<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: April 30, 1997
(Date of earliest event reported)
FIRSTPLUS INVESTMENT CORPORATION
(Exact name of Registrant as specified in its charter)
Nevada 333-11855 75-2596063
(State of Incorporation) (Commission File No.) (I.R.S. Employer
Identification No.)
3773 Howard Hughes Parkway
Suite 300N
Las Vegas, Nevada 89109
(Address of Principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (702) 892-3772
<PAGE> 2
Item 5. Other Events.
Reference is hereby made to the Registrant's Registration Statement on
Form S-3 (Fil No. 333-11855) filed with the Securities and Exchange Commission
(the "Commission") on September 12, 1996 (the "Registration Statement"),
pursuant to which the Registrant registered $1,240,625,000 aggregate principal
amount of its asset backed securities, issuable in various series, for sale in
accordance with the provisions of the Securities Act of 1933, as amended (the
"Act"). Reference is also hereby made to the Prospectus dated February 21,
1997, and the related Prospectus Supplement, dated February 21, 1997
(collectively, the "Prospectus"), which were previously filed with the
Commission pursuant to Rule 424(b)(5), with respect to the FIRSTPLUS HOME LOAN
OWNER TRUST 1997-1 Asset Backed Notes and Asset Backed Certificates, Series
1997-1, consisting of (A) the following classes of Asset Backed Notes
(collectively, the "Notes"): (i) Class A-1 Notes, Class A-2 Notes, Class A-3
Notes, Class A-4 Notes, Class A-5 Notes, Class A-6 Notes, Class A-7 Notes, and
Class A-8 Notes, and (B) the Asset Backed Certificates (the "Certificates" and,
together with the Notes, the "Offered Securities").
The Offered Securities were sold to Banc One Capital Corporation,
Bear, Stearns & Co. Inc. and PaineWebber Incorporated (collectively, the
"Underwriter") pursuant to the terms of an underwriting agreement dated as of
September 16, 1996 (the "Underwriting Agreement"), as supplemented by a terms
agreement dated as of February 21, 1997, each between the Registrant, FIRSTPLUS
FINANCIAL, INC. ("FFI") and the Underwriter. A copy of the Underwriting
Agreement was previously filed with the Commission in the Registrant's Current
Report on For 8-K dated December 20, 1996.
The Notes were issued pursuant to an Indenture dated as of February 1,
1997 (the "Indenture") between FIRSTPLUS HOME LOAN OWNER TRUST 1997-1 (the
"Issuer" or the "Trust") and First Bank, National Association, as Indenture
Trustee (the "Indenture Trustee"). A copy of the Indenture is filed herewith as
Exhibit 4.1.
The Notes are secured by the assets of the Trust pursuant to the
Indenture. The assets of the Trust primarily include a pool of home loans (the
"Home Loans") consisting of loans which are secured by either (i) mortgages,
deeds of trust or other similar security instruments, or (ii)security
instruments creating a lien on personal property such as home furnishings. The
Home Loans consist of loans for which the related proceeds were used to finance
(i) property improvements, (ii) the acquisition of personal property such as
home appliances or furnishings, (iii) debt consolidation, or (iv) in
combination, property improvements, debt consolidation and for other purposes.
The Certificates represent the entire undivided ownership interest in
the Trust and were issued pursuant to the Trust Agreement dated as of February
1, 1997 (the "Trust Agreement") among the Registrant, as Seller, FIRSTPLUS
RESIDUAL HOLDINGS, INC., as the Company, Wilmington Trust Company, as Owner
Trustee, and First Bank National Association, as Co-Owner Trustee. A copy of
the Trust Agreement is filed herewith as Exhibit 4.2.
The Home Loans were sold by FFI to the Registrant pursuant to the
terms of a Loan Sale Agreement dated as of February 27, 1997 (the "Loan Sale
Agreement") and were simultaneously sold by the Registrant to the Trust
pursuant to the Sale and Servicing Agreement (defined below). A copy of the
Loan Sale Agreement is filed herewith as Exhibit 10.1.
<PAGE> 3
The Home Loans will be serviced by FIRSTPLUS FINANCIAL, INC. ("FFI"),
an affiliate of the Registrant, pursuant to the terms of a Sale and Servicing
Agreement dated as of February 1, 1997 (the "Sale and Servicing Agreement")
among the Registrant, as Seller, FFI, as Transferor and Servicer, the Issuer,
and First Bank National Association, as Indenture Trustee and Co-Owner Trustee.
A copy of the Sale and Servicing Agreement is filed herewith as Exhibit 10.2.
Set forth below is a brief description of certain characteristics of
the Home Loans included in the Home Loan Pool as of the end of the Funding
Period.
The Home Loan Pool consists of 19,644 Home Loans having a Pool
Principal Balance as of the respective Cut-off Dates of the related Home Loans
of $599,998,614.23. The Home Loans (by Pool Principal Balance as of the
applicable Cut-off Dates) have the characteristics set forth in the following
tables:
HOME LOAN RATE
<TABLE>
<CAPTION>
RANGE OF Number of Percent of Total ce
HOME LOAN Home Aggregate by Aggregate al ce
RATES (%) Loans Principal Balance Principal Balance
--------- --------- ------------------ -------------------
<S> <C> <C> <C>
Less than 9.000% 1 $ 42,542.12 0.01%
9.000% to 9.999% 2 58,949.65 0.01%
10.000% to 10.999% 13 439,856.12 0.07%
11.000% to 11.999% 706 24,945,633.66 4.16%
12.000% to 12.999% 3,849 128,383,842.39 21.40%
13.000% to 13.999% 5,984 187,528,271.33 31.25%
14.000% to 14.999% 5,301 156,001,704.79 26.00%
15.000% to 15.999% 2,409 67,176,442.37 11.20%
16.000% to 16.999% 1,011 26,804,940.36 4.47%
17.000% to 17.999% 315 7,457,761.89 1.24%
18.000% to 18.999% 47 1,032,483.94 0.17%
19.000% to 19.999% 6 126,185.61 0.02%
------ ------------------ ------
Totals 19,644 $ 599,998,614.23 100.00%
====== ================== ======
</TABLE>
The weighted average Home Loan Rate of the Home Loans as of the
Cut-Off Date was approximately 14.111% per annum.
<PAGE> 4
CUT-OFF DATE LOAN PRINCIPAL BALANCES
<TABLE>
<CAPTION>
RANGE OF PERCENT OF TOTAL
CUT-OFF DATE NUMBER OF AGGREGATE BY AGGREGATE
PRINCIPAL BALANCE ($) HOME LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
--------------------- ---------- ------------------ -----------------
<S> <C> <C> <C>
Less than 10,000.00............................... 90 $ 869,328.36 0.14%
10,000.00 - 19,999.99................................ 2,579 43,126,886.80 7.19%
20,000.00 - 29,999.99................................ 8,689 219,373,811.67 38.56%
30,000.00 - 39,999.99................................ 5,015 176,282,589.50 29.38%
40,000.01 - 49,999.99................................ 2,342 107,009,819.53 17.84%
50,000.00 - 59,999.99................................ 677 36,444,949.03 6.07%
60,000.00 - 69,999.99................................ 193 12,434,211.48 2.07%
70,000.00 - 79,999.99................................ 48 3,577,017.86 0.60%
80,000.00 - 89,999.99................................ 11 880,000.00 0.15%
------ ------------------ ------
Totals ................................... 19,644 $ 599,998,614.23 100.00%
====== ================== ======
</TABLE>
The average principal balance of the Home Loans as of the Cut-Off Date
was approximately $34,326.50.
ORIGINAL LOAN PRINCIPAL BALANCES
<TABLE>
<CAPTION>
RANGE OF PERCENT OF TOTAL CE
PRINCIPAL BALANCE NUMBER OF AGGREGATE BY AGGREGATE CE
AT ORIGINATION($) HOME LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
----------------- ---------- ----------------- --------------------
<S> <C> <C> <C>
Less than 10,000.00 ............................... 9 $ 72,508.43 0.01%
10,000.00 - 19,999.99................................ 2,113 33,069,837.70 5.51%
20,000.00 - 29,999.99................................ 8,400 205,236,390.85 34.21%
30,000.00 - 39,999.99................................ 5,166 173,981,164.52 29.00%
40,000.00 - 49,999.99 ............................... 2,384 102,247,462.69 17.04%
50,000.00 - 59,999.99................................ 1,209 61,855,797.47 10.31%
60,000.00 - 69,999.99................................ 261 16,074,919.50 2.68%
70,000.00 - 79,999.99................................ 82 5,861,080.12 0.98%
80,000.00 - 89,999.99................................ 20 1,599,452.95 0.27%
------ --------------- -------
Totals ................................... 19,644 $599,998,614.23 100.00%
====== =============== ======
</TABLE>
The average principal balance of the Home Loans at origination was
approximately $34,409.55.
<PAGE> 5
GEOGRAPHIC CONCENTRATION
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
HOME AGGREGATE BY AGGREGATE L
STATE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCEL
----- ----- ----------------- ------------------
<S> <C> <C> <C>
Alabama ............................................ 22 $ 679,308.62 0.11%
Arkansas ............................................ 18 525,022.17 0.09%
Arizona ............................................ 966 27,249,234.43 4.54%
California........................................... 8,903 287,414,683.94 47.90%
Colorado ............................................ 884 25,761,724.27 4.29%
Connecticut.......................................... 53 1,503,339.64 0.25%
DC................................................... 5 178,623.41 0.03%
Delaware............................................. 7 157,298.76 0.03%
Florida ............................................ 1,546 43,725,451.35 7.29%
Georgia ............................................ 795 22,879,989.18 3.81%
Hawaii............................................... 2 67,183.24 0.01%
Idaho ............................................ 187 5,453,073.77 0.91%
Illinois ............................................ 255 7,418,195.49 1.24%
Indiana ............................................ 196 5,558,608.85 0.93%
Iowa................................................. 11 331,489.48 0.06%
Kansas ............................................ 90 2,796,792.02 0.47%
Kentucky ............................................ 69 1,901,967.94 0.32%
Louisiana............................................ 42 1,164,184.46 0.19%
Maryland ............................................ 469 14,566,404.19 2.43%
Massachusetts........................................ 100 3,332,641.33 0.56%
Michigan ............................................ 149 4,173,665.16 0.70%
Minnesota............................................ 261 7,590,260.49 1.27%
Mississippi.......................................... 50 1,406,473.82 0.23%
Missouri ............................................ 135 3,793,148.54 0.63%
Montana.............................................. 17 355,770.09 0.06%
Nebraska ............................................ 17 434,868.38 0.07%
Nevada............................................... 694 21,191,516.40 3.53%
New Hampshire........................................ 10 305,342.32 0.05%
New Jersey........................................... 97 2,916,057.58 0.49%
New Mexico........................................... 118 3,805,173.85 0.63%
New York............................................. 69 2,252,472.73 0.38%
North Carolina....................................... 403 11,912,082.64 1.99%
North Dakota......................................... 1 33,072.15 0.01%
Ohio ............................................ 394 10,924,652.60 1.82%
Oklahoma ............................................ 126 3,486,672.41 0.58%
Oregon ............................................ 237 7,369,701.84 1.23%
Pennsylvania......................................... 40 1,214,884.35 0.20%
Rhode Island......................................... 20 557,342.10 0.09%
South Carolina....................................... 284 7,596,371.08 1.27%
South Dakota......................................... 1 35,000.00 0.01%
Tennessee............................................ 220 5,956,469.55 0.99%
Texas ............................................ 5 162,817.67 0.03%
Utah ............................................ 360 10,190,681.39 1.70%
Vermont.............................................. 3 94,206.78 0.02%
Virginia ............................................ 524 15,570,460.86 2.60%
Washington........................................... 714 21,973,776.70 3.66%
West Virginia........................................ 7 171,236.88 0.03%
Wisconsin............................................ 51 1,346,306.19 0.22%
Wyoming.............................................. 17 512,913.14 0.09%
------ ------------------ -------
Totals ................................... 19,644 $ 599,998,614.23 100.00%
====== ================= ======
</TABLE>
<PAGE> 6
REMAINING TERM TO MATURITY
<TABLE>
<CAPTION>
RANGE OF PERCENT OF TOTAL
REMAINING TERM TO NUMBER OF AGGREGATE BY AGGREGATE
MATURITY (MONTHS) HOME LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
----------------- ---------- ----------------- -----------------
<S> <C> <C> <C>
30.00 to 59.99....................................... 120 2,431,215.93 0.41%
60.00 to 89.99....................................... 114 2,648,454.19 0.44%
90.00 to 119.99...................................... 973 23,327,904.49 3.89%
120.00 to 149.99..................................... 240 6,104,484.47 1.02%
150.00 to 179.99..................................... 4,054 118,008,516.00 19.67%
180.00 to 209.99..................................... 856 26,360,311.12 4.39%
210.00 to 239.99..................................... 6,281 188,947,080.33 31.49%
240.00 to 269.99..................................... 1,918 60,822,894.96 10.14%
270.00 to 299.99..................................... 4,226 140,090,626.04 23.35%
300.00 to 329.99..................................... 862 31,257,126.70 5.21%
Totals............................................ 19,644 $599,998,614.23 100.00%
======= =============== ======
</TABLE>
The weighted average remaining term to maturity of the Home Loans as
of the Cut-Off Date was approximately 233 months.
MONTHS SINCE ORIGINATION
<TABLE>
<CAPTION>
Percent of
Number of Total by
AGE Home Aggregate Aggregate
(IN MONTHS) Loans Principal Balance Principal Balance
----------- ----- ----------------- -----------------
<S> <C> <C> <C>
0.00 to 5.99 17,557 541,164,698.55 90.19%
6.00 to 11.99 1,913 54,418,324.75 9.07%
12.00 to 17.99 162 4,124,545.85 0.69%
18.00 to 23.99 1 33,980.03 0.01%
24.00 to 29.99 2 66,317.45 0.01%
30.00 to 35.99 8 165,780.05 0.03%
120.00 to 125.99 1 24,967.55 0.00%
Totals............................................ 19,644 $599,998,614.23 100.00%
======= =============== ======
</TABLE>
The weighted average age of the Home Loans as of the Cut-Off Date was
approximately three months.
<PAGE> 7
Item 7. Financial Statements and Exhibits.
<TABLE>
(c) Exhibits
Exhibit No. Description
----------- -----------
<S> <C>
4.1 Copy of Indenture
4.2 Copy of Trust Agreement
10.1 Copy of Loan Sale Agreement
10.2 Copy of Sale and Servicing Agreement
</TABLE>
<PAGE> 8
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Current Report on Form 8-K to be signed on
its behalf by the undersigned hereunto duly authorized.
FIRSTPLUS INVESTMENT CORPORATION
June 10, 1997 By: /s/ Christopher J. Gramlich
------------------------------
Christopher J. Gramlich,
Senior Vice President
<PAGE> 9
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- --------------------------------------------------------
<S> <C>
4.1 Copy of Indenture
4.2 Copy of Trust Agreement
10.1 Copy of Loan Sale Agreement
10.2 Copy of Sale and Servicing Agreement
</TABLE>
<PAGE> 1
EXHIBIT 4.1
INDENTURE
between
FIRSTPLUS HOME LOAN OWNER TRUST 1997-1,
as Issuer
and
FIRST BANK NATIONAL ASSOCIATION,
as Indenture Trustee
Dated as of February 1, 1997
FIRSTPLUS HOME LOAN OWNER TRUST 1997-1
Asset Backed Securities, Series 1997-1
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE......................................................2
SECTION 1.1 (a) Definitions...........................................................2
SECTION 1.2 Incorporation by Reference of Trust Indenture Act........................12
SECTION 1.3 Rules of Construction....................................................12
ARTICLE II THE NOTES......................................................................................13
SECTION 2.1 Form.....................................................................13
SECTION 2.2 Execution, Authentication, Delivery and Dating...........................13
SECTION 2.3 Registration; Registration of Transfer and Exchange......................14
SECTION 2.4 Mutilated, Destroyed, Lost or Stolen Notes...............................15
SECTION 2.5 Persons Deemed Owner.....................................................16
SECTION 2.6 Payment of Principal and Interest; Defaulted Interest....................16
SECTION 2.7 Cancellation.............................................................17
SECTION 2.8 Authentication of Notes..................................................17
SECTION 2.9 Release of Collateral....................................................20
SECTION 2.10 Book-Entry Notes.........................................................21
SECTION 2.11 Notices to Clearing Agency...............................................22
SECTION 2.12 Definitive Notes.........................................................22
SECTION 2.13 Tax Treatment............................................................22
ARTICLE III COVENANTS......................................................................................22
SECTION 3.1 Payment of Principal and Interest........................................22
SECTION 3.2 Maintenance of Office or Agency..........................................23
SECTION 3.3 Money for Payments To Be Held in Trust...................................23
SECTION 3.4 Existence................................................................25
SECTION 3.5 Protection of Collateral.................................................25
SECTION 3.6 Annual Opinions as to Collateral.........................................26
SECTION 3.7 Performance of Obligations; Servicing of Home Loans......................26
SECTION 3.8 Negative Covenants......................................................28
SECTION 3.9 Annual Statement as to Compliance........................................29
SECTION 3.10 Covenants of the Issuer..................................................30
SECTION 3.11 Servicer's Obligations...................................................30
SECTION 3.12 Restricted Payments......................................................30
SECTION 3.13 Treatment of Notes as Debt for Tax Purposes..............................30
SECTION 3.14 Notice of Events of Default..............................................30
SECTION 3.15 Further Instruments and Acts.............................................31
ARTICLE IV SATISFACTION AND DISCHARGE.....................................................................31
SECTION 4.1 Satisfaction and Discharge of Indenture..................................31
SECTION 4.2 Application of Trust Money...............................................32
SECTION 4.3 Repayment of Moneys Held by Paying Agent.................................32
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS -- (Cont'd)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE V REMEDIES.......................................................................................33
SECTION 5.1 Events of Default........................................................33
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment.......................34
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee........................................................35
SECTION 5.4 Remedies; Priorities.....................................................37
SECTION 5.5 Optional Preservation of the Collateral..................................39
SECTION 5.6 Limitation of Suits......................................................40
SECTION 5.7 Unconditional Rights of Noteholders To Receive Principal
and Interest............................................................40
SECTION 5.8 Restoration of Rights and Remedies.......................................41
SECTION 5.9 Rights and Remedies Cumulative...........................................41
SECTION 5.10 Delay or Omission Not a Waiver...........................................41
SECTION 5.11 Control by Noteholders...................................................41
SECTION 5.12 Waiver of Past Defaults..................................................42
SECTION 5.13 Undertaking for Costs....................................................42
SECTION 5.14 Waiver of Stay or Extension Laws.........................................42
SECTION 5.15 Action on Notes..........................................................43
SECTION 5.16 Performance and Enforcement of Certain Obligations.......................43
ARTICLE VI THE INDENTURE TRUSTEE..........................................................................44
SECTION 6.1 Duties of Indenture Trustee..............................................44
SECTION 6.2 Rights of Indenture Trustee..............................................45
SECTION 6.3 Individual Rights of Indenture Trustee...................................46
SECTION 6.4 Indenture Trustee's Disclaimer...........................................46
SECTION 6.5 Notice of Defaults.......................................................46
SECTION 6.6 Reports by Indenture Trustee to Holders..................................46
SECTION 6.7 Compensation and Indemnity...............................................46
SECTION 6.8 Replacement of Indenture Trustee.........................................47
SECTION 6.9 Successor Indenture Trustee by Merger....................................48
SECTION 6.10 Appointment of Co-Indenture Trustee or
Separate Indenture Trustee...............................................48
SECTION 6.11 Eligibility; Disqualification............................................49
SECTION 6.12 Preferential Collection of Claims Against Issuer.........................50
ARTICLE VII NOTEHOLDERS' LISTS AND REPORTS.......................................................................50
SECTION 7.1 Issuer To Furnish Indenture Trustee Names and Addresses
of Noteholders...........................................................50
SECTION 7.2 Preservation of Information; Communications
to Noteholders...........................................................50
</TABLE>
-ii-
<PAGE> 4
TABLE OF CONTENTS -- (Cont'd)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 7.3 Reports by Issuer........................................................50
SECTION 7.4 Reports by Indenture Trustee.............................................51
ARTICLE VIII ACCOUNTS, DISBURSEMENTS AND RELEASES................................................................51
SECTION 8.1 Collection of Money......................................................51
SECTION 8.2 Trust Accounts; Distributions............................................52
SECTION 8.3 General Provisions Regarding Accounts....................................54
SECTION 8.4 Servicer's Monthly Statements............................................55
SECTION 8.5 Release of Collateral....................................................55
SECTION 8.6 Opinion of Counsel.......................................................56
ARTICLE IX SUPPLEMENTAL INDENTURES........................................................................56
SECTION 9.1 Supplemental Indentures Without Consent of Noteholders...................56
SECTION 9.2 Supplemental Indentures with Consent of Noteholders......................57
SECTION 9.3 Execution of Supplemental Indentures.....................................59
SECTION 9.4 Effect of Supplemental Indenture........................................59
SECTION 9.5 Conformity with Trust Indenture Act......................................59
SECTION 9.6 Reference in Notes to Supplemental Indentures............................59
SECTION 9.7 Amendments to Trust Agreement............................................59
ARTICLE X REDEMPTION OF NOTES............................................................................60
SECTION 10.1 Redemption...............................................................60
SECTION 10.2 Form of Redemption Notice................................................61
SECTION 10.3 Notes Payable on Redemption Date; Provision for
Payment of Indenture Trustee and Securities Insurer......................61
ARTICLE XI MISCELLANEOUS..................................................................................62
SECTION 11.1 Compliance Certificates and Opinions, etc................................62
SECTION 11.2 Form of Documents Delivered to Indenture Trustee.........................63
SECTION 11.3 Acts of Noteholders......................................................64
SECTION 11.4 Notices, etc., to Indenture Trustee, Issuer, Rating Agencies
and Securities Insurer...................................................65
SECTION 11.5 Notices to Noteholders; Waiver...........................................65
SECTION 11.6 [RESERVED]...............................................................66
SECTION 11.7 Conflict with Trust Indenture Act........................................66
SECTION 11.8 Effect of Headings and Table of Contents.................................66
SECTION 11.9 Successors and Assigns...................................................66
SECTION 11.10 Separability.............................................................66
SECTION 11.11 Benefits of Indenture....................................................66
SECTION 11.12 Legal Holidays...........................................................67
SECTION 11.13 GOVERNING LAW............................................................67
</TABLE>
-iii-
<PAGE> 5
TABLE OF CONTENTS -- (Cont'd)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 11.14 Counterparts.............................................................67
SECTION 11.15 Recording of Indenture...................................................67
SECTION 11.16 Trust Obligation.........................................................67
SECTION 11.17 No Petition..............................................................68
SECTION 11.18 Inspection...............................................................68
SECTION 11.19 Grant of Noteholder Rights to Securities Insurer.........................68
SECTION 11.20 Third Party Beneficiary..................................................68
SECTION 11.21 Suspension and Termination of Securities
Insurer's Rights.........................................................68
</TABLE>
-iv-
<PAGE> 6
EXHIBITS
--------
<TABLE>
<CAPTION>
<S> <C> <C>
SCHEDULE A - Schedule of Home Loans
EXHIBIT A-1 - Form of Class A-1 Note
EXHIBIT A-2 - Form of Class A-2 Note
EXHIBIT A-3 - Form of Class A-3 Note
EXHIBIT A-4 - Form of Class A-4 Note
EXHIBIT A-5 - Form of Class A-5 Note
EXHIBIT A-6 - Form of Class A-6 Note
EXHIBIT A-7 - Form of Class A-7 Note
EXHIBIT A-8 - Form of Class A-8 Note
</TABLE>
-v-
<PAGE> 7
INDENTURE dated as of February 1, 1997, between FIRSTPLUS HOME LOAN
OWNER TRUST 1997-1, a Delaware business trust (the "Issuer"), and FIRST BANK
NATIONAL ASSOCIATION, a banking corporation, as trustee and not in its
individual capacity (the "Indenture Trustee").
