<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 30, 1999
GREEN TREE FINANCIAL CORPORATION
as depositor of
Green Tree Home Improvement and Home Equity Loans, Trust 1999-B
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 333-63305/333-75623 41-1807858
- --------------------------------------------------------------------------------
(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
- --------------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (651) 293-3400
Not Applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 1. Changes in Control of Registrant.
Not applicable.
Item 2. Acquisition or Disposition of Assets.
Not applicable.
Item 3. Bankruptcy or Receivership.
Not applicable.
Item 4. Changes in Registrant's Certifying Accountant.
Not applicable.
Item 5. Other Events.
On June 30, 1999, the Registrant issued $400,000,000 in aggregate
principal amount of Loan-Backed Notes. The Class A and Class M notes
were sold pursuant to a prospectus supplement, dated June 18, 1999, to
a prospectus dated June 18, 1999.
Item 6. Resignations of Registrant's Directors.
Not applicable.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
-2-
<PAGE>
(c) Exhibits.
The following is filed herewith. The exhibit numbers correspond with
Item 601(b) of Regulation S-K.
Exhibit No. Description
----------- -----------
4.1 Trust Agreement between Green Tree Financial
Corporation as Depositor, and Wilmington Trust
Company, as Owner Trustee, dated as of June 1, 1999.
4.2 Sale and Servicing Agreement between Green Tree Home
Improvement and Home Equity Loan Trust 1999-B, and
Green Tree Financial Corporation, as Seller and
Servicer, dated as of June 1, 1999.
4.3 Indenture between Green Tree Home Improvement and
Home Equity Loan Trust 1999-B, as Issuer, and U.S.
Bank Trust National Association, as Indenture
Trustee, dated as of June 1, 1999.
5.1 Opinion of Dorsey & Whitney LLP as to legality.
8.1 Tax opinion of Dorsey & Whitney LLP dated June 30,
1999, relating to REMIC matters.
23.1 Consent of PricewaterhouseCoopers LLP.
-3-
<PAGE>
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 depositor of Green Tree Home Improvement
and Home Equity Loan Trust 1999-B
By: /s/ Phyllis A. Knight
----------------------------------------
Phyllis A. Knight
Senior Vice President and Treasurer
-4-
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Page
- -------------- ----
4.1 Trust Agreement between Green Tree Financial Corporation as
Depositor, and Wilmington Trust Company, as Owner Trustee,
dated as of June 1, 1999.
4.2 Sale and Servicing Agreement between Green Tree Home
Improvement and Home Equity Loan Trust 1999-B, as the
Issuer or the Trust, and Green Tree Financial Corporation, as
Seller and Servicer, dated as of June 1, 1999.
4.3 Indenture between Green Tree Home Improvement and
Home Equity Loan Trust 1999-B, as Issuer, and U.S. Bank
Trust National Association, as Indenture Trustee, dated as
of June 1, 1999.
5.1 Opinion of Dorsey & Whitney LLP as to legality.
8.1 Tax opinion of Dorsey & Whitney LLP dated June 30, 1999,
relating to REMIC matters
23.1 Consent of PricewaterhouseCoopers LLP.
-5-
<PAGE>
EXHIBIT 4.1
GREEN TREE HOME IMPROVEMENT AND HOME EQUITY LOAN TRUST 1999-B
TRUST AGREEMENT
Dated as of June 1, 1999
between
GREEN TREE FINANCIAL CORPORATION,
as Depositor
and
WILMINGTON TRUST COMPANY,
as Owner Trustee
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS......................................................1-1
SECTION 1.1. Definitions...............................................1-1
SECTION 1.2. Usage of Terms............................................1-4
SECTION 1.3. Calculations..............................................1-4
SECTION 1.4. Section References........................................1-4
SECTION 1.5. Action by or Consent of Certificateholders................1-4
ARTICLE II CREATION OF TRUST...............................................2-1
SECTION 2.1. Creation of Trust.........................................2-1
SECTION 2.2. Office....................................................2-1
SECTION 2.3. Purposes and Powers.......................................2-1
SECTION 2.4. Appointment of Owner Trustee..............................2-2
SECTION 2.5. Initial Capital Contribution of Trust Estate..............2-2
SECTION 2.6. Declaration of Trust......................................2-2
SECTION 2.7. Liability of the Certificateholders.......................2-3
SECTION 2.8. Title to Trust Property...................................2-3
SECTION 2.9. Situs of Trust............................................2-3
SECTION 2.10. Representations and Warranties of the Depositor...........2-3
SECTION 2.11. [RESERVED]................................................2-5
SECTION 2.12. [RESERVED]................................................2-5
SECTION 2.13. Covenants of the Certificateholders.......................2-5
ARTICLE III THE CERTIFICATES...............................................3-1
SECTION 3.1. Initial Ownership.........................................3-1
SECTION 3.2. The Certificates..........................................3-1
SECTION 3.3. Authentication of Certificates............................3-1
SECTION 3.4. Registration of Transfer and Exchange of Certificates.....3-1
SECTION 3.5. Mutilated, Destroyed, Lost or Stolen Certificates.........3-3
SECTION 3.6. Persons Deemed Certificateholders.........................3-3
SECTION 3.7. Access to List of Certificateholders' Names and
Addresses..............................................3-4
SECTION 3.8. Maintenance of Office or Agency...........................3-4
SECTION 3.9. Appointment of Paying Agent...............................3-4
ARTICLE IV ACTIONS BY OWNER TRUSTEE........................................4-1
SECTION 4.1. Restriction on Power of Certificateholders................4-1
SECTION 4.2. Prior Notice to Certificateholders with Respect
to Certain Matters.....................................4-1
SECTION 4.3. Action by Certificateholders with Respect to Bankruptcy...4-1
SECTION 4.4. Restrictions on Certificateholders' Power.................4-1
ARTICLE V APPLICATION OF TRUST FUNDS; CERTAIN DUTIES.......................5-1
SECTION 5.1. Trust Accounts............................................5-1
SECTION 5.2. Application of Funds in Certificate Distribution Account..5-2
-i-
<PAGE>
SECTION 5.3. Method of Payment.........................................5-3
SECTION 5.4. No Segregation of Monies; No Interest.....................5-3
SECTION 5.5. Accounting; Reports; Tax Returns..........................5-3
ARTICLE VI AUTHORITY AND DUTIES OF OWNER TRUSTEE...........................6-1
SECTION 6.1. General Authority.........................................6-1
SECTION 6.2. General Duties............................................6-1
SECTION 6.3. Action upon Instruction...................................6-1
SECTION 6.4. No Duties Except as Specified in this Agreement
or in Instructions.....................................6-3
SECTION 6.5. No Action Except under Specified Documents
or Instructions........................................6-3
SECTION 6.6. Restrictions..............................................6-3
SECTION 6.7. Administration Agreement..................................6-4
ARTICLE VII CONCERNING THE OWNER TRUSTEE...................................7-1
SECTION 7.1. Acceptance of Trust and Duties............................7-1
SECTION 7.2. Furnishing of Documents...................................7-3
SECTION 7.3. Representations and Warranties............................7-3
SECTION 7.4. Reliance; Advice of Counsel...............................7-4
SECTION 7.5. Not Acting in Individual Capacity.........................7-4
SECTION 7.6. Owner Trustee Not Liable for Certificates, Notes
or Loans...............................................7-4
SECTION 7.7. Owner Trustee May Own Certificates and Notes..............7-5
ARTICLE VIII COMPENSATION OF OWNER TRUSTEE.................................8-1
SECTION 8.1. Owner Trustee's Fees and Expenses.........................8-1
SECTION 8.2. Indemnification...........................................8-1
SECTION 8.3. Nonrecourse Obligations...................................8-1
ARTICLE IX TERMINATION.....................................................9-1
SECTION 9.1. Termination of the Trust..................................9-1
ARTICLE X SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES..........10-1
SECTION 10.1. Eligibility Requirements for Owner Trustee...............10-1
SECTION 10.2. Resignation or Removal of Owner Trustee..................10-1
SECTION 10.3. Successor Owner Trustee..................................10-2
SECTION 10.4. Merger or Consolidation of Owner Trustee.................10-2
SECTION 10.5. Appointment of Co-Trustee or Separate Trustee............10-2
ARTICLE XI MISCELLANEOUS PROVISIONS.......................................11-1
SECTION 11.1. Amendment................................................11-1
SECTION 11.2. No Recourse..............................................11-2
SECTION 11.3. Governing Law............................................11-2
SECTION 11.4. Severability of Provisions...............................11-2
SECTION 11.5. Certificates Nonassessable and Fully Paid................11-2
-ii-
<PAGE>
SECTION 11.6. Third-Party Beneficiaries................................11-3
SECTION 11.7. Counterparts.............................................11-3
SECTION 11.8. Notices..................................................11-3
SECTION 11.9. Limitation of Liability..................................11-3
EXHIBIT A - CERTIFICATE OF TRUST..........................................A-1
EXHIBIT B - FORM OF CERTIFICATE...........................................B-1
EXHIBIT C - FORM OF REPRESENTATION LETTER AND CERTIFICATION...............C-1
-iii-
<PAGE>
THIS TRUST AGREEMENT, dated as of June 1, 1999, is made between Green Tree
Financial Corporation, a Delaware corporation, as depositor (the "Seller") and
Wilmington Trust Company, a Delaware banking corporation, as owner trustee (in
such capacity, the "Owner Trustee").
In consideration of the mutual agreements herein contained, and of other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions.
Unless otherwise expressly defined herein, the terms defined in the Sale
and Servicing Agreement (defined below) shall have the same meanings in this
Agreement. Whenever capitalized and used in this Agreement, the following words
and phrases, unless otherwise specified, shall have the following meanings:
Administration Agreement: The Administration Agreement, dated as of June 1,
1999, among the Administrator, the Trust, and the Indenture Trustee, as the same
may be amended and supplemented from time to time.
Administrator: Green Tree Financial Servicing Corporation, a Delaware
corporation, or any successor Administrator under the Administration Agreement.
Agreement or this Agreement: This Trust Agreement, all amendments and
supplements thereto and all exhibits and schedules to any of the foregoing.
Authentication Agent: Wilmington Trust Company, or its successor in
interest, and any successor authentication agent appointed as provided in this
Agreement.
Business Trust Statute: Chapter 38 of Title 12 of the Delaware Code, 12
Del. Code ss. 3801 et seq., as the same may be amended from time to time.
Certificates: The Green Tree Home Improvement and Home Equity Loan Trust
1999-B Certificates evidencing the beneficial interest of a Certificateholder in
the Trust, substantially in the form of Exhibit B, attached hereto.
Certificate Distribution Account: The account designated as the Certificate
Distribution Account in, and which is established and maintained pursuant to,
Section 5.1.
Certificate Majority: means holders of Certificates representing more than
50% of the interests of the Certificateholders as a whole.
1-1
<PAGE>
Certificate of Trust: The Certificate of Trust substantially in the form of
Exhibit A hereto, filed for the Trust pursuant to Section 3810(a) of the
Business Trust Statute.
Certificate Register and Certificate Registrar: The register maintained and
the registrar appointed pursuant to Section 3.4.
Certificateholder or Holder: A Person in whose name a Certificate is
registered in the Certificate Register.
Code: The meaning assigned to such term in Section 5.2(f).
Corporate Trust Office: The principal office of the Owner Trustee at which
at any particular time its corporate trust business shall be administered, which
office at the Closing Date is located at Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration; the telecopy number for the Corporate Trust Office on the date
of the execution of this Agreement is 302-651-8882.
Depositor: The Seller in its capacity as depositor hereunder.
ERISA: The meaning assigned to such term in Section 3.4(e).
Expenses: The meaning assigned to such term in Section 8.2.
Green Tree: Green Tree Financial Corporation, a Delaware corporation, and
its successors in interest.
GTFC-2: Green Tree Finance Corp.-Two, a Minnesota corporation.
Indemnified Parties: The meaning assigned to such term in Section 8.2.
Insolvency Event: With respect to a specified Person, (a) the commencement
of an involuntary case against such Person under the federal bankruptcy laws, as
now or hereinafter in effect, or another present or future federal or state
bankruptcy, insolvency or similar law, and such case is not dismissed within 60
days; or (b) the filing of a decree or entry of an order for relief by a court
having jurisdiction in the premises in respect of such Person or any substantial
part of its property in an involuntary case under any applicable federal or
state bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official for such Person or for any substantial part of its property, or
ordering the winding-up or liquidation of such Person's affairs; or (c) the
commencement by such Person of a voluntary case under any applicable federal or
state bankruptcy, insolvency or other similar law now or hereafter in effect, or
the consent by such Person to the entry of an order for relief in an involuntary
case under any such law, or the consent by such Person to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for such Person or for any substantial part of
its property, or the making by such Person of any general assignment for the
benefit of creditors, or
1-2
<PAGE>
the failure by such Person generally to pay its debts as such debts become due,
or the taking of action by such Person in furtherance of any of the foregoing.
Note Depository Agreement: The agreement among the Trust, the Indenture
Trustee, the Administrator and The Depository Trust Company, dated as of the
Closing Date, relating to the Notes, substantially in the form attached as
Exhibit B to the Indenture.
Owner Trustee: Wilmington Trust Company, or its successor in interest,
acting not individually but solely as trustee hereunder, and any successor
trustee appointed as provided in this Agreement.
Paying Agent: Any paying agent or co-paying agent appointed pursuant to
Section 3.9, which initially shall be U.S. Bank Trust National Association.
Record Date: With respect to any Payment Date, the close of business on the
last Business Day immediately preceding such Payment Date.
Related Documents: The Sale and Servicing Agreement, the Indenture, the
Insurance Agreement, the Certificates, the Notes, the Administration Agreement,
the Note Depository Agreement and the Underwriting Agreement. The Related
Documents executed by any party are referred to herein as "such party's Related
Documents," "its Related Documents" or by a similar expression.
Sale and Servicing Agreement: The Sale and Servicing Agreement, dated as of
June 1, 1999 between the Trust and Green Tree, as Seller and as Servicer, as the
same may be amended and supplemented from time to time.
Secretary of State: The Secretary of State of the State of Delaware.
Seller: Green Tree, or its successor in interest.
Servicer's Certificate: The Monthly Report delivered by the Servicer to the
Trust pursuant to Section 5.14 of the Sale and Servicing Agreement.
Trust: The trust created by this Agreement, the estate of which consists of
the Trust Property, which trust shall be known as "Green Tree Home Improvement
and Home Equity Loan Trust 1999-B."
Trust Accounts: The Collection Account, the Certificate Distribution
Account, the Note Distribution Account and the Undelivered Loan Account.
Trust Property: The property and proceeds of every description conveyed
pursuant to Section 2.5 hereof and Section 2.01 of the Sale and Servicing
Agreement, together with the Trust Accounts (including all Eligible Investments
therein and all proceeds therefrom).
Underwriter: Lehman Brothers Inc.
1-3
<PAGE>
Underwriting Agreement: The Underwriting Agreement and related Terms
Agreement, each dated June 18, 1999, between Green Tree and the Underwriter
relating to the Class A and Class M Notes.
Wilmington Trust: Wilmington Trust Company, a Delaware banking corporation.
SECTION 1.2. Usage of Terms.
With respect to all terms used in this Agreement, the singular includes the
plural and the plural the singular; words importing any gender include the other
genders; references to "writing" include printing, typing, lithography, and
other means of reproducing words in a visible form; references to agreements and
other contractual instruments include all subsequent amendments thereto or
changes therein entered into in accordance with their respective terms and not
prohibited by this Agreement; references to Persons include their permitted
successors and assigns; and the terms "include" or "including" mean "include
without limitation" or "including without limitation." To the extent that
definitions are contained in this Agreement, or in any such certificate or other
document, such definitions shall control.
SECTION 1.3. Calculations.
All calculations of the amount of interest accrued on the Certificates
shall be made on the basis of a 360-day year consisting of twelve 30-day months.
SECTION 1.4. Section References.
All references to Articles, Sections, paragraphs, subsections, clauses,
exhibits and schedules shall be to such portions of this Agreement unless
otherwise specified.
SECTION 1.5. Action by or Consent of Certificateholders.
(a) Except as expressly provided herein, any action that may be taken by
the Certificateholders under this Agreement may be taken by a Certificate
Majority. Except as expressly provided herein, any written notice or consent of
the Certificateholders delivered pursuant to this Agreement shall be effective
if signed by Holders of the Certificates evidencing not less than a Certificate
Majority at the time of the delivery of such notice.
(b) Whenever any provision of this Agreement refers to action to be taken,
or consented to, by Certificateholders, such provision shall be deemed to refer
to Certificateholders of record as of the Record Date immediately preceding the
date on which such action is to be taken, or consent given, by
Certificateholders.
1-4
<PAGE>
ARTICLE II
CREATION OF TRUST
SECTION 2.1. Creation of Trust.
There is hereby formed a trust to be known as "Green Tree Home Improvement
and Home Equity Loan Trust 1999-B," in which name the Trust may conduct
business, make and execute contracts and other instruments and sue and be sued.
SECTION 2.2. Office.
The office of the Trust shall be in care of the Owner Trustee at the
Corporate Trust Office or at such other address in Delaware as the Owner Trustee
may designate by written notice to the Certificateholders and the Depositor.
SECTION 2.3. Purposes and Powers.
The sole purpose of the Trust is to conserve the Trust Property and collect
and disburse the periodic income therefrom for the use and benefit of the
Certificateholders and the Noteholders and in furtherance of such purpose the
Trust shall have the power and authority to engage in the following activities:
(i) to issue the Notes pursuant to the Indenture and the Certificates
pursuant to this Agreement and to sell the Notes and the Certificates;
(ii) with the proceeds of the sale of the Notes and the Certificates,
to pay the organizational, start-up and transactional expenses of the Trust
and to pay the balance to the Seller pursuant to the Sale and Servicing
Agreement;
(iii) to assign, grant, transfer, pledge, mortgage and convey the
Trust Estate to the Indenture Trustee pursuant to the Indenture for the
benefit of the Noteholders and to hold, manage and distribute to the
Certificateholders pursuant to the terms of the Sale and Servicing
Agreement any portion of the Trust Property released from the lien of, and
remitted to the Trust pursuant to, the Indenture;
(iv) to enter into and perform its obligations under the Related
Documents to which it is or is to be a party;
(v) to engage in those activities, including entering into agreements,
that are necessary, suitable or convenient to accomplish the foregoing or
are incidental thereto or connected therewith; and
(vi) subject to compliance with the Related Documents, to engage in
such other activities as may be required in connection with conservation of
the Trust Property and the making of distributions to the
Certificateholders and the Noteholders.
2-1
<PAGE>
The Trust is hereby authorized to engage in the foregoing activities and any
activities that are necessary or incidental thereto. The Trust shall not engage
in any activity other than in connection with the foregoing or other than as
required or expressly authorized by the terms of this Agreement or the Related
Documents. Similarly, the Owner Trustee shall have no discretionary duties other
than performing those ministerial acts set forth above necessary to accomplish
the purpose of this Trust as set forth in the introductory sentence of this
Section.
SECTION 2.4. Appointment of Owner Trustee.
The Depositor hereby appoints the Owner Trustee as trustee of the Trust
effective as of the date hereof, to have all the rights, powers and duties set
forth herein and in the Business Trust Statute, and the Owner Trustee hereby
accepts such appointment.
SECTION 2.5. Initial Capital Contribution of Trust Estate.
The Depositor hereby sells, assigns, transfers, conveys and sets over to
the Owner Trustee, as of the date hereof, the sum of $10.00. The Owner Trustee
hereby acknowledges receipt in trust from the Depositor, as of the date hereof,
of the foregoing contribution, which shall constitute the initial Trust Property
and shall be deposited in the Certificate Distribution Account. The Depositor
shall pay organizational expenses of the Trust as they may arise or shall, upon
the request of the Owner Trustee, promptly reimburse the Owner Trustee for any
such expenses paid by the Owner Trustee.
SECTION 2.6. Declaration of Trust.
The Owner Trustee hereby declares that it will hold the Trust Property in
trust upon and subject to the conditions set forth herein for the use and
benefit of the Certificateholders, subject to the interests and rights in the
Trust Property granted to other Persons by the Related Documents. It is the
intention and agreement of the parties hereto that the Trust constitute a
business trust under the Business Trust Statute and that this Agreement
constitute the governing instrument of such business trust. None of the parties
hereto shall make the election provided in Treasury Regulation ss. 301.7701-3(c)
to have the Trust classified as an association taxable as a corporation. The
parties agree that, unless otherwise required by appropriate tax authorities,
for so long as GTFC-2 is the sole Certificateholder the Trust will file or cause
to be filed annual or other necessary returns, reports and other forms
consistent with the characterization of the Trust as an unincorporated division
of GTFC-2 for tax purposes. On or before the date hereof, the Owner Trustee
shall file in the Office of the Secretary of State the Certificate of Trust
required by Section 3810(a) of the Business Trust Statute, to be effective on
the Closing Date. Effective as of the date hereof, the Owner Trustee shall have
all rights, powers and duties set forth herein and in the Business Trust Statute
with respect to accomplishing the purposes of the Trust.
2-2
<PAGE>
SECTION 2.7. Liability of the Certificateholders.
No Certificateholder shall have any personal liability for any liability or
obligation of the Trust or by reason of any action taken by the parties to this
Agreement pursuant to any provisions of this Agreement or any Related Document.
SECTION 2.8. Title to Trust Property.
(a) Legal title to all the Trust Property shall be vested at all times in
the Trust as a separate legal entity except where applicable law in any
jurisdiction requires title to any part of the Trust Property to be vested in a
trustee or trustees, in which case title shall be deemed to be vested in the
Owner Trustee, a co-trustee and/or a separate trustee, as the case may be.
(b) The Certificateholders shall not have legal title to any part of the
Trust Property. The Certificateholders shall be entitled to receive
distributions with respect to their undivided beneficial ownership interest
therein only in accordance with Articles V and IX. No transfer, by operation of
law or otherwise, of any right, title or interest by any Certificateholder of
its ownership interest in the Trust Property shall operate to terminate this
Agreement or the trusts hereunder or entitle any transferee to an accounting or
to the transfer to it of legal title to any part of the Trust Property.
SECTION 2.9. Situs of Trust.
The Trust will be located and administered in the State of Delaware. All
bank accounts maintained by the Owner Trustee on behalf of the Trust shall be
located in the State of Delaware or the State of Minnesota. The Trust shall not
have any employees in any state other than Delaware; provided, however, that
nothing herein shall restrict or prohibit the Owner Trustee, the Servicer or any
agent of the Trust from having employees within or without the State of
Delaware. Payments will be received by the Trust only in Delaware or the State
of Minnesota, and payments will be made by the Trust only from Delaware or the
State of Minnesota. The only office of the Trust will be at the Corporate Trust
Office in Delaware.
SECTION 2.10. Representations and Warranties of the Depositor.
By execution of this Agreement, the Depositor makes the following
representations and warranties with respect to itself on which the Owner Trustee
relies in accepting the Trust Property in trust and issuing the Certificate.
(a) Organization and Good Standing. It has been duly organized and is
validly existing as a corporation in good standing under the laws of the
State of Delaware, with power and authority to own its properties and to
conduct its business as such properties are currently owned and as such
business is currently conducted and is proposed to be conducted pursuant to
this Agreement and the Related Documents.
(b) Due Qualification. It is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all
2-3
<PAGE>
jurisdictions in which the ownership or lease of its property, the conduct
of its business and the performance of its obligations under this Agreement
and the Related Documents requires such qualification.
(c) Power and Authority; Binding Obligations. It has the power and
authority to execute and deliver this Agreement and its Related Documents
and to perform its obligations pursuant thereto; and the execution,
delivery and performance of this Agreement and its Related Documents have
been duly authorized by all necessary corporate action. When executed and
delivered, this Agreement and the Related Documents will constitute the
legal, valid and binding obligations of the Depositor enforceable in
accordance with their 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.
(d) No Consent Required. No consent, license, approval or
authorization or registration or declaration with any Person or with any
governmental authority, bureau or agency is required in connection with the
execution, delivery or performance of this Agreement and the Related
Documents, except for such as have been obtained, effected or made.
(e) No Violation. The consummation of the transactions contemplated by
this Agreement and the Depositor's Related Documents and the fulfillment of
its obligations under this Agreement and its Related Documents shall not
conflict with, result in any breach of any of the terms and provisions of
or constitute (with or without notice, lapse of time or both) a default
under, its certificate of incorporation or bylaws, or any indenture,
agreement, mortgage, deed of trust or other instrument to which it is a
party or by which it is bound, or result in the creation or imposition of
any Lien upon any of its properties pursuant to the terms of any such
indenture, agreement, mortgage, deed of trust or other instrument, or
violate any law, order, rule or regulation applicable to it of any court or
of any federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over it or any of its
properties.
(f) No Proceedings. There are no proceedings or investigations pending
or, to its knowledge, threatened against it before any court, regulatory
body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over it or its properties (A) asserting
the invalidity of this Agreement or any of the Related Documents, (B)
seeking to prevent the issuance of the Certificates or the Notes or the
consummation of any of the transactions contemplated by this Agreement or
any of the Related Documents, (C) seeking any determination or ruling that
might materially and adversely affect its performance of its obligations
under, or the validity or enforceability of, this Agreement or any of the
Related Documents, or (D) seeking to adversely affect the federal income
tax or other federal, state or local tax attributes of the Certificates.
2-4
<PAGE>
SECTION 2.11. [RESERVED]
SECTION 2.12. [RESERVED]
SECTION 2.13. Covenants of the Certificateholders.
Each Certificateholder by becoming a Certificateholder agrees:
(a) to be bound by the terms and conditions of the Certificates and of
this Agreement, including any supplements or amendments hereto and to
perform the obligations of a Certificateholder as set forth therein or
herein, in all respects as if it were a signatory hereto. This undertaking
is made for the benefit of the Trust, the Owner Trustee and all other
Certificateholders present and future.
(b) if requested by the Trust, it will sign a federal income tax
return in its capacity as holder of an interest in the Trust. Each
Certificateholder also hereby agrees that in its tax returns it will not
take any position inconsistent with those taken in any tax returns filed by
the Trust.
(c) if such Certificateholder is other than an individual or other
entity holding its Certificate through a broker who reports securities
sales on Form 1099-B, to notify the Owner Trustee of any transfer by it of
a Certificate in a taxable sale or exchange, within 30 days of the date of
the transfer.
(d) until the completion of the events specified in Section 9.1(e),
not, for any reason, to institute proceedings for the Trust or the Seller
to be adjudicated a bankrupt or insolvent, or consent to the institution of
bankruptcy or insolvency proceedings against the Trust or the Seller, or
file a petition seeking or consenting to reorganization or relief under any
applicable federal or state law relating to bankruptcy, or consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) of the Trust or the Seller or a substantial part of
its property, or cause or permit the Trust or the Seller to make any
assignment for the benefit of its creditors, or admit in writing its
inability to pay its debts generally as they become due, or declare or
effect a moratorium on its debt or take any action in furtherance of any
such action.
2-5
<PAGE>
ARTICLE III
THE CERTIFICATES
SECTION 3.1. Initial Ownership.
Upon the formation of the Trust by the contribution by the Depositor
pursuant to Section 2.5 and until the issuance of the Certificates, the
Depositor shall be the sole beneficiary of the Trust.
SECTION 3.2. The Certificates.
The Certificates shall be executed on behalf of the Trust by manual or
facsimile signature of any authorized signatory of the Owner Trustee having such
authority under the Owner Trustee's seal imprinted or otherwise affixed thereon
and attested on behalf of the Owner Trustee by the manual or facsimile signature
of any authorized signatory of the Owner Trustee. Certificates bearing the
manual or facsimile signatures of individuals who were, at the time when such
signatures were affixed, authorized to sign on behalf of the Owner Trustee shall
be validly issued and entitled to the benefits of this Agreement,
notwithstanding that such individuals or any of them have ceased to be so
authorized prior to the authentication and delivery of such Certificates.
SECTION 3.3. Authentication of Certificates.
Simultaneously with the sale, assignment and transfer to the Trust of the
Loans and the delivery to the Trust of the Loan Files and the other Trust
Property pursuant to the Sale and Servicing Agreement, the Owner Trustee shall
cause the Certificates to be executed on behalf of the Trust, authenticated and
delivered to or upon the order of the Depositor. No Certificate shall entitle
its Holder to any benefit under this Agreement, or shall be valid for any
purpose, unless there shall appear on such Certificate a certificate of
authentication substantially in the form set forth in Exhibit B, executed by the
Owner Trustee or the Authentication Agent, by manual or facsimile signature;
such authentication shall constitute conclusive evidence that such Certificate
shall have been duly authenticated and delivered hereunder. Wilmington Trust
Company is hereby initially appointed Authentication Agent. All Certificates
shall be dated the date of their authentication.
SECTION 3.4. Registration of Transfer and Exchange of Certificates.
(a) The Certificate Registrar shall maintain, or cause to be maintained, at
the office or agency maintained pursuant to Section 3.8, a register (the
"Certificate Register") in which, subject to such reasonable regulations as it
may prescribe, the Owner Trustee shall provide for the registration of
Certificates and of transfers and exchanges of Certificates as provided in this
Agreement. The Owner Trustee is hereby initially appointed Certificate Registrar
for the purpose of registering Certificates and transfers and exchanges of
Certificates as provided in this Agreement.
3-1
<PAGE>
(b) Upon surrender for registration of transfer of any Certificate at the
office or agency maintained pursuant to Section 3.8, the Owner Trustee shall
execute, authenticate and deliver (or shall cause the Authentication Agent to
authenticate and deliver), in the name of the designated transferee or
transferees, one or more new Certificates dated the date of authentication by
the Owner Trustee or any Authentication Agent. At the option of a Holder,
Certificates may be exchanged for other Certificates of the same class in
authorized denominations of a like aggregate amount upon surrender of the
Certificates to be exchanged at the office or agency maintained pursuant to
Section 3.8.
(c) Every Certificate presented or surrendered for registration of transfer
or exchange shall be accompanied by (i) a written instrument of transfer in form
satisfactory to the Owner Trustee and the Certificate Registrar, duly executed
by the Holder or his attorney duly authorized in writing, and (ii) a
representation letter and certification in the form of Exhibit C hereto, duly
executed by the transferee Holder. Each Certificate surrendered for registration
of transfer or exchange shall be canceled and subsequently disposed of by the
Owner Trustee in accordance with its customary practice.
(d) No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Owner Trustee or the Certificate Registrar may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Certificates.
(e) The Certificates may not be acquired by or for the account of (i) an
employee benefit plan (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) that is subject to the
provisions of Title 1 of ERISA, (ii) a plan described in Section 4975(e)(1) of
the Internal Revenue Code of 1986, as amended, or (iii) any entity whose
underlying assets include "plan assets" (within the meaning of Department of
Labor ("DOL") Regulation Section 2510.3-101, 29 C.F.R. ss. 2510.3-101 or
otherwise under ERISA) by reason of a plan's investment in the entity,
including, without limitation, an insurance company acting on behalf of its
general account; provided, however, that a Certificate or an interest therein
may be transferred to an insurance company acting on behalf of its general
account if such insurance company represents and covenants in writing to the
Company, the Owner Trustee, the Underwriters and the Servicer that (i) on the
date of such transfer, less than 25% of the assets of such general account (as
reasonably determined by such insurance company) constitute "plan assets" for
purposes of Title I of ERISA and Section 4975 of the Code, (ii) the purchase and
holding of such Certificate are eligible for exemptive relief under Sections (1)
and (3) of Prohibited Transaction Class Exemption 95-60 and (iii) if, after the
initial acquisition of such Certificate, at any time during any calendar quarter
(A) 25% or more of the assets of such general account (as reasonably determined
by such insurance company no less frequently than each calendar quarter)
constitute "plan assets" for purposes of Title I of ERISA or Section 4975 of the
Code and no exemption or exception from the prohibited transaction rules applies
to the continued holding of such Certificate under Section 401(c) of ERISA and
the final regulations thereunder or under an exemption or regulation issued by
the DOL under ERISA or (B) the Company, the Owner Trustee, the Underwriters or
the Servicer furnishes to the insurance company an opinion of counsel to the
effect that the holding of such Certificate in the insurance company's general
account causes the assets of the Trust to be considered "plan assets" (within
3-2
<PAGE>
the meaning of DOL Regulation Section 2510.3-101, 29 C.F.R. ss. 2510.3-101 or
otherwise under ERISA), then such insurance company will dispose of all of the
Certificates then held in its general account by the end of the next following
calendar quarter.
(f) Notwithstanding anything contained herein to the contrary, the Owner
Trustee and the Certificate Registrar shall not be responsible for ascertaining
whether any transfer complies with the registration provisions or exemptions
from the Securities Act of 1933, as amended, the Securities and Exchange Act of
1934, as amended, applicable state securities law or the Investment Company Act
of 1940, as amended, or the exemption provisions of ERISA; provided, however,
that if a certificate is specifically required to be delivered to the Owner
Trustee by a purchaser or transferee of a Certificate, the Owner Trustee shall
be under a duty to examine the same to determine whether it conforms to the
requirements of this Agreement and shall promptly notify the party delivering
the same if such certificate does not so conform.
(g) Notwithstanding the preceding provisions of this Section, the Owner
Trustee shall not be required to make, and the Certificate Registrar shall not
be required to register, transfers or exchanges of Certificates for a period of
15 days preceding the due date for any payment with respect to the Certificate.
SECTION 3.5. Mutilated, Destroyed, Lost or Stolen Certificates.
If (a) any mutilated Certificate is surrendered to the Certificate
Registrar, or the Certificate Registrar receives evidence to its satisfaction of
the destruction, loss or theft of any Certificate, and (b) there is delivered to
the Certificate Registrar and the Owner Trustee such security or indemnity as
may be required by them to save each of them harmless, then, in the absence of
notice to the Certificate Registrar or the Owner Trustee that such Certificate
has been acquired by a bona fide purchaser, the Owner Trustee on behalf of the
Trust shall execute, authenticate and deliver (or the Authentication Agent shall
authenticate and deliver), in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate, a new Certificate of like tenor. In
connection with the issuance of any new Certificate under this Section 3.5, the
Owner 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 (including the fees and expenses of the Owner Trustee and the
Certificate Registrar) connected therewith. Any duplicate Certificate issued
pursuant to this Section 3.5 shall constitute conclusive evidence of ownership
in the Trust, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.
SECTION 3.6. Persons Deemed Owners.
Prior to due presentation of a Certificate for registration of transfer,
the Owner Trustee, the Certificate Registrar and any agent of the Owner Trustee
or the Certificate Registrar may treat the person in whose name any Certificate
is registered as the owner of such Certificate for the purpose of receiving
distributions pursuant to Section 5.2 and for all other purposes whatsoever, and
neither the Owner Trustee, the Certificate Registrar nor any agent of the Owner
Trustee or the Certificate Registrar shall be affected by any notice to the
contrary.
3-3
<PAGE>
SECTION 3.7. Access to List of Certificateholders' Names and Addresses.
The Owner Trustee shall furnish or cause to be furnished to the Servicer,
within 15 days after receipt by the Owner Trustee of a written request therefor,
a list, in such form as the Servicer may reasonably require, of the names and
addresses of the Certificateholders as of the most recent Record Date for
payment of distributions to Certificateholders. If three or more
Certificateholders of a Class, or one or more Certificateholders holding not
less than 25% of the interests of the Certificateholders as a whole (hereinafter
referred to as "Applicants"), apply in writing to the Owner Trustee, and such
application states that the Applicants desire to communicate with other
Certificateholders with respect to their rights under this Agreement or under
the Certificates and is accompanied by a copy of the communication that such
Applicants propose to transmit, then the Owner Trustee shall, within five
Business Days after the receipt of such application, afford such Applicants
access, during normal business hours, to the current list of Certificateholders.
Every Certificateholder, by receiving and holding a Certificate, agrees that
none of the Servicer or the Owner Trustee, nor any agent thereof, shall be held
accountable by reason of the disclosure of any such information as to the names
and addresses of the Certificateholders under this Agreement, regardless of the
source from which such information was derived.
SECTION 3.8. Maintenance of Office or Agency.
The Owner Trustee shall maintain in Wilmington, Delaware, an office or
offices or agency or agencies where Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Owner Trustee in respect of the Certificates and the Related Documents may
be served. The Owner Trustee initially designates its Corporate Trust Office for
such purposes. The Owner Trustee shall give prompt written notice to the
Depositor and to the Certificateholders of any change in the location of the
Certificate Register or any such office of agency.
SECTION 3.9. Appointment of Paying Agent.
The Paying Agent shall make distributions to Certificateholders from the
Certificate Distribution Account pursuant to Section 5.2 and shall report the
amounts of such distributions to the Owner Trustee. Any Paying Agent shall have
the revocable power to withdraw funds from the Certificate Distribution Account
for the purpose of making the distributions referred to above. The Owner Trustee
may revoke such power and remove the Paying Agent if the Owner Trustee
determines in its sole discretion that the Paying Agent shall have failed to
perform its obligations under this Agreement in any material respect. The Paying
Agent shall initially be U.S. Bank Trust National Association. U.S. Bank Trust
National Association shall be permitted to resign as Paying Agent upon 30 days'
written notice to the Owner Trustee. In the event that U.S. Bank Trust National
Association shall no longer be the Paying Agent, the Owner Trustee shall appoint
a successor to act as Paying Agent (which shall be a bank or trust company). The
Owner Trustee shall cause such successor Paying Agent or any additional Paying
Agent appointed by the Owner Trustee to execute and deliver to the Owner Trustee
an instrument in which such successor Paying Agent or additional Paying Agent
shall agree with the Owner Trustee that as Paying Agent, such successor Paying
Agent or additional Paying Agent will hold
3-4
<PAGE>
all sums, if any, held by it for payment to the Certificateholders in trust for
the benefit of the Certificateholders entitled thereto until such sums shall be
paid to such Certificateholders. The Paying Agent shall return all unclaimed
funds to the Owner Trustee, and upon removal of a Paying Agent, such Paying
Agent shall also return all funds in its possession to the Owner Trustee. The
provisions of Sections 7.1, 7.3, 7.4 and 8.1 shall apply to the Owner Trustee
also in its role as Paying Agent for so long as the Owner Trustee shall act as
Paying Agent and, to the extent applicable, to any other Paying Agent appointed
hereunder. Any reference in this Agreement to the Paying Agent shall include any
co-paying agent unless the context requires otherwise.
3-5
<PAGE>
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
SECTION 4.1. Restriction on Power of Certificateholders.
No Certificateholder shall have any right to vote or in any manner
otherwise control the operation and management of the Trust except as expressly
provided in this Agreement.
SECTION 4.2. Prior Notice to Certificateholders with Respect to Certain
Matters.
The Owner Trustee shall not take any of the following actions, unless at
least 30 days (or such shorter period as shall be required under the
circumstances) before the taking of such action, the Owner Trustee shall have
notified the Certificateholders in writing of the proposed action and the
Certificateholders shall not have notified the Owner Trustee in writing prior to
the 30th day after such notice is given that such Certificateholders have
withheld consent or provided alternative direction:
(a) the election by the Trust to file an amendment to the Certificate
of Trust unless such amendment is required to be filed under the Business
Trust Statute or unless such amendment would not materially and adversely
affect the interests of the Certificateholders;
(b) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is required unless such
amendment would not materially and adversely affect the interests of the
Certificateholders; or
(c) the amendment, change or modification of the Administration
Agreement, unless such amendment would not materially and adversely affect
the interests of the Certificateholders.
SECTION 4.3. Action by Certificateholders with Respect to Bankruptcy.
The Owner Trustee shall not have the power to commence a voluntary
proceeding in bankruptcy relating to the Trust without the unanimous prior
approval of all Certificateholders and the delivery to the Owner Trustee by each
such Certificateholder of a certificate certifying that such Certificateholder
reasonably believes that the Trust is insolvent.
SECTION 4.4. Restrictions on Certificateholders' Power.
No Certificateholder shall have any right by virtue or by availing itself
of any provisions of this Agreement to institute any suit, action, or proceeding
in equity or at law upon or under or with respect to this Agreement or any
Related Document, unless the Certificateholders are the instructing party
pursuant to Section 6.3 and unless a Certificateholder previously shall have
given to the Owner Trustee a written notice of default and of the continuance
thereof, as provided in this Agreement and unless Holders of Certificates
evidencing in the aggregate not less than a
4-1
<PAGE>
25% interest of the Certificates as a whole shall have made written request
upon the Owner Trustee to institute such action, suit or proceeding in its own
name as Owner Trustee under this Agreement and shall have offered to the Owner
Trustee such reasonable indemnity as it may require against the costs, expenses
and liabilities to be incurred therein or thereby, and the Owner Trustee, for 30
days after its receipt of such notice, request, and offer of indemnity, shall
have neglected or refused to institute any such action, suit, or proceeding, and
during such 30-day period no request or waiver inconsistent with such written
request has been given to the Owner Trustee pursuant to and in compliance with
this Section or Section 6.3; it being understood and intended, and being
expressly covenanted by each Certificateholder with every other
Certificateholder and the Owner Trustee, that no one or more Holders of
Certificates shall have any right in any manner whatever by virtue or by
availing itself or themselves of any provisions of this Agreement to affect,
disturb, or prejudice the rights of the Holders of any other of the
Certificates, or to obtain or seek to obtain priority over or preference to any
other such Holder, or to enforce any right under this Agreement, except in the
manner provided in this Agreement and for the equal, ratable, and common benefit
of all Certificateholders. For the protection and enforcement of the provisions
of this Section 4.4, each and every Certificateholder and the Owner Trustee
shall be entitled to such relief as can be given either at law or in equity.
4-2
<PAGE>
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
SECTION 5.1. Trust Accounts.
(a) On or prior to the Closing Date, the Depositor shall cause the Servicer
to establish the Certificate Distribution Account in the name of the Owner
Trustee for the benefit of the Certificateholders as provided in Section 6.01(c)
of the Sale and Servicing Agreement. The Certificate Distribution Account shall
be an Eligible Account and initially shall be a segregated trust account
established with the Indenture Trustee and maintained with the Indenture
Trustee, so long as the Indenture Trustee is acting as Paying Agent under
Section 3.9.
(b) The Owner Trustee shall possess all right, title and interest in all
funds on deposit from time to time in the Certificate Distribution Account and
in all proceeds thereof. If, at any time, the Certificate Distribution Account
ceases to be an Eligible Account, the Owner Trustee shall within 5 Business Days
(or such longer period, not to exceed 30 calendar days, as to which each Rating
Agency may consent) establish or cause the Servicer to establish a new
Certificate Distribution Account as an Eligible Account and shall transfer any
cash and/or any investments to such new Certificate Distribution Account.
(c) All amounts held in the Certificate Distribution Account shall, to the
extent permitted by applicable laws, rules and regulations, be invested by the
Paying Agent in Eligible Investments as provided in Section 6.01 of the Sale and
Servicing Agreement and pursuant to the written instructions of the
Administrator that mature not later than one Business Day prior to the Payment
Date for the Due Period to which such amounts relate. Investments in Eligible
Investments shall be made in the name of the Trust, and such investments shall
not be sold or disposed of prior to their maturity. Any investment of funds in
the Certificate Distribution Account shall be made in Eligible Investments held
by a financial institution with respect to which (a) such institution has noted
the Owner Trustee's interest therein by book entry or otherwise and (b) a
confirmation of the Owner Trustee's interest has been sent to the Owner Trustee
by such institution, provided that such Eligible Investments are (i) specific
certificated securities, and (ii) either (A) in the possession of such
institution or (B) in the possession of a clearing corporation in New York or
Delaware, registered in the name of such clearing corporation, 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 Owner
Trustee's security interest therein, and held by such clearing corporation in an
account of such institution. Subject to the other provisions hereof, the Paying
Agent on behalf of the Owner Trustee shall have sole control over each such
investment and the income thereon, and any certificate or other instrument
evidencing any such investment, if any, shall be delivered directly to the Owner
Trustee or its agent, together with each document of transfer, if any, necessary
to transfer title to such investment to the Owner Trustee in a manner which
complies with this Section 5.1. All interest, dividends, gains upon sale and
other income from, or earnings on investment of funds in the Certificate
Distribution Account shall be distributed on the next Payment Date pursuant to
Section 5.2(a). The Seller shall deposit in the Certificate Distribution Account
an amount equal to any net loss on such investments immediately as realized.
5-1
<PAGE>
SECTION 5.2. Application of Funds in Certificate Distribution Account.
(a) On each Payment Date the Paying Agent will, based on the information
contained in the Monthly Report delivered on the related Determination Date
pursuant to Section 5.14 of the Sale and Servicing Agreement, distribute to
Certificateholders, on a pro rata basis to the extent of the funds available,
amounts deposited in the Certificate Distribution Account.
(b) On the Payment Date following the date on which amounts received in
respect of the Seller's or the Servicer's exercise of its option to purchase the
corpus of the Trust pursuant to Section 8.01 of the Sale and Servicing
Agreement, or pursuant to the auction of the Loans as described in Section 10.04
of the Indenture or Section 9.3 of this Agreement, are deposited in the
Certificate Distribution Account, the Paying Agent will distribute such amounts
to Certificateholders in the manner described in Section 5.2(a).
(c) On the Payment Date on which proceeds are deposited in the Certificate
Distribution Account pursuant to Section 8.02 of the Sale and Servicing
Agreement (or on the Payment Date immediately following such deposit if such
proceeds are not deposited in the Certificate Distribution Account on a Payment
Date), the Paying Agent will distribute the proceeds so deposited in the
Certificate Distribution Account to Certificateholders in the manner described
in Section 5.2(a).
(d) On the Payment Date following the date on which the Indenture Trustee
makes payments of money or property in respect of liquidation of the Trust
Property pursuant to Section 5.06 of the Indenture and deposits funds received
in connection with such liquidation in the Certificate Distribution Account, the
Paying Agent will distribute such funds to Certificateholders in the manner
described in Section 5.2(a).
(e) On each Payment Date, the Owner Trustee shall send or cause to be sent
to each Certificateholder the statement required pursuant to Section 6.07 of the
Sale and Servicing Agreement.
(f) The Paying Agent agrees, to the extent required by the Internal Revenue
Code, and applicable federal regulations promulgated thereunder, as the same may
be amended from time to time (collectively, the "Code"), to withhold from each
payment due hereunder or under any Certificate, United States withholding taxes
at the appropriate rate, and, on a timely basis, to deposit such amounts with an
authorized depository and make such returns, filings and other reports in
connection therewith as are required of it under the Code. Any Certificateholder
which is eligible for an exemption from or reduction of withholding of United
States federal income taxes shall, from time to time, provide to the Owner
Trustee and the Paying Agent in a timely manner all appropriate and properly
completed forms indicating such eligibility, as may be necessary to permit the
Paying Agent not to withhold taxes from payments due to such Certificateholder.
In connection with the foregoing, the Owner Trustee shall promptly furnish or
cause to be furnished to each Certificateholder in a timely fashion such U.S.
Treasury forms as are required by the Code to be furnished to such
Certificateholder indicating payment of any taxes withheld from any payments by
the Paying Agent to such Certificateholder. The Owner Trustee and the Paying
Agent shall be fully protected in relying upon, and each Certificateholder
5-2
<PAGE>
by its acceptance of a Certificate hereunder agrees to indemnify and hold the
Owner Trustee and the Paying Agent harmless against all claims or liability of
any kind arising in connection with or related to the Owner Trustee's or the
Paying Agent's reliance upon any documents, forms or information provided by any
Certificateholder to the Owner Trustee. In addition, if the Paying Agent has not
withheld taxes on any payment made to any Certificateholder, and the Paying
Agent is subsequently required to remit to any taxing authority any such amount
not withheld, such Certificateholder shall return such amount to the Paying
Agent upon written demand by the Paying Agent. In no event shall the Owner
Trustee or the Paying Agent be liable for consequential damages to any
Certificateholder.
(g) Any funds remaining in the Certificate Distribution Account after
distribution of all amounts specified in this Section 5.2 shall be distributed
to the Certificateholders in the manner described in Section 5.2(a).
SECTION 5.3. Method of Payment.
Subject to Section 9.1(c), distributions required to be made to
Certificateholders on any Payment Date shall be made to each Certificateholder
of record on the preceding Record Date either by wire transfer, in immediately
available funds, to the account of such Holder at a bank or other entity having
appropriate facilities therefor, if such Certificateholder shall have provided
to the Certificate Registrar appropriate written instructions at least five
Business Days prior to such Payment Date and such Holder's Certificates in the
aggregate evidence a denomination of not less than $1,000,000, or, if not, by
check mailed to such Certificateholder at the address of such Holder appearing
in the Certificate Register.
SECTION 5.4. No Segregation of Monies; No Interest.
Subject to Sections 5.1 and 5.2, monies received by or on behalf of the
Owner Trustee hereunder need not be segregated in any manner except to the
extent required by law or by the Sale and Servicing Agreement and may be
deposited under such general conditions as may be prescribed by law, and neither
the Owner Trustee or the Paying Agent shall be liable for any interest thereon.
SECTION 5.5. Accounting; Reports; Tax Returns.
(a) It is the intention of the parties that for so long as there is only
one Certificateholder the Trust will be disregarded as a separate entity for tax
purposes, and that if there is more than one Certificateholder the Trust will be
treated as a partnership for tax purposes. Accordingly, the Administrator has
agreed pursuant to the Administration Agreement that the Administrator shall, as
appropriate: (i) maintain (or cause to be maintained) the books of the Trust on
a calendar year basis on the accrual method of accounting, (ii) deliver to each
Certificateholder, as may be required by the Code and applicable Treasury
Regulations, such information as may be required to enable each
Certificateholder to prepare its federal and state income tax returns, (iii)
obtain a federal tax identification number for the Trust, and file or cause to
be filed such tax returns relating to the Trust and direct the Owner Trustee to
make such elections as may from time to time be required or appropriate under
any applicable state or
5-3
<PAGE>
federal statute or rule or regulation thereunder so as to maintain the Trust's
characterization as a partnership for federal income tax purposes, (iv) collect
or cause to be collected any withholding tax as described in and in accordance
with Section 5.2(f) with respect to income or distributions to
Certificateholders and (v) file or cause to be filed all documents required to
be filed by the Trust with the Commission and otherwise take or cause to be
taken all such actions as are notified by the Servicer to the Administrator as
being required for the Trust's compliance with all applicable provisions of
state and federal securities laws.
(b) The Owner Trustee shall sign on behalf of the Trust the tax returns of
the Trust, unless applicable law requires the Certificateholder to sign such
documents, in which case such documents shall be signed by the
Certificateholder.
(c) None of the parties hereto shall make the election provided in Treasury
Regulation ss. 301.7701-3(c) to have the Trust classified as an association
taxable as a corporation.
5-4
<PAGE>
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
SECTION 6.1. General Authority.
The Owner Trustee is authorized and directed to execute and deliver the
Related Documents to which the Trust is to be a party and each certificate or
other document attached as an exhibit to or contemplated by the Related
Documents to which the Trust is to be a party and any amendment thereto, and on
behalf of the Trust, to direct the Indenture Trustee to authenticate and deliver
the Class A-1 Notes in the aggregate principal amount of $193,400,000, the Class
A-2 Notes in the aggregate principal amount of $100,000,000, the Class M-1 Notes
in the aggregate principal amount of $34,600,000, the Class M-2 Notes in the
aggregate principal amount of $23,600,000, the Class B-1 Notes in the aggregate
principal amount of $22,200,000 and the Class B-2 Notes in the aggregate
principal amount of $26,200,000. In addition to the foregoing, the Owner Trustee
is authorized, but shall not be obligated, to take all actions required of the
Trust pursuant to the Related Documents. The Owner Trustee is further
authorized, on behalf of the Trust, to enter into the Administration Agreement
and to appoint a successor Administrator.
SECTION 6.2. General Duties.
It shall be the duty of the Owner Trustee to discharge (or cause to be
discharged through the Administrator or such agents as shall be appointed) all
of its responsibilities pursuant to the terms of this Agreement and the Related
Documents and to administer the Trust in the interest of the Certificateholders,
subject to the Related Documents and in accordance with the provisions of this
Agreement. The Owner Trustee undertakes to perform such duties, and only such
duties, as are specifically set forth in this Agreement or as it shall be
directed in writing by the instructing party. No implied covenants or agreements
shall be read into this Agreement. Notwithstanding the foregoing, the Owner
Trustee shall be deemed to have discharged its duties and responsibilities
hereunder and under the Related Documents to the extent the Administrator has
agreed in the Administration Agreement to perform any act or to discharge any
duty of the Trust or the Owner Trustee hereunder or under any Related Document,
and the Owner Trustee shall not be liable for the default or failure of the
Administrator to carry out its obligations under the Administration Agreement.
SECTION 6.3. Action upon Instruction.
(a) Subject to Article IV, the Certificateholders shall have the exclusive
right to direct the actions of the Owner Trustee in the management of the Trust,
so long as such instructions are not inconsistent with the express terms set
forth herein or in any Related Document. The Certificateholders shall not
instruct the Owner Trustee in a manner inconsistent with this Agreement or the
Related Documents.
(b) The Owner Trustee shall not be required to take any action hereunder or
under any Related Document if the Owner Trustee shall have reasonably
determined, or shall have been
6-1
<PAGE>
advised by counsel, that such action is contrary to the terms hereof or of any
Related Document or is otherwise contrary to law.
(c) No provision of this Agreement shall require the Owner Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of its duties hereunder or in the exercise of any of its rights or
powers if it shall have reasonable grounds to believe that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it.
(d) In accepting the trusts hereby created, the Owner Trustee acts solely
as trustee hereunder and not in its individual capacity. The Owner Trustee
agrees to disburse all moneys actually received by it constituting part of the
Trust Property upon the terms of this Agreement. Notwithstanding anything in
this Agreement to the contrary, the Owner Trustee, when acting in such capacity,
shall not be personally liable or accountable to any Person, under any
circumstances, except by reason of its gross negligence, willful misconduct or
breach of its representations, warranties or covenants.
(e) The Owner Trustee shall be under no liability (except as provided in
(d) above) for any action taken by the Owner Trustee in good faith in reliance
upon any paper, order, list, demand, request, consent, affidavit, notice,
opinion, direction, endorsement, assignment, resolution, draft or other
document, believed by it to be genuine and to have been signed by the proper
party or parties or for the disposition of moneys or Trust Property pursuant to
this Agreement. As to any fact or matter, the manner of ascertainment of which
is not specifically prescribed herein, the Owner Trustee may for all purposes
hereof rely on a certificate, signed by the president or any vice president or
by the treasurer or other authorized officer of the relevant party, as to such
fact or matter, and such certificate shall constitute full protection to the
Owner Trustee for any action taken or omitted to be taken by it in good faith in
reliance thereon.
(f) Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Agreement or any
Related Document, the Owner Trustee shall promptly give notice (in such form as
shall be appropriate under the circumstances) to the Certificateholders
requesting instruction as to the course of action to be adopted, and to the
extent the Owner Trustee acts in good faith in accordance with any written
instruction received from the Certificateholders, the Owner Trustee shall not be
liable on account of such action to any Person. If the Owner Trustee shall not
have received appropriate instruction within ten days of such notice (or within
such shorter period of time as reasonably may be specified in such notice or may
be necessary under the circumstances) it may, but shall be under no duty to,
take or refrain from taking such action, not inconsistent with this Agreement or
the Related Documents, as it shall deem to be in the best interests of the
Certificateholders, and shall have no liability to any Person for such action or
inaction.
(g) In the event that the Owner Trustee is unsure as to the application of
any provision of this Agreement or any Related Document or any such provision is
ambiguous as to its application, or is, or appears to be, in conflict with any
other applicable provision, or in the event that this Agreement permits any
determination by the Owner Trustee or is silent or is incomplete as to the
course of action that the Owner Trustee is required to take with respect to a
particular
6-2
<PAGE>
set of facts, the Owner Trustee may give notice (in such form as shall be
appropriate under the circumstances) to the Certificateholders requesting
instruction and, to the extent that the Owner Trustee acts or refrains from
acting in good faith in accordance with any such instruction received, the Owner
Trustee shall not be liable, on account of such action or inaction, to any
Person. If the Owner Trustee shall not have received appropriate instruction
within 10 days of such notice (or within such shorter period of time as
reasonably may be specified in such notice or may be necessary under the
circumstances) it may, but shall be under no duty to, take or refrain from
taking such action, not inconsistent with this Agreement or the Related
Documents, as it shall deem to be in the best interests of the
Certificateholders, and shall have no liability to any Person for such action or
inaction.
SECTION 6.4. No Duties Except as Specified in this Agreement or in
Instructions.
The Owner Trustee shall not have any duty or obligation to manage, make any
payment with respect to, register, record, sell, dispose of, or otherwise deal
with the Trust Property, or to otherwise take or refrain from taking any action
under, or in connection with, any document contemplated hereby to which the
Trust is a party, except as expressly provided by the terms of this Agreement
(including as provided in Section 6.2) or in any written instruction received by
the Owner Trustee pursuant to Section 6.3; and no implied duties or obligations
shall be read into this Agreement or any Related Document against the Owner
Trustee. The Owner Trustee shall have no responsibility for preparing,
monitoring or filing any financing or continuation statements in any public
office at any time or otherwise to perfect or maintain the perfection of any
security interest or lien granted to it hereunder or to record this Agreement or
any Related Document; however, the Owner Trustee will from time to time execute
and deliver such financing or continuation statements as are prepared by the
Servicer and delivered to the Owner Trustee in final execution form for its
execution on behalf of the Trust for the purpose of perfecting or maintaining
the perfection of such a security interest or lien or effecting such a
recording. The Owner Trustee nevertheless agrees that it will, at its own cost
and expense (and not at the expense of the Trust), promptly take all action as
may be necessary to discharge any liens on any part of the Trust Property that
are attributable to claims against the Owner Trustee in its individual capacity
that are not related to the ownership or the administration of the Trust
Property.
SECTION 6.5. No Action Except under Specified Documents or Instructions.
The Owner Trustee shall not manage, control, use, sell, dispose of or
otherwise deal with any part of, the Trust Property except (i) in accordance
with the powers granted to and the authority conferred upon the Owner Trustee
pursuant to this Agreement, (ii) in accordance with the Related Documents and
(iii) in accordance with any document or instruction delivered to the Owner
Trustee pursuant to Section 6.3.
SECTION 6.6. Restrictions.
The Owner Trustee shall not take any action (a) that is inconsistent with
the purposes of the Trust set forth in Section 2.3 or (b) that, to the actual
knowledge of the Owner Trustee, would result in the Trust's becoming taxable as
a corporation for federal income tax purposes. The
6-3
<PAGE>
Certificateholders shall not direct the Owner Trustee to take any action that
would violate the provisions of this Section.
SECTION 6.7. Administration Agreement.
(a) The Administrator is authorized to execute on behalf of the Trust all
documents, reports, filings, instruments, certificates and opinions as it shall
be the duty of the Trust to prepare, file or deliver pursuant to the Related
Documents. Upon written request, the Owner Trustee shall execute and deliver to
the Administrator a power of attorney appointing the Administrator its agent and
attorney-in-fact to execute all such documents, reports, filings, instruments,
certificates and opinions.
(b) If the Administrator shall resign or be removed pursuant to the terms
of the Administration Agreement, the Owner Trustee may, and is hereby authorized
and empowered to, appoint or consent to the appointment of a successor
Administrator pursuant to the Administration Agreement.
(c) If the Administration Agreement is terminated, the Owner Trustee may,
and is hereby authorized and empowered to, appoint or consent to the appointment
of a Person to perform substantially the same duties as are assigned to the
Administrator in the Administration Agreement pursuant to an agreement
containing substantially the same provisions as are contained in the
Administration Agreement.
(d) The Owner Trustee shall promptly notify each Certificateholder of any
default by or misconduct of the Administrator under the Administration Agreement
of which the Owner Trustee has received written notice or of which a Responsible
Officer of the Owner Trustee has actual knowledge.
6-4
<PAGE>
ARTICLE VII
CONCERNING THE OWNER TRUSTEE
SECTION 7.1. Acceptance of Trust and Duties.
The Owner Trustee accepts the trusts hereby created and agrees to perform
its duties hereunder with respect to such trusts but only upon the terms of this
Agreement. The Owner Trustee also agrees to disburse all monies actually
received by it constituting part of the Trust Property upon the terms of the
Related Documents and this Agreement. The Owner Trustee shall not be answerable
or accountable hereunder or under any Related Document under any circumstances,
except (i) for its own willful misconduct or gross negligence, (ii) in the case
of the inaccuracy of any representation or warranty contained in Section 7.3,
(iii) for liabilities arising from the failure of the Owner Trustee to perform
obligations expressly undertaken by it in the last sentence of Section 6.4
hereof, (iv) for any investments issued by the Owner Trustee or any branch or
affiliate thereof in its commercial capacity or (v) for taxes, fees or other
charges on, based on or measured by, any fees, commissions or compensation
received by the Owner Trustee in connection with any of the transactions
contemplated by this Agreement or any Related Document. In particular, but not
by way of limitation (and subject to the exceptions set forth in the preceding
sentence):
(a) the Owner Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer of the Owner Trustee;
(b) the Owner Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
instructions of the Certificateholders;
(c) no provision of this Agreement or any Related Document shall
require the Owner Trustee to expend or risk funds or otherwise incur any
financial liability in the performance of any of its rights or powers
hereunder or under any Related Document if the Owner Trustee shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured or
provided to it;
(d) under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under this Agreement or any of the
Related Documents, including the principal of and interest on the
Certificates or the Notes;
(e) the Owner Trustee shall not be responsible for or in respect of
the recitals herein, the validity or sufficiency of this Agreement or for
the due execution hereof by the Depositor or for the form, character,
genuineness, sufficiency, value or validity of any of the Trust Property or
for or in respect of the validity or sufficiency of the Related Documents,
other than the certificate of authentication on the Certificates, and the
Owner Trustee shall in no event assume or incur any liability, duty, or
obligation to the Indenture
7-1
<PAGE>
Trustee, any Noteholder or to any Certificateholder, other than as
expressly provided for herein and in the Related Documents;
(f) the Owner Trustee shall not be liable for the default or
misconduct of the Administrator, the Paying Agent, the Indenture Trustee or
the Servicer under any of the Related Documents or otherwise and the Owner
Trustee shall have no obligation or liability to monitor the performance of
or to perform the obligations of the Trust under this Agreement or the
Related Documents that are required to be performed by the Administrator
under the Administration Agreement, the Indenture Trustee under the
Indenture, the Paying Agent under this Agreement or the Servicer under the
Sale and Servicing Agreement;
(g) the Owner 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 under this Agreement or otherwise or in
relation to this Agreement or any Related Document, at the request, order
or direction of the Certificateholders, unless such Certificateholders have
offered to the Owner Trustee security or indemnity satisfactory to it
against the costs, expenses and liabilities that may be incurred by the
Owner Trustee therein or thereby. The right of the Owner Trustee to perform
any discretionary act enumerated in this Agreement or in any Related
Document shall not be construed as a duty, and the Owner Trustee shall not
be answerable for other than its gross negligence or willful misconduct in
the performance of any such act;
(h) the Owner Trustee shall not be under any obligation to appear in,
prosecute or defend any action, which in its opinion may require it to
incur any out-of-pocket expense or any liability unless it shall be
furnished with such reasonable security and indemnity against such expense
or liability as it may require in accordance with the terms hereof. The
Owner Trustee may, but shall be under no duty to, undertake such action as
it may deem necessary at any and all times to protect the Trust Property
and the respective rights and interests of the Noteholders and the
Certificateholders pursuant to the terms of the Indenture and this
Agreement;
(i) the Owner Trustee may (at the expense of the Seller) consult with
counsel, and the written advice of counsel or any opinion of counsel shall
be full and complete authorization and protection in respect of any action
taken or omitted by the Owner Trustee in good faith reliance thereon; and
(j) notwithstanding anything contained herein to the contrary, neither
Wilmington Trust nor the Owner Trustee shall be required to take any action
in any jurisdiction other than in the State of Delaware if the taking of
such action will (i) require the consent or approval or authorization or
order of or giving of notice to, or the registration with or the taking of
any other action in respect of, any state or other governmental authority
or agency of any jurisdiction other than the State of Delaware; (ii) result
in any fee, tax or other governmental charge under the laws of any
jurisdiction or any political subdivisions thereof in existence on the date
hereof other than the State of Delaware becoming payable by Wilmington
Trust; or (iii) subject Wilmington Trust to
7-2
<PAGE>
personal jurisdiction in any jurisdiction other than the State of Delaware
for causes of action arising from acts unrelated to the consummation of the
transactions by Wilmington Trust or the Owner Trustee as the case may be,
contemplated hereby. The Owner Trustee shall be entitled to obtain (at the
expense of the Seller) an opinion of counsel to determine whether any
action required to be taken pursuant to this Agreement results in the
consequences described in clauses (i), (ii) and (iii) of the preceding
sentence. In the event that said counsel advises the Owner Trustee that
such action will result in such consequences, the Owner Trustee will
appoint an additional or separate trustee to proceed with such action.
