1
EXHIBIT 4.1
HFC REVOLVING CORPORATION,
as Depositor,
and
HOUSEHOLD FINANCE CORPORATION,
as Master Servicer,
and
BANK ONE, NATIONAL ASSOCIATION,
as Trustee
-----------------------
POOLING AND SERVICING AGREEMENT
Dated as of ________, 1999
-----------------------
Closed-End Home Equity Loan Asset Backed Certificates,
Series ______
2
TABLE OF CONTENTS
PAGE
----
ARTICLE I.
Definitions
Section 1.01. Definitions............................................................................6
Section 1.02. Interest Calculations.................................................................23
Section 1.03. Usage of Terms........................................................................24
ARTICLE II.
Conveyance of Home Equity Loans; Original Issuance of Certificates; Tax Treatment
Section 2.01. Acknowledgment; Conveyance of Home Equity Loans; Custody of Mortgage Files............25
Section 2.02. Acceptance by Trustee; Repurchase of Home Equity Loans; Conveyance of Eligible
Substitute Home Equity Loans..........................................................28
Section 2.03. Representations, Warranties and Covenants of the Master Servicer......................30
Section 2.04. Representations and Warranties of the Depositor Regarding this Agreement and the Home
Equity Loans; Repurchases and Substitutions...........................................31
Section 2.05. Execution and Authentication of Certificates..........................................36
Section 2.06. Designation of Interests in the REMIC.................................................36
Section 2.07. Designation of Start-up Day...........................................................36
Section 2.08. REMIC Certificate Maturity Date.......................................................36
Section 2.09. Miscellaneous REMIC Provisions........................................................36
ARTICLE III.
Administration and Servicing of Home Equity Loans
Section 3.01. The Master Servicer...................................................................38
Section 3.02. Collection of Certain Home Equity Loan Payments.......................................40
Section 3.03. Withdrawals from the Collection Account...............................................42
Section 3.04. Maintenance of Hazard Insurance; Property Protection Expenses.........................43
Section 3.05. Assumption and Modification Agreements................................................44
Section 3.06. Realization Upon Defaulted Home Equity Loans..........................................44
Section 3.07. Optional Purchase of Defaulted Home Equity Loans......................................45
Section 3.08. Trustee to Cooperate..................................................................46
Section 3.09. Servicing Compensation; Payment of Certain Expenses by Master Servicer................46
Section 3.10. Annual Statement as to Compliance.....................................................47
Section 3.11. Annual Servicing Report...............................................................47
Section 3.12. Access to Certain Documentation and Information Regarding the Home Equity Loans.......47
Section 3.13. Maintenance of Certain Servicing Insurance Policies...................................48
Section 3.14. Reports to the Securities and Exchange Commission.....................................48
Section 3.15. Taxpayer Identification Number........................................................48
Section 3.16. Information Required by the Internal Revenue Service Generally and Reports of
Foreclosures and Abandonments of Mortgaged Property...................................48
Section 3.17. Additional Covenants of HFC...........................................................49
3
ARTICLE IV.
Servicing Certificate
Section 4.01. Servicing Certificate.................................................................50
ARTICLE V.
Distributions and Statements to Certificateholders; Rights of Certificateholders
Section 5.01. Distributions.........................................................................52
Section 5.02. Statements to Certificateholders......................................................54
ARTICLE VI.
The Certificates
Section 6.01. The Certificates......................................................................57
Section 6.02. Registration of Transfer and Exchange of Certificates.................................57
Section 6.03. Mutilated, Destroyed, Lost or Stolen Certificates.....................................62
Section 6.04. Persons Deemed Owners.................................................................63
Section 6.05. Appointment of Paying Agent...........................................................63
Section 6.06. Actions of Certificateholders.........................................................63
ARTICLE VII.
The Master Servicer and the Depositor
Section 7.01. Liability of the Master Servicer and the Depositor....................................65
Section 7.02. Merger or Consolidation of, or Assumption of the Obligations of, the Master Servicer
or the Depositor......................................................................65
Section 7.03. Limitation on Liability of the Master Servicer, the Depositor and Others..............65
Section 7.04. Master Servicer Not to Resign.........................................................66
Section 7.05. Delegation of Duties..................................................................66
ARTICLE VIII.
Events of Default
Section 8.01. Events of Default.....................................................................68
Section 8.02. Trustee to Act; Appointment of Successor..............................................69
Section 8.03. Notification to Certificateholders....................................................70
4
ARTICLE IX.
The Trustee
Section 9.01. Duties of Trustee.....................................................................71
Section 9.02. Certain Matters Affecting the Trustee.................................................72
Section 9.03. Trustee Not Liable for Certificates or Home Equity Loans..............................73
Section 9.04. Trustee May Own Certificates..........................................................74
Section 9.05. Master Servicer to Pay Trustee's Fees and Expenses....................................74
Section 9.06. Eligibility Requirements for Trustee..................................................75
Section 9.07. Resignation or Removal of Trustee.....................................................75
Section 9.08. Successor Trustee.....................................................................75
Section 9.09. Merger or Consolidation of Trustee....................................................76
Section 9.10. Appointment of Co-Trustee or Separate Trustee.........................................76
Section 9.11. Trustee May Enforce Claims Without Possession of Certificates.........................77
Section 9.12. Inspection of Mortgage Files..........................................................78
Section 9.13. Tax Returns...........................................................................78
ARTICLE X.
Termination
Section 10.01. Termination...........................................................................79
Section 10.02. Additional Termination Requirements...................................................81
Section 10.03. Termination Upon Loss of REMIC Status.................................................81
ARTICLE XI.
Miscellaneous Provisions
Section 11.01. Amendment.............................................................................83
Section 11.02. Recordation of Agreement..............................................................84
Section 11.03. Limitation on Rights of Certificateholders............................................84
Section 11.04. Governing Law.........................................................................85
Section 11.05. Notices...............................................................................85
Section 11.06. Severability of Provisions............................................................86
Section 11.07. Assignment............................................................................86
Section 11.08. Certificates Nonassessable and Fully Paid.............................................86
Section 11.09. Third-Party Beneficiaries.............................................................86
Section 11.10. Counterparts..........................................................................86
Section 11.11. Effect of Headings and Table of Contents..............................................86
Section 11.12. Limitation on Voting of Preferred Stock...............................................86
EXHIBIT A Form of Class A-1 Certificate.............................................................A-1
EXHIBIT B Form of Class A-2 Certificate.............................................................B-1
EXHIBIT C Form of Class A-3 Certificate.............................................................C-1
EXHIBIT D Form of Class A-4 Certificate.............................................................D-1
EXHIBIT E Form of Class A-5 Certificate.............................................................E-1
EXHIBIT F Form of Class M-1 Certificate.............................................................G-1
EXHIBIT G Form of Class M-2 Certificate.............................................................H-1
EXHIBIT H Form of Class R Certificate...............................................................I-1
EXHIBIT I MORTGAGE LOAN SCHEDULE....................................................................K-1
EXHIBIT J FORM OF INVESTMENT LETTER.................................................................M-1
5
This Pooling and Servicing Agreement, dated as of __________, 1999,
among HFC Revolving Corporation, as Depositor, Household Finance Corporation, as
Master Servicer, and Bank One, National Association, as Trustee,
WITNESSETH THAT:
In consideration of the mutual agreements herein contained, the parties
hereto agree as follows:
ARTICLE I
Definitions
Section 1.01. Definitions. Whenever used in this Agreement, the following
words and phrases, unless the context otherwise requires, shall have the
meanings specified in this Article.
Accrual Period: As to any Class and Distribution Date, the calendar
month preceding the month in which such Distribution Date occurs.
Affiliate: As to any Person, any other Person controlling, controlled
by or under common control with such Person. For purposes of this definition,
"control" means the power to direct the management and policies of a Person,
directly or indirectly, whether through ownership of voting securities, by
contract or otherwise, and "controlling" and "controlled" shall have meanings
correlative to the foregoing.
Agreement: This Pooling and Servicing Agreement and all amendments
hereof and supplements hereto.
Applied Realized Loss Amount: As to any Class of Class M Certificates
and Distribution Date, the aggregate Realized Losses, if any, applied in
reduction of the Certificate Principal Balance of such Class on such
Distribution Date.
Appraised Value: As to any Home Equity Loan, the appraised value of the
related Mortgaged Property based upon the appraisal made by or on behalf of the
Sellers at the time of origination of such Home Equity Loan; provided, that if
the Mortgage Loan was originated simultaneously with or not more than 12 months
after a senior lien on the related Mortgaged Property, the lesser of the
Appraised Value at origination of the senior lien and the sales price of the
related Mortgaged Property.
Authorized Newspaper: A newspaper of general circulation in the Borough
of Manhattan, The City of New York, printed in the English language and
customarily published on each Business Day, whether or not published on
Saturdays, Sundays and holidays.
Available Distribution Amount: As to any Distribution Date, the sum,
without duplication, of all amounts described in clauses (i) through (iv),
inclusive, of Section 3.02(b) received by the Master Servicer with respect to
the related Collection Period and deposited in the Collection Account.
BIF: The Bank Insurance Fund, as from time to time constituted, created
under the Financial Institutions Reform, Recovery and Enhancement Act of 1989
or, if at any time after the execution of this instrument the Bank Insurance
Fund is not existing and performing duties now
6
assigned to it, the body performing such duties on such date.
Book-Entry Certificate: Any Class A or Class M Certificate registered
in the name of the Depository or its nominee, ownership of which is reflected on
the books of the Depository or on the books of a person maintaining an account
with such Depository (directly or as an indirect participant in accordance with
the rules of such Depository).
Business Day: Any day other than (i) a Saturday or a Sunday or (ii) a
day on which banking institutions in the State of New York or Illinois are
required or authorized by law to be closed.
Certificate: A Class A Certificate, Class M Certificate or Class R
Certificate.
Certificate Owner: The Person who is the beneficial owner of a
Book-Entry Certificate.
Certificate Principal Balance: As to any Class (other than the Class R
Certificates) and any Determination Date, the Original Class Certificate Balance
thereof reduced by (i) all amounts previously distributed to the holders of such
Class and allocable to principal and (ii) in the case of each Class of Class M
Certificates, all Applied Realized Loss Amounts previously allocated to such
Class. The Class R Certificates have no Certificate Principal Balance.
Certificate Register and Certificate Registrar: The register maintained
and the registrar appointed pursuant to Section 6.02.
Certificateholder or Holder: The Person in whose name a Certificate is
registered in the Certificate Register, except that, solely for the purpose of
giving any consent, direction, waiver or request pursuant to this Agreement, (i)
any Certificate registered in the name of the Depositor (unless to the knowledge
of a Responsible Officer of the Trustee the Depositor is acting as trustee or
nominee for a Person who is not an Affiliate of the Depositor and who makes the
voting decision with respect to such Certificate) or the Master Servicer or any
Person known to a Responsible Officer of the Trustee to be an Affiliate of
either the Depositor or the Master Servicer and (ii) any Certificate for which
the Depositor (unless to the knowledge of a Responsible Officer of the Trustee
(A) the Depositor is acting as trustee or nominee for a Person who is not an
Affiliate of the Depositor and who makes the voting decision with respect to
such Certificate or (B) the Depositor is the owner of all the Certificates) or
the Master Servicer or any Person known to a Responsible Officer of the Trustee
to be an Affiliate (other than an Affiliate that has purchased any Certificate
on the Closing Date) of either the Depositor or the Master Servicer is the
Certificate Owner shall be deemed not to be outstanding and the Percentage
Interest evidenced thereby shall not be taken into account in determining
whether the requisite amount of Percentage Interests necessary to effect any
such consent, direction, waiver or request has been obtained.
Charge Off Amount: As to any Charged Off Home Equity Loan and
Collection Period, an amount equal to the amount of the Principal Balance that
the Master Servicer has charged off on its servicing records during such
Collection Period.
7
Charged Off Home Equity Loan: A defaulted Home Equity Loan that is not
a Liquidated Home Equity Loan and as to which (i) collection procedures are
ongoing and (ii) the Master Servicer has charged off all or a portion of the
related Principal Balance.
Class: Any of the Class A-1, Class A-2, Class A-3, Class A-4, Class
A-5, Class M-1, Class M-2 and Class R Certificates.
Class A-1 Certificate: Any Certificate designated as a Class A-1
Certificate on the face thereof, substantially in the form of Exhibit A hereto.
Class A-2 Certificate: Any Certificate designated as a Class A-2
Certificate on the face thereof, substantially in the form of Exhibit B hereto.
Class A-3 Certificate: Any Certificate designated as a Class A-3
Certificate on the face thereof, substantially in the form of Exhibit C hereto.
Class A-4 Certificate: Any Certificate designated as a Class A-4
Certificate on the face thereof, substantially in the form of Exhibit D hereto.
Class A-5 Certificate: Any Certificate designated as a Class A-5
Certificate on the face thereof, substantially in the form of Exhibit E hereto.
Class A-5 Lockout Distribution Amount: As to any Distribution Date, the
product of (i) the Class A-5 Lockout Percentage for such Distribution Date and
(ii) the Class A-5 Lockout Pro Rata Distribution Amount for such Distribution
Date.
Class A-5 Lockout Percentage: As to each Distribution Date, shall be as
follows:
Distribution Dates Lockout Percentage
------------------ ------------------
______ - _______ 0%
______ - _______ 45%
______ - _______ 80%
______ - _______ 100%
______ and thereafter 300%
Notwithstanding the foregoing, if the aggregate Certificate Principal
Balance of the Class A Certificates has been reduced to zero, the Lockout
Percentage shall be 100%.
Class A-5 Lockout Pro Rata Distribution Amount: As to any Distribution
Date, an amount equal to the product of (x) a fraction, the numerator of which
is the aggregate Certificate Principal Balance of the Class A-5 Certificates
immediately prior to such Distribution Date and the denominator of which is the
aggregate Certificate Principal Balance of the Class A Certificates immediately
prior to such Distribution Date and (y) the Class A Principal Distribution
Amount for such Distribution Date.
8
Class A Pass-Through Rate: With respect to each Class of Class A
Certificates, the per annum rate set forth below:
CLASS PASS-THROUGH RATE
--------------------------- ---------------------------------------------
A-1 ____%
A-2 ____%
A-3 ____%
A-4 ____%
A-5 ____%
Class A Certificateholder: A Holder of a Class A Certificate.
Class A Certificates: Any of the Class A-1, Class A-2, Class A-3, Class
A-4 or Class A-5 Certificates.
Class A Principal Distribution Amount: As to any Distribution Date (a)
prior to the Stepdown Date or with respect to which a Trigger Event is in
effect, the lesser of (i) 100% of the Principal Distribution Amount and (ii) the
aggregate Certificate Principal Balance of the Class A Certificates immediately
prior to such Distribution Date and (b) on or after the Stepdown Date and as
long as a Trigger Event is not in effect, the excess, if any, of (x) the
aggregate Certificate Principal Balance of the Class A Certificates immediately
prior to such Distribution Date over (y) the lesser of (i) the product of (A)
[__]% and (B) the Pool Balance as of the last day of the related Collection
Period and (ii) the Pool Balance as of the last day of the related Collection
Period minus [$_____,000].
Class M-1 Certificate: Any Certificate designated as a Class M-1
Certificate on the face thereof, substantially in the form of Exhibit G hereto.
Class M-2 Certificate: Any Certificate designated as a Class M-2
Certificate on the face thereof, substantially in the form of Exhibit H hereto.
Class M-1 Principal Distribution Amount: As to any Distribution Date,
the excess, if any, of (a) the sum of (i) the aggregate Certificate Principal
Balance of the Class A Certificates (after taking into account the distribution
of the Class A Principal Distribution Amount on such Distribution Date) and (ii)
the aggregate Certificate Principal Balance of the Class M-1 Certificates
immediately prior to such Distribution Date, over (b) the lesser of (i) the
product of (A) [___%] and (B) the Pool Balance as of the last day of the related
Collection Period and (ii) the Pool Balance as of the last day of the related
Collection Period minus [$____,000].
Class M-2 Principal Distribution Amount: As to any Distribution Date,
the excess, if any, of (a) the sum of (i) the aggregate Certificate Principal
Balance of the Class A Certificates (after taking into account the payment of
the Class A Principal Distribution Amount on such Distribution Date), (ii) the
aggregate Certificate Principal Balance of the Class M-1 Certificates
9
(after taking into account the payment of the related Class M-1 Principal
Distribution Amount on such Distribution Date), and (iii) the aggregate
Certificate Principal Balance of the Class M-2 Certificates immediately prior to
such Distribution Date, over (b) the lesser of (i) the product of (A) [__%] and
(B) the Pool Balance as of the last day of the related Collection Period and
(ii) the Pool Balance as of the last day of the related Collection Period minus
[$____,000].
Class M Certificateholder: A Holder of a Class M Certificate.
Class M Certificates: The Class M-1 and the Class M-2 Certificates.
Class M Pass-Through Rate: With respect to each Class of Class M
Certificates, the per annum rate set forth below:
CLASS PASS-THROUGH RATE
--------------------------- ---------------------------------------------
M-1 ____%
M-2 ____%
Class R Certificate: Any Certificate designated as a Class R
Certificate on the face thereof, substantially in the form of Exhibit I hereto.
Closing Date: ________, 1999.
Code: The Internal Revenue Code of 1986, as the same may be amended
from time to time (or any successor statute thereto).
Collection Account: The custodial account or accounts created and
maintained for the benefit of the Certificateholders pursuant to Section
3.02(b). The Collection Account shall be an Eligible Account.
Collection Period: As to any Distribution Date and Home Equity Loan,
the calendar month preceding the month in which such Distribution Date occurs.
Combined Loan-to-Value Ratio or CLTV: As to each Home Equity Loan, a
ratio, expressed as a percentage, the numerator of which is the sum of (a) the
original Principal Balance of the Home Equity Loan and (b) the aggregate unpaid
principal balance, at the time of origination of the Home Equity Loan, of all
other mortgage loans, if any, secured by senior liens on the related Mortgaged
Property, and the denominator of which is the Appraised Value of the Mortgaged
Property.
Corporate Trust Office: The principal office of the Trustee at which at
any particular time its corporate trust business shall be administered, which
office on the Closing Date is located at the address set forth in Section 11.05.
Current Interest: As to each Class of Class A and Class M Certificates
and any
10
Distribution Date, (i) the interest accrued at the applicable Pass-Through Rate
during the Accrual Period on the aggregate Certificate Principal Balance of such
Class of Certificates.
Cut-Off Date: As to each Home Equity Loan, the close of business on
October 31, 1999.
Cut-Off Date Pool Balance: The aggregate of the Cut-Off Date Principal
Balances of the Home Equity Loans.
Cut-Off Date Principal Balance: As to any Home Equity Loan, the unpaid
principal balance thereof as of the Cut-Off Date or, as to any Eligible
Substitute Home Equity Loan, as of the date of substitution of such Eligible
Substitute Home Equity Loan.
Defective Home Equity Loan: A Home Equity Loan subject to repurchase
pursuant to Section 2.02 or 2.04.
Definitive Certificates: As defined in Section 6.02(c).
Delinquent Home Equity Loan: Any Home Equity Loan in respect of which
any payment due thereunder has not been made for [_____] days or greater, from
the date such payment was due.
Deposit Event: The lowering of the Master Servicer's short-term debt
rating below "P-1" by Xxxxx'x or "___ by Fitch.
Depositor: HFC Revolving Corporation, a Delaware corporation, and its
successors in interest.
Depository: The initial Depository shall be The Depository Trust
Company, the nominee of which is Cede & Co., as the registered Holder of Class A
and Class M Certificates. The Depository shall at all times be a "clearing
corporation" as defined in Section 8-102(3) of the UCC of the State of New York.
Depository Participant: A broker, dealer, bank or other financial
institution or other Person for whom from time to time the Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
Determination Date: As to any Distribution Date, the fifth Business Day
prior to such Distribution Date.
Distribution Date: The 20th day of each month (or if such 20th day is
not a Business Day, then the next succeeding Business Day), commencing [_______]
20, 1999.
Electronic Ledger: The electronic master record of home equity loans
(including the Home Equity Loans) maintained by the Master Servicer.
Eligible Account: An account that is either (i) maintained with a
depository institution
11
whose short-term debt obligations at the time of any deposit therein are rated
in the highest short-term debt rating category by the Rating Agencies, (ii) an
account or accounts maintained with a depository institution with a long-term
unsecured debt rating by each Rating Agency that is at least investment grade,
provided that the deposits in such account or accounts are fully insured by
either the BIF or the SAIF, (iii) a segregated trust account maintained on the
corporate trust side with the Trustee in its fiduciary capacity, or (iv) an
account otherwise acceptable to each Rating Agency, as evidenced by a letter to
such effect from each such Rating Agency to the Trustee, without reduction or
withdrawal of the then-current ratings of the Class A or Class M Certificates.
Eligible Substitute Home Equity Loan: A Home Equity Loan substituted by
the Depositor for a Defective Home Equity Loan pursuant to Section 2.02 or 2.04,
which on the date of such substitution must
(i) have a Principal Balance not substantially
greater or less than the Principal Balance of such Defective Home
Equity Loan;
(ii) have a Loan Rate of not less than the Loan Rate
of the Defective Home Equity Loan and not more than [___] basis points
in excess thereof;
(iii) have a remaining term to maturity not more than
six months earlier or later than the remaining term to maturity of the
Defective Home Equity Loan;
(iv) comply with the representations and warranties
set forth in Section 2.04(b), to the extent such representations and
warranties do not pertain exclusively to the Home Equity Loans
transferred on the Closing Date;
(v) have a Combined Loan-to-Value Ratio that is not
greater than the Combined Loan-to-Value Ratio of the Defective Home
Equity Loan as of the date of origination of such Defective Home Equity
Loan;
(vi) have a lien position at least equal to the lien
position of the Mortgage relating to the Defective Home Equity Loan;
and
(vii) be the obligation of a Mortgagor whose credit
profile is substantially similar to that of the Mortgagor under the
Defective Home Equity Loan,
provided, however, that with respect to (i) through (vii) above, a home equity
loan may qualify as an Eligible Substitute Home Equity Loan if each of the
Rating Agencies consents to such substitution.
Event of Default: As defined in Section 8.01.
Extra Principal Distribution Amount: As to any Distribution Date, the
lesser of (x) the Monthly Excess Cashflow and (y) the Overcollateralization
Deficiency.
12
Xxxxxx Xxx: Xxxxxx Xxx, formerly known as The Federal National Mortgage
Association, or any successor thereto.
FDIC: The Federal Deposit Insurance Corporation or any successor
thereto.
Fitch: Fitch IBCA, Inc. or its successors in interest.
Foreclosure Profit: As to any Liquidated Home Equity Loan, the amount,
if any, by which (i) the aggregate of its Liquidation Proceeds less Liquidation
Expenses exceeds (ii) the Principal Balance thereof immediately prior to the
final recovery of its Liquidation Proceeds, together with the sum of (x) accrued
and unpaid interest thereon at the applicable Loan Rate from the date interest
was last paid through the date of receipt of the final Liquidation Proceeds and
(y) the related Charge Off Amounts.
Xxxxxxx Mac: Xxxxxxx Mac, formerly known as The Federal Home Loan
Mortgage Corporation, or any successor thereto.
HFC: Household Finance Corporation, a Delaware corporation, and its
successors.
Home Equity Loan: Such of the home equity loans (together with the
related Mortgage Notes and Mortgages) transferred and assigned to the Trustee
pursuant to Section 2.01 as from time to time are held as a part of the Trust,
the home equity loans originally so held being identified in the Home Equity
Loan Schedule delivered on the Closing Date. As applicable, the term Home Equity
Loan shall be deemed to refer to the Mortgaged Property that has been converted
to ownership by the Master Servicer prior to the final recovery of related
Liquidation Proceeds.
Home Equity Loan Schedule: As to any date, the schedule of Home Equity
Loans, including any Eligible Substitute Home Equity Loans, included in the
Trust on such date. The initial Home Equity Loan Schedule is the schedule
delivered by the Depositor to the Trustee on the Closing Date, which schedule
sets forth as to each Home Equity Loan (i) the Cut-Off Date Principal Balance,
(ii) the Loan Rate, (iii) the lien position of the related Mortgage, (iv) the
CLTV, and (v) the name and address of the Mortgagor. The Home Equity Loan
Schedule will be amended from time to time to reflect the removal of Home Equity
Loans and the addition of any Eligible Substitute Home Equity Loans to the
Trust, and when so amended shall include the information set forth above with
respect to each Eligible Substitute Home Equity Loan as of its related date of
substitution.
Initial Home Equity Loan: Each Home Equity Loan transferred and
assigned to the Trust on the Closing Date.
