal requirements of any jurisdiction having authority over the
Trust, the Contracts or the Obligors, the Company and 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
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vest in such Person or Persons, in such capacity, such title to the Trust, or
any part thereof, and, subject to the other provisions of this Section 11.13,
such powers, duties, obligations, rights and trusts as the Company and the
Trustee may consider necessary or desirable. If the Company shall not have
joined in such appointment within 15 days after the receipt by it of a request
to do so, or in case an Event of Termination shall have occurred and be
continuing, the Trustee alone shall have the power to make such appointment. No
co-trustee or separate trustee hereunder shall be required to meet the terms of
eligibility as a successor trustee under Section 11.07 hereunder and no notice
to Certificateholders or the Class C Certificateholder of the appointment of
co-trustee(s) or separate trustee(s) shall be required under Section 11.09.
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.
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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 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 S&P and Fitch.
SECTION 11.16. Trustee Advances.
a. If the Servicer fails to deposit into the Certificate Account
Advances as required by Section 8.02, then the Trustee shall, subject to
the provisions of paragraph (b) below, from its own funds, deposit into the
Certificate Account the amount not so deposited by the Servicer on or
before the Business Day preceding the related Payment Date (a "Trustee
Advance").
b. The Trustee shall not be required to make any Trustee Advance if
and to the extent that it determines in good faith that the funds, if
advanced, would not be recoverable by it from subsequent amounts available
in the Certificate Account in accordance with Section 8.04(b) 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.
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ARTICLE XII
MISCELLANEOUS
SECTION 12.01. Servicer Not to Resign; Delegation of Servicing Duties.
The Servicer shall not resign from the obligations and duties hereby imposed on
it except upon determination that the performance of its duties hereunder is no
longer permissible under applicable law. Any such determination permitting the
resignation of the Servicer shall be evidenced by an Opinion of Counsel for the
Servicer to such effect delivered to the Trustee. No such resignation shall
become effective until the Trustee or a successor servicer shall have assumed
the responsibilities and obligations of the Servicer in accordance with Section
7.03.
Notwithstanding the foregoing, the Company, if it is the Servicer, may
delegate some or all of its servicing duties to a wholly owned subsidiary of the
Company, for so long as said subsidiary remains, directly or indirectly, a
wholly owned subsidiary of the Company. Notwithstanding any such delegation, the
Company shall retain all of the rights and obligations of the Servicer
hereunder.
SECTION 12.02. Company Not to Engage in Certain Transactions with
Respect to the Trust. The Company shall not:
a. Provide credit to any Certificateholder for the purpose of enabling
such Certificateholder to purchase Certificates;
b. Purchase any Certificates in an agency or trustee capacity; or
c. Loan any money to the Trust (other than Advances pursuant to
Section 8.02).
SECTION 12.03. Maintenance of Office or Agency. The Trustee will
maintain in Minneapolis or St. Paul, Minnesota, an office or agency where
Certificates or the Class C Certificates may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Trustee in
respect of the Certificates, the Class C Certificates and this Agreement may be
served. On the date hereof the Trustee's office for such purposes is located at
180 East 5th Street, Second Floor, St. Paul, Minnesota 55101. The Trustee will
give prompt written notice to the Company, the Servicer, the Certificateholders
and the Class C Certificateholders of any change in the location of the
Certificate Register or any such office or agency.
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SECTION 12.04. Termination.
a. The Trust created hereby and the respective obligations and
responsibilities of the Company, the Servicer and the Trustee created hereby
(other than the responsibility of the Trustee to make any final distributions to
Certificateholders and the Class C Certificateholders as set forth below) shall
terminate on the earlier of (a) the Payment Date on which the principal balance
of all of the 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 S&P, Fitch, the Certificateholders and the Class C
Certificateholders mailed no later than the fifth Business Day of the month of
the Final Payment Date specifying (1) the Final Payment Date upon which final
payment on the Certificates and the Class C Certificates will be made upon
presentation and surrender of Certificates and the Class C Certificates at the
office or agency of the Servicer therein designated; (2) the amount of any such
final payment; and (3) that the Record Date otherwise applicable to such Payment
Date is not applicable, payments being made only upon presentation and surrender
of the Certificates and the Class C Certificates at the office or agency of the
Servicer therein specified. Any notice of purchase of 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
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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.
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)(15), 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, the
Class HI: A-3 Principal Balance, the Class HI: A-4 Principal Balance and the
Class HI: A-5 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, the Class A-3 Pass-Through Rate, the Class HI:
A-4 Pass-Through Rate and the Class HI: A-5 Pass-Through Rate on the Class HI:
A-l Principal Balance, the Class HI: A-2 Principal Balance, the Class HI: A-3
Principal Balance, the Class HI: A-4 Principal Balance and the Class HI: A-5
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 ARM
Principal Balance, the Class HE: A-1B ARM Principal Balance, the Class HE: A-1
Principal Balance, the Class HE: A-2 Principal Balance, the Class HE: A-3
12-3
<PAGE>
Principal Balance, the Class HE: A-4 Principal Balance, the Class HE: A-5
Principal Balance, the Class HE: A-6 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 ARM Pass-Through Rate, the Class HE: A-1B ARM Pass-through Rate,
the Class HE: A-1 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, the Class
HE: A-5 Pass-Through Rate, the Class HE: A-6 Pass-Through Rate, and the Class
HE: A-7 IO Pass-Through Rate, on the Class HE: A-1A ARM 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, the Class HE: A-5 Principal Balance, the Class HE:
A-6 Principal Balance and the Class HE: A-7 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, (iv) as to
Class HE: B-1 Certificates, the Class HE: B-1 Principal Balance, together with
any Unpaid Class HE: B-1 Interest Shortfall, any Unpaid Class HE: B-1
Liquidation Loss Interest Shortfall and one month's interest at the Class HE:
B-1 Pass-Through Rate on the Class HE: B-1 Principal Balance, and (v) as to
Class HE: B-2 Certificates, the Class HE: B-2 Principal Balance, together with
any Unpaid Class HE: B-2 Interest Shortfall and one month's interest at the
Class HE: B-2 Pass-Through Rate on the Class HE: B-2 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-2 Guaranty
Payment deposited in the Certificate Account shall be distributed only to the
Class HE: B-2 Certificateholders. The distribution on the Final Payment Date
pursuant to this Section 12.04 shall be in lieu of the distribution otherwise
required to be made on such Payment Date in respect of each Class of
Certificates and the Class C 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
12-4
<PAGE>
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 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.
12-5
<PAGE>
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,
662/3% 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,
662/3% or more of the Aggregate Certificate Principal Balance, and the prior
written confirmation of S&P and Fitch that the rating of the Certificates will
not be lowered or withdrawn following such delegation, or (b) the prior written
consent of all of the Certificateholders, and any attempt to do so without such
consent shall be void. 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 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
12-6
<PAGE>
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 S&P and Fitch 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, 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.
12-7
<PAGE>
e. Concurrently with the solicitation of any consent pursuant to this
Section 12.08, the Trustee shall furnish written notification to S&P and Fitch.
Promptly after the execution of any amendment or consent pursuant to this
Section 12.08, the Trustee shall furnish written notification of the substance
of such amendment to S&P, Fitch, each Certificateholder and the Class C
Certificateholders.
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.
12-8
<PAGE>
SECTION 12.09. Notices. All communications and notices pursuant hereto
to the Servicer, the Company, the Trustee, S&P and Fitch shall be in writing and
delivered or mailed to it at the appropriate following address:
If to the Company or the Servicer:
Green Tree Financial Corporation
1100 Landmark Towers
345 St. Peter Street
St. Paul, Minnesota 55102-1639
Attention: Chief Financial Officer
Telecopier Number: (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 S&P:
Standard & Poor's
26 Broadway, 10th Floor
New York, New York 10004
Attention: Ernestine Warner, Mortgage Surveillance
If to Fitch:
Fitch IBCA, Inc.
One State Street Plaza
New York, New York 10004
Attention: Jenine Potolsky
or at such other address as the party may designate by notice to the other
parties hereto, which notice shall be effective when received.
All communications and notices pursuant hereto to a Certificateholder
or the Class C Certificateholders shall be in writing and delivered or mailed at
the address shown in the Certificate Register.
