EXHIBIT 4.5
[Form of Agreement]
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Certificates for Home Improvement Loans
Series ___________
POOLING AND SERVICING AGREEMENT
among
CONSECO FINANCE SECURITIZATIONS CORP.
Seller
CONSECO FINANCE CORP.
Originator and Servicer
and
[TRUSTEE]
not in its individual capacity but solely as Trustee
of
HOME IMPROVEMENT LOAN TRUST ________
Dated as of _______________, ______
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TABLE OF CONTENTS
Page
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Article I DEFINITIONS.............................................................................................2
SECTION 1.01 General................................................................................2
SECTION 1.02 Specific Terms.........................................................................2
Article II ESTABLISHMENT OF TRUST; TRANSFER OF CONTRACTS.........................................................12
SECTION 2.01 Closing...............................................................................12
SECTION 2.02 Conditions to the Closing.............................................................12
SECTION 2.03 Acceptance by Trustee.................................................................13
SECTION 2.04 Grantor Trust Provisions..............................................................14
Article III REPRESENTATIONS AND WARRANTIES.......................................................................14
SECTION 3.01 Representations and Warranties Regarding the Company..................................14
SECTION 3.02 Representations and Warranties Regarding Each Contract................................15
SECTION 3.03 Representations and Warranties Regarding the Contracts in the
Aggregate.........................................................................17
SECTION 3.04 Representations and Warranties Regarding the Contract Files...........................18
SECTION 3.05 Repurchases or Substitutions of Contracts for Breach of
Representations and Warranties....................................................18
Article IV PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS...........................................20
SECTION 4.01 Transfer of Contracts.................................................................20
SECTION 4.02 Costs and Expenses....................................................................20
Article V SERVICING OF CONTRACTS.................................................................................20
SECTION 5.01 Responsibility for Contract Administration............................................20
SECTION 5.02 Standard of Care......................................................................21
SECTION 5.03 Records...............................................................................21
SECTION 5.04 Inspection............................................................................21
SECTION 5.05 Certificate Account...................................................................21
SECTION 5.06 Enforcement...........................................................................23
SECTION 5.07 Trustee to Cooperate..................................................................24
SECTION 5.08 Costs and Expenses....................................................................25
SECTION 5.09 Maintenance of Insurance..............................................................26
SECTION 5.10 Merger or Consolidation of Servicer...................................................26
Article VI REPORTS AND TAX MATTERS...............................................................................26
SECTION 6.01 Monthly Reports.......................................................................26
SECTION 6.02 Officer's Certificate.................................................................28
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SECTION 6.03 Other Data............................................................................28
SECTION 6.04 Annual Report of Accountants..........................................................28
SECTION 6.05 Statements to Certificateholders......................................................29
SECTION 6.06 Payment of Taxes......................................................................30
Article VII SERVICE TRANSFER.....................................................................................30
SECTION 7.01 Events of Termination.................................................................30
SECTION 7.02 Transfer..............................................................................31
SECTION 7.03 Trustee to Act; Appointment of Successor..............................................32
SECTION 7.04 Notification to Certificateholders....................................................32
SECTION 7.05 Effect of Transfer....................................................................33
SECTION 7.06 Transfer of Certificate Account.......................................................33
Article VIII PAYMENTS............................................................................................33
SECTION 8.01 Monthly Payments......................................................................33
SECTION 8.02 Advances..............................................................................34
SECTION 8.03 [Limited Guaranty]....................................................................34
SECTION 8.04 Payments..............................................................................35
SECTION 8.05 Reassignment of Repurchased Contracts and Replaced Contracts..........................36
SECTION 8.06 Servicer's Purchase Option............................................................36
Article IX THE CERTIFICATES......................................................................................37
SECTION 9.01 The Certificates......................................................................37
SECTION 9.02 Registration of Transfer and Exchange of Certificates.................................38
SECTION 9.03 No Charge; Disposition of Void Certificates...........................................39
SECTION 9.04 Mutilated, Destroyed, Lost or Stolen Certificates.....................................40
SECTION 9.05 Persons Deemed Owners.................................................................40
SECTION 9.06 Access to List of Certificateholders' Names and Addresses.............................40
SECTION 9.07 Authenticating Agents.................................................................41
Article X INDEMNITIES............................................................................................41
SECTION 10.01 Real Estate...........................................................................41
SECTION 10.02 Liabilities to Obligors...............................................................41
SECTION 10.03 Tax Indemnification...................................................................41
SECTION 10.04 Servicer's Indemnities................................................................42
SECTION 10.05 Operation of Indemnities..............................................................42
Article XI THE TRUSTEE...........................................................................................42
SECTION 11.01 Duties of Trustee.....................................................................42
SECTION 11.02 Certain Matters Affecting the Trustee.................................................43
SECTION 11.03 Trustee Not Liable for Certificates or Contracts......................................44
SECTION 11.04 Trustee May Own Certificates..........................................................45
SECTION 11.05 Rights of Certificateholders to Direct Trustee and to Waive Events of
Termination.......................................................................45
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SECTION 11.06 The Servicer to Pay Trustee's Fees and Expenses.......................................45
SECTION 11.07 Eligibility Requirements for Trustee..................................................46
SECTION 11.08 Resignation or Removal of Trustee.....................................................46
SECTION 11.09 Successor Trustee.....................................................................47
SECTION 11.10 Merger or Consolidation of Trustee....................................................47
SECTION 11.11 Tax Returns...........................................................................48
SECTION 11.12 Obligor Claims........................................................................48
SECTION 11.13 Appointment of Co-Trustee or Separate Trustee.........................................49
SECTION 11.14 Certain Matters Relating to FHA Insurance.............................................50
SECTION 11.15 Trustee and [Trustee parent]..........................................................50
SECTION 11.16 Trustee Advances......................................................................50
Article XII MISCELLANEOUS........................................................................................50
SECTION 12.01 Servicer Not to Resign; Delegation of Servicing Duties................................50
SECTION 12.02 Company Not to Engage in Certain Transactions with Respect to the
Trust.............................................................................51
SECTION 12.03 Maintenance of Office or Agency.......................................................51
SECTION 12.04 Termination...........................................................................51
SECTION 12.05 Acts of Certificateholders............................................................52
SECTION 12.06 Calculations..........................................................................53
SECTION 12.07 Assignment or Delegation by Company...................................................53
SECTION 12.08 Amendment.............................................................................53
SECTION 12.09 Notices...............................................................................55
SECTION 12.10 Merger and Integration................................................................56
SECTION 12.11 Headings..............................................................................56
SECTION 12.12 Governing Law.........................................................................56
Exhibit A Certificate for Home Improvement Loans....................................................A-1
Exhibit B Form of Assignment........................................................................B-1
Exhibit C Certificate of Officer....................................................................C-1
Exhibit D Form of Opinion of Counsel for the Company................................................D-1
Exhibit E Form of Trustee's Acknowledgement.........................................................E-1
Exhibit F Certificate of Servicing Officer..........................................................F-1
Exhibit G-1 Certificate Regarding Repurchased Contracts...............................................G-1
Exhibit G-2 Certificate Regarding Substituted Contracts...............................................G-2
Exhibit H List of Contracts.........................................................................H-1
Exhibit I List of FHA-Insured Contracts ............................................................I-1
Exhibit J Form of Monthly Report....................................................................J-1
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AGREEMENT, dated as of ___________ 1, ______, among Conseco Finance
Securitizations Corp., as Seller, a corporation organized and existing under the
laws of the State of Minnesota, Conseco Finance Corp., as Originator and
Servicer, a corporation organized and existing under the laws of the State of
Delaware, as Seller and Servicer (the "Company"), and [TRUSTEE], a national
banking association organized and existing under the laws of the United States,
not in its individual capacity but solely as Trustee (the "Trustee") of Home
Improvement Loan Trust __________ (the "Trust").
WHEREAS, in the regular course of its business, the Company purchases,
originates and services home improvement contracts and promissory notes, which
contracts and notes provide for installment payments by or on behalf of the
purchaser of the home improvements;
WHEREAS, the Company and the Trustee have agreed to establish the
Trust;
WHEREAS, the Company and the Trustee wish to set forth the terms and
conditions pursuant to which the Trust, on behalf of the "Certificateholders",
as hereinafter defined, will acquire the "Contracts," as hereinafter defined,
and the Company will manage and service the Contracts;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the Company and the Trustee agree as provided
herein:
ARTICLE I
DEFINITIONS
SECTION 1.01 General.
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For the purpose of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, the terms defined in this
Article include the plural as well as the singular, the words "herein," "hereof"
and "hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular article, section or other subdivision, and
Section references refer to Sections of the Agreement.
SECTION 1.02 Specific Terms.
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"Advance" means, with respect to any Payment Date, the amounts, if any,
deposited by the Servicer or the Trustee, as applicable, in the Certificate
Account for such Payment Date pursuant to Section 8.02.
"Advance Payment" means any payment by an Obligor in advance of the Due
Period in which it would be due under such Contract and which payment is not a
Principal Prepayment.
"Affiliate" of any specified Person means any other Person controlling
or controlled by or under common control with such specified Person. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" or "controlled" have meanings
correlative to the foregoing.
"Aggregate Certificate Principal Balance" means at any time the
Original Series _______ Certificate Principal Balance minus all payments of
Monthly Principal made to the Certificateholders since the Closing Date.
"Agreement" means this Pooling and Servicing Agreement.
"Amount Available" has the meaning assigned in Section 8.04(a).
"Applicants" has the meaning assigned in Section 9.06.
"Authenticating Agent" means any authenticating agent appointed
pursuant to Section 9.07.
"Average Sixty-Day Delinquency Ratio" means, with respect to any
Payment Date, the arithmetic average of the Delinquency Ratios for such Payment
Date and for the two immediately preceding Payment Dates.
"Book-Entry Certificate" means any Certificate registered in the name
of the Depository or its nominee, ownership of which is reflected on the books
of the Depository or on the books of
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a person maintaining an account with such Depository (directly or as an indirect
participant in accordance with the rules of such Depository).
"Business Day" means any day other than (a) a Saturday or a Sunday, or
(b) another day on which banking institutions in the city in which the Person
taking action hereunder are authorized or obligated by law, executive order, or
governmental decree to be closed.
"Certificate" means a Certificate for Home Improvement Loans, Series
______, evidencing a Percentage Interest executed and delivered by the Trustee
substantially in the form of Exhibit A.
"Certificate Account" means a trust account created and maintained
pursuant to Section 5.05 in the name of the Trust in an Eligible Institution.
"Certificate Owner" means the person who is the beneficial owner of a
Book-Entry Certificate or, if Definitive Certificates have been issued,
Certificateholders.
"Certificate Register" means the register maintained pursuant to
Section 9.02.
"Certificate Registrar" or "Registrar" means the registrar appointed
pursuant to Section 9.02.
"Certificateholder" means the person in whose name a Certificate is
registered on the Certificate Register, except that, solely for the purposes of
giving any consent, waiver, request or demand pursuant to this Agreement, any
Certificate registered in the name of the Company or any Affiliate shall be
deemed not to be outstanding and the Percentage Interest evidenced thereby shall
not be taken into account in determining whether the requisite Percentage
Interest necessary to effect any such consent, request, waiver or demand has
been obtained; provided, however, that, solely for the purpose of determining
whether the Trustee is entitled to rely upon any such consent, waiver, request
or demand, only Certificates which the Trustee knows to be so owned shall be so
disregarded.
"Closing Date" means _______________, _______.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collected Amount" means, with respect to any Determination Date, the
amount of funds in the Certificate Account as of such Determination Date,
including all interest earned on such funds but excluding (i) amounts
constituting Advance Payments with respect to the immediately preceding Due
Period, (ii) amounts received after the end of such immediately preceding Due
Period, (iii) any Advances that will be deposited in the Certificate Account by
the Servicer or the Trustee, as applicable, and (iv) amounts required to be
deposited by the Company following such Determination Date pursuant to Section
3.05.
"Computer Tape" means the computer tape generated by the Company which
provides information relating to the Contracts and which was used by the Company
in selecting the Contracts, and includes the master file and the history file.
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"Contract File" means, as to each Contract, (a) the original copy of
the Contract which is comprised of the related contract and/or promissory note
and (b) a sale control document.
"Contract Interest Rate" means, as to any Contract, the annual rate of
interest specified in the Contract.
"Contracts" means the home improvement contracts and promissory notes
described in the List of Contracts attached hereto as Exhibit H and constituting
part of the corpus of the Trust, which Contracts are to be assigned and conveyed
by the Company to the Trust, and includes, without limitation, any and all
rights to receive payments which are due pursuant thereto on or after the
Cut-off Date, but excluding any rights to receive payments which are due
pursuant thereto prior to the Cut-off Date.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office at the date of the execution of this Agreement is
located at the address set forth in Section 12.09.
"Counsel for the Company" means _________________________________ or
other legal counsel for the Company.
"Cumulative Realized Loss Ratio" for any Payment Date is a fraction,
expressed as a percentage, the numerator of which is the aggregate Realized
Losses for that Payment Date and all prior Payment Dates, and the denominator of
which is the Cut-off Date Pool Principal Balance.
"Current Realized Loss Ratio" for any Payment Date is a fraction,
expressed as a percentage, the numerator of which is the aggregate Realized
Losses for the Payment Date and each of the two immediately preceding Payment
Dates, multiplied by four, and the denominator of which is the arithmetic
average of the Pool Scheduled Principal Balance as of the third preceding
Payment Date and the Pool Scheduled Principal Balance as of such Payment Date.
"Custodian" means at any time an Eligible Institution, or a financial
institution organized under the laws of the United States or any State, which is
subject to supervision and examination by Federal or State authorities and whose
commercial paper, or unsecured long-term debt (or, in the case of a member of a
bank holding company system, the commercial paper or unsecured long-term debt of
such bank holding company) has been rated A-1 by S&P and F-1 by Fitch in the
case of commercial paper, or BBB+ or higher by S&P and Baa1 or higher by Fitch
in the case of unsecured long-term debt, and is acting at such time as Custodian
of the Contract Files pursuant to Section 4.01.
"Cut-off Date" means ___________, ______ (or the date of origination of
the Contract, if later).
"Cut-off Date Pool Principal Balance" means the aggregate of the
Cut-off Date Principal Balances of the Contracts.
"Cut-off Date Principal Balance" means, as to any Contract, the unpaid
principal balance thereof at the Cut-off Date after giving effect to all
installments of principal due prior thereto.
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"Defaulted Contract" means a Contract with respect to which the
Servicer commenced foreclosure proceedings, made a sale of such Contract to a
third party for foreclosure or enforcement, or, in the case of an FHA-Insured
Contract, submitted a claim to FHA, or as to which there was a Delinquent
Payment 180 or more days past due.
"Definitive Certificates" has the meaning assigned in Section 9.02(e).
"Delinquency Ratio" for any Payment Date is a fraction, expressed as a
percentage, equal to the aggregate outstanding principal balance of all
Contracts that were delinquent 60 days or more as of the end of the immediately
preceding Due Period (including Defaulted Contracts that have not yet been
liquidated, but excluding Contracts that are current with respect to rescheduled
payments following the Obligor's bankruptcy) divided by the Pool Scheduled
Principal Balance immediately following such Payment Date.
"Delinquent Payment" means, as to any Contract, with respect to any Due
Period, any payment or portion of a payment that was originally scheduled to be
made during such Due Period under such Contract (after giving effect to any
reduction in the principal amount deemed owed on such Contract by the Obligor,
as described in Section 6.01(a)(ii)) and was not received or applied during such
Due Period and deposited in the Certificate Account, whether or not any payment
extension has been granted by the Servicer; provided, however, that with respect
to any Liquidated Contract, the payment scheduled to be made in the Due Period
in which such Contract became a Liquidated Contract shall not be deemed a
Delinquent Payment.
"Depository" means the initial Depository, The Depository Trust
Company, the nominee of which is Cede & Co., as the registered Holder of [one]
Certificate evidencing $____________ in Original Series ________ Certificate
Principal Balance of the Certificates, and any permitted successor depository.
The Depository shall at all times be a "clearing corporation" as defined in
Section 8-102(3) of the Uniform Commercial Code of the State of New York.
"Depository Participant" means a broker, dealer, bank or other
financial institution or other Person for whom from time to time a Depository
effects book-entry transfers and pledges of securities deposited with the
Depository.
"Determination Date" means the seventh Business Day following a Due
Period during the term of this Agreement.
"Due Period" means a calendar month during the term of this Agreement.
"Electronic Ledger" means the electronic master record of conditional
sales contracts and promissory notes of the Company.
"Eligible Account" means, at any time, an account which is any of the
following: (i) an account maintained with an Eligible Institution; (ii) an
account or accounts the deposits in which are fully insured by either the Bank
Insurance Fund or the Savings Association Insurance Fund of the FDIC; (iii) a
trust account (which shall be a "segregated trust account") maintained with the
corporate trust department of a federal or state chartered depository
institution or trust company with trust powers and acting in its fiduciary
capacity for the benefit of the Trustee hereunder, which depository institution
or trust company shall have capital and surplus of not
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less than $50,000,000.00; or (iv) an account that will not cause [rating
agencies] to downgrade or withdraw its then-current rating assigned to the
Certificates, as evidenced in writing by [rating agencies].
"Eligible Institution" means any depository institution (which may be
the Trustee or an Affiliate of the Trustee) organized under the laws of the
United States or any State, the deposits of which are insured to the full extent
permitted by law by the Federal Deposit Insurance Corporation, which is subject
to supervision and examination by Federal or State authorities and whose
short-term deposits have been rated A-1 by S&P and F-1 by Fitch or whose
unsecured long-term debt has been rated in one of the two highest rating
categories by S&P and Fitch.
"Eligible Investments" has the meaning assigned in Section 5.05(b).
"Eligible Servicer" means the Trustee or a Person qualified to act as
servicer of the Contracts under applicable Federal and State laws and
regulations, which is a Title I approved lender under FHA Regulations and which
services not less than an aggregate of $100,000,000 in outstanding principal
amount of FHA-insured home improvement contracts and promissory notes,
manufactured housing conditional sales contracts and installment loan agreements
and home equity loans.
"Eligible Substitute Contract" means, as to any Replaced Contract for
which such Eligible Substitute Contract is being substituted pursuant to Section
3.05(b), a Contract that (a) as of the date of its substitution, satisfies all
of the representations and warranties (which, except when expressly stated to be
as of origination, shall be deemed to be determined as of the date of its
substitution rather than as of the Cut-off Date or the Closing Date) in Section
3.02 and does not cause any of the representations and warranties in Section
3.03, after giving effect to such substitution, to be incorrect, (b) after
giving effect to the scheduled payment due in the month of such substitution,
has a Scheduled Principal Balance that is not greater than the Scheduled
Principal Balance of such Replaced Contract, (c) has a Contract Interest Rate
that is at least equal to the Contract Interest Rate of such Replaced Contract
and (d) has a remaining term to scheduled maturity that is not greater than the
remaining term to scheduled maturity of the Replaced Contract.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Errors and Omissions Protection Policy" means the employee errors and
omissions policy maintained by the Servicer or any similar replacement policy
covering errors and omissions by the Servicer's employees, and meeting the
requirements of Section 5.09, all as such policy relates to Contracts comprising
a portion of the corpus of the Trust.
"Event of Termination" has the meaning assigned in Section 7.01.
"FHA" means the Federal Housing Administration, or any successor
thereto.
"FHA Insurance" means the credit insurance provided by FHA pursuant to
Title I of the National Housing Act, as evidenced by the Company's Contract of
Insurance.
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"FHA-Insured Contracts" means those Contracts that have been or are
being reported to FHA as eligible for FHA Insurance, a list of which is attached
to this Agreement as Exhibit J.
"FHA Regulations" means the regulations promulgated by HUD relating to
Title I home improvement loans, currently found at 24 C.F.R. ss.201.
"Fidelity Bond" means the fidelity bond maintained by the Servicer or
any similar replacement bond, meeting the requirements of Section 5.09, as such
bond relates to Contracts comprising a portion of the corpus of the Trust.
"Final Payment Date" means the date specified in Section 12.04(b).
["Fitch" means Fitch Ratings, or any successor thereto; provided that,
if Fitch no longer has a rating outstanding on any Class of the Certificates,
then references herein to "Fitch" shall be deemed to refer to the NRSRO then
rating any Class of the Certificates (or, if more than one such NRSRO is then
rating any Class of the Certificates, to such NRSRO as may be designated by the
Servicer), and references herein to ratings by or requirements of Fitch shall be
deemed to have the equivalent meanings with respect to ratings by or
requirements of such NRSRO.]