Insurance Proceeds: Proceeds paid by any insurer pursuant to any
insurance policy covering a Home Equity Loan, or by the Master Servicer pursuant
to the last sentence of Section 3.04, net of any component thereof covering any
expenses incurred by or on behalf of the Master Servicer in connection with
obtaining such Insurance Proceeds and exclusive of any portion
13
thereof that is applied to the restoration or repair of the related Mortgaged
Property, released to the Mortgagor in accordance with the Master Servicer's
normal servicing procedures or required to be paid to any holder of a mortgage
senior to such Home Equity Loan.
Interest Carry Forward Amount: As to any Class of Class A or Class M
Certificates and any Distribution Date, the sum of (x) the amount, if any, by
which (i) the sum of the Current Interest and all prior unpaid Interest Carry
Forward Amounts for such Class as of the immediately preceding Distribution Date
exceeded (ii) the amount of the actual distribution with respect to interest
made to such Class on such Distribution Date plus (y) interest on such amount
calculated for the related Accrual Period at the related Pass-Through Rate in
effect with respect to such Class.
Interest Collections: As to any Distribution Date, the sum, without
duplication of:
(i) the portion allocable to interest of all scheduled monthly
payments on the Home Equity Loans received during the related
Collection Period, minus the Servicing Fee for the related Collection
Period;
(ii) all Net Liquidation Proceeds actually collected by the
Master Servicer during the related Collection Period (to the extent
such Net Liquidation Proceeds relate to interest);
(iii) the interest portion of the Purchase Price for any Home
Equity Loan repurchased from the Trust pursuant to the terms of this
Agreement during the related Collection Period;
(iv) the interest portion of all Substitution Adjustment
Amounts with respect to the related Collection Period; and
(v) all Recovered Charge Off Amounts, whether or not any
portions thereof may be considered principal pursuant to the terms of
the related Mortgage Note.
Lien: Any mortgage, deed of trust, pledge, conveyance, hypothecation,
assignment, participation, deposit arrangement, encumbrance, lien (statutory or
other), preference, priority right or interest or other security agreement or
preferential arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing or the filing of any financing statement under the UCC (other than any
such financing statement filed for informational purposes only) or comparable
law of any jurisdiction to evidence any of the foregoing; provided, however,
that any assignment pursuant to Section [6.05 or 7.02] hereof shall not be
deemed to constitute a Lien.
Liquidated Home Equity Loan: As to any Distribution Date, any Home
Equity Loan in respect of which the Master Servicer has determined as of the end
of the related Collection Period that all Liquidation Proceeds which it expects
to recover on such Home Equity Loan have been
14
recovered (exclusive of any possibility of a deficiency judgement).
Liquidation Expenses: Out-of-pocket expenses (exclusive of overhead)
that are incurred by the Master Servicer in connection with the liquidation of
any Home Equity Loan and not recovered under any insurance policy, such expenses
including, without limitation, reasonable legal fees and expenses, any
unreimbursed amount expended pursuant to Section 3.06 (including, without
limitation, amounts advanced to correct defaults on any mortgage loan that is
senior to such Home Equity Loan and amounts advanced to keep current or pay off
a mortgage loan that is senior to such Home Equity Loan) with respect to the
related Home Equity Loan and any related and unreimbursed expenditures for real
estate property taxes or for property restoration, preservation or insurance
against casualty loss or damage.
Liquidation Proceeds: Proceeds (including Insurance Proceeds) received
in connection with the liquidation of any Home Equity Loan, whether through
trustee's sale, foreclosure sale or otherwise.
Loan Rate: As to any Home Equity Loan and day, the per annum rate of
interest applicable under the related Mortgage Note to the calculation of
interest for such day on the Principal Balance.
Master Servicer: Household Finance Corporation, a Delaware corporation,
or its successor in interest, or any successor master servicer appointed as
herein provided.
Monthly Excess Cashflow: As to any Distribution Date, the excess, if
any, of (x) Interest Collections over (y) the Current Interest plus the Interest
Carry Forward Amount, if any, of all Classes of Class A and Class M Certificates
(after taking into account all distributions of interest on such Distribution
Date).
Moody's: Xxxxx'x Investors Service, Inc., or its successor in interest.
Mortgage: The mortgage, deed of trust or other instrument creating a
first, second or third lien on an estate in fee simple interest in real property
securing a Home Equity Loan.
Mortgage File: The mortgage documents (including without limitation the
related Mortgage Note) listed in Section 2.01 pertaining to a particular Home
Equity Loan and any additional documents required to be added to the Mortgage
File pursuant to this Agreement, which documents may be physical documents or,
pursuant to the terms of Section 2.01, may be optical images or other
representations thereof.
Mortgage Note: As to a Home Equity Loan, the mortgage note or other
evidence of indebtedness under which the related Mortgagor agrees to pay the
indebtedness evidenced thereby and secured by the related Mortgage.
Mortgaged Property: The underlying property securing a Home Equity
Loan.
15
Mortgagor: The obligor or obligors under a Mortgage.
Net Liquidation Proceeds: As to any Liquidated Home Equity Loan,
Liquidation Proceeds less Liquidation Expenses.
Net Loan Rate: As to any Home Equity Loan, the Loan Rate less the
Servicing Fee Rate.
Officer's Certificate: A certificate signed by the President, a Senior
Vice President, a Vice President, the Treasurer, Assistant Treasurer, Controller
or Assistant Controller of the Depositor or the Master Servicer, as the case may
be, and delivered to the Trustee.
Opinion of Counsel: A written opinion of counsel acceptable to the
Trustee, who may be internal counsel for the Master Servicer or the Depositor.
Original Class Certificate Balance: With respect to each Class of Class
A and Class M Certificates, the amount set forth below:
CLASS ORIGINAL CLASS CERTIFICATE BALANCE
--------------------------- ---------------------------------------------
A-1 $_______,000
A-2 $_______,000
A-3 $_______,000
A-4 $_______,000
A-5 $_______,000
M-1 $_______,000
M-2 $_______,000
Overcollateralization Amount: As to any Distribution Date, the excess,
if any, of (x) the Pool Balance as of the last day of the preceding Collection
Period over (y) the aggregate Certificate Principal Balance of all Classes of
Class A and Class M Certificates, calculated after taking into account all
distributions of principal on such Distribution Date (other than the Extra
Principal Distribution Amount), but prior to taking into account the application
of any Applied Realized Loss Amount on such Distribution Date.
Overcollateralization Deficiency: As to any Distribution Date, the
excess, if any, of (x) the Targeted Overcollateralization Amount over (y) the
Overcollateralization Amount, calculated after taking into account all
distributions of principal on such Distribution Date (other than the Extra
Principal Distribution Amount), but prior to taking into account the application
of any Applied Realized Loss Amount on such Distribution Date.
Overcollateralization Release Amount: As to any Distribution Date, the
amount (but not in excess of the Principal Collections for such Distribution
Date) equal to the excess of (i) the Overcollateralization Amount (assuming that
100% of the Principal Collections are applied on such Distribution Date to the
distribution of principal on the Class A and Class M Certificates) over (ii) the
Targeted Overcollateralization Amount.
16
Ownership Interest: As to any Certificate, any ownership or security
interest in such Certificate, including any interest in such Certificate as the
Holder thereof and any other interest therein, whether direct or indirect, legal
or beneficial, as owner or as pledgee.
Pass-Through Rate: Either the Class A Pass-Through Rate or the Class M
Pass-Through Rate, as the context requires.
Paying Agent: Any Person appointed as paying agent pursuant to Section
6.06.
Percentage Interest: For purposes of making distributions among
Certificates of the same Class of Class A or Class M Certificates, the
percentage obtained by dividing the principal denomination of such Certificate
by the aggregate of the principal denominations of all Certificates of such
Class. In the case of any Class R Certificate, the percentage interest set forth
on the face of such Class R Certificate.
Permitted Investments: One or more of the following (excluding any
callable investments purchased at a premium):
(i) direct obligations of, or obligations fully guaranteed as
to timely payment of principal and interest by, the United States or
any agency or instrumentality thereof, provided that such obligations
are backed by the full faith and credit of the United States;
(ii) repurchase agreements on obligations specified in clause
(i) maturing not more than three months from the date of acquisition
thereof, provided that the short-term unsecured debt obligations of the
party agreeing to repurchase such obligations are at the date of
acquisition rated by each Rating Agency in its highest short-term
rating category (which is ["A-1+"] for Fitch and "P-1" for Moody's);
(iii) certificates of deposit, time deposits and bankers'
acceptances (which, if Xxxxx'x is a Rating Agency, shall each have an
original maturity of not more than 90 days and, in the case of bankers'
acceptances, shall in no event have an original maturity of more than
365 days) of any U.S. depository institution or trust company
incorporated under the laws of the United States or any state thereof
and subject to supervision and examination by federal and/or state
banking authorities, provided that the unsecured short-term debt
obligations of such depository institution or trust company at the date
of acquisition thereof have been rated by each of Moody's and Fitch in
its highest unsecured short-term debt rating category;
(iv) commercial paper (having original maturities of not more
than 270 days) of any corporation incorporated under the laws of the
United States or any state thereof which on the date of acquisition has
been rated by Fitch and Xxxxx'x in their highest short-term rating
categories;
(v) short term investment funds sponsored by any trust company
or national banking association incorporated under the laws of the
United States or any state thereof
17
which on the date of acquisition has been rated by Fitch and Xxxxx'x in
their respective highest rating category for long-term unsecured debt,
or any other short-term investment fund the funds in which are invested
in securities rated in the highest rating category by Fitch and Moody's
and which mature on or prior to the next Distribution Date;
(vi) interests in any money market fund which at the date of
acquisition has a rating of "Aaa" by Moody's and ["AAAm" or "AAAm-G"]
by Fitch or such lower rating as will not result in the qualification,
downgrading or withdrawal of the then-current rating assigned to the
Class A Certificates by each Rating Agency; and
(vii) other obligations or securities that are acceptable to
each Rating Agency as a Permitted Investment hereunder and will not
result in a reduction in the then-current rating of the Class A or
Class M Certificates, as evidenced by a letter to such effect from such
Rating Agency;
provided that no instrument described hereunder shall evidence either the right
to receive (a) only interest with respect to the obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument if such interest and principal payments provide a
yield to maturity at par greater than 120% of the yield to maturity at par of
the underlying obligations; and provided, further, that no instrument described
hereunder may be purchased at a price greater than par if such instrument may be
prepaid or called at a price less than its purchase price prior to its stated
maturity.
Permitted Transferee: Any Person other than (i) the United States, any
State or any political subdivision thereof or any agency or instrumentality of
any of the foregoing, (ii) a foreign government, international organization or
any agency or instrumentality of either of the foregoing, (iii) an organization
which is exempt from tax imposed by Chapter 1 of the Code (including the tax
imposed by Code section 511 on unrelated business taxable income) (except
certain farmers' cooperatives described in Code section 521) on any excess
inclusions (as defined in Code section 860E(c)(1)) with respect to any Class R
Certificate, (iv) rural electric and telephone cooperatives described in Code
section 1381(a)(2)(C), (v) a Person that is not a citizen or resident of the
United States, a corporation or partnership (including an entity treated as a
corporation or partnership for U.S. federal income tax purposes) created or
organized in or under the laws of the United States, any state thereof or the
District of Columbia, or an estate whose income from sources without the United
States is includible in gross income for United States federal income tax
purposes regardless of its connection with the conduct of a trade or business
within the United States, or a trust if a court within the United States is able
to exercise primary supervision over the administration of the trust and one or
more United States Persons have the authority to control all substantial
decisions of the trust and (vi) any other Person so designated by the Trustee
based on an Opinion of Counsel to the effect that any transfer to such Person
may cause the Trust to fail to qualify as a REMIC at any time the Certificates
are outstanding. The terms "United States", "State" and "international
organization" shall have the meanings set forth in Code section 7701 or
successor provisions. A corporation will not be treated as an instrumentality of
the United States or of any State or political subdivision thereof if all of its
activities are subject to tax
18
and, with the exception of the Xxxxxxx Mac, a majority of its board of directors
is not selected by such governmental unit.
Person: Any individual, corporation, partnership, joint venture,
association, limited liability company, joint-stock company, trust,
unincorporated organization, or government or any agency or political
subdivision thereof.
Pool Balance: As to any date, the aggregate of the outstanding
Principal Balances of all Home Equity Loans as of such date.
Pool Factor: As to any Distribution Date, the percentage, carried to
seven places, obtained by dividing the aggregate Certificate Principal Balance
of the Class A and Class M Certificates for such Distribution Date by the
aggregate Original Class Certificate Balance of the Class A and Class M
Certificates.
Preferred Stock: As defined in Section 11.12.
Principal Balance: As to any Home Equity Loan (other than a Liquidated
Home Equity Loan) and date, the related Cut-Off Date Principal Balance, minus
the sum of (x) all collections credited against the principal balance of such
Home Equity Loan in accordance with the terms of the related Mortgage Note and
(y) any related Charge Off Amounts credited against the principal balance of
such Home Equity Loan prior to such date. For purposes of this definition, a
Liquidated Home Equity Loan shall be deemed to have a Principal Balance equal to
the Principal Balance of the related Home Equity Loan immediately prior to the
final recovery of related Liquidation Proceeds and a Principal Balance of zero
thereafter.
Principal Collections: As to any Distribution Date, the sum, without
duplication, of:
(i) the principal portion of all scheduled monthly payments on
the Home Equity Loans received by the Master Servicer during the
related Collection Period;
(ii) the principal portion of the Purchase Price for any Home
Equity Loan repurchased from the Trust pursuant to the terms of this
Agreement during the related Collection Period;
(iii) the principal portion of all Substitution Adjustment
Amounts with respect to the related Collection Period;
(iv) all Net Liquidation Proceeds (excluding Foreclosure
Profits and Recovered Charge Off Amounts) actually received by the
Master Servicer during the related Collection Period (to the extent
such Net Liquidation Proceeds relate to principal); and
(v) the principal portion of all other unscheduled collections
on the Home Equity Loans received by the Master Servicer during the
related Collection Period (including, without limitation, full and
partial prepayments of principal made by the
19
Mortgagors), to the extent not previously distributed.
Principal Distribution Amount: As to any Distribution Date, (i) the
sum, without duplication, of (x) the Principal Collections and (y) the Extra
Principal Distribution Amount, if any, minus (ii) for Distribution Dates
occurring on and after the Stepdown Date and for which a Trigger Event is not in
effect, the Overcollateralization Release Amount, if any.
Purchase Agreement: The purchase agreement dated as of November 1,
1999, between the Depositor and the Sellers pursuant to which the Sellers convey
to the Depositor all of their right, title and interest in and to the Home
Equity Loans.
Purchase Price: As to any Home Equity Loan purchased from the Trust on
any date pursuant to Section 2.02, 2.04 or 3.01 an amount equal to the sum of
(i) the Principal Balance thereof plus any related Charge Off Amount as of the
end of the related Collection Period preceding the date of repurchase, (ii)
accrued and unpaid interest to the end of such Collection Period computed on a
daily basis at the Net Loan Rate on the Principal Balance outstanding from time
to time and (iii) with respect to any Home Equity Loan the Master Servicer or
the related Seller, as the case may be, elects to repurchase or replace pursuant
to this Agreement, an amount sufficient so that after paying any taxes pursuant
to Section 860F(a)(l) or Section 860G(d)(l) of the Code with respect to such
purchase (including any taxes imposed on the Trust with respect to such
additional purchase price), the Trust will retain an amount equal to the sum of
clauses (i) and (ii).
Rating Agencies: Moody's and Fitch or their respective successors. If
such agency or a successor is no longer in existence, "Rating Agency" shall be
such statistical credit rating agency, or other comparable Person, designated by
the Depositor, notice of which designation shall be given to the Trustee.
References herein to the highest short term unsecured rating category of a
Rating Agency shall mean "P-1" or better in the case of Moody's and "______" in
the case of Fitch and in the case of any other Rating Agency shall mean such
equivalent ratings. References herein to the highest long-term rating category
of a Rating Agency shall mean "____" in the case of Fitch and "Aaa" in the case
of Moody's and in the case of any other Rating Agency, such equivalent rating.
Realized Losses: As to any (i) Charged Off Home Equity Loan and any
Collection Period (other than the Collection Period in which all or a portion of
such Charged Off Home Equity Loan becomes a Liquidated Home Equity Loan), the
related Charge Off Amount and (ii) Liquidated Home Equity Loan, the excess of
the related Principal Balance at the end of the Collection Period in which such
Liquidated Home Equity Loan became a Liquidated Home Equity Loan over the
portion of related Net Liquidation Proceeds that are allocable to principal in
accordance with the related Mortgage Note.
Record Date: The last day preceding the related Distribution Date;
provided, however, that following the date on which Definitive Certificates are
available pursuant to Section 6.02(c) the Record Date shall be the last day of
the month preceding the month in which the related Distribution Date occurs.
20
Recovered Charge Off Amount: As to any Home Equity Loan that became a
Liquidated Home Equity Loan in a Collection Period, the amount, if any, by which
(i) its Net Liquidation Proceeds that are allocable to principal in accordance
with the related Mortgage Note exceeds (ii) its Principal Balance immediately
prior to foreclosure up to an amount of all related Charge Off Amounts, but in
no event less than zero.
Regular Certificates: The Class A and Class M Certificates.
Related Documents: As such term is defined in the Purchase Agreement.
REMIC: A "real estate mortgage investment conduit" within the meaning
of Section 860D of the Code.
REMIC Certificate Maturity Date: The "latest possible maturity date" of
the Regular Certificates as that term is defined in Section [2.08] hereof.
REMIC Change of Law: Any proposed, temporary or final regulation,
revenue ruling, revenue procedure or other official announcement or
interpretation relating to the REMIC and the REMIC Provisions issued after the
Closing Date.
REMIC Provisions: Provisions of the Federal income tax law relating to
real estate mortgage investment conduits, which appear at Section 860A through
860G of Subchapter M of Chapter 1 of the Code, and related provisions, and
regulations promulgated thereunder, as the foregoing may be in effect from time
to time.
REO: A Mortgaged Property that is acquired by the Trust in a
foreclosure or by grant of deed in lieu of foreclosure.
Responsible Officer: When used with respect to the Trustee, any officer
in the Corporate Trustee Administration Department of the Trustee with direct
responsibility for the administration of this Agreement.
SAIF: The Savings Association Insurance Fund, as from time to time
constituted, created under the Financial Institutions Reform, Recovery and
Enhancement Act of 1989, or if at any time after the execution of this
instrument the Savings Association Insurance Fund is not existing and performing
duties now assigned to it, the body performing such duties on such date.
Sellers: [Household Realty Corporation, Household Finance Corporation
of California, Household Finance Corporation II, Household Finance Corporation
III, Household Finance Industrial Loan Company, Household Finance Realty
Corporation of New York, Household Financial Center Inc., Household Finance
Realty Corporation of Nevada, Household Industrial Loan Company of Kentucky,
Household Finance Industrial Loan Company of Iowa, Household Finance Consumer
Discount Company, Household Industrial Finance Company and Mortgage One
Corporation.]
21
Senior Enhancement Percentage: As to any Distribution Date, the
percentage obtained by dividing (x) the sum of (i) the aggregate Certificate
Principal Balance of the Class M Certificates and (ii) the Overcollateralization
Amount, in each case after taking into account the distribution of the Principal
Distribution Amount on such Distribution Date, by (y) the Pool Balance as of the
last day of the related Collection Period.
Senior Specified Enhancement Percentage: As to any Distribution Date
means [__]%.
Servicer: As to each Home Equity Loan, the related Seller that sold
such Home Equity Loan to the Depositor pursuant to the Purchase Agreement.
Servicing Certificate: A certificate completed by and executed on
behalf of the Master Servicer in accordance with Section 4.01.
Servicing Fee: The fee payable to the Master Servicer pursuant to
Section ____.
Servicing Fee Rate: A rate equal to ____% per annum.
Servicing Officer: Any officer of the Master Servicer or other
individual designated by an officer of the Master Servicer involved in, or
responsible for, the administration and servicing of the Home Equity Loans,
whose name and specimen signature appear on a list of servicing officers
furnished to the Trustee on the Closing Date by the Master Servicer, as such
list may be amended from time to time.
60 Day Delinquent Amount: As to any Collection Period, the aggregate of
the Principal Balances of all Home Equity Loans that are 60 or more days
contractually delinquent, in bankruptcy, in foreclosure or REO as of the end of
such Collection Period.
60 Day+ Rolling Average: As to any Distribution Date, the average of
the applicable 60 Day Delinquency Amounts for each of the six (6) immediately
preceding Collection Periods.
Stepdown Date: The earlier to occur of:
(i) the later to occur of (x) the Distribution Date in
[November 2002] and (y) the first Distribution Date on which the Senior
Enhancement Percentage (after taking into account distributions of
principal on such Distribution Date) is greater than or equal to the
Senior Specified Enhancement Percentage, and
(ii) the Distribution Date on which the aggregate Certificate
Principal Balance of the Class A Certificates has been reduced to zero.
Stepped Up Enhancement Level: As to any Distribution Date, two (2)
times the amount of the 60 Day+ Rolling Average.
22
Substitution Adjustment Amount: As to any Defective Home Equity Loan
and the date on which a substitution thereof occurs pursuant to Sections 2.02 or
2.04, the sum of:
(i) the excess, if any, of (a) the Principal Balance of such
Defective Home Equity Loan plus any related Charge Off Amount as of the
end of the related Collection Period preceding the date of substitution
(after the application of any principal payments received on such
Defective Home Equity Loan on or before the date of the substitution of
the applicable Eligible Substitute Home Equity Loan or Loans) over (b)
the aggregate Principal Balance of the applicable Eligible Substitute
Home Equity Loan or Loans, plus
(ii) accrued and unpaid interest to the end of such Collection
Period computed on a daily basis at the Net Loan Rate on the Principal
Balance of such Defective Home Equity Loan outstanding from time to
time.
Targeted Overcollateralization Amount: As to any Distribution Date, (x)
prior to the Stepdown date, [__.00%] of the Cut-Off Date Pool Balance, and (y)
on and after the Stepdown Date and assuming a Trigger Event is not in effect,
the greater of (i) [__%] of the Pool Balance as of the last day of the related
Collection Period and (ii) [$____,000]. If a Trigger Event is in effect on and
after the Stepdown Date, the Targeted Overcollateralization Amount shall be
equal to the Targeted Overcollateralization Amount for the immediately preceding
Distribution Date.
Tax Matters Person Residual Interest: A 0.000001% interest in the Class
R Certificates, which shall be issued to and held by the Master Servicer
throughout the term hereof.
Transfer: Any direct or indirect transfer, sale, pledge, hypothecation
or other form of assignment of any Ownership Interest in a Certificate.
Transfer Date: As to any Home Equity Loan transferred to or
retransferred from the Trust hereunder, the date on which such transfer or
retransfer is made under the terms hereof, which date shall be (i) in the case
of the Home Equity Loans originally listed on the Home Equity Loan Schedule, the
Closing Date, and (ii) in the case of any Eligible Substitute Home Equity Loan,
the date on which such Eligible Substitute Home Equity Loan is conveyed to the
Trust under the terms hereof.
Trigger Event: Any Distribution Date on which the 60 Day+ Rolling
Average equals or exceeds 50% of the Senior Enhancement Percentage; provided,
that if the aggregate Certificate Principal Balance of the Class A Certificates
has been reduced to zero, a Trigger Event shall be in effect only if the 60 Day+
Rolling Average equals or exceeds [___%]; provided, further, a Trigger Event
shall not be in effect if the Senior Enhancement Percentage equals or exceeds
the Stepped Up Enhancement Level.
Trust: The trust created by this Agreement and designated "Household
Home Equity Loan Trust 1999-1", the corpus of which consists of the Home Equity
Loans, such assets as shall from time to time be identified as deposited in the
Collection Account (exclusive of net earnings thereon), the Mortgage Notes and
other Mortgage File documents for the Home Equity Loans,
23
any property that secured a Home Equity Loan and that has become REO, the
interest of the Depositor in certain hazard insurance policies maintained by the
Mortgagors or the Master Servicer in respect of the Home Equity Loans, the
Collection Account, the proceeds of each of the foregoing and one share of
Preferred Stock of the Depositor.
Trustee: Bank One, National Association, a national banking
association, or any successor Trustee appointed in accordance with this
Agreement that has accepted such appointment in accordance with this Agreement.
UCC: The Uniform Commercial Code, as amended from time to time, as in
effect in any specified jurisdiction.
Section 1.02. Interest Calculations. All calculations of interest hereunder that
are made in respect of the Principal Balance of a Home Equity Loan shall be made
based on the number of days elapsed between the date that interest was last paid
on such Home Equity Loan and the date of receipt of the related Mortgagor's most
current payment. All calculations of interest on the Class A and Class M
Certificates shall be made on the basis of a 360-day year consisting of twelve
30-day months. The calculation of the Servicing Fee shall be made on the basis
of a 360-day year consisting of twelve 30-day months.