12-9
<PAGE>
SECTION 12.10. Merger and Integration. Except as specifically stated
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived or supplemented except as provided herein.
SECTION 12.11. Headings. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
SECTION 12.12. Governing Law. This Agreement shall be governed by,
and construed and enforced in accordance with, the laws of the State of
Minnesota.
12-10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized
this 1st day of August, 1998.
GREEN TREE FINANCIAL CORPORATION
By
--------------------------------
Its
----------------------------
Attest:
- ----------------------------------
Its
-------------------------------
U.S. BANK TRUST NATIONAL ASSOCIATION,
not in its individual capacity
but solely as Trustee
By
--------------------------------
Its
----------------------------
Attest:
- ----------------------------------
Its
-------------------------------
12-11
<PAGE>
STATE OF MINNESOTA )
) ss.
COUNTY OF RAMSEY )
The foregoing instrument was acknowledged before me this 1st day of August,
1998, by _______________, of Green Tree Financial Corporation, a Delaware
corporation, on behalf of the corporation.
-----------------------------------
Notary Public
[SEAL]
STATE OF MINNESOTA )
) ss.
COUNTY OF RAMSEY )
The foregoing instrument was acknowledged before me this day 1st of August,
1998, by _______________, of U.S. Bank Trust National Association, a national
banking association, on behalf of the national banking association.
-----------------------------------
Notary Public
[SEAL]
12-12
<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][4][5] No.
(Senior)
Cut-off Date: as defined in the Pass-Through Rate: ___%
Pooling and Servicing Agreement
dated August 1, 1998 Denomination: $________
First Payment Date: Aggregate Denomination of
September 15, 1998 All Class HI: A-[1][2][3][4][5]
Certificates: $__________
Servicer: Final Scheduled Payment Date:
Green Tree Financial Corporation __________ (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-D, CLASS HI: A-[1][2][3][4][5] (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-D, Class HI: A-[1][2][3][4][5] issued by Home Improvement and Home
Equity Loan Trust 1998-D (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
A-1
<PAGE>
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 August 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 September
1998, so long as the Agreement has not been terminated, by check (or, if such
Certificateholder holds Class HI: A-[1][2][3][4][5] Certificates with an
aggregate Percentage Interest of at least 5% of the Class HI: A-[1][2][3][4][5]
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][4][5]
Distribution Amount for such Payment Date. Distributions of interest and
principal on the Class HI: A-[1][2][3][4][5] Certificates will be made primarily
from amounts available in respect of the Home Improvement Contracts. The final
scheduled Payment Date of this Certificate is___________ or the next succeeding
Business Day if such ___________is not a Business Day.
The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the funds in the Certificate Account to the extent
available for distribution to the Certificateholder as provided in the Agreement
for payment hereunder and that the Trustee in its individual capacity is not
personally liable to the Certificateholder for any amounts payable under this
Certificate or the Agreement or, except as expressly provided in the Agreement,
subject to any liability under the Agreement. By acceptance of this Certificate,
the Certificateholder agrees to disclosure of his, her or its name and address
to other Certificateholders under the conditions specified in the Agreement.
This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds and duties evidenced hereby
and the rights, duties and immunities of the Trustee. Copies of the Agreement
and all amendments thereto will be provided to any Certificateholder free of
charge upon a written request to the Trustee.
A-2
<PAGE>
As provided in the Agreement and subject to the limitations set forth
therein, the transfer of this Certificate is registrable in the Certificate
Register of the Certificate Registrar upon surrender of this Certificate for
registration of transfer at the office or agency maintained by the Trustee in
Minneapolis or St. Paul, Minnesota, accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Certificate Registrar duly
executed by the holder hereof or his or her attorney duly authorized in writing,
and thereupon one or more new Certificates evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.
[Unless this Certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC") to the Trustee
or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL in as much as the registered owner
hereof, Cede & Co., has an interest herein.]
The Company, the Servicer, the Trustee, the Paying Agent and the
Certificate Registrar and any agent of the Company, the Servicer, the Trustee,
the Paying Agent or the Certificate Registrar may treat the person in whose name
this Certificate is registered as the owner hereof for all purposes, and neither
the Company, the Servicer, the Trustee, the Paying Agent, the Certificate
Registrar nor any such agent shall be affected by any notice to the contrary.
A-3
<PAGE>
IN WITNESS WHEREOF, Home Improvement and Home Equity Loan Trust 1998-D
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-D
By: U.S. BANK TRUST NATIONAL
ASSOCIATION
By:
-------------------------------
Authorized Officer
A-4
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ______________________________ the within Certificate for Home Improvement
and Home Equity Loans, Series 1998-D, and does hereby irrevocably constitute and
appoint ______________________________ Attorney to transfer the said certificate
on the Certificate Register maintained by the Trustee, with full power of
substitution in the premises.
Dated: _________ By:
-------------------------------
Signature
A-5
<PAGE>
EXHIBIT B
FORM OF CLASS 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 August 1, 1998 Home Improvement Contract Rate)]
First Payment Date:
September 15, 1998 Denomination: $___________
Servicer: Aggregate Denomination of
Green Tree Financial Corporation All Class HI: M-[1][2] Certificates:
$____________
Final Scheduled Payment Date:
________ (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-D, 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-D, Class HI: M-[1][2] issued by Home Improvement and Home Equity
Loan Trust 1998-D (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 August 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 September
1998, 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 ___________or the next succeeding Business Day if such
___________ 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
B-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 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 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.
B-3
<PAGE>
[Unless this Certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC") to the Trustee
or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL in as much as the registered owner
hereof, Cede & Co., has an interest herein.]
The Company, the Servicer, the Trustee, the Paying Agent and the
Certificate Registrar and any agent of the Company, the Servicer, the Trustee,
the Paying Agent or the Certificate Registrar may treat the person in whose name
this Certificate is registered as the owner hereof for all purposes, and neither
the Company, the Servicer, the Trustee, the Paying Agent, the Certificate
Registrar nor any such agent shall be affected by any notice to the contrary.
B-4
<PAGE>
IN WITNESS WHEREOF, Home Improvement and Home Equity Loan Trust 1998-D
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-D
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-D, 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: Pass-Through Rate: ___%
as defined in the Pooling and [(or, if less, the Weighted Average
Servicing Agreement dated Home Improvement Contract Rate)]
August 1, 1998
Denomination: $__________
First Payment Date:
September 15, 1998 Aggregate Denomination of all Class HI:
B-[1][2] Certificates:
$___________
Servicer: Final Scheduled Payment Date:
Green Tree Financial Corporation ___________ (or if such day is not a
Business Day, then the next succeeding
Business Day)
CUSIP: ______________
CERTIFICATES FOR HOME IMPROVEMENT AND HOME EQUITY LOANS
SERIES 1998-D, 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-D, Class HI: B-[1][2], issued by Home Improvement and Home Equity
Loan Trust 1998-D (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 August 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 September
1998, 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 ___________
or the next succeeding Business Day if such ___________ 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
C-2
<PAGE>
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 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 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.
C-3
<PAGE>
[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-4
<PAGE>
IN WITNESS WHEREOF, Home Improvement and Home Equity Loan Trust 1998-D
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-D
By: U.S. BANK TRUST NATIONAL
ASSOCIATION
By:
-------------------------------
Authorized Officer
C-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-D, and does hereby irrevocably constitute and
appoint ____________________________ Attorney to transfer the said certificate
on the Certificate Register maintained by the Trustee, with full power of
substitution in the premises.
Dated: _________________ By:
-------------------------------
Signature
C-6
<PAGE>
EXHIBIT D-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][2][3][4][5][6] No.
(Senior)
Cut-off Date: as defined in the Pass-Through Rate: ___%
Pooling and Servicing Agreement
dated August 1, 1998 Denomination: $________
First Payment Date: Aggregate Denomination of
September 15, 1998 all Class HE: A-[1][2][3][4][5][6]
Certificates: $__________
Servicer: Final Scheduled Payment Date:
Green Tree Financial Corporation ___________ (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-D, CLASS HE: A-[1][2][3][4][5][6] (SENIOR)
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN
GREEN TREE FINANCIAL CORPORATION OR ANY AFFILIATE THEREOF, EXCEPT TO THE EXTENT
SET FORTH IN THE AGREEMENT.