"GNMA" means the Government National Mortgage Association, or any
successor thereto.
"Grantor Trust" means a trust which is classified as a grantor trust
under the provisions of Sections 671 through 679 of the Code and related
provisions and any temporary, proposed or final regulations promulgated
thereunder, as the foregoing may be in effect from time to time.
"Guaranty Amount" has the meaning assigned in Section 8.03(b).
"HUD" means the United States Department of Housing and Urban
Development, or any successor thereto.
"Independent" means, when used with respect to any specified Person,
_____________________ [counsel] or any Person who (i) is in fact independent of
the Company and the Servicer, (ii) does not have any direct financial interest
or any material indirect financial interest in the Company or the Servicer or in
an Affiliate of either, and (iii) is not connected with the Company or the
Servicer as an officer, employee, promoter, underwriter, trustee, partner,
director or person performing similar functions. Whenever it is provided herein
that any Independent Person's opinion or certificate shall be furnished to the
Trustee, such opinion or certificate shall state that the signatory has read
this definition and is Independent within the meaning set forth herein.
"[Limited Guaranty" means the limited guaranty of the Company provided
pursuant to Section 8.03.]
"Liquidated Contract" means with respect to any Due Period, either
(1) a Defaulted Contract as to which (a) the Servicer has
received from the Obligor, or a third party purchaser of the Contract,
all amounts which the Servicer
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reasonably and in good faith expects to recover from or on account of
such Contract, or (b) in the case of an FHA-Insured Contract, either
(i) FHA has paid the claim or (ii) the Servicer has determined in good
faith that FHA will not pay the claim, or
(2) a Contract (a) upon which all or a portion of the first
payment of interest due by the Obligor was added to principal, and (b)
on which the Obligor failed to pay the full amount of principal due on
the Contract, as computed by the Servicer;
provided, however, that any Contract which the Company is obligated to
repurchase pursuant to Section 3.05, and did so repurchase, shall be deemed not
to be a Liquidated Contract; and provided further, that with respect to Due
Periods beginning on or after September 1, 2016, a Liquidated Contract also
means any Contract as to which the Servicer has commenced foreclosure
proceedings, made a sale of the Contract to a third party for foreclosure or
enforcement, or, in the case of an FHA-Insured contract, submitted a claim to
FHA.
"List of Contracts" means the list identifying each Contract
constituting part of the corpus of the Trust, which list (a) identifies each
Contract and (b) sets forth as to each Contract (i) the Cut-off Date Principal
Balance, (ii) the amount of monthly payments due from the Obligor, (iii) the
Contract Interest Rate and (iv) the maturity date, and which is attached to this
Agreement as Exhibit H.
"Monthly Interest" means, as of any Payment Date, (a) one month's
interest (or, with respect to the first Payment Date, interest from and
including the Closing Date to but excluding _________, _____) at the
Pass-Through Rate on the Aggregate Certificate Principal Balance immediately
prior to such Payment Date, computed on the basis of a 360-day year of twelve
30-day months, plus (b) any Unpaid Interest Shortfall.
"Monthly Principal" means, as of any Payment Date, the amount
determined pursuant to Section 6.01(a).
"Monthly Report" has the meaning assigned in Section 6.01.
"Monthly Servicing Fee" means, as of any Payment Date, one-twelfth of
the product of.75% and the Pool Scheduled Principal Balance with respect to the
preceding Payment Date.
["Moody's" means Xxxxx'x Investors Service, Inc., or any successor
thereto; provided that, if Moody's no longer has a rating outstanding on any
Class of Certificates, then references herein to "Moody's" shall be deemed to
refer to the NRSRO then rating any Class of the Certificates (or, if more than
one such NRSRO is then rating any Class of the Certificates, to such NRSRO as
may be designated by the Originator or the Trustee), and references herein to
ratings by or requirements of Xxxxx'x shall be deemed to have the equivalent
meanings with respect to ratings by or requirements of such NRSRO.]
"Net Liquidation Loss" means, as to a Liquidated Contract, the
difference between (a) the Repurchase Price of such Contract, and (b) the Net
Liquidation Proceeds with respect to such Liquidated Contract, where such
difference is a positive number.
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"Net Liquidation Proceeds" means, as to a Liquidated Contract, the
proceeds received, or, for Contracts which became Liquidated Contracts pursuant
to the last proviso in the definition of "Liquidated Contract," the estimated
proceeds to be received, as of the last day of the Due Period in which such
Contract became a Liquidated Contract, from the Obligor, from a third party
purchaser of the Contract, under FHA insurance, under insurance other than FHA
Insurance, or otherwise, net of liquidation expenses.
"NRSRO" means any nationally recognized statistical rating
organization.
"Obligor" means the purchaser of the financed home improvements or
other person who owes payments under a Contract.
"Officer's Certificate" means a certificate signed by the Chairman of
the Board, President or any Vice President of the Company and delivered to the
Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may,
except as expressly provided herein, be salaried counsel for the Company or the
Servicer, as applicable, acceptable to the Trustee and the Company.
"Original Series _________ Certificate Principal Balance" means
$______________ which is the aggregate principal balance of the Certificates as
of the Closing Date.
"Pass-Through Rate" means _____% per annum.
"Paying Agent" has the meaning assigned in Section 8.01(c).
"Payment Date" means the fifteenth day of each calendar month during
the term of this Agreement, or if such day is not a Business Day, the next
succeeding Business Day, commencing __________, _____.
"Percentage Interest" means an undivided interest in the Trust and, as
to a particular Certificateholder, means the undivided interest in the Trust
owned by that Certificateholder, the amount of such interest to equal, in the
case of the Certificates, a fraction (which shall be expressed as a percentage
rounded to eight decimal places) the numerator of which is the denomination of
the Certificate and the denominator of which is the Original Series 1996-E
Certificate Principal Balance. The aggregate of all Percentage Interests for the
Certificates shall equal 100%.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust (including any beneficiary thereof),
unincorporated organization or government or any agency or political subdivision
thereof.
"Plan" has the meaning assigned in Section 9.02(b).
"Pool Factor" means, at any time, the percentage derived from a
fraction, the numerator of which is the Aggregate Certificate Principal Balance
at such time and the denominator of which is the Original Series _________
Certificate Principal Balance.
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"Pool Scheduled Principal Balance" means, as of any Payment Date, the
aggregate Scheduled Principal Balance of all Contracts that were outstanding
during the immediately preceding Due Period.
"Principal Prepayment" means a payment or other recovery of principal
on a Contract which is received in advance of its scheduled due date and applied
upon receipt (or, in the case of a partial prepayment, upon the next scheduled
payment date on such Contract) to reduce the outstanding principal amount due on
such Contract prior to the date or dates on which such principal amount is due.
"Rating Agencies" means [list rating agencies].
"Realized Losses" for any Payment Date means the aggregate Net
Liquidation Losses for all Contracts that became Liquidated Contracts during the
immediately preceding Due Period.
"Record Date" means, with respect to any Payment Date, the Business Day
immediately preceding such Payment Date.
"Replaced Contract" has the meaning assigned in Section 3.05(b).
"Repurchase Price" means, with respect to a Contract to be repurchased
pursuant to Section 3.05 or which becomes a Liquidated Contract, an amount equal
to (a) the remaining principal amount outstanding on such Contract (without
giving effect to any Advances paid by the Servicer or the Trustee, as
applicable, with respect to such Contract pursuant to Section 8.02), plus (b)
interest at the Pass-Through Rate on such Contract from the end of the Due
Period with respect to which the Obligor last made a payment (without giving
effect to any Advances paid by the Servicer or the Trustee, as applicable, with
respect to such Contract pursuant to Section 8.02) through the date of such
repurchase or liquidation.
"Responsible Officer" means, with respect to the Trustee, the chairman
and any vice chairman of the board of directors, the president, the chairman and
vice chairman of any executive committee of the board of directors, every vice
president, assistant vice president, the secretary, every assistant secretary,
cashier or any assistant cashier, controller or assistant controller, the
treasurer, every assistant treasurer, every trust officer, assistant trust
officer and every other officer or assistant officer of the Trustee customarily
performing functions similar to those performed by persons who at the time shall
be such officers, respectively, or to whom a corporate trust matter is referred
because of knowledge of, familiarity with, and authority to act with respect to
a particular matter.
["S&P" means Standard & Poor's, a division of The XxXxxx-Xxxx
Companies, Inc., or any successor thereto; provided that, if S&P no longer has a
rating outstanding on any Class of the Certificates, then references herein to
"S&P" shall be deemed to refer to the NRSRO then rating any Class of the
Certificates (or, if more than one such NRSRO is then rating any Class of the
Certificates, to such NRSRO as may be designated by the Servicer), and
references herein to ratings by or requirements of S&P shall be deemed to have
the equivalent meanings with respect to ratings by or requirements of such
NRSRO.]
10
"Scheduled Principal Balance" means, as to any Contract and any Payment
Date or the Cut-off Date, the principal balance of such Contract as of the due
date in the Due Period immediately preceding such Payment Date or as of the due
date immediately preceding the Cut-off Date (or as of the Cut-off Date if the
Cut-off Date is the date of origination of such Contract), as the case may be,
as specified in the amortization schedule at the time relating thereto (before
any adjustment to such amortization schedule by reason of any bankruptcy of an
Obligor or similar proceeding or any moratorium or similar waiver or grace
period) after giving effect to any previous partial Principal Prepayments and to
the payment of principal due on such due date and irrespective of any
delinquency in payment by, or extension granted to, the related Obligor.
"Service Transfer" has the meaning assigned in Section 7.02.
"Servicer" means the Company until any Service Transfer hereunder and
thereafter means the new servicer appointed pursuant to Article VII.
"Servicing Officer" means any officer of the Servicer involved in, or
responsible for, the administration and servicing of Contracts whose name
appears on a list of servicing officers appearing in an Officer's Certificate
furnished to the Trustee by the Company, as the same may be amended from time to
time.
"Shortfall" has the meaning assigned in Section 8.03.
"Trust" means the trust created by this Agreement, the corpus of which
consists of (i) all the rights, benefits and obligations arising from and in
connection with the Contracts, including all interest and principal received on
or with respect to the Contracts (other than principal and interest due on the
Contracts before the Cut-off Date), (ii) all rights under FHA Insurance in
respect of each FHA-Insured Contract, (iii) all rights under the Errors and
Omissions Protection Policy and the Fidelity Bond as such policy and bond relate
to the Contracts, (iv) as to FHA-Insured Contracts, any rights under any flood
insurance policy as such insurance relates to the Contracts, (v) all documents
contained in the Contract Files, (vi) all proceeds and products of the
foregoing, [(vii) the Limited Guaranty] and (viii) the remittances, deposits and
payments made into the Certificate Account and amounts in the Certificate
Account (including all proceeds of investments thereof).
"Trustee Advance" has the meaning assigned in Section 11.16.
"Unpaid Interest Shortfall" means, with respect to any Payment Date,
the amount, if any, by which the Monthly Interest for the immediately preceding
Payment Date exceeded the amount distributed to Certificateholders on such
preceding Payment Date pursuant to Section 8.04(b), plus one month's interest
thereon (to the extent payment thereof is legally permissible) at the
Pass-Through Rate, computed on the basis of a 360-day year of twelve 30-day
months.
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Article II
ESTABLISHMENT OF TRUST; TRANSFER OF CONTRACTS
SECTION 2.01 Closing.
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a. There is hereby created, by the Company as settlor, a separate trust
which shall be known as Home Improvement Loan Trust Series ______. The Trust
shall be administered pursuant to the provisions of this Agreement for the
benefit of the Certificateholders.
b. The Company hereby transfers, assigns, sets over and otherwise
conveys to the Trustee on behalf of the Trust, by execution of an assignment
substantially in the form of Exhibit B hereto, (i) all the right, title and
interest of the Company in and to the Contracts, including all interest and
principal received by the Company on or with respect to the Contracts (other
than principal and interest due on the Contracts before the Cut-off Date), (ii)
all rights the Company may have against the originating contractor or lender
with respect to Contracts originated by a contractor or lender other than the
Company, (iii) all rights under FHA Insurance as such insurance relates to the
FHA-Insured Contracts, (iv) as to FHA-Insured Contracts all rights under any
flood insurance policy as such insurance relates to the Contracts, (v) all
rights under the Errors and Omissions Protection Policy and the Fidelity Bond as
such policy and bond relate to the Contracts, (vi) all documents contained in
the Contract Files, and (vii) all proceeds and products of the foregoing.
Although the Company and the Trustee agree that such transfer is intended to be
a sale, rather than a pledge, of all of the Company's right, title and interest
to such items, in the event such transfer is deemed to be a pledge to secure
indebtedness, the Company shall be deemed to have granted to the Trustee a
perfected first priority security interest in such items.
c. Although the parties intend that the conveyance of the Company's
right, title and interest in and to the Contracts pursuant to this Agreement
shall constitute a purchase and sale and not a loan, if such conveyances are
deemed to be a loan, the parties intend that the rights and obligations of the
parties to such loan shall be established pursuant to the terms of this
Agreement. If the conveyance is deemed to be a loan, the parties further intend
and agree that the Company shall be deemed to have granted to the Trustee, and
the Company does hereby grant to the Trustee, a perfected first-priority
security interest in the items designated in Section 2.01(b)(i) through
2.01(b)(vi) above, and that this Agreement shall constitute a security agreement
under applicable law. If the trust created by this Agreement terminates prior to
the satisfaction of the claims of any Person under any Certificates, the
security interest created hereby shall continue in full force and effect and the
Trustee shall be deemed to be the collateral agent for the benefit of such
Person.
SECTION 2.02 Conditions to the Closing.
-------------------------
On or before the Closing Date, the Company shall deliver or cause to be
delivered the following documents to the Trustee:
a. The List of Contracts, certified by the Chairman of the
Board, President or any Vice President of the Company.
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b. A certificate of an officer of the Company substantially in
the form of Exhibit C hereto.
c. An Opinion of Counsel for the Company substantially in the
form of Exhibit D hereto.
d. A letter from KPMG Peat Marwick, or another nationally
recognized accounting firm, stating that such firm has reviewed the
Contracts on a statistical sampling basis and, based on such sampling,
concluding that the Contracts conform in all material respects to the
List of Contracts, to a confidence level of 97.5%, with an error rate
not in excess of 1.8%, specifying those Contracts which do not so
conform.
e. Copies of resolutions of the board of directors of the
Company or of the executive committee of the board of directors of the
Company approving the execution, delivery and performance of this
Agreement and the transactions contemplated hereunder, certified in
each case by the secretary or an assistant secretary of the Company.
f. Officially certified recent evidence of due incorporation
and good standing of the Company under the laws of the State of
Delaware.
g. An Officer's Certificate listing the Servicer's Servicing
Officers.
h. Evidence of continued coverage of the Company under the
Errors and Omissions Protection Policy.
i. Evidence of deposit in the Certificate Account of all funds
received with respect to the Contracts from the Cut-off Date to the
Closing Date, other than amounts due before the Cut-off Date, together
with an Officer's Certificate to the effect that such amount is
correct.
j. An Officer's Certificate confirming that the Company's
internal audit department has reviewed the original or a copy of each
Contract and each Contract File, that each Contract and Contract File
conforms in all material respects with the List of Contracts and that
each Contract File is complete.
SECTION 2.03 Acceptance by Trustee.
---------------------
a. On the Closing Date, if the conditions set forth in Section 2.02
have been satisfied, the Trustee shall deliver a certificate to the Company
substantially in the form of Exhibit E hereto acknowledging conveyance of the
Contracts and Contract Files to the Trustee and declaring that the Trustee,
directly or through a Custodian, will hold all Contracts that have been
delivered in trust, upon the trusts herein set forth, for the use and benefit of
all Certificateholders, and shall issue, to or upon the order of the Company,
the Certificates representing, in the aggregate, ownership of the entire
beneficial interest in the Trust.
b. The Trustee or Custodian shall review each Contract File, as
described in Exhibit E, within 60 days of the Closing Date or the receipt by it
of the Contract File, whichever
13
is later. If, in its review of the Contract Files as described in Exhibit E, the
Trustee or a Custodian discovers a breach of the representations or warranties
set forth in Sections 3.02, 3.03 or 3.04 of this Agreement, or in the Officer's
Certificate delivered pursuant to Section 2.02(j) of this Agreement, the Trustee
or Custodian, as the case may be, shall notify the Company and the Company shall
cure such breach or repurchase such Contract pursuant to Section 3.05.
SECTION 2.04 Grantor Trust Provisions.
------------------------
The Company, as Servicer, the Trustee and the Certificateholders, by
acceptance of the Certificates, each agree that the Trust is intended to be
treated as a Grantor Trust for federal income tax purposes. In furtherance of
the foregoing, the Trustee (at the direction of the Company or the Servicer),
the Company and the Servicer shall take, or refrain from taking, all such action
as is necessary to maintain the status of the Trust as a Grantor Trust. After
the Closing Date, neither the Trustee, the Company nor any Servicer shall (i)
accept any contribution of assets to the Trust other than advances pursuant to
Section 8.02, (ii) dispose of any portion of the Trust other than as provided in
Sections 3.05 and 8.06, or (iii) engage in any activity which would, directly or
indirectly, adversely affect the status of the Trust as a Grantor Trust.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Company makes the following representations and warranties,
effective as of the Closing Date, on which the Trustee will rely in accepting
the Contracts in trust and issuing the Certificates on behalf of the Trust. The
repurchase and indemnification obligations of the Company set forth in Section
3.05 constitute the sole remedies available to the Trust or the
Certificateholders for a breach of a representation or warranty of the Company
set forth in Section 3.02, 3.03 or 3.04 of this Agreement or in the Officer's
Certificate delivered pursuant to Section 2.02(j) of this Agreement.
SECTION 3.01 Representations and Warranties Regarding the Company.
----------------------------------------------------
The Company represents and warrants to the Certificateholders that:
a. Organization and Good Standing. The Company is a
corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization and has the corporate
power to own its assets and to transact the business in which it is
currently engaged. The Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in
which the character of the business transacted by it or properties
owned or leased by it requires such qualification and in which the
failure so to qualify would have a material adverse effect on the
business, properties, assets, or condition (financial or other) of the
Company.
b. Authorization; Binding Obligations. The Company has the
power and authority to make, execute, deliver and perform this
Agreement and all of the transactions contemplated under this
Agreement, and to create the Trust and cause it to make, execute,
deliver and perform its obligations under this Agreement and has taken
all necessary corporate action to authorize the execution, delivery and
performance of this Agreement
14
and to cause the Trust to be created. When executed and delivered, this
Agreement will constitute the legal, valid and binding obligation of
the Company enforceable in accordance with its terms, except as
enforcement of such terms may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally
and by the availability of equitable remedies.
c. No Consent Required. The Company is not required to obtain
the consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any
governmental authority, bureau or agency in connection with the
execution, delivery, performance, validity or enforceability of this
Agreement.
d. No Violations. The execution, delivery and performance of
this Agreement by the Company will not violate any provision of any
existing law or regulation or any order or decree of any court or the
Certificate of Incorporation or Bylaws of the Company, or constitute a
material breach of any mortgage, indenture, contract or other agreement
to which the Company is a party or by which the Company may be bound.
e. Litigation. No litigation or administrative proceeding of
or before any court, tribunal or governmental body is currently
pending, or to the knowledge of the Company threatened, against the
Company or any of its properties or with respect to this Agreement or
the Certificates which, if adversely determined, would in the opinion
of the Company have a material adverse effect on the transactions
contemplated by this Agreement.
f. Licensing. The Company is duly licensed in each state in
which Contracts were originated to the extent the Company is required
to be licensed by applicable law in connection with the origination and
servicing of the Contracts.
SECTION 3.02 Representations and Warranties Regarding Each Contract.
------------------------------------------------------
The Company represents and warrants to the Certificateholders as to
each Contract:
a. List of Contracts. The information set forth in the List of
Contracts is true and correct as of its date.
b. Payments. As of the Cut-off Date, the most recent scheduled
payment due under the Contract was made by or on behalf of the Obligor
or was not delinquent for more than 59 days.
c. Costs Paid and No Waivers. The terms of the Contract have
not been waived, altered or modified in any respect, except by
instruments or documents identified in the Contract File. All costs,
fees and expenses incurred in making and closing the Contract have been
paid.
d. Binding Obligation. The Contract is the legal, valid and
binding obligation of the Obligor thereunder and is enforceable in
accordance with its terms,
15
except as such enforceability may be limited by laws affecting the
enforcement of creditors' rights generally.
e. No Defenses. The Contract is not subject to any right of
rescission, setoff, counterclaim or defense, including the defense of
usury, and the operation of any of the terms of the Contract or the
exercise of any right thereunder will not render the Contract
unenforceable in whole or in part or subject to any right of
rescission, setoff, counterclaim or defense, including the defense of
usury, and no such right of rescission, setoff, counterclaim or defense
has been asserted with respect thereto.
f. Underwriting Guidelines. Each Contract was originated or
purchased in accordance with the Company's then-current underwriting
guidelines.
g. FHA Insurance. If the Contract is an FHA-Insured Contract,
such Contract was originated in compliance with FHA Regulations and is
insured, without set-off, surcharge or defense, by FHA Insurance.
