EXECUTION
HFC REVOLVING CORPORATION,
as Depositor,
and
HOUSEHOLD FINANCE CORPORATION,
as Master Servicer,
and
BANK ONE, NATIONAL ASSOCIATION,
as Trustee
POOLING AND SERVICING AGREEMENT
Dated as of March 15, 2002
Closed-End Home Equity Loan Asset Backed Certificates,
Series 2002-1
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS .............................................................................. 1
Section 1.01. Definitions .................................................................... 1
Section 1.02. Interest Calculations .......................................................... 18
Section 1.03. Usage of Terms ................................................................. 18
ARTICLE II Conveyance of Home Equity Loans; Original Issuance
of Certificates; Tax Treatment ....................................................... 19
Section 2.01. Acknowledgment; Conveyance of Home Equity Loans; Custody of Mortgage Files ..... 19
Section 2.02. Acceptance by Trustee; Repurchase of Home Equity Loans; Conveyance of
Eligible Substitute Home Equity Loans ....................................... 22
Section 2.03. Representations, Warranties and Covenants of the Master Servicer ............... 24
Section 2.04. Representations and Warranties of the Depositor Regarding this Agreement and the
Home Equity Loans; Repurchases and Substitutions ........................... 25
Section 2.05. Execution and Authentication of Certificates ................................... 30
Section 2.06. Tax Treatment .................................................................. 30
Section 2.07. Federal Income Tax Allocations ................................................. 30
ARTICLE III Administration and Servicing of Home Equity Loans ...................................... 31
Section 3.01. The Master Servicer ............................................................ 31
Section 3.02. Collection of Certain Home Equity Loan Payments ................................ 33
Section 3.03. Withdrawals from the Collection Account ........................................ 35
Section 3.04. Maintenance of Hazard Insurance; Property
Protection Expenses ........................................................... 36
Section 3.05. Assumption and Modification Agreements ......................................... 37
Section 3.06. Realization Upon Defaulted Home Equity Loans ................................... 38
Section 3.07. [Reserved] ..................................................................... 38
Section 3.08. Trustee to Cooperate ........................................................... 38
Section 3.09. Servicing Compensation; Payment of Certain Expenses by Master Servicer 39
Section 3.10. Annual Statement as to Compliance .............................................. 39
Section 3.11. Annual Servicing Report ........................................................ 40
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Section 3.12. Access to Certain Documentation and Information Regarding the Home Equity Loans 40
Section 3.13. Maintenance of Certain Servicing Insurance Policies ............................ 41
Section 3.14. Reports to the Securities and Exchange Commission .............................. 41
Section 3.15. [Reserved] ..................................................................... 41
Section 3.16. Information Required by the Internal Revenue
Service Generally and Reports of Foreclosures and
Abandonments of Mortgaged Property ........................................... 41
Section 3.17. Additional Covenants of HFC .................................................... 41
ARTICLE IV Servicing Certificate ................................................................... 43
Section 4.01. Servicing Certificate .......................................................... 43
ARTICLE V Distributions and Statements to
Certificateholders; Rights of Certificateholders ........................................ 46
Section 5.01. Distributions .................................................................. 46
Section 5.02. Statements to Certificateholders ............................................... 48
ARTICLE VI The Certificates ........................................................................ 52
Section 6.01. The Certificates ............................................................... 52
Section 6.02. Registration of Transfer and Exchange of Certificates .......................... 52
Section 6.03. Mutilated, Destroyed, Lost or Stolen Certificates .............................. 55
Section 6.04. Persons Deemed Owners .......................................................... 56
Section 6.05. Appointment of Paying Agent .................................................... 56
Section 6.06. Actions of Certificateholders .................................................. 57
ARTICLE VII The Master Servicer and the Depositor .................................................. 58
Section 7.01. Liability of the Master Servicer and the Depositor ............................. 58
Section 7.02. Merger or Consolidation of, or Assumption of the
Obligations of, the Master Servicer or the Depositor .......................... 58
Section 7.03. Limitation on Liability of the Master Servicer,
the Depositor and Others ..................................................... 58
Section 7.04. Master Servicer Not to Resign .................................................. 59
Section 7.05. Delegation of Duties ........................................................... 59
ARTICLE VIII Events of Default ..................................................................... 60
Section 8.01. Events of Default .............................................................. 60
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TABLE OF CONTENTS
(continued)
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Section 8.02. Trustee to Act; Appointment of Successor ....................................... 61
Section 8.03. Notification to Certificateholders ............................................. 62
ARTICLE IX The Trustee ............................................................................. 63
Section 9.01. Duties of Trustee .............................................................. 63
Section 9.02. Certain Matters Affecting the Trustee .......................................... 64
Section 9.03. Trustee Not Liable for Certificates or Home Equity Loans ....................... 65
Section 9.04. Trustee May Own Certificates ................................................... 66
Section 9.05. Master Servicer to Pay Trustee's Fees and Expenses ............................. 66
Section 9.06. Eligibility Requirements for Trustee ........................................... 66
Section 9.07. Resignation or Removal of Trustee .............................................. 67
Section 9.08. Successor Trustee .............................................................. 67
Section 9.09. Merger or Consolidation of Trustee ............................................. 68
Section 9.10. Appointment of Co-Trustee or Separate Trustee .................................. 68
Section 9.11. Trustee May Enforce Claims Without
Possession of Certificates ................................................... 69
Section 9.12. Inspection of Mortgage Files ................................................... 69
Section 9.13. Tax Returns .................................................................... 70
Section 9.14. Calculation of LIBOR ........................................................... 70
ARTICLE X Termination .............................................................................. 72
Section 10.01. Termination ................................................................... 72
ARTICLE XI Miscellaneous Provisions ................................................................ 76
Section 11.01. Amendment ..................................................................... 76
Section 11.02. Recordation of Agreement ...................................................... 77
Section 11.03. Limitation on Rights of Certificateholders .................................... 77
Section 11.04. Governing Law ................................................................. 78
Section 11.05. Notices ....................................................................... 78
Section 11.06. Severability of Provisions .................................................... 79
Section 11.07. Assignment .................................................................... 79
Section 11.08. Certificates Nonassessable and Fully Paid ..................................... 79
Section 11.09. Third-Party Beneficiaries ..................................................... 79
Section 11.10. Counterparts .................................................................. 79
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TABLE OF CONTENTS
(continued)
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Section 11.11. Effect of Headings and Table of Contents ...................................... 79
Section 11.12. Limitation on Voting of Preferred Stock ....................................... 79
Section 11.13. Perfection Representations .................................................... 79
EXHIBITS
Schedule 1 Perfection Representations, Warranties and Covenants
Exhibit A Form of Class A Certificate
Exhibit B-1 Form of Class M Certificate
Exhibit C Form of Equity Certificate
Exhibit D Home Equity Loan Schedule
Exhibit E Form of Investment Letter
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This Pooling and Servicing Agreement, dated as of March 15, 2002, among
HFC REVOLVING CORPORATION, as Depositor, HOUSEHOLD FINANCE CORPORATION, as
Master Servicer, and BANK ONE, NATIONAL ASSOCIATION, as Trustee,
WITNESSETH THAT:
In consideration of the mutual agreements herein contained, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. Whenever used in this Agreement, the following
words and phrases, unless the context otherwise requires, shall have the
meanings specified in this Article.
Accrual Period: As to the Class A and Class M Certificates, for the
initial Distribution Date is the period from and including the Closing Date
through and including the day immediately preceding the initial Distribution
Date, and for each Distribution Date thereafter is the period from and including
the Distribution Date in the month immediately preceding the month in which the
Distribution Date occurs and ending on and including the day immediately
preceding the Distribution Date.
Additional Principal Reduction Amount: As to any Distribution Date, an
amount equal to the excess, if any, of (x) the Principal Reduction Amount over
(y) the Principal Distribution Amount.
Affiliate: As to any Person, any other Person controlling, controlled by
or under common control with such Person. For purposes of this definition,
"control" means the power to direct the management and policies of a Person,
directly or indirectly, whether through ownership of voting securities, by
contract or otherwise, and "controlling" and "controlled" shall have meanings
correlative to the foregoing.
Agreement: This Pooling and Servicing Agreement and all amendments hereof
and supplements hereto.
Appraised Value: As to any Home Equity Loan, the appraised value of the
related Mortgaged Property based upon the appraisal used by the applicable
Seller at the time of origination of such Home Equity Loan (or any mortgage loan
made by the Seller on the Mortgaged Property that the Home Equity Loan
replaced); provided that if the Home Equity Loan was originated simultaneously
with or not more than 12 months after another mortgage was placed on the related
Mortgaged Property, the lesser of the Appraised Value at origination of the
other mortgage and the sales price, if any, of the related Mortgaged Property.
Authorized Newspaper: A newspaper of general circulation in the Borough of
Manhattan, The City of New York, printed in the English language and customarily
published on each Business Day, whether or not published on Saturdays, Sundays
and holidays.
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Available Distribution Amount: As to any Distribution Date, the sum,
without duplication, of all amounts described in clauses (i) through (iv),
inclusive, of Section 3.02(b) received by the Master Servicer with respect to
the related Collection Period and deposited in the Collection Account.
Available Funds Cap: With respect to any Distribution Date, a per annum
rate equal to the weighted average of the Net Loan Rates of each Home Equity
Loan, in each case outstanding as of the first day of the related Collection
Period, multiplied by a fraction of which the numerator is 30 and the
denominator is the number of days in the related Accrual Period.
BIF: The Bank Insurance Fund, as from time to time constituted, created
under the Financial Institutions Reform, Recovery and Enhancement Act of 1989
or, if at any time after the execution of this instrument the Bank Insurance
Fund is not existing and performing duties now assigned to it, the body
performing such duties on such date.
Book-Entry Certificate: Any Class A or Class M Certificate registered in
the name of the Depository or its nominee, ownership of which is reflected on
the books of the Depository or on the books of a person maintaining an account
with such Depository (directly or as an indirect participant in accordance with
the rules of such Depository).
Business Day: Any day other than (i) a Saturday or a Sunday or (ii) a day
on which banking institutions in the State of New York or Illinois are required
or authorized by law to be closed.
Certificate: A Class A Certificate or Class M Certificate or the Equity
Certificate.
Certificate Owner: The Person who is the beneficial owner of a Book-Entry
Certificate.
Certificate Principal Balance: As to any Class A or Class M Certificate
and any Determination Date, the Original Class Certificate Principal Balance
thereof reduced by all amounts previously distributed to the holders of such
Class and allocable to principal. The Equity Certificate has no Certificate
Principal Balance and will represent overcollateralization.
Certificate Register and Certificate Registrar: The register maintained and
the registrar appointed pursuant to Section 6.02.
Certificateholder or Holder: The Person in whose name a Certificate is
registered in the Certificate Register, except that, solely for the purpose of
giving any consent, direction, waiver or request pursuant to this Agreement, (i)
any Certificate registered in the name of the Depositor (unless to the knowledge
of a Responsible Officer of the Trustee the Depositor is acting as trustee or
nominee for a Person who is not an Affiliate of the Depositor and who makes the
voting decision with respect to such Certificate) or the Master Servicer or any
Person known to a Responsible Officer of the Trustee to be an Affiliate of
either the Depositor or the Master Servicer and (ii) any Certificate for which
the Depositor (unless to the knowledge of a Responsible Officer of the Trustee
(A) the Depositor is acting as trustee or nominee for a Person who is not an
Affiliate of the Depositor and who makes the voting decision with respect to
such Certificate or (B) the Depositor is the owner of all the Certificates) or
the Master Servicer or any Person known to a Responsible Officer of the Trustee
to be an Affiliate (other than an Affiliate
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that has purchased any Certificate on the Closing Date) of either the Depositor
or the Master Servicer is the Certificate Owner shall be deemed not to be
outstanding and the Percentage Interest evidenced thereby shall not be taken
into account in determining whether the requisite amount of Percentage Interests
necessary to effect any such consent, direction, waiver or request has been
obtained.
Charge Off Amount: As to any Charged Off Home Equity Loan and Collection
Period, an amount equal to the amount of the Principal Balance that the Master
Servicer has charged off on its servicing records during such Collection Period.
Charged Off Home Equity Loan: A defaulted Home Equity Loan that is not a
Liquidated Home Equity Loan and as to which (i) collection procedures are
ongoing and (ii) the Master Servicer has charged off all or a portion of the
related Principal Balance.
Class: Either the Class A or Class M Certificates.
Class A Certificate: Any Certificate designated as a Class A Certificate
on the face thereof, substantially in the form of Exhibit A hereto.
Class A Certificateholder: A Holder of a Class A Certificate.
Class A Formula Rate: With respect to the Class A Certificates, and with
respect to the initial Accrual Period, 2.27% per annum, and as to any Accrual
Period thereafter, will be a per annum rate equal to LIBOR plus 0.37%.
Class A Pass-Through Rate: With respect to any Distribution Date and
Accrual Period, the lesser of (i) the Class A Formula Rate and (ii) the
Available Funds Cap for such Distribution Date.
Class A Supplemental Interest Amount: As of any Distribution Date, the sum
of (i) the excess, if any, of (a) interest due on the Class A Certificates at
the Class A Formula Rate over (b) interest due on the Class A Certificates at an
interest rate equal to the Available Funds Cap, (ii) any Class A Supplemental
Interest Amount remaining unpaid from prior Distribution Dates and (iii)
interest on the amount in clause (ii) at the Class A Formula Rate.
Class M Certificate: Any Certificate designated as a Class M Certificate
on the face thereof, substantially in the form of Exhibit B hereto.
Class M Certificateholder: A Holder of a Class M Certificate.
Class M Formula Rate: With respect to the Class M Certificates, and with
respect to the initial Accrual Period, 2.72% per annum, and as to any Accrual
Period thereafter, will be a per annum rate equal to LIBOR plus 0.82%.
Class M Pass-Through Rate: With respect to any Distribution Date and
Accrual Period, the lesser of (i) the Class M Formula Rate and (ii) the
Available Funds Cap for such Distribution Date.
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Class M Supplemental Interest Amount: As of any Distribution Date, the sum
of (i) the excess, if any, of (a) interest due on the Class M Certificates at
the Class M Formula Rate over (b) interest due on the Class M Certificates at an
interest rate equal to the Available Funds Cap, (ii) any Class M Supplemental
Interest Amount remaining unpaid from prior Distribution Dates and (iii)
interest on the amount in clause (ii) at the Class M Formula Rate.
Closing Date: March 15, 2002.
Code: The Internal Revenue Code of 1986, as the same may be amended from
time to time (or any successor statute thereto).
Collection Account: The custodial account or accounts created and
maintained for the benefit of the Certificateholders pursuant to Section
3.02(b). The Collection Account shall be an Eligible Account.
Collection Period: As to any Distribution Date and Home Equity Loan, the
calendar month immediately preceding the month in which such Distribution Date
occurs, except that with respect to the initial Distribution Date, the
Collection Period is the period from March 4, 2002 to March 31, 2002.
Combined Loan-to-Value Ratio or CLTV: As to each Home Equity Loan, a
ratio, expressed as a percentage, the numerator of which is the sum of (a) the
original Principal Balance of the Home Equity Loan and (b) the aggregate unpaid
principal balance, at the time of origination of the Home Equity Loan, of all
other mortgage loans, if any, secured by liens senior to that Home Equity Loan
on the related Mortgaged Property, and the denominator of which is the Appraised
Value of the Mortgaged Property.
Corporate Trust Office: The principal office of the Trustee at which at
any particular time its corporate trust business shall be administered, which
office on the Closing Date is located at the address set forth in Section 11.05.
Current Interest: As to the Class A and Class M Certificates and any
Distribution Date, the interest accrued at the applicable Pass-Through Rate
during the Accrual Period on the aggregate Certificate Principal Balance of such
Class of Certificates.
Cut-Off Date: As to each Home Equity Loan, the close of business on March
3, 2002.
Cut-Off Date Pool Balance: The aggregate of the Cut-Off Date Principal
Balances of the Home Equity Loans.
Cut-Off Date Principal Balance: As to any Home Equity Loan, the unpaid
principal balance thereof as of the Cut-Off Date or, as to any Eligible
Substitute Home Equity Loan, as of the date of substitution of such Eligible
Substitute Home Equity Loan.
Defective Home Equity Loan: A Home Equity Loan subject to repurchase or
substitution pursuant to Section 2.02 or 2.04.
Definitive Certificates: As defined in Section 6.02(f).
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Deposit Date: As to any Distribution Date, the Business Day immediately
preceding such Distribution Date.
Deposit Event: The lowering of the Master Servicer's short-term debt
rating below "P-1" by Xxxxx'x, "A-1" by Standard & Poor's or "F1" by Fitch or
any time in which HFC shall cease to be the Master Servicer.
Depositor: HFC Revolving Corporation, a Delaware corporation, and its
successors in interest.
Depository: The initial Depository shall be The Depository Trust Company,
the nominee of which is Cede & Co., as the registered Holder of Class A and
Class M Certificates. The Depository shall at all times be a "clearing
corporation" as defined in Section 8-102(3) of the UCC of the State of New York.
Depository Participant: A broker, dealer, bank or other financial
institution or other Person for whom from time to time the Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
Determination Date: As to any Distribution Date, the second Business Day
prior to such Distribution Date.
Distribution Date: The 20th day of each month (or if such 20th day is not
a Business Day, then the next succeeding Business Day), commencing April 22,
2002.
Electronic Ledger: The electronic master record of home equity loans
(including the Home Equity Loans) maintained by the Master Servicer.
Eligible Account: An account that is either (i) maintained with a
depository institution whose short-term debt obligations at the time of any
deposit therein are rated in the highest short-term debt rating category by the
Rating Agencies, (ii) an account or accounts maintained with a depository
institution with a long-term unsecured debt rating by each Rating Agency that is
at least investment grade, provided that the deposits in such account or
accounts are fully insured by either the BIF or the SAIF, (iii) a segregated
trust account maintained on the corporate trust side with the Trustee in its
fiduciary capacity, or (iv) an account otherwise acceptable to each Rating
Agency, as evidenced by a letter to such effect from each such Rating Agency to
the Trustee, without reduction or withdrawal of the then-current ratings of the
Class A or Class M Certificates.
Eligible Substitute Home Equity Loan: A Home Equity Loan substituted (a)
by the Depositor or the Master Servicer for a Defective Home Equity Loan
pursuant to Section 2.02(a) or 2.04 or (b) by the Master Servicer pursuant to
Section 2.02(b), which on the date of such substitution must
(i) have a Principal Balance not substantially greater or less
than the Principal Balance of such Defective Home Equity Loan or such
elected substituted Home Equity Loan;
5
(ii) have a current Loan Rate of not less than the Loan Rate
of the Defective Home Equity Loan or elected substituted Home Equity Loan
and not more than 500 basis points in excess thereof;
(iii) have a remaining term to maturity not more than six
months earlier or later than the remaining term to maturity of the
Defective Home Equity Loan or elected substituted Home Equity Loan;
(iv) comply with the representations and warranties set forth
in Section 2.04(b), to the extent such representations and warranties do
not pertain exclusively to the Home Equity Loans transferred on the
Closing Date;
(v) have a Combined Loan-to-Value Ratio that is not greater
than the Combined Loan-to-Value Ratio of the Defective Home Equity Loan or
elected substituted Home Equity Loan as of the date of origination of such
Defective Home Equity Loan or elected substituted Home Equity Loan;
(vi) have a lien position at least equal to the lien position
of the Mortgage relating to the Defective Home Equity Loan or elected
substituted Home Equity Loan; and
(vii) be the obligation of a Mortgagor whose credit profile is
substantially similar to that of the Mortgagor under the Defective Home
Equity Loan or elected substituted Home Equity Loan,
provided, however, that with respect to (i) through (vii) above, a home equity
loan may qualify as an Eligible Substitute Home Equity Loan if each of the
Rating Agencies consents to such substitution.
Enhancement Percentage: As to any Distribution Date, the percentage
obtained by dividing (x) the Interim Overcollateralization Amount by (y) the
Pool Balance as of the last day of the related Collection Period.
Equity Certificate: Any Certificate designated as an Equity Certificate on
the face thereof, in the form of Exhibit C hereto.
Events of Default: As defined in Section 8.01.
Extra Principal Distribution Amount: As to any Distribution Date, the
lesser of (x) the Monthly Excess Cashflow and (y) the Interim
Overcollateralization Deficiency.
Xxxxxx Xxx: Xxxxxx Xxx, formerly known as The Federal National Mortgage
Association, or any successor thereto.
FDIC: The Federal Deposit Insurance Corporation or any successor thereto.
Final Scheduled Distribution Date: With respect to the Class A and Class M
Certificates, the Distribution Date occurring in December, 2031.
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Fitch: Fitch Ratings, or its successor in interest.
Foreclosure Profit: As to any Liquidated Home Equity Loan, the amount, if
any, by which (i) the aggregate of its Liquidation Proceeds less Liquidation
Expenses exceeds (ii) the Principal Balance thereof immediately prior to the
final recovery of its Liquidation Proceeds, together with the sum of (x) accrued
and unpaid interest thereon at the applicable Loan Rate from the date interest
was last paid through the date of receipt of the final Liquidation Proceeds and
(y) the related Charge Off Amounts.
Xxxxxxx Mac: Xxxxxxx Mac, formerly known as The Federal Home Loan Mortgage
Corporation, or any successor thereto.
HFC: Household Finance Corporation, a Delaware corporation, and its
successors.
Home Equity Loan: Such of the home equity loans (together with the related
Mortgage Notes and Mortgages) transferred and assigned to the Trustee pursuant
to Section 2.01 and pursuant to the Transfer Agreement as from time to time are
held as a part of the Trust, the home equity loans originally so held being
identified in the Home Equity Loan Schedule delivered on the Closing Date. As
applicable, the term Home Equity Loan shall be deemed to refer to the Mortgaged
Property that has been converted to ownership by the Master Servicer prior to
the final recovery of related Liquidation Proceeds.
Home Equity Loan Purchase Agreement: The home equity loan purchase
agreement dated as of March 15, 2002, between the Depositor and the Sellers
pursuant to which the Sellers convey to the Depositor all of their right, title
and interest in and to the unpaid Principal Balance of the Home Equity Loans,
including all interest and principal payments in respect thereof received on or
after the Cut-Off Date, and certain other rights with respect to the collateral
supporting the Home Equity Loans.
Home Equity Loan Schedule: As to any date, the schedule of Home Equity
Loans, including any Eligible Substitute Home Equity Loans, included in the
Trust on such date. The initial Home Equity Loan Schedule is the schedule
delivered by the Depositor to the Trustee on the Closing Date and delivered as
Exhibit D hereto, which schedule may be in the form of a computer file or an
electronic or magnetic tape and sets forth as to each Home Equity Loan (i) the
account number, (ii) the Cut-Off Date Principal Balance, (iii) the Loan Rate,
(iv) the lien position of the related Mortgage and (v) the CLTV. The Home Equity
Loan Schedule will be amended from time to time to reflect the removal of Home
Equity Loans and the addition of any Eligible Substitute Home Equity Loans to
the Trust, and when so amended shall include the information set forth above
with respect to each Eligible Substitute Home Equity Loan as of its related date
of substitution.
Initial Home Equity Loan: Each Home Equity Loan transferred and assigned
to the Trust on the Closing Date.
Insurance Proceeds: Proceeds paid by any insurer pursuant to any insurance
policy covering a Home Equity Loan, or by the Master Servicer pursuant to the
last sentence of Section 3.04, net of any component thereof covering any
expenses incurred by or on behalf of the Master Servicer in connection with
obtaining such Insurance Proceeds and exclusive of any portion
7
thereof that is applied to the restoration or repair of the related Mortgaged
Property, released to the Mortgagor in accordance with the Master Servicer's
normal servicing procedures or required to be paid to any holder of a mortgage
senior to such Home Equity Loan.
Interest Carry Forward Amount: As to the Class A or Class M Certificates
and any Distribution Date, the sum of (x) the amount, if any, by which (i) the
sum of the Current Interest and all prior unpaid Interest Carry Forward Amounts
for such Class as of the immediately preceding Distribution Date exceeded (ii)
the amount of the actual distribution with respect to interest made to such
Class on such Distribution Date plus (y) interest on such amount calculated for
the related Accrual Period at the related Pass-Through Rate in effect with
respect to such Class.
Interest Collections: As to any Distribution Date, the sum, without
duplication of:
(i) the portion allocable to interest of all scheduled monthly
payments on the Home Equity Loans received during the related Collection
Period, minus the Servicing Fee for the related Collection Period;
(ii) all Net Liquidation Proceeds actually collected by the
Master Servicer during the related Collection Period (to the extent such
Net Liquidation Proceeds relate to interest);
(iii) the interest portion of the Purchase Price for any Home
Equity Loan repurchased from the Trust pursuant to the terms of this
Agreement during the related Collection Period;
(iv) the interest portion of all Substitution Adjustment
Amounts with respect to the related Collection Period; and
(v) to the extent advanced by the Master Servicer pursuant to
Section 3.01(f) and not previously distributed, the amount of any
Skip-A-Pay Advance deposited by the Master Servicer into the Collection
Account with respect to such Distribution Date.
Interim Overcollateralization Amount: As to any Distribution Date, the
excess, if any, of (x) the Pool Balance as of the last day of the preceding
Collection Period over (y) (i) the aggregate Certificate Principal Balance of
all Class A and Class M Certificates (before taking into account any
distributions of principal on such Distribution Date) less (ii) the Principal
Collections for such Distribution Date.
Interim Overcollateralization Deficiency: As to any Distribution Date, the
excess, if any, of (x) the Targeted Overcollateralization Amount over (y) the
Interim Overcollateralization Amount.
LIBOR: The per annum rate established by the Trustee in accordance with
Section 9.14.
LIBOR Business Day: Any day on which dealings in United States dollars are
transacted in the London interbank market.
8
LIBOR Determination Date: As to any Distribution Date, the second LIBOR
Business Day before the first day of the related Accrual Period.
Lien: Any mortgage, deed of trust, pledge, conveyance, hypothecation,
assignment, participation, deposit arrangement, encumbrance, lien (statutory or
other), preference, priority right or interest or other security agreement or
preferential arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing or the filing of any financing statement under the UCC (other than any
such financing statement filed for informational purposes only) or comparable
law of any jurisdiction to evidence any of the foregoing.
Liquidated Home Equity Loan: As to any Distribution Date, any Home Equity
Loan in respect of which the Master Servicer has determined as of the end of the
related Collection Period that all Liquidation Proceeds which it expects to
recover on such Home Equity Loan have been recovered (exclusive of any
possibility of a deficiency judgment).
Liquidation Expenses: Out-of-pocket expenses (exclusive of overhead) that
are incurred by the Master Servicer in connection with the liquidation of any
Home Equity Loan and not recovered under any insurance policy, such expenses
including, without limitation, reasonable legal fees and expenses, any
unreimbursed amount expended pursuant to Section 3.06 (including, without
limitation, amounts advanced to correct defaults on any mortgage loan that is
senior to such Home Equity Loan and amounts advanced to keep current or pay off
a mortgage loan that is senior to such Home Equity Loan) with respect to the
related Home Equity Loan and any related and unreimbursed expenditures for real
estate property taxes, mechanics liens, title perfection, property management or
for property restoration, preservation or insurance against casualty loss or
damage.
Liquidation Proceeds: Proceeds (including Insurance Proceeds) received in
connection with the liquidation of any Home Equity Loan, whether through
trustee's sale, foreclosure sale or otherwise.
Loan Rate: As to any Home Equity Loan and day, the per annum rate of
interest applicable under the related Mortgage Note to the calculation of
interest for such day on the Principal Balance.
Master Servicer: Household Finance Corporation, a Delaware corporation, or
its successor in interest, or any successor master servicer appointed as herein
provided.
Monthly Excess Cashflow: As to any Distribution Date, the excess, if any,
of (i) the excess, if any, of (x) Interest Collections (for clarity purposes
only, net of any Servicing Fee) over (y) the Current Interest plus the Interest
Carry Forward Amount, if any, of all Class A and Class M Certificates (after
taking into account all distributions of interest on such Distribution Date)
over (ii) the Additional Principal Reduction Amount.
Moody's: Xxxxx'x Investors Service, Inc., or its successor in interest.
9
Mortgage: The mortgage, deed of trust or other instrument creating a
first, second or third lien on an estate in fee simple interest in real property
securing a Home Equity Loan.
Mortgage File: The mortgage documents (including without limitation the
related Mortgage Note) listed in Section 2.01 pertaining to a particular Home
Equity Loan and any additional documents required to be added to the Mortgage
File pursuant to this Agreement, which documents may be physical documents or,
pursuant to the terms of Section 2.01, may be optical images or other
representations thereof.
Mortgage Note: As to a Home Equity Loan, the mortgage note or other
evidence of indebtedness under which the related Mortgagor agrees to pay the
indebtedness evidenced thereby and secured by the related Mortgage.
Mortgaged Property: The underlying property securing a Home Equity Loan.
Mortgagor: The obligor or obligors under a Mortgage.
Net Liquidation Proceeds: As to any Liquidated Home Equity Loan,
Liquidation Proceeds less Liquidation Expenses.
Net Loan Rate: As to any Home Equity Loan, the Loan Rate less the
Servicing Fee Rate.
Officer's Certificate: A certificate signed by the President, a Senior
Vice President, a Vice President, the Treasurer, Assistant Treasurer, Controller
or Assistant Controller of the Depositor or the Master Servicer, as the case may
be, and delivered to the Trustee.
Opinion of Counsel: A written opinion of counsel acceptable to the
Trustee, who may be internal counsel for the Master Servicer or the Depositor.
Original Class Certificate Principal Balance: With respect to the Class A
and Class M Certificates, the amount set forth below:
CLASS ORIGINAL CLASS CERTIFICATE PRINCIPAL
BALANCE
----- ------------------------------------
A $900,771,000
M $112,596,000
Overcollateralization Amount: As to any Distribution Date, the excess, if
any, of (x) the Pool Balance as of the last day of the preceding Collection
Period over (y) the aggregate Certificate Principal Balance of all Class A and
Class M Certificates calculated after taking into account all distributions in
respect of principal on such Distribution Date.
Overcollateralization Release Amount: As to any Distribution Date, the
amount (but not in excess of the Principal Collections for such Distribution
Date) equal to the excess, if any, of (i) the Interim Overcollateralization
Amount over (ii) the Targeted Overcollateralization Amount.
10
Ownership Interest: As to any Certificate, any ownership or security
interest in such Certificate, including any interest in such Certificate as the
Holder thereof and any other interest therein, whether direct or indirect, legal
or beneficial, as owner or as pledgee.
Pass-Through Rate: Either the Class A Pass-Through Rate or the Class M
Pass-Through Rate, as the context requires.
Paying Agent: Any Person appointed as paying agent pursuant to Section
6.05.
Percentage Interest: For purposes of making distributions among
Certificates of the Class A or Class M Certificates, the percentage obtained by
dividing the principal denomination of such Certificate by the aggregate of the
principal denominations of all Certificates of such Class. In the case of the
Equity Certificate, the percentage interest set forth on the face of such Equity
Certificate.
Perfection Representations: The representations, warranties and covenants
set forth in Schedule 1 attached hereto.