Section 1.03. Usage of Terms. As to all terms in this Agreement the singular
includes the plural and the plural the singular; words importing any gender
include the other gender; references to "writing" include printing, typing,
lithography, optical imaging, 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 term "including"
means "including without limitation." The term "related Collection Period" as
used herein with respect to any Distribution Date shall mean the Collection
Period immediately preceding such Distribution Date and the term "preceding
Collection Period" as used herein with respect to any Distribution Date shall
mean the Collection Period preceding the related Collection Period for such
Distribution Date.
24
ARTICLE II
Conveyance of Home Equity Loans; Original Issuance of Certificates; Tax
Treatment
Section 2.01. Acknowledgment; Conveyance of Home Equity Loans; Custody of
Mortgage Files.
(a) The Depositor, concurrently with the execution and delivery of this
Agreement, does hereby irrevocably transfer, assign, sell, set over and
otherwise convey to the Trustee for the benefit of the Certificateholders
without recourse (subject to Sections 2.02 and 2.04) (i) all of its right, title
and interest in and to each Home Equity Loan, including its Cut-Off Date
Principal Balance, and all collections in respect thereof received on or after
the Cut-Off Date; (ii) property which secured such Home Equity Loan and which
has been acquired by foreclosure or deed in lieu of foreclosure; and (iii) its
interest in any insurance policies in respect of the Home Equity Loans; (iv) all
proceeds of any of the foregoing.
(b) The Depositor agrees to take, or to cause to be taken, such actions and
to execute such documents (including without limitation the filing of all
necessary continuation statements for the UCC-1 financing statement filed in the
State of Illinois (which shall have been filed as promptly as practicable, but
in no event later than 15 days following the Closing Date) describing the Home
Equity Loans and naming the Depositor as debtor and the Trustee as secured
party, and any amendments or other filings to the UCC-1 financing statement
required to reflect a change in the UCC of the name or corporate structure of
the Depositor, or the filing of any additional UCC-1 financing statement due to
any change in the principal office of the Depositor) as are necessary to perfect
and protect the Certificateholders' interests in each Home Equity Loan and the
proceeds thereof (other than delivering to the Trustee possession of the
Mortgage Files, which possession will, subject to the terms hereof, be
maintained by the Servicers on behalf of the Master Servicer as custodian and
bailee for the Trustee). With respect to the Home Equity Loans sold by each
Seller to the Depositor, the Master Servicer shall cause such Seller to file as
promptly as practicable, but in no event later than 15 days following the
Closing Date, in the appropriate public filing office or offices UCC-1 financing
statements and continuation statements describing such Home Equity Loans and
naming such Seller as seller and the Depositor as buyer, to file appropriate
continuation statements thereto, to file amendments thereto in the case of a
name change or change in corporate structure and to file appropriate additional
UCC-1 financing statements, if any, if such Seller changes its principal office.
(c) In connection with such transfer and assignment by the Depositor, the
Master Servicer, acting through the Servicers, acknowledges hereby that it is
holding, with respect to the Home Equity Loans transferred on the Closing Date,
and will hold, with respect to each Eligible Substitute Home Equity Loan, on and
from the applicable Transfer Date, as custodian and bailee for the Trustee the
following documents or instruments with respect to each such Home Equity Loan:
(i) the original Mortgage Note, endorsed in blank, with all intervening
endorsements showing a complete chain of title from the originator of such Home
Equity Loan to the Seller or a copy of such original Mortgage Note with an
accompanying lost note affidavit;
25
(ii) the original Mortgage, with evidence of recording thereon,
provided that if the original Mortgage has been delivered for recording to the
appropriate public recording office of the jurisdiction in which the Mortgaged
Property is located but has not yet been returned to the Seller by such
recording office, the Seller may hold a copy of such original Mortgage; and
(iii) originals of any amendments to the Mortgage Note or Mortgage,
any modification or assumption agreements and any previous assignments of such
Home Equity Loan;
provided, however, that as to any Home Equity Loan, if, as evidenced by
an Opinion of Counsel delivered to and in form and substance satisfactory to the
Trustee, (x) an optical image or other representation of the related documents
specified in clauses (i) through (iii) above are enforceable in the relevant
jurisdictions to the same extent as the original of such document and (y) such
optical image or other representation does not impair the ability of an owner of
such Home Equity Loan to transfer its interest in such Home Equity Loan, such
optical image or other representation may be held by the Master Servicer, acting
through the Servicers, as custodian and bailee for the Trustee in lieu of the
physical documents specified above.
(d) Except as hereinafter provided, the Master Servicer, acting through the
Servicers, shall be entitled to maintain possession of all of the foregoing
documents and instruments and shall not be required to deliver any of them to
the Trustee. In the event, however, that possession of any of such documents or
instruments is required by any Person (including the Trustee) acting as
successor master servicer pursuant to [Section 7.04 or 8.02] in order to carry
out the duties of Master Servicer hereunder, then such successor shall be
entitled to request delivery, at the expense of the Master Servicer, of such
documents or instruments by the Master Servicer and to retain such documents or
instruments for servicing purposes; provided that the Trustee or such servicers
shall maintain such documents at such offices as may be required by any
regulatory body having jurisdiction over such Home Equity Loans.
(e) The Master Servicer's right to maintain possession, directly or through
the Servicers, of the documents enumerated above shall continue so long as (i)
the long-term senior unsecured debt of HFC is assigned ratings of at least "A"
by Fitch and "A-3" by Xxxxx'x, or such lower ratings as shall be acceptable to
the Rating Agencies in order to maintain their current ratings of the Class A
and Class M Certificates, and (ii) each of the Servicers remains an Affiliate of
HFC. At such time as either of the conditions specified in the preceding
sentence is not satisfied, as promptly as practicable, but in no event more than
90 days thereafter in the case of clause (i) below and 60 days in the case of
clause (ii) below, the Master Servicer shall cause each Servicer, at such
Servicer's expense or, at the Master Servicer's discretion, the Master
Servicer's expense, to (i) either (x) record an assignment of Mortgage in favor
of the Trustee (which may be a blanket assignment if permitted by applicable
law) with respect to each of the Home Equity Loans being serviced by such
Servicer in the appropriate real property or other records or (y) deliver to the
Trustee the assignment of such Mortgage in favor of the Trustee in form for
recordation, together with an Opinion of Counsel addressed to the Trustee to the
effect that recording is not required to protect the Trustee's right, title and
interest in and to the related Home Equity Loan or to perfect a first priority
security interest in favor of the Trustee in the related Home Equity Loan, which
Opinion of Counsel also shall be reasonably acceptable to each of the Rating
Agencies (as evidenced in writing), and (ii) unless an Opinion of Counsel,
reasonably acceptable to the Trustee and the Rating Agencies (as
26
evidenced in writing), is delivered to the Trustee to the effect that delivery
of the Mortgage Files is not necessary to protect the Trustee's right, title and
interest in and to the related Home Equity Loans or to perfect a first priority
security interest in favor of the Trustee in the related Home Equity Loans,
deliver the related Mortgage Files to the Trustee to be held by the Trustee in
trust, upon the terms herein set forth, for the use and benefit of all present
and future Certificateholders, and the Trustee shall retain possession thereof
except to the extent the Master Servicer or Servicers require any Mortgage Files
for normal servicing as contemplated by [Section 3.07]. The Master Servicer
shall cause the Servicers to appoint the Trustee their attorney-in-fact to
prepare, execute and record any assignments of Mortgages required under this
Section 2.01 in the event that the Servicers should fail to do so on a timely
basis.
(f) Within 90 days following delivery, if any, of the Mortgage Files to the
Trustee pursuant to the preceding subsection, the Trustee shall review each such
Mortgage File to ascertain that all required documents set forth in this Section
2.01 have been executed and received and that such documents relate to the Home
Equity Loans identified on the Home Equity Loan Schedule, and in so doing the
Trustee may rely on the purported due execution and genuineness of any signature
thereon. If within such 90-day period the Trustee finds any document
constituting a part of a Mortgage File not to have been executed or received or
to be unrelated to the Home Equity Loans identified in said Home Equity Loan
Schedule or, if in the course of its review, the Trustee determines that such
Mortgage File is otherwise defective in any material respect, the Trustee shall
promptly upon the conclusion of its review notify the Depositor and the Master
Servicer, and the Depositor and the Master Servicer shall have a period of 90
days after such notice within which to correct or cure any such defect;
provided, however, that if such defect shall not have been corrected or cured
within such 90-day period due to the failure of the related office of real
property or other records to return any document constituting a part of a
Mortgage File, the Depositor or the Master Servicer shall so notify the Trustee
and the period during which such defect may be corrected or cured shall be
extended for one additional 90-day period.
(g) The Trustee shall have no responsibility for reviewing any Mortgage
File except as expressly provided in this Section 2.01. In reviewing any
Mortgage File pursuant to this Section 2.01, the Trustee shall have no
responsibility for determining whether any document is valid and binding,
whether the text of any assignment or endorsement is in proper or recordable
form (except, if applicable, to determine if the Trustee is the assignee or
endorsee), whether any document has been recorded in accordance with the
requirements of any applicable jurisdiction, or whether a blanket assignment is
permitted in any applicable jurisdiction, whether any Person executing any
document is authorized to do so or whether any signature thereon is genuine, but
shall only be required to determine whether a document has been executed, that
it appears to be what it purports to be and, where applicable, that it purports
to be recorded.
(h) The Master Servicer hereby confirms to the Trustee that on or prior to
the Closing Date and on or prior to the applicable Transfer Date with respect to
any Eligible Substitute Home Equity Loan, the portions of the Electronic Ledger
relating to such Home Equity Loans have been or will have been clearly and
unambiguously marked, and the appropriate entries have been or will have been
27
made in its general accounting records, to indicate that such Home Equity Loans
have been transferred to the Trustee and constitute part of the Trust in
accordance with the terms hereof.
Section 2.02. Acceptance by Trustee; Repurchase of Home Equity Loans; Conveyance
of Eligible Substitute Home Equity Loans.
(a) The Trustee hereby acknowledges receipt of all the right, title and
interest of the Depositor in and to the Home Equity Loans pursuant to Section
2.01, including but not limited to the transfer and assignment of the Mortgage
Notes and the Mortgages, and declares that it holds and will hold such documents
and interests and all amounts received by it in trust, upon the terms herein set
forth, for the use and benefit of all present and future Certificateholders. If
the time to cure any defect of which the Trustee has notified the Depositor and
the Master Servicer following the Trustee's review of the Home Equity Loan Files
pursuant to Section 2.01 has expired or if any loss is suffered by the Trustee,
on behalf of the Certificateholders, in respect of any Home Equity Loan as a
result of (i) a defect in any document constituting a part of a Mortgage File or
(ii) the related Seller's retention of such Mortgage File or an assignment of
Mortgage not having been recorded, the Depositor shall, in the case of a defect
in such document, or the Master Servicer shall, in the case of a loss resulting
from such Seller's retention of a Mortgage File or assignment of Mortgage not
having been recorded, on the Business Day next preceding the Distribution Date
in the month following the end of the Collection Period in which the time to
cure such defect expired or such loss occurred, either (i) repurchase the
related Home Equity Loan (a "Defective Home Equity Loan") (including any
property acquired in respect thereof and any insurance policy or insurance
proceeds with respect thereto) from the Trust at a price equal to the Purchase
Price which shall be accomplished by deposit by the Depositor or the Master
Servicer, as applicable, in the Collection Account pursuant to Section 3.02 on
such next preceding Business Day, or (ii) so long as such Distribution Date
occurs within two (2) years following the Closing Date, remove such Defective
Home Equity Loan from the Trust and substitute in its place an Eligible
Substitute Home Equity Loan or Loans.
(b) As to any Eligible Substitute Home Equity Loan or Loans, the Master
Servicer shall cause the related Seller to deliver to the Trustee with respect
to such Eligible Substitute Home Equity Loan or Loans an acknowledgment that the
related Seller is holding as custodian for the Trustee such documents and
agreements, if any, as are permitted to be held by the related Seller in
accordance with Section 2.01. An assignment of Mortgage in favor of the Trustee
with respect to such Eligible Substitute Home Equity Loan or Loans shall be
required to be recorded in the appropriate real property or other records or
delivered to the Trustee with the Opinion of Counsel referred to in Section 2.01
under the same circumstances that all other assignments of Mortgage are required
to be recorded hereunder. For any Collection Period during which the Depositor
or the Master Servicer substitutes one or more Eligible Substitute Home Equity
Loans, the Master Servicer shall determine the Substitution Adjustment Amount.
The Depositor or the Master Servicer, as applicable, shall deposit the
Substitution Adjustment Amount in the Collection Account no later than the
Business Day next preceding the Distribution Date in the month following the end
of the Collection Period in which such substitution occurs. The Master Servicer
shall amend the Home Equity Loan Schedule to reflect the removal of the
Defective Home Equity
28
Loan from the terms of this Agreement and the substitution of the Eligible
Substitute Home Equity Loan or Loans. Upon such substitution, the Eligible
Substitute Home Equity Loan or Loans shall be subject to the terms of this
Agreement in all respects, and the Depositor shall be deemed to have made with
respect to such Eligible Substitute Home Equity Loan or Loans, as of the date of
substitution, the covenants, representations and warranties set forth in Section
2.04. The Trustee shall upon satisfaction of the conditions in this subsection
immediately effect the reconveyance of such Defective Home Equity Loan so
removed from the Trust to the Depositor or the Master Servicer, as applicable.
The procedures applied by the Depositor or the Master Servicer in selecting each
Eligible Substitute Home Equity Loan shall not be adverse to the interests of
the Certificateholders and shall be comparable to the selection procedures
applicable to the Home Equity Loans originally conveyed hereunder.
(c) Upon receipt by the Trustee of (i) in the case of a repurchase, written
notification signed by a Servicing Officer to the effect that the Purchase Price
for any such Defective Home Equity Loan has been so deposited in the Collection
Account or (ii) in the case of a substitution, (A) written notification signed
by a Servicing Officer to the effect that the Substitution Adjustment Amount, if
any, has been so deposited in the Collection Account and (B) an Officer's
Certificate reciting the transfer and assignment of the Eligible Substitute Home
Equity Loan(s) to the Trustee and, if required at such time, that the related
Mortgage File(s) for such Eligible Substitute Home Equity Loan(s) have been
delivered to the Trustee and the assignment(s) of Mortgage have been recorded,
the Trustee shall execute and deliver such instrument of transfer or assignment
presented to it by the Master Servicer, in each case without recourse, as shall
be necessary to vest in the Depositor or the Master Servicer, as the case may
be, legal and beneficial ownership of such Defective Home Equity Loan (including
any property acquired in respect thereof or proceeds of any insurance policy
with respect thereto). It is understood and agreed that the obligation of the
Depositor or the Master Servicer to repurchase or substitute for (to the extent
permitted herein) any Defective Home Equity Loan shall constitute the sole
remedy respecting such defect available to Certificateholders or the Trustee
against the Depositor or the Master Servicer, and such obligation on the part of
the Master Servicer shall survive any resignation or termination of the Master
Servicer hereunder.
(d) In connection with any Defective Home Equity Loan required to be
purchased or substituted for, the Master Servicer shall deliver to the Trustee
an Opinion of Counsel to the effect that such purchase or substitution will not
cause (i) any federal tax to be imposed on the Trust, including, without
limitation, any Federal tax imposed on "prohibited transactions" under Section
860F(a)(1) of the Code or on "contributions after the start-up day" under
Section 860G(d)(1) of the Code or (ii) the Trust to fail to qualify as a REMIC
at any time that any Certificate is outstanding. In the event that such opinion
indicates that a purchase or substitution will result in the imposition of a
prohibited transaction tax, give rise to net taxable income or be deemed a
contribution to the REMIC after the "start-up day" of the REMIC within the
meaning of Section 860G(a)(9) of the Code, the Depositor or the Master Servicer
shall not be required to repurchase or substitute for any such Defective Home
Equity Loan unless and until the Master Servicer has determined there is an
actual or imminent default with respect thereto or that such defect or breach
adversely affects the enforceability of such Defective Home Equity Loan.
29
Section 2.03. Representations, Warranties and Covenants of the Master Servicer.
The Master Servicer represents, warrants and covenants that as of the Closing
Date:
(i) The Master Servicer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power to own its assets and to transact the business in which it
is currently engaged. The Master Servicer 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
require such qualification and in which the failure to so qualify would have a
material adverse effect on the business, properties, assets, or condition
(financial or other) of the Master Servicer;
(ii) The Master Servicer has the power and authority to make, execute,
deliver and perform its obligations under this Agreement and to perform its
obligations with respect to all of the transactions contemplated under this
Agreement, and has taken all necessary corporate action to authorize the
execution, delivery and performance of its obligations under this Agreement.
When executed and delivered, this Agreement will constitute the legal, valid and
binding obligation of the Master Servicer enforceable in accordance with its
terms, except as enforcement of such terms may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors' rights
generally and by the availability of equitable remedies (whether in a proceeding
at law or in equity);
(iii) The Master Servicer is not required to obtain the consent of any
other Person 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, except for such consents, licenses, approvals
or authorizations, or registrations or declarations, as shall have been obtained
or filed, as the case may be;
(iv) The execution and delivery of this Agreement and the performance
of the transactions contemplated hereby by the Master Servicer will not violate
any provision of any existing law or regulation or any order or decree of any
court applicable to the Master Servicer or any provision of the Certificate of
Incorporation or Bylaws of the Master Servicer, or constitute a material breach
of any mortgage, indenture, contract or other agreement to which the Master
Servicer is a party or by which the Master Servicer may be bound; and
(v) No litigation or administrative proceeding of or before any court,
tribunal or governmental body is currently pending, or to the knowledge of the
Master Servicer threatened, against the Master Servicer or any of its properties
or with respect to this Agreement or the Certificates which in the opinion of
the Master Servicer has a reasonable likelihood of resulting in a material
adverse effect on the transactions contemplated by this Agreement.
The representations and warranties set forth in this Section 2.03 shall
survive the sale and assignment of the Home Equity Loans to the Trust. Upon
discovery of a breach of any representations and warranties which materially and
adversely affects the interests of the Certificateholders, the Person
discovering such breach shall give prompt written notice to the other parties.
Within 60 days (or such longer period as permitted by prior written consent of a
Responsible Officer of the Trustee) of its discovery or its receipt of notice of
such breach, the Master Servicer shall cure such breach in all material
respects.
30
Section 2.04. Representations and Warranties of the Depositor Regarding this
Agreement and the Home Equity Loans; Repurchases and Substitutions.
(a) The Depositor represents and warrants that as of the Closing Date:
(i) The Depositor is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has the corporate
power to own its assets and to transact the business in which it is currently
engaged. The Depositor 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 require such
qualification and in which the failure to so qualify would have a material
adverse effect on the business, properties, assets or condition (financial or
other) of the Depositor;
(ii) The Depositor has the power and authority to make, execute,
deliver and perform its obligations under this Agreement and to perform its
obligations with respect to all of the transactions contemplated under this
Agreement, and has taken all necessary corporate action to authorize the
execution, delivery and performance of its obligations under this Agreement.
When executed and delivered, this Agreement will constitute the legal, valid and
binding obligation of the Depositor enforceable in accordance with its terms,
except as enforcement of such terms may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally and by the
availability of equitable remedies (whether in a proceeding at law or in
equity);
(iii) The Depositor is not required to obtain the consent of any other
Person 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, except for such consents, licenses, approvals or authorizations, or
registrations or declarations, as shall have been obtained or filed, as the case
may be;
(iv) The execution and delivery of this Agreement and the performance
of the transactions contemplated hereby by the Depositor will not violate any
provision of any existing law or regulation or any order or decree of any court
applicable to the Depositor or any provision of the Certificate of Incorporation
or Bylaws of the Depositor, or constitute a material breach of any mortgage,
indenture, contract or other agreement to which the Depositor is a party or by
which the Depositor may be bound; and
(v) No litigation or administrative proceeding of or before any court,
tribunal or governmental body is currently pending, or to the knowledge of the
Depositor threatened, against the Depositor or any of its properties or with
respect to this Agreement or the Certificates which in the opinion of the
Depositor has a reasonable likelihood of resulting in a material adverse effect
on the transactions contemplated by this Agreement.
(b) The Depositor represents and warrants with respect to each Home Equity
Loan that as of the Closing Date (or to the extent expressly stated herein as of
such other time):
(i) This Agreement constitutes either (A) a valid transfer and
assignment to the Trustee of all right,
31
title and interest of the Depositor in and to the Home Equity Loans, all monies
due or to become due with respect thereto, all proceeds thereof, such funds as
are from time to time deposited in the Collection Account (excluding any
investment earnings thereon) and all other property specified in the definition
of "Trust" as being part of the corpus of the Trust conveyed to the Trust by the
Depositor, or (B) a grant of a security interest (as defined in the UCC as in
effect in Illinois) in such property to the Trustee on behalf of the
Certificateholders, which is enforceable with respect to the Home Equity Loans,
all monies due or to become due with respect thereto, all proceeds thereof and
such funds as are from time to time deposited in the Collection Account
(excluding any investment earnings thereon). If this Agreement constitutes the
grant of a security interest to the Trust in such property, and if the Trustee
obtains and maintains possession of the Mortgage File for each Home Equity Loan,
the Trust shall have a first priority perfected security interest in such
property, subject to the effect of Section 9-306 of the UCC with respect to
collections on the Home Equity Loans that are deposited in the Collection
Account in accordance with Section 3.02;
(ii) The information set forth in the Home Equity Loan Schedule with
respect to such Home Equity Loan is true and correct in all material respects;
(iii) Immediately prior to the transfer and assignment by the related
Seller to the Depositor pursuant to the Purchase Agreement, the Home Equity Loan
has not been assigned or pledged, and the related Seller has good and marketable
title thereto, and the related Seller is the sole owner and holder of such Home
Equity Loan free and clear of any and all liens, claims, encumbrances,
participation interests, equities, pledges, charges or security interests of any
nature, and has full right and authority, under all governmental and regulatory
bodies having jurisdiction over the ownership of such Home Equity Loan, to
transfer and assign the same pursuant to the Purchase Agreement;
(iv) Immediately prior to the transfer and assignment by the Depositor
to the Trustee pursuant to this Agreement, the Home Equity Loan has not been
assigned or pledged, and the Depositor has good and marketable title thereto,
and the Depositor is the sole owner and holder of such Home Equity Loan free and
clear of any and all liens, claims, encumbrances, participation interests,
equities, pledges, charges or security interests of any nature, and has full
right and authority, under all governmental and regulatory bodies having
jurisdiction over the ownership of such Home Equity Loan, to transfer and assign
the same pursuant to this Agreement;
(v) The related Mortgage is a valid and subsisting first, second or
third lien, as set forth on the Home Equity Loan Schedule with respect to such
Home Equity Loan, on the property therein described, and the related Mortgaged
Property is free and clear of all encumbrances and liens having priority over
the first, second or third lien, as applicable, of such Mortgage except for
liens for (a) real estate taxes and special assessments not yet delinquent; (b)
any first and if applicable, second mortgage loan secured by such Mortgaged
Property and specified on the Home Equity Loan Schedule; (c) covenants,
conditions and restrictions, rights of way, easements and other matters of
public record as of the date of recording that are acceptable to mortgage
lending institutions generally; and (d) other matters to which like properties
are commonly subject which do not materially interfere with the benefits of the
security intended to be provided by such Mortgage;
(vi) To the best knowledge of the Depositor, there is no valid offset,
defense or counterclaim of any obligor under the Mortgage;
32
(vii) To the best knowledge of the Depositor, there is no delinquent
recording or other tax or fee or assessment lien against the related Mortgaged
Property;
(viii) To the Depositor's knowledge, there is no proceeding pending or
threatened for the total or partial condemnation of the related Mortgaged
Property, and such property is free of material damage and is in good repair;
(ix) There are no mechanics' or similar liens or claims which have been
filed for work, labor or material affecting the related Mortgaged Property which
are, or may be, liens prior or equal to the lien of the related Mortgage, except
liens which are fully insured against by the title insurance policy referred to
in clause (xiii);
(x) As of the Cut-Off Date for the Initial Home Equity Loans or as of
the applicable Transfer Date for any Eligible Substitute Home Equity Loan, no
scheduled monthly payment is more than ___ days delinquent (measured on a
contractual basis); and with respect to the Initial Home Equity Loans, no more
than ____% (by Cut-Off Date Pool Balance) were 30-59 days delinquent (measured
on a contractual basis) and no more than ____% (by Cut-Off Date Pool Balance)
were 60-89 days delinquent (measured on a contractual basis);
(xi) The related Mortgage File contains each of the documents and
instruments specified to be included therein (including an appraisal (which may
be an appraisal prepared using a statistical data base));
(xii) The related Mortgage Note and the related Mortgage at the time
they were made complied in all material respects with applicable state and
federal laws, including, without limitation, usury, truth-in-lending, real
estate settlement procedures, consumer credit protection, equal credit
opportunity or disclosure laws applicable to the Home Equity Loan;
(xiii) A lender's title insurance policy or binder was issued on the
date of origination of each Home Equity Loan for home equity loans in excess of
$50,000, and each such policy is valid and remains in full force and effect, and
a title search or other assurance of title customary in the relevant
jurisdiction was obtained with respect to each Home Equity Loan as to which no
title insurance policy or binder was issued;
(xiv) The related Mortgaged Property is not a mobile home or a
manufactured housing unit that is not permanently attached to its foundation;
(xv) As of the Cut-Off Date for the Initial Home Equity Loans, no more
than ___% of such Home Equity Loans (by Cut-Off Date Pool Balance) are secured
by Mortgaged Properties located in one United States postal zip code;
(xvi) As of the Cut-Off Date, the Combined Loan-to-Value Ratio for each
Initial Home Equity Loan was not in excess of _____%;
(xvii) No selection procedure reasonably believed by the Depositor to
be adverse to the interests of the Certificateholders was utilized in selecting
the Home Equity Loan;
33
(xviii) The Depositor has not transferred the Home Equity Loans to the
Trust with any intent to hinder, delay or defraud any of its creditors;
(xix) Each Mortgage Note and each Mortgage is in substantially the form
previously provided to the Trustee by the Depositor and each Home Equity Loan is
an enforceable obligation of the related Mortgagor;
(xx) The Depositor has not received a notice of default of any senior
mortgage loan with respect to the related Mortgaged Property that has not been
cured by a party other than the related Servicer;
(xxi) The Home Equity Loan does not have an original term to maturity
in excess of [360] months. As of the Cut-Off Date for the Initial Home Equity
Loans, the weighted average remaining term to maturity of the Home Equity Loans
on a contractual basis is approximately ____ months.