Following the assignment of such FHA-Insured Contract to the Trustee,
the Trustee on behalf of the Trust will be entitled to the full
benefits of the FHA Insurance.
h. Lawful Assignment. The Contract was not originated in and
is not subject to the laws of any jurisdiction whose laws would make
the transfer of the Contract under this Agreement or pursuant to
transfers of Certificates unlawful or render the Contract
unenforceable. The Company has duly executed a valid blanket assignment
of the Contracts transferred to the Trust, and has transferred all its
right, title and interest in such Contracts, including all rights the
Company may have against the originating contractor-seller with respect
to Contracts originated by a contractor-seller rather than the Company,
to the Trust. The blanket assignment, any and all documents executed by
the Company pursuant to Section 2.01(b) hereof, and this Agreement each
constitute the legal, valid and binding obligation of the Company
enforceable in accordance with their respective terms.
i. Compliance with Law. At the date of origination of the
Contract, all requirements of any federal and state laws, rules and
regulations applicable to the Contract, including, without limitation,
usury and truth in lending laws and (if such Contract is an FHA-Insured
Contract) the FHA Regulations have been complied with, and the Company
shall for at least the period of this Agreement, maintain in its
possession, available for the Trustee's inspection, and shall deliver
to the Trustee upon demand, evidence of compliance with all such
requirements.
j. Contract in Force. The Contract has not been satisfied or
subordinated in whole or in part or rescinded.
k. Capacity of Parties. The signature(s) of the Obligor(s) on
the Contract are genuine and all parties to the Contract had full legal
capacity to execute the Contract.
l. Good Title. The Company is the sole owner of the Contract
and, if such Contract is an FHA-Insured Contract, because the Trustee
is a lender approved by HUD to originate and purchase Title I loans
under a valid Title I contract of insurance, has the
16
authority to sell, transfer and assign such Contract to the Trust under
the terms of this Agreement. There has been no assignment, sale or
hypothecation of the Contract by the Company except the usual past
hypothecation of the Contract in connection with the Company's normal
banking transactions in the conduct of its business, which
hypothecation terminates upon sale of the Contract to the Trust. The
Company has good and marketable title to the Contract, free and clear
of any encumbrance, equity, loan, pledge, charge, claim, lien or
encumbrance of any type and has full right to transfer the Contract to
the Trust.
m. No Defaults. As of the Cut-off Date, there was no default,
breach, violation or event permitting acceleration existing under the
Contract and no event which, with notice and the expiration of any
grace or cure period, would constitute such a default, breach,
violation or event permitting acceleration under such Contract (except
payment delinquencies permitted by clause (b) above). The Company has
not waived any such default, breach, violation or event permitting
acceleration except payment delinquencies permitted by clause (b)
above.
n. Equal Installments. The Contract has a fixed Contract
Interest Rate and provides for level monthly payments which fully
amortize the loan over its term.
o. One Original. There is only one original executed Contract,
which Contract has been delivered to the Trustee or its Custodian on or
before the Closing Date.
p. Genuine Documents. All documents submitted are genuine, and
all other representations as to each Contract, including the List of
Contracts delivered to the Trustee, are true and correct. Any copies of
documents provided by the Company are accurate and complete (except
that, with respect to each Contract that was originated by a
contractor-seller rather than the Company, the Company makes such
representation and warranty only to the best of the Company's
knowledge).
q. Origination. The Contract was originated by a home
improvement contractor in the ordinary course of such contractor's
business or was originated by the Company directly.
r. Good Repair. The property described in the Contract is, to
the best of the Company's knowledge, free of damage and in good repair.
SECTION 3.03 Representations and Warranties Regarding the Contracts in
---------------------------------------------------------
the Aggregate.
-------------
The Company represents and warrants to the Certificateholders that:
a. Amounts. The Cut-off Date Pool Principal Balance equals the
Original Series 1996-E Certificate Principal Balance, and each Contract
has a Contract Interest Rate greater than the Pass-Through Rate.
b. Characteristics. The Contracts have the following
characteristics: (i) all Contracts are unsecured contracts; (ii) no
Contract has a remaining maturity of more than
17
240 months; and (iii) the final scheduled payment date on the Contract
with the latest maturity is in September, 2016. No Contract was
originated before ___________, ____. No Contract has a Contract
Interest Rate less than 10.00%.
c. Geographic Concentrations. By Cut-off Date Principal
Balance, ______% of the Contracts relate to improvements to property
located in California. No other state represents more than 10% of the
Cut-off Date Pool Principal Balance. No more than 5% of the Contracts
by Cut-off Date Principal Balance relate to improvements to property
located in an area with the same five-digit zip code.
d. Marking Records. By the Closing Date, the Company has
caused the portions of the Electronic Ledger relating to the Contracts
to be clearly and unambiguously marked to indicate that such Contracts
constitute part of the Trust and are owned by the Trust in accordance
with the terms of the Trust created hereunder.
e. No Adverse Selection. No adverse selection procedures have
been employed in selecting the Contracts.
f. Contractor Concentration. No more than ____% of the
Contracts, by Cut-off Date Principal Balance, were originated by any
one contractor.
SECTION 3.04 Representations and Warranties Regarding the Contract
-----------------------------------------------------
Files.
-----
The Company represents and warrants to the Certificateholders that:
a. Possession. Immediately prior to the Closing Date, the
Company will have possession of each original Contract and the related
Contract File, and there are and there will be no custodial agreements
or servicing contracts in effect materially and adversely affecting the
rights of the Company to make, or cause to be made, any delivery
required hereunder.
b. Bulk Transfer Laws. The transfer, assignment and conveyance
of the Contracts and the Contract Files by the Company pursuant to this
Agreement is not subject to the bulk transfer or any similar statutory
provisions in effect in any applicable jurisdiction.
SECTION 3.05 Repurchases or Substitutions of Contracts for Breach of
-------------------------------------------------------
Representations and Warranties.
------------------------------
a. The Company shall repurchase a Contract, at its Repurchase Price,
not later than 90 days after the day on which the Company, the Servicer or the
Trustee first discovers or should have discovered a breach of a representation
or warranty of the Company set forth in Sections 3.02, 3.03 or 3.04 of this
Agreement or in the Officer's Certificate delivered pursuant to Section 2.02(j)
of this Agreement that materially adversely affects the Trust's or the
Certificateholders' interest in such Contract and which breach has not been
cured; provided, however, that (i) in the event that a party other than the
Company first becomes aware of such breach, such discovering party shall notify
the Company in writing within 5 Business Days of the date of such discovery and
(ii) with respect to any Contract incorrectly described on the List of
18
Contracts with respect to unpaid principal balance, which the Company would
otherwise be required to repurchase pursuant to this Section, the Company may,
in lieu of repurchasing such Contract, deposit in the Certificate Account within
90 days from the date of such discovery cash in an amount sufficient to cure
such deficiency or discrepancy. Any such cash so deposited shall be distributed
to Certificateholders on the immediately following Payment Date as a collection
of principal or interest on such Contract, according to the nature of the
deficiency or discrepancy. Notwithstanding any other provision of this
Agreement, the obligation of the Company under this Section shall not terminate
upon a Service Transfer pursuant to Article VII.
b. On or prior to the date that is 120 days after the Closing Date, the
Company, at its election, may substitute an Eligible Substitute Contract for a
Contract that it is obligated to repurchase pursuant to Section 3.05(a) (such
Contract being referred to as the "Replaced Contract") upon satisfaction of the
following conditions:
(i) the Company shall have conveyed to the Trustee the
Contract to be substituted for the Replaced Contract and the Contract
File related to such Contract and the Company shall have marked the
Electronic Ledger indicating that such Contract constitutes part of the
Trust;
(ii) the Contract to be substituted for the Replaced Contract
is an Eligible Substitute Contract and the Company delivers an
Officers' Certificate, substantially in the form of Exhibit G-2 hereto,
to the Trustee certifying that such Contract is an Eligible Substitute
Contract;
(iii) the Company shall have delivered to the Trustee evidence
of filing of a UCC-1 financing statement executed by the Company as
debtor, naming the Trustee as secured party and filed in Minnesota,
listing such Contract as collateral;
(iv) if the Scheduled Principal Balance of such Replaced
Contract is greater than the Scheduled Principal Balance of the
Contract being substituted, the Company shall have deposited in the
Certificate Account the amount of such excess and shall have included
in the Officers' Certificate required by clause (ii) above a
certification that such deposit has been made.
Upon satisfaction of such conditions, the Trustee shall add such Contract to,
and delete such Replaced Contract from, the List of Contracts. Such substitution
shall be effected prior to the first Determination Date that occurs more than 90
days after the Company becomes aware, or should have become aware, or receives
written notice from the Trustee, of the breach referred to in Section 3.05(a).
Promptly after any substitution of a Contract, the Company shall give written
notice of such substitution to [rating agencies].
c. If the Company is required to repurchase a Contract under Section
3.05(a) or has elected to substitute an Eligible Substitute Contract for a
Contract under Section 3.05(b), and if the reason for such repurchase or
substitution is that the Company has failed to deliver to the Trustee the
Contract File for the Contract (except in the case of a failure to deliver
evidence of the lien on the related improved property and evidence of due
recording of such mortgage, deed of trust or security deed, if available), then
notwithstanding the time periods set out in Sections 3.05(a) and 3.05(b), the
Company shall either (i) repurchase such Contract, at its
19
respective Repurchase Price within 30 days of the Closing Date, or (ii)
substitute an Eligible Substitute Contract for the Contract within 90 days of
the Closing Date.
d. The Company shall defend and indemnify the Trustee and the
Certificateholders against all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel, which may be
asserted against or incurred by any of them as a result of any third-party
action arising out of any breach of any such representation and warranty.
ARTICLE IV
PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS
SECTION 4.01 Transfer of Contracts.
---------------------
a. On or prior to the Closing Date, the Company shall deliver the
Contract Files to the Trustee. The Trustee shall maintain the Contract Files at
its office or with a duly appointed Custodian. The Trustee may release a
Contract File to the Servicer pursuant to Section 5.07. The Company has filed a
form UCC-1 financing statement regarding the sale of the Contracts to the
Trustee, and shall file continuation statements in respect of such UCC-1
financing statement as if such financing statement were necessary to perfect
such sale. The Company shall take any other actions necessary to maintain the
perfection of the sale of the Contracts to the Trustee.
b. If at any time during the term of this Agreement the Company does
not have a long-term senior debt rating of BBB- or higher from [rating
agencies], the Company shall promptly execute and deliver to the Trustee (if it
has not previously done so) endorsements of each Contract.
SECTION 4.02 Costs and Expenses.
------------------
The Servicer agrees to pay all reasonable costs and disbursements in
connection with the vesting (including the perfection and the maintenance of
perfection, as against all third parties) in the Trust of all right, title and
interest in and to the Contracts.
ARTICLE V
SERVICING OF CONTRACTS
SECTION 5.01 Responsibility for Contract Administration.
------------------------------------------
The Servicer will have the sole obligation to manage, administer,
service and make collections on the Contracts and perform or cause to be
performed all contractual and customary undertakings of the holder of the
Contracts to the Obligor. The Company, if it is the Servicer, may delegate some
or all of its servicing duties to a wholly owned subsidiary of the Company, for
so long as such subsidiary remains, directly or indirectly, a wholly owned
subsidiary of the Company. Notwithstanding any such delegation the Company shall
retain all of the rights and obligations of the Servicer hereunder. The Trustee,
at the request of a Servicing Officer, shall furnish the Servicer with any
powers of attorney or other documents necessary or appropriate to enable the
Servicer to carry out its servicing and administrative duties hereunder. The
Company
20
is hereby appointed the Servicer until such time as any Service Transfer shall
be effected under Article VII.
SECTION 5.02 Standard of Care.
----------------
In managing, administering, servicing and making collections on the
Contracts pursuant to this Agreement, the Servicer will exercise that degree of
skill and care required by FHA (in the case of FHA-Insured Contracts) consistent
with the highest degree of skill and care that the Servicer exercises with
respect to similar contracts (including manufactured housing contracts) serviced
by the Servicer; provided, however, that such degree of skill and care shall be
at least as favorable as the degree of skill and care generally applied by
prudent servicers of home improvement contracts and promissory notes for prudent
institutional investors.
SECTION 5.03 Records.
-------
The Servicer shall, during the period it is servicer hereunder,
maintain such books of account and other records as will enable the Trustee to
determine the status of each Contract.
SECTION 5.04 Inspection.
----------
a. At all times during the term hereof, the Servicer shall afford the
Trustee and its authorized agents reasonable access during normal business hours
to the Servicer's records relating to the Contracts, which have not previously
been provided to the Trust, and will cause its personnel to assist in any
examination of such records by the Trustee. The examination referred to in this
Section will be conducted in a manner which does not unreasonably interfere with
the Servicer's normal operations or customer or employee relations. Without
otherwise limiting the scope of the examination the Trustee may make, the
Trustee may, using generally accepted audit procedures, verify the status of
each Contract and review the Electronic Ledger and records relating thereto for
conformity to Monthly Reports prepared pursuant to Article VI and compliance
with the standards represented to exist as to each Contract in this Agreement.
b. At all times during the term hereof, the Servicer shall keep
available a copy of the List of Contracts at its principal executive office for
inspection by Certificateholders.
c. A Certificateholder holding Certificates representing in the
aggregate at least 5% of the Percentage Interest in the Trust shall have the
rights of inspection afforded to the Trustee pursuant to this Section 5.04.
SECTION 5.05 Certificate Account.
-------------------
a. On or before the Closing Date, the Company shall establish the
Certificate Account on behalf of the Trust, which shall be an Eligible Account.
The Servicer shall pay into the Certificate Account as promptly as practicable
(not later than the next Business Day) following receipt thereof, all amounts
received with respect to the Contracts, including all proceeds of FHA Insurance
claims received by the Servicer, other than extension fees and assumption fees,
which fees shall be retained by the Servicer as compensation for servicing the
Contracts. The Trustee shall pay into the Certificate Account as promptly as
practicable all proceeds of FHA Insurance claims with respect to FHA-Insured
contracts by the Trustee. All
21
amounts paid into the Certificate Account under this Agreement shall be held in
trust for the Trustee and the Certificateholders until payment of any such
amounts is authorized under this Agreement. Only the Trustee may withdraw funds
from the Certificate Account.
b. If the Servicer so directs, the institution maintaining the
Certificate Account shall, in the name of the Trustee in its capacity as such,
invest the amounts in the Certificate Account in Eligible Investments that
mature not later than one Business Day prior to the next succeeding Payment
Date. Any investment of funds in the Certificate Account shall be made in
Eligible Investments held by a financial institution in accordance with the
following requirements: (1) all Eligible Investments shall be held in an account
with such financial institution in the name of the Trustee, and the agreement
governing such account shall be governed by the laws of the State of Minnesota,
(2) with respect to securities held in such account, such securities shall be
(i) certificated securities (as such term is used in N.Y. U.C.C. ss.
8-313(d)(i), securities deemed to be certificated securities under applicable
regulations of the United States government, or uncertificated securities issued
by an issuer organized under the laws of the State of New York or the State of
Delaware, (ii) either (A) in the possession of such institution, (B) in the
possession of a clearing corporation (as such term is used in Minn. Stat. ss.
336.8-313(g)) in the State of New York, registered in the name of such clearing
corporation or its nominee, not endorsed for collection or surrender or any
other purpose not involving transfer, not containing any evidence of a right or
interest inconsistent with the Trustee's security interest therein, and held by
such clearing corporation in an account of such institution, (C) held in an
account of such institution with the Federal Reserve Bank of New York or the
Federal Reserve Bank of Minneapolis, or (D) in the case of uncertificated
securities, issued in the name of such institution, and (iii) identified, by
book entry or otherwise, as held for the account of, or pledged to, the Trustee
on the records of such institution, and such institution shall have sent the
Trustee a confirmation thereof, and (3) with respect to repurchase obligations
held in such account, such repurchase obligations shall be identified by such
institution, by book entry or otherwise, as held for the account of, or pledged
to, the Trustee on the records of such institution, and the related securities
shall be held in accordance with the requirements of clause (2) above. Once such
funds are invested, such Eligible Institution shall not change the investment of
such funds. All income and gain from such investments shall be added to the
Certificate Account and distributed on such Payment Date pursuant to Section
8.04(b). Losses, if any, realized on amounts in the Certificate Account invested
pursuant to this paragraph shall first be credited against undistributed
investment earnings on amounts in the Certificate Account invested pursuant to
this paragraph, and shall thereafter be deemed to reduce the amount on deposit
in the Certificate Account and otherwise available for distribution to
Certificateholders pursuant to Section 8.01. The Company, the Servicer and the
Trustee shall in no way be liable for losses on amounts invested in accordance
with the provisions hereof. Funds in the Certificate Account not so invested
must be insured to the extent permitted by law by the Federal Deposit Insurance
Corporation. "Eligible Investments" are any of the following:
(i) direct obligations of, and obligations fully guaranteed
by, the United States of America, the Federal Home Loan Mortgage
Corporation, the Federal National Mortgage Association, or any agency
or instrumentality of the United States of America the obligations of
which are backed by the full faith and credit of the United States of
America;
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(ii) (A) demand and time deposits in, certificates of deposit
of, bankers' acceptances issued by, or federal funds sold by any
depository institution or trust company (including the Trustee or any
Affiliate of the Trustee, acting in its commercial capacity)
incorporated under the laws of the United States of America or any
state thereof and subject to supervision and examination by federal
and/or state authorities, so long as, at the time of such investment or
contractual commitment providing for such investment, the commercial
paper or other short-term debt obligations of such depository
institution or trust company are rated at least A-1 by S&P and F-1 by
Fitch and (B) any other demand or time deposit or certificate of
deposit which is fully insured by the Federal Deposit Insurance
Corporation;
(iii) shares of an investment company registered under the
Investment Company Act of 1940, whose shares are registered under the
Securities Act of 1933 and are rated AAA by S&P and Fitch, and whose
only investments are in securities described in clauses (i) and (ii)
above;
(iv) repurchase obligations with respect to (A) any security
described in clause (i) above or (B) any other security issued or
guaranteed by an agency or instrumentality of the United States of
America, in either case entered into with a depository institution or
trust company (acting as principal) described in clause (ii)(A) above;
(v) securities bearing interest or sold at a discount issued
by any corporation incorporated under the laws of the United States of
America or any State thereof which have a credit rating of at least AA
from both S&P and Fitch at the time of such investment; provided,
however, that securities issued by any particular corporation will not
be Eligible Investments to the extent that investment therein will
cause the then outstanding principal amount of securities issued by
such corporation and held as part of the corpus of the Trust to exceed
10% of amounts held in the Certificate Account; and
(vi) commercial paper having a rating of at least A-1 from S&P
and F-1 from Fitch at the time of such investment or pledge as
security.
The Trustee may trade with itself or an Affiliate in the purchase or
sale of such Eligible Investments.
c. If at any time the Trustee receives notice (from [rating agencies],
the Servicer or otherwise) that the Certificate Account has ceased to be an
Eligible Account, the Trustee shall, as soon as practicable but in no event
later than five Business Days of the Trustee's receipt of such notice, transfer
the Certificate Account and all funds and Eligible Investments therein to an
Eligible Account. Following any such transfer, the Trustee shall notify [rating
agencies] and the Servicer of the location of the Certificate Account.
SECTION 5.06 Enforcement.