Permitted Investments: One or more of the following (excluding any
callable investments purchased at a premium):
(i) direct obligations of, or obligations fully guaranteed as to
timely payment of principal and interest by, the United States or any
agency or instrumentality thereof, provided that such obligations are
backed by the full faith and credit of the United States;
(ii) repurchase agreements on obligations specified in clause (i)
maturing not more than three months from the date of acquisition thereof,
provided that the short-term unsecured debt obligations of the party
agreeing to repurchase such obligations are at the date of acquisition
rated by each Rating Agency in its highest short-term rating category
(which is "F1" for Fitch, "A-1+" for Standard & Poor's and "P-1" for
Moody's);
(iii) certificates of deposit, time deposits and bankers'
acceptances (which, if Xxxxx'x is a Rating Agency, shall each have an
original maturity of not more than 90 days and, in the case of bankers'
acceptances, shall in no event have an original maturity of more than 365
days) of any U.S. depository institution or trust company incorporated
under the laws of the United States or any state thereof and subject to
supervision and examination by federal and/or state banking authorities,
provided that the unsecured short-term debt obligations of such depository
institution or trust company at the date of acquisition thereof have been
rated by each of Moody's, Standard & Poor's and Fitch in its highest
unsecured short-term debt rating category;
(iv) commercial paper (having original maturities of not more than
270 days) of any corporation incorporated under the laws of the United
States or any state thereof which on the date of acquisition has been
rated by Fitch, Standard & Poor's and Moody's in their highest short-term
rating categories;
(v) short term investment funds sponsored by any trust company or
national banking association incorporated under the laws of the United
States or any state thereof
11
which on the date of acquisition has been rated by Fitch, Standard &
Poor's and Moody's in their respective highest rating category for
long-term unsecured debt, or any other short-term investment fund the
funds in which are invested in securities rated in the highest rating
category by Fitch, Standard & Poor's and Moody's and which mature on
demand or prior to the next Distribution Date;
(vi) interests in any money market fund which at the date of
acquisition has a rating of "Aaa" by Moody's and "AAA" by Fitch and
Standard & Poor's or such lower rating as will not result in the
qualification, downgrading or withdrawal of the then current rating
assigned to the Class A or Class M Certificates by each Rating Agency; and
(vii) other obligations or securities that are indebtedness in
registered form for U.S. federal income tax purposes and that are
acceptable to each Rating Agency as a Permitted Investment hereunder and
will not result in a reduction in the then-current rating of the Class A
or Class M Certificates, as evidenced by a confirmation or letter to such
effect from such Rating Agency;
provided that no instrument described hereunder shall evidence either the right
to receive (a) only interest with respect to the obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument if such interest and principal payments provide a
yield to maturity at par greater than 120% of the yield to maturity at par of
the underlying obligations; and provided, further, that no instrument described
hereunder may be purchased at a price greater than par if such instrument may be
prepaid or called at a price less than its purchase price prior to its stated
maturity.
Person: Any individual, corporation, partnership, joint venture,
association, limited liability company, joint-stock company, trust,
unincorporated organization, or government or any agency or political
subdivision thereof.
Pool Balance: As to any date, the aggregate of the outstanding Principal
Balances of all Home Equity Loans as of such date.
Pool Factor: As to any Distribution Date, the percentage, carried to seven
places, obtained by dividing the aggregate Certificate Principal Balance of the
Class A and Class M Certificates for such Distribution Date by the aggregate
Original Class Certificate Principal Balance of the Class A and Class M
Certificates.
Preferred Stock: As defined in Section 11.12.
Principal Balance: As to any Home Equity Loan (other than a Liquidated
Home Equity Loan) and date, the related Cut-Off Date Principal Balance, minus
the sum of (x) all collections credited against the principal balance of such
Home Equity Loan in accordance with the terms of the related Mortgage Note and
(y) any related Charge Off Amounts credited against the principal balance of
such Home Equity Loan prior to such date. For purposes of this definition, a
Liquidated Home Equity Loan shall be deemed to have a Principal Balance equal to
the Principal Balance of the related Home Equity Loan immediately prior to the
final recovery of related Liquidation Proceeds and a Principal Balance of zero
thereafter.
00
Xxxxxxxxx Xxxxx Xxxxxxx Xxxxxx: As to the Class A or Class M Certificates
and any Distribution Date, the amount, if any, by which (i) the amounts payable
to such Class pursuant to Section 5.01(a)(iv) and (v) (with respect to the Class
A Certificates) or pursuant to Section 5.01(a)(vii) and (viii) (with respect to
the Class M Certificates), as applicable, as of the preceding Distribution Date
exceeded (ii) the amount of the actual distributions made to such Class on such
prior Distribution Date pursuant to Section 5.01(a)(iv) and (v) (with respect to
the Class A Certificates) or pursuant to Section 5.01(a)(vii) and (viii) (with
respect to the Class M Certificates), as applicable.
Principal Collections: As to any Distribution Date, the sum, without
duplication, of:
(i) the principal portion of all scheduled monthly payments on the
Home Equity Loans received by the Master Servicer during the related Collection
Period;
(ii) the principal portion of the Purchase Price for any Home Equity
Loan repurchased from the Trust pursuant to the terms of this Agreement
during the related Collection Period;
(iii) the principal portion of all Substitution Adjustment
Amounts with respect to the related Collection Period;
(iv) all Net Liquidation Proceeds (excluding Foreclosure Profits and
Recovered Charge Off Amounts) actually received by the Master Servicer
during the related Collection Period (to the extent such Net Liquidation
Proceeds relate to principal); and
(v) the principal portion of all other unscheduled collections on
the Home Equity Loans received by the Master Servicer during the related
Collection Period (including, without limitation, full and partial
prepayments of principal made by the Mortgagors), to the extent not
previously distributed.
Principal Distribution Amount: As to any Distribution Date, (i) the
Principal Collections minus (ii) for Distribution Dates occurring on and after
the Stepdown Date and for which a Trigger Event is not in effect, the
Overcollateralization Release Amount, if any.
Principal Reduction Amount: As to any Distribution Date, an amount equal
to (i) the excess of (x) the Pool Balance as of the first day of the Collection
Period over (y) the Pool Balance as of the last day of the Collection Period
minus (ii) for Distribution Dates occurring on and after the Stepdown Date and
for which a Trigger Event is not in effect, the Overcollateralization Release
Amount, if any.
Private Holder: Each beneficial owner of a right to receive any payments
(including payments denominated as interest or principal) in respect of any
direct or indirect interest in the Trust, including any financial instrument or
contract the value of which is determined in whole or part by reference to the
Trust (including the Trust's assets, income of the Trust or distributions made
by the Trust), excluding any interest in the Trust represented by any Class A
Certificates, Class M Certificates or any other interest as to which the Trustee
has received an Opinion of Counsel to the effect that such Class A Certificates,
Class M Certificates or other interest will be
13
treated as debt or otherwise not as an equity interest in either the Trust or
the Trust Estate for federal income tax purposes, in each case, provided such
interest is not convertible or exchangeable into an interest in the Trust or the
Trust's income or equivalent value. Any Person holding more than one interest
each of which separately would cause such Person to be a Private Holder shall be
treated as a single Private Holder, and each holder of an interest in a Private
Holder which is a partnership, an S corporation or a grantor trust under the
Code (each, a "flow-through entity") shall be treated as a Private Holder
unless, based on an Opinion of Counsel, such holder of an interest in the
flow-through entity would not be a "partner" for purposes of United States
Treasury Regulations Section 1.7704-1(h)(3).
Purchase Price: As to any Home Equity Loan purchased from the Trust on any
date pursuant to Section 2.02, 2.04 or 3.01 an amount equal to the sum of (i)
the Principal Balance thereof plus any related Charge Off Amount as of the end
of the related Collection Period preceding the date of repurchase, and (ii)
accrued and unpaid interest to the end of such Collection Period computed on a
daily basis at the Net Loan Rate on the Principal Balance outstanding from time
to time.
Rating Agencies: Moody's, Standard & Poor's and Fitch or their respective
successors. If such agency or a successor is no longer in existence, "Rating
Agency" shall be such nationally recognized statistical credit rating agency, or
other comparable Person, designated by the Depositor, notice of which
designation shall be given to the Trustee. References herein to the highest
short term unsecured rating category of a Rating Agency shall mean "P-1" or
better in the case of Moody's, "A-1+" or better in the case of Standard & Poor's
and "F1" in the case of Fitch and in the case of any other Rating Agency shall
mean such equivalent ratings. References herein to the highest long-term rating
category of a Rating Agency shall mean "AAA" in the case of Fitch and Standard &
Poor's and "Aaa" in the case of Moody's and in the case of any other Rating
Agency, such equivalent rating.
Record Date: The last day preceding the related Distribution Date;
provided, however, that following the date on which Definitive Certificates are
available pursuant to Section 6.02(f), the Record Date shall be the last day of
the month preceding the month in which the related Distribution Date occurs.
Recovered Charge Off Amount: As to any Home Equity Loan that became a
Liquidated Home Equity Loan in a Collection Period, the amount, if any, by which
(i) its Net Liquidation Proceeds that are allocable to principal in accordance
with the related Mortgage Note exceeds (ii) its Principal Balance immediately
prior to foreclosure up to an amount of all related Charge Off Amounts, but in
no event less than zero.
Related Documents: As such term is defined in the Home Equity Loan
Purchase Agreement.
REO: A Mortgaged Property that is acquired by the Trust in a foreclosure
or by grant of deed in lieu of foreclosure.
Required Excess Cashflow: As to any Distribution Date, means 2.5%, divided
by 12, multiplied by the Pool Balance as of the first day of the related
Collection Period.
14
Responsible Officer: When used with respect to the Trustee, any officer at
the Corporate Trust Office of the Trustee with direct responsibility for the
administration of this Agreement, and any officer of the Trustee to whom matters
under this Agreement may be referred.
SAIF: The Savings Association Insurance Fund, as from time to time
constituted, created under the Financial Institutions Reform, Recovery and
Enhancement Act of 1989, or if at any time after the execution of this
instrument the Savings Association Insurance Fund is not existing and performing
duties now assigned to it, the body performing such duties on such date.
Sellers: Household Realty Corporation, Household Finance Corporation of
Alabama, Household Finance Corporation of California, Household Finance
Corporation II, Household Finance Corporation III, Household Finance Corporation
of West Virginia, Household Finance Realty Corporation of New York, Household
Financial Center Inc., Household Finance Realty Corporation of Nevada, Household
Finance Industrial Loan Company of Iowa, Household Finance Consumer Discount
Company, Household Industrial Finance Company and Mortgage One Corporation.
Servicer: As to each Home Equity Loan, the related Seller that sold such
Home Equity Loan to the Depositor pursuant to the Home Equity Loan Purchase
Agreement.
Servicing Certificate: A certificate completed by and executed on behalf
of the Master Servicer in accordance with Section 4.01.
Servicing Fee: The fee payable to the Master Servicer pursuant to Section
3.09, equal to 1/12th of the Servicing Fee Rate for each Home Equity Loan in the
Home Equity Loan Schedule multiplied by the outstanding Principal Balance of
such Home Equity Loan as of the first day of the related Collection Period.
Servicing Fee Rate: A rate equal to 0.50% per annum.
Servicing Officer: Any officer of the Master Servicer or other individual
designated by an officer of the Master Servicer involved in, or responsible for,
the administration and servicing of the Home Equity Loans, whose name and
specimen signature appear on a list of servicing officers furnished to the
Trustee on the Closing Date by the Master Servicer, as such list may be amended
from time to time.
60 Day Delinquency Percentage: As to any Collection Period, (a) the
aggregate of the Principal Balances of all Home Equity Loans that are 60 or more
days contractually delinquent, in bankruptcy, in foreclosure and REO, over (b)
the Pool Balance as of the end of such Collection Period.
60 Day+ Rolling Average: As to any Distribution Date, the average of the
60 Day Delinquency Percentage for each of the three (3) immediately preceding
Collection Periods.
Skip-A-Pay Advance: For any Collection Period, means the positive result,
if any, of the Required Excess Cashflow on the related Distribution Date, minus
the Monthly Excess Cashflow on the related Distribution Date. For the avoidance
of doubt, if the result of the foregoing
15
calculation is not a positive number, the Skip-A-Pay Advance for the related
Collection Period shall be zero.
Skip-A-Pay Reimbursement Amount: As of any Distribution Date means, the
positive result, if any, of the Monthly Excess Cashflow on such Distribution
Date, minus the Required Excess Cashflow on such Distribution Date.
Standard & Poor's: Standard & Poor's, a division of the XxXxxx-Xxxx
Companies, or its successor in interest.
Statistical Cut-Off Date: The close of business on February 14, 2002.
Stepdown Date: The later to occur of:
(i) the earlier to occur of (x) the Distribution Date in September
2004 and (y) the first Distribution Date on which the aggregate
Certificate Principal Balance of the Class A and Class M Certificates has
been reduced to zero, and
(ii) the first Distribution Date on which the Pool Balance has been
reduced to 50% of the Cut-Off Date Pool Balance.
Stepped Up Enhancement Level: As to any Distribution Date, two (2) times
the amount of the 60 Day+ Rolling Average.
Subsequent Cut-Off Date: As to each Eligible Substitute Home Equity Loan,
the close of business on the day designated as the "Subsequent Cut-Off Date"
with respect to the Eligible Substitute Home Equity Loan.
Substitution Adjustment Amount: As to any Defective Home Equity Loan or
any Home Equity Loan for which the Master Servicer elects to substitute pursuant
to Section 2.02(b) and the date on which a substitution thereof occurs pursuant
to Sections 2.02 or 2.04, the sum of:
(i) the excess, if any, of (a) the Principal Balance of such
Defective Home Equity Loan or such elected Home Equity Loan plus any
related Charge Off Amount as of the end of the related Collection Period
preceding the date of substitution (after the application of any principal
payments received on such Defective Home Equity Loan or such elected Home
Equity Loan on or before the date of the substitution of the applicable
Eligible Substitute Home Equity Loan or Loans) over (b) the aggregate
Principal Balance of the applicable Eligible Substitute Home Equity Loan
or Loans, plus
(ii) accrued and unpaid interest to the end of such Collection
Period computed on a daily basis at the Net Loan Rate on the Principal
Balance of such Defective Home Equity Loan or such elected Home Equity
Loan outstanding from time to time.
Supplemental Interest Amount: The Class A Supplemental Interest Amount or
Class M Supplemental Interest Amount, as applicable.
16
Targeted Overcollateralization Amount: As to any Distribution Date, (x) prior to
the Stepdown Date, 17% of the Cut-Off Date Pool Balance, and (y) on and after
the Stepdown Date and assuming a Trigger Event is not in effect, the lesser of
(i) 17% of the Cut-Off Date Pool Balance and (ii) the greater of (A) 34% of the
Pool Balance as of the last day of the related Collection Period and (B)
$5,629,818. If a Trigger Event is in effect on and after the Stepdown Date, the
Targeted Overcollateralization Amount shall be equal to the Targeted
Overcollateralization Amount for the immediately preceding Distribution Date.
Transfer: Any direct or indirect transfer, sale, pledge, hypothecation or
other form of assignment of any Ownership Interest in a Certificate.
Transfer Agreement: The transfer agreement dated as of March 15, 2002,
between the Trustee and each Seller pursuant to which the Sellers will assign to
the Trust all of their right, title and interest in and on the Transferred
Assets not otherwise transferred pursuant to the Home Equity Loan Purchase
Agreement.
Transfer Date: As to any Home Equity Loan transferred to or retransferred
from the Trust hereunder, the date on which such transfer or retransfer is made
under the terms hereof, which date shall be (i) in the case of the Home Equity
Loans originally listed on the Home Equity Loan Schedule, the Closing Date, and
(ii) in the case of any Eligible Substitute Home Equity Loan, the date on which
such Eligible Substitute Home Equity Loan is conveyed to the Trust under the
terms hereof.
Transferred Assets: All aspects, rights, title or interests of, in, to or
under the Home Equity Loans that are not otherwise conveyed hereunder pursuant
to Section 2.01, including, without limitation, all agreements, instruments and
other documents evidencing or governing the Mortgagor's obligations under the
Home Equity Loans or otherwise related thereto or establishing or setting forth
the terms and conditions thereof, and any amendments or modifications thereto,
and all property and collateral securing the borrowers obligations thereunder.
Trigger Event: Any Distribution Date on which the 60 Day+ Rolling Average
equals or exceeds 50% of the Enhancement Percentage; provided a Trigger Event
shall not be in effect if the Enhancement Percentage exceeds the Stepped Up
Enhancement Level.
Trust: The trust created by this Agreement and designated "Household Home
Equity Loan Trust 2002-1", the corpus of which consists of the Trust Fund.
Trust Fund: Consists of the Home Equity Loans, such assets as shall from
time to time be identified as deposited in the Collection Account (exclusive of
net earnings thereon), the Mortgage Notes and other Mortgage File documents for
the Home Equity Loans, any property that secured a Home Equity Loan and that has
become REO, the interest of the Depositor in certain hazard insurance policies
maintained by the Mortgagors or the Master Servicer in respect of the Home
Equity Loans, the Collection Account, the proceeds of each of the foregoing and
one share of Preferred Stock of the Depositor.
17
Trustee: Bank One, National Association, a national banking association,
or any successor Trustee appointed in accordance with this Agreement that has
accepted such appointment in accordance with this Agreement.
UCC: The Uniform Commercial Code, as in effect from time to time in any
specified jurisdiction.
Widely-Held Certification: A certification delivered to the Trustee by the
underwriters of the Class A and Class M Certificates to the effect that one or
more Classes of Class A and/or Class M Certificates will be owned on such date
by 100 or more investors independent of the Sellers, the Trust, the Depositor,
and each other.
Section 1.02. Interest Calculations. All calculations of interest
hereunder that are made in respect of the Principal Balance of a Home Equity
Loan shall be made based on the number of days elapsed between the date that
interest was last paid on such Home Equity Loan and the date of receipt of the
related Mortgagor's most current payment. All calculations of interest on the
Class A and Class M Certificates shall be made on the basis of a 360-day year
and the actual number of days in the related Accrual Period.
Section 1.03. Usage of Terms. As to all terms in this Agreement the
singular includes the plural and the plural the singular; words importing any
gender include the other gender; references to "writing" include printing,
typing, lithography, optical imaging, and other means of reproducing words in a
visible form; references to agreements and other contractual instruments include
all subsequent amendments thereto or changes therein entered into in accordance
with their respective terms and not prohibited by this Agreement; references to
Persons include their permitted successors and assigns; and the term "including"
means "including without limitation." The term "related Collection Period" as
used herein with respect to any Distribution Date shall mean the Collection
Period immediately preceding such Distribution Date and the term "preceding
Collection Period" as used herein with respect to any Distribution Date shall
mean the Collection Period preceding the related Collection Period for such
Distribution Date.
18
ARTICLE II
Conveyance of Home Equity Loans; Original Issuance of Certificates; Tax
Treatment
Section 2.01. Acknowledgment; Conveyance of Home Equity Loans; Custody
of Mortgage Files.
(a) The Depositor, concurrently with the execution and delivery of this
Agreement, does hereby irrevocably transfer, assign, sell, set over and
otherwise convey to the Trustee for the benefit of the Certificateholders
without recourse (subject to Sections 2.02 and 2.04) (i) all of its right, title
and interest in and to the unpaid principal balance of each Home Equity Loan and
each Eligible Substitute Home Equity Loan, including all Interest Collections
and Principal Collections in respect of any such Home Equity Loan received after
the Cut-Off Date with respect to each Initial Home Equity Loan and after the
Subsequent Cut-Off Date with respect to each Eligible Substitute Home Equity
Loan pursuant to the Home Equity Loan Purchase Agreement; (ii) property which
secured such Home Equity Loan and which has been acquired by foreclosure or deed
in lieu of foreclosure; (iii) its interest in any insurance policies in respect
of the Home Equity Loans; (iv) all proceeds of any of the foregoing; and (v) one
share of the Depositor's Preferred Stock.
(b) The Depositor agrees to take, or to cause to be taken, such actions
and to execute such documents (including without limitation the filing of all
necessary continuation statements for the UCC-1 financing statement filed in the
State of Illinois and the State of Delaware, as applicable (which shall have
been filed as promptly as practicable, but in no event later than 10 days
following the effective date of this Agreement), describing the Home Equity
Loans and naming the Depositor as seller and the Trustee as buyer, and any
amendments or other filings to the UCC-1 financing statement required to reflect
a change in the applicable UCC, or a change of the name or corporate structure
of the Depositor, or the filing of any additional UCC-1 financing statement due
to any change in the principal office of the Depositor) as are necessary to
perfect and protect the Certificateholders' interests in the Trust created
hereunder, including each Home Equity Loan and the proceeds thereof (other than
delivering to the Trustee possession of the Mortgage Files, which possession
will, subject to the terms hereof, be maintained by the Servicers on behalf of
the Master Servicer as custodian and bailee for the Trustee). The parties hereto
intend that the transactions set forth herein constitute a sale and not a pledge
by the Depositor to the Trust of all the Depositor's right, title and interest
in and to the Home Equity Loans and other Trust property as and to the extent
described above. In the event the transactions set forth herein are
characterized as a pledge and not a sale, the Depositor hereby grants to the
Trustee a security interest in all of the Depositor's right, title and interest
in, to and under the Home Equity Loans and such other Trust property, to secure
all of the Depositor's obligations hereunder, and this Agreement shall
constitute a security agreement under applicable law. With respect to the Home
Equity Loans sold by each Seller to the Depositor, the Master Servicer shall
cause such Seller to file as promptly as practicable, but in no event later than
ten days following the effective date of this Agreement, in the appropriate
public filing office or offices UCC-1 financing statements and continuation
statements describing such Home Equity Loans and naming such Seller as seller
and the Depositor as buyer, to file appropriate
19
continuation statements thereto, to file amendments thereto in the case of a
change in the applicable UCC, name change or change in corporate structure and
to file appropriate additional UCC-1 financing statements, if any, if such
Seller changes its jurisdiction of incorporation.
(c) In connection with such transfer and assignment by the Depositor
and the Master Servicer, acting through the Servicers, hereby acknowledge that
the Servicers are holding, with respect to the Home Equity Loans transferred on
the Closing Date, and will hold, with respect to each Eligible Substitute Home
Equity Loan, on and from the applicable Transfer Date, as custodian and bailee
for the Trustee, the following documents or instruments with respect to each
such Home Equity Loan:
(i) the original Mortgage Note with all intervening
endorsements showing a complete chain of title from the originator of
such Home Equity Loan to the Seller or a copy of such original Mortgage
Note with an accompanying lost note affidavit;
(ii) the original Mortgage, with evidence of recording
thereon, provided that if the original Mortgage has been delivered for
recording to the appropriate public recording office of the
jurisdiction in which the Mortgaged Property is located but has not yet
been returned to the Seller by such recording office, the Seller may
hold a copy of such original Mortgage; and
(iii) originals of any amendments to the Mortgage Note or
Mortgage, any modification or assumption agreements and any previous
assignments of such Home Equity Loan;
provided, however, that as to any Home Equity Loan, if, as evidenced by an
Opinion of Counsel delivered to and in form and substance satisfactory to the
Trustee, (x) an optical image or other electronic representation of the related
documents specified in clauses (i) through (iii) above are enforceable in the
relevant jurisdictions to the same extent as the original of such document and
(y) such optical image or other representation does not impair the ability of an
owner of such Home Equity Loan to transfer its interest in such Home Equity
Loan, such optical image or other representation may be held by the Master
Servicer, acting through the Servicers, as custodian and bailee for the Trustee,
in lieu of the physical documents specified above.
(d) Except as hereinafter provided, the Master Servicer, acting through
the Servicers, shall be entitled to maintain possession of all of the foregoing
documents and instruments, shall not be required to deliver any of them to the
Trustee and shall not be required to record an assignment of Mortgage in favor
of the Trustee with respect to any Home Equity Loan. In the event, however, that
possession of any of such documents or instruments is required by any Person
(including the Trustee) acting as successor master servicer pursuant to Section
7.04 or 8.02 in order to carry out the duties of Master Servicer hereunder, then
such successor shall be entitled to request delivery, at the expense of the
Master Servicer, of such documents or instruments by the Master Servicer and to
retain such documents or instruments for servicing purposes; provided that the
Trustee or such servicers shall maintain such documents at such offices as may
be required by any regulatory body having jurisdiction over such Home Equity
Loans.
20
(e) The Master Servicer's right to maintain possession, directly or
through the Servicers, of the documents enumerated above shall continue so long
as (i) at least two of Xxxxx'x, Standard & Poor's and Fitch assign a long-term
senior unsecured debt rating to HFC of at least "Baa3", in the case of Xxxxx'x,
"BBB", in the case of Fitch, and "BBB-", in the case of Standard & Poor's, or
such lower ratings as shall be acceptable to the Rating Agencies in order to
maintain their current ratings of the Class A and Class M Certificates, and (ii)
each of the Servicers remains an Affiliate of HFC. At such time as either of the
conditions specified in the preceding sentence is not satisfied, as promptly as
practicable, but in no event more than 90 days thereafter in the case of clause
(i) below and 60 days in the case of clause (ii) below, the Master Servicer
shall cause each Servicer, at such Servicer's expense or, at the Master
Servicer's discretion, the Master Servicer's expense, to (i) either (x) record
an assignment of Mortgage in favor of the Trustee (which may be a blanket
assignment if permitted by applicable law) with respect to each of the Home
Equity Loans being serviced by such Servicer in the appropriate real property or
other records or (y) deliver to the Trustee the assignment of such Mortgage in
favor of the Trustee in form for recordation, together with an Opinion of
Counsel addressed to the Trustee to the effect that recording is not required to
protect the Trustee's right, title and interest in and to the related Home
Equity Loan or to perfect a first priority security interest in favor of the
Trustee in the related Home Equity Loan, which Opinion of Counsel also shall be
reasonably acceptable to each of the Rating Agencies (as evidenced in writing),
and (ii) unless an Opinion of Counsel, reasonably acceptable to the Trustee and
the Rating Agencies (as evidenced in writing), is delivered to the Trustee to
the effect that delivery of the Mortgage Files is not necessary to protect the
Trustee's right, title and interest in and to the related Home Equity Loans or
to perfect a first priority security interest in favor of the Trustee in the
related Home Equity Loans, deliver the related Mortgage Files to the Trustee to
be held by the Trustee in trust, upon the terms herein set forth, for the use
and benefit of all present and future Certificateholders, and the Trustee shall
retain possession thereof except to the extent the Master Servicer or Servicers
require any Mortgage Files for normal servicing as contemplated by Section 3.08.
The Master Servicer shall cause the Servicers to appoint the Trustee their
attorney-in-fact to prepare, execute and record any assignments of Mortgages
required under this Section 2.01 in the event that the Servicers or the Master
Servicer should fail to do so on a timely basis.
(f) Within 90 days following delivery, if any, of the Mortgage Files to
the Trustee pursuant to the preceding subsection, the Trustee shall review each
such Mortgage File to ascertain that all required documents set forth in this
Section 2.01 have been executed and received and that such documents relate to
the Home Equity Loans identified on the Home Equity Loan Schedule, and in so
doing the Trustee may rely on the purported due execution and genuineness of any
signature thereon. If within such 90-day period the Trustee finds any document
constituting a part of a Mortgage File not to have been executed or received or
to be unrelated to the Home Equity Loans identified in said Home Equity Loan
Schedule or, if in the course of its review, the Trustee determines that such
Mortgage File is otherwise defective in any material respect, the Trustee shall
promptly upon the conclusion of its review notify the Depositor and the Master
Servicer, and the Depositor and the Master Servicer shall have a period of 90
days after such notice within which to correct or cure any such defect;
provided, however, that if such defect shall not have been corrected or cured
within such 90-day period due to the failure of the related office of real
property or other records to return any document constituting a part of a
Mortgage File, the Depositor or the Master Servicer shall so notify the Trustee
and the
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period during which such defect may be corrected or cured shall be extended for
one additional 90-day period.
(g) The Trustee shall have no responsibility for reviewing any Mortgage
File except as expressly provided in this Section 2.01. In reviewing any
Mortgage File pursuant to this Section 2.01, the Trustee shall have no
responsibility for determining whether any document is valid and binding,
whether the text of any assignment or endorsement is in proper or recordable
form (except, if applicable, to determine if the Trustee is the assignee or
endorsee), whether any document has been recorded in accordance with the
requirements of any applicable jurisdiction, or whether a blanket assignment is
permitted in any applicable jurisdiction, whether any Person executing any
document is authorized to do so or whether any signature thereon is genuine, but
shall only be required to determine whether a document has been executed, that
it appears to be what it purports to be and, where applicable, that it purports
to be recorded.
(h) The Master Servicer hereby confirms to the Trustee that on or prior
to the Closing Date and on or prior to the applicable Transfer Date with respect
to any Eligible Substitute Home Equity Loan, the portions of the Electronic
Ledger relating to such Home Equity Loans have been or will have been clearly
and unambiguously marked, and the appropriate entries have been or will have
been made in its general accounting records, to indicate that such Home Equity
Loans have been transferred to the Trustee and constitute part of the Trust in
accordance with the terms hereof.
Section 2.02. Acceptance by Trustee; Repurchase of Home Equity Loans;
Conveyance of Eligible Substitute Home Equity Loans.
(a) The Trustee hereby acknowledges receipt of all the right, title and
interest of the Depositor in and to the assets described Section 2.01(a)(i)
through (v), and all of the right, title and interest of the Sellers in and to
the Transferred Assets pursuant to the Transfer Agreement, including but not
limited to the transfer and assignment of the Mortgage Notes and the Mortgages,
and declares that it holds and will hold such documents and interests and all
amounts received by it in trust, upon the terms herein set forth, for the use
and benefit of all present and future Certificateholders. If the time to cure
any defect of which the Trustee has notified the Depositor and the Master
Servicer following the Trustee's review of the Home Equity Loan Files pursuant
to Section 2.01 has expired or if any loss is suffered by the Trustee, on behalf
of the Certificateholders, in respect of any Home Equity Loan as a result of (i)
a defect in any document constituting a part of a Mortgage File or (ii) the
related Seller's retention of such Mortgage File or an assignment of Mortgage
not having been recorded, the Depositor shall, in the case of a defect in such
document, or the Master Servicer shall, in the case of a loss resulting from
such Seller's retention of a Mortgage File or assignment of Mortgage not having
been recorded, on the Business Day next preceding the Distribution Date in the
month following the end of the Collection Period in which the time to cure such
defect expired or such loss occurred, either (i) repurchase the related Home
Equity Loan (a "Defective Home Equity Loan") (including any property acquired in
respect thereof and any insurance policy or insurance proceeds with respect
thereto) from the Trust at a price equal to the Purchase Price which shall be
accomplished by deposit by the Depositor or the Master Servicer, as applicable,
in the Collection Account pursuant to Section 3.02 on such next preceding
Business Day, or (ii)
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remove such Defective Home Equity Loan from the Trust and substitute in its
place an Eligible Substitute Home Equity Loan or Loans.
(b) The Master Servicer, in its sole discretion, shall have the right,
but not the obligation, to elect (by written notice sent to the Trustee) to
substitute in the place of any Home Equity Loan an Eligible Substitute Home
Equity Loan or Loans; provided that the aggregate of all substitutions pursuant
to this Section shall not exceed 30% of the Cut-Off Date Pool Balance.
(c) As to any Eligible Substitute Home Equity Loan or Loans, the Master
Servicer shall cause the related Seller to deliver to the Trustee with respect
to such Eligible Substitute Home Equity Loan or Loans an acknowledgment that the
related Seller is holding as custodian for the Trustee such documents and
agreements, if any, as are permitted to be held by the related Seller in
accordance with Section 2.01. An assignment of the Mortgage in favor of the
Trustee with respect to such Eligible Substitute Home Equity Loan or Loans shall
be required to be recorded in the appropriate real property or other records or
delivered to the Trustee with the Opinion of Counsel referred to in Section 2.01
under the same circumstances that all other assignments of Mortgage are required
to be recorded hereunder. For any Collection Period during which the Depositor
or the Master Servicer substitutes one or more Eligible Substitute Home Equity
Loans, the Master Servicer shall determine the Substitution Adjustment Amount.
The Depositor or the Master Servicer, as applicable, shall deposit the
Substitution Adjustment Amount in the Collection Account no later than the
Business Day next preceding the Distribution Date in the month following the end
of the Collection Period in which such substitution occurs. The Master Servicer
shall amend the Home Equity Loan Schedule to reflect the removal of the
Defective Home Equity Loan or Home Equity Loan for which the Master Servicer has
made a substitution election pursuant to Section 2.02(b) from the terms of this
Agreement and the substitution of the Eligible Substitute Home Equity Loan or
Loans. Upon such substitution, the Eligible Substitute Home Equity Loan or Loans
shall be subject to the terms of this Agreement in all respects, and the
Depositor shall be deemed to have made with respect to such Eligible Substitute
Home Equity Loan or Loans, as of the date of substitution, the covenants,
representations and warranties set forth in Section 2.04(b). The Trustee shall
upon satisfaction of the conditions in this subsection immediately take any
action requested by the Depositor, if any, to effect the reconveyance of such
Defective Home Equity Loan or such Home Equity Loan for which the Master
Servicer has made a substitution election so removed from the Trust to the
Depositor or the Master Servicer, as applicable. The procedures applied by the
Depositor or the Master Servicer in selecting each Eligible Substitute Home
Equity Loan shall not be adverse to the interests of the Certificateholders and
shall be comparable to the selection procedures applicable to the Home Equity
Loans originally conveyed hereunder.