This certifies that ____________ is the registered owner of the
undivided Percentage Interest represented by the original principal amount set
forth above in the Certificates for Home Improvement and Home Equity Loans,
Series 1998-D, Class HE: A-[1][2][3][4][5][6] issued by Home Improvement and
Home Equity Loan Trust 1998-D (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
D-1-1
<PAGE>
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 August 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 September
1998, so long as the Agreement has not been terminated, by check (or, if such
Certificateholder holds Class HE: A-[1][2][3][4][5][6] Certificates with an
aggregate Percentage Interest of at least 5% of the Class HE:
A-[1][2][3][4][5][6] Certificates and so desires, by wire transfer pursuant to
instructions delivered to the Trustee at least 10 days prior to such Payment
Date) to the registered Certificateholder at the address appearing on the
Certificate Register as of the Business Day immediately preceding such Payment
Date, in an amount equal to the Certificateholder's Percentage Interest of the
Class HE: A-[1][2][3][4][5][6] Distribution Amount for such Payment Date.
Distributions of interest and principal on the Class HE: A-[1][2][3][4][5][6]
Certificates will be made primarily from amounts available in respect of the
Home Equity Contracts. The final scheduled Payment Date of this Certificate is
___________ or the next succeeding Business Day if such ___________ 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
D-1-2
<PAGE>
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-1-3
<PAGE>
IN WITNESS WHEREOF, Home Improvement and Home Equity Loan Trust 1998-D
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-D
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-D, 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][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][B] ARM No.
(Senior)
Cut-off Date: Pass-Through Rate: [ ___%]
as defined in the Pooling and [Variable rate equal to Class
Servicing Agreement dated August 1, HE: A-1B ARM Pass-Through Rate]
1998
Denomination: $________
First Payment Date: Aggregate Denomination of
September 15, 1998 all Class HE: A-1[A][B] ARM
Certificates: $________
Servicer: Final Scheduled Payment Date:
Green Tree Financial Corporation ___________ (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-D, CLASS HE: A-1[A][B] ARM (SENIOR)
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN
GREEN TREE FINANCIAL CORPORATION OR ANY AFFILIATE THEREOF, EXCEPT TO THE EXTENT
SET FORTH IN THE AGREEMENT.
This certifies that _________________ is the registered owner of the
undivided Percentage Interest represented by the original principal amount set
forth above in the Certificates for Home Improvement and Home Equity Loans,
Series 1998-D, Class HE: A-1[A][B] ARM issued by Home Improvement and Home
Equity Loan Trust 1998-D (the "Trust"), which includes among its assets two
sub-pools, one
D-2-1
<PAGE>
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 August 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 September
1998, so long as the Agreement has not been terminated, by check (or, if such
Certificateholder holds Class HE: A-1[A][B] ARM Certificates with an aggregate
Percentage Interest of at least 5% of the Class HE: A-1[A][B] ARM Certificates
and so desires, by wire transfer pursuant to instructions delivered to the
Trustee at least 10 days prior to such Payment Date) to the registered
Certificateholder at the address appearing on the Certificate Register as of the
Business Day immediately preceding such Payment Date, in an amount equal to the
Certificateholder's Percentage Interest of the Class HE: A-1[A][B] ARM
Distribution Amount for such Payment Date. Distributions of interest and
principal on the Class HE: A-1 [A][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 ___________ or the next
succeeding Business Day if such ___________ 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,
D-2-2
<PAGE>
benefits, obligations, proceeds and duties evidenced hereby and the rights,
duties and immunities of the Trustee. Copies of the Agreement and all amendments
thereto will be provided to any Certificateholder free of charge upon a written
request to the Trustee.
As provided in the Agreement and subject to the limitations set forth
therein, the transfer of this Certificate is registrable in the Certificate
Register of the Certificate Registrar upon surrender of this Certificate for
registration of transfer at the office or agency maintained by the Trustee in
Minneapolis or St. Paul, Minnesota, accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Certificate Registrar duly
executed by the holder 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-D
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-D
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-D, 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-7 IO CERTIFICATE
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR
INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE.
Class HE: A-7 IO No.
(Senior)
Cut-off Date: Pass-Through Rate: ___%
as defined in the Pooling and Class HE: A-7 IO Original Notional
Servicing Agreement dated Principal Amount: $110,000,000
August 1, 1998
Certificates: $ _________ (or the Class
First Payment Date: HE: A Principal Balance for such
September 15, 1998 Payment Date, if less)
Final Scheduled Payment Date:
___________ (or if such day is not a
Servicer: Business Day, then the next succeeding
Green Tree Financial Corporation Business Day)
CUSIP: ______________
CERTIFICATE FOR HOME IMPROVEMENT AND HOME EQUITY LOANS
SERIES 1998-D, CLASS HE: A-7 IO (SENIOR)
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN
GREEN TREE FINANCIAL CORPORATION OR ANY AFFILIATE THEREOF, EXCEPT TO THE EXTENT
SET FORTH IN THE AGREEMENT.
This certifies that ______________ is the registered owner of the undivided
Percentage Interest represented by the Class HE: A-7 IO Original Notional
Principal Amount set forth above in the Certificates for Home Improvement and
Home Equity Loans, Series 1998-D, Class HE: A-7 IO issued by Home Improvement
and Home Equity Loan Trust 1998-D (the "Trust"), which includes among its assets
two sub-pools, one of which is comprised of home
D-3-1
<PAGE>
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 August 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 September
1998, so long as the Agreement has not been terminated, by check (or, if such
Certificateholder holds Class HE: A-7 IO Certificates with an aggregate
Percentage Interest of at least 5% of the Class HE: A-7 IO Certificates and so
desires, by wire transfer pursuant to instructions delivered to the Trustee at
least 10 days prior to such Payment Date) to the registered Certificateholder at
the address appearing on the Certificate Register as of the Business Day
immediately preceding such Payment Date, in an amount equal to the
Certificateholder's Percentage Interest of the Class HE: A-7 IO Distribution
Amount for such Payment Date. Distributions of interest on the Class HE: A-7 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
___________ or the next succeeding Business Day if such ___________ 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
D-3-2
<PAGE>
to disclosure of his, her or its name and address to other Certificateholders
under the conditions specified in the Agreement.
This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds and duties evidenced hereby
and the rights, duties and immunities of the Trustee. Copies of the Agreement
and all amendments thereto will be provided to any Certificateholder free of
charge upon a written request to the Trustee.
As provided in the Agreement and subject to the limitations set forth
therein, the transfer of this Certificate is registrable in the Certificate
Register of the Certificate Registrar upon surrender of this Certificate for
registration of transfer at the office or agency maintained by the Trustee in
Minneapolis or St. Paul, Minnesota, accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Certificate Registrar duly
executed by the holder hereof or his or her attorney duly authorized in writing,
and thereupon one or more new Certificates evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.
[Unless this Certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC") to the Trustee
or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL in as much as the registered owner
hereof, Cede & Co., has an interest herein.]
The Company, the Servicer, the Trustee, the Paying Agent and the
Certificate Registrar and any agent of the Company, the Servicer, the Trustee,
the Paying Agent or the Certificate Registrar may treat the person in whose name
this Certificate is registered as the owner hereof for all purposes, and neither
the Company, the Servicer, the Trustee, the Paying Agent, the Certificate
Registrar nor any such agent shall be affected by any notice to the contrary.
D-3-3
<PAGE>
IN WITNESS WHEREOF, Home Improvement and Home Equity Loan Trust 1998-D
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-D
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-D, 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 August 1, 1998 Home Equity Contract Rate)]
First Payment Date:
September 15, 1998 Denomination: $________
Servicer: Aggregate Denomination of
Green Tree Financial Corporation all Class HE: M-[1][2] Certificates:
$___________
Final Scheduled Payment Date:
___________ (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-D, 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.
E-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-D, Class HE: M-[1][2] issued by Home Improvement and Home Equity
Loan Trust 1998-D (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 August 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 September
1998, 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 ___________ or the next succeeding Business Day if such
___________ 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
E-2
<PAGE>
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 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 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
E-3
<PAGE>
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.