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the holders of the Issuer's Class A-1
6.05% Asset Backed Notes (the "Class A-1 Notes"), Class A-2 6.28% Asset Backed
Notes (the "Class A-2 Notes"), Class A-3 6.45% Asset Backed Notes (the "Class
A-3 Notes"), Class A-4 6.60% Asset Backed Notes (the "Class A-4 Notes"), Class
A-5 6.70% Asset Backed Notes (the "Class A-5 Notes"), Class A-6 6.95% Asset
Backed Notes (the "Class A-6 Notes"), Class A-7 7.16% Asset Backed Notes (the
"Class A-7 Notes") and Class A-8 7.33% Asset Backed Notes (the "Class A-8
Notes") and, together with the Class A-1, Class A-2 , Class A-3, Class A-4,
Class A-5, Class A-6, Class A-7 and Class A-8 Notes, the "Notes"):
GRANTING CLAUSE
Subject to the terms of this Indenture, the Issuer hereby Grants to
the Indenture Trustee at the Closing Date, as Indenture Trustee for the benefit
of the holders of the Notes, all of the Issuer's right, title and interest in
and to: (i) the Trust Estate (as defined in the Sale and Servicing Agreement);
(ii) all right, title and interest of the Issuer in the Sale and Servicing
Agreement (including the Issuer's right to cause the Transferor and/or the
Seller to repurchase Home Loans from the Issuer under certain circumstances
described therein); (iii) all present and future claims, demands, causes of
action and choses in action in respect of any or all of the foregoing and all
payments on or under and all proceeds of every kind and nature whatsoever in
respect of any or all of the foregoing, including all proceeds of the
conversion thereof, voluntary or involuntary, into cash or other liquid
property, all cash proceeds, accounts, accounts receivable, notes, drafts,
acceptances, chattel paper, checks, deposit accounts, insurance proceeds,
condemnation awards, rights to payment of any and every kind and other forms of
obligations and receivables, instruments and other property which at any time
constitute all or part of or are included in the proceeds of any of the
foregoing; (iv) all funds on deposit from time to time in the Trust Accounts
(including the Certificate Distribution Account) and (v) all other property of
the Trust from time to time (collectively, the "Collateral").
The foregoing Grant is made in trust to secure the payment of
principal of and interest on, and any other amounts owing in respect of, the
Notes, equally and ratably without prejudice, priority or distinction, and to
secure compliance with the provisions of this Indenture, all as provided in
this Indenture.
The Indenture Trustee, as Indenture Trustee on behalf of the holders
of the Notes, acknowledges such Grant, accepts the trusts hereunder and agrees
to perform its duties required in this Indenture to the best of its ability to
the end that the interests of the holders of the Notes may be adequately and
effectively protected. The Indenture Trustee agrees and acknowledges that the
Indenture Trustee's Home Loan Files will be held by the Custodian for the
benefit of the Indenture Trustee in Dallas, Texas. The Indenture Trustee
further agrees and acknowledges that each other
INDENTURE (SERIES 1997-1) -- PAGE 1
<PAGE> 8
item of Collateral that is physically delivered to the Indenture Trustee will be
held by the Indenture Trustee in St. Paul, Minnesota.
I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 (a) Definitions. Except as otherwise specified herein or
as the context may otherwise require, the following terms have the respective
meanings set forth below for all purposes of this Indenture.
"Act" has the meaning specified in Section 11.3(a).
"Administration Agreement" means the Administration Agreement dated as
of February 1, 1997, among the Administrator, the Issuer and the Indenture
Trustee.
"Administrator" means First Bank National Association, a national
banking association, or any successor Administrator under the Administration
Agreement.
"Affiliate" means, with respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect
to any Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Authorized Officer" means, with respect to the Issuer, any officer of
the Owner Trustee who is authorized to act for the Owner Trustee in matters
relating to the Issuer and who is identified on the list of Authorized Officers
delivered by the Owner Trustee to the Indenture Trustee on the Closing Date (as
such list may be modified or supplemented from time to time thereafter) and, so
long as the Administration Agreement is in effect, any Vice President or more
senior officer of the Administrator who is authorized to act for the
Administrator in matters relating to the Issuer and to be acted upon by the
Administrator pursuant to the Administration Agreement and who is identified on
the list of Authorized Officers delivered by the Administrator to the Indenture
Trustee on the Closing Date (as such list may be modified or supplemented from
time to time thereafter).
"Available Collection Amount" means, an amount equal to the sum of:
(i) all amounts received on the Home Loans or required to be paid by the
Servicer, the Transferor or the Seller during the related Due Period (exclusive
of amounts not required to be deposited in the Collection Account and amounts
permitted to be withdrawn by the Indenture Trustee from the Collection Account
pursuant to Section 5.01(d) of the Sale and Servicing Agreement) as reduced by
any portion thereof that may not be withdrawn therefrom pursuant to an order of
a United States bankruptcy court of competent jurisdiction imposing a stay
pursuant to Section 362 of the United States Bankruptcy Code; (ii) in the case
of a Distribution Date relating to a Due Period that occurs prior
INDENTURE (SERIES 1997-1) -- PAGE 2
<PAGE> 9
to the end of the Funding Period, an amount from the Capitalized Interest
Account sufficient to fund any shortfall in the Interest Distribution Amount
attributable to the amounts in the Pre-Funding Account; (iii) in the case of
the Pre-Funding Termination Distribution Date, amounts, if any, remaining in
the Pre-Funding Account at the end of the Funding Period (net of reinvestment
income, which shall be transferred to the Capitalized Interest Account); (iv)
with respect to the final Distribution Date or an early redemption or
termination of the Offered Securities pursuant to Section 11.02 of the Sale and
Servicing Agreement, the Termination Price, and (v) any and all income or gain
from investments in the Collection Account.
"Basic Documents" means the Certificate of Trust, the Trust Agreement,
this Indenture, the Sale and Servicing Agreement, the Loan Sale Agreement, the
Administration Agreement, the Insurance Agreement, the Custodial Agreement, the
Note Depository Agreement, the Certificate Depository Agreement and other
documents and certificates delivered in connection therewith.
"Book-Entry Notes" means a beneficial interest in the Class A-1 Notes,
the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the Class A-5
Notes, the Class A-6 Notes, the Class A-7 Notes and the Class A-8 Notes,
ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 2.10.
"Business Day" means any day other than (i) a Saturday or a Sunday, or
(ii) a day on which banking institutions in New York City or the city in which
the Securities Insurer or the corporate trust office of the Indenture Trustee
is located are authorized or obligated by law or executive order to be closed.
"Certificate Depository Agreement" has the meaning specified in Section
1.1 of the Trust Agreement.
"Certificate of Trust" means the certificate of trust of the Issuer
substantially in the form of Exhibit B to the Trust Agreement.
"Class A-1 Final Scheduled Distribution Date" means the Distribution
Date occurring in January, 2004.
"Class A-1 Interest Rate" means 6.05% per annum (computed on the basis
of a 360-day year consisting of twelve 30-day months).
"Class A-1 Notes" means the Class A-1 6.05% Asset Backed Notes,
substantially in the form of Exhibit A-1.
"Class A-2 Final Scheduled Distribution Date" means the Distribution
Date occurring in September, 2006.
"Class A-2 Interest Rate" means 6.28% per annum (computed on the basis
of a 360-day year consisting of twelve 30-day months).
INDENTURE (SERIES 1997-1) -- PAGE 3
<PAGE> 10
"Class A-2 Notes" means the Class A-2 6.28% Asset Backed Notes,
substantially in the form of Exhibit A-2.
"Class A-3 Final Scheduled Distribution Date" means the Distribution
Date occurring in February, 2009.
"Class A-3 Interest Rate" means 6.45% per annum (computed on the basis
of a 360 day year consisting of twelve 30-day months).
"Class A-3 Notes" means the Class A-3 6.45% Asset Backed Notes,
substantially in the form of Exhibit A-3.
"Class A-4 Final Scheduled Distribution Date" means the Distribution
Date occurring in July, 2010.
"Class A-4 Interest Rate" means 6.60% per annum (computed on the basis
of a 360 day year consisting of twelve 30-day months).
"Class A-4 Notes" means the Class A-4 6.60% Asset Backed Notes,
substantially in the form of Exhibit A-4.
"Class A-5 Final Scheduled Distribution Date" means the Distribution
Date occurring in November, 2011.
"Class A-5 Interest Rate" means 6.70% per annum (computed on the basis
of a 360 day year consisting of twelve 30-day months).
"Class A-5 Notes" means the Class A-5 6.70% Asset Backed Notes,
substantially in the form of Exhibit A-5.
"Class A-6 Final Scheduled Distribution Date" means the Distribution
Date occurring in December, 2015.
"Class A-6 Interest Rate" means 6.95% per annum (computed on the basis
of a 360 day year consisting of twelve 30-day months).
"Class A-6 Notes" means the Class A-6 6.95% Asset Backed Notes,
substantially in the form of Exhibit A-6.
"Class A-7 Final Scheduled Distribution Date" means the Distribution
Date occurring in September, 2018.
"Class A-7 Interest Rate" means 7.16% per annum (computed on the basis
of a 360 day year consisting of twelve 30-day months).
INDENTURE (SERIES 1997-1) -- PAGE 4
<PAGE> 11
"Class A-7 Notes" means the Class A-7 7.16% Asset Backed Notes,
substantially in the form of Exhibit A-7.
"Class A-8 Final Scheduled Distribution Date" means the Distribution
Date occurring in August, 2020.
"Class A-8 Interest Rate" means 7.33% per annum (computed on the basis
of a 360 day year consisting of twelve 30-day months).
"Class A-8 Notes" means the Class A-8 7.33% Asset Backed Notes,
substantially in the form of Exhibit A-8.
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with
the Clearing Agency.
"Closing Date" means February 27, 1997.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and Treasury Regulations promulgated thereunder.
"Collateral" has the meaning specified in the Granting Clause of this
Indenture.
"Company" means FIRSTPLUS RESIDUAL HOLDINGS, INC., a Nevada
corporation or any successor in interest thereto.
"Corporate Trust Office" means the principal office of the Indenture
Trustee at which at any particular time its corporate trust business shall be
administered, which office at date of execution of this Agreement is located at
180 East Fifth Street, St. Paul, Minnesota 55101; Attention: Corporate Trust
Department, or at such other address as the Indenture Trustee may designate
from time to time by notice to the Noteholders and the Issuer, or the principal
corporate trust office of any successor Indenture Trustee at the address
designated by such successor Indenture Trustee by notice to the Noteholders and
the Issuer.
"Default" means any occurrence that is, or with notice or the lapse of
time or both would become, an Event of Default.
"Definitive Notes" has the meaning specified in Section 2.12.
"Depository Institution" means any depository institution or trust
company, including the Indenture Trustee, that (a) is incorporated under the
laws of the United States of America or any
INDENTURE (SERIES 1997-1) -- PAGE 5
<PAGE> 12
State thereof, (b) is subject to supervision and examination by federal or
state banking authorities and (c) has outstanding unsecured commercial paper or
other short-term unsecured debt obligations that are rated A-1 by S&P and P-1
by Moody's (or comparable ratings if S&P and Moody's are not the Rating
Agencies).
"Distribution Date" means the 10th day of any month or if such 10th
day is not a Business Day, the first Business Day immediately following such
day, commencing in March 1997.
"Due Period" means, with respect to any Distribution Date and any
class of Notes, the calendar month immediately preceding the month of such
Distribution Date.
"Event of Default" has the meaning specified in Section 5.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Executive Officer" means, with respect to any corporation, the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
Executive Vice President, any Vice President, the Secretary or the Treasurer of
such corporation; and with respect to any partnership, any general partner
thereof.
"Final Scheduled Distribution Date" means with respect to a Class of
Notes the respective Class A-1 Final Scheduled Distribution Date, Class A-2
Final Scheduled Distribution Date, Class A-3 Final Scheduled Distribution Date,
Class A-4 Final Scheduled Distribution Date, Class A-5 Final Scheduled
Distribution Date, Class A-6 Final Scheduled Distribution Date, Class A-7 Final
Scheduled Distribution Date, or Class A-8 Final Scheduled Distribution Date.
"Grant" means mortgage, pledge, bargain, sell, warrant, alienate,
remise, release, convey, assign, transfer, create, and grant a lien upon and a
security interest in and right of set-off against, deposit, set over and
confirm pursuant to this Indenture. A Grant of the Collateral or of any other
agreement or instrument shall include all rights, powers and options (but none
of the obligations) of the granting party thereunder, including the immediate
and continuing right to claim for, collect, receive and give receipt for
principal and interest payments in respect of the Collateral and all other
moneys payable thereunder, to give and receive notices and other
communications, to make waivers or other agreements, to exercise all rights and
options, to bring Proceedings in the name of the granting party or otherwise,
and generally to do and receive anything that the granting party is or may be
entitled to do or receive thereunder or with respect thereto.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Note Register; provided that the exercise of any rights of
such Holder or Noteholder under this Indenture shall at all times be subject to
Section 11.19 hereto.
"Indenture Trustee" means First Bank National Association, a national
banking corporation, as Indenture Trustee under this Indenture, or any
successor Indenture Trustee under this Indenture.
INDENTURE (SERIES 1997-1) -- PAGE 6
<PAGE> 13
"Independent" means, when used with respect to any specified Person,
that the Person (a) is in fact independent of the Issuer, any other obligor on
the Notes, the Seller and any Affiliate of any of the foregoing Persons, (b)
does not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Seller or any Affiliate of
any of the foregoing Persons and (c) is not connected with the Issuer, any such
other obligor, the Seller or any Affiliate of any of the foregoing Persons as
an officer, employee, promoter, underwriter, trustee, partner, director or
person performing similar functions.
"Independent Certificate" means a certificate or opinion to be
delivered to the Indenture Trustee under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.1, made by
an Independent appraiser or other expert appointed by an Issuer Order and
approved by the Indenture Trustee in the exercise of reasonable care, and such
opinion or certificate shall state that the signer has read the definition of
"Independent" in this Indenture and that the signer is Independent within the
meaning thereof.
"Interest Distribution Amount" means, on any Distribution Date, the
sum of the Noteholders' Interest Distributable Amount for each Class of Notes
and the Certificateholders' Interest Distributable Amount for such Distribution
Date.
"Interest Rate" means the Class A-1 Interest Rate, the Class A-2
Interest Rate, the Class A-3 Interest Rate, the Class A-4 Interest Rate, the
Class A-5 Interest Rate, the Class A-6 Interest Rate, the Class A-7 Interest
Rate or the Class A-8 Interest Rate, as applicable.
"Issuer" means FIRSTPLUS HOME LOAN OWNER TRUST 1997-1 until a
successor replaces it and, thereafter, means the successor and, for purposes of
any provision contained herein and required by the TIA, each other obligor on
the Notes.
"Issuer Order" and "Issuer Request" mean a written order or request
signed in the name of the Issuer by any one of its Authorized Officers and
delivered to the Indenture Trustee.
"Moody's" means Moody's Investor Service, Inc., or any successor
thereto.
"Note" means a Class A-1 Note, a Class A-2 Note, a Class A-3 Note, a
Class A-4 Note, a Class A-5 Note, a Class A-6 Note, a Class A-7 Note or a Class
A-8 Note, as applicable.
"Note Depository Agreement" means the agreement dated February 27,
1997, among the Issuer, the Administrator, the Indenture Trustee and The
Depository Trust Company, as the initial Clearing Agency, relating to the Book
Entry Notes.
"Note Owner" means, with respect to a Book-Entry Note, the Person who
is the beneficial owner of such Book-Entry Note, as reflected on the books of
the Clearing Agency or on the books of a Person maintaining an account with
such Clearing Agency (directly as a Clearing Agency Participant or as an
indirect participant, in each case in accordance with the rules of such
Clearing Agency).
INDENTURE (SERIES 1997-1) -- PAGE 7
<PAGE> 14
"Note Register" and "Note Registrar" have the respective meanings
specified in Section 2.3.
"Officer's Certificate" means a certificate signed by any Authorized
Officer of the Issuer or the Administrator, under the circumstances described
in, and otherwise complying with, the applicable requirements of Section 11.1,
and delivered to the Indenture Trustee. Unless otherwise specified, any
reference in this Indenture to an Officer's Certificate shall be to an
Officer's Certificate of any Authorized Officer of the Issuer or the
Administrator.
"Opinion of Counsel" means one or more written opinions of counsel who
may, except as otherwise expressly provided in this Indenture, be employees of
or counsel to the Issuer and who shall be satisfactory to the Indenture Trustee
and the Securities Insurer, and which opinion or opinions shall be addressed to
the Indenture Trustee, as Indenture Trustee, and the Securities Insurer and
shall comply with any applicable requirements of Section 11.1 and shall be in
form and substance satisfactory to the Indenture Trustee and the Securities
Insurer.
"Outstanding" means, with respect to any Note and as of the date of
determination, any Note theretofore authenticated and delivered under this
Indenture except:
(i) Notes theretofore canceled by the Note Registrar or
delivered to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which
money in the necessary amount has been theretofore
deposited with the Indenture Trustee or any Paying
Agent in trust for the Holders of such Notes
(provided, however, that if such Notes are to be
redeemed, notice of such redemption has been duly
given pursuant to this Indenture or provision for
such notice has been made, satisfactory to the
Indenture Trustee); and
(iii) Notes in exchange for or in lieu of which other
Notes have been authenticated and delivered
pursuant to this Indenture unless proof
satisfactory to the Indenture Trustee is presented
that any such Notes are held by a bona fide
purchaser; provided, that in determining whether
the Holders of the requisite Outstanding Amount of
the Notes have given any request, demand,
authorization, direction, notice, consent, or
waiver hereunder or under any Basic Document, Notes
owned by the Issuer, any other obligor upon the
Notes, the Seller or any Affiliate of any of the
foregoing Persons shall be disregarded and deemed
not to be Outstanding, except that, in determining
whether the Indenture Trustee shall be protected in
relying upon any such request, demand,
authorization, direction, notice, consent, or
waiver, only Notes that the Indenture Trustee knows
to be so owned shall be so disregarded. Notes so
owned that have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes
to the satisfaction of the Indenture Trustee the
pledgee's right so to act with respect to such
Notes and
INDENTURE (SERIES 1997-1) -- PAGE 8
<PAGE> 15
that the pledgee is not the Issuer, any other
obligor upon the Notes, the Seller or any Affiliate
of any of the foregoing Persons.
"Outstanding Amount" means the aggregate principal amount of all
Notes, or Class of Notes, as applicable, Outstanding at the date of
determination.
"Owner Trustee" means Wilmington Trust Company, not in its individual
capacity but solely as Owner Trustee under the Trust Agreement, or any
successor Owner Trustee under the Trust Agreement.
"Paying Agent" means the Indenture Trustee or any other Person that
meets the eligibility standards for the Indenture Trustee specified in Section
6.11 and is authorized by the Issuer to make payments to and distributions from
the Note Distribution Account, including payment of principal of or interest on
the Notes on behalf of the Issuer.
"Payment Date" means a Distribution Date.
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated organization, or government or any agency or political
subdivision thereof.
"Predecessor Note" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.4 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"Proceeding" means any suit in equity, action at law or other judicial
or administrative proceeding.
"Rating Agency Condition" means, with respect to any action to which a
Rating Agency Condition applies, that each Rating Agency shall have been given
10 days (or such shorter period as is acceptable to each Rating Agency) prior
notice thereof and that each of the Rating Agencies shall have notified the
Seller, the Servicer and the Issuer in writing that such action will not result
in a reduction or withdrawal of the then current rating of the Notes.
"Rating Agency" means either or both of (i) Standard & Poor's or (ii)
Moody's. If no such organization or successor is any longer in existence,
"Rating Agency" shall be a nationally recognized statistical rating
organization or other comparable Person designated by the Securities Insurer,
notice of which designation shall be given to the Issuer, the Indenture
Trustee, the Owner Trustee and the Servicer.
"Record Date" means, as to each Distribution Date, the last Business
Day of the month immediately preceding the month in which such Distribution
Date occurs.
INDENTURE (SERIES 1997-1) -- PAGE 9
<PAGE> 16
"Redemption Date" means in the case of a redemption of the Notes
pursuant to Section 10.1 or a payment to Noteholders pursuant to Section 10.3,
the Distribution Date specified by the Affiliated Holder pursuant to Section
10.1.
"Redemption Price" means in the case of a redemption of the Notes
pursuant to Section 10.1, an amount equal to the unpaid principal amount of the
Notes redeemed plus accrued and unpaid interest thereon at the respective
Interest Rates for each Class of Notes being so redeemed to but excluding the
Redemption Date, plus any unpaid Trust Fees and Expenses and all other amounts
owed to the Securities Insurer pursuant to the Insurance Agreement.
"Registered Holder" means the Person in whose name a Note is
registered on the Note Register on the applicable Record Date.
"Regular Principal Distribution Amount" means, on each Distribution
Date, an amount equal to the lesser of:
(A) the sum of the aggregate Class Principal Balance of the
Notes and the Certificate Principal Balance of the Certificates
immediately prior to such Distribution Date; and
(B) the greater of (1) the sum of (i) each scheduled payment
of principal collected by the Servicer in the related Due Period, (ii)
all partial and full principal prepayments applied by the Servicer
during such related Due Period, (iii) the principal portion of all Net
Liquidation Proceeds, Insurance Proceeds and Released Mortgaged
Property Proceeds received during the related Due Period, (iv) (a)
that portion of the purchase price of any repurchased Home Loan which
represents principal and (b) the principal portion of any Substitution
Adjustments required to be deposited in the Collection Account as of
the related Determination Date, (v) the amount of any Net Loan Losses
for the preceding Due Period equal to the amount on deposit in the
Reserve Account until such amount is reduced to zero, and (vi) if the
Overcollateralization Amount is zero, the amount of any Net Loan
Losses for the preceding Due Period minus the sum of (a) the amount
included in clause (v) above for such Distribution Date and (b) the
amount of Net Loan Losses for the preceding Due Period allocated to
reduce the Overcollateralization Amount to zero on such Distribution
Date pursuant to Section 5.09 of the Sale & Servicing Agreement; and
(2) the amount by which (i) the aggregate principal balance of the
Securities as of the preceding Distribution Date (after giving effect
to all payments of principal on such preceding Distribution Date)
exceeds (ii) the Pool Principal Balance plus funds on deposit in the
Pre-Funding Account, each as of the immediately preceding
Determination Date; provided, however, that if such Distribution Date
is an Overcollateralization Stepdown Date, then with respect to the
distribution of principal to the Noteholders and Certificateholders
the foregoing amount in each case, will be reduced (but not less than
zero) by the Overcollateralization Reduction Amount, if any, for such
Distribution Date.