(d) Upon receipt by the Trustee of (i) in the case of a repurchase, a
Servicing Certificate to the effect that the Purchase Price for any such
Defective Home Equity Loan or such Home Equity Loan for which the Master
Servicer has made a substitution election has been so deposited in the
Collection Account or (ii) in the case of a substitution, (A) a Servicing
Certificate to the effect that the Substitution Adjustment Amount, if any, has
been so deposited in the Collection Account and (B) an Officer's Certificate
reciting the transfer and assignment of the Eligible Substitute Home Equity
Loan(s) to the Trustee and, if required at such time, that the related Mortgage
File(s) for such Eligible Substitute Home Equity Loan(s) have been delivered to
the Trustee and the assignment(s) of Mortgage have been recorded, the Trustee
shall execute
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and deliver such instrument of transfer or assignment presented to it by the
Master Servicer, in each case without recourse, as shall be necessary to vest in
the Depositor or the Master Servicer, as applicable, legal and beneficial
ownership of such Defective Home Equity Loan or such Home Equity Loan for which
the Master Servicer has made a substitution election (including any property
acquired in respect thereof or proceeds of any insurance policy with respect
thereto). It is understood and agreed that the obligation of the Depositor or
the Master Servicer to repurchase or substitute for (to the extent permitted
herein) any Defective Home Equity Loan shall constitute the sole remedy
respecting such defect available to Certificateholders or the Trustee against
the Depositor or the Master Servicer, and such obligation on the part of the
Master Servicer shall survive any resignation or termination of the Master
Servicer hereunder.
Section 2.03. Representations, Warranties and Covenants of the Master
Servicer. The Master Servicer represents, warrants and covenants that as of the
Closing Date:
(a) The Master Servicer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power to own its assets and to transact the business in which it
is currently engaged. The Master Servicer is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which the
character of the business transacted by it or properties owned or leased by it
require such qualification and in which the failure to so qualify would have a
material adverse effect on the business, properties, assets, or condition
(financial or other) of the Master Servicer;
(b) The Master Servicer has the power and authority to make, execute,
deliver and perform its obligations under this Agreement and to perform its
obligations with respect to all of the transactions contemplated under this
Agreement, and has taken all necessary corporate action to authorize the
execution, delivery and performance of its obligations under this Agreement.
When executed and delivered, this Agreement will constitute the legal, valid and
binding obligation of the Master Servicer enforceable in accordance with its
terms, except as enforcement of such terms may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors' rights
generally and by the availability of equitable remedies (whether in a proceeding
at law or in equity);
(c) The Master Servicer is not required to obtain the consent of any
other Person or any consent, license, approval or authorization from, or
registration or declaration with, any governmental authority, bureau or agency
in connection with the execution, delivery, performance, validity or
enforceability of this Agreement, except for such consents, licenses, approvals
or authorizations, or registrations or declarations, as shall have been obtained
or filed, as the case may be;
(d) The execution and delivery of this Agreement and the performance of
the transactions contemplated hereby by the Master Servicer will not violate any
provision of any existing law or regulation or any order or decree of any court
applicable to the Master Servicer or any provision of the Certificate of
Incorporation or Bylaws of the Master Servicer, or constitute a material breach
of any mortgage, indenture, contract or other agreement to which the Master
Servicer is a party or by which the Master Servicer may be bound; and
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(e) No litigation or administrative proceeding of or before any court,
tribunal or governmental body is currently pending, or to the knowledge of the
Master Servicer threatened, against the Master Servicer or any of its properties
or with respect to this Agreement or the Certificates which in the opinion of
the Master Servicer has a reasonable likelihood of resulting in a material
adverse effect on the transactions contemplated by this Agreement.
The representations and warranties set forth in this Section 2.03 shall
survive the sale and assignment of the Home Equity Loans to the Trust. Upon
discovery of a breach of any representations and warranties which materially and
adversely affects the interests of the Certificateholders, the Person
discovering such breach shall give prompt written notice to the other parties.
Within 60 days (or such longer period as permitted by prior written consent of a
Responsible Officer of the Trustee) of its discovery or its receipt of notice of
such breach, the Master Servicer shall cure such breach in all material
respects.
Section 2.04. Representations and Warranties of the Depositor Regarding
this Agreement and the Home Equity Loans; Repurchases and Substitutions.
(a) The Depositor represents and warrants that as of the Closing Date:
(i) The Depositor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and has the corporate power to own its assets and to transact the
business in which it is currently engaged. The Depositor is duly
qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the character of the business
transacted by it or properties owned or leased by it require such
qualification and in which the failure to so qualify would have a
material adverse effect on the business, properties, assets or
condition (financial or other) of the Depositor;
(ii) The Depositor has the power and authority to make,
execute, deliver and perform its obligations under this Agreement and
to perform its obligations with respect to all of the transactions
contemplated under this Agreement, and has taken all necessary
corporate action to authorize the execution, delivery and performance
of its obligations under this Agreement. When executed and delivered,
this Agreement will constitute the legal, valid and binding obligation
of the Depositor enforceable in accordance with its terms, except as
enforcement of such terms may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally
and by the availability of equitable remedies (whether in a proceeding
at law or in equity);
(iii) The Depositor is not required to obtain the consent of
any other Person or any consent, license, approval or authorization
from, or registration or declaration with, any governmental authority,
bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Agreement, except for
such consents, licenses, approvals or authorizations, or registrations
or declarations, as shall have been obtained or filed, as the case may
be;
(iv) The execution and delivery of this Agreement and the
performance of the transactions contemplated hereby by the Depositor
will not violate any provision of any
25
existing law or regulation or any order or decree of any court
applicable to the Depositor or any provision of the Certificate of
Incorporation or Bylaws of the Depositor, or constitute a material
breach of any mortgage, indenture, contract or other agreement to which
the Depositor is a party or by which the Depositor may be bound; and
(v) No litigation or administrative proceeding of or before
any court, tribunal or governmental body is currently pending, or to
the knowledge of the Depositor threatened, against the Depositor or any
of its properties or with respect to this Agreement or the Certificates
which in the opinion of the Depositor has a reasonable likelihood of
resulting in a material adverse effect on the transactions contemplated
by this Agreement.
(b) The Depositor represents and warrants with respect to each Home
Equity Loan that as of the Closing Date with respect to the Initial Home Equity
Loans and the applicable Transfer Date with respect to any Eligible Substitute
Home Equity Loans (or to the extent expressly stated herein as of such other
time):
(i) This Agreement and the Transfer Agreement constitute a
valid transfer and assignment to the Trustee of all right, title and
interest of the Depositor and the Sellers, respectively, in and to the
Home Equity Loans, all monies due or to become due with respect
thereto, all proceeds thereof, such funds as are from time to time
deposited in the Collection Account (excluding any investment earnings
thereon) and all other property specified in the definition of "Trust"
as being part of the corpus of the Trust conveyed to the Trust by the
Depositor;
(ii) The information set forth in the Home Equity Loan
Schedule with respect to such Home Equity Loan is true and correct in
all material respects;
(iii) Immediately prior to the transfer and assignment by the
related Seller to the Depositor and the Trustee pursuant to the Home
Equity Loan Purchase Agreement and the Transfer Agreement, the Home
Equity Loan has not been assigned or pledged, and the related Seller
has good and marketable title thereto, and the related Seller is the
sole owner and holder of such Home Equity Loan free and clear of any
and all liens, claims, encumbrances, participation interests, equities,
pledges, charges or security interests of any nature, and has full
right and authority, under all governmental and regulatory bodies
having jurisdiction over the ownership of such Home Equity Loan, to
transfer and assign the same pursuant to the Home Equity Loan Purchase
Agreement and the Transfer Agreement;
(iv) Immediately prior to the transfer and assignment by the
Depositor to the Trustee pursuant to this Agreement, the Home Equity
Loan has not been assigned or pledged, and the Depositor has good and
marketable title thereto, and the Depositor is the sole owner and
holder of such Home Equity Loan free and clear of any and all liens,
claims, encumbrances, participation interests, equities, pledges,
charges or security interests of any nature, and has full right and
authority, under all governmental and regulatory bodies having
jurisdiction over the ownership of such Home Equity Loan, to transfer
and assign the same pursuant to this Agreement;
26
(v) The related Mortgage is a valid and subsisting first or
second lien, as set forth on the Home Equity Loan Schedule with respect
to such Home Equity Loan, on the property therein described, and the
related Mortgaged Property is free and clear of all encumbrances and
liens having priority over the first or second lien, as applicable, of
such Mortgage except for liens for (a) real estate taxes and special
assessments not yet delinquent; (b) any first and, if applicable,
second mortgage loan secured by such Mortgaged Property and specified
on the Home Equity Loan Schedule; (c) covenants, conditions and
restrictions, rights of way, easements and other matters of public
record as of the date of recording that are acceptable to mortgage
lending institutions generally; and (d) other matters to which like
properties are commonly subject which do not materially interfere with
the benefits of the security intended to be provided by such Mortgage;
(vi) To the best knowledge of the Depositor, there is no valid
offset, defense or counterclaim of any obligor under the Mortgage;
(vii) To the best knowledge of the Depositor, there is no
delinquent recording or other tax or fee or assessment lien against the
related Mortgaged Property;
(viii) To the best knowledge of the Depositor, there is no
proceeding pending or threatened for the total or partial condemnation
of the related Mortgaged Property, and such property is free of
material damage and is in good repair;
(ix) There are no mechanics' or similar liens or claims which
have been filed for work, labor or material affecting the related
Mortgaged Property which are, or may be, liens prior or equal to the
lien of the related Mortgage, except (a) liens which are fully insured
against by the title insurance policy referred to in clause (xiii) or
(b) liens which do not materially interfere with the collection of the
Home Equity Loan upon foreclosure or otherwise;
(x) As of the Cut-Off Date for the Initial Home Equity Loans
(or as of the applicable Transfer Date for any Eligible Substitute Home
Equity Loan), no scheduled monthly payment is more than 29 days
delinquent (measured on a contractual basis);
(xi) The related Mortgage File contains each of the documents
and instruments specified to be included therein (including, if
applicable, an appraisal (which may be an appraisal prepared using a
statistical data base));
(xii) The related Mortgage Note and the related Mortgage at
the time they were made complied in all material respects with
applicable state and federal laws, including, without limitation,
usury, truth-in-lending, real estate settlement procedures, consumer
credit protection, equal credit opportunity or disclosure laws
applicable to the Home Equity Loan;
(xiii) A lender's title insurance policy or binder was issued
on the date of origination of each Home Equity Loan for home equity
loans in excess of $50,000 (in excess of $75,000 in Oklahoma), and each
such policy is valid and remains in full force and effect, and a title
search or other assurance of title customary in the relevant
27
jurisdiction was obtained with respect to each Home Equity Loan as to
which no title insurance policy or binder was issued;
(xiv) The related Mortgaged Property is not a mobile home or a
manufactured housing unit that is not permanently attached to its
foundation;
(xv) As of the Statistical Cut-Off Date for the Initial Home
Equity Loans, no more than 0.32% of such Home Equity Loans (by Pool
Balance as of the Statistical Cut-Off Date) are secured by Mortgaged
Properties located in one United States postal zip code;
(xvi) As of the Statistical Cut-Off Date, the Combined
Loan-to-Value Ratio for each Initial Home Equity Loan was not in excess
of 115%;
(xvii) No selection procedure reasonably believed by the
Depositor to be adverse to the interests of the Certificateholders was
utilized in selecting the Home Equity Loan;
(xviii) The Depositor has not transferred the Home Equity
Loans to the Trust with any intent to hinder, delay or defraud any of
its creditors;
(xix) Each Mortgage Note and each Mortgage is in substantially
the form previously provided to the Trustee by the Depositor and each
Home Equity Loan is an enforceable obligation of the related Mortgagor;
(xx) The Depositor has not received a notice of default of any
senior mortgage loan with respect to the related Mortgaged Property
that has not been cured by a party other than the related Servicer;
(xxi) The Initial Home Equity Loan does not have an original
term to maturity in excess of 360 months; and as of the Statistical
Cut-Off Date for the Initial Home Equity Loans, the weighted average
remaining term to maturity of the Initial Home Equity Loans on a
contractual basis is approximately 298 months.
(xxii) The related Mortgaged Property consists of a single
parcel of real property with a one-to-four unit single family residence
erected thereon, or an individual condominium unit, planned unit
development unit or townhouse;
(xxiii) As of the Cut-Off Date, the average Principal Balance
of the Initial Home Equity Loans was $96,228; and
(xxiv) As of the Statistical Cut-Off Date, approximately
87.45% (by Pool Balance as of the Statistical Cut-Off Date) and 12.55%
(by Pool Balance as of the Statistical Cut-Off Date) of the Initial
Home Equity Loans are first and second liens, respectively.
(c) It is understood and agreed that the representations and warranties
set forth in this Section 2.04 shall survive the transfer and assignment of the
Home Equity Loans to the Trustee. Upon discovery by the Depositor, the Master
Servicer or the Trustee of a breach of any of the
28
representations and warranties set forth in this Section 2.04, without regard to
any limitation set forth in such representation or warranty concerning the
knowledge of the Depositor as to the facts stated therein, which materially and
adversely affects the interests of the Certificateholders in the related Home
Equity Loan, the person discovering such breach shall give prompt written notice
to the other parties and each Rating Agency. Within 60 days of its discovery or
its receipt of notice of such breach, or, with the prior written consent of a
Responsible Officer of the Trustee, such longer period not to exceed 90 days
specified in such consent, the Depositor or, as necessary, the Master Servicer
shall cure such breach in all material respects. With regard to any such breach
of the representations and warranties set forth in Section 2.04(b), unless, at
the expiration of such 60 day or longer period, such breach has been cured in
all material respects or otherwise does not exist or continue to exist, the
Depositor or the Master Servicer shall, not later than the Business Day next
preceding the Distribution Date in the month following the end of the Collection
Period in which any such cure period expired, either (i) repurchase such
Defective Home Equity Loan (including any property acquired in respect thereof
and any insurance policy or insurance proceeds with respect thereto) or (ii)
remove such Home Equity Loan from the Trust and substitute in its place an
Eligible Substitute Home Equity Loan or Loans, in the same manner and subject to
the same conditions as set forth in Section 2.02. Upon making any such
repurchase or substitution the Depositor or the Master Servicer, as applicable,
shall be entitled to receive an instrument of assignment or transfer from the
Trustee to the same extent as set forth in Section 2.02 with respect to the
repurchase or replacement of Home Equity Loans under that Section. Subject to
Section 2.04(d), it is understood and agreed that the obligation of the
Depositor or the Master Servicer to purchase or substitute for any such
Defective Home Equity Loan (or property acquired in respect thereof) shall
constitute the sole remedy against the Depositor or the Master Servicer
respecting such breach of the foregoing representations or warranties available
to Certificateholders or the Trustee against the Depositor or the Master
Servicer, and such obligation on the part of the Master Servicer shall survive
any resignation or termination of the Master Servicer hereunder.
(d) The Depositor and the Master Servicer, jointly and not severally,
agree to indemnify and hold harmless the Trust against any and all out-of-pocket
financial losses, claims, expenses, damages or liabilities to which the Trust
may become subject, insofar as such out-of-pocket financial losses, claims,
expenses, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any representation or warranty made by the Depositor in this
Section 2.04 on which the Trust has relied, being, or alleged to be, untrue or
incorrect in any material respect. This indemnity will be in addition to any
liability which the Depositor or the Master Servicer may otherwise have.
(e) Promptly after receipt by the Trust of notice of the commencement
of any action or proceeding in any way relating to or arising from this
Agreement, the Trustee will notify the Depositor and the Master Servicer of the
commencement thereof, but the omission so to notify the party from whom
indemnification is sought (the "Indemnifying Party") will not relieve the
Indemnifying Party from any liability which it may have to the party seeking
indemnification (the "Indemnified Party") except to the extent that the
Indemnifying Party is adversely affected by the lack of notice. In case any such
action is brought against the Indemnified Party, and it notifies the
Indemnifying Party of the commencement thereof, the Indemnifying Party will be
entitled to participate in the defense (with the consent of the Indemnified
Party which shall not be unreasonably withheld) of such action at the
Indemnifying Party's expense.
29
Section 2.05. Execution and Authentication of Certificates. The Trustee
on behalf of the Trust shall cause to be executed, authenticated and delivered
on the Closing Date to or upon the order of the Depositor, in exchange for the
Home Equity Loans, concurrently with the assignment and conveyance to the
Trustee of the Home Equity Loans, the Class A and Class M Certificates in
authorized denominations and the Equity Certificate, together evidencing the
ownership of the entire Trust.
Section 2.06. Tax Treatment.
(a) The Trust shall, and each Class A and Class M Certificateholder by
acceptance of its Class A or Class M Certificate, as applicable, does hereby
agree to, treat the Class A and Class M Certificates as debt for U.S. federal
income tax purposes of a disregarded entity under the principles of Treas. Reg.
Section 301.7701-3(b). It is the intention of the parties hereto that, solely
for federal, state and local income and other tax purposes, the Trust shall not
be treated as an entity separate from the Depositor and that all necessary
returns, reports or other forms shall be filed by the Depositor in a manner
consistent with such tax characterization.
(b) The Depositor has structured this Agreement and the Certificates
with the intention that the Class A and Class M Certificates will qualify under
applicable federal, state and local tax law as indebtedness, and the Equity
Certificate as equity of the Trust. The Depositor, the Master Servicer, the
Trustee, each Certificateholder and each Certificate Owner agree to treat and to
take no action inconsistent with the treatment of the Class A and Class M
Certificates (or beneficial interest therein) as indebtedness for purposes of
federal, state and local income or franchise taxes or any other tax imposed on
or measured by income. Each Certificateholder, by acceptance of its Certificate,
and each Certificate Owner, by acquisition of a beneficial interest in a
Certificate, agree to be bound by the provisions of this Section 2.6. Each
Certificateholder agrees that it will cause any Certificate Owner acquiring an
interest in a Class A or Class M Certificate through it to comply with this
Agreement as to its treatment of the Certificate as indebtedness under
applicable tax law, as described in this Section 2.6.
Section 2.07. Federal Income Tax Allocations. Net income of the Trust
for any month as determined for federal income tax purposes (and each item of
income, gain, loss, credit and deduction entering into the computation thereof)
shall be taken into account by the Depositor as the Holder of the Equity
Certificate.
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ARTICLE III
Administration and Servicing of Home Equity Loans
Section 3.01. The Master Servicer.
(a) The Master Servicer shall, or shall cause the Servicers to, service and
administer the Home Equity Loans in a manner consistent with the terms of this
Agreement and with general industry practice and shall have full power and
authority, acting alone or through the Servicers, to do any and all things in
connection with such servicing and administration which it may deem necessary or
desirable, it being understood, however, that the Master Servicer shall at all
times remain responsible to the Trustee and the Certificateholders for the
performance of its duties and obligations hereunder in accordance with the terms
hereof. Any amounts received by the related Servicer in respect of a Home Equity
Loan shall be deemed to have been received by the Master Servicer whether or not
actually received by it. Without limiting the generality of the foregoing, the
Master Servicer shall continue, and is hereby authorized and empowered by the
Trustee, to execute and deliver, on behalf of itself, the Certificateholders and
the Trustee or any of them, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge and all other
comparable instruments, with respect to the Home Equity Loans and with respect
to the Mortgaged Properties. Upon the written request of the Master Servicer,
the Depositor and the Trustee shall furnish the Master Servicer with any powers
of attorney and other documents necessary or appropriate to enable the Master
Servicer to carry out its servicing and administrative duties hereunder. The
Master Servicer in such capacity may also consent to the placing of a proposed
lien senior to that of the Mortgage on the related Mortgaged Property, provided
that such proposed lien is not secured by a note providing for negative
amortization and:
(x) (i) the Mortgage relating to the Home Equity Loan was in a first
lien position as of the Cut-Off Date and was in a first lien position
immediately prior to the placement of the proposed senior lien, and (ii) the
ratio of (a) the sum of the Principal Balance of the Home Equity Loan and
the principal balance of the mortgage loan to be secured by the proposed
senior lien to (b) the Appraised Value of the Mortgaged Property at the time
the Home Equity Loan was originated is not greater than (1) with respect to
Home Equity Loans with an original CLTV of 85% or less, 85%, (2) with
respect to Home Equity Loans with an original CLTV in excess of 85% and not
greater than 95%, 95% and (3) with respect to Home Equity Loans with an
original CLTV in excess of 95% and not greater than 115%, 115%;
(y) (i) the Mortgage relating to the Home Equity Loan was in a first or
second lien position at the time the related Home Equity Loan was conveyed
to the Trust and, immediately following the placement of such proposed
senior lien, such Mortgage will be in a second or, if such Mortgage was in a
second lien position at the time the related Home Equity Loan was conveyed
to the Trust, a third lien position and (ii) the principal balance of the
mortgage loan to be secured
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by the proposed senior lien and the rate at which interest accrues thereon
are no greater than those of the related Home Equity Loan as of the date it
was first conveyed to the Trust; or
(z) the Mortgage relating to the Home Equity Loan was in a second lien
position as of the Cut-Off Date and the proposed senior lien secures a
mortgage loan that refinances an existing first mortgage loan and the
outstanding principal amount of such mortgage loan immediately following
such refinancing and the rate at which interest accrues thereon are not
greater than that of such existing first mortgage loan at the date the
mortgage loan was originated.
(b) If (i) foreclosure proceedings are commenced with respect to any Home
Equity Loan with respect to which the Master Servicer has consented to the
placing of a subsequent senior lien pursuant to clause (x) in Section 3.01(a),
or (ii) any loss is suffered by the Trustee on behalf of the Certificateholders
in respect of any Home Equity Loan as a result of (x) a failure to file on or
within ten days following the effective date of this Agreement the UCC-l
financing statements referred to in Section 2.01 or (y) a failure to publish on
or prior to the Closing Date such notices reflecting the sale of the Home Equity
Loans as are described in Section 3440.1(h) of the California Civil Code, then
the Master Servicer shall repurchase or substitute for any adversely affected
Home Equity Loan on the Business Day preceding the next Distribution Date
following the end of the Collection Period during which such foreclosure
proceedings were commenced or such losses were suffered. Such repurchase or
substitution shall be accomplished in the same manner and subject to the same
conditions as set forth in Section 2.02. Upon making any such repurchase or
substitution the Master Servicer shall be entitled to receive an instrument of
assignment or transfer from the Trustee to the same extent as set forth in
Section 2.02.
(c) Upon the request of a Mortgagor or at the Master Servicer's own
initiative, the Master Servicer (or the related Servicer on behalf of the Master
Servicer) may waive, modify or vary any term of any Home Equity Loan or consent
to the postponement of strict compliance with any such term or in any manner
grant indulgence to any Mortgagor if:
(i) in the Master Servicer's (or such Servicer's) good faith
determination such waiver, modification, postponement or indulgence will
enhance recovery with respect to such Home Equity Loan; and
(ii) the Mortgagor is in default with respect to the Home Equity Loan,
or such default is, in the judgment of the Master Servicer (or such
Servicer) imminent.
(d) Subject to subparagraph (e) below, in addition to the circumstances
described under Section 3.01(c), the Master Servicer (or the related Servicer on
behalf of the Master Servicer) may waive, modify or vary any term of any Home
Equity Loan, if the purpose of such action is to reduce the likelihood of
prepayment or of default of such Home Equity Loan, to increase the likelihood of
repayment or repayment upon default of such Home Equity Loan, to increase the
likelihood of repayment in full of or recoveries under such Home Equity Loan, or
to otherwise benefit the Certificateholders, all in the reasonable judgment of
the Master Servicer.
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(e) Notwithstanding any provision in this Agreement to the contrary, the
Master Servicer may not defer the scheduled monthly interest and principal
payment on any Home Equity Loan that is not in default or (in the judgment of
the Master Servicer (or the related Servicer on behalf of the Master Servicer))
for which default is not imminent unless (i) the Master Servicer elects to make
a Skip-A-Pay Advance pursuant to subparagraph (f) below or (ii) each Rating
Agency advises in writing that as a result of such deferment the then current
rating of the Class A and Class M Certificates will not be withdrawn, suspended
or reduced; provided, however, that the Master Servicer may not defer the
scheduled monthly payment on any Home Equity Loan in reliance on clause (i)
above unless the Master Servicer determines, in its good faith judgment, that
such Skip-A-Pay Advance will be recoverable from future payments on the Home
Equity Loans.
(f) If during any Collection Period the Master Servicer deferred the
scheduled monthly payment on any Home Equity Loan that was not in default or for
which default was not imminent in reliance on clause (i) of subparagraph (e)
above, no later than 12:00 noon Chicago time on each Deposit Date, the Master
Servicer shall deposit into the Collection Account an amount equal to the
Skip-A-Pay Advance for such Collection Period. On each Distribution Date, the
Master Servicer shall be entitled to reimburse itself for all previously
unreimbursed Skip-A-Pay Advances from funds on deposit in the Collection
Account, before making any distributions to Certificateholders pursuant to
Section 5.01, up to an amount equal to the Skip-A-Pay Reimbursement Amount on
such Distribution Date; provided, however, that the Skip-A-Pay Reimbursement
Amount that the Master Servicer is entitled to receive on such Distribution Date
shall be reduced by the portion of such amount, if any, that was applied to
reduce the amount of funds that the Master Servicer was required to deposit or
to cause to be deposited into the Collection Account on the preceding Deposit
Date pursuant to Section 3.02(b).
(g) The relationship of the Master Servicer (and of any successor to the
Master Servicer as servicer under this Agreement) to the Trustee under this
Agreement is intended by the parties to be that of an independent contractor and
not that of a joint venturer, partner or agent.
(h) In the event that the rights, duties and obligations of the Master
Servicer are terminated hereunder, any successor to the Master Servicer in its
sole discretion may, to the extent permitted by applicable law, terminate the
existing subservicer arrangements with any Servicer or assume the terminated
Master Servicer's rights under such subservicing arrangements which termination
or assumption will not violate the terms of such arrangements.
Section 3.02. Collection of Certain Home Equity Loan Payments.
(a) The Master Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the Home Equity Loans, and
shall, to the extent such procedures shall be consistent with this Agreement,
follow such collection procedures as it follows with respect to home equity
loans in its servicing portfolio comparable to the Home Equity Loans. Consistent
with, and without limiting the generality of, the foregoing, the Master Servicer
may in its discretion (i) waive any late payment charge or any assumption fees
or other fees that may be collected in the ordinary course of servicing the Home
Equity Loans, (ii) arrange with a Mortgagor a schedule for the payment of
delinquent amounts, so long as such arrangement is consistent with the Master
Servicer's policies with respect to the home equity
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loans it owns or services, (iii) sell the Home Equity Loan at its fair market
value to a third party for collection activity or (iv) treat a Home Equity Loan
as current if the Mortgagor has made one scheduled payment (which, for the
purposes of this Section 3.02(a)(iii) only, is in accordance with the Master
Servicer's customary servicing practices and may be less than 100% of the
scheduled payment) to cure the delinquency status of such Home Equity Loan.
(b) The Master Servicer shall establish and maintain with the Trustee a
separate trust account (the "Collection Account") titled "Bank One, National
Association, as Trustee, in trust for the registered holders of Closed-End Home
Equity Loan Asset Backed Certificates, Series 2002-1". In the event that a
successor Trustee is appointed as provided in Section 9.07, a new Collection
Account shall be promptly established at and maintained by such successor
Trustee, and the title of the new Collection Account shall be "[Successor
Trustee], as Trustee, in trust for the registered holders of Closed-End Home
Equity Loan Asset Backed Certificates, Series 2002-1", and any amounts in the
old Collection Account shall be transferred to the new Collection Account. The
Collection Account shall be an Eligible Account. No later than 12:00 noon
Chicago time on each Deposit Date (or, if a Deposit Event has occurred and the
Master Servicer has not provided credit enhancement acceptable to each of the
Rating Agencies, within two (2) Business Days following receipt thereof), the
Master Servicer shall deposit or cause to be deposited into the Collection
Account the following payments and collections received or made by it with
respect to the Home Equity Loans (without duplication):
(i) Interest Collections (net of any Servicing Fee) on the Home
Equity Loans;
(ii) Principal Collections on the Home Equity Loans;
(iii) Insurance Proceeds (including, for this purpose, any amount
required to be paid by the Master Servicer pursuant to Section 3.04 and
excluding any portion thereof constituting Principal Collections); and
(iv) amounts required to be paid by the Master Servicer in connection
with the termination of the Trust pursuant to Section 10.01;
provided, however, that so long as a Deposit Event has not occurred (unless the
Master Servicer has provided credit enhancement acceptable to each of the Rating
Agencies), the amount of funds that the Master Servicer is required to deposit
or to cause to be deposited into the Collection Account on or before such
Deposit Date shall be reduced by the Skip-A-Pay Reimbursement Amount the Master
Servicer is entitled to receive on the next Distribution Date.
The foregoing requirements respecting deposits to the Collection Account are
exclusive, it being understood that, without limiting the generality of the
foregoing, fees (including annual fees) or late charge penalties payable by
Mortgagors, prepayment penalties, or amounts received by the Master Servicer or
a Servicer for the accounts of Mortgagors for application towards the payment of
taxes, insurance premiums, assessments and similar items for the account of the
related Servicer, if any, need not be deposited in the Collection Account.
(c) The Trustee shall hold amounts deposited in the Collection Account as
trustee for the Certificateholders. In addition, the Master Servicer shall
notify the Trustee in writing on each
34
Determination Date of the amount of payments and collections to be deposited in
the Collection Account with respect to the related Distribution Date.
(d) The Master Servicer may cause the institution maintaining the Collection
Account to invest any funds in the Collection Account in Permitted Investments
(including obligations of the Master Servicer or of any of its affiliates, if
such obligations otherwise qualify as Permitted Investments), which shall mature
or otherwise be available not later than the Business Day next preceding the
Distribution Date or on the Distribution Date next following the date of such
investment as long as such action does not result in a withdrawal or downgrading
of the then current ratings on the Class A and Class M Certificates by the
Rating Agencies (except that any investment in an obligation of the institution
with which the Collection Account is maintained may mature on or before 12:00
noon, Chicago time, on such Distribution Date) and shall not be sold or disposed
of prior to its maturity. In the event the Trustee is at any time maintaining
the Collection Account, any request by the Master Servicer to invest funds on
deposit in the Collection Account shall be in writing, shall be delivered to the
Trustee at or before 10:30 A.M., Chicago time, if such investment is to be made
on such day, and shall certify that the requested investment is a Permitted
Investment that matures at or prior to the time required hereby. Any such
investment shall be registered in the name of or controlled by the Trustee as
trustee hereunder or in the name of its nominee and to the extent such
investments are certificated they shall be maintained in the possession or
control of the Trustee in the state of its Corporate Trust Office. Except as
provided above, all income and gain realized from any such investment shall be
for the benefit of the Master Servicer and shall be subject to its withdrawal or
order from time to time. The amount of any losses incurred in respect of the
principal amount of any such investments shall be deposited in the Collection
Account by the Master Servicer out of its own funds immediately as realized.
(e) The Trustee is hereby authorized to execute purchases and sales of
Permitted Investments as directed by the Master Servicer through the facilities
of its own trading or capital markets operations. The Trustee shall send to the
Master Servicer statements reflecting the monthly activity for each such
purchase and sale made for the preceding month. Although the Master Servicer
recognizes that it may obtain a broker confirmation or written monthly statement
containing comparable information at no additional cost, the Master Servicer
hereby agrees that confirmations of investments are not required to be issued by
the Trustee for each month in which a monthly statement is rendered. No
statement need be rendered pursuant to the provision of this subsection if no
activity occurred in the account for such month.