SECTION 7.2. Furnishing of Documents.
The Owner Trustee shall furnish to the Certificateholders, promptly upon
receipt of a written request therefor, duplicates or copies of all reports,
notices, requests, demands, certificates, financial statements and any other
instruments furnished to the Owner Trustee under the Related Documents unless
the Certificateholders have previously received such items.
SECTION 7.3. Representations and Warranties.
The Owner Trustee hereby represents and warrants to the Depositor and the
Certificateholders that:
(a) It is a banking corporation duly organized and validly existing in
good standing under the laws of the State of Delaware. It has all requisite
corporate power and authority and all franchises, grants, authorizations,
consents, orders and approvals from all governmental authorities of the
State of Delaware and the United States governing its banking and trust
powers necessary to execute, deliver and perform its obligations under this
Agreement.
(b) It has taken all corporate action necessary to authorize the
execution and delivery by it of this Agreement and each Related Document to
which the Trust is a party, and this Agreement and each Related Document
will be executed and delivered by one of its officers who is duly
authorized to execute and deliver this Agreement on its behalf.
(c) Neither the execution nor the delivery by it of this Agreement,
nor the consummation by it of the transactions contemplated hereby nor
compliance by it with any of the terms or provisions hereof will contravene
any Federal or Delaware law, governmental rule or regulation governing the
banking or trust powers of the Owner Trustee or any judgment or order
binding on it, or constitute any default under its charter documents or
bylaws or any indenture, mortgage, contract, agreement or instrument to
which it is a party or by which any of its properties may be bound or
result in the creation or imposition of any lien, charge or encumbrance on
the Trust Property resulting from actions by or claims against the Owner
Trustee individually which are unrelated to this Agreement or the Related
Documents.
7-3
<PAGE>
SECTION 7.4. Reliance; Advice of Counsel.
(a) The Owner Trustee shall incur no liability to anyone in acting upon any
signature, instrument, notice, resolution, request, consent, order, certificate,
report, opinion, bond, or other document or paper believed by it to be genuine
and believed by it to be signed by the proper party or parties. The Owner
Trustee may accept a certified copy of a resolution of the board of directors or
other governing body of any corporate party as conclusive evidence that such
resolution has been duly adopted by such body and that the same is in full force
and effect. As to any fact or matter the method of the determination of which is
not specifically prescribed herein, the Owner Trustee may for all purposes
hereof rely on a certificate, signed by the president or any vice president or
by the treasurer or other authorized officers of the relevant party, as to such
fact or matter, and such certificate shall constitute full protection to the
Owner Trustee for any action taken or omitted to be taken by it in good faith in
reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in the
performance of its duties and obligations under this Agreement or the Related
Documents, the Owner Trustee (i) may act directly or through its agents or
attorneys pursuant to agreements entered into with any of them, and the Owner
Trustee shall not be liable for the conduct or misconduct of such agents or
attorneys if such agents or attorneys shall have been selected by the Owner
Trustee with reasonable care, and (ii) may consult with counsel, accountants and
other skilled persons to be selected with reasonable care and employed by it.
The Owner Trustee shall not be liable for anything done, suffered or omitted in
good faith by it in accordance with the written opinion or advice of any such
counsel, accountants or other such persons and not contrary to this Agreement or
any Related Document.
SECTION 7.5. Not Acting in Individual Capacity.
Except as provided in this Article VII, in accepting the trusts hereby
created Wilmington Trust Company acts solely as Owner Trustee hereunder and not
in its individual capacity and all Persons having any claim against the Owner
Trustee by reason of the transactions contemplated by this Agreement or any
Related Document shall look only to the Trust Property for payment or
satisfaction thereof.
SECTION 7.6. Owner Trustee Not Liable for Certificates, Notes or Loans.
The recitals contained herein and in the Certificates and the Notes (other
than the signature and counter-signature of the Owner Trustee on the
Certificates and the Notes) shall be taken as the statements of the Depositor,
and the Owner Trustee assumes no responsibility for the correctness thereof. The
Owner Trustee makes no representations as to the validity or sufficiency of this
Agreement, of any Related Document or of the Certificates (other than the
signature and counter-signature of the Owner Trustee on the Certificates) or the
Notes (other than the signature or counter-signature of the Owner Trustee on the
Notes), or of any Loan or related documents. The Owner Trustee shall at no time
have any responsibility or liability for or with respect to the legality,
validity and enforceability of any Loan, or the perfection and priority of any
security interest created by any Loan in any real property or the maintenance of
any such perfection and priority of any security interest created by any Loan in
any real property or for or with respect to
7-4
<PAGE>
the sufficiency of the Trust Property or its ability to generate the payments to
be distributed to Certificateholders under this Agreement or the Noteholders
under the Indenture, including, without limitation: the existence, condition and
ownership of any real property; the existence and enforceability of any
insurance thereon; the existence and contents of any Loan or any computer or
other record thereof; the validity of the assignment of any Loan to the Trust or
of any intervening assignment; the completeness of any Loan; the performance or
enforcement of any Loan; the compliance by the Seller or the Servicer with any
warranty or representation made under any Related Document or in any related
document or the accuracy of any such warranty or representation or any action of
the Indenture Trustee or the Servicer taken in the name of the Owner Trustee.
SECTION 7.7. Owner Trustee May Own Certificates and Notes.
The Owner Trustee in its individual or any other capacity may become the
owner or pledgee of Certificates or Notes and may deal with the Depositor, the
Seller, the Indenture Trustee and the Servicer in banking or other transactions
with the same rights as it would have if it were not Owner Trustee.
7-5
<PAGE>
ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE
SECTION 8.1. Owner Trustee's Fees and Expenses.
The Owner Trustee shall receive as compensation for its services hereunder
such fees as have been separately agreed upon before the date hereof between
Green Tree and the Owner Trustee (or, with respect to any successor Owner
Trustee, reasonable compensation for all services rendered by it hereunder), and
the Owner Trustee shall be entitled to be reimbursed by Green Tree for its other
reasonable expenses hereunder, including the reasonable compensation, expenses
and disbursements of such agents, representatives, experts and counsel as the
Owner Trustee may employ in connection with the exercise and performance of its
rights and its duties hereunder; provided, however, that the Owner Trustee shall
only be entitled to reimbursement for such expenses hereunder to the extent such
expenses (i) are fees of outside counsel engaged by the Owner Trustee in respect
of the performance of its obligations hereunder or (ii) relate to the
performance of its obligations pursuant to Section 5.5 hereof.
SECTION 8.2. Indemnification.
Green Tree shall be liable as primary obligor for, and shall indemnify the
Owner Trustee in its individual capacity and its successors, assigns, agents and
servants, and any co-trustee (collectively, the "Indemnified Parties") from and
against, any and all liabilities, obligations, losses, damages, taxes, claims,
actions and suits, and any and all reasonable costs, expenses and disbursements
(including reasonable legal fees and expenses) of any kind and nature whatsoever
(collectively, "Expenses") which may at any time be imposed on, incurred by, or
asserted against the Owner Trustee or any Indemnified Party in any way relating
to or arising out of this Agreement, the Related Documents, the Trust Property,
the administration of the Trust Property or the action or inaction of the Owner
Trustee hereunder, except only that Green Tree shall not be liable for or
required to indemnify the Owner Trustee from and against Expenses arising or
resulting from any of the matters described in the third sentence of Section
7.1. The indemnities contained in this Section shall survive the resignation or
termination of the Owner Trustee or the termination of this Agreement.
SECTION 8.3. Nonrecourse Obligations.
Notwithstanding anything in this Agreement or any Related Document, the
Owner Trustee agrees in its individual capacity and in its capacity as Owner
Trustee for the Trust that all obligations of the Trust to the Owner Trustee
individually or as Owner Trustee for the Trust shall be recourse to the Trust
Property only and specifically shall not be recourse to the assets of any
Certificateholder.
8-1
<PAGE>
ARTICLE IX
TERMINATION
SECTION 9.1. Termination of the Trust.
(a) The respective obligations and responsibilities of the Depositor and
the Owner Trustee created by this Agreement and the Trust created by this
Agreement shall terminate upon the later of (i) the maturity or other
liquidation of the last Loan (including the purchase as of any Payment Date by
the Seller or the Servicer at its option of the corpus of the Trust as described
in Section 8.01 of the Sale and Servicing Agreement) and the subsequent
distribution of amounts in respect of such Loans as provided in the Related
Documents, or (ii) the payment to Certificateholders of all amounts required to
be paid to them pursuant to this Agreement. In any case, there shall be
delivered to the Owner Trustee, the Indenture Trustee, the Rating Agencies and
the Note Insurer an Opinion of Counsel that all applicable preference periods
under federal, state and local bankruptcy, insolvency and similar laws have
expired with respect to the payments pursuant to clause (ii); provided, however,
that in no event shall the trust created by this Agreement continue beyond the
expiration of 21 years from the death of the last survivor of the descendants
living on the date of this Agreement of Rose Kennedy of the Commonwealth of
Massachusetts; and provided, further, that the rights to indemnification under
Section 8.2 shall survive the termination of the Trust. The Servicer shall
promptly notify the Owner Trustee of any prospective termination pursuant to
this Section 9.1. The bankruptcy, liquidation, dissolution, termination,
resignation, expulsion, withdrawal, death or incapacity of any
Certificateholder, shall not (x) operate to terminate this Agreement or the
Trust, nor (y) entitle such Certificateholder's legal representatives or heirs
to claim an accounting or to take any action or proceeding in any court for a
partition or winding up of all or any part of the Trust or Trust Property nor
(z) otherwise affect the rights, obligations and liabilities of the parties
hereto.
(b) Except as provided in Section 9.1(a), neither the Depositor nor any
Certificateholder shall be entitled to revoke or terminate the Trust.
(c) Within five Business Days of receipt of notice of final distribution on
the Certificates from the Seller or the Servicer given pursuant to Section
8.01(b) of the Sale and Servicing Agreement , the Owner Trustee shall mail
written notice to the Certificateholder specifying (i) the Payment Date upon
which final payment of the Certificates shall be made upon presentation and
surrender of Certificates at the office of the Paying Agent therein specified,
(ii) the amount of any such final payment, and (iii) that the Record Date
otherwise applicable to such Payment Date is not applicable, payments being made
only upon presentation and surrender of the Certificates at the office of the
Paying Agent therein specified. The Owner Trustee shall give such notice to the
Certificate Registrar at the time such notice is given to Certificateholders. In
the event such notice is given, (i) the Indenture Trustee shall make deposits
into the Certificate Distribution Account in accordance with Section 6.06 of the
Sale and Servicing Agreement, or, (ii) in the case of an optional purchase of
Loans pursuant to Section 8.01 of the Sale and Servicing Agreement, the
Indenture Trustee shall deposit the amount specified in Section 8.01 of the Sale
and Servicing Agreement. Upon presentation and surrender of the Certificates,
the
9-1
<PAGE>
Paying Agent shall cause to be distributed to Certificateholders amounts
distributable on such Payment Date pursuant to Section 5.2.
(d) In the event that all of the Certificateholders shall not surrender
their Certificates for cancellation within six months after the date specified
in the above-mentioned written notice, the Owner Trustee shall give a second
written notice to the remaining Certificateholders to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. If within one year after the second notice all the Certificates shall
not have been surrendered for cancellation, the Owner Trustee may take
appropriate steps, or may appoint an agent to take appropriate steps, to contact
the remaining Certificateholders concerning surrender of their Certificates, and
the cost thereof shall be paid out of the funds and other assets that remain
subject to this Agreement. Any funds which are payable to Certificateholders
remaining in the Trust after exhaustion of such remedies shall be distributed by
the Owner Trustee to The United Way (but only upon termination of this
Agreement), and the Certificateholders, by acceptance of their Certificates,
hereby waive any rights with respect to such funds.
(e) Upon the winding up of the Trust and its termination, the Owner Trustee
shall cause the Certificate of Trust to be canceled by filing a certificate of
cancellation with the Secretary of State in accordance with the provisions of
Section 3810 of the Business Trust Statute.
9-2
<PAGE>
ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
SECTION 10.1. Eligibility Requirements for Owner Trustee.
The Owner Trustee shall at all times be a corporation (i) satisfying the
provisions of Section 3807(a) of the Business Trust Statute; (ii) authorized to
exercise corporate trust powers; (iii) having a combined capital and surplus of
at least $50,000,000 and subject to supervision or examination by Federal or
State authorities; (iv) having (or having a parent which has) a long-term debt
rating of at least P-1 by Moody's or AA- by Standard & Poor's and a short-term
debt rating of A-1+ from S&P or otherwise acceptable to the Rating Agencies; and
(v) shall not be an Affiliate of the Seller. If such corporation shall publish
reports of condition at least annually, pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then for the purpose of
this Section, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the Owner Trustee shall
cease to be eligible in accordance with the provisions of this Section, the
Owner Trustee shall resign immediately in the manner and with the effect
specified in Section 10.2.
SECTION 10.2. Resignation or Removal of Owner Trustee.
The Owner Trustee may at any time resign and be discharged from the trusts
hereby created by giving written notice thereof to the Depositor at least 30
days before the date specified in such instrument. Upon receiving such notice of
resignation, the Depositor shall promptly appoint a successor Owner Trustee
meeting the qualifications set forth in Section 10.1 by written instrument, in
duplicate, one copy of which instrument shall be delivered to the resigning
Owner Trustee and one copy to the successor Owner Trustee. If no successor Owner
Trustee shall have been so appointed and have accepted appointment within 30
days after the giving of such notice of resignation, the resigning Owner Trustee
may petition any court of competent jurisdiction for the appointment of a
successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in accordance
with the provisions of Section 10.1 and shall fail to resign after written
request therefor by the Depositor or if at any time the Owner Trustee shall be
legally unable to act, or shall be adjudged bankrupt or insolvent, or a receiver
of the Owner Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Owner Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Depositor may remove the Owner Trustee. If the Depositor shall remove the Owner
Trustee under the authority of the immediately preceding sentence, the Depositor
shall promptly appoint a successor Owner Trustee meeting the qualification
requirements of Section 10.1 by written instrument, in duplicate, one copy of
which instrument shall be delivered to the outgoing Owner Trustee so removed and
one copy to the successor Owner Trustee and payment of all fees owed to the
outgoing Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section shall
not become effective until all fees
10-1
<PAGE>
and expenses, including any indemnity payments, due to the outgoing Owner
Trustee have been paid and until acceptance of appointment by the successor
Owner Trustee pursuant to Section 10.3. The Depositor shall provide notice of
such resignation or removal of the Owner Trustee to each of the Rating Agencies.
SECTION 10.3. Successor Owner Trustee.
Any successor Owner Trustee appointed pursuant to Section 10.2 shall
execute, acknowledge and deliver to the Depositor and to its predecessor Owner
Trustee an instrument accepting such appointment under this Agreement, and
thereupon the resignation or removal of the predecessor Owner Trustee shall
become effective and such successor Owner Trustee, without any further act, deed
or conveyance, shall become fully vested with all the rights, powers, duties,
and obligations of its predecessor under this Agreement, with like effect as if
originally named as Owner Trustee. The predecessor Owner Trustee shall deliver
to the successor Owner Trustee all documents and statements and monies held by
it under this Agreement; and the predecessor Owner 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 Owner Trustee
all such rights, powers, duties, and obligations.
No successor Owner Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Owner Trustee shall
be eligible pursuant to Section 10.1.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Administrator shall mail notice of the successor Owner Trustee
to the Certificateholder, the Indenture Trustee, the Noteholders, the Note
Insurer and the Rating Agencies. If the Administrator shall fail to mail such
notice within 10 days after acceptance of appointment by the successor Owner
Trustee, the successor Owner Trustee shall cause such notice to be mailed at the
expense of the Administrator. Any successor Owner Trustee appointed hereunder
shall promptly file an amendment to the Certificate of Trust as required by the
Business Trust Statute.
SECTION 10.4. Merger or Consolidation of Owner Trustee.
Any corporation into which the Owner Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Owner Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Owner Trustee, shall be the successor of the Owner Trustee
hereunder, provided such corporation shall be eligible pursuant to Section 10.1,
without the execution or filing of any instrument or any further act on the part
of any of the parties hereto, anything herein to the contrary notwithstanding,
and provided further that the Owner Trustee shall mail notice of such merger or
consolidation to the Rating Agencies.
SECTION 10.5. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of the Trust Property or any
10-2
<PAGE>
Loan Security may at the time be located, the Administrator and the Owner
Trustee acting jointly shall have the power and shall execute and deliver all
instruments to appoint one or more Persons approved by the Owner Trustee to act
as co-trustee, jointly with the Owner Trustee, or separate trustee or separate
trustees, of all or any part of the Trust Property, and to vest in such Person,
in such capacity, such title to the Trust, or any part thereof, and, subject to
the other provisions of this Section, such powers, duties, obligations, rights
and trusts as the Administrator and the Owner Trustee may consider necessary or
desirable. If the Administrator shall not have joined in such appointment within
15 days after the receipt by it of a request so to do, the Owner Trustee shall
have the power to make such appointment. No co-trustee or separate trustee under
this Agreement shall be required to meet the terms of eligibility as a successor
trustee pursuant to Section 10.1 and no notice of the appointment of any
co-trustee or separate trustee shall be required pursuant to Section 10.1.
Each separate trustee and co-trustee shall, to the extent permitted by law,
be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties, and obligations conferred or imposed
upon the Owner Trustee shall be conferred upon and exercised or performed
by the Owner Trustee and such separate trustee or co-trustee jointly (it
being understood that such separate trustee or co-trustee is not authorized
to act separately without the Owner Trustee joining in such act), except to
the extent that under any law of any jurisdiction in which any particular
act or acts are to be performed the Owner 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 Property or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or co-trustee, but
solely at the direction of the Owner Trustee;
(ii) no trustee under this Agreement shall be personally liable by
reason of any act or omission of any other trustee under this Agreement;
and
(iii) the Administrator and the Owner Trustee acting jointly may at
any time accept the resignation of or remove any separate trustee or
co-trustee.
Any notice, request or other writing given to the Owner Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article X. Each separate trustee and co-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 Owner 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
Owner Trustee. Each such instrument shall be filed with the Owner Trustee and a
copy thereof given to the Administrator.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any
10-3
<PAGE>
lawful act under or in respect of this Agreement on its behalf and in its name.
If any separate trustee or co-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 Owner Trustee, to the extent
permitted by law, without the appointment of a new or successor trustee.
10-4
<PAGE>
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.1. Amendment.
(a) This Agreement may be amended by the Depositor and the Owner Trustee
with the consent of the Note Insurer, but without the consent of any of the
Certificateholder or Noteholders, (i) to cure any ambiguity, or (ii) to correct,
supplement or modify any provisions in this Agreement; provided, however, that
such action shall not, as evidenced by an Opinion of Counsel, adversely affect
in any material respect the interests of any Certificateholder or Noteholder or
the Note Insurer.
(b) This Agreement may also be amended from time to time, by the Depositor
and the Owner Trustee with the consent of a Certificate Majority of the
Certificates and, if such amendment materially and adversely affects the
interests of Noteholders, the consent of a Note Majority (which consent of any
Holder of a Certificate or Note given pursuant to this Section or pursuant to
any other provision of this Agreement shall be conclusive and binding on such
Holder and on all future Holders of such Certificate or Note and of any
Certificate or Note issued upon the transfer thereof or in exchange thereof or
in lieu thereof whether or not notation of such consent is made upon the
Certificate or Note) for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement, or of
modifying in any manner the rights of the Holders of Certificates or Notes;
provided, however, that no such amendment shall (a) increase or reduce in any
manner the amount of, or accelerate or delay the timing of, collections of
payments on Loans or distributions that shall be required to be made on any
Certificate or Note or the Class A-1 Interest Rate, the Class A-2 Interest Rate,
the Class M-1 Interest Rate, the Class M-2 Interest Rate, the Class B-1 Interest
Rate or the Class B-2 Interest Rate, or (b) reduce the aforesaid percentage
required to consent to any such amendment or any waiver hereunder, without the
consent of the Holders of all Certificates and Notes then outstanding.
(c) Prior to the execution of any such amendment or consent, the Owner
Trustee shall furnish written notification of the substance of such amendment or
consent to each Rating Agency and to the Note Insurer.
(d) Promptly after the execution of any such amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder, the Indenture Trustee and to the
Note Insurer unless such parties have previously received such notification.
(e) It shall not be necessary for the consent of Certificateholders or
Noteholders pursuant to Section 11.1(b) to approve the particular form of any
proposed amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents (and any
other consents of Certificateholders, Noteholders and the Note Insurer provided
for in this Agreement) and of evidencing the authorization of the
11-1
<PAGE>
execution thereof by Certificateholders shall be subject to such reasonable
requirements as the Owner Trustee may prescribe, including the establishment of
record dates.
(f) Prior to the execution of any amendment to this Agreement, the Owner
Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating
that the execution of such amendment is authorized or permitted by this
Agreement and that all conditions precedent to the execution and delivery of
such amendment have been satisfied. The Owner Trustee may, but shall not be
obligated to, enter into any such amendment which affects the Owner Trustee's
own rights, duties or immunities under this Agreement or otherwise.
(g) The Depositor and the Owner Trustee may amend this Agreement in order
to effect a "financial asset securitization investment trust" ("FASIT") election
for all or a portion of the Trust; provided, that (i) the Depositor delivers an
Opinion of Counsel to the Owner Trustee to the effect that such election will
not adversely affect the Federal or applicable state income tax characterization
of any outstanding Notes or Certificates or the taxability of the Trust under
Federal or applicable state income tax laws or otherwise have a material adverse
effect on the Certificates or Notes, and (ii) the requirements of clauses (c),
(d) and (f) above are met.
SECTION 11.2. No Recourse.
Each Certificateholder by accepting a Certificate acknowledges that such
Certificateholder's Certificates represent beneficial interests in the Trust
only and do not represent interests in or obligations of the Seller, the
Servicer, the Owner Trustee, the Indenture Trustee or any Affiliate of any of
the foregoing and no recourse may be had against such parties or their assets,
except as may be expressly set forth or contemplated in this Agreement, the
Certificates or the Related Documents.
SECTION 11.3. Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF
LAWS THEREOF AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES UNDER THIS
AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.4. Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other provisions of this
Agreement or of the Certificates or the rights of the Holders thereof.
SECTION 11.5. Certificates Nonassessable and Fully Paid.
11-2
<PAGE>
Certificateholders shall not be personally liable for obligations of the
Trust. The fractional undivided interests in the Trust represented by the
Certificates shall be nonassessable for any losses or expenses of the Trust or
for any reason whatsoever, and Certificates upon execution thereof by the Owner
Trustee pursuant to Section 3.3 are and shall be deemed fully paid.
SECTION 11.6. Third-Party Beneficiaries.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns. The
parties further agree that the Indenture Trustee, the Noteholders, the
Certificateholders and the Note Insurer shall be deemed to be third party
beneficiaries of this Agreement. Except as otherwise provided in this Agreement,
no other Person shall have any right or obligation hereunder.
SECTION 11.7. Counterparts.
For the purpose of facilitating its execution and for other purposes, this
Agreement may be executed simultaneously in any number of counterparts, each of
which counterparts shall be deemed to be an original, and all of which
counterparts shall constitute but one and the same instrument.
SECTION 11.8. Notices.
All demands, notices and communications under this Agreement shall be in
writing, personally delivered or mailed by certified mail, return receipt
requested, and shall be deemed to have been duly given upon receipt (a) in the
case of the Depositor, at the following address: c/o Green Tree Financial
Corporation, 1100 Landmark Towers, 345 St. Peter Street, St. Paul, Minnesota
55102-1639, Attention: Chief Financial Officer, (b) in the case of the Owner
Trustee, at the Corporate Trust Office, (c) in the case of each Rating Agency,
55 Water Street, New York, New York 10041 (for Standard & Poor's) Attention:
Asset-Backed Surveillance and 99 Church Street, New York, New York 10007,
Attention: ABS Monitoring Department (for Moody's), and (d) in the case of the
Note Insurer, at the following address: Financial Security Assurance Inc., 350
Park Avenue, New York, New York 10022, Attn: Surveillance Department Re: Green
Tree Home Improvement and Home Equity Loan Trust 1999-B or at such other address
as shall be designated by any such party in a written notice to the other
parties. Notwithstanding the foregoing, any notice required or permitted to be
mailed to a Certificateholder shall be given by first class mail, postage
prepaid, at the address of such Holder as shown in the Certificate Register, and
any notice so mailed within the time prescribed in this Agreement shall be
conclusively presumed to have been duly given, whether or not the
Certificateholder receives such notice.
SECTION 11.9 Limitation of Liability
It is expressly understood and agreed by the parties hereto that (a) this
Agreement is executed and delivered by Wilmington Trust Company, not
individually or personally but solely as Owner Trustee of Green Tree Home
Improvement and Home Equity Loan Trust 1999-B, in
11-3
<PAGE>
the exercise of the powers and authority conferred and vested in it, (b) each of
the representations, undertakings and agreements herein made on the part of the
Issuer is made and intended not as personal representations, undertakings and
agreements by Wilmington Trust Company but is made and intended for the purpose
for binding only the Issuer, (c) nothing herein contained shall be construed as
creating any liability on Wilmington Trust Company, individually, or personally,
to perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties hereto and by any
Person claiming by, through or under the parties hereto and (d) under no
circumstances shall Wilmington Trust Company be personally liable for the
payment of any indebtedness or expenses of the Issuer or be liable for the
breach or failure of any obligation, representation, warranty or covenant made
or undertaken by the Issuer under this Agreement or any other related documents.
11-4
<PAGE>
IN WITNESS WHEREOF, the Depositor and the Owner Trustee have caused this
Trust Agreement to be duly executed by their respective officers as of the day
and year first above written.
GREEN TREE FINANCIAL CORPORATION,
as Depositor
By: /s/ Phyllis A. Knight
------------------------------------
Name: Phyllis A. Knight
Title: Senior Vice President and
Treasurer
WILMINGTON TRUST COMPANY,
as Owner Trustee
By: /s/ Norma P. Closs
------------------------------------
Name: Norma P. Closs
Title: Vice President
<PAGE>
EXHIBIT A
CERTIFICATE OF TRUST OF
GREEN TREE HOME IMPROVEMENT AND HOME EQUITY
LOAN TRUST 1999-B
THIS Certificate of Trust of GREEN TREE HOME IMPROVEMENT AND HOME EQUITY
LOAN TRUST 1999-B (the "Trust") is being duly executed and filed by the
undersigned trustee, to form a business trust under the Delaware Business Trust
Act (12 Del. Code, ss. 3801 et seq.) (the "Act").
1. Name. The name of the business trust formed hereby is GREEN TREE HOME
IMPROVEMENT AND HOME EQUITY LOAN TRUST 1999-B.
2. Delaware Trustee. The name and business address of the trustee of the
Trust in the State of Delaware is Wilmington Trust Company, Rodney Square North,
1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate
Trust Administration.
3. This Certificate of Trust will be effective June 30, 1999.
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate of
Trust in accordance with Section 3811(a) of the Act.
WILMINGTON TRUST COMPANY,
as trustee
By: /s/ Norma P. Closs
------------------------------------
Name: Norma P. Closs
------------------------------
Title: Vice President
------------------------------
A-1
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE
THIS TRUST CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT
TO THE NOTES TO THE EXTENT DESCRIBED IN THE INDENTURE
REFERRED TO HEREIN.
GREEN TREE HOME IMPROVEMENT AND HOME EQUITY
LOAN TRUST 1999-B
evidencing the beneficial interest in the Trust, as defined below, the property
of which includes a pool of home improvement contracts and promissory notes and
home equity loans secured by mortgages, deeds of trust or security deeds on
certain real property which is subject to the home improvement or home equity
loan to which it relates, all sold to the Trust by Green Tree Financial
Corporation.
This Certificate does not represent an obligation of, or an interest in, Green
Tree Financial Corporation or any affiliate thereof.
Certificate No. Percentage Interest: ____%
First Payment Date:
July 15, 1999
Servicer:
Green Tree Financial Corporation
This Certificate may not be acquired by (a) an employee benefit plan (as defined
in Section 3(3) of ERISA) that is subject to the provisions of Title I of ERISA,
(b) a plan described in Section 4975(e)(1) of the Code or (c) any entity whose
underlying assets include plan assets by reason of such plan's investment in the
entity (including an insurance company acting on behalf of its general account)
(each, a "Benefit Plan Investor"). Prior to its purchase of this Certificate,
the proposed transferee of such Certificate must certify and covenant in writing
(in the form of letter attached as Exhibit C to the Trust Agreement) to the
Seller, the Servicer, the Owner Trustee and the Underwriters that it is not a
Benefit Plan Investor or that it is an insurance company general account and
that its purchase of this Certificate will satisfy certain conditions specified
in the exemptive relief granted by, and the regulations proposed by, the
Department of Labor) and that it will dispose of the Certificate within a
prescribed period of time if such conditions cease to be satisfied or if the
Company, the Owner Trustee, the Underwriters or the Servicer furnishes to the
insurance company an opinion of counsel to the effect that the insurance
company's holding of the Certificate in its general account causes the assets of
the Trust to be considered "plan assets"
B-1
<PAGE>
under ERISA. Any transfer of this Certificate in violation of the foregoing
shall be void and of no effect.
THIS CERTIFIES THAT ______________________ is the registered owner of a
nonassessable, fully paid, fractional undivided interest in the Green Tree Home
Improvement And Home Equity Loan Trust 1999-B (the "Trust"). The Trust was
created pursuant to a Trust Agreement, dated as of June 1, 1999 (the "Trust
Agreement"), between Green Tree Financial Corporation, as depositor (the
"Depositor"), and Wilmington Trust Company, not in its individual capacity but
solely as Owner Trustee (the "Owner Trustee"), a summary of certain of the
pertinent provisions of which is set forth below. To the extent not otherwise
defined herein, the capitalized terms used herein have the meanings assigned to
them in the Trust Agreement or the Sale and Servicing Agreement, dated as of
June 1, 1999 (the "Sale and Servicing Agreement"), between the Trust and Green
Tree Financial Corporation (the "Seller"), in its individual capacity and as
servicer (the "Servicer").
This Certificate is one of the duly authorized Certificates issued under
the Trust Agreement (herein called the "Certificates"). The Trust has also
issued under the Indenture, dated as of June 1, 1999, between the Trust and U.S.
Bank Trust National Association, as trustee, the Notes (the "Notes") designated
as the Class A-1, Class A-2, Class M-1, Class M-2, Class B-1 and Class B-2
Notes. This Certificate is issued under and is subject to the terms, provisions
and conditions of the Trust Agreement, to which Trust Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound. The property of the Trust includes (as more fully described in
the Trust Agreement) a pool of home improvement contracts and promissory notes
and home equity loans (the "Loans") which are secured by mortgages, deeds of
trust or security deeds on certain real property which is the subject of the
home improvement or home equity loans to which it relates, certain monies due
thereunder on or after the Cutoff Date, an assignment of the Seller's security
interests in the related real property, certain bank accounts and property
(including the right to receive Liquidation Proceeds) securing the Loans, and
proceeds of all of the foregoing.
Under the Trust Agreement, there will be distributed on the 15th day of
each month or, if such 15th day is not a Business Day, the next succeeding
Business Day (the "Payment Date"), commencing on July 15, 1999, to the person in
whose name this Certificate is registered at the close of business on the
Business Day immediately preceding such Payment Date (the "Record Date"), such
Certificateholder's fractional undivided interest in the amounts then
distributable on the Certificates to the extent of the funds available therefor.
The Certificateholder, by its acceptance of a Certificate, covenants and
agrees that it will not at any time institute against or join in any institution
against the Depositor or the Trust of any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under
any United States Federal or state bankruptcy or similar law in connection with
any obligations relating to the Certificates, the Notes, the Trust Agreement or
any of the Related Documents.
Except as provided in the Trust Agreement, distributions on this
Certificate will be made by the Paying Agent by check or money order mailed to
the Certificateholder of record in the
B-2
<PAGE>
Certificate Register without the presentation or surrender of this Certificate
or the making of any notation hereon. Except as otherwise provided in the Trust
Agreement and notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Paying Agent of the pendency of
such distribution and only upon presentation and surrender of this Certificate
at the office or agency maintained for that purpose by the Owner Trustee. The
Record Date otherwise applicable to distributions shall not be applicable to
such final distribution.
The Certificates do not represent an obligation of, or an interest in, the
Depositor, the Servicer, the Owner Trustee or any Affiliate of any of them. The
Certificates are limited in right of payment to certain collections and
recoveries respecting the Loans, all as more specifically set forth in the Trust
Agreement. A copy of the Trust Agreement may, upon request, be examined by any
Certificateholder during normal business hours at the principal office of the
Depositor and at such other places, if any, designated by the Depositor.
The Trust Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
parties thereto and the rights of the Certificateholders under the Trust
Agreement at any time by the Depositor and the Owner Trustee. In certain limited
circumstances, the Trust Agreement may only be amended with the consent of the
Holders of Certificates evidencing not less than a Certificate Majority. Any
such consent by the Holder of this Certificate shall be conclusive and binding
on such Holder and on all future Holders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent is made upon this Certificate.
As provided in the Trust Agreement and subject to certain limitations set
forth therein, the transfer of this Certificate is registrable in the
Certificate Registrar upon surrender of this Certificate for registration of
transfer at the offices or agencies of the Certificate Registrar maintained by
the Owner Trustee in Wilmington, Delaware accompanied by a written instrument of
transfer in form satisfactory to the Owner Trustee and the Certificate Registrar
duly executed by the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of authorized denominations
evidencing the same aggregate fractional undivided interest in the Trust issued
to the designated transferee. The initial Certificate Registrar appointed under
the Trust Agreement is Wilmington Trust Company.
As provided in the Trust Agreement and subject to certain limitations
therein set forth, Certificates are exchangeable for new Certificates of a like
interest, as requested by the Holder surrendering the same. No service charge
will be made for any such registration of transfer or exchange, but the Owner
Trustee may require payment of a sum sufficient to cover any tax or governmental
charges payable in connection therewith.
The Owner Trustee, the Certificate Registrar and any agent of the Owner
Trustee or the Certificate Registrar may treat the person in whose name this
Certificate is registered as the owner hereof for the purpose of receiving
distributions and for all other purposes, and neither the Owner Trustee, the
Certificate Registrar nor any such agent shall be affected by any notice to the
contrary.
B-3
<PAGE>
The obligations and responsibilities created by the Trust Agreement and the
Trust created thereby shall terminate upon the payment to Certificateholders of
all amounts required to be paid to them pursuant to the Trust Agreement and the
disposition of all property held as part of the Trust. The Servicer or the
Seller may at its option purchase the corpus of the Trust at a price specified
in the Sale and Servicing Agreement, and such purchase of the Loans and other
property of the Trust will effect early retirement of the Certificates;
provided, however, such right of purchase is exercisable only as of a Record
Date as of which the Pool Scheduled Principal Balance is less than or equal to
10% of the Cutoff Date Pool Principal Balance.
The recitals contained herein shall be taken as the statements of the
Depositor or the Servicer, as the case may be, and the Owner Trustee assumes no
responsibility for the correctness thereof. The Owner Trustee makes no
representations as to the validity or sufficiency of this Certificate or of any
Loan or related document.
Unless the certificate of authentication hereon shall have been executed by
an authorized officer of the Owner Trustee, by manual or facsimile signature,
this Certificate shall not entitle the Holder hereof to any benefit under the
Trust Agreement or the Sale and Servicing Agreement or be valid for any purpose.
B-4
<PAGE>
IN WITNESS WHEREOF, the Owner Trustee on behalf of the Trust and not in its
individual capacity has caused this Certificate to be duly executed.
Dated: ______________ , ______
GREEN TREE HOME IMPROVEMENT AND
HOME EQUITY LOAN TRUST 1999-B
By WILMINGTON TRUST COMPANY, not in
its individual capacity but solely
on behalf of the Issuer as Owner
Trustee under the Trust Agreement
By:
------------------------------------
Name:
------------------------------
Title:
------------------------------
B-5
<PAGE>
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned Trust
Agreement.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as
Owner Trustee
By:
------------------------------------
as Authenticating Agent
B-6
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
_________________________________________ (PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE)
(Please print or typewrite name and address, including postal zip code, of
assignee)
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
Attorney to transfer said Certificate on the books of the Certificate Registrar,
with full power of substitution in the premises.
Dated: *
------------------------------------
Signature Guaranteed:
*
------------------------------------
*NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatsoever. Such signature must be
guaranteed by a member firm of The New York Stock Exchange, Inc. or a commercial
bank or trust company.
B-7
<PAGE>
EXHIBIT C
FORM OF REPRESENTATION LETTER AND CERTIFICATION
_____________ , 199__
Green Tree Financial Corporation Lehman Brothers Inc.
1100 Landmark Towers American Exchange Tower
345 St. Peter Street Three World Financial Center
St. Paul, MN 55102 New York, New York 10285
Attention: Chief Financial Officer
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attn: Corporate Trust Administration
Re: Green Tree Home Improvement and Home Equity Loan Trust 1999-B
Ladies and Gentlemen:
This is to notify you as to the transfer of Green Tree Home Improvement and
Home Equity Loan Trust 1999-B Certificate, No ____.
The undersigned is the holder of the Certificate and with this notice
hereby deposits with the Trustee a certificate representing the Certificate and
requests that Certificates in the same percentage interest be issued and
executed on behalf of the Trust and authenticated by the Trustee, as specified
in the Trust Agreement, and registered to the purchaser on ________,____, as
follows:
Name:
Denominations:
Address:
Taxpayer I.D. No.:
C-1
<PAGE>
In connection with the proposed purchase, the undersigned hereby confirms
that:
1. The undersigned either:
(a) is not (i) an "employee benefit plan" (as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), including governmental plans and church plans, (ii) a plan
described in Section 4975(e)(1) of the Internal Revenue Code of 1986, as
amended (the "Code"), including individual retirement accounts and Keogh
plans, or (iii) any other entity whose underlying assets include "plan
assets" (as defined in United States Department of Labor ("DOL") Regulation
Section 2510.3-101, 29 C.F.R. ss. 2510.3-101 or otherwise under ERISA) by
reason of a plan's investment in the entity, including, without limitation,
an insurance company general account, or
(b) is an insurance company acting on behalf of a general account and
(i) on the date hereof less than 25% of the assets of such general account
(as reasonably determined by us) constitute "plan assets" for purposes of
Title I of ERISA and Section 4975 of the Code, (ii) the purchase and
holding of such Certificate are eligible for exemptive relief under
Sections (1) and (3) of Prohibited Transaction Class Exemption 95-60, and
(iii) the undersigned agrees that if, after the undersigned's initial
acquisition of the Certificates, at any time during any calendar quarter
(A) 25% or more of the assets of such general account (as reasonably
determined by us no less frequently than each calendar quarter) constitute
"plan assets" for purposes of Title I of ERISA or Section 4975 of the Code
and no exemption or exception from the prohibited transaction rules applies
to the continued holding of the Certificates under Section 401(c) of ERISA
and the final regulations thereunder or under an exemption or regulation
issued by the DOL under ERISA or (B) the Company, the Owner Trustee, the
Underwriters or the Servicer furnishes to the insurance company an opinion
of counsel to the effect that the holding of such Certificate in the
insurance company's general account causes the assets of the Trust to be
considered "plan assets" (within the meaning of DOL Regulation Section
2510.3- 101, 29 C.F.R. ss. 2510.3-101 or otherwise under ERISA), we will
dispose of all Certificates issued by the Trust then held in our general
account by the end of the next following calendar quarter.
2. The undersigned understands that any purported transfer of any
Certificate in contravention of the restrictions and conditions set forth in
paragraph 1 above (including any violation of the representation in paragraph 1
by an investor who continues to hold a Certificate occurring any time after the
transfer in which it acquired such Certificate) shall be null and void, and the
purported transferee shall not be recognized by the Trust or any other person as
a Certificateholder for any purpose.
3. The person signing this letter on behalf of the ultimate beneficial
purchaser of the Certificates has been duly authorized by such beneficial
purchaser of the Certificates to do so.
4. The Certificates purchased by the undersigned should be registered in
the name and issued in the denominations set forth on Schedule 1 hereto. All
payments on the Certificates
C-2
<PAGE>
held by the undersigned should be wired in accordance with the instructions set
forth on Schedule 1 hereto unless the undersigned otherwise notifies the Trustee
in writing.
You are entitled to rely upon this letter, and the undersigned understands
that, in granting their respective consents to the purchase of Certificates, the
Company, the Servicer, the Trustee and the Underwriters will rely on the
undersigned's representations and warranties in this letter and on the
undersigned's certifications in the documents delivered by the undersigned to
the Company, the Servicer, the Trustee or the Underwriters in conjunction with
the purchase of Certificates by the undersigned. You are irrevocably authorized
to produce this letter or a copy hereof to any interested party in any
administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.
Very truly yours,
[NAME OF HOLDER OF CERTIFICATE]
By:
-------------------------------------
Name, Chief Financial or other
Executive Officer
C-3
<PAGE>
Schedule 1
----------
Registration and Payment Instructions
-------------------------------------
Registration Instructions:
- --------------------------
Full Legal Name of Purchaser: ______________________________________________
Name in Which Certificates Should be Registered: ___________________________
Number and Denomination of Certificates: ___________________________________
Payment Instructions:
Name of Bank: ________________________________________________________
Address of Bank: ________________________________________________________
Account Name: ________________________________________________________
Account Number: ________________________________________________________
ABA Number: ________________________________________________________
Reference: ________________________________________________________
Notice Information:
- -------------------
Address: ________________________________________________________
________________________________________________________
Attention: ________________________________________________________
Telephone: ________________________________________________________
Telefax: ________________________________________________________
C-4
<PAGE>
EXHIBIT 4.2
GREEN TREE HOME IMPROVEMENT AND HOME EQUITY LOAN TRUST 1999-B
SALE AND SERVICING AGREEMENT
between
GREEN TREE HOME IMPROVEMENT AND HOME EQUITY LOAN TRUST 1999-B
and
GREEN TREE FINANCIAL CORPORATION
as Seller and Servicer
Dated as of June 1, 1999
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS..................................................... 1-1
SECTION 1.01. General................................................ 1-1
SECTION 1.02. Specific Terms......................................... 1-1
ARTICLE II TRANSFER OF LOANS.............................................. 2-1
SECTION 2.01. Transfer of Loans...................................... 2-1
SECTION 2.02. Conditions to Acceptance by Owner Trustee.............. 2-1
ARTICLE III REPRESENTATIONS AND WARRANTIES................................ 3-1
SECTION 3.01. Representations and Warranties Regarding the
Company and Covenants of the Company................... 3-1
SECTION 3.02. Representations and Warranties Regarding Each Loan..... 3-3
SECTION 3.03. Representations and Warranties Regarding the Loans
in the Aggregate....................................... 3-8
SECTION 3.04. Representations and Warranties Regarding the Loan
Files.................................................. 3-9
SECTION 3.05. Repurchase of Loans for Breach of Representations
and Warranties.........................................3-10
ARTICLE IV PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS.... 4-1
SECTION 4.01. Custody of Loans....................................... 4-1
SECTION 4.02. Filings................................................ 4-1
SECTION 4.03. Name Change or Relocation.............................. 4-1
SECTION 4.04. Chief Executive Office................................. 4-2
SECTION 4.05. Costs and Expenses..................................... 4-2
ARTICLE V SERVICING OF LOANS.............................................. 5-1
SECTION 5.01. Responsibility for Loan Administration................. 5-1
SECTION 5.02. Standard of Care....................................... 5-1
SECTION 5.03. Records................................................ 5-1
SECTION 5.04. Inspection; Computer Tape.............................. 5-1
SECTION 5.05. Collections............................................ 5-2
SECTION 5.06. Enforcement............................................ 5-3
SECTION 5.07. Satisfaction of Loans.................................. 5-4
SECTION 5.08. Costs and Expenses..................................... 5-4
SECTION 5.09. Maintenance of Insurance............................... 5-4
SECTION 5.10. [RESERVED]............................................. 5-5
SECTION 5.11. Deposit of Funds....................................... 5-5
SECTION 5.12. Retitling; Lien Holder................................. 5-5
SECTION 5.13. [RESERVED]............................................. 5-5
SECTION 5.14. Monthly Reports; Certificate of Servicing Officer...... 5-6
SECTION 5.15. Annual Report of Accountants........................... 5-6
SECTION 5.16. Certain Duties of the Servicer Under the Trust
Agreement.............................................. 5-6
-i-
<PAGE>
SECTION 5.17. [RESERVED]............................................. 5-6
SECTION 5.18. Annual Statement as to Compliance; Notice of
Servicer Termination Event............................. 5-7
SECTION 5.19. [RESERVED]............................................. 5-7
SECTION 5.20. Maintenance of Lien Interests in Real Property......... 5-7
SECTION 5.21. Covenants, Representations, and Warranties of
Servicer............................................... 5-8
SECTION 5.22. Purchase of Loans Upon Breach of Covenant.............. 5-8
ARTICLE VI DISTRIBUTIONS; TRUST ACCOUNTS; LIMITED GUARANTY;
STATEMENTS TO SECURITYHOLDERS.................................. 6-1
SECTION 6.01. Trust Accounts......................................... 6-1
SECTION 6.02. Collection Account Deposits............................ 6-2
SECTION 6.03. Permitted Withdrawals.................................. 6-2
SECTION 6.04. Advances .............................................. 6-3
SECTION 6.05. Limited Guarantee...................................... 6-3
SECTION 6.06. Distributions.......................................... 6-3
SECTION 6.07. Statements to Securityholders.......................... 6-5
SECTION 6.08. Claims Upon Policy..................................... 6-7
SECTION 6.09. Effect of Payments by the Note Insurer; Subrogation.... 6-8
SECTION 6.10. Notices to the Note Insurer............................ 6-9
SECTION 6.11. Rights of the Note Insurer To Exercise Rights of
Noteholders............................................ 6-9
SECTION 6.12. Withdrawals From Undelivered Loan Account.............. 6-9
ARTICLE VII SERVICE TRANSFER.............................................. 7-1
SECTION 7.01. Servicer Termination Event............................. 7-1
SECTION 7.02. [RESERVED]............................................. 7-4
SECTION 7.03. [RESERVED]............................................. 7-4
SECTION 7.04. Notification to Securityholders........................ 7-4
SECTION 7.05. Effect of Transfer..................................... 7-5
SECTION 7.06. Transfer of Collection Account......................... 7-5
SECTION 7.07. Limits on Liability.................................... 7-6
SECTION 7.08. Waiver of Past Defaults................................ 7-6
ARTICLE VIII TERMINATION.................................................. 8-1
SECTION 8.01. Company's or Servicer's Repurchase Option.............. 8-1
SECTION 8.02. Liquidation of Trust Estate............................ 8-2
ARTICLE IX INDEMNITIES.................................................... 9-1
SECTION 9.01. Company's Indemnities.................................. 9-1
SECTION 9.02. Liabilities to Obligors................................ 9-1
SECTION 9.03. Servicer's Indemnities................................. 9-1
SECTION 9.04. Operation of Indemnities............................... 9-1
ARTICLE X MISCELLANEOUS...................................................10-1
SECTION 10.01. Servicer Not to Assign Duties or Resign;
Delegation of Servicing Duties.........................10-1
-ii-
<PAGE>
SECTION 10.02. Assignment or Delegation by Company....................10-1
SECTION 10.03. Amendment..............................................10-2
SECTION 10.04. Notices................................................10-3
SECTION 10.05. Merger and Integration.................................10-5
SECTION 10.06. Headings...............................................10-5
SECTION 10.07. Governing Law..........................................10-5
SECTION 10.08. Limitation of Liability................................10-5
SECTION 10.09. The Note Insurer.......................................10-6
SECTION 10.10. Third Party Rights.....................................10-6
SECTION 10.11. Limitation of Liability................................10-6
EXHIBIT A - FORM OF ASSIGNMENT..............................................A-1
EXHIBIT B - FORM OF CERTIFICATE REGARDING REPURCHASED LOANS.................B-1
EXHIBIT C - FORM OF MONTHLY REPORT..........................................C-1
EXHIBIT D - FORM OF CERTIFICATE OF SERVICING OFFICER........................D-1
-iii-
<PAGE>
THIS SALE AND SERVICING AGREEMENT, dated as of June 1, 1999, between Green
Tree Home Improvement and Home Equity Loan Trust 1999-B (the "Issuer" or the
"Trust") and Green Tree Financial Corporation, a corporation organized and
existing under the laws of the State of Delaware, as Seller and Servicer (the
"Company").
WHEREAS, the Issuer wishes to purchase from the Company certain "Loans," as
hereinafter defined; and
WHEREAS, Financial Security Assurance Inc. (the "Note Insurer") is intended
to be a third party beneficiary of this Agreement and is hereby recognized by
the parties hereto to be a third-party beneficiary of this Agreement; and
WHEREAS, the Company and the Issuer wish to set forth the terms and
conditions pursuant to which the Issuer will acquire the Loans and the Company
will service the Loans;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth, the Company and the Issuer agree as provided herein:
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.01. General.
For the purpose of this Agreement, except as otherwise expressly provided
or unless the context otherwise requires, the terms defined in this Article
include the plural as well as the singular, the words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular Article, Section or other subdivision, and Section
references refer to Sections of this Agreement.
SECTION 1.02. Specific Terms.
All terms defined in any Related Document and not otherwise defined in this
Agreement shall have the meanings given them in such Related Document.
"Advance Payment" means, with respect to any Due Period, any payment by an
Obligor that was not due under the related Loan during or before such Due Period
and which payment is not a Principal Prepayment.
"Affiliate" of any specified Person means any other Person controlling or
controlled by or under common control with such specified Person. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" or "controlled" have meanings
correlative to the foregoing.
"Aggregate Liquidation Loss Principal Amount" means, as of any Payment
Date, the excess, if any, of (a) the Note Principal Balance as of the preceding
Payment Date (after giving effect to distributions of principal thereon) over
(b) the Pool Scheduled Principal Balance.
"Agreement" means this Sale and Servicing Agreement as the same may be
amended or supplemented from time to time.
"Amount Available" means, as to any Payment Date, an amount equal to the
Collected Funds for that Payment Date, plus any amounts required to be deposited
in the Collection Account for such Payment Date pursuant to Sections 6.05, 8.01
and 8.02, plus any Insured Payment deposited in the Note Distribution Account
for such Payment Date.
"Amount Held for Future Distribution" means, as to any Payment Date, the
total of the amounts held in the Collection Account on the last day of the
related Due Period on account of Advance Payments in respect of such Due Period.
"Assignment" means the Assignment from the Company to the Trust in
substantially the form of Exhibit A, whereby the Company assigns the Loans to
the Trust.
1-1
<PAGE>
"Average Sixty-Day Delinquency Ratio" means the arithmetic average of the
Sixty-Day Delinquency Ratios for such Payment Date and for the two immediately
preceding Payment Dates.
"Backup Servicer" means the Indenture Trustee, which shall initially serve
as Backup Servicer hereunder in the event of the termination of the Servicer,
subject to the right of the Indenture Trustee to assign such duties to another
party pursuant to Section 7.01.
"Business Day" means any day other than a Saturday, Sunday, legal holiday
or other day on which commercial banking institutions in Minneapolis, Minnesota,
New York, New York, Wilmington, Delaware or any other location of any successor
Servicer, successor Owner Trustee or successor Indenture Trustee are authorized
or obligated by law, executive order or governmental decree to be closed.
"Certificate" means the Certificate issued under the Trust Agreement.
"Certificate Distribution Account" means the account established and
maintained pursuant to Section 6.01(c).
"Certificate Distribution Amount" means the amount specified in Section
6.06(a)(xvii).
"Certificateholder" means the person in whose name a Certificate is
registered on the Certificate Register.
"Civil Relief Interest Shortfall" means, with respect to any Due Period,
for any Loan as to which there has been a reduction in the amount of interest
collectible thereon for the most recently ended Due Period as a result of the
Soldiers' and Sailors' Civil Relief Act of 1940, as amended, the amount, if any,
by which interest collectible on such Loan during the most recently ended Due
Period is less than one month's interest on the outstanding principal balance of
such Loan at a rate equal to the related Loan Interest Rate.
"Class" means pertaining to each Class of Notes.
"Class A Distribution Amount" means, as to any Payment Date, the sum of the
amounts paid to Class A Noteholders on such Payment Date pursuant to Sections
8.02(c)(1) and (5) of the Indenture.
"Class A Formula Distribution Amount" means, as to any Payment Date, the
sum of (a) the Class A Formula Principal Distribution Amount, (b) the Class A
Interest Amount, and (c) any Unpaid Class A Interest Shortfall.
"Class A Formula Principal Distribution Amount" means, as to any Payment
Date, the lesser of (a) the Class A Percentage of the Formula Principal
Distribution Amount and (b) the Class A Principal Balance.
1-2
<PAGE>
"Class A Interest Amount" means, as to any Payment Date, the sum of the
Class A-1 Interest Amount and the Class A-2 Interest Amount.
"Class A Percentage" means, as to any Payment Date, a fraction, expressed
as a percentage, the numerator of which is the Class A Principal Balance and the
denominator of which is the sum of (a) the Class A Principal Balance, (b) if the
Class M-1 Distribution Test is satisfied on such Payment Date, the Class M-1
Adjusted Principal Balance, otherwise zero, (c) if the Class M-2 Distribution
Test is satisfied on such Payment Date, the Class M-2 Adjusted Principal
Balance, otherwise zero, (d) if the Class B-1 Distribution Test is satisfied on
such Payment Date, the Class B-1 Adjusted Principal Balance, otherwise zero and
(e) if the Class B-2 Distribution Test is satisfied on such Payment Date, the
Class B-2 Principal Balance, otherwise zero.
"Class A Principal Balance" means, as to any Payment Date, the sum of the
Class A-1 Principal Balance and the Class A-2 Principal Balance.
"Class A Principal Deficiency Amount" means, as to any Payment Date, the
amount, if any, by which the Pool Scheduled Principal Balance on such Payment
Date is less than the Class A Principal Balance.
"Class A Principal Distribution Amount" means (1) as to any Payment Date on
which there is no Class A Principal Deficiency Amount, the lesser of (a) the
Amount Available remaining after distribution of amounts described in Sections
6.06(a)(i) through (iv) and (b) the Class A Formula Principal Distribution
Amount, and (2) as to any Payment Date on which there is a Class A Principal
Deficiency Amount on such Payment Date, the lesser of (x) the Amount Available
remaining after distribution of amounts described in Section 6.06(a)(i) through
(iv) and (y) the Class A Principal Balance on such Payment Date.
"Class A-1 Interest Amount" means, with respect to any Payment Date, an
amount equal to one month's interest (or, with respect to the first Payment
Date, interest from and including the Closing Date to but excluding the first
Payment Date) at the Class A-1 Interest Rate on the Class A-1 Principal Balance
for such Payment Date.
"Class A-1 Interest Carryover Shortfall" means, with respect to any Payment
Date, the amount, if any, by which the amount distributed to Holders of the
Class A-1 Notes on such Payment Date pursuant to Section 8.02(c)(1) of the
Indenture is less than the sum of the Class A-1 Interest Amount and the Unpaid
Class A-1 Interest Shortfall for such Payment Date.
"Class A-1 Interest Rate" means a per annum rate of interest equal to
7.11%, computed on the basis of a year of 360 days and twelve 30-day months.
"Class A-1 Notes" means the Class A-1 Notes issued by the Trust pursuant to
the Indenture.
1-3
<PAGE>
"Class A-1 Principal Balance" means, as to any Payment Date, the Original
Class A-1 Principal Balance less all amounts distributed to Holders of Class A-1
Notes on any prior Payment Date on account of principal pursuant to Section
8.02(c) of the Indenture.
"Class A-2 Interest Amount" means, with respect to any Payment Date, one
month's interest (or, with respect to the first Payment Date, interest from and
including the Closing Date to but excluding the first Payment Date) at the Class
A-2 Interest Rate on the Class A-2 Principal Balance for such Payment Date.
"Class A-2 Interest Carryover Shortfall" means, with respect to any Payment
Date, the amount, if any, by which the amount distributed to Holders of the
Class A-2 Notes on such Payment Date pursuant to Section 8.02(c)(1) of the
Indenture is less than the sum of the Class A-2 Interest Amount for such Payment
Date and the Unpaid Class A-2 Interest Shortfall.
"Class A-2 Interest Rate" means a per annum rate of interest equal to
7.11%, computed on the basis of a year of 360 days and twelve 30-day months.
"Class A-2 Notes" means the Class A-2 Notes issued by the Trust pursuant to
the Indenture.
"Class A-2 Principal Balance" means, as to any Payment Date the Original
Class A-2 Principal Balance less all amounts distributed to Holders of Class A-2
Notes on prior Payment Dates on account of principal pursuant to Section 8.02(c)
of the Indenture.
"Class B Principal Balance" means, as to any Payment Date, the sum of the
Class B-1 Principal Balance and the Class B-2 Principal Balance.
"Class B-1 Adjusted Principal Balance" means, as of any Payment Date, the
Class B-1 Principal Balance as of that Payment Date minus the Class B-1
Liquidation Loss Principal Amount (if any) as of the prior Payment Date.
"Class B-1 Distribution Amount" means, as to any Payment Date, the sum of
the amounts paid to Class B-1 Noteholders on such Payment Date pursuant to
Sections 8.02(c)(4), (8) and (9) of the Indenture.
"Class B-1 Distribution Test" means, to be considered "satisfied" for any
Payment Date, that (i) such Payment Date occurs in or after July 2003; (ii) the
Average Sixty-Day Delinquency Ratio for such Payment Date is less than or equal
to 10% of the Senior Subordination Percentage; (iii) the Cumulative Realized
Losses Test for such Payment Date is satisfied; (iv) the fraction, expressed as
a percentage, the numerator of which is the sum of the Class B-1 Adjusted
Principal Balance and the Class B-2 Adjusted Principal Balance as of such
Payment Date and the denominator of which is the Pool Scheduled Principal
Balance as of the immediately preceding Payment Date, is equal to or greater
than 24.20%; and (v) the Supplementary Principal Distribution Test is satisfied.
1-4
<PAGE>
"Class B-1 Formula Distribution Amount" means, as to any Payment Date, the
sum of (a) the Class B-1 Interest Amount, (b) any Unpaid Class B-1 Interest
Shortfall, (c) any Class B-1 Formula Liquidation Loss Interest Distribution
Amount, and (d) the Class B-1 Formula Principal Distribution Amount.
"Class B-1 Formula Liquidation Loss Interest Distribution Amount" means, as
to any Payment Date, the sum of (a) the Class B-1 Liquidation Loss Interest
Amount, if any, and (b) the Unpaid Class B-1 Liquidation Loss Interest
Shortfall, if any.
"Class B-1 Formula Principal Distribution Amount" means, as to any Payment
Date, the lesser of (a) the Class B-1 Percentage of the Formula Principal
Distribution Amount or (b) the Class B-1 Principal Balance.
"Class B-1 Interest Amount" means, with respect to any Payment Date, an
amount equal to one month's interest (or, with respect to the first Payment
Date, interest from and including the Closing Date to but excluding the first
Payment Date) at the Class B-1 Interest Rate on the Class B-1 Adjusted Principal
Balance for such Payment Date.
"Class B-1 Interest Carryover Shortfall" means, with respect to any Payment
Date, the amount, if any, by which the amount distributed to Holders of the
Class B-1 Notes on such Payment Date pursuant to Section 8.02(c)(4) of the
Indenture is less than the sum of the Class B-1 Interest Amount plus the Unpaid
Class B-1 Interest Shortfall for such Payment Date.
"Class B-1 Interest Rate" means 13.55% per annum, computed on the basis of
a year of 360 days consisting of twelve 30-day months.
"Class B-1 Liquidation Loss Interest Amount" means, as to any Payment Date,
an amount equal to one month's interest (or, as to the first Payment Date,
interest from and including the Closing Date to but excluding the first Payment
Date) at the Class B-1 Interest Rate on the Class B-1 Liquidation Loss Principal
Amount (if any) for the immediately preceding Payment Date.
"Class B-1 Liquidation Loss Interest Shortfall" means, as to any Payment
Date, the amount, if any, by which the Class B-1 Formula Liquidation Loss
Interest Distribution Amount exceeds any amount distributed to Class B-1 Note on
such Payment Date pursuant to Section 8.02(c)(9) of the Indenture.
"Class B-1 Liquidation Loss Principal Amount" means, as to any Payment
Date, the lesser of (a) the Class B-1 Principal Balance (after giving effect to
all distributions of principal on the Class B-1 Notes on such Payment Date) and
(b) the excess, if any, of the Aggregate Liquidation Loss Principal Amount over
the Class B-2 Principal Balance (after giving effect to all distributions of
principal on the Class B-2 Notes on such Payment Date).
"Class B-1 Notes" means the Class B-1 Notes issued by the Trust pursuant to
the Indenture.
1-5
<PAGE>
"Class B-1 Percentage" means:
(i) zero, if the Class A Principal Balance, the Class M-1 Principal
Balance and the Class M-2 Principal Balance have not yet been reduced to
zero and the Class B-1 Distribution Test is not satisfied or
(ii) a fraction, expressed as a percentage, the numerator of which is
the Class B-1 Adjusted Principal Balance and the denominator of which is
the sum of (a) the Class A Principal Balance, (b) the Class M-1 Adjusted
Principal Balance, (c) the Class M-2 Adjusted Principal Balance, (d) the
Class B-1 Adjusted Principal Balance and (e) if the Class B-2 Distribution
Test is satisfied on such Payment Date, the Class B-2 Adjusted Principal
Balance, otherwise zero.
"Class B-1 Principal Balance" means, as to any Payment Date, the Original
Class B-1 Principal Balance less all amounts distributed to Holders of Class B-1
Notes on prior Payment Dates on account of principal pursuant to Section
8.02(c)(8) of the Indenture.