E-4
<PAGE>
IN WITNESS WHEREOF, Home Improvement and Home Equity Loan Trust 1998-D
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-D
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-D, 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,
THE CLASS HE: M CERTIFICATES [AND THE CLASS HE: B-1 CERTIFICATES] AS DESCRIBED
IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
Class HE: 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 August 1, 1998 Home Equity Contract Rate)]
First Payment Date:
September 15, 1998 Denomination: $________
Servicer: Aggregate Denomination of
Green Tree Financial Corporation all Class HE: B-[1][2] Certificates:
$___________
Final Scheduled Payment Date:
___________ (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-D, CLASS HE: B-[1][2] (SUBORDINATE)
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN
GREEN TREE FINANCIAL CORPORATION OR ANY AFFILIATE THEREOF, EXCEPT TO THE EXTENT
SET FORTH IN THE AGREEMENT.
This certifies that ______________ is the registered owner of the
undivided Percentage Interest represented by the original principal amount set
forth above in the Certificates for Home Improvement and Home Equity Loans,
Series 1998-D, Class HE: B-[1][2], issued by Home Improvement and Home Equity
Loan Trust 1998-D (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-2 Limited Guaranty]. The Trust has been created pursuant to a Pooling and
Servicing Agreement (the "Agreement"), dated as of August 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 September
1998, so long as the Agreement has not been terminated, by check (or, if such
Certificateholder holds Class HE: B-[1][2] Certificates with an aggregate
Percentage Interest of at least 5% of the Class HE: 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 HE: B-[1][2] Distribution
Amount [and any Class HE: B-2 Guaranty Payment] for such Payment Date.
Distributions of interest and principal on the Class HE: B-[1][2] Certificates
will be made primarily from amounts available in respect of the Home Equity
Contracts.
F-2
<PAGE>
The final scheduled Payment Date of this Certificate is ___________ or the next
succeeding Business Day if such ___________ 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-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 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 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
F-3
<PAGE>
the office or agency maintained by the Trustee in Minneapolis or St. Paul,
Minnesota, accompanied by a written instrument of transfer in form satisfactory
to the Trustee and the Certificate Registrar duly executed by the holder thereof
or his or her attorney duly authorized in writing, and thereupon one or more new
Certificates evidencing the same aggregate Percentage Interest will be issued to
the designated transferee or transferees.
[Unless this Certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC") to the Trustee
or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL in as much as the registered owner
hereof, Cede & Co., has an interest herein.]
The Company, the Servicer, the Trustee, the Paying Agent and the
Certificate Registrar and any agent of the Company, the Servicer, the Trustee,
the Paying Agent or the Certificate Registrar may treat the person in whose name
this Certificate is registered as the owner hereof for all purposes, and neither
the Company, the Servicer, the Trustee, the Paying Agent, the Certificate
Registrar nor any such agent shall be affected by any notice to the contrary.
F-4
<PAGE>
IN WITNESS WHEREOF, Home Improvement and Home Equity Loan Trust 1998-D
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-D
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-D, 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 August 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-D, 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
(including, without limitation, all related mortgages, deeds of trust and
security deeds and any and all rights to receive payments on or with respect to
the Initial Contracts due after the applicable 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 an Initial Contract for the benefit of the creditor of such Initial
Contract, (iv) all rights the Company may have against the originating
contractor or lender with respect to Initial 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 Initial Contracts, (vi) all rights under any title insurance policies, if
applicable, on any of the properties securing Initial Contracts, (vii) all
documents contained in the Contract Files relating to the Initial Contracts,
(viii) amounts in the Certificate 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 August, 1998.
GREEN TREE FINANCIAL CORPORATION
[Seal] By:
--------------------------------
[Name]
[Title]
G-1
<PAGE>
EXHIBIT H
FORM OF CERTIFICATE OF OFFICER
GREEN TREE FINANCIAL CORPORATION
The undersigned certifies that he is a [title] of Green Tree Financial
Corporation, a Delaware corporation (the "Company"), and that as such he is duly
authorized to execute and deliver this certificate on behalf of the Company in
connection with the Pooling and Servicing Agreement dated as of August 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
August, 1998.
[Name]
[Title]
H-1
<PAGE>
EXHIBIT I
FORM OF OPINION OF COUNSEL FOR THE COMPANY
The opinion of Dorsey & Whitney LLP 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-2
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-2 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
I-1
<PAGE>
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.
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 avoidable as a
preferential transfer under Section 547 of the United States Bankruptcy Code (11
U.S.C. ss. 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
I-2
<PAGE>
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. ss.336.9-301(3)) who becomes such
after the Closing Date, except that a subsequent purchaser of any Contract who
gives new value and takes possession thereof in the ordinary course of his
business would have priority over the Trustee's security interest in such
Contract, if such purchaser acts without knowledge that such Contract was
subject to a security interest. We have assumed for the purposes of this opinion
that during the term of the Pooling and Servicing Agreement the Trustee, or its
custodian, shall maintain possession of the Contract Files for the purpose of
perfecting the assignment to the Trustee of the Contracts. We express no opinion
with respect to the enforceability of any individual Contract or the existence
of any claims, rights or other matters in favor of any Obligor or the owner of
any financed home improvement.
9. In reliance upon certain representations and warranties set forth in
the Pooling and Servicing Agreement and assuming that the Company and the
Trustee comply with the requirements of the Pooling and Servicing Agreement,
including the filing 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 avoidable as a fraudulent transfer under the Uniform
Fraudulent Transfer Act as in effect in Minnesota on the date hereof (Minn.
Stat. ss.ss. 513.41 through 513.51), nor, should the Company become a debtor
under the United States
I-3
<PAGE>
Bankruptcy Code, as a fraudulent transfer under Section 548 of the United States
Bankruptcy Code (11 U.S.C. ss. 548) as in effect on the date hereof.
I-4
<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-D (the "Trust") created
pursuant to the Pooling and Servicing Agreement dated as of August 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 ["Initial
Contracts"] ["Subsequent 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 Initial Contracts (due after the [Cut-off Date]
[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 [an Initial] [a
Subsequent] Contract for the benefit of the creditor of such Initial Contract,
(iv) all rights the Company may have against the originating contractor or
lender with respect to [Initial/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
[Initial/Subsequent] Contracts, (vi) all rights under any title insurance
policies, if applicable, on any of the properties securing [Initial/Subsequent]
Contracts, (vii) all documents contained in the Contract Files relating to the
[Initial/Subsequent] Contracts, [(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-2 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.
J-1
<PAGE>
IN WITNESS WHEREOF, ___________________ as Trustee has caused this
acknowledgment to be executed by its duly authorized officer and its corporate
seal affixed hereto as of this ___ day of August, 1998.
U.S. BANK TRUST NATIONAL
ASSOCIATION
as Trustee
[Seal] By:
-------------------------------
[Name]
[Title]
J-2
<PAGE>
EXHIBIT K
FORM OF CERTIFICATE OF SERVICING OFFICER
GREEN TREE FINANCIAL CORPORATION
The undersigned certifies that he is a [title] of Green Tree Financial
Corporation, a Delaware corporation (the "Company"), and that as such he is duly
authorized to execute and deliver this certificate on behalf of the Company
pursuant to Section 6.02 of the Pooling and Servicing Agreement (the
"Agreement") dated as of August 1, 1998 between the Company and U.S. Bank Trust
National Association, as Trustee of Home Improvement and Home Equity Loan Trust
1998-D (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
August, 1998.
GREEN TREE FINANCIAL CORPORATION
By:
-------------------------------
[Name]
[Title]
K-1
<PAGE>
EXHIBIT L
FORM OF CLASS C CERTIFICATE
[MASTER] [SUBSIDIARY]
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS 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,
THE CLASS HE: B-1 CERTIFICATES AND THE CLASS HE: B-2 CERTIFICATES AS DESCRIBED
IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT AND
LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM
REGISTRATION UNDER SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN
ACCORDANCE WITH THE PROVISIONS OF SECTION 9.02 OF THE POOLING AND SERVICING
AGREEMENT REFERRED TO HEREIN.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE. THIS CERTIFICATE MAY ONLY BE TRANSFERRED TO A PERMITTED TRANSFEREE
(AS DEFINED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN); ANY SUCH
TRANSFER MUST ALSO SATISFY THE OTHER REQUIREMENTS OF SECTION 9.02 OF SUCH
POOLING AND SERVICING AGREEMENT.