Section 3.03. Withdrawals from the Collection Account.
(a) The Trustee shall withdraw or cause to be withdrawn funds from the
Collection Account for the following purposes:
(i) On each Distribution Date, to make distributions and payments to
Certificateholders pursuant to Section 5.01;
(ii) From time to time, to make investments in Permitted Investments
and to pay to the Master Servicer all income and gain earned in respect of
Permitted Investments or on funds deposited in the Collection Account;
35
(iii) To reimburse the Depositor or the Master Servicer to the extent
permitted by Section 7.03;
(iv) To withdraw any funds deposited in the Collection Account that
were not required to be deposited therein or were deposited therein in error
and to pay such funds to the appropriate Person;
(v) To pay to the party legally entitled by a final order of a court
of competent jurisdiction in an insolvency proceeding an amount equal to any
preference claim made with respect to amounts paid with respect to the Home
Equity Loans; provided that, if any such amount is later determined not to
be a preference by such court of competent jurisdiction and is returned to
the Master Servicer or any Servicer, such amount shall be redeposited into
the Collection Account by the Master Servicer;
(vi) to clear and terminate the Collection Account upon the
termination of this Agreement and to pay any amounts remaining therein to
the Equity Certificateholder; and
(vii) to reimburse the Master Servicer for Skip-A-Pay Advances to the
extent permitted by Section 3.01(f).
(b) If the Master Servicer deposits in the Collection Account any amount not
required to be deposited therein or credited thereto or any amount in respect of
payments by Mortgagors made by checks subsequently returned for insufficient
funds or other reason for non-payment, it may at any time withdraw such amount
from the Collection Account pursuant to Section 3.03(a)(iv), and any such
amounts shall not be included in Interest Collections and Principal Collections,
any provision herein to the contrary notwithstanding. Any withdrawal or debit
permitted by Section 3.03(a) may be accomplished by delivering an Officer's
Certificate to the Trustee which describes the purpose of such withdrawal
(including, without limitation, that any such amount was deposited in the
Collection Account in error or, in the case of returned checks, that such
amounts were properly debited, respectively). Upon receipt of any such Officer's
Certificate, the Trustee shall withdraw such amount for the account of the
Master Servicer. All funds deposited by the Master Servicer in the Collection
Account shall be held by the Trustee in trust for the Certificateholders, until
disbursed in accordance with Section 5.01 or withdrawn or debited in accordance
with this Section.
Section 3.04. Maintenance of Hazard Insurance; Property Protection
Expenses. Each Home Equity Loan requires that the borrower thereunder maintain
hazard insurance naming the Master Servicer or the related Servicer as loss
payee providing extended coverage in an amount which is at least equal to the
lesser of (i) the maximum insurable value of the Mortgaged Property or (ii) the
combined principal balance owing on such Home Equity Loan and any mortgage loan
senior to such Home Equity Loan from time to time. The Master Servicer
represents and warrants that it or the applicable Seller verified the existence
of such hazard insurance at the origination of the Home Equity Loan. The Master
Servicer shall also maintain on property acquired upon foreclosure, or by grant
of deed in lieu of foreclosure, hazard insurance with extended coverage in an
amount which is at least equal to the lesser of (i) the maximum insurable value
of the Mortgaged Property or (ii) the combined unpaid principal balance owing on
such Home Equity Loan and any mortgage loans senior to such Home Equity
36
Loans at the time of such foreclosure or grant of deed in lieu of foreclosure
plus accrued interest thereon. Amounts collected by the Master Servicer under
any such policies shall be deposited in the Collection Account to the extent
called for by Section 3.02. In cases in which any Mortgaged Property is located
in a federally designated flood area, the hazard insurance to be maintained for
the related Home Equity Loan shall include flood insurance. All such flood
insurance shall be in such amounts as are required under applicable guidelines
of Xxxxxx Xxx. The Master Servicer shall be under no obligation to require that
any Mortgagor maintain earthquake or other additional insurance and shall be
under no obligation itself to maintain any such additional insurance on property
acquired in respect of a Home Equity Loan, other than pursuant to such
applicable laws and regulations as shall at any time be in force and as shall
require such additional insurance. As to Mortgaged Properties acquired by the
Master Servicer as provided herein, the Master Servicer may satisfy its
obligation set forth in the first sentence of this Section 3.04 by self insuring
Mortgaged Properties for which the aggregate unpaid principal balance of the
related Home Equity Loans plus the outstanding balance of any mortgage loans
senior to such Home Equity Loans at the time title was acquired, plus accrued
interest (the "Combined Exposure"), was less than $500,000 (or such other amount
as the Master Servicer may in good faith determine from time to time) and by
causing hazard policies to be maintained with respect to Mortgaged Properties
for which the Combined Exposure equals or exceeds the self insurance threshold
established from time to time by the Master Servicer by maintaining a blanket
policy consistent with prudent industry standards insuring against hazard losses
on the Mortgaged Properties. Such policy may contain a deductible clause, in
which case the Master Servicer shall, in the event that there shall not have
been maintained on the related Mortgaged Property a policy complying with the
first sentence of this Section 3.04, and there shall have been a loss which
would have been covered by such policy, deposit in the Collection Account the
amount not otherwise payable under the blanket policy because of such deductible
clause.
Section 3.05. Assumption and Modification Agreements. In any case in which
a Mortgaged Property has been or is about to be conveyed by the Mortgagor, the
Master Servicer shall exercise or refrain from exercising its right to
accelerate the maturity of such Home Equity Loan consistent with the
then-current practice of the Master Servicer and without regard to the inclusion
of such Home Equity Loan in the Trust and not in the Master Servicer's
portfolio. If it elects not to enforce its right to accelerate or if it is
prevented from doing so by applicable law, the Master Servicer (so long as such
action conforms with the Master Servicer's underwriting standards at the time
for new originations) is authorized to take or enter into an assumption and
modification agreement from or with the Person to whom such Mortgaged Property
has been or is about to be conveyed, pursuant to which such Person becomes
liable under the Mortgage Note and, to the extent permitted by applicable law,
the Mortgagor remains liable thereon. The Master Servicer shall notify the
Trustee that any assumption and modification agreement has been completed by
delivering to the Trustee an Officer's Certificate certifying that such
agreement is in compliance with this Section and by forwarding to the applicable
Servicer on behalf of the Depositor or the Trustee, as applicable, the original
copy of such assumption and modification agreement. Any such assumption and
modification agreement shall, for all purposes, be considered a part of the
related Mortgage File to the same extent as all other documents and instruments
constituting a part thereof. No change in the terms of the related Mortgage Note
may be made by the Master Servicer in connection with any such assumption to the
extent that such change would not be permitted to be made in respect of the
original Mortgage Note pursuant to Section 3.01 unless the conditions specified
in Section 3.01 are satisfied. Any fee
37
collected by the Master Servicer for entering into any such agreement will be
retained by the Master Servicer as additional servicing compensation.
Section 3.06. Realization Upon Defaulted Home Equity Loans.
(a) The Master Servicer (or the Master Servicer together with the related
Seller as called for by the Home Equity Loan Purchase Agreement) shall foreclose
upon or otherwise comparably convert to ownership Mortgaged Properties securing
such of the Home Equity Loans as come into and continue in default when, in the
opinion of the Master Servicer based upon the practices and procedures referred
to in the following sentence, no satisfactory arrangements can be made for
collection of delinquent payments pursuant to Section 3.02; provided that if the
Master Servicer has actual knowledge or reasonably believes that any Mortgaged
Property is affected by hazardous or toxic wastes or substances and that the
acquisition of such Mortgaged Property would not be commercially reasonable,
then the Master Servicer will not cause the Trust to acquire title to such
Mortgaged Property in a foreclosure or similar proceeding. In connection with
such foreclosure or other conversion, the Master Servicer shall follow such
practices (including, in the case of any default on a related senior mortgage
loan, the advancing of funds to correct such default) and procedures as it shall
deem necessary or advisable and as shall be normal and usual in its general
mortgage servicing activities. The foregoing is subject to the proviso that the
Master Servicer shall not be required to expend its own funds in connection with
any foreclosure or towards the correction of any default on a related senior
mortgage loan or restoration of any property unless it shall determine that such
expenditure will increase Net Liquidation Proceeds. The Master Servicer will be
reimbursed out of Liquidation Proceeds for advances of its own funds to pay
Liquidation Expenses before any Net Liquidation Proceeds are deposited in the
Collection Account.
(b) In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall (i) so long as at least two of Xxxxx'x, Standard & Poor's and Fitch assign
a long-term unsecured debt rating to the Master Servicer of at least "Baa3", in
the case of Xxxxx'x, "BBB", in the case of Fitch, and "BBB-" in the case of
Standard & Poor's, be issued in the name of the related Servicer or (ii) if the
rating requirements in clause (i) are not satisfied, be issued to the Trustee,
or to its nominee on behalf of Certificateholders.
Section 3.07. [Reserved].
Section 3.08. Trustee to Cooperate.
(a) Upon any payment in full of the Principal Balance of any Home Equity
Loan, the Master Servicer is authorized to execute, pursuant to the
authorization contained in Section 3.01, if the assignments of Mortgage have
been recorded as required hereunder, an instrument of satisfaction regarding the
related Mortgage, which instrument of satisfaction shall be recorded by the
Master Servicer if required by applicable law and be delivered to the Person
entitled thereto. It is understood and agreed that no expenses incurred in
connection with such instrument of satisfaction or transfer shall be reimbursed
from amounts deposited in the Collection Account. If the Trustee is holding the
Mortgage Files, from time to time and as appropriate for the servicing or
foreclosure of any Home Equity Loan, the Trustee shall, upon request of the
Master Servicer
38
and delivery to the Trustee of a trust receipt signed by a Servicing Officer,
release the related Mortgage File to the Master Servicer, and the Trustee shall
execute such documents as shall be necessary to the prosecution of any such
proceedings or the taking of other servicing actions. Such trust receipt shall
obligate the Master Servicer to return the Mortgage File to the Trustee when the
need therefor by the Master Servicer no longer exists unless the Home Equity
Loan shall be liquidated, in which case, upon receipt of an Officer's
Certificate of the Master Servicer, the trust receipt shall be released by the
Trustee to the Master Servicer.
(b) In order to facilitate the foreclosure of the Mortgage securing any Home
Equity Loan that is in default following recordation of the assignments of
Mortgage in accordance with the provisions hereof, the Trustee shall, if the
Master Servicer so requests in writing and supplies the Trustee with appropriate
forms therefor, assign such Home Equity Loan for the purpose of collection to
the Master Servicer or to the related Servicer (any such assignment shall
unambiguously indicate that the assignment is for the purpose of collection
only), and, upon such assignment, such assignee for collection will thereupon
bring all required actions in its own name and otherwise enforce the terms of
the Home Equity Loan and deposit or credit the Net Liquidation Proceeds received
with respect thereto in the Collection Account. In the event that all delinquent
payments due under any such Home Equity Loan are paid by the Mortgagor and any
other defaults are cured then the assignee for collection shall promptly
reassign such Home Equity Loan to the Trustee and return it to the place where
the related Mortgage File was being maintained.
Section 3.09. Servicing Compensation; Payment of Certain Expenses by Master
Servicer. The Master Servicer shall be entitled to receive the Servicing Fee as
compensation for its services in connection with servicing the Home Equity
Loans. The Servicing Fee for each Collection Period shall be paid to the Master
Servicer out of Interest Collections prior to their deposit in the Collection
Account and shall not be the responsibility or liability of the Trust, the
Trustee or the Class A or Class M Certificateholders. Additional servicing
compensation in the form of late payment charges or other receipts not required
to be deposited in the Collection Account shall be retained by the Master
Servicer. The Master Servicer shall be required to pay all expenses incurred by
it in connection with its activities hereunder (including payment of Trustee
fees and all other fees and expenses not expressly stated hereunder to be for
the account of the Certificateholders) and shall not be entitled to
reimbursement therefor except as specifically provided herein.
Section 3.10. Annual Statement as to Compliance.
(a) The Master Servicer will deliver to the Trustee and a copy to each of
the Rating Agencies, on or before March 31 of each year, beginning March 31,
2003, an Officer's Certificate stating that (i) a review of the activities of
the Master Servicer during the preceding calendar year (or in the case of the
Officer's Certificate delivered in 2003, from the Closing Date) and of its
performance under this Agreement has been made under such officer's supervision
and (ii) to the best of such officer's knowledge, based on such review, the
Master Servicer has fulfilled all its material obligations under this Agreement
throughout such year (or in the case of the Officer's Certificate delivered in
2003, from the Closing Date), or, if there has been a default in the fulfillment
of any such obligation, specifying each such default known to such officer and
the nature and status thereof.
39
(b) The Master Servicer shall deliver to the Trustee and a copy to each of
the Rating Agencies, promptly after having obtained knowledge thereof, but in no
event later than five Business Days thereafter, written notice by means of an
Officer's Certificate of any event which with the giving of notice or the lapse
of time or both, would become an Event of Default.
Section 3.11. Annual Servicing Report. On or before March 31 of each year,
beginning March 31, 2003, the Master Servicer at its expense shall cause a firm
of nationally recognized independent public accountants (who may also render
other services to the Master Servicer) to furnish a report to the Trustee and a
copy to each of the Rating Agencies to the effect that such firm has examined
certain documents and records relating to the servicing of home equity loans by
the Master Servicer during the most recent calendar year (or in the case of the
report delivered in 2003, from the Closing Date) then ended under pooling and
servicing agreements (including this Agreement) substantially similar to this
Agreement and that such examination, which has been conducted substantially in
compliance with the audit guide for audits of non-supervised mortgagees approved
by the Department of Housing and Urban Development for use by independent public
accountants (to the extent that the procedures in such audit guide are
applicable to the servicing obligations set forth in such agreements), has
disclosed no items of noncompliance with the provisions of this Agreement which,
in the opinion of such firm, are material, except for such items of
noncompliance as shall be set forth in such report.
Section 3.12. Access to Certain Documentation and Information Regarding the
Home Equity Loans.
(a) The Master Servicer and the Servicers shall provide to the Trustee,
Class A or Class M Certificateholders that are federally insured savings and
loan associations, the Office of Thrift Supervision, the successor to the
Federal Home Loan Bank Board, the FDIC and the supervisory agents and examiners
of the Office of Thrift Supervision access to the documentation regarding the
Home Equity Loans required by applicable regulations of the Office of Thrift
Supervision and the FDIC (acting as operator of the SAIF or the BIF), such
access being afforded without charge but only upon reasonable request and during
normal business hours at the offices of the Master Servicer or the Servicers.
Nothing in this Section shall derogate from the obligation of the Master
Servicer to observe any applicable law prohibiting disclosure of information
regarding the Mortgagors, and the failure of the Master Servicer to provide
access as provided in this Section as a result of such obligation shall not
constitute a breach of this Section.
(b) No later than the Determination Date preceding the related Distribution
Date, the Master Servicer shall supply information in such form as the Trustee
shall reasonably request to the Trustee and the Paying Agent as is required in
the Trustee's reasonable judgment to enable the Paying Agent or the Trustee, as
the case may be, to make the required distributions and to furnish the required
reports to Certificateholders on such Distribution Date.
Section 3.13. Maintenance of Certain Servicing Insurance Policies. The
Master Servicer shall during the term of its service as master servicer maintain
in force (i) a policy or policies of insurance covering errors and omissions in
the performance of its obligations as master servicer hereunder and (ii) a
fidelity bond in respect of its officers, employees or agents. Each such policy
or policies and bond shall, together, comply with the requirements from time to
time of Xxxxxx Xxx for Persons performing servicing for mortgage loans purchased
by such association.
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Section 3.14. Reports to the Securities and Exchange Commission. The Master
Servicer shall, on behalf of the Trust, cause to be filed with the Securities
and Exchange Commission any periodic reports required to be filed under the
provisions of the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Securities and Exchange Commission thereunder.
Section 3.15. [Reserved].
Section 3.16. Information Required by the Internal Revenue Service
Generally and Reports of Foreclosures and Abandonments of Mortgaged Property.
The Master Servicer shall prepare and deliver, or cause to be prepared, mailed
and filed all federal and state information reports for the Home Equity Loans
when and as required by all applicable state and federal income tax laws
including, to the extent applicable, returns reporting a cancellation of
indebtedness as prescribed by Section 6050P of the Code. In particular, with
respect to the requirement under Section 6050J of the Code, to the effect that a
lender shall be required to report foreclosures and abandonments of any
mortgaged property for each year beginning in 2002, the Master Servicer shall
prepare, mail and file in a timely fashion each year as required by law
information statements in accordance with the reporting requirements imposed by
Section 6050J with respect to each instance occurring during the previous
calendar year in which the Master Servicer or any Servicer (i) on behalf of the
Trustee acquired an interest in any Mortgaged Property through foreclosure or
other comparable conversion in full or partial satisfaction of a Home Equity
Loan or (ii) knew or had reason to know that any Mortgaged Property has been
abandoned. The information statements from the Master Servicer shall be in form
and substance sufficient to meet the reporting requirements imposed by Section
6050J of the Code.
Section 3.17. Additional Covenants of HFC. HFC hereby agrees that:
(a) it will maintain its books and records to clearly note the separate
corporate existence of the Depositor, each Servicer and the Master Servicer;
(b) the Depositor, the Servicers and HFC will share certain overhead
expenses, although the amount the Depositor will be charged for such use will be
based on actual use to the extent practicable and, to the extent such allocation
is not practicable, on a basis reasonably related to use;
(c) separate financial records will be maintained to reflect the assets and
liabilities of the Depositor, HFC and each Servicer, which financial records are
and will be subject to audit by independent public accountants at the reasonable
request of the Board of Directors of the Depositor, HFC or such Servicer, as the
case may be;
(d) except as permitted hereunder, there will be no commingling of the
assets of the Depositor with the assets of HFC or any Servicer. All demand
deposit accounts and other bank accounts of the Depositor will be maintained
separately from those of HFC and the Servicers. Monetary transactions between
the Depositor and HFC or any Servicer are and will continue to be properly
reflected in their respective financial records;
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(e) HFC at all times will recognize, and will take all steps within its
power to maintain, the corporate existence of the Depositor and Servicers as
being separate and apart from its own corporate existence and will not refer to
the Depositor or any Servicer as a department or division of HFC; and
(f) Except as otherwise expressly provided herein, the Depositor and HFC
will not guaranty or advance the proceeds for payment of any obligations of the
Trust.
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ARTICLE IV
Servicing Certificate
Section 4.01. Servicing Certificate. Not later than each Determination
Date, the Master Servicer shall deliver to the Trustee, the Paying Agent and
each Rating Agency a Servicing Certificate (in written form or the form of
computer readable media or such other form as may be agreed to by the Trustee
and the Master Servicer), together with an Officer's Certificate to the effect
that such Servicing Certificate is true and correct in all material respects,
stating the related Collection Period, Distribution Date, the series number of
the Certificates, the date of this Agreement, and:
(i) the Available Distribution Amount for such Distribution Date,
separately stating the amount of Interest Collections and Principal
Collections;
(ii) the amount of the distributions to Holders of the Class A and
Class M Certificates for such Distribution Date, separately stating the
portions thereof allocable to interest and allocable to principal;
(iii) the amount of any Interest Carry Forward Amount and
Supplemental Interest Amount for each Class paid on such Distribution Date
and the amount of any Interest Carry Forward Amount or Supplemental Interest
Amount for each Class remaining after giving effect to the distributions on
such Distribution Date;
(iv) the amount of any Extra Principal Distribution Amount for such
Distribution Date;
(v) the Principal Distribution Amount for such Distribution Date,
separately stating the components thereof;
(vi) the amount of any Principal Carry Forward Amount for each Class
paid on such Distribution Date and the amount of any Principal Carry Forward
Amount for each Class remaining after giving effect to the distributions on
such Distribution Date;
(vii) the number and aggregate Principal Balance of any Home Equity
Loan purchased or substituted by the Depositor or the Master Servicer with
respect to the related Collection Period pursuant to Section 2.02;
(viii) the number and aggregate Principal Balance of any Home Equity
Loan purchased or substituted by the Depositor or the Master Servicer with
respect to the related Collection Period pursuant to Section 2.04;
(ix) the number and aggregate Principal Balance of any Home Equity
Loan purchased or substituted by the Depositor or the Master Servicer with
respect to the related Collection Period pursuant to Section 3.01;
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(x) the number and aggregate Principal Balance of any Home Equity
Loan that the Master Servicer has consented to the placement of a senior
lien during the related Collection Period pursuant to Section 3.01(a);
(xi) the amount of any Substitution Adjustment Amounts for such
Distribution Date;
(xii) the Servicing Fee for such Collection Period and any accrued
amounts thereof that remain unpaid for previous Collection Periods;
(xiii) the amount, if any, to be distributed to the Equity
Certificateholder on such Distribution Date;
(xiv) the Overcollateralization Amount, the Interim
Overcollateralization Amount, the Interim Overcollateralization Deficiency,
the Overcollateralization Release Amount, the Targeted Overcollateralization
Amount and the Monthly Excess Cashflow for such Distribution Date;
(xv) the number of Home Equity Loans outstanding at the beginning
and end of such Collection Period;
(xvi) the Pool Balance as of the end of such Collection Period;
(xvii) the Certificate Principal Balance of each Class of Certificates
and the Pool Factor after giving effect to the distribution on such
Distribution Date;
(xviii) the number and aggregate Principal Balances of Home Equity
Loans (x) as to which the scheduled monthly payment is contractually
delinquent for 30-59 days, 60-89 days and 90 or more days, respectively and
(y) that have become REO, in each case as of the end of such Collection
Period;
(xix) the unpaid principal amount of all Home Equity Loans that
became Liquidated Home Equity Loans during such Collection Period;
(xx) the book value of any real estate acquired through foreclosure
or grant of a deed in lieu of foreclosure;
(xxi) whether a Trigger Event has occurred or is continuing;
(xxii) such other information as is required by the Code and
regulations thereunder to be made available to Holders of the Class A and
Class M Certificates;
(xxiii) whether an Event of Default has occurred since the prior
Determination Date, specifying each such Event of Default if one has
occurred;
(xxiv) the Class A Formula Rate, Class A Pass-Through Rate, Class M
Formula Rate and Class M Pass-Through Rate for such Distribution Date;
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(xxv) the amount of any Skip-A-Pay Advances for the related
Collection Period; and
(xxvi) the Skip-A-Pay Reimbursement Amount for such Distribution Date.
The Trustee shall conclusively rely upon the information contained in a
Servicing Certificate for purposes of making distributions pursuant to Section
5.01, shall have no duty to inquire into such information and shall have no
liability in so relying. The format and content of the Servicing Certificate may
be modified by the mutual agreement of the Master Servicer and the Trustee or as
may be required by the rules and regulations of the Securities and Exchange
Commission. The Master Servicer shall give notice of any such change to the
Rating Agencies.
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ARTICLE V
Distributions and Statements to Certificateholders;
Rights of Certificateholders
Section 5.01. Distributions. (a) On each Distribution Date, the Trustee
shall withdraw an amount equal to the Available Distribution Amount from the
Collection Account and make distributions thereof as described below (to the
extent of the Available Distribution Amount) to Holders of the Certificates in
the following order of priority:
(i) to the Class A Certificates, the Current Interest plus the
Interest Carry Forward Amount with respect to the Class A Certificates;
provided that if the amount available is not sufficient to make a full
distribution of interest with respect to the Class A Certificates, the
amount of the shortfall will be carried forward with accrued interest;
(ii) to the Class M Certificates, the Current Interest plus the
Interest Carry Forward Amount with respect to the Class M Certificates;
provided that if the amount available is not sufficient to make a full
distribution of interest with respect to the Class M Certificates, the
amount of the shortfall will be carried forward with accrued interest;
(iii) to the Class A Certificates until the Certificate Principal
Balance of such Class A Certificates has been reduced to zero, 88.88892178%
of the Principal Distribution Amount;
(iv) to the Class A Certificates, the Principal Carry Forward Amount
with respect to the Class A Certificates;
(v) to the Class A Certificates until the Certificate Principal
Balance of such Class A Certificates has been reduced to zero, 88.88892178%
of the Additional Principal Reduction Amount;
(vi) to the Class M Certificates until the Certificate Principal
Balance of such Class M Certificates has been reduced to zero, 11.11107822%
of the Principal Distribution Amount;
(vii) to the Class M Certificates, the Principal Carry Forward Amount
with respect to the Class M Certificates;
(viii) to the Class M Certificates until the Certificate Principal
Balance of such Class M Certificates has been reduced to zero, 11.11107822%
of the Additional Principal Reduction Amount;
(ix) concurrently, to the Class A and Class M Certificates until the
Certificate Principal Balance of each such Class A and Class M Certificates
has been reduced to zero, 88.88892178% of the Extra Principal Distribution
Amount to the Class A Certificates and 11.11107822% of the Extra Principal
Distribution Amount to the Class M Certificates;
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(x) to the Class A and Class M Certificates, their pro rata share,
according to the outstanding Class A Supplemental Interest Amount and Class
M Supplemental Interest Amount, as applicable, of the aggregate Class A
Supplemental Interest Amount and Class M Supplemental Interest Amount;
(xi) to the Equity Certificate, any remaining Available Distribution
Amount; provided, however, that on any Distribution Date after the earlier
of (i) the date on which the first auction conducted by the Trustee pursuant
to Section 10.01(c) does not produce any bid at least equal to the
Termination Price or (ii) the March 2012 Distribution Date, any remaining
amount available for distribution pursuant to this Section 5.01(a)(xi) shall
instead be distributed concurrently, 88.88892178% to the Class A
Certificates and 11.11107822% to the Class M Certificates, in reduction of
the applicable Class or Classes' Certificate Principal Balance.
(b) Final Maturity of Class A and M Certificates. If either or both of the
Class A or the Class M Certificates remain outstanding on the March 2012
Distribution Date (after taking into account all distributions of principal to
such Classes of Certificates on such Distribution Date pursuant to subparagraph
(a) above) (the "Debt Repayment Date"), the Trustee shall sell the Trust
Property to accelerate the repayment of all of the accrued interest on and the
Certificate Principal Balance of the Class A and Class M Certificates by
soliciting at least two bids for the sale of the Home Equity Loans, and shall
sell to the highest bidder the number of Home Equity Loans (which may be less
than all of the Home Equity Loans) necessary to generate sufficient sales
proceeds to fully repay the Certificate Principal Balance of the Class A and
Class M Certificates, together with any unpaid Interest Carry Forward Amounts
allocable to such Classes, plus accrued interest on such Certificate Principal
Balance and any unpaid Interest Carry Forward Amounts to but excluding the date
on which such Home Equity Loans are sold (the "Sale Date") at the related
Pass-Through Rates (collectively, the "Debt Repayment Amount"). On the Sale
Date, the Trustee shall distribute such sales proceeds first to the Class A and
Class M Certificates, up to the Debt Repayment Amount, to retire such
Certificates, and shall distribute any remaining sales proceeds to the Equity
Certificate. The foregoing notwithstanding, to the extent that the Trustee,
after using commercially reasonable efforts to do so for 90 days following the
Debt Repayment Date, does not receive a bid for the sale of all of the Home
Equity Loans that will generate sales proceeds at least equal to the Debt
Repayment Amount, the Trustee shall (i) sell the Home Equity Loans to the
highest bidder and (ii) distribute the sales proceeds in accordance with the
payment priorities set forth in subparagraph (a) above, and terminate the Trust
pursuant to Section 10.01(a)(ii); provided, however, that the Trustee shall not
sell the Home Equity Loans and distribute the sales proceeds under this sentence
unless the Holders of the Class A and Class M Certificates evidencing Percentage
Interests aggregating not less than 66 2/3% of each of the Classes consent
thereto. If the Trustee is unable to obtain the consent of the Holders of the
Class A and Class M Certificates to do so, on each Distribution Date after the
Debt Repayment Date, the Trustee shall continue to distribute the Available
Distribution Amount to the Holders of the Certificates in accordance with the
payment priorities set forth in subparagraph (a) above.
(c) Method of Distribution. The Trustee shall make distributions in respect
of a Distribution Date to each Certificateholder of record on the related Record
Date (other than as provided in Section 10.01 respecting the final distribution)
by check or money order mailed to
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such Certificateholder at the address appearing in the Certificate Register, or
upon written request by a Certificateholder delivered to the Trustee at least
five Business Days prior to such Record Date, by wire transfer (but only if such
Certificateholder is the Depository or such Certificateholder owns of record one
or more Class of Certificates having principal denominations aggregating at
least $5,000,000), or by such other means of payment as such Certificateholder
and the Trustee shall agree. Distributions among Certificateholders shall be
made in proportion to the Percentage Interests evidenced by the Certificates
held by such Certificateholders.
(d) Distributions on Book-Entry Certificates. Each distribution with respect
to a Book-Entry Certificate shall be paid to the Depository, which shall credit
the amount of such distribution to the accounts of its Depository Participants
in accordance with its normal procedures. Each Depository Participant shall be
responsible for disbursing such distribution to the Certificate Owners that it
represents and to each indirect participating brokerage firm (a "brokerage firm"
or "indirect participating firm") for which it acts as agent. Each brokerage
firm shall be responsible for disbursing funds to the Certificate Owners that it
represents. All such credits and disbursements with respect to a Book-Entry
Certificate are to be made by the Depository and the Depository Participants in
accordance with the provisions of the Class A or Class M Certificates. None of
the Trustee, the Paying Agent, the Certificate Registrar, the Depositor or the
Master Servicer shall have any responsibility therefor except as otherwise
provided by applicable law.
Section 5.02. Statements to Certificateholders. (a) On each Determination
Date, the Master Servicer shall provide the Trustee and the Paying Agent access
to a statement in order to make available to each Certificateholder, and
concurrently with each distribution to Certificateholders the Trustee shall make
available to them such statement with respect to their distribution setting
forth:
(i) the amount of the distributions to Holders of the Class A and
Class M Certificates for such Distribution Date, separately stating the
portions thereof allocable to interest and allocable to principal;
(ii) the amount of any Interest Carry Forward Amount and
Supplemental Interest Amount for each Class paid on such Distribution Date
and the amount of any Interest Carry Forward Amount or Supplemental Interest
Amount for each Class remaining after giving effect to the distributions on
such Distribution Date;
(iii) the amount of any Extra Principal Distribution Amount for such
Distribution Date;
(iv) the Principal Distribution Amount for such Distribution Date,
separately stating the components thereof;
(v) the Principal Carry Forward Amount for each Class paid on such
Distribution Date and the amount of any Principal Carry Forward Amount for
each Class remaining after giving effect to the distribution s on such
Distribution Date;
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(vi) the number and aggregate Principal Balance of any Home Equity
Loans purchased by the Depositor or the Master Servicer with respect to the
related Collection Period pursuant to Sections 2.02, 2.04 and 3.01;
(vii) the amount of any Substitution Adjustment Amounts for such
Distribution Date;
(viii) the Servicing Fee for such Collection Period and any accrued
amounts thereof that remain unpaid for previous Collection Periods;
(ix) the amount, if any, to be distributed to the Equity
Certificateholder on such Distribution Date;
(x) the Overcollateralization Amount, the Interim
Overcollateralization Amount, the Interim Overcollateralization Deficiency,
the Overcollateralization Release Amount, the Targeted Overcollateralization
Amount and the Monthly Excess Cashflow for such Distribution Date;
(xi) the number of Home Equity Loans outstanding at the beginning
and end of such Collection Period;
(xii) the Pool Balance as of the end of such Collection Period;
(xiii) the Certificate Principal Balance of each Class of Certificates
and the Pool Factor after giving effect to the distribution on such
Distribution Date;
(xiv) the number and aggregate Principal Balances of Home Equity
Loans (x) as to which the scheduled monthly payment is contractually
delinquent for 30-59 days, 60-89 days and 90 or more days, respectively, and
(y) that have become REO, in each case as of the end of such Collection
Period;
(xv) the unpaid principal amount of all Home Equity Loans that
became Liquidated Home Equity Loans during such Collection Period;
(xvi) the book value of any real estate acquired through foreclosure
or grant of a deed in lieu of foreclosure;
(xvii) whether a Trigger Event has occurred or is continuing;
(xviii) such other information as is required by the Code and
regulations thereunder to be made available to Holders of the Class A and
Class M Certificates;
(xix) whether an Event of Default has occurred since the prior
Determination Date, specifying each such Event of Default if one has
occurred;
(xx) LIBOR for such Distribution Date;
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(xxi) the Class A Formula Rate, Class A Pass-Through Rate, Class M
Formula Rate and Class M Pass-Through Rate for such Distribution Date;
(xxii) the amount of any Skip-A-Pay Advances for the related
Collection Period; and
(xxiii) the Skip-A-Pay Reimbursement Amount for such Distribution Date.