"Class B-1 Principal Distribution Amount" means, as to any Payment Date,
the lesser of (a) the Amount Available remaining after distribution of amounts
described in Sections 6.06(a)(i) through (viii), and (b) the Class B-1 Formula
Principal Distribution Amount.
"Class B-2 Adjusted Principal Balance" means, as of any Payment Date, the
Class B-2 Principal Balance as of that Payment Date minus any Class B-2
Liquidation Loss Principal Amount as of the prior Payment Date that was not paid
by Green Tree pursuant to the Limited Guaranty.
"Class B-2 Distribution Amount" means, as to any Payment Date, the sum of
the amounts paid to Class B-2 Noteholders on such Payment Date pursuant to
Section 8.02(c)(10) of the Indenture.
"Class B-2 Distribution Test" means, to be considered "satisfied" for any
Payment Date, that (i) such Payment Date occurs in or after July 2003; (ii) the
Average Sixty-Day Delinquency Ratio for such Payment Date is less than or equal
to 10% of the Senior Subordination Percentage; (iii) the Cumulative Realized
Losses Test for such Payment Date is satisfied; (iv) the fraction, expressed as
a percentage, the numerator of which is the Class B-2 Adjusted Principal Balance
as of such Payment Date and the denominator of which is the Pool Scheduled
Principal Balance as of the immediately preceding Payment Date, is equal to or
greater than 13.10%; (v) the Class B-2 Adjusted Principal Balance must not be
less than $2,000,000; and (vi) the Supplementary Principal Distribution Test is
satisfied.
"Class B-2 Formula Distribution Amount" means, as to any Payment Date, the
sum of (a) the Class B-2 Interest Amount, (b) any Unpaid Class B-2 Interest
Shortfall, (c) the Class B-2 Formula Principal Distribution Amount, and (d) the
Class B-2 Liquidation Loss Principal Amount, if any (but in no event more than
is necessary to reduce the Class B-2 Principal Balance to zero).
1-6
<PAGE>
"Class B-2 Formula Principal Distribution Amount" means, as to any Payment
Date, the lesser of (a) the Class B-2 Percentage of the Formula Principal
Distribution Amount, and (b) the Class B-2 Principal Balance.
"Class B-2 Interest Amount" means, as to any Payment Date, an amount equal
to one month's interest (or, with respect to the first Payment Date, interest
from and including the Closing Date to but excluding the first Payment Date) at
the Class B-2 Interest Rate on the Class B-2 Principal Balance for such Payment
Date.
"Class B-2 Interest Carryover Shortfall" means, with respect to any Payment
Date, the amount, if any, by which the amount distributed to Holders of the
Class B-2 Certificates on such Payment Date pursuant to Section 8.02(c)(10) of
the Indenture is less than the sum of the Class B-2 Interest Amount plus the
Unpaid Class B-2 Interest Shortfall for such Payment Date.
"Class B-2 Interest Rate" means 11.16% per annum, computed on the basis of
a 360-day year consisting of twelve 30-day months.
"Class B-2 Liquidation Loss Principal Amount" means, as to any Payment
Date, the lesser of (a) the Class B-2 Principal Balance (after giving effect to
all distributions of principal on the Class B-2 Notes on such Payment Date) and
(b) the Aggregate Liquidation Loss Principal Amount.
"Class B-2 Notes" means the Class B-2 Notes issued by the Trust pursuant to
the Indenture.
"Class B-2 Percentage" means:
(i) zero, if the Class A Principal Balance, the Class M-1 Principal
Balance, the Class M-2 Principal Balance and the Class B-1 Principal
Balance have not yet been reduced to zero and the Class B-2 Distribution
Test is not satisfied or
(ii) a fraction, expressed as a percentage, the numerator of which is
the Class B-2 Principal Balance and the denominator of which is the sum of
(a) the Class A Principal Balance, (b) the Class M-1 Adjusted Principal
Balance, (c) the Class M-2 Adjusted Principal Balance, (d) the Class B-1
Adjusted Principal Balance and (e) the Class B-2 Adjusted Principal
Balance.
"Class B-2 Principal Balance" means, as to any Payment Date, the Original
Class B-2 Principal Balance less all amounts distributed to Holders of Class B-2
Notes on prior Payment Dates on account of principal pursuant to Section
8.02(c)(10) of the Indenture.
"Class M-1 Adjusted Principal Balance" means, as of any Payment Date, the
Class M-1 Principal Balance as of that Payment Date minus the Class M-1
Liquidation Loss Principal Amount (if any) as of the prior Payment Date.
1-7
<PAGE>
"Class M-1 Distribution Amount" means, as to any Payment Date, the sum of
the amounts paid to Class M-1 Noteholders on such Payment Date pursuant to
Sections 8.02(c)(2), (6) and (9) of the Indenture.
"Class M-1 Distribution Test" means, to be considered "satisfied" for any
Payment Date, that (i) such Payment Date occurs in or after July 2003; (ii) the
Average Sixty-Day Delinquency Ratio for such Payment Date is less than or equal
to 10% of the Senior Subordination Percentage; (iii) the Cumulative Realized
Losses Test for such Payment Date is satisfied; (iv) the fraction, expressed as
a percentage, the numerator of which is the sum of the Class M-1 Adjusted
Principal Balance, the Class M-2 Adjusted Principal Balance, the Class B-1
Adjusted Principal Balance and the Class B-2 Adjusted Principal Balance as of
such Payment Date and the denominator of which is the Pool Scheduled Principal
Balance as of the immediately preceding Payment Date, is equal to or greater
than 53.30%; and (v) the Supplementary Principal Distribution Test is satisfied.
"Class M-1 Formula Distribution Amount" means, as to any Payment Date, the
sum of (a) the Class M-1 Interest Amount, (b) any Unpaid Class M-1 Interest
Shortfall, (c) any Class M-1 Formula Liquidation Loss Interest Amount, and (d)
the Class M-1 Formula Principal Distribution Amount.
"Class M-1 Formula Liquidation Loss Interest Distribution Amount" means, as
to any Payment Date, the sum of (a) the Class M-1 Liquidation Loss Interest
Amount, if any, and (b) the Unpaid Class M-1 Liquidation Loss Interest
Shortfall, if any.
"Class M-1 Formula Principal Distribution Amount" means, as to any Payment
Date, the lesser of (a) the Class M-1 Percentage of the Formula Principal
Distribution Amount, and (b) the Class M-1 Principal Balance.
"Class M-1 Interest Amount" means, with respect to any Payment Date, an
amount equal to one month's interest (or, with respect to the first Payment
Date, interest from and including the Closing Date to but excluding the first
Payment Date) at the Class M-1 Interest Rate on the Class M-1 Adjusted Principal
Balance for such Payment Date.
"Class M-1 Interest Carryover Shortfall" means, with respect to any Payment
Date, the amount, if any, by which the amount distributed to Holders of the
Class M-1 Notes on such Payment Date pursuant to Section 8.02(c)(2) of the
Indenture is less than the sum of the Class M-1 Interest Amount and the Unpaid
Class M-1 Interest Shortfall for such Payment Date.
"Class M-1 Interest Rate" means a per annum rate of interest equal to
8.38%, calculated on the basis of a year of 360 days consisting of twelve 30-day
months.
"Class M-1 Liquidation Loss Interest Amount" means, as to any Payment Date,
an amount equal to one month's interest (or, as to the first Payment Date,
interest from and including the Closing Date to but excluding the first Payment
Date) at the Class M-1 Interest Rate on the Class M-1 Liquidation Loss Principal
Amount (if any) for the immediately preceding Payment Date.
1-8
<PAGE>
"Class M-1 Liquidation Loss Interest Shortfall" means, as to any Payment
Date, the amount, if any, by which the Class M-1 Formula Liquidation Loss
Interest Distribution Amount exceeds any amount distributed to Class M-1
Noteholders on such Payment Date pursuant to Section 8.02(c)(9) of the
Indenture.
"Class M-1 Liquidation Loss Principal Amount" means, as to any Payment
Date, the lesser of (a) the Class M-1 Principal Balance (after giving effect to
all distributions of principal on the Class M-1 Notes on such Payment Date) and
(b) the excess, if any, of the Aggregate Liquidation Loss Principal Amount over
the aggregate of the Class M-2 Principal Balance and the Class B Principal
Balance (after giving effect to all distributions of principal on the Class M-2
and Class B Notes on such Payment Date).
"Class M-1 Notes" means the Class M-1 Notes issued by the Trust pursuant to
the Indenture.
"Class M-1 Percentage" means:
(i) zero, as to any Payment Date on which the Class A Principal
Balance has not yet been reduced to zero and on which the Class M-1
Distribution Test is not satisfied or
(ii) a fraction, expressed as a percentage, the numerator of which is
the Class M-1 Adjusted Principal Balance and the denominator of which is
the sum of (a) the Class A Principal Balance, (b) the Class M-1 Adjusted
Principal Balance, (c) if the Class M-2 Distribution Test is satisfied on
such Payment Date, the Class M-2 Adjusted Principal Balance, otherwise
zero, (d) if the Class B-1 Distribution Test is satisfied on such Payment
Date, the Class B-1 Adjusted Principal Balance, otherwise zero and (e) if
the Class B-2 Distribution Test is satisfied on such Payment Date, the
Class B-2 Adjusted Principal Balance, otherwise zero.
"Class M-1 Principal Balance" means, as to any Payment Date, the Original
Class M-1 Principal Balance less all amounts distributed to Holders of Class M-1
Notes on prior Payment Dates on account of principal pursuant to Section 8.02(c)
of the Indenture.
"Class M-1 Principal Distribution Amount" means, as to any Payment Date,
the lesser of (a) the Amount Available remaining after distribution of amounts
described in Sections 6.06(a)(i) through (vi), and (b) the Class M-1 Formula
Principal Distribution Amount.
"Class M-2 Adjusted Principal Balance" means, as of any Payment Date, the
Class M-2 Principal Balance as of that Payment Date minus the Class M-2
Liquidation Loss Principal Amount (if any) as of the prior Payment Date.
"Class M-2 Distribution Amount" means, as to any Payment Date, the sum of
the amounts paid to Class M-2 Noteholders on such Payment Date pursuant to
Sections 8.02(c)(2), (7) and (9) of the Indenture.
1-9
<PAGE>
"Class M-2 Distribution Test" means, to be considered "satisfied" for any
Payment Date, that (i) such Payment Date occurs in or after July 2003; (ii) the
Average Sixty-Day Delinquency Ratio for such Payment Date is less than or equal
to 10% of the Senior Subordination Percentage; (iii) the Cumulative Realized
Losses Test for such Payment Date is satisfied; (iv) the fraction, expressed as
a percentage, the numerator of which is the sum of the Class M-2 Adjusted
Principal Balance, the Class B-1 Adjusted Principal Balance and the Class B-2
Adjusted Principal Balance as of such Payment Date and the denominator of which
is the Pool Scheduled Principal Balance as of the immediately preceding Payment
Date, is equal to or greater than 36.00%; and (v) the Supplementary Principal
Distribution Test is satisfied.
"Class M-2 Formula Distribution Amount" means, as to any Payment Date, the
sum of (a) the Class M-2 Interest Amount, (b) any Unpaid Class M-2 Interest
Shortfall, (c) any Class M-2 Formula Liquidation Loss Interest Distribution
Amount, and (d) the Class M-2 Formula Principal Distribution Amount.
"Class M-2 Formula Liquidation Loss Interest Distribution Amount" means, as
to any Payment Date, the sum of (a) the Class M-2 Liquidation Loss Interest
Amount, if any, and (b) the Unpaid Class M-2 Liquidation Loss Interest
Shortfall, if any.
"Class M-2 Formula Principal Distribution Amount" means, as to any Payment
Date, the lesser of (a) the Class M-2 Percentage of the Formula Principal
Distribution Amount and (b) the Class M-2 Principal Balance.
"Class M-2 Interest Amount" means, with respect to any Payment Date, an
amount equal to one month's interest (or, with respect to the first Payment
Date, interest from and including the Closing Date to but excluding the first
Payment Date) at the Class M-2 Interest Rate on the Class M-2 Adjusted Principal
Balance.
"Class M-2 Interest Carryover Shortfall" means, with respect to any Payment
Date, the amount, if any, by which the amount distributed to Holders of the
Class M-2 Notes on such Payment Date pursuant to Section 8.02(c)(2) of the
Indenture is less than the sum of the Class M-2 Interest Amount and the Unpaid
Class M-2 Interest Shortfall for such Payment Date.
"Class M-2 Interest Rate" means a per annum rate of interest equal to
10.54%, calculated on the basis of a year of 360 days consisting of twelve
30-day months.
"Class M-2 Liquidation Loss Interest Amount" means, as to any Payment Date,
an amount equal to one month's interest (or, as to the first Payment Date,
interest from and including the Closing Date to but excluding the first Payment
Date) at the Class M-2 Interest Rate on the Class M-2 Liquidation Loss Principal
Amount (if any) for the immediately preceding Payment Date.
"Class M-2 Liquidation Loss Interest Shortfall" means, as to any Payment
Date, the amount, if any, by which the Class M-2 Formula Liquidation Loss
Interest Distribution Amount exceeds any amount distributed to Class M-2
Noteholders on such Payment Date pursuant to Section 8.02(c)(9) of the
Indenture.
1-10
<PAGE>
"Class M-2 Liquidation Loss Principal Amount" means, as to any Payment
Date, the lesser of (a) the Class M-2 Principal Balance (after giving effect to
all distributions of principal on the Class M-2 Notes on such Payment Date) and
(b) the excess, if any, of the Aggregate Liquidation Loss Principal Amount over
the Class B Principal Balance (after giving effect to all distributions of
principal on the Class B Notes on such Payment Date).
"Class M-2 Notes" means the Class M-2 Notes issued by the Trust pursuant to
the Indenture.
"Class M-2 Percentage" means:
(i) zero, as to any Payment Date on which the Class A Principal
Balance and the Class M-1 Principal Balance have not yet been reduced to
zero and on which the Class M-2 Distribution Test is not satisfied, or
(ii) a fraction, expressed as a percentage, the numerator of which is
the Class M-2 Adjusted Principal Balance and the denominator of which is
the sum of (a) the Class A Principal Balance, (b) the Class M-1 Adjusted
Principal Balance, (c) the Class M-2 Adjusted Principal Balance, (d) if the
Class B-1 Distribution Test is satisfied on such Payment Date, the Class
B-1 Adjusted Principal Balance, otherwise zero and (e) if the Class B-2
Distribution Test is satisfied on such Payment Date, the Class B-2 Adjusted
Principal Balance, otherwise zero.
"Class M-2 Principal Balance" means, as to any Payment Date, the Original
Class M-2 Principal Balance less all amounts distributed to Holders of Class M-2
Notes on prior Payment Dates on account of principal pursuant to Section 8.02(c)
of the Indenture.
"Class M-2 Principal Distribution Amount" means, as to any Payment Date,
the lesser of (a) the Amount Available remaining after distribution of amounts
described in Sections 6.06(a)(i) through (vii), and (b) the Class M-2 Formula
Principal Distribution Amount.
"Class Percentage Interest" means, as to any Note or Certificate, the
percentage interest evidenced thereby in distributions made on the related
Class, such percentage interest being equal to the percentage (carried to eight
places) obtained from dividing the denomination of such Note or Certificate by
the aggregate denomination of all Notes or Certificates of the related Class
(which equals the Original Class A-1 Principal Balance in the case of a Class
A-1 Note, the Original Class A-2 Principal Balance in the case of a Class A-2
Note, the Original Class M-1 Principal Balance in the case of a Class M-1 Note,
the Original Class M-2 Principal Balance in the case of a Class M-2 Note, the
Original Class B-1 Principal Balance in the case of a Class B-1 Note or the
Original Class B-2 Principal Balance in the case of a Class B-2 Note). The
aggregate Class Percentage Interest for each Class of Notes or Certificates
shall equal 100%.
"Class Principal Balance" means, as to any date, the Class A-1 Principal
Balance, the Class A-2 Principal Balance, the Class M-1 Principal Balance, the
Class M-2 Principal Balance, the Class B-1 Principal Balance or the Class B-2
Principal Balance, as appropriate.
1-11
<PAGE>
"Closing Date" means June 30, 1999.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Security" means, with respect to any Loan, (i) the mortgage,
deed of trust or security deed granted by or on behalf of the related Obligor
with respect thereto, including the lien on the related real property, (ii) all
other security interests or liens and property subject thereto from time to time
purporting to secure payment of such Loan, whether pursuant to the agreement
giving rise to such Loan or otherwise, together with all financing statements
signed by the Obligor describing any collateral securing such Loan, (iii) all
rights the Company may have against the originator of the Loan if other than the
Company, (iv) all rights under hazard insurance, if applicable, on the property
described in the Loan, (v) all rights in any title insurance policy with respect
to a Loan and (vi) all guarantees, insurance and other agreements or
arrangements of whatever character from time to time supporting or securing
payment of such Loan whether pursuant to the agreement giving rise to such Loan
or otherwise, and (vii) all records in respect of such Loan.
"Collected Funds" means, as to any Payment Date, an amount equal to (a) the
sum of (i) the amount on deposit in the Collection Account as of the close of
business on the last day of the related Due Period (exclusive of any amounts
deposited therein pursuant to Sections 6.05, 8.01 or 8.02 of this Agreement),
and (ii) any amounts required to be deposited in the Collection Account on or
before the Business Day immediately preceding such Payment Date pursuant to
Section 5.09, reduced by (b) the sum as of the close of business on the last day
of the immediately preceding Due Period of (i) the Amount Held for Future
Distribution and (ii) amounts permitted to be withdrawn by the Trustee from the
Collection Account pursuant to clauses (b) - (e), inclusive, of Section 6.03.
"Collection Account" means the account established and maintained pursuant
to Section 6.01.
"Computer Tape" means the computer tape generated by the Company which
provides information relating to the Loans and which was used by the Company in
selecting the Loans, and includes the master file and the history file.
"Corporate Trust Office" means with respect to the Owner Trustee, the
principal office of the Owner Trustee at which at any particular time its
corporate trust business shall be administered, which office at the Closing Date
is located at Rodney Square North, 1100 North Market Street, Wilmington,
Delaware 19890-0001, Attention: Corporate Trust Administration; the telecopy
number for the Corporate Trust Office of the Owner Trustee on the date of the
execution of this Agreement is 302-651-8882; with respect to the Indenture
Trustee, the principal office of the Indenture Trustee at which at any
particular time its corporate trust business shall be administered, which office
at the Closing Date is located at U.S. Bank Trust National Association, 180 East
Fifth Street, St. Paul, Minnesota 55101 Attention: Corporate Trust Department;
the telecopy number for the Corporate Trust Office of the Indenture Trustee on
the date of execution of this Agreement is (651) 244-0089.
1-12
<PAGE>
"Counsel for the Company" means Dorsey & Whitney LLP, or other legal
counsel for the Company acceptable to the Note Insurer.
"Cumulative Realized Loss Ratio" means, for any Payment Date, a fraction,
expressed as a percentage, the numerator of which is the Cumulative Realized
Losses for that Payment Date, and the denominator of which is the Cut-off Date
Pool Principal Balance.
"Cumulative Realized Losses Test" means, to be considered "satisfied" for
any Payment Date:
(i) if such Payment Date occurs between July 15, 2003 and July 14, 2004,
that the Cumulative Realized Losses as of such Payment Date are less
than or equal to 10% of the Cut-off Date Pool Principal Balance;
(ii) if such Payment Date occurs between July 15, 2004 and July 14, 2005,
that the Cumulative Realized Losses as of such Payment Date are less
than or equal to 12% of the Cut-off Date Pool Principal Balance;
(iii) if such Payment Date occurs between July 15, 2005 and July 14, 2006,
that the Cumulative Realized Losses as of such Payment Date are less
than or equal to 14% of the Cut-off Date Pool Principal Balance; and
(iv) if such Payment Date occurs on or after July 15, 2006, that the
Cumulative Realized Losses as of such Payment Date are less than or
equal to 15% of the Cut-off Date Pool Principal Balance.
"Current Realized Loss Ratio" means, as to any Payment Date, a fraction,
expressed as a percentage, the numerator of which is the aggregate Realized
Losses for such Payment Date and each of the eleven immediately preceding
Payment Dates and the denominator of which is the arithmetic average of the Pool
Scheduled Principal Balance of as of the twelfth preceding Payment Date and the
Pool Scheduled Principal Balance of as of such Payment Date.
"Cut-off Date" means May 1, 1999 (or the date of origination, if later).
"Cut-off Date Pool Principal Balance" means the aggregate of the Cut-off
Date Principal Balances of the Loans.
"Cut-off Date Principal Balance" means, as to any Loan, the unpaid
principal balance thereof at the Cut-off Date after giving effect to all
installments of principal due prior thereto.
"Defaulted Loan" means a Loan with respect to which the Servicer commenced
foreclosure proceedings, made a sale of such Loan to a third party for
foreclosure or enforcement, or as to which there was a Delinquent Payment 180 or
more days past due.
"Delinquent Payment" means, as to any Loan, with respect to any Due Period,
any payment or portion of a payment of principal or interest that was originally
scheduled to be made
1-13
<PAGE>
during such Due Period under such Loan (after giving effect to any reduction in
the principal amount deemed owed on such Loan by the Obligor) and was not
received or applied during such Due Period, whether or not any payment extension
permitted under Section 5.06(f) has been granted by the Servicer.
"Determination Date" means the third Business Day prior to each Payment
Date during the term of this Agreement.
"Due Date" means, as to any Loan, the date of the month on which the
scheduled monthly payment for such Loan is due.
"Due Period" means a calendar month during the term of this Agreement.
"Electronic Ledger" means the electronic master record of installment sale
contracts, home equity loans 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 subject to regulations regarding fiduciary funds on
deposit similar to federal regulations with trust powers and acting in its
fiduciary capacity for the benefit of the Indenture Trustee, which depository
institution or trust company shall have capital and surplus (or, if such
depository institution or trust company is a subsidiary of a bank holding
company system, the capital and surplus of the bank holding company) of not less
than $50,000,000 and the securities of such depository institution (or, if such
depository institution is a subsidiary of a bank holding company system and such
depository institution's securities are not rated, the securities of the bank
holding company) shall have a credit rating from Standard & Poor's (if rated by
Standard & Poor's) and Moody's (if rated by Moody's) in one of its generic
credit rating categories which signifies investment grade; or (iv) an account
that will not cause either of the Rating Agencies to downgrade or withdraw their
then-current ratings assigned to the Notes (without regard to the Note Insurance
Policy), as confirmed in writing by the Rating Agencies.
"Eligible Institution" means any depository institution (which may be the
Owner Trustee, the Indenture Trustee or an Affiliate of either) organized under
the laws of the United States or any State, the deposits of which are insured to
the full extent permitted by law by the Bank Insurance Fund (currently
administered by the Federal Deposit Insurance Corporation), which is subject to
supervision and examination by federal or state authorities and whose short-term
deposits have been rated A-1 by Standard & Poor's and P-1 by Moody's if the
deposits are to be held in the account for less than 30 days, or whose unsecured
long-term debt has been rated in one of the two highest rating categories by
Standard & Poor's and Moody's if the deposits are to be held in the account for
30 days or more, or who shall otherwise be acceptable to the Rating Agencies.
1-14
<PAGE>
"Eligible Investments" are any of the following:
(i) direct obligations of, and obligations fully guaranteed by, the
United States of America, the Federal Home Loan Mortgage Corporation, the
Federal National Mortgage Association having the highest credit rating then
available from Moody's and Standard & Poor's, or any agency or
instrumentality of the United States of America the obligations of which
are backed by the full faith and credit of the United States of America and
which are noncallable;
(ii) 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 Indenture Trustee or any Affiliate of the
Indenture 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 deposits of such
depository institution or trust company (or, in the case of a depository
institution which is the principal subsidiary of a holding company, the
commercial paper or other short-term debt obligations of such holding
company) are rated at least A-1+ by Standard & Poor's and at least P-1 by
Moody's;
(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 the highest credit rating then available from Moody's and
Standard & Poor's and whose only investments are in securities described in
clauses (i) and (ii) above if the Indenture Trustee has taken possession of
any certificate evidencing the shares or, if uncertificated, there is an
appropriate book entry notation showing the Indenture Trustee as the owner
of the shares;
(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) above if the Indenture Trustee has
taken possession of any certificate evidencing the securities or, if
uncertificated, there is an appropriate book entry notation showing the
Indenture Trustee as the owner of the securities;
(v) securities bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States of America or
any State thereof which have a credit rating of at least AAA by Standard &
Poor's and at least Aaa from Moody's at the time of such investment;
provided, however, that securities issued by any particular corporation
will not be Eligible Investments to the extent that investment therein will
cause the then outstanding principal amount of securities issued by such
corporation and held as part of the corpus of the Trust to exceed 10% of
amounts held in the Collection Account;
1-15
<PAGE>
(vi) commercial paper having a rating of at least A-1+ from Standard &
Poor's and at least P-1 by Moody's at the time of such investment or pledge
as a security; and
(vii) any other investment approved by the Note Insurer in advance and
in writing.
Notwithstanding the foregoing, securities that represent the right to receive
payments only of interest due on underlying obligations shall not be included as
Eligible Investments, whether or not such securities otherwise fall within (i)
through (vi) above.
Each of the Indenture Trustee and the Owner Trustee may trade with itself
or an Affiliate in the purchase or sale of such Eligible Investments.
"Eligible Servicer" means the Company or a Person designated as an approved
seller-servicer by Fannie Mae or Freddie Mac and otherwise qualified to act as
servicer of the Loans under applicable Federal and State laws and regulations,
and which services not less than an aggregate of $100,000,000 in outstanding
principal amount of home improvement contracts and promissory notes,
manufactured housing conditional sales contracts and installment loan agreements
and home equity loans.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Errors and Omissions Protection Policy" means the employee errors and
omissions policy maintained by the Servicer or any similar replacement policy
covering errors and omissions by the Servicer's employees, and meeting the
requirements of Section 5.09, all as such policy relates to Loans comprising a
portion of the corpus of the Trust.
"Federal Bankruptcy Code" means 11 U.S.C. Section 101 et seq.
"Fidelity Bond" means the fidelity bond maintained by the Servicer or any
similar replacement bond, meeting the requirements of Section 5.09, as such bond
relates to Loans comprising a portion of the corpus of the Trust.
"Final Scheduled Payment Date" has the meaning given in the Indenture.
"Formula Principal Distribution Amount" means, with respect to any Payment
Date, the sum of the Group 1 Formula Principal Distribution Amount and the Group
2 Formula Principal Distribution Amount, provided that the Formula Principal
Distribution Amount for the Distribution Date in August 2029 shall be the Note
Principal Balance.
"Group 1 Formula Principal Distribution Amount" means, as of any Payment
Date, the sum of the following amounts with respect to the related Due Period,
in each case computed in accordance with the method specified in the related
Group 1 Loan:
(i) all scheduled payments of principal due on each outstanding Group
1 Loan during the immediately preceding Due Period as specified in the
amortization schedule at
1-16
<PAGE>
the time applicable thereto (after adjustments for previous Partial
Principal Prepayments and after any adjustment to such amortization
schedule by reason of any bankruptcy of an Obligor or similar proceeding or
any moratorium or similar waiver or grace period); plus
(ii) the Scheduled Principal Balance of each Group 1 Loan which,
during the immediately preceding Due Period, was purchased by the Company
pursuant to this Agreement on account of a breach of a representation or
warranty; plus
(iii) all Partial Principal Prepayments applied and all Principal
Prepayments in Full received on Group 1 Loans during the immediately
preceding Due Period; plus
(iv) the aggregate Scheduled Principal Balance of all Group 1 Loans
that became Liquidated Loans during the immediately preceding Due Period;
plus the amount of any reduction in the outstanding principal balance of
any Group 1 Loan during such Due Period ordered as a result of a bankruptcy
or similar proceeding involving the related Obligor; plus
(v) any amount described in clauses (i) through (iv) above that was
not previously distributed because of an insufficient amount of funds
available in the Collection Account if (1) the Payment Date occurs on or
after the Payment Date on which the Class B-2 Principal Balance has been
reduced to zero, or (2) such amount was not covered by a Guaranty Payment
and corresponding reduction in the Class B-2 Principal Balance.
"Group 2 Formula Principal Distribution Amount" means, as of any Payment
Date, the sum of the following amounts with respect to the related Due Period,
in each case computed in accordance with the method specified in the related
Group 2 Loan:
(i) all scheduled payments of principal due on each outstanding Group
2 Loan during the immediately preceding Due Period as specified in the
amortization schedule at the time applicable thereto (after adjustments for
previous Partial Principal Prepayments and after any adjustment to such
amortization schedule by reason of any bankruptcy of an Obligor or similar
proceeding or any moratorium or similar waiver or grace period); plus
(ii) the Scheduled Principal Balance of each Group 2 Loan which,
during the immediately preceding Due Period, was purchased by the Company
pursuant to this Agreement on account of a breach of a representation or
warranty; plus
(iii) all Partial Principal Prepayments applied and all Principal
Prepayments in Full received on Group 2 Loans during the immediately
preceding Due Period; plus
(iv) the aggregate Scheduled Principal Balance of all Group 2 Loans
that became Liquidated Loans during the immediately preceding Due Period;
plus the amounts of any reduction in the outstanding principal balance of a
Group 2 Loan during such Due Period ordered as a result of a bankruptcy or
similar proceeding involving the related Obligor; plus
1-17
<PAGE>
(v) any amount described in clauses (i) through (iv) above that was
not previously distributed because of an insufficient amount of funds
available in the Collection Account if (1) the Payment Date occurs on or
after the Payment Date on which the Class B-2 Principal Balance has been
reduced to zero, or (2) such amount was not covered by a Guaranty Payment
and corresponding reduction in the Class B-2 Principal Balance.
"Group 1 Loan" means a Loan identified as such on the List of Loans.
"Group 2 Loan" means a Loan identified as such on the List of Loans.
"Guaranty Payment" means, as of any Payment Date, the amount, if any, by
which (A) the Class B-2 Formula Distribution Amount on such Payment Date exceeds
(B) the remainder of (x) the sum of the Collected Funds as of that Payment Date
plus any amounts on deposit in the Collection Account as of that Payment Date
pursuant to Sections 8.01 or 8.02 of this Agreement, minus (y) the amounts to be
distributed from the Collection Account on that Payment Date pursuant to clauses
(i) through (xi) of Section 6.06(a).
"Holder" means the person in whose name a Note is registered on the Note
Register.
"Home Equity Loan" means each closed-end home equity loan described in the
List of Loans and to be assigned and conveyed by the Company to the Trust, and
includes, without limitation, any and all related mortgages, deeds of trust and
security deeds and any and all rights to receive payments which are due pursuant
thereto on or after the Cut-off Date.
"Home Improvement Loans" means each retail installment sale contract and
promissory note described in the List of Loans and to be assigned and conveyed
by the Company to the Trust, and includes, without limitation, any and all
related mortgages, deeds of trust and security deeds and any and all rights to
receive payments which are due pursuant thereto on or after the Cut-off Date.
"Indemnification Agreement" means the Indemnification Agreement dated as of
June 18, 1999 among the Note Insurer, the Seller and the Underwriter.
"Indenture" means the Indenture, dated as of June 1, 1999, between the
Trust and U.S. Bank Trust National Association, as Indenture Trustee, as the
same may be amended and supplemented from time to time.
"Indenture Trustee" means the Person acting as Trustee under the Indenture,
its successors in interest and any successor Trustee under the Indenture.
"Independent" means, when used with respect to any specified Person, Dorsey
& Whitney LLP, or any Person who (i) is in fact independent of the Company and
the Servicer, (ii) does not have any direct financial interest or any material
indirect financial interest in the Company or the Servicer or in an Affiliate of
either and (iii) is not connected with the Company or the Servicer as an
officer, employee, promoter, underwriter, trustee, partner, director or person
performing
1-18
<PAGE>
similar functions. Whenever it is provided herein that any Independent Person's
opinion or certificate shall be furnished to the Trustee, such opinion or
certificate shall state that the signatory has read this definition and is
Independent within the meaning set forth herein.
"Insurance Agreement" means the Insurance and Indemnity Agreement dated as
of June 1, 1999, among the Trust, the Seller and the Note Insurer, as such
agreement may be amended from time to time.
"Insured Payment" means as to any Payment Date, the lesser of (a) the
Shortfall or (b) the amount deposited in the Policy Payments Account pursuant to
Section 6.08.
"Late Payment Rate" means the lesser of (a) the greater of (i) the per
annum rate of interest, publicly announced from time to time by The Chase
Manhattan Bank at its principal office in the City of New York, as its prime or
base lending rate (any change in such rate of interest to be effective on the
date such change is announced by The Chase Manhattan Bank) plus 3%, and (ii) the
per annum rate equal to 7.11% and (b) the maximum rate permissible under
applicable usury or similar laws limiting interest rates. The Late Payment Rate
shall be computed on the basis of the actual number of days elapsed over a year
of 360 days.
"Limited Guaranty" means the obligation of the Company to make Guaranty
Payments pursuant to Section 6.05.
"Liquidated Loan" means with respect to any Due Period, either
(i) a Defaulted Loan as to which the Servicer has received from the
Obligor, or a third party purchaser of the Loan, all amounts which the
Servicer reasonably and in good faith expects to recover from or on account
of such Loan, or
(ii) a Loan as to which there was a Delinquent Payment 180 or more
days past due (without regard to any extension given by the Servicer under
Section 5.06(f));
provided, however, that any Loan which the Company is obligated to repurchase
pursuant to Section 3.05, and did so repurchase shall be deemed not to be a
Liquidated Loan; and provided, further, that with respect to Due Periods
beginning on or after August 2027, a Liquidated Loan also means any Loan as to
which the Servicer has commenced foreclosure proceedings or made a sale of the
Loan to a third party for foreclosure or enforcement.
"Liquidation Expenses" means out-of-pocket expenses (exclusive of any
overhead expenses) which are incurred by the Servicer in connection with the
liquidation of any Defaulted Loan, including, without limitation, legal fees and
expenses, and any related and unreimbursed expenditures for property taxes,
property preservation or restoration of the property to marketable condition.
"Liquidation Proceeds" means cash (including insurance proceeds) received
in connection with the liquidation of Defaulted Loans, whether through
repossession, foreclosure sale or otherwise.
1-19
<PAGE>
"List of Loans" means the list identifying each Loan constituting part of
the corpus of the Trust, which list (a) identifies each Group 1 and Group 2
Loan, (b) sets forth as to each Loan (i) the Cut-off Date Principal Balance,
(ii) the amount of monthly payments due from the Obligor, (iii) the Loan
Interest Rate and (iv) the maturity date, and (c) which is attached to the
Assignment.
"Loan File" means, as to each Loan, (a) the original copy of the Loan which
is comprised of the related original contract and/or original promissory note,
endorsed to the Indenture Trustee or in blank, (b) the original or a copy of the
mortgage, deed of trust or security deed or similar evidence of a lien on the
related improved property and evidence of due recording of such mortgage, deed
of trust or security deed, if available, (c) if such Loan 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, (d) an assignment of the mortgage, deed of trust or
security deed to the Indenture Trustee or in blank, and (e) originals of any
extension, modification or waiver agreement(s).
"Loan Interest Rate" means, with respect to any Loan, the annual rate of
interest specified in that Loan.
"Loans" means, collectively, the Home Improvement Loans and the Home Equity
Loans.
"MN UCC" means the Uniform Commercial Code as in effect in the State of
Minnesota.
"Monthly Report" has the meaning assigned in Section 5.14.
"Monthly Servicing Fee" means, as of any Payment Date (a) on which the
Company is acting as Servicer, one-twelfth of the product of 0.75% and the Pool
Scheduled Principal Balance and (b) on which the Company is not acting as
Servicer, any amount agreed to by the Indenture Trustee, the Note Insurer and
the successor Servicer; provided that only that portion of the Monthly Servicing
Fee that does not exceed one-twelfth of the product of 0.75% and the Pool
Scheduled Principal Balance for the immediately preceding Payment Date shall be
paid pursuant to Section 6.06(a)(i) and any balance shall be paid pursuant to
Section 6.06(a)(xiv).
"Moody's" means Moody's Investors Services, Inc., or any successor thereto;
provided that, if Moody's no longer has a rating outstanding on any Class of
Notes, then references herein to "Moody's" shall be deemed to refer to the NRSRO
then rating any Class of the Notes (or, if more than one such NRSRO is then
rating any Class of the Notes, to such NRSRO as may be designated by the
Servicer), and references herein to ratings by or requirements of Moody's shall
be deemed to have the equivalent meanings with respect to ratings by or
requirements of such NRSRO.
"Net Liquidation Loss" means, as to a Liquidated Loan, the difference
between (a) the Repurchase Price of such Loan, and (b) the Net Liquidation
Proceeds with respect to such Liquidated Loan, where such difference is a
positive number.
1-20
<PAGE>
"Net Liquidation Proceeds" means, as to a Liquidated Loan, the proceeds
received, or, for Loans which become Liquidated Loans pursuant to the last
proviso in the definition of "Liquidated Loan," the estimated proceeds to be
received, as of the last day of the Due Period in which such Loan became a
Liquidated Loan, from the Obligor, from a third party purchaser of the Loan,
under insurance or otherwise, net of Liquidation Expenses.
"Note Distribution Account" means the account designated as such,
established and maintained pursuant to Section 6.01(b).
"Note Insurance Policy" means the financial guaranty insurance policy
(number 50829-N) dated June 30, 1999 issued by the Note Insurer to the Indenture
Trustee for the benefit of the Holders of the Class A-1 Notes and Class A-2
Notes pursuant to which the Note Insurer guarantees the Scheduled Payments.
"Note Insurer" means Financial Security Assurance Inc., or any successor
thereto, as issuer of the Note Insurance Policy.
"Note Insurer Default" means the existence and continuance of any of the
following:
(i) the Note Insurer fails to make a payment required under the Note
Insurance Policy in accordance with its terms; or
(ii) the Note Insurer shall have (i) filed a petition or commenced any
case or proceeding under any provision or chapter of the United States
Bankruptcy Code, the New York State Insurance Law or any other similar
federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation, or reorganization, (ii) made a general assignment for the
benefit of its creditors or (iii) had an order for relief entered against
it under the United States Bankruptcy Code, the New York State Insurance
Law or any other similar federal or state law relating to insolvency,
bankruptcy, rehabilitation, liquidation, or reorganization that is final
and nonappealable.
"Noteholder" means the Person in whose name a Note is registered on the
Note Register.
"Note Majority" means, as to each Class of Notes, Holders of Notes
representing a majority of the Class Principal Balance of such Class, provided
that with respect to the Class A Notes, Note Majority means the Note Insurer if
there is at the time of determination no continuing Note Insurer Default.
"Note Pool Factor" means, with respect to any Payment Date and each Class
of Notes, an eight-digit decimal figure equal to the outstanding principal
balance of such Class of Notes as of such Payment Date (after giving effect to
all distributions on such date) divided by the Original Class Principal Balance
of such Class of Notes.
"Note Principal Balance" means, as of any Payment Date, the sum of the
Class A-1 Principal Balance, the Class A-2 Principal Balance, the Class M-1
Principal Balance, the Class M-2 Principal Balance, the Class B-1 Principal
Balance and the Class B-2 Principal Balance.
1-21
<PAGE>
"Notes" means the Class A-1 Notes, Class A-2 Notes, Class M-1 Notes, Class
M-2 Notes, Class B-1 Notes or Class B-2 Notes.
"NRSRO" means any nationally recognized statistical rating organization.
"Obligor" means a Person who is indebted under a Loan.
"Officer's Certificate" means a certificate signed by the Chairman of the
Board, President or any Vice President of the Company and delivered to the Owner
Trustee and/or the Indenture Trustee as applicable.
"Opinion of Counsel" means a written opinion of counsel, who may, except as
expressly provided herein, be salaried counsel for the Company, acceptable to
the Indenture Trustee, the Owner Trustee, the Note Insurer and the Company.
"Original Class A-1 Principal Balance" means $193,400,000.
"Original Class A-2 Principal Balance" means $100,000,000.
"Original Class B-1 Principal Balance" means $22,200,000.
"Original Class B-2 Principal Balance" means $26,200,000.
"Original Class M-1 Principal Balance" means $34,600,000.
"Original Class M-2 Principal Balance" means $23,600,000.
"Original Class Principal Balance" means, with respect to any Class, the
Original Class A-1 Principal Balance, the Original Class A-2 Principal Balance,
the Original Class M-1 Principal Balance, the Original Class M-2 Principal
Balance, the Original Class B-1 Principal Balance or the Original Class B-2
Principal Balance, as appropriate.
"Original Note Principal Balance" means the sum of the Original Class A-1
Principal Balance, Original Class A-2 Principal Balance, Original Class M-1
Principal Balance, Original Class M-2 Principal Balance, Original Class B-1
Principal Balance and Original B-2 Principal Balance.
"Owner Trustee" means Wilmington Trust Company, acting not individually but
solely as trustee, or its successor in interest, and any successor appointed as
provided in the Trust Agreement.
"Partial Principal Prepayment" means (a) any Principal Prepayment other
than a Principal Prepayment in Full and (b) any cash amount deposited in the
Collection Account pursuant to the proviso in Section 3.05(a).
1-22
<PAGE>
"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 on July 15, 1999.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint stock company, trust (including any
beneficiary thereof), unincorporated organization or government or any agency or
political subdivision thereof.
"Policy Payments Account" means the policy payment account maintained by
the Indenture Trustee pursuant to Section 6.08(b) hereof.
"Pool Factor" means, as to any Payment Date, a percentage derived from a
fraction, the numerator of which is the Note Principal Balance and the
denominator of which is the Cut-off Date Pool Principal Balance for such Payment
Date.
"Pool Scheduled Principal Balance" means, as of any Payment Date, the
aggregate Scheduled Principal Balance of all Loans that were outstanding as of
the last day of the related Due Period and other than Liquidated or Repurchased
Loans.
"Premium Amount" means, as to any Payment Date, an amount equal to 0.22%
per annum of the Class A Principal Balance.
"Principal Prepayment" means a payment or other recovery of principal on a
Loan (exclusive of Liquidation Proceeds) which is received in advance of its
scheduled due date and applied upon receipt (or, in the case of a Partial
Principal Prepayment, upon the next scheduled Payment Date on such Loan) to
reduce the outstanding principal amount due on such Loan prior to the date or
dates on which such principal amount is due.
"Principal Prepayment in Full" means any Principal Prepayment of the entire
principal balance of a Loan.
"Rating Agencies" means Standard & Poor's and Moody's.
"Realized Losses" means, as to any Payment Date, the aggregate Net
Liquidation Losses for all Loans that became Liquidated Loans during the
immediately preceding Due Period.
"Record Date" means the Business Day immediately preceding the related
Payment Date.
"Reimbursement Amount" means, as of any Payment Date, the sum of (x)(i) all
Insured Payments previously paid to the Indenture Trustee by the Note Insurer
and not previously repaid to the Note Insurer pursuant to Section 6.06(a)(vi)
plus (ii) interest accrued on each such Insured Payment not previously repaid
calculated at the Late Payment Rate and (y)(i) any amounts then due and owing to
the Note Insurer under the Insurance Agreement (including, without limitation,
any unpaid Premium Amount relating to such Payment Date or an earlier Payment
Date) as certified in writing by the Note Insurer to the Servicer and the
Indenture Trustee, plus (ii) interest on such amounts at the Late Payment Rate.
1-23
<PAGE>
"Related Documents" means the Trust Agreement, the Indenture, the
Administration Agreement, the Insurance Agreement, the Indemnification
Agreement, the Note Insurance Policy, the Certificate, the Notes, the Custodial
Agreement, and the Underwriting Agreement. The Related Documents executed by any
party are referred to herein as "such party's Related Documents," "its Related
Documents" or by a similar expression.
"Repurchase Price" means, with respect to a Loan to be repurchased pursuant
to Section 3.05 or which becomes a Liquidated Loan, an amount equal to (a) the
remaining principal amount outstanding on such Loan, plus (b) interest at the
Loan Interest Rate on such Loan from the end of the Due Period with respect to
which the Obligor last made a scheduled payment through the date of such
repurchase or liquidation.
"Responsible Officer" means, with respect to the Owner 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 Owner 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.
"Scheduled Payments" means, as to any Payment Date, the sum of (a) the
Class A Interest Amount less the Class A Percentage of any Civil Relief Interest
Shortfall, (b) any Class A Principal Deficiency Amount and (c) without
duplication, on the Final Scheduled Payment Date for the Class A-1 Notes or the
Class A-2 Notes, the Class A-1 Principal Balance or Class A-2 Principal Balance,
respectively.
"Scheduled Principal Balance" means, with respect to any Loan and any
Payment Date or the Cut-off Date, the principal balance of such Loan as of the
Due Date in the Due Period immediately preceding such Payment Date or Cut-off
Date, as the case may be, as specified in the amortization schedule at the time
relating thereto (before any adjustment to such amortization schedule by reason
of any bankruptcy of an Obligor or similar proceeding or any moratorium or
similar waiver or grace period) after giving effect to any previous Partial
Principal Prepayments and to the payment of principal due on such Due Date and
irrespective of any delinquency in payment by, or extension granted to, the
related Obligor. If for any Loan the Cut-off Date is the date of origination of
the Loan, its Scheduled Principal Balance as of the Cut-off Date is the
principal balance of the Loan on its date of origination.
"Securities" means the Notes and the Certificate.
"Securityholders" means the Noteholders and the Certificateholder.
"Seller" means Green Tree Financial Corporation.
1-24
<PAGE>
"Senior Subordination Percentage" means:
(i) on any Payment Date on which the Class A Principal Balance has not been
reduced to zero, a fraction, expressed as a percentage, (x) the numerator of
which is the sum of the Class M-1 Adjusted Principal Balance, the Class M-2
Adjusted Principal Balance, the Class B-1 Adjusted Principal Balance and the
Class B-2 Adjusted Principal Balance and (y) the denominator of which is the
Pool Scheduled Principal Balance; or
(ii) on any Payment Date on which the Class A Principal Balance has been
reduced to zero and the Class M-1 Principal Balance has not been reduced to
zero, a fraction, expressed as a percentage, (x) the numerator of which is the
sum of the Class M-2 Adjusted Principal Balance, the Class B-1 Adjusted
Principal Balance and the Class B-2 Adjusted Principal Balance and (y) the
denominator of which is the Pool Scheduled Principal Balance; or
(iii) on any Payment Date on which the Class M-1 Principal Balance has been
reduced to zero and the Class M-2 Principal Balance has not been reduced to
zero, a fraction, expressed as a percentage, (x) the numerator of which is the
sum of the Class B-1 Adjusted Principal Balance and the Class B-2 Adjusted
Principal Balance and (y) the denominator of which is the Pool Scheduled
Principal Balance; or
(iv) on any Payment Date on which the Class M-2 Principal Balance has been
reduced to zero and the Class B-1 Principal Balance has not been reduced to
zero, a fraction, expressed as a percentage, (x) the numerator of which is the
Class B-2 Adjusted Principal Balance and (y) the denominator of which is the
Pool Scheduled Principal Balance.
"Service Transfer" has the meaning assigned in Section 7.01.
"Servicer" means the Company until any Service Transfer hereunder and
thereafter means the new servicer appointed pursuant to Article VII.
"Servicer Termination Event" has the meaning assigned in Section 7.01.
"Servicer Termination Test" means, to be considered "satisfied" on any
Payment Date, that (a) the Average Sixty-Day Delinquency Ratio does not exceed
9.0%, (b) the sum of the Realized Losses for the preceding twelve Payment Dates
does not exceed 7.5% of the Pool Scheduled Principal Balance as of the first
Payment Date in such 12-month period, and (c) the Cumulative Realized Loss Ratio
does not exceed the following ratio:
Payment Date Ratio
------------------------------------------- -------
On or before June 2000 8.0%
After June 2000 and on or before June 2001 12.0%
After June 2001 and on or before June 2002 15.0%
After June 2002 and on or before June 2003 18.0%
After June 2003 21.0%
1-25
<PAGE>
"Servicing Officer" means any officer of the Servicer involved in, or
responsible for, the administration and servicing of Loans whose name appears on
a list of servicing officers appearing in an Officer's Certificate furnished to
the Trustee by the Servicer, as the same may be amended from time to time.
"Shortfall" means, as to any Payment Date, the amount, if any, by which the
Scheduled Payments exceed that portion of the Collected Funds, plus any amounts
deposited in the Collection Account pursuant to Sections 8.01 and 8.02,
available for deposit in the Note Distribution Account in respect of the Class A
Notes pursuant to Sections 6.06(iv) and (v).
"Sixty-Day Delinquency Ratio" means, as to any Payment Date, a fraction,
expressed as a percentage, the numerator of which is the aggregate of the
outstanding balances of all Loans that were delinquent 60 days or more as of the
end of the prior Due Period and all Loans in respect of which the related real
estate has been foreclosed upon but is still in inventory, and the denominator
of which is the Pool Scheduled Principal Balance as of such Payment Date.
"Standard & Poor's" means Standard & Poor's Ratings Service, or any
successor thereto; provided that if Standard & Poor's no longer has a rating
outstanding on any Class of Notes, then references herein to "Standard & Poor's"
shall be deemed to refer to the NRSRO then rating any Class of the Notes (or, if
more than one such NRSRO is then rating any Class of the Notes, to such NRSRO as
may be designated by the Servicer), and references herein to ratings by or
requirements of Standard & Poor's shall be deemed to have the equivalent
meanings with respect to ratings by or requirements of such NRSRO.
"Supplementary Principal Distribution Amount" means, on any Payment Date on
which the Supplementary Principal Distribution Test is not satisfied, unless
waived in writing by the Note Insurer, an amount equal to the lesser of (a) the
Class A Principal Balance or (b) the Amount Available (excluding any Guaranty
Payment) remaining after distribution of amounts described in Sections
6.06(a)(i) through (xiv).
"Supplementary Principal Distribution Test" means, to be considered
"satisfied" for any Payment Date, that (a) the Cumulative Realized Loss Ratio
does not exceed the following ratio:
Payment Date Ratio
------------------------------------------ -------
On or before June 2001 8.0%
After June 2001 and on or before June 2002 12.0%
After June 2002 17.0%
and (b) the Current Realized Loss Ratio does not exceed 7.0%.
"Term of Service" has the meaning assigned in Section 7.01(b).
"Trust" means Green Tree Home Improvement and Home Equity Loan Trust
1999-B.
1-26
<PAGE>
"Trust Accounts" means the Collection Account, the Note Distribution
Account, the Undelivered Loan Account, the Certificate Distribution Account and
the Policy Payments Account.
"Trust Agreement" means the Trust Agreement dated as of June 1, 1999
between the Company and the Owner Trustee, as the same may be amended and
supplemented from time to time.
"Trust Fund" means the property conveyed to the Trust pursuant to Section
2.01(a).
"Undelivered" means, with respect to a Loan and any date of determination,
a Loan identified on the exception report attached to the Acknowledgment
delivered by the Indenture Trustee under Section 6.01(k) of the Indenture on the
Closing Date as a Loan as to which the Indenture Trustee (a) did not receive the
related contract or promissory note as of the Closing Date and (b) has not
received the related contract or promissory note and remitted payment for it to
the Company pursuant to Section 6.12.
"Undelivered Loan Account" means the account so designated, established and
maintained pursuant to Section 6.01(d).
"Underwriter" means Lehman Brothers Inc.
"Underwriting Agreement" means the Underwriting Agreement dated as of June
18, 1999 between the Company and the Underwriter relating to the Class A and
Class M Notes.
"Unpaid Class A Interest Shortfall" means, as to any Payment Date, the sum
of the Unpaid Class A-1 Interest Shortfall and the Unpaid Class A-2 Interest
Shortfall.
"Unpaid Class A-1 Interest Shortfall" means, as to any Payment Date, the
amount, if any, of the excess of (x) the Class A-1 Interest Carryover Shortfall,
if any, for the immediately prior Payment Date, plus (y) accrued interest (to
the extent payment thereof is legally permissible) at the Class A-1 Interest
Rate on such remainder from such immediately prior Payment Date to the current
Payment Date.
"Unpaid Class A-2 Interest Shortfall" means, as to any Payment Date, the
amount, if any, of the excess of (x) the Class A-2 Interest Carryover Shortfall,
if any, for the immediately prior Payment Date, plus (y) accrued interest (to
the extent payment thereof is legally permissible) at the Class A-2 Interest
Rate on such remainder from such immediately prior Payment Date to the current
Payment Date.
"Unpaid Class B-1 Interest Shortfall" means, as to any Payment Date, the
amount, if any, of the remainder of (x) the Class B-1 Interest Carryover
Shortfall, if any, for the immediately prior Payment Date, plus (y) the Unpaid
Class B-1 Interest Shortfall determined as of such immediately prior Payment
Date, minus (z) all amounts distributed to the Holders of Class B-1 Notes on
account of any Unpaid Class B-1 Interest Shortfall pursuant to Section
8.02(c)(4) of the Indenture on such immediately prior Payment Date, plus accrued
interest (to the extent payment
1-27
<PAGE>
thereof is legally permissible) at the Class B-1 Interest Rate on such remainder
from such immediately prior Payment Date to the current Payment Date.
"Unpaid Class B-1 Liquidation Loss Interest Shortfall" means, with respect
to any Payment Date, the amount, if any, of the Class B-1 Liquidation Loss
Interest Shortfall for the prior Payment Date, plus one month's interest thereon
(to the extent payment thereof is legally permissible) at the Class B-1 Interest
Rate.
"Unpaid Class B-2 Interest Shortfall" means, as to any Payment Date, the
amount, if any, of the remainder of (x) the Class B-2 Interest Carryover
Shortfall, if any, for the immediately prior Payment Date, plus (y) the Unpaid
Class B-2 Interest Shortfall determined as of such immediately prior Payment
Date, minus (z) all amounts distributed to the Holders of Class B-2 Notes on
account of any Unpaid Class B-2 Interest Shortfall pursuant to Section
8.02(c)(10) of the Indenture on such immediately prior Payment Date, plus
accrued interest (to the extent payment thereof is legally permissible) at the
Class B-2 Interest Rate on such remainder from such immediately prior Payment
Date to the current Payment Date.
"Unpaid Class M-1 Interest Shortfall" means, as to any Payment Date, the
amount, if any, of the remainder of (x) the Class M-1 Interest Carryover
Shortfall, if any, for the immediately prior Payment Date, plus (y) the Unpaid
Class M-1 Interest Shortfall determined as of such immediately prior Payment
Date, minus (z) all amounts distributed to the Holders of Class M-1 Notes on
account of any Unpaid Class M-1 Interest Shortfall pursuant to Section
8.02(c)(2) of the Indenture on such immediately prior Payment Date, plus accrued
interest (to the extent payment thereof is legally permissible) at the Class M-1
Interest Rate on such remainder from such immediately prior Payment Date to the
current Payment Date.
"Unpaid Class M-1 Liquidation Loss Interest Shortfall" means, with respect
to any Payment Date, the amount, if any, of the Class M-1 Liquidation Loss
Interest Shortfall for the prior Payment Date, plus one month's interest thereon
(to the extent payment thereof is legally permissible) at the Class M-1 Interest
Rate.
"Unpaid Class M-2 Interest Shortfall" means, as to any Payment Date, the
amount, if any, of the remainder of (x) the Class M-2 Interest Carryover
Shortfall, if any, for the immediately prior Payment Date, plus (y) the Unpaid
Class M-2 Interest Shortfall determined as of such immediately prior Payment
Date, minus (z) all amounts distributed to the Holders of Class M-2 Notes on
account of any Unpaid Class M-2 Interest Shortfall pursuant to Section
8.02(c)(3) of the Indenture on such immediately prior Payment Date, plus accrued
interest (to the extent payment thereof is legally permissible) at the Class M-2
Interest Rate on such remainder from such immediately prior Payment Date to the
current Payment Date.
"Unpaid Class M-2 Liquidation Loss Interest Shortfall" means, with respect
to any Payment Date, the amount, if any, of the Class M-2 Liquidation Loss
Interest Shortfall for the prior Payment Date, plus one month's interest thereon
(to the extent payment thereof is legally permissible) at the Class M-2 Interest
Rate.
1-28
<PAGE>
ARTICLE II
TRANSFER OF CONTRACTS
SECTION 2.01. Transfer of Loans.
(a) Subject to the terms and conditions of this Agreement, the Company
hereby irrevocably and unconditionally transfers, assigns, sets over and
otherwise conveys to the Trust by execution of an Assignment substantially in
the form of Exhibit A hereto all right, title and interest of the Company in and
to (1) the Loans (including, without limitation, the Collateral Security), and
all moneys payable thereon or in respect to the Loans, including any liquidation
proceeds therefrom but excluding payments due on the Loans prior to the Cut-off
Date, (2) the Errors and Omissions Protection Policy as such policy relates to
the Loans, (3) all items contained in the Loan Files, (4) the Trust Accounts and
all funds on deposit therein from time to time and all investments and proceeds
thereof (including all income thereon), and (5) all proceeds and products of the
foregoing.
(b) Although the parties intend that the conveyance pursuant to this
Agreement of the Company's right, title and interest in and to the Loans shall
constitute a purchase and sale and not a pledge of security for loans from the
Certificateholders and/or the Noteholders, if such conveyance is deemed to be a
pledge of security for loans from the Certificateholders, the Noteholders or any
other Persons (the "Secured Obligations"), the parties intend that the rights
and obligations of the parties to the Secured Obligations shall be established
pursuant to the terms of this Agreement and that the Company shall be deemed to
have granted to the Trust, and the Company does hereby grant to the Trust, a
perfected first-priority security interest in the items designated in Section
2.01(a)(1) through 2.01(a)(5) above, and all proceeds thereof, to secure the
Secured Obligations, 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, any Note or the Secured Obligations, the security interest created
hereby shall continue in full force and effect and the Owner Trustee shall be
deemed to be the collateral agent for the benefit of such Person.
SECTION 2.02. Conditions to Acceptance by Owner Trustee.
As conditions to the Owner Trustee's execution and delivery of the Notes on
behalf of the Trust and the execution, authentication and delivery of the
Certificates on behalf of the Trust on the Closing Date, the Owner Trustee on
behalf of the Trust shall have received the following on or before the Closing
Date:
(a) The List of Loans, certified by the Chairman of the Board,
President or any Vice President of the Company (which certification may be
part of the Assignment delivered pursuant to Section 2.02(f)).
(b) A letter from PricewaterhouseCoopers LLP or another nationally
recognized accounting firm, stating that such firm has reviewed the Group 1
Loans and the Initial (as defined in the prospectus relating to the Notes)
Group 2 Loans on a
2-1
<PAGE>
statistical sampling basis and, based on such sampling, concluding that,
except with respect to those Loans so specified in the letter, such Loans
conform in all material respects to the List of Loans, to a confidence
level of 97.5%, with an error rate generally not in excess of 1.8%.
(c) 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, its
Related Documents and the transactions contemplated hereunder, certified in
each case by the secretary or an assistant secretary of the Company.
(d) Officially certified recent evidence of due incorporation and good
standing of the Company under the laws of the State of Delaware.
(e) Evidence of filing of UCC-1 financing statements (a) with the
Secretary of State of Minnesota, executed by the Company as debtor, naming
the Trust as secured party and describing the Loans as collateral and (b)
with the Secretary of State of Minnesota and Delaware executed by the Trust
as debtor, naming the Indenture Trustee as secured party and describing the
Indenture Collateral as collateral.
(f) An executed copy of the Assignment.
(g) Evidence of continued coverage of the Company under the Errors and
Omissions Protection Policy.
(h) Evidence of deposit in the Collection Account of all funds
received with respect to the Loans prior to the Closing Date which were due
on or after the Cut-off Date, together with an Officer's Certificate to the
effect that such amount is correct.
(i) An Officer's Certificate confirming that the Company's internal
audit department has reviewed the original or a copy of each Loan and each
Loan File, that each Loan and Loan File conforms in all material respects
with the List of Loans and that each Loan File is complete in all material
respects, except to the extent permitted by this Agreement.
(j) An executed copy of each of the Insurance Agreement, the Note
Insurance Policy and the other Related Documents.
(k) Evidence of the deposit in the Undelivered Loan Account of an
amount equal to the aggregate of the Cut-off Date Principal Balances of the
Undelivered Loans.
(l) An executed copy of the Indenture Trustee's Acknowledgment
delivered under Section 6.01(k) of the Indenture.
(m) Such other documents and certificates as the Trust may request.
2-2
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Company makes the following representations and warranties, effective
as of the Closing Date, on which the Trust will rely in accepting the Loans and
the other Trust Property in trust and on which the Owner Trustee relies in
executing and delivering, on behalf of the Trust, the Certificates and the
Notes, and on which the Note Insurer relies in issuing the Note Insurance
Policy. The repurchase obligation of the Company set forth in Section 3.05
constitutes the sole remedy available to the Trust, the Owner Trustee, the
Indenture Trustee, and the Securityholders for a breach of a representation or
warranty of the Company set forth in Sections 3.02, 3.03 and 3.04 of this
Agreement or in the Officer's Certificate delivered pursuant to Section 2.02(i)
of this Agreement.
SECTION 3.01. Representations and Warranties Regarding the Company and
Covenants of the Company.
The representations and warranties set forth in this Section 3.01 shall
survive delivery by the Company of the Loans and the Loan Files. As promptly as
practicable, but in any event, within 60 days of its discovery or its receipt of
notice from any Person of a material breach of any representation or warranty in
this Section 3.01, the Company shall cure such breach in all material respects;
provided, however, that if the Company can establish to the reasonable
satisfaction of the Note Insurer that it is diligently pursuing remedial action,
then the cure period may be extended for an additional 90 days with the written
approval of the Note Insurer.
(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 its
Related Documents and all of the transactions contemplated under this
Agreement and thereunder and to sell and assign the Trust Property to be
sold and assigned to the Trust by it and has taken all necessary corporate
action to authorize the execution, delivery and performance of this
Agreement and its Related Documents. When executed and delivered, this
Agreement and its Related Documents will constitute the legal, valid and
binding obligations of the Company enforceable in accordance with their
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.
3-1
<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 by the
Company of this Agreement and its Related Documents and the fulfillment of
their terms 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 Related Documents, or the
Securities which, if adversely determined, would in the opinion of the
Company have a material adverse effect on the transactions contemplated by
this Agreement and Related Documents.
(f) Licensing. The Company is duly registered as a finance company in
each state in which Loans were originated, to the extent such registration
is required by applicable law.
(g) Chief Executive Office. The chief executive office of the Company
is at 1100 Landmark Towers, 345 St. Peter Street, St. Paul, Minnesota
55102-1639.
(h) Absolute Sale. The Company intends that the transfer of Loans and
the Collateral Security constitute a complete and absolute sale, removing
the Loans and the Collateral Security from the Company's estate, for
purposes of Section 541 of the United States Bankruptcy Code, as amended.
(i) No Default. The Company is not in default with respect to any
order or decree of any court or any order, regulation or demand of any
federal, state, municipal or governmental agency, which default would
materially and adversely affect the condition (financial or other) or
operations of the Company or its properties or the consequences of which
would materially and adversely affect its performance hereunder and under
its other Related Documents. The Company is not in default under any
agreement involving financial obligations or on any outstanding obligation
which would materially adversely impact the financial condition or
operations of the Company or legal documents associated with the
transaction contemplated by this Agreement or the other Related Documents.
(j) No Material Adverse Change. To the best knowledge of the Company,
there has been no material adverse change in any information submitted by
the Company in writing to the Note Insurer with respect to the transactions
contemplated by this Agreement (unless such information was subsequently
supplemented in writing).