INDENTURE (SERIES 1997-1) -- PAGE 10
<PAGE> 17
"Reserve Account" means, the account established and maintained
pursuant to Section 5.07 of the Sale and Servicing Agreement.
"Responsible Officer" means, with respect to the Indenture Trustee,
any officer within the Corporate Trust Office of the Indenture Trustee,
including any Vice President, Assistant Vice President, Assistant Treasurer,
Assistant Secretary or any other officer of the Indenture Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also, with respect to a particular matter, any other officer to
whom such matter is referred because of such officer's knowledge of and
familiarity with the particular subject.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement
dated as of February 1, 1997, among the Issuer, FIRSTPLUS INVESTMENT
CORPORATION, as Seller, and, FIRSTPLUS FINANCIAL, INC., as Transferor and
Servicer, and the Indenture Trustee, as Indenture Trustee and Co-Owner Trustee.
"Schedule of Home Loans" means the listing of the Home Loans set forth
in Schedule A, as supplemented as of each Subsequent Transfer Date and as of
any date on which a Deleted Home Loan has been repurchased from the Trust or
substituted with a Qualified Home Loan pursuant to Section 3.05 of the Sale and
Servicing Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" shall mean FIRSTPLUS INVESTMENT CORPORATION, in its capacity
as seller under the Sale and Servicing Agreement, and its successor in
interest.
"Servicer" shall mean FIRSTPLUS FINANCIAL, INC. in its capacity as
servicer under the Sale and Servicing Agreement, and any Successor Servicer
thereunder.
"Standard & Poor's means Standard & Poor's Ratings Group, a division
of The McGraw-Hill Companies, Inc.
"State" means any one of the 50 States of the United States of America
or the District of Columbia.
"Successor Servicer" has the meaning specified in Section 3.7(e).
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939
as in force on the date hereof, unless otherwise specifically provided.
"UCC" means, unless the context otherwise requires, the Uniform
Commercial Code, as in effect in the relevant jurisdiction, as amended from
time to time.
INDENTURE (SERIES 1997-1) -- PAGE 11
<PAGE> 18
(b) Except as otherwise specified herein or as the context may
otherwise require, capitalized terms used but not otherwise defined herein have
the respective meanings set forth in the Sale and Servicing Agreement for all
purposes of this Indenture.
SECTION 1.2 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Indenture
Trustee.
"obligor" on the indenture securities means the Issuer and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined in the
TIA, defined by TIA reference to another statute or defined by Commission rule
have the meaning assigned to them by such definitions.
SECTION 1.3 Rules of Construction. Unless the context otherwise
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the
meaning assigned to it in accordance with generally
accepted accounting principles as in effect from
time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words
in the plural include the singular; and
(vi) any agreement, instrument or statute defined or
referred to herein or in any instrument or
certificate delivered in connection herewith means
such agreement, instrument or statute as from time
to time amended, modified or supplemented (as
provided in such agreements) and includes (in the
case of
INDENTURE (SERIES 1997-1) -- PAGE 12
<PAGE> 19
agreements or instruments) references to all
attachments thereto and instruments incorporated
therein; references to a Person are also to its
permitted successors and assigns.
II
THE NOTES
SECTION 2.1 Form. The Notes shall be designated as the "FIRSTPLUS HOME
LOAN OWNER TRUST 1997-1 Asset Backed Notes, Series 1997-1". The Class A-1
Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the Class
A-5 Notes, the Class A-6 Notes, the Class A-7 Notes and the Class A-8 Notes, in
each case together with the Indenture Trustee's certificate of authentication,
shall be in substantially the form set forth in Exhibit A-1, Exhibit A-2,
Exhibit A-3, Exhibit A-4, Exhibit A-5, Exhibit A-6, Exhibit A-7 and Exhibit
A-8, respectively, with such appropriate insertions, omissions, substitutions
and other variations as are required or permitted by this Indenture, and may
have such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may, consistently herewith, be determined by the
officers executing such Notes, as evidenced by their execution thereof. Any
portion of the text of any Note may be set forth on the reverse thereof, with
an appropriate reference thereto on the face of the Note.
The Definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods, all as determined by
the officers executing such Notes, as evidenced by their execution of such
Notes.
Each Note shall be dated the date of its authentication. The terms of
the Notes set forth in Exhibit A-1, Exhibit A-2, Exhibit A-3, Exhibit A-4,
Exhibit A-5, Exhibit A-6, Exhibit A-7 and Exhibit A-8 are part of the terms of
this Indenture.
SECTION 2.2 Execution, Authentication, Delivery and Dating. The Notes
shall be executed on behalf of the Issuer by an Authorized Officer of the Owner
Trustee or the Administrator. The signature of any such Authorized Officer on
the Notes may be manual or facsimile.
Notes bearing the manual or facsimile signature of individuals who
were at any time Authorized Officers of the Owner Trustee or the Administrator
shall bind the Issuer, notwithstanding that such individuals or any of them
have ceased to hold such offices prior to the authentication and delivery of
such Notes or did not hold such offices at the date of such Notes.
Subject to the satisfaction of the conditions set forth in Section
2.8, the Indenture Trustee shall authenticate and deliver Class A-1 Notes for
original issue in an aggregate principal amount of $139,980,000, Class A-2
Notes for original issue in an aggregate principal amount of $64,680,000, Class
A-3 Notes for original issue in an aggregate principal amount of $65,160,000,
Class A-4 Notes for original issue in an aggregate principal amount of
$49,750,000, Class A-5 Notes for original issue in an aggregate principal
amount of $49,170,000, Class A-6 Notes for original
INDENTURE (SERIES 1997-1) -- PAGE 13
<PAGE> 20
issue in an aggregate principal amount of $93,110,000, Class A-7 Notes for
original issue in an aggregate principal amount of $61,330,000 and Class A-8
Notes for original issue in an aggregate principal amount of $37,570,000. The
aggregate principal amount of Class A-1 Notes, Class A-2 Notes, Class A-3
Notes, Class A-4 Notes, Class A-5 Notes, Class A-6 Notes, Class A-7 Notes and
Class A-8 Notes outstanding at any time may not exceed such respective amounts.
The Notes that are authenticated and delivered by the Indenture
Trustee to or upon the order of the Issuer on the Closing Date shall be dated
February 27, 1997. All other Notes that are authenticated after the Closing
Date for any other purpose under the Indenture shall be dated the date of their
authentication. The Notes shall be issuable as registered Notes in the minimum
denomination $100,000 and integral multiples of $1,000 in excess thereof.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Indenture Trustee by the manual signature of one of its
authorized signatories, and such certificate upon any Note shall be conclusive
evidence, and the only evidence, that such Note has been duly authenticated and
delivered hereunder.
SECTION 2.3 Registration; Registration of Transfer and Exchange. The
Issuer shall cause to be kept a register (the "Note Register") in which,
subject to such reasonable regulations as it may prescribe, the Issuer shall
provide for the registration of Notes and the registration of transfers of
Notes. The Indenture Trustee initially shall be the "Note Registrar" for the
purpose of registering Notes and transfers of Notes as herein provided. Upon
any resignation of any Note Registrar, the Issuer shall promptly appoint a
successor or, if it elects not to make such an appointment, assume the duties
of Note Registrar.
If a Person other than the Indenture Trustee is appointed by the
Issuer as Note Registrar, the Issuer will give the Indenture Trustee prompt
written notice of the appointment of such Note Registrar and of the location,
and any change in the location, of the Note Register, and the Indenture Trustee
shall have the right to inspect the Note Register at all reasonable times and
to obtain copies thereof, and the Indenture Trustee shall have the right to
rely upon a certificate executed on behalf of the Note Registrar by an
Executive Officer thereof as to the names and addresses of the Holders of the
Notes and the principal amounts and number of such Notes.
Upon surrender for registration of transfer of any Note at the office
or agency of the Issuer to be maintained as provided in Section 3.2, the Issuer
shall execute, and the Indenture Trustee shall authenticate and the Noteholder
shall obtain from the Indenture Trustee, in the name of the designated
transferee or transferees, one or more new Notes of the same Class in any
authorized denominations, of a like aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes of
the same Class in any authorized denominations, of a like aggregate principal
amount, upon surrender of the Notes to be exchanged at such office or agency.
Whenever any Notes are so surrendered for exchange, the Issuer shall execute,
and the Indenture Trustee shall authenticate and the Noteholder shall obtain
INDENTURE (SERIES 1997-1) -- PAGE 14
<PAGE> 21
from the Indenture Trustee, the Notes which the Noteholder making the exchange
is entitled to receive.
All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of the Issuer, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Notes
surrendered upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument
of transfer in form satisfactory to the Indenture Trustee duly executed by, the
Holder thereof or such Holder's attorney duly authorized in writing, with such
signature guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in the Securities Transfer Agent's Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Note
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Exchange Act.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Issuer may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 2.4 or Section 9.6 not involving any transfer.
The preceding provisions of this Section notwithstanding, the Issuer
shall not be required to make and the Note Registrar need not register
transfers or exchanges of Notes selected for redemption or of any Note for a
period of 15 days preceding the due date for any payment with respect to such
Note.
SECTION 2.4 Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
mutilated Note is surrendered to the Indenture Trustee, or the Indenture
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Note, and (ii) there is delivered to the Indenture Trustee such security
or indemnity as may be required by it to hold the Issuer and the Indenture
Trustee harmless, then, in the absence of notice to the Issuer, the Note
Registrar or the Indenture Trustee that such Note has been acquired by a bona
fide purchaser, and the Issuer shall execute, and upon its request the
Indenture Trustee shall authenticate and deliver, in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen Note, a replacement Note of the
same Class; provided, however, that if any such destroyed, lost or stolen Note,
but not a mutilated Note, shall have become or within seven days shall be due
and payable, or shall have been called for redemption, instead of issuing a
replacement Note, the Issuer may pay such destroyed, lost or stolen Note when
so due or payable or upon the Redemption Date without surrender thereof. If,
after the delivery of such replacement Note or payment of a destroyed, lost or
stolen Note pursuant to the proviso to the preceding sentence, a bona fide
purchaser of the original Note in lieu of which such replacement Note was
issued presents for payment such original Note, the Issuer and the Indenture
Trustee shall be entitled to recover such replacement Note (or such payment)
from the Person to whom it was delivered or any Person taking such replacement
Note from such Person to whom such replacement Note was delivered or any
assignee of such Person, except a bona fide purchaser, and shall be entitled to
recover upon the
INDENTURE (SERIES 1997-1) -- PAGE 15
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security or indemnity provided therefor to the extent of any loss, damage, cost
or expense incurred by the Issuer or the Indenture Trustee in connection
therewith.
Upon the issuance of any replacement Note under this Section, the
Issuer may require the payment by the Holder of such Note, other than the
Securities Insurer, of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other reasonable
expenses (including the fees and expenses of the Indenture Trustee) connected
therewith.
Every replacement Note issued pursuant to this Section in replacement
of any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.5 Persons Deemed Owner. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Securities Insurer, the
Indenture Trustee and any agent of the Issuer, the Securities Insurer or the
Indenture Trustee may treat the Person in whose name any Note is registered (as
of the day of determination) as the owner of such Note for the purpose of
receiving payments of principal of and interest, if any, on such Note and for
all other purposes whatsoever, whether or not such Note be overdue, and none of
the Issuer, the Securities Insurer, the Indenture Trustee or any agent of the
Issuer or the Indenture Trustee shall be affected by notice to the contrary.
SECTION 2.6 Payment of Principal and Interest; Defaulted Interest.
(a) The Class A-1 Notes, the Class A-2 Notes, the Class
A-3 Notes, the Class A-4 Notes, the Class A-5
Notes, the Class A-6 Notes, the Class A-7 Notes and
the Class A-8 Notes shall accrue interest at the
Class A-1 Interest Rate, the Class A-2 Interest
Rate, the Class A-3 Interest Rate, the Class A-4
Interest Rate, the Class A-5 Interest Rate, the
Class A-6 Interest Rate, the Class A-7 Interest
Rate and the Class A-8 Interest Rate, respectively,
as set forth in Exhibits A-1, A-2, A-3, A-4, A-5,
A-6, A-7 and A-8, respectively, and such interest
shall be payable on each Distribution Date as
specified therein, subject to Section 3.1. Any
installment of interest or principal, if any,
payable on any Note that is punctually paid or duly
provided for by the Issuer on the applicable
Distribution Date shall be paid to the Person in
whose name such Note (or one or more Predecessor
Notes) is registered on the Record Date by check
mailed first-class postage prepaid to such Person's
address as it appears on the Note Register on such
Record Date, except that, unless Definitive Notes
have been
INDENTURE (SERIES 1997-1) -- PAGE 16
<PAGE> 23
issued pursuant to Section 2.12, with respect to
Notes registered on the Record Date in the name of
the nominee of the Clearing Agency (initially, such
nominee to be Cede & Co.), payment will be made by
wire transfer in immediately available funds to the
account designated by such nominee and except for
the final installment of principal payable with
respect to such Note on a Distribution Date or on
the applicable Final Scheduled Distribution Date
for such Class of Notes (and except for the
Redemption Price for any Note called for redemption
pursuant to Section 10.1), which shall be payable
as provided below. The funds represented by any
such checks returned undelivered shall be held in
accordance with Section 3.3.
(b) The principal of each Note shall be payable in
installments on each Distribution Date as provided
in the forms of the Notes set forth in Exhibit A-1,
Exhibit A-2, Exhibit A-3, Exhibit A-4, Exhibit A-5,
Exhibit A-6, Exhibit A-7 and Exhibit A-8.
Notwithstanding the foregoing, the entire unpaid
principal amount of the Notes of a Class of Notes
shall be due and payable, if not previously paid,
on the earlier of (i) the respective Final
Scheduled Distribution Date of such Class, (ii) the
Redemption Date or (iii) the date on which an Event
of Default shall have occurred and be continuing,
if the Indenture Trustee or the Holders of Notes
representing not less than a majority of the
Outstanding Amount of the Notes have declared the
Notes to be immediately due and payable in the
manner provided in Section 5.2. All principal
payments on each Class of Notes shall be made pro
rata to the Noteholders of such Class entitled
thereto. The Indenture Trustee shall notify the
Person in whose name a Note is registered at the
close of business on the Record Date preceding the
Distribution Date on which the Issuer expects that
the final installment of principal of and interest
on such Note will be paid. Such notice shall be
mailed or transmitted by facsimile prior to such
final Distribution Date and shall specify that such
final installment will be payable only upon
presentation and surrender of such Note and shall
specify the place where such Note may be presented
and surrendered for payment of such installment. A
copy of such form of notice shall be sent to the
Securities Insurer by the Indenture Trustee.
Notices in connection with redemptions of Notes
shall be mailed to Noteholders as provided in
Section 10.2.
SECTION 2.7 Cancellation. All Notes surrendered for payment,
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Indenture Trustee, be delivered to the Indenture Trustee
and shall be promptly canceled by the Indenture Trustee. The Issuer may at any
time deliver to the Indenture Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Issuer may have acquired in any
manner
INDENTURE (SERIES 1997-1) -- PAGE 17
<PAGE> 24
whatsoever, and all Notes so delivered shall be promptly canceled by the
Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange
for any Notes canceled as provided in this Section, except as expressly
permitted by this Indenture. All canceled Notes may be held or disposed of by
the Indenture Trustee in accordance with its standard retention or disposal
policy as in effect at the time unless the Issuer shall direct by an Issuer
Order that they be destroyed or returned to it; provided, that such Issuer
Order is timely and the Notes have not been previously disposed of by the
Indenture Trustee.
SECTION 2.8 Authentication of Notes. The Notes may be authenticated by
the Indenture Trustee, upon Issuer Request and upon receipt by the Indenture
Trustee of the following:
(a) An Issuer Order authorizing the execution and authentication
of such Notes by the Issuer.
(b) All of the items of Collateral which shall be delivered to the
Indenture Trustee or its designee.
(c) An executed counterpart of the Trust Agreement.
(d) Opinions of Counsel addressed to the Indenture Trustee and the
Securities Insurer to the effect that:
(i) all instruments furnished to the Indenture
Trustee as conditions precedent to the
authentication of the Notes by the
Indenture Trustee pursuant to the Indenture
conform to the requirements of this
Indenture and constitute all the documents
required to be delivered hereunder for the
Indenture Trustee to authenticate the
Notes;
(ii) all conditions precedent provided for in
this Indenture relating to the
authentication of the Notes have been
complied with;
(iii) the Owner Trustee has power and authority to
execute, deliver and perform its obligations
under the Trust Agreement;
(iv) the Issuer has been duly formed is validly
existing as a business trust under the laws
of the State of Delaware, 12 Del. C. Section
3801, et seq., and has power, authority and
legal right to execute and deliver this
Indenture, the Administration Agreement, the
Insurance Agreement and the Sale and
Servicing Agreement;
(v) assuming due authorization, execution and
delivery thereof by the Indenture Trustee,
the Indenture is the valid, legal and
binding obligation of the Issuer,
enforceable in accordance with its terms,
subject to bankruptcy, insolvency,
reorganization, arrangement, moratorium,
fraudulent or preferential conveyance and
other similar
INDENTURE (SERIES 1997-1) -- PAGE 18
<PAGE> 25
laws of general application affecting the
rights of creditors generally and to
general principles of equity (regardless of
whether such enforcement is considered in a
proceeding in equity or at law);
(vi) the Notes, when executed and authenticated
as provided herein and delivered against
payment therefor, will be the valid, legal
and binding obligations of the Issuer
pursuant to the terms of this Indenture,
entitled to the benefits of this Indenture,
and will be enforceable in accordance with
their terms, subject to bankruptcy,
insolvency, reorganization, arrangement,
moratorium, fraudulent or preferential
conveyance and other similar laws of general
application affecting the rights of
creditors generally and to general
principles of equity (regardless of whether
such enforcement is considered in a
proceeding in equity or at law);
(vii) the Trust Agreement authorizes the Issuer
to Grant the Collateral to the Indenture
Trustee as security for the Notes and the
Owner Trustee has taken all necessary
action under the Trust Agreement to Grant
the Collateral to the Indenture Trustee;
(viii) this Indenture has been duly qualified under
the Trust Indenture Act of 1939;
(ix) this Indenture, together with the Grant of
the Collateral to the Indenture Trustee,
creates a valid security interest in the
Collateral in favor of the Indenture
Trustee for the benefit of the Noteholders;
(x) such action has been taken with respect to
delivery of possession of the Collateral,
and with respect to the execution and filing
of this Indenture and any financing
statements as are necessary to make
effective and to perfect a first priority
security interest created by this Indenture
in the Collateral in favor of the Indenture
Trustee, except that with respect to the
Debt Instruments, possession of such Debt
Instruments must be maintained by the
Indenture Trustee or an agent of the
Indenture Trustee (other than the Issuer, an
Affiliate of the Issuer, or a "securities
intermediary," as defined in Section 8.102
of the UCC, an agent of the Indenture
Trustee; and
(xi) no authorization, approval or consent of
any governmental body having jurisdiction
in the premises which has not been obtained
by the Issuer is required to be obtained by
the Issuer for the valid issuance and
delivery of the Notes, except that no
opinion need be expressed with respect to
any such authorizations, approvals or
INDENTURE (SERIES 1997-1) -- PAGE 19
<PAGE> 26
consents as may be required under any state
securities "blue sky" laws.
(e) An Officer's Certificate complying with the requirements of
Section 11.1 and stating that:
(i) the Issuer is not in Default under this Indenture
and the issuance of the Notes applied for will not
result in any breach of any of the terms,
conditions or provisions of, or constitute a
default under, the Trust Agreement, any indenture,
mortgage, deed of trust or other agreement or
instrument to which the Issuer is a party or by
which it is bound, or any order of any court or
administrative agency entered in any proceeding to
which the Issuer is a party or by which it may be
bound or to which it may be subject, and that all
conditions precedent provided in this Indenture
relating to the authentication and delivery of the
Notes applied for have been complied with;
(ii) the Issuer is the owner of all of the Home Loans,
has not assigned any interest or participation in
the Home Loans (or, if any such interest or
participation has been assigned, it has been
released) and has the right to Grant all of the Home
Loans to the Indenture Trustee;
(iii) the Issuer has Granted to the Indenture Trustee all
of its right, title, and interest in the Collateral,
and has delivered or caused the same to be delivered
to the Indenture Trustee;
(iv) attached thereto are true and correct copies of
letters signed by Moody's and S&P confirming that
each Class of the Notes and the Certificates have
been rated "Aaa" and "AAA" by Moody's and S&P,
respectively; and
(v) all conditions precedent provided for in this
Indenture relating to the authentication of the
Notes have been complied with.
(f) A fair value certificate from the Servicer, as agent of the Trust,
pursuant to Section 2(a)M of the Administration Agreement.
SECTION 2.9 Release of Collateral.
(a) Subject to subsections (b) and (c) hereof
and Section 11.1 and the terms of the Basic
Documents, the Indenture Trustee shall
release property from the lien of this
Indenture only upon receipt of an Issuer
Request accompanied by an Officer's
Certificate, an Opinion of Counsel and
Independent Certificates in accordance with
TIA Sections 314(c) and 314(d)(l) or an
Opinion of Counsel in lieu of
INDENTURE (SERIES 1997-1) -- PAGE 20
<PAGE> 27
such Independent Certificates to the effect
that the TIA does not require any such
Independent Certificates.
(b) The Servicer, on behalf of the Issuer,
shall be entitled to obtain a release from
the lien of this Indenture for any Home
Loan and the related Mortgaged Property at
any time (i) after a payment by the
Transferor or the Issuer of the Purchase
Price of the Home Loan, (ii) after a
Qualified Substitute Home Loan is
substituted for such Home Loan and payment
of the Substitution Adjustment, if any,
(iii) after liquidation of the Home Loan in
accordance with Section 4.02 of the Sale
and Servicing Agreement and the deposit of
all Recoveries thereon in the Collection
Account, or (iv) upon the termination of a
Home Loan (due to, among other causes, a
prepayment in full of the Home Loan and
sale or other disposition of the related
Mortgaged Property), if the Issuer delivers
to the Indenture Trustee and the Securities
Insurer an Issuer Request (A) identifying
the Home Loan and the related Mortgaged
Property to be released, (B) requesting the
release thereof, (C) setting forth the
amount deposited in the Collection Account
with respect thereto, and (D) certifying
that the amount deposited in the Collection
Account (x) equals the Purchase Price of
the Home Loan, in the event a Home Loan and
the related Mortgaged Property are being
released from the lien of this Indenture
pursuant to item (i) above, (y) equals the
Substitution Adjustment related to the
Qualified Substitute Home Loan and the
Deleted Home Loan released from the lien of
the Indenture pursuant to item (ii) above,
or (z) equals the entire amount of
Recoveries received with respect to such
Home Loan and the related Mortgaged
Property in the event of a release from the
lien of this Indenture pursuant to items
(iii) or (iv) above.