L-1
<PAGE>
Class C [Master] [Subsidiary] No.
(Subordinate)
Cut-off Date: Percentage Interest:
Is defined in the Pooling
and Servicing Agreement
First Payment Date:
September 15, 1998
CERTIFICATE FOR HOME IMPROVEMENT
AND HOME EQUITY LOANS SERIES 1998-D
Original Series 1998-D 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-D
(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 August 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 September
1998, so long as the Agreement has not been terminated, by check to the
registered Class C [Master] [Subsidiary] Certificateholder at the address
appearing on the Certificate Register as of the Business Day immediately
preceding such Payment Date, in an amount equal to (1) the difference between
(A) the Sub-Pool HI Amount Available, and (B) the
L-2
<PAGE>
sum of (i) the Class HI: A Distribution Amount, (ii) the Class HI: M-1
Distribution Amount, (iii) the Class HI: M-2 Distribution Amount, (iv) the Class
HI: B-1 Distribution Amount, (v) the Class HI: B-2 Distribution Amount, (vi) the
Monthly Servicing Fee with respect to the Home Improvement Contracts, (vii)
amounts to reimburse the Trustee or any successor Servicer for any payments of
FHA Insurance premiums not paid by the Company, as Servicer, and for which the
Trustee or such successor Servicer has not been reimbursed by the Company,
(viii) amounts to reimburse the Servicer or the Trustee, as applicable, for
prior Advances with respect to the Home Improvement Contracts, and (ix) amounts
necessary to reimburse the Company for any previous unreimbursed Class HI: B-2
Guaranty Payments, and (2) the difference between (A) the Sub-Pool HE Amount
Available, and (B) the sum of (i) the Class HE: A Distribution Amount, (ii) the
Class HE: M-1 Distribution Amount, (iii) the Class HI: M-2 Distribution Amount,
(iv) the Class HE: B-1 Distribution Amount, (v) the Class HE: B-2 Distribution
Amount, (vi) the Monthly Servicing Fee with respect to the Home Equity
Contracts, (vii) amounts to reimburse the Servicer or the Trustee, as
applicable, for prior Advances with respect to the Home Equity Contracts, and
(viii) amounts necessary to reimburse the Company for any previous unreimbursed
Class HE: B-2 Guaranty Payments. The final scheduled Payment Date of this Class
C [Master] [Subsidiary] Certificate is [__________] [__________] or the next
succeeding Business Day if such [__________] [__________] is not a Business Day.
The Class C [Master] [Subsidiary] Certificateholder, by its acceptance
of this Certificate, agrees that it will look solely to the funds in the
Certificate Account to the extent available for distribution to the Class C
[Master] [Subsidiary] Certificateholder as provided in the Agreement for payment
hereunder and that the Trustee in its individual capacity is not personally
liable to the Class C [Master] [Subsidiary] Certificateholder for any amounts
payable under this Certificate or the Agreement or, except as expressly provided
in the Agreement, subject to any liability under the Agreement. By acceptance of
this Certificate, the Class C [Master] [Subsidiary] 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
L-3
<PAGE>
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
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
L-4
<PAGE>
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-5
<PAGE>
IN WITNESS WHEREOF, Home Improvement and Home Equity Loan Trust 1998-D
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-D
By: U.S. BANK TRUST NATIONAL
ASSOCIATION
By:
-------------------------------
Authorized Officer
L-6
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto __________________________ the within Certificate for Home Improvement and
Home Equity Loans, Series 1998-D, 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-7
<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 August 1, 1998 between the Company and U.S. Bank Trust
National Association, as Trustee of Home Improvement and Home Equity Loan Trust
1998-D (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 August, 1998.
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 August 1, 1998 between the Company and U.S. Bank
Trust National Association, as Trustee of Home Improvement and Home Equity Loan
Trust 1998-D (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 [description, as to each Contract, as to how
it satisfies the definition of "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,
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. The requirements of Section 2.03 of the Agreement have been met with
respect to each Eligible Substitute Contract.
[6. There has been deposited in the Certificate Account the amounts
listed on the schedule attached hereto as the amount by which the Scheduled
Principal Balance of each Replaced 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 August, 1998.
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 August 1, 1998 between the Company and U.S. Bank Trust
National Association, as Trustee of Home Improvement and Home Equity Loan Trust
1998-D (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 [description, as to each Contract, as to how it
satisfies the definition of "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, 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 , 1998.
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-D, Class C
The undersigned purchaser (the "Purchaser") understands that the
purchase of the above-referenced certificates (the "Certificates") may be made
only by institutions which are "Accredited Investors" under Regulation D, as
promulgated under the Securities Act of 1933, as amended (the "1933 Act"), which
includes banks, savings and loan associations, registered brokers and dealers,
insurance companies, investment companies, and organizations described in
Section 501(c)(3) of the Internal Revenue Code, corporations, business trusts
and partnerships, not formed for the specific purpose of acquiring the
Certificates offered, with total assets in excess of $5,000,000. The undersigned
represents on behalf of the Purchaser that the Purchaser is an "Accredited
Investor" within the meaning of such definition. The Purchaser is urged to
review carefully the responses, representations and warranties it is making
herein.
Representations and Warranties
The Purchaser makes the following representations and warranties in
order to permit the Trustee, Green Tree Financial Corporation, and to determine
its suitability as a purchaser of Certificates and to determine that the
exemption from registration relied upon by Green Tree Financial Corporation
under Section 4(2) of the 1933 Act is available to it.
1. The Purchaser understands that the Certificates have not been and
will not be registered under the 1933 Act and may be resold (which resale is not
currently contemplated) only if registered pursuant to the provisions of the
1933 Act or if an exemption from registration is available, that Green Tree
Financial Corporation is
N-1
<PAGE>
not required to register the Certificates and that any transfer must comply with
Section 9.02 of the Pooling and Servicing Agreement relating to the
Certificates.
2. The Purchaser will comply with all applicable federal and state
securities laws in connection with any subsequent resale of the Certificates.
3. The Purchaser is a sophisticated institutional investor and has
knowledge and experience in financial and business matters and is capable of
evaluating the merits and risks of its investment in the Certificates and is
able to bear the economic risk of such investment. The Purchaser has reviewed
the Prospectus Supplement dated August 14, 1998, to the Prospectus dated August
14, 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 Certificate, acknowledges
(i) it may incur tax liabilities in excess of any cash flows generated by the
interest and (ii) it intends to pay the taxes associated with holding the Class
C Certificate as they become due.