-----------
a. The Servicer shall, consistent with customary servicing procedures,
act with respect to the Contracts in such manner as will maximize the receipt of
principal and interest on such Contracts and liquidation proceeds with respect
to Liquidated Contracts. The Company
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shall pay all FHA Insurance premiums required by FHA Regulations in respect of
FHA-Insured Contracts; if the Company is no longer the Servicer and fails to pay
such FHA Insurance premiums, the successor Servicer shall pay such premiums and
shall be entitled to reimbursement therefor in accordance with Section 8.04. The
Servicer shall comply with FHA Regulations in servicing FHA-Insured Contracts so
that the related FHA Insurance remains in full force and effect, except for
good-faith disputes relating to FHA Regulations or such FHA Insurance.
b. In accordance with the standard of care specified in Paragraph 5.02,
the Servicer may, in its own name, if possible, or as agent for the Trust, take
such steps that in the Servicer's reasonable judgment will maximize liquidation
proceeds with respect to the Contract, including, for example, the sale of the
Contract to a third party for enforcement or the submission of a claim to FHA
(with respect to an FHA-Insured Contract). The Servicer shall also deposit in
the Certificate Account any Net Liquidation Proceeds received in connection with
any Contract which became a Liquidated Contract in a prior Due Period.
c. The Servicer may xxx to enforce or collect upon Contracts, in its
own name, if possible, or as agent for the Trust. If the Servicer elects to
commence a legal proceeding to enforce a Contract, the act of commencement shall
be deemed to be an automatic assignment of the Contract to the Servicer for
purposes of collection only. If, however, in any enforcement suit or legal
proceeding it is held that the Servicer may not enforce a Contract on the
grounds that it is not a real party in interest or a holder entitled to enforce
the Contract, the Trustee on behalf of the Trust shall, at the Servicer's
expense, take such steps as the Servicer deems necessary to enforce the
Contract, including bringing suit in its name or the names of the
Certificateholders.
d. The Servicer may grant to the Obligor on any Contract any rebate,
refund or adjustment out of the Certificate Account that the Servicer in good
faith believes is required because of prepayment in full of the Contract. The
Servicer will not permit any rescission or cancellation of any Contract.
e. If, following the termination of the Trust pursuant to Section
12.04, HUD demands reimbursement of an FHA Insurance claim paid on an
FHA-Insured Contract prior to the termination of the Trust, the Servicer agrees
that it will not seek to recover any such amount from the Trustee or the
Certificateholders.
f. Any provision of this Agreement to the contrary notwithstanding, the
Servicer shall not agree to the modification or waiver of any provision of a
Contract, if such modification or waiver would be treated as a taxable exchange
under Section 1001 of the Code or any proposed, temporary or final Treasury
Regulations promulgated thereunder, unless such contract is in default or
default is imminent.
SECTION 5.07 Trustee to Cooperate.
--------------------
a. Upon payment in full on any Contract, the Servicer will notify the
Trustee and the Company (if the Company is not the Servicer) on the next
succeeding Payment Date by certification of a Servicing Officer (which
certification shall include a statement to the effect that all amounts received
in connection with such payments which are required to be deposited in the
24
Certificate Account pursuant to Section 5.05 have been so deposited) and shall
request delivery of the Contract and Contract File to the Servicer. Upon receipt
of such delivery and request, the Trustee shall promptly release or cause to be
released such Contract and Contract File to the Servicer. Upon receipt of such
Contract and Contract File, each of the Company (if different from the Servicer)
and the Servicer is authorized to execute an instrument in satisfaction of such
Contract and to do such other acts and execute such other documents as the
Servicer deems necessary to discharge the Obligor thereunder. The Servicer shall
determine when a Contract has been paid in full; provided that, to the extent
that insufficient payments are received on a Contract credited by the Servicer
as prepaid or paid in full and satisfied, the shortfall shall be paid by the
Servicer out of its own funds, without any right of reimbursement therefor
(except from additional amounts recovered from the related Obligor or otherwise
in respect of such Contract), and deposited in the Certificate Account.
b. If the Servicer elects to submit a claim to FHA under the FHA
Insurance in respect of an FHA-Insured Contract and payment is received from
FHA, the Servicer shall notify the Trustee and the Company (if the Company is
not the Servicer) on the next succeeding Payment Date by certification of a
Servicing Officer (which certification shall include a statement to the effect
that all amounts received in connection with such payments which are required to
be deposited in the Certificate Account pursuant to Section 5.05 have been so
deposited) and shall request delivery of the Contract and Contract File to the
Servicer. Upon receipt of such delivery and request, the Trustee shall promptly
release or cause to be released such Contract and Contract File to the Servicer.
c. From time to time as appropriate for servicing and making a claim
for FHA Insurance coverage in connection with an FHA-Insured Contract, the
Trustee shall, upon written request of a Servicing Officer and delivery to the
Trustee of a receipt signed by such Servicing Officer, cause the original
Contract and the related Contract File to be released to the Servicer and shall
execute such documents as the Servicer shall deem necessary to the prosecution
of any such proceedings. Upon request of a Servicing Officer, the Trustee shall
perform such other acts as reasonably requested by the Servicer and otherwise
cooperate with the Servicer in enforcement of the Certificateholders' rights and
remedies with respect to Contracts.
d. The Servicer's receipt of a Contract and/or Contract File shall
obligate the Servicer to return the original Contract and the related Contract
File to the Trustee when its need by the Servicer has ceased unless the Contract
shall be liquidated or repurchased as described in Section 3.05 or 8.06.
SECTION 5.08 Costs and Expenses.
------------------
Except as provided in Section 8.04(b) for the reimbursement of
Advances, all costs and expenses incurred by the Servicer in carrying out its
duties hereunder (including payment of FHA Insurance premiums, the Trustee's
fees pursuant to Section 11.06, fees and expenses of accountants and payments of
all fees and expenses incurred in connection with the enforcement of Contracts
and all other fees and expenses not expressly stated hereunder to be for the
account of the Trust) shall be paid by the Servicer and the Servicer shall not
be entitled to reimbursement hereunder, except that the Servicer shall be
reimbursed out of the liquidation proceeds of a Liquidated Contract (including
FHA Insurance proceeds) for customary out-of-pocket
25
liquidation expenses incurred by it. The Servicer shall not incur such
liquidation expenses unless it determines in its good faith business judgment
that incurring such expenses will increase the Net Liquidation Proceeds on the
related Contract. The Servicer's out-of-pocket liquidation expenses in
connection with the submission of a claim to FHA currently do not exceed $100
per Contract.
SECTION 5.09 Maintenance of Insurance.
------------------------
The Servicer shall at all times keep in force a policy or policies of
insurance covering errors and omissions for failure to maintain insurance as
required by this Agreement, and a fidelity bond. Such policy or policies and
such fidelity bond shall be in such form and amount as is generally customary
among persons who service a portfolio of home improvement loans having an
aggregate principal amount of $10,000,000 or more, and which are generally
regarded as servicers acceptable to institutional investors. The Servicer shall
cause to be maintained with respect to any real property related to an
FHA-Insured Contract such hazard insurance and flood insurance as may be
required by FHA Regulations, it being understood at the Closing Date that
neither hazard nor flood insurance is required to be maintained with respect to
the Contracts under the FHA Regulations.
SECTION 5.10 Merger or Consolidation of Servicer.
-----------------------------------
Any Person into which the Servicer may be merged or converted or with
which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which the Servicer shall be a party shall be the
successor of the Servicer hereunder, provided such Person shall be an Eligible
Servicer, without the execution or filing of any paper or any further act on the
part of any of the parties hereto, anything herein to the contrary
notwithstanding. The Servicer shall promptly notify [rating agencies] in the
event it is a party to any merger, conversion or consolidation.
ARTICLE VI
REPORTS AND TAX MATTERS
SECTION 6.01 Monthly Reports.
---------------
No later than one Business Day following each Determination Date, the
Servicer shall deliver to the Trustee, [rating agencies] a Monthly Report,
substantially in the form of Exhibit I hereto, which report shall include the
following information with respect to the immediately following Payment Date:
a. The amount of Monthly Principal to be distributed on such
Payment Date pursuant to Section 8.01, which, subject to the Amount
Available therefor in accordance with Section 8.04(b), shall be:
(i) The amount of regular principal payments on
Contracts paid or applied during the prior Due Period (other
than the amount attributable to principal of any payment
received during such Due Period and due in a previous
26
Due Period, if such payment was previously advanced as a
Delinquent Payment pursuant to Section 8.02); plus
(ii) The amount of Principal Prepayments received
during the prior Due Period; plus
(iii) The amount of any Delinquent Payments that is
attributable to principal on the related Contracts, whether or
not such Delinquent Payments will be advanced pursuant to
Section 8.02; plus
(iv) The aggregate remaining principal balance of all
Contracts that became Liquidated Contracts during the prior
Due Period; plus
(v) The aggregate Repurchase Price paid by the
Company for any Contracts repurchased during the prior Due
Period as described in Section 3.05 that is attributable to
the principal amount outstanding on such Contracts; plus
(vi) That portion of the price paid by the Servicer
for any Contracts repurchased as described in Section 8.06
that is attributable to the principal amount outstanding on
such Contracts; plus
(vii) The amount of any reduction in the principal
amount deemed owed by the Obligor as a result of the Obligor's
bankruptcy; plus
(viii) The aggregate principal amount specified in
clauses (i) through (vii) above, for all prior Payment Dates
that was not previously distributed because of an insufficient
amount available in the Certificate Account [(after taking
into account amounts deposited therein pursuant to the Limited
Guaranty)].
b. the amount of Monthly Interest to be paid on such Payment
Date, subject to the Amount Available therefor in accordance with
Section 8.04(b);
c. the remaining Aggregate Certificate Principal Balance after
giving effect to the payment of Monthly Principal on such Payment Date
(on which Monthly Interest will be calculated on the next succeeding
Payment Date);
d. the total amount of Advances to be made by the Servicer;
e. the total amount of Advances made by the Servicer on prior
Payment Dates for which the Servicer has not been reimbursed;
f. the amount in the Company's FHA Insurance Reserve available
to pay FHA Insurance claims on the FHA-Insured Contracts;
g. the Collected Amount for the prior Due Period and the
Shortfall (if any) for such Payment Date;
27
h. the amounts of fees previously paid or to be paid on such
Payment Date by the Trust in respect of the prior Due Period,
separately identifying the Monthly Servicing Fee paid during the prior
Due Period;
i. the Pool Factor immediately before and immediately after
such Payment Date;
j. the Pool Scheduled Principal Balance for such Payment Date;
k. the number of Contracts with Delinquent Payments,
identifying such Contracts and the amount of such Delinquent Payments,
and the number of and aggregate unpaid principal balance of Contracts
with payments delinquent 31-59, 60-89 and 90+ days, respectively;
l. the number of Liquidated Contracts, identifying such
Contracts and the Net Liquidation Loss on such Contracts;
m. the Average Sixty-Day Delinquency Ratio, the Current
Realized Loss Ratio and the Cumulative Realized Loss Ratio; and
n. [the Guaranty Amount and the payment to be made by the
Company, if any, relating to such Payment Date pursuant to the Limited
Guaranty;] and
o. the aggregate number and principal amount of FHA-Insured
Contracts on which either (i) the Servicer has submitted a claim for
FHA Insurance, HUD rejected such claim and the Servicer has determined
not to resubmit such claim, or (ii) the Servicer has determined not to
submit a claim for FHA Insurance because such claim would not be paid
by HUD.
SECTION 6.02 Officer's Certificate.
---------------------
Each Monthly Report pursuant to Section 6.01 shall be accompanied by a
certificate of a Servicing Officer substantially in the form of Exhibit F,
certifying the accuracy of the Monthly Report and that no Event of Termination
or event that with notice or lapse of time or both would become an Event of
Termination has occurred, or if such event has occurred and is continuing,
specifying the event and its status.
SECTION 6.03 Other Data.
----------
In addition, the Company and (if different from the Company) the
Servicer shall, on request of the Trustee, [rating agencies], furnish the
Trustee, [rating agencies] such underlying data as may be reasonably requested.
SECTION 6.04 Annual Report of Accountants.
----------------------------
On or before May 1 of each year, commencing May 1, [2003], the Servicer
at its expense shall cause a firm of independent public accountants which is a
member of the American Institute of Certified Public Accountants to furnish a
statement to the Servicer, the Trustee,
28
[rating agencies] to the effect that such firm has examined certain documents
and records relating to the servicing of the home improvement contracts and
promissory notes under pooling and servicing agreements substantially similar
one to another (such statement to have attached thereto a schedule setting forth
the pooling and servicing agreements covered thereby, including this Agreement)
and that, on the basis of such examination, conducted substantially in
compliance with generally accepted auditing standards, (i) such servicing has
been conducted in compliance with such pooling and servicing agreements, and
(ii) the Servicer's payment of FHA Insurance premiums and submission of FHA
Insurance claims has been conducted in compliance with FHA Regulations, except
for such significant exceptions or errors in records that, in the opinion of
such firm, generally accepted auditing standards requires it to report.
SECTION 6.05 Statements to Certificateholders.
--------------------------------
a. Concurrently with each distribution to Certificateholders pursuant
to Article VIII, the Trustee, in its capacity as Certificate Registrar and
Paying Agent, shall cause to be mailed to [rating agencies] and to each
Certificateholder at the address appearing on the Certificate Register a
statement as of the related Payment Date prepared by the Servicer setting forth:
(i) the amount of the aggregate distribution to the
Certificateholders which constitutes Monthly Principal, specifying the
amounts attributable to scheduled payments by Obligors, to Principal
Prepayments by Obligors, and to other payments with respect to
principal;
(ii) the amount of the aggregate distribution to the
Certificateholders which constitutes Monthly Interest;
(iii) the remaining Aggregate Certificate Principal Balance
(after giving effect to the payment of Monthly Principal on such
Payment Date);
(iv) the Company's FHA Insurance reserve amount (as of the
most recent date available);
(v) the Average Sixty-Day Delinquency Ratio and the Cumulative
Realized Loss Ratio;
(vi) the amount of fees paid out of the Trust, separately
identifying each such fee;
(vii) the Pool Factor immediately before and immediately after
such Payment Date;
(viii) the number and aggregate principal balance of Contracts
delinquent 31-59, 60-89 and 90+ days, respectively;
(ix) the number of Contracts that became Liquidated Contracts
during the immediately preceding Due Period;
29
(x) [the Guaranty Amount and the payment to be made by the
Company, if any, relating to such Payment Date pursuant to the Limited
Guaranty;]
(xi) such other customary factual information as is available
to the Company or the Servicer (if different from the Company) to
enable Certificateholders to prepare their tax returns, including
information required with respect to computing the accrual of market
discount; and
(xii) such other customary factual information as is available
to the Company or the Servicer (if different from the Company) as the
Servicer can reasonably obtain from its existing data base to enable
Certificateholders to comply with regulatory requirements.
b. Within 75 days after the end of each calendar year, the Certificate
Registrar shall mail to each Certificateholder of record at any time during such
year a report prepared by the Servicer as to the aggregate amounts of interest
accrued and principal paid to such Certificateholder, and any additional
information reported pursuant to subsections (a)(x) and (a)(xi) of this Section
6.05, attributable to such Certificateholder.
c. A Certificateholder holding Certificates representing in the
aggregate at least 5% of the Percentage Interest in the Trust shall, upon
written request to the Trustee, be entitled to receive copies of all reports
provided to the Trustee.
SECTION 6.06 Payment of Taxes.
----------------
The Servicer shall be responsible for and agrees to prepare, make and
file all federal, state, local or other tax returns, information statements and
other returns and documents of every kind and nature whatsoever required to be
made or filed by or on behalf of the Trust pursuant to the Code and other
applicable tax laws and regulations. Each such return, statement and document
shall, to the extent required by the Code or other applicable law and at the
request of the Servicer, be signed on behalf of the Trust by the Trustee. The
Trustee shall have no responsibility whatsoever for the accuracy or completeness
of any such return, statement or document. The Servicer agrees to indemnify the
Trustee and hold it harmless for, from, against and in respect to any and all
liability, loss, damage and expense which may be incurred by the Trustee based
upon or as a result of the Trustee's execution of any and all such tax returns,
statements and documents.
ARTICLE VII
SERVICE TRANSFER
SECTION 7.01 Events of Termination.
---------------------
"Event of Termination" means the occurrence of any of the following:
a. Any failure by the Servicer to make any payment or deposit
required to be made hereunder (including an Advance) and the
continuance of such failure for a period of four Business Days;
30
b. Failure on the Servicer's part to observe or perform in any
material respect any covenant or agreement in this Agreement (other
than a covenant or agreement which is elsewhere in this Section
specifically dealt with) which continues unremedied for 30 days;
c. Any assignment by the Servicer of its duties or rights
hereunder except as specifically permitted hereunder, or any attempt to
make such an assignment;
d. A court having jurisdiction in the premises shall have
entered a decree or order for relief in respect of the Servicer in an
involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of the Servicer, as the case may be, or for any substantial
liquidation of its affairs;
e. The Servicer shall have commenced a voluntary case under
any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or shall have consented to the entry of an order
for relief in an involuntary case under any such law, or shall have
consented to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian or sequestrator (or other
similar official) of the Servicer or for any substantial part of its
property, or shall have made any general assignment for the benefit of
its creditors, or shall have failed to, or admitted in writing its
inability to, pay its debts as they become due, or shall have taken any
corporate action in furtherance of the foregoing;
f. The failure of the Servicer to be an Eligible Servicer; or
g. If the Company is the Servicer, the Company's servicing
rights under its master seller-servicer agreement with GNMA are
terminated by GNMA.
SECTION 7.02 Transfer.
--------
If an Event of Termination has occurred and is continuing, either the
Trustee or Certificateholders with aggregate Percentage Interests representing
25% or more of the Trust, by notice in writing to the Servicer (and to the
Trustee if given by the Certificateholders) may terminate all (but not less than
all) of the Servicer's management, administrative, servicing and collection
functions (such termination being herein called a "Service Transfer"). On
receipt of such notice (or, if later, on a date designated therein), all
authority and power of the Servicer under this Agreement, whether with respect
to the Contracts, the Contract Files or otherwise (except with respect to the
Certificate Account, the transfer of which shall be governed by Section 7.06),
shall pass to and be vested in the Trustee pursuant to and under this Section
7.02; and, without limitation, the Trustee is authorized and empowered to
execute and deliver on behalf of the Servicer, as attorney-in-fact or otherwise,
any and all documents and other instruments, and to do any and all acts or
things necessary or appropriate to effect the purposes of such notice of
termination. If the Servicer was the lender of record for purposes of the FHA
Insurance relating to FHA-Insured Contracts, the Trustee shall notify HUD of
such termination and shall request that HUD transfer the FHA Insurance reserves
allocable to such Contracts to the successor Servicer; provided, however, that
if the Trustee is the successor Servicer, the
31
Trustee shall request such transfer of reserves if and to the extent it is
legally able to do so, and the Trustee shall use its best efforts to obtain any
approvals that may be required for the Trustee to receive such transfer of
reserves. Each of the Company and the Servicer agrees to cooperate with the
Trustee in effecting the termination of the responsibilities and rights of the
Servicer hereunder, including, without limitation, the transfer to the Trustee
for administration by it of all cash amounts which shall at the time be held by
the Servicer for deposit, or have been deposited by the Servicer, in the
Certificate Account, or for its own account in connection with its services
hereafter or thereafter received with respect to the Contracts and the transfer
of all rights under FHA Insurance relating to FHA-Insured Contracts. The
Servicer shall transfer to the new servicer (i) the Servicer's records relating
to the Contracts in such electronic form as the new servicer may reasonably
request and (ii) any Contract Files in the Servicer's possession.
SECTION 7.03 Trustee to Act; Appointment of Successor.
----------------------------------------
On and after the time the Servicer receives a notice of termination
pursuant to Section 7.02, the Trustee shall be the successor in all respects to
the Servicer in its capacity as servicer under this Agreement and the
transactions set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Servicer
by the terms and provisions hereof, and the Servicer shall be relieved of such
responsibilities, duties and liabilities arising after such Service Transfer;
provided, however, that (i) the Trustee will not assume any obligations of the
Company pursuant to Section 3.05, and (ii) the Trustee shall not be liable for
any acts or omissions of the Servicer occurring prior to such Service Transfer
or for any breach by the Servicer of any of its obligations contained herein or
in any related document or agreement. As compensation therefor, the Trustee
shall be entitled to receive reasonable compensation out of the Monthly
Servicing Fee. Notwithstanding the above, the Trustee may, if it shall be
unwilling so to act, or shall, if it is legally unable so to act, appoint, or
petition a court of competent jurisdiction to appoint, an Eligible Servicer as
the successor to the Servicer hereunder in the assumption of all or any part of
the responsibilities, duties or liabilities of the Servicer hereunder. Pending
appointment of a successor to the Servicer hereunder, unless the Trustee is
prohibited by law from so acting, the Trustee shall act in such capacity as
hereinabove provided. In connection with such appointment and assumption, the
Trustee may make such arrangements for the compensation of such successor out of
payments on Contracts as it and such successor shall agree; provided, however,
that no such monthly compensation shall, without the written consent of 100% of
the Certificateholders, exceed the Monthly Servicing Fee. The Trustee and such
successor shall take such action, consistent with this Agreement, as shall be
necessary to effectuate any such succession.