(c) The Indenture Trustee shall, if requested
by the Servicer, temporarily release or
cause the Custodian to temporarily release
to the Servicer the Indenture Trustee's
Home Loan File pursuant to the provisions
of Section 7.02 of the Sale and Servicing
Agreement upon compliance by the Servicer
of the provisions thereof provided that the
Indenture Trustee's Home Loan File shall
have been stamped to signify the Issuer's
pledge to the Indenture Trustee under the
Indenture.
SECTION 2.10 Book-Entry Notes. The Notes, upon original issuance, will
be issued in the form of typewritten Notes representing the Book-Entry Notes,
to be delivered to The Depository Trust Company, the initial Clearing Agency,
by, or on behalf of, the Issuer. The Book-Entry Notes shall be registered
initially on the Note Register in the name of Cede & Co., the nominee of the
initial Clearing Agency, and no Owner thereof will receive a definitive Note
representing such Note Owner's interest in such Note, except as provided in
Section 2.12. Unless and until definitive, fully
INDENTURE (SERIES 1997-1) -- PAGE 21
<PAGE> 28
registered Notes (the "Definitive Notes") have been issued to such Note Owners
pursuant to Section 2.12:
(i) the provisions of this Section shall be in full force
and effect;
(ii) the Note Registrar and the Indenture Trustee shall
be entitled to deal with the Clearing Agency for all
purposes of this Indenture (including the payment of
principal of and interest on the Notes and the
giving of instructions or directions hereunder) as
the sole holder of the Notes, and shall have no
obligation to the Note Owners;
(iii) to the extent that the provisions of this Section
conflict with any other provisions of this
Indenture, the provisions of this Section shall
control;
(iv) the rights of Note Owners shall be exercised only
through the Clearing Agency and shall be limited to
those established by law and agreements between such
Note Owners and the Clearing Agency and/or the
Clearing Agency Participants pursuant to the Note
Depository Agreement. Unless and until Definitive
Notes are issued pursuant to Section 2.12, the
initial Clearing Agency will make book-entry
transfers among the Clearing Agency Participants and
receive and transmit payments of principal of and
interest on the Notes to such Clearing Agency
Participants; and
(v) whenever this Indenture requires or permits actions
to be taken based upon instructions or directions of
Holders of Notes evidencing a specified percentage
of the Outstanding Amount of the Notes, the Clearing
Agency shall be deemed to represent such percentage
only to the extent that it has received instructions
to such effect from Note Owners and/or Clearing
Agency Participants owning or representing,
respectively, such required percentage of the
beneficial interest in the Notes and has delivered
such instructions to the Indenture Trustee.
SECTION 2.11 Notices to Clearing Agency. Whenever a notice or other
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to such Note Owners pursuant to
Section 2.12, the Indenture Trustee shall give all such notices and
communications specified herein to be given to Holders of the Notes to the
Clearing Agency, and shall have no obligation to such Note Owners.
SECTION 2.12 Definitive Notes. If (i) the Administrator advises the
Indenture Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities with respect to the Book-Entry
Notes and the Administrator is unable to locate a qualified successor, (ii) the
Administrator at its option advises the Indenture Trustee in writing that it
elects to terminate the book-entry system through the Clearing Agency or (iii)
after the occurrence of an Event of Default, Owners of the Book-Entry Notes
representing beneficial interests aggregating at least a
INDENTURE (SERIES 1997-1) -- PAGE 22
<PAGE> 29
majority of the Outstanding Amount of such Notes advise the Clearing Agency in
writing that the continuation of a book-entry system through the Clearing
Agency is no longer in the best interests of such Note Owners, then the
Clearing Agency shall notify all Note Owners and the Indenture Trustee of the
occurrence of such event and of the availability of Definitive Notes to Note
Owners requesting the same. Upon surrender to the Indenture Trustee of the
typewritten Notes representing the Book-Entry Notes by the Clearing Agency,
accompanied by registration instructions, the Issuer shall execute and the
Indenture Trustee shall authenticate the Definitive Notes in accordance with
the instructions of the Clearing Agency. None of the Issuer, the Note Registrar
or the Indenture Trustee shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying
on, such instructions. Upon the issuance of Definitive Notes, the Indenture
Trustee shall recognize the Holders of the Definitive Notes as Noteholders.
SECTION 2.13 Tax Treatment. The Issuer has entered into this
Indenture, and the Notes will be issued, with the intention that, for federal,
state and local income, single business and franchise tax purposes, the Notes
will qualify as indebtedness of the Issuer secured by the Collateral. The
Issuer, by entering into this Indenture, and each Noteholder, by its acceptance
of a Note (and each Note Owner by its acceptance of an interest in the
applicable Book-Entry Note), agree to treat the Notes for federal, state and
local income, single business and franchise tax purposes as indebtedness of the
Issuer.
III
COVENANTS
SECTION 3.1 Payment of Principal and Interest. The Issuer will duly
and punctually pay (or will cause to be duly and punctually paid) the principal
of and interest, if any, on the Notes in accordance with the terms of the Notes
and this Indenture. Without limiting the foregoing, subject to and in
accordance with Section 8.2(c), the Issuer will cause to be distributed all
amounts on deposit in the Note Distribution Account on a Distribution Date
deposited therein pursuant to the Sale and Servicing Agreement (i) for the
benefit of the Class A-1 Notes, to the Class A-1 Noteholders, (ii) for the
benefit of the Class A-2 Notes, to the Class A-2 Noteholders, (iii) for the
benefit of the Class A-3 Notes, to the Class A-3 Noteholders, (iv) for the
benefit of the Class A-4 Notes, to the Class A-4 Noteholders, (v) for the
benefit of the Class A-5 Notes, to the Class A-5 Noteholders, (vi) for the
benefit of the Class A-6 Notes, to the Class A-6 Noteholders, (vii) for the
benefit of the Class A-7 Notes, to the A-7 Noteholders, and (viii) for the
benefit of the Class A-8 Notes, to the Class A-8 Noteholders. Amounts properly
withheld under the Code by any Person from a payment to any Noteholder of
interest and/or principal shall be considered as having been paid by the Issuer
to such Noteholder for all purposes of this Indenture.
The Notes shall be non-recourse obligations of the Issuer and shall be
limited in right of payment to amounts available from the Collateral and any
amounts received by the Indenture Trustee under the Guaranty Policy in respect
of the Notes, as provided in this Indenture. The Issuer shall not otherwise be
liable for payments on the Notes. If any other provision of this Indenture
shall be
INDENTURE (SERIES 1997-1) -- PAGE 23
<PAGE> 30
deemed to conflict with the provisions of this Section 3.1, the provisions of
this Section 3.1 shall control.
SECTION 3.2 Maintenance of Office or Agency. The Issuer will or will
cause the Administrator to maintain in the Borough of Manhattan, The City of
New York, an office or agency where Notes may be surrendered for registration
of transfer or exchange, and where notices and demands to or upon the Issuer in
respect of the Notes and this Indenture may be served. The Issuer hereby
initially appoints the Administrator to serve as its agent for the foregoing
purposes and to serve as Paying Agent with respect to the Certificates. The
Issuer will give prompt written notice to the Indenture Trustee of the
location, and of any change in the location, of any such office or agency. If
at any time the Issuer shall fail to maintain any such office or agency or
shall fail to furnish the Indenture Trustee with the address thereof, such
surrenders, notices and demands may be made or served at the Corporate Trust
Office, and the Issuer hereby appoints the Indenture Trustee as its agent to
receive all such surrenders, notices and demands.
SECTION 3.3 Money for Payments To Be Held in Trust. As provided in
Section 8.2(a ) and (b), all payments of amounts due and payable with respect
to any Notes that are to be made from amounts withdrawn from the Collection
Account and the Note Distribution Account pursuant to Section 8.2(c) shall be
made on behalf of the Issuer by the Indenture Trustee or by the Paying Agent,
and no amounts so withdrawn from the Collection Account and the Note
Distribution Account for payments of Notes shall be paid over to the Issuer
except as provided in this Section.
On or before the third Business Day preceding each Distribution Date
and Redemption Date, the Indenture Trustee shall deposit or cause to be
deposited in the Note Distribution Account an aggregate sum sufficient to pay
the amounts due on such Distribution Date or Redemption Date under the Notes,
such sum to be held in trust for the benefit of the Persons entitled thereto,
and (unless the Paying Agent is the Indenture Trustee) shall promptly notify
the Indenture Trustee of its action or failure so to act.
Any Paying Agent shall be appointed by Issuer Order with written
notice thereof to the Indenture Trustee and the Securities Insurer. Any Paying
Agent appointed by the Issuer shall be a Person who would be eligible to be
Indenture Trustee hereunder as provided in Section 6.11. The Issuer shall not
appoint any Paying Agent (other than the Indenture Trustee) which is not, at
the time of such appointment, a Depository Institution.
The Issuer will cause each Paying Agent other than the Administrator
to execute and deliver to the Indenture Trustee an instrument in which such
Paying Agent shall agree with the Indenture Trustee (and if the Indenture
Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions
of this Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts
due with respect to the Notes in trust for the
benefit of the Persons entitled thereto until such
sums shall be paid to such Persons or otherwise
disposed of as herein provided and pay such sums to
such Persons as herein provided;
INDENTURE (SERIES 1997-1) -- PAGE 24
<PAGE> 31
(ii) give the Indenture Trustee and the Securities
Insurer notice of any default by the Issuer (or any
other obligor upon the Notes) of which it has actual
knowledge in the making of any payment required to
be made with respect to the Notes;
(iii) at any time during the continuance of any such
default, upon the written request of the Indenture
Trustee, forthwith pay to the Indenture Trustee all
sums so held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith
pay to the Indenture Trustee all sums held by it in
trust for the payment of Notes if at any time it
ceases to meet the standards required to be met by a
Paying Agent at the time of its appointment; and
(v) comply with all requirements of the Code with
respect to the withholding from any payments made by
it on any Notes of any applicable withholding taxes
imposed thereon and with respect to any applicable
reporting requirements in connection therewith;
provided, however, that with respect to withholding
and reporting requirements applicable to original
issue discount (if any) on the Notes, the Issuer
shall have first provided the calculations
pertaining thereto to the Indenture Trustee.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by
Issuer Order direct any Paying Agent to pay to the Indenture Trustee all sums
held in trust by such Paying Agent, such sums to be held by the Indenture
Trustee upon the same trusts as those upon which the sums were held by such
Paying Agent; and upon such payment by any Paying Agent to the Indenture
Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Subject to applicable laws with respect to escheat of funds or
abandoned property, any money held by the Indenture Trustee or any Paying Agent
in trust for the payment of any amount due with respect to any Note and
remaining unclaimed for two years after such amount has become due and payable
shall be discharged from such trust and be paid to the Issuer on Issuer
Request; and the Holder of such Note shall thereafter, as an unsecured general
creditor, look only to the Issuer for payment thereof (but only to the extent
of the amounts so paid to the Issuer), and all liability of the Indenture
Trustee or such Paying Agent with respect to such trust money shall thereupon
cease; provided, however, that the Indenture Trustee or such Paying Agent,
before being required to make any such repayment, shall at the expense and
direction of the Issuer cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in The City of New York, notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such publication, any unclaimed balance of such money then
remaining will be repaid to the Issuer. The Indenture Trustee shall also adopt
and employ, at the expense and direction of the Issuer, any other reasonable
INDENTURE (SERIES 1997-1) -- PAGE 25
<PAGE> 32
means of notification of such repayment (including, but not limited to, mailing
notice of such repayment to Holders whose Notes have been called but have not
been surrendered for redemption or whose right to or interest in moneys due and
payable but not claimed is determinable from the records of the Indenture
Trustee or of any Paying Agent, at the last address of record for each such
Holder).
SECTION 3.4 Existence.
(a) Subject to Section 3.4(b), the Issuer will
keep in full effect its existence, rights
and franchises as a business trust under
the laws of the State of Delaware (unless
it becomes, or any successor Issuer
hereunder is or becomes, organized under
the laws of any other State or of the
United States of America, in which case the
Issuer will keep in full effect its
existence, rights and franchises under the
laws of such other jurisdiction) and will
obtain and preserve its qualification to do
business in each jurisdiction in which such
qualification is or shall be necessary to
protect the validity and enforceability of
this Indenture, the Notes and the
Collateral.
(b) Any successor to the Owner Trustee
appointed pursuant to Section 10.2 of the
Trust Agreement shall be the successor
Owner Trustee under this Indenture without
the execution or filing of any paper,
instrument or further act to be done on the
part of the parties hereto.
(c) Upon any consolidation or merger of or
other succession to the Owner Trustee, the
Person succeeding to the Owner Trustee
under the Trust Agreement may exercise
every right and power of the Owner Trustee
under this Indenture with the same effect
as if such Person had been named as the
Owner Trustee herein.
SECTION 3.5 Protection of Collateral. The Issuer will from time to
time and upon the direction of the Securities Insurer execute and deliver all
such supplements and amendments hereto and all such financing statements,
continuation statements, instruments of further assurance and other
instruments, and will take such other action necessary or advisable to:
(i) provide further assurance with respect to
the Grant of all or any portion of the
Collateral;
(ii) maintain or preserve the lien and security
interest (and the priority thereof) of this
Indenture or carry out more effectively the
purposes hereof;
(iii) perfect, publish notice of or protect the
validity of any Grant made or to be made by
this Indenture;
INDENTURE (SERIES 1997-1) -- PAGE 26
<PAGE> 33
(iv) enforce any rights with respect to the
Collateral; or
(v) preserve and defend title to the Collateral
and the rights of the Indenture Trustee,
the Noteholders and the Securities Insurer
in such Collateral against the claims of
all persons and parties.
The Issuer hereby designates the Administrator its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required to be executed pursuant to this Section 3.5.
SECTION 3.6 Annual Opinions as to Collateral.
On or before February 15 in each calendar year, beginning in 1998, the
Issuer shall furnish to the Indenture Trustee an Opinion of Counsel either
stating that, in the opinion of such counsel, such action has been taken with
respect to the recording, filing, re-recording and refiling of this Indenture,
any indentures supplemental hereto and any other requisite documents and with
respect to the execution and filing of any financing statements and
continuation statements as is necessary to maintain the lien and security
interest created by this Indenture and reciting the details of such action or
stating that in the opinion of such counsel no such action is necessary to
maintain such lien and security interest. Such Opinion of Counsel shall also
describe the recording, filing, re-recording and refiling of this Indenture,
any indentures supplemental hereto and any other requisite documents and the
execution and filing of any financing statements and continuation statements
that will, in the opinion of such counsel, be required to maintain the lien and
security interest of this Indenture until February 15th of the following
calendar year.
SECTION 3.7 Performance of Obligations; Servicing of Home Loans.
(a) The Issuer will not take any action and will
use its best efforts not to permit any
action to be taken by others that would
release any Person from any of such
Person's material covenants or obligations
under any instrument or agreement included
in the Collateral or that would result in
the amendment, hypothecation,
subordination, termination or discharge of,
or impair the validity or effectiveness of,
any such instrument or agreement, except as
expressly provided in this Indenture, the
Sale and Servicing Agreement or such other
instrument or agreement.
(b) The Issuer may contract with or otherwise
obtain the assistance of other Persons
(including, without limitation, the
Administrator under the Administration
Agreement) to assist it in performing its
duties under this Indenture, and any
performance of such duties by a Person
identified to the Indenture Trustee and the
Securities Insurer in an Officer's
Certificate of the Issuer shall be deemed
to be action taken
INDENTURE (SERIES 1997-1) -- PAGE 27
<PAGE> 34
by the Issuer. Initially, the Issuer has
contracted with the Servicer and the
Administrator to assist the Issuer in
performing its duties under this Indenture.
The Administrator must at all times be the
same person as the Indenture Trustee.
(c) The Issuer will punctually perform and
observe all of its obligations and
agreements contained in this Indenture, the
Basic Documents and in the instruments and
agreements included in the Collateral,
including but not limited to (i) filing or
causing to be filed all UCC financing
statements and continuation statements
required to be filed by the terms of this
Indenture and the Sale and Servicing
Agreement and (ii) recording or causing to
be recorded all Mortgages, Assignments of
Mortgage, all intervening Assignments of
Mortgage and all assumption and
modification agreements required to be
recorded by the terms of the Sale and
Servicing Agreement, in accordance with and
within the time periods provided for in
this Indenture and/or the Sale and
Servicing Agreement, as applicable. Except
as otherwise expressly provided therein,
the Issuer shall not waive, amend, modify,
supplement or terminate any Basic Document
or any provision thereof without the
consent of the Indenture Trustee, the
Securities Insurer, and the Holders of at
least a majority of the Outstanding Amount
of the Notes.
(d) If the Issuer shall have knowledge of the
occurrence of an Event of Default under the
Sale and Servicing Agreement, the Issuer
shall promptly notify the Indenture
Trustee, the Securities Insurer and the
Rating Agencies thereof, and shall specify
in such notice the action, if any, the
Issuer is taking with respect of such
default. If such an Event of Default shall
arise from the failure of the Servicer to
perform any of its duties or obligations
under the Sale and Servicing Agreement with
respect to the Home Loans, the Issuer shall
take all reasonable steps available to it
to remedy such failure.
(e) As promptly as possible after the giving of
notice of termination to the Servicer of
the Servicer's rights and powers pursuant
to Section 10.01 of the Sale and Servicing
Agreement, the Issuer, upon the prior
written consent of or upon the direction of
the Securities Insurer, shall appoint a
successor servicer (the "Successor
Servicer"), and such Successor Servicer
shall accept its appointment by a written
assumption in a form acceptable to the
Indenture Trustee. In the event that a
Successor Servicer has not been appointed
and accepted its appointment at the time
when the Servicer ceases to act as
Servicer, the Indenture Trustee without
further action shall automatically be
appointed the Successor Servicer. The
Indenture
INDENTURE (SERIES 1997-1) -- PAGE 28
<PAGE> 35
Trustee may resign as the Servicer by
giving written notice of such resignation
to the Issuer and in such event will be
released from such duties and obligations,
such release not to be effective until the
date a new servicer enters into a servicing
agreement with the Issuer as provided
below. Upon delivery of any such notice to
the Issuer, the Issuer shall obtain a new
servicer as the Successor Servicer under
the Sale and Servicing Agreement. Any
Successor Servicer other than the Indenture
Trustee shall (i) satisfy the criteria
specified in Section 9.04(b) of the Sale
and Servicing Agreement and (ii) enter into
a servicing agreement with the Issuer
having substantially the same provisions as
the provisions of the Sale and Servicing
Agreement applicable to the Servicer. If
within 30 days after the delivery of the
notice referred to above, the Issuer shall
not have obtained such a new servicer, the
Indenture Trustee may appoint, or may
petition a court of competent jurisdiction
to appoint, a Successor Servicer. In
connection with any such appointment, the
Indenture Trustee may make such
arrangements for the compensation of such
successor as it and such successor shall
agree, subject to the limitations set forth
below and in the Sale and Servicing
Agreement, and in accordance with Section
10.02 of the Sale and Servicing Agreement,
the Issuer shall enter into an agreement
with such successor for the servicing of
the Home Loans (such agreement to be in
form and substance satisfactory to the
Indenture Trustee and the Securities
Insurer). If the Indenture Trustee shall
succeed to the Servicer's duties as
servicer of the Home Loans as provided
herein, it shall do so in its individual
capacity and not in its capacity as
Indenture Trustee and, accordingly, the
provisions of Article VI hereof shall be
inapplicable to the Indenture Trustee in
its duties as successor Servicer and the
servicing of the Home Loans. In case the
Indenture Trustee shall become successor
Servicer under the Sale and Servicing
Agreement, the Indenture Trustee shall be
entitled to appoint as Servicer any one of
its Affiliates, provided that it shall be
fully liable for the actions and omissions
of such Affiliate in such capacity as
Successor Servicer.
(f) Upon any termination of the Servicer's
rights and powers pursuant to the Sale and
Servicing Agreement, the Issuer shall
promptly notify the Indenture Trustee and
the Securities Insurer. As soon as a
successor Servicer is appointed and
approved by the Securities Insurer, the
Issuer shall notify the Indenture Trustee
of such appointment, specifying in such
notice the name and address of such
successor Servicer.
(g) Without derogating from the absolute nature
of the assignment granted to the Indenture
Trustee under this Indenture or the rights
of
INDENTURE (SERIES 1997-1) -- PAGE 29
<PAGE> 36
the Indenture Trustee hereunder, the Issuer
agrees (i) that it will not, without the
prior written consent of the Indenture
Trustee and the Securities Insurer, or, if
a Securities Insurer Default has occurred
and is continuing, the Holders of at least
a majority in Outstanding Amount of the
Notes, amend, modify, waive, supplement,
terminate or surrender, or agree to any
amendment, modification, supplement,
termination, waiver or surrender of, the
terms of any Collateral (except to the
extent otherwise provided in the Sale and
Servicing Agreement) or the Basic
Documents, or waive timely performance or
observance by the Servicer or the Seller
under the Sale and Servicing Agreement; and
(ii) that any such amendment shall not (A)
increase or reduce in any manner the amount
of, or accelerate or delay the timing of,
distributions that are required to be made
for the benefit of the Noteholders or (B)
reduce the aforesaid percentage of the
Notes that is required to consent to any
such amendment, without the consent of the
Holders of all the outstanding Notes. If
any such amendment, modification,
supplement or waiver shall be so consented
to by the Indenture Trustee and the
Securities Insurer or, if a Securities
Insurer Default has occurred and is
continuing, such Holders, the Issuer
agrees, promptly following a request by the
Indenture Trustee or the Securities Insurer
to do so, to execute and deliver, in its
own name and at its own expense, such
agreements, instruments, consents and other
documents as the Indenture Trustee may deem
necessary or appropriate in the
circumstances.