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
[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-D
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. Sub-Pool HI Senior Percentage _________
4. Class HI: B Percentage _________
CLASS HI: A CERTIFICATES
INTEREST
5. Aggregate current interest
(a) Class HI: A-1 Pass-through Rate (5.97%)
(b) Class HI: A-l Interest _________
(c) Class HI: A-2 Pass-through Rate (5.94%)
(d) Class HI: A-2 Interest _________
(e) Class HI: A-3 Pass-through Rate (6.08%)
(f) Class HI: A-3 Interest _________
Q-1
<PAGE>
(g) Class HI: A-4 Pass-through Rate (6.20%)
(h) Class HI: A-4 Interest _________
(i) Class HI: A-5 Pass-through Rate (6.35%)
(j) Class HI: A-5 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 (6.61%)
(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 _________
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 7.00%)
Q-2
<PAGE>
(b) Class HI: B-2 Interest _________
(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 (7.70%)
(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:
(a) Class HI: A-1 _________
(b) Class HI: A-2 _________
(c) Class HI: A-3 _________
(d) Class HI: A-4 _________
(e) Class HI: A-5 _________
25. (a) Class HI: A-1 Principal Balance _________
(b) Class HI: A-2 Principal Balance _________
(c) Class HI: A-3 Principal Balance _________
(d) Class HI: A-4 Principal Balance _________
(e) Class HI: A-5 Principal Balance _________
26. Amount, if any, by which the Senior Percentage of the
Sub-Pool HI 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 amount in clause (c)
of the Class HI: M-1 Formula 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 Senior Percentage of the
Sub-Pool HI 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 such remaining Sub-Pool HI
Amount Available not been less than the Senior Percentage of the Sub-Pool HI
Formula Principal Distribution Amount. Otherwise, the Senior Percentage of the
Sub-Pool HI Formula Principal Distribution Amount 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 amount in clause (c)
of the Class HI: M-2 Formula 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 September 2001)
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
Q-5
<PAGE>
Pool Principal Balance may not
exceed 10%) _________
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 15.4%) _________
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 amount in clause (c) of the
Class HI: B-1 Formula Distribution Amount exceeds the amount
distributed pursuant to item (41) _________
Q-6
<PAGE>
CLASS HI: A CERTIFICATES
44. Sub-Pool HI Supplementary Principal Distribution Amount _________
PRINCIPAL
45. Class HI: A principal distribution:
(a) Class HI: A-1 _________
(b) Class HI: A-2 _________
(c) Class HI: A-3 _________
(d) Class HI: A-4 _________
(e) Class HI: A-5 _________
46. (a) Class HI: A-1 Principal Balance _________
(b) Class HI: A-2 Principal Balance _________
(c) Class HI: A-3 Principal Balance _________
(d) Class HI: A-4 Principal Balance _________
(e) Class HI: A-5 Principal Balance _________
CLASS HI: M-1 CERTIFICATES
47. Sub-Pool HI Supplementary Principal Distribution Amount less
any distributions pursuant to item (45) _________
PRINCIPAL
48. Class HI: M-1 principal distribution _________
49. Class HI: M-1 Principal Balance _________
CLASS HI: M-1 CERTIFICATES
50. Sub-Pool HI Supplementary Principal Distribution Amount less
any distributions pursuant to items (45) and (48) _________
PRINCIPAL
51. Class HI: M-1 principal distribution _________
52. Class HI: M-1 Principal Balance _________
Q-7
<PAGE>
CLASS HI: M-1 CERTIFICATES
53. Sub-Pool HI Amount Available less all preceding
distributions _________
LIQUIDATION LOSS INTEREST
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 _________
Q-8
<PAGE>
63. Amount applied to Unpaid Class HI: B-1 Liquidation Loss
Interest Shortfall _________
64. Remaining Unpaid Class HI: B -1 Liquidation Loss
Interest Shortfall _________
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 7.79%)
(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 Distribution Amount plus Class HI: B-2
Liquidation Loss Principal Amount exceeds
Class HI: B-2 Distribution Amount _________
Q-9
<PAGE>
CLASS HI: A, CLASS HI: M AND CLASS HI: B CERTIFICATES
73. Pool Scheduled Principal Balance of Sub-Pool HI _________
74. Sub-Pool HI Pool Factor _________
75. Home Improvement Contracts Delinquent:
30 - 59 days _________
60 or more days _________
76. Principal Balance of Defaulted Home
Improvement Contracts _________
77. Number of Liquidated Home Improvement
Contracts and Net Liquidation Loss _________
78. Number of Home Improvement Contracts Remaining _________
79. Number and Principal Balance of Home
Improvement Contracts with FHA claims finally
rejected, or no FHA claim was submitted
because FHA Insurance was unavailable _________
80. FHA Insurance reserve amount _________
81. Amount received from FHA Insurance _________
82. Sub-Pool HI Pre-Funded Amount _________
COMPANY AND CLASS C SUBSIDIARY CERTIFICATES
83. Monthly Servicing Fee _________
84. Class HI: B-2 Guaranty Fee _________
85. Class C Subsidiary Residual Payment _________
Q-10
<PAGE>
SUB-POOL HE
1. Sub-Pool HE Amount Available (including Monthly
Servicing Fee) _________
2. Sub-Pool HE Formula Principal Distribution Amount:
(a) Scheduled principal _________
(b) Principal Prepayments _________
(c) Liquidated Contracts _________
(d) Repurchases _________
(e) Previously undistributed (a)-(d) amounts _________
(f) Pre-Funded Fixed Rate Amount, if any
(Post-Funding Payment Date) _________
(g) MINUS Class HE: A-1 ARM Formula Principal
Distribution Amount _________
3. Class HE: A-1 ARM Formula Principal
Distribution Amount (lesser of
Class HE: A-1A ARM Principal Balance plus
Class HE: A-1B ARM Principal Balance or sum of (a)-(f)) _________
(a) Scheduled principal _________
(b) Principal Prepayments _________
(c) Liquidated Contracts _________
(d) Repurchases _________
(e) Pre-Funded ARM Amount, if any
(Post-Funding Payment Date) _________
(f) Clause (vi) of definition _________
4. Sub-Pool HE Senior Percentage _________
5. Class HE: B Percentage _________
6. LIBOR _________
7. Pass-Through Margin (.17% or .34%) _________
8. Available Funds Pass-Through Rate _________
9. Class HE: A-7 IO Notional Principal Amount _________
Q-11
<PAGE>
CLASS HE: A CERTIFICATES
INTEREST
10. Aggregate current interest
(a) Class HE: A-1A ARM Pass-through Rate (5.89%)
(b) Class HE: A-lA ARM 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 14.0%)
(d) Class HE: A-1B ARM Interest _________
(e) Class HE: A-1 Pass-through Rate (5.98%) _________
(f) Class HE: A-l Interest _________
(g) Class HE: A-2 Pass-through Rate (5.96%) _________
(h) Class HE: A-2 Interest _________
(i) Class HE: A-3 Pass-through Rate (6.13%) _________
(j) Class HE: A-3 Interest _________
(k) Class HE: A-4 Pass-through Rate (6.25%) _________
(l) Class HE: A-4 Interest _________
(m) Class HE: A-5 Pass-through Rate (6.32%) _________
(n) Class HE: A-5 Interest _________
(o) Class HE: A-6 Pass-through Rate (6.15%) _________
(p) Class HE: A-6 Interest _________
(q) Class HE: A-7 IO Pass-through Rate (6.75%) _________
(r) Class HE: A-7 IO Interest _________
11. Amount applied to Unpaid Class HE: A Interest Shortfall _________
12. Remaining Unpaid Class HE: A Interest Shortfall _________
CLASS HE: M-1 CERTIFICATES
13. Sub-Pool HE Amount Available less all preceding
distributions _________
INTEREST ON CLASS HE: M-1 ADJUSTED PRINCIPAL BALANCE
14. Class HI: M-1 Adjusted Principal Balance _________
Q-12
<PAGE>
15. Current Interest
(a) Class HE: M-1 Pass-through Rate (6.71%) _________
(b) Class HE: M-1 Interest _________
16. Amount applied to Unpaid Class HE: M-1
Interest Shortfall _________
17. Remaining Unpaid Class HE: M-1
Interest Shortfall _________
CLASS HE: M-2 CERTIFICATES
18. Sub-Pool HE Amount Available less all preceding
distributions _________
INTEREST ON CLASS HE: M-2 ADJUSTED PRINCIPAL BALANCE
19. Class HI: M-2 Adjusted Principal Balance _________
20. 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 7.10%)
(b) Class HE: M-2 Interest _________
21. Amount applied to Unpaid Class HE: M-2
Interest Shortfall _________
22. Remaining Unpaid Class HE: M-2
Interest Shortfall _________
CLASS HE: B-1 CERTIFICATES
23. Sub-Pool HE Amount Available less all preceding
distributions _________
INTEREST ON CLASS HE: B-1 ADJUSTED PRINCIPAL BALANCE
<PAGE>
24. Class HI: B-1 Adjusted Principal Balance _________
25. Current Interest
(a) Class HE: B-1 Pass-through Rate (7.80%)
(b) Class HE: B-1 Interest _________
26. Amount applied to Unpaid Class HE: B-1
Interest Shortfall _________
27. Remaining Unpaid Class HE: B-1
Interest Shortfall _________
CLASS HE: A CERTIFICATES
28. Sub-Pool HE Amount Available less all preceding
distributions _________
PRINCIPAL
29. Class HE: A-6 Lockout Percentage for such
Payment Date _________
30. Class HE: A principal distribution:
(a) Class HE: A-1A ARM _________
(b) Class HE: A-1B ARM _________
(c) Class HE: A-6 Lockout Pro Rata Distribution Amount _________
(d) Balance of Sub-Pool HE Senior Percentage of Sub-Pool
- --------------
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-7 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 such 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-7 IO
Certificates) based on the amount distributable had such remaining Sub-Pool HE
Amount Available not been less than the Class HE: A Formula Principal
Distribution Amount. Otherwise, the Class HE: A-1 ARM Formula Principal
Distribution Amount and the Sub-Pool HE Senior Percentage of the Sub-Pool HE
Formula Principal Distribution Amount is to be distributed sequentially as
described in this item 30.