(xxii) The related Mortgaged Property consists of a single parcel of
real property with a one-to-four unit single family residence erected thereon,
or an individual condominium unit, planned unit development unit or townhouse,
generally approvable by Xxxxxx Xxx;
(xxiii) As of the Cut-Off Date, (a) no more than _____% (by Cut-Off
Date Pool Balance) of the Initial Home Equity Loans are secured by real property
improved by individual condominium units, planned unit developments, townhouses
or two-to-four family residences erected thereon, and (b) at least _____% (by
Cut-Off Date Pool Balance) of the Initial Home Equity Loans are secured by real
property with a detached one-family residence erected thereon;
(xxiv) As of the Cut-Off Date, the minimum Principal Balance of any
Initial Home Equity Loan was $_______, the maximum Principal Balance was
$_________ and the weighted average Principal Balance was $___________;
(xxv) As of the Cut-Off Date, approximately _____% (by Cut-Off Date
Pool Balance) and _____% (by Cut-Off Date Pool Balance) of the Initial Home
Equity Loans are first and second liens, respectively; and
(xxvi) The related Mortgage is a "qualified mortgage" under the REMIC
Provisions.
(c) It is understood and agreed that the representations and warranties set
forth in this Section 2.04 shall survive the transfer and assignment of the Home
Equity Loans to the Trustee. Upon discovery by the Depositor, the Master
Servicer or the Trustee of a breach of any of the foregoing representations and
warranties, without regard to any limitation set forth in such representation or
warranty concerning the knowledge of the Depositor as to the facts stated
therein, which materially and adversely affects the interests of the
Certificateholders in the related Home Equity Loan, the person discovering such
breach shall give prompt written notice to the other parties. Within 60 days of
its discovery or its receipt of notice of such breach, or, with the prior
written consent of a Responsible Officer of the Trustee, such longer period not
to exceed 90 days specified in such consent, the Depositor or, as necessary, the
Master Servicer shall cure such breach in all material respects. With regard to
any such breach of the representations and warranties set forth in Section
2.04(b), unless, at the expiration of such 60 day or longer period,
34
such breach has been cured in all material respects or otherwise does not exist
or continue to exist, the Depositor or the Master Servicer shall, not later than
the Business Day next preceding the Distribution Date in the month following the
end of the Collection Period in which any such cure period expired, either (i)
repurchase such Defective Home Equity Loan (including any property acquired in
respect thereof and any insurance policy or insurance proceeds with respect
thereto) or (ii) remove such Home Equity Loan from the Trust and substitute in
its place an Eligible Substitute Home Equity Loan or Loans, in the same manner
and subject to the same conditions as set forth in Section 2.02. Upon making any
such repurchase or substitution the Depositor or the Master Servicer, as
applicable, shall be entitled to receive an instrument of assignment or transfer
from the Trustee to the same extent as set forth in Section 2.02 with respect to
the repurchase or replacement of Home Equity Loans under that Section. It is
understood and agreed that the obligation of the Depositor or the Master
Servicer to purchase or substitute for any such Defective Home Equity Loan (or
property acquired in respect thereof) shall constitute the sole remedy against
the Depositor or the Master Servicer respecting such breach of the foregoing
representations or warranties available to Certificateholders or the Trustee
against the Depositor or the Master Servicer, and such obligation shall on the
part of the Master Servicer shall survive any resignation or termination of the
Master Servicer hereunder.
Section 2.05. Execution and Authentication of Certificates. The Trustee on
behalf of the Trust shall cause to be executed, authenticated and delivered on
the Closing Date to or upon the order of the Depositor, in exchange for the Home
Equity Loans, concurrently with the assignment and conveyance to the Trustee of
the Home Equity Loans, each Class of Class A and Class M Certificates in
authorized denominations and the Class R Certificates, together evidencing the
ownership of the entire Trust.
Section 2.06. Designation of Interests in the REMIC. Each Class of Class A and
Class M Certificates is hereby designated as a "regular interest" in the REMIC
and the Class R Certificates are hereby designated as the single "residual
interest" in the REMIC.
Section 2.07. Designation of Start-up Day. The Closing Date is hereby designated
as the "start-up day" of the REMIC within the meaning of Section 860G(a)(9) of
the Code.
Section 2.08. REMIC Certificate Maturity Date. Solely for purposes of satisfying
Section 1.860G-1(a)(4)(iii) of the Treasury Regulations, the "latest possible
maturity date" of the REMIC is the Distribution Date in _______.
Section 2.09. Miscellaneous REMIC Provisions.
(a) The parties intend that the Trust formed hereunder shall constitute,
and that the affairs of the Trust shall be conducted so as to qualify it as a
"real estate mortgage investment conduit" as defined in and in accordance with
the REMIC Provisions. In furtherance of such intention, the Master Servicer
covenants and agrees that it shall, to the extent permitted by applicable law,
act as agent (and the Master Servicer is hereby appointed to act as agent) on
behalf of the Trust and that in such capacity it shall:
(i) prepare, or cause to be prepared, for the Trustee's signature and
file, or cause to be filed, all
35
required federal and state tax returns for the REMIC using a calendar year as
the taxable year for the Trust when and as required by the REMIC Provisions and
other applicable federal income tax laws;
(ii) prepare and forward, or cause to be prepared and forwarded, to the
Certificateholders all information reports as and when required to be provided
to them in accordance with the REMIC Provisions and other applicable Federal
income tax laws;
(iii) conduct the affairs of the Trust at all times that any
Certificates are outstanding so as to maintain the status thereof as a REMIC
under the REMIC Provisions;
(iv) notwithstanding any other provision of this Agreement (other than
as expressly provided in Article X) not knowingly or intentionally take any
action that would cause, or omit to take any action that would or might
reasonably prevent, the termination of the REMIC status of the Trust;
(v) so long as it holds the Tax Matters Person Residual Interest, serve
as Tax Matters Person pursuant to Treasury Regulation Section 1.860F-4(d) for
the Trust;
(vi) notwithstanding any other provisions of the Agreement (other than
Sections 2.02, 2.04 and 3.01(a) with respect to the purchase of Home Equity
Loans under certain circumstances) knowingly or intentionally take any action
that would cause or would create a material risk of causing, the Trust to be
subject to tax under Sections 860F(a)(l) or 860G(d)(l) of the Code; and
(vii) pay (if permitted by applicable law) on the REMIC's behalf the
amount of any federal income tax, including prohibited transaction penalty taxes
or taxes on contributions to the REMIC after the startup day, imposed on the
Trust when and as the same shall be due and payable (but such obligation shall
not prevent the Master Servicer or any other appropriate Person from contesting
at its own expense any such tax in appropriate proceedings and shall not prevent
the Master Servicer from withholding payment of such tax, if permitted by law,
pending the outcome of such proceedings); provided, that, if any such tax shall
be paid by the Master Servicer, it shall thereafter be reimbursed from amounts
otherwise distributable to the Holders of the Class R Certificates, on a pro
rata basis, and the Master Servicer is hereby authorized to retain from amounts
otherwise distributable to the Holders of the Class R Certificates on any
Distribution Date sufficient funds to reimburse the Master Servicer for the
payment of any such tax (to the extent that the Master Servicer has not been
previously reimbursed or indemnified therefor).
(b) If the Master Servicer is not permitted, by applicable law, to fulfill
any of its duties described in this Section 2.09, the Trustee shall carry out
such duties pursuant to the instructions of the Master Servicer. The Trustee
covenants and agrees that it shall make an election, on behalf of the Trust, to
be treated as a REMIC on Internal Revenue Service Form 1066 of the Trust for its
first taxable year, in accordance with the REMIC Provisions.
36
ARTICLE III
Administration and Servicing of Home Equity Loans
SECTION 3.01. The Master Servicer.
(a) The Master Servicer shall, or shall cause the Servicers to, service and
administer the Home Equity Loans in a manner consistent with the terms of this
Agreement and with general industry practice and shall have full power and
authority, acting alone or through the Servicers, to do any and all things in
connection with such servicing and administration which it may deem necessary or
desirable, it being understood, however, that the Master Servicer shall at all
times remain responsible to the Trustee and the Certificateholders for the
performance of its duties and obligations hereunder in accordance with the terms
hereof. Any amounts received by the related Servicer in respect of a Home Equity
Loan shall be deemed to have been received by the Master Servicer whether or not
actually received by it. Without limiting the generality of the foregoing, the
Master Servicer shall continue, and is hereby authorized and empowered by the
Trustee, to execute and deliver, on behalf of itself, the Certificateholders and
the Trustee or any of them, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge and all other
comparable instruments, with respect to the Home Equity Loans and with respect
to the Mortgaged Properties. Upon the written request of the Master Servicer,
the Depositor and the Trustee shall furnish the Master Servicer with any powers
of attorney and other documents necessary or appropriate to enable the Master
Servicer to carry out its servicing and administrative duties hereunder. The
Master Servicer in such capacity may also consent to the placing of a proposed
lien senior to that of the Mortgage on the related Mortgaged Property, provided
that such proposed lien is not secured by a note providing for negative
amortization and:
(x) (i) the Mortgage relating to the Home Equity Loan was in a
first lien position as of the Cut-Off Date and was in a first lien
position immediately prior to the placement of the proposed senior
lien, and (ii) the ratio of (a) the sum of the Principal Balance of the
Home Equity Loan and the principal balance of the mortgage loan to be
secured by the proposed senior lien to (b) the Appraised Value of the
Mortgaged Property at the time the Home Equity Loan was originated is
not greater than (1) with respect to Home Equity Loans with an original
CLTV of [85]% or less, [85]% or (2) with respect to Home Equity Loans
with an original CLTV in excess of [85]% and not greater than [95]%,
[95]%;
(y) (i) the Mortgage relating to the Home Equity Loan was in a
first or second lien position at the time the related Home Equity Loan
was conveyed to the Trust and, immediately following the placement of
such proposed senior lien, such Mortgage will be in a second or, if
such Mortgage was in a second lien position at the time the related
Home Equity Loan was conveyed to the Trust, a third lien position and
(ii) the principal balance of the mortgage loan to be secured by the
proposed senior lien and the rate at which interest accrues thereon are
no greater than those of the related Home Equity Loan as of the date it
was first conveyed to the Trust; or
37
(z) the Mortgage relating to the Home Equity Loan was in a
second or third lien position as of the Cut-Off Date and the proposed
senior lien secures a mortgage loan that refinances an existing first
or second mortgage loan and the outstanding principal amount of such
mortgage loan immediately following such refinancing and the rate at
which interest accrues thereon are not greater than that of such
existing first or second mortgage loan at the date of such refinancing;
(b) If (i) foreclosure proceedings are commenced with respect to any Home
Equity Loan with respect to which the Master Servicer has consented to the
placing of a subsequent senior lien pursuant to clause (x) in Section 3.01(a),
or (ii) any loss is suffered by the Trustee on behalf of the Certificateholders
in respect of any Home Equity Loan as a result of (x) a failure to file on or
within 15 days following the Closing Date the UCC-l financing statements
referred to in Section 2.01 or (y) a failure to publish on or prior to the
Closing Date such notices reflecting the sale of the Home Equity Loans as are
described in Section 3440.1(h) of the California Civil Code, then the Master
Servicer shall repurchase or substitute for any adversely affected Home Equity
Loan on the Business Day preceding the next Distribution Date following the end
of the Collection Period during which such foreclosure proceedings were
commenced or such losses were suffered. Such repurchase or substitution shall be
accomplished in the same manner and subject to the same conditions as set forth
in Section 2.02. Upon making any such repurchase or substitution the Master
Servicer shall be entitled to receive an instrument of assignment or transfer
from the Trustee to the same extent as set forth in Section 2.02.
(c) Upon the request of a Mortgagor or at the Master Servicer's own
initiative, the Master Servicer (or the related Servicer on behalf of the Master
Servicer) may waive, modify or vary any term of any Home Equity Loan or consent
to the postponement of strict compliance with any such term or in any manner
grant indulgence to any Mortgagor if in the Master Servicer's (or such
Servicer's) good faith determination such waiver, modification, postponement or
indulgence is not materially adverse to the interests of the Certificateholders.
Notwithstanding the foregoing, unless:
(i) the Mortgagor is in default with respect to the Home Equity Loan,
or such default is, in the judgment of the Master Servicer (or such Servicer),
imminent; and
(ii) such waiver, modification, postponement or indulgence would not
cause the Trust to be disqualified as a REMIC or otherwise cause a tax to be
imposed on the Trust);
the Master Servicer (or the related Servicer on behalf of the Master Servicer)
may not permit any such waiver, modification, postponement or indulgence that
would constitute a significant modification of the Loan Rate (except as required
by law or as contemplated by the Mortgage Note), constitute a cancellation or
discharge of the Principal Balance (unless in connection with the liquidation of
the related Home Equity Loan), or constitute an extension of the scheduled
maturity date of the Home Equity Loan.
(d) The Master Servicer, upon receipt of a certificate from the Sellers to
the effect that in order to
38
maintain their competitive positions in the home equity loan industry prudent
business practice requires a modification to the terms of the Mortgage Notes, as
well as the agreements governing all comparable loans in their respective
portfolios pursuant to the provision designated "Termination and Changes in the
Agreement" or "Changes in the Agreement", as the case may be, of the forms
thereof, will deliver to the Trustee and each of the Rating Agencies, prior to
the effectiveness of any such modifications, an Opinion of Counsel to the effect
that such modifications will not (i) be materially adverse to the interests of
the Certificateholders, and (ii) affect the status of the Trust Fund as a REMIC
or otherwise cause a tax to be imposed on the Trust. Following the delivery of
such opinion the proposed modifications may be made to the Mortgage Notes. In
the event such opinion is not delivered prior to the time such modifications
would be effective, the Master Servicer shall cause the Sellers to refrain from
making any such modifications.
(e) Notwithstanding anything to the contrary contained herein, any other
changes to the terms of a Home Equity Loan that may adversely affect the status
of the Trust Fund as a REMIC or otherwise cause a tax to be imposed on the
Trust, may be agreed to by the Master Servicer (or the related Servicer on
behalf of the Master Servicer) if the Master Servicer (i) has determined that
such changes are necessary to avoid prepayment of the Home Equity Loan as a
result of refinancing provided by another lender and that such changes are
consistent with prudent business practice as evidenced by an Officer's
Certificate signed by a Servicing Officer to such effect and (ii) repurchases
such Home Equity Loan on the Business Day next preceding the Distribution Date
following the end of the Collection Period during which such determination was
made and prior to the effectiveness of such changes. In the event that such
repurchase does not occur, no changes may be made to the terms of such Home
Equity Loan. Such repurchase shall be accomplished in the same manner and
subject to the same conditions set forth in Section 2.02. Upon making any such
repurchase, the Master Servicer shall be entitled to receive an instrument of
assignment or transfer from the Trustee to the same extent as set forth in
Section 2.02.
(f) The relationship of the Master Servicer (and of any successor to the
Master Servicer as servicer under this Agreement) to the Trustee under this
Agreement is intended by the parties to be that of an independent contractor and
not that of a joint venturer, partner or agent.
(g) In the event that the rights, duties and obligations of the Master
Servicer are terminated hereunder, any successor to the Master Servicer in its
sole discretion may, to the extent permitted by applicable law, terminate the
existing subservicer arrangements with any Servicer or assume the terminated
Master Servicer's rights under such subservicing arrangements which termination
or assumption will not violate the terms of such arrangements.
Section 3.02. Collection of Certain Home Equity Loan Payments.
(a) The Master Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the Home Equity Loans, and
shall, to the extent such procedures shall be consistent with this Agreement,
follow such collection procedures as it follows with respect to home equity
loans in its servicing portfolio comparable to the Home Equity Loans. Consistent
with, and without limiting the generality of, the foregoing, the Master Servicer
may in its
39
discretion (i) waive any late payment charge or any assumption fees or other
fees that may be collected in the ordinary course of servicing the Home Equity
Loans, (ii) arrange with a Mortgagor a schedule for the payment of delinquent
amounts, so long as such arrangement is consistent with the Master Servicer's
policies with respect to the home equity loans it owns or services, and (iii)
and treat a Home Equity Loan as current if the Mortgagor has made one scheduled
payment to cure the delinquency status of such Home Equity Loan.
(b) The Master Servicer shall establish and maintain with the Trustee a
separate trust account (the "Collection Account") titled "Bank One, National
Association, as Trustee, in trust for the registered holders of Closed-End Home
Equity Loan Asset Backed Certificates, Series 1999-1". In the event that a
successor Trustee is appointed as provided in Section 9.07, a new Collection
Account shall be promptly established at and maintained by such successor
Trustee, and the title of the new Collection Account shall be "[Successor
Trustee], as Trustee, in trust for the registered holders of Closed-End Home
Equity Loan Asset Backed Certificates, Series 1999-1", and any amounts in the
old Collection Account shall be transferred to the new Collection Account. The
Collection Account shall be an Eligible Account. No later than 12:00 noon New
York time one (1) Business Day prior to each Distribution Date (or, if a Deposit
Event has occurred, within two (2) Business Days following receipt thereof), the
Master Servicer shall deposit or cause to be deposited into the Collection
Account the following payments and collections received or made by it with
respect to the Home Equity Loans (without duplication):
(i) Interest Collections on the Home Equity Loans;
(ii) Principal Collections on the Home Equity Loans;
(iii) Insurance Proceeds (including, for this purpose, any amount
required to be paid by the Master Servicer pursuant to Section 3.04 and
excluding any portion thereof constituting Principal Collections); and
(iv) amounts required to be paid by the Depositor in connection with
the termination of the Trust pursuant to Section 10.01.
The foregoing requirements respecting deposits to the Collection Account are
exclusive, it being understood that, without limiting the generality of the
foregoing, fees (including annual fees) or late charge penalties payable by
Mortgagors, or amounts received by the Master Servicer or a Servicer for the
accounts of Mortgagors for application towards the payment of taxes, insurance
premiums, assessments and similar items for the account of the related Servicer,
if any, need not be deposited in the Collection Account.
(c) The Trustee shall hold amounts deposited in the Collection Account as
trustee for the Certificateholders. In addition, the Master Servicer shall
notify the Trustee in writing on each Determination Date of the amount of
payments and collections to be deposited in the Collection Account with respect
to the related Distribution Date.
(d) The Master Servicer may cause the institution maintaining the
Collection Account to invest any funds in the Collection Account in Permitted
Investments (including obligations of the Master
40
Servicer or of any of its affiliates, if such obligations otherwise qualify as
Permitted Investments), which shall mature or otherwise be available not later
than the Business Day next preceding the Distribution Date or, with the approval
of the Rating Agencies, on the Distribution Date next following the date of such
investment (except that any investment in an obligation of the institution with
which the Collection Account is maintained may mature on or before 12:00 noon,
Chicago time, on such Distribution Date) and shall not be sold or disposed of
prior to its maturity. In the event the Trustee is at any time maintaining the
Collection Account, any request by the Master Servicer to invest funds on
deposit in the Collection Account shall be in writing, shall be delivered to the
Trustee at or before 10:30 A.M., Chicago time, if such investment is to be made
on such day, and shall certify that the requested investment is a Permitted
Investment that matures at or prior to the time required hereby. Any such
investment shall be registered in the name of the Trustee as trustee hereunder
or in the name of its nominee and to the extent such investments are
certificated they shall be maintained in the possession of the Trustee in the
state of its Corporate Trust Office. Except as provided above, all income and
gain realized from any such investment shall be for the benefit of the Master
Servicer and shall be subject to its withdrawal or order from time to time. The
amount of any losses incurred in respect of the principal amount of any such
investments shall be deposited in the Collection Account by the Master Servicer
out of its own funds immediately as realized.
(e) The Trustee is hereby authorized to execute purchases and sales of
Permitted Investments as directed by the Master Servicer through the facilities
of its own trading or capital markets operations. The Trustee shall send to the
Master Servicer statements reflecting the monthly activity for each such
purchase and sale made for the preceding month. Although the Master Servicer
recognizes that it may obtain a broker confirmation or written monthly statement
containing comparable information at no additional cost, the Master Servicer
hereby agrees that confirmations of investments are not required to be issued by
the Trustee for each month in which a monthly statement is rendered. No
statement need be rendered pursuant to the provision of this subsection if no
activity occurred in the account for such month.
Section 3.03. Withdrawals from the Collection Account.
(a) The Trustee shall withdraw or cause to be withdrawn funds from the
Collection Account for the following purposes:
(i) On each Distribution Date, to make distributions and payments to
Certificateholders pursuant to Section [5.01];
(ii) From time to time, to make investments in Permitted Investments
and to pay to the Master Servicer all income and gain earned in respect of
Permitted Investments or on funds deposited in the Collection Account;
(iii) To reimburse the Master Servicer to the extent permitted by
Section 7.03;
(iv) To withdraw any funds deposited in the Collection Account that
were not required to be deposited therein or were deposited therein in error and
to pay such funds to the appropriate Person;
41
(v) To pay to the party legally entitled by a final order of a court of
competent jurisdiction in an insolvency proceeding an amount equal to any
preference claim made with respect to amounts paid with respect to the Home
Equity Loans; provided that, if any such amount is later determined not to be a
preference by such court of competent jurisdiction and is returned to the Master
Servicer or any Servicer, such amount shall be redeposited into the Collection
Account by the Master Servicer; and
(vi) to clear and terminate the Collection Account upon the termination
of this Agreement and to pay any amounts remaining therein to the Class R
Certificateholders.
(b) If the Master Servicer deposits in the Collection Account any amount
not required to be deposited therein or credited thereto or any amount in
respect of payments by Mortgagors made by checks subsequently returned for
insufficient funds or other reason for non-payment, it may at any time withdraw
such amount from the Collection Account pursuant to Section 3.03(a)(iv), and any
such amounts shall not be included in Interest Collections and Principal
Collections, any provision herein to the contrary notwithstanding. Any
withdrawal or debit permitted by Section 3.03(a) may be accomplished by
delivering an Officer's Certificate to the Trustee which describes the purpose
of such withdrawal (including, without limitation, that any such amount was
deposited in the Collection Account in error or, in the case of returned checks,
that such amounts were properly debited, respectively). Upon receipt of any such
Officer's Certificate, the Trustee shall withdraw such amount for the account of
the Master Servicer. All funds deposited by the Master Servicer in the
Collection Account shall be held by the Trustee in trust for the
Certificateholders, until disbursed in accordance with [Section 5.01] or
withdrawn or debited in accordance with this Section.
Section 3.04. Maintenance of Hazard Insurance; Property Protection Expenses.