SECTION 3.8 Negative Covenants. So long as any Notes are Outstanding,
the Issuer shall not:
(i) except as expressly permitted by this Indenture, the
Loan Sale Agreement or the Sale and Servicing
Agreement, sell, transfer, exchange or otherwise
dispose of any of the properties or assets of the
Issuer, including those included in the Collateral,
unless directed to do so by the Indenture Trustee or
the Securities Insurer;
(ii) claim any credit on, or make any deduction from the
principal or interest payable in respect of, the
Notes (other than amounts properly withheld from
such payments under the Code) or assert any claim
against any present or former Noteholder by reason
of the payment of the taxes levied or assessed upon
any part of the Collateral;
(iii) engage in any business or activity other than as
permitted by the Trust Agreement or other than in
connection with, or relating to, the issuance of
Notes pursuant to this Indenture, or amend the Trust
Agreement as in effect on the Closing Date other
than in accordance with Section 11.1 thereof,
INDENTURE (SERIES 1997-1) -- PAGE 30
<PAGE> 37
(iv) issue debt obligations under any other indenture;
(v) incur or assume any indebtedness or guaranty any
indebtedness of any Person, except for such
indebtedness as may be incurred by the Issuer in
connection with the issuance of the Notes pursuant
to this Indenture;
(vi) dissolve or liquidate in whole or in part or merge or
consolidate with any other Person;
(vii) (A) permit the validity or effectiveness of this
Indenture to be impaired, or permit the lien of this
Indenture to be amended, hypothecated, subordinated,
terminated or discharged, or permit any Person to be
released from any covenants or obligations with
respect to the Notes under this Indenture except as
may be expressly permitted hereby, (B) permit any
lien, charge, excise, claim, security interest,
mortgage or other encumbrance (other than the lien
of this Indenture) to be created on or extend to or
otherwise arise upon or burden the Collateral or any
part thereof or any interest therein or the proceeds
thereof (other than tax liens, mechanics' liens and
other liens that arise by operation of law, in each
case on any of the Mortgaged Properties and arising
solely as a result of an action or omission of the
related Obligor) or (C) permit the lien of this
Indenture not to constitute a valid first priority
(other than with respect to any such tax, mechanics'
or other lien) security interest in the Collateral;
(viii) remove the Administrator without cause unless the
Rating Agency Condition shall have been satisfied in
connection with such removal; or
(ix) take any other action or fail to take any action
which may cause the Issuer to be taxable as (a) an
association pursuant to Section 7701 of the Code and
the corresponding regulations or (b) as a taxable
mortgage pool pursuant to Section 7701(i) of the
Code and the corresponding regulations.
SECTION 3.9 Annual Statement as to Compliance. The Issuer will deliver
to the Indenture Trustee and the Securities Insurer, within 120 days after the
end of each fiscal year of the Issuer (commencing with the fiscal year 1997),
an Officer's Certificate stating, as to the Authorized Officer signing such
Officer's Certificate, that:
(i) a review of the activities of the Issuer during such
year and of its performance under this Indenture has
been made under such Authorized Officer's
supervision; and
(ii) to the best of such Authorized Officer's knowledge,
based on such review, the Issuer has complied with
all conditions and covenants under this
INDENTURE (SERIES 1997-1) -- PAGE 31
<PAGE> 38
Indenture throughout such year, or, if there has
been a default in its compliance with any such
condition or covenant, specifying each such default
known to such Authorized Officer and the nature and
status thereof.
SECTION 3.10 Covenants of the Issuer. All covenants of the Issuer in
this Indenture are covenants of the Issuer and are not covenants of the Owner
Trustee. The Owner Trustee is, and any successor Owner Trustee under the Trust
Agreement will be, entering into this Indenture solely as Owner Trustee under
the Trust Agreement and not in its respective individual capacity, and in no
case whatsoever shall the Owner Trustee or any such successor Owner Trustee be
personally liable on, or for any loss in respect of, any of the statements,
representations, warranties or obligations of the Issuer hereunder, as to all
of which the parties hereto agree to look solely to the property of the Issuer.
SECTION 3.11 Servicer's Obligations. The Issuer shall cause the
Servicer to comply with Sections 5.01, 6.01, 7.07 and Article IX of the Sale
and Servicing Agreement.
SECTION 3.12 Restricted Payments. The Issuer shall not, directly or
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or
security in or of the Issuer or to the Servicer, (ii) redeem, purchase, retire
or otherwise acquire for value any such ownership or equity interest or
security or (iii) set aside or otherwise segregate any amounts for any such
purpose; provided, however, that the Issuer may make, or cause to be made, (x)
distributions to the Servicer, the Indenture Trustee, the Owner Trustee, the
Securityholders and the holders of the Residual Interest as contemplated by,
and to the extent funds are available for such purpose under, the Sale and
Servicing Agreement or the Trust Agreement and (y) payments to the Indenture
Trustee pursuant to Section 1(a)(ii) of the Administration Agreement. The
Issuer will not, directly or indirectly, make or cause to be made payments to
or distributions from the Collection Account except in accordance with this
Indenture and the Basic Documents.
SECTION 3.13 Treatment of Notes as Debt for Tax Purposes. The Issuer
shall, and shall cause the Administrator to, treat the Notes as indebtedness
for all federal and state tax purposes.
SECTION 3.14 Notice of Events of Default. The Issuer shall give the
Indenture Trustee, the Securities Insurer and the Rating Agencies prompt
written notice of each Event of Default hereunder, each default on the part of
the Servicer or the Seller of its obligations under the Sale and Servicing
Agreement and each default on the part of the Transferor or the Seller of its
obligations under the Loan Sale Agreement.
SECTION 3.15 Further Instruments and Acts. Upon request of the
Indenture Trustee or the Securities Insurer, the Issuer will execute and
deliver such further instruments and do such further acts as may be reasonably
necessary or proper to carry out more effectively the purpose of this
Indenture.
INDENTURE (SERIES 1997-1) -- PAGE 32
<PAGE> 39
IV
SATISFACTION AND DISCHARGE
SECTION 4.1 Satisfaction and Discharge of Indenture. This Indenture
shall cease to be of further effect with respect to the Notes (except as to (i)
rights of registration of transfer and exchange, (ii) substitution of
mutilated, destroyed, lost or stolen Notes, (iii) rights of Noteholders to
receive payments of principal thereof and interest thereon, (iv) Sections 3.3,
3.4, 3.5, 3.8 and 3.10 hereof, (v) the rights, obligations and immunities of
the Indenture Trustee hereunder (including the rights of the Indenture Trustee
under Section 6.7 and the obligations of the Indenture Trustee under Section
4.2) and (vi) the rights of Noteholders as beneficiaries hereof with respect to
the property so deposited with the Indenture Trustee payable to all or any of
them), and the Indenture Trustee, on demand of and at the expense of the
Issuer, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture with respect to the Notes, when all of the
following have occurred:
(A) either
(1) all Notes theretofore
authenticated and
delivered (other than (i)
Notes that have been
destroyed, lost or stolen
and that have been
replaced or paid as
provided in Section 2.4
and (ii) Notes for whose
payment money has
theretofore been deposited
in trust or segregated and
held in trust by the
Issuer and thereafter
repaid to the Issuer or
discharged from such
trust, as provided in
Section 3.3) have been
delivered to the Indenture
Trustee for cancellation;
or
(2) all Notes not theretofore
delivered to the Indenture
Trustee for cancellation
a. have become due and payable,
b. will become due and payable at the Class A-8
Final Scheduled Distribution Date within one
year, or
c. are to be called for redemption within one
year under arrangements satisfactory to the
Indenture Trustee for the giving of notice
of redemption by the Indenture Trustee in
the name, and at the expense, of the Issuer,
and the Issuer, in the case of a., b. or c.
above, has irrevocably deposited or caused
to be irrevocably deposited with the
Indenture Trustee cash or direct obligations
of or obligations guaranteed by the United
States of America (which will mature prior
to the date such amounts are payable), in
trust for such purpose, in an
INDENTURE (SERIES 1997-1) -- PAGE 33
<PAGE> 40
amount sufficient to pay and discharge the
entire indebtedness on such Notes not
theretofore delivered to the Indenture
Trustee for cancellation when due to the
applicable Final Scheduled Distribution
Date of such Class of Notes or Redemption
Date (if Notes shall have been called for
redemption pursuant to Section 10.1), as
the case may be;
(B) the later of (a) eighteen months
after payment in full of all
outstanding obligations under the
Securities, (b) the payment in full
of all unpaid Trust Fees and
Expenses and all sums owing to the
Securities Insurer under the
Insurance Agreement and (c) the
date on which the Issuer has paid
or caused to be paid all other sums
payable hereunder by the Issuer;
and
(C) the Issuer has delivered to the
Indenture Trustee an Officer's
Certificate, an Opinion of Counsel
and (if required by the TIA or the
Indenture Trustee) an Independent
Certificate from a firm of certified
public accountants, each meeting
the applicable requirements of
Section 11.1(a) and, subject to
Section 11.2, each stating that all
conditions precedent herein
provided for relating to the
satisfaction and discharge of this
Indenture with respect to the Notes
have been complied with.
SECTION 4.2 Application of Trust Money. All moneys deposited with the
Indenture Trustee pursuant to Sections 3.3 and 4.1 hereof shall be held in
trust and applied by it, in accordance with the provisions of the Notes and
this Indenture, to the payment, either directly or through any Paying Agent, as
the Indenture Trustee may determine, to the Holders of the particular Notes for
the payment or redemption of which such moneys have been deposited with the
Indenture Trustee, of all sums due and to become due thereon for principal and
interest; but such moneys need not be segregated from other funds except to the
extent required herein or in the Sale and Servicing Agreement or required by
law.
SECTION 4.3 Repayment of Moneys Held by Paying Agent. In connection
with the satisfaction and discharge of this Indenture with respect to the
Notes, all moneys then held by any Paying Agent other than the Indenture
Trustee under the provisions of this Indenture with respect to such Notes
shall, upon demand of the Issuer, be paid to the Indenture Trustee to be held
and applied according to Section 3.3 and thereupon such Paying Agent shall be
released from all further liability with respect to such moneys.
INDENTURE (SERIES 1997-1) -- PAGE 34
<PAGE> 41
V
REMEDIES
SECTION 5.1 Events of Default. "Event of Default,"wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body):
(a) default in the payment of any interest on
any Note when the same becomes due and
payable; or
(b) default in the payment of the principal of
or any installment of the principal of any
Note when the same becomes due and payable;
or
(c) default in the observance or performance of
any covenant or agreement of the Issuer
made in this Indenture (other than a
covenant or agreement, a default in the
observance or performance of which is
elsewhere in this Section specifically
dealt with), or any representation or
warranty of the Issuer made in this
Indenture, the Insurance Agreement, the
Sale and Servicing Agreement or in any
certificate or other writing delivered
pursuant hereto or in connection herewith
proving to have been incorrect in any
material respect as of the time when the
same shall have been made, and such default
shall continue or not be cured, or the
circumstance or condition in respect of
which such misrepresentation or warranty
was incorrect shall not have been
eliminated or otherwise cured, for a period
of 30 days after there shall have been
given, by registered or certified mail, to
the Issuer by the Indenture Trustee or to
the Issuer and the Indenture Trustee by the
Holders of at least 25% of the Outstanding
Amount of the Notes, a written notice
specifying such default or incorrect
representation or warranty and requiring it
to be remedied and stating that such notice
is a notice of Default hereunder; or
(d) default in the observance or performance of
any covenant or agreement of the Company
made in the Trust Agreement or any
representation or warranty of the Company
made in the Trust Agreement, proving to
have been incorrect in any material respect
as of the time when the same shall have
been made, and such default shall continue
or not be cured, or the circumstance or
condition in respect of which such
misrepresentation or warranty was incorrect
shall not have been eliminated or otherwise
cured, for a period of 30 days after there
shall have been given, by registered or
certified mail,
INDENTURE (SERIES 1997-1) -- PAGE 35
<PAGE> 42
to the Issuer by the Indenture Trustee or
to the Issuer and the Indenture Trustee by
the Holders of at least 25% of the
Outstanding Amount of the Notes, a written
notice specifying such default or incorrect
representation or warranty and requiring it
to be remedied and stating that such notice
is a notice of Default hereunder;
(e) the filing of a decree or order for relief
by a court having jurisdiction in the
premises in respect of the Issuer or any
substantial part of the Collateral in an
involuntary case under any applicable
federal or state bankruptcy, insolvency or
other similar law now or hereafter in
effect, or appointing a receiver,
liquidator, assignee, custodian, trustee,
sequestrator or similar official of the
Issuer or for any substantial part of the
Collateral, or ordering the winding-up or
liquidation of the Issuer's affairs, and
such decree or order shall remain unstayed
and in effect for a period of 60
consecutive days; or
(f) the commencement by the Issuer of a
voluntary case under any applicable federal
or state bankruptcy, insolvency or other
similar law now or hereafter in effect, or
the consent by the Issuer to the entry of
an order for relief in an involuntary case
under any such law, or the consent by the
Issuer to the appointment or taking
possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator
or similar official of the Issuer or for
any substantial part of the Collateral, or
the making by the Issuer of any general
assignment for the benefit of creditors, or
the failure by the Issuer generally to pay
its debts as such debts become due, or the
taking of any action by the Issuer in
furtherance of any of the foregoing.
The Issuer shall deliver to the Indenture Trustee and the Securities
Insurer, within five days after the occurrence thereof, written notice in the
form of an Officer's Certificate of any event which with the giving of notice
and the lapse of time would become an Event of Default under clauses (c) and
(d) above, its status and what action the Issuer is taking or proposes to take
with respect thereto.
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment. If an
Event of Default should occur and be continuing, then and in every such case
the Indenture Trustee, at the direction or upon the prior written consent of
the Securities Insurer or the Holders of Notes representing not less than a
majority of the Outstanding Amount of the Notes may declare all the Notes to be
immediately due and payable, by a notice in writing to the Issuer (and to the
Indenture Trustee if given by Noteholders), and upon any such declaration the
unpaid principal amount of such Notes, together with accrued and unpaid
interest thereon through the date of acceleration, shall become immediately due
and payable.
At any time after such declaration of acceleration of maturity has
been made and before a judgment or decree for payment of the money due has been
obtained by the Indenture Trustee as
INDENTURE (SERIES 1997-1) -- PAGE 36
<PAGE> 43
hereinafter in this Article V provided, the Holders of Notes representing a
majority of the Outstanding Amount of the Notes, by written notice to the
Issuer and the Indenture Trustee, may rescind and annul such declaration and
its consequences if:
(a) the Issuer has paid or deposited with the
Indenture Trustee a sum sufficient to pay:
(i) all payments of principal of and interest on
all Notes and all other amounts that would
then be due hereunder or upon such Notes if
the Event of Default giving rise to such
acceleration had not occurred; and
(ii) all sums paid or advanced by the Indenture
Trustee hereunder and the reasonable
compensation, expenses, disbursements and
advances of the Indenture Trustee and its
agents and counsel; and
(iii) all Events of Default, other than the
nonpayment of the principal of the Notes
that has become due solely by such
acceleration, have been cured or waived as
provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any
right consequent thereto.
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee.
(a) The Issuer covenants that if (i) default is
made in the payment of any interest on any
Note when the same becomes due and payable,
and such default continues for a period of
five days, or (ii) default is made in the
payment of the principal of or any
installment of the principal of any Note
when the same becomes due and payable, the
Issuer will, upon demand of the Indenture
Trustee and at the direction of the
Securities Insurer, pay to the Indenture
Trustee, for the benefit of the Holders of
the Notes and the Securities Insurer, the
whole amount then due and payable on such
Notes for principal and interest, with
interest upon the overdue principal and, to
the extent payment at such rate of interest
shall be legally enforceable, upon overdue
installments of interest at the rate borne
by the Notes and in addition thereto such
further amount as shall be sufficient to
cover the costs and expenses of collection,
including the reasonable compensation,
expenses, disbursements and advances of the
Indenture Trustee and the Securities
Insurer and their respective agents and
counsel.
(b) In case the Issuer shall fail forthwith to
pay such amounts upon such demand, the
Indenture Trustee, in its own name and as
trustee of an express trust, shall at the
direction of the Securities Insurer, and if
a Securities Insurer Default has occurred
and is continuing, the
INDENTURE (SERIES 1997-1) -- PAGE 37
<PAGE> 44
Indenture Trustee may and shall at the
direction of the majority of the Holders of
the Notes, institute a Proceeding for the
collection of the sums so due and unpaid,
and may prosecute such Proceeding to
judgment or final decree, and may enforce
the same against the Issuer or other
obligor upon such Notes and collect in the
manner provided by law out of the property
of the Issuer or other obligor upon such
Notes, wherever situated, the moneys
adjudged or decreed to be payable.
(c) If an Event of Default occurs and is
continuing, the Indenture Trustee shall, at
the direction of the Securities Insurer,
and if a Securities Insurer Default has
occurred and is continuing, the Indenture
Trustee may and shall at the direction of
the majority of the Holders of the Notes, as
more particularly provided in Section 5.4,
in its discretion, proceed to to protect
and enforce its rights and the rights of
the Securities Insurer and the Noteholders,
by such appropriate Proceedings as the
Indenture Trustee shall deem most effective
to protect and enforce any such rights,
whether for the specific enforcement of any
covenant or agreement in this Indenture or
in aid of the exercise of any power granted
herein, or to enforce any other proper
remedy or legal or equitable right vested
in the Indenture Trustee by this Indenture
or by law.
(d) In case there shall be pending, relative to
the Issuer or any other obligor upon the
Notes or any Person having or claiming an
ownership interest in the Collateral,
Proceedings under Title 11 of the United
States Code or any other applicable federal
or state bankruptcy, insolvency or other
similar law, or in case a receiver,
assignee or trustee in bankruptcy or
reorganization, liquidator, sequestrator or
similar official shall have been appointed
for or taken possession of the Issuer or
its property or such other obligor or
Person, or in case of any other comparable
judicial Proceedings relative to the Issuer
or other obligor upon the Notes, or to the
creditors or property of the Issuer or such
other obligor, the Indenture Trustee,
irrespective of whether the principal of
any Notes shall then be due and payable as
therein expressed or by declaration or
otherwise and irrespective of whether the
Indenture Trustee shall have made any
demand pursuant to the provisions of this
Section, shall be entitled and empowered,
upon the direction of the Securities
Insurer, by intervention in such
Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount
of principal and interest owing and unpaid in respect of the Notes and
to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Indenture Trustee
INDENTURE (SERIES 1997-1) -- PAGE 38
<PAGE> 45
(including any claim for reasonable compensation to the Indenture
Trustee, each predecessor Indenture Trustee and the Securities
Insurer, and their respective agents, attorneys and counsel, and for
reimbursement of all expenses and liabilities incurred, and all
advances made, by the Indenture Trustee and each predecessor Indenture
Trustee (except as a result of negligence or bad faith), the
Securities Insurer and of the Noteholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to
vote on behalf of the Holders of Notes in any election of a trustee, a
standby trustee or Person performing similar functions in any such
Proceedings;
(iii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute all
amounts received with respect to the claims of the Noteholders, the
Securities Insurer and the Indenture Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims
of the Indenture Trustee, the Securities Insurer or the Holders of
Notes allowed in any judicial proceedings relative to the Issuer, its
creditors and its property; and any trustee, receiver, liquidator,
custodian or other similar official in any such Proceeding is hereby
authorized by each of such Noteholders and the Securities Insurer to
make payments to the Indenture Trustee and, in the event that the
Indenture Trustee shall consent to the making of payments directly to
such Noteholders and the Securities Insurer, to pay to the Indenture
Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee, each predecessor Indenture
Trustee and their respective agents, attorneys and counsel, and all
other expenses and liabilities incurred, and all advances made, by the
Indenture Trustee and each predecessor Indenture Trustee except as a
result of negligence or bad faith.
(e) Nothing herein contained shall be deemed to
authorize the Indenture Trustee to
authorize or consent to or vote for or
accept or adopt on behalf of any Noteholder
or the Securities Insurer any plan of
reorganization, arrangement, adjustment or
composition affecting the Notes or the
rights of any Holder thereof or the
Securities Insurer or to authorize the
Indenture Trustee to vote in respect of the
claim of any Noteholder in any such
proceeding except, as aforesaid, to vote
for the election of a trustee in bankruptcy
or similar Person.
(f) All rights of action and of asserting
claims under this Indenture, or under any
of the Notes, may be enforced by the
Indenture Trustee without the possession of
any of the Notes or the production thereof
in any trial or other Proceedings relative
thereto, and any such action or Proceedings
instituted by the Indenture Trustee shall
be brought in its own name as trustee of an
express trust, and any recovery of
judgment, subject to the payment of the
expenses, disbursements and
INDENTURE (SERIES 1997-1) -- PAGE 39
<PAGE> 46
compensation of the Indenture Trustee, each
predecessor Indenture Trustee and their
respective agents and attorneys, shall be
for the ratable benefit of the Holders of
the Notes and the Securities Insurer.
(g) In any Proceedings brought by the Indenture
Trustee (and also any Proceedings involving
the interpretation of any provision of this
Indenture to which the Indenture Trustee
shall be a party), the Indenture Trustee
shall be held to represent all the
Noteholders, and it shall not be necessary
to make any Noteholder a party to any such
Proceedings.
SECTION 5.4 Remedies; Priorities.
(a) If an Event of Default shall have occurred
and be continuing, the Indenture Trustee
shall, at the direction of the Securities
Insurer, and if a Securities Insurer
Default has occurred and is continuing, the
Indenture Trustee may and at the direction
of a majority of the Holders of the Notes
shall do one or more of the following
(subject to Section 5.5):
(i) institute Proceedings in its own name and as trustee
of an express trust for the collection of all amounts then payable on
the Notes or under this Indenture with respect thereto, whether by
declaration or otherwise, enforce any judgment obtained, and collect
from the Issuer and any other obligor upon such Notes moneys adjudged
due;
(ii) institute Proceedings from time to time for the
complete or partial foreclosure of this Indenture with respect to the
Collateral;
(iii) exercise any remedies of a secured party under the
UCC and take any other appropriate action to protect and enforce the
rights and remedies of the Indenture Trustee, the Securities Insurer
or the Noteholders; and
(iv) sell the Collateral or any portion thereof or rights
or interest therein in a commercially reasonable manner, at one or
more public or private sales called and conducted in any manner
permitted by law; provided, however, that the Indenture Trustee may
not sell or otherwise liquidate the Collateral following an Event of
Default, unless (A) the Holders of 100% of the Outstanding Amount of
the Notes consent thereto, (B) the proceeds of such sale or
liquidation distributable to the Noteholders are sufficient to
discharge in full all amounts then due and unpaid upon such Notes for
principal and interest or (C) the Indenture Trustee determines that
the Collateral will not continue to provide sufficient funds for the
payment of principal of and interest on the Notes as they would have
become due if the Notes had not been declared due and payable, and the
Indenture Trustee obtains the consent of Holders of 66-2/3% of the
Outstanding Amount of the Notes. In determining such sufficiency or
insufficiency with respect to clause (B) and (C), the Indenture
Trustee may,
INDENTURE (SERIES 1997-1) -- PAGE 40
<PAGE> 47
but need not, obtain and rely upon an opinion of an Independent
investment banking or accounting firm of national reputation as to the
feasibility of such proposed action and as to the sufficiency of the
Collateral for such purpose.