Q-14
<PAGE>
HE Formula Principal Distribution Amount:
(i) Class HE: A-1 _________
(ii) Class HE: A-2 _________
(iii) Class HE: A-3 _________
(iv) Class HE: A-4 _________
(v) Class HE: A-5 _________
(vi) Class HE: A-6 _________
31. (a) Class HE: A-1A ARM Principal Balance _________
(b) Class HE: A-1B ARM Principal Balance _________
(c) Class HE: A-1 Principal Balance _________
(d) Class HE: A-2 Principal Balance _________
(e) Class HE: A-3 Principal Balance _________
(f) Class HE: A-4 Principal Balance _________
(g) Class HE: A-5 Principal Balance _________
(h) Class HE: A-6 Principal Balance _________
32. Amount, if any, by which Class HE: A Formula Principal
Distribution Amount exceeds amounts distributed pursuant
to item (31) _________
CLASS HE: M-1 CERTIFICATES
33. Sub-Pool HE Amount Available less all preceding
distributions _________
PRINCIPAL
34. Class HE: M-1 principal distribution _________
35. Class HE: M-1 Principal Balance _________
36. Amount, if any, by which the amount in clause (c)
of the Class HE: M-1 Formula Distribution Amount
exceeds the amount distributed pursuant to item (34) _________
CLASS HE: M-2 CERTIFICATES
37. Sub-Pool HE Amount Available less all preceding
distributions _________
Q-15
<PAGE>
PRINCIPAL
38. Class HE: M-2 principal distribution _________
39. Class HE: M-2 Principal Balance _________
40. Amount, if any, by which the amount in clause (c)
of the Class HE: M-2 Formula Distribution Amount
(the "Class HE: M-2 Formula Principal Distribution
Amount") exceeds the amount distributed pursuant to
item (38) _________
CLASS HE: B PRINCIPAL DISTRIBUTION TESTS (tests must be satisfied
on and after the Payment Date occurring in September 2001)
41. 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 6.0%) _________
42. 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%) _________
43. 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%) _________
Q-16
<PAGE>
44. 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%) _________
45. Class HE: B Principal Balance Test
Class HE: B Principal Balance (before
any distributions on current
Payment Date) divided by Pool
Scheduled Principal Balance for
prior Payment Date (must equal
or exceed 14.6%) _________
CLASS HE: B-1 CERTIFICATES
46. Sub-Pool HE Amount Available less all preceding
distributions _________
PRINCIPAL
47. Class HE: B-1 principal distribution _________
48. Class HE: B-1 Principal Balance _________
49. Amount, if any, by which the amount in clause (c) of
the Class HE: B-1 Formula Distribution Amount exceeds
the amount distributed pursuant to item (47) _________
CLASS HE: M-1 CERTIFICATES
50. Sub-Pool HE Amount Available less all preceding
distributions _________
Q-17
<PAGE>
LIQUIDATION LOSS INTEREST
51. Class HE: M-1 Formula Liquidation Loss Interest
Distribution Amount _________
Q-18
<PAGE>
52. Amount applied to Unpaid Class HE: M-1 Liquidation Loss
Interest Shortfall _________
53. Remaining Unpaid Class HE: M-1 Liquidation Loss
Interest Shortfall _________
CLASS HE: M-2 CERTIFICATES
54. Sub-Pool HE Amount Available less all preceding
distributions _________
LIQUIDATION LOSS INTEREST
55. Class HE: M-2 Formula Liquidation Loss Interest Distribution
Amount _________
56. Amount applied to Unpaid Class HE: M-2 Liquidation Loss
Interest Shortfall _________
57. Remaining Unpaid Class HE: M-2 Liquidation Loss
Interest Shortfall _________
CLASS HE: B-1 CERTIFICATES
58. Sub-Pool HE Amount Available less all preceding
distributions _________
LIQUIDATION LOSS INTEREST
59. Class HE: B-1 Formula Liquidation Loss Interest Distribution
Amount _________
60. Amount applied to Unpaid Class HE: B-1 Liquidation Loss
Interest Shortfall _________
61. Remaining Unpaid Class HE: B -1 Liquidation Loss
Interest Shortfall _________
CLASS HE: B-2 CERTIFICATES
62. Sub-Pool HE Amount Available less all preceding
distributions _________
Q-19
<PAGE>
INTEREST
63. Current interest
(a) Class HE: B-2 Pass-through Rate (floating rate equal
to the Weighted Average Home Improvement Contract
Rate, but in no event greater than 7.78%)
(b) Class HE: B-2 Interest _________
64. Amount applied to Unpaid Class
HE: B-2 Interest Shortfall _________
65. Remaining Unpaid Class HE: B-2
Interest Shortfall _________
PRINCIPAL
66. Class HE: B-2 principal distribution _________
67. Class HE: B-2 Guaranty Payment _________
68. Class HE: B-2 Principal Balance _________
69. Amount, if any, by which Class HE: B-2
Formula Distribution Amount plus Class HE: B-2
Liquidation Loss Principal Amount exceeds
Class HE: B-2 Distribution Amount _________
CLASS HE: A-1B ARM CERTIFICATES
70. Sub-Pool HE Amount Available less all preceding
distributions _________
AVAILABLE FUNDS LIMITATION INTEREST
71. Class HE: A-1B ARM Formula Available Funds Limitation
Interest Distribution Amount _________
72. Amount applied to Unpaid Class HE: A-1B ARM
Available Funds Limitation Shortfall _________
73. Remaining Unpaid Class HE: A-1B ARM
Available Funds Limitation Shortfall _________
Q-20
<PAGE>
CLASS HE: A, CLASS HE: M AND CLASS HE: B CERTIFICATES
74. Pool Scheduled Principal Balance of Sub-Pool HE _________
(a) Fixed Rate Home Equity Contracts _________
(b) Adjustable Rate Home Equity Contracts _________
75. Sub-Pool HE Pool Factor _________
76. Home Equity Contracts Delinquent:
30 - 59 days
Fixed Rate _________
Adjustable Rate _________
60 or more days
Fixed Rate _________
Adjustable Rate _________
77. Principal Balance of Defaulted Home Equity Contracts
Fixed Rate _________
Adjustable Rate _________
78. Number of Liquidated Home Equity Contracts and
Net Liquidation Loss _________
Fixed Rate _________
Adjustable Rate _________
79. Number of Home Equity Contracts Remaining
Fixed Rate _________
Adjustable Rate _________
80. Sub-Pool HE Pre-Funded ARM Amount _________
81. Sub-Pool HE Pre-Funded Fixed Rate Amount _________
Q-21
<PAGE>
COMPANY AND CLASS C SUBSIDIARY CERTIFICATES
82. Monthly Servicing Fee _________
83. Class HE: B-2 Guaranty Fee _________
84. Class C Subsidiary Residual Payment _________
Please contact the Bondholder Relations Department of U.S. Bank Trust
National Association at (612) 224-0444 with any questions regarding this
Statement or your Distribution.
Q-22
<PAGE>
EXHIBIT R
FORM OF ADDITION NOTICE
______________, 1998
U.S. Bank Trust National Association
180 East Fifth Street
St. Paul, MN 55101
Re: Pooling and Servicing Agreement (the "Agreement"), dated as of
August 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-D
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:
Fixed Rate: $_____________
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 August 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-D, 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 (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 Home Improvement Contracts
and Subsequent Home Equity Contracts (excluding principal due before the
Subsequent Cut-off Date), (ii) all rights under FHA Insurance in respect of each
Subsequent Home Improvement Contract or Subsequent Home Equity 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 Home
Improvement Contract or Subsequent Home Equity 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 Home Improvement
Contracts and Subsequent Home Equity 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 Home Improvement Contracts and Subsequent Home Equity Contracts, (vi)
all rights under any title insurance policies, if applicable, on any of the
properties securing Subsequent Home Improvement Contracts and Subsequent Home
Equity 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 Section 2.03 and Article
III of the Agreement and no others. All undefined capitalized terms used in this
Assignment have the meanings given them in the Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be duly
executed this ___ day of August, 1998.