The Master Servicer shall cause to be maintained for each Home Equity Loan
hazard insurance naming the Master Servicer or the related Servicer as loss
payee thereunder providing extended coverage in an amount which is at least
equal to the lesser of (i) the maximum insurable value of the Mortgaged Property
or (ii) the combined principal balance owing on such Home Equity Loan and any
mortgage loan senior to such Home Equity Loan from time to time. The Master
Servicer shall also maintain on property acquired upon foreclosure, or by grant
of deed in lieu of foreclosure, hazard insurance with extended coverage in an
amount which is at least equal to the lesser of (i) the maximum insurable value
of the Mortgaged Property or (ii) the combined unpaid principal balance owing on
such Home Equity Loan and any mortgage loans senior to such Home Equity Loans at
the time of such foreclosure or grant of deed in lieu of foreclosure plus
accrued interest thereon. Amounts collected by the Master Servicer under any
such policies shall be either deposited in the Collection Account to the extent
called for by Section 3.02. In cases in which any Mortgaged Property is located
in a federally designated flood area, the hazard insurance to be maintained for
the related Home Equity Loan shall include flood insurance. All such flood
insurance shall be in such amounts as are required under applicable guidelines
of Xxxxxx Xxx. The Master Servicer shall be under no obligation to require that
any Mortgagor maintain earthquake or other additional insurance and shall be
under no obligation itself to maintain any such additional insurance on property
acquired in respect of a Home Equity Loan, other than pursuant to such
applicable laws and regulations as shall at any time be in force and as shall
require such additional insurance. As
42
to Mortgaged Properties acquired by the Master Servicer as provided herein, the
Master Servicer may satisfy its obligation set forth in the first sentence of
this Section 3.04 by self insuring Mortgaged Properties for which the aggregate
unpaid principal balance of the related Home Equity Loans plus the outstanding
balance of any mortgage loans senior to such Home Equity Loans at the time title
was acquired, plus accrued interest (the "Combined Exposure"), was less than
$500,000 (or such other amount as the Master Servicer may in good faith
determine from time to time) and by causing hazard policies to be maintained
with respect to Mortgaged Properties for which the Combined Exposure equals or
exceeds the self insurance threshold established from time to time by the Master
Servicer by maintaining a blanket policy consistent with prudent industry
standards insuring against hazard losses on the Mortgaged Properties. Such
policy may contain a deductible clause, in which case the Master Servicer shall,
in the event that there shall not have been maintained on the related Mortgaged
Property a policy complying with the first sentence of this Section 3.04, and
there shall have been a loss which would have been covered by such policy,
deposit in the Collection Account the amount not otherwise payable under the
blanket policy because of such deductible clause.
Section 3.05. Assumption and Modification Agreements. In any case in which a
Mortgaged Property has been or is about to be conveyed by the Mortgagor, the
Master Servicer shall exercise or refrain from exercising its right to
accelerate the maturity of such Home Equity Loan consistent with the
then-current practice of the Master Servicer and without regard to the inclusion
of such Home Equity Loan in the Trust and not in the Master Servicer's
portfolio. If it elects not to enforce its right to accelerate or if it is
prevented from doing so by applicable law, the Master Servicer (so long as such
action conforms with the Master Servicer's underwriting standards at the time
for new originations) is authorized to take or enter into an assumption and
modification agreement from or with the Person to whom such Mortgaged Property
has been or is about to be conveyed, pursuant to which such Person becomes
liable under the Mortgage Note, to the extent permitted by applicable law, the
Mortgagor remains liable thereon. The Master Servicer shall notify the Trustee
that any assumption and modification agreement has been completed by delivering
to the Trustee an Officer's Certificate certifying that such agreement is in
compliance with this Section 3.05 and by forwarding to the applicable Servicer
on behalf of the Depositor or the Trustee, as applicable, the original copy of
such assumption and modification agreement. Any such assumption and modification
agreement shall, for all purposes, be considered a part of the related Mortgage
File to the same extent as all other documents and instruments constituting a
part thereof. No change in the terms of the related Mortgage Note may be made by
the Master Servicer in connection with any such assumption to the extent that
such change would not be permitted to be made in respect of the original
Mortgage Note pursuant to Section 3.01 unless the conditions specified in
Section 3.01 are satisfied. Any fee collected by the Master Servicer for
entering into any such agreement will be retained by the Master Servicer as
additional servicing compensation.
Section 3.06. Realization Upon Defaulted Home Equity Loans.
(a) The Master Servicer (or the Master Servicer together with the related
Seller as called for by the Purchase Agreement) shall foreclose upon or
otherwise comparably convert to ownership
43
Mortgaged Properties securing such of the Home Equity Loans as come into and
continue in default when, in the opinion of the Master Servicer based upon the
practices and procedures referred to in the following sentence, no satisfactory
arrangements can be made for collection of delinquent payments pursuant to
[Section 3.02]; provided that if the Master Servicer has actual knowledge or
reasonably believes that any Mortgaged Property is affected by hazardous or
toxic wastes or substances and that the acquisition of such Mortgaged Property
would not be commercially reasonable, then the Master Servicer will not cause
the Trust to acquire title to such Mortgaged Property in a foreclosure or
similar proceeding. In connection with such foreclosure or other conversion, the
Master Servicer shall follow such practices (including, in the case of any
default on a related senior mortgage loan, the advancing of funds to correct
such default) and procedures as it shall deem necessary or advisable and as
shall be normal and usual in its general mortgage servicing activities. The
foregoing is subject to the proviso that the Master Servicer shall not be
required to expend its own funds in connection with any foreclosure or towards
the correction of any default on a related senior mortgage loan or restoration
of any property unless it shall determine that such expenditure will increase
Net Liquidation Proceeds. The Master Servicer will be reimbursed out of
Liquidation Proceeds for advances of its own funds to pay Liquidation Expenses
before any Net Liquidation Proceeds are deposited in the Collection Account.
(b) In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall (i) so long as the long-term unsecured debt of the Master Servicer is
assigned ratings of at least [__] by Fitch and A-3 by Moody's, be issued in the
name of the related Servicer or (ii) if the rating requirements in clause (i)
are not satisfied, be issued to the Trustee, or to its nominee on behalf of
Certificateholders. In the event that the Trust acquires any Mortgaged Property
as aforesaid or otherwise in connection with a default or imminent default on a
Home Equity Loan, such Mortgaged Property shall be disposed of by or on behalf
of the Trust within three (3) years after its acquisition by the Trust unless
the Trustee shall have received an Opinion of Counsel to the effect that the
holding by the Trust of such Mortgaged Property subsequent to three years after
its acquisition will not result in the imposition of taxes on "prohibited
transactions" of the Trust as defined in Section 860F of the Code or cause the
Trust to fail to qualify as a REMIC at any time that any Certificates are
outstanding. If the Trustee has not otherwise disposed of any such Mortgaged
Property after its acquisition by the Trust, the Master Servicer may purchase
such Mortgaged Property prior to the third anniversary of the date on which it
was acquired at a price equal to its fair market value as established by an
appraisal conducted by an independent appraiser, such appraisal to be at the
expense of the Master Servicer.
Section 3.07. Optional Purchase of Defaulted Home Equity Loans. The Master
Servicer, in its sole discretion, shall have the right, but not the obligation,
to elect (by written notice sent to the Trustee) to purchase for its own account
from the Trust any Home Equity Loan which is 90 days or more contractually
delinquent. The Master Servicer shall not purchase an aggregate amount of
defaulted Home Equity Loans in excess of [___]% of the Cut-Off Date Pool
Balance. The Purchase Price for any Home Equity Loan purchased under this
Section shall be paid by a deposit in the Collection Account on the Business Day
preceding the Distribution Date next following the
44
end of the Collection Period during which such defaulted Home Equity Loan became
90 days or more contractually delinquent. Such purchase shall be accomplished in
the same manner and subject to the same conditions as set forth in Section 2.02.
Upon making any such purchase the Master Servicer shall be entitled to receive
an instrument of assignment or transfer from the Trustee to the same extent as
set forth in Section 2.02.
Section 3.08. Trustee to Cooperate.
(a) Upon any payment in full of the Principal Balance of the Home Equity
Loan, the Master Servicer is authorized to execute, pursuant to the
authorization contained in Section 3.01, if the assignments of Mortgage have
been recorded as required hereunder, an instrument of satisfaction regarding the
related Mortgage, which instrument of satisfaction shall be recorded by the
Master Servicer if required by applicable law and be delivered to the Person
entitled thereto. It is understood and agreed that no expenses incurred in
connection with such instrument of satisfaction or transfer shall be reimbursed
from amounts deposited in the Collection Account. If the Trustee is holding the
Mortgage Files, from time to time and as appropriate for the servicing or
foreclosure of any Home Equity Loan, the Trustee shall, upon request of the
Master Servicer and delivery to the Trustee of a trust receipt signed by a
Servicing Officer, release the related Mortgage File to the Master Servicer, and
the Trustee shall execute such documents as shall be necessary to the
prosecution of any such proceedings or the taking of other servicing actions.
Such trust receipt shall obligate the Master Servicer to return the Mortgage
File to the Trustee when the need therefor by the Master Servicer no longer
exists unless the Home Equity Loan shall be liquidated, in which case, upon
receipt of an Officer's Certificate of the Master Servicer, the trust receipt
shall be released by the Trustee to the Master Servicer.
(b) In order to facilitate the foreclosure of the Mortgage securing any
Home Equity Loan that is in default following recordation of the assignments of
Mortgage in accordance with the provisions hereof, the Trustee shall, if the
Master Servicer so requests in writing and supplies the Trustee with appropriate
forms therefor, assign such Home Equity Loan for the purpose of collection to
the Master Servicer or to the related Servicer (any such assignment shall
unambiguously indicate that the assignment is for the purpose of collection
only), and, upon such assignment, such assignee for collection will thereupon
bring all required actions in its own name and otherwise enforce the terms of
the Home Equity Loan and deposit or credit the Net Liquidation Proceeds received
with respect thereto in the Collection Account. In the event that all delinquent
payments due under any such Home Equity Loan are paid by the Mortgagor and any
other defaults are cured then the assignee for collection shall promptly
reassign such Home Equity Loan to the Trustee and return it to the place where
the related Mortgage File was being maintained.
Section 3.09. Servicing Compensation; Payment of Certain Expenses by Master
Servicer. The Master Servicer shall be entitled to receive the Servicing Fee as
compensation for its services in connection with servicing the Home Equity
Loans. The Servicing Fee for each Collection Period shall be paid to the Master
Servicer out of Interest Collections prior to their deposit in the Collection
Account and shall not be the responsibility or liability of the Trust, the
Trustee or the Class A or Class M Certificateholders. Additional servicing
compensation in the form of late payment charges or
45
other receipts not required to be deposited in the Collection Account shall be
retained by the Master Servicer. The Master Servicer shall be required to pay
all expenses incurred by it in connection with its activities hereunder
(including payment of Trustee fees and all other fees and expenses not expressly
stated hereunder to be for the account of the Certificateholders) and shall not
be entitled to reimbursement therefor except as specifically provided herein.
Section 3.10. Annual Statement as to Compliance.
(a) The Master Servicer will deliver to the Trustee and a copy to each of
the Rating Agencies, on or before March 31 of each year, beginning March 31,
2001, an Officer's Certificate stating that (i) a review of the activities of
the Master Servicer during the preceding calendar year (or in the case of the
Officer's Certificate delivered in 2001, from the Closing Date) and of its
performance under this Agreement has been made under such officer's supervision
and (ii) to the best of such officer's knowledge, based on such review, the
Master Servicer has fulfilled all its material obligations under this Agreement
throughout such year (or in the case of the Officer's Certificate delivered in
2001, from the Closing Date), 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 Master Servicer shall deliver to the Trustee and a copy to each of
the Rating Agencies, promptly after having obtained knowledge thereof, but in no
event later than five Business Days thereafter, written notice by means of an
Officer's Certificate of any event which with the giving of notice or the lapse
of time or both, would become an Event of Default.
Section 3.11. Annual Servicing Report. On or before March 31 of each year,
beginning March 31, 2001, the Master Servicer at its expense shall cause a firm
of nationally recognized independent public accountants (who may also render
other services to the Master Servicer) to furnish a report to the Trustee and a
copy to each of the Rating Agencies to the effect that such firm has [examined
certain documents and records relating to the servicing of home equity loans by
the Master Servicer during the most recent calendar year (or in the case of the
report delivered in 2001, from the Closing Date) then ended under pooling and
servicing agreements (including this Agreement) substantially similar to this
Agreement and that such examination, which has been conducted substantially in
compliance with the audit guide for audits of non-supervised mortgagees approved
by the Department of Housing and Urban Development for use by independent public
accountants (to the extent that the procedures in such audit guide are
applicable to the servicing obligations set forth in such agreements), has
disclosed no items of noncompliance with the provisions of this Agreement which,
in the opinion of such firm, are material, except for such items of
noncompliance as shall be set forth in such report][, with respect to the Master
Servicer's overall servicing operations, examined such operations in accordance
with the requirements of the Uniform Single Attestation Program for Mortgage
Bankers, and stating such firm's conclusions relating thereto].
46
Section 3.12. Access to Certain Documentation and Information Regarding the
Home Equity Loans.
(a) The Master Servicer and the Servicers shall provide to the Trustee,
Class A or Class M Certificateholders that are federally insured savings and
loan associations, the Office of Thrift Supervision, the successor to the
Federal Home Loan Bank Board, the FDIC and the supervisory agents and examiners
of the Office of Thrift Supervision access to the documentation regarding the
Home Equity Loans required by applicable regulations of the Office of Thrift
Supervision and the FDIC (acting as operator of the SAIF or the BIF), such
access being afforded without charge but only upon reasonable request and during
normal business hours at the offices of the Master Servicer or the Servicers.
Nothing in this Section shall derogate from the obligation of the Master
Servicer to observe any applicable law prohibiting disclosure of information
regarding the Mortgagors, and the failure of the Master Servicer to provide
access as provided in this Section as a result of such obligation shall not
constitute a breach of this Section.
(b) The Master Servicer shall supply information in such form as the
Trustee shall reasonably request to the Trustee and the Paying Agent, on or
before the start of the third Business Day preceding the related Distribution
Date, as is required in the Trustee's reasonable judgment to enable the Paying
Agent or the Trustee, as the case may be, to make the required distributions and
to furnish the required reports to Certificateholders.
Section 3.13. Maintenance of Certain Servicing Insurance Policies. The Master
Servicer shall during the term of its service as master servicer maintain in
force (i) a policy or policies of insurance covering errors and omissions in the
performance of its obligations as master servicer hereunder and (ii) a fidelity
bond in respect of its officers, employees or agents. Each such policy or
policies and bond shall, together, comply with the requirements from time to
time of Xxxxxx Mae for Persons performing servicing for mortgage loans purchased
by such Association.
Section 3.14. Reports to the Securities and Exchange Commission. The Master
Servicer shall, on behalf of the Trust, cause to be filed with the Securities
and Exchange Commission any periodic reports required to be filed under the
provisions of the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Securities and Exchange Commission thereunder.
Section 3.15. Taxpayer Identification Number. The Master Servicer shall prepare
for the Trustee's signature and file, or the Trustee shall prepare and file,
with the Internal Revenue Service, on behalf of the Trust, an application on IRS
Form SS-4. The Trustee or the Master Servicer, as the case may be, upon receipt
from the Internal Revenue Service of the Notice of Taxpayer Identification
Number Assigned, shall promptly forward a copy of such notice to the other
party.
Section 3.16. Information Required by the Internal Revenue Service Generally
and Reports of Foreclosures and Abandonments of Mortgaged Property. The Master
Servicer shall prepare and deliver, or cause to be prepared and delivered, to
the Trustee all federal and state information reports when and as required by
all applicable state and federal income tax laws including, to the extent
applicable, returns reporting a cancellation of indebtedness as prescribed by
Section 6050P of the Code. In particular, with respect to the requirement under
Section 6050J of the Code to the effect that the Trustee shall make reports of
foreclosures and abandonments of any mortgaged property for each year beginning
in 1999, the Master Servicer, in order to facilitate this reporting process,
shall
47
provide to the Trustee in a timely fashion each year as required by law reports
relating to each instance occurring during the previous calendar year in which
the Master Servicer or any Servicer (i) on behalf of the Trustee acquired an
interest in any Mortgaged Property through foreclosure or other comparable
conversion in full or partial satisfaction of a Home Equity Loan or (ii) knew or
had reason to know that any Mortgaged Property has been abandoned. The reports
from the Master Servicer shall be in form and substance sufficient to enable the
Trustee to meet the reporting requirements imposed by Section 6050J of the Code.
Section 3.17. Additional Covenants of HFC. HFC hereby agrees that:
(i) it will maintain its books and records to clearly note the separate
corporate existence of the Depositor, each Servicer and the Master Servicer;
(ii) the Depositor, the Servicers and HFC will share certain overhead
expenses, although the amount the Depositor will be charged for such use will be
based on actual use to the extent practicable and, to the extent such allocation
is not practicable, on a basis reasonably related to use;
(iii) separate financial records will be maintained to reflect the
assets and liabilities of the Depositor, HFC and each Servicer, which financial
records are and will be subject to audit by independent public accountants at
the reasonable request of the Board of Directors of the Depositor, HFC or such
Servicer, as the case may be;
(iv) except as permitted hereunder, there will be no commingling of the
assets of the Depositor with the assets of HFC or any Servicer. All demand
deposit accounts and other bank accounts of the Depositor will be maintained
separately from those of HFC and the Servicers. Monetary transactions between
the Depositor and HFC or any Servicer are and will continue to be properly
reflected in their respective financial records;
(v) HFC at all times will recognize, and will take all steps within its
power to maintain, the corporate existence of the Depositor and Servicers as
being separate and apart from its own corporate existence and will not refer to
the Depositor or any Servicer as a department or division of HFC; and
(vi) Except as otherwise expressly provided herein, HFC will not
guaranty any obligations of the Depositor.
48
ARTICLE IV
Servicing Certificate
Section 4.01. Servicing Certificate. Not later than each Determination Date, the
Master Servicer shall deliver to the Trustee, the Paying Agent and each Rating
Agency a Servicing Certificate (in written form or the form of computer readable
media or such other form as may be agreed to by the Trustee and the Master
Servicer), together with an Officer's Certificate to the effect that such
Servicing Certificate is true and correct in all material respects, stating the
related Collection Period, Distribution Date, the series number of the
Certificates, the date of this Agreement, and:
(i) the Available Distribution Amount for such Distribution Date,
separately stating the amount of Interest Collections and Principal Collections;
(ii) the amount of the distributions to Holders of each Class of Class
A and Class M Certificates for such Distribution Date, separately stating the
portions thereof allocable to interest and allocable to principal;
(iii) the amount of any Interest Carry Forward Amount for each Class
paid on such Distribution Date and the amount of any Interest Carry Forward
Amount for each Class remaining after giving effect to the distributions on such
Distribution Date;
(iv) the amount of any Extra Principal Distribution Amount for such
Distribution Date;
(v) the Principal Distribution Amount for such Distribution Date,
separately stating the components thereof;
(vi) the number and aggregate Principal Balance of any Home Equity
Loans purchased by the Depositor or the Master Servicer with respect to the
related Collection Period pursuant to [Section 2.02, 2.04, 3.01 and 3.07];
(vii) the amount of any Substitution Adjustment Amounts for such
Distribution Date;
(viii) the Servicing Fee for such Collection Period and any accrued
amounts thereof that remain unpaid for previous Collection Periods;
(ix) the Realized Losses for such Collection Period and the amount of
such losses, if any, constituting Applied Realized Loss Amounts;
(x) the amount, if any, to be distributed to the Class R
Certificateholders on such Distribution Date;
(xi) The Overcollateralization Amount, Overcollateralization
Deficiency, the Overcollateralization Release Amount, the Targeted
Overcollateralization Amount and the Monthly Excess Cashflow for such
Distribution Date;
(xii) The number of Home Equity Loans outstanding at the beginning and
end of such Collection Period;
(xiii) The Pool Balance as of the end of such Collection Period;
49
(xiv) the Certificate Principal Balance of each Class of Certificates
and the Pool Factor after giving effect to the distribution on such Distribution
Date;
(xv) the number and aggregate Principal Balances of Home Equity Loans
(x) as to which the scheduled monthly payment is delinquent for 30-59 days,
60-89 days and 90 or more days, respectively, and (y) that have become REO, in
each case as of the end of such Collection Period;
(xvi) The unpaid principal amount of all Home Equity Loans that became
Liquidated Home Equity Loans during such Due Period;
(xvii) The book value (within the meaning of 12 C.F.R. ss. 571.13 or
comparable provision) of any real estate acquired through foreclosure or grant
of a deed in lieu of foreclosure;
(xviii) Whether a Trigger Event has occurred or is continuing;
(xix) Such other information as is required by the Code and regulations
thereunder to be made available to Holders of the Regular Certificates; and
(xx) whether an Event of Default has occurred since the prior
Determination Date, specifying each such Event of Default if one has occurred.
The Trustee shall conclusively rely upon the information contained in a
Servicing Certificate for purposes of making distributions pursuant to Section
5.01, shall have no duty to inquire into such information and shall have no
liability in so relying. The format and content of the Servicing Certificate may
be modified by the mutual agreement of the Master Servicer and the Trustee. The
Master Servicer shall give notice of any such change to the Rating Agencies.
50
ARTICLE V
Distributions and Statements to Certificateholders; Rights of Certificateholders
Section 5.01. Distributions. (a) On each Distribution Date, the Trustee shall
withdraw an amount equal to the Available Distribution Amount from the
Collection Account and make distributions thereof as described below (to the
extent of the Available Distribution Amount) to Holders of the Certificates in
the following order of priority:
I. from the Available Distribution Amount in the following order of
priority:
(i) to the Class A Certificates, the Current Interest plus the
Interest Carry Forward Amount with respect to each Class of Class A
Certificates without any priority among such Class A Certificates;
provided, that if amount available is not sufficient to make a full
distribution of interest with respect to all Classes of the Class A
Certificates, the amount available will be distributed among the
outstanding Classes of Class A Certificates pro rata based on the
aggregate amount of interest due on each such Class, and the amount of
the shortfall will be carried forward with accrued interest;
(ii) to the Class M-1 Certificates, the Current Interest plus the
Interest Carry Forward Amount with respect to the Class M-1
Certificates; and
(iii) to the Class M-2 Certificates, the Current Interest plus the
Interest Carry Forward Amount with respect to the Class M-2
Certificates.
II. On each distribution date (a) before the related Stepdown Date or
with respect to which a Trigger Event is in effect, the certificates will be
entitled to receive distributions of principal up to the Principal Distribution
Amount for such distribution date, to the extent of the remaining funds in the
Collection Account after the distributions of interest have been made pursuant
to paragraph (a)I.(i) through (iii) above, in the amounts set forth below and in
the following order of priority:
(i) to the Class A-5 Certificates, the Class A-5 Lockout
Distribution Amount, and then sequentially to each Class of the Class A
Certificates, in the order of their numerical class designation until
the Certificate Principal Balance of each such Class of Class A
Certificates has been reduced to zero; provided, that if on any
distribution date the Class A-4 Certificate Principal Balance is zero,
to the Class A-5 Certificates, without regard to the Class A-5 Lockout
Distribution Amount, until the Certificate Principal Balance thereof
has been reduced to zero;
(ii) after the aggregate Certificate Principal Balance of the Class
A Certificates has been reduced to zero, to the Class M-1 Certificates,
until the Class M-1 Certificate Principal Balance has been reduced to
zero;
(iii) after the aggregate Certificate Principal Balance of the Class
A Certificates
51
and the Class M-1 Certificates has been reduced to zero, to the Class
M-2 Certificates, until the Class M-2 Certificate Principal Balance has
been reduced to zero; and
(iv) any remaining amount to the Class R Certificates.
III. On each distribution date (a) on or after the related Stepdown
Date and (b) as long as a Trigger Event is not in effect, the certificates will
be entitled to receive distributions of principal up to the Principal
Distribution Amount for such distribution date, to the extent of the remaining
funds in the Collection Account after the distributions of interest have been
made pursuant to paragraph (a)I.(i) through (iii) above, in the amounts set
forth below and in the following order of priority:
(i) to the Class A Certificates, the Class A Principal Distribution
Amount shall be distributed as follows: first, to the Class A-5
Certificates, the Class A-5 Lockout Distribution Amount, and then
sequentially to each Class of the Class A Certificates, in the order of
their numerical class designation until the Certificate Principal
Balance of each such Class of Class A Certificates has been reduced to
zero; provided, that if on any distribution date the Class A-4
Certificate Principal Balance is zero, to the Class A-5 Certificates,
without regard to the Class A-5 Lockout Distribution Amount, until the
Certificate Principal Balance thereof has been reduced to zero;
(ii) to the Class M-1 Certificates, the Class M-1 Principal
Distribution Amount, until the Class M-1 Certificate Principal Balance
has been reduced to zero;
(iii) to the Class M-2 Certificates, the Class M-2 Principal
Distribution Amount, until the Class M-2 Certificate Principal Balance
has been reduced to zero; and
(iv) any remaining amount to the Class R Certificates.
(b) Method of Distribution. The Trustee shall make distributions in respect
of a Distribution Date to each Certificateholder of record on the related Record
Date (other than as provided in Section 10.01 respecting the final distribution)
by check or money order mailed to such Certificateholder at the address
appearing in the Certificate Register, or upon written request by a
Certificateholder delivered to the Trustee at least five Business Days prior to
such Record Date, by wire transfer (but only if such Certificateholder is the
Depository or such Certificateholder owns of record one or more Class of
Certificates having principal denominations aggregating at least $5,000,000), or
by such other means of payment as such Certificateholder and the Trustee shall
agree. Distributions among Certificateholders shall be made in proportion to the
Percentage Interests evidenced by the Certificates held by such
Certificateholders.