(b) If the Indenture Trustee collects any money
or property pursuant to this Article V, it
shall pay out the money or property in the
following order:
FIRST: to the Indenture Trustee for the Indenture Trustee Fee
then due and any costs or expenses incurred by it in connection with
the enforcement of the remedies provided for in this Article V and to
the Owner Trustee for the Owner Trustee Fee then due;
SECOND: to the Securities Insurer for the Guaranty Insurance
Premium then due and unpaid;
THIRD: to the Servicer for the Servicing Fee then due and
unpaid;
FOURTH: to Noteholders for amounts due and unpaid on the Notes
for interest (including any premium), pro rata, according to the
amounts due and payable on the Notes for interest (including any
premium);
FIFTH: to Holders of the Class A-1 Notes for amounts due and
unpaid on the Class A-1 Notes for principal, pro rata, according to
the amounts due and payable on the Class A-1 Notes for principal,
until the Outstanding Amount of the Class A-1 Notes is reduced to
zero;
SIXTH: to Holders of the Class A-2 Notes for amounts due and
unpaid on the Class A-2 Notes for principal, pro rata, according to
the amounts due and payable on the Class A-2 Notes for principal,
until the Outstanding Amount of the Class A-2 Notes is reduced to
zero;
SEVENTH: to Holders of the Class A-3 Notes for amounts due and
unpaid on the Class A-3 Notes for principal, pro rata, according to
the amounts due and payable on the Class A-3 Notes for principal,
until the Outstanding Amount of the Class A-3 Notes is reduced to
zero;
EIGHTH: to Holders of the Class A-4 Notes for amounts due and
unpaid on the Class A-4 Notes for principal, pro rata, according to
the amounts due and payable on the Class A-4 Notes for principal,
until the Outstanding Amount of the Class A-4 Notes is reduced to
zero;
NINTH: to Holders of the Class A-5 Notes for amounts due and
unpaid on the Class A-5 Notes for principal, pro rata, according to
the amounts due and payable on the Class A-5 Notes for principal,
until the Outstanding Amount of the Class A-5 Notes is reduced to
zero;
INDENTURE (SERIES 1997-1) -- PAGE 41
<PAGE> 48
TENTH: to Holders of the Class A-6 Notes for amounts due and
unpaid on the Class A-6 Notes for principal, pro rata, according to
the amounts due and payable on the Class A-6 Notes for principal,
until the Outstanding Amount of the Class A-6 Notes is reduced to
zero;
ELEVENTH: to Holders of the Class A-7 Notes for amounts due
and unpaid on the Class A-7 Notes for principal, pro rata, according
to the amounts due and payable on the Class A-7 Notes for principal,
until the Outstanding Amount of the Class A-7 Notes is reduced to
zero;
TWELFTH: to Holders of the Class A-8 Notes for amounts due
and unpaid on the Class A-8 Notes for principal, pro rata, according
to the amounts due and payable on the Class A-8 Notes for principal,
until the Outstanding Amount of the Class A-8 Notes is reduced to
zero;
THIRTEENTH: to the Owner Trustee or Co-Owner Trustee, as
applicable, for amounts required to be distributed to the
Certificateholders pursuant to the Trust Agreement;
FOURTEENTH: to the Securities Insurer for any amounts then
due and payable under the Insurance Agreement;
FIFTEENTH: to the Servicer for any amounts then due and
payable as the Servicing Advance Reimbursement Amount under the Sale
and Servicing Agreement; and
SIXTEENTH: to the Owner Trustee or Co-Owner Trustee, as
applicable, for any amounts to be distributed, pro rata, to the
holders of the Residual Interest.
The Indenture Trustee may fix a record date and payment date for any
payment to be made to the Noteholders pursuant to this Section. At least 15
days before such record date, the Indenture Trustee shall mail to each
Noteholder, the Securities Insurer and the Issuer a notice that states the
record date, the payment date and the amount to be paid.
SECTION 5.5 Optional Preservation of the Collateral. If the Notes have
been declared to be due and payable under Section 5.2 following an Event of
Default and such declaration and its consequences have not been rescinded and
annulled, the Indenture Trustee may, but need not, elect to maintain possession
of the Collateral. It is the desire of the parties hereto and the Noteholders
that there be at all times sufficient funds for the payment of principal of and
interest on the Notes, and the Indenture Trustee shall take such desire into
account when determining whether or not to maintain possession of the
Collateral. In determining whether to maintain possession of the Collateral,
the Indenture Trustee may, but need not, obtain and rely upon an opinion of an
Independent investment banking or accounting firm of national reputation as to
the feasibility of such proposed action and as to the sufficiency of the
Collateral for such purpose.
INDENTURE (SERIES 1997-1) -- PAGE 42
<PAGE> 49
SECTION 5.6 Limitation of Suits. No Holder of any Note shall have any
right to institute any Proceeding, judicial or otherwise, with respect to this
Indenture or for the appointment of a receiver or trustee, or for any other
remedy hereunder for so long as a Securities Insurer Default has not occurred
or is not continuing and if a Securities Insurer Default has occurred and is
continuing, unless:
(a) such Holder has previously given written
notice to the Indenture Trustee of a
continuing Event of Default;
(b) the Holders of not less than 25% of the
Outstanding Amount of the Notes have made
written request to the Indenture Trustee to
institute such Proceeding in respect of
such Event of Default in its own name as
Indenture Trustee hereunder;
(c) such Holder or Holders have offered to the
Indenture Trustee reasonable indemnity
against the costs, expenses and liabilities
to be incurred in complying with such
request;
(d) the Indenture Trustee for 60 days after its
receipt of such notice, request and offer
of indemnity has failed to institute such
Proceedings; and
(e) no direction inconsistent with such written
request has been given to the Indenture
Trustee during such 60-day period by the
Holders of a majority of the Outstanding
Amount of the Notes.
It is understood and intended that no one or more Holders of Notes
shall have any right in any manner whatever by virtue of, or by availing of,
any provision of this Indenture to affect, disturb or prejudice the rights of
any other Holders of Notes or to obtain or to seek to obtain priority or
preference over any other Holders or to enforce any right under this Indenture,
except in the manner herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of
Notes, each representing less than a majority of the Outstanding Amount of the
Notes, the Indenture Trustee in its sole discretion may determine what action,
if any, shall be taken, notwithstanding any other provisions of this Indenture.
SECTION 5.7 Unconditional Rights of Noteholders To Receive Principal
and Interest. Notwithstanding any other provisions in this Indenture, the
Holder of any Note shall have the right, which is absolute and unconditional,
to receive payment of the principal of and interest, if any, on such Note on or
after the respective Final Scheduled Distribution Date thereof expressed in
such Note or in this Indenture (or, in the case of redemption, on or after the
Redemption Date) and to institute suit for the enforcement of any such payment,
and such right shall not be impaired without the consent of such Holder.
INDENTURE (SERIES 1997-1) -- PAGE 43
<PAGE> 50
SECTION 5.8 Restoration of Rights and Remedies. If the Indenture
Trustee, the Securities Insurer or any Noteholder has instituted any Proceeding
to enforce any right or remedy under this Indenture and such Proceeding has
been discontinued or abandoned for any reason or has been determined adversely
to the Indenture Trustee, the Securities Insurer or to such Noteholder, then
and in every such case the Issuer, the Indenture Trustee, the Securities
Insurer and the Noteholders shall, subject to any determination in such
Proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter all rights and remedies of the Indenture Trustee and
the Noteholders shall continue as though no such Proceeding had been
instituted.
SECTION 5.9 Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Indenture Trustee, the Securities Insurer or
to the Noteholders is intended to be exclusive of any other right or remedy,
and every right and remedy shall, to the extent permitted by law, be cumulative
and in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.
SECTION 5.10 Delay or Omission Not a Waiver. No delay or omission of
the Indenture Trustee, the Securities Insurer or any Holder of any Note to
exercise any right or remedy accruing upon any Default or Event of Default
shall impair any such right or remedy or constitute a waiver of any such
Default or Event of Default or an acquiescence therein. Every right and remedy
given by this Article V or by law to the Indenture Trustee, the Securities
Insurer or to the Noteholders may be exercised from time to time, and as often
as may be deemed expedient, by the Indenture Trustee, the Securities Insurer or
by the Noteholders, as the case may be, subject, in each case, however, to the
right of the Securities Insurer to control any such right and remedy, except as
provided in Section 11.21.
SECTION 5.11 Control by Noteholders. The Holders of a majority of the
Outstanding Amount of the Notes shall have the right to direct the time, method
and place of conducting any Proceeding for any remedy available to the
Indenture Trustee with respect to the Notes or exercising any trust or power
conferred on the Indenture Trustee; provided that:
(a) such direction shall not be in conflict with
any rule of law or with this Indenture;
(b) subject to the express terms of Section
5.4, any direction to the Indenture Trustee
to sell or liquidate the Collateral shall
be by Holders of Notes representing not
less than 100% of the Outstanding Amount of
the Notes;
(c) if the conditions set forth in Section 5.5
have been satisfied and the Indenture
Trustee elects to retain the Collateral
pursuant to such Section, then any
direction to the Indenture Trustee by
Holders of
INDENTURE (SERIES 1997-1) -- PAGE 44
<PAGE> 51
Notes representing less than 100% of the
Outstanding Amount of the Notes to sell or
liquidate the Collateral shall be of no
force and effect; and
(d) the Indenture Trustee may take any other
action deemed proper by the Indenture
Trustee that is not inconsistent with such
direction.
Notwithstanding the rights of the Securities Insurer and the
Noteholders set forth in this Section, subject to Section 6.1, the Indenture
Trustee need not take any action that it determines might involve it in
liability or might materially adversely affect the rights of any Noteholders
not consenting to such action.
SECTION 5.12 Waiver of Past Defaults. Prior to the declaration of the
acceleration of the maturity of the Notes as provided in Section 5.2, the
Holders of Notes representing not less than a majority of the Outstanding
Amount of the Notes may waive any past Default or Event of Default and its
consequences except a Default (a) in the payment of principal of or interest on
any of the Notes or (b) in respect of a covenant or provision hereof that
cannot be modified or amended without the consent of the Securities Insurer or
the Holder of each Note, as applicable. In the case of any such waiver, the
Issuer, the Indenture Trustee, the Securities Insurer and the Holders of the
Notes shall be restored to their former positions and rights hereunder,
respectively; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereto.
Upon any such waiver, such Default shall cease to exist and be deemed
to have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereto.
SECTION 5.13 Undertaking for Costs. All parties to this Indenture
agree, and each Holder of any Note by such Holder's acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any
suit for the enforcement of any right or remedy under this Indenture, or in any
suit against the Indenture Trustee for any action taken, suffered or omitted by
it as Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to (a) any suit instituted by the
Indenture Trustee or the Securities Insurer, (b) any suit instituted by any
Noteholder, or group of Noteholders, in each case holding in the aggregate more
than 10% of the Outstanding Amount of the Notes or (c) any suit instituted by
any Noteholder for the enforcement of the payment of principal of or interest
on any Note on or after the respective due dates expressed in such Note and in
this Indenture (or, in the case of redemption, on or after the Redemption
Date).
INDENTURE (SERIES 1997-1) -- PAGE 45
<PAGE> 52
SECTION 5.14 Waiver of Stay or Extension Laws. The Issuer covenants
(to the extent that it may lawfully do so) that it will not at any time insist
upon, or plead or in any manner whatsoever, claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this
Indenture; and the Issuer (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that
it will not hinder, delay or impede the execution of any power herein granted
to the Indenture Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.
SECTION 5.15 Action on Notes. The Indenture Trustee's right to seek
and recover judgment on the Notes or under this Indenture shall not be affected
by the seeking, obtaining or application of any other relief under or with
respect to this Indenture. Neither the lien of this Indenture nor any rights or
remedies of the Indenture Trustee or the Noteholders shall be impaired by the
recovery of any judgment by the Indenture Trustee against the Issuer or by the
levy of any execution under such judgment upon any portion of the Collateral or
upon any of the assets of the Issuer. Any money or property collected by the
Indenture Trustee shall be applied in accordance with Section 5.4(b).
SECTION 5.16 Performance and Enforcement of Certain Obligations.
(a) Promptly following a request from the
Indenture Trustee to do so and at the
Administrator's expense, the Issuer shall
take all such lawful action as the
Indenture Trustee may request to compel or
secure the performance and observance by
the Seller and the Servicer, as applicable,
of each of their obligations to the Issuer
under or in connection with the Sale and
Servicing Agreement or by the Seller of its
obligations under or in connection with the
Loan Sale Agreement, and to exercise any
and all rights, remedies, powers and
privileges lawfully available to the Issuer
under or in connection with the Sale and
Servicing Agreement to the extent and in
the manner directed by the Indenture
Trustee, including the transmission of
notices of default on the part of the
Seller or the Servicer thereunder and the
institution of legal or administrative
actions or proceedings to compel or secure
performance by the Seller or the Servicer
of each of their obligations under the Sale
and Servicing Agreement.
(b) If an Event of Default has occurred and is
continuing, the Indenture Trustee may, and
at the direction (which direction shall be
in writing or by telephone, confirmed in
writing promptly thereafter) of the Holders
of 66-2/3% of the Outstanding Amount of the
Notes shall, exercise all rights, remedies,
powers, privileges and claims of the Issuer
against the Seller or the Servicer under or
in connection with the Sale and Servicing
Agreement, or against the Seller under or
in connection with the Loan Sale Agreement,
including the right or
INDENTURE (SERIES 1997-1) -- PAGE 46
<PAGE> 53
power to take any action to compel or
secure performance or observance by the
Seller or the Servicer, as the case may be,
of each of their obligations to the Issuer
thereunder and to give any consent,
request, notice, direction, approval,
extension, or waiver under the Sale and
Servicing Agreement or the Loan Sale
Agreement, as the case may be, and any
right of the Issuer to take such action
shall be suspended.
VI
THE INDENTURE TRUSTEE
SECTION 6.1 Duties of Indenture Trustee.
(a) If an Event of Default has occurred and is
continuing, the Indenture Trustee shall
exercise the rights and powers vested in it
by this Indenture 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 such
person's own affairs.
(b) Except during the continuance of an Event
of Default:
(i) the Indenture Trustee undertakes to perform such
duties and only such duties as are specifically set forth in this
Indenture and no implied covenants or obligations shall be read into
this Indenture against the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the
Indenture Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Indenture Trustee and
conforming to the requirements of this Indenture; however, the
Indenture Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Indenture Trustee may not be relieved
from liability for its own negligent
action, its own negligent failure to act or
its own willful misconduct, except that:
(i) this paragraph does not limit the effect of paragraph
(b) of this Section;
(ii) the Indenture Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer unless
it is proved that the Indenture Trustee was negligent in ascertaining
the pertinent facts; and
INDENTURE (SERIES 1997-1) -- PAGE 47
<PAGE> 54
(iii) the Indenture Trustee shall not be liable with
respect to any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to Section 5.11.
(d) Every provision of this Indenture that in
any way relates to the Indenture Trustee is
subject to paragraphs (a), (b), (c) and (g)
of this Section.
(e) The Indenture Trustee shall not be liable
for interest on any money received by it
except as the Indenture Trustee may agree
in writing with the Issuer.
(f) Money held in trust by the Indenture
Trustee shall be segregated from other
funds except to the extent permitted by law
or the terms of this Indenture or the Sale
and Servicing Agreement.
(g) No provision of this Indenture shall require
the Indenture Trustee to expend or risk its
own funds or otherwise incur financial
liability in the performance of any of its
duties hereunder or in the exercise of any
of its rights or powers, if it shall have
reasonable grounds to believe that
repayment of such funds or adequate
indemnity against such risk or liability is
not reasonably assured to it; provided,
however, that the Indenture
Trustee shall not refuse or fail to perform
any of its duties hereunder solely as a
result of nonpayment of its normal fees and
expenses and further provided that nothing
in this Section 6.1(g) shall be construed
to limit the exercise by the Indenture
Trustee of any right or remedy permitted
under this Indenture or otherwise in the
event of the Issuer's failure to pay the
Indenture Trustee's fees and expenses
pursuant to Section 6.7. In determing that
such repayment or indemnity is not
reasonably assured to it, the Indenture
Trustee must consider not only the
likelihood of repayment or indemnity by or
on behalf of the Issuer but also the
likelihood of repayment or indemnity from
amounts payable to it from the Collateral
pursuant to Section 6.7.
(h) Every provision of this Indenture relating
to the conduct or affecting the liability
of or affording protection to the Indenture
Trustee shall be subject to the provisions
of this Section and to the provisions of
the TIA.
INDENTURE (SERIES 19971) PAGE 48
<PAGE> 55
SECTION 6.2 Rights of Indenture Trustee.
(a) The Indenture Trustee may rely on any
document believed by it to be genuine and
to have been signed or presented by the
proper person. The Indenture Trustee need
not investigate any fact or matter stated
in the document.
(b) Before the Indenture Trustee acts or
refrains from acting, it may require an
Officer's Certificate or an Opinion of
Counsel. The Indenture Trustee shall not be
liable for any action it takes or omits to
take in good faith in reliance on an
Officer's Certificate or Opinion of
Counsel.
(c) The Indenture Trustee may execute any of
the trusts or powers hereunder or perform
any duties hereunder either directly or by
or through agents or attorneys or a
custodian or nominee.
(d) The Indenture Trustee shall not be liable
for (i) any action it takes or omits to
take in good faith which it believes to be
authorized or within its rights or powers;
provided, however, that such action or
omission by the Indenture Trustee does not
constitute willful misconduct, negligence
or bad faith; or (ii) any willful
misconduct or gross negligence on the part
of the Custodian.
(e) The Indenture Trustee may consult with
counsel, and the advice or opinion of
counsel with respect to legal matters
relating to this Indenture and the Notes
shall be full and complete authorization
and protection from liability in respect to
any action taken, omitted or suffered by it
hereunder in good faith and in accordance
with the advice or opinion of such counsel.
SECTION 6.3 Individual Rights of Indenture Trustee. The Indenture
Trustee in its individual or any other capacity may become the owner or pledgee
of Notes and may otherwise deal with the Issuer or its Affiliates with the same
rights it would have if it were not Indenture Trustee. Any Paying Agent, Note
Registrar, co-registrar or co-paying agent may do the same with like rights.
However, the Indenture Trustee must comply with Sections 6.11 and 6.12.
SECTION 6.4 Indenture Trustee's Disclaimer. The Indenture Trustee
shall not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Notes, shall not be accountable for the
Issuer's use of the proceeds from the Notes, or responsible for any statement
of the Issuer in the Indenture or in any document issued in connection with the
sale of the Notes or in the Notes other than the Indenture Trustee's
certificate of authentication.
INDENTURE (SERIES 1997-1) -- PAGE 49
<PAGE> 56
SECTION 6.5 Notice of Defaults. If a Default occurs and is continuing
and if it is known to a Responsible Officer of the Indenture Trustee, the
Indenture Trustee shall mail to the Securities Insurer and each Noteholder
notice of the Default within 90 days after it occurs. Except in the case of a
Default in payment of principal of or interest on any Note (including payments
pursuant to the mandatory redemption provisions of such Note), the Indenture
Trustee may withhold the notice if and so long as a committee of its
Responsible Officers in good faith determines that withholding the notice is in
the interests of Noteholders.
SECTION 6.6 Reports by Indenture Trustee to Holders. The Indenture
Trustee shall deliver to each Noteholder such information as may be required to
enable such holder to prepare its federal and state income tax returns.
SECTION 6.7 Compensation and Indemnity. As compensation for its
services hereunder, the Indenture Trustee shall be entitled to receive, on each
Distribution Date, the Indenture Trustee's Fee pursuant to Section 8.2(c)
hereof (which compensation shall not be limited by any law on compensation of a
trustee of an express trust) and shall be entitled to reimbursement for all
reasonable out-of-pocket expenses incurred or made by it, including costs of
collection, in addition to the compensation for its services. Such expenses
shall include the reasonable compensation and expenses, disbursements and
advances of the Indenture Trustee's agents, counsel, accountants and experts.
The Issuer agrees to cause the Servicer to indemnify the Indenture Trustee
against any and all loss, liability or expense (including attorneys' fees)
incurred by it in connection with the administration of this trust and the
performance of its duties hereunder. The Indenture Trustee shall notify the
Issuer and the Servicer promptly of any claim for which it may seek indemnity.
Failure by the Indenture Trustee to so notify the Issuer and the Servicer shall
not relieve the Issuer of its obligations hereunder. The Issuer shall or shall
cause the Servicer to defend any such claim, and the Indenture Trustee may have
separate counsel and the Issuer shall or shall cause the Servicer to pay the
fees and expenses of such counsel. Neither the Issuer nor the Servicer need
reimburse any expense or indemnify against any loss, liability or expense
incurred by the Indenture Trustee through the Indenture Trustee's own willful
misconduct, negligence or bad faith.
The Issuer's payment obligations to the Indenture Trustee pursuant to
this Section shall survive the discharge of this Indenture. When the Indenture
Trustee incurs expenses after the occurrence of a Default specified in Section
5.1(e) or (f) with respect to the Issuer, the expenses are intended to
constitute expenses of administration under Title 11 of the United States Code
or any other applicable federal or state bankruptcy, insolvency or similar law.
SECTION 6.8 Replacement of Indenture Trustee. No resignation or
removal of the Indenture Trustee and no appointment of a successor Indenture
Trustee shall become effective until the acceptance of appointment by the
successor Indenture Trustee pursuant to this Section. The Indenture Trustee may
resign at any time by so notifying the Issuer and the Securities Insurer. The
Holders of a majority in Outstanding Amount of the Notes may remove the
Indenture Trustee by so notifying the Indenture Trustee and may appoint a
successor Indenture Trustee. The Issuer shall remove the Indenture Trustee upon
the prior written consent of the Securities Insurer if:
INDENTURE (SERIES 1997-1) -- PAGE 50
<PAGE> 57
(a) the Indenture Trustee fails to comply with
Section 6.11;
(b) the Indenture Trustee is adjudged a bankrupt
or insolvent;
(c) a receiver or other public officer takes
charge of the Indenture Trustee or its
property; or
(d) the Indenture Trustee otherwise becomes
incapable of acting.
If the Indenture Trustee resigns or is removed or if a vacancy exists
in the office of Indenture Trustee for any reason (the Indenture Trustee in
such event being referred to herein as the retiring Indenture Trustee), the
Issuer shall promptly appoint a successor Indenture Trustee acceptable to the
Securities Insurer.
A successor Indenture Trustee shall deliver a written acceptance of
its appointment to the retiring Indenture Trustee, the Securities Insurer and
to the Issuer. Thereupon the resignation or removal of the retiring Indenture
Trustee shall become effective, and the successor Indenture Trustee shall have
all the rights, powers and duties of the Indenture Trustee under this
Indenture. The successor Indenture Trustee shall mail a notice of its
succession to Noteholders. The retiring Indenture Trustee shall promptly
transfer all property held by it as Indenture Trustee to the successor
Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Issuer or the Holders of a majority in Outstanding
Amount of the Notes may petition any court of competent jurisdiction for the
appointment of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Indenture Trustee and the appointment of a successor Indenture Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to
this Section, the Issuer's and the Administrator's obligations under Section
6.7 shall continue for the benefit of the retiring Indenture Trustee.
SECTION 6.9 Successor Indenture Trustee by Merger. If the Indenture
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another
corporation or banking association, the resulting, surviving or transferee
corporation without any further act shall be the successor Indenture Trustee;
provided, that such corporation or banking association shall be otherwise
qualified and eligible under Section 6.11. The Indenture Trustee shall provide
the Securities Insurer and the Rating Agencies prior written notice of any such
transaction.
INDENTURE (SERIES 1997-1) -- PAGE 51
<PAGE> 58
In case at the time such successor or successors by merger, conversion
or consolidation to the Indenture Trustee shall succeed to the trusts created
by this Indenture any of the Notes shall have been authenticated but not
delivered, any such successor to the Indenture Trustee may adopt the
certificate of authentication of any predecessor trustee, and deliver such
Notes so authenticated; and in case at that time any of the Notes shall not
have been authenticated, any successor to the Indenture Trustee may
authenticate such Notes either in the name of any predecessor hereunder or in
the name of the successor to the Indenture Trustee; and in all such cases such
certificates shall have the full force which it is anywhere in the Notes or in
this Indenture provided that the certificate of the Indenture Trustee shall
have.