3-2
<PAGE>
(k) Non-consolidation. For so long as Green Tree Finance Corp.--Two
("GTFC2") is the Certificateholder, the Company covenants that:
(i) it will at all times hold out to the public, including the
respective creditors of the Company and GTFC2, is a separate entity
from the other. The Company and GTFC2 will not share a common logo.
The Company will not hold out or consider GTFC2 as a department or
division of the Company.
(ii) Other than the payment of certain of the organizational
expenses of GTFC2 by the Company, GTFC2 will be responsible for the
payment of all its losses, obligations and expenses, and it will be
adequately capitalized to conduct its business.
(iii) All transactions and dealings between the Company and GTFC2
will be on such terms and conditions as would be generally available
to entities unaffiliated with the Company in comparable transactions.
All such transactions have been and will be made only with prior
approval of GTFC2's Board of Directors, at arm's length, in good
faith, and without the intent to hinder, delay or defraud creditors of
either entity, and transfers between the Company and GTFC2 will not be
made if the party making the transfer is insolvent or would be
rendered insolvent by the transfer.
(iv) Following the formation of the Trust, the Company will
disclose all material transactions associated with the transaction in
communications to its shareholders and in public announcements which
will disclose the separate corporate identity of GTFC2 and that the
assets of GTFC2 will not be available for payment of creditors' claims
in the event of the insolvency of the Company.
(v) GTFC2 will comport itself in a manner consistent with the
factual assumptions contained in the "nonconsolidation opinion" of
Dorsey & Whitney LLP dated June 30, 1999 rendered in connection with
the issuance of the Notes.
SECTION 3.02. Representations and Warranties Regarding Each Loan.
(a) List of Loans. The information set forth in the List of Loans is true,
complete and correct as of its date.
(b) Payments. No scheduled payment due under the Loan was delinquent over
59 days as of the Cut-off Date.
(c) Costs Paid and No Waivers. The terms of the Loan have not been waived,
altered or modified in any respect, except by instruments or documents
identified in the Loan File. All costs, fees and expenses incurred in making,
closing and perfecting the lien of the Loan have been paid. The subject real
property has not been released from the lien of such Loan.
3-3
<PAGE>
(d) Binding Obligation. The Loan is the legal, valid and binding obligation
of the Obligor thereunder and is enforceable in accordance with its terms,
except as such enforceability may be limited by laws affecting the enforcement
of creditors' rights generally.
(e) No Defenses. The Loan is not subject to any right of rescission,
setoff, counterclaim or defense, including the defense of usury, and the
operation of any of the terms of the Loan or the exercise of any right
thereunder will not render the Loan unenforceable in whole or in part or subject
to any right of rescission, setoff, counterclaim or defense, including the
defense of usury, and no such right of rescission, setoff, counterclaim or
defense has been asserted with respect thereto.
(f) Insurance Coverage. The Company has been named as an additional insured
party under any hazard insurance on the property described in the Loan, to the
extent required by the Company's underwriting guidelines, which coverage
represents not less than the least of (i) the outstanding principal balance of
the Loan (together, in the case of a junior mortgage loan, with the outstanding
principal balance of all liens senior thereto), (ii) the minimum amount required
to compensate for damage or loss to the related real property on a replacement
cost basis, or (iii) the full insurable value of the related real property. If
upon origination of the Loan, the property securing the Loan 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) Lawful Assignment. The Loan was not originated in and is not subject to
the laws of any jurisdiction whose laws would make the transfer of the Loan
pursuant to this Agreement, or pursuant to transfers of the Securities, unlawful
or render the Loan unenforceable.
(h) Compliance with Law. At the date of origination of the Loan, all
requirements of any federal and state laws, rules and regulations applicable to
the Loan, including, without limitation, usury, truth in lending and equal
credit opportunity laws, have been complied with, and the Company shall for at
least the period of this Agreement, maintain in its possession, available for
the Owner Trustee's inspection, and shall deliver to the Owner Trustee upon
demand, evidence of compliance with all such requirements.
(i) Loan in Force. The Loan has not been satisfied or subordinated in whole
or in part or rescinded, and the real property securing the Loan has not been
released from the lien of the Loan in whole or in part.
(j) Valid Lien. Each Loan has been duly executed and delivered by the
Obligor, and the lien created thereby has been duly recorded, or has been
delivered to the appropriate governmental authority for recording and will be
duly recorded within 180 days and constitutes a valid and perfected first,
second, third or fourth priority lien on the real estate described in such Loan.
3-4
<PAGE>
(k) Capacity of Parties. The signature(s) of the Obligor(s) on the Loan are
genuine and all parties to the Loan had full legal capacity to execute the Loan.
(l) Good Title. The Company is the sole owner of the Loan and has the
authority to sell, transfer and assign such Loan to the Trust under the terms of
this Agreement. There has been no assignment, sale or hypothecation of the Loan
by the Company except the usual past hypothecation of the Loan in connection
with the Company's normal banking transactions in the conduct of its business,
which hypothecation terminates upon sale of the Loan to the Trust. The Company
has good and marketable title to the Loan, free and clear of any encumbrance,
equity, loan, pledge, charge, claim, lien or encumbrance of any type and has
full right to transfer the Loan to the Trust.
(m) No Defaults. There is no default, breach, violation or event permitting
acceleration existing under the Loan and no event which, with notice and the
expiration of any grace or cure period, would constitute such a default, breach,
violation or event permitting acceleration under such Loan (except payment
delinquencies permitted by clause (b) above). The Company has not waived any
such default, breach, violation or event permitting acceleration except payment
delinquencies permitted by clause (b) above.
(n) No Liens. There are, to the best of the Company's knowledge, no liens
or claims which have been filed for work, labor or materials affecting the
Collateral Security securing the Loan which are or may be liens prior to, or
equal or coordinate with, the lien of the Loan.
(o) Equal Installments. Each Loan has a fixed Loan Interest Rate and
provides for substantially level monthly payments which fully amortize the loan
over its term.
(p) RESERVED.
(q) One Original. There is only one original executed Loan, which Loan has
been delivered to the Trust or its custodian on or before the Closing Date.
(r) Genuine Documents. All documents submitted are genuine, and all other
representations as to the Loan, including the List of Loans, are true and
correct. Any copies of documents provided by the Company are accurate and
complete (except that, with respect to any Loan that was originated by a
contractor or lender other than the Company, the Company makes such
representation and warranty only to the best of the Company's knowledge).
(s) Origination. Each Home Improvement Loan 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 Loan was originated by
a home equity lender in the ordinary course of such lender's business or was
originated by the Company directly.
(t) Underwriting Guidelines. The Loan was originated or purchased in
accordance with the Company's then-current underwriting guidelines.
3-5
<PAGE>
(u) Good Repair. The property described in the Loan is, to the best of the
Company's knowledge, free of damage and in good repair.
(v) No Government Loans. No Obligor is the United States government or an
agency, authority, instrumentality or other political subdivision of the United
States government.
(w) Consolidation of Advances. Any advances made after the date of
origination of the Loan but prior to the Cutoff Date have been consolidated with
the outstanding principal amount secured by the related mortgage, and the
secured principal amount, as consolidated, bears a single interest rate and
single repayment term reflected on the List of Loans. The consolidated principal
amount does not exceed the original principal amount of the Loan. The Loan does
not obligate the Servicer to make future advances to the Obligor at the option
of the Obligor.
(x) Condemnation. There is no proceeding pending or threatened for the
total or partial condemnation of the real property that is described in the
Loan, nor is such a proceeding currently occurring.
(y) Encroachments. Any improvements which were included for the purposes of
determining the appraised value of any real property securing the Loan are
wholly within the boundaries and building restriction lines of such real
property, and no improvements on adjoining properties encroach upon such real
property.
(z) Zoning. No improvement located on or part of any real property that is
described in the Loan is in violation of any applicable zoning law or
regulation, and all inspections, licenses and certificates required to be made
or issued with respect to all occupied portions of the property and, with
respect to the use and occupancy of the same, including but not limited to
certificates of occupancy and fire underwriting certificates, have been made or
obtained from the appropriate authorities and such property is lawfully occupied
under the applicable law.
(aa) Deeds of Trust. If the Loan constitutes a deed of trust, a trustee,
duly qualified under applicable law to serve as such, has been properly
designated and currently so serves and is named in the Loan, and no fees or
expenses are or will become payable by the Indenture Trustee to the trustee
under the deed of trust, except in connection with a trustee's sale after
default by the related Obligor.
(bb) Remedies. The Loan contains customary and enforceable provisions which
render the rights and remedies of the holder thereof adequate for the
realization against the related property of the benefits of the security,
including (i) in the case of a mortgage designated as a deed of trust, by
trustee's sale, and (ii) otherwise by judicial foreclosure. There is no
homestead or other exemption, other than any applicable redemption rights
available to the related Obligor, which would materially interfere with the
right to sell the related property at a trustee's sale or the right to foreclose
the related mortgage.
(cc) Appraisal. The Loan was, to the extent required by the Company's
underwriting guidelines, originated based upon a full appraisal, which included
an interior inspection of the subject property by a qualified appraiser, duly
appointed by the Company, who had no interest,
3-6
<PAGE>
direct or indirect in the related real property or in any loan made on the
security thereof, and whose compensation is not affected by the approval or
disapproval of the Loan.
(dd) Hazardous Substances. The Company has no actual knowledge that there
exist any hazardous substances, hazard wastes or solid wastes, as such terms are
defined in the Comprehensive Environmental Response Compensation and Liability
Act, the Resource Conservation and Recovery Act of 1976, or other federal, state
or local environmental legislation, on any real property described in the Loan.
(ee) Ground Lease. With respect to any real property described in the Loan
subject to a ground lease (i) the current ground lessor has been identified and
all ground rents which have previously become due and owing have been paid, (ii)
the ground lease term extends, or is automatically renewable, for at least five
years beyond the maturity date of the Loan, (iii) the ground lease has been duly
executed and recorded, (iv) the amount of the ground rent and any increases
therein are clearly identified in the lease and are for predetermined amounts at
predetermined times, (v) the ground rent payment is included in the Obligor's
monthly payment as an expense item in determining the qualification of the
borrower for the Loan, (vi) the Company has the right to cure defaults on the
ground lease, and (vii) the terms and conditions of the leasehold do not prevent
the free and absolute marketability of the property.
(ff) Defaults on Prior Liens. The Company has not received notice of
default of any prior mortgage loan secured by any real property described in the
Loan which default has not been cured by a party other than the Company.
(gg) Certain Advances. The Company has not advanced funds, or induced,
solicited or knowingly received any advance of funds from a party other than the
owner of any real property described in the Loan or the Obligor, directly or
indirectly, for the payment of any amount required by any Loan.
(hh) Review of the Loan File. The Company has reviewed all of the documents
constituting the Loan File and has made such inquiries as it deems necessary to
make and confirm the accuracy of the representations set forth herein.
(ii) Knowledge of Certain Facts. The Company has no knowledge of any
circumstances or conditions not reflected in the representations set forth
herein, or in the Loan File with respect to the Loan, the related real property
or the related Obligor which, in the Company's opinion, could reasonably be
expected to affect materially and adversely the value of related real property,
the marketability of the Loan, or cause the Loan to become delinquent or
otherwise in default.
(jj) Manufactured Home. The Loan is not a loan in respect of a manufactured
home or the land on which a manufactured home or manufactured home will be
placed.
(kk) No Errors, Omissions, Etc. No error, omission, misrepresentation,
negligence, fraud or similar occurrence with respect to the Loan has taken place
on the part of any person, including without limitation the obligor, any
appraiser, any builder or developer, or any other
3-7
<PAGE>
party involved in the origination of the Loan or in the application of any
insurance in relation to the Loan.
(ll) Servicing. The Loan has been serviced in accordance with all
applicable laws and, to the best of the Company's knowledge, no fraud or
misrepresentation was committed by any Person in connection therewith.
(mm) Inspection. Upon completion of all home improvements in excess of
$5,000, the real property securing such Loan was inspected by the Company or its
agents.
(nn) No Bankruptcies. The real property described in the Loan has not been
subject to any bankruptcy proceeding or foreclosure proceeding to which the
Obligor was a party, and the Obligor has not filed for protection under
applicable bankruptcy laws. There is no homestead or other exemption available
to the Obligor which would interfere with the right to sell the real property at
a trustee's sale or the right to foreclose the related mortgage. The Obligor has
not notified the Company, and the Company has no knowledge of, any relief
requested or allowed to the Obligor under the Soldier's and Sailors' Civil
Relief Act of 1940, as amended.
(oo) Certain Disclosure Statements. Each Obligor has executed a statement
to the effect that it has received all disclosure materials required by
applicable law with respect to the making of fixed rate mortgage loans and
rescission materials with respect to home improvement loans, and such statement
will be retained.
SECTION 3.03. Representations and Warranties Regarding the Loans in the
Aggregate.
(a) Amounts. The aggregate principal amounts payable by Obligors under the
Loans as of the Cut-off Date equal the Cut-off Date Pool Principal Balance.
(b) Characteristics. The Loans 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 April 2029; (iv) none has a
Loan Interest Rate less than 6.94%; (v) none was originated before December 1,
1980; and (vi) none contains a provision for the extension of the original term
of the related note.
(c) Group 1 Loans. The original principal balance of each Group 1 Loan did
not exceed (i) $103,890.33, if secured by a first lien or (ii) 50% of the
aggregate principal balance of the prior liens, if secured by a junior lien.
(d) Geographic Concentrations. By Cut-off Date Principal Balance, 10.59% of
the Loans are secured by property located in California, 7.47% in Florida, 5.26%
in Illinois, 5.30% in New York, and 5.16% in Virginia. No other state represents
more than 5% of the aggregate Cut-off Date Principal Balances of the Loans. No
more than 1% of the Loans by Cut-off Date Principal Balance are secured by
property located in an area with the same five-digit zip code.
3-8
<PAGE>
(e) Computer Tape. The Computer Tape made available by the Company was
complete and accurate as of its date and includes a description of the same
Loans that are described in the List of Loans.
(f) Marking Records. The Company has caused the portions of the Electronic
Ledger relating to the Loans to be clearly and unambiguously marked to indicate
that such Loans constitute part of the Trust and are owned by the Trust in
accordance with the terms of the trust created under the Trust Agreement.
(g) No Adverse Selection. Except for the effect of the representations and
warranties made in Sections 3.02 and 3.03 hereof, no adverse selection
procedures have been employed in selecting the Loans.
(h) Not Principally Real Estate Secured, etc. With respect to at least 50%
of the Loans in the aggregate: (i) the fair market value of the interest in the
real property securing each such Loan is less than 80% of the adjusted issue
price of such Loan at the time the obligation was originated; and (ii)
substantially all of the proceeds of each such Loan were not used to acquire,
improve or protect an interest in real property that, at the origination date,
was the only security for such Loan.
(i) Non-Owner Occupied. As of the Cut-off Date, no more than 0.06% and
0.05% of the aggregate Scheduled Principal Balances of the Group 1 Loans and
Group 2 Loans, respectively, are secured by real property that is non-owner
occupied property (i.e., investor-owned and vacation property).
(j) Ground Leases. As of the Cut-off Date, the aggregate Scheduled
Principal Balances of all Loans subject to ground leases does not exceed 1% of
the Cut-off Date Pool Scheduled Principal Balance.
(k) Income Verification. No more than 1.05% and 0.52% of the aggregate
Scheduled Principal Balances of the Group 1 Loans and Group 2 Loans,
respectively, was originated under any non-income verification program of the
Company.
SECTION 3.04. Representations and Warranties Regarding the Loan Files.
(a) Possession. Immediately prior to the Closing Date, the Company will
have possession of each original Loan and the related Loan File and there are
not and there will not be any custodial agreements in effect that materially and
adversely affect the rights of the Company to make, or cause to be made, any
delivery required hereunder.
(b) Bulk Transfer Laws. The transfer, assignment and conveyance of the
Loans and the Loan Files by the Company pursuant to this Agreement is not
subject to the bulk transfer or any similar statutory provisions in effect in
any applicable jurisdiction.
(c) Delivery. On or before July 15, 1999, the Company shall have delivered
to the Indenture Trustee the related contract or promissory note, endorsed to
the Indenture Trustee or in
3-9
<PAGE>
blank, for each Loan that was an Undelivered Loan on the Closing Date and on or
before September 1, 1999 the Company shall have delivered the complete Loan File
for each Loan to the Indenture Trustee (or its custodian).
SECTION 3.05. Repurchase of Loans for Breach of Representations and
Warranties.
(a) The Company shall repurchase a Loan, at its Repurchase Price, not later
than the last day of the Due Period prior to the Due Period during which occurs
the 90th day after the day on which the Company, the Servicer, the Note Insurer,
the Owner Trustee or the Indenture Trustee first discovers, or the Company or
the Servicer should have discovered, a breach of a representation or warranty of
the Company set forth in Sections 3.02, 3.03 or 3.04 of this Agreement or in the
Officer's Certificate delivered pursuant to Section 2.02(i) that materially
adversely affects the interest of the Trust or the Securityholders in such Loan
and which breach has not been cured; provided, however, that (i) in the event
that a party other than the Company first becomes aware of such a breach, such
discovering party shall notify the Company in writing within five Business Days
of the date of such discovery (although the failure of a party to give such
notice shall not relieve the Company of its repurchase obligation hereunder),
(ii) with respect to any Loan incorrectly described on the List of Loans with
respect to unpaid principal balance, which the Company would otherwise be
required to repurchase pursuant to this Section, the Company may, in lieu of
repurchasing such Loan, deposit in the Collection Account no later than the
first Determination Date that is 90 or more days from the date of such discovery
cash in an amount sufficient to cure such deficiency or discrepancy, plus
interest, at the Loan Interest Rate, on the amount of such deficiency, from the
Cut-off Date to the date of deposit, (iii) a breach of the representation or
warranty set forth in Section 3.04(c) shall be conclusively deemed to materially
and adversely affect the interests of the Trust in the affected Loan(s) and (iv)
any repurchase of Loans as a result of the breach of a representation and
warranty set forth in Section 3.03 shall be without adverse selection of Loans,
as determined by the Note Insurer. Any such cash so deposited shall be accounted
for as a collection of principal or interest on such Loan, according to the
nature of the deficiency or discrepancy. Notwithstanding any other provision of
this Agreement, the obligation of the Company under this Section shall not
terminate upon a Service Transfer pursuant to Article VII.
(b) Upon receipt by the Trust by deposit in the Collection Account of the
Repurchase Price under subsection (a) above, and upon receipt of a certificate
of a Servicing Officer in the form attached hereto as Exhibit B, the Indenture
Trustee shall release its security interest in such Loan and the Owner Trustee
on behalf of the Trust shall convey and assign to the Company all of the
Securityholders' right, title and interest in the repurchased Loan without
recourse, representation or warranty, except as to the absence of liens, charges
or encumbrances created by or arising as a result of actions of the Trust.
(c) The Company shall defend and indemnify the Owner Trustee, the Trust,
the Indenture Trustee, the Note Insurer and the Securityholders against all
costs, expenses, losses, damages, claims and liabilities, including reasonable
fees and expenses of counsel, arising out of any claims 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 representation set forth in Sections 3.02, 3.03 or 3.04
3-10
<PAGE>
of this Agreement or in the Officer's Certificate delivered pursuant to Section
2.02(i) of this Agreement.
3-11
<PAGE>
ARTICLE IV
PERFECTION OF TRANSFER AND
PROTECTION OF SECURITY INTERESTS
SECTION 4.01. Custody of Loans.
(a) The Trust appoints the Indenture Trustee to maintain custody of the
Loan Files for the Loans, as further specified in Section 6.01(k) of the
Indenture.
(b) The Company has delivered to the Indenture Trustee the original copy of
each Loan that is not an Undelivered Loan, endorsed to the Trust or in blank and
within 30 days of the Closing Date the Company shall deliver to the Indenture
Trustee (if it has not previously done so) with respect to each Loan an
assignment in recordable form of each mortgage, deed of trust or security deed
securing the Loan, and the remainder of the Loan File for each Loan.
(c) The Company has delivered to the Indenture Trustee and the Note Insurer
an Opinion of Counsel to the effect that the execution and recording of the
assignments of the mortgages, deeds of trust and security deeds securing the
Loans is not necessary, in any jurisdiction other than the State of Maryland, to
effect the assignment to the Indenture Trustee of the Company's lien on the real
property securing each Loan. The Company will, or will cause the Indenture
Trustee, at the Company's expense, to file in the appropriate recording offices
within 60 days of the Closing Date, each mortgage, deed of trust and security
deed that encumbers real property located in Maryland.
SECTION 4.02. Filings.
On or prior to the Closing Date, the Company shall cause the UCC-1
financing statements referred to in Section 2.02(e) to be filed. The Servicer on
behalf of the Trust shall cause to be filed all necessary continuation
statements of the UCC-1 financing statements. From time to time the Servicer
shall take and cause to be taken such actions and execute such documents as are
necessary to perfect and protect the Securityholders' interests in the Loans,
the Collateral Security and their proceeds against all other persons, including,
without limitation, the filing of financing statements, amendments thereto and
continuation statements, the execution of transfer instruments and the making of
notations on or taking possession of all records or documents of title. If the
Servicer comes into possession of any Loan File, whether for purposes of
enforcement of the Loan or otherwise, Servicer will maintain the first priority
perfected security interest of the Trust in such Loan so long as the Loan is
property of the Trust.
SECTION 4.03. Name Change or Relocation.
(a) During the term of this Agreement, the Company shall not change its
name, identity or structure or relocate its chief executive office without first
giving notice thereof to the Owner Trustee, the Indenture Trustee, the Note
Insurer and the Servicer. In addition, following any such change in the name,
identity, structure or location of the chief executive office of the
4-1
<PAGE>
Company, the Company shall give written notice of any such change to Standard &
Poor's and Moody's.
(b) If any change in the Company's name, identity or structure or the
relocation of its chief executive office would make any financing or
continuation statement or notice of lien filed under this Agreement seriously
misleading within the meaning of applicable provisions of the UCC or any title
statute or would cause the security interest evidenced by any such financing or
continuation statement or notice of lien to become unperfected (whether
immediately or with lapse of time), the Company, no later than five days after
the effective date of such change, shall file, or cause to be filed, such
amendments or financing statements as may be required to preserve, perfect and
protect the Securityholders' interests in the Loans, including the Collateral
Security and all proceeds thereof.
SECTION 4.04. Chief Executive Office.
During the term of this Agreement, the Company will maintain its chief
executive office in one of the States of the United States, except Tennessee.
SECTION 4.05. Costs and Expenses.
The Servicer agrees to pay all reasonable costs and disbursements in
connection with the perfection and the maintenance of perfection, as against all
third parties, of the Securityholders' right, title and interest in and to the
Loans, including the Collateral Security and all proceeds thereof.
4-2
<PAGE>
ARTICLE V
SERVICING OF CONTRACTS
SECTION 5.01. Responsibility for Loan Administration.
The Servicer will have the sole obligation to manage, administer, service
and make collections on the Loans and perform or cause to be performed all
contractual and customary undertakings of the holder of the Loans to the
Obligor. The Servicer may delegate duties under this Agreement to any of the
Servicer's Affiliates. In addition, the Servicer may at any time perform the
specific duty of foreclosing mortgage liens through subcontractors who are in
such business. The Servicer may also perform other specific duties through
subcontractors; provided that the Servicer gives notice to each of the Trust,
the Indenture Trustee, the Note Insurer and the Rating Agencies of the use of
any such subcontractors; and provided further that no such delegation of duties
by the Servicer shall relieve the Servicer of its responsibility with respect
thereto. The Owner Trustee, on behalf of the Trust and 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 hereby appoints
itself the Servicer until such time as any Service Transfer shall be effected
under Article VII.
SECTION 5.02. Standard of Care.
In managing, administering, servicing and making collections on the Loans
pursuant to this Agreement, the Servicer will exercise that degree of skill and
care required consistent with the highest degree of skill and care that the
Servicer exercises with respect to similar contracts serviced by the Servicer;
provided, however, that notwithstanding the foregoing, the Servicer shall not
release or waive the right to collect the unpaid balance on any Loan.
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 Trust and the
Indenture Trustee to determine the status of each Loan.
SECTION 5.04. Inspection; Computer Tape.
(a) At all times during the term hereof, the Servicer shall afford the
Trust, the Note Insurer and Indenture Trustee and their authorized agents
reasonable access during normal business hours to the Servicer's records
relating to the Loans and will cause its personnel to assist in any examination
of such records by the Trust, the Note Insurer and Indenture Trustee or their
authorized agents. 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 Trust, the Note Insurer and Indenture Trustee may
make, the Trust, the Note Insurer and Indenture Trustee may, using generally
accepted audit procedures, verify the status of each Loan and review the
5-1
<PAGE>
Electronic Ledger and records relating thereto for conformity to Monthly Reports
prepared pursuant to Section 5.14 and compliance with the standards represented
to exist as to each Loan in this Agreement.
The Servicer shall provide to any Securityholder such access to the records
relating to the Loans only in such cases where the Servicer is required by
applicable statutes or regulations, whether applicable to the Servicer or to
such Securityholder, to permit such Securityholder to review such documentation.
In each case, such access shall be afforded without charge but only upon
reasonable request and during normal business hours. Nothing in this Section
shall derogate from the obligation of the Servicer to observe any applicable law
prohibiting disclosure of information regarding the Obligors, and the failure of
the Servicer to provide access as provided in this Section as a result of such
obligation shall not constitute a breach of this Section. Any Securityholder, by
its acceptance of a Certificate or Note (or by acquisition of its beneficial
interest therein), as applicable, shall be deemed to have agreed to keep
confidential and not to use for its own benefit any information obtained by it
pursuant to this Section, except as may be required by applicable law.
(b) At all times during the term hereof, the Servicer shall keep available
a copy of the List of Loans at its principal executive office for inspection by
the Trust, the Indenture Trustee and the Note Insurer.
(c) On or before the ninth Business Day of each month, the Servicer will
provide to the Indenture Trustee and the Note Insurer a Computer Tape setting
forth a list of all the outstanding Loans and the outstanding principal balance
of each such Loan as of the end of the next preceding Due Period.
SECTION 5.05. Collections.
(a) The Servicer shall pay into the Collection Account as promptly as
practicable (not later than the next Business Day) following receipt thereof all
payments from Obligors and Net Liquidation Proceeds (other than late payment
penalty fees, extension fees and assumption fees, which shall be retained by the
Servicer as additional compensation for servicing the Loans, and any payments
that were due prior to the Cut-off Date, which shall be remitted to the
Company).
(b) If the Servicer so directs, the institution maintaining the Collection
Account shall, in the name of the Indenture Trustee in its capacity as such,
invest the amounts in the Collection Account in Eligible Investments that mature
not later than one Business Day prior to the next succeeding Payment Date. Once
such funds are invested, such institution shall not change the investment of
such funds. All income and gain from such investments shall be added to the
Collection Account and distributed on such Payment Date pursuant to Section
6.06(a). The Company, the Note Insurer and the Indenture Trustee shall in no way
be liable for losses on amounts invested in accordance with the provisions
hereof. The Servicer shall deposit in the Collection Account an amount equal to
any net loss on such investments immediately as realized. Funds in the
Collection Account not so invested must be insured to the extent permitted by
law by the Federal Deposit Insurance Corporation.
5-2
<PAGE>
SECTION 5.06. Enforcement.
(a) The Servicer shall, consistent with customary servicing procedures and
the terms of this Agreement, act with respect to the Loans in such manner as
will maximize the receipt of principal and interest on such Loans and
Liquidation Proceeds with respect to Liquidated Loans.
(b) In accordance with the standard of care specified in Section 5.02, the
Servicer may, in its own name, if possible, or as agent for the Trust, commence
proceedings for the foreclosure of any real estate securing a Loan, or may take
such other steps that in the Servicer's reasonable judgment will maximize
Liquidation Proceeds with respect to the Loan, including, for example, the sale
of the Loan to a third party for foreclosure or enforcement and, in the case of
any default on a related prior mortgage loan, the advancing of funds to correct
such default and the advancing of funds to pay off a related prior mortgage
loan, which advances are Liquidation Expenses that will be reimbursed to the
Servicer out of related Liquidation Proceeds before the related Net Liquidation
Proceeds are deposited in the Collection Account. The Servicer shall also
deposit in the Collection Account any Net Liquidation Proceeds received in
connection with any Loan which became a Liquidated Loan in a prior Due Period.
(c) The Servicer may sue to enforce or collect upon Loans, in its own name,
if possible, or as agent for the Trust. If the Servicer elects to commence a
legal proceeding to enforce a Loan, the act of commencement shall be deemed to
be an automatic assignment of the Loan to the Servicer for purposes of
collection only. If, however, in any enforcement suit or legal proceeding it is
held that the Servicer may not enforce a Loan on the ground that it is not a
real party in interest or a holder entitled to enforce the Loan, the Owner
Trustee on behalf of the Trust shall, at the Servicer's expense, take such steps
as the Servicer deems necessary to enforce the Loan, including bringing suit in
its name or the names of the Securityholders.
(d) The Servicer shall exercise any rights of recourse against third
persons that exist with respect to any Loan in accordance with the Servicer's
usual practice. Without limitation of the foregoing, in exercising recourse
rights, the Servicer is authorized on behalf of the Trust to reassign the Loan
or to resell the related real property to the person against whom recourse
exists at the price set forth in the document creating the recourse.
(e) So long as the Company is the Servicer, the Servicer may grant to the
Obligor on any Loan any rebate, refund or adjustment out of the Collection
Account that the Servicer in good faith believes is required because of
prepayment in full of the Loan. The Servicer will not permit any rescission or
cancellation of any Loan.
(f) So long as the Company is the Servicer, the Servicer may, consistent
with its customary servicing procedures and consistent with Section 5.02, grant
to the Obligor on any Loan an extension of payments due under such Loan,
provided that Obligors may not be solicited for extensions and no more than one
extension of payments under a Loan may be granted in any twelve-month period.
The Servicer may not permit the extension of any payment beyond July 15, 2028.
5-3
<PAGE>
(g) The Servicer shall enforce any due-on-sale clause in a Loan if such
enforcement is called for under its then current servicing policies for
obligations similar to the Loans, provided that such enforcement is permitted by
applicable law and will not adversely affect any applicable insurance policy. If
an assumption of a Loan is permitted by the Servicer, upon conveyance of the
related real property the Servicer shall use its best efforts to obtain an
assumption agreement in connection therewith.
(h) Any provision of this Agreement to the contrary notwithstanding, the
Servicer shall not agree to the modification or waiver of any provision of a
Loan, if such modification or waiver, when aggregated with all previous
modifications or waivers of the provisions of Loans, would cause any Notes to be
treated as having been exchanged for other Notes in a taxable exchange under
Section 1001 of the Code or any proposed, temporary or final Treasury
Regulations issued thereunder. Not more than 5% of the Cut-off Date Pool
Principal Balance may be modified or waived without the Note Insurer's prior
written consent. The Servicer, may not purchase any Loan from the Trust other
than; pursuant to Sections 3.05 or 5.22 or (ii) with the prior written consent
of the Note Insurer.
SECTION 5.07. Satisfaction of Loans.
Upon payment in full on any Loan, the Servicer will notify the Trust, the
Indenture Trustee, the Note Insurer 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 Collection Account pursuant to Section 5.05 have been so
deposited). The Servicer is authorized to execute an instrument in satisfaction
of such Loan and to do such other acts and execute such other documents as the
Servicer deems necessary to discharge the Obligor thereunder and eliminate the
lien on the related real property. The Servicer shall determine when a Loan has
been paid in full; to the extent that insufficient payments are received on a
Loan credited by the Servicer as prepaid or paid in full and satisfied, the
shortfall shall be paid by the Servicer out of its own funds.
SECTION 5.08. Costs and Expenses.
All costs and expenses incurred by the Servicer in carrying out its duties
hereunder, including all fees and expenses incurred in connection with the
enforcement of Loans (including enforcement of Defaulted Loans and foreclosure
of liens securing such Loans) shall be paid by the Servicer and the Servicer
shall not be entitled to reimbursement hereunder, except that the Servicer shall
be reimbursed out of the Liquidation Proceeds of a Liquidated Loan for
Liquidation Expenses incurred by it. The Servicer shall not incur such
Liquidation Expenses unless it determines in its good faith business judgment
that incurring such expenses will increase the Net Liquidation Proceeds on the
related Loan.
SECTION 5.09. Maintenance of Insurance.
(a) Except as otherwise provided in subsection (b) of this Section 5.09,
the Servicer shall cause to be maintained with respect to each Loan, hazard
insurance (excluding flood
5-4
<PAGE>
insurance coverage) if such Loan is secured by a first priority mortgage, deed
of trust or security deed, issued by a company authorized to issue such policies
in the state in which the related real property is located and in an amount
which is not less than the maximum insurable value of such real property or the
principal balance due from the Obligor on the related Loan, whichever is less;
provided, however, that the amount of coverage provided by each insurance policy
shall be sufficient to avoid the application of any co-insurance clause
contained therein; and provided, further, that such insurance policies may
provide for customary deductible amounts. Each insurance policy caused to be
maintained by the Servicer shall contain a standard loss payee clause in favor
of the Servicer and its successors and assigns.
(b) The Servicer shall keep in force throughout the term of this Agreement
(i) a policy or policies of insurance covering errors and omissions for failure
to maintain insurance as required by this Agreement and (ii) a fidelity bond.
Such policy or policies and such fidelity bond shall be in such form and amount
as is generally customary among Persons which service a portfolio of retail
installment sales contracts and home equity loan agreements having an aggregate
principal amount of $100,000,000 or more and which are generally regarded as
servicers acceptable to institutional investors.
SECTION 5.10. [RESERVED]
SECTION 5.11. Deposit of Funds.
So long as the Company is Servicer, any collections in respect of Loans
collected by the Company shall, prior to the deposit thereof in the Collection
Account pursuant to Section 5.05, be held in bank accounts entitled
substantially as follows: "[name of depository], as agent for U.S. Bank Trust
National Association and other trustees and Green Tree Financial Corporation, as
their interests may appear."
SECTION 5.12. [RESERVED]
SECTION 5.13. [RESERVED]
SECTION 5.14. Monthly Reports; Certificate of Servicing Officer.
(a) No later than 1:00 p.m. (Minnesota time) on each Determination Date,
the Servicer shall deliver to the Trust, the Indenture Trustee, the Paying
Agent, the Note Insurer, the Company (if the Company is not the Servicer), the
Rating Agencies and the Note Insurer a "Monthly Report," substantially in the
form of Exhibit C hereto.
(b) Each Monthly Report pursuant to Section 5.14(a) shall be accompanied by
a certificate of a Servicing Officer substantially in the form of Exhibit D,
certifying the accuracy of the Monthly Report and that no Servicer Termination
Event or event that with notice or lapse of time or both would become a Servicer
Termination Event has occurred, or if such event has occurred and is continuing,
specifying the event and its status.
5-5
<PAGE>
(c) The Company and (if different from the Company) the Servicer shall, on
request of the Trust, the Indenture Trustee, either of the Rating Agencies, the
Note Insurer or a Securityholder, furnish the Trust, the Indenture Trustee, the
Rating Agencies, the Note Insurer or a Securityholder such underlying data as
may be reasonably requested.
SECTION 5.15. Annual Report of Accountants.
On or before March 31 of each year, commencing March 31, 2000, 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 make
available to the Trust, the Indenture Trustee, the Note Insurer, Standard &
Poor's and Moody's a report stating that such firm has examined selected
documents and records relating to the servicing of home improvement contracts
and promissory notes and home equity loans, including the Loans covered by this
Agreement, in accordance with the Mortgage Bankers Association of America's
Uniform Single Attestation Program for Mortgage Bankers, or any successor
uniform program, and that, on the basis of such examination, such servicing has
been conducted in compliance with the minimum servicing standards identified
therein, except for such significant exceptions or errors in records that, in
the opinion of such firm, generally accepted auditing standards requires it to
report.
SECTION 5.16. Certain Duties of the Servicer Under the Trust Agreement.
The Servicer shall, and hereby agrees that it will, monitor the Trust's
compliance with all applicable provisions of state and federal securities laws,
notify the Trust and the Administrator of any actions to be taken by the Trust
necessary for compliance with such laws and prepare on behalf of the Trust and
the Administrator all notices, filings or other documents or instruments
required to be filed under such laws.
SECTION 5.17. [RESERVED]
SECTION 5.18. Annual Statement as to Compliance; Notice of Servicer
Termination Event.
(a) The Servicer shall deliver to the Trust, the Indenture Trustee, the
Note Insurer and the Rating Agencies, on or before March 31 (or 90 days after
the end of the Servicer's fiscal year, if other than December 31) of each year,
beginning on March 31, 2000, an officer's certificate signed by an authorized
officer of the Servicer, dated as of December 31 (or other applicable date) of
the immediately preceding year, stating that (i) a review of the activities of
the Servicer during the preceding 12-month period (or such other period as shall
have elapsed from the Closing Date to the date of the first such certificate)
and of its performance under this Agreement has been made under such officer's
supervision, and (ii) to such officer's knowledge, based on such review, the
Servicer has fulfilled all its obligations under this Agreement throughout such
period, or, if there has been a default in the fulfillment of any such
obligation, specifying each such default known to such officer and the nature
and status thereof.
(b) The Company or the Servicer shall deliver to the Trust, the Indenture
Trustee, the Servicer, the Note Insurer or the Company (as applicable) and each
Rating Agency promptly after
5-6
<PAGE>
having obtained knowledge thereof, but in no event later than 2 Business Days
thereafter, written notice in an officer's certificate of any event which with
the giving of notice or lapse of time, or both, would become a Servicer
Termination Event under Section 7.01.
SECTION 5.19. [RESERVED]
SECTION 5.20. Maintenance of Lien Interests in Real Property.
(a) Consistent with the policies and procedures required by this Agreement
or as directed by the Note Insurer, the Indenture Trustee or their respective
counsel, the Servicer shall take such steps as are necessary to maintain
perfection of the lien interest created by each Loan in the related real
property on behalf of the Trust, including but not limited to obtaining the
execution by the Obligors and the recording, registering, filing, re-recording,
re-filing, and re-registering of all security agreements, financing statements,
mortgages, deeds of trust, and continuation statements as are necessary to
maintain the security interest granted by the Obligors under the respective
Loans. In the event that the assignment of a Loan to the Trust is insufficient,
without a notation on the related real estate's certificate of title, or without
fulfilling any additional administrative requirements under the laws of the
state in which the real estate is located, to perfect a security interest in the
related real estate in favor of the Trust, the Servicer hereby agrees that the
Servicer's designation as the secured party on the certificate of title is in
its capacity as agent of the Trust.
(b) Upon the occurrence of a Servicer Termination Event, the Trust and the
Servicer shall take or cause to be taken such action as may, in the opinion of
the Note Insurer, the Indenture Trustee, their respective counsel or counsel to
the Trust, be necessary to perfect or re-perfect the lien interests in the real
estate securing the Loans in the name of the Trust by amending the title
documents of real estate or by such other reasonable means as may, in the
opinion of the Note Insurer, the Indenture Trustee, their respective counsel or
counsel to the Trust, be necessary or prudent. The Servicer hereby agrees to pay
all expenses related to such perfection or re-perfection and to take all action
necessary therefor.
SECTION 5.21. Covenants, Representations, and Warranties of Servicer. By
its execution and delivery of this Agreement, the Servicer makes the following
representations, warranties and covenants on which the Trust relies in accepting
the Loans and issuing the Notes and the Certificates and on which the Indenture
Trustee relies in authenticating the Notes, the Note Insurer relies in issuing
the Note Insurance Policy, and the Owner Trustee relies in authenticating the
Certificates.
(a) Liens in Force. The real estate securing each Loan shall not be
released in whole or in part from the lien interest granted by the Loan, except
upon payment in full of the Loan or as otherwise contemplated herein;
(b) No Impairment. The Servicer shall do nothing to impair the rights of
the Trust, the Indenture Trustee, the Note Insurer, or the Securityholders in
the Loans, the Note Insurance Policy or the other Trust Property; and
5-7
<PAGE>
(c) No Amendments. The Servicer shall not extend or otherwise amend the
terms of any Loan, except in accordance with Section 5.06.
SECTION 5.22. Purchase of Loans Upon Breach of Covenant.
Upon discovery by any of the Servicer, Note Insurer, the Trust or the
Indenture Trustee of a breach of any of the covenants set forth in Section
5.20(a) or 5.21, the party discovering such breach shall give prompt written
notice to the others; provided, however, that the failure to give any such
notice shall not affect any obligation of the Servicer. Not later than the last
day of the Due Period that is 90 days after its discovery or receipt of notice
of any breach of any such covenant which materially and adversely affects the
interests of the Securityholders or the Trust in any Loan (including any
Liquidated Loan), the Servicer shall, unless it shall have cured such breach in
all material respects, purchase from the Trust the Loan affected by such breach
and pay the related Repurchase Price. It is understood and agreed that the
obligation of the Servicer to purchase any Loan (including any Liquidated Loan)
with respect to which such a breach has occurred and is continuing shall, if
such obligation is fulfilled, constitute the sole remedy against the Servicer
for such breach available to the Securityholders, the Trust, the Note Insurer,
or the Indenture Trustee on behalf of the Noteholders; provided, however, that
the Servicer shall indemnify the Owner Trustee, the Trust, the Indenture
Trustee, the Note Insurer, and the Securityholders 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 third party claims arising out of the events or facts giving rise to such
breach.
5-8
<PAGE>
ARTICLE VI
DISTRIBUTIONS; TRUST ACCOUNTS; LIMITED GUARANTY;
STATEMENTS TO SECURITYHOLDERS
SECTION 6.01. Trust Accounts.
(a) The Servicer shall establish the Collection Account in the name of the
Indenture Trustee for the benefit of the Securityholders and the Note Insurer.
The Collection Account shall be an Eligible Account and initially shall be a
segregated trust account established with the Indenture Trustee and maintained
with the Indenture Trustee.
(b) The Servicer shall establish the Note Distribution Account in the name
of the Indenture Trustee for the benefit of the Noteholders and the Note
Insurer. The Note Distribution Account shall be an Eligible Account and
initially shall be a segregated trust account established with the Indenture
Trustee and maintained with the Indenture Trustee.
(c) The Servicer shall establish the Certificate Distribution Account in
the name of the Owner Trustee for the benefit of the Certificateholders. The
Certificate Distribution Account shall be an Eligible Account and initially
shall be a segregated trust account established with the Indenture Trustee and
maintained with the Indenture Trustee, so long as the Indenture Trustee is
acting as Paying Agent under Section 3.9 of the Trust Agreement.
(d) The Servicer shall establish the Undelivered Loan Account on behalf of
the Trust, which must be an Eligible Account, and shall deposit therein the
amount received from the Company pursuant to Section 2.02(k). The Undelivered
Loan Account shall be an Eligible Account and shall be a segregated trust
account established with the Indenture Trustee and maintained with the Indenture
Trustee.
(e) All amounts held in the Collection Account, the Note Distribution
Account and the Undelivered Loan Account (but not the Certificate Distribution
Account) shall, to the extent permitted by applicable laws, rules and
regulations, be invested, as directed by the Servicer, in Eligible Investments
that mature not later than one Business Day prior to the Payment Date for the
Due Period to which such amounts relate. Any such written direction shall
certify that any such investment is authorized by this Section 6.01(e). Such
investments in Eligible Investments shall be made in the name of the Indenture
Trustee on behalf of the Note Insurer and the Trust, and such investments shall
not be sold or disposed of prior to their maturity. Any investment of funds in
the Collection Account, the Note Distribution Account or the Undelivered Loan
Account shall be made in Eligible Investments held by a financial institution
with respect to which (a) such institution has noted the Indenture Trustee's
interest therein by book entry or otherwise and (b) a confirmation of the
Indenture Trustee's interest has been sent to the Indenture Trustee by such
institution, provided that such Eligible Investments are (i) specific
certificated securities (as such term is used in MN UCC ss. 336.8-313(1)(d)(i)),
and (ii) either (A) in the possession of such institution or (B) in the
possession of a clearing corporation (as such term is used in MN UCC ss.
336.8-313(1)(g)) in New York or Minnesota, registered in the name of such
clearing corporation, not endorsed for collection or surrender or any other
purpose not involving
6-1
<PAGE>
transfer, not containing any evidence of a right or interest inconsistent with
the Indenture Trustee's security interest therein, and held by such clearing
corporation in an account of such institution. Subject to the other provisions
hereof, the Indenture Trustee shall have sole control over each such investment
and the income thereon, and any certificate or other instrument evidencing any
such investment, if any, shall be delivered directly to the Indenture Trustee or
its agent, together with each document of transfer, if any, necessary to
transfer title to such investment to the Indenture Trustee in a manner which
complies with this Section 6.01. All interest, dividends, gains upon sale and
other income from, or earnings on, investments of funds in the Collection
Account, the Note Distribution Account and the Undelivered Loan Account shall be
deposited in the Collection Account and distributed on the next Payment Date
pursuant to Section 6.06. The Servicer shall deposit in the applicable
Collection Account, the Note Distribution Account and the Undelivered Loan
Account an amount equal to any net loss on such investments immediately as
realized.
SECTION 6.02. Collection Account Deposits.
(a) Collections. The Servicer shall remit directly to the Collection
Account (no later than the next Business Day as specified in Section 5.05) all
payments by or on behalf of the Obligors on the Loans and all Liquidation
Proceeds received by the Servicer.
(b) [RESERVED].
(c) Repurchased Loans. The Company shall deposit in the Collection Account
the Repurchase Price for each Loan repurchased by it under Section 3.05. The
Servicer shall deposit in the Collection Account the Repurchase Price for each
Loan repurchased by it under Section 5.22.
SECTION 6.03. Permitted Withdrawals.
The Indenture Trustee may, from time to time as provided herein, make
withdrawals from the Collection Account of amounts deposited in said account
that are attributable to the Loans only for the following purposes:
(a) to make payments in the amounts and in the manner provided for in
Section 6.06;
(b) to pay to the Company with respect to each Loan or property
acquired in respect thereof that has been repurchased pursuant to Section
3.05, all amounts received thereon and not required to be distributed to
Noteholders or Certificateholders as of the date on which the related
Scheduled Principal Balance or Repurchase Price is determined;
(c) to reimburse the Servicer out of Liquidation Proceeds for
Liquidation Expenses incurred by it, to the extent such reimbursement is
permitted pursuant to Section 5.08;
6-2
<PAGE>
(d) to withdraw any amount deposited in the Collection Account that
was not required to be deposited therein; or
(e) to make any rebates or adjustments deemed necessary by the
Servicer pursuant to Section 5.06(e).
Since, in connection with withdrawals pursuant to clauses (a) and (b), the
Company's or the Servicer's entitlement thereto is limited to collections or
other recoveries on the related Loan, the Servicer shall keep and maintain a
separate accounting, on a Loan by Loan basis, for the purpose of justifying any
withdrawal from the Collection Account pursuant to such clauses.
SECTION 6.04. 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
Collection 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 Collection Account in accordance with Section 6.06(a).
If the Servicer fails to advance all Delinquent Payments required under this
Section 6.04, the Indenture Trustee shall be obligated to advance such
Delinquent Payments pursuant to Section 6.15 of the Indenture.
(b) The Servicer and the Indenture Trustee shall be entitled to
reimbursement of an Advance from subsequent funds available therefor in the
Collection Account in accordance with Section 6.06(a).
SECTION 6.05. Limited Guaranty.
(a) No later than the Determination Date prior to each Payment Date, the
Servicer (if other than the Company) shall notify the Company of the amount of
the Guaranty Payment (if any) for such Payment Date. Not later than the Business
Day preceding each Payment Date, the Company shall deposit the Guaranty Payment,
if any, for such Payment Date into the Collection Account.
(b) The obligations of the Company under this Section shall not terminate
upon or otherwise be affected by a Service Transfer pursuant to Article VII of
this Agreement.
(c) The obligation of the Company to provide the Limited Guaranty under
this Agreement shall terminate on the Final Scheduled Payment Date.
(d) The obligation of the Company to make the Guaranty Payments described
in subsection (a) above shall be unconditional and irrevocable. The Company
acknowledges that its obligation to make the Guaranty Payments described in
subsection (a) above shall be deemed a guaranty by the Company of that portion
of the Obligors' obligations under the Loans that is allocable to the Class B-2
Noteholders.
6-3
<PAGE>
(e) If the Company fails to make a Guaranty Payment in whole or in part,
the Company shall promptly notify the Owner Trustee, and the Owner Trustee shall
promptly notify the Rating Agencies.
SECTION 6.06. Distributions.
(a) On each Payment Date, the Servicer shall instruct the Indenture Trustee
(based on the information contained in the Monthly Report delivered pursuant to
Section 5.14) to make the following deposits and distributions by 11:00 a.m.
(Minnesota time), to the extent of the Amount Available for such Payment Date
and in the following order of priority, provided that any Insured Payment shall
be distributed solely to the Class A-1 and Class A-2 Noteholders and any
Guaranty Payment shall be distributed solely to the Class B-2 Noteholders:
(i) Servicing Fee. If the Company or an Affiliate is not the Servicer,
then to the Servicer, the Monthly Servicing Fee for the related Due Period
(not to exceed 1/12 of 0.75% of the Pool Scheduled Principal Balance);
(ii) Premium Amount. After payment of the amounts specified in clause
(i) above, the Premium Amount to the Note Insurer;
(iii) [RESERVED].
(iv) Note Interest. After payment of the amounts specified in clause
(i) and (ii) above, to the Note Distribution Account, the sum of the Class
A-1, Class A-2, Class M-1, Class M-2 and Class B-1 Interest Amounts and any
Unpaid Class A-1, Class A-2, Class M-1, Class M-2 and Class B-1 Interest
Shortfalls;
(v) Class A Principal Distribution Amount. After payment of the
amounts specified in clauses (i) through (iv) above, to the Note
Distribution Account, the Class A Principal Distribution Amount;
(vi) Reimbursement Amount. After payment of the amounts specified in
clauses (i) through (v) above, the Reimbursement Amount to the Note
Insurer;
(vii) Class M-1 Principal Distribution Amount. After payment of the
amounts specified in clauses (i) through (vi) above, to the Note
Distribution Account, the Class M-1 Principal Distribution Amount;
(viii) Class M-2 Principal Distribution Amount. After payment of the
amounts specified in clauses (i) through (vii) above, to the Note
Distribution Account, the Class M-2 Principal Distribution Amount;
(ix) Class B-1 Principal Distribution Amount. After payment of the
amounts specified in clauses (i) through (viii) above, to the Note
Distribution Account, the Class B-1 Principal Distribution Amount;
6-4
<PAGE>
(x) Liquidation Loss Interest. After payment of the amounts specified
in clauses (i) through (ix) above, to the Note Distribution Account the sum
of the Class M-1, Class M-2, and Class B-1 Liquidation Loss Interest
Distribution Amounts and Unpaid Class M-1, Class M-2, Class B-1 Liquidation
Loss Interest Shortfalls;
(xi) Class B-2 Interest. After payment of the amounts specified in
clauses (i) through (x) above, to the Note Distribution Account, the sum of
the Class B-2 Interest Amount and any Unpaid Class B-2 Interest Shortfall;
(xii) Class B-2 Principal. After payment of the amounts specified in
clauses (i) through (xi) above, to the Note Distribution Account, the Class
B-2 Principal Distribution Amount;
(xiii) Monthly Servicing Fee. After payment of the amounts specified
in clauses (i) through (xii) above, to the Company, if the Servicer, the
Monthly Servicing Fee;
(xiv) Unreimbursed Advances. After payment of the amounts specified in
clauses (i) through (xiii) above, to reimburse the Servicer or the
Indenture Trustee, as applicable, for any unreimbursed Advances made with
respect to the Loans in respect of current or prior Payment Dates and to
reimburse the Company for any unreimbursed Advances made pursuant to
Section 6.04 of this Sale and Servicing Agreement and Section 6.15 of the
Indenture;
(xv) Supplementary Principal Distribution Amount. After payment of the
amounts specified in clauses (i) through (xiv) above, to the Note
Distribution Account the Supplementary Principal Distribution Amount;
(xvi) Additional Monthly Servicing Fee. After payment of the amounts
specified in clauses (i) through (xv), above to the Servicer (if not the
Company or an Affiliate) any portion of the Monthly Servicing Fee in excess
of 1/12 of the product of 0.75% and the Pool Scheduled Principal Balance;
and
(xvii) Certificate Distribution Amount. After payment of the amounts
specified in clauses (i) through (xvi) above, to the Certificate
Distribution Account the remaining Amount Available.
(b) Guaranty Payments. On each Payment Date the Servicer shall instruct the
Indenture Trustee to distribute to the Note Distribution Account any Guaranty
Payment deposited in the Collection Account pursuant to Section 6.05.
SECTION 6.07. Statements to Securityholders.
(a) On each Payment Date, the Indenture Trustee shall include with each
distribution to each Noteholder, and the Paying Agent shall include with each
distribution to each Certificateholder (with a copy to the Owner Trustee), a
statement (which statement shall also be provided to each Rating Agency and the
Note Insurer) based on information in the Monthly
6-5
<PAGE>
Report delivered on the related Determination Date pursuant to Section 5.14,
setting forth the following information:
(i) the amount of such distribution to Holders of each Class of Notes
allocable to interest, separately identifying any Unpaid Class A-1 Interest
Shortfall, Unpaid Class A-2 Interest Shortfall, Unpaid Class M-1 Interest
Shortfall, Unpaid Class M-2 Interest Shortfall, Unpaid Class B-1 Interest
Shortfall and Unpaid Class B-2 Interest Shortfall included in such
distribution and any remaining Unpaid Class A-1 Interest Shortfall, Unpaid
Class A-2 Interest Shortfall, Unpaid Class M-1 Interest Shortfall, Unpaid
Class M-2 Interest Shortfall, Unpaid Class B-1 Interest Shortfall and
Unpaid Class B-2 Interest Shortfall;
(ii) the Class A-1 Interest Carryover Shortfall, the Class A-2
Interest Carryover Shortfall, the Class M-1 Interest Carryover Shortfall,
the Class M-2 Interest Carryover Shortfall, the Class B-1 Interest
Carryover Shortfall and the Class B-2 Interest Carryover Shortfall, if any,
for such Payment Date;
(iii) the amount of such distribution to Holders of each Class of
Notes allocable to principal, separately identifying the Group 1 Formula
Principal Distribution Amount, the Group 2 Formula Principal Distribution
Amount, and the amount, if any, by which the Class A, Class M-1, Class M-2,
and Class B-1 and Class B-2 Principal Distribution Amounts, respectively,
exceed the respective Class A, Class M-1, Class M-2, Class B-1 and Class
B-2 Formula Principal Distribution Amounts;
(iv) the Class A-1 Principal Balance, the Class A-2 Principal Balance,
the Class M-1 Principal Balance, the Class M-2 Principal Balance, the Class
B-1 Principal Balance and the Class B-2 Principal Balance after giving
effect to the distribution of principal on such Payment Date;
(v) the amount, if any, of the Guaranty Payment on such Payment Date;
(vi) the amount of the Monthly Servicing Fee with respect to the
immediately preceding Due Period;
(vii) the Certificate Distribution Amount;
(vii) the Pool Scheduled Principal Balance for such Payment Date;
(viii) the Note Pool Factor for each Class after giving effect to the
distribution of principal on such Payment Date;
(ix) the number and aggregate principal balances of Loans delinquent
(a) 30-59 days, (b) 60-89 days, and (c) 90 or more days;
(x) the number and aggregate Scheduled Principal Balance of Loans that
became Defaulted Loans during the immediately preceding Due Period;
6-6
<PAGE>
(xi) the number and aggregate Scheduled Principal Balance of Defaulted
Loans as of the last day of the immediately preceding Due Period;
(xii) the number and aggregate Scheduled Principal Balance of Loans
that became Liquidated Loans during the immediately preceding Due Period
and the related Net Liquidation Losses;
(xiii) the number and aggregate principal balance of Loans (x) in
foreclosure, (y) as to which foreclosure of the related real property lien
was completed during the related Due Period, exclusive of any such Loans
that are Liquidated Loans and (z) foreclosed upon and in the Servicer's
inventory ;
(xiv) information relating to the satisfaction or non-satisfaction of
the the Class M-1 Distribution Test, Class M-2 Distribution Test, Class B-1
Distribution Test, Class B-2 Distribution Test, Servicer Termination Test
and Supplementary Principal Distribution Test; and
(xv) the amount of any payment by the Note Insurer under the Note
Insurance Policy and any reimbursement paid to the Note Insurer.
In the case of information furnished pursuant to clauses (i) through (iv)
above, the amounts shall be expressed as a dollar amount per $1,000 denomination
of Note or per Note with a 1% Percentage Interest.
(b) The Indenture Trustee shall inform any of the Noteholders,
Certificateholder, Underwriter, Rating Agencies or Note Insurer inquiring by
telephone of the information contained in the most recent Monthly Report.
(c) Certificateholders may obtain copies of the statements delivered by the
Owner Trustee pursuant to subsection (a) above upon written request to the Owner
Trustee at the Corporate Trust Office (together with a certification that such
Person is a Certificateholder and payment of any expenses associated with the
distribution thereof). Noteholders may obtain copies of the statements delivered
by the Indenture Trustee pursuant to subsection (a) above upon written request
to the Indenture Trustee at its Corporate Trust Office (together with a
certification that such Person is a Noteholder and payment of any expenses
associated with the distribution thereof).
SECTION 6.08. Claims Upon Policy.
(a) If, any Monthly Report delivered to the Indenture Trustee pursuant to
Section 5.14 discloses a Shortfall, the Indenture Trustee shall, promptly on the
Business Day it receives the Monthly Report, give notice to the Note Insurer of
the amount of the Shortfall. In the event that a payment becomes due pursuant to
the terms of the Note Insurance Policy, the Indenture Trustee shall submit a
Notice (in the form attached to such Note Insurance Policy) in accordance with
the terms of the Note Insurance Policy.
6-7
<PAGE>
(b) The Indenture Trustee shall establish a separate special purpose trust
account for the benefit of the Holders of the Class A Notes and the Note Insurer
(the "Policy Payments Account") over which the Indenture Trustee shall have
exclusive control and sole right of withdrawal. The Indenture Trustee shall
deposit any amount paid under the Note Insurance Policy in the Policy Payments
Account and distribute such amount only for purposes of payment to the Holders
of the Class A Notes of the Scheduled Payments for which a claim was made and
such amount may not be applied to satisfy any costs, expenses or liabilities of
the Servicer, the Seller, the Indenture Trustee or the Trust. Amounts paid under
the Note Insurance Policy shall be transferred to the Note Distribution Account
in accordance with the next succeeding paragraph and disbursed by the Indenture
Trustee to Holders of the Class A Notes in accordance with Section 8.02(c) of
the Indenture. It shall not be necessary for such payments to be made by checks
or wire transfers separate from the checks or wire transfers used to pay the
Insured Payments with other funds available to make such payment. However, the
amount of any payment of principal of or interest on the Class A Notes to be
paid from funds transferred from the Policy Payments Account shall be noted as
provided in paragraph (c) below in the Register and in the statement to be
furnished to Class A Noteholders pursuant to Section 6.07. Funds held in the
Policy Payments Account shall not be invested by the Indenture Trustee.
On any Payment Date with respect to which a claim has been made under the
Note Insurance Policy, the amount of funds received by the Indenture Trustee as
a result of any claim under the Note Insurance Policy, to the extent required to
make the Scheduled Payments on such Payment Date, shall be withdrawn from the
Policy Payments Account and deposited in the Note Distribution Account and
applied by the Indenture Trustee, together with the other funds to be withdrawn
from the Note Distribution Account, directly to the payment in full of the
Scheduled Payments due on the Class A Notes. Funds received by the Indenture
Trustee as a result of any claim under the Note Insurance Policy shall be
deposited by the Indenture Trustee in the Policy Payments Account and used
solely for payment to the Holders of the Class A Notes and may not be applied to
satisfy any costs, expenses or liabilities of the Servicer, the Seller, the
Indenture Trustee or the Trust. Any funds remaining in the Policy Payments
Account on the first Business Day following a Payment Date shall be remitted to
the Note Insurer, pursuant to the instructions of the Note Insurer, by the end
of such Business Day.
(c) The Indenture Trustee shall keep a complete and accurate record of the
amount of interest and principal paid in respect of any Class A Note from moneys
received under the Note Insurance Policy. The Note Insurer shall have the right
to inspect such records at reasonable times during normal business hours upon
one Business Day's prior notice to the Indenture Trustee.
(d) The Indenture Trustee shall promptly notify the Note Insurer and the
Fiscal Agent (as defined in the Note Insurance Policy) of any proceeding or the
institution of any action, of which an authorized officer of the Indenture
Trustee has actual knowledge, seeking the avoidance as a preferential transfer
under applicable bankruptcy, insolvency, receivership or similar law (a
"Preference Claim") of any distribution made with respect to the Notes. Each
Holder of a Class A Note by its purchase of such Note, the Servicer and the
Indenture Trustee hereby agree that, the Note Insurer (so long as no Note
Insurer Default exists) may at any time during the continuation of any
proceeding relating to a Preference Claim direct all matters relating to such
Preference
6-8
<PAGE>
Claim, including without limitation, (i) the direction of any appeal of any
order relating to such Preference Claim and (ii) the posting of any surety,
supersedeas or performance bond pending any such appeal. In addition and without
limitation of the foregoing, the Note Insurer shall be subrogated to the rights
of the Servicer, the Indenture Trustee and each Holder of a Class A Note in the
conduct of any such Preference Claim, including, without limitation, all rights
of any party to an adversary proceeding action with respect to any court order
issued in connection with any such Preference Claim.
(e) The Indenture Trustee shall, at the time it provides notice to the Note
Insurer, notify, by mail to the Class A Noteholders that, in the event the any
such Noteholder's scheduled payment is avoided as a preferential transfer, such
Noteholder will be entitled to payment pursuant to the terms of the Note
Insurance Policy, a copy of which shall be made available through the Indenture
Trustee, or the Fiscal Agent, if any, and the Indenture Trustee shall furnish to
the Note Insurer or its Fiscal Agent, if any, its records evidencing the
payments of principal of and interest on the Class A Notes, if any, which have
been made by the Indenture Trustee and subsequently recovered from Class A
Noteholders, and the dates on which such payments were made.
(f) The Indenture Trustee shall, upon retirement of the Class A Notes,
furnish to the Note Insurer a notice of such retirement, and, upon the
retirement of the Class A Notes and the expiration of the term of the Note
Insurance Policy, surrender the Note Insurance Policy to the Note Insurer for
cancellation.
SECTION 6.09. Effect of Payments by the Note Insurer; Subrogation.
Anything herein to the contrary notwithstanding, any payment with respect
to principal of or interest on any of the Class A Notes which is made with
moneys received pursuant to the terms of the Note Insurance Policy shall not be
considered payment of such Notes from the Trust and shall not result in the
payment of or the provision for the payment of the principal of or interest on
such Notes within the meaning of Section 6.06. The Servicer and the Owner
Trustee acknowledge, and each Holder by its acceptance of a Class A Note agrees,
that without the need for any further action on the part of the Note Insurer,
the Seller, the Servicer, the Indenture Trustee or the Paying Agent (a) to the
extent the Note Insurer makes payments, directly or indirectly, on account of
principal of or interest on any Class A Notes to the Holder of such Class A
Notes, the Note Insurer will be fully subrogated to the rights of such
Noteholders to receive such principal and interest from the Trust and (b) the
Note Insurer shall be paid such principal and interest but only from the sources
and in the manner provided herein for the payment of such principal and
interest.