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 August 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 2.03(c), 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 August, 1998.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
T-1
<PAGE>
DORSEY & WHITNEY LLP
Pillsbury Center South
220 South Sixth Street
Minneapolis, Minnesota 55402-1498
Telephone: (612) 340-2600
Fax: (612) 340-2868
EXHIBIT 5.1
Green Tree Financial Corporation
1100 Landmark Towers
345 St. Peter Street
St. Paul, Minnesota 55102-1639
Re: Registration Statements on Form S-3
File Nos. 333-46457 and 333-49951
Ladies and Gentlemen:
We have acted as counsel to Green Tree Financial Corporation, a
Delaware corporation (the "Company"), in connection with the preparation and
filing with the Securities and Exchange Commission (the "Commission") of
Registration Statements on Form S-3 (File Nos. 333-46457 and 333-49951)
(hereinafter referred to as the "Registration Statement") under the Securities
Act of 1933, as amended, relating to an aggregate of $3,000,000,000 of
Certificates for Home Improvement and Home Equity Loans to be issued from time
to time in series under separate Pooling and Servicing Agreements, and the
preparation of a Prospectus Supplement dated August 14, 1998, and the related
Prospectus dated August 14, 1998 (together, the "Prospectus") relating to the
offer and sale by the Company of $1,346,450,000 (approximate) aggregate
principal amount of Certificates for Home Improvement and Home Equity Loans,
Series 1998-D (the "Certificates"), to be issued under a Pooling and Servicing
Agreement, dated as of August 1, 1998 (the "Pooling and Servicing Agreement")
between the Company and U.S. Bank Trust National Association, as Trustee (the
"Trustee"). Capitalized terms used herein and not defined have the meanings
assigned thereto in the Pooling and Servicing Agreement.
The Company will provide an HE: B-2 Limited Guaranty and an HI:B-2
Limited Guaranty with respect to the Class HE: B-2 Certificates and Class HI:
B-2 Certificates, respectively.
We have examined the Registration Statement, the Prospectus, the
Pooling and Servicing Agreement, and such other related documents, and have
reviewed such questions of law, as we have considered necessary and appropriate
for the purposes of this opinion. Based on the foregoing, we are of the opinion
that:
1. The Pooling and Servicing Agreement has been duly authorized by the
Board of Directors of the Company and duly executed and delivered by the Company
and constitutes the valid and binding obligation of the Company, and the HE: B-2
Limited Guaranty and the HI:B-2 Limited Guaranty of the Company provided for
therein constitute the valid and binding obligations of the Company.
2. The Certificates have been duly executed and delivered in accordance
with the terms of the Pooling and Servicing Agreement and are legally and
validly issued, and the holders of such Certificates are entitled to the
benefits of the Pooling and Servicing Agreement.
The opinions set forth above are subject to the following
qualifications and exceptions:
<PAGE>
Green Tree Financial Corporation
August 20, 1998
Page 2
(a) Our opinion in paragraph 1 above is subject to the effect
of any applicable bankruptcy, insolvency, reorganization, moratorium or
other similar law of general application affecting creditors' rights.
(b) Our opinion in paragraph 1 above is subject to the effect
of general principles of equity, including (without limitation)
concepts of materiality, reasonableness, good faith and fair dealing,
and other similar doctrines affecting the enforceability of agreements
generally (regardless of whether considered in a proceeding in equity
or at law).
(c) Minnesota Statutes ss. 290.371, Subd. 4, provides that any
corporation required to file a Notice of Business Activities Report
does not have a cause of action upon which it may bring suit under
Minnesota law unless the corporation has filed a Notice of Business
Activities Report and provides that the use of the courts of the State
of Minnesota for all contracts executed and all causes of action that
arose before the end of any period for which a corporation failed to
file a required report is precluded. Insofar as our opinion may relate
to the valid, binding and enforceable character of any agreement under
Minnesota law or in a Minnesota court, we have assumed that any party
seeking to enforce such agreement has at all times been, and will
continue at all times to be, exempt from the requirement of filing a
Notice of Business Activities Report or, if not exempt, has duly filed,
and will continue to duly file, all Notice of Business Activities
Reports.
Our opinions expressed above are limited to the laws of the
State of Minnesota and the Delaware General Corporation Law.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement, and to the reference to our firm under the
heading "Legal Matters" in the Prospectus comprising part of the Registration
Statement.
Dated: August 20, 1998
Very truly yours,
/s/ Dorsey & Whitney LLP
CFS
<PAGE>
DORSEY & WHITNEY LLP
Pillsbury Center South
220 South Sixth Street
Minneapolis, Minnesota 55402-1498
Telephone: (612) 340-2600
Fax: (612) 340-2868
EXHIBIT 8.1
Green Tree Financial Corporation
1100 Landmark Towers
345 St. Peter Street
St. Paul, MN 55102-1639
Re: Federal Income Tax Consequences of Certificates
for Home Improvement and Home Equity Loans
Ladies and Gentlemen:
We have acted as counsel to Green Tree Financial Corporation, a
Delaware corporation (the "Company"), in connection with the preparation and
filing with the Securities and Exchange Commission (the "Commission") of
Registration Statements on Form S-3 (File Nos. 333-46457 and 333-49951)
(together, hereinafter referred to as the "Registration Statement") under the
Securities Act of 1933, as amended, relating to an aggregate of $3,000,000,000
of Certificates for Home Improvement and Home Equity Loans to be issued from
time to time in series under separate Pooling and Servicing Agreements, and the
preparation of a Prospectus Supplement dated August 14, 1998, and the related
Prospectus dated August 14, 1998 (together, the "Prospectus") relating to the
offer and sale by the Company of $1,346,450,000 (approximate) aggregate
principal amount of Certificates for Home Improvement and Home Equity Loans
Series, 1998-D (the "Certificates"), to be issued under a Pooling and Servicing
Agreement, dated as of August 1, 1998 (the "Pooling and Servicing Agreement")
between the Company and U.S. Bank Trust National Association, as Trustee (the
"Trustee"). Capitalized terms used herein and not defined have the meanings
assigned thereto in the Pooling and Servicing Agreement.
You have requested our opinion with respect to certain federal income
tax consequences of the purchase, ownership and disposition of the Certificates.
For purposes of rendering our opinion we have examined the Registration
Statement, the Prospectus and the Pooling and Servicing Agreement.
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. Our
opinion is also based on the representations and warranties set forth in the
Pooling and Servicing Agreement and the assumptions that the Company and the
Trustee will at all times comply with the requirements of the Pooling and
Servicing Agreement, including, without limitation, the requirement that a
proper election to be taxed as a real estate mortgage investment conduit
("REMIC") under the Internal Revenue Code of 1986, as amended (the "Code") is
made in accordance with the Pooling and Servicing Agreement and the Code and
that the Certificates will be issued as described in the Prospectus.
<PAGE>
Green Tree Financial Corporation
August 20, 1998
Page 2
Based upon the foregoing, as of the date hereof it is our opinion that
the Trust created pursuant to the Pooling and Servicing Agreement will qualify
as two separate REMICs under the Code and under the REMIC Regulations, and that
the Sub-Pool HI Certificates and the Sub-Pool HE Certificates will evidence
ownership of the "regular interests" in the Master REMIC, the Subsidiary Regular
Interests will evidence ownership of the "regular interests" in the Subsidiary
REMIC and the Class C Master Certificate and the Class C Subsidiary Certificate
will evidence ownership of the single class of "residual interests" in the
Master REMIC and the Subsidiary REMIC, respectively.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the heading "Certain
Federal Income Tax Consequences" in the Prospectus, and we hereby confirm that,
insofar as they constitute statements of law or legal conclusions as to the
likely outcome of material issues under the federal income tax laws, the
discussion under such heading accurately sets forth our advice.
Dated: August 20, 1998
Very truly yours,
/s/ Dorsey & Whitney LLP
CFS