SECTION 7.04 Notification to Certificateholders.
----------------------------------
a. Promptly following the occurrence of any Event of Termination, the
Servicer shall give written notice thereof to the Trustee, [rating agencies] and
the Certificateholders at their respective addresses appearing on the
Certificate Register.
b. Within 10 days following any termination or appointment of a
successor to the Servicer pursuant to this Article VII, the Trustee shall give
written notice thereof to [rating agencies] and the Certificateholders at their
respective addresses appearing on the Certificate Register.
32
SECTION 7.05 Effect of Transfer.
------------------
a. After the Service Transfer, the Trustee or new Servicer shall notify
Obligors to make payments directly to the new Servicer that are due under the
Contracts after the effective date of the Service Transfer.
b. After the Service Transfer, the replaced Servicer shall have no
further obligations with respect to the management, administration, servicing or
collection of the Contracts and the new Servicer shall have all of such
obligations, except that the replaced Servicer will transmit or cause to be
transmitted directly to the new Servicer for its own account, promptly on
receipt and in the same form in which received, any amounts (properly endorsed
where required for the new Servicer to collect them) received as payments upon
or otherwise in connection with the Contracts.
c. A Service Transfer shall not affect the rights and duties of the
parties hereunder (including but not limited to the indemnities of the Servicer
and the Company pursuant to Article X and Sections 3.05, 11.06 and 11.12(f))
other than those relating to the management, administration, servicing or
collection of the Contracts after the Service Transfer.
SECTION 7.06 Transfer of Certificate Account.
-------------------------------
Notwithstanding the provisions of Section 7.02, if the Certificate
Account shall be maintained with the Servicer and an Event of Termination shall
occur and be continuing, the Servicer shall, after five days' written notice
from the Trustee, or in any event within ten days after the occurrence of the
Event of Termination, establish a new account or accounts in trust for the
Certificateholders and the conforming with the requirements of this Agreement at
the corporate trust department of the Trustee or with an Eligible Institution
other than the Servicer and promptly cause the Trustee to transfer all funds in
the Certificate Account to such new account, which shall thereafter be deemed
the Certificate Account for the purposes hereof.
ARTICLE VIII
PAYMENTS
SECTION 8.01 Monthly Payments.
----------------
a. Subject to the terms of this Article VIII, each holder of a
Certificate as of a Record Date shall be paid on the next succeeding Payment
Date by check mailed to such Certificateholder at the address for such
Certificateholder appearing on the Certificate Register (or, if such
Certificateholder holds Certificates with an aggregate Percentage Interest in
the Trust of at least 5% and so requests, by wire transfer pursuant to
instructions delivered to the Trustee at least 10 days prior to such Payment
Date), the sum equal to such Certificateholder's Percentage Interest of Monthly
Interest and Monthly Principal. Final payment of any Certificate shall be made
only upon presentation of such Certificate at the office or agency of the Paying
Agent.
b. Each distribution with respect to a Book-Entry Certificate shall be
paid to the Depository, which shall credit the amount of such distribution to
the accounts of its Depository Participants in accordance with its normal
procedures. Each Depository Participant shall be
33
responsible for disbursing such distribution to the Certificate Owners that it
represents and to each indirect participating brokerage firm (a "brokerage firm"
or "indirect participating firm") for which it acts as agent. Each brokerage
firm shall be responsible for disbursing funds to the Certificate Owners that it
represents. All such credits and disbursements with respect to a Book-Entry
Certificate are to be made by the Depository and the Depository Participants in
accordance with the provisions of the Book-Entry Certificates. Neither the
Trustee, the Certificate Registrar nor the Company shall have any responsibility
therefor except as otherwise provided by applicable law. To the extent
applicable and not contrary to the rules of the Depository, the Trustee shall
comply with the provisions of the form of the Certificates as set forth in
Exhibit A hereto.
c. The Trustee shall either act as the paying agent or appoint an
Eligible Institution to be the paying agent (in either such case the "Paying
Agent") and cause it to make the payments to the Certificateholders required
hereunder. The Trustee initially appoints its corporate trust operations
department, with an office at [Trustee Address], Attention: [Corporate Trust
Operations,] as such Paying Agent. The Trustee shall require the Paying Agent
(if other than the Trustee) to agree in writing that all amounts held by the
Paying Agent for payment hereunder will be held in trust for the benefit of the
Certificateholders and that it will notify the Trustee of any failure by the
Servicer to make funds available to the Paying Agent for the payment of amounts
due on the Certificates.
SECTION 8.02 Advances.
--------
a. Not later than one Business Day following the Determination Date,
the Servicer shall advance all Delinquent Payments for the immediately preceding
Due Period by depositing the aggregate amount of such Delinquent Payments in the
Certificate Account; provided, however, that the Servicer shall be obligated to
advance Delinquent Payments only to the extent that the Servicer, in its sole
discretion, expects to be able to recover such advances from funds subsequently
available, therefor in the Certificate Account in accordance with Section
8.04(b). If the Servicer fails to advance all Delinquent Payments required under
this Section 8.02, the Trustee shall be obligated to advance such Delinquent
Payments pursuant to Section 11.16.
b. The Servicer shall be entitled to reimbursement of an Advance from
subsequent funds available therefor in the Certificate Account in accordance
with Section 8.04(b).
SECTION 8.03 [Limited Guaranty.
-----------------
a. [If the Monthly Report as of any Determination Date indicates that
(a) the sum of (i) the Collected Amount plus (ii) any Advances that will be
deposited in the Certificate Account in respect of such Determination Date by
the Servicer or the Trustee, as applicable, plus (iii) the aggregate of the
Repurchase Prices for Contracts to be repurchased by the Company in respect of
such Determination Date pursuant to Section 3.05, is less than (b) the aggregate
amount payable on the immediately following Payment Date pursuant to Section
8.04(b)(1), (2), (3) and, if the Company is not the Servicer, (5) (such
difference being hereinafter referred to as a "Shortfall"), then, if the Company
is the Servicer, the Company shall pay into the Certificate Account not later
than one Business Day after such Determination Date the lesser of (a) such
Shortfall plus the excess, if any, of the amount of Advances specified on the
Monthly Report as described in (a)(ii) above over the amount of Advances
actually deposited in the Certificate Account in respect of such Determination
Date, and plus the excess, if any, of the aggregate Repurchase Prices specified
on the Monthly Report as described in
34
(a)(iii) above over the aggregate Repurchase Prices actually deposited in the
Certificate Account in respect of such Determination Date, or (b) the Guaranty
Amount. If the Company is not the Servicer, the Servicer shall deliver to the
Company, no later than one Business Day after such Determination Date, a written
demand that the Company pay under the Limited Guaranty the amount specified in
the preceding sentence; upon receipt of such demand, the Company shall pay such
amount into the Certificate Account not later than two Business Days before the
related Payment Date. Notwithstanding any other provision of this Agreement, the
obligation of the Company under this Section shall be irrevocable, unconditional
and not terminate upon a Service Transfer pursuant to Article VII.
b. On any Payment Date the Company shall be obligated pursuant to the
Limited Guaranty only up to the Guaranty Amount. The "Guaranty Amount" shall
equal:
(i) on the first Payment Date, $__________.
(ii) on any Payment Date thereafter, the lesser of (A)
$___________ minus all amounts paid by the Company pursuant to the
Limited Guaranty with respect to previous Payment Dates, and (B) the
Aggregate Certificate Principal Balance on such Payment Date and an
amount equal to three months' interest at the Pass-Through Rate on the
Aggregate Certificate Principal Balance on such Payment Date.
c. The obligation of the Company to provide the Limited Guaranty under
this Agreement shall terminate on the Final Payment Date.
d. If the Company fails to make any payment required under the Limited
Guaranty, the Company shall promptly notify the Trustee, and the Trustee shall
promptly notify [rating agencies].]
SECTION 8.04 Payments.
--------
a. On each Determination Date the Servicer shall determine the
following amount of funds (the "Amount Available"): (i) the Collected Amount as
of such Determination Date; plus (ii) an amount equal to the sum of (1) the
aggregate amount of Advances that will be deposited in the Certificate Account
by the Servicer or the Trustee, as applicable, pursuant to Section 8.02 or
11.16, (2) [the amount to be deposited by the Company in the Certificate Account
pursuant to the Limited Guaranty in accordance with Section 8.03,] and (3) the
aggregate of the Repurchase Prices for Contracts to be repurchased by the
Company in respect of such Determination Date pursuant to Section 3.05.
b. On each Payment Date the Trustee shall apply the Amount Available
(as determined on the immediately preceding Determination Date) in the
Certificate Account to make payment in the following order of priority:
1. if neither the Company nor a wholly owned subsidiary of the
Company is the Servicer, to pay the Monthly Servicing Fee and any other
compensation owed to the Servicer pursuant to Section 7.03;
35
2. to pay Monthly Interest to the Certificateholders; provided
that the portion of the Amount Available to be applied to the payment
of such Monthly Interest shall in no event exceed the sum of (a)
amounts received in respect of interest on the Contracts, plus (b) [any
payments received in respect of the Limited Guaranty other than
payments with respect to amounts included in Monthly Principal];
3. to pay Monthly Principal to the Certificateholders;
4. if the Company or a wholly owned subsidiary of the Company
is the Servicer, to pay the Servicer the Monthly Servicing Fee;
5. to reimburse the Trustee or any successor Servicer for any
payments of FHA Insurance premiums in respect of FHA-Insured Contracts
not paid by the Company and for which the Trustee or such successor
Servicer has not been reimbursed by the Company;
6. to reimburse the Servicer or the Trustee, as applicable,
for any unreimbursed Advances made in respect of current or prior
Payment Dates; and
7. [to pay the remainder, if any, of the Amount Available to
the Company as the fee for providing the Limited Guaranty.]
c. If the Trustee shall not have received the applicable Monthly Report
by any Payment Date, the Trustee shall distribute all funds then in the
Certificate Account to Certificateholders as Monthly Interest and then Monthly
Principal, to the extent of such funds, on such Payment Date.
SECTION 8.05 Reassignment of Repurchased Contracts and Replaced
--------------------------------------------------
Contracts.
---------
Upon receipt by the Trust by deposit in the Certificate Account of the
Repurchase Price under Section 3.05, or the delivery of an Eligible Substitute
Contract under Section 3.05, and upon receipt of a certificate of a Servicing
Officer in the form attached hereto as Exhibit G-1 or G-2, the Trustee shall
convey and assign to the Company all of the Certificateholders' right, title and
interest in the repurchased Contract or Replaced Contract without recourse,
representation or warranty, except as to the absence of liens, charges or
encumbrances created by or arising as a result of actions of the Trustee. Upon
such deposit of the Repurchase Price or delivery of such Eligible Substitute
Contract, the Servicer shall be deemed to have released any claims to such
Contract as a result of Advances with respect to such Contract.
SECTION 8.06 Servicer's Purchase Option.
--------------------------
a. The Servicer shall, subject to subsection (b) hereof, have the
option to purchase all of the Contracts and all property acquired in respect of
any Contract remaining in the Trust at a price equal to the greatest of:
A. the sum of 100% of the principal balance of each Contract,
together with accrued and unpaid interest on each such Contract at the
Pass-Through Rate,
36
B. the aggregate fair market value (as reasonably determined
by the Servicer as of the close of business on the third Business Day
preceding the date of such purchase) of all of the assets of the Trust,
and
C. the Aggregate Certificate Principal Balance as of the date
of such purchase (less any amounts on deposit in the Certificate
Account on such purchase date and representing payments of principal in
respect of the Contracts) plus an amount necessary to pay the Monthly
Interest due on the Payment Date occurring in the calendar month
following such purchase date (less any amounts on deposit in the
Certificate Account on such purchase date and representing payments of
interest in respect of the Contracts at the Pass-Through Rate).
b. The purchase by the Servicer of all of the Contracts pursuant to
this Section 8.06 above shall be conditioned upon (1) the Pool Scheduled
Principal Balance, at the time of any such purchase, aggregating less than 10%
of the Cut-off Date Pool Principal Balance, and (2) the Servicer having provided
the Trustee and the Depository (if any) with at least 30 days' written notice.
If such option is exercised, the Servicer shall provide to the Trustee the
certification required by Section 12.04, and the Trustee shall promptly sign
such certification and release to the Servicer the Contract Files pertaining to
the Contracts being purchased.
ARTICLE IX
THE CERTIFICATES
SECTION 9.01 The Certificates.
----------------
The Certificates shall be substantially in the forms set forth in
Exhibit A, and shall, on original issue, be executed by manual or facsimile
signature of the Company by any one of its President, Vice Presidents,
Secretary, Treasurer or other authorized officers and authenticated by the
Trustee to or upon the order of the Company upon receipt. The Certificates shall
be evidenced by (i) one or more Certificates representing $_______________ in
Original Series _____ Certificate Principal Balance, beneficial ownership of
such Certificates to be held through Book-Entry Certificates, and (ii) a single
Certificate representing $.___ in Original Series _______ Certificate Principal
Balance.
The Certificates shall be authenticated by manual signature on behalf
of the Trustee by a duly authorized Responsible Officer or authorized signatory.
Certificates bearing the signatures of individuals who were at any time the
proper officers of the Trustee shall bind the Trustee, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
authentication and delivery of such Certificate or did not hold such offices at
the date of such Certificates. No Certificate shall be entitled to any benefit
under this Agreement, or be valid for any purpose, unless such Certificate has
been authenticated by manual signature in accordance with this Section, and such
signature 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,
except for those Certificates authenticated on the Closing Date, which shall be
dated the Closing Date.
37
SECTION 9.02 Registration of Transfer and Exchange of Certificates.
-----------------------------------------------------
a. The Trustee shall keep at the office or agency to be maintained in
accordance with Section 12.03 a "Certificate Register" in which the Trustee
shall provide for the registration of Certificates and of transfers and
exchanges of Certificates as herein provided. The Trustee initially appoints
itself to be the "Certificate Registrar" and transfer agent for the purpose of
registering Certificates and transfers and exchanges of Certificates as provided
herein. The Trustee will give prompt written notice to Certificateholders and
the Servicer of any change in the Certificate Registrar.
b. No transfer of a Certificate by, on behalf of or with plan assets of
any employee benefit plan, trust or account that is subject to ERISA, or that is
described in Section 4975(e)(1) of the Code (each, a "Plan") will be registered
unless the transferee, at its expense, delivers to the Trustee, the Servicer and
the Company an opinion of counsel (satisfactory to the Trustee, the Servicer and
the Company) that the purchase and holding of a Certificate by, on behalf of, or
with Plan assets of such Plan is permissible under applicable law, 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 Trust, the Company or the Servicer to any obligation or
liability in addition to those undertaken in this Agreement. Unless such opinion
is delivered, each person acquiring a Certificate will be deemed to represent to
the Trustee, the Company and the Servicer that such person is neither a Plan,
nor acting on behalf of a Plan, nor purchasing with Plan assets of any Plan.
c. At the option of a Certificateholder, Certificates may be exchanged
for other Certificates of authorized denominations of a like aggregate original
denomination, upon surrender of such Certificates to be exchanged at such
office. Whenever any Certificates are so surrendered for exchange, the Trustee
shall execute and deliver the Certificates which the Certificateholder making
the exchange is entitled to receive. Every Certificate presented or surrendered
for transfer or exchange shall be duly endorsed by, or shall be accompanied by a
written instrument of transfer in form satisfactory to the Trustee and the
Certificate Registrar duly executed by, the holder thereof or his or her
attorney duly authorized in writing.
d. Except as provided in paragraph (e) below the Book-Entry
Certificates shall at all times remain registered in the name of the Depository
or its nominee and at all times: (i) registration of the Certificates may not be
transferred by the Trustee except to another Depository; (ii) the Depository
shall maintain book-entry records with respect to the Certificate Owners and
with respect to ownership and transfers of such Certificates; (iii) ownership
and transfers of registration of the Certificates on the books of the Depository
shall be governed by applicable rules established by the Depository; (iv) the
Depository may collect its usual and customary fees, charges and expenses from
its Depository Participants; (v) the Trustee shall deal with the Depository,
Depository Participants and indirect participating firms as representatives of
the Certificate Owners of the Certificates for purposes of exercising the rights
of Holders under this Agreement, and requests and directions for and votes of
such representatives shall not be deemed to be inconsistent if they are made
with respect to different Certificate Owners; and (vi) the Trustee may rely and
shall be fully protected in relying upon information furnished by the Depository
with respect to its Depository Participants and furnished by the Depository
38
Participants with respect to indirect participating firms and persons shown on
the books of such indirect participating firms as direct or indirect Certificate
Owners.
All transfers by Certificate Owners of Book-Entry Certificates shall be
made in accordance with the procedures established by the Depository Participant
or brokerage firm representing such Certificateholder. Each Depository
Participant shall only transfer Book-Entry Certificates of Certificate Owners it
represents or of brokerage firms for which it acts as agent in accordance with
the Depository's normal procedures.
e. If (x)(i) the Company or the Depository advises the Trustee in
writing that the Depository is no longer willing or able properly to discharge
its responsibilities as Depository, and (ii) the Trustee or the Company is
unable to locate a qualified successor, or (y) the Company at its sole option
advises the Trustee in writing that it elects to terminate the book-entry system
through the Depository, the Trustee shall notify all Certificate Owners, through
the Depository, of the occurrence of any such event and of the availability of
definitive, fully registered Certificates (the "Definitive Certificates") to
Certificate Owners requesting the same. Upon surrender to the Trustee of the
Certificates by the Depository, accompanied by registration instructions from
the Depository for registration, the Trustee shall issue the Definitive
Certificates. Neither the Company nor the Trustee shall be liable for any delay
in delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of Definitive
Certificates all references herein to obligations imposed upon or to be
performed by the Depository shall be deemed to be imposed upon and performed by
the Trustee, to the extent applicable with respect to such Definitive
Certificates and the Trustee shall recognize the Holders of the Definitive
Certificates as Certificateholders hereunder.
f. On or prior to the Closing Date, there shall be delivered to the
Depository one Certificate, in registered form, registered in the name of the
Depository's nominee, Cede & Co., the total face amount of which represents
$_____________ in Original Series _______8 Certificate Principal Balance. Such
Certificate shall bear the following legend:
"Unless this Certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the Trustee
or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein."
SECTION 9.03 No Charge; Disposition of Void Certificates.
-------------------------------------------
No service charge shall be made to a Certificateholder for any transfer
or exchange of Certificates, but the Certificate Registrar may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any transfer or exchange of Certificates. All
Certificates surrendered for transfer and exchange shall be disposed of in a
manner approved by the Trustee.
39
SECTION 9.04 Mutilated, Destroyed, Lost or Stolen Certificates.
-------------------------------------------------
If (a) any mutilated Certificate is surrendered to the Certificate
Registrar, or the Certificate Registrar receives evidence to its satisfaction of
the destruction, loss or theft of any Certificate, and (b) there is delivered to
the Certificate Registrar and the Trustee such security or indemnity as may be
required by each to save it harmless, then in the absence of notice to the
Certificate Registrar or the Trustee that such Certificate has been acquired by
a bona fide purchaser, the Trustee shall execute and deliver, in exchange for or
in lieu of any such mutilated, destroyed, lost or stolen Certificate a new
Certificate of like tenor and original denomination. Upon the issuance of any
new Certificate under this Section 9.04, the Trustee may require the payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses connected therewith. Any
duplicate Certificate issued pursuant to this Section 9.04 shall constitute
complete and indefeasible evidence of ownership of the Percentage Interest, as
if originally issued, whether or not the mutilated, destroyed, lost or stolen
Certificate shall be found at any time.
SECTION 9.05 Persons Deemed Owners.
---------------------
Prior to due presentation of a Certificate for registration of
transfer, the Servicer, the Company, the Trustee, the Paying Agent and the
Certificate Registrar may treat the person in whose name any Certificate is
registered as the owner of such Certificate for the purpose of receiving
remittances pursuant to Section 8.01 and for all other purposes whatsoever, and
none of the Servicer, the Company, the Trustee, the Certificate Registrar, the
Paying Agent or any agent of the Servicer, the Company, the Trustee, the Paying
Agent or the Certificate Registrar shall be affected by notice to the contrary.