(b) In the case of information furnished pursuant to clauses (i) and (ii)
above, the amounts shall be expressed as a dollar amount per Class A Certificate
or Class M Certificate, as applicable, with a $1,000 denomination.
The Trustee will make the reports referred to in this section (and, at its
option, any additional files containing the same information in an alternative
format) available each month to Certificateholders and other parties to this
Agreement via the Trustee's website, which is presently located at
xxx.xxx.xxxxxxx.xxx. Persons that are unable to use the above website are
entitled to have a paper copy mailed to them via first class mail by calling the
Trustee at (000) 000-0000. The Trustee shall have the right to change the way
the reports referred to in this section are distributed in order to make such
distribution more convenient and/or more accessible to the above parties and to
the Certificateholders. The Trustee shall provide timely and adequate
notification to all above parties and to the Certificateholders regarding any
such change.
(c) The Master Servicer shall also give access to such statement to each
Rating Agency at the time it gives access to such statement to the Trustee and
the Paying Agent.
(d) Within 60 days after the end of each calendar year, the Master Servicer
shall prepare or cause to be prepared and shall forward or give access to the
Trustee the information set forth in clauses (i) and (ii) above aggregated for
such calendar year. Such obligation of the Master Servicer shall be deemed to
have been satisfied to the extent that substantially comparable information
shall be provided by the Master Servicer pursuant to any requirements of the
Code.
(e) On each Distribution Date, the Master Servicer shall forward or give
access to the Trustee, in electronic or written form as may be agreed upon by
the Master Servicer and the Trustee, for making available to the Holder of the
Equity Certificate a copy of the report forwarded to the Holders of Class A
Certificates and Class M Certificates on such Distribution Date. The Master
Servicer shall also forward or give access to the Trustee, in electronic or
written form as may be agreed upon by the Master Servicer and the Trustee, for
making available to the Holder of the Equity Certificate a statement setting
forth the amount of the distribution to the Holder of the Equity Certificate,
together with such other information as the Master Servicer deems necessary or
appropriate.
(f) Within 90 days after the end of each calendar year, the Master Servicer
shall forward or give access to the Trustee for mailing to each Person who at
any time during the calendar year was the Holder of the Equity Certificate a
statement containing the applicable distribution information provided pursuant
to this Section aggregated for such calendar year or applicable portion thereof
during which such Person was the Holder of the Equity Certificate together with
any other information relating to the Trust reasonably required in order to
enable an Equity
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Certificateholder to timely prepare and file its U.S. federal income tax returns
and reports. Such obligation of the Master Servicer shall be deemed to have been
satisfied to the extent that substantially comparable information shall be
provided by the Master Servicer to the Trustee pursuant to any requirements of
the Code.
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ARTICLE VI
The Certificates
Section 6.01. The Certificates.
(a) The Class A, Class M and Equity Certificate shall be substantially in
the forms set forth in Exhibit A through Exhibit C, and shall, on original
issue, be executed by the Trustee on behalf of the Trust and authenticated and
delivered by the Trustee to or upon the order of the Depositor concurrently with
the sale and assignment to the Trustee of the Trust. The Class A Certificates
and Class M Certificates shall be initially evidenced by one or more
certificates representing the entire Original Class Certificate Principal
Balance, and shall be held in minimum dollar denominations of $1,000 and
multiples of $1,000 in excess thereof (except that one Certificate of the Class
A and Class M Certificates may be in a different denomination).
(b) The Certificates shall be executed on behalf of the Trust by manual or
facsimile signature of any officer of the Trustee duly authorized to execute
such Certificates on behalf of the Trust. Certificates bearing the manual or
facsimile signatures of individuals who were, at the time when such signatures
were affixed, authorized to sign on behalf of the Trustee shall bind the
Trustee, notwithstanding that such individuals or any of them have ceased to be
so authorized prior to the authentication and delivery of such Certificates or
did not hold such offices at the date of such Certificate. No Certificate shall
be entitled to any benefit under this Agreement, or be valid for any purpose,
unless such Certificate shall have been manually authenticated by the Trustee
substantially in the form provided for herein, and such authentication upon any
Certificate shall be conclusive evidence, and the only evidence, that such
Certificate has been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their authentication. Subject to Section
6.02, the Class A and Class M Certificates shall be Book-Entry Certificates. The
Equity Certificate shall not be a Book-Entry Certificate.
Section 6.02. Registration of Transfer and Exchange of Certificates.
(a) The Certificate Registrar shall cause to be kept at its corporate trust
office (which shall be the Corporate Trust Office if the Trustee is the
Certificate Registrar) a Certificate Register in which, subject to such
reasonable regulations as it may prescribe, the Certificate Registrar shall
provide for the registration of the Certificates and of transfers and exchanges
of the Certificates as herein provided. The Trustee shall initially serve as
Certificate Registrar for the purpose of registering the Certificates and
transfers and exchanges of Certificates as herein provided.
(b) Upon surrender for registration of transfer of any Certificate at any
office or agency of the Certificate Registrar maintained for such purpose
pursuant to the foregoing paragraph, and in the case of the Equity Certificate,
upon satisfaction of the conditions applicable to such Certificate set forth
below, the Trustee shall execute on behalf of the Trust and shall authenticate
and deliver in the name of the designated transferee or transferees, one or more
new Certificates
52
of a like Class and of the same aggregate Percentage Interest dated the date of
authentication by the Trustee.
(c) At the option of the Certificateholders, Certificates may be exchanged
for other Certificates, but solely for Certificates of like Class, in authorized
denominations and the same aggregate Percentage Interests, upon surrender of the
Certificates to be exchanged at any such office or agency. Whenever any
Certificates are so surrendered for exchange, the Trustee shall execute on
behalf of the Trust and shall authenticate and deliver the Certificates of such
Class which the Certificateholder making the exchange is entitled to receive.
Every Certificate presented or surrendered for registration of transfer or
exchange shall (if so required by the Trustee or the Certificate Registrar) be
duly endorsed by, or be accompanied by a written instrument of transfer in form
satisfactory to the Trustee and the Certificate Registrar duly executed by, the
Holder thereof or such Holder's attorney duly authorized in writing. In the case
of the Equity Certificate presented or surrendered for registration of transfer
or exchange, the instrument of transfer shall contain an investment letter
substantially in the form of Exhibit E, and shall be accompanied by an Opinion
of Counsel to the effect that such transfer will not subject the Trust or any
other Person to federal income taxation as an association or publicly traded
partnership taxable as a corporation or cause the holders of any Class A and
Class M Certificates unaffiliated with the Master Servicer to recognize income,
gain or loss for federal income tax purposes. Every Equity Certificate will bear
the legends set forth in Exhibit E.
(d) Except as provided in Section 6.02(f), the Book-Entry Certificates shall
at all times remain registered in the name of the Depository or its nominee and
at all times: (i) transfers of the Book-Entry Certificates may not be registered
by the Trustee except to another Depository; (ii) the Depository shall maintain
book-entry records with respect to the Certificate Owners and with respect to
ownership and registration of transfers of such Certificates; (iii) ownership
and registration of transfers of the Book-Entry Certificates on the books of the
Depository shall be governed by applicable rules established by the Depository;
(iv) the Depository may collect its usual and customary fees, charges and
expenses from its Depository Participants; (v) the Trustee shall deal with the
Depository as representative of the Certificate Owners of the Book-Entry
Certificates for purposes of exercising the rights of Holders under this
Agreement, and requests and directions for and votes of such representative
shall not be deemed to be inconsistent if they are made with respect to
different Certificate Owners; and (vi) the Trustee may rely and shall be fully
protected in relying upon information furnished by the Depository with respect
to its Depository Participants and furnished by the Depository Participants with
respect to indirect participating firms and Persons shown on the books of such
indirect participating firms as direct or indirect Certificate Owners.
(e) All transfers by Certificate Owners of Book-Entry Certificates shall be
made in accordance with the procedures established by the Depository Participant
or brokerage firm representing such Certificate Owners. Each Depository
Participant shall only transfer ownership interests represented by Book-Entry
Certificates of Certificate Owners that it represents or of brokerage firms for
which it acts as agent in accordance with the Depository's normal procedures.
The parties hereto are hereby authorized to execute a letter of representations
with the Depository or take such other action as may be necessary or desirable
to register a Book-Entry Certificate to the Depository. In the event of any
conflict between the terms of any such Letter of Representation and this
Agreement the terms of this Agreement shall control.
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(f) If (i) (x) the Depository or the Depositor advises the Trustee in
writing that the Depository is no longer willing or able to discharge properly
its responsibilities as Depository and (y) the Trustee or the Depositor is
unable to locate a qualified successor, (ii) the Depositor, at its sole option,
with the consent of the Trustee, elects to terminate the book-entry system
through the Depository or (iii) after the occurrence of an Event of Default, the
Certificate Owners of the Class A and Class M Certificates representing
Percentage Interests aggregating not less than 51% advises the Trustee and
Depository through the Financial Intermediaries and the Depository Participants
in writing that the continuation of a book-entry system through the Depository
to the exclusion of definitive, fully registered certificates (the "Definitive
Certificates") to Certificate Owners is no longer in the best interests of the
Certificate Owners, upon surrender to the Certificate Registrar of the Class A
and Class M Certificates by the Depository, accompanied by registration
instructions from the Depository for registration, the Trustee shall, at the
Master Servicer's expense, execute on behalf of the Trust and authenticate the
Definitive Certificates. None of the Depositor, the Master Servicer or the
Trustee shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Certificates, all references herein to
obligations imposed upon or to be performed by the Depository shall be deemed to
be imposed upon and performed by the Trustee, to the extent applicable with
respect to such Definitive Certificates, and the Trustee, the Certificate
Registrar, the Master Servicer and the Depositor shall recognize the Holders of
the Definitive Certificates as Certificateholders hereunder.
(g) No service charge shall be made for any Transfer or exchange of
Certificates of any Class, but the Trustee may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any Transfer or exchange of Certificates.
(h) All Certificates surrendered for Transfer and exchange shall be
cancelled and subsequently disposed of by the Certificate Registrar.
(i) Except in the case of the initial Transfer to the Depositor, no Transfer
of an Equity Certificate (or any other equity interests in the Trust) shall be
made unless such Transfer is exempt from the registration requirements of the
Securities Act of 1933, as amended, and any applicable state securities laws or
is made in accordance with said Act and laws. Except in the case of the initial
Transfer to the Depositor, as a condition to any Transfer of an Equity
Certificate, (i) the Trustee may require a written Opinion of Counsel acceptable
to and in form and substance satisfactory to the Trustee that such Transfer may
be made pursuant to an exemption, describing the applicable exemption and the
basis therefor, from said Act and laws or is being made pursuant to said Act and
laws, which Opinion of Counsel shall not be an expense of the Trustee, the
Master Servicer or the Trust and (ii) the Trustee may require the Transferee to
execute an investment letter acceptable to and in form and substance
satisfactory to the Trustee certifying to the Master Servicer, the Sellers and
the Trustee the facts surrounding such Transfer, which investment letter shall
not be an expense of the Trustee, the Master Servicer or the Trust Fund except
to the extent any of such parties is the transferor of such Certificate. The
Holder of an Equity Certificate desiring to effect such Transfer shall, and does
hereby agree to, indemnify the Trustee, the Master Servicer and the Trust
against any liability that may result if the Transfer is not so exempt or is not
made in accordance with such federal and state laws.
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(j) Except in the case of the initial Transfer of an Equity Certificate to
the Depositor, no Transfer of a Class A Certificate, Class M Certificate or
Equity Certificate with respect to which a Widely-Held Certification was not
delivered (each, an "ERISA-Restricted Certificate") shall be made unless the
Trustee shall have received a representation from the transferee of such
Certificate, acceptable to and in form satisfactory to the Trustee and the
Depositor, to the effect that such transferee is not an employee benefit plan or
arrangement as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") which is subject to Title I of ERISA
or a plan subject to Section 4975 of the Code, nor a person acting on behalf of
any such plan or arrangement nor using the assets of any such plan or
arrangement to effect such transfer. In the event that the foregoing
representation is violated, such attempted transfer or acquisition shall be void
and of no effect. The Trustee shall be under no liability to any Person for any
registration of Transfer of any ERISA-Restricted Certificate that is in fact not
permitted by this Section or for making any payments due on such Certificate to
the Holder thereof or taking any other action with respect to such Holder under
the provisions of this Agreement so long as the Transfer was registered by the
Trustee in accordance with the foregoing requirements.
(k) The Equity Certificate may not be offered, transferred or sold except to
the Depositor or an Affiliate thereof that is an institutional "accredited
investor" (as defined in Rule 501(a)(1)-(3) or (7) under the Securities Act of
1933, as amended, and who is a United States person (as defined in Section
7701(a)(30) of the Code) in reliance on an exemption from the registration
requirements of the Securities Act of 1933, as amended.
(l) The Equity Certificate may not be sold, pledged, transferred, assigned,
or otherwise conveyed, in whole or in part, without the prior written approval
of the Trustee. A legend to such effect shall be placed on the Equity
Certificate.
(m) To the fullest extent permitted by law, no admission (or purported
admission) of an Equity Certificateholder, and no transfer (or purported
transfer) of the Equity Certificate (or any economic interest therein) shall be
effective, and any such admission or transfer (or purported admission or
transfer) shall be void ab initio, and no Person shall otherwise become an
Equity Certificateholder, and the Trustee shall not register any such admission
or transfer (or purported admission or transfer) unless: (i) such Person is a
U.S. Person , (ii) such Person has delivered to the Trustee an investment letter
substantially in the form of Exhibit E and (iii) such admission or transfer
shall not result in there being more than 95 Private Holders. In addition, if at
any time the representations and warranties of the Depositor made pursuant to
Section 2.04 are untrue, or if at any time the certifications in the investment
letter substantially in the form of Exhibit E are untrue, then the purchase of
the Equity Certificate by such Person shall be void ab initio and of no effect.
To the fullest extent permitted by law, the Trust shall not recognize any
prohibited transfer described in this paragraph either (i) by redeeming the
transferor's interest, or (ii) by admitting the transferee as an Equity
Certificateholder or otherwise recognizing any right of the transferee
(including any right of the transferee to receive distributions from the Trust,
directly or indirectly). The Trustee shall be fully protected in relying upon
the certificates and opinions delivered to it hereunder in connection with any
purported transfer.
Section 6.03. Mutilated, Destroyed, Lost or Stolen Certificates. If (i) any
mutilated Certificate is surrendered to the Certificate Registrar or the
Certificate Registrar receives
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evidence to its satisfaction of the destruction, loss or theft of any
Certificate, and (ii) there is delivered to the Trustee, the Master Servicer and
the Certificate Registrar such security or indemnity as may be required by them
to save each of them harmless, then, in the absence of notice to the Trustee or
the Certificate Registrar that such Certificate has been acquired by a bona fide
purchaser, the Trustee shall execute on behalf of the Trust and shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate, a new Certificate of like Class, tenor
and Percentage Interest. Upon the issuance of any new Certificate under this
Section, the Trustee or the Certificate Registrar may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in relation thereto and any other expenses (including the fees and expenses of
the Trustee and the Certificate Registrar) connected therewith. Any duplicate
Certificate issued pursuant to this Section shall constitute complete and
indefeasible evidence of ownership in the Trust, as if originally issued,
whether or not the lost, stolen or destroyed Certificate shall be found at any
time.
Section 6.04. Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, the Master Servicer, the Depositor,
the Trustee, the Certificate Registrar and any agent of the Master Servicer, the
Depositor, the Trustee or the Certificate Registrar may treat the Person in
whose name any Certificate is registered as the owner of such Certificate for
the purpose of receiving distributions pursuant to Section 5.01 and for all
other purposes whatsoever, and none of the Master Servicer, the Depositor, the
Trustee, the Certificate Registrar or any agent of any of them shall be affected
by notice to the contrary.
Section 6.05. Appointment of Paying Agent.
(a) The Paying Agent shall make distributions to Certificateholders from the
Collection Account pursuant to Section 5.01 and shall report the amounts of such
distributions to the Trustee. The duties of the Paying Agent may include the
obligation (i) to withdraw funds from the Collection Account pursuant to Section
3.03 for the purpose of making the distributions referred to above and (ii) to
distribute statements and provide information to Certificateholders as required
hereunder. The Paying Agent hereunder shall at all times be a corporation duly
incorporated and validly existing under the laws of the United States of America
or any state thereof, authorized under such laws to exercise corporate trust
powers and subject to supervision or examination by federal or state
authorities. The Paying Agent shall initially be the Trustee. The Trustee may
appoint a successor to act as Paying Agent, which appointment shall be
reasonably satisfactory to the Depositor.
(b) The Trustee shall cause the Paying Agent (if other than the Trustee) to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee that such Paying Agent shall hold all sums, if any,
held by it for payment to the Certificateholders in trust for the benefit of the
Certificateholders entitled thereto until such sums shall be paid to such
Certificateholders and shall agree that it shall comply with all requirements of
the Code regarding the withholding of payments in respect of federal income
taxes due from Certificate Owners and otherwise comply with the provisions of
this Agreement applicable to it.
Section 6.06. Actions of Certificateholders.
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(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Agreement to be given or taken by
Certificateholders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Certificateholders in person or by
their agents duly appointed in writing; and except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Trustee and, when required, to the Depositor or the Master
Servicer. Proof of execution of any such instrument or of a writing appointing
any such agent shall be sufficient for any purpose of this Agreement and
conclusive in favor of the Trustee, the Depositor and the Master Servicer, if
made in the manner provided in this Section.
(b) The fact and date of the execution by any Certificateholder of any such
instrument or writing may be proved in any reasonable manner which the Trustee
deems sufficient.
(c) Any request, demand, authorization, direction, notice, consent, waiver
or other act by a Certificateholder shall bind every Holder of every Certificate
issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof, in respect of anything done, or omitted to be done, by the
Trustee, the Depositor or the Master Servicer in reliance therein, whether or
not notation of such action is made upon such Certificate.
(d) The Trustee may require such additional proof of any matter referred to
in this Section 6.06 as it shall deem necessary.
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ARTICLE VII
The Master Servicer and the Depositor
Section 7.01. Liability of the Master Servicer and the Depositor. The
Master Servicer shall be liable in accordance herewith only to the extent of the
obligations specifically imposed upon and undertaken by the Master Servicer
herein. The Depositor shall be liable in accordance herewith only to the extent
of the obligations specifically imposed upon and undertaken by the Depositor
herein.
Section 7.02. Merger or Consolidation of, or Assumption of the Obligations
of, the Master Servicer or the Depositor. Any corporation into which the Master
Servicer or Depositor may be merged or consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Master
Servicer or the Depositor shall be a party, or any corporation succeeding to the
business of the Master Servicer or the Depositor, shall be the successor of the
Master Servicer or the Depositor, as the case may be, hereunder, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding.
Section 7.03. Limitation on Liability of the Master Servicer, the Depositor
and Others. None of the Master Servicer, the Depositor, or any director,
officer, employee or agent of the Master Servicer or the Depositor shall be
under any liability to the Trust or the Certificateholders for any action taken
or for refraining from the taking of any action by the Master Servicer or the
Depositor, as applicable, in good faith pursuant to this Agreement, or for
errors in judgment; provided, however, that this provision shall not protect the
Master Servicer, the Depositor or any such person against any liability which
would otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties hereunder, and that this provision shall not be construed
to entitle the Master Servicer to indemnity in the event that amounts advanced
by the Master Servicer to retire any senior Lien exceed Net Liquidation Proceeds
realized with respect to the related Home Equity Loan. The Master Servicer, the
Depositor and any director, officer, employee or agent of the Master Servicer or
the Depositor may rely in good faith on any document of any kind prima facie
properly executed and submitted by any Person respecting any matters arising
hereunder. The Master Servicer, the Depositor and any director, officer,
employee or agent of the Master Servicer or the Depositor shall be indemnified
by the Trust and held harmless against any loss, liability or expense incurred
in connection with any legal action relating to this Agreement or the
Certificates, other than any loss, liability or expense related to any specific
Home Equity Loan or Home Equity Loans (except as any such loss, liability or
expense shall be otherwise reimbursable pursuant to this Agreement) and any
loss, liability or expense incurred by reason of willful misfeasance, bad faith
or gross negligence in the performance of duties hereunder or by reason of
reckless disregard of obligations and duties hereunder. Neither the Master
Servicer nor the Depositor shall be under any obligation to appear in, prosecute
or defend any legal action which is not incidental to its respective duties
under this Agreement, and which in its opinion may involve it in any expense or
liability; provided, however, that the Master Servicer or the Depositor may, in
its sole discretion, undertake any such
58
action which it may deem necessary or desirable in respect of this Agreement and
the rights and duties of the parties hereto and the interests of the
Certificateholders hereunder. In such event, the reasonable legal expenses and
costs of such action and any liability resulting therefrom and any claims by the
Master Servicer or the Depositor hereunder for indemnification shall be
expenses, costs and liabilities of the Trust, and the Master Servicer or the
Depositor, as the case may be, shall be entitled to be reimbursed therefor and
indemnified pursuant to the terms hereof from amounts deposited in the
Collection Account as provided by Section 3.03. The Master Servicer's and the
Depositor's right to indemnity or reimbursement pursuant to this Section shall
survive any resignation or termination of the Master Servicer pursuant to
Section 7.04 or 8.01 with respect to any losses, expenses, costs or liabilities
arising prior to such resignation or termination (or arising from events that
occurred prior to such resignation or termination). The Master Servicer shall
have no claim (whether by subrogation or otherwise) or other action against any
Certificateholder for any amounts paid by the Master Servicer pursuant to any
provision of this Agreement.
Section 7.04. Master Servicer Not to Resign. Subject to the provisions of
Section 7.02, the Master Servicer shall not resign from the obligations and
duties hereby imposed on it except (i) upon determination that the performance
of its obligations or duties hereunder are no longer permissible under
applicable law or are in material conflict by reason of applicable law with any
other activities carried on by it or its subsidiaries or Affiliates, the other
activities of the Master Servicer so causing such a conflict being of a type and
nature carried on by the Master Servicer or its subsidiaries or Affiliates at
the date of this Agreement or (ii) upon satisfaction of the following
conditions: (a) the Master Servicer has proposed a successor servicer to the
Trustee in writing and such proposed successor servicer is reasonably acceptable
to the Trustee; (b) each Rating Agency shall have confirmed to the Trustee that
the appointment of such proposed successor servicer as Master Servicer hereunder
will not result in the reduction or withdrawal of the then-current rating of the
Class A or Class M Certificates; and (c) such proposed successor servicer has
agreed in writing to assume the obligations of Master Servicer hereunder and the
Master Servicer has delivered to the Trustee an Opinion of Counsel to the effect
that all conditions precedent to the resignation of the Master Servicer and the
appointment of and acceptance by the proposed successor servicer have been
satisfied; provided, however, that in the case of clause (i) above no such
resignation by the Master Servicer shall become effective until the Trustee
shall have assumed the Master Servicer's responsibilities and obligations
hereunder or the Trustee shall have designated a successor servicer in
accordance with Section 8.02. Any such resignation shall not relieve the Master
Servicer of responsibility for any of the obligations specified in Sections 8.01
and 8.02 as obligations that survive the resignation or termination of the
Master Servicer. Any such determination permitting the resignation of the Master
Servicer pursuant to clause (i) above shall be evidenced by an Opinion of
Counsel to such effect delivered to the Trustee.
Section 7.05. Delegation of Duties. In the ordinary course of business, the
Master Servicer at any time may delegate any of its duties hereunder to any
Person, including any of its Affiliates, who agrees to conduct such duties in
accordance with standards comparable to those with which the Master Servicer
complies pursuant to Section 3.01. Such delegation shall not relieve the Master
Servicer of its liabilities and responsibilities with respect to such duties and
shall not constitute a resignation within the meaning of Section 7.04. The
Master Servicer shall provide each Rating Agency and the Trustee with written
notice prior to the delegation of any of
59
its duties to any Person other than any of the Master Servicer's Affiliates or
their respective successors and assigns.
ARTICLE VIII
Events of Default
Section 8.01. Events of Default. If any one of the following events
("Events of Default") shall occur and be continuing:
(a) Any failure by the Master Servicer to deposit in the Collection Account
any deposit required to be made under the terms of this Agreement which
continues unremedied for a period of five (5) Business Days after the date upon
which written notice of such failure shall have been given to the Master
Servicer by the Trustee, or to the Master Servicer and the Trustee by Holders of
Certificates evidencing not less than 51% of the aggregate Percentage Interests
of the Class A and Class M Certificates; or
(b) Any failure on the part of the Master Servicer duly to observe or
perform in any material respect any other covenants or agreements of the Master
Servicer set forth in the Certificates or in this Agreement, which failure (A)
materially and adversely affects the interests of Certificateholders and (B)
continues unremedied for a period of sixty (60) days after the date on which
written notice of such failure, requiring the same to be remedied, shall have
been given to the Master Servicer by the Trustee, or to the Master Servicer and
the Trustee by Holders of Certificates evidencing not less than 51% of the
aggregate Percentage Interests of the Class A and Class M Certificates; or
(c) The entry against the Master Servicer of a decree or order by a court or
agency or supervisory authority having jurisdiction in the premises for the
appointment of a trustee, conservator, receiver or liquidator in any insolvency,
conservatorship, receivership, readjustment of debt, marshalling of assets and
liabilities or similar proceedings, or for the winding up or liquidation of its
affairs, and the continuance of any such decree or order unstayed and in effect
for a period of 60 consecutive days; or
(d) The consent by the Master Servicer to the appointment of a trustee,
conservator, receiver or liquidator in any insolvency, conservatorship,
receivership, readjustment of debt, marshalling of assets and liabilities or
similar proceedings of or relating to the Master Servicer or of or relating to
substantially all of its property; or the Master Servicer shall admit in writing
its inability to pay its debts generally as they become due, file a petition to
take advantage of any applicable insolvency or reorganization statute, make an
assignment for the benefit of its creditors, or voluntarily suspend payment of
its obligations;
then, and in each and every case, so long as an Event of Default shall not have
been remedied by the Master Servicer, either the Trustee or the Holders of
Certificates evidencing not less than 51% of the aggregate Percentage Interests
of the Class A and Class M Certificates, by notice then given in writing to the
Master Servicer (and to the Trustee if given by the Class A and Class M
Certificateholders) may terminate all of the rights and obligations of the
Master Servicer as servicer under this Agreement; provided, however, that the
responsibilities and duties of the
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initial Master Servicer with respect to the purchase of Home Equity Loans
pursuant to Sections 2.04(c) and 3.01 shall not terminate. Any such notice to
the Master Servicer shall also be given to each Rating Agency. On or after the
receipt by the Master Servicer of such written notice, all authority and power
of, and all benefits accruing to, the Master Servicer under this Agreement,
whether with respect to the Certificates or the Home Equity Loans or otherwise,
shall pass to and be vested in the Trustee or, if a successor Master Servicer
has been appointed under Section 8.02, such successor Master Servicer pursuant
to and under this Section 8.01; and, without limitation, the Trustee is hereby
authorized and empowered to execute and deliver, on behalf of the Master
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments, and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement of each Home Equity Loan and related
documents, or otherwise. The Master Servicer agrees to cooperate with the
Trustee in effecting the termination of the responsibilities and rights of the
Master Servicer hereunder, including, without limitation, the transfer to the
Trustee for the administration by it of all cash amounts that shall at the time
be held by the terminated Master Servicer and to be deposited by it in the
Collection Account, or that have been deposited by the terminated Master
Servicer in the Collection Account or thereafter received by the terminated
Master Servicer with respect to the Home Equity Loans.
Notwithstanding the foregoing, a delay in or failure of performance under
Section 8.01(a) for a period of five (5) Business Days or under Section 8.01(b)
for a period of sixty (60) days, shall not constitute an Event of Default if
such delay or failure could not be prevented by the exercise of reasonable
diligence by the Master Servicer and such delay or failure was caused by an act
of God, acts of declared or undeclared war, public disorder, terrorism,
rebellion or sabotage, epidemics, landslides, lightning, fire, hurricanes,
earthquakes, floods or similar causes. The preceding sentence shall not relieve
the Master Servicer from using its best efforts to perform its obligations in a
timely manner in accordance with the terms of this Agreement, and the Master
Servicer shall provide the Trustee, the Depositor and the Class A and Class M
Certificateholders with an Officer's Certificate giving prompt notice of such
failure or delay by it, together with a description of its efforts to so perform
its obligations. The Master Servicer shall immediately notify the Trustee and
each Rating Agency in writing of any Events of Default.
Section 8.02. Trustee to Act; Appointment of Successor.
(a) On and after the time the Master Servicer receives a notice of
resignation or termination pursuant to Section 7.04 or 8.01, the Trustee shall
be the successor in all respects to the Master Servicer in its capacity as
servicer under this Agreement and the transactions set forth or provided for
herein and shall be subject to all the responsibilities, duties and liabilities
relating thereto placed on the Master Servicer by the terms and provisions
hereof; provided, however, that the responsibilities and duties of HFC as Master
Servicer with respect to the purchase of the Home Equity Loans pursuant to
Sections 2.04(c) and 3.01 shall not terminate. As compensation therefor, the
Trustee shall be entitled to such compensation as the Master Servicer would have
been entitled to hereunder if no such notice of termination had been given.
Notwithstanding the above, (i) if the Trustee is unwilling to act as successor
Master Servicer, or (ii) if the Trustee is legally unable so to act, the Trustee
may (in the situation described in clause (i)) or shall (in the situation
described in clause (ii)) appoint, or petition a court of competent jurisdiction
to appoint,
61
any housing and home finance institution or other mortgage loan or home equity
loan servicer having all licenses and permits required in order to perform its
obligations hereunder and a net worth of not less than $50,000,000 as the
successor to the Master Servicer hereunder in the assumption of all or any part
of the responsibilities, duties or liabilities of the Master Servicer hereunder;
provided that the appointment of any such successor Master Servicer will not
result in the qualification, reduction or withdrawal of the then-current rating
assigned to either the Class A or Class M Certificates by the Rating Agencies,
as evidenced by a writing to such effect delivered to the Trustee. Pending
appointment of a successor to the Master Servicer hereunder, unless the Trustee
is prohibited by law from so acting, the Trustee shall act in such capacity as
hereinabove provided. In connection with such appointment and assumption, the
successor shall be entitled to receive compensation out of payments on Home
Equity Loans in an amount equal to the compensation which the Master Servicer
would otherwise have received pursuant to Section 3.09 (or such lesser
compensation as the Trustee and such successor shall agree). The Trustee and
such successor shall take such action, consistent with this Agreement, as shall
be necessary to effectuate any such succession.
(b) Any successor, including the Trustee, to the Master Servicer as master
servicer shall during the term of its service as master servicer (i) continue to
service and administer the Home Equity Loans for the benefit of
Certificateholders and (ii) maintain in force a policy or policies of insurance
covering errors and omissions in the performance of its obligations as Master
Servicer hereunder and a fidelity bond in respect of its officers, employees and
agents to the same extent as the Master Servicer is so required pursuant to
Section 3.13. The appointment of a successor Master Servicer shall not affect
any liability of the predecessor Master Servicer which may have arisen under
this Agreement prior to its termination as Master Servicer (including, without
limitation, any deductible under an insurance policy pursuant to Section 3.04),
nor shall any successor Master Servicer be liable for any acts or omissions of
the predecessor Master Servicer or for any breach by such Master Servicer or the
Depositor of any of their representations or warranties contained herein or in
any related document or agreement.