(c) Distributions on Book-Entry Certificates. Each distribution with
respect to a Book-Entry Certificate shall be paid to the Depository, which shall
credit the amount of such distribution to the accounts of its Depository
Participants in accordance with its normal procedures. Each Depository
Participant shall be responsible for disbursing such distribution to the
Certificate Owners that it represents and to each indirect participating
brokerage firm (a "brokerage firm" or
52
"indirect participating firm") for which it acts as agent. Each brokerage firm
shall be responsible for disbursing funds to the Certificate Owners that it
represents. All such credits and disbursements with respect to a Book-Entry
Certificate are to be made by the Depository and the Depository Participants in
accordance with the provisions of the Class A or Class M Certificates. None of
the Trustee, the Paying Agent, the Certificate Registrar, the Depositor or the
Master Servicer shall have any responsibility therefor except as otherwise
provided by applicable law.
Section 5.02. Statements to Certificateholders. (a) On each Determination Date,
the Master Servicer shall forward to the Trustee and the Paying Agent for
mailing to each Certificateholder, and concurrently with each distribution to
Certificateholders the Trustee shall mail to them a statement with respect to
their distribution setting forth:
(i) the amount of the distributions to Holders of each Class of Class A
and Class M Certificates for such Distribution Date, separately stating the
portions thereof allocable to interest and allocable to principal;
(ii) the amount of any Interest Carry Forward Amount for each Class
paid on such Distribution Date and the amount of any Interest Carry Forward
Amount for each Class remaining after giving effect to the distributions on such
Distribution Date;
(iii) the amount of any Extra Principal Distribution Amount for such
Distribution Date;
(iv) the Principal Distribution Amount for such Distribution Date,
separately stating the components thereof;
(v) the number and aggregate Principal Balance of any Home Equity Loans
purchased by the Depositor or the Master Servicer with respect to the related
Collection Period pursuant to [Section 2.02, 2.04, 3.01 and 3.07];
(vi) the amount of any Substitution Adjustment Amounts for such
Distribution Date;
(vii) the Servicing Fee for such Collection Period and any accrued
amounts thereof that remain unpaid for previous Collection Periods;
(viii) the Realized Losses for such Collection Period and the amount of
such losses, if any, constituting Applied Realized Loss Amounts;
(ix) the amount, if any, to be distributed to the Class R
Certificateholders on such Distribution Date;
(x) The Overcollateralization Amount, Overcollateralization Deficiency,
the Overcollateralization Release Amount, the Targeted Overcollateralization
Amount and the Monthly Excess Cashflow for such Distribution Date;
(xi) The number of Home Equity Loans outstanding at the beginning and
end of such Collection Period;
(xii) The Pool Balance as of the end of such Collection Period;
53
(xiii) the Certificate Principal Balance of each Class of Certificates
and the Pool Factor after giving effect to the distribution on such Distribution
Date;
(xiv) the number and aggregate Principal Balances of Home Equity Loans
(x) as to which the scheduled monthly payment is delinquent for 30-59 days,
60-89 days and 90 or more days, respectively, and (y) that have become REO, in
each case as of the end of such Collection Period;
(xv) The unpaid principal amount of all Home Equity Loans that became
Liquidated Home Equity Loans during such Due Period;
(xvi) The book value (within the meaning of 12 C.F.R. ss. 571.13 or
comparable provision) of any real estate acquired through foreclosure or grant
of a deed in lieu of foreclosure;
(xvii) Whether a Trigger Event has occurred or is continuing;
(xviii) Such other information as is required by the Code and
regulations thereunder to be made available to Holders of the Regular
Certificates; and
(xix) whether an Event of Default has occurred since the prior
Determination Date, specifying each such Event of Default if one has occurred;
(b) In the case of information furnished pursuant to clauses (i) and (ii)
above, the amounts shall be expressed as a dollar amount per Class A Certificate
or Class M Certificate, as applicable, with a $1,000 denomination.
(c) The Master Servicer shall also give such statement to each Rating
Agency at the time it gives such statement to the Trustee and the Paying Agent.
(d) Within 60 days after the end of each calendar year, the Master Servicer
shall prepare or cause to be prepared and shall forward to the Trustee the
information set forth in clauses (i) and (ii) above aggregated for such calendar
year. Such obligation of the Master Servicer shall be deemed to have been
satisfied to the extent that substantially comparable information shall be
provided by the Master Servicer pursuant to any requirements of the Code.
(e) On each Distribution Date, the Master Servicer shall forward to the
Trustee for mailing to each Holder of a Class R Certificate a copy of the report
forwarded to the Holders of Class A Certificates and Class M Certificates on
such Distribution Date. The Master Servicer shall also forward to the Trustee
for mailing to Holders of Class R Certificates a statement setting forth the
amount of the distribution to Holders of Class R Certificates expressed as a
dollar amount per Class R Certificate with a 10% Percentage Interest, together
with such other information as the Master Servicer deems necessary or
appropriate.
(f) Within 90 days after the end of each calendar year, the Master Servicer
shall forward to the Trustee for mailing to each Person who at any time during
the calendar year was the Holder of a Class R Certificate a statement containing
the applicable distribution information provided pursuant to this Section
aggregated for such calendar year or applicable portion thereof during which
such Person was the Holder of a Class R Certificate together with any other
information relating to the Trust
54
reasonably required in order to enable a Class R Certificateholder to prepare
its federal income tax return. Such obligation of the Master Servicer shall be
deemed to have been satisfied to the extent that substantially comparable
information shall be provided by the Master Servicer to the Trustee pursuant to
any requirements of the Code.
55
ARTICLE VI
The Certificates
Section 6.01. The Certificates.
(a) The Class A, Class M and Class R Certificates shall be substantially in
the forms set forth in Exhibit A through Exhibit G, and shall, on original
issue, be executed by the Trustee on behalf of the Trust and authenticated and
delivered by the Trustee to or upon the order of the Depositor concurrently with
the sale and assignment to the Trustee of the Trust. The Class A and Class M
Certificates shall be initially evidenced by one or more certificates
representing the entire Original Class Certificate Balance, and shall be held in
minimum dollar denominations of $1,000 and dollar multiples in excess thereof
(except that one Certificate of each Class of Regular Certificates may be in a
different denomination). Except for the Class R Certificate representing the Tax
Matters Person Residual Interest, the Class R Certificates shall be issuable in
a minimum denomination of a 10% Percentage Interest and integral multiples of
10% in excess thereof (except that one of such Class R Certificates shall be
issuable in a denomination that is not an integral multiple of 10%).
(b) The Certificates shall be executed on behalf of the Trust by manual or
facsimile signature of any officer of the Trustee duly authorized to execute
such Certificates on behalf of the Trust. 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 Trustee shall bind the
Trustee, notwithstanding that such individuals or any of them have ceased to be
so authorized prior to the authentication and delivery of such Certificates or
did not hold such offices at the date of such Certificate. No Certificate shall
be entitled to any benefit under this Agreement, or be valid for any purpose,
unless such Certificate shall have been manually authenticated by the Trustee
substantially in the form provided for herein, and such authentication upon any
Certificate shall be conclusive evidence, and the only evidence, that such
Certificate has been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their authentication. Subject to Section
6.02, the Class A and Class M Certificates shall be Book-Entry Certificates. The
Class R Certificates shall not be Book-Entry Certificates.
Section 6.02. Registration of Transfer and Exchange of Certificates.
(a) The Certificate Registrar shall cause to be kept at its corporate trust
office (which shall be the Corporate Trust Office if the Trustee is the
Certificate Registrar) a Certificate Register in which, subject to such
reasonable regulations as it may prescribe, the Certificate Registrar shall
provide for the registration of the Certificates and of transfers and exchanges
of the Certificates as herein provided. The Trustee shall initially serve as
Certificate Registrar for the purpose of registering the Certificates and
transfers and exchanges of Certificates as herein provided.
(b) Upon surrender for registration of transfer of any Certificate at any
office or agency of the Certificate Registrar maintained for such purpose
pursuant to the foregoing paragraph, and in the case of the Class M and Class R
Certificates, upon satisfaction of the conditions applicable to such
56
Certificates set forth below, the Trustee shall execute on behalf of the Trust
and shall authenticate and deliver in the name of the designated transferee or
transferees, one or more new Certificates of a like Class and of the same
aggregate Percentage Interest.
(c) At the option of the Certificateholders, Certificates may be exchanged
for other Certificates of like Class in authorized denominations and the same
aggregate Percentage Interests, upon surrender of the Certificates to be
exchanged at any such office or agency. Whenever any Certificates are so
surrendered for exchange, the Trustee shall execute on behalf of the Trust and
shall authenticate and deliver the Certificates of such Class which the
Certificateholder making the exchange is entitled to receive. Every Certificate
presented or surrendered for registration of transfer or exchange shall (if so
required by the Trustee or the Certificate Registrar) be duly endorsed by, or be
accompanied by a written instrument of transfer in form satisfactory to the
Trustee and the Certificate Registrar duly executed by, the Holder thereof or
such Holder's attorney duly authorized in writing.
(d) Except as provided in Section 6.02(f), the Book-Entry Certificates
shall at all times remain registered in the name of the Depository or its
nominee and at all times: (i) transfers of the Book-Entry Certificates may not
be registered by the Trustee except to another Depository; (ii) the Depository
shall maintain book-entry records with respect to the Certificate Owners and
with respect to ownership and registration of transfers of such Certificates;
(iii) ownership and registration of transfers of the Book-Entry Certificates on
the books of the Depository shall be governed by applicable rules established by
the Depository; (iv) the Depository may collect its usual and customary fees,
charges and expenses from its Depository Participants; (v) the Trustee shall
deal with the Depository as representative of the Certificate Owners of the
Book-Entry Certificates for purposes of exercising the rights of Holders under
this Agreement, and requests and directions for and votes of such representative
shall not be deemed to be inconsistent if they are made with respect to
different Certificate Owners; and (vi) the Trustee may rely and shall be fully
protected in relying upon information furnished by the Depository with respect
to its Depository Participants and furnished by the Depository Participants with
respect to indirect participating firms and Persons shown on the books of such
indirect participating firms as direct or indirect Certificate Owners.
(e) All transfers by Certificate Owners of Book-Entry Certificates shall be
made in accordance with the procedures established by the Depository Participant
or brokerage firm representing such Certificate Owners. Each Depository
Participant shall only transfer ownership interests represented by Book-Entry
Certificates of Certificate Owners that it represents or of brokerage firms for
which it acts as agent in accordance with the Depository's normal procedures.
The parties hereto are hereby authorized to execute a letter of representations
with the Depository or take such other action as may be necessary or desirable
to register a Book-Entry Certificate to the Depository. In the event of any
conflict between the terms of any such Letter of Representation and this
Agreement the terms of this Agreement shall control.
(f) If (i) (x) the Depository or the Depositor advises the Trustee in
writing that the Depository is no longer willing or able to discharge properly
its responsibilities as Depository and (y) the Trustee
57
or the Depositor is unable to locate a qualified successor, (ii) the Depositor,
at its sole option, with the consent of the Trustee, elects to terminate the
book-entry system through the Depository or (iii) after the occurrence of an
Event of Default, the Certificate Owners of each Class of Regular Certificates
representing Percentage Interests aggregating not less than 51% advises the
Trustee and Depository through the Financial Intermediaries and the Depository
Participants in writing that the continuation of a book-entry system through the
Depository to the exclusion of definitive, fully registered certificates (the
"Definitive Certificates") to Certificate Owners is no longer in the best
interests of the Certificate Owners, upon surrender to the Certificate Registrar
of each Class of Regular Certificates by the Depository, accompanied by
registration instructions from the Depository for registration, the Trustee
shall, at the Master Servicer's expense, execute on behalf of the Trust and
authenticate the Definitive Certificates. None of the Depositor, the Master
Servicer or the Trustee shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying on,
such instructions. Upon the issuance of Definitive Certificates, all references
herein to obligations imposed upon or to be performed by the Depository shall be
deemed to be imposed upon and performed by the Trustee, to the extent applicable
with respect to such Definitive Certificates, and the Trustee, the Certificate
Registrar, the Master Servicer and the Depositor shall recognize the Holders of
the Definitive Certificates as Certificateholders hereunder.
(g) No service charge shall be made for any Transfer or exchange of
Certificates of any Class, but the Trustee 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.
(h) All Certificates surrendered for Transfer and exchange shall be
destroyed by the Certificate Registrar.
(i) Except in the case of the initial Transfer to Household Finance
Corporation, no Transfer of a Class R Certificate shall be made unless such
Transfer is exempt from the registration requirements of the Securities Act of
1933, as amended, and any applicable state securities laws or is made in
accordance with said Act and laws. Except in the case of the initial Transfer to
Household Finance Corporation, as a condition to any Transfer of Class R
Certificate, (i) the Trustee may require a written Opinion of Counsel acceptable
to and in form and substance satisfactory to the Trustee that such Transfer may
be made pursuant to an exemption, describing the applicable exemption and the
basis therefor, from said Act and laws or is being made pursuant to said Act and
laws, which Opinion of Counsel shall not be an expense of the Trustee, the
Master Servicer, the Trust and (ii) the Trustee may require the Transferee to
execute an investment letter acceptable to and in form and substance
satisfactory to the Trustee certifying to the Master Servicer, the Sellers and
the Trustee the facts surrounding such Transfer, which investment letter shall
not be an expense of the Trustee, the Master Servicer or the Trust Fund except
to the extent any of such parties is the transferor of such Certificate. The
Holder of a Class R Certificate desiring to effect such Transfer shall, and does
hereby agree to, indemnify the Trustee, the Master Servicer and the Trust
against any liability that may result if the Transfer is not so exempt or is not
made in accordance with such federal and state laws.
(j) Except in the case of the initial Transfer to Household Finance
Corporation, no Transfer of a Class M Certificate or Class R Certificate shall
be made to an employee benefit plan subject to ERISA, and to
58
Section 4975 of the Code (or comparable provisions of any subsequent
enactments), or a trustee of any such plan, unless the Trustee shall have
received an Opinion of Counsel satisfactory to the Trustee to the effect that
the purchase or holding of such Class M or Class R Certificate will not result
in the assets of the Trust being deemed to be "plan assets" and subject to the
prohibited transaction provisions of ERISA and the Code and will not subject the
Trustee, the Master Servicer, the Sellers or the Trust to any obligation in
addition to those undertaken in this Agreement, which Opinion of Counsel shall
not be an expense of the Trustee, the Master Servicer, the Sellers or the Trust
except to the extent any of such parties is the transferor of such Certificate.
Unless such Opinion of Counsel is delivered, each Transferee shall be deemed to
represent to the Trustee, the Sellers and the Master Servicer that such
Transferee is neither an employee benefit plan subject to Section 406 of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
Section 4975 of the Code, nor a person acting on behalf of any such plan.
(k) Each Person who has or who acquires any Ownership Interest in a Class R
Certificate shall be deemed by the acceptance or acquisition of such Ownership
Interest to have agreed to be bound by the following provisions and to have
irrevocably appointed the Trustee designee as its attorney-in-fact to negotiate
the terms of any mandatory sale under clause (vi) below and to execute all
instruments of Transfer and to do all other things necessary in connection with
any such sale, and the rights of each Person acquiring any Ownership Interest in
a Class R Certificate are expressly subject to the following provisions:
(i) Each Person holding or acquiring any Ownership Interest in a Class
R Certificate shall be a Permitted Transferee, shall not be holding or acquiring
such Ownership Interest on behalf of any Person that is not a Permitted
Transferee and shall promptly notify the Trustee of any change or impending
change in its status or the status of any beneficial owner as a Permitted
Transferee.
(ii) No Person shall acquire an Ownership Interest in a Class R
Certificate unless such Ownership Interest is a pro rata undivided interest.
(iii) No Ownership Interest in a Class R Certificate may be transferred
without the express written consent of the Trustee. In connection with any
proposed Transfer of any Ownership Interest in a Class R Certificate, the
Trustee shall as a condition to such consent, require delivery to it, in form
and substance satisfactory to it, of each of the following:
A. an affidavit from the proposed Transferee in the form attached
as Exhibit __ (a "Transfer Affidavit") to the effect that (a) such Transferee is
a Permitted Transferee and that it is not acquiring its Ownership Interest in
the Class R Certificate that is the subject of the proposed Transfer as a
nominee, trustee or agent for any Person who is not a Permitted Transferee; (b)
the proposed Transferee does not have the intention to impede the assessment or
collection of tax legally required to be paid with respect to any Ownership
Interest in a Class R Certificate and the Proposed Transferee acknowledges that
the Class R Certificate may generate tax liabilities in excess of the cash flow
associated with the Class R Certificate and intends to pay such taxes associated
with the Class R Certificate when they become due, (c) it has no present
knowledge or
59
expectation that it will become insolvent or subject to a bankruptcy proceeding
for so long as it holds any Ownership Interest in a Class R Certificate, (d) it
is not a Non-U.S. Person or is a Non-U.S. Person and has furnished to the
transferor and the Trustee (i) an Internal Revenue Service Form 4224 or (ii) an
opinion of a nationally recognized tax counsel to the effect that such transfer
of a Class R Certificate will not be disregarded for federal income tax purposes
and (e) it will abide by the provisions of this Section 6.02(c); and
B. a covenant of the proposed Transferee to the effect that the
proposed Transferee agrees to be bound by and to abide by the Transfer
restrictions applicable to the Class R Certificates
(iv) Notwithstanding the delivery of a Transfer Affidavit by a proposed
Transferee under clause (iii) above, if the Trustee has actual knowledge that
the proposed Transferee is not a Permitted Transferee, no Transfer of any
Ownership Interest in a Class R Certificate to such proposed Transferee shall be
effected.
(v) Any attempted or purported Transfer of any Ownership Interest in a
Class R Certificate in violation of the provisions of this Section 6.02 shall be
absolutely null and void and shall vest no rights in the purported Transferee.
If any purported Transferee shall, in violation of the provisions of this
Section 6.02, become a Holder of a Class R Certificate, then the prior Holder of
such Certificate that is a Permitted Transferee shall, upon discovery that the
registration of Transfer of such Class R Certificate was not in fact permitted
by this Section 6.02, be restored to all rights as Holder thereof retroactive to
the date of registration of Transfer of such Class R Certificate. The Trustee
shall be under no liability to any Person for any registration of Transfer of a
Class R Certificate that is in fact not permitted by this Section 6.02 or for
making any distributions due on such Certificate to the Holder thereof or taking
any other action with respect to such Holder under the provisions of the
Agreement so long as the Transfer was not registered upon the express written
consent of the Trustee. The Trustee shall be entitled to recover from any Holder
of a Class R Certificate that was in fact not a Permitted Transferee at the time
such distributions were made all distributions made on such Class R Certificate.
Any such distributions so recovered by the Trustee shall be distributed and
delivered by the Trustee to the prior Holder of such Certificate that is a
Permitted Transferee.
(vi) If any Person other than a Permitted Transferee acquires any
Ownership Interest in a Class R Certificate in violation of the restrictions in
this Section 6.02(k), then the Trustee shall have the right, without notice to
the Holder of such Class R Certificate or any other Person having an Ownership
Interest therein, to sell such Class R Certificate to a purchaser selected by
the Trustee on such terms as the Trustee may choose. Such purchaser may be the
Trustee itself or any affiliate of the Trustee. The proceeds of such sale, net
of commissions (which may include commissions payable to the Trustee or its
affiliates), expenses and taxes due, if any, will be remitted by the Trustee to
the previous Holder of such Class R Certificate that is a Permitted Transferee,
except that in the event that the Trustee determines that the Holder of such
Class R Certificate may be liable for any amount due under this Section 6.02(k)
or any other provisions of this Agreement, the Trustee may withhold a
corresponding amount from such remittance as security for such claim. The terms
and conditions of any sale under this clause (vi) shall be
60
determined in the sole discretion of the Trustee, and it shall not be liable to
any Person having an Ownership Interest in a Class R Certificate as a result of
its exercise of such discretion.
(vii) Each Person holding or acquiring any Ownership Interest in a
Class R Certificate shall agree (A) to require a Transfer Affidavit from any
other Person to whom such person attempts to transfer any Ownership Interest in
a Class R Certificate and (B) not to transfer any Ownership Interest in, or to
cause the transfer of any Ownership Interest in, a Class R Certificate if it has
actual knowledge that such Person is not a Permitted Transferee or will be
holding any Ownership Interest in a Class R Certificate on behalf of a Person
that is not a Permitted Transferee.
(l) Upon notice to the Trustee that any Ownership Interest in a Class R
Certificate has been transferred, either directly or indirectly, to any Person
that is not a Permitted Transferee or an agent thereof (including a broker,
nominee or middleman) in contravention of the foregoing restrictions, or that is
a pass-through entity as defined in Section 860E(e)(6) of the Code an interest
of which is held of record by a Person that is not a Permitted Transferee, the
Trustee agrees to furnish to the Internal Revenue Service, the transferor of
such Class R Certificate or such agent or pass-through entity such information
necessary to the application of Section 860E(e) of the Code as may be required
by the Code, including but not limited to the present value of the total
anticipated excess inclusions with respect to such Class R Certificate (or
portion thereof) for periods after such transfer and the total excess inclusions
for any taxable year allocable to any holder of an interest in such pass-through
entity that is not a Permitted Transferee. The Trustee shall require the Master
Servicer to make all necessary computations under this paragraph; provided,
however, that the Trustee shall in no event be excused from furnishing such
information to the Internal Revenue Service.
(m) The foregoing provisions of Section 6.02(k)-(l) shall cease to apply to
Transfers occurring on or after the date on which there shall have been
delivered to the Trustee, in form and substance satisfactory to the Trustee, (i)
written notification from each Rating Agency that the removal of the
restrictions on Transfer set forth in Section 6.02(k)-(l) will not cause such
Rating Agency to downgrade its rating of the Certificates and (ii) an Opinion of
Counsel to the effect that such removal will not cause the Trust to fail to
qualify as a REMIC. The affidavit referred to in clause (k)(iii) A. above shall
not be required in the case of the initial Transfer to Household Finance
Corporation.
Section 6.03. Mutilated, Destroyed, Lost or Stolen Certificates. If (i) 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 (ii) there is delivered to the Trustee,
the Master Servicer and the Certificate Registrar such security or indemnity as
may be required by them to save each of them harmless, then, in the absence of
notice to the Trustee or the Certificate Registrar that such Certificate has
been acquired by a bona fide purchaser, the Trustee shall execute on behalf of
the Trust and shall authenticate and deliver, in exchange for or in lieu of any
such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
Class, tenor and Percentage Interest. Upon the issuance of any new Certificate
under this Section 6.03, the Trustee or the Certificate Registrar 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 Trustee and the Certificate Registrar) connected
therewith.
61
Any duplicate Certificate issued pursuant to this Section 6.03 shall constitute
complete and indefeasible 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 6.04. Persons Deemed Owners. Prior to due presentation of a Certificate
for registration of transfer, the Master Servicer, the Depositor, the Trustee,
the Certificate Registrar and any agent of the Master Servicer, the Depositor,
the 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 5.01 and for all other purposes
whatsoever, and none of the Master Servicer, the Depositor, the Trustee, the
Certificate Registrar or any agent of any of them shall be affected by notice to
the contrary.
Section 6.05. Appointment of Paying Agent.
(a) The Paying Agent shall make distributions to Certificateholders from
the Collection Account pursuant to Section 5.01 and shall report the amounts of
such distributions to the Trustee. The duties of the Paying Agent may include
the obligation (i) to withdraw funds from the Collection Account pursuant to
Section 3.03 for the purpose of making the distributions referred to above and
(ii) to distribute statements and provide information to Certificateholders as
required hereunder. The Paying Agent hereunder shall at all times be a
corporation duly incorporated and validly existing under the laws of the United
States of America or any state thereof, authorized under such laws to exercise
corporate trust powers and subject to supervision or examination by federal or
state authorities. The Paying Agent shall initially be the Trustee. The Trustee
may appoint a successor to act as Paying Agent, which appointment shall be
reasonably satisfactory to the Depositor.
(b) The Trustee shall cause the Paying Agent (if other than the Trustee) to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee that such Paying Agent shall hold 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 and shall agree that it shall comply with all requirements of
the Code regarding the withholding of payments in respect of federal income
taxes due from Certificate Owners and otherwise comply with the provisions of
this Agreement applicable to it.
Section 6.06. Actions of Certificateholders.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Agreement to be given or taken by
Certificateholders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Certificateholders in person or by
their 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 Trustee and, when required, to the Depositor or the Master
Servicer. Proof of execution of any such instrument or of a writing appointing
any such agent shall be sufficient for any purpose of this Agreement and
conclusive in favor of the Trustee, the Depositor and the Master Servicer, if
made in the manner provided in this Section.