SECTION 9.06 Access to List of Certificateholders' Names and Addresses.
---------------------------------------------------------
The Certificate Registrar will furnish to the Trustee and the Servicer,
within five days after receipt by the Certificate Registrar of a request
therefor from the Trustee in writing, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Certificateholders as of
the most recent Record Date. If Holders of Certificates evidencing Percentage
Interests representing 25% or more of the Trust apply in writing to the Trustee
(hereinafter referred to as "Applicants"), and such application states that the
Applicants desire to communicate with other Certificateholders with respect to
their rights under this Agreement or under the Certificates and is accompanied
by a copy of the communication which such Applicants propose to transmit, then
the Trustee shall, within five Business Days after the receipt of such
application, afford such Applicants access during normal business hours to the
most recent list of Certificateholders held by the Trustee. If such list is as
of a date more than 90 days prior to the date of receipt of such Applicants'
request, the Trustee shall promptly request from the Certificate Registrar a
current list as provided above, and shall afford such Applicants access to such
list promptly upon receipt. Every Certificateholder, by receiving and holding a
Certificate, agrees with the Certificate Registrar and the Trustee that none of
the Company, the Certificate Registrar or the Trustee shall be held accountable
by reason of the disclosure of any such information as to the names and
addresses of the Certificateholders hereunder, regardless of the source from
which such information was derived.
40
SECTION 9.07 Authenticating Agents.
---------------------
The Trustee may appoint one or more Authenticating Agents with power to
act on its behalf and subject to its direction in the execution and delivery of
the Certificates. For all purposes of this Agreement, the execution and delivery
of Certificates by the Authenticating Agent pursuant to this Section shall be
deemed to be the execution and delivery of Certificates "by the Trustee."
ARTICLE X
INDEMNITIES
SECTION 10.01 Real Estate.
-----------
The Company will defend and indemnify the Trust, the Trustee (including
the Custodian and any other agents of the Trustee) and the Certificateholders
against any and all costs, expenses, losses, damages, claims and liabilities,
including reasonable fees and expenses of counsel and expenses of litigation
arising out of or resulting from the use or ownership of any real estate related
to a Contract by the Company or the Servicer or any Affiliate of either.
Notwithstanding any other provision of this Agreement, the obligation of the
Company under this Section shall not terminate upon a Service Transfer pursuant
to Article VII, except that the obligation of the Company under this Section
shall not relate to the actions of any subsequent Servicer after a Service
Transfer.
SECTION 10.02 Liabilities to Obligors.
-----------------------
No obligation or liability to any Obligor under any of the Contracts is
intended to be assumed by the Trust or the Certificateholders under or as a
result of this Agreement and the transactions contemplated hereby and, to the
maximum extent permitted and valid under mandatory provisions of law, the Trust
and the Certificateholders expressly disclaim such assumption.
SECTION 10.03 Tax Indemnification.
-------------------
The Company agrees to pay, and to indemnify, defend and hold harmless
the Trust, the Trustee (including the Custodian and any other agents of the
Trustee) and the Certificateholders from, any taxes which may at any time be
asserted with respect to, and as of the date of, the transfer of the Contracts
to the Trust, including, without limitation, any sales, gross receipts, general
corporation, personal property, privilege or license taxes (but not including
any federal, state or other taxes arising out of the creation of the Trust and
the issuance of the Certificates, except to the extent such taxes are imposed
due to a breach by the Company of its obligations under this Agreement) and
costs, expenses and reasonable counsel fees in defending against the same,
whether arising by reason of the acts to be performed by the Company, the
Servicer or the Trustee under this Agreement or imposed against the Trust, a
Certificateholder or otherwise.
41
SECTION 10.04 Servicer's Indemnities.
----------------------
The Servicer shall defend and indemnify the Trust, the Trustee
(including the Custodian and any other agents of the Trustee) and the
Certificateholders against any and all costs, expenses, losses, damages, claims
and liabilities including any failure to comply with FHA Regulations in
enforcing an FHA-Insured Contract, in respect of any action taken or omitted to
be taken by the Servicer with respect to any Contract. This indemnity shall
survive any Service Transfer (but the original Servicer's obligations under this
Section 10.04 shall not relate to any actions of any subsequent Servicer after a
Service Transfer) and any payment of the amount owing under, or any repurchase
by the Company of, any such Contract.
SECTION 10.05 Operation of Indemnities.
------------------------
Indemnification under this Article shall include, without limitation,
reasonable fees and expenses of counsel and expenses of litigation. If the
Company or the Servicer has made any indemnity payments to the Trustee pursuant
to this Article and the Trustee thereafter collects any of such amounts from
others, the Trust will repay such amounts collected to the Company or the
Servicer, as the case may be, without interest.
ARTICLE XI
THE TRUSTEE
SECTION 11.01 Duties of Trustee.
-----------------
The Trustee, prior to the occurrence of an Event of Termination and
after the curing of all Events of Termination which may have occurred,
undertakes to perform such duties and only such duties as are specifically set
forth in this Agreement. If an Event of Termination has occurred (which has not
been cured), the Trustee shall exercise such of the rights and powers vested in
it by this Agreement, and use the same degree of care and skill in their
exercise, as a prudent man would exercise or use under the circumstances in the
conduct of his own affairs.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform as to form to the requirements of this Agreement.
Subject to Section 11.03, no provision of this Agreement shall be
construed to relieve the Trustee from liability for its own negligent action,
its own negligent failure to act or its own misconduct; provided, however, that:
a. Prior to the occurrence of an Event of Termination, and
after the curing of all such Events of Termination which may have
occurred, the duties and obligations of the Trustee shall be determined
solely by the express provisions of this Agreement, the Trustee shall
not be liable except for the performance of such duties and obligations
as are specifically set forth in this Agreement, no implied covenants
or obligations shall be read into this Agreement against the Trustee
and, in the absence of bad faith on the part of the Trustee, the
Trustee may conclusively rely, as to the truth of the statements and
the
42
correctness of the opinions expressed therein, upon any certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Agreement;
b. The Trustee shall not be liable for an error of judgment
made in good faith by a Responsible Officer of the Trustee, unless it
shall be proved that the Trustee was negligent in ascertaining the
pertinent facts;
c. The Trustee shall not be personally liable with respect to
any action taken, suffered or omitted to be taken by it in good faith
in accordance with the direction of the Certificateholders with
aggregate Percentage Interests representing 25% or more of the Trust
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
d. The Trustee shall not be charged with knowledge of any
event referred to in Section 7.01 unless a Responsible Officer of the
Trustee at the Corporate Trust Office obtains actual knowledge of such
event or the Trustee receives written notice of such event from the
Servicer or the Certificateholders with aggregate Percentage Interests
representing 25% or more of the Trust.
e. The Trustee may rely and shall be protected in acting or
refraining from taking any action in reliance on the advice of the
Servicer in all matters with respect to FHA Insurance. The Trustee
shall not be liable for any actions taken by the Servicer with respect
to FHA Insurance, including but not limited to the maintenance of such
insurance and the submission of claims to FHA.
None of the provisions contained in this Agreement shall in any event
require the Trustee to perform, or be responsible for the manner of performance
of, any of the obligations of the Company or the Servicer under this Agreement,
except during such time, if any, as the Trustee shall be the successor to, and
be vested with the rights, duties, powers and privileges of, the Servicer in
accordance with the terms of this Agreement. The Trustee shall not be required
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if there is reasonable ground for believing that the repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
SECTION 11.02 Certain Matters Affecting the Trustee.
-------------------------------------
Except as otherwise provided in Section 11.01:
a. The Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officer's Certificate,
certificate of a Servicing Officer, certificate of auditors or any
other certificate, statement, instrument, opinion, report, notice,
request, consent, order, appraisal, bond or other paper or document
believed by it to be genuine and to have been signed or presented by
the proper party or parties;
b. The Trustee may consult with counsel and any opinion of any
counsel for the Company or the Servicer shall be full and complete
authorization and protection in
43
respect of any action taken or suffered or omitted by the Trustee
hereunder in good faith and in accordance with such Opinion of Counsel;
c. The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement, or to institute,
conduct or defend any litigation hereunder or in relation hereto, at
the request, order or direction of any of the Certificateholders,
pursuant to the provisions of this Agreement, unless such
Certificateholders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which
may be incurred therein or thereby; provided, however, that nothing
contained herein shall relieve the Trustee of the obligations, upon the
occurrence of an Event of Termination (which has not been cured), to
exercise such of the rights and powers vested in it by this Agreement,
and to use the same degree of care and skill in their exercise as a
prudent man would exercise or use under the circumstances in the
conduct of his own affairs;
d. Prior to the occurrence of an Event of Termination and
after the curing of all Events of Termination which may have occurred,
the Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
bond or other paper or document, unless requested in writing so to do
by Certificateholders with aggregate Percentage Interests representing
25% or more of the Trust; provided, however, that if the payment within
a reasonable time to the Trustee of the costs, expenses or liabilities
likely to be incurred by it in the making of such investigation is, in
the opinion of the Trustee, not reasonably assured to the Trustee by
the security afforded to it by the terms of this Agreement, the Trustee
may require reasonable indemnity against such cost, expense or
liability as a condition to so proceeding. The reasonable expense of
every such examination shall be paid by the Servicer or, if paid by the
Trustee, shall be reimbursed by the Servicer upon demand; and
e. The Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys or a custodian and shall not be liable for
any acts or omissions of such agents, attorneys or custodians if
appointed by it with due care hereunder.
SECTION 11.03 Trustee Not Liable for Certificates or Contracts.
------------------------------------------------
The Trustee assumes no responsibility for the correctness of the
recitals contained herein or in the Certificates (other than the Trustee's
execution thereof). The Trustee makes no representations as to the validity or
sufficiency of this Agreement or of the Certificates (other than its execution
thereof) or of any Contract, Contract File or related document. The Trustee
shall not be accountable for the use or application by the Servicer or the
Company of funds paid to the Company in consideration of conveyance of the
Contracts to the Trust by the Company or deposited in or withdrawn from the
Certificate Account by the Servicer.
44
SECTION 11.04 Trustee May Own Certificates.
----------------------------
The Trustee in its individual or other capacity may become the owner or
pledgee of Certificates representing less than all the beneficial interest in
the Trust with the same rights as it would have if it were not Trustee.
SECTION 11.05 Rights of Certificateholders to Direct Trustee and to
-----------------------------------------------------
Waive Events of Termination.
---------------------------
Certificateholders with aggregate Percentage Interests representing 25%
or more of the Trust shall have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee; provided, however, that,
subject to Section 11.01, the Trustee shall have the right to decline to follow
any such direction if the Trustee being advised by counsel determines that the
action so directed may not lawfully be taken, or if the Trustee in good faith
shall, by a Responsible Officer or Officers of the Trustee, determine that the
proceedings so directed would be illegal or involve it in personal liability or
be unduly prejudicial to the rights of Certificateholders not parties to such
direction; and provided further that nothing in this Agreement shall impair the
right of the Trustee to take any action deemed proper by the Trustee and which
is not inconsistent with such direction by the Certificateholders.
Certificateholders with aggregate Percentage Interests representing 51% or more
of the Trust may on behalf of Certificateholders waive any past Event of
Termination hereunder and its consequences, except a default in respect of a
covenant or provision hereof which under Section 12.08 cannot be modified or
amended without the consent of all Certificateholders, and upon any such waiver,
such Event of Termination shall cease to exist and shall be deemed to have been
cured for every purpose of this Agreement; but no such waiver shall extend to
any subsequent or other Event of Termination or impair any right consequent
thereon.
SECTION 11.06 The Servicer to Pay Trustee's Fees and Expenses.
-----------------------------------------------
The Servicer agrees:
a. to pay to the Trustee reasonable compensation for all
services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a
trustee of an express trust);
b. except as otherwise expressly provided herein, to reimburse
the Trustee, to the extent requested by the Trustee, for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Agreement (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to its negligence or bad faith; and
c. to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence or
bad faith on its part, arising out of or in connection with the
acceptance or administration of this trust and its duties hereunder,
including the costs and expenses of defending itself against any claim
or liability in connection with the exercise or performance of any of
its powers or duties hereunder.
45
The covenants in this Section 11.06 shall be for the benefit of the
Trustee in its capacities as Trustee, Paying Agent and Certificate Registrar
hereunder, and shall survive the termination of this Agreement.
SECTION 11.07 Eligibility Requirements for Trustee.
------------------------------------
The Trustee hereunder shall at all times be a financial institution
organized and doing business under the laws of the United States of America or
any State, authorized under such laws to exercise corporate trust powers and a
Title I approved lender pursuant to FHA Regulations, and shall have a combined
capital and surplus of at least $50,000,000 or shall be a member of a bank
holding system the aggregate combined capital and surplus of which is
$50,000,000, provided that the Trustee's separate capital and surplus shall at
all times be at least the amount required by Section 310(a)(2) of the Trust
Indenture Act of 1939, as amended. If such Person publishes reports of condition
at least annually, pursuant to law or to the requirements of a supervising or
examining authority, then for the purposes of this Section 11.07, the combined
capital and surplus of such Person shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so published. In
addition, the Trustee [(or, if the Trustee is [Trustee], the parent company of
[Trustee])] shall at all times have a long-term deposit rating from S&P of at
least BBB or as shall otherwise be acceptable to S&P and have a long-term
deposit rating from Fitch of at least BBB or as shall be otherwise acceptable to
Fitch. In case at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section 11.07, the Trustee shall resign immediately
in the manner and with the effect specified in Section 11.08.
SECTION 11.08 Resignation or Removal of Trustee.
---------------------------------
The Trustee may at any time resign and be discharged from the trusts
hereby created by giving written notice thereof to the Servicer and the Company.
Upon receiving such notice of resignation, the Company shall promptly appoint a
successor Trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to each of the Servicer and the Company and one
copy to the successor Trustee. If no successor Trustee shall have been so
appointed and shall have accepted appointment within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 11.07 and shall fail to resign after written
request therefor by the Company, or if at any time the Trustee shall be legally
unable to act, or shall be adjudged a bankrupt or insolvent, or a receiver of
the Trustee or of its property shall be appointed, or any public officer shall
take charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation, then the Company may
remove the Trustee. If the Company shall have removed the Trustee under the
authority of the immediately preceding sentence, the Company shall promptly
appoint a successor Trustee by written instrument, in duplicate, one copy of
which instrument shall be delivered to the Trustee so removed and one copy to
the successor trustee.
46
Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section 11.08 shall
not become effective until acceptance of appointment by the successor Trustee as
provided in Section 11.09.
SECTION 11.09 Successor Trustee.
-----------------
Any successor Trustee appointed as provided in Section 11.08 shall
execute, acknowledge and deliver to the Servicer, the Company and to its
predecessor Trustee an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor Trustee shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as Trustee. The predecessor Trustee shall deliver or cause to be delivered
to the successor Trustee the Contracts and the Contract Files and any related
documents and statements held by it hereunder; and, if the Contracts are then
held by a Custodian pursuant to a custodial agreement, the predecessor Trustee
and the Custodian shall amend such custodial agreement to make the successor
Trustee the successor to the predecessor Trustee thereunder; and the Servicer,
the Company and the predecessor Trustee shall execute and deliver such
instruments and do such other things as may reasonably be required for fully and
certainly vesting and confirming in the successor Trustee all such rights,
powers, duties and obligations. If the predecessor Trustee is then the lender of
record for purposes of FHA Insurance (due to an Event of Termination), the
predecessor Trustee shall submit a report to FHA describing the transfer of the
FHA-Insured Contracts without recourse, in such form as is then required under
FHA Regulations to cause HUD to transfer to the successor Trustee the FHA
insurance reserves applicable to the FHA-Insured Contracts.
No successor Trustee shall accept appointment as provided in this
Section 11.09 unless at the time of such acceptance such successor Trustee shall
be eligible under the provisions of Section 11.07.
Upon acceptance of appointment by a successor Trustee as provided in
this Section 11.09, the Servicer shall cause notice of the succession of such
Trustee hereunder to be mailed to [rating agencies] and to each
Certificateholder at their addresses as shown in the Certificate Register. If
the Servicer fails to mail such notice within ten days after acceptance of
appointment by the successor Trustee, the successor Trustee shall cause such
notice to be mailed at the expense of the Servicer.
SECTION 11.10 Merger or Consolidation of Trustee.
----------------------------------
Any Person into which the Trustee may be merged or converted or with
which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any Person
succeeding to the corporate trust business of the Trustee, shall be the
successor of the Trustee hereunder, provided such Person shall be eligible under
the provisions of Section 11.07, without the execution or filing of any paper or
any further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding. The Trustee shall promptly notify [rating agencies] in
the event it is a party to any merger, conversion or consolidation.
47
SECTION 11.11 Tax Returns.
-----------
Upon the Servicer's request, the Trustee will furnish the Servicer with
all such information as the Servicer may reasonably require in connection with
preparing all tax returns of the Trust and the Trustee shall execute such
returns.
SECTION 11.12 Obligor Claims.
--------------
In connection with any offset defenses, or affirmative claims for
recovery, asserted in legal actions brought by Obligors under one or more
Contracts based upon provisions therein complying with, or upon other rights or
remedies arising from, any legal requirements applicable to the Contracts,
including, without limitation, the Federal Trade Commission's Trade Regulation
Rule Concerning Preservation of Consumers' Claims and Defenses (16 C.F.R. ss.
433) as amended from time to time:
a. The Trustee is not, and shall not be deemed to be, either
in any individual capacity, as trustee hereunder or otherwise, a
creditor, or a joint venturer with or an Affiliate of, or acting in
concert or cooperation with, any seller of home improvements, in the
arrangement, origination or making of Contracts. The Trustee is the
holder of the Contracts only as trustee on behalf of the
Certificateholders, and not as a principal or in any individual or
personal capacity;
b. The Trustee shall not be personally liable for or obligated
to pay Obligors any affirmative claims asserted thereby, or responsible
to Certificateholders for any offset defense amounts applied against
Contract payments, pursuant to such legal actions;
c. The Trustee will pay, solely from available Trust monies,
affirmative claims for recovery by Obligors only pursuant to final
judicial orders or judgments, or judicially approved settlement
agreements, resulting from such legal actions;
d. The Trustee will comply with judicial orders and judgments
which require its actions or cooperation in connection with Obligors'
legal actions to recover affirmative claims against Certificateholders;
e. The Trustee will cooperate with and assist
Certificateholders in their defense of legal actions by Obligors to
recover affirmative claims if such cooperation and assistance is not
contrary to the interests of the Trustee as a party to such legal
actions and if the Trustee is satisfactorily indemnified for all
liability, costs and expenses arising therefrom; and
f. The Company hereby agrees to indemnify, hold harmless and
defend the Trustee and Certificateholders from and against any and all
liability, loss, costs and expenses of the Trustee and
Certificateholders resulting from any affirmative claims for recovery
asserted or collected by Obligors under the Contracts. Notwithstanding
any other provision of this Agreement, the obligation of the Company
under this Section 11.12(f) shall not terminate upon a Service Transfer
pursuant to Article VII.
48
SECTION 11.13 Appointment of Co-Trustee or Separate Trustee.
---------------------------------------------
Notwithstanding any other provisions hereof, at any time, for the
purpose of meeting any legal requirements of any jurisdiction having authority
over the Trust, the Contracts or the Obligors, the Company and Trustee acting
jointly shall have the power and shall execute and deliver all instruments to
appoint one or more Persons approved by the Trustee to act as co-trustee or
co-trustees, jointly with the Trustee, or separate trustee or separate trustees,
of all or any part of the Trust, and to vest in such Person or Persons, in such
capacity, such title to the Trust, or any part thereof, and, subject to the
other provisions of this Section 11.13, such powers, duties, obligations, rights
and trusts as the Company and the Trustee may consider necessary or desirable.
If the Company shall not have joined in such appointment within 15 days after
the receipt by it of a request to do so, or in case an Event of Termination
shall have occurred and be continuing, the Trustee alone shall have the power to
make such appointment. No co-trustee or separate trustee hereunder shall be
required to meet the terms of eligibility as a successor trustee under Section
11.07 hereunder and no notice to Certificateholders of the appointment of
co-trustee(s) or separate trustee(s) shall be required under Section 11.09
hereof.
In the case of any appointment of a co-trustee or separate trustee
pursuant to this Section 11.13 all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such co-trustee or separate trustee
jointly, except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed (whether as Trustee hereunder or
as successor to the Servicer hereunder), the Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights, powers,
duties and obligations (including the holding of title to the Trust or any
portion thereof in any such jurisdiction) shall be exercised and performed by
such co-trustee or separate trustee at the direction of the Trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then co-trustees and separate trustees,
as effectively as if given to each of them. Every instrument appointing any
co-trustee or separate trustee shall refer to this Agreement and the conditions
of this Article XI. Each co-trustee and separate trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee.