Section 8.03. Notification to Certificateholders. Upon any termination or
appointment of a successor to the Master Servicer pursuant to this Article VIII,
the Trustee shall give prompt written notice thereof to the Certificateholders
at their respective addresses appearing in the Certificate Register and each
Rating Agency.
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ARTICLE IX
The Trustee
Section 9.01. Duties of Trustee. The Trustee, prior to the occurrence
of an Event of Default and after the curing of all Events of Default which may
have occurred, undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement. If an Event of Default of which a
Responsible Officer of the Trustee shall have actual knowledge has occurred
(which has not been cured), the Trustee shall exercise such rights and powers
vested in it by this Agreement, and use the same degree of care and skill in
their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his own affairs.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement.
No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own misconduct; provided, however, that:
(a) prior to the occurrence of an Event of Default of which a
Responsible Officer of the Trustee shall have actual knowledge, and after the
curing of all such Events of Default which may have occurred, the duties and
obligations of the Trustee shall be determined solely by the express provisions
of this Agreement, the Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this Agreement, no
implied covenants or obligations shall be read into this Agreement against the
Trustee and, in the absence of bad faith on the part of the Trustee, the Trustee
may conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or opinions furnished to
the Trustee and conforming to the requirements of this Agreement;
(b) the Trustee shall not be personally liable for an error of judgment
made in good faith by a Responsible Officer of the Trustee, unless it shall be
proved that the Trustee was negligent in performing its duties in accordance
with the terms of this Agreement;
(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 consent or in accordance with the direction of the Holders of Class A
and Class M Certificates evidencing not less than 51% of the aggregate
Percentage Interests of the Class A and Class M Certificates relating to the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred upon the Trustee, under
this Agreement; and
(d) the Trustee shall not be charged with knowledge of any failure by
the Master Servicer to comply with the obligations of the Master Servicer
referred to in clauses (a) and (b) of Section 8.01 unless a Responsible Officer
of the Trustee obtains actual knowledge of such failure or the
63
Trustee receives written notice of such failure from the Master Servicer or the
Holders of Class A and Class M Certificates evidencing not less than 51% of the
aggregate Percentage Interests of the Class A and Class M Certificates.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it, and
none of the provisions contained in this Agreement shall in any event require
the Trustee to perform, or be responsible for the manner of performance of, any
of the obligations of the Master Servicer under this Agreement, except during
such time, if any, as the Trustee shall be the successor to, and be vested with
the rights, duties, powers and privileges of, the Master Servicer in accordance
with the terms of this Agreement.
Section 9.02. Certain Matters Affecting the Trustee. Except as
otherwise provided in Section 9.01:
(a) the Trustee may request and rely upon, and shall be protected in
acting or refraining from acting upon, any resolution, Officer's Certificate,
Servicing Certificate, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, consent, order,
appraisal, bond or other paper or document reasonably believed by it to be
genuine and to have been signed or presented by the proper party or parties;
(b) the Trustee may consult with counsel and any written advice or
Opinion of Counsel shall be full and complete authorization and protection in
respect of any action taken or suffered or omitted by it hereunder in good faith
and in accordance with such advice or Opinion of Counsel;
(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; nothing contained herein shall,
however, relieve the Trustee of the obligations, upon the occurrence of an Event
of Default of which a Responsible Officer of the Trustee has actual knowledge
(which has not been cured), to exercise such of the rights and powers vested in
it by this Agreement, and to use the same degree of care and skill in their
exercise as a prudent person would exercise or use under the circumstances in
the conduct of his own affairs;
(d) the Trustee shall not be personally liable for any action taken,
suffered or omitted by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this Agreement;
(e) prior to the occurrence of an Event of Default of which a
Responsible Officer of the Trustee has actual knowledge and after the curing of
all Events of Default which may have occurred, the Trustee shall not be bound to
make any investigation into the facts or matters stated
64
in any resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, bond or other paper or documents, unless
requested in writing to do so by Holders of Class A and Class M Certificates
evidencing not less than 51% of the aggregate Percentage Interests of the Class
A and Class M Certificates; provided, however, that if the payment within a
reasonable time to the Trustee of the costs, expenses or liabilities likely to
be incurred by it in the making of such investigation is, in the opinion of the
Trustee, not reasonably assured to the Trustee by the security afforded to it by
the terms of this Agreement, the Trustee may require reasonable indemnity
against such cost, expense or liability as a condition to such proceeding. The
reasonable expense of every such examination shall be paid by the Master
Servicer or, if paid by the Trustee, shall be reimbursed by the Master Servicer
upon demand. Nothing in this clause (e) shall derogate from the obligation of
the Master Servicer to observe any applicable law prohibiting disclosure of
information regarding the Mortgagors; and
(f) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys or a custodian (except that the Trustee shall not be responsible for
selecting the Master Servicer as custodian and bailee).
Section 9.03. Trustee Not Liable for Certificates or Home Equity Loans.
The recitals contained herein and in the Certificates (other than the
authentication of the Trustee on the Certificates) shall be taken as the
statements of the Master Servicer, and the Trustee assumes no responsibility for
the correctness of the same. The Trustee makes no representations as to the
validity or sufficiency of this Agreement or of the Certificates (other than the
signature and authentication of the Trustee on the Certificates) or of any Home
Equity Loan or related document. The Trustee shall not be accountable for the
use or application by the Master Servicer of any of the Certificates or of the
proceeds of such Certificates, or for the use or application of any funds paid
to the Depositor or the Master Servicer in respect of the Home Equity Loans or
deposited in or withdrawn from the Collection Account by the Master Servicer.
The Trustee shall at no time have any responsibility or liability for or with
respect to the legality, validity and enforceability of any Mortgage or any Home
Equity Loan, or the perfection and priority of any Mortgage or the maintenance
of any such perfection and priority, or for or with respect to the sufficiency
of the Trust or its ability to generate the payments to be distributed to
Certificateholders under this Agreement, including, without limitation: the
existence, condition and ownership of any Mortgaged Property; the existence and
enforceability of any hazard insurance thereon (other than if the Trustee shall
assume the duties of the Master Servicer pursuant to Section 8.02); the
existence and contents of any Home Equity Loan on any computer or other record
thereof (other than if the Trustee shall assume the duties of the Master
Servicer pursuant to Section 8.02); the validity of the assignment of any Home
Equity Loan to the Trust or of any intervening assignment; the completeness of
any Home Equity Loan; the performance or enforcement of any Home Equity Loan
(other than if the Trustee shall assume the duties of the Master Servicer
pursuant to Section 8.02); the compliance by the Depositor or the Master
Servicer with any warranty or representation made under this Agreement or in any
related document or the accuracy of any such warranty or representation prior to
the Trustee's receipt of notice or other discovery of any non-compliance
therewith or any breach thereof; any investment of monies by or at the direction
of the Master Servicer or any loss resulting therefrom, it being understood that
the Trustee shall remain responsible for any Trust property that it may hold in
its individual capacity; the acts or omissions of the Depositor, the Master
Servicer (other than if the Trustee shall assume the duties of the Master
Servicer pursuant to Section 8.02), any Servicer
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(other than if the Trustee shall assume the duties of the Master Servicer
pursuant to Section 8.02 and shall engage such Servicer as its subservicer) or
any Mortgagor; any action of the Master Servicer (other than if the Trustee
shall assume the duties of the Master Servicer pursuant to Section 8.02), or any
Servicer (other than if the Trustee shall assume the duties of the Master
Servicer pursuant to Section 8.02 and shall engage such Servicer as its
subservicer) taken in the name of the Trustee; or any action by the Trustee
taken at the instruction of the Master Servicer in accordance with the terms of
this Agreement (other than if the Trustee shall assume the duties of the Master
Servicer pursuant to Section 8.02); provided, however, that the foregoing shall
not relieve the Trustee of its obligation to perform its duties under this
Agreement. The Trustee shall have no responsibility for filing any financing or
continuation statement in any public office at any time or to otherwise perfect
or maintain the perfection of any security interest or lien granted to it
hereunder (unless the Trustee shall have become the successor Master Servicer)
or to prepare or file any Securities and Exchange Commission filing for the
Trust or to record this Agreement.
Section 9.04. Trustee May Own Certificates. The Trustee in its
individual or any other capacity may become the owner or pledgee of Certificates
and may transact business with the Depositor, the Master Servicer and their
Affiliates with the same rights as it would have if it were not Trustee.
Section 9.05. Master Servicer to Pay Trustee's Fees and Expenses. The
Master Servicer covenants and agrees to pay to the Trustee from time to time,
and the Trustee shall be entitled to, reasonable compensation (which shall not
be limited by any provision of law in regard to the compensation of a trustee of
an express trust) for all services rendered by it in the execution of the trusts
hereby created and in the exercise and performance of any of the powers and
duties hereunder of the Trustee, and the Master Servicer will pay or reimburse
the Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any of the
provisions of this Agreement (including the reasonable compensation and the
expenses and disbursements of its counsel and of all persons not regularly in
its employ) except any such expense, disbursement or advance as may arise from
its negligence or bad faith. In addition, the Master Servicer and the Depositor,
jointly and severally, covenant and agree to indemnify the Trustee from, and
hold it harmless against, any and all losses, liabilities, damages, claims or
expenses other than those resulting from the Trustee's willful malfeasance, bad
faith or gross negligence or by reason of the Trustee's reckless disregard of
its obligations and duties hereunder.
Section 9.06. Eligibility Requirements for Trustee. The Trustee
hereunder shall at all times be a corporation duly incorporated and validly
existing under the laws of the United States of America or any state thereof,
authorized under such laws to exercise corporate trust powers, having a combined
capital and surplus of at least $50,000,000 and subject to supervision or
examination by federal or state authority. If such corporation publishes reports
of condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such corporation shall be deemed to
be its combined capital and surplus as set forth in its most recent report of
condition so published. The principal office of the Trustee (other than the
initial Trustee) shall be in a state with respect to which an Opinion of Counsel
has been delivered to such Trustee at the time such Trustee is appointed Trustee
to the effect that the Trust will not be
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a taxable entity under the laws of such state. In case at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section,
the Trustee shall resign immediately in the manner and with the effect specified
in Section 9.07.
Section 9.07. Resignation or Removal of Trustee. The Trustee may at any
time resign and be discharged from the trusts hereby created by giving written
notice thereof to the Depositor, the Master Servicer and each Rating Agency.
Upon receiving such notice of resignation, the Depositor shall promptly appoint
a successor Trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning Trustee and one copy to the
successor Trustee; provided, however, that any such successor Trustee shall be
subject to the prior written approval of the Master Servicer. If no successor
Trustee shall have been so appointed and have accepted appointment within 30
days after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 9.06 and shall fail to resign after written
request therefor by the Depositor, or if at any time the Trustee shall be
legally unable to act, or shall be adjudged a bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Depositor may remove the Trustee. If the Depositor removes the Trustee under the
authority of the immediately preceding sentence, the Depositor shall promptly
appoint a successor Trustee by written instrument, in duplicate, one copy of
which instrument shall be delivered to the Trustee so removed and one copy to
the successor Trustee.
Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor Trustee as
provided in Section 9.08.
Section 9.08. Successor Trustee. Any successor Trustee appointed as
provided in Section 9.07 shall execute, acknowledge and deliver to the Depositor
and to its predecessor Trustee an instrument accepting such appointment
hereunder, and thereupon the resignation or removal of the predecessor Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as Trustee. The Depositor, the Master Servicer and the predecessor Trustee
shall execute and deliver such instruments and do such other things as may
reasonably be required for fully and certainly vesting and confirming in the
successor Trustee all such rights, powers, duties and obligations.
No successor Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance (i) such successor Trustee shall
be eligible under the provisions of Section 9.06, (ii) the unsecured long-term
debt of such successor Trustee is rated at least "A3" by Xxxxx'x or (iii) the
Rating Agencies have confirmed that such successor Trustee will not result in a
withdrawal or a downgrading of the then current rating on the Class A or Class M
Certificates. The predecessor Trustee shall notify the Rating Agency of the
appointment of any successor Trustee.
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Upon acceptance of appointment by a successor Trustee as provided in
this Section, the Master Servicer shall mail notice of the succession of such
Trustee hereunder to all Holders of Certificates at their addresses as shown in
the Certificate Register and to each Rating Agency. If the Master Servicer fails
to mail such notice within 30 days after acceptance of appointment by the
successor Trustee, the successor Trustee shall cause such notice to be mailed at
the expense of the Master Servicer.
Section 9.09. Merger or Consolidation of Trustee. Any corporation into
which the Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to all or substantially all of the business of the Trustee, shall be
the successor of the Trustee hereunder, provided that such corporation shall be
eligible under the provisions of Section 9.06, without the execution or filing
of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding.
Section 9.10. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust or any Mortgaged Property may at the time be located, the Depositor
and the Trustee acting jointly shall have the power and shall execute and
deliver all instruments to appoint one or more Persons approved by them to act
as co-trustee or co-trustees, jointly with the Trustee, or separate trustee or
separate trustees, of all or any part of the Trust, and to vest in such Person
or Persons, in such capacity and for the benefit of the Certificateholders, such
title to the Trust, or any part thereof, and, subject to the other provisions of
this Section, such powers, duties, obligations, rights and trusts as the Master
Servicer and the Trustee may consider necessary or desirable. Any such
co-trustee or separate trustee shall be subject to the written approval of the
Master Servicer. If the Master Servicer shall not have joined in such
appointment within 15 days after the receipt by it of a request so to do, or in
the case an Event of Default shall have occurred and be continuing, the Trustee
alone shall have the power to make such appointment. No co-trustee or separate
trustee hereunder shall be required to meet the terms of eligibility as a
successor Trustee under Section 9.06 and no notice to Certificateholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 9.08.
Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(a) all rights, powers, duties and obligations conferred or imposed
upon the Trustee shall be conferred or imposed upon and exercised or performed
by the Trustee and such separate trustee or co-trustee jointly (it being
understood that such separate trustee or co-trustee is not authorized to act
separately without the Trustee joining in such act), except to the extent that
under any law of any jurisdiction in which any particular act or acts are to be
performed (whether as Trustee hereunder or as successor to the Master Servicer
hereunder), the Trustee shall be incompetent or unqualified to perform such act
or acts, in which event such rights, powers, duties and obligations (including
the holding of title to the Trust or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such separate trustee
or co-trustee, but solely at the direction of the Trustee;
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(b) no trustee hereunder shall be held personally liable by reason of
any act or omission of any other trustee hereunder; and
(c) the Master Servicer and the Trustee acting jointly may at any time
accept the resignation of or remove any separate trustee or co-trustee, except
that following the occurrence of an Event of Default which has not been cured,
the Trustee acting alone may accept the resignation of or remove any separate
trustee or co-trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then-separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article IX. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Depositor and the Master Servicer.
Any separate trustee or co-trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor Trustee.
Section 9.11. Trustee May Enforce Claims Without Possession of
Certificates. All rights of action and claims under this Agreement or the
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto. Any such proceeding instituted by the Trustee shall
be brought in its own name or in its capacity as Trustee. Any recovery of
judgment shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the benefit of the Certificateholders.
Section 9.12. Inspection of Mortgage Files. Following the time that the
Mortgage Files have been delivered to the Trustee upon reasonable prior notice
and during regular business hours, the Trustee shall permit representatives of
applicable state regulatory agencies to inspect the Mortgage Files on the
Trustee's premises or shall provide such documents at such places required by
state regulations, including the offices of the Servicers. Any loss incurred by
the Trustee in fulfilling such obligations shall be paid by the Master Servicer.
Section 9.13. Tax Returns. In the event the Trust shall be required to
file tax returns, the Master Servicer, as soon as practicable after it is made
aware of such requirement, shall prepare or cause to be prepared any tax returns
required to be filed by the Trust for execution by the Person holding the
largest percentage of the Equity Certificate, or such other Person as may be
required by law and, to the extent possible, shall file such returns at least
five days before such returns are due to be filed. The Master Servicer shall
also prepare or cause to be prepared all tax
69
information required by law to be distributed to Certificateholders and shall
deliver such information to the Trustee at least five days prior to the date it
is required by law to be distributed to Certificateholders. The Master Servicer,
upon request, shall furnish the Trustee with all such information known to the
Master Servicer as may be reasonably required in connection with the preparation
of all tax returns of the Trust. In no event shall the Trustee or the Master
Servicer be liable for any liabilities, costs or expenses of the Trust, the
Certificateholders or the Certificate Owners arising under any tax law,
including without limitation federal, state, local or foreign income taxes or
any other tax imposed on or measured by income (or any interest or penalty with
respect thereto or arising from a failure to comply therewith)
Section 9.14. Calculation of LIBOR. Until the Principal Balance of each
of the Class A and Class M Certificates has been reduced to zero, the Trustee
shall establish LIBOR on each LIBOR Determination Date as follows:
(a) If on such LIBOR Determination Date a rate for United States dollar
deposits for one month appears on the Dow Xxxxx Telerate System, page 3750,
LIBOR for the next Accrual Period shall be equal to such rate as of 11:00 A.M.,
London time;
(b) If such rate does not appear on such page (or such other page as
may replace that page on that service, or if such service is no longer offered,
such other service for displaying LIBOR or comparable rates as may be selected
by the Trustee after consultation with the Master Servicer), the rate shall be
determined as follows:
(i) The Trustee on the LIBOR Determination Date will request
the principal London offices of each of four major reference
banks in the London interbank market, as selected by the
Trustee, to provide the Trustee with its offered quotation for
deposits in United States dollars for the upcoming one-month
period, commencing on the second LIBOR Business Day
immediately following such LIBOR Determination Date, to prime
banks in the London interbank market at approximately 11:00
a.m. London time on such LIBOR Determination Date and in a
principal amount that is representative for a single
transaction in United States dollars in such market at such
time. If at least two such quotations are provided, LIBOR
determined on such LIBOR Determination Date will be the
arithmetic mean of such quotations.
(ii) If fewer than two quotations are provided, LIBOR
determined on such LIBOR Determination Date will be the
arithmetic mean of the rates quoted at approximately 11:00
a.m. in New York City on such LIBOR Determination Date by
three major banks in New York City selected by the Trustee for
one-month United States dollar loans to leading European
banks, in a principal amount that is representative for a
single transaction in United States dollars in such market at
such time; provided, however, that if the banks so selected by
the Trustee are not quoting as mentioned in this sentence,
LIBOR determined on such LIBOR Determination Date will
continue to be LIBOR as then currently in effect on such LIBOR
Determination Date.
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(c) The establishment of LIBOR on each LIBOR Determination Date by the
Trustee and the Trustee's calculation of the rate of interest applicable to the
Class A and Class M Certificates for the related Accrual Period shall (in the
absence of manifest error) be final and binding.
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ARTICLE X
Termination
Section 10.01. Termination.
(a) The respective obligations and responsibilities of the Master
Servicer, the Depositor and the Trustee created hereby (other than the
obligation of the Trustee to make certain payments to Certificateholders after
the final Distribution Date, the obligations of the Depositor and the Master
Servicer under Section 9.05 and the obligation of the Master Servicer to send
certain notices as hereinafter set forth) shall terminate upon the last action
required to be taken by the Trustee pursuant to this Article X on the earliest
of (i) the repurchase by the Master Servicer of all Home Equity Loans and all
property acquired in respect of any Home Equity Loan remaining in the Trust at a
price (the "Termination Price") equal to the greater of (A) the sum of (x) 100%
of the Principal Balance of each Home Equity Loan (other than any Home Equity
Loan as to which title to the underlying Mortgaged Property has been acquired
and whose fair market value is included pursuant to clause (y) below) as of the
first day of the Collection Period preceding the Distribution Date upon which
the proceeds of any repurchase are to be distributed and (y) the fair market
value of such acquired property (as determined by the Master Servicer as of the
close of business on the third Business Day next preceding the date upon which
notice of any such termination is furnished to Certificateholders pursuant to
Section 10.01(e)) plus, in each case, one month's interest at the applicable Net
Loan Rate on the Principal Balance of each Home Equity Loan (including any Home
Equity Loan as to which title to the underlying Mortgaged Property has been
acquired), (B) the aggregate fair market value (as determined by the Master
Servicer as of the close of business on such third preceding Business Day) of
all of the assets of the Trust, or (C) the sum of the Certificate Principal
Balance of the Class A and Class M Certificates, together with any unpaid
Interest Carry Forward Amounts and Supplemental Interest Amounts allocable to
such Classes, plus one month's interest on such Certificate Principal Balance
and any unpaid Interest Carry Forward Amounts and Supplemental Interest Amounts
at the related Pass-Through Rates, or (ii) the final payment or other
liquidation of the Principal Balance of the last Home Equity Loan remaining in
the Trust or the disposition of all property acquired upon foreclosure or deed
in lieu of foreclosure of any Home Equity Loan or (iii) the Distribution Date in
December 2031; provided that in no event shall the Trust created hereby continue
beyond the expiration of 21 years from the death of the last survivor of the
descendants of Xxxxxx X. Xxxxxxx, the late Ambassador of the United States to
the Court of St. Xxxxx, living on the date hereof. Upon termination in
accordance with clause (i), (ii) or (iii) of this Section 10.01, the Trustee
shall execute such documents and instruments of transfer, in each case without
recourse, representation or warranty, presented by the Depositor and take such
other actions as the Depositor may reasonably request to effect the retransfer
of the Home Equity Loans to the Depositor.
(b) The right of the Master Servicer to repurchase all Home Equity
Loans pursuant to clause (i) of Section 10.01(a) above is conditioned upon the
aggregate Certificate Principal Balance of the Class A and Class M Certificates
being less than fifteen (15%) percent of the initial aggregate Certificate
Principal Balance of the Class A and Class M Certificates. The
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Master Servicer may exercise such right on the first Distribution Date following
the date on which the aggregate Certificate Principal Balance of the Class A and
Class M Certificates was reduced to less than fifteen percent (15%) of the
initial aggregate Certificate Principal Balance of the Class A and Class M
Certificates and any Distribution Date thereafter with respect to which the
conditions specified in the preceding sentence are satisfied unless the Trustee
has accepted a qualifying bid for the Home Equity Loans pursuant to subsection
(c) below. If such right is exercised, the Trustee shall, promptly following
payment of the repurchase price, execute proper instruments acknowledging
termination and discharge of this Agreement.
(c) If the Master Servicer does not repurchase all of the Home Equity
Loans pursuant to clause (i) of Section 10.01(a) above within three (3) months
of the first Distribution Date upon which such repurchase option may occur and
all of the Home Equity Loans have not been sold by the Trustee pursuant to
Section 5.01(b), then promptly on the following Distribution Date the Trustee
shall begin a process for soliciting bids in connection with an auction of the
Home Equity Loans. The Trustee shall provide the Master Servicer written notice
of such auction at least ten (10) Business Days prior to the date bids must be
received in such auction (the "Auction Date"). The auction shall be conducted as
follows:
(i) If at least two bids are received, the Trustee shall
solicit and resolicit new bids from all participating bidders until
only one bid remains or the remaining bidders decline to resubmit bids.
The Trustee shall accept the highest of such remaining bids if it is
equal to or in excess of the Termination Price. If less than two bids
are received or the highest bid after the resolicitation process is
completed is not equal to or in excess of the Termination Price, the
Trustee shall not consummate such sale. If a bid equaling the
Termination Price is received, then the Trustee may, and if so
requested by the Master Servicer shall, consult with a financial
advisor, which may be an underwriter of the Certificates, to determine
if the fair market value of the Home Equity Loans and related property
has been offered.
(ii) If the first auction conducted by the Trustee does not
produce any bid at least equal to the Termination Price, then the
Trustee shall, beginning on the Distribution Date occurring
approximately three months after the Auction Date for the failed first
auction (provided that all of the Home Equity Loans have not been sold
by the Trustee pursuant to Section 5.01(b)), commence another auction
in accordance with the requirements of this subsection (c). If such
second auction does not produce any bid at least equal to the
Termination Price, then the Trustee shall, beginning on the
Distribution Date occurring approximately three months after the
Auction Date for the failed second auction, commence another auction in
accordance with the requirements of this subsection (c), and shall
continue to conduct similar auctions approximately every three months
thereafter until the earliest of (i) delivery by the Master Servicer of
notice of exercise of its repurchase option pursuant to clause (i) of
Section 10.01(a) above, (ii) receipt by the Trustee of a bid meeting
the conditions specified in the preceding paragraph, or (iii) the
Distribution Date on which the Principal Balance of all the Home Equity
Loans is reduced to zero.
(iii) If the Trustee receives a bid meeting the conditions
specified in this subsection (c), then the Trustee shall release to the
winning bidder, upon payment of the
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bid purchase price, the Mortgage Files pertaining to the Home Equity
Loans being purchased and take such other actions as the winning bidder
may reasonably request to effect the transfer of the Home Equity Loans
to the winning bidder.
(d) [Reserved].
(e) Notice of any termination, specifying the Distribution Date (which
shall be a date that would otherwise be a Distribution Date) upon which the
Certificateholders may surrender their Certificates to the Trustee for payment
of the final distribution and cancellation, shall be given promptly by the
Trustee (upon receipt of written directions from the Master Servicer, if the
Depositor is exercising its right to retransfer the Home Equity Loans) by letter
to Certificateholders mailed not earlier than the 15th day and not later than
the 25th day of the month next preceding the month of such final distribution
specifying (i) the Distribution Date upon which final distribution of the
Certificates will be made upon presentation and surrender of the Certificates at
the office or agency of the Trustee therein designated, (ii) the amount of any
such final distribution and (iii) that the Record Date otherwise applicable to
such Distribution Date is not applicable, distributions being made only upon
presentation and surrender of the Certificates at the office or agency of the
Trustee therein specified. In the event written directions are delivered by the
Master Servicer to the Trustee as described in the preceding sentence, the
Depositor shall deposit in the Collection Account on or before the Distribution
Date for such final distribution in immediately available funds an amount which,
when added to the funds on deposit in the Collection Account that are payable to
the related Certificateholders, will be equal to the purchase price for the
assets of the Trust computed as above provided.
(f) Upon presentation and surrender of the Certificates, the Trustee
shall cause to be distributed to the Certificateholders on the Distribution Date
for such final distribution, in proportion to their respective Percentage
Interests, an amount equal to (i) as to the Class A or Class M Certificates,
such Class' appropriate share of the Principal Distribution Amount, any Interest
Carry Forward Amounts and one month's interest at the related Pass-Through Rate
on such Certificate Principal Balance and (ii) as to the Equity Certificate the
amount which remains on deposit in the Collection Account (other than the
amounts retained to meet claims) after application pursuant to clause (i) above.
The distribution on such final Distribution Date shall be in lieu of the
distribution otherwise required to be made on such Distribution Date in respect
of each Class of Certificates.
(g) In the event that all of the Certificateholders shall not surrender
their Certificates for final payment and cancellation on or before such final
Distribution Date, the Trustee shall on such date cause all funds in the
Collection Account not distributed in final distribution to Certificateholders
to be withdrawn therefrom and credited to the remaining Certificateholders by
depositing such funds in a separate escrow account for the benefit of such
Certificateholders and the Depositor (if the Depositor has exercised its right
to retransfer the Home Equity Loans) or the Trustee (in any other case) and the
Trustee shall give a second written notice to the remaining Certificateholders
to surrender their Certificates for cancellation and receive the final
distribution with respect thereto. If within one year after the second notice
all the Certificates shall not have been surrendered for cancellation, any funds
deposited in such escrow account and remaining unclaimed shall be paid by the
Trustee to the Master Servicer and thereafter Certificateholders shall look only
to the Master Servicer with respect to any claims in respect of such funds.
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ARTICLE XI
Miscellaneous Provisions
Section 11.01. Amendment. This Agreement may be amended from time to
time by the Master Servicer, the Depositor and the Trustee, in each case without
the consent of any of the Certificateholders, (i) to cure any ambiguity, (ii) to
correct any defective provisions or to correct or supplement any provisions
herein that may be inconsistent with any other provisions herein, (iii) to add
to the duties of the Depositor or the Master Servicer, (iv) to add, amend or
modify any other provisions with respect to matters or questions arising under
this Agreement, which shall not be inconsistent with this Agreement, or (v) to
add or amend any provisions of this Agreement as required by any Rating Agency
or any other nationally recognized statistical rating agency in order to
maintain or improve any rating of the Class A and Class M Certificates (it being
understood that, after obtaining the ratings in effect on the Closing Date,
neither the Trustee, the Depositor nor the Master Servicer is obligated to
obtain, maintain or improve any such rating); provided, however, that as
evidenced by an Opinion of Counsel (a copy of which shall be delivered to the
Trustee) (at the expense of the requesting party), in each case such action
shall not materially and adversely affect the interests of any Class A and Class
M Certificateholder; and provided, further, that the amendment shall not be
deemed to adversely affect in any material respect the interests of the Class A
and Class M Certificateholders and no Opinion of Counsel to that effect shall be
required if the Person requesting the amendment receives a confirmation from
each Rating Agency stating that the amendment would not result in the
downgrading or withdrawal of the respective ratings then assigned to the Class A
and Class M Certificates.
This Agreement also may be amended from time to time by the Master
Servicer, the Depositor and the Trustee, in each case with the consent of the
Holders of the Class A and Class M Certificates which is affected by such
amendment, evidencing Percentage Interests aggregating not less than 51% in
Percentage Interests of such Class or in the case of an amendment which affects
all classes, evidencing Percentage Interests aggregating not less than 51% of
all Classes, for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement or of modifying in
any manner the rights of the Certificateholders; provided, however, that no such
amendment shall (i) reduce in any manner the amount of, or delay the timing of,
collections of payments on Home Equity Loans, or (ii) reduce the aforesaid
percentage required to consent to any such amendment, or (iii) create a material
risk of the Trust incurring taxes imposed under the Code or of the Class A
Certificates or Class M Certificates not being treated as indebtedness under the
Code, or (iv) result in a downgrading of the ratings of the Class A and Class M
Certificates without, in each case, the consent of the Holders of all Classes of
Certificates then outstanding or each Class of Certificates affected thereby.
Prior to the solicitation of consent of Certificateholders in
connection with any such amendment, the party seeking such amendment shall
furnish the Trustee with an Opinion of Counsel stating whether such amendment
would create a material risk of the Trust incurring taxes imposed under the Code
and notice of the conclusion expressed in such Opinion of
75
Counsel shall be included with any such solicitation. An amendment made with the
consent of all Certificateholders and executed in accordance with this Section
shall be permitted or authorized by this Agreement notwithstanding that such
Opinion of Counsel may conclude that such amendment would create a material risk
of the Trust incurring taxes imposed under the Code.
Prior to the execution of any such amendment made with the consent of
Certificateholders, the Master Servicer shall furnish written notification of
the substance of such amendment to each Rating Agency. In addition, promptly
after the execution of any such amendment made with the consent of the
Certificateholders, the Trustee shall furnish written notification of the
substance of such amendment to each Certificateholder.
It shall not be necessary for the consent of Certificateholders under
this Section to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the substance
thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject to
such reasonable requirements as the Trustee may prescribe.
Prior to the execution of any amendment to this Agreement, the Trustee
shall be entitled to receive and rely upon an Opinion of Counsel stating that
the execution of such amendment is authorized or permitted by this Agreement.
The Trustee may, but shall not be obligated to, enter into any such amendment
which affects the Trustee's own rights, duties or immunities under this
Agreement.
Section 11.02. Recordation of Agreement. This Agreement is subject to
recordation in all appropriate public offices for real property records in all
the counties or other comparable jurisdictions in which any or all of the
Mortgaged Properties are situated, and in any other appropriate public recording
office or elsewhere, such recordation to be effected by the Master Servicer and
at its expense on direction by the Trustee (which shall not have any duty to
determine whether such recordation should be made), but only upon direction of
the Trustee or the Master Servicer accompanied by an Opinion of Counsel to the
effect that such recordation materially and beneficially affects the interests
of Certificateholders.