62
(b) The fact and date of the execution by any Certificateholder of any such
instrument or writing may be proved in any reasonable manner which the Trustee
deems sufficient.
(c) Any request, demand, authorization, direction, notice, consent, waiver
or other act by a Certificateholder shall bind every Holder of every Certificate
issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof, in respect of anything done, or omitted to be done, by the
Trustee, the Depositor or the Master Servicer in reliance therein, whether or
not notation of such action is made upon such Certificate.
(d) The Trustee may require such additional proof of any matter referred to
in this Section 6.06 as it shall deem necessary.
63
ARTICLE VII
The Master Servicer and the Depositor
Section 7.01. Liability of the Master Servicer and the Depositor. The Master
Servicer shall be liable in accordance herewith only to the extent of the
obligations specifically imposed upon and undertaken by the Master Servicer
herein. The Depositor shall be liable in accordance herewith only to the extent
of the obligations specifically imposed upon and undertaken by the Depositor
herein.
Section 7.02. Merger or Consolidation of, or Assumption of the Obligations of,
the Master Servicer or the Depositor. Any corporation into which the Master
Servicer or Depositor may be merged or consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Master
Servicer or the Depositor shall be a party, or any corporation succeeding to the
business of the Master Servicer or the Depositor, shall be the successor of the
Master Servicer or the Depositor, as the case may be, 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.
Section 7.03. Limitation on Liability of the Master Servicer, the Depositor and
Others. None of the Master Servicer, the Depositor, or any director, officer,
employee or agent of the Master Servicer or the Depositor shall be under any
liability to the Trust or the Certificateholders for any action taken or for
refraining from the taking of any action by the Master Servicer or the
Depositor, as applicable, in good faith pursuant to this Agreement, or for
errors in judgment; provided, however, that this provision shall not protect the
Master Servicer, the Depositor or any such person against any liability which
would otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties hereunder, and that this provision shall not be construed
to entitle the Master Servicer to indemnity in the event that amounts advanced
by the Master Servicer to retire any senior Lien exceed Net Liquidation Proceeds
realized with respect to the related Home Equity Loan. The Master Servicer, the
Depositor and any director, officer, employee or agent of the Master Servicer or
the Depositor may rely in good faith on any document of any kind prima facie
properly executed and submitted by any Person respecting any matters arising
hereunder. The Master Servicer, the Depositor and any director, officer,
employee or agent of the Master Servicer or the Depositor shall be indemnified
by the Trust and held harmless against any loss, liability or expense incurred
in connection with any legal action relating to this Agreement or the
Certificates, other than any loss, liability or expense related to any specific
Home Equity Loan or Home Equity Loans (except as any such loss, liability or
expense shall be otherwise reimbursable pursuant to this Agreement) and any
loss, liability or expense incurred by reason of willful misfeasance, bad faith
or gross negligence in the performance of duties hereunder or by reason of
reckless disregard of obligations and duties hereunder. Neither the Master
Servicer nor the Depositor shall be under any obligation to appear in, prosecute
or defend any legal action which is not incidental to its respective duties
under this Agreement, and which in its opinion may involve it in any expense or
liability; provided, however, that the Master Servicer or the Depositor may, in
64
its sole discretion, undertake any such action which it may deem necessary or
desirable in respect of this Agreement and the rights and duties of the parties
hereto and the interests of the Certificateholders hereunder. In such event, the
reasonable legal expenses and costs of such action and any liability resulting
therefrom and any claims by the Master Servicer or the Depositor hereunder for
indemnification shall be expenses, costs and liabilities of the Trust, and the
Master Servicer or the Depositor, as the case may be, shall be entitled to be
reimbursed therefor and indemnified pursuant to the terms hereof from amounts
deposited in the Collection Account as provided by Section 3.03. The Master
Servicer's and the Depositor's right to indemnity or reimbursement pursuant to
this Section 7.03 shall survive any resignation or termination of the Master
Servicer pursuant to Section 7.04 or 8.01 with respect to any losses, expenses,
costs or liabilities arising prior to such resignation or termination (or
arising from events that occurred prior to such resignation or termination). The
Master Servicer shall have no claim (whether by subrogation or otherwise) or
other action against any Certificateholder for any amounts paid by the Master
Servicer pursuant to any provision of this Agreement.
Section 7.04. Master Servicer Not to Resign. Subject to the provisions of
Section 7.02, the Master Servicer shall not resign from the obligations and
duties hereby imposed on it except (i) upon determination that the performance
of its obligations or 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 or its subsidiaries or Affiliates, the other
activities of the Master Servicer so causing such a conflict being of a type and
nature carried on by the Master Servicer or its subsidiaries or Affiliates at
the date of this Agreement or (ii) upon satisfaction of the following
conditions: (a) the Master Servicer has proposed a successor servicer to the
Trustee in writing and such proposed successor servicer is reasonably acceptable
to the Trustee; (b) each Rating Agency shall have delivered a letter to the
Trustee stating that the appointment of such proposed successor servicer as
Master Servicer hereunder will not result in the reduction or withdrawal of the
then-current rating of the Class A or Class M Certificates; and (c) such
proposed successor servicer has agreed in writing to assume the obligations of
Master Servicer hereunder and the Master Servicer has delivered to the Trustee
an Opinion of Counsel to the effect that all conditions precedent to the
resignation of the Master Servicer and the appointment of and acceptance by the
proposed successor servicer have been satisfied; provided, however, that in the
case of clause (i) above no such resignation by the Master Servicer shall become
effective until the Trustee shall have assumed the Master Servicer's
responsibilities and obligations hereunder or the Trustee shall have designated
a successor servicer in accordance with Section 8.02. Any such resignation shall
not relieve the Master Servicer of responsibility for any of the obligations
specified in Sections 8.01 and 8.02 as obligations that survive the resignation
or termination of the Master Servicer. Any such determination permitting the
resignation of the Master Servicer pursuant to clause (i) above shall be
evidenced by an Opinion of Counsel to such effect delivered to the Trustee.
Section 7.05. Delegation of Duties. In the ordinary course of business, the
Master Servicer at any time may delegate any of its duties hereunder to any
Person, including any of its Affiliates, who agrees to conduct such duties in
accordance with standards comparable to those with which the Master Servicer
complies pursuant to Section 3.01. Such delegation shall not relieve the Master
Servicer
65
of its liabilities and responsibilities with respect to such duties and shall
not constitute a resignation within the meaning of Section 7.04. The Master
Servicer shall provide each Rating Agency and the Trustee with written notice
prior to the delegation of any of its duties to any Person other than any of the
Master Servicer's Affiliates or their respective successors and assigns.
66
ARTICLE VIII
Events of Default
Section 8.01. Events of Default. If any one of the following events ("Events of
Default") shall occur and be continuing:
(i) Any failure by the Master Servicer to deposit in the Collection
Account any deposit required to be made under the terms of this Agreement which
continues unremedied for a period of five (5) Business Days after the date upon
which written notice of such failure shall have been given to the Master
Servicer by the Trustee, or to the Master Servicer and the Trustee by Holders of
Certificates evidencing not less than 51% of the aggregate Percentage Interests
of the Regular Certificates; or
(ii) Any failure on the part of the Master Servicer duly to observe or
perform in any material respect any other covenants or agreements of the Master
Servicer set forth in the Certificates or in this Agreement, which failure (A)
materially and adversely affects the interests of Certificateholders and (B)
continues unremedied for a period of sixty (60) days after the date on which
written notice of such failure, requiring the same to be remedied, shall have
been given to the Master Servicer by the Trustee, or to the Master Servicer and
the Trustee by Holders of Certificates evidencing not less than 51% of the
aggregate Percentage Interests of the Regular Certificates; or
(iii) The entry against the Master Servicer of a decree or order by a
court or agency or supervisory authority having jurisdiction in the premises for
the appointment of a trustee, conservator, receiver or liquidator in any
insolvency, conservatorship, receivership, readjustment of debt, marshalling of
assets and liabilities or similar proceedings, or for the winding up or
liquidation of its affairs, and the continuance of any such decree or order
unstayed and in effect for a period of 60 consecutive days; or
(iv) The consent by the Master Servicer to the appointment of a
trustee, conservator, receiver or liquidator in any insolvency, conservatorship,
receivership, readjustment of debt, marshalling of assets and liabilities or
similar proceedings of or relating to the Master Servicer or of or relating to
substantially all of its property; or the Master Servicer shall admit in writing
its inability to pay its debts generally as they become due, file a petition to
take advantage of any applicable insolvency or reorganization statute, make an
assignment for the benefit of its creditors, or voluntarily suspend payment of
its obligations;
then, and in each and every case, so long as an Event of Default shall not have
been remedied by the Master Servicer, either the Trustee or the Holders of
Certificates evidencing not less than 51% of the aggregate Percentage Interests
of the Regular Certificates, by notice then given in writing to the Master
Servicer (and to the Trustee if given by the Regular Certificateholders) may
terminate all of the rights and obligations of the Master Servicer as servicer
under this Agreement; provided, however, that the responsibilities and duties of
the initial Master Servicer with respect to the purchase of Home Equity Loans
pursuant to Section 3.01 shall not terminate. Any such notice to the Master
Servicer shall also be given to each Rating Agency. On or after the receipt
67
by the Master Servicer of such written notice, all authority and power of, and
all benefits accruing to, the Master Servicer under this Agreement, whether with
respect to the Certificates or the Home Equity Loans or otherwise, shall pass to
and be vested in the Trustee or, if a successor Master Servicer has been
appointed under Section 8.02, such successor Master Servicer pursuant to and
under this Section 8.01; and, without limitation, the Trustee is hereby
authorized and empowered to execute and deliver, on behalf of the Master
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments, and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement of each Home Equity Loan and related
documents, or otherwise. The Master Servicer agrees to cooperate with the
Trustee in effecting the termination of the responsibilities and rights of the
Master Servicer hereunder, including, without limitation, the transfer to the
Trustee for the administration by it of all cash amounts that shall at the time
be held by the terminated Master Servicer and to be deposited by it in the
Collection Account, or that have been deposited by the terminated Master
Servicer in the Collection Account or thereafter received by the terminated
Master Servicer with respect to the Home Equity Loans.
Notwithstanding the foregoing, a delay in or failure of performance
under Section 8.01(i) for a period of five (5) Business Days or under Section
8.01(ii) for a period of sixty (60) days, shall not constitute an Event of
Default if such delay or failure could not be prevented by the exercise of
reasonable diligence by the Master Servicer and such delay or failure was caused
by an act of God, acts of declared or undeclared war, public disorder, rebellion
or sabotage, epidemics, landslides, lightning, fire, hurricanes, earthquakes,
floods or similar causes. The preceding sentence shall not relieve the Master
Servicer from using its best efforts to perform its obligations in a timely
manner in accordance with the terms of this Agreement, and the Master Servicer
shall provide the Trustee, the Depositor and the Regular Certificateholders with
an Officers' Certificate giving prompt notice of such failure or delay by it,
together with a description of its efforts to so perform its obligations. The
Master Servicer shall immediately notify the Trustee in writing of any Events of
Default.
Section 8.02 Trustee to Act; Appointment of Successor.
(a) On and after the time the Master Servicer receives a notice of
termination pursuant to Section 8.01 or 7.04, the Trustee shall be the successor
in all respects to the Master Servicer in its capacity as servicer under this
Agreement and the transactions set forth or provided for herein and shall be
subject to all the responsibilities, duties and liabilities relating thereto
placed on the Master Servicer by the terms and provisions hereof; provided,
however, that the responsibilities and duties of HFC as Master Servicer with
respect to the purchase of the Home Equity Loans pursuant to Section 3.01 shall
not terminate. As compensation therefor, the Trustee shall be entitled to such
compensation as the Master Servicer would have been entitled to hereunder if no
such notice of termination had been given. Notwithstanding the above, (i) if the
Trustee is unwilling to act as successor Master Servicer, or (ii) if the Trustee
is legally unable so to act, the Trustee may (in the situation described in
clause (i)) or shall (in the situation described in clause (ii)) appoint, or
petition a court of competent jurisdiction to appoint, any housing and home
finance institution or other mortgage loan or home equity loan servicer having
all licenses and
68
permits required in order to perform its obligations hereunder and a net worth
of not less than $50,000,000 as the successor to the Master Servicer hereunder
in the assumption of all or any part of the responsibilities, duties or
liabilities of the Master Servicer hereunder; provided that the appointment of
any such successor Master Servicer will not result in the qualification,
reduction or withdrawal of the then-current ratings assigned to the either the
Class A or Class M Certificates by the Rating Agencies, as evidenced by a
writing to such effect delivered to the Trustee. Pending appointment of a
successor to the Master Servicer hereunder, unless the Trustee is prohibited by
law from so acting, the Trustee shall act in such capacity as hereinabove
provided. In connection with such appointment and assumption, the successor
shall be entitled to receive compensation out of payments on Home Equity Loans
in an amount equal to the compensation which the Master Servicer would otherwise
have received pursuant to Section 3.08 (or such lesser compensation as the
Trustee and such successor shall agree). The Trustee and such successor shall
take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession.
(b) Any successor, including the Trustee, to the Master Servicer as master
servicer shall during the term of its service as master servicer (i) continue to
service and administer the Home Equity Loans for the benefit of
Certificateholders and (ii) maintain in force a policy or policies of insurance
covering errors and omissions in the performance of its obligations as Master
Servicer hereunder and a fidelity bond in respect of its officers, employees and
agents to the same extent as the Master Servicer is so required pursuant to
Section 3.13. The appointment of a successor Master Servicer shall not affect
any liability of the predecessor Master Servicer which may have arisen under
this Agreement prior to its termination as Master Servicer (including, without
limitation, any deductible under an insurance policy pursuant to Section 3.04),
nor shall any successor Master Servicer be liable for any acts or omissions of
the predecessor Master Servicer or for any breach by such Master Servicer or the
Depositor of any of their representations or warranties contained herein or in
any related document or agreement.
Section 8.03. Notification to Certificateholders. Upon any termination or
appointment of a successor to the Master Servicer pursuant to this Article VIII,
the Trustee shall give prompt written notice thereof to the Certificateholders
at their respective addresses appearing in the Certificate Register and each
Rating Agency.
69
ARTICLE IX
The Trustee
Section 9.01 Duties of Trustee. The Trustee, prior to the occurrence of an
Event of Default and after the curing of all Events of Default which may have
occurred, undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement. If an Event of Default of which a
Responsible Officer of the Trustee shall have actual knowledge has occurred
(which has not been cured), the Trustee shall exercise such rights and powers
vested in it by this Agreement, and use 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 his own affairs.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement.
No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own misconduct; provided, however, that:
(i) prior to the occurrence of an Event of Default of which a
Responsible Officer of the Trustee shall have actual knowledge, and after the
curing of all such Events of Default which may have occurred, the duties and
obligations of the Trustee shall be determined solely by the express provisions
of this Agreement, the Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this Agreement, no
implied covenants or obligations shall be read into this Agreement against the
Trustee and, in the absence of bad faith on the part of the Trustee, the Trustee
may conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or opinions furnished to
the Trustee and conforming to the requirements of this Agreement;
(ii) the Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible Officer of the Trustee, unless it
shall be proved that the Trustee was negligent in performing its duties in
accordance with the terms of this Agreement;
(iii) the Trustee shall not be personally liable with respect to any
action taken, suffered or omitted to be taken by it in good faith in accordance
with the consent or in accordance with the direction of the Holders of Regular
Certificates evidencing not less than 51% of the aggregate Percentage Interests
of the Regular Certificates relating to the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred upon the Trustee, under this Agreement; and
(iv) the Trustee shall not be charged with knowledge of any failure by
the Master Servicer to comply with the obligations of the Master Servicer
referred to in clauses (i) and (ii) of Section 8.01 unless a Responsible Officer
of the Trustee obtains actual knowledge of such failure or the Trustee
70
receives written notice of such failure from the Master Servicer or the Holders
of Regular Certificates evidencing not less than 51% of the aggregate Percentage
Interests of the Regular Certificates.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it, and
none of the provisions contained in this Agreement shall in any event require
the Trustee to perform, or be responsible for the manner of performance of, any
of the obligations of the Master Servicer under this Agreement, except during
such time, if any, as the Trustee shall be the successor to, and be vested with
the rights, duties, powers and privileges of, the Master Servicer in accordance
with the terms of this Agreement.
Section 9.02. Certain Matters Affecting the Trustee. Except as otherwise
provided in Section 9.01:
(i) the Trustee may request and rely upon, and shall be protected in
acting or refraining from acting upon, any resolution, Officer's Certificate,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, bond or other paper
or document reasonably believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(ii) the Trustee may consult with counsel and any written advice or
opinion of counsel shall be full and complete authorization and protection in
respect of any action taken or suffered or omitted by it hereunder in good faith
and in accordance with such advice or Opinion of Counsel;
(iii) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement, or to institute, conduct or
defend any litigation hereunder or in relation hereto, at the request, order or
direction of any of the Certificateholders, pursuant to the provisions of this
Agreement, unless such Certificateholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby; nothing contained herein shall,
however, relieve the Trustee of the obligations, upon the occurrence of an Event
of Default of which a Responsible Officer of the Trustee has actual knowledge
(which has not been cured), to exercise such of the rights and powers vested in
it by this Agreement, and to use the same degree of care and skill in their
exercise as a prudent person would exercise or use under the circumstances in
the conduct of his own affairs;
(iv) the Trustee shall not be personally liable for any action taken,
suffered or omitted by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this Agreement;
(v) prior to the occurrence of an Event of Default of which a
Responsible Officer of the Trustee has actual knowledge and after the curing of
all Events of Default which may have occurred, the Trustee shall not be bound to
make any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request, consent,
order, approval, bond
71
or other paper or documents, unless requested in writing to do so by Holders of
Regular Certificates evidencing not less than 51% of the aggregate Percentage
Interests of the Regular Certificates; provided, however, that if the payment
within a reasonable time to the Trustee of the costs, expenses or liabilities
likely to be incurred by it in the making of such investigation is, in the
opinion of the Trustee, not reasonably assured to the Trustee by the security
afforded to it by the terms of this Agreement, the Trustee may require
reasonable indemnity against such cost, expense or liability as a condition to
such proceeding. The reasonable expense of every such examination shall be paid
by the Master Servicer or, if paid by the Trustee, shall be reimbursed by the
Master Servicer upon demand. Nothing in this clause (v) shall derogate from the
obligation of the Master Servicer to observe any applicable law prohibiting
disclosure of information regarding the Mortgagors; and
(vi) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys or a custodian (except that the Trustee shall not be responsible for
selecting the Master Servicer as custodian and bailee).
Section 9.03. Trustee Not Liable for Certificates or Home Equity Loans. The
recitals contained herein and in the Certificates (other than the authentication
of the Trustee on the Certificates) shall be taken as the statements of the
Master Servicer, and the Trustee assumes no responsibility for the correctness
of the same. The Trustee makes no representations as to the validity or
sufficiency of this Agreement or of the Certificates (other than the signature
and authentication of the Trustee on the Certificates) or of any Home Equity
Loan or related document. The Trustee shall not be accountable for the use or
application by the Master Servicer of any of the Certificates or of the proceeds
of such Certificates, or for the use or application of any funds paid to the
Depositor or the Master Servicer in respect of the Home Equity Loans or
deposited in or withdrawn from the Collection Account by the Master Servicer.
The Trustee shall at no time have any responsibility or liability for or with
respect to the legality, validity and enforceability of any Mortgage or any Home
Equity Loan, or the perfection and priority of any Mortgage or the maintenance
of any such perfection and priority, or for or with respect to the sufficiency
of the Trust or its ability to generate the payments to be distributed to
Certificateholders under this Agreement, including, without limitation: the
existence, condition and ownership of any Mortgaged Property; the existence and
enforceability of any hazard insurance thereon (other than if the Trustee shall
assume the duties of the Master Servicer pursuant to Section 8.02); the
existence and contents of any Home Equity Loan on any computer or other record
thereof (other than if the Trustee shall assume the duties of the Master
Servicer pursuant to Section 8.02); the validity of the assignment of any Home
Equity Loan to the Trust or of any intervening assignment; the completeness of
any Home Equity Loan; the performance or enforcement of any Home Equity Loan
(other than if the Trustee shall assume the duties of the Master Servicer
pursuant to Section 8.02); the compliance by the Depositor or the Master
Servicer with any warranty or representation made under this Agreement or in any
related document or the accuracy of any such warranty or representation prior to
the Trustee's receipt of notice or other discovery of any non-compliance
therewith or any breach thereof; any investment of monies by or at the direction
of the Master Servicer or any loss resulting therefrom, it being understood that
the Trustee shall remain responsible for any Trust property that it may hold in
its individual capacity; the acts or omissions of the Depositor, the
72
Master Servicer (other than if the Trustee shall assume the duties of the Master
Servicer pursuant to Section 8.02), any Servicer (other than if the Trustee
shall assume the duties of the Master Servicer pursuant to Section 8.02 and
shall engage such Servicer as its subservicer) or any Mortgagor; any action of
the Master Servicer (other than if the Trustee shall assume the duties of the
Master Servicer pursuant to Section 8.02), or any Servicer (other than if the
Trustee shall assume the duties of the Master Servicer pursuant to Section 8.02
and shall engage such Servicer as its subservicer) taken in the name of the
Trustee; or any action by the Trustee taken at the instruction of the Master
Servicer in accordance with the terms of this Agreement (other than if the
Trustee shall assume the duties of the Master Servicer pursuant to Section
8.02); provided, however, that the foregoing shall not relieve the Trustee of
its obligation to perform its duties under this Agreement. The Trustee shall
have no responsibility for filing any financing or continuation statement in any
public office at any time or to otherwise perfect or maintain the perfection of
any security interest or lien granted to it hereunder (unless the Trustee shall
have become the successor Master Servicer) or to prepare or file any Securities
and Exchange Commission filing for the Trust or to record this Agreement.
Section 9.04. Trustee May Own Certificates. The Trustee in its individual or any
other capacity may become the owner or pledgee of Certificates with the same
rights as it would have if it were not Trustee.
Section 9.05. Master Servicer to Pay Trustee's Fees and Expenses. The Master
Servicer covenants and agrees to pay to the Trustee from time to time, and the
Trustee shall be entitled to, reasonable compensation (which shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust) for all services rendered by it in the execution of the trusts
hereby created and in the exercise and performance of any of the powers and
duties hereunder of the Trustee, and the Master Servicer will pay or reimburse
the Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any of the
provisions of this Agreement (including the reasonable compensation and the
expenses and disbursements of its counsel and of all persons not regularly in
its employ) except any such expense, disbursement or advance as may arise from
its negligence or bad faith. In addition, the Master Servicer and the Depositor,
jointly and severally, covenant and agree to indemnify the Trustee from, and
hold it harmless against, any and all losses, liabilities, damages, claims or
expenses other than those resulting from the Trustee's willful malfeasance, bad
faith or gross negligence or by reason of the Trustee's reckless disregard of
its obligations and duties hereunder.
Section 9.06. Eligibility Requirements for Trustee. The Trustee hereunder shall
at all times be a corporation duly incorporated and validly existing under the
laws of the United States of America or any state thereof, authorized under such
laws to exercise corporate trust powers, having a combined capital and surplus
of at least $50,000,000 and subject to supervision or examination by federal or
state authority. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purposes of this Section 9.06, 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. The principal office of the Trustee (other than the initial Trustee)
shall be in a state with respect to
73
which an Opinion of Counsel has been delivered to such Trustee at the time such
Trustee is appointed Trustee to the effect that the Trust will not be a taxable
entity under the laws of such state. In case at any time the Trustee shall cease
to be eligible in accordance with the provisions of this Section 9.06, the
Trustee shall resign immediately in the manner and with the effect specified in
Section 9.07.
Section 9.07. Resignation or Removal of Trustee. The Trustee may at any time
resign and be discharged from the trusts hereby created by giving written notice
thereof to the Depositor, the Master Servicer and each Rating Agency. Upon
receiving such notice of resignation, the Depositor shall promptly appoint a
successor Trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning Trustee and one copy to the
successor Trustee; provided, however, that any such successor Trustee shall be
subject to the prior written approval of the Master Servicer. If no successor
Trustee shall have been so appointed and have accepted appointment within 30
days after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 9.06 and shall fail to resign after written
request therefor by the Depositor, or if at any time the Trustee shall be
legally unable to act, or shall be adjudged a bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Depositor may remove the Trustee. If the Depositor removes the Trustee under the
authority of the immediately preceding sentence, the Depositor shall promptly
appoint a successor Trustee by written instrument, in duplicate, one copy of
which instrument shall be delivered to the Trustee so removed and one copy to
the successor Trustee.
Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section 9.07 shall
not become effective until acceptance of appointment by the successor Trustee as
provided in Section 9.08.