Any co-trustee or separate trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any co-trustee or separate trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
49
SECTION 11.14 Certain Matters Relating to FHA Insurance.
-----------------------------------------
a. In the event the Company and the successor Servicer, if any, shall
fail to pay all FHA Insurance premiums with respect to the FHA-Insured Contracts
required by FHA Regulations, the Trustee shall pay such FHA Insurance premiums
and shall be entitled to reimbursement for such amounts pursuant to Section
8.04(b)(5).
b. If, following the termination of the Trust pursuant to Section
12.04, HUD demands reimbursement from the Trustee of an FHA Insurance claim paid
on an FHA-Insured Contract prior to the termination of the Trust, the Trustee
agrees that it will not seek to recover any such amount from any Person other
than the Servicer that submitted such claim.
SECTION 11.15 Trustee and [Trustee parent].
----------------------------
In the event the Trustee ceases to be a direct, wholly owned subsidiary
of ____________, the Trustee shall promptly notify [rating agencies].
SECTION 11.16 Trustee Advances.
----------------
a. If the Servicer fails to deposit into the Certificate Account
Advances as required by Section 8.02, then the Trustee shall, subject to the
provisions of paragraph (b) below, from its own funds, deposit into the
Certificate Account the amount not so deposited by the Servicer on or before the
Business Day preceding the related Payment Date (a "Trustee Advance").
b. The Trustee shall not be required to make any Trustee Advance (i) if
and to the extent that it determines in good faith that the funds, if advanced,
would not be recoverable by it from subsequent collections, including Net
Liquidation Proceeds, or (ii) if the Trustee is prohibited by law from making
any such Trustee Advance, as evidenced by an Opinion of Counsel.
c. The Trustee shall be entitled to reimbursement of a Trustee Advance
from funds subsequently available therefor in the Certificate Account in
accordance with Section 8.04(b).
ARTICLE XII
MISCELLANEOUS
SECTION 12.01 Servicer Not to Resign; Delegation of Servicing Duties.
------------------------------------------------------
The Servicer shall not resign from the obligations and duties hereby
imposed on it except upon determination that the performance of its duties
hereunder is no longer permissible under applicable law. Any such determination
permitting the resignation of the Servicer shall be evidenced by an Opinion of
Counsel for the Servicer to such effect delivered to the Trustee. No such
resignation shall become effective until the Trustee or a successor servicer
shall have assumed the responsibilities and obligations of the Servicer in
accordance with Section 7.03.
Notwithstanding the foregoing, the Company, if it is the Servicer, may
delegate some or all of its servicing duties to a wholly owned subsidiary of the
Company, for so long as said
50
subsidiary remains, directly or indirectly, a wholly owned subsidiary of the
Company. Notwithstanding any such delegation the Company shall retain all of the
rights and obligations of the Servicer hereunder.
SECTION 12.02 Company Not to Engage in Certain Transactions with
--------------------------------------------------
Respect to the Trust.
--------------------
The Company shall not:
a. Provide credit to any Certificateholder for the purpose of
enabling such Certificateholder to purchase Certificates;
b. Purchase any Certificates in an agency or trustee capacity;
or
c. Loan any money to the Trust.
SECTION 12.03 Maintenance of Office or Agency.
-------------------------------
The Trustee will maintain in Minneapolis or St. Xxxx, Minnesota, an
office or agency where Certificates may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Trustee in
respect of the Certificates and this Agreement may be served. On the date hereof
the Trustee's office for such purposes is located at 000 Xxxx 0xx Xxxxxx, Xxxxx
Xxxxx, Xx. Xxxx, Xxxxxxxxx 00000. The Trustee will give prompt written notice to
the Company, the Servicer and the Certificateholders of any change in the
location of the Certificate Register or any such office or agency.
SECTION 12.04 Termination.
-----------
a. The Trust created hereby and the respective obligations and
responsibilities of the Company, the Servicer and the Trustee created hereby
(other than the responsibility of the Trustee to make any final distributions to
Certificateholders as set forth below) shall terminate on the earlier of (a) the
Payment Date on which the principal balance of all of the Contracts is reduced
to zero; or (b) the Payment Date occurring in the month following the Servicer's
purchase of the Contracts pursuant to Section 8.06; provided, that in no event
shall the trust created hereby continue beyond the expiration of 21 years from
the death of the last survivor of the descendants of Xxxxxx X. Xxxxxxx, the late
Ambassador of the United States to the Court of St. Xxxxx, living on the date
hereof, and provided, further, that the Servicer's and the Company's
representations and warranties and indemnities by the Company and the Servicer
shall survive termination.
b. Notice of any termination, specifying the date (the "Final Payment
Date"), which shall be a date that would otherwise be a Payment Date and upon
which all Certificateholders may surrender their Certificates to the Servicer
for payment of the final distribution and cancellation, shall be given promptly
by the Trustee (upon direction by the Servicer ten days prior to the date such
notice is to be mailed) by letter to [rating agencies] and to the
Certificateholders mailed no later than the fifth Business Day of the month of
the Final Payment Date specifying (1) the Final Payment Date upon which final
payment on the Certificates will be made upon presentation and surrender of
Certificates at the office or agency of the Servicer
51
therein designated; (2) the amount of any such final payment; and (3) that the
Record Date otherwise applicable to such Payment Date is not applicable,
payments being made only upon presentation and surrender of the Certificates at
the office or agency of the Servicer therein specified. The Trustee shall give
such notice to the Certificate Registrar at the time such notice is given to the
Certificateholders. In the event such notice is given in connection with the
Servicer's election to purchase the Contracts, the Servicer shall deposit in the
Certificate Account on the Final Payment Date in immediately available funds an
amount equal to the above-described purchase price and upon such deposit
Certificateholders will be entitled to the amount specified in Section 12.04(c).
Upon certification to the Trustee by a Servicing Officer, following such final
deposit the Trustee shall promptly release to the Servicer the Contract Files
for the remaining Contracts, and the Trustee shall execute all assignments,
endorsements and other instruments necessary to effectuate such transfer.
c. Upon presentation and surrender of the Certificates, the Trustee
shall cause to be distributed to Certificateholders on the Final Payment Date in
proportion to their respective Percentage Interests, to the extent of the Amount
Available, an amount equal to Monthly Interest and Monthly Principal. The
distribution on the Final Payment Date pursuant to this Section 12.04 shall be
in lieu of the distribution otherwise required to be made on such Payment Date
in respect of the Certificates.
d. In the event that all of the Certificateholders do not surrender
their Certificates for cancellation within three months after the time specified
in the above-mentioned written notice, the Company shall give a second written
notice to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
three months after the second notice all the Certificates shall not have been
surrendered for cancellation, the Company shall transfer to itself all amounts
remaining on deposit in the Certificate Account, to hold in trust for
Certificateholders who have not surrendered their Certificates for cancellation,
together with the final record list of Certificateholders, and the Company shall
take appropriate steps, or may appoint an agent to take appropriate steps, to
contact the remaining Certificateholders concerning surrender of their
Certificates, and the cost thereof shall be paid out of the funds and other
assets which remain in trust hereunder.
SECTION 12.05 Acts of Certificateholders.
--------------------------
a. Except as otherwise specifically provided herein, whenever
Certificateholder approval, authorization, direction, notice, consent, waiver,
or other action is required hereunder, such approval, authorization, direction,
notice, consent, waiver or other action shall be deemed to have been given or
taken on behalf of, and shall be binding upon, all Certificateholders if agreed
to by Certificateholders with aggregate Percentage Interests representing 51% or
more of the Trust.
b. 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
agent duly appointed in writing; and except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Trustee and, where required, to the Servicer. Proof of
execution
52
of any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Agreement and (subject to Section 11.01)
conclusive in favor of the Trustee, the Servicer and the Company if made in the
manner provided in this Section.
c. The fact and date of the execution by any Certificateholder of any
such instrument or writing may be proved in any reasonable manner which the
Trustee deems sufficient.
d. The ownership of Certificates shall be proved by the Certificate
Register.
e. 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 Servicer or the Company in reliance thereon, whether or not
notation of such action is made upon such Certificates.
f. The Trustee may require such additional proof of any matter referred
to in this Section as it shall deem necessary.
SECTION 12.06 Calculations.
------------
Except as otherwise provided in this Agreement, all interest rate and
basis point calculations under this Agreement will be made on the basis of a
360-day year and twelve 30-day months and will be carried out to at least three
decimal places.
SECTION 12.07 Assignment or Delegation by Company.
-----------------------------------
Except as specifically authorized hereunder, and except for its
obligations as Servicer which are dealt with under Article V and Article VII,
the Company may not convey and assign or delegate any of its rights or
obligations hereunder absent the prior written consent of Certificateholders
with aggregate Percentage Interests representing 66-2/3% or more of the Trust,
and any attempt to do so without such consent shall be void. Notwithstanding the
foregoing, the Company may not delegate its obligations under Section 8.03
hereof absent (a) the prior written consent of Certificateholders with aggregate
Percentage Interests representing 66-2/3% or more of the Trust and the prior
written confirmation of [rating agencies] that the rating of the Certificates
will not be lowered or withdrawn following such delegation, or (b) the prior
written consent of all of the Certificateholders, and any attempt to do so
without such consent shall be void.
SECTION 12.08 Amendment.
---------
a. This Agreement may be amended from time to time by the Company, the
Servicer and the Trustee, without the consent of any of the Certificateholders
to correct manifest error, to cure any ambiguity, to correct or supplement any
provisions herein or therein which may be inconsistent with any other provisions
herein or therein, as the case may be; provided, however, that such action shall
not, as evidenced by an Opinion of Counsel for the Servicer, adversely affect in
any material respect the interests of any Certificateholder.
53
b. This Agreement may also be amended by agreement of the Trustee, the
Servicer and the Company at any time without the consent of the
Certificateholders to effect the transfer of FHA Insurance reserves to another
entity in compliance with revisions to FHA Regulations, provided that prior to
any such amendment [rating agencies] have each confirmed in writing that the
rating of the Certificates will not be lowered or withdrawn following such
amendment.
c. This Agreement may also be amended from time to time by the
Servicer, the Company and the Trustee, with the consent of Certificateholders
with aggregate Percentage Interests representing 66-2/3% or more of the Trust,
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 and any Event of Termination may be
waived by Certificateholders with aggregate Percentage Interests representing
51% or more of the Trust; provided, however, that no such amendment or waiver
shall (a) reduce in any manner the amount of, or delay the timing of,
collections of payments on the Contracts or distributions which are required to
be made on any Certificate, or (b) reduce the aforesaid percentage required to
consent to any such amendment, without the consent of the holders of all
Certificates then outstanding or (c) cause any tax to be imposed on the Trust.
d. This Agreement shall not be amended under this Section without the
consent of 100% of the Certificateholders if such amendment would result in the
disqualification of the Trust as a Grantor Trust under the Code.
e. Concurrently with the solicitation of any consent pursuant to this
Section 12.08, the Trustee shall furnish written notification to [rating
agencies] of such solicitation. Promptly after the execution of any amendment or
consent pursuant to this Section 12.08, the Trustee shall furnish written
notification of the substance of such amendment to [rating agencies] and each
Certificateholder.
f. It shall not be necessary for the consent of Certificateholders
under this Section 12.08 to approve the particular form of any proposed
amendment, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject to
such reasonable requirements as the Trustee may prescribe.
g. The Trustee may, but shall not be obligated to, enter into any such
amendment which affects the Trustee's own rights, duties or immunities under
this Agreement or otherwise.
h. In connection with any amendment pursuant to this Section, the
Trustee shall be entitled to receive an Opinion of Counsel to the Servicer to
the effect that such amendment is authorized or permitted by the Agreement.
i. Upon the execution of any amendment or consent pursuant to this
Section 12.08, this Agreement shall be modified in accordance therewith, and
such amendment or consent shall form a part of this Agreement for all purposes,
and every Certificateholder hereunder shall be bound thereby.
j. In the absence of the consent described in subsection (c) of this
Section, in connection with any amendment pursuant to this Section, the Trustee
shall have received an
54
unqualified Opinion of Counsel, the expense of which shall not be an expense of
the Trust, stating that any such amendment will not adversely affect the status
of the Trust as a Grantor Trust.
SECTION 12.09 Notices.
-------
All communications and notices pursuant hereto to the Servicer, the
Company, [rating agencies] and the Trustee shall be in writing and delivered or
mailed to it at the appropriate following address:
If to the Originator or the Servicer:
Conseco Finance Corp.
1100 Landmark Towers
000 Xx. Xxxxx Xxxxxx
Xx. Xxxx, Xxxxxxxxx 00000-0000
Attention: Chief Financial Officer
Telecopier Number: (000) 000-0000
If to the Seller:
Conseco Finance Securitizations Corp..
1100 Landmark Towers
000 Xx. Xxxxx Xxxxxx
Xx. Xxxx, Xxxxxxxxx 00000-0000
Attention:
Telecopier Number: (651)
If to the Trustee:
[Address]
Attention:
Telecopier Number: (____) ___________
If to [rating agencies]:
Standard and Poor's
00 Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: ____________________
or at such other address as the party may designate by notice to the other
parties hereto, which notice shall be effective when received.
All communications and notices pursuant hereto to a Certificateholder
shall be in writing and delivered or mailed at the address shown in the
Certificate Register.
55
SECTION 12.10 Merger and Integration.
----------------------
Except as specifically stated otherwise herein, this Agreement sets
forth the entire understanding of the parties relating to the subject matter
hereof, and all prior understandings, written or oral, are superseded by this
Agreement. This Agreement may not be modified, amended, waived or supplemented
except as provided herein.
SECTION 12.11 Headings.
--------
The headings herein are for purposes of reference only and shall not
otherwise affect the meaning or interpretation of any provision hereof.
SECTION 12.12 Governing Law.
-------------
This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Minnesota.
56
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized this ______ day
of _________________, _______.
CONSECO FINANCE CORP.
By
----------------------------
Attest:
--------------------------------
CONSECO FINANCE SECURITIZATIONS
CORP.
By
----------------------------
Attest:
--------------------------------
[TRUSTEE],
not in its individual capacity
but solely as Trustee
By
----------------------------
Its Trust Officer
Attest:
--------------------------------
EXHIBIT A
---------
FORM OF CERTIFICATE
-------------------
Unless this Certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC") to the Trustee or
its agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL in as much as the registered owner
hereof, Cede & Co., has an interest herein.
CERTIFICATE FOR HOME IMPROVEMENT LOANS
SERIES _______
Home Improvement Loan Trust _______
Original Series ________ Certificate Principal Balance of the Trust: $__________
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN
[CONSECO FINANCE CORP. OR ANY AFFILIATE THEREOF, EXCEPT TO THE EXTENT SET FORTH
IN THE AGREEMENT.
THE PRINCIPAL REPRESENTED BY THIS CERTIFICATE IS PAYABLE IN
INSTALLMENTS, AS DESCRIBED HEREIN AND IN THE AGREEMENT. ACCORDINGLY, THE UNPAID
PRINCIPAL AMOUNT OF THE TRUST MAY BE LESS THAN THAT SET FORTH ABOVE. ANYONE
ACQUIRING THIS CERTIFICATE MAY ASCERTAIN THE CURRENT UNPAID PRINCIPAL AMOUNT
REPRESENTED BY THIS CERTIFICATE BY INQUIRY OF THE TRUSTEE.
No. 1
Date of Pooling and Servicing Agreement: Pass-Through Rate: ______%
------------, ------
Denomination: $_____________
Cut-off Date: September 1, 0000 Xxxxxxxxx Xxxxxxxxxxxx of All
Certificates:
$---------------
First Payment Date: _______________ Final Scheduled Payment Date:
_________________ (or if such
day is not a Business Day, then
the next succeeding Business
Day)
Servicer: Conseco Finance Corp. CUSIP:
A-1
This certifies that Cede & Co. is the registered owner of the undivided
Percentage Interest represented by the original principal amount set forth above
in Home Improvement Loan Trust _______ (the "Trust"), which includes among its
assets a pool of home improvement installment sales contracts and promissory
notes (and any and all rights to receive payments which are due pursuant thereto
on or after _________________). The Trust has been created pursuant to a Pooling
and Servicing Agreement (the "Agreement"), dated as of ___________, ____, among
Conseco Finance Securitiezations Corp., as Seller, Consdeco Finance Corp., as
Originator and Servicer (the "Company"), and [TRUSTEE], as Trustee of the Trust
(the "Trustee"). This Certificate is one of the Certificates described in the
Agreement and is issued pursuant and subject to the Agreement. By acceptance of
this Certificate the holder assents to and becomes bound by the Agreement. To
the extent not defined herein, all capitalized terms have the meanings assigned
to such terms in the Agreement.
The Agreement contemplates, subject to its terms, payment on the
fifteenth day (or if such day is not a Business Day, the next succeeding
Business Day) (the "Payment Date") of each calendar month commencing
___________, _____, so long as the Agreement has not been terminated, by check
(or, if such Certificateholder holds Certificates with an aggregate Percentage
Interest of at least 5% and so desires, by wire transfer pursuant to
instructions delivered to the Trustee at least 10 days prior to such Payment
Date) from funds drawn from the Certificate Account to the registered
Certificateholder at the address appearing on the Certificate Register as of the
Business Day immediately preceding such Payment Date, an amount equal to the
Certificateholder's Percentage Interest of Monthly Principal and Monthly
Interest. The final scheduled Payment Date of this Certificate is ____________,
____ or the next succeeding Business Day if such _______________ is not a
Business Day.
The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the funds in the Certificate Account [and the
Limited Guaranty of the Company], to the extent available for distribution to
the Certificateholder as provided in the Agreement for payment hereunder and
that the Trustee in its individual capacity is not personally liable to the
Certificateholder for any amounts payable under this Certificate or the
Agreement or, except as expressly provided in the Agreement, subject to any
liability under the Agreement. By acceptance of this Certificate, the
Certificateholder agrees to disclosure of his, her or its name and address to
other Certificateholders under the conditions specified in the Agreement.
No transfer of a Certificate by, on behalf of or with plan assets of
any employee benefit plan, trust or account that is subject to the Employment
Retirement Income Security Act of 1974, as amended ("ERISA"), or that is
described in Section 4975(e)(1) of the Code (each, a "Plan") will be registered
unless the transferee, at its expense, delivers to the Trustee, the Servicer and
the Company an opinion of counsel (satisfactory to the Trustee, the Servicer and
the Company) that the purchase and holding of a Certificate by, on behalf of, or
with Plan assets of such Plan is permissible under applicable law, 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 Trust, the Company or the Servicer to any obligation or
liability in addition to those undertaken in this Agreement. Unless such opinion
is delivered, each person acquiring this Certificate will be deemed to represent
to the Trustee, the Company and the Servicer that such person is neither a Plan,
nor acting on behalf of a Plan, nor purchasing with Plan assets of any Plan.
A-2
This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds and duties evidenced hereby
and the rights, duties and immunities of the Trustee. Copies of the Agreement
and all amendments thereto will be provided to any Certificateholder free of
charge upon a written request to the Trustee.
As provided in the Agreement and subject to the limitations set forth
therein, the transfer of this Certificate is registrable in the Certificate
Register of the Certificate Registrar upon surrender of this Certificate for
registration of transfer at the office or agency maintained by the Trustee in
Minneapolis or St. Xxxx, Minnesota, accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Certificate Registrar duly
executed by the holder thereof or his or her attorney duly authorized in
writing, and thereupon one or more new Certificates evidencing the same
aggregate Percentage Interest will be issued to the designated transferee or
transferees.
The Company, the Servicer, the Trustee, the Paying Agent and the
Certificate Registrar and any agent of the Company, the Servicer, the Trustee,
the Paying Agent or the Certificate Registrar may treat the person in whose name
this Certificate is registered as the owner hereof for all purposes, and neither
the Company, the Servicer, the Trustee, the Paying Agent, the Certificate
Registrar nor any such agent shall be affected by any notice to the contrary.
A-3
IN WITNESS WHEREOF, Home Improvement Loan Trust _______ has caused this
Certificate to be duly executed by the manual signature of a duly authorized
officer of the Trustee.