SECTION 6.10 Appointment of Co-Indenture Trustee or Separate Indenture
Trustee.
(a) Notwithstanding any other provisions of this
Indenture, at any time, for the purpose of
meeting any legal requirement of any
jurisdiction in which any part of the
Collateral may at the time be located, the
Indenture Trustee shall have the power,
with the prior written consent of the
Securities Insurer, and may execute and
deliver all instruments to appoint one or
more Persons to act as a co-trustee or
co-trustees, or separate trustee or
separate trustees, of all or any part of
the Trust, and to vest in such Person or
Persons, in such capacity and for the
benefit of the Noteholders, such title to
the Collateral, or any part hereof, and,
subject to the other provisions of this
Section, such powers, duties, obligations,
rights and trusts as the Indenture Trustee
may consider necessary or desirable. No
co-trustee or separate trustee hereunder
shall be required to meet the terms of
eligibility as a successor trustee under
Section 6.11 and no notice to Noteholders of
the appointment of any co-trustee or
separate trustee shall be required under
Section 6.8 hereof; provided that the
Indenture Trustee shall deliver notice of
any such co-trustee or separate trustee to
the Securities Insurer.
(b) Every separate trustee and co-trustee
shall, to the extent permitted by law, be
appointed and act subject to the following
provisions and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Indenture Trustee shall be conferred or imposed upon
and exercised or performed by the Indenture Trustee and such separate
trustee or co-trustee jointly (it being understood that such separate
trustee or co-trustee is not authorized to act separately without the
Indenture Trustee joining in such act), except to the extent that
under any law of any jurisdiction in which any particular act or acts
are to be performed the Indenture Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights,
powers, duties and obligations (including the holding of title to the
Collateral or any portion thereof
INDENTURE (SERIES 1997-1) -- PAGE 52
<PAGE> 59
in any such jurisdiction) shall be exercised and performed singly by
such separate trustee or co-trustee, but solely at the direction of
the Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by
reason of any act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the
resignation of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given
to the Indenture Trustee shall be deemed to
have been given to each of the then
separate trustees and co-trustees, as
effectively as if given to each of them.
Every instrument appointing any separate
trustee or co-trustee shall refer to this
Agreement and the conditions of this
Article VI. Each separate trustee and
and co-trustee, upon its acceptance of the
trusts conferred, shall be vested with the
estates or property specified in its
instrument of appointment, jointly with the
Indenture Trustee, subject to all the
provisions of this Indenture, specifically
including every provision of this Indenture
relating to the conduct of, affecting the
liability of, or affording protection to,
the Indenture Trustee. Every such
instrument shall be filed with the
Indenture Trustee.
(d) Any separate trustee or co-trustee may at
any time constitute the Indenture Trustee
its agent or attorney-in-fact with full
power and authority, to the extent not
prohibited by law, to do any lawful act
under or in respect of this Agreement on
its behalf and in its name. If any separate
trustee or co-trustee shall die, become
incapable of acting, resign or be removed,
all of its estates, properties, rights,
remedies and trusts shall vest in and be
exercised by the Indenture Trustee, to the
extent permitted by law, without the
appointment of a new or successor trustee.
SECTION 6.11 Eligibility; Disqualification. The Indenture Trustee
shall at all times satisfy the requirements of TIA Section 310(a). The
Indenture Trustee shall have a combined capital and surplus of at least
$50,000,000 as set forth in its most recent published annual report of
condition and it or its parent shall have a long-term debt rating of A3 or
better by Moody's or shall otherwise be acceptable to Moody's. The Indenture
Trustee shall comply with TIA Section 310(b), including the optional provision
permitted by the second sentence of TIA Section 310(b)(9); provided, however,
that there shall be excluded from the operation of TIA Section 310(b)(1) any
indenture or indentures under which other securities of the Issuer are
outstanding if the requirements for such exclusion set forth in TIA Section
310(b)(1) are met.
INDENTURE (SERIES 1997-1) -- PAGE 53
<PAGE> 60
SECTION 6.12 Preferential Collection of Claims Against Issuer. The
Indenture Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). An Indenture Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated.
VII
NOTEHOLDERS' LISTS AND REPORTS
SECTION 7.1 Issuer To Furnish Indenture Trustee Names and Addresses of
Noteholders. The Issuer will furnish or cause to be furnished to the Indenture
Trustee (a) not more than five days after each Record Date, a list, in such
form as the Indenture Trustee may reasonably require, of the names and
addresses of the Holders of Notes as of such Record Date, (b) at such other
times as the Indenture Trustee may request in writing, within 30 days after
receipt by the Issuer of any such request, a list of similar form and content
as of a date not more than 10 days prior to the time such list is furnished;
provided, however, that so long as the Indenture Trustee is the Note Registrar,
no such list shall be required to be furnished.
SECTION 7.2 Preservation of Information; Communications to
Noteholders.
(a) The Indenture Trustee shall preserve, in as
current a form as is reasonably
practicable, the names and addresses of the
Holders of Notes contained in the most
recent list furnished to the Indenture
Trustee as provided in Section 7.1 and the
names and addresses of Holders of Notes
received by the Indenture Trustee
in its capacity as Note Registrar. The
Indenture Trustee may destroy any list
furnished to it as provided in such Section
7.1 upon receipt of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA
Section 312(b) with other Noteholders with
respect to their rights under this
Indenture or under the Notes.
(c) The Issuer, the Indenture Trustee and the
Note Registrar shall have the protection of
TIA Section 312(c).
SECTION 7.3 Reports by Issuer.
(a) The Issuer shall:
(i) file with the Indenture Trustee and the Securities
Insurer, within 15 days after the Issuer is required to file the same
with the Commission, copies of the annual reports and of the
information, documents and other reports (or copies of such portions
of any of the foregoing as the Commission may from time to time by
rules and regulations prescribe) that
INDENTURE (SERIES 1997-1) -- PAGE 54
<PAGE> 61
the Issuer may be required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act;
(ii) file with the Indenture Trustee and the Securities
Insurer and the Commission in accordance with the rules and
regulations prescribed from time to time by the Commission such
additional information, documents and reports with respect to
compliance by the Issuer with the conditions and covenants of this
Indenture as may be required from time to time by such rules and
regulations; and
(iii) supply to the Indenture Trustee (and the Indenture
Trustee shall transmit by mail to all Noteholders described in TIA
Section 313(c)) such summaries of any information, documents and
reports required to be filed by the Issuer pursuant to clauses (i) and
(ii) of this Section 7.3(a) and by rules and regulations prescribed
from time to time by the Commission.
(b) Unless the Issuer otherwise determines, the
fiscal year of the Issuer shall end on
December 31 of each year.
SECTION 7.4 Reports by Indenture Trustee. If required by TIA Section
313(a), within 60 days after each February 1, beginning with February 1, 1998,
the Indenture Trustee shall mail to the Securities Insurer and to each
Noteholder as required by TIA Section 313(c) a brief report dated as of such
date that complies with TIA Section 313(a). The Indenture Trustee also shall
comply with TIA Section 313(b).
A copy of each report at the time of its mailing to Noteholders shall
be filed by the Indenture Trustee with the Commission and each securities
exchange, if any, on which the Notes are listed. The Issuer shall notify the
Indenture Trustee if and when the Notes are listed on any securities exchange.
VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 8.1 Collection of Money.
(a) General. Except as otherwise expressly
provided herein, the Indenture Trustee may
demand payment or delivery of, and shall
receive and collect, directly and without
intervention or assistance of any fiscal
agent or other intermediary, all money and
other property payable to or receivable by
the Indenture Trustee pursuant to this
Indenture. The Indenture Trustee shall
apply all such money received by it as
provided in this Indenture. Except as
otherwise expressly provided in this
Indenture, if any default occurs in the
making of any payment or performance under
any agreement or instrument that is
INDENTURE (SERIES 1997-1) -- PAGE 55
<PAGE> 62
part of the Collateral, the Indenture
Trustee may, and upon written request of
the Securities Insurer shall, take such
action as may be appropriate to enforce
such payment or performance, including the
institution and prosecution of appropriate
Proceedings. Any such action shall be
without prejudice to any right to claim a
Default or Event of Default under this
Indenture and any right to proceed
thereafter as provided in Article V.
(b) Claims Under Guaranty Policy. The Notes and
the Certificates will be insured by the
Guaranty Policy pursuant to the terms set
forth therein, notwithstanding any
provisions to the contrary contained in
this Indenture or the Sale and Servicing
Agreement. All amounts received under the
Guaranty Policy shall be used solely for
the payment to Securityholders of principal
and interest on the Notes and the
Certificates.
SECTION 8.2 Trust Accounts; Distributions.
(a) On or prior to the Closing Date, the Issuer
shall cause the Servicer to establish and
maintain, in the name of the Indenture
Trustee for the benefit of the Noteholders,
or the Co-Owner Trustee for the benefit of
the Certificateholders, the Trust Accounts
as provided in ARTICLE V of the Sale and
Servicing Agreement. The Indenture Trustee
or Co-Owner Trustee shall deposit amounts
into the Trust Accounts in accordance with
the terms hereof, the Sale and Servicing
Agreement and the Servicer's Monthly
Remittance Report.
(b) On or before the third Business Day prior to
each Distribution Date, the Indenture
Trustee shall withdraw from the Collection
Account, the Pre-Funding Account, the
Capitalized Interest Account and the
Reserve Account, as applicable, the
Available Collection Amount and the Reserve
Account Withdrawal Amount, if any, with
respect to the preceding Due Period
pursuant to Section 5.01(b)(2) of the Sale
and Servicing Agreement and will deposit
such amount into the Note Distribution
Account. No later than the second Business
Day prior to each Distribution Date, to the
extent funds are available in the Note
Distribution Account, the Indenture Trustee
shall either retain funds in the Note
Distribution Account or make the
withdrawals from the Note Distribution
Account and deposits into the other Trust
Accounts for distribution on such
Distribution Date as required pursuant to
Section 5.01(c) of the Sale and Servicing
Agreement.
(c) On each Distribution Date and Redemption
Date, to the extent funds are available in
the Note Distribution Account, the
Indenture Trustee
INDENTURE (SERIES 1997-1) -- PAGE 56
<PAGE> 63
shall make the following distributions from
the amounts on deposit in the Note
Distribution Account in the following order
of priority (except as otherwise provided
in Section 5.4(b)):
(i) (A) to the Servicer, an amount equal to the
Servicing Compensation (net of any amounts
retained prior to deposit into the
Collection Account pursuant to Section
5.01(b)(1) of the Sale and Servicing
Agreement) and all unpaid Servicing
Compensation from prior due periods, (B) to
the Securities Insurer, an amount equal to
the Guaranty Insurance Premium and all
unpaid Guaranty Insurance Premiums from
prior Due Periods, (C) to the Indenture
Trustee, an amount equal to the Indenture
Trustee Fee and all unpaid Indenture
Trustee Fees from prior Due Periods, and
(D) to the Owner Trustee, an amount equal
to the Owner Trustee Fee and all unpaid
Owner Trustee Fees from prior Due Periods;
(ii) only to the extent of funds withdrawn from
the Pre-Funding Account and deposited in
the Note Distribution Account by the
Indenture Trustee pursuant to Section
5.03(c) of the Sale and Servicing Agreement
(net of any amount deposited in the
Certificate Distribution Account from the
Note Distribution Account for distribution
to Certificateholders pursuant to
Subsection 5.01(c)(ii) of the Sale and
Servicing Agreement), pro rata, to the
Holders of the Class A-1 Notes, the Holders
of the Class A-2 Notes, the Holders of the
Class A-3 Notes, the Holders of the Class
A-4 Notes, the Holders of the Class A-5
Notes, the Holders of the Class A-6 Notes,
the Holders of the Class A-7 Notes and the
Holders of the Class A-8 Notes based on the
Class Principal Balance of each such Class,
in each case to reduce the Class Principal
Balance of each such Class; provided that
if the amount of such funds equals or is
less than $50,000, then such amount shall
be distributed sequentially to the Holders
of each Class of Notes, in ascending order
of their respective Class designations, to
reduce the respective Class Principal
Balances thereof;
(iii) to the Holders of each Class of the Notes,
the Noteholders' Interest Distributable
Amount for such Distribution Date;
provided, that if there are not sufficient
funds in the Note Distribution Account to
pay the entire amount of accrued and unpaid
interest then due on the Notes, the amount
in the Note Distribution Account shall be
applied to the payment of such interest on
the Notes pro rata on the basis of the
total such interest due on the Notes;
INDENTURE (SERIES 1997-1) -- PAGE 57
<PAGE> 64
(iv) to the Holders of the Class A-1 Notes, the
Noteholders' Principal Distributable Amount
until the Outstanding Amount of the Class
A-1 Notes is reduced to zero;
(v) to the Holders of the Class A-2 Notes, the
remaining Noteholders' Principal
Distributable Amount after distributions
pursuant to clause (iv) above until the
Outstanding Amount of the Class A-2 Notes
is reduced to zero;
(vi) to the Holders of the Class A-3 Notes, the
remaining Noteholders' Principal
Distributable Amount after distributions
pursuant to clauses (iv) and (v) above
until the Outstanding Amount of the Class
A-3 Notes is reduced to zero;
(vii) to the Holders of the Class A-4 Notes, the
remaining Noteholders' Principal
Distributable Amount after distributions
pursuant to clauses (iv) through (vi) above
until the Outstanding Amount of the Class
A-4 Notes is reduced to zero;
(viii) to the Holders of the Class A-5 Notes, the
remaining Noteholders' Principal
Distributable Amount after distributions
pursuant to clauses (iv) through (vii)
above until the Outstanding Amount of the
Class A-5 Notes is reduced to zero;
(ix) to the Holders of the Class A-6 Notes, the
remaining Noteholders' Principal
Distributable Amount after distributions
pursuant to clauses (iv) through (viii)
above until the Outstanding Amount of the
Class A-6 Notes is reduced to zero;
(x) to the Holders of the Class A-7 Notes, the
remaining Noteholders' Principal
Distributable Amount after distributions
pursuant to clauses (iv) through (ix) above
until the Outstanding Amount of the Class
A-7 Notes is reduced to zero; and
(xi) to the Holders of the Class A-8 Notes, the
remaining Noteholders' Principal
Distributable Amount after distributions
pursuant to clauses (iv) through (x) above
until the Outstanding Amount of the Class
A-8 Notes is reduced to zero.
(d) On each Distribution Date and each Redemption Date, to the extent
of the interest of the Indenture Trustee in the Certificate Distribution
Account (as described in Section 5.08(a) of the Sale and Servicing Agreement),
the Indenture Trustee hereby authorizes the Owner Trustee, the Co- Owner
Trustee or the Paying Agent, as applicable, to make the distributions from the
Certificate Distribution Account as required pursuant to Section 5.06(c) of the
Sale and Servicing Agreement.
INDENTURE (SERIES 1997-1) -- PAGE 58
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(e) The Indenture Trustee shall make claims under the Guaranty Policy
pursuant to Section 5.02 of the Sale and Servicing Agreement and in accordance
with the Guaranty Policy. The Indenture Trustee shall deposit any Guaranteed
Payment received from the Security Insurer in the Note Distribution Account for
the portion of the Guaranteed Payment payable on the related Class of Notes or
in the Certificate Distribution Account for the portion of the Guaranteed
Payment payable on the related Certificate. For claims under the Guaranty
Policy for a Deficiency Amount, on the related Distribution Date, the Indenture
Trustee shall distribute such amount based upon the portion of the Interest
Distribution Amount and the portion of the Regular Distribution Amount payable
on the related Class of Note to the Holders of such Class of Note and payable
on the related Certificate to such Certificateholders in accordance with the
terms of the Sale and Servicing Agreement. For claims under the Guaranty Policy
for a Preference Amount, the Indenture Trustee shall distribute such amount in
accordance with the terms of the Guaranty Policy. All amounts received under
the Guaranty Policy shall be used solely for the payment to Securityholders of
principal and interest on the related Class of Notes and the Certificates, as
applicable.
SECTION 8.3 General Provisions Regarding Accounts.
(a) So long as no Default or Event of Default
shall have occurred and be continuing, all
or a portion of the funds in the Trust
Accounts shall be invested in Permitted
Investments and reinvested by the Indenture
Trustee at the direction of the Affiliated
Holder in accordance with the provisions of
ARTICLE V of the Sale and Servicing
Agreement. All income or other gain from
investments of moneys deposited in the
Trust Accounts shall be deposited by the
Indenture Trustee into the Note
Distribution Account, and any loss
resulting from such investments shall be
charged to such account. The Issuer will
not direct the Indenture Trustee to make
any investment of any funds or to sell any
investment held in any of the Trust
Accounts unless the security interest
Granted and perfected in such account will
continue to be perfected in such investment
or the proceeds of such sale, in either
case without any further action by any
Person, and, in connection with any
direction to the Indenture Trustee to make
any such investment or sale, if requested
by the Indenture Trustee, the Issuer shall
deliver to the Indenture Trustee an Opinion
of Counsel, acceptable to the Indenture
Trustee, to such effect.
(b) Subject to Section 6.1(c), the Indenture
Trustee shall not in any way be held liable
by reason of any insufficiency in any of
the Trust Accounts resulting from any loss
on any Eligible Investment included therein
except for losses attributable to the
Indenture Trustee's failure to make
payments on such Eligible Investments
issued by the Indenture Trustee, in its
commercial capacity as principal obligor
and not as trustee, in accordance with
their terms.
INDENTURE (SERIES 1997-1) -- PAGE 59
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(c) If (i) the Issuer shall have failed to give
investment directions for any funds on
deposit in the Trust Accounts to the
Indenture Trustee by 11:00 a.m. Eastern
Time (or such other time as may be agreed
by the Issuer and Indenture Trustee) on any
Business Day or (ii) a Default or Event of
Default shall have occurred and be
continuing with respect to the Notes but
the Notes shall not have been declared due
and payable pursuant to Section 5.2 or
d(iii) if such Notes shall been declared
due and payable following an Event of
Default, amounts collected or receivable
from the Collateral are being applied in
accordance with Section 5.5 as if there had
not been such a declaration, then the
Indenture Trustee shall, to the fullest
extent practicable, invest and reinvest
funds in the Trust Accounts in one or more
Eligible Investments.
SECTION 8.4 Servicer's Monthly Statements. On each Distribution Date,
the Indenture Trustee shall deliver the Servicer's Monthly Statement (as
defined in the Sale and Servicing Agreement) with respect to such Distribution
Date to the DTC, the Rating Agencies, and the Securities Insurer.
SECTION 8.5 Release of Collateral.
(a) Subject to the payment of its fees and
expenses pursuant to Section 6.7, the
Indenture Trustee may, and when required by
the provisions of this Indenture shall,
execute instruments to release property from
the lien of this Indenture, or convey the
Indenture Trustee's interest in the same, in
a manner and under circumstances that are not
inconsistent with the provisions of this
Indenture. No party relying upon an
instrument executed by the Indenture Trustee
as provided in this Article VIII shall be
bound to ascertain the Indenture Trustee's
authority, inquire into the satisfaction of
any conditions precedent or see to the
application of any moneys.
(b) The Indenture Trustee shall, at such time as
there are no Notes Outstanding and all sums
due to (i) the Certificateholders pursuant
to Section 5.06(c) of the Sale and Servicing
Agreement, (ii) the Servicer pursuant to
Section 8.2(c)(i)(A) hereof, (iii) the
Securities Insurer pursuant to Section
8.2(c)(i)(B) hereof, the Indenture Trustee
pursuant to Section 8.2(c)(i)(C) hereof, the
Owner Trustee pursuant to Section
8.2(c)(i)(D) hereof, and the Custodian
pursuant to Section 8.2(c)(i)(E) hereof have
been paid, release any remaining portion of
the Collateral that secured the Notes from
the lien of this Indenture and release to the
Issuer or any other Person entitled thereto
any funds then on deposit in the Trust
Accounts. The Indenture Trustee shall release
property from the lien of this Indenture
pursuant
INDENTURE (SERIES 19971) PAGE 60
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to this Subsection (b) only upon receipt of
an Issuer Request accompanied by an
Officer's Certificate, an Opinion of
Counsel and (if required by the TIA)
Independent Certificates in accordance with
TIA Sections 314(c) and 314(d)(1) meeting
the applicable requirements of Section 11.1.
SECTION 8.6 Opinion of Counsel. The Indenture Trustee and the
Securities Insurer shall receive at least seven days notice when requested by
the Issuer to take any action pursuant to Section 8.5(a), accompanied by copies
of any instruments involved, and the Indenture Trustee shall also require, as a
condition to such action, an Opinion of Counsel, in form and substance
satisfactory to the Indenture Trustee, stating the legal effect of any such
action, outlining the steps required to complete the same, and concluding that
all conditions precedent to the taking of such action have been complied with
and such action will not materially and adversely impair the security for the
Notes or the rights of the Noteholders in contravention of the provisions of
this Indenture; provided, however, that such Opinion of Counsel shall not be
required to express an opinion as to the fair value of the Collateral. Counsel
rendering any such opinion may rely, without independent investigation, on the
accuracy and validity of any certificate or other instrument delivered to the
Indenture Trustee in connection with any such action.
IX
SUPPLEMENTAL INDENTURES
SECTION 9.1 Supplemental Indentures Without Consent of Noteholders.
(a) Without the consent of the Holders of any
Notes but with prior notice to the Rating
Agencies and with the prior written consent
of the Securities Insurer, the Issuer and
the Indenture Trustee, when authorized by
an Issuer Order, at any time and from time
to time, may enter into one or more
indentures supplemental hereto (which shall
conform to the provisions of the Trust
Indenture Act as in force at the date of
the execution thereof), in form
satisfactory to the Indenture Trustee, for
any of the following purposes:
(i) to correct or amplify the description of any property at
any time subject to the lien of this Indenture, or better to assure,
convey and confirm unto the Indenture Trustee any property subject or
required to be subjected to the lien of this Indenture, or to subject
to the lien of this Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Notes contained;
INDENTURE (SERIES 1997-1) PAGE 61
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(iii) to add to the covenants of the Issuer, for the
benefit of the Holders of the Notes, or to surrender any right or
power herein conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any
property to or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any
provision herein or in any supplemental indenture that may be
inconsistent with any other provision herein or in any supplemental
indenture or to make any other provisions with respect to matters or
questions arising under this Indenture or in any supplemental
indenture; provided, that such action shall not adversely affect the
interests of the Holders of the Notes;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes
and to add to or change any of the provisions of this Indenture as
shall be necessary to facilitate the administration of the trusts
hereunder by more than one trustee, pursuant to the requirements of
Article VI; or
(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA or under any similar
federal statute hereafter enacted and to add to this Indenture such
other provisions as may be expressly required by the TIA.