The Indenture Trustee and the Servicer shall cooperate in all respects with
any reasonable request by the Note Insurer for action to preserve or enforce the
Note Insurer's rights or interests under this Agreement without limiting the
rights or affecting the interests of the Class A Noteholders as otherwise set
forth therein.
6-9
<PAGE>
SECTION 6.10. Notices to the Note Insurer.
All notices, statements, reports, certificates or opinions required by this
Agreement to be sent to any other party hereto or to any of the Noteholders
shall also be sent to the Note Insurer.
SECTION 6.11. Rights of the Note Insurer To Exercise Rights of Noteholders.
By accepting its Note, each Class A Noteholder agrees that unless a Note
Insurer Default exists and until payment in full of the Class A Notes and all
amounts owing to the Note Insurer under the Insurance Agreement, the Note
Insurer shall have the right to exercise all rights of the Class A Noteholders
as specified under this Agreement without any further consent of the Class A
Noteholders.
SECTION 6.12. Withdrawals From Undelivered Loan Account. Amounts on deposit
in the Undelivered Loan Account shall be withdrawn by the Indenture Trustee as
follows:
(a) If the Company delivers the related Loan for an Undelivered Loan
to the Indenture Trustee on or before July 15, 1999, the Indenture Trustee
shall withdraw an amount equal to 100% of the Cut-off Date Principal
Balance of such Loan and pay such amount to or upon the order of the
Company.
(b) The Company shall give the Indenture Trustee telephonic notice of
its intended delivery of such Loans. The Indenture Trustee will use
reasonable efforts to process the Loans and remit any amount payable for
them to the Company in a timely manner.
(c) On July 30, 1999, the Indenture Trustee shall deposit into the
Collection Account any amounts remaining in the Undelivered Loan Account.
Any amount so deposited shall constitute the payment of the Repurchase
Price for the related Undelivered Loan(s).
6-10
<PAGE>
ARTICLE VII
SERVICE TRANSFER
SECTION 7.01. Servicer Termination Event.
(a) Subject to Section 7.09, the Note Insurer or the Indenture Trustee
(with the prior written consent of the Note Insurer, or, except in the case of
item (vi) below, the Noteholders, with the consent of the Note Insurer, may
remove the Servicer (such removal being herein called a "Service Transfer") upon
the occurrence of any of the following events (each a "Servicer Termination
Event"):
(i) The Servicer shall (A) apply for or consent to the appointment of
a receiver, trustee, liquidator or custodian or similar entity with respect
to itself or its property, (B) admit in writing its inability to pay its
debts generally as they become due, (C) make a general assignment for the
benefit of creditors, (D) be adjudicated a bankrupt or insolvent, (E)
commence a voluntary case under the federal bankruptcy laws of the United
States of America or file a voluntary petition or answer seeking
reorganization, an arrangement with creditors or an order for relief or
seeking to take advantage of any insolvency law or file an answer admitting
the material allegations of a petition filed against it in any bankruptcy,
reorganization or insolvency proceeding or (F) take corporate action for
the purpose of effecting any of the foregoing; or
(ii) If without the application, approval or consent of the Servicer,
a proceeding shall be instituted in any court of competent jurisdiction,
under any law relating to bankruptcy, insolvency, reorganization or relief
of debtors, seeking in respect of the Servicer an order for relief or an
adjudication in bankruptcy, reorganization, dissolution, winding up,
liquidation, a composition or arrangement with creditors, a readjustment of
debts, the appointment of a trustee, receiver, liquidator or custodian or
similar entity with respect to the Servicer or of all or any substantial
part of its assets, or other like relief in respect thereof under any
bankruptcy or insolvency law, and, if such proceeding is being contested by
the Servicer in good faith, the same shall (A) result in the entry of an
order for relief or any such adjudication or appointment or (B) continue
undismissed or pending and unstayed for any period of seventy-five (75)
consecutive days; or
(iii) The Servicer shall fail to perform any one or more of its
material obligations hereunder and shall continue in default thereof for a
period of thirty (30) days (one (1) Business Day in the case of a delay in
making a payment required of the Servicer under this Agreement), or the
Servicer shall fail to deliver the Monthly Report on any Determination
Date, after the earlier of (A) actual knowledge of an officer of the
Servicer or (B) receipt of notice from the Indenture Trustee or the Note
Insurer of said failure; provided, however, that if the Servicer can
demonstrate to the reasonable satisfaction of the Note Insurer that it is
diligently pursuing remedial action, then the cure period may be extended
with the written approval of the Note Insurer; or
7-1
<PAGE>
(iv) The Servicer shall fail to cure any breach of any of its
representations and warranties set forth in Section 5.21 which materially
and adversely affects the interests of the Noteholders or the Note Insurer
for a period of sixty (60) days after the earlier of the Servicer's
discovery or receipt of notice thereof; provided, however, that if the
Servicer can demonstrate to the reasonable satisfaction of the Note Insurer
that it is diligently pursuing remedial action, then the cure period may be
extended with the written approval of the Note Insurer; or
(v) The merger, consolidation or other combination of the Servicer
with or into any other entity, unless (A) the Servicer or an Affiliate of
the Servicer is the surviving entity of such combination or (B) the
surviving entity (I) is servicing at least $[300,000,000] of home equity
loans that are similar to the Loans, (II) has equity of not less than
$[10,000,000] (as determined in accordance with generally acceptable
accounting principles), (III) is consented to by the Note Insurer (such
consent not to be unreasonably withheld) and (IV) agrees to assume the
Servicer's obligations thereunder; or
(vi) The failure of the Servicer (except the Indenture Trustee in its
capacity as successor Servicer) to satisfy the Servicer Termination Test,
or the occurrence of an Event of Default under the Insurance Agreement.
(b) Upon the occurrence of a Servicer Termination Event, the Servicer shall
act as servicer under this Agreement, subject to the right of removal set forth
in subsection (a) hereof, for an initial period commencing on the date on which
such Servicer Termination Event occurred and ending on the last day of the
calendar quarter in which such Servicer Termination Event occurred, which period
may be extended by the Note Insurer in its sole discretion for a succeeding
quarterly period on December 31, March 31, June 30 and September 30 of each year
as provided below (each such quarterly period for which the Servicer shall be
designated to act as servicer hereunder, a "Term of Service"); provided that
nothing in this Section 7.01(a) shall prohibit the Note Insurer or the Indenture
Trustee from removing the Servicer pursuant to Section 7.01(a). Notwithstanding
the foregoing, the Note Insurer may, in its sole discretion, extend the period
for which the Servicer is to act as such for a period in excess of one quarter
(provided such extension shall be an additional one or more quarters), but any
such extension shall be revocable at any time by the Note Insurer upon written
notice delivered to the Indenture Trustee and the Servicer at least fifteen days
prior to the expiration of the related quarterly period.
(c) The Servicer agrees to use its best efforts to inform the Indenture
Trustee of any materially adverse information regarding the Servicer's servicing
activities that comes to the attention of the Note Insurer from time to time.
(d) The Servicer shall not resign from the obligations and duties hereby
imposed on it, except upon determination that its duties hereunder are no longer
permissible under applicable law or are in material conflict by reason of
applicable law with any other activities carried on by it, the other activities
of the Servicer so causing such a conflict being of a type and nature carried on
by the Servicer at the date of this Agreement. Any such determination permitting
the resignation of the Servicer shall be evidenced by an opinion of counsel
acceptable to the
7-2
<PAGE>
Indenture Trustee and the Note Insurer at the expense of the Servicer to such
effect which shall be delivered to the Indenture Trustee and the Note Insurer.
(e) Notwithstanding any other provision in this Agreement, no removal or
resignation of the Servicer shall become effective until the Indenture Trustee
or a successor Servicer shall have assumed the Servicer's responsibilities and
obligations in accordance with this Section.
(f) Upon removal or resignation of the Servicer, or expiration of its Term
of Service without renewal, the Servicer at its own expense also shall promptly
deliver or cause to be delivered to a successor servicer or the Indenture
Trustee all the books and records (including, without limitation, records kept
in electronic form) that the Servicer has maintained for the Loans, including
all tax bills, assessment notices, insurance premium notices and all other
documents as well as all original documents then in the Servicer's possession.
(g) Any collections then being held by the Servicer prior to its removal
and any collections received by the Servicer after removal or resignation shall
be endorsed by it to the Indenture Trustee and remitted directly and immediately
to the Indenture Trustee or the successor Servicer.
(h) Upon removal or resignation of the Servicer, or expiration of its Term
of Service without renewal, the Indenture Trustee shall, at the direction of the
Note Insurer, and may, if a Note Insurer Default exists and is continuing or the
Note Insurer's rights have been terminated as described in Section 11.21(b) of
the Indenture, (i) solicit bids for a successor servicer as described below or
(ii) appoint the Backup Servicer (or such other Person as may be designated by
the Note Insurer) as Servicer. If the Indenture Trustee solicits bids for a
successor Servicer, the Indenture Trustee agrees to act as Backup Servicer
during the solicitation process and shall assume all duties of the Servicer
(except as otherwise provided in this Agreement). The Indenture Trustee shall,
if it is unable to obtain a qualifying bid and is prevented by law from acting
as Servicer, appoint, or petition a court of competent jurisdiction to appoint,
any housing and home finance institution, bank or mortgage servicing institution
which has been designated as an approved seller-servicer by Fannie Mae or
Freddie Mac for first and second lien home equity loans and having equity of not
less than $15,000,000 (or such lower level as may be acceptable to the Note
Insurer), as determined in accordance with generally accepted accounting
principles and acceptable to the Note Insurer 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. The compensation of any successor
Servicer (other than the Indenture Trustee in its capacity as successor
Servicer) so appointed shall be the Monthly Servicing Fee, provided, however,
that if the Indenture Trustee becomes the successor Servicer it shall receive as
its compensation the same compensation paid to the Servicer immediately prior to
the Servicer's removal or resignation.
(i) In the event the Indenture Trustee solicits bids as provided above, the
Indenture Trustee shall solicit, by public announcement, bids from housing and
home finance institutions, banks and mortgage servicing institutions meeting the
qualifications set forth above. Such public announcement shall specify that the
successor Servicer shall be entitled to servicing compensation in accordance
with clause (h) above, together with the other servicing
7-3
<PAGE>
compensation in the form of assumption fees, late payment charges or otherwise
as provided in Section 5.08. Within thirty days after any such public
announcement, the Indenture Trustee shall negotiate and effect the sale,
transfer and assignment of the servicing rights and responsibilities hereunder
to the qualified party approved by the Note Insurer submitting the highest
satisfactory bid as to the price it will pay to obtain servicing. The Indenture
Trustee shall deduct from any sum received by the Indenture Trustee from the
successor to the Servicer in respect of such sale, transfer and assignment all
costs and expenses of any public announcement and of any sale, transfer and
assignment of the servicing rights and responsibilities hereunder. After such
deductions, the remainder of such sum less any amounts due the Indenture Trustee
or the Trust from the Servicer shall be paid by the Indenture Trustee to the
Servicer at the time of such sale, transfer and assignment to the Servicer's
successor.
(j) The Indenture Trustee and such successor Servicer shall take such
action, consistent with this Agreement, as shall be necessary to effectuate any
such succession, including the notification to all Obligors of the transfer of
servicing. The Servicer agrees to cooperate with the Indenture Trustee and any
successor Servicer in effecting the termination of the Servicer's servicing
responsibilities and rights hereunder and shall promptly provide the Indenture
Trustee or such successor Servicer, as applicable, all documents and records
reasonably requested by it to enable it to assume the Servicer's functions
hereunder and shall promptly also transfer to the Indenture Trustee or such
successor Servicer, as applicable, all amounts which then have been or should
have been deposited in the Collection Account by the Servicer or which are
thereafter received with respect to the Loans. Neither the Indenture Trustee nor
any other successor Servicer shall be held liable by reason of any failure to
make, or any delay in making, any distribution hereunder or any portion thereof
caused by (i) the failure of the Servicer to deliver, or any delay in
delivering, cash, documents or records to it, or (ii) restrictions imposed by
any regulatory authority having jurisdiction over the Servicer. If the Servicer
resigns or is replaced hereunder, or its term of service expires without
renewal, the Servicer agrees to reimburse the Trust, the Noteholders and the
Note Insurer for the costs and expenses associated with the transfer of
servicing to the replacement Servicer.
(k) The Indenture Trustee or any other successor Servicer, upon assuming
the duties of Servicer hereunder, shall at the expense of the previous Servicer
immediately record all assignments of Loans not previously recorded in the name
of the Indenture Trustee or as directed by the Note Insurer.
SECTION 7.02. [RESERVED]
SECTION 7.03. [RESERVED]
SECTION 7.04. Notification to Securityholders.
(a) Promptly following the occurrence of any Servicer Termination Event,
the Servicer shall give written notice thereof to the Indenture Trustee, the
Trust, the Note Insurer, the Rating Agencies and the Obligors, to the extent
required by law.
7-4
<PAGE>
(b) Within ten days following any termination or appointment of a successor
to the Servicer pursuant to this Article VII, the Owner Trustee on behalf of the
Trust shall give written notice thereof to the Rating Agencies, the Note
Insurer, and the Certificateholders at their respective addresses appearing on
the Certificate Register and the Indenture Trustee shall give written notice
thereof to Noteholders at their respective addresses appearing in the Note
Register.
(c) The Owner Trustee on behalf of the Trust shall give written notice to
the Rating Agencies at least 30 days prior to the date upon which any Eligible
Servicer (other than the Indenture Trustee) is to assume the responsibilities of
Servicer pursuant to Section 7.01, naming such successor Servicer.
(d) The Indenture Trustee shall give notice to the Note Insurer, the
Noteholders, the Owner Trustee, the Seller, and the Rating Agencies of the
occurrence of any event described in Section 7.01(a) of which the Indenture
Trustee is aware.
SECTION 7.05. Effect of Transfer.
(a) After the Service Transfer, the Indenture Trustee or new Servicer may
notify Obligors to make payments directly to the new Servicer that are due under
the Loans after the effective date of the Service Transfer.
(b) After the Service Transfer, the replaced Servicer shall have no further
obligations with respect to the management, administration, servicing or
collection of the Loans and the new Servicer shall have all of such obligations,
except that the replaced Servicer will transmit or cause to be transmitted
directly to the new Servicer for its own account, promptly on receipt and in the
same form in which received, any amounts (properly endorsed where required for
the new Servicer to collect them) received as payments upon or otherwise in
connection with the Loans.
(c) A Service Transfer shall not affect the rights and duties of the
parties hereunder (including but not limited to the indemnities of the Servicer
and the Company pursuant to Article IX and Sections 3.05 and 5.22) other than
those relating to the management, administration, servicing or collection of the
Loans.
SECTION 7.06. Transfer of Collection Account.
Notwithstanding the provisions of Section 7.01, if the Collection Account
shall be maintained with the Servicer and a Servicer Termination Event shall
occur and be continuing, the Servicer shall, after five days' written notice
from the Indenture Trustee or the Note Insurer, or in any event within ten days
after the occurrence of the Servicer Termination Event, establish an Eligible
Account with an institution other than the Servicer and promptly transfer all
funds in the Collection Account to such new account, which shall thereafter be
deemed the Collection Account for the purposes hereof.
7-5
<PAGE>
SECTION 7.07. Limits on Liability.
The Servicer will be liable to the Trust, the Owner Trustee, the Indenture
Trustee, the Note Insurer and the Securityholders only to the extent of the
obligations specifically undertaken by the Servicer under this Agreement and
will have no other obligations or liabilities hereunder. Neither the Servicer
nor any of its directors, officers, employees or agents will have any liability
to the Trust, the Owner Trustee, the Indenture Trustee or the Securityholders
(except as explicitly provided in this Agreement) for any action taken, or for
refraining from taking any action, pursuant to this Agreement, other than any
liability that would otherwise be imposed by reason of the Servicer's breach of
this Agreement or willful misfeasance, bad faith or negligence (including errors
in judgment) in the performance of its duties, or by reason of reckless
disregard of obligations and duties under this Agreement or any violation of
law.
SECTION 7.08. Waiver of Past Defaults.
The Note Insurer or a Note Majority of each Class may, on behalf of all
Holders of Notes, waive any default by the Servicer in the performance of its
obligations hereunder and its consequences. Upon any such waiver of a past
default, such default shall cease to exist, and any Servicer Termination Event
arising therefrom shall be deemed to have been remedied for every purpose of
this Agreement. No such waiver shall extend to any subsequent or other default
or impair any right consequent thereon.
7-6
<PAGE>
ARTICLE VIII
TERMINATION
SECTION 8.01. Company's or Servicer's Repurchase Option.
(a) Subject to the conditions in subsection (b) below, the Company, the
Note Insurer, or the Servicer may repurchase all of the Loans and all real
property acquired in respect of any Loan remaining in the Trust at a price equal
to the greatest of:
(i) the sum of (x) 100% of the principal balance of each Loan (other
than any Loan as to which title to the underlying real property has been
acquired and whose fair market value is included pursuant to clause (y)
below), plus (y) the fair market value of such acquired real property (as
determined by the Company);
(ii) the aggregate fair market value (as determined by the Company) of
all of the assets of the Trust (but in no event more than the amount
sufficient to pay all principal and interest outstanding on the Securities,
plus any unpaid fees and expenses of the Indenture Trustee and the Owner
Trustee); or
(iii) the aggregate Note Principal Balance;
plus, one month's interest at the applicable Loan Interest Rate on the Scheduled
Principal Balance of each Loan.
(b) The purchase by the Company or the Servicer of all of the Loans
pursuant to Section 8.01(a) shall be at the option of the Company, or the
Servicer or the Note Insurer on any Payment Date, but shall be conditioned upon
(1) the Pool Scheduled Principal Balance, as of the end of the Due Period
immediately preceding such Payment Date, aggregating an amount equal to or less
than 10% of the Cut-off Date Pool Principal Balance, (2) the Company, the Note
Insurer or the Servicer having provided the Indenture Trustee and the Owner
Trustee and the Depository (if any) with at least 30 days' written notice (which
may be given prior to the end of the Due Period referred to in clause (1)
above), (3) the Company or the Servicer (as applicable) shall have delivered to
the Indenture Trustee and the Owner Trustee an unqualified Opinion of Counsel
stating that payment of the purchase price to the Securityholders will not
constitute a voidable preference or fraudulent transfer under the United States
Bankruptcy Code, and (4) unless the Note Insurer otherwise agrees in writing,
all Reimbursement Amounts owed to the Note Insurer shall have been paid in full.
In the event the notice described in the preceding sentence is given in
connection with the Company's election to purchase the Loans, the Company shall
deposit in the Collection Account on the related Payment Date in immediately
available funds an amount equal to the above-described purchase price and the
Indenture Trustee shall distribute the amounts so deposited in accordance with
Section 6.06. Upon certification to the Indenture Trustee by a Servicing
Officer, following such final deposit, the Indenture Trustee shall promptly
release to the Company the Loan Files for the remaining Loans, and the Indenture
Trustee and Owner Trustee on behalf of the Trust shall execute all assignments,
endorsements and other instruments necessary to effectuate such transfer.
8-1
<PAGE>
SECTION 8.02. Liquidation of Trust Estate.
Upon any sale of the assets of the Trust pursuant to Section 10.03 of the
Indenture or Section 9.2 of the Trust Agreement, the Trust shall instruct the
Indenture Trustee or the Owner Trustee, as the case may be, to deposit the
proceeds from such sale after all payments and reserves therefrom have been made
in the Collection Account. On the Payment Date on which such proceeds are
deposited in the Collection Account (or, if such proceeds are not so deposited
on a Payment Date, on the Payment Date immediately following such deposit), the
Trust shall instruct the Indenture Trustee to distribute such funds, together
with all other amounts available, in accordance with the terms of Section
6.06(a).
8-2
<PAGE>
ARTICLE IX
INDEMNITIES
SECTION 9.01. Company's Indemnities.
The Company will defend and indemnify the Trust, the Owner Trustee, the
Indenture Trustee, the Note Insurer (including the paying agent and any other
agents of the Owner Trustee, the Note Insurer and the Indenture Trustee), and
the Securityholders against any and all costs, expenses, losses, damages, taxes,
claims and liabilities, including reasonable fees and expenses of counsel and
expenses of litigation of any third-party claims arising out of or resulting
from (i) the origination of any Loan (including but not limited to truth in
lending requirements) or the servicing of such Loan prior to its transfer to the
Trust (but only to the extent such cost, expense, loss, damage, tax, claim or
liability is not provided for by the Company's repurchase of such Loan pursuant
to Section 3.05), (ii) the use or ownership of any real property related to a
Loan by the Company or the Servicer or any Affiliate of either, or (iii) the
Company's or the Trust's violation of federal or state securities laws in
connection with the offering and sale of the Securities. 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 9.02. Liabilities to Obligors.
No obligation or liability to any Obligor under any of the Loans is
intended to be assumed by the Trust, the Owner Trustee, Indenture Trustee, the
Note Insurer or the Securityholders 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 Owner Trustee, Indenture
Trustee, the Note Insurer and the Securityholders expressly disclaim such
assumption.
SECTION 9.03. Servicer's Indemnities.
The Servicer shall defend and indemnify the Trust, the Owner Trustee, the
Indenture Trustee (including the Paying Agent and any other agents of the Owner
Trustee, the Note Insurer and the Indenture Trustee) and the Securityholders
against any and all costs, expenses, losses, damages, taxes, claims and
liabilities, including reasonable fees and expenses of counsel and expenses of
litigation, in respect of any action taken or omitted to be taken by the
Servicer with respect to any Loan. This indemnity shall survive any Service
Transfer (but the original Servicer's obligations under this Section 9.03 shall
not relate to any actions of any subsequent Servicer after a Service Transfer)
and any payment of the amount owing under, or any repurchase by the Company of,
any such Loan.
SECTION 9.04. 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
9-1
<PAGE>
indemnity payments pursuant to this Article and the recipient thereafter
collects any of such amounts from others, the recipient will repay such amounts
collected to the Company or the Servicer, as the case may be, without interest.
9-2
<PAGE>
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Servicer Not to Assign Duties or Resign; Delegation of
Servicing Duties.
The Servicer may not sell or assign its rights and duties as Servicer
hereunder, except as expressly provided for herein, provided that the Servicer
may pledge or assign the right to receive all or any portion of the Monthly
Servicing Fee payable to it. 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 or is in
material conflict by reason of applicable law with any other activities carried
on by it. Any such determination permitting the resignation of the Servicer
shall be evidenced by an Opinion of Counsel for the Servicer to such effect
addressed and delivered to the Trust, the Indenture Trustee and the Note
Insurer. No such resignation shall become effective until the Indenture Trustee
or a successor servicer shall have assumed the responsibilities and obligations
of the Servicer in accordance with Sections 7.01.
Notwithstanding the foregoing:
(a) Any person into which the Servicer may be merged or consolidated,
or any corporation resulting from any merger, conversion or consolidation
to which the Servicer shall be a party, or any Person succeeding to the
business of the Servicer, shall be the successor of the Servicer hereunder,
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; provided, however, that the successor or surviving Person
to the Servicer shall satisfy the criteria set forth in the definition of
Eligible Servicer. The Servicer shall promptly notify Standard & Poor's,
Moody's and the Note Insurer of any such merger to which it is a party.
(b) The Servicer may, with the consent of the Note Insurer, delegate
duties under this Agreement to any of the Servicer's Affiliates. In
addition, the Servicer may at any time perform the specific duty of
foreclosing real property liens through subcontractors who are in the
business of servicing home improvement contracts and promissory notes or
home equity loans, and may also perform other specific duties through
subcontractors; provided that the Servicer gives notice to the Trust and
the Indenture Trustee and each of Standard & Poor's and Moody's, and
provided further that no such delegation of duties by the Servicer shall
relieve the Servicer of its responsibility with respect thereto.
SECTION 10.02. Assignment or Delegation by Company.
Except as specifically authorized hereunder, the Company may not convey and
assign or delegate any of its rights or obligations hereunder absent the prior
written consent of the Note Insurer or, if a Note Insurer Event of Default
exists, a Note Majority of each Class of Notes and a
10-1
<PAGE>
Certificate Majority, 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 VI.
Notwithstanding the foregoing, any person into which the Company may be
merged or consolidated, or any corporation resulting from any merger, conversion
or consolidation to which the Company shall be a party, or any Person succeeding
to the business of the Company, shall be the successor of the Company hereunder,
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
Company shall promptly notify Standard & Poor's and Moody's of any such merger
to which it is a party.
SECTION 10.03. Amendment.
(a) This Agreement may be amended from time to time by the Company, the
Servicer and the Trust, with the prior written consent of the Indenture Trustee
and the Note Insurer but without the consent of any of the Securityholders, 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, including, without limitation, to add or amend any provision as
required by Standard & Poor's, Moody's, or any other nationally recognized
statistical rating organization in order to improve or maintain the rating of
any Class of Notes or the Certificates, provided, however, that such action
shall not, as evidenced by an Opinion of Counsel for the Company, adversely
affect in any material respect the interests of any Securityholder or the Note
Insurer.
(b) This Agreement may also be amended from time to time by the Company,
the Servicer and the Trust with the prior written consent of the Indenture
Trustee and the Note Insurer and with the consent of the Holders of Notes
representing a majority of the aggregate Outstanding Amount of the Notes (which
consent of any Holder of a Note given pursuant to this Section or pursuant to
any other provision of this Agreement shall be conclusive and binding on such
Holder and on all future Holders of such Note and of any Note issued upon the
transfer thereof or in exchange thereof or in lieu thereof whether or not
notation of such consent is made upon the Note) for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement, or of modifying in any manner the rights of the Holders of
Notes; provided, however, no such amendment shall (a) increase or reduce in any
manner the amount of, or accelerate or delay the timing of, collections of
payments on Loans or distributions required to be made on any Note or the Class
A-1 Interest Rate, Class A-2 Interest Rate, Class M-1 Interest Rate, Class M-2
Interest Rate, Class B-1 Interest Rate or Class B-2 Interest Rate, (b) amend any
provisions of Section 6.06 in such a manner as to affect the priority of payment
of interest, principal or premium to Noteholders, or (c) reduce the aforesaid
percentage required to consent to any such amendment or any waiver hereunder,
without the consent of the Holders of all Notes then Outstanding, and provided
further, that the Rating Agency Condition has been satisfied.
(c) Concurrently with the solicitation of any consent pursuant to this
Section 10.03, the Indenture Trustee shall furnish written notification to
Standard & Poor's and Moody's of
10-2
<PAGE>
such solicitation. Promptly after the execution of any amendment pursuant to
this Section 10.03, the Indenture Trustee shall furnish written notification of
the substance of such amendment to Standard & Poor's, Moody's and each
Securityholder.
(d) It shall not be necessary for the consent of Securityholders under this
Section 10.03 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 Securityholders shall be subject to such reasonable
requirements as the Indenture Trustee may prescribe.
(e) Each of the Owner Trustee and Indenture Trustee may, but shall not be
obligated to, enter into any such amendment which affects its own rights, duties
or immunities under this Agreement or otherwise.
(f) In connection with any amendment pursuant to this Section, the Owner
Trustee and Indenture Trustee shall be entitled to receive an unqualified
Opinion of Counsel to the Servicer to the effect that such amendment is
authorized or permitted by the Agreement.
(g) Upon the execution of any amendment or consent pursuant to this Section
10.03, 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 Securityholder hereunder shall be bound thereby.
SECTION 10.4. Notices.
All communications and notices pursuant hereto to the Servicer, the
Company, the Trust, the Owner Trustee, the Indenture Trustee, Standard & Poor's,
Moody's and the Note Insurer shall be in writing and delivered (by facsimile or
other means) 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
10-3
<PAGE>
If to the Trust or Owner Trustee:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
Telecopier Number: 302-651-8882
If to the Indenture Trustee:
U.S. Bank Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Corporate Trust Administration, Structured Finance
Telecopier Number: (651) 244-0089
If to Standard & Poor's:
Standard & Poor's Ratings Services
55 Water Street
New York, New York 10041
Attention: Asset-Backed Surveillance
Telecopier Number: (212) 208-8208
If to Moody's:
Moody's Investors Services, Inc.
99 Church Street
New York, New York 10007
Attention: Extension Mortgage Group
Telecopier Number: (212) 553-4392
If to Note Insurer:
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Surveillance Department
Re: Green Tree Home Improvement
and Home Equity Loan Trust 1999-B
Loan-Backed Notes
Confirmation: (212) 826-0100
Telecopy Nos.: (212) 339-3518, (212) 339-3529
10-4
<PAGE>
(in each case in which notice or other communication to the Note
Insurer refers to a Servicer Termination Event, a claim on the
Note Insurance Policy or with respect to which failure on the
part of the Note Insurer to respond shall be deemed to constitute
consent or acceptance, then a copy of such notice or other
communication should also be sent to the attention of each of the
General Counsel and the Head-Financial Group of the Note Insurer
and shall be marked on the outside "URGENT MATERIAL ENCLOSED")
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 Securityholder shall be
in writing and delivered or mailed at the address shown in the Note Register or
the Certificate Register, as applicable.
SECTION 10.05. 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 10.06. Headings.
The headings herein are for purposes of reference only and shall not
otherwise affect the meaning or interpretation of any provision hereof.
SECTION 10.07. Governing Law.
This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Minnesota.
SECTION 10.08. Limitation of Liability.
It is expressly understood and agreed by the parties hereto that (a) this
Agreement is executed and delivered by Wilmington Trust Company, not
individually or personally but solely as trustee of Green Tree Home Improvement
and Home Equity Loan Trust 1999-B under the Trust Agreement, in the exercise of
the powers and authority conferred and vested in it, (b) each of the
representations, undertakings and agreements herein made on the part of the
Trust is made and intended not as personal representations, undertakings and
agreements by Wilmington Trust Company but is made and intended for the purpose
for binding only the Trust, (c) nothing herein contained shall be construed as
creating any liability on Wilmington Trust Company, individually or personally,
to perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties hereto and by any
Person claiming by, through or under the parties hereto and (d) under no
circumstances shall Wilmington Trust
10-5
<PAGE>
Company be personally liable for the payment of any indebtedness or expenses of
the Trust or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by the Trust under this
Agreement or the other Related Documents.
SECTION 10.09. The Note Insurer.
Any right conferred to the Note Insurer hereunder shall be suspended and
shall run to the benefit of the Class A Noteholders during any period in which
there exists a Note Insurer Default; provided, that the right of the Note
Insurer to receive the Premium Amount shall not be suspended if such Note
Insurer Default was a default other than a default under clause (a) of the
definition thereof. At such time as the Notes are no longer outstanding
hereunder and the Note Insurer has received all Reimbursement Amounts, the Note
Insurer's rights hereunder shall terminate.
SECTION 10.10. Third Party Rights.
The Seller, the Issuer, the Servicer, and the Securityholders agree that
the Note Insurer shall be deemed a third-party beneficiary of this Agreement as
if it were a party hereto. The Seller, the Issuer, the Servicer, and the
Securityholders agree that the Indenture Trustee shall be deemed a third-party
beneficiary of this Agreement as if it were a party hereto.
10-6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized this 30th
day of June, 1999.
ISSUER:
GREEN TREE HOME IMPROVEMENT AND
HOME EQUITY LOAN TRUST 1999-B
By WILMINGTON TRUST COMPANY, not in
its individual capacity but solely on
behalf of the Issuer as Owner Trustee
under the Trust Agreement
By: /s/ Norma P. Closs
------------------------------------
Name: Norma P. Closs
------------------------------
Title: Vice President
------------------------------
SELLER AND SERVICER:
GREEN TREE FINANCIAL CORPORATION
By: /s/ Phyllis A. Knight
------------------------------------
Name: Phyllis A. Knight
------------------------------
Title: Senior Vice President and
--------------------------
Treasurer
----------
Acknowledged and Accepted:
U.S. BANK TRUST NATIONAL
ASSOCIATION, not in its individual
capacity but solely as Indenture Trustee
By: /s/ H. Howard
------------------------------------
Name: Howard
------------------------------
Title: Vice President
------------------------------
By: /s/ Harry H. Halley
------------------------------------
Name: Harry H. Halley
------------------------------
Title: Assistant Secretary
------------------------------
10-7
<PAGE>
EXHIBIT A
FORM OF ASSIGNMENT
In accordance with the Sale and Servicing Agreement (the "Agreement") dated
as of June 1, 1999 between Green Tree Financial Corporation (the "Company") and
Green Tree Home Improvement and Home Equity Loan Trust 1999-B, the Company does
hereby transfer, assign, set over and otherwise convey to the Trust all right,
title and interest of the Company in (i) the home improvement contracts and
promissory notes and home equity loans (collectively, the "Loans") identified in
the List of Loans, a copy of which is attached hereto, including, without
limitation, all related Collateral Security, all liens and security interests
created thereby and any and all rights to receive payments which are due
pursuant thereto from and after the Cut-off Date, but excluding any rights to
receive payments which were due pursuant thereto prior to the Cut-off Date, (ii)
the Errors and Omissions Protection Policy as such policy relates to the Loans,
(iii) all items contained in the Loan Files, (iv) the Trust Accounts and all
funds on deposit therein from time to time and all investments and proceeds
thereof (including all income thereon), and (v) all proceeds in any way derived
from any of the foregoing. Capitalized terms used herein but not defined herein
have the meanings assigned to them in the Agreement.
This Assignment is made pursuant to and upon the representation and
warranties on the part of the undersigned contained in Article III of the
Agreement and no others.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be duly
executed this ______ day of June, 1999.
GREEN TREE FINANCIAL CORPORATION
By:
------------------------------------
Name:
------------------------------
Title:
------------------------------
A-1
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE REGARDING
REPURCHASED CONTRACTS
GREEN TREE FINANCIAL CORPORATION
CERTIFICATE REGARDING REPURCHASED CONTRACTS
The undersigned certifies that he is a [title] of Green Tree Financial
Corporation, a Delaware corporation (the "Company"); he is duly authorized to
execute and deliver this certificate on behalf of the Servicer pursuant to
Section 3.05 of the Sale and Servicing Agreement (the "Agreement"), dated as of
June 30, 1999 between the Company and Green Tree Home Improvement and Home
Equity Loan Trust 1999-B (the "Trust") (all capitalized terms used herein
without definition having the respective meanings specified in the Agreement):
1. The Loans on the attached schedule are to be repurchased by the
[Company] [Servicer] on the date hereof pursuant to Section [3.05] [5.22]
of the Agreement.
2. Upon deposit of the Repurchase Price for such Loans, such Loans
may, pursuant to Section [3.05] [5.22] of the Agreement, be assigned by the
Trust to the [Company] [Servicer].
IN WITNESS WHEREOF, I have affixed hereunto my signature this ______ day of
June, 1999.
GREEN TREE FINANCIAL CORPORATION
By:
------------------------------------
Name:
------------------------------
Title:
------------------------------
B-1
<PAGE>
EXHIBIT C
FORM OF MONTHLY REPORT
GREEN TREE HOME IMPROVEMENT AND HOME EQUITY LOAN TRUST 1999-B
Payment Date: _____________
1. Amount Available __________
2. Note Insurance Policy __________
(a) Shortfall __________
(b) Insured Payment __________
3. Monthly Servicing Fee (if Green Tree is not the Servicer)
(up to 1/12 of 0.75% of Pool Scheduled Principal Balance) __________
4. Premium Amount __________
Interest
- --------
Class A
-------
5. Class A-1 Interest Rate (7.11%) __________
6. Class A-1 Interest Amount __________
7. Unpaid Class A-1 Interest Shortfall __________
8. Class A-1 Interest paid __________
9. Class A-1 Interest Carryover Shortfall __________
10. Class A-2 Interest Rate (7.11%) __________
11. Class A-2 Interest Amount __________
12. Unpaid Class A-2 Interest Shortfall __________
13. Class A-2 Interest paid __________
14. Class A-2 Interest Carryover Shortfall __________
C-1
<PAGE>
Class M-1
---------
15. Interest on Class M-1 Adjusted Principal Balance
(a) Class M-1 Adjusted Principal Balance __________
(b) Class M-1 Interest Rate (8.38%) __________
(c) Class M-1 Interest Amount __________
(d) Unpaid Class M-1 Interest Shortfall __________
(e) Class M-1 Interest paid __________
(f) Class M-1 Interest Carryover Shortfall __________
Class M-2
---------
16. Interest on Class M-2 Adjusted Principal Balance
(a) Class M-2 Adjusted Principal Balance __________
(b) Class M-2 Interest Rate (10.54%) __________
(c) Class M-2 Interest Amount __________
(d) Unpaid Class M-2 Interest Shortfall __________
(e) Class M-2 Interest paid __________
(f) Class M-2 Interest Carryover Shortfall __________
Class B-1
---------
17. Interest on Class B-1 Adjusted Principal Balance
(a) Class B-1 Adjusted Principal Balance __________
(b) Class B-1 Interest Rate (13.55%) __________
(c) Class B-1 Interest Amount __________
(d) Unpaid Class B-1 Interest Shortfall __________
(e) Class B-1 Interest paid __________
(f) Class B-1 Interest Carryover Shortfall __________
Principal
- ---------
18. Group 1 Formula Principal Distribution Amount
(a) Scheduled principal __________
(b) Principal Prepayments __________
(c) Liquidated Loans __________
(d) Repurchases __________
(e) Previously undistributed (a)-(d) amounts __________
C-2
<PAGE>
19. Group 2 Formula Principal Distribution Amount __________
(a) Scheduled principal __________
(b) Principal Prepayments __________
(c) Liquidated Loans __________
(d) Repurchases __________
(e) Previously undistributed (a)-(d) amounts __________
Class A Principal
-----------------
20. Amount Available less prior distributions __________
21. Class A-1 Formula Principal Distribution Amount __________
22. Class A-2 Formula Principal Distribution Amount
23. Class A Principal Distribution Amount(1) __________
(a) Class A-1 principal paid __________
(b) Class A-2 principal paid __________
24. Class A Principal Balance (after distributions of
principal on current Payment Date) __________
(a) Class A-1 __________
(b) Class A-2 __________
Note Insurer
------------
25. Reimbursement Amount to Note Insurer __________
26. [Reserved]
- --------
(1) If there is a Class A Principal Deficiency not covered by an Insured
Payment, the remaining Amount Available pro rata to the Class A-1 Notes and
the Class A-2 Notes based on their respective principal balances.
Otherwise, the Class A Percentage of the Group 1 Formula Principal
Distribution Amount to the Class A-1 Noteholders and the Class A Percentage
of the Group 2 Formula Principal Distribution Amount to the Class A-2
Noteholders until either Class of Class A Notes has been paid in full; and
thereafter to the unpaid Class of Class A Notes until paid in full, the
Class A Percentage of the Formula Principal Distribution Amount.
C-3
<PAGE>
Class M-1 Principal
-------------------
27. Remaining Amount Available __________
28. Class M-1 Formula Principal Distribution Amount __________
29. Class M-1 Principal Distribution Amount __________
30. Class M-1 Principal Balance (after distributions of
principal on current Payment Date) __________
Class M-1 Distribution Test
---------------------------
(test must be satisfied on and after the
Payment Date occurring in July 2003)
31. Average Sixty-Day Delinquency Ratio Test
(a) Sixty-Day Delinquency Ratio for
current Payment Date __________
(b) Average Sixty-Day Delinquency Ratio Test (arithmetic
average of ratios for this month and two preceding
months; may not exceed 10% of the Senior Subordination
Percentage calculated in Item 97.)
32. Cumulative Realized Losses Test
(a) Cumulative Realized Losses for current Payment Date
(as a percentage of Cut-off Date Pool Principal
Balance; may not exceed 10.0% from July 15, 2003 to
July 14, 2004; 12.0% from July 15, 2004 to July 14,
2005; 14.0% from July 15, 2005, to July 14, 2006 and
15.0% thereafter) __________
33. The sum of the Class M-1 Adjusted Principal Balance, the
Class M-2 Adjusted Principal Balance, the Class B-1
Adjusted Principal Balance and the Class B-2 Adjusted
Principal Balance divided by the Pool Scheduled Principal
Balance of the preceding Payment Date (not to be less than
53.30%) __________
34. Supplementary Principal Distribution Test
(a) To be "satisfied" on any Payment Date,
C-4
<PAGE>
the Cumulative Realized Loss Ratio does not exceed
8.0% for any Payment Date on or prior to June 2001,
12.0% for any Payment Date after June 2001 but on or
before June 2002, 17.0% for any payment date after
June 2002 and the Current Realized Loss Ratio does
not exceed 7.0% __________
Class M-2 Principal
-------------------
35. Remaining Amount Available __________
36. Class M-2 Formula Principal Distribution Amount __________
37. Class M-2 Principal Distribution Amount __________
38. Class M-2 Principal Balance (after distributions of
principal on current Payment Date)
Class M-2 Distribution Test
---------------------------
(test must be satisfied on and after the
Payment Date occurring in July 2003)
39. Average Sixty-Day Delinquency Ratio Test
(a) Sixty-Day Delinquency Ratio for
current Payment Date __________
(b) Average Sixty-Day Delinquency Ratio Test (arithmetic
average of ratios for this month and two preceding
months; may not exceed 10% of the Senior Subordination
Percentage calculated in Item 97) __________
40. Cumulative Realized Losses Test
(a) Cumulative Realized Losses for current Payment Date
(as a percentage of Cut-off Date Pool Principal
Balance; may not exceed 10.0% from July 15, 2003 to
July 14, 2004; 12.0% from July 15, 2004 to July 14,
2005; 14.0% from July 15, 2005, to July 14, 2006 and
15.0% thereafter) __________
41. The sum of the Class M-2 Adjusted Principal Balance, the
Class B-1 Adjusted Principal Balance and the Class B-2
Adjusted Principal Balance divided by the Pool Scheduled
Principal Balance of the preceding Payment Date (not to
be less
C-5
<PAGE>
than 36.00%) __________
42. Supplementary Principal Distribution Test
(a) To be "satisfied" on any Payment Date, the Cumulative
Realized Loss Ratio does not exceed 8.0% for any
Payment Date on or prior to June 2001, 12.0% for any
Payment Date after June 2001 but on or before June
2002, 17.0% for any payment date after June 2002 and
the Current Realized Loss Ratio does not exceed 7.0% __________
Class B-1 Distribution Tests
----------------------------
(tests must be satisfied on and after the
Payment Date occurring in July 2003)
43. Average Sixty-Day Delinquency Ratio Test
(a) Sixty-Day Delinquency Ratio for
current Payment Date __________
(b) Average Sixty-Day Delinquency Ratio Test (arithmetic
average of ratios for this month and two preceding
months; may not exceed 10% of the Senior Subordination
Percentage calculated in Item 97) __________
44. Cumulative Realized Losses Test
(a) Cumulative Realized Losses for current Payment Date
(as a percentage of Cut-off Date Pool Principal
Balance; may not exceed 10.0% from July 15, 2003 to
July 14, 2004; 12.0% from July 15, 2004 to July 14,
2005; 14.0% from July 15, 2005, to July 14, 2006 and
15.0% thereafter) __________
45. The sum of the Class B-1 Adjusted Principal Balance and the
Class B-2 Adjusted Principal Balance divided by the Pool
Scheduled Principal Balance of the preceding Payment Date
(not to be less than 36.00%) __________
46. Supplementary Principal Distribution Test
(a) To be "satisfied" on any Payment Date,
C-6
<PAGE>
the Cumulative Realized Loss Ratio does not exceed
8.0% for any Payment Date on or prior to June 2001,
12.0% for any Payment Date after June 2001 but on or
before June 2002, 17.0% for any payment date after
June 2002 and the Current Realized Loss Ratio does
not exceed 7.0% __________
Class B-1 Principal
-------------------
47. Amount Available less all prior
distributions __________
48. Class B-1 Formula Principal Distribution Amount __________
49. Class B-1 Principal Distribution Amount __________
50. Class B-1 Principal Balance (after distributions of
principal on current Payment Date) __________
C-7
<PAGE>
Class B-2 Distribution Test
---------------------------
(test must be satisfied on and after the
Payment Date occurring in July 2003)
31. Average Sixty-Day Delinquency Ratio Test
(a) Sixty-Day Delinquency Ratio for
current Payment Date __________
(b) Average Sixty-Day Delinquency Ratio Test (arithmetic
average of ratios for this month and two preceding
months; may not exceed 10% of the Senior Subordination
Percentage calculated in Item 97.)
32. Cumulative Realized Losses Test
(a) Cumulative Realized Losses for current Payment Date
(as a percentage of Cut-off Date Pool Principal
Balance; may not exceed 10.0% from July 15, 2003 to
July 14, 2004; 12.0% from July 15, 2004 to July 14,
2005; 14.0% from July 15, 2005, to July 14, 2006 and
15.0% thereafter) __________
33. The Class B-2 Adjusted Principal Balance divided by the Pool
Scheduled Principal Balance of the preceding Payment Date
(not to be less than 13.10%) __________
__. Class B-2 Adjusted Principal Balance (not
to be less than $2,000,000) __________
34. Supplementary Principal Distribution Test
(a) To be "satisfied" on any Payment Date, the Cumulative
Realized Loss Ratio does not exceed 8.0% for any
Payment Date on or prior to June 2001, 12.0% for any
Payment Date after June 2001 but on or before June
2002, 17.0% for any payment date after June 2002 and
the Current Realized Loss Ratio does not exceed 7.0% __________
C-8
<PAGE>
52. Cumulative Realized Losses Test
(a) Cumulative Realized Losses for current Payment Date
(as a percentage of Cut-off Date Pool Principal
Balance; may not exceed 10.0% from July 15, 2003 to
July 14, 2004; 12.0% from July 15, 2004 to July 14,
2005; 14.0% from July 15, 2005, to July 14, 2006 and
15.0% thereafter) __________
53. The Class B-2 Adjusted Principal Balance divided by the Pool
Scheduled Principal Balance of the preceding Payment Date
(not to be less than 13.10%) __________
54. Class B-2 Adjusted Principal Balance (not to be
less than $2,000,000)
55. Supplementary Principal Distribution Test
(a) To be "satisfied" on any Payment Date, the Cumulative
Realized Loss Ratio does not exceed 8.0% for any
Payment Date on or prior to June 2001, 12.0% for any
Payment Date after June 2001 but on or before June
2002, 17.0% for any payment date after June 2002 and
the Current Realized Loss Ratio does not exceed 7.0% __________
Liquidation Loss Interest; Total Distribution
Class M-1
---------
56. (a) Amount Available less all prior distributions __________
(b) Class M-1 Formula Liquidation Loss Interest
Distribution Amount __________
(c) Amount applied to Unpaid Class M-1 Liquidation
Loss Interest Shortfall __________
(d) Remaining Unpaid Class M-1 Liquidation Loss
Interest Shortfall __________
57. Amount by which Class M-1 Formula Distribution Amount
(lines 15(c) and (d), 28, 45(b)) exceeds Class M-1
Distribution Amount (lines 15(e), 29, 45(c)) __________
Class M-2 Notes
---------------
C-9
<PAGE>
58. (a) Amount Available less all prior
distributions __________
(b) Class M-2 Formula Liquidation Loss Interest
Distribution Amount __________
(c) Amount applied to Unpaid Class M-2 Liquidation
Loss Interest Shortfall __________
(d) Remaining Unpaid Class M-2 Liquidation Loss
Interest Shortfall __________
59. Amount by which Class M-2 Formula Distribution Amount
(lines 16(c) and (d), 32, 47(b)) exceeds Class M-2
Distribution Amount (lines 16(e), 33, 47(c)) __________
60. Class B-1
---------
(a) Amount Available less all preceding distributions __________
(b) Class B-1 Formula Liquidation Loss Interest
Distribution Amount __________
(c) Amount applied to Unpaid Class B-1 Liquidation Loss
Interest Shortfall __________
(d) Remaining Unpaid Class B -1 Liquidation Loss
Interest Shortfall __________
61. Amount by which Class B-1 Formula Distribution Amount
(lines 17(c) and (d), 42, 49(b)) exceeds Class B-1
Distribution Amount (lines 17(e), 43, 49(c)) __________
Class B-2
---------
62. Amount Available less all prior distributions __________
Interest
63. (a) Class B-2 Interest Rate (11.16%) __________
(b) Class B-2 Interest Amount __________
(c) Unpaid Class B-2 Interest Shortfall __________
(d) Class B-2 interest paid __________
(e) Class B-2 Interest Carryover Shortfall __________
Principal
64. Amount Available after prior distributions __________
65. Class B-2 Formula Principal Distribution Amount __________
66. Class B-2 Liquidation Loss Principal Amount __________
C-10
<PAGE>
67. Guaranty Payment __________
68. Class B-2 Principal Distribution Amount __________
69. Class B-2 Principal Balance
(after distributions of principal on current Payment Date) __________
70. Amount by which Class B-2 Formula Distribution Amount
(lines 52(b) and (c), 54 and 55) exceeds Class B-2
Distribution Amount (lines 52(d) and 57)) __________
71. Monthly Servicing Fee
(if Company is Servicer) __________
Class B-2 Distribution Test
---------------------------
72. Average Sixty-Day Delinquency Ratio Test
(a) Sixty-Day Delinquency Ratio for
current Payment Date __________
(b) Average Sixty-Day Delinquency Ratio Test (arithmetic
average of ratios for this month and two preceding
months; may not exceed [4.5]%) __________
__________
Supplementary Principal Distribution
------------------------------------
Class A
-------
73. Supplementary Principal Distribution Amount __________
(a) Class A-1 __________
(b) Class A-1 Principal Balance (after of payment of (a)) __________
(c) Class A-2 __________
(d) Class A-2 Principal Balance (after payment of (c)) __________
74. Supplementary Principal Distribution Test; to be "satisfied,"
Cumulative Realized Loss Ratio (line 37(b)) may not exceed the
following ratio:
Payment Date Ratio
------------ -----
On or before June 2000 8.0%
After June 2000 and
<PAGE>
on or before June 2001 12.0%
After June 2001 and
on or before June 2002 15.0%
After June 2002 and
on or before June 2003 18.0%
After June 2003 21.0%
75. Monthly Servicing Fee (portion, if any, in excess of
1/12 of 0.75% of Pool Scheduled Principal Balance;
Company or Affiliate not Servicer) __________
Certificate Distribution Amount
76. Amount Available remaining after prior distributions __________
Class A, Class M, Class B Notes
77. Group 1 Pool Scheduled Principal Balance __________
78. Group 2 Pool Scheduled Principal Balance __________
79. Group 1 Pool Factor __________
80. Group 2 Pool Factor __________
81. Group 1 Note Pool Factor
Class A-1 __________
Class A-2 __________
Class M-1 __________
Class M-2 __________
Class B-1 __________
Class B-2 __________
82. Group 2 Note Pool Factor
Class A-1 __________
Class A-2 __________
Class M-1 __________
Class M-2 __________
Class B-1 __________
Class B-2 __________
C-12
<PAGE>
83. Group 1 Loans delinquent by number and aggregate
Scheduled Principal Balance:
(a) 30 - 59 days __________
(b) 60 - 89 days __________
(c) 90 or more days __________
84. Group 2 Loans delinquent by number and aggregate
Scheduled Principal Balance:
(a) 30 - 59 days __________
(b) 60 - 89 days __________
(c) 90 or more days __________
85. Group 1 Defaulted Loans, by number and Scheduled
Principal Balance:
(a) That became Defaulted Loans during related
Due Period __________
__________
(b) As of last day of related Due Period __________
__________
(c) That became Liquidated Loans during related
Due Period __________
__________
Net Liquidation Losses __________
(d) In foreclosure __________
__________
(e) Foreclosure completed __________
during related Due Period __________
(f) Foreclosed upon and held by Servicer __________
86. Group 2 Defaulted Loans, by number and Scheduled
Principal Balance:
(a) That became Defaulted Loans during related
Due Period __________
__________
(b) As of last day of related Due Period __________
(c) That became Liquidated Loans during related
Due Period __________
__________
Net Liquidation Losses __________
C-13
<PAGE>
(d) In foreclosure __________
__________
(e) Foreclosure completed __________
during related Due Period __________
(f) Foreclosed upon and held by Servicer __________
__________
87. Home Equity Pool Scheduled Principal Balance __________
88. Home Improvement Pool Scheduled Principal Balance __________
89. Home Equity Pool Factor __________
90. Home Improvement Pool Factor __________
91. Home Equity Note Pool Factor
Class A-1 __________
Class A-2 __________
Class M-1 __________
Class M-2 __________
Class B-1 __________
Class B-2 __________
92. Home Improvement Note Pool Factor
Class A-1 __________
Class A-2 __________
Class M-1 __________
Class M-2 __________
Class B-1 __________
Class B-2 __________
93. Home Equity Loans delinquent by number and aggregate
Scheduled Principal Balance:
(a) 30 - 59 days __________
(b) 60 - 89 days __________
(c) 90 or more days __________
94. Home Improvement Loans delinquent by number and aggregate
Scheduled Principal Balance:
(a) 30 - 59 days __________
(b) 60 - 89 days __________
(c) 90 or more days __________
C-14
<PAGE>
95. Home Equity Defaulted Loans, by number and Scheduled
Principal Balance:
(a) That became Defaulted Loans during related
Due Period __________
__________
(b) As of last day of related Due Period __________
__________
(c) That became Liquidated Loans during related
Due Period __________
__________
Net Liquidation Losses __________
(d) In foreclosure __________
__________
(e) Foreclosure completed __________
during related Due Period __________
(f) Foreclosed upon and held by Servicer __________
__________
96. Home Improvement Defaulted Loans, by number and
Scheduled Principal Balance:
(a) That became Defaulted Loans during related
Due Period __________
__________
(b) As of last day of related Due Period __________
__________
(c) That became Liquidated Loans during related
Due Period __________
__________
Net Liquidation Losses __________
(d) In foreclosure __________
__________
(e) Foreclosure completed __________
during related Due Period __________
(f) Foreclosed upon and held by Servicer __________
97. Senior Subordination Percentage (as of any Payment Date)
(a) Before the Class A Principal Balance has been
reduced to zero, the sum of the Class M-1 Adjusted
Principal Balance, the Class M-2 Adjusted Principal
Balance, the Class B-1 Adjusted Principal Balance and
the Class B-2
C-15
<PAGE>
Adjusted Principal Balance divided by
the Pool Scheduled Principal Balance;
(b) on any Payment Date on which the Class A
Principal Balance has been reduced to zero
and the Class M-1 Principal Balance has not
been reduced to zero, the sum of the Class M-2
Adjusted Principal Balance, the Class B-1 Adjusted
Principal Balance and the Class B-2 Adjusted
Principal Balance divided by the Pool
Scheduled Principal Balance;
(c) On any Payment Date on which the Class M-1
Principal Balance has been reduced to zero and the
Class M-2 Principal Balance has not been reduced to
zero, the sum of the Class B-1 Adjusted Principal
Balance and the Class B-2 Adjusted Principal Balance
divided by the Pool Scheduled Principal Balance; and
(d) On any Payment Date on which the Class M-2
Principal Balance has been reduced to zero and the
Class B-1 Principal Balance has not been reduced to
zero, the Class B-2 Adjusted Principal Balance divided
by the Pool Scheduled Principal Balance. __________
98. Cumulative Realized Loss Ratio
(a) As of any Payment Date, Cumulative Realized Losses
divided by the Cut-off Date Pool Principal Balance __________
99. Servicer Termination Test; to be "satisfied,"
(a) the Average Sixty-Day Delinquency Ratio may
not exceed 7.5%, __________
(b) the sum of the Realized Losses for the preceding
twelve Payment Dates may not exceed 7.5% of the
Pool Scheduled Principal Balance as of the first
Payment Date in such 12-month period, and __________
(c) the Cumulative Realized Loss Ratio (line 37(b))
may not exceed the following ratio:
C-16
<PAGE>
Payment Date Ratio
------------------------------------------ -------
On or before June 2000 8.0%
After June 2000 and on or before June 2001 12.0%
After June 2001 and on or before June 2002 15.0%
After June 2002 and on or before June 2003 18.0%
After June 2003 21.0%
The amounts of principal and interest distributions set out above are
expressed as a dollar amount per Note with a 1% Class Percentage Interest or per
$1,000 denomination of Note or Certificate.
Please contact __________________ of U.S. Bank Trust National Association,
__________________ with any questions regarding this Statement or your
Distribution.
C-17
<PAGE>
EXHIBIT D
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 "Servicer"), and that as such he is
duly authorized to execute and deliver this certificate on behalf of the
Servicer pursuant to Section 5.14 of the Sale and Servicing Agreement (the
"Agreement") dated as of June 30, 1999 between the Company and Green Tree Home
Improvement and Home Equity Loan Trust 1999-B (all capitalized terms used herein
without definition having the respective meanings specified in the Agreement),
and further certifies that:
1. The Monthly Report for the period from ________ to ________
attached to this certificate is complete and accurate in accordance with
the requirements of Section 5.14 of the Agreement; and
2. As of the date hereof, no Servicer Termination Event or event that
with notice or lapse of time or both would become an Servicer Termination
Event has occurred.
IN WITNESS WHEREOF, I have affixed hereunto my signature this ________ day
of June, 1999.
GREEN TREE FINANCIAL CORPORATION
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
D-1
<PAGE>
EXHIBIT D
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 "Servicer"), and that as such he is
duly authorized to execute and deliver this certificate on behalf of the
Servicer pursuant to Section 5.14 of the Sale and Servicing Agreement (the
"Agreement") dated as of June 30, 1999 between the Company and Green Tree Home
Improvement and Home Equity Loan Trust 1999-B (all capitalized terms used herein
without definition having the respective meanings specified in the Agreement),
and further certifies that:
1. The Monthly Report for the period from ________ to ________
attached to this certificate is complete and accurate in accordance with
the requirements of Section 5.14 of the Agreement; and
2. As of the date hereof, no Servicer Termination Event or event that
with notice or lapse of time or both would become an Servicer Termination
Event has occurred.
IN WITNESS WHEREOF, I have affixed hereunto my signature this ________ day
of June, 1999.
GREEN TREE FINANCIAL CORPORATION
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
D-1
<PAGE>
EXHIBIT 4.3
GREEN TREE HOME IMPROVEMENT AND
HOME EQUITY LOAN TRUST 1999-B
----------
INDENTURE
Dated as of June 1, 1999
----------
U.S. BANK TRUST NATIONAL ASSOCIATION
Indenture Trustee
<PAGE>
CROSS REFERENCE TABLE
TIA Indenture
Section Section
------- ---------
310 (a)(1)....................................................... 6.11
(a)(2)....................................................... 6.11
(a)(3)....................................................... 6.10
(a)(4)....................................................... NA
(a)(5)....................................................... 6.11
(b).......................................................... 6.08; 6.11
(c).......................................................... NA
311 (a).......................................................... 6.12
(b).......................................................... 6.12
(c).......................................................... NA
312 (a).......................................................... 7.01
(b).......................................................... 7.02
(c).......................................................... 7.02
313 (a).......................................................... 7.04
(b)(1)....................................................... 7.04
(b)(2)....................................................... 7.04
(c).......................................................... 11.05
(d).......................................................... 7.04
314 (a).......................................................... 7.03
(b).......................................................... 3.06; 11.15
(c)(1)....................................................... 11.01
(c)(2)....................................................... 11.01
(c)(3)....................................................... 11.01
(d).......................................................... 11.01
(e).......................................................... 11.01
(f).......................................................... 11.01
315 (a).......................................................... 6.01
(b).......................................................... 6.05; 11.05
(c).......................................................... 6.01
(d).......................................................... 6.01
(e).......................................................... 5.14
316 (a)(last sentence)........................................... 1.01
(a)(1)(A).................................................... 5.12
(a)(1)(B).................................................... 5.13
(a)(2)....................................................... NA
(b).......................................................... 5.08
(c).......................................................... NA
317 (a)(1)....................................................... 5.03
(a)(2)....................................................... 5.03
(b).......................................................... 3.03
318 (a).......................................................... 11.07
- ----------
Note: This Cross Reference Table shall not, for any purpose, be deemed to be
part of this Indenture. NA means Not Applicable.