Dated: ____________________
HOME IMPROVEMENT LOAN TRUST _______
[TRUSTEE]
By
--------------------------------
Authorized Officer
A-4
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
_______________ unto _______________ the within Certificate for Home Improvement
Loans, Series ________, Home Improvement Loan Trust _______, and does hereby
irrevocably constitute _______________ and appoint _______________ Attorney to
transfer the said certificate on the Certificate Register maintained by the
Trustee, with full power of substitution in the premises.
Dated: _______________ By
-------------------------------
Signature
A-5
EXHIBIT B
---------
FORM OF ASSIGNMENT
------------------
In accordance with the Pooling and Servicing Agreement (the
"Agreement") dated as of _______________, _____, between the undersigned and
[TRUSTEE], as Trustee (the "Trustee"), the undersigned does hereby transfer,
convey and assign, set over and otherwise convey, without recourse, to Home
Improvement Loan Trust ___________, created by the Agreement, to be held in
trust as provided in the Agreement, (i) all right, title and interest in the
home improvement contracts and installment notes (including, without limitation,
any and all rights to receive payments which are due pursuant thereto on or
after _______________, _____, but excluding any rights to receive payments which
were due pursuant thereto prior to _______________, _____, ) identified in the
List of Contracts delivered pursuant to Section 2.02(a) of the Agreement, (ii)
all rights the Company may have against the originating contractor or lender
with respect to Contracts originated by a contractor or lender other than the
Company, (iii) all rights under FHA Insurance as such insurance relates to the
FHA-Insured Contracts, (iv) as to FHA-Insured Contracts, any rights under any
flood insurance policy as such insurance relates to the Contracts, (v) all
rights under the Errors and Omissions Protection Policy and the Fidelity Bond,
as such policy and bond relate to the Contracts, (vi) all documents contained in
the Contract Files, and (vii) all proceeds and products of the foregoing.
This Assignment is made pursuant to and upon the representation and
warranties on the part of the undersigned contained in Article III of the
Agreement and no others. All undefined capitalized terms used in this Assignment
have the meanings specified in the Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be
duly executed this _____ day of ____________, ______.
CONSECO FINANCE SECURITIZATIONS
CORP.
[Seal] By
--------------------------------
[Name]
[Title]
B-1
EXHIBIT C
---------
[CONSECO FINANCE CORP.]
-----------------------
[CONSECO FINANCE SECURITIZATIONS CORP.]
---------------------------------------
CERTIFICATE OF OFFICER
----------------------
I, ________________________, hereby certify that I am the [title] of
[Conseco Finance Corp., a Delaware Corporation] [Conseco Finance Securitizations
Corp., a Minnesota corporation] (the "Company"), and that as such I am duly
authorized to execute and deliver this certificate on behalf of the Company in
connection with the Pooling and Servicing Agreement dated as of _______________,
_____, (the "Agreement") relating to the Home Improvement Loan Trust _______
between the Company and [TRUSTEE], as Trustee (all capitalized terms used herein
without definition having the respective meanings specified in the Agreement),
and further certifies that:
(i) attached hereto as Exhibit I is a true and correct copy of
the [Restated] [Articles] [Certificate] of Incorporation of the
Company, together with all amendments thereto as in effect on the date
hereof;
(ii) attached hereto as Exhibit II is a true and correct copy
of the [Restated] Bylaws of the Company, as amended, as in effect on
the date hereof;
(iii) the representations and warranties of the Company
contained in Sections 3.01 and 3.04 of the Agreement are true and
correct on and as of the date hereof and, to the best of his knowledge,
the representations and warranties of the Company contained in Sections
3.02 and 3.03 of the Agreement are true and correct on and as of the
date hereof;
(iv) no event with respect to the Company has occurred and is
continuing which would constitute an Event of Termination or an event
that with notice or lapse of time or both would become an Event of
Termination under the Agreement; and
(v) each of the agreements and conditions of the Company to be
performed on or before the date hereof pursuant to the Agreement have
been performed in all material respects.
IN WITNESS WHEREOF, I have affixed hereunto my signature this _____ day
of ________________, _______.
-----------------------------------
[Name]
[Title]
C-1
EXHIBIT D
---------
FORM OF OPINION OF COUNSEL FOR THE ORIGINATOR
---------------------------------------------
The opinion of [Counsel] shall be to the effect that (capitalized terms
have the meanings set forth in the Pooling and Servicing Agreement):
1. The Originator is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware,
with corporate power to execute, deliver and perform its obligations
under the Pooling and Servicing Agreement, the Underwriting Agreement
and the Certificates.
2. The Pooling and Servicing Agreement has been duly
authorized by all requisite corporate action, duly executed and
delivered by the Originator, and constitute the valid and binding
obligations of the Originator enforceable in accordance with their
terms. The Certificates have been duly authorized by all requisite
corporate action and, when duly and validly executed by the Trustee in
accordance with the Pooling and Servicing Agreement, will be validly
issued and outstanding and entitled to the benefits of the Pooling and
Servicing Agreement. The participants to whose accounts The Depository
Trust Company has credited the Certificates have acquired all the
Trust's rights in the Certificates free of any adverse claim, assuming
that such participants purchased the Certificates for value and without
notice of any adverse claim.
3. No consent, approval, authorization or order of any state
or federal court or governmental agency or body is required to be
obtained by the Originator for the consummation of the transactions
contemplated by the Pooling and Servicing Agreement except such as may
be required under blue sky laws under any jurisdiction in connection
with the offering of the Certificates by the Underwriter pursuant to
the Underwriting Agreement.
4. The Pooling and Servicing Agreement is not required to be
qualified under the Trust Indenture Act of 1939, as now in effect, and
the Trust is not required to be registered as an investment company
under the Investment Company Act of 1940.
5. Neither the transfer of the Contracts to the Trustee acting
on behalf of the Trust, nor the execution and delivery of the Pooling
and Servicing Agreement, nor the consummation of any other of the
transactions contemplated in the Pooling and Servicing Agreement, or
the consummation of any other of the transactions contemplated in the
Pooling and Servicing Agreement, nor the fulfillment of the terms of
the Certificates, the Pooling and Servicing Agreement by the Originator
will conflict with, or result in a breach, violation or acceleration
of, or constitute a default under, any term or provision of the
Restated Certificate of Incorporation or Restated Bylaws of the
Originator or of any indenture or other agreement or instrument known
to us to which the Originator is a party or by which it is bound, or
result in a violation of, or contravene the terms of any statute, order
or regulation, applicable to the Originator of any court, regulatory
body, administrative agency or governmental body having jurisdiction
over it.
D-1
6. There are no actions or proceedings pending or, to the best
of our knowledge, actions, proceedings or investigations pending or
overtly threatened against the Originator before any court,
administrative agency or other tribunal (A) asserting the invalidity of
the Pooling and Servicing Agreement, the Certificates, the hazard or
flood insurance policies applicable to any Contracts or the Errors and
Omissions Protection Policy, (B) seeking to prevent the issuance of the
Certificates or the consummation of any of the transactions
contemplated by the Pooling and Servicing Agreement, (C) which is
likely materially and adversely to affect the performance by the
Originator of its obligations under, or the validity or enforceability
of, the Underwriting Agreement, the Pooling and Servicing Agreement or
the Certificates or (D) seeking adversely to affect the federal income
tax attributes of the Certificates described in the Prospectus and the
Prospectus Supplement under the heading "Certain Federal Income Tax
Consequences."
7. The transfer of the Contracts to the Trust in accordance
with Section 2.01 of the Pooling and Servicing Agreement would not be
avoidable as a preferential transfer under Section 547 of the United
States Bankruptcy Code (11 U.S.C. ss. 547), as in effect on the date
hereof, in the event that the Originator became a debtor under the
United States Bankruptcy Code.
8. The transfer of the Loans (other than the Subsequent Loans)
to CFSC in accordance with Section 2.1 of the Transfer Agreement would
not be avoidable as a preferential transfer under Section 547 of the
United States Bankruptcy Code (11 U.S.C. ss.547), as in effect on the
date hereof, in the event that Conseco Finance became a debtor under
the United States Bankruptcy Code.
9. Pursuant to the Transfer Agreement, Conseco Finance has
transferred to CFSC all of Conseco Finance's right, title and interest
in the Loans (other than the Subsequent Loans), free and clear of any
and all other assignments, encumbrances, options, rights, claims, liens
or security interests (except tax or possessory liens) that may affect
the right of CFSC in and to such Loans, and has delivered the related
Loan Files to the Trustee (as CFSC's designee) or its custodian. No
filing or other action, other than the filing of a financing statement
on Form UCC-1 with the Secretary of State of the State of Delaware in
the form attached hereto as Exhibit A, and the filing of continuation
statements as required by Section 4.1 of the Transfer Agreement, is
necessary to perfect as against third parties the assignment of such
Loans by Conseco Finance to CFSC. We have separately provided you with
our opinion concerning whether such assignment could be recharacterized
as a pledge rather than a sale in the event Conseco Finance became a
debtor under the United States Bankruptcy Code. However, in the event
such assignment were characterized as a pledge securing a loan from
CFSC to Conseco Finance, it is our opinion that, based solely upon the
Officer's Certificate attached hereto as Exhibit C and the UCC searches
referenced therein, CFSC would be deemed to have a valid and perfected
first priority security interest in such Loans and the proceeds
thereof. We have assumed for the purposes of this opinion that, during
the term of the Transfer Agreement, the Trustee (as CFSC's designee),
or its custodian, will maintain possession of the Loan Files for the
purpose of perfecting the assignment to CFSC of the Loans. We express
no opinion with respect to the enforceability of any individual Loan or
the existence of any claims, rights or other matters in favor of any
Obligor.
D-2
10. Pursuant to the Pooling and Servicing Agreement, CFSC has
transferred to the Trustee, acting on behalf of the Trust, all of
CFSC's right, title and interest in the Loans (other than the
Subsequent Loans), free and clear of any and all other assignments,
encumbrances, options, rights, claims, liens or security interests
(except tax or possessory liens) that may affect the right of the
Trustee in and to such Loans, and has delivered the related Loan Files
to the Trustee or its custodian. No filing or other action, other than
the filing of a financing statement on Form UCC-1 with the Secretary of
State of the State of Minnesota in the form attached hereto as Exhibit
B which has been delivered to the Minnesota Secretary of State, and the
filing of continuation statements as required by Section 4.01 of the
Pooling and Servicing Agreement, is necessary to perfect as against
third parties the assignment of such Loans by CFSC to the Trust. The
Pooling and Servicing Agreement states that it is the intent of the
parties that CFSC's transfer of the Loans to the Trust be deemed a
sale, rather than a pledge to secure indebtedness. However, in the
event such assignment were characterized as a pledge securing a loan
from the Certificateholders to CFSC, it is our opinion that, based
solely upon the Officer's Certificate attached hereto as Exhibit C and
the UCC searches referenced therein, the Trustee would be deemed to
have a valid and perfected first priority security interest in such
Loans and the proceeds thereof. We have assumed for the purposes of
this opinion that, during the term of the Pooling and Servicing
Agreement, the Trustee or its custodian will maintain possession of the
Loan Files for the purpose of perfecting the assignment to the Trustee
of the Loans. We express no opinion with respect to the enforceability
of any individual Loan or the existence of any claims, rights or other
matters in favor of any Obligor.
11. For federal income tax purposes, the Trust created
pursuant to the Pooling and Servicing Agreement will be treated as a
grantor trust under Subpart E, Part I, of Subchapter J of the Internal
Revenue Code of 1986, as amended (the "Code") and not as an association
taxable as a corporation under the Code, and under Section 671 of the
Code, each Certificateholder will be treated as the owner of an
undivided pro rata interest in each of the Contracts in the Trust.
12. The transfer of the Contracts and the proceeds thereof by
the Originator to the Trustee on the date hereof pursuant to the
Pooling and Servicing Agreement would not be avoidable as fraudulent
transfers under the Uniform Fraudulent Transfer Act as in effect in
Minnesota on the date hereof (Minn. Stat. xx.xx. 513.41 through
513.51), nor, should the Originator become a debtor under the United
States Bankruptcy Code, as fraudulent transfers under Section 548 of
the United States Bankruptcy Code (11 U.S.C. ss. 548) as in effect on
the date hereof.
D-3
EXHIBIT E
---------
FORM OF TRUSTEE'S ACKNOWLEDGMENT
--------------------------------
[TRUSTEE], a national banking association organized under the laws of
the United States, acting as trustee (the "Trustee") of Home Improvement Loan
Trust _______ (the "Trust") created pursuant to the Pooling and Servicing
Agreement dated as of _____________, _____ among Conseco Finance Corp., Conseco
Finance Securitizations Corp. and the Trustee (the "Agreement") (all capitalized
terms used herein without definition having the respective meanings specified in
the Agreement) acknowledges, pursuant to Section 2.03 of the Agreement, that the
Trustee has received the following: (i) all right, title and interest in the
home improvement contracts and promissory notes (including, without limitation,
any and all rights to receive payments which are due pursuant thereto on or
after _____________, _____ but excluding any rights to receive payments which
were due pursuant thereto prior to _____________, _____) identified in the List
of Contracts delivered pursuant to Section 2.02 of the Agreement, (ii) all
rights the Company may have against the originating contractor or lender with
respect to Contracts originated by a contractor or lender other than the
Company, (iii) all rights under FHA Insurance as such insurance relates to the
FHA-Insured Contracts, (iv) as to FHA-Insured Contracts, any rights under any
flood insurance policy as such insurance relates to the Contracts, (v) all
rights under the Errors and Omissions Protection Policy and the Fidelity Bond,
as such policy and bond relate to the Contracts, (vi) all documents contained in
the Contract Files, [(vii) the Limited Guaranty], and (viii) all proceeds and
products of the foregoing; and declares that, directly or through a Custodian,
it will hold all Contract Files that have been delivered in trust, upon the
trusts set forth in the Agreement for the use and benefit of all
Certificateholders. The Trustee acknowledges that it has conducted a cursory
review of the Contract Files and hereby confirms that except as noted on the
document exception listing attached hereto, each Contract File contained (a) an
original contract or promissory note, and (b) a sale control document. The
Trustee has not otherwise reviewed the Contracts and Contract Files for
compliance with the terms of the Pooling and Servicing Agreement.
E-1
IN WITNESS WHEREOF, [TRUSTEE], as Trustee, has caused this
acknowledgment to be executed by its duly authorized officer and its corporate
seal affixed hereto as of this ____ day of ________________, _____.
[TRUSTEE]
as Trustee
[Seal] By
--------------------------------
[Name]
[Title]
E-2
EXHIBIT F
---------
CONSECO FINANCE CORP.
--------------------
CERTIFICATE OF SERVICING OFFICER
--------------------------------
The undersigned certifies that he is a [title] of Conseco Finance
Corp., a Delaware corporation (the "Company"), and that as such he is duly
authorized to execute and deliver this certificate on behalf of the Company
pursuant to Section 6.02 of the Pooling and Servicing Agreement (the
"Agreement") dated as of _____________, _____ between the Company and [TRUSTEE],
as Trustee of Home Improvement Loan Trust ________ (all capitalized terms used
herein without definition having the respective meanings specified in the
Agreement), and further certifies that:
1. The Monthly Report for the period from _______________ to
_______________ attached to this certificate is complete and accurate
in accordance with the requirements of Sections 6.01 and 6.02 of the
Agreement; and
2. As of the date hereof, no Event of Termination or event
that with notice or lapse of time or both would become an Event of
Termination has occurred.
IN WITNESS WHEREOF, I have affixed hereunto my signature this _____ day
of _______________, _____.
CONSECO FINANCE CORP.
By
--------------------------------
[Name]
[Title]
F-1
EXHIBIT G-1
-----------
CONSECO FINANCE COIRP.
----------------------
CERTIFICATE REGARDING REPURCHASED CONTRACTS
-------------------------------------------
The undersigned certifies that he is a [title] of Conseco Finance
Corp., a Delaware corporation (the "Company"), and that as such he is duly
authorized to execute and deliver this certificate on behalf of the Company
pursuant to Sections 3.05 and 8.05 of the Pooling and Servicing Agreement (the
"Agreement") dated as of _____________, _____ between the Company and [TRUSTEE],
as Trustee of Home Improvement Loan Trust ______ (all capitalized terms used
herein without definition having the respective meanings specified in the
Agreement), and further certifies that:
1. The Contracts on the attached schedule are to be
repurchased by the Company on the date hereof pursuant to Section 3.05
of the Agreement.
2. Upon deposit of the Repurchase Price for such Contracts,
such Contracts may, pursuant to Section 8.05 of the Agreement, be
assigned by the Trustee to the Company.
IN WITNESS WHEREOF, I have affixed hereunto my signature this _____ day
of _______________, _____.
CONSECO FINANCE CORP.
By
--------------------------------
[Name]
[Title]
G-1-1
EXHIBIT G-2
-----------
FORM OF
-------
CERTIFICATE REGARDING SUBSTITUTED CONTRACTS
-------------------------------------------
CONSECO FINANCE CORP.
CERTIFICATE REGARDING SUBSTITUTED CONTRACTS
The undersigned certify that they are [title] and [title], respectively
of Conseco Finance Corp., a corporation organized under the laws of Delaware
("the Company"), and that as such they are duly authorized to execute and
deliver this certificate on behalf of the Company pursuant to Section 3.05(b) of
the Pooling and Servicing Agreement (the "Agreement"), dated as of
_____________, _____ between the Company and [TRUSTEE], Trustee (all capitalized
terms used herein without definition having the respective meanings specified in
the Agreement), and further certify that:
1. The Contract and Contract File for each such Eligible
Substitute Contract have been delivered to the Trustee or its
Custodian.
2. The Contracts on the attached schedule are to be
substituted on the date hereof pursuant to Section 3.05(b) of the
Agreement and each such Contract is an Eligible Substitute Contract
[description, as to each Contract, as to how it satisfies the
definition of "Eligible Substitute Contract"].
3. The UCC-1 financing statements in respect of the Contracts
to be substituted, in the form required by Section 3.05 (b)(iii) of the
Agreement, have been filed with the appropriate offices.
4. There has been deposited in the Certificate Account the
amounts listed on the schedule attached hereto as the amount by which
the Scheduled Principal Balance of each Replaced Contract exceeds the
Scheduled Principal Balance of each Contract being substituted
therefor.
IN WITNESS WHEREOF, we have affixed hereunto our signatures this _____
day of _______________, _____.
CONSECO FINANCE CORP.
By
--------------------------------
[Name]
[Title]
G-2-1
EXHIBIT H
---------
LIST OF CONTRACTS
-----------------
[To Be Supplied]
H-1
EXHIBIT I
---------
LIST OF FHA-INSURED CONTRACTS
-----------------------------
I-1
[TO BE REVISED]
EXHIBIT J
---------
FORM OF MONTHLY REPORT
----------------------
CERTIFICATES FOR HOME IMPROVEMENT LOANS
SERIES 1996-E
Distribution Date: _________
A. Collected Amount _________
B. Delinquent Payments Advanced _________
C. Aggregate Repurchase Price for Contracts to be Repurchased _________
D. Amount Available (A + B + C) _________
E. Monthly Interest _________
F. Monthly Principal
(1) Regular Principal Payments _________
(2) Principal Prepayments _________
(3) Delinquent Principal Advanced _________
(4) Net Losses _________
(5) Contracts Repurchased due to Breach
of Representations and Warranties (see attached) _________
(6) Bankruptcy Write-down _________
(7) Unpaid Principal from Prior Months _________
Total Principal _________
G. Monthly Servicing Fee _________
H. Advances Reimbursed _________
I. Guaranty Fee _________
J. Shortfall [(E + F + (if Company is not the Servicer) G) - D] _________
K. Guaranty Payment (lesser of J or Guaranty Amount from prior month) _________
L. Aggregate Certificate Principal Balance _________
M. New Guaranty Amount (lesser of
(1) Guaranty Amount from prior month - K, or (2) L) _________
N. Current Month Pool Factor _________
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Previous Month Pool Factor _________
O. Aggregate Scheduled Balances and Number of Delinquent Contracts
(1) 31-59 days ________ _________
(2) 60-89 days ________ _________
(3) 90 days or more ________ _________
P. Liquidated Contracts _________
(1) Number _________
(2) Net Liquidation Loss _________
Q. Number of Loans Remaining _________
R. Number and Principal Balance of Contracts with
FHA claims finally rejected, or no FHA claim was
submitted because FHA Insurance was unavailable _________
S. Average Sixty-Day Delinquency Ratio _________
T. Current Realized Loss Ratio _________
U. Cumulative Realized Loss Ratio _________
Please contact the Bondholder Relations Department of [TRUSTEE] at (_____)
_____________ with any questions regarding this Statement or your Distribution.
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