Section 9.08. Successor Trustee. Any successor Trustee appointed as provided in
Section 9.07 shall execute, acknowledge and deliver to the Depositor and to its
predecessor Trustee an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as Trustee. The Depositor, the Master Servicer and the predecessor Trustee
shall execute and deliver such instruments and do such other things as may
reasonably be required for fully and certainly vesting and confirming in the
successor Trustee all such rights, powers, duties and obligations.
No successor Trustee shall accept appointment as provided in this
Section 9.08 unless at the time of such acceptance (i) such successor Trustee
shall be eligible under the provisions of Section 9.06, (ii) the unsecured
long-term debt of such successor Trustee is rated at least "A-3" by Moody's or
(iii) such successor Trustee is consented to by each Rating Agency. The
74
predecessor Trustee shall notify the Rating Agency of the appointment of any
successor Trustee.
Upon acceptance of appointment by a successor Trustee as provided in
this Section 9.08, the Master Servicer shall mail notice of the succession of
such Trustee hereunder to all Holders of Certificates at their addresses as
shown in the Certificate Register and to each Rating Agency. If the Master
Servicer fails to mail such notice within 30 days after acceptance of
appointment by the successor Trustee, the successor Trustee shall cause such
notice to be mailed at the expense of the Master Servicer.
Section 9.09. Merger or Consolidation of Trustee. Any corporation into which the
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
Trustee shall be a party, or any corporation succeeding to all or substantially
all of the business of the Trustee, shall be the successor of the Trustee
hereunder, provided that such corporation shall be eligible under the provisions
of Section 9.06, 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.
Section 9.10. 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 or any
Mortgaged Property may at the time be located, the Depositor and the Trustee
acting jointly shall have the power and shall execute and deliver all
instruments to appoint one or more Persons approved by the to act as co-trustee
or co-trustees, jointly with the Trustee, or separate trustee or separate
trustees, of all or any part of the Trust, and to vest in such Person or
Persons, in such capacity and for the benefit of the Certificateholders, such
title to the Trust, or any part thereof, and, subject to the other provisions of
this Section 9.10, such powers, duties, obligations, rights and trusts as the
Master Servicer and the Trustee may consider necessary or desirable. Any such
co-trustee or separate trustee shall be subject to the written approval of the
Master Servicer. If the Master Servicer shall not have joined in such
appointment within 15 days after the receipt by it of a request so to do, or in
the case an Event of Default shall have occurred and be continuing, the Trustee
alone shall have the power to make such appointment. No co-trustee or separate
trustee hereunder shall be required to meet the terms of eligibility as a
successor Trustee under Section 9.06 and no notice to Certificateholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 9.08.
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 Trustee shall be conferred or imposed upon and exercised or performed
by the 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 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 (whether as Trustee hereunder or as successor to the Master Servicer
hereunder), the Trustee shall be incompetent or unqualified to perform such act
or acts, in which event such rights, powers, duties and obligations
75
(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 Trustee;
(ii) no trustee hereunder shall be held personally liable by reason of
any act or omission of any other trustee hereunder; and
(iii) the Master Servicer and the Trustee acting jointly may at any
time accept the resignation of or remove any separate trustee or co-trustee,
except that following the occurrence of an Event of Default which has not been
cured, the Trustee acting alone may accept the resignation of or remove any
separate trustee or co-trustee.
Any notice, request or other writing given to the 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 IX. 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 Trustee or separately, as
may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Depositor and the Master Servicer.
Any separate trustee or co-trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any 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
Trustee, to the extent permitted by law, without the appointment of a new or
successor Trustee.
Section 9.11. Trustee May Enforce Claims Without Possession of Certificates. All
rights of action and claims under this Agreement or the Certificates may be
prosecuted and enforced by the Trustee without the possession of any of the
Certificates or the production thereof in any proceeding relating thereto. Any
such proceeding instituted by the Trustee shall be brought in its own name or in
its capacity as Trustee. Any recovery of judgment shall, after provision for the
payment of the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, be for the benefit of the
Certificateholders.
Section 9.12. Inspection of Mortgage Files. Following the time that the Mortgage
Files have been delivered to the Trustee upon reasonable prior notice and during
regular business hours, the Trustee shall permit representatives of applicable
state regulatory to inspect the Mortgage Files on the Trustee's premises or
shall provide such documents at such places required by state regulations,
including the offices of the Servicers. Any loss incurred by the Trustee in
fulfilling such obligations shall be paid by the Master Servicer.
76
Section 9.13. Tax Returns. The Trustee, upon request, will furnish the Master
Servicer with all such information as may be reasonably required in connection
with the preparation of all tax returns of the Trust, and shall, upon request,
execute such returns.
77
ARTICLE X
Termination
Section 10.01 Termination.
(a) Subject to Section 10.02, the respective obligations and
responsibilities of the Master Servicer, the Depositor and the Trustee created
hereby (other than the obligation of the Trustee to make certain payments to
Certificateholders after the final Distribution Date, the obligations of the
Depositor and the Master Servicer under Section 9.05 and the obligation of the
Master Servicer to send certain notices as hereinafter set forth) shall
terminate upon the last action required to be taken by the Trustee pursuant to
this Article X on the earliest of (i) the repurchase by the Master Servicer or
the Depositor of all Home Equity Loans and all property acquired in respect of
any Home Equity Loan remaining in the Trust at a price (the "Termination Price")
equal to the greater of (A) the sum of (x) 100% of the Principal Balance of each
Home Equity Loan (other than any Home Equity Loan as to which title to the
underlying Mortgaged Property has been acquired and whose fair market value is
included pursuant to clause (y) below) as of the first day of the Collection
Period preceding the Distribution Date upon which the proceeds of any repurchase
are to be distributed and (y) the fair market value of such acquired property
(as determined by the Master Servicer as of the close of business on the third
Business Day next preceding the date upon which notice of any such termination
is furnished to Certificateholders pursuant to Section 10.01(d)) plus, in each
case, one month's interest at the applicable Net Loan Rate on the Principal
Balance of each Home Equity Loan (including any Home Equity Loan as to which
title to the underlying Mortgaged Property has been acquired), (B) the aggregate
fair market value (as determined by the Master Servicer as of the close of
business on such third preceding Business Day) of all of the assets of the
Trust, or (C) the sum of the Certificate Principal Balance of the Class A and
Class M Certificates, together with any unpaid Interest Carry Forward Amounts
allocable to such Classes, plus one month's interest on such Certificate
Principal Balance and any unpaid Interest Carry Forward Amounts at the related
Pass-Through Rates, or (ii) the final payment or other liquidation of the
Principal Balance of the last Home Equity Loan remaining in the Trust or the
disposition of all property acquired upon foreclosure or deed in lieu of
foreclosure of any Home Equity Loan or (iii) the disposition of the Home Equity
Loans and Mortgaged Property pursuant to the provisions of Section 10.03 or (iv)
the Distribution Date in _________; provided that in no event shall the Trust
created hereby continue beyond the expiration of 21 years from the death of the
last survivor of the descendants of Xxxxxx X. Xxxxxxx, the late Ambassador of
the United States to the Court of St. Xxxxx, living on the date hereof. Upon
termination in accordance with clause (i), (ii) or (iv) of this Section 10.01,
the Trustee shall execute such documents and instruments of transfer, in each
case without recourse, representation or warranty, presented by the Depositor
and take such other actions as the Depositor may reasonably request to effect
the retransfer of the Home Equity Loans to the Depositor.
(b) The right of the Master Servicer and the Depositor to repurchase all
Home Equity Loans pursuant to clause (i) of Section 10.01(a) above is
conditioned upon the Pool Balance as of the final
78
Distribution Date being less than fifteen (15%) percent of the initial aggregate
Certificate Principal Balance of the Regular Certificates and receipt by the
Trustee of an Opinion of Counsel to the effect that such repurchase will give
rise neither to any tax on prohibited transactions under Section 860(F)(a)(l) of
the Code nor to any tax on contributions to the REMIC after the startup day
under Section 860G(d) of the Code. If such right is exercised, the Master
Servicer or Depositor, as the case may be, shall provide to the Trustee the
certification required by [Section 3.07] and the Trustee shall, promptly
following payment of the repurchase price, execute proper instruments
acknowledging termination and discharge of this Agreement.
(c) Notice of any termination, specifying the Distribution Date (which
shall be a date that would otherwise be a Distribution Date) upon which the
Certificateholders may surrender their Certificates to the Trustee for payment
of the final distribution and cancellation, shall be given promptly by the
Trustee (upon receipt of written directions from the Master Servicer, if the
Depositor is exercising its right to retransfer the Home Equity Loans) by letter
to Certificateholders mailed not earlier than the 15th day and not later than
the 25th day of the month next preceding the month of such final distribution
specifying (i) the Distribution Date upon which final distribution of the
Certificates will be made upon presentation and surrender of the Certificates at
the office or agency of the Trustee therein designated, (ii) the amount of any
such final distribution and (iii) that the Record Date otherwise applicable to
such Distribution Date is not applicable, distributions being made only upon
presentation and surrender of the Certificates at the office or agency of the
Trustee therein specified. In the event written directions are delivered by the
Master Servicer to the Trustee as described in the preceding sentence, the
Depositor shall deposit in the Collection Account on or before the Distribution
Date for such final distribution in immediately available funds an amount which,
when added to the funds on deposit in the Collection Account that are payable to
the related Certificateholders, will be equal to the purchase price for the
assets of the Trust computed as above provided.
(d) Upon presentation and surrender of the Certificates, the Trustee shall
cause to be distributed to the Certificateholders on the Distribution Date for
such final distribution, in proportion to their respective Percentage Interests,
an amount equal to (i) as to each Class of Class A or Class M Certificates, such
Class' appropriate share of the Principal Distribution Amount, any Interest
Carry Forward Amounts and one month's interest at the related Pass-Through Rate
on such Certificate Principal Balance and (ii) as to Class R Certificates the
amount which remains on deposit in the Certificate Account (other than the
amounts retained to meet claims) after application pursuant to clause (i) above.
The distribution on such final Distribution Date shall be in lieu of the
distribution otherwise required to be made on such Distribution Date in respect
of each Class of Certificates.
(e) In the event that all of the Certificateholders shall not surrender
their Certificates for final payment and cancellation on or before such
final Distribution Date, the Trustee shall on such date cause all funds in the
Collection Account not distributed in final distribution to Certificateholders
to be withdrawn therefrom and credited to the remaining Certificateholders by
depositing such funds in a separate escrow account for the benefit of such
Certificateholders and the Depositor (if the Depositor has exercised its right
to retransfer the Home Equity Loans) or the Trustee (in any other case) and the
Trustee shall give a second written notice to the remaining Certificateholders
79
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, any funds
deposited in such escrow account and remaining unclaimed shall be paid by the
Trustee to the Master Servicer and thereafter Certificateholders shall look only
to the Master Servicer with respect to any claims in respect of such funds.
Section 10.02. Additional Termination Requirements.
(a) In the event that the Master Servicer exercises its repurchase option
as provided in Section 10.01, the Trust shall be terminated in accordance with
the following additional requirements, unless the Trustee has received an
Opinion of Counsel to the effect that the failure of the Trust to comply with
the requirements of this Section 10.02 will not (i) result in the imposition of
taxes on "prohibited transactions" of the Trust as defined in Section 860F of
the Code or contributions to the REMIC after the startup day as defined in
Section 860G(d) of the Code, or (ii) cause the Trust to fail to qualify as a
REMIC at any time that any Certificates are outstanding:
(i) Within 90 days prior to the final Distribution Date set forth in
the notice given by the Master Servicer under Section 10.09 1, the Trustee, at
the direction of the Master Servicer, shall adopt a plan of complete liquidation
of the Trust;
(ii) At or after the time of adoption of such a plan of complete
liquidation and at or prior to the Distribution Date for the final distribution,
the Trustee shall sell all of the assets of the Trust to the Master Servicer,
for cash; provided, however, that in the event that a calendar quarter ends
after the time of adoption of such a plan of complete liquidation but prior to
the such final Distribution Date, the Trustee shall not sell any of the assets
of the Trust prior to the close of that calendar quarter; and
(iii) The Trustee shall make the distributions specified in Section
10.01(d) hereof on or before the final Distribution Date referred to in clause
(i) above.
(b) The Trustee hereby agrees to adopt such a plan of complete liquidation
upon the written request of the Master Servicer and to take such other action in
connection therewith as may be reasonably requested by the Master Servicer.
Section 10.03. Termination Upon Loss of REMIC Status.
(a) Following a final determination by the Internal Revenue Service, or by
a court of competent jurisdiction, in either case from which no appeal is taken
within the permitted time for such appeal, or if any appeal is taken, following
a final determination of such appeal from which no further appeal can be taken,
to the effect that the Trust does not qualify as a REMIC pursuant to Section
860D of the Code (the "Final Determination") and such failure to qualify cannot
reasonably be rectified, as soon as practical but in any event within 30
calendar days following such Final Determination, the Holders of a majority in
interest of the Class R Certificates then outstanding or the Master Servicer may
direct the Trustee on behalf of the Trust to adopt a plan of complete
liquidation. Upon receipt of such direction from the Holders of the Class R
Certificates or the Master Servicer, the Trustee shall notify all
Certificateholders of such election
80
to liquidate (the "Termination Notice"). The Trustee shall sell all (but not
fewer than all) the Home Equity Loans, all Mortgaged Property and all other
assets (other than cash) then remaining in the Trust, and distribute the
proceeds of the liquidation of the Trust Fund, each in accordance with the plan
of complete liquidation and in the order specified in Section 10.01 (d) hereof,
such that, if so directed, the liquidation of the Trust, the distribution of the
proceeds of the liquidation (and any other cash assets of the Trust) and the
termination of this Agreement occur no later than the close of the 30th day
after the date of the Termination Notice.
(b) Alternatively, following a Final Determination, the Holders
representing a majority in interest of the Class R Certificates then outstanding
may, at their option and upon delivery to the Holders of the Class A
Certificates and Class M Certificates of an opinion of counsel experienced in
Federal income tax matters selected by the Holders of the Class R Certificates,
which opinion shall be reasonably satisfactory in form and substance to the
Trustee, to the effect that the effect of the Final Determination is to increase
substantially the probability that the gross income of the Trust will be subject
to Federal taxation, purchase from the Trust Fund all (but not fewer than all)
the Home Equity Loans, all Mortgaged Property and all other assets (other than
cash) remaining in the Trust at a purchase price equal to the Termination Price.
81
ARTICLE XI
Miscellaneous Provisions
Section 11.01. Amendment. This Agreement may be amended from time to time by the
Master Servicer, the Depositor and the Trustee, in each case without the consent
of any of the Certificateholders, (i) to cure any ambiguity, (ii) to correct any
defective provisions or to correct or supplement any provisions herein that may
be inconsistent with any other provisions herein, (iii) to add to the duties of
the Depositor or the Master Servicer, (iv) to modify, eliminate or add to any of
its provisions to such extent as shall be necessary to maintain the
qualification of the Trust as a REMIC and to comply with the requirements of the
Code and the REMIC provisions, (v) to add any other provisions with respect to
matters or questions arising under this Agreement, which shall not be
inconsistent with this Agreement, or (vi) to add or amend any provisions of this
Agreement as required by any Rating Agency or any other nationally recognized
statistical rating agency in order to maintain or improve any rating of the
Regular Certificates (it being understood that, after obtaining the ratings in
effect on the Closing Date, neither the Trustee, the Depositor nor the Master
Servicer is obligated to obtain, maintain or improve any such rating); provided,
however, that as evidenced by an Opinion of Counsel (a copy of which shall be
delivered to the Trustee) (at the expense of the requesting party), in each case
such action shall not materially and adversely affect the interests of any
Regular Certificateholder; and provided, further, that the amendment shall not
be deemed to adversely affect in any material respect the interests of the
Regular Certificateholders and no Opinion of Counsel to that effect shall be
required if the Person requesting the amendment obtains a letter from each
Rating Agency stating that the amendment would not result in the downgrading or
withdrawal of the respective ratings then assigned to the Regular Certificates.
This Agreement also may be amended from time to time by the Master
Servicer, the Depositor and the Trustee, in each case with the consent of the
Holders of each Class of Regular Certificates which is affected by such
amendment, evidencing Percentage Interests aggregating not less than 51% in
Percentage Interests of such Class or in the case of an amendment which affects
all classes, evidencing Percentage Interests aggregating not less than 51% of
all Classes, 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 Certificateholders; provided, however, that no such
amendment shall (i) reduce in any manner the amount of, or delay the timing of,
collections of payments on Home Equity Loans, or (ii) reduce the aforesaid
percentage required to consent to any such amendment, or (iii) adversely affect
the status of the Trust as a REMIC or create a material risk of the Trust
incurring taxes imposed under Section 860F(a)(1) or 860(d)(1) of the Code, or
(iv) result in a downgrading of the ratings of the Regular Certificates without,
in each case, the consent of the Holders of all Classes of Certificates then
outstanding or each Class of Certificates affected thereby.
Prior to the solicitation of consent of Certificateholders in
connection with any such amendment, the party seeking such amendment shall
furnish the Trustee with an Opinion of Counsel stating whether such amendment
would adversely affect the qualification of the Trust as
82
a REMIC or create a material risk of the Trust incurring taxes imposed under
860F(a)(1) or 860G(d)(1) of the Code and notice of the conclusion expressed in
such Opinion of Counsel shall be included with any such solicitation. An
amendment made with the consent of all Certificateholders and executed in
accordance with this Section 11.01 shall be permitted or authorized by this
Agreement notwithstanding that such Opinion of Counsel may conclude that such
amendment would adversely affect the qualification of the Trust as a REMIC or
create a material risk of the Trust incurring taxes imposed under 860F(a)(1) or
860G(d)(l) of the Code.
Prior to the execution of any such amendment made with the consent of
Certificateholders, the Master Servicer shall furnish written notification of
the substance of such amendment to each Rating Agency. In addition, promptly
after the execution of any such amendment made with the consent of the
Certificateholders, the Trustee shall furnish written notification of the
substance of such amendment to each Certificateholder.
It shall not be necessary for the consent of Certificateholders under
this Section 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 of evidencing the
authorization of the execution thereof by Certificateholders shall be subject to
such reasonable requirements as the Trustee may prescribe.
Prior to the execution of any amendment to this Agreement, the 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.
The Trustee may, but shall not be obligated to, enter into any such amendment
which affects the Trustee's own rights, duties or immunities under this
Agreement.
Section 11.02. Recordation of Agreement. This Agreement is subject to
recordation in all appropriate public offices for real property records in all
the counties or other comparable jurisdictions in which any or all of the
Mortgaged Properties are situated, and in any other appropriate public recording
office or elsewhere, such recordation to be effected by the Master Servicer and
at its expense on direction by the Trustee (which shall not have any duty to
determine whether such recordation should be made), but only upon direction of
the Trustee or the Master Servicer accompanied by an Opinion of Counsel to the
effect that such recordation materially and beneficially affects the interests
of Certificateholders.
For the purpose of facilitating the recordation of this Agreement as
herein provided 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 such counterparts shall constitute but one and
the same instrument.
Section 11.03. Limitation on Rights of Certificateholders. The death or
incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations and liabilities of the parties
hereto or any of them.
83
No Certificateholder shall have any right to vote (except as provided
in Section 11.01) or in any manner otherwise control the operation and
management of the Trust, or the obligations of the parties hereto, nor shall
anything herein set forth, or contained in the terms of the Certificates, be
construed so as to constitute the Certificateholders from time to time as
partners or members of an association; nor shall any Certificateholder be under
any liability to any third person by reason of any action taken by the parties
to this Agreement pursuant to any provision hereof.
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,
unless such Holder previously shall have given to the Trustee a written notice
of default and of the continuance thereof, as hereinbefore provided, and unless
also the Holders of Certificates evidencing not less than 51% of the aggregate
Percentage Interests of the Regular Certificates shall have made written request
upon the Trustee to institute such action, suit or proceeding in its own name as
Trustee hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby, and the Trustee, for 60 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; it being understood and intended,
and being expressly covenanted by each Certificateholder with every other
Certificateholder and the 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 herein provided and for the
equal, ratable and common benefit of all Certificateholders. For the protection
and enforcement of the provisions of this Section, each and every
Certificateholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.
Section 11.04. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF ILLINOIS AND THE OBLIGATIONS, RIGHTS AND REMEDIES
OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 11.05. Notices. All demands, notices (whether or not any notice is
referred to herein as a notice, a written notice or a notice in writing) and
communications hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered at or mailed by certified mail, return
receipt requested, or telecopied to (a) in the case of the Depositor or the
Master Servicer, c/o Household Finance Corporation, 0000 Xxxxxxx Xxxx, Xxxxxxxx
Xxxxxxx, Xxxxxxxx 00000, Attention: Treasurer, (b) in the case of the Trustee,
at the Corporate Trust Office, 0 Xxxx Xxx, Xxxxx XX0-0000, Xxxxxxx, Xxxxxxxx
00000-0000, Attn: Corporate Trust Administration, (c) in the case of Xxxxx'x,
Home Equity Loan Monitoring Group, 4th Floor, 00 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, and (d) in the case of Fitch, Xxx Xxxxx Xxxxxx Xxxxx, 00xx Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000, Attention: _____________, or, as to each party, at
such other address as shall be
84
designated by such party in a written notice to each other party. 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. 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 11.06. 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 11.07. Assignment. Notwithstanding anything to the contrary contained
herein, except as provided in [Sections 6.05, 7.02 and 7.04], this Agreement may
not be assigned by the Depositor or the Master Servicer without the prior
written consent of Holders of Certificates of each Class, voting as a Class,
evidencing, as to each such Class, Percentage Interests aggregating not less
than 66-2/3%.
Section 11.08. Certificates Nonassessable and Fully Paid. The parties agree
that the Certificateholders shall not be personally liable for obligations of
the Trust, that the beneficial ownership interests represented by the
Certificates shall be nonassessable for any losses or expenses of the Trust or
for any reason whatsoever, and that the Certificates upon execution by the
Trustee on behalf of the Trust and the authentication and delivery thereof by
the Trustee pursuant to [Sections 2.08 or 6.01] are and shall be deemed fully
paid.
Section 11.09. Third-Party Beneficiaries. This Agreement will inure to the
benefit of and be binding upon the parties hereto, the Certificateholders and
their respective successors and permitted assigns. Except as otherwise provided
in this Agreement, no other person will have any right or obligation hereunder.
Section 11.10. Counterparts. This instrument 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 11.11. 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.
Section 11.12. Limitation on Voting of Preferred Stock. The Trustee shall hold
all of the preferred stock ("Preferred Stock") of the Depositor in trust, for
the benefit of the Certificateholders, and shall vote such stock only pursuant
to the written instructions of Holders of Certificates evidencing not less than
51% of the aggregate Percentage Interests of the Regular Certificates.
Concurrently with any retransfer of the Home Equity Loans to the Depositor
pursuant to Section 10.01, the Trustee shall transfer to the Depositor for
cancellation all shares of Preferred Stock held by the Trustee.
85
IN WITNESS WHEREOF, the Depositor, the Master Servicer and the Trustee have
caused this Agreement to be duly executed by their respective officers all as of
the day and year first above written.
HFC REVOLVING CORPORATION,
as Depositor
By:
---------------------------------
Name:
Title:
HOUSEHOLD FINANCE CORPORATION,
as Master Servicer
By:
---------------------------------
Name:
Title:
[NAME OF TRUSTEE],
as Trustee
By:
---------------------------------
Name:
Title:
86
State of Illinois }
} ss.:
County of Xxxx }
On this _____ day of November, 1999 before me, a notary public in and
for the State of Illinois, personally appeared, known to me who, being by me
duly sworn, did depose and say that ____________________________________________
he resides at; that he is the _________________________________________________
of HFC Revolving Corporation, a Delaware corporation, one of the parties that
executed the foregoing instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that it was so
affixed by order of the Board of Directors of said corporation; and that he
signed his name thereto by like order.
Notary Public
[Seal]
State of Illinois }
} ss.:
County of Xxxx }
On this _____ day of November, 1999 before me, a notary public in and
for the State of Illinois, personally appeared
______________________________________, known to me who, being by me duly sworn,
did depose and say that he resides at _________________________________________;
that he is the of Household Finance Corporation, a Delaware corporation, one of
the parties that executed the foregoing instrument; that he knows the seal of
said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by order of the Board of Directors of said
corporation; and that he signed his name thereto by like order.
Notary Public
[Seal]
87
State of Illinois }
} ss.:
County of Xxxx }
On this _____ day of November, 1999 before me, a notary public in and
for the State of Illinois, personally appeared ________________________________,
known to me who, being by me duly sworn, did depose and say that he resides at
______________________________; that he is the _________________________________
of Bank One, National Association of Chicago, a national banking association,
one of the parties that executed the foregoing instrument; and that he signed
his name thereto by order of the Board of Directors of said association.
Notary Public
[Seal]