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE.......................1-1
SECTION 1.01. Definitions.............................................1-1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.......1-9
SECTION 1.03. Rules of Construction...................................1-9
ARTICLE II THE NOTES.......................................................2-1
SECTION 2.01. Form....................................................2-1
SECTION 2.02. Execution, Authentication and Delivery..................2-1
SECTION 2.03. Temporary Notes.........................................2-2
SECTION 2.04. Registration; Registration of Transfer and Exchange.....2-2
SECTION 2.05. Mutilated, Destroyed, Lost or Stolen Notes..............2-4
SECTION 2.06. Person Deemed Owner.....................................2-4
SECTION 2.07. Payment of Principal and Interest; Defaulted Interest...2-5
SECTION 2.08. Cancellation............................................2-6
SECTION 2.09. Book-Entry Notes........................................2-6
SECTION 2.10. Notices to Depository...................................2-7
SECTION 2.11. Definitive Notes........................................2-7
SECTION 2.12. No Additional Notes.....................................2-7
ARTICLE III COVENANTS......................................................3-1
SECTION 3.01. Payment of Principal, Interest and Premium..............3-1
SECTION 3.02. Maintenance of Office or Agency.........................3-1
SECTION 3.03. Money for Payments To Be Held in Trust..................3-1
SECTION 3.04. Existence...............................................3-3
SECTION 3.05. Protection of Trust Estate..............................3-3
SECTION 3.06. Opinions as to Trust Estate.............................3-4
SECTION 3.07. Performance of Obligations; Servicing of Loans..........3-4
SECTION 3.08. Negative Covenants......................................3-5
SECTION 3.09. Annual Statement as to Compliance.......................3-6
SECTION 3.10. Issuer May Consolidate, etc. Only on Certain Terms......3-6
SECTION 3.11. Successor or Transferee.................................3-8
SECTION 3.12. No Other Business.......................................3-9
SECTION 3.13. No Borrowing............................................3-9
SECTION 3.14. Servicer's Obligations..................................3-9
SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities.......3-9
SECTION 3.16. Capital Expenditures....................................3-9
SECTION 3.17. Restricted Payments.....................................3-9
SECTION 3.18. Notice of Events of Default............................3-10
SECTION 3.19. Further Instruments and Acts...........................3-10
SECTION 3.20. Compliance with Laws...................................3-10
SECTION 3.21. Amendments of Sale and Servicing Agreement and
Trust Agreement....................................3-10
SECTION 3.22. Removal of Administrator...............................3-10
-i-
<PAGE>
SECTION 3.23. Income Tax Characterization............................3-10
SECTION 3.24. Investment Company Act.................................3-11
ARTICLE IV SATISFACTION AND DISCHARGE......................................4-1
SECTION 4.01. Satisfaction and Discharge of Indenture.................4-1
SECTION 4.02. Application of Trust Money..............................4-2
SECTION 4.03. Repayment of Moneys Held by Paying Agent................4-2
SECTION 4.04. Release of Trust Estate.................................4-2
ARTICLE V REMEDIES.........................................................5-1
SECTION 5.01. Events of Default.......................................5-1
SECTION 5.02. Rights upon Event of Default............................5-2
SECTION 5.03. Collection of Indebtedness and Suits for
Enforcement by Indenture Trustee; Authority
of Indenture Trustee................................5-2
SECTION 5.04. Remedies................................................5-4
SECTION 5.05. Optional Preservation of the Loans......................5-5
SECTION 5.06. Priorities..............................................5-5
SECTION 5.07. Limitation of Suits.....................................5-5
SECTION 5.08. Unconditional Rights of Noteholders To Receive
Principal and Interest..............................5-6
SECTION 5.09. Restoration of Rights and Remedies......................5-7
SECTION 5.10. Rights and Remedies Cumulative..........................5-7
SECTION 5.11. Delay or Omission Not a Waiver..........................5-7
SECTION 5.12. Control by the Note Insurer.............................5-7
SECTION 5.13. Waiver of Past Defaults.................................5-8
SECTION 5.14. Undertaking for Costs...................................5-8
SECTION 5.15. Waiver of Stay or Extension Laws........................5-9
SECTION 5.16. Action on Notes.........................................5-9
SECTION 5.17. Performance and Enforcement of Certain Obligations......5-9
ARTICLE VI THE TRUSTEE.....................................................6-1
SECTION 6.01. Duties of Indenture Trustee.............................6-1
SECTION 6.02. Rights of Indenture Trustee.............................6-3
SECTION 6.03. Individual Rights of Indenture Trustee..................6-4
SECTION 6.04. Indenture Trustee's Disclaimer..........................6-4
SECTION 6.05. Notice of Defaults......................................6-4
SECTION 6.06. Reports by Indenture Trustee to Holders.................6-4
SECTION 6.07. Compensation and Indemnity..............................6-4
SECTION 6.08. Replacement of Indenture Trustee........................6-5
SECTION 6.09. Successor Indenture Trustee by Merger...................6-6
SECTION 6.10. Appointment of Co-Indenture Trustee or Separate
Indenture Trustee...................................6-7
SECTION 6.11. Eligibility; Disqualification...........................6-8
SECTION 6.12. Preferential Collection of Claims Against Issuer........6-8
SECTION 6.13. Indenture Trustee to Cooperate..........................6-8
SECTION 6.14. Sale and Servicing Agreement............................6-9
-ii-
<PAGE>
SECTION 6.15. Indenture Trustee Advances..............................6-9
ARTICLE VII NOTEHOLDERS' LISTS AND REPORTS.................................7-1
SECTION 7.01. Issuer To Furnish Indenture Trustee Names and
Addresses of Noteholders............................7-1
SECTION 7.02. Preservation of Information; Communications to
Noteholders.........................................7-1
SECTION 7.03. Reports by Issuer.......................................7-1
SECTION 7.04. Reports by Indenture Trustee............................7-2
ARTICLE VIII ACCOUNTS, DISBURSEMENTS AND RELEASES..........................8-1
SECTION 8.01. Collection of Money.....................................8-1
SECTION 8.02. Trust Accounts..........................................8-1
SECTION 8.03. General Provisions Regarding Accounts...................8-5
ARTICLE IX SUPPLEMENTAL INDENTURES.........................................9-1
SECTION 9.01. Supplemental Indentures Without Consent
of Noteholders......................................9-1
SECTION 9.02. Supplemental Indentures With Consent of Noteholders.....9-2
SECTION 9.03. Execution of Supplemental Indentures....................9-3
SECTION 9.04. Effect of Supplemental Indenture........................9-4
SECTION 9.05. Conformity With Trust Indenture Act.....................9-4
SECTION 9.06. Reference in Notes to Supplemental Indentures...........9-4
ARTICLE X REDEMPTION OF NOTES.............................................10-1
SECTION 10.01. Redemption.............................................10-1
SECTION 10.02. Form of Redemption Notice..............................10-1
SECTION 10.03. Notes Payable on Redemption Date.......................10-1
ARTICLE XI MISCELLANEOUS..................................................11-1
SECTION 11.01. Compliance Certificates and Opinions, etc..............11-1
SECTION 11.02. Form of Documents Delivered to Indenture Trustee.......11-1
SECTION 11.03. Acts of Noteholders....................................11-2
SECTION 11.04. Notices, etc., to Indenture Trustee, Issuer, the
Note Insurer and Rating Agencies...................11-3
SECTION 11.05. Notices to Noteholders; Waiver.........................11-3
SECTION 11.06. Alternate Payment and Notice Provisions................11-4
SECTION 11.07. Conflict with Trust Indenture Act......................11-4
SECTION 11.08. Effect of Headings and Table of Contents...............11-4
SECTION 11.09. Successors and Assigns.................................11-5
SECTION 11.10. Severability...........................................11-5
SECTION 11.11. Benefits of Indenture..................................11-5
SECTION 11.12. Legal Holidays.........................................11-5
SECTION 11.13. Governing Law..........................................11-5
SECTION 11.14. Counterparts...........................................11-5
SECTION 11.15. Recording of Indenture.................................11-5
SECTION 11.16. Trust Obligation.......................................11-6
-iii-
<PAGE>
SECTION 11.17. No Petition............................................11-6
SECTION 11.18. Inspection.............................................11-6
SECTION 11.19. Grant of Owner Rights to Note Insurer..................11-7
SECTION 11.20. Third Party Beneficiary................................11-7
SECTION 11.21. Suspension and Termination of Note Insurer's Rights....11-7
EXHIBIT A-1 - Form of Indenture Trustee Acknowledgment....................A-1-1
EXHIBIT A-2 - Form of Indenture Trustee Acknowledgment....................A-2-1
EXHIBIT B - Form of Depository Agreement................................B-1
EXHIBIT C-1 - Form of Class A Certificate.................................C-1-1
EXHIBIT C-2 - Form of Class M Certificate.................................C-2-1
EXHIBIT C-3 - Form of Class B Certificate.................................C-3-1
-iv-
<PAGE>
INDENTURE, dated as of June 1, 1999, between Green Tree Home Improvement
and Home Equity Loan Trust 1999-B, a Delaware business trust (the "Issuer"), and
U.S. Bank Trust National Association, a national banking association organized
and existing under the laws of the United States of America, in its capacity as
trustee (the "Indenture Trustee") and not in its individual capacity.
Each party agrees as follows for the benefit of the other party and for the
equal and ratable benefit of the Holders of the Issuer's Class A-1 Notes (the
"Class A-1 Notes"), Class A-2 Notes (the "Class A-2 Notes"), Class M-1 Notes
(the "Class M-1 Notes"), Class M-2 Notes (the "Class M-2 Notes"), Class B-1
Notes (the "Class B-1 Notes"), and the Class B-2 Notes (the "Class B-2 Notes")
(collectively, the "Notes") and the Note Insurer.
As security for the payment and performance by the Issuer of its
obligations under this Indenture and the Notes, the Issuer has agreed to assign
the Indenture Collateral (as defined below) as collateral for the benefit of the
Indenture Trustee on behalf of the Noteholders and the Note Insurer:
GRANTING CLAUSE
The Issuer hereby Grants, transfers and assigns to the Indenture Trustee on
the Closing Date, on behalf of and for the benefit of the Noteholders and the
Note Insurer, without recourse, all of the Issuer's right, title and interest in
and to: (a) the Loans (including but not limited to the Collateral Security),
and all moneys payable thereon or in respect to the Loans, including any
liquidation proceeds therefrom but excluding payments due on the Loans prior to
the Cut-off Date; (b) the Errors and Omissions Protection Policy as such policy
relates to the Loans; (c) all items contained in the Loan Files; (d) the Trust
Accounts (other than the Certificate Distribution Account) and all funds on
deposit therein from time to time, and all investments and proceeds thereof
(including all income thereon); (e) the Issuer's rights and benefits, but none
of its obligations, under the Sale and Servicing Agreement; (f) the Issuer's
rights and benefits, but none of its obligations, under the Insurance Agreement;
and (g) all present and future claims, demands, causes and choses in action in
respect of any or all of the foregoing and all payments on or under and all
proceeds and products of every kind and nature whatsoever in respect of any or
all of the foregoing, including all proceeds of the conversion, voluntary or
involuntary, into cash or other liquid property, all cash proceeds, accounts,
accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit
accounts, insurance proceeds, condemnation awards, rights to payment of any and
every kind and other forms of obligations and Loans, instruments and other
property which at any time constitute all or part of or are included in the
proceeds of any of the foregoing (collectively, the "Indenture Collateral").
The foregoing Grant is made in trust to secure the payment of principal of
and interest on, and any other amounts owing in respect of, the Notes, equally
and ratably without prejudice, priority or distinction, and to secure compliance
with the provisions of this Indenture, all as provided in this Indenture.
The Indenture Trustee, for the benefit of the Holders of the Notes and the
Note Insurer, acknowledges such Grant, accepts the trusts under this Indenture
in accordance with the
1-1
<PAGE>
provisions of this Indenture and agrees to perform its duties required in this
Indenture to the best of its ability to the end that the interests of the
Holders of the Notes and the Note Insurer may be adequately and effectively
protected. The Indenture Trustee shall hold the Note Insurance Policy in trust
and shall hold any proceeds of any claim relating to the Class A Notes made upon
the Note Insurance Policy solely for the use and benefit of the Class A
Noteholders in accordance with the terms hereof and the terms of the Note
Insurance Policy.
1-2
<PAGE>
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
Except as otherwise specified herein or as the context may otherwise
require, the following terms have the respective meanings set forth below for
all purposes of this Indenture. Except as otherwise defined herein, all terms
defined in the Sale and Servicing Agreement or the Trust Agreement have the
meanings given them in such Related Document.
"Act" has the meaning specified in Section 11.03(a).
"Administration Agreement" means the Administration Agreement, dated as of
June 1, 1999, among the Administrator, the Issuer, and the Indenture Trustee, as
the same may be amended and supplemented from time to time.
"Administrator" means Green Tree Financial Servicing Corporation, a
Delaware corporation, or any successor Administrator under the Administration
Agreement.
"Affiliate" means, with respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Authorized Officer" means, with respect to the Issuer, any officer of the
Owner Trustee who is authorized to act for the Owner Trustee in matters relating
to the Issuer and who is identified on the list of Authorized Officers delivered
by the Owner Trustee to the Indenture Trustee on the Closing Date (as such list
may be modified or supplemented from time to time thereafter).
"Book-Entry Note" means any Note 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 Saturday, Sunday, legal holiday
or other day on which commercial banking institutions in Minneapolis, Minnesota,
New York, New York, Wilmington, Delaware or any other location of any successor
Servicer, successor Owner Trustee or successor Indenture Trustee are authorized
or obligated by law, executive order or governmental decree to remain closed.
"Certificate of Trust" means the Certificate of Trust of the Issuer
substantially in the form of Exhibit A to the Trust Agreement.
1-1
<PAGE>
"Certificate" means the Certificate issued under the Trust Agreement.
"Class A Notes" means the Class A-1 Notes and Class A-2 Notes.
"Class A-1 Interest Rate" means a per annum rate of interest equal to
7.11%, computed on the basis of a year of 360 days and twelve 30-day months.
"Class A-1 Notes" means the Class A-1 Notes substantially in the form of
Exhibit C-1.
"Class A-2 Interest Rate" means a per annum rate of interest equal to
7.11%, computed on the basis of a year of 360 days and twelve 30-day months.
"Class A-2 Notes" means the Class A-2 Notes substantially in the form of
Exhibit C-1.
"Class B-1 Interest Rate" means 13.55% per annum, computed on the basis of
a year of 360 days consisting of twelve 30-day months.
"Class B-1 Notes" means the Class B-1 Notes substantially in the form of
Exhibit C-3.
"Class B-2 Interest Rate" means 11.16% per annum, computed on the basis of
a 360-day year consisting of twelve 30-day months.
"Class B-2 Notes" means the Class B-2 Notes substantially in the form of
Exhibit C-3.
"Class M-1 Interest Rate" means a per annum rate of interest equal to
8.38%, calculated on the basis of a year of 360 days consisting of twelve 30-day
months.
"Class M-1 Notes" means the Class M-1 Notes substantially in the form of
Exhibit C-2.
"Class M-2 Interest Rate" means a per annum rate of interest equal to
10.54%, calculated on the basis of a year of 360 days consisting of twelve
30-day months.
"Class M-2 Notes" means the Class M-2 Notes substantially in the form of
Exhibit C-2.
"Closing Date" means June 30, 1999.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and Treasury Regulations promulgated thereunder.
"Collection Account" means the account established and maintained pursuant
to Section 6.01 of the Sale and Servicing Agreement.
"Company" means Green Tree Financial Corporation.
"Corporate Trust Office" means the principal office of the Indenture
Trustee at which at any particular time its corporate trust business shall be
administered which office at date of the
1-2
<PAGE>
execution of this Indenture is located at 180 East Fifth Street, St. Paul,
Minnesota 55101, Attention: Corporate Trust Administration, Structured Finance;
or at such other address as the Indenture Trustee may designate from time to
time by notice to the Noteholders and the Issuer, or the principal corporate
trust office of any successor Indenture Trustee (and such successor Indenture
Trustee will notify the Noteholders and the Issuer of its address).
"Default" means any occurrence that is, or with notice or the lapse of time
or both would become, an Event of Default.
"Definitive Notes" has the meaning specified in Section 2.09.
"Depository" means the initial Depository, The Depository Trust Company,
the nominee of which is Cede & Co., as the registered Holder of $193,400,000 in
aggregate principal amount of the Class A-1 Notes, $100,000,000 in aggregate
principal amount of the Class A-2 Notes, $34,600,000 in aggregate principal
amount of the Class M-1 Notes, $23,600,000 in aggregate principal amount of the
Class M-2 Notes, $22,200,000 in aggregate principal amount of the Class B-1
Notes and $26,200,000 in aggregate principal amount of the Class B-2 Notes, as
of the Closing Date, and any permitted successor depository. The Depository
shall at all times be a "clearing corporation" as defined in the Uniform
Commercial Code of the State of New York.
"Depository Agreement" means the agreement among the Issuer, the Indenture
Trustee, the Administrator, and The Depository Trust Company, as the initial
Depository, dated as of the Closing Date, relating to the Notes, substantially
in the form of Exhibit B.
"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.
"Event of Default" has the meaning specified in Section 5.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Executive Officer" means, with respect to any corporation, the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
Executive Vice President, any Vice President, any Responsible Officer, the
Secretary or the Treasurer of such corporation; and with respect to any
partnership, any general partner thereof.
"Final Scheduled Payment Date" means with respect to each Class of Notes,
the Payment Date occurring in the month and year indicated: Class A-1 -- July
15, 2026; Class A-2 -- July 15, 2026; Class M-1 -- July 15, 2026; Class M-2 --
July 15, 2026; Class B-1 -- July 15, 2026; and Class B-2 -- July 15, 2029.
"General Partner" has the meaning given in the Trust Agreement.
"Grant" means mortgage, pledge, bargain, sell, warrant, alienate, remise,
release, convey, assign, transfer, create, and grant a lien upon and a security
interest in and right of set-off against,
1-3
<PAGE>
deposit, set over and confirm pursuant to this Indenture. A Grant of the
Indenture Collateral or of any other agreement or instrument shall include all
rights, powers and options (but none of the obligations) of the Granting party
thereunder, including the immediate and continuing right to claim for, collect,
receive and give receipt for principal and interest payments in respect of the
Indenture Collateral and all other moneys payable thereunder, to give and
receive notices and other communications, to make waivers or other agreements,
to exercise all rights and options, to bring Proceedings in the name of the
Granting party or otherwise and generally to do and receive anything that the
Granting party is or may be entitled to do or receive thereunder or with respect
thereto.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Note Register.
"Indebtedness" means, with respect to any Person at any time, (a)
indebtedness or liability of such Person for borrowed money whether or not
evidenced by bonds, debentures, notes or other instruments, or for the deferred
purchase price of property or services (including trade obligations); (b)
obligations of such Person as lessee under leases which should have been or
should be, in accordance with generally accepted accounting principles, recorded
as capital leases; (c) current liabilities of such Person in respect of unfunded
vested benefits under plans covered by Title IV of ERISA; (d) obligations issued
for or liabilities incurred on the account of such Person; (e) obligations or
liabilities of such Person arising under acceptance facilities; (f) obligations
of such Person under any guarantees, endorsements (other than for collection or
deposit in the ordinary course of business) and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any Person
or otherwise to assure a creditor against loss; (g) obligations of such Person
secured by any lien on property or assets of such Person, whether or not the
obligations have been assumed by such Person; or (h) obligations of such Person
under any interest rate or currency exchange agreement.
"Indenture" means this Indenture as amended or supplemented from time to
time.
"Indenture Collateral" has the meaning specified in the Granting Clause of
this Indenture.
"Indenture Trustee Advance" has the meaning specified in Section 6.15(c).
"Independent" means, when used with respect to any specified Person, that
the Person (a) is in fact independent of the Issuer, any other obligor upon the
Notes, the Company and any Affiliate of any of the foregoing Persons, (b) does
not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Company or any Affiliate of
any of the foregoing Persons and (c) is not connected with the Issuer, any such
other obligor, the Company or any Affiliate of any of the foregoing Persons as
an officer, employee, promoter, underwriter, trustee, partner, director or
person performing similar functions.
"Independent Certificate" means a certificate or opinion to be delivered to
the Indenture Trustee under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01, made by an
Independent appraiser or other expert appointed by an Issuer Order and approved
by the Indenture Trustee in the exercise of reasonable care, and such
1-4
<PAGE>
opinion or certificate shall state that the signer has read the definition of
"Independent" in this Indenture and that the signer is Independent within the
meaning thereof.
"Interest Rate" means the Class A-1 Interest Rate, the Class A-2 Interest
Rate, the Class M-1 Interest Rate, the Class M-2 Interest Rate, the Class B-1
Interest Rate or the Class B-2 Interest Rate, as applicable.
"Issuer" means the party named as such in this Indenture until a successor
replaces it and, thereafter, means the successor and, for purposes of any
provision contained herein and required by the TIA, each other obligor on the
Notes.
"Issuer Order" and "Issuer Request" means a written order or request signed
in the name of the Issuer by any one of its Authorized Officers and delivered to
the Indenture Trustee.
"Note" means a Class A-1 Note, a Class A-2 Note, a Class M-1 Note, a Class
M-2 Note, a Class B-1 Note or a Class B-2 Note.
"Note Distribution Account" means the account designated as such,
established and maintained pursuant to Section 6.01 of the Sale and Servicing
Agreement.
"Note Owner" means, with respect to a Book-Entry Note, the Person who is
the owner of such Book-Entry Note, as reflected on the books of the Depository,
or on the books of a Person maintaining an account with such Depository
(directly as a Depository participant or as an indirect participant, in each
case in accordance with the rules of such Depository) and with respect to any
Definitive Notes, the Holder.
"Note Register" and "Note Registrar" have the respective meanings specified
in Section 2.04.
"Officers' Certificate" means a certificate signed by any Authorized
Officer of the Issuer, under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01, and delivered to,
the Indenture Trustee. Unless otherwise specified, any reference in this
Indenture to an Officers' Certificate shall be to an Officers' Certificate of
any Authorized Officer of the Issuer.
"Opinion of Counsel" means one or more written opinions of counsel who may,
except as otherwise expressly provided in this Indenture, be employees of or
counsel to the Issuer and who shall be satisfactory to the Indenture Trustee and
the Note Insurer and which shall comply with any applicable requirements of
Section 11.01, and shall be in form and substance satisfactory to the Indenture
Trustee and the Note Insurer.
"Original Class A-1 Principal Balance" means $193,400,000.
"Original Class A-2 Principal Balance" means $100,000,000.
"Original Class M-1 Principal Balance" means $34,600,000.
1-5
<PAGE>
"Original Class M-2 Principal Balance" means $23,600,000.
"Original Class B-1 Principal Balance" means $22,200,000.
"Original Class B-2 Principal Balance" means $26,200,000.
"Original Note Principal Balance" means the sum of the Original Class A-1
Principal Balance, Original Class A-2 Principal Balance, Original Class M-1
Principal Balance, Original Class M-2 Principal Balance, Original Class B-1
Principal Balance and Original Class B-2 Principal Balance.
"Outstanding" means, as of the date of determination, all Notes theretofore
authenticated and delivered under this Indenture except:
(i) Notes theretofore canceled by the Note Registrar or delivered to
the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in the
necessary amount has been theretofore deposited with the Indenture Trustee
or any Paying Agent in trust for the Holders of such Notes (provided,
however, that if such Notes are to be redeemed, notice of such redemption
has been duly given pursuant to this Indenture or provision therefor,
satisfactory to the Indenture Trustee, has been made); and
(iii) Notes in exchange for or in lieu of other Notes which have been
authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Indenture Trustee is presented that any such Notes are
held by a bona fide purchaser;
provided, however, that Class A Notes which have been paid with proceeds of the
Note Insurance Policy shall continue to remain Outstanding for purposes of this
Indenture until the Note Insurer has been paid as subrogee hereunder or
reimbursed pursuant to the Sale and Servicing Agreement or the Insurance
Agreement as evidenced by a written notice from the Note Insurer delivered to
the Indenture Trustee, and the Note Insurer shall be deemed to be the Holder
thereof to the extent of any payments thereon made by the Note Insurer,
provided, further, however, that in determining whether the Holders of the
requisite Outstanding Amount of the Notes have given any request, demand,
authorization, direction, notice, consent or waiver hereunder or under any
Related Document, Notes owned by the Issuer, any other obligor upon the Notes,
the Company or any Affiliate of any of the foregoing Persons shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Indenture Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only Notes
that the Indenture Trustee knows to be so owned shall be so disregarded. Notes
so owned that have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Indenture Trustee the
pledgee's right so to act with respect to such Notes and that the pledgee is not
the Issuer, any other obligor upon the Notes, the Company or any Affiliate of
any of the foregoing Persons.
1-6
<PAGE>
"Outstanding Amount" means the aggregate principal amount of all Notes, or
class of Notes, as applicable, Outstanding at the date of determination.
"Owner Trustee" means Wilmington Trust Company, not in its individual
capacity but solely as Owner Trustee under the Trust Agreement, or any successor
owner trustee under the Trust Agreement.
"Payment Date" means the fifteenth day of each calendar month during the
term of this Indenture or if such day is not a Business Day, the next succeeding
Business Day, commencing in July 1999.
"Paying Agent" means the Indenture Trustee or any other Person that meets
the eligibility standards for the Indenture Trustee specified in Section 6.11
and is authorized by the Issuer, with the consent of the Note Insurer, to make
the distributions from the Note Distribution Account, including payment of
principal of or interest on the Notes on behalf of the Issuer.
"Person" means any individual, corporation, estate, partnership, limited
liability company, joint venture, association, joint stock company, trust
(including any beneficiary thereof), unincorporated organization or government
or any agency or political subdivision thereof.
"Predecessor Note" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.05 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"Proceeding" means any suit in equity, action at law or other judicial or
administrative proceeding.
"Rating Agency" means each of Standard & Poor's and Moody's, so long as
such Persons maintain a rating on the Notes; and if either Standard & Poor's or
Moody's no longer maintains a rating on the Notes, such other nationally
recognized statistical rating organization selected by the Company.
"Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have been given 10 days (or such shorter period as is
acceptable to each Rating Agency) prior notice thereof and that each of the
Rating Agencies shall have notified the Company, the Servicer, the Indenture
Trustee, the Owner Trustee, the Note Insurer and the Issuer in writing that such
action will not result in a reduction or withdrawal of the then current rating
of the Notes.
"Record Date" means, with respect to a Payment Date or Redemption Date, the
close of business on the last Business Day immediately preceding such Payment
Date or Redemption Date.
1-7
<PAGE>
"Redemption Date" means in the case of a redemption of the Notes pursuant
to Section 10.01, the Payment Date specified by the Servicer or the Issuer
pursuant to Section 10.01.
"Redemption Price" means the sum of (a) (i) in the case of a redemption of
the Notes pursuant to Section 10.01, an amount equal to the principal amount of
the Notes redeemed plus accrued and unpaid interest on the principal amount of
each class of Notes at the respective Interest Rate for each such class of Notes
being so redeemed to but excluding the Redemption Date, or (ii) in the case of a
payment made to Noteholders pursuant to Section 10.01(b), the amount on deposit
in the Note Distribution Account, but not in excess of the amount specified in
clause (a)(i) above, plus (b) any and all amounts then owing to the Note Insurer
pursuant to the Insurance Agreement, after giving effect to such payment or
redemption.
"Registered Holder" means the Person in whose name a Note is registered on
the Note Register on the applicable Record Date.
"Related Documents" means the Trust Agreement, the Certificate, the Notes,
the Sale and Servicing Agreement, the Administration Agreement, the Insurance
Agreement, the Depository Agreement and the Underwriting Agreement. The Related
Documents executed by any party are referred to herein as "such party's Related
Documents," "its Related Documents" or by a similar expression.
"Responsible Officer" means, with respect to the Indenture Trustee, any
officer of the Indenture Trustee assigned by the Indenture Trustee to administer
its corporate trust affairs relating to the Trust Estate.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement,
dated as of June 1, 1999, among the Issuer, the Company and the Servicer.
"Schedule of Loans" means the listing of the Loans set forth in Exhibit A.
"Secured Obligations" means all amounts and obligations which the Issuer
may at any time owe to or on behalf of the Indenture Trustee for the benefit of
the Noteholders or the Note Insurer under this Indenture or the Notes or the
Note Insurance Policy.
"State" means any one of the 50 states of the United States of America or
the District of Columbia.
"Termination Date" means the date on which the Indenture Trustee shall have
received payment and performance of all Secured Obligations.
"Trust Estate" means all money, instruments, rights and other property that
are subject or intended to be subject to the lien and security interest of this
Indenture for the benefit of the Noteholders (including, without limitation, the
Indenture Collateral Granted to the Indenture Trustee), including all proceeds
thereof.
1-8
<PAGE>
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as in
force on the date hereof, unless otherwise specifically provided.
"Indenture Trustee" means U.S. Bank Trust National Association, a national
banking association organized under the laws of the United States, as Indenture
Trustee under this Indenture, or any successor Indenture Trustee under this
Indenture.
"UCC" means, unless the context otherwise requires, the Uniform Commercial
Code, as in effect in the relevant jurisdiction, as amended from time to time.
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Indenture Trustee.
"obligor" on the indenture securities means the Issuer and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule have
the meaning assigned to them by such definitions.
SECTION 1.03. Rules of Construction.
Unless otherwise specified:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles as in
effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
1-9
<PAGE>
(v) words in the singular include the plural and words in the plural
include the singular; and
(vi) references to Sections, Subsections, Schedules and Exhibits shall
refer to such portions of this Indenture.
1-10
<PAGE>
ARTICLE II
THE NOTES
SECTION 2.01. Form.
The Class A-1 Notes and the Class A-2 Notes, the Class M-1 Notes and the
Class M-2 Notes, and the Class B-1 Notes and the Class B-2 Notes, in each case
together with the Indenture Trustee's certificate of authentication, shall be in
substantially the forms set forth in Exhibits C-1, C-2 and C-3, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture and may have such letters, numbers or
other marks of identification and such legends or endorsements placed thereon as
may, consistently herewith, be determined by the officers executing such Notes,
as evidenced by their execution of the Notes. Any portion of the text of any
Note may be set forth on the reverse thereof, with an appropriate reference
thereto on the face of the Note.
The Definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods all as determined by
the officers executing such Notes, as evidenced by their execution of such
Notes.
Each Note shall be dated the date of its authentication. The terms of the
Notes set forth in Exhibits C-1, C-2 and C-3 are part of the terms of this
Indenture.
SECTION 2.02. Execution, Authentication and Delivery.
The Notes shall be executed on behalf of the Issuer by any of its
Authorized Officers. The signature of any such Authorized Officer on the Notes
may be manual or facsimile. Notes bearing the manual or facsimile signature of
individuals who were at any time Authorized Officers of the Issuer shall bind
the Issuer, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Notes or did
not hold such offices at the date of such Notes.
The Indenture Trustee shall, upon receipt of an Issuer Order, authenticate
and deliver for original issue Class A-1 Notes in an aggregate principal amount
of $193,400,000, Class A-2 Notes in an aggregate principal amount of
$100,000,000, Class M-1 Notes in an aggregate principal amount of $34,600,000,
Class M-2 Notes in an aggregate principal amount of $23,600,000, Class B-1 Notes
in an aggregate principal amount of $22,200,000 and Class B-2 Notes in an
aggregate principal amount of $26,200,000. The aggregate principal amount of
Class A-1 Notes, Class A-2 Notes, Class M-1 Notes, Class M-2 Notes, Class B-1
Notes and Class B-2 Notes outstanding at any time may not exceed that amount
except as provided in Section 2.05.
Each Note shall be dated the date of its authentication. The Notes shall be
issuable as registered Notes in the minimum denomination of $1,000 and in
integral multiples thereof.
2-1
<PAGE>
No Note shall be entitled to any benefit under this Indenture or be valid
or obligatory for any purpose, unless there appears on such Note a certificate
of authentication substantially in the form provided for herein executed by the
Indenture Trustee by the manual signature of one of its authorized signatories,
and such certificate upon any Note shall be conclusive evidence, and the only
evidence, that such Note has been duly authenticated and delivered hereunder.
SECTION 2.03. Temporary Notes.
Pending the preparation of Definitive Notes, the Issuer may execute, and
upon receipt of an Issuer Order the Indenture Trustee shall authenticate and
deliver, temporary Notes which are printed, lithographed, typewritten,
mimeographed or otherwise produced, of the tenor of the Definitive Notes in lieu
of which they are issued and with such variations not inconsistent with the
terms of this Indenture as the officers executing such Notes may determine, as
evidenced by their execution of such Notes.
If temporary Notes are issued, the Issuer will cause Definitive Notes to be
prepared without unreasonable delay. After the preparation of Definitive Notes,
the temporary Notes shall be exchangeable for Definitive Notes upon surrender of
the temporary Notes at the office or agency of the Issuer to be maintained as
provided in Section 3.02, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Notes, the Issuer shall execute and
the Indenture Trustee shall authenticate and deliver in exchange therefor a like
principal amount of Definitive Notes of authorized denominations. Until so
exchanged, the temporary Notes shall in all respects be entitled to the same
benefits under this Indenture as Definitive Notes.
SECTION 2.04. Registration; Registration of Transfer and Exchange.
The Issuer shall cause to be kept a register (the "Note Register") in
which, subject to such reasonable regulations as it may prescribe, the Issuer
shall provide for the registration of Notes and the registration of transfers of
Notes. The Indenture Trustee shall be "Note Registrar" for the purpose of
registering Notes and transfers of Notes as herein provided. Upon any
resignation of any Note Registrar, the Issuer, with the consent of the Note
Insurer, shall promptly appoint a successor or, if it elects not to make such an
appointment, assume the duties of Note Registrar.
If, with the consent of the Note Insurer, a Person other than the Indenture
Trustee is appointed by the Issuer as Note Registrar, the Issuer will give the
Indenture Trustee prompt written notice of the appointment of such Note
Registrar and of the location, and any change in the location, of the Note
Register, and the Indenture Trustee and the Note Insurer, shall have the right
to inspect the Note Register at all reasonable times and to obtain copies
thereof, and the Indenture Trustee and the Note Insurer shall have the right to
rely upon a certificate executed on behalf of the Note Registrar by an Executive
Officer thereof as to the names and addresses of the Holders of the Notes and
the principal amounts and number of such Notes.
Upon surrender for registration of transfer of any Note at the office or
agency of the Issuer to be maintained as provided in Section 3.02, the Issuer
shall execute, and the Indenture Trustee shall authenticate and the Noteholder
shall obtain from the Indenture Trustee, in the
2-2
<PAGE>
name of the designated transferee or transferees, one or more new Notes in any
authorized denominations, of a like aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes in any
authorized denominations, of a like aggregate principal amount, upon surrender
of the Notes to be exchanged at such office or agency. Whenever any Notes are so
surrendered for exchange, the Issuer shall execute, and the Indenture Trustee
shall authenticate and the Noteholder shall obtain from the Indenture Trustee,
the Notes which the Noteholder making the exchange is entitled to receive.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument of
transfer in form satisfactory to the Indenture Trustee duly executed by, the
Holder thereof or such Holder's attorney duly authorized in writing, with such
signature guaranteed by a commercial bank or trust company located, or having a
correspondent located, in the city of New York or the city in which the
Corporate Trust Office is located, or by a member firm of a national securities
exchange, and such other documents as the Indenture Trustee may require.
Each Noteholder, by acceptance of a Note and each Note Owner, by acceptance
of a beneficial interest in a Note, shall be deemed to have represented that
either (1) it is not acquiring the Note or a beneficial interest therein on
behalf of or with "plan assets" of an "employee benefit plan" within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended) or a "plan" (within the meaning of section 4975 of the Code) or (2) its
acquisition and holding of the Note, or beneficial interest therein, will not
give rise to a non-exempt prohibited transaction under section 406(a) of the
Employee Retirement Income Security Act of 1974, as amended, or section 4975 of
the Code.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Issuer or the Indenture Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Notes, other than exchanges pursuant to Section 2.03 or 9.06 not
involving any transfer.
The preceding provisions of this Section notwithstanding, the Issuer shall
not be required to make and the Note Registrar need not register transfers or
exchanges of Notes selected for redemption or of any Note for a period of 15
days preceding the due date for any payment with respect to the Note.
SECTION 2.05. Mutilated, Destroyed, Lost or Stolen Notes.
If (i) any mutilated Note is surrendered to the Indenture Trustee, or the
Indenture Trustee receives evidence to its satisfaction of the destruction, loss
or theft of any Note, and (ii) there is
2-3
<PAGE>
delivered to the Indenture Trustee such security or indemnity as may be required
by them to hold the Issuer and the Indenture Trustee harmless, then, in the
absence of notice to the Issuer, the Note Registrar or the Indenture Trustee
that such Note has been acquired by a bona fide purchaser, the Issuer shall
execute and upon its request the Indenture Trustee shall authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Note, a replacement Note; provided, however, that if any such destroyed,
lost or stolen Note, but not a mutilated Note, shall have become or within seven
days shall be due and payable, or shall have been called for redemption, instead
of issuing a replacement Note, the Issuer may pay such destroyed, lost or stolen
Note when so due or payable or upon the Redemption Date without surrender
thereof. If, after the delivery of such replacement Note or payment of a
destroyed, lost or stolen Note pursuant to the proviso to the preceding
sentence, a bona fide purchaser of the original Note in lieu of which such
replacement Note was issued presents for payment such original Note, the Issuer
and the Indenture Trustee shall be entitled to recover such replacement Note (or
such payment) from the Person to whom it was delivered or any Person taking such
replacement Note from such Person to whom such replacement Note was delivered or
any assignee of such Person, except a bona fide purchaser, and shall be entitled
to recover upon the security or indemnity provided therefor to the extent of any
loss, damage, cost or expense incurred by the Issuer or the Indenture Trustee in
connection therewith.
Upon the issuance of any replacement Note under this Section, the Issuer or
the Indenture Trustee may require the payment by the Holder of such Note of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in relation thereto and any other reasonable expenses (including the fees and
expenses of the Indenture Trustee or the Note Registrar) connected therewith.
Every replacement Note issued pursuant to this Section in replacement of
any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.06. Person Deemed Owner.
Prior to due presentment for registration of transfer of any Note, the
Issuer, the Indenture Trustee, the Note Insurer and any agent of the Issuer or
the Indenture Trustee or the Note Insurer may treat the Person in whose name any
Note is registered (as of the day of determination) as the owner of such Note
for the purpose of receiving payments of principal of and interest, if any, on
such Note and for all other purposes whatsoever, whether or not such Note is
overdue, and none of the Issuer, the Indenture Trustee nor any agent of the
Issuer, the Indenture Trustee or the Note Insurer shall be affected by notice to
the contrary.
2-4
<PAGE>
SECTION 2.07. Payment of Principal and Interest; Defaulted Interest.
(a) The Notes shall accrue interest as provided in the forms of the Class A
Notes, the Class M Notes and the Class B Notes set forth in Exhibits C-1, C-2
and C-3 and such interest shall be payable on each Payment Date as specified
therein, subject to Section 3.01. Any installment of interest or principal, if
any, payable on any Note which is punctually paid or duly provided for by the
Issuer on the applicable Payment Date shall be paid to the Person in whose name
such Note (or one or more Predecessor Notes) is registered on the Record Date,
by check mailed first-class, postage prepaid to such Person's address as it
appears on the Note Register on such Record Date, except that, unless Definitive
Notes have been issued pursuant to Section 2.11, with respect to Notes
registered on the Record Date in the name of the nominee of the Depository,
payment will be made by wire transfer in immediately available funds to the
account designated by such nominee and except for (i) the final installment of
principal payable with respect to such Note on a Payment Date and (ii) the
Redemption Price for any Note called for redemption pursuant to Section 10.01,
which shall be payable as provided below. The funds represented by any such
checks returned undelivered shall be held in accordance with Section 3.03.
(b) The principal of each Note shall be payable in installments on each
Payment Date as provided in the forms of the Class A Notes, the Class M Notes
and the Class B Notes set forth in Exhibits C-1, C-2 and C-3, respectively.
Notwithstanding the foregoing, the entire unpaid principal amount of the Notes
shall be due and payable, if not previously paid, on the date on which an Event
of Default shall have occurred and the Notes shall have been declared to be
immediately due and payable in the manner provided in Section 5.02. All
principal payments on a Class of Notes shall be made pro rata to the Noteholders
of such Class entitled thereto. The Indenture Trustee shall notify the Person in
whose name a Note is registered (with a copy to the Note Insurer if such Note is
a Class A Note) at the close of business on the Record Date preceding the
Payment Date on which the Issuer expects that the final installment of principal
of and interest on such Note will be paid. Such notice shall be mailed no later
than five days prior to such final Payment Date and shall specify that such
final installment will be payable only upon presentation and surrender of such
Note and shall specify the place where such Note may be presented and
surrendered for payment of such installment. Notices in connection with
redemptions of Notes shall be mailed to Noteholders and the Note Insurer as
provided in Section 10.02.
(c) Promptly following the date on which all principal of and interest on
the Class A-1 Notes and/or Class A-2 Notes has been paid in full and such Notes
have been surrendered to the Indenture Trustee, the Indenture Trustee shall, if
the Note Insurer has paid any amount in respect of such Notes under the Note
Insurance Policy that has not been reimbursed to the Note Insurer, deliver such
surrendered Notes to the Note Insurer.
SECTION 2.08. Cancellation.
Subject to Section 2.07(c), all Notes surrendered for payment, registration
of transfer, exchange or redemption shall, if surrendered to any Person other
than the Indenture Trustee, be delivered to the Indenture Trustee and shall be
promptly canceled by the Indenture Trustee.
2-5
<PAGE>
Subject to Section 2.07(c), the Issuer may at any time deliver to the Indenture
Trustee for cancellation any Notes previously authenticated and delivered
hereunder which the Issuer may have acquired in any manner whatsoever, and all
Notes so delivered shall be promptly canceled by the Indenture Trustee. No Notes
shall be authenticated in lieu of or in exchange for any Notes canceled as
provided in this Section, except as expressly permitted by this Indenture. All
canceled Notes may be held or disposed of by the Indenture Trustee in accordance
with its standard retention or disposal policy as in effect at the time unless
the Issuer shall direct by an Issuer Order that they be destroyed or returned to
it, provided that such Issuer Order is timely and the Notes have not been
previously disposed of by the Indenture Trustee.
SECTION 2.09. Book-Entry Notes.
The Notes, upon original issuance, will be issued in the form of a
typewritten Note or Notes representing the Book-Entry Notes, to be delivered to
The Depository Trust Company, the initial Depository, by, or on behalf of, the
Issuer. Each such Note shall initially be registered on the Note Register in the
name of Cede & Co., the nominee of the initial Depository, and no Note Owner
will receive a Definitive Note representing such Note Owner's interest in such
Note, except as provided in Section 2.11. Unless and until definitive, fully
registered Notes (the "Definitive Notes") have been issued to Note Owners
pursuant to Section 2.11:
(i) the provisions of this Section shall be in full force and effect;
(ii) the Note Registrar and the Indenture Trustee shall be entitled to
deal with the Depository for all purposes of this Indenture (including the
payment of principal of and interest on the Notes and the giving of
instructions or directions hereunder) as the sole holder of the Notes, and
shall have no obligation to the Note Owners;
(iii) to the extent that the provisions of this Section conflict with
any other provisions of this Indenture, the provisions of this Section
shall control;
(iv) the rights of Note Owners shall be exercised only through the
Depository and shall be limited to those established by law and agreements
between such Note Owners and the Depository and/or the Depository
Participants. Pursuant to the Depository Agreement, unless and until
Definitive Notes are issued pursuant to Section 2.11, the initial
Depository will make book-entry transfers among the Depository Participants
and receive and transmit payments of principal of and interest on the Notes
to such Depository Participants; and
(v) whenever this Indenture requires or permits actions to be taken
based upon instructions or directions of Holders of Notes evidencing a
specified percentage of the Outstanding Amount of the Notes, the Depository
shall be deemed to represent such percentage only to the extent that it has
received instructions to such effect from Note Owners and/or Depository
Participants owning or representing, respectively, such required percentage
of the beneficial interest in the Notes and has delivered such instructions
to the Indenture Trustee.
2-6
<PAGE>
SECTION 2.10. Notices to Depository.
Whenever a notice or other communication to the Noteholders is required
under this Indenture, unless and until Definitive Notes shall have been issued
to Note Owners pursuant to Section 2.11, the Indenture Trustee shall give all
such notices and communications specified herein to be given to Holders of the
Notes to the Depository and shall have no obligation to the Note Owners.
SECTION 2.11. Definitive Notes.
If (i) the Administrator advises the Indenture Trustee in writing that the
Depository is no longer willing or able properly to discharge its
responsibilities with respect to the Notes, and the Administrator is unable to
locate a qualified successor, (ii) the Administrator at its option advises the
Indenture Trustee in writing that it elects to terminate the book-entry system
through the Depository or (iii) after the occurrence of an Event of Default, a
Note Majority of each Class advises the Depository in writing that the
continuation of a book-entry system through the Depository is no longer in the
best interests of the Note Owners, then the Depository shall notify all Note
Owners, the Note Insurer and the Indenture Trustee of the occurrence of any such
event and of the availability of Definitive Notes to Note Owners requesting the
same. Upon surrender to the Indenture Trustee of the Note or Notes representing
the Book-Entry Notes by the Depository, accompanied by registration
instructions, the Issuer shall execute and the Indenture Trustee shall
authenticate the Definitive Notes in accordance with the instructions of the
Depository. None of the Issuer, the Note Registrar, the Note Insurer or the
Indenture 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 Notes, the Indenture Trustee shall
recognize the Holders of the Definitive Notes as Noteholders.
SECTION 2.12. No Additional Notes.
No Notes in addition to the Class A Notes, Class M Notes and Class B Notes
shall be issued under this Indenture.
2-7
<PAGE>
ARTICLE III
COVENANTS
SECTION 3.01. Payment of Principal, Interest and Premium.
The Issuer will duly and punctually pay the principal and interest on the
Notes in accordance with the terms of the Notes and this Indenture. Without
limiting the foregoing, the Issuer will cause to be distributed all amounts on
deposit in the Note Distribution Account on a Payment Date in accordance with
Section 8.02(c). Amounts properly withheld under the Code by any Person from a
payment to any Noteholder of interest and/or principal shall be considered as
having been paid by the Issuer to such Noteholder for all purposes of this
Indenture.
SECTION 3.02. Maintenance of Office or Agency.
The Issuer will maintain an office or agency where Notes may be surrendered
for registration of transfer or exchange, and where notices and demands to or
upon the Issuer in respect of the Notes and this Indenture may be served. The
Issuer hereby initially appoints the Indenture Trustee to serve as its agent for
the foregoing purposes. Such office will initially be located at the Corporate
Trust Office. The Issuer will give prompt written notice to the Indenture
Trustee of the location, and of any change in the location, of any such office
or agency. If at any time the Issuer shall fail to maintain any such office or
agency or shall fail to furnish the Indenture Trustee with the address thereof,
such surrenders, notices and demands may be made or served at the Corporate
Trust Office, and the Issuer hereby appoints the Indenture Trustee as its agent
to receive all such surrenders, notices and demands.
SECTION 3.03. Money for Payments To Be Held in Trust.
As provided in Section 8.02, all payments of amounts due and payable with
respect to any Notes that are to be made pursuant to Section 8.02(c) from
amounts withdrawn from the Note Distribution Account shall be made on behalf of
the Issuer by the Indenture Trustee or by another Paying Agent, and no amounts
so withdrawn from the Note Distribution Account for payment of Notes shall be
paid over to the Issuer.
On or before each Payment Date or Redemption Date, the Issuer shall deposit
or cause to be deposited in the Note Distribution Account an aggregate sum
sufficient to pay the amounts then becoming due, such sum to be held in trust
for the benefit of the Persons entitled thereto and shall promptly notify the
Note Insurer and (unless the Paying Agent is the Indenture Trustee) the
Indenture Trustee of its action or failure so to act.
3-1
<PAGE>
The Issuer will cause each Paying Agent other than the Indenture Trustee to
execute and deliver to the Indenture Trustee an instrument in which such Paying
Agent shall agree with the Indenture Trustee (and if the Indenture Trustee acts
as Paying Agent, it hereby so agrees), subject to the provisions of this
Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes or the Note Insurer in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and pay such sums to such Persons
as herein provided;
(ii) give the Indenture Trustee or the Note Insurer notice of any
default (of which it has actual knowledge) by the Issuer (or any other
obligor upon the Notes) in the making of any payment required to be made
with respect to the Notes;
(iii) at any time during the continuance of any such default, upon the
written request of the Indenture Trustee, forthwith pay to the Indenture
Trustee all sums so held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to the
Indenture Trustee all sums held by it in trust for the payment of Notes if
at any time it ceases to meet the standards required to be met by a Paying
Agent at the time of its appointment; and
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable
reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, by Issuer Order direct
any Paying Agent to pay to the Indenture Trustee all sums held in trust by such
Paying Agent, such sums to be held by the Indenture Trustee upon the same trusts
as those upon which the sums were held by such Paying Agent; and upon such
payment by any Paying Agent to the Indenture Trustee, such Paying Agent shall be
released from all further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds, any money held
by the Indenture Trustee or any Paying Agent in trust for the payment of any
amount due with respect to any Note and remaining unclaimed for two years after
such amount has become due and payable shall be discharged from such trust and
upon Issuer Request shall be deposited by the Indenture Trustee in the
Collection Account; and the Holder of such Note shall thereafter, as an
unsecured general creditor, look only to the Issuer for payment thereof, and all
liability of the Indenture Trustee or such Paying Agent with respect to such
trust money shall thereupon cease; provided, however, that the Indenture Trustee
or such Paying Agent, before being required to make any such repayment, may at
the expense of the Issuer cause to be published once, in a newspaper published
in the English language, customarily published on each Business Day and of
general circulation in the city of New York, notice that such money remains
unclaimed and that, after a
3-2
<PAGE>
date specified therein, which shall not be less than 30 days from the date of
such publication, any unclaimed balance of such money then remaining will be
repaid to or for the account of the Issuer. The Indenture Trustee may also adopt
and employ, at the expense of the Issuer, any other reasonable means of
notification of such repayment (including, but not limited to, mailing notice of
such repayment to Holders whose Notes have been called but have not been
surrendered for redemption or whose right to or interest in moneys due and
payable but not claimed is determinable from the records of the Indenture
Trustee or of any Paying Agent, at the last address of record for each such
Holder).
SECTION 3.04. Existence.
The Issuer will keep in full effect its existence, rights and franchises as
a business trust under the laws of the State of Delaware (unless it becomes, or
any successor Issuer hereunder is or becomes, organized under the laws of any
other state or of the United States of America, in which case the Issuer will
keep in full effect its existence, rights and franchises under the laws of such
other jurisdiction) and will obtain and preserve its qualification to do
business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Indenture, the
Notes, the Indenture Collateral and each other instrument or agreement included
in the Trust Estate.
SECTION 3.05. Protection of Trust Estate.
The Issuer intends the security interest Granted pursuant to this Indenture
in favor of the Indenture Trustee to be prior to all other liens in respect of
the Trust Estate, and the Issuer shall take all actions necessary to obtain and
maintain, in favor of the Indenture Trustee, for the benefit of the Noteholders,
a first lien on and a first priority, perfected security interest in the Trust
Estate. The Issuer will from time to time execute and deliver all such
supplements and amendments hereto and all such financing statements,
continuation statements, instruments of further assurance and other instruments,
all as prepared by the Servicer and delivered to the Issuer, or otherwise upon
the direction of the Note Insurer, and will take such other action necessary or
advisable to:
(i) grant more effectively all or any portion of the Trust Estate;
(ii) maintain or preserve the lien and security interest (and the
priority thereof) created by this Indenture or carry out more effectively
the purposes hereof;
(iii) perfect, publish notice of or protect the validity of any Grant
made or to be made by this Indenture, including the filing of continuation
statements with respect to any UCC financing statements covering the
Indenture Collateral filed in favor of the Indenture Trustee;
(iv) enforce any of the Indenture Collateral;
(v) preserve and defend title to the Trust Estate and the rights of
the Indenture Trustee in such Trust Estate against the claims of all
persons and parties; or
3-3
<PAGE>
(vi) pay all taxes or assessments levied or assessed upon the Trust
Estate when due.
The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required by the Indenture Trustee pursuant to this Section.
SECTION 3.06. Opinions as to Trust Estate.
(a) Promptly after the execution and delivery of this Indenture, the Issuer
shall furnish to the Indenture Trustee and the Note Insurer an Opinion of
Counsel to the effect that, in the opinion of such counsel, either (i) all
financing statements and continuation statements have been executed and filed
that are necessary to create and continue the Indenture Trustee's first priority
perfected security interest in the Indenture Collateral for the benefit of the
Noteholders and the Note Insurer, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are given, or (ii)
no such action shall be necessary to perfect such security interest; and
(b) Within 90 days after the beginning of each calendar year beginning with
the first calendar year beginning more than three months after the Cut-off Date,
the Issuer shall furnish to the Indenture Trustee and the Note Insurer an
Opinion of Counsel, dated as of a date during such 90-day period, to the effect
that, in the opinion of such counsel, either (i) all financing statements and
continuation statements have been executed and filed that are necessary to
create and continue the Indenture Trustee's first priority perfected security
interest in the Indenture Collateral for the benefit of the Noteholders, and
reciting the details of such filing or referring to prior Opinions of Counsel in
which such details are given, or (ii) no such action shall be necessary to
perfect such security interest. Such Opinion of Counsel shall also describe the
recording, filing, re-recording and refiling of this Indenture, any indentures
supplemental hereto and any other requisite documents and the execution and
filing of any financing statements and continuation statements that will, in the
opinion of such counsel, be required to maintain the lien and security interest
of this Indenture until the 90th day following the end of such calendar year.
SECTION 3.07. Performance of Obligations; Servicing of Loans.
(a) The Issuer will not take any action and will use its best efforts not
to permit any action to be taken by others that would release any Person from
any of such Person's material covenants or obligations under any instrument or
agreement included in the Trust Estate or that would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or agreement, except as
expressly provided in this Indenture, the Sale and Servicing Agreement or such
other instrument or agreement.
(b) The Issuer has contracted with the Servicer and the Administrator to
assist the Issuer in performing its duties under this Indenture. With the prior
written consent of Note Insurer, the Issuer may contract with other Persons to
assist it in performing its duties under this Indenture, and any performance of
such duties by a Person identified to the Indenture Trustee and
3-4
<PAGE>
the Note Insurer in an Officers' Certificate of the Issuer shall be deemed to be
action taken by the Issuer.
(c) The Issuer will punctually perform and observe all of its obligations
and agreements contained in this Indenture, the Related Documents and in the
instruments and agreements included in the Trust Estate, including but not
limited to filing or causing to be filed all UCC financing statements and
continuation statements required to be filed by the terms of this Indenture and
the Sale and Servicing Agreement in accordance with and within the time periods
provided for herein and therein.
(d) If the Issuer shall have knowledge of the occurrence of a "Servicer
Termination Event" under the Sale and Servicing Agreement, the Issuer shall
promptly notify the Indenture Trustee, the Note Insurer and the Rating Agencies
thereof, and shall specify in such notice the action, if any, the Issuer is
taking with respect of such default. If a "Servicer Termination Event" shall
arise from the failure of the Servicer to perform any of its duties or
obligations under the Sale and Servicing Agreement with respect to the Loans,
the Issuer shall take all reasonable steps available to it to remedy such
failure.
(e) If the Issuer has given notice of termination to the Servicer of the
Servicer's rights and powers pursuant to Section 7.01 of the Sale and Servicing
Agreement, as promptly as possible thereafter, the Issuer shall with the prior
written consent of, or upon the direction of the Note Insurer, appoint a
successor servicer in accordance with Section 7.01 of the Sale and Servicing
Agreement.
(f) Upon any termination of the Servicer's rights and powers pursuant to
the Sale and Servicing Agreement, the Issuer shall promptly notify the Indenture
Trustee and the Note Insurer. As soon as a successor Servicer is appointed, the
Issuer shall notify the Indenture Trustee and the Note Insurer of such
appointment, specifying in such notice the name and address of such successor
Servicer.
(g) The Issuer agrees that it will not waive timely performance or
observance by the Servicer, the Indenture Trustee or the Company of their
respective duties under the Related Documents without the prior written consent
of the Note Insurer or if the effect thereof would adversely affect the Holders
of the Notes.
SECTION 3.08. Negative Covenants.
Until the Termination Date, the Issuer shall not, except as expressly
permitted by this Indenture or the Sale and Servicing Agreement or any Related
Document,
(i) sell, transfer, exchange or otherwise dispose of any of the
properties or assets of the Issuer, including those included in the Trust
Estate, unless directed to do so by the Indenture Trustee or the Note
Insurer;
(ii) claim any credit on, or make any deduction from the principal,
interest or premium payable in respect of, the Notes (other than amounts
properly withheld from
3-5
<PAGE>
such payments under the Code) or assert any claim against any present or
former Noteholder by reason of the payment of the taxes levied or assessed
upon any part of the Trust Estate;
(iii) (A) permit the validity or effectiveness of this Indenture to be
impaired, or permit the lien in favor of the Indenture Trustee created by
this Indenture to be amended, hypothecated, subordinated, terminated or
discharged, or permit any Person to be released from any covenants or
obligations with respect to the Notes under this Indenture, (B) permit any
lien, charge, excise, claim, security interest, mortgage or other
encumbrance (other than the lien in favor of the Indenture Trustee created
by this Indenture) to be created on or extend to or otherwise arise upon or
burden the Trust Estate or any part thereof or any interest therein or the
proceeds thereof (other than tax liens, mechanics' liens and other liens
that arise by operation of law, in each case on the real property securing
a Loan and arising solely as a result of an action or omission of the
related Obligor), (C) permit the lien in favor of the Indenture Trustee
created by this Indenture not to constitute a valid first priority (other
than with respect to any such tax, mechanics' or other lien) security
interest in the Trust Estate, or (D) amend, modify or fail to comply with
the provisions of the Related Documents without the prior written consent
of the Indenture Trustee and the Note Insurer; or
(iv) take any other action or fail to take any action that may cause
the Issuer or the Trust (or any portion thereof) to be characterized as (a)
an association (or a publicly traded limited partnership) taxable as a
corporation pursuant to Section 7701 or 7704 of the Code and the
corresponding regulations or (b) a taxable mortgage pool pursuant to
Section 7701(i) of the Code and the corresponding regulations.
SECTION 3.09. Annual Statement as to Compliance.
The Issuer will deliver to the Indenture Trustee and the Note Insurer,
within 120 days after the end of each fiscal year of the Issuer (commencing with
the fiscal year ended December 31, 1999), an Officers' Certificate stating, as
to the Authorized Officer signing such Officer's Certificate, that
(i) a review of the activities of the Issuer during such year and of
performance under this Indenture has been made under such Authorized
Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based on such
review, the Issuer has complied with all conditions and covenants under
this Indenture throughout such year, or, if there has been a default in the
compliance of any such condition or covenant, specifying each such default
known to such Authorized Officer and the nature and status thereof.
SECTION 3.10. Issuer May Consolidate, etc. Only on Certain Terms.
(a) The Issuer shall not consolidate or merge with or into any other
Person, unless
3-6
<PAGE>
(i) the Person (if other than the Issuer) formed by or surviving such
consolidation or merger shall be a Person organized and existing under the
laws of the United States of America or any State and shall expressly
assume, by an indenture supplemental hereto, executed and delivered to the
Indenture Trustee, in form and substance satisfactory to the Indenture
Trustee, the due and punctual payment of the principal of and interest on
all Notes and the performance or observance of every agreement and covenant
of this Indenture and each other Related Document on the part of the Issuer
to be performed or observed, all as provided herein;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel which shall
be delivered to and shall be satisfactory to the Indenture Trustee to the
effect that such transaction will not have any material adverse tax
consequence to the Issuer, any Noteholder or any Certificateholder;
(v) any action as is necessary to maintain the lien and security
interest created in favor of the Indenture Trustee by this Indenture shall
have been taken;
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officers' Certificate and an Opinion of Counsel (which shall describe the
actions taken as required by clause (a)(v) of this Section 3.10 or that no
such actions will be taken) each stating that such consolidation or merger
and such supplemental indenture comply with this Article III and that all
conditions precedent herein provided for relating to such transaction have
been compiled with (including any filing required by the Exchange Act);
(vii) the Issuer or the Person (if other than the Issuer) formed by or
surviving such consolidation or merger has a net worth, immediately after
such consolidation or merger, that is (a) greater than zero and (b) not
less than the net worth of the Issuer immediately prior to giving effect to
such consolidation or merger; and
(viii) the Note Insurer shall have given its prior written consent.
(b) The Issuer shall not convey or transfer all or substantially all of its
properties or assets, including those included in the Trust Estate, to any
Person (except as expressly permitted by the Indenture, the Sale and Servicing
Agreement or any Related Document), unless
(i) the Person that acquires by conveyance or transfer the properties
and assets of the Issuer shall (A) be a United States citizen or a Person
organized and existing under the laws of the United States of America or
any State, (B) expressly assume, by an indenture supplemental hereto,
executed and delivered to the Indenture Trustee, in form and substance
satisfactory to the Indenture Trustee, the due and punctual payment of the
3-7
<PAGE>
principal of and interest on all Notes and the performance or observance of
every agreement and covenant of this Indenture and each Related Document on
the part of the Issuer to be performed or observed, all as provided herein,
(C) expressly agree by means of such supplemental indenture that all right,
title and interest so conveyed or transferred shall be subject and
subordinate to the rights of Holders of the Notes, (D) unless otherwise
provided in such supplemental indenture, expressly agree to indemnify,
defend and hold harmless the Issuer and the Indenture Trustee against and
from any loss, liability or expense arising under or related to this
Indenture and the Notes and (E) expressly agree by means of such
supplemental indenture that such Person (or if a group of Persons, then one
specified Person) shall make all filings with the Commission (and any other
appropriate Person) required by the Exchange Act in connection with the
Notes;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel which shall
be delivered to and shall be satisfactory to the Indenture Trustee to the
effect that such transaction will not have any material adverse tax
consequence to the Issuer, any Noteholder or any Certificateholder;
(v) any action as is necessary to maintain the lien and security
interest created in favor of the Indenture Trustee by this Indenture shall
have been taken;
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officers' Certificate and an Opinion of Counsel (which shall describe the
actions taken as required by clause (b)(v) of this Section 3.10 or that no
such actions will be taken) each stating that such conveyance or transfer
and such supplemental indenture comply with this Article III and that all
conditions precedent herein provided for relating to such transaction have
been complied with (including any filing required by the Exchange Act);
(vii) the Person acquiring by conveyance or transfer the properties or
assets of the Issuer has a net worth, immediately after such conveyance or
transfer, that is (a) greater than zero and (b) not less than the net worth
of the Issuer immediately prior to giving effect to such conveyance or
transfer; and
(viii) the Note Insurer shall have given its prior written consent.
SECTION 3.11. Successor or Transferee.
(a) Upon any consolidation or merger of the Issuer in accordance with
Section 3.10(a), the Person formed by or surviving such consolidation or merger
(if other than the Issuer) shall succeed to, and be substituted for, and may
exercise every right and power of, the Issuer under this Indenture with the same
effect as if such Person had been named as the Issuer herein.
3-8
<PAGE>
(b) Upon a conveyance or transfer of all the assets and properties of the
Issuer pursuant to Section 3.10(b), the Issuer will be released from every
covenant and agreement of this Indenture to be observed or performed on the part
of the Issuer with respect to the Notes immediately upon the delivery of written
notice to the Indenture Trustee and the Note Insurer stating that the Issuer is
to be so released.
SECTION 3.12. No Other Business.
The Issuer shall not engage in any business other than financing,
purchasing, owning, selling and managing the Loans in the manner contemplated by
this Indenture and the Related Documents and activities incidental thereto.
SECTION 3.13. No Borrowing.
The Issuer shall not issue, incur, assume, guarantee or otherwise become
liable, directly or indirectly, for any Indebtedness except for (i) the Notes
and (ii) any other Indebtedness permitted by or arising under the Related
Documents. The proceeds of the Notes and the Certificates shall be used
exclusively to fund the Issuer's purchase of the Loans and the other assets
specified in the Sale and Servicing Agreement, and to pay the Issuer's
organizational, transactional and start-up expenses.
SECTION 3.14. Servicer's Obligations.
The Issuer shall cause the Servicer to fulfill its obligations under the
Sale and Servicing Agreement.
SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities.
Except as contemplated by the Sale and Servicing Agreement or this
Indenture, the Issuer shall not make any loan or advance or credit to, or
guarantee (directly or indirectly or by an instrument having the effect of
assuming another's payment or performance on any obligation or capability of so
doing or otherwise), endorse or otherwise become contingently liable, directly
or indirectly, in connection with the obligations, stocks or dividends of, or
own, purchase, repurchase or acquire (or agree contingently to do so) any stock,
obligations, assets or securities of, any other interest in, or make any capital
contribution to, any other Person.
SECTION 3.16. Capital Expenditures.
The Issuer shall not make any expenditure (by long-term or operating lease
or otherwise) for capital assets (either realty or personalty).
SECTION 3.17. Restricted Payments.
Except as expressly permitted by this Indenture or the Sale and Servicing
Agreement, the Issuer shall not, directly or indirectly, (i) make any
distribution (by reduction of capital or otherwise), whether in cash, property,
securities or a combination thereof, to the Owner Trustee
3-9
<PAGE>
or any owner of a beneficial interest in the Issuer or otherwise with respect to
any ownership or equity interest or security in or of the Issuer or to the
Servicer, (ii) redeem, purchase, retire or otherwise acquire for value any such
ownership or equity interest or security or (iii) set aside or otherwise
segregate any amounts for any such purpose. The Issuer will not, directly or
indirectly, make payments to or distributions from the Collection Account except
in accordance with this Indenture and the Related Documents.
SECTION 3.18. Notice of Events of Default.
The Issuer agrees to give the Indenture Trustee, the Note Insurer and the
Rating Agencies prompt written notice of each Event of Default hereunder and
each default on the part of the Servicer or the Company of its obligations under
the Sale and Servicing Agreement.
SECTION 3.19. Further Instruments and Acts.
Upon request of the Indenture Trustee or the Note Insurer, the Issuer will
execute and deliver such further instruments and do such further acts as may be
reasonably necessary or proper to carry out more effectively the purpose of this
Indenture.
SECTION 3.20. Compliance with Laws.
The Issuer shall comply with the requirements of all applicable laws, the
noncompliance with which would, individually or in the aggregate, materially and
adversely affect the ability of the Issuer to perform its obligations under the
Notes, this Indenture or any Related Document.