For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
Section 11.03. Limitation on Rights of Certificateholders. The death or
incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations and liabilities of the parties
hereto or any of them.
No Certificateholder shall have any right to vote (except as provided
in Section 11.01) or in any manner otherwise control the operation and
management of the Trust, or the obligations of the parties hereto, nor shall
anything herein set forth, or contained in the terms of the
76
Certificates, be construed so as to constitute the Certificateholders from time
to time as partners or members of an association; nor shall any
Certificateholder be under any liability to any third person by reason of any
action taken by the parties to this Agreement pursuant to any provision hereof.
No Certificateholder shall have any right by virtue or by availing
itself of any provisions of this Agreement to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Agreement,
unless such Holder previously shall have given to the Trustee a written notice
of default and of the continuance thereof, as hereinbefore provided, and unless
also the Holders of Certificates evidencing not less than 51% of the aggregate
Percentage Interests of the Class A and Class M Certificates shall have made
written request upon the Trustee to institute such action, suit or proceeding in
its own name as Trustee hereunder and shall have offered to the Trustee such
reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Trustee, for 60 days
after its receipt of such notice, request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding; it being
understood and intended, and being expressly covenanted by each
Certificateholder with every other Certificateholder and the Trustee, that no
one or more Holders of Certificates shall have any right in any manner whatever
by virtue or by availing itself or themselves of any provisions of this
Agreement to affect, disturb or prejudice the rights of the Holders of any other
of the Certificates, or to obtain or seek to obtain priority over or preference
to any other such Holder, or to enforce any right under this Agreement, except
in the manner herein provided and for the equal, ratable and common benefit of
all Certificateholders. For the protection and enforcement of the provisions of
this Section, each and every Certificateholder and the Trustee shall be entitled
to such relief as can be given either at law or in equity.
Section 11.04. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.
Section 11.05. Notices. All demands, notices (whether or not any notice
is referred to herein as a notice, a written notice or a notice in writing) and
communications hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered at or mailed by certified mail, return
receipt requested, or telecopied to (a) in the case of the Depositor or the
Master Servicer, 0000 Xxxxxxx Xxxx, Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000, Attention:
Treasurer, (b) in the case of the Trustee, at the Corporate Trust Office, 1 Bank
Xxx Xxxxx, Xxxxx XX0-0000, Xxxxxxx, Xxxxxxxx 00000-0000, Attention: Corporate
Trust Administration, (c) in the case of Xxxxx'x, ABS Monitoring Department, 00
Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, (d) in the case of Standard & Poor's,
00 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Structured
Finance Surveillance and (e) in the case of Fitch, Xxx Xxxxx Xxxxxx Xxxxx, 00xx
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: RMBS Surveillance Department, or, as
to each party, at such other address as shall be designated by such party in a
written notice to each other party. Any notice required or permitted to be
mailed to a Certificateholder shall be given by first class mail, postage
prepaid, at the address of such Holder as shown in the Certificate Register. Any
notice so mailed within the time prescribed in this Agreement shall be
77
conclusively presumed to have been duly given, whether or not the
Certificateholder receives such notice.
Section 11.06. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or the rights of the Holders thereof.
Section 11.07. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 7.02 and 7.04, this Agreement
may not be assigned by the Depositor or the Master Servicer without the prior
written consent of Holders of Certificates of each Class, voting as a Class,
evidencing, as to each such Class, Percentage Interests aggregating not less
than 66-2/3%.
Section 11.08. Certificates Nonassessable and Fully Paid. The parties
agree that the Certificateholders shall not be personally liable for obligations
of the Trust, that the beneficial ownership interests represented by the
Certificates shall be nonassessable for any losses or expenses of the Trust or
for any reason whatsoever, and that the Certificates upon execution by the
Trustee on behalf of the Trust and the authentication and delivery thereof by
the Trustee pursuant to Sections 2.05 or 6.01 are and shall be deemed fully
paid.
Section 11.09. Third-Party Beneficiaries. This Agreement will inure to
the benefit of and be binding upon the parties hereto, the Certificateholders
and their respective successors and permitted assigns. Except as otherwise
provided in this Agreement, no other person will have any right or obligation
hereunder.
Section 11.10. Counterparts. This instrument may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 11.11. Effect of Headings and Table of Contents. The Article
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
Section 11.12. Limitation on Voting of Preferred Stock. The Trustee
shall hold all of the preferred stock ("Preferred Stock") of the Depositor in
trust, for the benefit of the Certificateholders, and, during the continuance of
an Event of Default, shall vote such stock only pursuant to the written
instructions of Holders of Certificates evidencing not less than 51% of the
aggregate Percentage Interests of the Class A and Class M Certificates. The
Trustee shall not permit a transfer of any of the Preferred Stock to HFC or any
of its Affiliates. Concurrently with any retransfer of the Home Equity Loans to
the Master Servicer pursuant to Section 10.01, the Trustee shall transfer to the
Depositor for cancellation all shares of Preferred Stock held by the Trustee.
Section 11.13. Perfection Representations. The Perfection
Representations shall be a part of this Agreement for all purposes.
78
IN WITNESS WHEREOF, the Depositor, the Master Servicer and the Trustee
have caused this Agreement to be duly executed by their respective officers all
as of the day and year first above written.
HFC REVOLVING CORPORATION,
as Depositor
By:
---------------------------------
Name:
Title:
HOUSEHOLD FINANCE CORPORATION,
as Master Servicer
By:
---------------------------------
Name:
Title:
BANK ONE, NATIONAL ASSOCIATION,
as Trustee
By:
---------------------------------
Name:
Title:
S-1
State of Illinois }
} ss.:
County of Xxxx }
On this _____ day of __________, 2002 before me, a notary
public in and for the State of Illinois, personally appeared , known to
me who, being by me duly sworn, did depose and say that he resides at ;
that he is the of HFC Revolving Corporation, a Delaware corporation, one
of the parties that executed the foregoing instrument; that he knows the seal of
said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by order of the Board of Directors of said
corporation; and that he signed his name thereto by like order.
-----------------------
Notary Public
[Seal]
State of Illinois }
} ss.:
County of Xxxx }
On this _____ day of __________, 2002 before me, a notary
public in and for the State of Illinois, personally appeared , known to
me who, being by me duly sworn, did depose and say that he resides at ;
that he is the of Household Finance Corporation, a Delaware corporation,
one of the parties that executed the foregoing instrument; that he knows the
seal of said corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by order of the Board of Directors of
said corporation; and that he signed his name thereto by like order.
-----------------------
Notary Public
[Seal]
S-2
State of Illinois }
} ss.:
County of Xxxx }
On this _____ day of __________, 2002 before me, a notary
public in and for the State of Illinois, personally appeared , known to me who,
being by me duly sworn, did depose and say that he resides at ; that he is the
of _____________________________ of __________, a ____________________, one of
the parties that executed the foregoing instrument; and that he signed his name
thereto by order of the Board of Directors of said association.
-----------------------
Notary Public
[Seal]
S-3
Schedule 1
PERFECTION REPRESENTATIONS, WARRANTIES AND COVENANTS
The Depositor hereby represents, warrants, and covenants to the Trustee as to
itself and the Sellers as follows on the Closing Date and on each Distribution
Date thereafter:
General
1. This Agreement creates a valid and continuing security interest (as defined
in the applicable UCC) in the Home Equity Loans in favor of the Trustee, which
security interest is prior to all other Liens, and is enforceable as such as
against creditors of and purchasers from the Depositor.
2. The Home Equity Loans constitute "general intangibles" or "instruments"
within the meaning of the applicable UCC.
3. The Collection Account and all subaccounts thereof constitute either a
deposit account or a securities account.
4. To the extent that payments and collections received or made with respect to
the Home Equity Loans constitute securities entitlements, such payments and
collections have been and will have been credited to the Collection Account. The
securities intermediary for the Collection Account has agreed to treat all
assets credited to the Collection Account as "financial assets" within the
meaning of the applicable UCC.
Creation
5. The Depositor owns and has good and marketable title to the Home Equity Loans
free and clear of any Lien, claim or encumbrance of any Person, excepting only
liens for taxes, assessments or similar governmental charges or levies incurred
in the ordinary course of business that are not yet due and payable or as to
which any applicable grace period shall not have expired, or that are being
contested in good faith by proper proceedings and for which adequate reserves
have been established, but only so long as foreclosure with respect to such a
lien is not imminent and the use and value of the property to which the Lien
attaches is not impaired during the pendency of such proceeding.
6. The Depositor has received all consents and approvals to the sale of the Home
Equity Loans hereunder to the Trustee required by the terms of the Home Equity
Loans that constitute instruments.
7. To the extent the Collection Account or subaccounts thereof constitute
securities entitlements, certificated securities or uncertificated securities,
the Depositor has received all consents and approvals required to transfer to
the Trustee its interest and rights in the Collection Account hereunder.
Perfection
8. The Depositor has caused or will have caused, within ten days after the
effective date of this Agreement, the filing of all appropriate financing
statements in the proper filing office in the appropriate jurisdictions under
applicable law in order to perfect the sale of the Home Equity Loans from the
Depositor to the Trustee, and the security interest in the Home Equity Loans
granted to the Trustee hereunder.
9. With respect to the Collection Account and all subaccounts that constitute
deposit accounts, either:
(i) the Depositor has delivered to the Trustee a fully-executed
agreement pursuant to which the bank maintaining the deposit accounts
has agreed to comply with all instructions originated by the Trustee
directing disposition of the funds in the Collection Account without
further consent by the Depositor; or
(ii) the Depositor has taken all steps necessary to cause the Trustee
to become the account holder of the Collection Account.
10. With respect to the Collection Account or subaccounts thereof that
constitute securities accounts or securities entitlements, either:
(i) the Depositor has caused or will have caused, within ten days after
the effective date of this Agreement, the filing of all appropriate
financing statements in the proper filing office in the appropriate
jurisdictions under applicable law in order to perfect the security
interest granted in the Collection Account to the Trustee; or
(ii) the Depositor has delivered to the Trustee a fully-executed
agreement pursuant to which the securities intermediary has agreed to
comply with all instructions originated by the Trustee relating to the
Collection Account without further consent by the Depositor; or
(iii) the Depositor has taken all steps necessary to cause the
securities intermediary to identify in its records the Trustee as the
person having a security entitlement against the securities
intermediary in the Collection Account.
Priority
11. Other than the transfer of the Home Equity Loans to the Trustee under the
Transfer Agreement, and the security interest granted to the Trustee pursuant to
this Agreement, neither the Depositor nor the Sellers have pledged, assigned,
sold, granted a security interest in, or otherwise conveyed any of the Home
Equity Loans. Neither the Depositor nor the Sellers have authorized the filing
of, or are aware of any financing statements against the Depositor or any of the
Sellers that include a description of collateral covering the Home Equity Loans
other than any financing statement relating to the security interest granted to
the Trustee hereunder or that has been terminated.
12. The Depositor is not aware of any judgment, ERISA or tax lien filings
against either the Depositor or any of the Sellers.
13. To the Depositor's knowledge, none of the instruments that constitute or
evidence the Home Equity Loans has any marks or notations indicating that they
have been pledged, assigned or otherwise conveyed to any Person other than the
Trustee.
14. Neither the Collection Account nor any subaccount thereof is in the name of
any person other than the Depositor or the Trustee as trustee hereunder or in
the name of its nominee. The Depositor has not consented for the securities
intermediary of the Collection Account to comply with entitlement orders of any
person other than the Trustee.
15. Survival of Perfection Representations. Notwithstanding any other provision
of this Agreement or any other transaction document, the Perfection
Representations contained in this Schedule shall be continuing, and remain in
full force and effect (notwithstanding any replacement of the Master Servicer or
termination of the Master Servicer's rights to act as such) until such time as
all obligations under this Agreement have been finally and fully paid and
performed.
16. No Waiver. The parties to this Agreement (i) shall not, without obtaining a
confirmation of the then-current rating of the Certificates, waive any of the
Perfection Representations, and (ii) shall provide the Rating Agencies with
prompt written notice of any breach of the Perfection Representations, and shall
not, without obtaining a confirmation of the then-current rating of the
Certificates (as determined after any adjustment or withdrawal of the ratings
following notice of such breach) waive a breach of any of the Perfection
Representations.
17. Master Servicer to Maintain Perfection and Priority. The Master Servicer
covenants that, in order to evidence the interests of the Depositor and the
Trustee under this Agreement, the Master Servicer shall take such action, or
execute and deliver such instruments (other than effecting a Filing (as defined
below), unless such Filing is effected in accordance with this paragraph) as may
be necessary or advisable (including, without limitation, such actions as are
requested by the Trustee) to maintain and perfect, as a first priority interest,
the Trustee's security interest in the Home Equity Loans. The Master Servicer
shall, from time to time and within the time limits established by law, prepare
and present to the Trustee for the Trustee to authorize (based in reliance on
the Opinion of Counsel hereinafter provided for) the Master Servicer to file,
all financing statements, amendments, continuations, initial financing
statements in lieu of a continuation statement, terminations, partial
terminations, releases or partial releases, or any other filings necessary or
advisable to continue, maintain and perfect the Trustee's security interest in
the Home Equity Loans as a first-priority interest (each a "Filing"). The Master
Servicer shall present each such Filing to the Trustee together with (x) an
Opinion of Counsel to the effect that such Filing is (i) consistent with grant
of the security interest to the Trustee pursuant to Section 2.01 of this
Agreement, (ii) satisfies all requirements and conditions to such Filing in this
Agreement and (iii) satisfies the requirements for a Filing of such type under
the Uniform Commercial Code in the applicable jurisdiction (or if the Uniform
Commercial Code does not apply, the applicable statute governing the perfection
of security interests), and (y) a form of authorization for the Trustee's
signature. Upon receipt of such Opinion of Counsel and form of authorization,
the Trustee shall promptly authorize in writing
the Master Servicer to, and the Master Servicer shall, effect such Filing under
the Uniform Commercial Code without the signature of the Depositor or the
Trustee where allowed by applicable law. Notwithstanding anything else in the
transaction documents to the contrary, the Master Servicer shall not have any
authority to effect a Filing without obtaining written authorization from the
Trustee.
EXHIBIT A
FORM OF CLASS A 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 IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE ACCEPTANCE OF THIS CERTIFICATE CONSTITUTES AN AGREEMENT BY THE
CERTIFICATEHOLDER TO TREAT SUCH CERTIFICATE AS INDEBTEDNESS FOR FEDERAL, STATE
AND LOCAL INCOME OR FRANCHISE TAX PURPOSES (OR ANY OTHER TAX IMPOSED ON, OR
MEASURED BY, INCOME), AND TO TAKE NO ACTION INCONSISTENT WITH SUCH TREATMENT OF
THIS CERTIFICATE.
A-1
Certificate No. :
Cut-Off Date : March 3, 2002
First Distribution Date : April 22, 2002
Final Scheduled Distribution Date : December 22, 2031
Original Class Certificate
Balance of this Certificate
("Denomination") : $
Original Certificate Principal
Balance of this Class : $
Pass-Through Rate : LIBOR + [___]%(1)
CUSIP :
Class : A
--------
(1) Subject to the Available Funds Cap.
A-2
HOUSEHOLD HOME EQUITY LOAN TRUST 2002-1
Closed-End Home Equity Loan Asset-Backed Certificates,
Series 2002-1
Class A
evidencing a percentage interest in the distributions allocable to the
Certificates of the above-referenced Class with respect to a Trust
consisting of closed-end fixed- or declining-rate home equity loans (the
"Home Equity Loans").
HFC Revolving Corporation, as Depositor
Principal in respect of this Certificate is distributable monthly as set
forth herein. Accordingly, the Certificate Principal Balance of this Class A
Certificate at any time may be less than the Original Class Certificate
Principal Balance set forth on the face hereof, as described herein. This Class
A Certificate does not evidence an obligation of, or an interest in, and is not
guaranteed by the Depositor, the Sellers, the Master Servicer, or the Trustee
referred to below or any of their respective affiliates. Neither this Class A
Certificate nor the Home Equity Loans are guaranteed or insured by any
governmental agency or instrumentality.
This certifies that CEDE & CO. is the registered owner of the Percentage
Interest evidenced by this Class A Certificate (obtained by dividing the
principal denomination of this Class A Certificate by the aggregate of the
principal denominations of all Certificates of this Class) in certain monthly
distributions with respect to a Trust consisting primarily of the Home Equity
Loans deposited by HFC Revolving Corporation (the "Depositor"). The Trust was
created pursuant to a Pooling and Servicing Agreement dated as of March 15, 2002
(the "Agreement") among the Depositor, Household Finance Corporation, as Master
Servicer (the "Master Servicer") and Bank One, National Association, as Trustee
(the "Trustee"). To the extent not defined herein, the capitalized terms used
herein have the meanings assigned in the Agreement. This Class A Certificate is
issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Certificateholder of this Class A Certificate
by virtue of the acceptance hereof assents and by which such Certificateholder
is bound.
Reference is hereby made to the further provisions of this Class A
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
This Class A Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by an
authorized signatory of the Trustee.
A-3
IN WITNESS WHEREOF, the Trustee on behalf of the Trust has caused this
Certificate to be duly executed.
Dated: March ___, 2002
HOUSEHOLD HOME EQUITY LOAN TRUST 2002-1
By: BANK ONE, NATIONAL ASSOCIATION
not in its individual capacity,
but solely as Trustee
By_____________________________________
This is one of the Class A Certificates
referenced in the above-mentioned Agreement
By:__________________________________
Authorized Signatory of
BANK ONE, NATIONAL ASSOCIATION,
as Trustee
A-4
[Reverse of Class A Certificate]
HOUSEHOLD HOME EQUITY LOAN TRUST 2002-1
Closed-End Home Equity Loan Asset-Backed Certificates,
Series 2002-1
This Certificate is one of a duly authorized issue of Certificates
designated as Household Home Equity Loan Trust 2002-1, Closed-End Home Equity
Loan Asset-Backed Certificates, Series 2002-1 (herein collectively called the
"Certificates"), and representing a beneficial ownership interest in the Trust
created by the Agreement.
The Certificateholder, by its acceptance of this Certificate, agrees that
it will look solely to the funds on deposit in the Collection Account for
payment hereunder and that the Trustee is not liable to the Certificateholders
for any amount payable under this Certificate or the Agreement or, except as
expressly provided in the Agreement, subject to any liability under the
Agreement.
This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for the interests, rights and limitations of rights,
benefits, obligations and duties evidenced thereby, and the rights, duties and
immunities of the Trustee.
Pursuant to the terms of the Agreement, a distribution will be made on the
20th day of each month or, if such 20th day is not a Business Day, the next
succeeding Business Day (the "Distribution Date"), commencing on the first
Distribution Date specified on the face hereof, to the Person in whose name this
Certificate is registered at the close of business on the applicable Record Date
in an amount equal to the product of the Percentage Interest evidenced by this
Certificate and the amount required to be distributed to Certificateholders of
Certificates of the Class to which this Certificate belongs on such Distribution
Date pursuant to the Agreement. The Record Date applicable to each Distribution
Date is the Business Day preceding such Distribution Date; provided, however,
that following the date on which Definitive Certificates are available pursuant
to Section 6.02(f) of the Agreement, the Record Date shall be the last day of
the month preceding the month in which such Distribution Date occurs.
Distributions on this Certificate shall be made by check or money order
mailed to the address of the person entitled thereto as it appears on the
Certificate Register or, upon the written request by a Certificateholder owning
Certificates having the requisite aggregate denominations or Percentage
Interests specified in the Agreement, by wire transfer or otherwise, as set
forth in the Agreement. The final distribution on each Certificate will be made
in like manner, but only upon presentment and surrender of such Certificate at
the office or agency of the Trustee specified in the notice to
Certificateholders of such final distribution.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Trustee and the rights of the
A-5
Certificateholders under the Agreement at any time by the Master Servicer, the
Depositor, and the Trustee, in each case with the consent of the
Certificateholders of the requisite percentage of the Percentage Interests of
each Class of Certificates affected by such amendment or all classes in the case
of amendments or modifications which affect all classes, as specified in the
Agreement. Any such consent by the holder of this Certificate shall be
conclusive and binding to such holder and upon all future holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange therefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.
As provided in the Agreement and subject to certain limitations therein
set forth, 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 Certificate
Registrar (which shall be the Corporate Trust Office if the Trustee is the
Certificate Registrar as provided in the Agreement). Every Certificate presented
or surrendered for registration of transfer or exchange shall (if so required by
the Trustee or the Certificate Registrar) be duly endorsed by, or accompanied by
a written instrument of transfer in form satisfactory to the Trustee and the
Certificate Registrar duly executed by, the Certificateholder hereof or such
Certificateholder's attorney duly authorized in writing. Upon satisfaction of
the foregoing, one or more new Certificates of the same Class in authorized
denominations and evidencing the same aggregate Percentage Interest in the Trust
will be issued to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates without
coupons in denominations specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of the same Class in authorized denominations
and evidencing the same aggregate Percentage Interest, as requested by the
Holder surrendering the same.
No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Sellers, the Master Servicer, the Depositor, and the Trustee and any
agent of the Sellers, the Master Servicer, the Depositor or the Trustee may
treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and the Sellers, the Master Servicer, the Depositor, or
the Trustee or any such agent shall not be affected by any notice to the
contrary.
On any Distribution Date following the date at which the aggregate
Certificate Principal Balance is less than 15% of the initial aggregate
Certificate Principal Balance of the Class A and Class M Certificates, the
Master Servicer will have the option to purchase, in whole, from the Trust the
Home Equity Loans at a purchase price determined as provided in the Agreement
A-6
provided, however, if the Master Servicer does not purchase all of the Home
Equity Loans pursuant to Section 10.01(a)(i) of the Agreement within three
months of the first Distribution Date upon which such purchase option may occur
and all of the Home Equity Loans have not been sold by the Trustee pursuant to
Section 5.01(b) of the Agreement, then the Trustee shall begin a process for
soliciting bids in connection with an auction of the Home Equity Loans pursuant
to Section 10.01(c) of the Agreement. In the event that no such optional
termination occurs, the obligations and responsibilities created by the
Agreement will terminate upon the earliest of (i) the final payment or other
liquidation of the Principal Balance of the last Home Equity Loan remaining in
the Trust or the disposition of all property acquired upon foreclosure or deed
in lieu of foreclosure of any Home Equity Loan and (ii) the Distribution Date in
December 2031. In no event, however, will the trust created by the Agreement
continue beyond the expiration of 21 years from the death of the last survivor
of the descendants living at the date of the Agreement of a certain person named
in the Agreement.
Capitalized terms used herein that are defined in the Agreement shall have
the meanings ascribed to them in the Agreement and nothing herein shall be
deemed inconsistent with that meaning.
A-7
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(Please print or typewrite name and address including postal zip code of
assignee)
the Percentage Interest evidenced by the within Certificate and hereby
authorizes the transfer of the registration of such Percentage Interest to
assignee on the Certificate Register of the Trust.
I (We) further direct the Trustee to issue a new Certificate of a like
denomination and Class, to the above-named assignee and deliver such Certificate
to the following address:
-------------------------------------------------------------------------------.
Dated:
------------
-------------------------------------
Signature by or on behalf of assignor
A-8
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of distribution:
Distributions shall be made, by wire transfer or otherwise, in immediately
available funds to
,
-------------------------------------------------------------------------------
,
-------------------------------------------------------------------------------
,
-------------------------------------------------------------------------------
for the account of ,
------------------------------------------------------------
Account number , or, if mailed by check, to
------------------- ------------------
.
-------------------------------------------------------------------------------
Applicable statements should be mailed to
--------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
.
-------------------------------------------------------------------------------
This information is provided by ,
------------------------------------------
the assignee named above, or ,
---------------------------------------------------
as its agent.
A-9
EXHIBIT B
FORM OF CLASS M 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 IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE ACCEPTANCE OF THIS CERTIFICATE CONSTITUTES AN AGREEMENT BY THE
CERTIFICATEHOLDER TO TREAT SUCH CERTIFICATE AS INDEBTEDNESS FOR FEDERAL, STATE
AND LOCAL INCOME OR FRANCHISE TAX PURPOSES (OR ANY OTHER TAX IMPOSED ON, OR
MEASURED BY, INCOME), AND TO TAKE NO ACTION INCONSISTENT WITH SUCH TREATMENT OF
THIS CERTIFICATE.
B-1
Certificate No. :
Cut-Off Date : March 3, 2002
First Distribution Date : April 22, 2002
Final Scheduled Distribution Date : December 22, 2031
Original Class Certificate
Balance of this Certificate
("Denomination") : $
Original Certificate Principal
Balance of this Class : $
Pass-Through Rate : LIBOR + [___]%(1)
CUSIP :
Class : M
----------
(1) Subject to the Available Funds Cap.
B-2
HOUSEHOLD HOME EQUITY LOAN TRUST 2002-1
Closed-End Home Equity Loan Asset-Backed Certificates,
Series 2002-1
Class M
evidencing a percentage interest in the distributions allocable to the
Certificates of the above-referenced Class with respect to a Trust
consisting of closed-end fixed- or declining-rate home equity loans (the
"Home Equity Loans")
HFC Revolving Corporation, as Depositor
Principal in respect of this Certificate is distributable monthly as set
forth herein. Accordingly, the Certificate Principal Balance of this Class M
Certificate at any time may be less than the Original Class Certificate
Principal Balance set forth on the face hereof, as described herein. This Class
M Certificate does not evidence an obligation of, or an interest in, and is not
guaranteed by the Depositor, the Sellers, the Master Servicer, or the Trustee
referred to below or any of their respective affiliates. Neither this Class M
Certificate nor the Home Equity Loans are guaranteed or insured by any
governmental agency or instrumentality.
This certifies that CEDE & CO. is the registered owner of the Percentage
Interest evidenced by this Class M Certificate (obtained by dividing the
principal denomination of this Class M Certificate by the aggregate of the
principal denominations of all Certificates of this Class) in certain monthly
distributions with respect to a Trust consisting primarily of the Home Equity
Loans deposited by HFC Revolving Corporation (the "Depositor"). The Trust was
created pursuant to a Pooling and Servicing Agreement dated as of March 15, 2002
(the "Agreement") among the Depositor, Household Finance Corporation, as Master
Servicer (the "Master Servicer") and Bank One, National Association, as Trustee
(the "Trustee"). To the extent not defined herein, the capitalized terms used
herein have the meanings assigned in the Agreement. This Class M Certificate is
issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Certificateholder of this Class M Certificate
by virtue of the acceptance hereof assents and by which such Certificateholder
is bound.
Reference is hereby made to the further provisions of this Class M
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
This Class M Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by an
authorized signatory of the Trustee.
B-3
IN WITNESS WHEREOF, the Trustee on behalf of the Trust has caused this
Certificate to be duly executed.
Dated: March ___, 2002
HOUSEHOLD HOME EQUITY LOAN TRUST 2002-1
By: BANK ONE, NATIONAL ASSOCIATION
not in its individual capacity,
but solely as Trustee
By_____________________________________
This is one of the Class M Certificates
referenced in the above-mentioned Agreement
By:__________________________________
Authorized Signatory of
BANK ONE, NATIONAL ASSOCIATION,
as Trustee
B-4
[Reverse of Class M Certificate]
HOUSEHOLD HOME EQUITY LOAN TRUST 2002-1
Closed-End Home Equity Loan Asset-Backed Certificates,
Series 2002-1
This Certificate is one of a duly authorized issue of Certificates
designated as Household Home Equity Loan Trust 2002-1, Closed-End Home Equity
Loan Asset-Backed Certificates, Series 2002-1 (herein collectively called the
"Certificates"), and representing a beneficial ownership interest in the Trust
created by the Agreement.
The Certificateholder, by its acceptance of this Certificate, agrees that
it will look solely to the funds on deposit in the Collection Account for
payment hereunder and that the Trustee is not liable to the Certificateholders
for any amount payable under this Certificate or the Agreement or, except as
expressly provided in the Agreement, subject to any liability under the
Agreement.
This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for the interests, rights and limitations of rights,
benefits, obligations and duties evidenced thereby, and the rights, duties and
immunities of the Trustee.
Pursuant to the terms of the Agreement, a distribution will be made on the
20th day of each month or, if such 20th day is not a Business Day, the next
succeeding Business Day (the "Distribution Date"), commencing on the first
Distribution Date specified on the face hereof, to the Person in whose name this
Certificate is registered at the close of business on the applicable Record Date
in an amount equal to the product of the Percentage Interest evidenced by this
Certificate and the amount required to be distributed to Certificateholders of
Certificates of the Class to which this Certificate belongs on such Distribution
Date pursuant to the Agreement. The Record Date applicable to each Distribution
Date is the Business Day preceding such Distribution Date; provided, however,
that following the date on which Definitive Certificates are available pursuant
to Section 6.02(f) of the Agreement, the Record Date shall be the last day of
the month preceding the month in which such Distribution Date occurs.
Distributions on this Certificate shall be made by check or money order
mailed to the address of the person entitled thereto as it appears on the
Certificate Register or, upon the written request by a Certificateholder owning
Certificates having the requisite aggregate denominations or Percentage
Interests specified in the Agreement, by wire transfer or otherwise, as set
forth in the Agreement. The final distribution on each Certificate will be made
in like manner, but only upon presentment and surrender of such Certificate at
the office or agency of the Trustee specified in the notice to
Certificateholders of such final distribution.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Trustee and the rights of the
B-5
Certificateholders under the Agreement at any time by the Master Servicer, the
Depositor, and the Trustee, in each case with the consent of the
Certificateholders of the requisite percentage of the Percentage Interests of
each Class of Certificates affected by such amendment or all classes in the case
of amendments or modifications which affect all classes, as specified in the
Agreement. Any such consent by the holder of this Certificate shall be
conclusive and binding to such holder and upon all future holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange therefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.
As provided in the Agreement and subject to certain limitations therein
set forth, 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 Certificate
Registrar (which shall be the Corporate Trust Office if the Trustee is the
Certificate Registrar as provided in the Agreement). Every Certificate presented
or surrendered for registration of transfer or exchange shall (if so required by
the Trustee or the Certificate Registrar) be duly endorsed by, or accompanied by
a written instrument of transfer in form satisfactory to the Trustee and the
Certificate Registrar duly executed by, the Certificateholder hereof or such
Certificateholder's attorney duly authorized in writing. Upon satisfaction of
the foregoing, one or more new Certificates of the same Class in authorized
denominations and evidencing the same aggregate Percentage Interest in the Trust
will be issued to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates without
coupons in denominations specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of the same Class in authorized denominations
and evidencing the same aggregate Percentage Interest, as requested by the
Holder surrendering the same.
No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Sellers, the Master Servicer, the Depositor, and the Trustee and any
agent of the Sellers, the Master Servicer, the Depositor or the Trustee may
treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and the Sellers, the Master Servicer, the Depositor, or
the Trustee or any such agent shall not be affected by any notice to the
contrary.
On any Distribution Date following the date at which the aggregate
Certificate Principal Balance is less than 15% of the initial aggregate
Certificate Principal Balance of the Class A and Class M Certificates, the
Master Servicer will have the option to purchase, in whole, from the Trust the
Home Equity Loans at a purchase price determined as provided in the Agreement
B-6
provided, however, if the Master Servicer does not purchase all of the Home
Equity Loans pursuant to Section 10.01(a)(i) of the Agreement within three
months of the first Distribution Date upon which such purchase option may occur
and all of the Home Equity Loans have not been sold by the Trustee pursuant to
Section 5.01(b) of the Agreement, then the Trustee shall begin a process for
soliciting bids in connection with an auction of the Home Equity Loans pursuant
to Section 10.01(c) of the Agreement. In the event that no such optional
termination occurs, the obligations and responsibilities created by the
Agreement will terminate upon the earliest of (i) the final payment or other
liquidation of the Principal Balance of the last Home Equity Loan remaining in
the Trust or the disposition of all property acquired upon foreclosure or deed
in lieu of foreclosure of any Home Equity Loan and (ii) the Distribution Date in
December 2031. In no event, however, will the trust created by the Agreement
continue beyond the expiration of 21 years from the death of the last survivor
of the descendants living at the date of the Agreement of a certain person named
in the Agreement.