SECTION 3.21. Amendments of Sale and Servicing Agreement and Trust
Agreement.
The Issuer shall not agree to any amendment to Section 10.03 of the Sale
and Servicing Agreement or Section 11.1 of the Trust Agreement to eliminate the
requirements thereunder that the Indenture Trustee, the Note Insurer or the
Holders of the Notes consent to amendments thereto as provided therein.
SECTION 3.22. Removal of Administrator.
So long as any Notes are issued and Outstanding, the Issuer shall not
remove the Administrator without cause unless the Rating Agency Condition shall
have been satisfied in connection with such removal and the Issuer shall have
obtained the prior written consent of the Note Insurer.
SECTION 3.23. Income Tax Characterization.
For purposes of federal income, state and local income and franchise and
any other income taxes, the Issuer will treat the Notes as indebtedness of the
Issuer. The Issuer, by entering into this Indenture, and each Noteholder, by its
acceptance of its Note (and each Note Owner by its acceptance of an interest in
the applicable Book-Entry Note), agree to treat the Notes for federal, state and
local income, single business and franchise tax purposes as indebtedness.
3-10
<PAGE>
SECTION 3.24. Investment Company Act.
The Issuer shall not become an "investment company" or under the "control"
of an "investment company" as such terms are defined in the Investment Company
Act of 1940, as amended (or any successor or amendatory statute), and the rules
and regulations thereunder (taking into account not only the general definition
of the term "investment company" but also any available exceptions to such
general definition);provided, however, that the Issuer shall be in compliance
with this Section 3.24 if it shall have obtained an order exemption it from
regulation as an "investment company" so long as it is in compliance with the
conditions imposed in such order.
3-11
<PAGE>
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.01. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect with respect to the
Notes except as to (i) rights of registration of transfer and exchange, (ii)
substitution of mutilated, destroyed, lost or stolen Notes, (iii) rights of
Noteholders to receive payments of principal, interest and premium, if any,
thereon, (iv) Sections 3.03, 3.04, 3.05, 3.07, 3.08, 3.10, 3.12, 3.13, 3.20,
3.21 and 3.23, (v) the rights, obligations and immunities of the Indenture
Trustee hereunder (including the rights of the Indenture Trustee under Section
6.07 and the obligations of the Indenture Trustee under Section 4.02) and of the
Note Insurer hereunder and (vi) the rights of Noteholders as beneficiaries
hereof with respect to the property so deposited with the Indenture Trustee
payable to all or any of them, and the Indenture Trustee, on demand of and at
the expense of the Issuer, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture with respect to the Notes, when
(A) either
(1) all Notes theretofore authenticated and delivered (other than
(i) Notes that have been destroyed, lost or stolen and that have been
replaced or paid as provided in Section 2.05 and (ii) Notes for whose
payment money has theretofore been deposited in trust or segregated
and held in trust by the Issuer and thereafter repaid to the Issuer or
discharged from such trust, as provided in Section 3.03) have been
delivered to the Indenture Trustee for cancellation; or
(2) all Notes not theretofore delivered to the Indenture Trustee
for cancellation
(i) have become due and payable, or
(ii) will become due and payable at the applicable Final
Scheduled Payment Date within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Indenture Trustee for the giving
of notice of redemption by the Indenture Trustee in the name, and
at the expense, of the Issuer,
and the Issuer, in the case of (i), (ii) or (iii) above, has irrevocably
deposited or caused to be irrevocably deposited with the Indenture Trustee
as part of the Trust Estate cash or direct obligations of or obligations
guaranteed by the United States of America (which will mature prior to the
date such amounts are payable), in trust in an Eligible Account in the name
of the Indenture Trustee for such purpose, in an amount sufficient to pay
and discharge (a) the entire indebtedness on such Notes not theretofore
delivered to the
4-1
<PAGE>
Indenture Trustee for cancellation when due to the applicable Final
Scheduled Payment Date or Redemption Date (if Notes shall have been called
for redemption pursuant to Section 10.01), as the case may be and (b) all
amounts due to the Note Insurer pursuant to the Insurance Agreement;
(B) the Issuer has paid or caused to be paid all Secured Obligations;
and
(C) the Issuer has delivered to the Indenture Trustee and the Note
Insurer an Officers' Certificate, an Opinion of Counsel and (if required by
the TIA or the Indenture Trustee) an Independent Certificate from a firm of
certified public accountants, each meeting the applicable requirements of
Section 11.01(a) and each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture
have been complied with and the Rating Agency Condition has been satisfied.
SECTION 4.02. Application of Trust Money.
All moneys deposited with the Indenture Trustee pursuant to Section 4.01
hereof shall be held in trust and applied by it, in accordance with the
provisions of the Notes and this Indenture, to the payment, either directly or
through any Paying Agent, as the Indenture Trustee may determine, to the Holders
of the particular Notes for the payment or redemption of which such moneys have
been deposited with the Indenture Trustee, of all sums due and to become due
thereon for principal and interest; but such moneys need not be segregated from
other funds except to the extent required herein or in the Sale and Servicing
Agreement or required by law.
SECTION 4.03. Repayment of Moneys Held by Paying Agent.
In connection with the satisfaction and discharge of this Indenture with
respect to the Notes, all moneys then held by any Paying Agent other than the
Indenture Trustee under the provisions of this Indenture with respect to such
Notes shall, upon demand of the Issuer, be paid to the Indenture Trustee to be
held and applied according to Section 3.03 and thereupon such Paying Agent shall
be released from all further liability with respect to such moneys.
SECTION 4.04. Release of Trust Estate.
The Indenture Trustee shall, on or after the Termination Date, release any
remaining portion of the Trust Estate from the lien created by this Indenture
and deposit in the Collection Account any funds then on deposit in any other
Trust Account. The Indenture Trustee shall release property from the lien
created by this Indenture pursuant to this Section 4.04 only upon receipt of an
Issuer Request accompanied by an Officer's Certificate, an Opinion of Counsel
and (if required by the TIA) Independent Certificates in accordance with TIA
ss.ss. 314(c) and 314(d)(1) meeting the applicable requirements of Section
11.01.
4-2
<PAGE>
ARTICLE V
REMEDIES
SECTION 5.01. Events of Default.
"Event of Default," wherever used herein, means any one of the following
events (whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) default in the payment of any interest on any Note when the same
becomes due and payable, provided that the determination of a default shall
be made without regard to payments made by the Note Insurer; or
(ii) default in the payment of the principal of any Note when the same
becomes due and payable, provided that the determination of a default shall
be made without regard to payments made by the Note Insurer; or
(iii) default in the observance or performance of any covenant or
agreement of the Issuer made in this Indenture (other than a covenant or
agreement, a default in the observance or performance of which is elsewhere
in this Section specifically dealt with), or any representation or warranty
of the Issuer made in this Indenture or in any certificate or other writing
delivered pursuant hereto or in connection herewith proving to have been
incorrect in any material respect as of the time when the same shall have
been made, and such default shall continue or not be cured, or the
circumstance or condition in respect of which such misrepresentation or
warranty was incorrect shall not have been eliminated or otherwise cured,
for a period of 30 days after there shall have been given, by registered or
certified mail, to the Issuer by the Indenture Trustee or to the Issuer and
the Indenture Trustee by the Note Insurer or by the Holders of at least 25%
of the Outstanding Amount of the Notes, with the prior written consent of
the Note Insurer, a written notice specifying such default or incorrect
representation or warranty and requiring it to be remedied and stating that
such notice is a "Notice of Default" hereunder; or
(iv) the commencement of an involuntary case against the Issuer under
any applicable Federal or state bankruptcy, insolvency or other similar law
now or hereafter in effect, and such case is not dismissed within 60 days;
or
(v) the commencement by the Issuer of a voluntary case under any
applicable Federal or state bankruptcy, insolvency or other similar law now
or hereafter in effect, the entry of an order for relief in an involuntary
case against the Issuer under any such law, the consent by the Issuer to
the entry of any such order for relief, the consent by the Issuer to the
appointment or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Issuer or for
any substantial part of the Trust Estate, the making by the Issuer of any
general assignment for the benefit of creditors, the
5-1
<PAGE>
failure by the Issuer generally to pay its debts as such debts become due,
or the taking of action by the Issuer in furtherance of any of the
foregoing.
The Issuer shall deliver to the Indenture Trustee and the Note Insurer,
within five days after obtaining knowledge of the occurrence thereof, written
notice in the form of an Officers' Certificate of any event which with the
giving of notice and the lapse of time would become an Event of Default under
clause (iii), its status and what action the Issuer is taking or proposes to
take with respect thereto.
SECTION 5.02. Rights upon Event of Default.
If an Event of Default shall have occurred and be continuing, the Indenture
Trustee (x) shall, upon the direction or with the prior written consent of the
Note Insurer if the Event of Default relates in whole or in part to or affects
the Class A-1 Notes or the Class A-2 Notes, or (y) if a Note Insurer Event of
Default has occurred and is continuing may, and if so requested in writing by
Holders holding Notes representing at least 66-2/3% of the Outstanding Amount of
each Class of Notes then Outstanding shall, or (z) if the Event of Default
relates solely to or solely affects a Class of Notes other than the Class A-1
Notes or the Class A-2 Notes, the Indenture Trustee may, and if so requested in
writing by the Holders of (i) 66-2/3% of the Outstanding Amount of each Class of
Notes to which the Event of Default relates or which it affects and (ii) 66-2/3%
of the Outstanding Amount of each Class of Notes which is senior in priority to
the Class of Notes to which the Event of Default relates or which it affects,
shall, upon prior written notice to the Rating Agencies, declare by written
notice to the Issuer that the Notes become due, whereupon they shall become,
immediately due and payable at par, together with accrued interest thereon. For
the avoidance of doubt, an Event of Default in Section 5.01(iii) shall be deemed
to relate to and affect each class of Notes. Notwithstanding anything to the
contrary in this Section, if an Event of Default specified in Section 5.01(iv)
or (v) shall occur and be continuing the Notes shall become immediately due and
payable at par, together with accrued interest thereon. If an Event of Default
shall have occurred and be continuing, the Indenture Trustee may, subject to the
provisions of Section 5.04(a), exercise any of the remedies specified in Section
5.04(a).
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee; Authority of Indenture Trustee.
(a) The Issuer covenants that if any Notes are accelerated following the
occurrence of an Event of Default, the Issuer will, upon demand of the Indenture
Trustee or at the direction of the Note Insurer, pay to the Indenture Trustee,
for the benefit of the Holders of such Notes and the Note Insurer, the whole
amount then due and payable on such Notes for principal and interest, with
interest upon the overdue principal, and, to the extent payment at such rate of
interest shall be legally enforceable, upon overdue installments of interest, at
the applicable Interest Rate and in addition thereto such further amount as
shall be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Indenture
Trustee and the Note Insurer and their respective agents and counsel.
5-2
<PAGE>
(b) If an Event of Default occurs and is continuing, the Indenture Trustee
shall at the direction of the Note Insurer, and if a Note Insurer Default has
occurred and is continuing, the Indenture Trustee may, in its discretion,
proceed to protect and enforce its rights and the rights of the Noteholders and
the Note Insurer, by such appropriate Proceedings as the Indenture Trustee shall
deem most effective to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid of
the exercise of any power granted herein, or to enforce any other proper remedy
or legal or equitable right vested in the Indenture Trustee by this Indenture or
by law.
(c) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Trust Estate, Proceedings under Title 11 of the United States Code or any
other applicable Federal or state bankruptcy, insolvency or other similar law,
or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or Person,
or in case of any other comparable judicial Proceedings relative to the Issuer
or other obligor upon the Notes, or to the creditors or property of the Issuer
or such other obligor, the Indenture Trustee, irrespective of whether the
principal of any Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee shall
have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal, interest and premium, if any, owing and unpaid in respect of the
Notes and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Indenture Trustee (including
any claim for reasonable compensation to the Indenture Trustee and each
predecessor Indenture Trustee and the Note Insurer, and their respective
agents, attorneys and counsel, and for reimbursement of all expenses and
liabilities incurred, and all advances made, by the Indenture Trustee and
each predecessor Indenture Trustee, except as a result of negligence or bad
faith), the Note Insurer and of the Noteholders allowed in such
Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote on
behalf of the Holders of Notes in any election of a trustee, a standby
trustee or Person performing similar functions in any such Proceedings;
(iii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute all amounts received with
respect to the claims of the Noteholders, the Note Insurer and of the
Indenture Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of the Indenture
Trustee, the Note Insurer or the Holders of Notes allowed in any judicial
proceedings relative to the Issuer, its creditors and its property;
5-3
<PAGE>
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders and the
Note Insurer to make payments to the Indenture Trustee, and, in the event that
the Indenture Trustee shall consent to the making of payments directly to such
Noteholders and the Note Insurer, to pay to the Indenture Trustee such amounts
as shall be sufficient to cover reasonable compensation to the Indenture
Trustee, each predecessor Indenture Trustee and their respective agents,
attorneys and counsel, and all other expenses and liabilities incurred, and all
advances made, by the Indenture Trustee and each predecessor Indenture Trustee
except as a result of negligence or bad faith.
(d) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Noteholder or the Note Insurer any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any Holder
thereof or the Note Insurer or to authorize the Indenture Trustee to vote in
respect of the claim of any Noteholder in any such proceeding except, as
aforesaid, to vote for the election of a trustee in bankruptcy or similar
Person.
(e) All rights of action and of asserting claims under this Indenture or
under any of the Notes, may be enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceedings relative thereto, and any such action or Proceedings instituted by
the Indenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the expenses,
disbursements and compensation of the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Holders of the Notes or the Note Insurer.
(f) In any Proceedings brought by the Indenture Trustee (including any
Proceedings involving the interpretation of any provision of this Indenture),
the Indenture Trustee shall be held to represent all the Holders of the Notes,
and it shall not be necessary to make any Noteholder a party to any such
Proceedings.
SECTION 5.04. Remedies.
If an Event of Default shall have occurred and be continuing, the Indenture
Trustee shall, at the direction of the Note Insurer, or if a Note Insurer Event
of Default has occurred and is continuing may (subject to Section 5.05):
(i) institute Proceedings in its own name and as or on behalf of a
trustee of an express trust for the collection of all amounts then payable
on the Notes or to the Note Insurer or under this Indenture with respect
thereto, whether by declaration or otherwise, enforce any judgment
obtained, and collect from the Issuer and any other obligor upon such Notes
moneys adjudged due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Trust Estate;
5-4
<PAGE>
(iii) exercise any remedies of a secured party under the UCC and any
other remedy available to the Indenture Trustee and take any other
appropriate action to protect and enforce the rights and remedies of the
Indenture Trustee on behalf of the Noteholders and the Note Insurer; and
(iv) sell the Trust Estate or any portion thereof or rights or
interest therein, at one or more public or private sales called and
conducted in any manner permitted by law; provided, however, that the
Indenture Trustee may not sell or otherwise liquidate the Trust Estate
following an Event of Default unless (x) so directed by the Note Insurer
or, (y) if a Note Insurer Event of Default has occurred and is continuing,
(A) such Event of Default is of the type described in Section 5.01(i) or
(ii), or (B) either (I) the Holders of 100% of the Outstanding Amount of
the Notes consent thereto, (II) the proceeds of such sale or liquidation
distributable to the Noteholders will be sufficient to discharge in full
all amounts then due and unpaid upon such Notes for principal and interest,
or (III) the Indenture Trustee determines that the Trust Estate will not
continue to provide sufficient funds for the payment of principal of and
interest on the Notes as they would have become due if the Notes had not
been declared due and payable, and in each case the Indenture Trustee
provides prior written notice to the Rating Agencies and obtains the
consent of Holders of 66-2/3% of the Outstanding Amount of each Class of
Notes. In determining such sufficiency or insufficiency with respect to
clause (II) or (III), the Indenture Trustee may, but need not, obtain and
rely upon an opinion of an Independent investment banking or accounting
firm of national reputation as to the feasibility of such proposed action
and as to the sufficiency of the Trust Estate for such purpose.
SECTION 5.05. Optional Preservation of the Loans.
If any Notes have been declared to be due and payable under Section 5.02
following an Event of Default and such declaration and its consequences have not
been rescinded and annulled, the Indenture Trustee may, but need not, elect to
maintain possession of the Trust Estate. It is the desire of the parties hereto
and the Noteholders that there be at all times sufficient funds for the payment
of principal of and interest on the Notes, and the Indenture Trustee shall take
such desire into account when determining whether or not to maintain possession
of the Trust Estate. In determining whether to maintain possession of the Trust
Estate, the Indenture Trustee may, but need not, obtain and rely upon an opinion
of an Independent investment banking or accounting firm of national reputation
as to the feasibility of such proposed action and as to the sufficiency of the
Trust Estate for such purpose.
SECTION 5.06. Priorities.
If the Indenture Trustee collects any money or property pursuant to this
Article V, including any money or property in respect of liquidation of the
Trust Estate pursuant to Section 5.04(a)(iv), the Indenture Trustee shall pay
out the money or property in the following order:
FIRST: amounts due and owing and required to be distributed to the
Servicer pursuant to priority (i) of Section 6.06(a) of the Sale and
Servicing Agreement and not previously distributed;
5-5
<PAGE>
SECOND: amounts due and owing to the Note Insurer pursuant to priority
(ii) of Section 6.06(a) of the Sale and Servicing Agreement and not
previously distributed;
THIRD: to Class A Noteholders for amounts unpaid on the Class A Notes
for interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Class A Notes for interest;
FOURTH: to Class M-1 Noteholders for amounts unpaid on the Class M-1
Notes for interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Class M-1 Notes for
interest accrued on the Class M-1 Adjusted Principal Balance;
FIFTH: to Class M-2 Noteholders for amounts unpaid on the Class M-2
Notes for interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Class M-2 Notes for
interest accrued on the Class M-2 Adjusted Principal Balance;
SIXTH: to Class B-1 Noteholders for amounts due and unpaid on the
Class B-1 Notes for interest, ratably, without preference or priority of
any kind, according to the amounts due and payable on the Class B-1 Notes
for interest accrued on the Class B-1 Adjusted Principal Balance;
SEVENTH: to Class A Noteholders for amounts unpaid on the Class A
Notes for principal, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Class A Notes for
principal;
EIGHTH: to Class M-1 Noteholders for amounts unpaid on the Class M-1
Notes for principal, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Class M-1 Notes for
principal;
NINTH: to Class M-2 Noteholders for amounts unpaid on the Class M-2
Notes for principal, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Class M-2 Notes for
principal;
TENTH: to Class B-1 Noteholders for amounts unpaid on the Class B-1
Notes for principal, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Class B-1 Notes for
principal;
ELEVENTH: to Class M-1 Noteholders for amounts unpaid with respect to
Class M-1 Liquidation Loss Interest Distribution Amounts and Class M-1
Liquidation Loss Interest Shortfalls;
TWELFTH: to Class M-2 Noteholders for amounts unpaid with respect to
Class M-2 Liquidation Loss Interest Distribution Amounts and Class M-2
Liquidation Loss Interest Shortfalls;
5-6
<PAGE>
THIRTEENTH: to Class B-1 Noteholders for amounts unpaid with respect
to Class B-1 Liquidation Loss Interest Distribution Amounts and Class B-1
Liquidation Loss Interest Shortfalls;
FOURTEENTH: to Class B-2 Noteholders for amounts due and unpaid on the
Class B-2 Notes for interest, ratably, without preference or priority of
any kind, according to the amounts due and payable on the Class B-1 Notes
for interest;
FIFTEENTH: to Class B-2 Noteholders for amounts unpaid on the Class
B-2 Notes for principal, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Class B-2 Notes for
principal;
SIXTEENTH: amounts due and owing and required to be distributed to the
Servicer pursuant to priority (xiii) of Section 6.06(a) of the Sale and
Servicing Agreement and not previously distributed;
SEVENTEENTH: amounts due and owing and required to be distributed to
the Servicer or the Indenture Trustee, as applicable, pursuant to priority
(xiv) of Section 6.06(a) of the Sale and Servicing Agreement and not
previously distributed;
EIGHTEENTH: amounts due and owing and required to be distributed to
the Servicer pursuant to priority (xvi) of Section 6.06(a) of the Sale and
Servicing Agreement and not previously distributed; and
NINETEENTH: the remainder, if any, to the Issuer.
SECTION 5.07. Limitation of Suits.
No Holder of any Note shall have any right to institute any Proceeding,
judicial or otherwise, with respect to this Indenture, or for the appointment of
a receiver or trustee, or for any other remedy hereunder for so long as no Note
Insurer Event of Default has occurred and is continuing. No Holder of any Note
shall have any right to institute any Proceeding, judicial or otherwise, with
respect to this Indenture, or for the appointment of a receiver or trustee, or
for any other remedy hereunder if a Note Insurer Event of Default has occurred
and is continuing, unless:
(i) such Holder has previously given written notice to the Indenture
Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25% of the Outstanding Amount of the
Notes have made written request to the Indenture Trustee to institute such
Proceeding in respect of such Event of Default in its own name as Indenture
Trustee hereunder;
(iii) such Holder or Holders have offered to the Indenture Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in complying with such request;
5-7
<PAGE>
(iv) the Indenture Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute such
Proceedings; and
(v) no direction inconsistent with such written request has been given
to the Indenture Trustee during such 60-day period by the Holders of a
majority of the Outstanding Amount of the Notes;
it being understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Notes or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Notes,
each representing less than a majority of the Outstanding Amount of the Notes,
the Indenture Trustee in its sole discretion may determine what action, if any,
shall be taken, notwithstanding any other provisions of this Indenture.
SECTION 5.08. Unconditional Rights of Noteholders To Receive Principal and
Interest.
Notwithstanding any other provisions in this Indenture, the Holder of any
Note shall have the right, which is absolute and unconditional, to receive
payment of the principal of and interest on such Note on or after the respective
due dates thereof expressed in such Note or in this Indenture (or, in the case
of redemption, on or after the Redemption Date) and to institute suit for the
enforcement of any such payment, and such right shall not be impaired without
the consent of such Holder.
SECTION 5.09. Restoration of Rights and Remedies.
If the Indenture Trustee, the Note Insurer or any Noteholder has instituted
any Proceeding to enforce any right or remedy under this Indenture and such
Proceeding has been discontinued or abandoned for any reason or has been
determined adversely to the Indenture Trustee, the Note Insurer or to such
Noteholder, then and in every such case the Issuer, the Indenture Trustee, the
Note Insurer and the Noteholders shall, subject to any determination in such
Proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter all rights and remedies of the Indenture Trustee, the
Note Insurer and the Noteholders shall continue as though no such Proceeding had
been instituted.
SECTION 5.10. Rights and Remedies Cumulative.
No right or remedy herein conferred upon or reserved to the Indenture
Trustee, the Note Insurer or to the Noteholders is intended to be exclusive of
any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or
5-8
<PAGE>
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
SECTION 5.11. Delay or Omission Not a Waiver.
No delay or omission of the Indenture Trustee, the Note Insurer or any
Holder of any Note to exercise any right or remedy accruing upon any Default or
Event of Default shall impair any such right or remedy or constitute a waiver of
any such Default or Event of Default or an acquiescence therein. Every right and
remedy given by this Article V or by law to the Indenture Trustee, the Note
Insurer or to the Noteholders may be exercised from time to time, and as often
as may be deemed expedient, by the Indenture Trustee, the Note Insurer or by the
Noteholders, as the case may be.
SECTION 5.12. Control by the Note Insurer.
The Note Insurer, or if a Note Insurer Default exists, the Owners of a
majority of the Outstanding Amount of the Notes, shall have the right to direct
the time, method and place of conducting any Proceeding for any remedy available
to the Indenture Trustee with respect to the Notes or exercising any trust or
power conferred on the Indenture Trustee; provided that:
(a) such direction shall not be in conflict with any rule of law or
with this Indenture;
(b) if a Note Insurer Default exists, subject to the express terms of
Section 5.04, any direction to the Indenture Trustee to sell or liquidate
the Indenture Collateral shall be by Owners of Notes representing not less
than 100% of the Outstanding Amount of the Notes;
(c) if the conditions set forth in Section 5.05 have been satisfied
and the Indenture Trustee elects to retain the Indenture Collateral
pursuant to such Section, then any direction to the Indenture Trustee by
Holders of Notes representing less than 100% of the Outstanding Amount of
the Notes to sell or liquidate the Indenture Collateral shall be of no
force and effect; and
(d) if a Note Insurer Default exists, the Indenture Trustee may take
any such action deemed proper by the Indenture Trustee that is not
inconsistent with such direction.
Notwithstanding the rights of the Note Insurer and the Noteholders set
forth in this Section, subject to Section 6.01, the Indenture Trustee need not
take any action that it determines might involve it in liability or might
materially adversely affect the rights of any Noteholders not consenting to such
action.
SECTION 5.13. Waiver of Past Defaults.
5-9
<PAGE>
Prior to the declaration of the acceleration of the maturity of the Notes
as provided in Section 5.02, the Note Insurer, or if a Note Insurer Default
exists, Noteholders representing not less than a Note Majority of each Class of
Notes, may waive any past Default or Event of Default and its consequences
except a Default (a) in the payment of principal of or interest on any of the
Notes or (b) in respect of a covenant or provision hereof that cannot be
modified or amended without the consent of the Note Insurer or the Holder of
each Note, as applicable. In the case of any such waiver, the Issuer, the
Indenture Trustee, the Note Insurer and the Noteholders shall be restored to
their former positions and rights hereunder, respectively; but no such waiver
shall extend to any subsequent or other Default or impair any right consequent
thereto.
SECTION 5.14. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Note by such
Holder's acceptance thereof shall be deemed to have agreed, that any court may
in its discretion require, in any suit for the enforcement of any right or
remedy under this Indenture, or in any suit against the Indenture Trustee for
any action taken, suffered or omitted by it as Indenture Trustee, the filing by
any party litigant in such suit of an undertaking to pay the costs of such suit
and that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in such suit, having due
regard to the merits and good faith of the claims or defenses made by such party
litigant; but the provisions of this Section shall not apply to (a) any suit
instituted by the Indenture Trustee or the Note Insurer, (b) any suit instituted
by any Noteholder, or group of Noteholders, in each case holding in the
aggregate more than 10% of the Outstanding Amount of the Notes or (c) any suit
instituted by any Noteholder for the enforcement of the payment of principal of
or interest on any Note on or after the respective due dates expressed in such
Note and in this Indenture (or, in the case of redemption, on or after the
Redemption Date).
SECTION 5.15. Waiver of Stay or Extension Laws.
The Issuer covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead or in any manner whatsoever, claim or
take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, that may affect the covenants or the
performance of this Indenture; and the Issuer (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantages of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Indenture Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
SECTION 5.16. Action on Notes.
The Indenture Trustee's right to seek and recover judgment on the Notes or
under this Indenture shall not be affected by the seeking, obtaining or
application of any other relief under or with respect to this Indenture. Neither
the lien of this Indenture nor any rights or remedies of the Indenture Trustee
or the Noteholders shall be impaired by the recovery of any judgment by
5-10
<PAGE>
the Indenture Trustee against the Issuer or by the levy of any execution under
such judgment upon any portion of the Trust Estate or upon any of the assets of
the Issuer.
SECTION 5.17. Performance and Enforcement of Certain Obligations.
(a) Promptly following a request from the Indenture Trustee or the Note
Insurer to do so and at the Administrator's expense, the Issuer agrees to take
all such lawful action as the Indenture Trustee may request to compel or secure
the performance and observance by the Company or the Servicer, as applicable, of
each of their obligations to the Issuer under or in connection with the Sale and
Servicing Agreement in accordance with the terms thereof, and to exercise any
and all rights, remedies, powers and privileges lawfully available to the Issuer
under or in connection with the Sale and Servicing Agreement to the extent and
in the manner directed by the Indenture Trustee or the Note Insurer, including
the transmission of notices of default on the part of the Company or the
Servicer thereunder and the institution of legal or administrative actions or
proceedings to compel or secure performance by the Company or the Servicer of
each of their obligations under the Sale and Servicing Agreement.
(b) If an Event of Default has occurred and is continuing, the Indenture
Trustee (i) shall, at the direction of the Note Insurer, and (ii) if a Note
Insurer Default exists may, and at the direction (which direction shall be in
writing, including facsimile) of the Holders of 66-2/3% of the Outstanding
Amount of each Class of Notes shall, exercise all rights, remedies, powers,
privileges and claims of the Issuer against the Company or the Servicer under or
in connection with the Sale and Servicing Agreement, including the right or
power to take any action to compel or secure performance or observance by the
Company or the Servicer of each of their obligations to the Issuer thereunder
and to give any consent, request, notice, direction, approval, extension or
waiver under the Sale and Servicing Agreement, and any right of the Issuer to
take such action shall be suspended.
5-11
<PAGE>
ARTICLE VI
THE TRUSTEE
SECTION 6.01. Duties of Indenture Trustee.
(a) If an Event of Default has occurred and is continuing, the Indenture
Trustee shall exercise the rights and powers vested in it by this Indenture with
the same degree of care and skill in their exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Indenture Trustee and conforming to the
requirements of this Indenture; however, the Indenture Trustee shall
examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture and, if applicable, the
Indenture Trustee's other Related Documents.
(c) The Indenture Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section;
(ii) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer unless it is proved
that the Indenture Trustee was negligent in ascertaining the pertinent
facts; and
(iii) the Indenture Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 5.12.
(d) Every provision of this Indenture that in any way relates to the
Indenture Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Issuer.
6-1
<PAGE>
(f) Money held in trust by the Indenture Trustee need not be segregated
from other funds except to the extent required by law or the terms of this
Indenture or the Sale and Servicing Agreement.
(g) No provision of this Indenture shall require the Indenture Trustee 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 it shall have reasonable grounds to believe that repayments
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Indenture Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
(i) In no event shall the Indenture Trustee be required to perform, or be
responsible for the manner of performance of, any of the obligations of the
Servicer, or any other party, under the Sale and Servicing Agreement unless and
until appointed successor Servicer in accordance with Section 7.01 thereof.
(j) The Indenture Trustee shall, and hereby agrees that it will, perform
all of the obligations and duties required of it under the Sale and Servicing
Agreement.
(k) The Indenture Trustee shall maintain the Loan Files at the Corporate
Trust office or with a duly appointed custodian, who shall not be an Affiliate
of the Company and shall act as the agent of the Indenture Trustee on behalf of
the Noteholders; provided that the Loan Files shall be maintained in Minnesota
unless, prior to their removal therefrom, the Indenture Trustee shall have
delivered to the Note Insurer an opinion of counsel satisfactory to the Note
Insurer to the effect that all UCC financing statements and other actions have
been taken so as to maintain in effect the perfected security interest of the
Indenture Trustee in the Indenture Collateral. The Indenture Trustee may release
Loan Files pursuant to Section 6.13 hereof. The Indenture Trustee will on the
Closing Date acknowledge receipt of the Loan Files by execution and delivery of
an Acknowledgment in the form of Exhibit A-1 hereto. On or before July 31, 1999,
the Indenture Trustee will deliver to the Company and the Note Insurer an
Acknowledgment in the form of Exhibit A-2 hereto.
(l) Without limiting the generality of this Section 6.01, the Indenture
Trustee shall have no duty (i) to see to any recording, filing or depositing of
this Indenture or any agreement referred to herein or any financing statement
evidencing a security interest in any real property securing a Loan, or to see
to the maintenance of any such recording or filing or depositing or to any
recording, refiling or redepositing of any thereof, (ii) to see to any insurance
of real property securing a contract or Obligors or to effect or maintain any
such insurance, (iii) to see to the payment or discharge of any tax, assessment
or other governmental charge or any lien or encumbrance of any kind owing with
respect to, assessed or levied against any part of the Trust, (iv) to confirm or
verify the contents of any reports or certificates delivered to the Indenture
Trustee pursuant to this Indenture or the Sale and Servicing Agreement believed
by the Indenture Trustee to be genuine and to have been signed or presented by
the proper party or parties, or
6-2
<PAGE>
(v) to inspect the real property securing any Loan at any time or ascertain or
inquire as to the performance of observance of any of the Issuer's, the
Company's or the Servicer's representations, warranties or covenants or the
Servicer's duties and obligations as Servicer and as custodian of the Loan Files
under the Sale and Servicing Agreement.
SECTION 6.02. Rights of Indenture Trustee.
(a) The Indenture Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The Indenture
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officers' Certificate (with respect to factual matters) or an Opinion
of Counsel, as applicable. The Indenture Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on the Officers'
Certificate or Opinion of Counsel, as applicable, or as directed by the
requisite amount of Noteholders as provided herein.
(c) The Indenture 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 or nominee, and the Indenture Trustee shall not be
responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed with
due care by it hereunder.
(d) The Indenture Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Indenture Trustee's conduct does
not constitute willful misconduct, negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Notes shall be full and complete authorization and protection from liability
in respect to any action taken, omitted or suffered by it hereunder in good
faith and in accordance with the advice or opinion of such counsel.
(f) The Indenture Trustee shall be under no obligation to institute,
conduct or defend any litigation under this Indenture or in relation to this
Indenture, at the request, order or direction of the Note Insurer or any of the
Holders of Notes, pursuant to the provisions of this Indenture, unless the Note
Insurer or such Holders of Notes shall have offered to the Indenture Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that may be incurred therein or thereby; provided, however, that the Indenture
Trustee shall, upon the occurrence of an Event of Default (that has not been
cured), exercise the rights and powers vested in it by this Indenture with
reasonable care and skill.
(g) The Indenture 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 to
6-3
<PAGE>
do so by the Note Insurer or Holders of Notes evidencing not less than 25% of
the Outstanding Amount thereof; provided, however, that if the payment within a
reasonable time to the Indenture 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 Indenture Trustee, not reasonably assured to the Indenture
Trustee by the security afforded to it by the terms of this Indenture or the
Sale and Servicing Agreement, the Indenture 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 Person making such request, or, if paid by the Indenture Trustee, shall be
reimbursed by the Person making such request upon demand.
SECTION 6.03. Individual Rights of Indenture Trustee.
The Indenture Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may otherwise deal with the Issuer or its
Affiliates with the same rights it would have if it were not Indenture Trustee.
Any Paying Agent, Note Registrar, co-registrar or co-paying agent may do the
same with like rights. However, the Indenture Trustee is required to comply with
Sections 6.11 and 6.12.
SECTION 6.04. Indenture Trustee's Disclaimer.
The Indenture Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture, the Trust
Estate or the Notes, it shall not be accountable for the Issuer's use of the
proceeds from the Notes, and it shall not be responsible for any statement of
the Issuer in the Indenture or in any document issued in connection with the
sale of the Notes or in the Notes other than the Indenture Trustee's certificate
of authentication.
SECTION 6.05. Notice of Defaults.
If a Default occurs and is continuing and if it is known to a Responsible
Officer of the Indenture Trustee, the Indenture Trustee shall mail to the Note
Insurer and to each Noteholder notice of the Default within 90 days after it
occurs. Except in the case of a Default in payment of principal of or interest
on any Note (including payments pursuant to the mandatory redemption provisions
of such Note), the Indenture Trustee may withhold the notice if and so long as a
committee of its Responsible Officers in good faith determines that withholding
the notice is in the interests of Noteholders.
SECTION 6.06. Reports by Indenture Trustee to Holders.
The Indenture Trustee shall deliver to each Noteholder such information as
may be required to enable such holder to prepare its federal and state income
tax returns.
SECTION 6.07. Compensation and Indemnity.
The Issuer shall or shall cause the Administrator to pay to the Indenture
Trustee from time to time reasonable compensation for its services. The
Indenture Trustee's compensation shall not be limited by any law on compensation
of a trustee of an express trust. The Issuer shall
6-4
<PAGE>
or shall cause the Administrator to reimburse the Indenture Trustee for all
reasonable out-of-pocket expenses incurred or made by it, including the costs of
collection, in addition to the compensation for its services. Such expenses
shall include the reasonable compensation and expenses, disbursements and
advances of the Indenture Trustee's agents, counsel, accountants and experts.
The Issuer shall or shall cause the Administrator to indemnify the Indenture
Trustee against any and all loss, liability or expense (including attorneys'
fees) incurred by it in connection with the administration of this trust and the
performance of its duties hereunder. The Indenture Trustee shall notify the
Issuer and the Administrator promptly of any claim for which it may seek
indemnity. Failure by the Indenture Trustee to so notify the Issuer and the
Administrator shall not relieve the Issuer or the Administrator of its
obligations hereunder. The Issuer shall or shall cause the Administrator to
defend any such claim, and the Indenture Trustee may have separate counsel and
the Issuer shall or shall cause the Administrator to pay the fees and expenses
of such counsel. Neither the Issuer not the Administrator need reimburse any
expense or indemnify against any loss, liability or expense incurred by the
Indenture Trustee through the Indenture Trustee's own wilful misconduct,
negligence or bad faith.
The Issuer's payment obligations to the Indenture Trustee pursuant to this
Section shall survive the discharge of this Indenture. When the Indenture
Trustee incurs expenses after the occurrence of a Default specified in Section
5.01(iv) or (v) with respect to the Issuer, the expenses are intended to
constitute expenses of administration under Title 11 of the United States Code
or any other applicable federal or state bankruptcy, insolvency or similar law.
SECTION 6.08. Replacement of Indenture Trustee.
The Indenture Trustee may resign at any time by so notifying the Issuer.
The Issuer (with the prior written consent or at the direction of the Note
Insurer) may remove the Indenture Trustee if:
(i) the Indenture Trustee fails to comply with Section 6.11;
(ii) a court having jurisdiction in the premises in respect of the
Indenture Trustee in an involuntary case or proceeding under federal or
state banking or bankruptcy laws, as now or hereafter constituted, or any
other applicable federal or state bankruptcy, insolvency or other similar
law, shall have entered a decree or order granting relief or appointing a
receiver, liquidator, assignee, custodian, trustee, conservator,
sequestrator (or similar official) for the Indenture Trustee or for any
substantial part of the Indenture Trustee's property, or ordering the
winding-up or liquidation of the Indenture Trustee's affairs;
(iii) an involuntary case under the federal bankruptcy laws, as now or
hereafter in effect, or another present or future federal or state
bankruptcy, insolvency or similar law is commenced with respect to the
Indenture Trustee and such case is not dismissed within 60 days;
(iv) the Indenture Trustee commences a voluntary case under any
federal or state banking or bankruptcy laws, as now or hereafter
constituted, or any other applicable
6-5
<PAGE>
federal or state bankruptcy, insolvency or other similar law, or consents
to the appointment of or taking possession by a receiver, liquidator,
assignee, custodian, trustee, conservator, sequestrator (or other similar
official) for the Indenture Trustee or for any substantial part of the
Indenture Trustee's property, or makes any assignment for the benefit of
creditors or fails generally to pay its debts as such debts become due or
takes any corporate action in furtherance of any of the foregoing; or
(v) the Indenture Trustee otherwise becomes incapable of acting.
If the Indenture Trustee resigns or is removed or if a vacancy exists in
the office of Indenture Trustee for any reason (the Indenture Trustee in such
event being referred to herein as the retiring Indenture Trustee), the Issuer
shall promptly appoint a successor Indenture Trustee acceptable to the Note
Insurer.
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Issuer. Thereupon the
resignation or removal of the retiring Indenture Trustee shall become effective,
and the successor Indenture Trustee shall have all the rights, powers and duties
of the Indenture Trustee under this Indenture. The successor Indenture Trustee
shall mail a notice of its succession to Noteholders. The retiring Indenture
Trustee shall promptly transfer all property held by it as Indenture Trustee to
the successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days after
the retiring Indenture Trustee resigns or is removed, the retiring Indenture
Trustee, the Issuer, the Note Insurer or the Holders of a majority in
Outstanding Amount of the Notes may petition any court of competent jurisdiction
for the appointment of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, the Note
Insurer or any Noteholder may petition any court of competent jurisdiction for
the removal of the Indenture Trustee and the appointment of a successor
Indenture Trustee.
Any resignation or removal of the Indenture Trustee and appointment of a
successor Indenture Trustee pursuant to any of the provisions of this Section
shall not become effective until acceptance of appointment by the successor
Indenture Trustee pursuant to this Section and payment of all fees and expenses
owed to the retiring Indenture Trustee. Notwithstanding the replacement of the
Indenture Trustee pursuant to this Section, the retiring Indenture Trustee shall
be entitled to payment or reimbursement of such amounts as such Person is
entitled pursuant to Section 6.07.
SECTION 6.09. Successor Indenture Trustee by Merger.
If the Indenture Trustee consolidates with, merges or converts into, or
transfers all or substantially all its corporate trust business or assets to,
another corporation or banking association, the resulting, surviving or
transferee corporation without any further act shall be the successor Indenture
Trustee; provided that such corporation or banking association shall be
otherwise qualified and eligible under Section 6.11. The Indenture Trustee shall
provide the Note Insurer and the Rating Agencies prompt notice of any such
transaction.
6-6
<PAGE>
In case at the time such successor or successors by merger, conversion or
consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture any of the Notes shall have been authenticated but not delivered,
any such successor to the Indenture Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
SECTION 6.10. Appointment of Co-Indenture Trustee or Separate Indenture
Trustee.
(a) Notwithstanding any other provisions of this Indenture, at any time,
for the purpose of meeting any legal requirement of any jurisdiction in which
any part of the Trust may at the time be located, the Indenture Trustee shall
have the power, with prior written consent of Note Insurer, and may execute and
deliver all instruments to appoint one or more Persons to act as a co-trustee or
co-trustees, or separate trustee or separate trustees, of all or any part of the
Trust, and to vest in such Person or Persons, in such capacity and for the
benefit of the Noteholders, such title to the Trust Estate, or any part hereof,
and, subject to the other provisions of this Section, such powers, duties,
obligations, rights and trusts as the Indenture Trustee may consider necessary
or desirable. No co-trustee or separate trustee hereunder shall be required to
meet the terms of eligibility as a successor Indenture Trustee under Section
6.11 and no notice to Noteholders of the appointment of any co-trustee or
separate trustee shall be required under Section 6.08 hereof.
(b) Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Indenture Trustee shall be conferred or imposed upon and exercised
or performed by the Indenture Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Indenture
Trustee joining in such act), except to the extent that under any law of
any jurisdiction in which any particular act or acts are to be performed
the Indenture 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 singly by such separate
trustee or co-trustee, but solely at the direction of the Indenture
Trustee;
(ii) no trustee hereunder shall be personally liable by reason of any
act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the resignation of
or remove any separate trustee or co-trustee.
6-7
<PAGE>
(c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VI. Each separate trustee and co-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
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture 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 separate trustee or
co-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 Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee. Notwithstanding anything to the
contrary in this Indenture, the appointment of any separate trustee or
co-trustee shall not relieve the Indenture Trustee of its obligations and duties
under this Indenture.
SECTION 6.11. Eligibility; Disqualification.
The Indenture Trustee shall at all times satisfy the requirements of TIA
ss. 310(a). The Indenture Trustee shall have a combined capital and surplus of
at least $50,000,000 as set forth in its most recent published annual report of
condition and shall not be an Affiliate of the Company. The Indenture Trustee
shall comply with TIA ss. 310(b), including the optional provision permitted by
the second sentence of TIA ss. 310(b)(9); provided, however, that there shall be
excluded from the operation of TIA ss. 310(b)(1) any indenture or indentures
under which other securities of the Issuer are outstanding if the requirements
for such exclusion set forth in TIA ss. 310(b)(1) are met.
SECTION 6.12. Preferential Collection of Claims Against Issuer.
The Indenture Trustee shall comply with TIA ss. 311(a), excluding any
creditor relationship listed in TIA ss. 311(b). A Indenture Trustee who has
resigned or been removed shall be subject to TIA ss. 311(a) to the extent
indicated.
SECTION 6.13. Indenture Trustee to Cooperate.
(a) Upon payment in full on any Loan, the Servicer will notify the
Indenture Trustee and the Company (if the Company is not the Servicer) on the
next succeeding Distribution 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
Collection Account pursuant to Section 5.05 of the Sale and Servicing Agreement
have been so deposited) and shall request delivery of the Loan and Loan File to
the Servicer. Upon receipt
6-8
<PAGE>
of such delivery and request, the Indenture Trustee shall promptly release or
cause to be released such Loan and Loan File to the Servicer. Upon receipt of
such Loan and Loan File, each of the Company (if different from the Servicer)
and the Servicer is authorized to execute an instrument in satisfaction of such
Loan and to do such other acts and execute such other documents as the Servicer
deems necessary to discharge the Obligor thereunder and eliminate any lien on
the related real estate. The Servicer shall determine when a Loan has been paid
in full; provided that, to the extent that insufficient payments are received on
a Loan credited by the Servicer as prepaid or paid in full and satisfied, the
shortfall shall be paid by the Servicer out of its own funds, without any right
of reimbursement therefor (except from additional amounts recovered from the
related Obligor or otherwise in respect of such Loan), and deposited in the
Collection Account.
(b) The Servicer's receipt of a Loan and/or Loan File shall obligate the
Servicer to return the original Loan and the related Loan File to the Indenture
Trustee when its need by the Servicer has ceased unless the Loan shall be
liquidated or repurchased as described in Section 3.05 or 8.02 of the Sale and
Servicing Agreement.
SECTION 6.14. Sale and Servicing Agreement.
Insofar as such provisions describe rights or duties of the Indenture
Trustee, the Indenture Trustee acknowledges and agrees to the terms of Sections
3.05, 4.01, 5.22, and 10.03 and Articles VI, VII and VIII of the Sale and
Servicing Agreement. Such provisions are incorporated herein by reference.
SECTION 6.15. Indenture Trustee Advances.
a. If the Servicer fails to deposit into the Collection Account Advances as
required by Section 6.04 of the Sale and Servicing Agreement, then the Indenture
Trustee shall, subject to the provisions of paragraph (b) below, from its own
funds, deposit into the Collection Account the amount not so deposited by the
Servicer on or before the Business Day preceding the related Payment Date (an
"Indenture Trustee Advance").
b. The Indenture Trustee shall not be required to make any Indenture
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 Collection Account in accordance with Section 6.06(a) of the
Sale and Servicing Agreement.
c. The Indenture Trustee shall be entitled to reimbursement of an Indenture
Trustee Advance from funds subsequently available therefor in the Collection
Account in accordance with Section 6.06(a) of the Sale and Servicing Agreement.
6-9
<PAGE>
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
SECTION 7.01. Issuer To Furnish Indenture Trustee Names and Addresses of
Noteholders.
The Issuer will furnish or cause to be furnished to the Indenture Trustee
(a) not more than five days after the earlier of (i) each Record Date and (ii)
three months after the last Record Date, a list, in such form as the Indenture
Trustee may reasonably require, of the names and addresses of the Holders of
Notes as of such Record Date, (b) at such other times as the Indenture Trustee
may request in writing, within 30 days after receipt by the Issuer of any such
request, a list of similar form and content as of a date not more than 10 days
prior to the time such list is furnished; provided, however, that so long as the
Indenture Trustee is the Note Registrar, no such list shall be required to be
furnished.
SECTION 7.02. Preservation of Information; Communications to Noteholders.
(a) The Indenture Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of the Holders of Notes
contained in the most recent list furnished to the Indenture Trustee as provided
in Section 7.01 and the names and addresses of Holders of Notes received by the
Indenture Trustee in its capacity as Note Registrar. The Indenture Trustee may
destroy any list furnished to it as provided in such Section 7.01 upon receipt
of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA ss. 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have the
protection of TIA ss. 312(c).
SECTION 7.03. Reports by Issuer.
(a) The Issuer shall:
(i) file with the Indenture Trustee and the Note Insurer, within 15
days after the Issuer is required to file the same with the Securities and
Exchange Commission (the "Commission"), copies of the annual reports and of
the information, documents and other reports (or copies of such portions of
any of the foregoing as the Commission may from time to time by rules and
regulations prescribe) which the Issuer may be required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act;
(ii) file with the Indenture Trustee, and the Note Insurer and the
Commission in accordance with rules and regulations prescribed from time to
time by the Commission such additional information, documents and reports
with respect to compliance by the
7-1
<PAGE>
Issuer with the conditions and covenants of this Indenture as may be
required from time to time by such rules and regulations; and
(iii) supply to the Indenture Trustee (and the Indenture Trustee shall
transmit by mail to the Note Insurer and to all Noteholders described in
TIA ss. 313(c)) such summaries of any information, documents and reports
required to be filed by the Issuer pursuant to clauses (i) and (ii) of this
Section 7.03(a) as may be required by rules and regulations prescribed from
time to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the Issuer
shall end on December 31 of each year.
SECTION 7.04. Reports by Indenture Trustee.
If required by TIA ss. 313(a), within 60 days after each March 31 beginning
with March 31, 2000, the Indenture Trustee shall mail to the Note Insurer and to
each Noteholder as required by TIA ss. 313(c) a brief report dated as of such
date that complies with TIA ss. 313(a). The Indenture Trustee also shall comply
with TIA ss. 313(b).
A copy of each report at the time of its mailing to Noteholders shall be
filed by the Indenture Trustee with the Commission and each stock exchange, if
any, on which the Notes are listed. The Issuer shall notify the Indenture
Trustee and the Note Insurer if and when the Notes are listed on any stock
exchange.
7-2
<PAGE>
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 8.01. Collection of Money.
(a) Except as otherwise expressly provided herein, the Indenture Trustee
may demand payment or delivery of, and shall receive and collect, directly and
without intervention or assistance of any fiscal agent or other intermediary,
all money and other property payable to or receivable by the Indenture Trustee
pursuant to this Indenture. The Indenture Trustee shall apply all such money
received by it as provided in this Indenture. Except as otherwise expressly
provided in this Indenture, if any default occurs in the making of any payment
or performance under any agreement or instrument that is part of this Indenture
or the Notes, the Indenture Trustee may take such action as may be appropriate
to enforce such payment or performance, including the institution and
prosecution of appropriate Proceedings. Any such action shall be without
prejudice to any right to claim a Default or Event of Default under this
Indenture and any right to proceed thereafter as provided in Article V;
(b) Claims Under Note Insurance Policy. The Class A Notes are insured by
the Note Insurance Policy pursuant to the terms set forth therein,
notwithstanding any provisions to the contrary contained in this Indenture or
the Sale and Servicing Agreement. All amounts received under the Note Insurance
Policy in respect of the Class A Notes shall be used solely for the payment of
Insured Payments to the Holders of the Class A Notes.
The Indenture Trustee shall make claims under the Note Insurance Policy
pursuant to Section 6.08 of the Sale and Servicing Agreement and in accordance
with the Note Insurance Policy. The Indenture Trustee shall deposit any Insured
Payment received from the Note Insurer in respect of the Class A Notes in the
Policy Payments Account. All amounts received under the Note Insurance Policy in
respect of the Class A Notes shall be used solely for the payment to Holders of
the Class A Notes of principal and interest on the Class A notes, and shall not
be applied for any other purpose.
The Indenture Trustee acknowledges and agrees to the terms of Sections 6.08
and 6.09 of the Sale and Servicing Agreement which are incorporated herein by
reference.
SECTION 8.02. Trust Accounts.
(a) On or prior to the Closing Date, the Issuer shall establish, or caused
to be established, and maintain, in the name of the Indenture Trustee, for the
benefit of the Noteholders and the Certificateholders, the Trust Accounts as
provided in Section 6.01 of the Sale and Servicing Agreement.
(b) All collections in respect of the Loans will be deposited in the
Collection Account as provided in Section 6.02 of the Sale and Servicing
Agreement.
8-1
<PAGE>
(c) On each Payment Date, the Indenture Trustee shall distribute all
amounts on deposit in the Note Distribution Account to Noteholders in respect of
the Notes to the extent of amounts due and unpaid on the Notes for principal and
interest, in accordance with the information provided by the Servicer in the
following order of priority and in accordance with Section 8.02(d):
(1) to pay the Class A Interest Amount and any Unpaid Class A Interest
Shortfall as follows:
(i) to the Class A-1 Noteholders, the Class A-1 Interest Amount
and to the Class A-2 Noteholders, the Class A-2 Interest Amount; or,
if the amount available therefor is less than the amount necessary to
pay the Class A-1 Interest Amount and the Class A-2 Interest Amount,
pro rata to the Class A-1 and Class A-2 Noteholders in accordance with
their respective entitlements to interest; and
(ii) to the Class A-1 Noteholders, the amount, if any, of the
Unpaid Class A-1 Interest Shortfall and to the Class A-2 Noteholders
the amount, if any, of the Unpaid Class A-2 Interest Shortfall or, if
the amount available therefor is less than the amount necessary to pay
the Unpaid Class A-1 Interest Shortfall and the Unpaid Class A-2
Interest Shortfall, pro rata to the Class A-1 and Class A-2
Noteholders based on the Unpaid Interest Shortfall of each Class;
(2) after payment of the amounts specified in clause (1) above, to the
Class M-1 Noteholders as follows:
(i) the Class M-1 Interest Amount; and
(ii) any Unpaid Class M-1 Interest Shortfall;
(3) after payment of the amounts specified in clauses (1) and (2)
above, to the Class M-2 Noteholders as follows:
(i) the Class M-2 Interest Amount; and
(ii) any Unpaid Class M-2 Interest Shortfall;
(4) after payment of the amounts specified in clauses (1) through (3)
above, to the Class B-1 Noteholders as follows:
(i) the Class B-1 Interest Amount; and
(ii) any Unpaid Class B-1 Interest Shortfall;
8-2
<PAGE>
(5) after payment of the amounts specified in clauses (1) through (4)
above, to pay principal in respect of the Class A-1 Notes and Class A-2
Notes as follows:
(i) if there is a Class A Principal Deficiency Amount as to such
Payment Date, the amount remaining on deposit in the Note Distribution
Account, pro rata to the Class A-1 Notes and Class A-2 Notes based on
the Class Principal Balance of each such Class (but in no event more
than the related Class Principal Balance); and
(ii) if there is no Class A Principal Deficiency Amount as to
such Payment Date:
(A) if the amount remaining on deposit in the Note
Distribution Account is less than the Class A Percentage of the
Formula Principal Distribution Amount, such remaining amount, pro
rata to the Class A-1 and Class A-2 Noteholders based upon the
amounts that would have been distributed pursuant to clause (B),
below, had there been no such deficiency;
(B) if the amount remaining on deposit in the Note
Distribution Account is not less than the Class A Percentage of
the Formula Principal Distribution Amount, then
(a) to the Class A-1 Noteholders, the Class A
Percentage of the Group 1 Formula Principal Distribution
Amount, plus, on and after the Payment Date on which the
Class A-2 Notes are paid in full, the Class A Percentage of
the Group 2 Formula Principal Distribution Amount (less, on
such Payment Date, any amount paid to reduce the Class A-2
Principal Balance to zero), but in no event more than is
necessary to reduce the Class A-1 Principal Balance to zero;
and
(b) to the Class A-2 Noteholders, the Class A
Percentage of the Group 2 Formula Principal Distribution
Amount, plus, on and after the Payment Date on which the
Class A-1 Notes are paid in full, the Class A Percentage of
the Group 1 Formula Principal Distribution Amount (less, on
such Payment Date, any amount paid to reduce the Class A-1
Principal Balance to zero), but in no event more than is
necessary to reduce the Class A-2 Principal Balance to zero;
(iii) Any Supplementary Principal Distribution Amount deposited
in the Note Distribution Account, to the Class A-1 Noteholders and
Class A-2 Noteholders pro rata based on their entitlement pursuant to
clause (ii)(B), above;
8-3
<PAGE>
(6) after payment of the amounts specified in clauses (1) through (5)
above, to the Class M-1 Noteholders the Class M-1 Percentage of the Formula
Principal Distribution Amount until payment in full of the Class M-1
Principal Balance;
(7) after payment of the amounts specified in clauses (1) through (6)
above, to the Class M-2 Noteholders the Class M-2 Percentage of the Formula
Principal Distribution Amount until payment in full of the Class M-2
Principal Balance;
(8) after payment of the amounts specified in clauses (1) through (7)
above, to the Class B-1 Noteholders the Class B-1 Percentage of the Formula
Principal Distribution Amount, until payment in full of the Class B-1
Principal Amount;
(9) after payment of the amounts specified in clauses (1) through (8)
above, to the Class M-1, Class M-2 and Class B-1 Noteholders as follows:
(i) any Class M-1 Liquidation Loss Interest Amount; and
(ii) any Unpaid Class M-1 Liquidation Loss Interest Shortfall;
(iii) any Class M-2 Liquidation Loss Interest Amount; and
(iv) any Unpaid Class M-2 Liquidation Loss Interest Shortfall;
(v) any Class B-1 Liquidation Loss Interest Amount; and
(vi) any Unpaid Class B-1 Liquidation Loss Interest Shortfall;
(10) after payment of the amounts specified in clauses (1) through (9)
above, to the Class B-2 Noteholders as follows:
(i) the Class B-2 Interest Amount;
(ii) any Unpaid Class B-2 Interest Shortfall; and
(iii) the Class B-2 Formula Principal Distribution Amount.
(d) If the Indenture Trustee shall not have received the applicable Monthly
Report by any Payment Date, the Indenture Trustee shall distribute all funds
then in the Note Distribution Account to Noteholders in accordance with Section
8.02(c), to the extent of such funds, on such Payment Date. Any Guaranty Payment
shall be used solely to pay the Class B-2 Noteholders. Any Insured Payment shall
be used solely to pay the Class A Noteholders.
(e) The Indenture Trustee agrees, to the extent required by the Code, to
withhold from each payment due hereunder or under any Note, United States
withholding taxes at the appropriate rate, and, on a timely basis, to deposit
such amounts with an authorized depository and make such returns, filings and
other reports in connection therewith as are required of it
8-4
<PAGE>
under the Code. Any Noteholder which is eligible for an exemption from or
reduction of withholding of United States federal income taxes shall, from time
to time, provide to the Indenture Trustee in a timely manner all appropriate and
properly completed forms indicating such eligibility, as may be necessary to
permit the Indenture Trustee not to withhold taxes from payments due to such
Noteholder. In connection with the foregoing, the Indenture Trustee shall
promptly furnish to each Noteholder in a timely fashion such U.S. Treasury forms
as are required by the Code to be furnished to such Noteholder indicating
payment of any taxes withheld from any payments by the Indenture Trustee to such
Noteholder. The Indenture Trustee shall be fully protected in relying upon, and
each Noteholder by its acceptance of a Note hereunder agrees to indemnify and
hold the Indenture Trustee harmless against all claims or liability of any kind
arising in connection with or related to the Indenture Trustee's reliance upon
any documents, forms or information provided by any Noteholder to the Indenture
Trustee. In addition, if the Indenture Trustee has not withheld taxes on any
payment made to any Noteholder, and the Indenture Trustee is subsequently
required to remit to any taxing authority any such amount not withheld, such
Noteholder shall return such amount to the Indenture Trustee upon written demand
by the Indenture Trustee. In no event shall the Indenture Trustee be liable for
consequential damages to any Noteholder.
SECTION 8.03. General Provisions Regarding Accounts.
(a) So long as no Default or Event of Default shall have occurred and be
continuing, all or a portion of the funds in the Collection Account and Note
Distribution Account shall be invested and reinvested in Eligible Investments in
accordance with the provisions of Section 6.01(d) of the Sale and Servicing
Agreement. All income or other gain from investments of moneys deposited in such
accounts shall be deposited by the Indenture Trustee in the Collection Account,
and any loss resulting from such investments shall be charged to the account.
The Issuer will not direct the Indenture Trustee to make any investment of any
funds or to sell any investment held in either the Collection Account or the
Note Distribution Account unless the security interest Granted and perfected in
such account will continue to be perfected in such investment or the proceeds of
such sale, in either case without any further action by any Person, and, in
connection with any direction to the Indenture Trustee to make any such
investment or sale, if requested by the Indenture Trustee, the Issuer shall
deliver to the Indenture Trustee an Opinion of Counsel, acceptable to the
Indenture Trustee, to such effect. The Servicer shall deposit in the applicable
Account an amount equal to any net loss on such investments immediately as
realized.
(b) Subject to Section 6.01(c), the Indenture Trustee shall not in any way
be held liable by reason of any insufficiency in any of the Trust Accounts
resulting from any loss on any Eligible Investment included therein except for
losses attributable to the Indenture Trustee's failure to make payments on such
Eligible Investments issued by the Indenture Trustee, in its commercial capacity
as principal obligor and not as Indenture Trustee, in accordance with their
terms.
(c) If (i) the Issuer shall have failed to give investment directions for
any funds on deposit in the Collection Account and Note Distribution Account to
the Indenture Trustee by 11:00 a.m., New York City time (or such other time as
may be agreed by the Issuer and Indenture
8-5
<PAGE>
Trustee), on any Business Day or (ii) a Default or Event of Default shall have
occurred and be continuing with respect to the Notes but the Notes shall not
have been declared due and payable pursuant to Section 5.02 or (iii) if such
Notes shall have been declared due and payable following an Event of Default,
amounts collected or receivable from the Trust Estate are being applied in
accordance with Section 5.05 as if there had not been such a declaration, then
the Indenture Trustee shall, to the fullest extent practicable, invest and
reinvest funds in the Collection Account and Note Distribution Account in one or
more Eligible Investments.
8-6
<PAGE>
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01. Supplemental Indentures Without Consent of Noteholders.
(a) Without the consent of the Holders of any Notes but with prior notice
to the Rating Agencies and with the prior written consent of the Note Insurer,
the Issuer and the Indenture Trustee, when authorized by an Issuer Order, at any
time and from time to time, may enter into one or more indentures supplemental
hereto (which shall conform to the provisions of the Trust Indenture Act as in
force at the date of the execution thereof), in form satisfactory to the
Indenture Trustee, for any of the following purposes:
(i) to correct or amplify the description of any property at any time
subject to the lien of this Indenture, or better to assure, convey and
confirm unto the Indenture Trustee any property subject or required to be
subjected to the lien created by this Indenture, or to subject to the lien
created by this Indenture additional property;
(ii) to evidence the succession, in compliance with the applicable
provisions hereof, of another Person to the Issuer, and the assumption by
any such successor of the covenants of the Issuer herein and in the Notes
contained;
(iii) to add to the covenants of the Issuer, for the benefit of the
Holders of the Notes, or to surrender any right or power herein conferred
upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property to
or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any provision
herein or in any supplemental indenture which may be inconsistent with any
other provision herein or in any supplemental indenture or to make any
other provisions with respect to matters or questions arising under this
Indenture or in any supplemental indenture; provided that such action shall
not adversely affect the interests of the Holders of the Notes;
(vi) to evidence and provide for the acceptance of the appointment
hereunder by a successor Indenture Trustee with respect to the Notes and to
add to or change any of the provisions of this Indenture as shall be
necessary to facilitate the administration of the trusts hereunder by more
than one trustee, pursuant to the requirements of Article VI; or
(vii) to modify, eliminate or add to the provisions of this Indenture
to such extent as shall be necessary to effect the qualification of this
Indenture under the TIA or under any similar federal statute hereafter
enacted and to add to this Indenture such other provisions as may be
expressly required by the TIA.
9-1
<PAGE>
The Indenture Trustee is hereby authorized to join in the execution of any
such supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by an Issuer
Order, may, also without the consent of any of the Holders of the Notes but with
prior notice to the Rating Agencies and prior written consent of the Note
Insurer, enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to, or changing in any manner or eliminating
any of the provisions of, this Indenture or of modifying in any manner the
rights of the Holders of the Notes under this Indenture; provided, however, that
such action shall not, as evidenced by an Opinion of Counsel, adversely affect
in any material respect the interests of any Noteholder.