Capitalized terms used herein that are defined in the Agreement shall have
the meanings ascribed to them in the Agreement and nothing herein shall be
deemed inconsistent with that meaning.
B-7
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(Please print or typewrite name and address including postal zip code of
assignee)
the Percentage Interest evidenced by the within Certificate and hereby
authorizes the transfer of the registration of such Percentage Interest to
assignee on the Certificate Register of the Trust.
I (We) further direct the Trustee to issue a new Certificate of a like
denomination and Class, to the above-named assignee and deliver such Certificate
to the following address:
.
-------------------------------------------------------------------------------
Dated:
-------------
-------------------------------------
Signature by or on behalf of assignor
B-8
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of distribution:
Distributions shall be made, by wire transfer or otherwise, in immediately
available funds to
,
-------------------------------------------------------------------------------
,
-------------------------------------------------------------------------------
,
-------------------------------------------------------------------------------
,
-------------------------------------------------------------------------------
for the account of ,
------------------------------------------------------------
Account number , or, if mailed by check, to
------------------- -------------------
.
-------------------------------------------------------------------------------
Applicable statements should be mailed to
--------------------------------------
--------------------------------------------------------------------------------
.
-------------------------------------------------------------------------------
This information is provided by ,
-----------------------------------------
the assignee named above, or ,
---------------------------------------------------
as its agent.
B-9
EXHIBIT C
FORM OF EQUITY CERTIFICATE
THE ACCEPTANCE OF THIS CERTIFICATE CONSTITUTES AN AGREEMENT BY THE
CERTIFICATEHOLDER TO (1) TREAT SUCH CERTIFICATE AS EQUITY FOR FEDERAL, STATE AND
LOCAL INCOME OR FRANCHISE TAX PURPOSES (OR ANY OTHER TAX IMPOSED ON, OR MEASURED
BY, INCOME) OF A DISREGARDED ENTITY, AND TO TAKE NO ACTION INCONSISTENT WITH
SUCH TREATMENT OF THIS CERTIFICATE AS INDEBTEDNESS FOR SUCH PURPOSES; AND (2)
TAKE NO ACTION INCONSISTENT WITH THE TREATMENT OF ANY CLASS A CERTIFICATE OR
CLASS M CERTIFICATE AS INDEBTEDNESS FOR FEDERAL, STATE AND LOCAL INCOME OR
FRANCHISE TAX PURPOSES (OR ANY OTHER TAX IMPOSED ON, OR MEASURED BY, INCOME).
THIS CERTIFICATE MAY NOT BE TRANSFERRED TO ANY PERSON EXCEPT IN CONNECTION WITH
THE ASSUMPTION BY THE TRANSFEREE OF CERTAIN DUTIES SPECIFIED IN THE AGREEMENT.
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). ANY RESALE OR TRANSFER OF THIS CERTIFICATE WITHOUT
REGISTRATION THEREOF UNDER THE ACT MAY ONLY BE MADE IN A TRANSACTION EXEMPTED
FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND IN ACCORDANCE WITH THE
PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN.
THIS EQUITY CERTIFICATE HAS SPECIFIED NO PRINCIPAL BALANCE, DOES NOT BEAR
INTEREST AND WILL NOT RECEIVE ANY DISTRIBUTIONS EXCEPT AS PROVIDED HEREIN.
NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE
PROPOSED TRANSFEREE DELIVERS TO THE TRUSTEE A TRANSFER AFFIDAVIT IN ACCORDANCE
WITH THE PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN.
NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE
TRANSFEREE DELIVERS TO THE TRUSTEE A REPRESENTATION LETTER TO THE EFFECT THAT
SUCH TRANSFEREE IS NOT AN EMPLOYEE BENEFIT PLAN SUBJECT TO THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, A PLAN SUBJECT TO SECTION
4975 OF THE CODE OR AN ENTITY DEEMED TO HOLD PLAN ASSETS BY REASON OF AN
EMPLOYEE BENEFIT PLAN'S OR OTHER PLAN'S INVESTMENT IN THE ENTITY.
NOTWITHSTANDING ANYTHING ELSE TO THE CONTRARY HEREIN, ANY PURPORTED TRANSFER OF
THIS
C-1
CERTIFICATE TO OR ON BEHALF OF AN EMPLOYEE BENEFIT PLAN SUBJECT TO ERISA OR TO
THE CODE SHALL BE VOID AND OF NO EFFECT.
C-2
Certificate No.: 1
Percentage Interest
evidenced by this
Certificate: 100%
HOUSEHOLD HOME EQUITY LOAN TRUST 2002-1
Closed-End Home Equity Loan Asset-Backed Certificates,
Series 2002-1
Equity Certificate
evidencing a percentage interest in the distributions allocable to this
Certificate with respect to a Trust consisting of closed-end fixed- and
declining-rate home equity loans (the "Home Equity Loans")
HFC Revolving Corporation, as Depositor
This Certificate does not evidence an obligation of, or an interest in,
and is not guaranteed by the Depositor, the Sellers, the Master Servicer or the
Trustee referred to below or any of their respective affiliates. Neither this
Certificate nor the Home Equity Loans are guaranteed or insured by any
governmental agency or instrumentality.
This certifies that HFC REVOLVING CORPORATION is the registered owner of
the Percentage Interest evidenced by this Certificate specified above in the
interest represented by this Certificate in a Trust consisting primarily of the
Home Equity Loans deposited by HFC Revolving Corporation (the "Depositor"). The
Trust was created pursuant to a Pooling and Servicing Agreement dated as of
March 15, 2002 (the "Agreement") among the Depositor, Household Finance
Corporation as Master Servicer (the "Master Servicer"), and Bank One, National
Association, as Trustee (the "Trustee"). To the extent not defined herein, the
capitalized terms used herein have the meanings assigned in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Certificateholder
is bound.
This Certificate does not have a specified principal balance or
pass-through rate and will be entitled to distributions only to the extent set
forth in the Agreement. In addition, any distribution of the proceeds of any
remaining assets of the Trust will be made only upon presentment and surrender
of this Certificate at the Corporate Trust Office or the office or agency
maintained by the Trustee in Chicago, Illinois.
C-3
Except in the case of the initial transfer to the Depositor, no transfer
of the Equity Certificate shall be made unless such Transfer is exempt from the
registration requirements of the Securities Act of 1933, as amended, and any
applicable state securities laws or is made in accordance with said Act and
laws. Except in the case of the initial Transfer to the Depositor, as a
condition to any Transfer of the Equity Certificate, (i) the Trustee may require
a written Opinion of Counsel acceptable to and in form and substance
satisfactory to the Trustee that such Transfer may be made pursuant to an
exemption, describing the applicable exemption and the basis therefor, from said
Act and laws or is being made pursuant to said Act and laws, which Opinion of
Counsel shall not be an expense of the Trustee, the Master Servicer or the Trust
and (ii) the Trustee may require the Transferee to execute an investment letter
acceptable to and in form and substance satisfactory to the Trustee certifying
to the Master Servicer, the Sellers and the Trustee the facts surrounding such
Transfer, which investment letter shall not be an expense of the Trustee, the
Master Servicer or the Trust Fund except to the extent any of such parties is
the transferor of such Certificate. The Holder of the Equity Certificate
desiring to effect such transfer shall, and does hereby agree to, indemnify the
Trustee, the Master Servicer and the Trust against any liability that may result
if the Transfer is not so exempt or is not made in accordance with such federal
and state laws.
Neither this Certificate nor any interest herein may be acquired or
transferred unless the purchaser or the transferee delivers to the Trustee a
representation letter, acceptable to and in form satisfactory to the Trustee, to
the effect that such purchaser or transferee is not an employee benefit plan or
arrangement as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), which is subject to Title I of ERISA
or a plan subject to Section 4975 of the Code or an entity deemed to hold plan
assets by reason of an employee benefit plan's or other plan's investment in the
entity or a person acting on behalf of any such plan or arrangement nor using
the assets of any such plan or arrangement to effect such acquisition or
transfer. In the event that the foregoing is violated, such attempted transfer
or acquisition shall be void and of no effect. The Trustee shall be under no
liability to any Person for any registration of any ERISA-Restricted Certificate
that is in fact not permitted by the Pooling and Servicing Agreement or for
making any payments due on such Certificate to the Holder thereof or taking any
other action with respect to such Holder under the provisions of the Pooling and
Servicing Agreement so long as the Transfer or acquisition was registered by the
Trustee in accordance with the foregoing requirements.
The Equity Certificate may not be offered, transferred or sold except to
the Depositor or an Affiliate thereof that is an institutional "accredited
investor" (as defined in Rule 501(a)(1)-(3) or (7) under the Securities Act of
1933, as amended, and who is a United States person (as defined in Section
7701(a)(30) of the Code) in reliance on an exemption from the registration
requirements of the Securities Act of 1933, as amended.
The Equity Certificate may not be sold, pledged, transferred, assigned, or
otherwise conveyed, in whole or in part, without the prior written approval of
the Trustee.
C-4
To the fullest extent permitted by law, no admission (or purported
admission) of an Equity Certificateholder, and no transfer (or purported
transfer) of the Equity Certificate (or any economic interest therein) shall be
effective, and any such admission or transfer (or purported admission or
transfer) shall be void ab initio, and no Person shall otherwise become an
Equity Certificateholder, and the Trustee shall not register any such admission
or transfer (or purported admission or transfer) unless: (i) such Person is a
U.S. Person , (ii) such Person has delivered to the Trustee an investment letter
substantially in the form of Exhibit E to the Pooling and Servicing Agreement
and (iii) such admission or transfer shall not result in there being more than
95 Private Holders. In addition, if at any time the representations and
warranties of the Depositor made pursuant to Section 2.04 of the Pooling and
Servicing Agreement are untrue, or if at any time the certifications in the
investment letter substantially in the form of Exhibit E to the Pooling and
Servicing Agreement are untrue, then the purchase of the Equity Certificate by
such Person shall be void ab initio and of no effect. To the fullest extent
permitted by law, the Trust shall not recognize any prohibited transfer
described in this paragraph either (i) by redeeming the transferor's interest,
or (ii) by admitting the transferee as an Equity Certificateholder or otherwise
recognizing any right of the transferee (including any right of the transferee
to receive distributions from the Trust, directly or indirectly). The Trustee
shall be fully protected in relying upon the certificates and opinions delivered
to it hereunder in connection with any purported transfer.
Reference is hereby made to the further provisions of this Certificate set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Certificate shall not be entitled to any benefit under the Agreement
or be valid for any purpose unless manually countersigned by an authorized
officer of the Trustee.
* * *
C-5
IN WITNESS WHEREOF, the Trustee on behalf of the Trust has caused this
Certificate to be duly executed.
Dated: March ___, 2002
HOUSEHOLD HOME EQUITY LOAN TRUST 2002-1
By: BANK ONE, NATIONAL ASSOCIATION
not in its individual capacity,
but solely as Trustee
By:
------------------------------------
This is the Equity Certificate
referenced in the above-mentioned Agreement
By:
-----------------------------------------
Authorized Signatory of
Bank One, National Association, as Trustee
C-6
[Reverse of Equity Certificate]
HOUSEHOLD HOME EQUITY LOAN TRUST 2002-1
Closed-End Home Equity Loan Asset-Backed
Certificates, Series 2002-1
This Certificate is one of a duly authorized issue of Certificates
designated as Household Home Equity Loan Trust 2002-1, Closed-End Home Equity
Loan Asset-Backed Certificates, Series 2002-1 (herein collectively called the
"Certificates"), and representing a beneficial ownership interest in the Trust
created by the Agreement.
The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the funds on deposit in the Collection Account for
payment hereunder and that the Trustee is not liable to the Certificateholders
for any amount payable under this Certificate or the Agreement or, except as
expressly provided in the Agreement, subject to any liability under the
Agreement.
This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for the interests, rights and limitations of
rights, benefits, obligations and duties evidenced thereby, and the rights,
duties and immunities of the Trustee.
Pursuant to the terms of the Agreement, a distribution will be made on
the 20th day of each month or, if such 20th day is not a Business Day, the next
succeeding Business Day (the "Distribution Date"), commencing on the first
Distribution Date specified on the face hereof, to the Person in whose name this
Certificate is registered at the close of business on the applicable Record Date
in an amount equal to the product of the Percentage Interest evidenced by this
Certificate and the amount required to be distributed to Certificateholders of
Certificates of the Class to which this Certificate belongs on such Distribution
Date pursuant to the Agreement. The Record Date applicable to each Distribution
Date is the Business Day preceding such Distribution Date; provided, however,
that following the date on which Definitive Certificates are available pursuant
to Section 6.02(f) of the Agreement, the Record Date shall be the last day of
the month preceding the month in which such Distribution Date occurs.
Distributions on this Certificate shall be made by check or money order
mailed to the address of the person entitled thereto as it appears on the
Certificate Register or, upon the written request by a Certificateholder owning
Certificates having the requisite aggregate denominations or Percentage
Interests specified in the Agreement, by wire transfer or otherwise, as set
forth in the Agreement. The final distribution on each Certificate will be made
in like manner, but only upon presentment and surrender of such Certificate at
the office or agency of the Trustee specified in the notice to
Certificateholders of such final distribution.
C-7
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Trustee and the rights of the Certificateholders under the Agreement at any time
by the Master Servicer, the Depositor, and the Trustee, in each case with the
consent of the Certificateholders of the requisite percentage of the Percentage
Interests of each Class of Certificates affected by such amendment or all
classes in the case of amendments or modifications which affect all classes, as
specified in the Agreement. Any such consent by the holder of this Certificate
shall be conclusive and binding to such holder and upon all future holders of
this Certificate and of any Certificate issued upon the transfer hereof or in
exchange therefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.
As provided in the Agreement and subject to certain limitations therein
set forth, 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 Certificate
Registrar (which shall be the Corporate Trust Office if the Trustee is the
Certificate Registrar as provided in the Agreement). Every Certificate presented
or surrendered for registration of transfer or exchange shall (if so required by
the Trustee or the Certificate Registrar) be duly endorsed by, or accompanied by
a written instrument of transfer in form satisfactory to the Trustee and the
Certificate Registrar duly executed by, the Certificateholder hereof or such
Certificateholder's attorney duly authorized in writing. In the case of the
Equity Certificate presented or surrendered for registration of transfer or
exchange, the instrument of transfer shall contain an investment letter
substantially in the form of Exhibit E to the Pooling and Servicing Agreement,
and shall be accompanied by an Opinion of Counsel to the effect that such
transfer will not subject the Trust or any other Person to federal income
taxation as an association or publicly traded partnership taxable as a
corporation or cause the holders of any Class A and Class M Certificates
unaffiliated with the Master Servicer to recognize income, gain or loss for
federal income tax purposes. Upon satisfaction of the foregoing, one or more new
Certificates of the same Class in authorized denominations and evidencing the
same aggregate Percentage Interest in the Trust will be issued to the designated
transferee or transferees.
The Certificates are issuable only as registered Certificates without
coupons in denominations specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of the same Class in authorized denominations
and evidencing the same aggregate Percentage Interest, as requested by the
Holder surrendering the same.
No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Sellers, the Master Servicer, the Depositor, and the Trustee and
any agent of the Sellers, the Master Servicer, the Depositor or the Trustee may
treat the Person in whose name
C-8
this Certificate is registered as the owner hereof for all purposes, and the
Sellers, the Master Servicer, the Depositor, or the Trustee or any such agent
shall not be affected by any notice to the contrary.
On any Distribution Date following the date at which the aggregate
Certificate Principal Balance is less than 15% of the initial aggregate
Certificate Principal Balance of the Class A and Class M Certificates, the
Master Servicer will have the option to purchase, in whole, from the Trust the
Home Equity Loans at a purchase price determined as provided in the Agreement
provided, however, if the Master Servicer does not purchase all of the Home
Equity Loans pursuant to Section 10.01(a)(i) of the Agreement within three
months of the first Distribution Date upon which such purchase option may occur
and all of the Home Equity Loans have not been sold by the Trustee pursuant to
Section 5.01(b) of the Agreement, then the Trustee shall begin a process for
soliciting bids in connection with an auction of the Home Equity Loans pursuant
to Section 10.01(c) of the Agreement. In the event that no such optional
termination occurs, the obligations and responsibilities created by the
Agreement will terminate upon the earliest of (i) the final payment or other
liquidation of the Principal Balance of the last Home Equity Loan remaining in
the Trust or the disposition of all property acquired upon foreclosure or deed
in lieu of foreclosure of any Home Equity Loan and (ii) the Distribution Date in
December 2031. In no event, however, will the trust created by the Agreement
continue beyond the expiration of 21 years from the death of the last survivor
of the descendants living at the date of the Agreement of a certain person named
in the Agreement.
Capitalized terms used herein that are defined in the Agreement shall
have the meanings ascribed to them in the Agreement and nothing herein shall be
deemed inconsistent with that meaning.
C-9
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
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--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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(Please print or typewrite name and address
including postal zip code of assignee)
the Percentage Interest evidenced by the within Certificate and hereby
authorizes the transfer of registration of such Percentage Interest to assignee
on the Certificate Register of the Trust.
I (We) further direct the Trustee to issue a new Certificate of a like
denomination to the above-named assignee and deliver such Certificate to the
following address:
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Dated:
--------------
-----------------------------------------
Signature by or on behalf of assignor
C-10
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of distribution:
Distribution shall be made, by wire transfer or otherwise, in
immediately available funds to
,
-------------------------------------------------------------------------------
,
-------------------------------------------------------------------------------
,
-------------------------------------------------------------------------------
for the account of ,
------------------------------------------------------------
Account number , or, if mailed by check, to
----------------------- -------------
.
-------------------------------------------------------------------------------
Applicable statements should be mailed to
---------------------------------------------
-------------------------------------------------------------------------------
.
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
This information is provided by ,
--------------------------------------
the assignee named above, or ,
--------------------------------------------------
as its agent.
C-11
EXHIBIT D
HOME EQUITY LOAN SCHEDULE
D-1
EXHIBIT E
FORM OF INVESTMENT LETTER [NON-RULE 144A]
[DATE]
HFC Revolving Corporation
0000 Xxxxxxx Xxxx
Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000
Bank One, National Association
Bank One Plaza
Global Corporate Trust Services
Suite IL1-0126
Xxxxxxx, Xxxxxxxx 00000-0000
Re: HOUSEHOLD HOME EQUITY LOAN TRUST 2002-1
Closed-End Home Equity Loan Asset-Backed Certificates,
Series 2002-1, Equity Certificate
Ladies and Gentlemen:
In connection with our requisition of the above-captioned Certificate,
we certify that (a) we understand that the Certificate is not being registered
under the Securities Act of 1933, as amended (the "Act"), or any state
securities laws and is being transferred to us in a transaction that is exempt
from the registration requirements of the Act and any such laws, (b) we are an
"accredited investor," as defined in Regulation D under the Act, and have such
knowledge and experience in financial and business matters that we are capable
of evaluating the merits and risks of investments in the Certificate, (c) we
have had the opportunity to ask questions of and receive answers from the
Depositor concerning the purchase of the Certificate and all matters relating
thereto or any additional information deemed necessary to our decision to
purchase the Certificate, (d) we are not an employee benefit plan that is
subject to the Employee Retirement Income Security Act of 1974, as amended, or a
plan that is subject to Section 4975 of the Internal Revenue Code of 1986, as
amended, or an entity deemed to hold plan assets by reason of an employee
benefit plan's or other plan's investment in the entity (each, a "Plan"), nor
are we acting on behalf of any such Plan, (e) we are acquiring the Certificate
for investment for our own account and not with a view to any distribution of
such Certificate and we are the sole beneficial owner of the Certificate (but
without prejudice to our right at all times to sell or otherwise dispose of the
Certificate in accordance with clause (i) below), (f) we have not offered or
sold the Certificate to, or solicited offers to buy the Certificate from, any
person, or otherwise approached or negotiated with any person with respect
thereto, or taken any other action which would result in a violation of Section
5 of the Act, (g) we are (i) a U.S. Person as defined in Section 7701(a)(30) of
the Internal Revenue Code of 1986, as amended (the "Code") and (ii) an Affiliate
E-1
of HFC Revolving Corporation (as such term is defined in the Pooling and
Servicing Agreement, dated as of March 15, 2002, among HFC Revolving
Corporation, as Depositor, Household Finance Corporation, as Master Servicer,
and Bank One, National Association, as Trustee), (h) we are not and will not
become for U.S. federal income tax purposes a partnership, subchapter S
corporation or grantor trust (as defined in the Code), and (i) we will not sell,
transfer or otherwise dispose of the Certificate unless (1) such sale, transfer
or other disposition is made pursuant to an effective registration statement
under the Act or is exempt from such registration requirements, and if
requested, we will at our expense provide an opinion of counsel satisfactory to
the addressees of this Certificate that such sale, transfer or other disposition
may be made pursuant to an exemption from the Act, (2) such sale, transfer or
other disposition occurs by unconditional sale of the entire right, title and
interest to the Certificate and the purchaser or transferee of the Certificate
has executed and delivered to you a certificate to substantially the same effect
as this certificate, and (3) the purchaser or transferee has otherwise complied
with any conditions for transfer set forth in the Pooling and Servicing
Agreement.
Very truly yours,
[NAME OF TRANSFEREE]
By:
---------------------------------------
Authorized Officer
E-2
FORM OF RULE 144A LETTER
[DATE]
HFC Revolving Corporation
0000 Xxxxxxx Xxxx
Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000
Bank One National Association
Bank One Plaza
Global Corporate Trust Services
Suite IL1-0126
Xxxxxxx, Xxxxxxxx 00000-0000
Re: HOUSEHOLD HOME EQUITY LOAN TRUST 2002-1
Closed-End Home Equity Loan Asset-Backed Certificates,
Series 2002-1, Equity Certificate
Ladies and Gentlemen:
In connection with our acquisition of the above Certificate we certify
that (a) we understand that the Certificate is not being registered under the
Securities Act of 1933, as amended (the "Act"), or any state securities laws and
is being transferred to us in a transaction that is exempt from the registration
requirements of the Act and any such laws, (b) we have had the opportunity to
ask questions of and receive answers from the Depositor concerning the purchase
of the Certificate and all matters relating thereto or any additional
information deemed necessary to our decision to purchase the Certificate, (c) we
are not an employee benefit plan that is subject to the Employee Retirement
Income Security Act of 1974, as amended, or a plan that is subject to Section
4975 of the Internal Revenue Code of 1986, as amended, or an entity deemed to
hold plan assets by reason of an employee benefit plan's or other plan's
investment in the entity (each, a "Plan"), nor are we acting on behalf of any
such Plan, (d) we have not, nor has anyone acting on our behalf offered,
transferred, pledged, sold or otherwise disposed of the Certificate, any
interest in the Certificate or any other similar security to, or solicited any
offer to buy or accept a transfer, pledge or other deposition of the
Certificate, any interest in the Certificate or any other similar security from,
or otherwise approached or negotiated with respect to the Certificate, any
interest in the Certificate or any other similar security with, any person in
any manner, or made any general solicitation by means of general advertising or
in any other manner, or taken any other action, that would constitute a
distribution of the Certificate under the Securities Act or that would render
the disposition of the Certificate a violation of Section 5 of the Securities
Act or require registration pursuant thereto, nor will act, nor has authorized
or will authorize any person to act, in such manner with respect to the
Certificate and (e) we are a
E-3
"qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act and have completed either of the forms of certification to that
effect attached hereto as Annex 1 or Annex 2. We are aware that the sale to us
is being made in reliance on Rule 144A. We are acquiring the Certificate for our
own account or for resale pursuant to Rule 144A and further, understand that the
Certificate may be resold, pledged or transferred only (i) to a person
reasonably believed to be a qualified institutional buyer that purchases for its
own account or for the account of a qualified institutional buyer to whom notice
is given that the resale, pledge or transfer is being made in reliance on Rule
144A, or (ii) pursuant to another exemption from registration under the
Securities Act.
Very truly yours,
[NAME OF TRANSFEREE]
By:
-----------------------------------------
Authorized Officer
E-4
ANNEX 1 TO EXHIBIT E
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Transferees Other Than Registered Investment Companies]
The undersigned (the "Buyer") hereby certifies as follows to the
parties listed in the Rule 144A Transferee Certificate to which this
certification relates with respect to the Certificate described therein:
i. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
Buyer.
ii. In connection with purchases by the Buyer, the Buyer is a
"qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933, as amended ("Rule 144A") because (i) the Buyer owned
and/or invested on a discretionary basis $_______ in securities (except for the
excluded securities referred to below) as of the end of the Buyer's most recent
fiscal year (such amount being calculated in accordance with Rule 144A and ____
Buyer satisfies the criteria in the category marked below.
_____ Corporation, etc. The Buyer is a corporation (other than
a bank, savings and loan association or similar institution),
Massachusetts or similar business trust, partnership, or
charitable organization described in Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended.
_____ Bank. The Buyer (a) is a national bank or banking
institution organized under the laws of any State, territory
or the District of Columbia, the business of which is
substantially confined to banking and is supervised by the
State or territorial banking commission or similar official or
is a foreign bank or equivalent institution, and (b) has an
audited net worth of at least $25,000,000 as demonstrated in
its latest annual financial statements, a copy of which is
attached hereto.
_____ Savings and Loan. The Buyer (a) is a savings and loan
association, building and loan association, cooperative bank,
homestead association or similar institution, which is
supervised and examined by a State or Federal authority having
supervision over any such institutions or is a foreign savings
and loan association or equivalent institution and (b) has an
audited net worth of at least $25,000,000 as demonstrated in
its latest annual financial statements, a copy of which is
attached hereto.
E-1-1
_____ Broker-dealer. The Buyer is a dealer registered
pursuant to Section 15 of the Securities Exchange Act of 1934.
_____ Insurance Company. The Buyer is an insurance company
whose primary and predominant business activity is the writing
of insurance or the reinsuring of risks underwritten by
insurance companies and which is subject to supervision by the
insurance commissioner or a similar official or agency of a
State, territory or the District of Columbia.
_____ State or Local Plan. The Buyer is a plan established
and maintained by a State, its political subdivisions, or any
agency or instrumentality of the State or its political
subdivisions, for the benefit of its employees.
_____ ERISA Plan. The Buyer is an employee benefit plan within
the meaning of Title I of the Employee Retirement Income
Security Act of 1974.
_____ Investment Advisor. The Buyer is an investment advisor
registered under the Investment Advisors Act of 1940.
_____ Small Business Investment Company. Buyer is a small
business investment company licensed by the U.S. Small
Business Administration under Section 301(c) or(d) of the
Small Business Investment Act of 1958.
_____ Business Development Company. Buyer is a business
development company as defined in Section 202(a)(22) of the
Investment Advisors Act of 1940.
iii. The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Buyer, (ii) securities that
are part of an unsold allotment to or subscription by the Buyer, if the Buyer is
a dealer, (iii) securities issued or guaranteed by the U.S. or any
instrumentality thereof, (iv) bank deposit notes and certificates of deposit,
(v) loan participations, (vi) repurchase agreements, (vii) securities owned but
subject to a repurchase agreement and (viii) currency, interest rate and
commodity swaps.
iv. For purposes of determining the aggregate amount of securities
owned and/or invested on a discretionary basis by the Buyer, the Buyer used the
cost of such securities to the Buyer and did not include any of the securities
referred to in the preceding paragraph, except (i) where the Buyer reports its
securities holdings in its financial statements on the basis of their market
value, and (ii) no current information with respect to the cost of those
securities has been published. If clause (ii) in the preceding sentence applies,
the securities may be valued at market. Further, in determining such aggregate
amount, the Buyer may have included securities owned by subsidiaries of the
Buyer, but only if such subsidiaries are consolidated with the Buyer in its
financial statements prepared in accordance with generally accepted accounting
principles and if
E-1-2
the investments of such subsidiaries are managed under the Buyer's direction.
However, such securities were not included if the Buyer is a majority-owned,
consolidated subsidiary of another enterprise and the Buyer is not itself a
reporting company under the Securities Exchange Act of 1934, as amended.
v. The Buyer acknowledges that it is familiar with Rule 144A and
understands that the seller to it and other parties related to the Certificate
are relying and will continue to rely on the statements made herein because one
or more sales to the Buyer may be in reliance on Rule 144A.
vi. Until the date of purchase of the Rule 144A Securities, the Buyer
will notify each of the parties to which this certification is made of any
changes in the information and exclusions herein. Until such notice is given,
the Buyer's purchase of the Certificate will constitute a reaffirmation of this
certification as of the date of such purchase. In addition, if the Buyer is a
bank or savings and loan as provided above, the Buyer agrees that it will
furnish to the parties updated annual financial statements promptly after they
become available.
---------------------------
Print Name of Buyer
By:
-------------------------------------------
Name:
Title:
Date:
----------------
E-1-3
ANNEX 2 TO EXHIBIT E
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Transferees That are Registered Investment Companies]
The undersigned (the "Buyer") hereby certifies as follows to the
parties listed in the Rule 144A Transferee Certificate to which this
certification relates with respect to the Certificate described therein.
1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President of the Buyer or, if the Buyer is a
"qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933, as amended ("Rule 144A") because Buyer is part of a
Family of Investment Companies (as defined below), is such an officer of the
Adviser.
2. In connection with purchases by Buyer, the Buyer is a "qualified
institutional buyer" as defined in SEC Rule 144A because (i) the Buyer is an
investment company registered under the Investment Company Act of 1940, as
amended and (ii) as marked below, the Buyer alone, or the Buyer's Family of
Investment Companies, owned at least $100,000,000 in securities (other than the
excluded securities referred to below) as of the end of the Buyer's most recent
fiscal year. For purposes of determining the amount of securities owned by the
Buyer or the Buyer's Family of Investment Companies, the cost of such securities
was used, except (i) where the Buyer or the Buyer's Family of Investment
Companies reports its securities holdings in its financial statements on the
basis of their market value, and (ii) no current information with respect to the
cost of those securities has been published. If clause (ii) in the preceding
sentence applies, the securities may be valued at market.
_____ The Buyer owned $_________ in securities (other than the
excluded securities referred to below) as of the end of the
Buyer's most recent fiscal year (such amount being calculated
in accordance with Rule 144A).
_____ The Buyer is part of a Family of Investment Companies
which owned in the aggregate $_______ in securities (other
than the excluded securities referred to below) as of the end
of the Buyer's most recent fiscal year (such amount being
calculated in accordance with Rule 144A).
3. The term "Family of Investment Companies" as used herein means two
or more registered investment companies (or series thereof) that have the same
investment adviser or investment advisers that are affiliated (by virtue of
being majority owned subsidiaries of the same parent or because one investment
adviser is a majority owned subsidiary of the other)).
E-2-1
4. The term "securities" as used herein does not include (i) securities
of issuers that are affiliated with the Buyer or are part of the Buyer's Family
of Investment Companies, (ii) securities issued or guaranteed by the U.S. or any
instrumentality thereof, (iii) bank deposit notes and certificates of deposit,
(iv) loan participations, (v) repurchase agreements, (vi) securities owned but
subject to a repurchase agreement and (viii) currency, interest rate and
commodity swaps.
5. The Buyer is familiar with Rule 144A and understands that the
parties listed in the Rule 144A Transferee Certificate to which this
certification relates are relying and will continue to rely on the statements
made herein because one or more sales to the Buyer will be in reliance on Rule
144A. In addition, the Buyer will only purchase for the Buyer's own account.
6. Until the date of purchase of the Certificate, the undersigned will
notify the parties listed in the Rule 144A Transferee Certificate to which this
certification relates of any changes in the information and conclusions herein.
Until such notice is given, the Buyers' purchase of the Certificate will
constitute a reaffirmation of this certification by the undersigned as of the
date of such purchase.
Print Name of Buyer or Adviser
By:
---------------------------------
Name:
Title:
IF AN ADVISER:
Print Name of Buyer
Date:
-------------------
E-2-2