SECTION 9.02. Supplemental Indentures With Consent of Noteholders.
The Issuer and the Indenture Trustee, when authorized by an Issuer Order,
also may, with prior notice to the Rating Agencies, and with the consent of the
Note Insurer and of Holders of not less than a majority of the Outstanding
Amount of the Notes, by Act of such Holders delivered to the Issuer and the
Indenture Trustee, enter into an indenture or indentures supplemental hereto for
the purpose of adding any provisions to, or changing in any manner or
eliminating any of the provisions of, this Indenture or of modifying in any
manner the rights of the Holders of the Notes under this Indenture; provided,
however, that, no such supplemental indenture shall, without the consent of the
Holder of each Outstanding Note affected thereby and the Note Insurer if
affected thereby:
(i) change the date of payment of any installment of principal of or
interest on any Note, or reduce the principal amount thereof, the interest
rate thereon or the Redemption Price with respect thereto, change the
provision of this Indenture relating to the application of collections on,
or the proceeds of the sale of, the Trust Estate to payment of principal of
or interest on the Notes, or change any place of payment where, or the coin
or currency in which, any Note or the interest thereon is payable, or
impair the right to institute suit for the enforcement of the provisions of
this Indenture requiring the application of funds available therefor, as
provided in Article V, to the payment of any such amount due on the Notes
on or after the respective due dates thereof (or, in the case of
redemption, on or after the Redemption Date);
(ii) reduce the percentage of the Outstanding Amount of the Notes, the
consent of the Holders of which is required for any such supplemental
indenture, or the consent of the Holders of which is required for any
waiver of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences provided for in this Indenture;
(iii) modify or alter the provisions of the proviso to the definition
of the term "Outstanding";
9-2
<PAGE>
(iv) reduce the percentage of the Outstanding Amount of the Notes
required to direct the Indenture Trustee to direct the Issuer to sell or
liquidate the Trust Estate pursuant to Section 5.04;
(v) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional
provisions of this Indenture or the Related Documents cannot be modified or
waived without the consent of the Holder of each Outstanding Note affected
thereby;
(vi) modify any of the provisions of this Indenture in such manner as
to affect the calculation of the amount of any payment of interest or
principal due on any Note on any Payment Date (including the calculation of
any of the individual components of such calculation) or to affect the
rights of the Holders of Notes to the benefit of any provisions for the
mandatory redemption of the Notes contained herein; or
(vii) permit the creation of any lien ranking prior to or on a parity
with the lien created by this Indenture with respect to any part of the
Trust Estate or, except as otherwise permitted or contemplated herein,
terminate the lien created by this Indenture on any property at any time
subject hereto or deprive the Holder of any Note of the security provided
by the lien created by this Indenture.
The Indenture Trustee may in its discretion determine whether or not any
Notes would be affected by any supplemental indenture, and any such
determination shall be conclusive upon the Holders of all Notes, whether
theretofore or thereafter authenticated and delivered hereunder. The Indenture
Trustee shall not be liable for any such determination made in good faith.
It shall not be necessary for any Act of Noteholders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Indenture Trustee of any
supplemental indenture pursuant to this Section, the Indenture Trustee shall
mail to the Holders of the Notes to which such amendment or supplemental
indenture relates a notice setting forth in general terms the substance of such
supplemental indenture. Any failure of the Indenture Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.
SECTION 9.03. Execution of Supplemental Indentures.
In executing, or permitting the additional trusts created by, any
supplemental indenture permitted by this Article IX or the modifications thereby
of the trusts created by this Indenture, the Indenture Trustee shall be entitled
to receive, and subject to Sections 6.01 and 6.02 shall be fully protected in
relying upon, an Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this Indenture. The
Indenture Trustee may, but shall not be obligated to, enter into any such
supplemental indenture that affects the Indenture Trustee's own rights, duties,
liabilities or immunities under this Indenture or otherwise.
9-3
<PAGE>
SECTION 9.04. Effect of Supplemental Indenture.
Upon the execution of any supplemental indenture pursuant to the provisions
hereof, this Indenture shall be and be deemed to be modified and amended in
accordance therewith with respect to the Notes affected thereby, and the
respective rights, limitations of rights, obligations, duties, liabilities and
immunities under this Indenture of the Indenture Trustee, the Issuer and the
Holders of the Notes shall thereafter be determined, exercised and enforced
hereunder subject in all respects to such modifications and amendments, and all
the terms and conditions of any such supplemental indenture shall be and be
deemed to be part of the terms and conditions of this Indenture for any and all
purposes.
SECTION 9.05. Conformity With Trust Indenture Act.
Every amendment of this Indenture and every supplemental indenture executed
pursuant to this Article IX shall conform to the requirements of the Trust
Indenture Act as then in effect so long as this Indenture shall then be
qualified under the Trust Indenture Act.
SECTION 9.06. Reference in Notes to Supplemental Indentures.
Notes authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article IX may, and if required by the Indenture
Trustee shall, bear a notation in form approved by the Indenture Trustee as to
any matter provided for in such supplemental indenture. If the Issuer or the
Indenture Trustee shall so determine, new notes so modified as to conform, in
the opinion of the Indenture Trustee and the Issuer, to any such supplemental
indenture may be prepared and executed by the Issuer and authenticated and
delivered by the Indenture Trustee in exchange for Outstanding Notes.
9-4
<PAGE>
ARTICLE X
REDEMPTION OF NOTES
SECTION 10.01. Redemption.
In the event that the Company or the Servicer or the Note Insurer pursuant
to Article VIII of the Sale and Servicing Agreement purchases the corpus of the
Trust, the Notes are subject to redemption in whole, but not in part, on the
Payment Date on which such repurchase or sale occurs, for a purchase price equal
to the Redemption Price; provided, however, that the Issuer has available funds
sufficient to pay the Redemption Price. The Company, the Servicer or the Issuer
shall furnish the Note Insurer and the Rating Agencies notice of such
redemption. If the Notes are to be redeemed pursuant to this Section 10.01, the
Servicer or the Issuer shall furnish notice of such election to the Indenture
Trustee and the Note Insurer not later than 25 days prior to the Redemption
Date, and the Issuer shall deposit with the Indenture Trustee in the Note
Distribution Account the Redemption Price of the Notes to be redeemed, whereupon
all such Notes shall be due and payable on the Redemption Date upon the
furnishing of a notice complying with Section 10.02 to each Holder of the Notes.
SECTION 10.02. Form of Redemption Notice.
Notice of redemption under Section 10.01 shall be given by the Indenture
Trustee by first-class mail, postage prepaid, mailed not less than five days
prior to the applicable Redemption Date to each Holder of Notes, as of the close
of business on the Record Date with respect to the Payment Date immediately
preceding the applicable Redemption Date, at such Holder's address appearing in
the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price; and
(iii) the place where such Notes are to be surrendered for payment of
the Redemption Price (which shall be the office or agency of the Issuer to
be maintained as provided in Section 3.02).
Notice of redemption of the Notes shall be given by the Indenture Trustee
in the name and at the expense of the Issuer. Failure to give notice of
redemption, or any defect therein, to any Holder of any Note shall not impair or
affect the validity of the redemption of any other Note.
SECTION 10.03. Notes Payable on Redemption Date.
The Notes or portions thereof to be redeemed shall, following notice of
redemption (if any) as required by Section 10.02, on the Redemption Date become
due and payable at the
10-1
<PAGE>
Redemption Price and (unless the Issuer shall default in the payment of the
Redemption Price) no interest shall accrue on the Redemption Price for any
period after the date to which accrued interest is calculated for purposes of
calculating the Redemption Price.
10-2
<PAGE>
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Compliance Certificates and Opinions, etc.
Upon any application or request by the Issuer to the Indenture Trustee to
take any action under any provision of this Indenture, the Issuer shall furnish
to the Indenture Trustee (i) an Officers' Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, (ii) an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent, if any, have been
complied with and (iii) (if required by the TIA) an Independent Certificate from
a firm of certified public accountants meeting the applicable requirements of
this Section, except that, in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(i) a statement that each signatory of such certificate or opinion has
read or has caused to be read such covenant or condition and the
definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(iii) a statement that, in the opinion of each such signatory, such
signatory has made such examination or investigation as is necessary to
enable such signatory to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such signatory,
such condition or covenant has been complied with.
SECTION 11.02. Form of Documents Delivered to Indenture Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless
11-1
<PAGE>
such officer knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to the matters upon which
his certificate or opinion is based are erroneous. Any such certificate of an
Authorized Officer or Opinion of Counsel may be based, insofar as it relates to
factual matters, upon a certificate or opinion of, or representations by, an
officer or officers of the Servicer, the Company or the Issuer, stating that the
information with respect to such factual matters is in the possession of the
Servicer, the Company or the Issuer, unless such counsel knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article VI.
SECTION 11.03. Acts of Noteholders.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Noteholders
may be embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such Noteholders in person or by agents 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
Indenture Trustee, and, where it is hereby expressly required, to the Issuer.
Such instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Noteholders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and (subject to Section 6.01) conclusive in favor of
the Indenture Trustee and the Issuer, if made in the manner provided in this
Section.
(b) The fact and date of the execution by any person of any such instrument
or writing may be proved in any manner that the Indenture Trustee deems
sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Notes shall bind the Holder of every Note
issued upon the registration thereof or in exchange therefor or in lieu thereof,
in respect of anything done, omitted
11-2
<PAGE>
or suffered to be done by the Indenture Trustee or the Issuer in reliance
thereon, whether or not notation of such action is made upon such Note.
SECTION 11.04. Notices, etc., to Indenture Trustee, Issuer, the Note
Insurer and Rating Agencies.
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Noteholders or other documents provided or permitted by this Indenture to
be made upon, given or furnished to or filed with:
(a) the Indenture Trustee by any Noteholder or by the Issuer shall be
sufficient for every purpose hereunder if made, given, furnished or filed
in writing to or with the Indenture Trustee at its Corporate Trust Office,
or
(b) the Issuer by the Indenture Trustee or by any Noteholder shall be
sufficient for every purpose hereunder if made in writing and mailed,
first-class, postage prepaid, to the Issuer addressed to: Green Tree Home
Improvement and Home Equity Loan Trust 1998-F, in care of Wilmington Trust
Company, as Owner Trustee, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration
or at any other address previously furnished in writing to the Indenture
Trustee by the Issuer. The Issuer shall promptly transmit any notice
received by it from the Noteholders to the Indenture Trustee, or
(c) the Rating Agencies by the Issuer, the Indenture Trustee or the
Owner Trustee shall be sufficient for every purpose hereunder if made in
writing, personally delivered or mailed by certified mail, return receipt
requested to (i) in the case of Moody's, at the following address: 99
Church Street, New York, New York 10007, Attention: ABS Monitoring
Department and (ii) in the case of Standard & Poor's, at the following
address: Standard & Poor's Ratings Service, 55 Water Street, New York, New
York 10041; or as to each of the foregoing, at such other address as shall
be designated by written notice to the other parties, or
(d) the Note Insurer by the Issuer, the Indenture Trustee or the Owner
Trustee shall be sufficient for every purpose hereunder if made in writing,
personally delivered or mailed by certified mail, return receipt requested,
to Financial Security Assurance Inc., 350 Park Avenue, New York, New York
10022, Attn: Surveillance Department Re: Green Tree Home Improvement and
Home Equity Loan Trust 1999-B, or at such other address as shall be
designated by written notice to the other parties.
SECTION 11.05. Notices to Noteholders; Waiver.
Where this Indenture provides for notice to Noteholders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class, postage prepaid to each Noteholder
affected by such event, at his address as it appears on the Note Register, not
later than the latest date, and not earlier than the earliest date, prescribed
for the giving of such notice. In any case where notice to Noteholders is given
by
11-3
<PAGE>
mail, neither the failure to mail such notice nor any defect in any notice so
mailed to any particular Noteholder shall affect the sufficiency of such notice
with respect to other Noteholders, and any notice that is mailed in the manner
herein provided shall conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by any Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Noteholders shall be filed with the Indenture Trustee but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result of
a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event to Noteholders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies, failure to
give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute a Default or Event of
Default.
SECTION 11.06. Alternate Payment and Notice Provisions.
Notwithstanding any provision of this Indenture or any of the Notes to the
contrary, the Issuer may enter into any agreement with any Holder of a Note
providing for a method of payment, or notice by the Indenture Trustee or any
Paying Agent to such Holder, that is different from the methods provided for in
this Indenture for such payments or notices. The Issuer will furnish to the
Indenture Trustee a copy of each such agreement and the Indenture Trustee will
cause payments to be made and notices to be given in accordance with such
agreements.
SECTION 11.07. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with another
provision hereof that is required to be included in this Indenture by any of the
provisions of the Trust Indenture Act, such required provision shall control.
The provisions of TIA ss.ss. 310 through 317 that impose duties on any Person
(including the provisions automatically deemed included herein unless expressly
excluded by this Indenture) are a part of and govern this Indenture, whether or
not physically contained herein.
SECTION 11.08. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
11-4
<PAGE>
SECTION 11.09. Successors and Assigns.
All covenants and agreements in this Indenture and the Notes by the Issuer
shall bind its successors and assigns, whether so expressed or not. All
agreements of the Indenture Trustee in this Indenture shall bind its successors.
SECTION 11.10. Severability.
In case any provision in this Indenture or in the Notes shall be invalid,
illegal or unenforceable, the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 11.11. Benefits of Indenture.
Nothing in this Indenture or in the Notes, express or implied, shall give
to any Person, other than the parties hereto and their successors hereunder, and
the Noteholders, and any other party secured hereunder, and any other Person
with an ownership interest in any part of the Trust Estate, any benefit or any
legal or equitable right, remedy or claim under this Indenture, except that Note
Insurer is an express third party beneficiary, as provided in Section 11.20.
SECTION 11.12. Legal Holidays.
In any case where the date on which any payment is due shall not be a
Business Day, then (notwithstanding any other provision of the Notes or this
Indenture) payment need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on the date on
which nominally due, and no interest shall accrue for the period from and after
any such nominal date.
SECTION 11.13. Governing Law.
THIS INDENTURE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF MINNESOTA, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
SECTION 11.14. Counterparts.
This Indenture may be executed in any number of counterparts, each of which
so executed shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 11.15. Recording of Indenture.
If this Indenture is subject to recording in any appropriate public
recording offices, such recording is to be effected by the Issuer and at its
expense accompanied by an Opinion of Counsel (which may be counsel to the
Indenture Trustee or any other counsel reasonably
11-5
<PAGE>
acceptable to the Indenture Trustee,) to the effect that such recording is
necessary either for the protection of the Noteholders or any other Person
secured hereunder or for the enforcement of any right or remedy granted to the
Indenture Trustee under this Indenture.
SECTION 11.16. Trust Obligation.
No recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Notes or under this Indenture or any certificate or other writing delivered in
connection herewith or therewith, against (i) the Indenture Trustee or the Owner
Trustee in its individual capacity, (ii) any owner of a beneficial interest in
the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director,
employee or agent of the Indenture Trustee or the Owner Trustee in its
individual capacity, any holder of a beneficial interest in the Issuer, the
Owner Trustee or the Indenture Trustee or of any successor or assign of the
Indenture Trustee or the Owner Trustee in its individual capacity, except as any
such Person may have expressly agreed (it being understood that the Indenture
Trustee and the Owner Trustee have no such obligations in their individual
capacity) and except that any such partner, owner or beneficiary shall be fully
liable, to the extent provided by applicable law, for any unpaid consideration
for stock, unpaid capital contribution or failure to pay any installment or call
owing to such entity. For all purposes of this Indenture, in the performance of
any duties or obligations of the Issuer hereunder, the Owner Trustee shall be
subject to, and entitled to the benefits of, the terms and provisions of
Articles VI, VII and VIII of the Trust Agreement.
SECTION 11.17. No Petition.
The Indenture Trustee, by entering into this Indenture, and each
Noteholder, by accepting a Note, hereby covenant and agree that they will not at
any time institute against the Company, the Issuer or any General Partner, or
join in any institution against the Company, the Issuer or any General Partner
of, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States federal or state
bankruptcy or similar law in connection with any obligations relating to the
Notes, this Indenture or any of the Related Documents.
SECTION 11.18. Inspection.
The Issuer agrees that, on reasonable prior notice, it will permit any
representative of the Indenture Trustee, during the Issuer's normal business
hours, to examine all the books of account, records, reports, and other papers
of the Issuer, to make copies and extracts therefrom, to cause such books to be
audited by independent certified public accountants, and to discuss the Issuer's
affairs, finances and accounts with the Issuer's officers, employees, and
independent certified public accountants, all at such reasonable times and as
often as may be reasonably requested. The Indenture Trustee shall and shall
cause its representatives to hold in confidence all such information except to
the extent disclosure may be required by law (and all reasonable applications
for confidential treatment are unavailing) and except to the extent that the
Indenture Trustee may reasonably determine that such disclosure is consistent
with its obligations hereunder.
11-6
<PAGE>
SECTION 11.19. Grant of Owner Rights to Note Insurer.
In consideration for the guarantee of the Class A Notes by the Note Insurer
pursuant to the Note Insurance Policy, the Class A Noteholders hereby grant to
the Note Insurer the right to act as the Noteholder of 100% of the Outstanding
Class A Notes for the purpose of exercising the rights of the Holders of the
Class A Notes hereunder, including the voting rights of such Holders, but
excluding those rights requiring the consent of all such Noteholders under
Section 9.02 and any rights of such Holders to distributions under Section 8.02
hereof; provided that the preceding grant of rights to the Note Insurer by the
Class A Noteholders shall be subject to Section 11.21 hereof. The rights of the
Note Insurer to direct certain actions and consent to certain actions of the
Noteholders hereunder will terminate at such time as the Class A Principal
Balance has been reduced to zero and the Note Insurer has been reimbursed for
all Insured Payments and any other amounts owed under the Note Insurance Policy
and the Insurance Agreement and the Note Insurer has no further obligation under
the Note Insurance Policy.
SECTION 11.20. Third Party Beneficiary.
The parties hereto acknowledge that the Note Insurer is an express third
party beneficiary hereof entitled to enforce any rights reserved to it hereunder
as if it were actually a party hereto.
SECTION 11.21. Suspension and Termination of Note Insurer's Rights.
(a) During the continuation of a Note Insurer Default, rights granted or
reserved to the Note Insurer hereunder shall vest instead in the Noteholders;
provided that the Note Insurer shall be entitled to any distributions in
reimbursement of the Reimbursement Amount, and the Note Insurer shall retain
those rights under Section 9.02 hereof to consent to any supplement to this
Indenture.
(b) At such time as either (i) the Class A Principal Balance has been
reduced to zero or (ii) the Note Insurance Policy has been terminated following
a Note Insurer Default, and in either case of (i) or (ii) the Note Insurer has
been reimbursed for all Insured Payments and any other amounts owed under the
Note Insurance Policy and the Insurance Agreement (and the Note Insurer no
longer has any obligation under the Note Insurance Policy, except for breach
thereof by the Note Insurer), then the rights and benefits granted or reserved
to the Note Insurer hereunder (including the rights to direct certain actions
and receive certain notices) shall terminate and the Noteholders shall be
entitled to the exercise of such rights and to receive such benefits of the Note
Insurer following such termination to the extent that such rights and benefits
are applicable to the Noteholders.
SECTION 11.22. Limitation of Liability.
It is expressly understood and agreed by the parties hereto that (a) this
Agreement is executed and delivered by Wilmington Trust Company, not
individually or personally but solely as Owner Trustee of Green Tree Home
Improvement and Home Equity Loan Trust 1999-B, in the exercise of the powers and
authority conferred and vested in it, (b) each of the representations,
undertakings and agreements herein made on the part of the Issuer is made and
11-7
<PAGE>
intended not as personal representations, undertakings and agreements by
Wilmington Trust Company but is made and intended for the purpose for binding
only the Issuer, (c) nothing herein contained shall be construed as creating any
liability on Wilmington Trust Company, individually or personally, to perform
any covenant either expressed or implied contained herein, all such liability,
if any, being expressly waived by the parties hereto and by any Person claiming
by, through or under the parties hereto and (d) under no circumstances shall
Wilmington Trust Company be personally liable for the payment of any
indebtedness or expenses of the Issuer or be liable for the breach or failure of
any obligation, representation, warranty or covenant made or undertaken by the
Issuer under this Agreement or any other related documents.
11-8
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused this
Indenture to be duly executed by their respective officers, thereunto duly
authorized, all as of the day and year first above written.
GREEN TREE HOME IMPROVEMENT AND
HOME EQUITY LOAN TRUST 1999-B
By WILMINGTON TRUST COMPANY, not in
its individual capacity but solely
on behalf of the Issuer as Owner
Trustee under the Trust Agreement
By: /s/ Norma P. Closs
-----------------------------------
Name: Norma P. Closs
Title: Vice President
U.S. BANK TRUST NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Indenture Trustee
By: /s/ H. Howard
-----------------------------------
Name: Howard
Title: Vice President
<PAGE>
EXHIBIT A-1
Form of Indenture Trustee Acknowledgment
U.S. Bank Trust National Association, a national banking association
organized under the laws of the United States, acting as Indenture Trustee (the
"Indenture Trustee") under the Indenture dated as of June 1, 1999 between Green
Tree Home Improvement and Home Equity Loan Trust 1999-B and the Indenture
Trustee (the "Indenture") (all capitalized terms used herein without definition
having the respective meanings specified in the Indenture) acknowledges that the
Indenture Trustee has received the original contract or promissory note for each
of the home improvement contracts and promissory notes and home equity loans
identified in the List of Loans, except for any identified on Schedule A hereto.
IN WITNESS WHEREOF, U.S. Bank Trust National Association, as Indenture
Trustee, has caused this acknowledgment to be executed by its duly authorized
officer and its corporate seal affixed hereto as of this 30th day of June, 1999.
U.S. BANK TRUST NATIONAL ASSOCIATION
not in its individual capacity but
solely as Indenture Trustee
By:
-------------------------------------
Its:
---------------------------------
A-1-1
<PAGE>
EXHIBIT A-2
Form of Indenture Trustee Acknowledgment
U.S. Bank Trust National Association, a national banking association
organized under the laws of the United States, acting as Indenture Trustee (the
"Indenture Trustee") under the Indenture dated as of June 1, 1999 between Green
Tree Home Improvement and Home Equity Loan Trust 1999-B and the Indenture
Trustee (the "Indenture") (all capitalized terms used herein without definition
having the respective meanings specified in the Indenture) acknowledges that the
Indenture Trustee has received the Loan Files for the home improvement contracts
and promissory notes and home equity loans identified in the List of Loans,
except for any identified on Schedule A hereto.
The Trustee acknowledges that it has conducted a cursory review of the Loan
Files and hereby confirms that, except as noted on the document exception
listing attached hereto, each Loan File contained (a) an original contract or
promissory note endorsed to the Indenture Trustee or in blank, (b) an original
or a copy of the mortgage, deed of trust or similar evidence of a lien on the
related improved real estate (each, a "mortgage"), (c) in the case of a Loan
originated by a contractor, an original or a copy of an assignment of the
mortgage by the contractor to Green Tree, (d) an assignment of the mortgage by
the Company to the Indenture Trustee or in blank, and (e) originals of any
extension, modification or waiver agreement.. The Trustee has not otherwise
reviewed the Loans and Loan Files for compliance with the terms of the Indenture
or the Sale and Servicing Agreement.
IN WITNESS WHEREOF, U.S. Bank Trust National Association, as Indenture
Trustee, has caused this acknowledgment to be executed by its duly authorized
officer and its corporate seal affixed hereto as of this 30th day of June, 1999.
U.S. BANK TRUST NATIONAL ASSOCIATION
not in its individual capacity but
solely as Indenture Trustee
By:
-------------------------------------
Its:
---------------------------------
A-2-1
<PAGE>
EXHIBIT B
Form of Depository Agreement
B-1
<PAGE>
EXHIBIT C-1
Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its
agent for registration of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or in such other name as is 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.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
GREEN TREE HOME IMPROVEMENT AND HOME EQUITY LOAN TRUST 1999-B
CLASS A-[1][2] _____% NOTE
REGISTERED
NO. R-____
$_________
CUSIP No.__________
Green Tree Home Improvement and Home Equity Loan Trust 1999-B, a business
trust organized and existing under the laws of the State of Delaware (herein
referred to as the "Issuer"), for value received, hereby promises to pay to Cede
& Co., or registered assigns, the principal sum of _________________________
DOLLARS ($___________) payable on each Payment Date in an amount equal to the
result obtained by multiplying (i) a fraction, the numerator of which is
$__________ and the denominator of which is $__________ by (ii) the aggregate
amount, if any, payable from the Note Distribution Account in respect of
principal on the Class A-[1][2] Notes pursuant to Section 3.01 of the Indenture
(the "Indenture") dated as of June 1, 1999, between the Issuer and U.S. Bank
Trust National Association (the "Indenture Trustee"); provided, however, that
the entire unpaid principal amount of this Note shall be due and payable on the
earlier of the __________ Payment Date (the "Class A-[1][2] Final Scheduled
Payment Date") and the Redemption Date, if any, pursuant to Section 10.01 of the
Indenture referred to on the reverse hereof.
The Issuer will pay interest on this Note at the Class A-[1][2] Interest
Rate on each Payment Date until the principal of this Note is paid or made
available for payment, on the principal amount of this Note outstanding on the
preceding Payment Date (after giving effect to all payments of principal made on
the preceding Payment Date). Interest on this Note will accrue for each Payment
Date from the most recent Payment Date on which interest has been paid to but
excluding such Payment Date or, if no interest has yet been paid, from June 30,
1999. Interest will be computed on the basis of a 360-day year consisting of
twelve 30-day months. Such principal of and interest on this Note shall be paid
in the manner specified on the reverse hereof.
C-1-1
<PAGE>
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture and Related Documents, none of Wilmington Trust
Company in its individual capacity, U.S. Bank Trust National Association in its
individual capacity, any owner of a beneficial interest in the Issuer, the
Seller, the Servicer, or any of their respective partners, beneficiaries,
agents, officers, directors, employees or successors or assigns shall be
personally liable for, nor shall recourse be had to any of them for, the payment
of principal of or interest on this Note or performance of, or omission to
perform, any of the covenants, obligations or indemnifications contained in the
Indenture. Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, agrees that, except as
expressly provided in the Indenture and Related Documents, in the case of an
Event of Default under the Indenture, it shall have no claim against any of the
foregoing for any deficiency, loss or claim therefrom; provided, however, that
nothing contained herein shall be taken to prevent recourse to, and enforcement
against, the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
C-1-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer.
Date: _______________
GREEN TREE HOME IMPROVEMENT AND
HOME EQUITY LOAN TRUST 1999-B
By WILMINGTON TRUST COMPANY, not in
its individual capacity but solely
on behalf of the Issuer as Owner
Trustee under the Trust Agreement
By:
-------------------------------------
Name:
Title:
C-1-3
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
U.S. BANK TRUST NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Indenture Trustee
By:
------------------------------------
Authorized Signatory
C-1-4
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-[1][2] % Notes (herein called the "Class
A-[1][2]_____% Notes"), all issued under the Indenture, to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Class A-[1][2] Notes. The Class A-[1][2] Notes
are subject to all terms of the Indenture. All terms used in this Note that are
defined in the Indenture, as supplemented or amended, shall have the meanings
assigned to them in or pursuant to the Indenture, as so supplemented or amended.
The Class A-1 Notes, the Class A-2 Notes, the Class M-1 Notes, the Class
M-2 Notes, the Class B-1 Notes and the Class B-2 Notes (collectively the
"Notes") are secured by the collateral pledged as security therefor as provided
in the Indenture.
Principal of the Class A-[1][2] Notes will be payable on each Payment Date
in an amount described on the face hereof. "Payment Date" means the fifteenth
day of each month, or, if any such date is not a Business Day, the next
succeeding Business Day, commencing July 15, 1999.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the Class A-[1][2] Final Scheduled Payment
Date and the Redemption Date, if any, pursuant to Section 10.01 of the
Indenture. All principal payments on the Class A-[1][2] Notes shall be made pro
rata to the Class A-[1][2] Noteholders entitled thereto.
Financial Security Assurance Inc. (the "Note Insurer") has issued a Note
Insurance Policy in the name of the Indenture Trustee for the benefit of the
Holders of the Class A-1 and Class A-2 Notes (the "Class A Notes"). Unless a
Note Insurer Default shall be continuing, subject to Section 11.19 of the
Indenture, the Note Insurer shall be deemed to be the Holder of 100% of the
Outstanding Amount of Class A Notes for the purpose of exercising the rights,
including voting rights, under the Indenture. In addition, on each Payment Date,
after the Holders of the Class A Notes have been paid all amounts to which they
are entitled, the Note Insurer will be entitled to be reimbursed for any
unreimbursed Insured Payments and any other amounts owed under the Note
Insurance Policy in respect of the Class A Notes.
Payments of interest on this Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Registered Holder of this Note (or one or more Predecessor Notes)
on the Note Register as of the close of business on each Record Date, except
that with respect to Notes registered on the Record Date in the name of the
nominee of the Depository (initially, such nominee to be Cede & Co.), payments
will be made by wire transfer in immediately available funds to the account
designated by such nominee. Such checks shall be mailed to the Person entitled
thereto at the address of such Person as it appears on the Note Register as of
the applicable Record Date without requiring that this Note be submitted for
notation of payment. Any reduction in the principal amount of this Note (or any
one or more Predecessor Notes) affected by any payments made on any Payment Date
shall be binding upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or
C-1-5
<PAGE>
in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are
expected to be available, as provided in the Indenture, for payment in full of
the then remaining unpaid principal amount of this Note on a Payment Date, then
the Indenture Trustee, in the name of and on behalf of the Issuer, will notify
the Person who was the Registered Holder hereof as of the Record Date with
respect to the Payment Date immediately preceding such Redemption Date by notice
mailed within five days of such Redemption Date and the amount then due and
payable shall be payable only upon presentation and surrender of this Note at
the Indenture Trustee's principal Corporate Trust Office or at the office of the
Indenture Trustee's agent appointed for such purposes located in the city of New
York.
The Issuer shall pay interest on overdue installments of interest at the
Class A-[1][2] Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed pursuant to Section
10.01 of the Indenture, in whole, but not in part, at the option of the Company,
the Servicer or the Note Insurer on any Payment Date on or after the date on
which the Pool Scheduled Principal Balance is less than or equal to 10% of the
Cut-off Date Pool Principal Balance.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by the Holder hereof or his attorney duly
authorized in writing, with such signature guaranteed by a commercial bank or
trust company located, or having a correspondent located, in the city in which
the Corporate Trust Office is located, or a member firm of a national securities
exchange, and such other documents as the Indenture Trustee may require, and
thereupon one or more new Notes of authorized denominations and in the same
aggregate principal amount will be issued to the designated transferee or
transferees. No service charge will be charged for any registration of transfer
or exchange of this Note, but the transferor may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Seller, Servicer, Indenture Trustee or the Owner
Trustee in its individual capacity, (ii) any owner of a beneficial interest in
the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or
employee of the Seller, Servicer, Indenture Trustee or the Owner Trustee in its
individual capacity, any holder of a beneficial interest in the Issuer, the
Owner Trustee or the Seller, Servicer, Indenture Trustee or of any successor or
assign of the Indenture Trustee or the Owner Trustee in its individual capacity,
except as any such Person may have expressly agreed and except that any such
partner, owner or beneficiary shall be fully liable, to the extent provided by
applicable law, for any unpaid consideration for stock, unpaid capital
contribution or failure to pay any installment or call owing to such entity.
C-1-6
<PAGE>
Each Noteholder, as of the Closing Date, or Note Owner, as of the Closing
Date, by acceptance of a Note or, in the case of a Note Owner, a beneficial
interest in a Note, will be deemed to represent that either (1) it is not
acquiring the Note (or beneficial interest in a Note) with the assets of an
"employee benefit plan" within the meaning of section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or a "plan" within
the meaning of section 4875 of the Code; or (2) the acquisition and holding of
the Note (or beneficial interest in a Note) will not give rise to a non-exempt
prohibited transaction under Section 406(a) of ERISA or Section 4975 of the
Code.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees that by
accepting the benefits of the Indenture and such Note that such Noteholder or
Note Owner will not at any time institute against the Company, the Issuer or any
General Partner, or join in any institution against the Company, the Issuer or
any General Partner of, any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings under any United States Federal or state bankruptcy
or similar law in connection with any obligations relating to the Notes, the
Indenture or the Related Documents.
It is the intent and agreement of the Issuer, the Indenture Trustee, the
Noteholders and Note Owners that, for purposes of federal income, state and
local income and franchise and any other income taxes, the Notes will be treated
as indebtedness of the Issuer. Each Noteholder and Note Owner, by acceptance of
this Note or, in the case of a Note Owner, a beneficial interest in this Note,
covenants and agrees to treat this Note as indebtedness for such tax purposes
and to take no action inconsistent with such treatment.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note shall
be overdue, and neither the Issuer, the Indenture Trustee nor any such agent
shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of each Class of Notes. The Indenture also
contains provisions permitting the Holders of Notes representing specified
percentages of the Outstanding Amount of Notes, on behalf of the Holders of all
the Notes, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Note (or any one or more
Predecessor Notes) shall be conclusive and binding upon such Holders and upon
all future Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note. The Indenture also permits the
Indenture Trustee to amend or waive certain terms and conditions set forth in
the Indenture without the consent of Holders of the Notes issued thereunder.
C-1-7
<PAGE>
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Indenture Trustee and the
Holder of Notes under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of Minnesota, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
C-1-8
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
- -------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
- --------------------------------------------------------------------------------
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated: ________ ________________________________________
**
Signature Guaranteed:
________________________________________
- ----------
** NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.
C-1-9
<PAGE>
EXHIBIT C-2
Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its
agent for registration of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or in such other name as is 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.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
GREEN TREE HOME IMPROVEMENT AND HOME EQUITY LOAN TRUST 1999-B
CLASS M-[1][2]_______% NOTE
REGISTERED
NO. R-____
$_________
CUSIP No.__________
Green Tree Home Improvement and Home Equity Loan Trust 1999-B, a business
trust organized and existing under the laws of the State of Delaware (herein
referred to as the "Issuer"), for value received, hereby promises to pay to Cede
& Co., or registered assigns, the principal sum of _________________________
DOLLARS ($____________) payable on each Payment Date in an amount equal to the
result obtained by multiplying (i) a fraction, the numerator of which is
$__________ and the denominator of which is $__________ by (ii) the aggregate
amount, if any, payable from the Note Distribution Account in respect of
principal on the Class M-[1][2] Notes pursuant to Section 3.01 of the Indenture
(the "Indenture") dated as of June 1, 1999, between the Issuer and U.S. Bank
Trust National Association (the "Indenture Trustee"); provided, however, that
the entire unpaid principal amount of this Note shall be due and payable on the
earlier of the __________ Payment Date (the "Class M-[1][2] Final Scheduled
Payment Date") and the Redemption Date, if any, pursuant to Section 10.01 of the
Indenture referred to on the reverse hereof.
The Issuer will pay interest on this Note at the Class M-[1][2] Interest
Rate on each Payment Date until the principal of this Note is paid or made
available for payment, on the Class M-[1][2] Adjusted Principal Balance of this
Note outstanding on the preceding Payment Date (after giving effect to all
payments of principal made on the preceding Payment Date). Interest on this Note
will accrue for each Payment Date from the most recent Payment Date on which
interest has been paid to but excluding such Payment Date or, if no interest has
yet been paid, from June 30, 1999. Interest will be computed on the basis of a
360-day year consisting of twelve 30-day months. Such principal of and interest
on this Note shall be paid in the manner specified on the reverse hereof.
C-2-1
<PAGE>
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture and Related Documents, none of Wilmington Trust
Company in its individual capacity, U.S. Bank Trust National Association in its
individual capacity, any owner of a beneficial interest in the Issuer, the
Seller, the Servicer, or any of their respective partners, beneficiaries,
agents, officers, directors, employees or successors or assigns shall be
personally liable for, nor shall recourse be had to any of them for, the payment
of principal of or interest on this Note or performance of, or omission to
perform, any of the covenants, obligations or indemnifications contained in the
Indenture. Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, agrees that, except as
expressly provided in the Indenture and Related Documents, in the case of an
Event of Default under the Indenture, it shall have no claim against any of the
foregoing for any deficiency, loss or claim therefrom; provided, however, that
nothing contained herein shall be taken to prevent recourse to, and enforcement
against, the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
C-2-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer.
Date:________________
GREEN TREE HOME IMPROVEMENT AND
HOME EQUITY LOAN TRUST 1999-B
By WILMINGTON TRUST COMPANY, not in
its individual capacity but solely
on behalf of the Issuer as Owner
Trustee under the Trust Agreement
By:
-------------------------------------
Name:
Title:
C-2-3
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
U.S. BANK TRUST NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Indenture Trustee
By:
-----------------------------------
Authorized Signatory
C-2-4
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class M-[1][2] _____% Notes (herein called the "Class M-[1][2]
Notes"), all issued under the Indenture, to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights and obligations thereunder of the Issuer, the Indenture Trustee and the
Holders of the Class M-[1][2] Notes. The Class M-[1][2] Notes are subject to all
terms of the Indenture. All terms used in this Note that are defined in the
Indenture, as supplemented or amended, shall have the meanings assigned to them
in or pursuant to the Indenture, as so supplemented or amended.
The Class A-1 Notes, the Class A-2 Notes, the Class M-1 Notes, the Class
M-2 Notes, the Class B-1 Notes and the Class B-2 Notes (collectively the
"Notes") are and will be equally and ratably secured by the collateral pledged
as security therefor as provided in the Indenture.
Principal of the Class M-[1][2] Notes will be payable on each Payment Date
in an amount described on the face hereof. "Payment Date" means the fifteenth
day of each month, or, if any such date is not a Business Day, the next
succeeding Business Day, commencing July 15, 1999.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the Class M-[1][2] Final Scheduled Payment
Date and the Redemption Date, if any, pursuant to Section 10.01 of the
Indenture. All principal payments on the Class M-[1][2] Notes shall be made pro
rata to the Class M-[1][2] Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Registered Holder of this Note (or one or more Predecessor Notes)
on the Note Register as of the close of business on each Record Date, except
that with respect to Notes registered on the Record Date in the name of the
nominee of the Depository (initially, such nominee to be Cede & Co.), payments
will be made by wire transfer in immediately available funds to the account
designated by such nominee. Such checks shall be mailed to the Person entitled
thereto at the address of such Person as it appears on the Note Register as of
the applicable Record Date without requiring that this Note be submitted for
notation of payment. Any reduction in the principal amount of this Note (or any
one or more Predecessor Notes) affected by any payments made on any Payment Date
shall be binding upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not noted hereon. If funds are expected to be available, as
provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Payment Date, then the Indenture Trustee, in
the name of and on behalf of the Issuer, will notify the Person who was the
Registered Holder hereof as of the Record Date with respect to the Payment Date
immediately preceding such Redemption Date by notice mailed within five days of
such Redemption Date and the amount then due and payable shall be payable only
upon presentation and surrender of this Note at the Indenture Trustee's
principal Corporate Trust Office or at the office of the Indenture Trustee's
agent appointed for such purposes located in the city of New York.
C-2-5
<PAGE>
The Issuer shall pay interest on overdue installments of interest at the
Class M-[1][2] Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed pursuant to Section
10.01 of the Indenture, in whole, but not in part, at the option of the Company
or the Servicer on any Payment Date on or after the date on which the Pool
Scheduled Principal Balance is less than or equal to 10% of the Cut-off Date
Pool Principal Balance.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by the Holder hereof or his attorney duly
authorized in writing, with such signature guaranteed by a commercial bank or
trust company located, or having a correspondent located, in the city in which
the Corporate Trust Office is located, or a member firm of a national securities
exchange, and such other documents as the Indenture Trustee may require, and
thereupon one or more new Notes of authorized denominations and in the same
aggregate principal amount will be issued to the designated transferee or
transferees. No service charge will be charged for any registration of transfer
or exchange of this Note, but the transferor may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder, as of the Closing Date, or Note Owner, as of the Closing
Date, by acceptance of a Note or, in the case of a Note Owner, a beneficial
interest in a Note, will be deemed to represent that either (1) it is not
acquiring the Note (or beneficial interest in a Note) with the assets of an
"employee benefit plan" within the meaning of section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or a "plan" within
the meaning of section 4875 of the Code; or (2) the acquisition and holding of
the Note (or beneficial interest in a Note) will not give rise to a non-exempt
prohibited transaction under Section 406(a) of ERISA or Section 4975 of the
Code.
C-2-6
<PAGE>
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees that by
accepting the benefits of the Indenture and such Note that such Noteholder or
Note Owner will not at any time institute against the Company, the Issuer or any
General Partner, or join in any institution against the Company, the Issuer or
any General Partner of, any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings under any United States Federal or state bankruptcy
or similar law in connection with any obligations relating to the Notes, the
Indenture or the Related Documents.
It is the intent and agreement of the Issuer, the Indenture Trustee, the
Noteholders and Note Owners that, for purposes of federal income, state and
local income and franchise and any other income taxes, the Notes will be treated
as indebtedness of the Issuer. Each Noteholder and Note Owner, by acceptance of
this Note or, in the case of a Note Owner, a beneficial interest in this Note,
covenants and agrees to treat this Note as indebtedness for such tax purposes
and to take no action inconsistent with such treatment.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note shall
be overdue, and neither the Issuer, the Indenture Trustee nor any such agent
shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of each Class of Notes. The Indenture also
contains provisions permitting the Holders of Notes representing specified
percentages of the Outstanding Amount of Notes, on behalf of the Holders of all
the Notes, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Note (or any one or more
Predecessor Notes) shall be conclusive and binding upon such Holders and upon
all future Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note. The Indenture also permits the
Indenture Trustee to amend or waive certain terms and conditions set forth in
the Indenture without the consent of Holders of the Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Indenture Trustee and the
Holder of Notes under the Indenture.
C-2-7
<PAGE>
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of Minnesota, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
C-2-8
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
- -------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
- --------------------------------------------------------------------------------
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated:________ ________________________________________
**
Signature Guaranteed:
________________________________________
- ----------
** NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.
C-2-9
<PAGE>
EXHIBIT C-3
Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its
agent for registration of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or in such other name as is 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.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
GREEN TREE HOME IMPROVEMENT AND HOME EQUITY LOAN TRUST 1999-B
CLASS B-[1][2] _______% NOTE
REGISTERED
NO. R-______
$_________
CUSIP No.__________
Green Tree Home Improvement and Home Equity Loan Trust 1999-B, a business
trust organized and existing under the laws of the State of Delaware (herein
referred to as the "Issuer"), for value received, hereby promises to pay to Cede
& Co., or registered assigns, the principal sum of _________________________
DOLLARS ($___________) payable on each Payment Date in an amount equal to the
result obtained by multiplying (i) a fraction, the numerator of which is
$__________ and the denominator of which is $__________ by (ii) the aggregate
amount, if any, payable from the Note Distribution Account in respect of
principal on the Class B-[1][2] Notes pursuant to Section 3.01 of the Indenture
(the "Indenture") dated as of June 1, 1999, between the Issuer and U.S. Bank
Trust National Association (the "Indenture Trustee"); provided, however, that
the entire unpaid principal amount of this Note shall be due and payable on the
earlier of the __________ Payment Date (the "Class B-[1][2] Final Scheduled
Payment Date") and the Redemption Date, if any, pursuant to Section 10.01 of the
Indenture referred to on the reverse hereof.
The Issuer will pay interest on this Note at the Class B-[1][2] Interest
Rate on each Payment Date until the principal of this Note is paid or made
available for payment, on the Class B-[1][2] Adjusted Principal Balance of this
Note outstanding on the preceding Payment Date (after giving effect to all
payments of principal made on the preceding Payment Date). Interest on this Note
will accrue for each Payment Date from the most recent Payment Date on which
interest has been paid to but excluding such Payment Date or, if no interest has
yet been paid, from June 30, 1999. Interest will be computed on the basis of a
360-day year consisting of twelve 30-day months. Such principal of and interest
on this Note shall be paid in the manner specified on the reverse hereof.
C-3-1
<PAGE>
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture and Related Documents, none of Wilmington Trust
Company in its individual capacity, U.S. Bank Trust National Association in its
individual capacity, any owner of a beneficial interest in the Issuer, the
Seller, the Servicer, or any of their respective partners, beneficiaries,
agents, officers, directors, employees or successors or assigns shall be
personally liable for, nor shall recourse be had to any of them for, the payment
of principal of or interest on this Note or performance of, or omission to
perform, any of the covenants, obligations or indemnifications contained in the
Indenture. Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, agrees that, except as
expressly provided in the Indenture and Related Documents, in the case of an
Event of Default under the Indenture, it shall have no claim against any of the
foregoing for any deficiency, loss or claim therefrom; provided, however, that
nothing contained herein shall be taken to prevent recourse to, and enforcement
against, the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
C-3-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer.
Date: ___________ CERTIFICATES FOR HOME IMPROVEMENT
AND HOME EQUITY LOAN TRUST 1999-B
By WILMINGTON TRUST COMPANY, not in
its individual capacity but solely
on behalf of the Issuer as Owner
Trustee under the Trust Agreement
By:
------------------------------------
Name:
Title:
C-3-3
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
U.S. BANK TRUST NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Indenture Trustee
By:
-------------------------------------
Authorized Signatory
C-3-4
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class B-[1][2] _____% Notes (herein called the "Class B-[1][2]
Notes"), all issued under the Indenture, to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights and obligations thereunder of the Issuer, the Indenture Trustee and the
Holders of the Class B-[1][2] Notes. The Class B-[1][2] Notes are subject to all
terms of the Indenture. All terms used in this Note that are defined in the
Indenture, as supplemented or amended, shall have the meanings assigned to them
in or pursuant to the Indenture, as so supplemented or amended.
The Class A-1 Notes, the Class A-2 Notes, the Class M-1 Notes, the Class
M-2 Notes, the Class B-1 Notes and the Class B-2 Notes (collectively, the
"Notes") are and will be equally and ratably secured by the collateral pledged
as security therefor as provided in the Indenture.
Principal of the Class B-[1][2] Notes will be payable on each Payment Date
in an amount described on the face hereof. "Payment Date" means the fifteenth
day of each month, or, if any such date is not a Business Day, the next
succeeding Business Day, commencing July 15, 1999.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the Class B-[1][2] Final Scheduled Payment
Date and the Redemption Date, if any, pursuant to Section 10.01 of the
Indenture. All principal payments on the Class B-[1][2] Notes shall be made pro
rata to the Class B-[1][2] Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Registered Holder of this Note (or one or more Predecessor Notes)
on the Note Register as of the close of business on each Record Date, except
that with respect to Notes registered on the Record Date in the name of the
nominee of the Depository (initially, such nominee to be Cede & Co.), payments
will be made by wire transfer in immediately available funds to the account
designated by such nominee. Such checks shall be mailed to the Person entitled
thereto at the address of such Person as it appears on the Note Register as of
the applicable Record Date without requiring that this Note be submitted for
notation of payment. Any reduction in the principal amount of this Note (or any
one or more Predecessor Notes) affected by any payments made on any Payment Date
shall be binding upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not noted hereon. If funds are expected to be available, as
provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Payment Date, then the Indenture Trustee, in
the name of and on behalf of the Issuer, will notify the Person who was the
Registered Holder hereof as of the Record Date with respect to the Payment Date
immediately preceding such Redemption Date by notice mailed within five days of
such Redemption Date and the amount then due and payable shall be payable only
upon presentation and surrender of this Note at the Indenture Trustee's
principal Corporate Trust Office or at the office of the Indenture Trustee's
agent appointed for such purposes located in the city of New York.
C-3-5
<PAGE>
The Issuer shall pay interest on overdue installments of interest at the
Class B-1[1][2] Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed pursuant to Section
10.01 of the Indenture, in whole, but not in part, at the option of the Company
or the Servicer on any Payment Date on or after the date on which the Pool
Scheduled Principal Balance is less than or equal to 10% of the Cut-off Date
Pool Principal Balance.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by the Holder hereof or his attorney duly
authorized in writing, with such signature guaranteed by a commercial bank or
trust company located, or having a correspondent located, in the city in which
the Corporate Trust Office is located, or a member firm of a national securities
exchange, and such other documents as the Indenture Trustee may require, and
thereupon one or more new Notes of authorized denominations and in the same
aggregate principal amount will be issued to the designated transferee or
transferees. No service charge will be charged for any registration of transfer
or exchange of this Note, but the transferor may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder, as of the Closing Date, or Note Owner, as of the Closing
Date, by acceptance of a Note or, in the case of a Note Owner, a beneficial
interest in a Note, will be deemed to represent that either (1) it is not
acquiring the Note (or beneficial interest in a Note) with the assets of an
"employee benefit plan" within the meaning of section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or a "plan" within
the meaning of section 4875 of the Code; or (2) the acquisition and holding of
the Note (or beneficial interest in a Note) will not give rise to a non-exempt
prohibited transaction under Section 406(a) of ERISA or Section 4975 of the
Code.
C-3-6
<PAGE>
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees that by
accepting the benefits of the Indenture and such Note that such Noteholder or
Note Owner will not at any time institute against the Company, the Issuer or any
General Partner, or join in any institution against the Company, the Issuer or
any General Partner of, any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings under any United States Federal or state bankruptcy
or similar law in connection with any obligations relating to the Notes, the
Indenture or the Related Documents.
It is the intent and agreement of the Issuer, the Indenture Trustee, the
Noteholders and Note Owners that, for purposes of federal income, state and
local income and franchise and any other income taxes, the Notes will be treated
as indebtedness of the Issuer. Each Noteholder and Note Owner, by acceptance of
this Note or, in the case of a Note Owner, a beneficial interest in this Note,
covenants and agrees to treat this Note as indebtedness for such tax purposes
and to take no action inconsistent with such treatment.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note shall
be overdue, and neither the Issuer, the Indenture Trustee nor any such agent
shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of each Class of Notes. The Indenture also
contains provisions permitting the Holders of Notes representing specified
percentages of the Outstanding Amount of Notes, on behalf of the Holders of all
the Notes, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Note (or any one or more
Predecessor Notes) shall be conclusive and binding upon such Holders and upon
all future Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note. The Indenture also permits the
Indenture Trustee to amend or waive certain terms and conditions set forth in
the Indenture without the consent of Holders of the Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Indenture Trustee and the
Holder of Notes under the Indenture.
C-3-7
<PAGE>
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of Minnesota, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
C-3-8
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
- -------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
- --------------------------------------------------------------------------------
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated: ___________ ________________________________________
**
Signature Guaranteed:
________________________________________
- ----------
** NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.
C-3-9
<PAGE>
EXHIBIT 5.1
Green Tree Financial Corporation
1100 Landmark Towers
345 St. Peter Street
St. Paul, Minnesota 55102-1639
Re: Registration Statement on Form S-3
Green Tree Home Improvement and Home Equity Loan Trust 1999-B
File No. 333-36943 and 333-52233
Ladies and Gentlemen:
We have acted as counsel to Green Tree Financial Corporation, a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended, of $4,000,000,000 of Asset-Backed Loans (the
"Loans") to be issued by Green Tree Recreational, Equipment & Consumer Trusts to
be formed by the Company from time to time, the related preparation and filing
of the Registration Statements on Form S-3 filed by the Company with the
Securities and Exchange Commission (the "Commission") (File No. 333-63305 and
333-75623) (together, the "Registration Statement"), and the preparation of a
Prospectus Supplement dated June 18, 1999, and the related Prospectus dated June
18, 1999 (together, the "Prospectus") relating to the offer and sale by the
Company of $400,000,000 (approximate) aggregate principal amount of Loan-Backed
Notes (the "Notes") to be issued by Green Tree Home Improvement and Home Equity
Loan Trust 1999-B (the "Trust"). The corpus of the Trust will consist of the
Loans, the related Collateral Security and certain other property. The Trust was
established pursuant to a Trust Agreement dated as of June 1, 1999, among the
Company, as Depositor, and Wilmington Trust Company, as Owner Trustee (the
"Trust Agreement"). The Notes are to be issued pursuant to an Indenture dated
June 1, 1999 by and between Trust and U.S. Bank Trust National Association, as
Trustee (the "Indenture"). The Loans are described in the Prospectus forming
part of the Registration Statement.
<PAGE>
Green Tree Financial Corporation
June 30, 1999
Page 2
The Company will provide a Limited Guaranty (the "Limited Guaranty") with
respect to the B-2 Notes.
We have examined the Registration Statement, the Prospectus, the Trust
Agreement, the Sale and Servicing Agreement and Indenture, 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 Trust Agreement, the Sale and Servicing Agreement and Indenture have
been duly authorized by the Board of Directors of the Company and duly executed
and delivered by the Company and constitute valid and binding obligations of the
Company, and the Limited Guaranty of the Company provided for in the Sale and
Servicing Agreement constitutes the valid and binding obligation of the Company.
2. When the Notes have been duly executed and delivered in accordance with
the terms of the Trust Agreement, they will be legally and validly issued, and
the holders of the Notes will be entitled to the benefits of the Trust
Agreement.
3. When the Notes have been duly executed and delivered by the Owner
Trustee, authenticated by the Indenture Trustee, and delivered and paid for
pursuant to the Underwriting Agreement, the Notes will have been duly issued and
will constitute valid and binding obligations of the Trust.
The opinions set forth above are subject to the following qualifications
and exceptions:
(a) Our opinion in paragraphs 1 and 3 above are 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 paragraphs 1 and 3 above are 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).
<PAGE>
Green Tree Financial Corporation
June 30, 1999
Page 3
(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: June 30, 1999
Very truly yours,
/s/ Dorsey & Whitney LLP
CFS
<PAGE>
EXHIBIT 8.1
Green Tree Financial Corporation
1100 Landmark Towers
345 St. Peter Street
St. Paul, Minnesota 55102-1639
Re: Green Tree Financial Corporation and
Green Tree Home Improvement and Home Equity Loan Trust 1999-B
Ladies and Gentlemen:
We have acted as counsel for Green Tree Financial Corporation ("Green
Tree") in connection with the establishment by Green Tree of Green Tree Home
Improvement and Home Equity Loan Trust 1999-B (the "Trust"), pursuant to a Trust
Agreement, dated as of June 1, 1999 (the "Trust Agreement"), between Green Tree
and Wilmington Trust Company, as Owner Trustee (the "Owner Trustee"), and Green
Tree's execution of a Sale and Servicing Agreement dated as of June 1, 1999 (the
"Sale and Servicing Agreement"), between Green Tree and the Trust. The Trust
will issue $400,000,000 aggregate principal amount of Loan-Backed Notes (the
"Notes") pursuant to an Indenture, dated as of June 1, 1999 (the "Indenture"),
between the Trust and U.S. Bank Trust National Association, as Trustee, and a
single class of Certificates (the "Certificates") pursuant to the Trust
Agreement. The issuance of the Notes is also described in two registration
statements on Form S-3 (File No. 333-63305 and 333-75623) (together, the
"Registration Statement"), and in the related Prospectus Supplement dated June
18, 1999 (the "Prospectus Supplement") and Prospectus dated June 18, 1999 (the
"Base Prospectus") (together, the "Prospectus").
For purposes of rendering our opinion we have examined the Registration
Statement, the Trust Agreement, the Sale and Servicing Agreement, the Indenture,
and the related documents and agreements contemplated therein (collectively, the
"Transaction Documents"), and we have reviewed such questions of law as we have
considered necessary and appropriate. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to them in the
Prospectus.
Our opinion is based upon the existing provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), currently applicable Treasury Department
regulations issued
<PAGE>
Green Tree Financial Corporation
June 30, 1999
Page 2
thereunder, current published administrative positions of the Internal Revenue
Service (the "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. Any change in such
authorities may affect the opinions rendered herein. Our opinion is also based
on the representations set forth in the certificate dated the date hereof
delivered to us by Green Tree, the representations and warranties set forth in
the Transaction Documents and the assumptions that Green Tree, as Seller and
Servicer, the Certificateholder, the Owner Trustee and the Indenture Trustee
will at all times comply with the requirements of the Transaction Documents.
An opinion of counsel is predicated on all the facts and conditions set
forth in the opinion and is based upon counsel's analysis of the statutes,
regulatory interpretations and case law in effect as of the date of the opinion.
It is not a guarantee of the current status of the law and should not be
accepted as a guarantee that a court of law or an administrative agency will
concur in the opinion.
1. Federal Tax Characterization of the Trust. The Trust is a business
entity whose federal tax characterization will be determined under Treasury
Regulations ss.ss. 301.7701-2 and 301.7701-3. Treasury Regulations ss.
301.7701-2 provides that "a business entity is any entity recognized for federal
tax purposes . . . that is not properly classified as a trust under ss.
301.7701- 4 or otherwise subject to special treatment under the Internal Revenue
Code." Because the Trust will be recognized as an entity for federal tax
purposes and will not be properly classified as a trust under ss. 301.7701-4,
the Trust will be a "business entity" within ss. 301.7701-2.
Treasury Regulations ss. 301.7701-2 also provides that certain types of
entities are treated as corporations for federal tax purposes, including
entities formed under a state statute which refers to the entity as
"incorporated or as a corporation, body corporate or body politic," or as a
"joint-stock company or joint-stock association." The definition of corporation
also includes insurance companies, certain banking entities, foreign entities
and other entities specified in ss. 301.7701-2. The Trust is not an entity which
is treated as a corporation under ss. 301.7701-2.
Treasury Regulations ss. 301.7701-3 refers to a business entity that is not
classified as a corporation as an "eligible entity." That section provides that
an eligible entity with a single owner can elect to be classified as an
association (which is taxed as a corporation) or to be disregarded as an entity
separate from its owner. An eligible entity with at least two members can elect
to be classified as either an association or a partnership. Treasury Regulations
ss. 301.7701-3 further provides certain default rules pursuant to which, unless
the entity affirmatively elects to be classified as an association, an eligible
entity is disregarded as an entity separate from its owner if it has a single
owner, and is treated as a partnership if it has two or more members.
<PAGE>
Green Tree Financial Corporation
June 30, 1999
Page 3
Under Sections 2.6 and 5.5 of the Trust Agreement, Green Tree, the
Certificateholder and the Owner Trustee have agreed not to file any election to
treat the Trust as an association taxable as a corporation.
Based on the foregoing, it is our opinion that the Trust will not be
treated as an association taxable as a corporation for federal tax purposes.
Under Section 7704 of the Code, certain publicly traded partnerships are
treated as corporations for federal income tax purposes. This treatment does not
apply, however, to any publicly traded partnership if 90% or more of the gross
income of the partnership constitutes "qualifying income." For purposes of
Section 7704, "qualifying income" generally includes interest, dividends and
certain other types of passive income. Based on the representations made in the
Transaction Documents, we conclude that if the Trust is treated as a partnership
for federal income tax purposes, 90% or more of the Trust's gross income will
constitute "qualifying income" within the meaning of Section 7704 of the Code.
Therefore, it is our opinion that the Trust will not be taxed as a corporation
under the publicly traded partnership rules of Section 7704 of the Code.
Under Section 7701(i) of the Code, certain entities classified as "taxable
mortgage pools" are treated as corporations for federal income tax purposes.
Section 7701(i) defines taxable mortgage pool to include any entity (other than
a REMIC or a FASIT) which meets the following requirements:
(i) substantially all of the assets of such entity consists of debt
obligations (or interests therein) and more than 50% of such debt
obligations (or interests) consists of real estate mortgages (or interests
therein),
(ii) such entity is the obligor under debt obligations with two or more
maturities, and
(iii) under the terms of the debt obligations referred to in clause (ii)
(or underlying arrangement), payments on such debt obligations bear a
relationship to payments on the debt obligations (or interests) referred to
in clause (i).
Treasury Regulations ss. 301.7701(i) (the "TMP Regs") define real estate
mortgages to include all obligations that are principally secured by an interest
in real property. The TMP Regs further provide that an obligation is principally
secured by an interest in real property only if either (i) the fair market value
of the interest in real property securing he obligation was at least equal to 80
percent of the adjusted issue price of the obligation at the time
<PAGE>
Green Tree Financial Corporation
June 30, 1999
Page 4
it was originated, or (ii) substantially all of the proceeds of the obligation
were used to acquire, improve or protect an interest in real property, that, at
the origination date, is the only security for the obligation. Any obligation
which does not meet either of the foregoing tests is not considered a real
estate mortgage for purposes of the TMP Regs. In the Transaction Documents,
Seller has represented that not over 50% of the obligations held by the Trust
satisfies either of the foregoing tests. Therefore, it is our opinion that the
Trust will not be taxed as a corporation under the taxable mortgage pool rules
of Section 7701(i) of the Code.
2. Federal Tax Characterization of the Notes. The characterization of an
instrument as debt or equity for federal income tax purposes depends on all of
the facts and circumstances in each case. In any such determination, several
factors must be considered, including, among other things, the independence of
the debt holder and equity holders, the intention of the parties to create a
debt, the creation of a formal debt instrument, the safety of the principal
amount, and the debt to equity ratio of the issuer. In this regard, we note that
the Owner Trustee, on behalf of the Trust, and each Noteholder will agree to
treat the Notes as debt for federal income tax purposes. Based on such
agreement, the factors listed above and other considerations, although there is
no authority on transactions which resemble the issuance of the Notes by the
Trust, it is our opinion that the Notes will be treated as debt for federal
income tax purposes.
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 the headings "Prospectus Summary -- Tax
Status" and "Certain Federal Income Tax Consequences" in the Base Prospectus and
"Summary of Term -- Tax Status" and "Certain Federal and State Income Tax
Consequences" in the Prospectus Supplement accurately sets forth our advice.
3. Minnesota State Income Tax Consequences. Based on the discussion of the
federal income tax characterization of the Trust and the Notes set forth above
and the provisions of Minnesota law as of the date hereof, it is our opinion
that, for Minnesota income, franchise and excise tax purposes, the Trust will
not be classified as an association taxable as a corporation and that the Notes
will be treated as debt. It is also our opinion that for Certificateholders and
Noteholders who are not residents of, or otherwise subject to tax in, Minnesota,
ownership of a Certificate or a Note will not be a factor in determining whether
such Certificateholder or Noteholder is subject to Minnesota income, franchise
or excise taxes.
We hereby confirm that, insofar as they constitute statements of law or
legal conclusions as to the likely outcome of material issues under the
Minnesota income tax laws, the discussion under the headings "Prospectus Summary
- -- Tax Status" and"Certain State Income Tax Consequences" in the Base Prospectus
and "Summary of Term -- Tax Status" and "Certain
<PAGE>
Green Tree Financial Corporation
June 30, 1999
Page 5
Federal and State Income Tax Consequences" in the Prospectus Supplement
accurately sets forth our advice.
We express no opinion about the tax treatment of any features of the
Trust's activities or an investment therein other than those expressly set forth
above.
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
"Federal Income Tax Consequences" in the Prospectus comprising part of the
Registration Statement.
Dated: June 30, 1999
Very truly yours,
/s/ Dorsey & Whitney LLP
CFS
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Prospectus Supplement of
Green Tree Financial Corporation relating to the Green Tree Home Improvement and
Home Equity Loan Trust 1999-B of our report dated January 26, 1999 on our audits
of the consolidated financial statements of Financial Security Assurance Inc.
and Subsidiaries as of December 31, 1998 and 1997, and for each of the three
years in the period ended December 31, 1998. We also consent to the reference to
our Firm under the caption "Experts".
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
June 25, 1999