The Indenture Trustee is hereby authorized to join in the execution of
any such supplemental indenture and to make any further appropriate agreements
and stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, with
the prior written consent of the Securities Insurer, when authorized
by an Issuer Order, may, also without the consent of any of the
Holders of the Notes but with prior consent of the Rating Agencies,
enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to, or changing in any manner or
eliminating any of the provisions of, this Indenture or of modifying
in any manner the rights of the Holders of the Notes under this
Indenture; provided, however, that such action shall not, as evidenced
by (i) an Opinion of Counsel or (ii) satisfaction of the Rating Agency
Condition, adversely affect in any material respect the interests of
any Noteholder.
SECTION 9.2 Supplemental Indentures with Consent of Noteholders. The
Issuer and the Indenture Trustee, when authorized by an Issuer Order, also may,
with prior consent of the Rating Agencies, the Securities Insurer and with the
consent of the Holders of not less than a majority of the Outstanding Amount of
the Notes, by Act of such Holders delivered to the Issuer and the Indenture
Trustee, enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to, or changing in any manner or eliminating
any of the provisions of, this
INDENTURE (SERIES 1997-1) -- PAGE 62
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Indenture or of modifying in any manner the rights of the Holders of the Notes
under this Indenture; provided, however, that no such supplemental indenture
shall, without the consent of the Holder of each Outstanding Note affected
thereby and the Securities Insurer if affected thereby:
(a) change the date of payment of any installment
of principal of or interest on any Note, or
reduce the principal amount thereof, the
interest rate thereon or the Redemption
Price with respect thereto, change the
provisions of this Indenture relating to
the application of collections on, or the
proceeds of the sale of, the Collateral to
payment of principal of or interest on the
Notes, or change any place of payment
where, or the coin or currency in which,
any Note or the interest thereon is
payable, or impair the right to institute
suit for the enforcement of the provisions
of this Indenture requiring the application
of funds available therefor, as provided in
Article V, to the payment of any such
amount due on the Notes on or after the
respective due dates thereof (or, in the
case of redemption, on or after the
Redemption Date);
(b) reduce the percentage of the Outstanding
Amount of the Notes, the consent of the
Holders of which is required for any such
supplemental indenture, or the consent of
the Holders of which is required for any
waiver of compliance with certain
provisions of this Indenture or certain
defaults hereunder and their consequences
provided for in this Indenture;
(c) modify or alter the provisions of the proviso
to the definition of the term "Outstanding";
(d) reduce the percentage of the Outstanding
Amount of the Notes required to direct the
Indenture Trustee to direct the Issuer to
sell or liquidate the Collateral pursuant
to Section 5.4;
(e) modify any provision of this Section except
to increase any percentage specified herein
or to provide that certain additional
provisions of this Indenture or the Basic
Documents cannot be modified or waived
without the consent of the Holder of each
Outstanding Note affected thereby;
(f) modify any of the provisions of this
Indenture in such manner as to affect the
calculation of the amount of any payment of
interest or principal due on any Note on any
Distribution Date (including the
calculation of any of the individual
components of such calculation) or to
affect the rights of the Holders of Notes
to the benefit of any
INDENTURE (SERIES 1997-1) -- PAGE 63
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provisions for the mandatory redemption of
the Notes contained herein; or
(g) permit the creation of any lien ranking
prior to or on a parity with the lien of
this Indenture with respect to any part of
the Collateral or, except as otherwise
permitted or contemplated herein, terminate
the lien of this Indenture on any property
at any time subject hereto or deprive the
Holder of any Note of the security provided
by the lien of this Indenture.
The Indenture Trustee may in its discretion determine whether or not
any Notes would be affected by any supplemental indenture and any such
determination shall be conclusive upon the Holders of all Notes, whether
theretofore or thereafter authenticated and delivered hereunder. The Indenture
Trustee shall not be liable for any such determination made in good faith.
In connection with requesting the consent of the Noteholders pursuant
to this Section, the Indenture Trustee shall mail to the Holders of the Notes
to which such amendment or supplemental indenture relates a notice setting
forth in general terms the substance of such supplemental indenture. It shall
not be necessary for any Act of Noteholders under this Section to approve the
particular form of any proposed supplemental indenture, but it shall be
sufficient if such Act shall approve the substance thereof.
SECTION 9.3 Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modification thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled to receive, and
subject to Sections 6.1 and 6.2, shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Indenture Trustee may, but shall
not be obligated to, enter into any such supplemental indenture that affects
the Indenture Trustee's own rights, duties, liabilities or immunities under
this Indenture or otherwise.
SECTION 9.4 Effect of Supplemental Indenture. Upon the execution of
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and shall be deemed to be modified and amended in accordance therewith
with respect to the Notes affected thereby, and the respective rights,
limitations of rights, obligations, duties, liabilities and immunities under
this Indenture of the Indenture Trustee, the Issuer and the Holders of the
Notes shall thereafter be determined, exercised and enforced hereunder subject
in all respects to such modifications and amendments, and all the terms and
conditions of any such supplemental indenture shall be and be deemed to be part
of the terms and conditions of this Indenture for any and all purposes.
SECTION 9.5 Conformity with Trust Indenture Act. Every amendment of
this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as then
in effect so long as this Indenture shall then be qualified under the Trust
Indenture Act.
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SECTION 9.6 Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee
shall, bear a notation in form approved by the Indenture Trustee as to any
matter provided for in such supplemental indenture. If the Issuer or the
Indenture Trustee shall so determine, new Notes so modified as to conform, in
the opinion of the Indenture Trustee and the Issuer, to any such supplemental
indenture may be prepared and executed by the Issuer and authenticated and
delivered by the Indenture Trustee in exchange for Outstanding Notes.
SECTION 9.7 Amendments to Trust Agreement.
Subject to Section 11.1 of the Trust Agreement, the Indenture Trustee
shall, upon Issuer Order, consent to any proposed amendment to the Trust
Agreement or an amendment to or waiver of any provision of any other document
relating to the Trust Agreement, such consent to be given without the necessity
of obtaining the consent of the Holders of any Notes upon satisfaction of the
requirements under Section 11.1 of the Trust Agreement.
Nothing in this Section shall be construed to require that any Person
obtain the consent of the Indenture Trustee to any amendment or waiver or any
provision of any document where the making of such amendment or the giving of
such waiver without obtaining the consent of the Indenture Trustee is not
prohibited by this Indenture or by the terms of the document that is the
subject of the proposed amendment or waiver.
X
REDEMPTION OF NOTES
SECTION 10.1 Redemption.
The Affiliated Holder may, at its option, effect an early redemption
of the Notes on or after any Distribution Date on which the Pool Principal
Balance declines to 15% or less of the Pool Principal Balance of the Initial
Home Loans and Subsequent Home Loans conveyed to the Trust as of their
respective Cut-Off Dates. The Affiliated Holder shall effect such early
redemption by directing the Indenture Trustee to sell all of the Home Loans to
a person that is not an Affiliate of the Affiliated Holder, the Seller, or the
Servicer at a price not less than the Redemption Price. In addition, the
Affiliated Holder may, at its option, effect an early redemption of the Notes
on or after any Distribution Date on which the Pool Principal Balance declines
to 10% or less of the Pool Principal Balance of the Initial Home Loans and
Subsequent Home Loan conveyed to the Trust as of their respective Cut-Off
Dates. In connection with any such optional termination, to the extent that
sufficient proceeds are not available from the sale of the Home Loans or the
termination of the Trust, the Affiliated Holder will pay the outstanding fees
and expenses, if any, of the Indenture Trustee, the Issuer, the Securities
Insurer, and the Servicer.
INDENTURE (SERIES 1997-1) -- PAGE 65
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In addition, subject to Section 11.19, on any date on or after which
(i) 17.5% or more (based on Net Loan Losses) of the Home Loans have become
Defaulted Home Loans on a cumulative basis and (ii) the Overcollateralization
Amount has been reduced to zero or an amount less than zero, then the
Securities Insurer may, at its option, effect an early retirement of the
Securities and termination of this Agreement.
Any such redemption by the Affiliated Holder or the Securities
Insurer, as applicable, shall be accomplished by the Affiliated Holder or the
Securities Insurer, as applicable, depositing or causing to be deposited into
the Collection Account by 10:00 A.M. New York City time on the third Business
Day prior to the Redemption Date the amount of the Redemption Price. On the
same day that the Redemption Price is deposited into the Collection Account,
the Redemption Price and any amounts then on deposit in the Collection Account
(other than any amounts not required to have been deposited therein pursuant to
Section 5.01(b)(1) of the Sale and Servicing Agreement) shall be transferred to
the Note Distribution Account for distribution to the Noteholders on the
Redemption Date; and any amounts received with respect to the Home Loans and
Foreclosure Properties subsequent to such transfer shall belong to the Servicer
or the Securities Insurer, as applicable. For purposes of calculating the
Required Distribution Amount for the Redemption Date, amounts transferred to
the Note Distribution Account pursuant to the immediately preceding sentence on
the Determination Date immediately preceding such final Distribution Date shall
in all cases be deemed to have been received during the related Due Period, and
such transfer shall be made pursuant to Section 5.01(c) of the Sale and
Servicing Agreement.
The Servicer or the Issuer shall furnish the Rating Agencies and the
Securities Insurer notice of any such redemption in accordance with Section
10.2.
SECTION 10.2 Form of Redemption Notice.
(a) Notice of redemption under Section 10.1
shall be given by the Indenture Trustee by
first-class mail, postage prepaid, or by
facsimile mailed or transmitted not later
than 10 days prior to the applicable
Redemption Date to each Holder of Notes, as
of the close of business on the Record Date
preceding the applicable Redemption Date,
at such Holder's address or facsimile
number appearing in the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price; and
(iii) the place where such Notes are to be surrendered for
payment of the Redemption Price (which shall be the office or agency
of the Issuer to be maintained as provided in Section 3.2).
INDENTURE (SERIES 1997-1) -- PAGE 66
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Notice of redemption of the Notes shall be given by the Indenture
Trustee in the name of the Issuer and at the expense of the Servicer. Failure
to give notice of redemption, or any defect therein, to any Holder of any Note
shall not impair or affect the validity of the redemption of any other Note.
SECTION 10.3 Notes Payable on Redemption Date; Provision for Payment
of Indenture Trustee and Securities Insurer. The Notes or portions thereof to
be redeemed shall, following notice of redemption as required by Section 10.2
(in the case of redemption pursuant to Section 10.1), on the Redemption Date
become due and payable at the Redemption Price and (unless the Issuer shall
default in the payment of the Redemption Price) no interest shall accrue on the
Redemption Price for any period after the date to which accrued interest is
calculated for purposes of calculating the Redemption Price. The Issuer may not
redeem the Notes unless, (i) all outstanding obligations under the Notes have
been paid in full and (ii) the Indenture Trustee has been paid all amounts to
which it is entitled hereunder and the Securities Insurer has been paid all
Securities Insurer Reimbursement Amounts to which it is entitled as of the
applicable Redemption Date.
XI
MISCELLANEOUS
SECTION 11.1 Compliance Certificates and Opinions, etc.
(a) Upon any application or request by the
Issuer to the Indenture Trustee to take any
action under any provision of this
Indenture, the Issuer shall furnish to the
Indenture Trustee (i) an Officer's
Certificate stating that all conditions
precedent, if any, provided for in this
Indenture relating to the proposed action
have been complied with, (ii) an Opinion of
Counsel stating that in the opinion of such
counsel all such conditions precedent, if
any, have been complied with and (iii) (if
required by the TIA) an Independent
Certificate from a firm of certified public
accountants meeting the applicable
requirements of this Section, except that,
in the case of any such application or
request as to which the furnishing of such
documents is specifically required by any
provision of this Indenture, no additional
certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each
signatory of such
certificate or opinion has
read or has caused to be
read such covenant or
condition and the
definitions herein
relating thereto;
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(2) a brief statement as to the
nature and scope of the
examination or
investigation upon which
the statements or opinions
contained in such
certificate or opinion are
based;
(3) a statement that, in the
opinion of each such
signatory, such signatory
has made such examination
or investigation as is
necessary to enable such
signatory to express an
informed opinion as to
whether or not such
covenant or condition has
been complied with; and
(4) a statement as to whether,
in the opinion of each such
signatory, such condition
or covenant has been
complied with.
(b) (i) Prior to the deposit of any Collateral
or other property or securities with the
Indenture Trustee that is to be made the
basis for the release of any property or
securities subject to the lien of this
Indenture, the Issuer shall, in addition to
any obligation imposed in Section 11.1(a)
or elsewhere in this Indenture, furnish to
the Indenture Trustee an Officer's
Certificate certifying or stating the
opinion of each person signing such
certificate as to the fair value (within 90
days of such deposit) to the Issuer of the
Collateral or other property or
securities to be so deposited.
(ii) Whenever the Issuer is required to furnish to the
Indenture Trustee an Officer's Certificate certifying or stating the
opinion of any signer thereof as to the matters described in clause
(i) above, the Issuer shall also deliver to the Indenture Trustee an
Independent Certificate as to the same matters, if the fair value to
the Issuer of the securities to be so deposited and of all other such
securities made the basis of any such withdrawal or release since the
commencement of the then-current fiscal year of the Issuer, as set
forth in the certificates delivered pursuant to clause (i) above and
this clause (ii), is 10% or more of the Outstanding Amount of the
Notes, but such a certificate need not be furnished with respect to
any securities so deposited, if the fair value thereof to the Issuer
as set forth in the related Officer's Certificate is less than $25,000
or less than one percent of the Outstanding Amount of the Notes.
(iii) Whenever any property or securities are to be released
from the lien of this Indenture, the Issuer shall also furnish to the
Indenture Trustee an Officer's Certificate certifying or stating the
opinion of each person signing such certificate as to the fair value
(within 90 days of such release) of the property or securities
proposed to be released and stating that in the opinion of such person
the proposed release will not impair the security under this Indenture
in contravention of the provisions hereof.
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(iv) Whenever the Issuer is required to furnish to the
Indenture Trustee an Officer's Certificate certifying or stating the
opinion of any signer thereof as to the matters described in clause
(iii) above, the Issuer shall also furnish to the Indenture Trustee an
Independent Certificate as to the same matters if the fair value of
the property or securities and of all other property, other than
property as contemplated by clause (v) below or securities released
from the lien of this Indenture since the commencement of the
then-current calendar year, as set forth in the certificates required
by clause (iii) above and this clause (iv), equals 10% or more of the
Outstanding Amount of the Notes, but such certificate need not be
furnished in the case of any release of property or securities if the
fair value thereof as set forth in the related Officer's Certificate
is less than $25,000 or less than one percent of the then Outstanding
Amount of the Notes.
SECTION 11.2 Form of Documents Delivered to Indenture Trustee. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may
certify or give an opinion with respect to some matters and one or more other
such Persons as to other matters, and any such Person may certify or give an
opinion as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which such officer's
certificate or opinion is based are erroneous. Any such certificate of an
Authorized Officer or Opinion of Counsel may be based, insofar as it relates to
factual matters, upon a certificate or opinion of, or representations by, an
officer or officers of the Servicer, the Seller, the Issuer or the
Administrator, stating that the information with respect to such factual
matters is in the possession of the Servicer, the Seller, the Issuer or the
Administrator, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of
the facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article VI.
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SECTION 11.3 Acts of Noteholders.
(a) Any request, demand, authorization,
direction, notice, consent, waiver or other
action provided by this Indenture to be
given or taken by Noteholders may be
embodied in and evidenced by one or more
instruments of substantially similar tenor
signed by such Noteholders in person or by
agents duly appointed in writing; and
except as herein otherwise expressly
provided such action shall become effective
when such instrument or instruments are
delivered to the Indenture Trustee, and,
where it is hereby expressly required, to
the Issuer. Such instrument or instruments
(and the action embodied therein and
evidenced thereby) are herein sometimes
referred to as the "Act" of the Noteholders
signing such instrument or instruments.
Proof of execution of any such instrument
or of a writing appointing any such agent
shall be sufficient for any purpose of this
Indenture and (subject to Section 6.1)
conclusive in favor of of the Indenture
Trustee and the Issuer, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any
person of any such instrument or writing
may be proved in any manner that the
Indenture Trustee deems sufficient.
(c) The ownership of Notes shall be proved by
the Note Register.
(d) Any request, demand, authorization,
direction, notice, consent, waiver or other
action by the Holder of any Notes shall
bind the Holder of every Note issued upon
the registration thereof or in exchange
therefor or in lieu thereof, in respect of
anything done, omitted or suffered to be
done by the Indenture Trustee or the Issuer
in reliance thereon, whether or not
notation of such action is made upon such
Note.
SECTION 11.4 Notices, etc., to Indenture Trustee, Issuer, Rating
Agencies and Securities Insurer. Any request, demand, authorization, direction,
notice, consent, waiver or Act of Noteholders or other documents provided or
permitted by this Indenture shall be in writing and if such request, demand,
authorization, direction, notice, consent, waiver or act of Noteholders is to
be made upon, given or furnished to or filed with:
(a) the Indenture Trustee by any Noteholder or
by the Issuer shall be sufficient for every
purpose hereunder if made, given, furnished
or filed in writing to or with the
Indenture Trustee at its Corporate Trust
Office, or
INDENTURE (SERIES 1997-1) -- PAGE 70
<PAGE> 77
(b) the Issuer by the Indenture Trustee or by
any Noteholder shall be sufficient for
every purpose hereunder if in writing and
mailed first-class, postage prepaid to the
Issuer addressed to: FIRSTPLUS Home Loan
Owner Trust 1997-1, in care of Wilmington
Trust Company, Rodney Square North, 1100
North Market Street, Wilmington, Delaware
19890, Attention: Emmett R. Harmon, or at
any other address previously furnished in
writing to the Indenture Trustee by the
Issuer or the Administrator. The Issuer
shall promptly transmit any notice received
by it from the Noteholders to the Indenture
Trustee.
Notices required to be given to the Rating Agencies by the Issuer, the
Indenture Trustee or the Owner Trustee shall be in writing, personally
delivered or mailed by certified mail, return receipt requested, to (i) in the
case of Moody's, at the following address: Moody's Investors Service, Inc.,
Residential Mortgage Monitoring Department, 99 Church Street, New York, New
York 10007, and (ii) in the case of Standard & Poor's, at the following
address: Standard & Poor's Ratings Group, 26 Broadway (15th Floor), New York,
New York 10004, Attention of Asset Backed Surveillance Department; or as to
each of the foregoing, at such other address as shall be designated by written
notice to the other parties.
Notices required to be given to the Securities Insurer by the Issuer,
the Indenture Trustee or the Owner Trustee shall be in writing, personally
delivered or mailed by certified mail, return receipt requested, to the
following address: MBIA Insurance Corporation, 113 King Street, Armonk, New
York 10504, Attention: Insured Portfolio Management - Structured Finance
(IPM-SF), or at such other address as shall be designated by written notice to
the other parties.
SECTION 11.5 Notices to Noteholders; Waiver. Where this Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner
herein provided shall conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice
may be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Noteholders when
INDENTURE (SERIES 1997-1) -- PAGE 71
<PAGE> 78
such notice is required to be given pursuant to any provision of this
Indenture, then any manner of giving such notice as shall be satisfactory to
the Indenture Trustee shall be deemed to be a sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies,
failure to give such notice shall not affect any other rights or obligations
created hereunder, and shall not under any circumstance constitute a Default or
Event of Default.
SECTION 11.6 [RESERVED].
SECTION 11.7 Conflict with Trust Indenture Act. If any provision
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this Indenture by any of the provisions of the Trust
Indenture Act, such required provision shall control.
The provisions of TIA Sections 310 through 317 that impose duties on
any person (including the provisions automatically deemed included herein
unless expressly excluded by this Indenture) are a part of and govern this
Indenture, whether or not physically contained herein.
SECTION 11.8 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 11.9 Successors and Assigns. All covenants and agreements in
this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Indenture Trustee
in this Indenture shall bind its successors, co-trustees and agents.
SECTION 11.10 Separability. In case any provision in this Indenture or
in the Notes shall be invalid, illegal or unenforceable, the validity,
legality, and enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.
SECTION 11.11 Benefits of Indenture. Nothing in this Indenture or in
the Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, and the Noteholders, and any other party
secured hereunder, and any other Person with an ownership interest in any part
of the Collateral, any benefit or any legal or equitable right, remedy or claim
under this Indenture, except that the Securities Insurer is an express third
party beneficiary to this Indenture as provided in Section 11.20.
SECTION 11.12 Legal Holidays. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
INDENTURE (SERIES 1997-1) -- PAGE 72
<PAGE> 79
SECTION 11.13 GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.14 Counterparts. This Indenture may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
SECTION 11.15 Recording of Indenture. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Indenture Trustee or any other counsel reasonably
acceptable to the Indenture Trustee) to the effect that such recording is
necessary either for the protection of the Noteholders or any other Person
secured hereunder or for the enforcement of any right or remedy granted to the
Indenture Trustee under this Indenture.
SECTION 11.16 Trust Obligation. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer, the Owner Trustee or
the Indenture Trustee on the Notes or under this Indenture or any certificate
or other writing delivered in connection herewith or therewith, against (i) the
Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any
owner of a beneficial interest in the Issuer or (iii) any partner, owner,
beneficiary, agent, officer, director, employee or agent of the Indenture
Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee
or of any successor or assign of the Indenture Trustee or the Owner Trustee in
its individual capacity, except as any such Person may have expressly agreed
(it being understood that the Indenture Trustee and the Owner Trustee have no
such obligations in their individual capacity) and except that any such
partner, owner or beneficiary shall be fully liable, to the extent provided by
applicable law, for any unpaid consideration for stock, unpaid capital
contribution or failure to pay any installment or call owing to such entity.
For all purposes of this Indenture, in the performance of any duties or
obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and
entitled to the benefits of, the terms and provisions of Article VI, VII and
VIII of the Trust Agreement.
SECTION 11.17 No Petition. The Indenture Trustee, by entering into
this Indenture, and each Noteholder, by accepting a Note, hereby covenant and
agree that they will not at any time institute against the Seller, the
Servicer, the Affiliated Holder or the Issuer, or join in any institution
against the Seller, the Servicer, the Affiliated Holder or the Issuer of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Notes, this
Indenture or any of the Basic Documents.
INDENTURE (SERIES 1997-1) -- PAGE 73
<PAGE> 80
SECTION 11.18 Inspection. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Indenture Trustee or the
Securities Insurer, during the Issuer's normal business hours, to examine all
the books of account, records, reports and other papers of the Issuer, to make
copies and extracts therefrom, to cause such books to be audited by Independent
certified public accountants, and to discuss the Issuer's affairs, finances and
accounts with the Issuer's officers, employees, and Independent certified
public accountants, all at such reasonable times and as often as may be
reasonably requested. The Indenture Trustee shall and shall cause its
representatives to hold in confidence all such information except to the extent
disclosure may be required by law (and all reasonable applications for
confidential treatment are unavailing) and except to the extent that the
Indenture Trustee may reasonably determine that such disclosure is consistent
with its obligations hereunder.
SECTION 11.19 Grant of Noteholder Rights to Securities Insurer. In
consideration for the guarantee of the Notes by the Securities Insurer pursuant
to the Guaranty Policy, the Noteholders hereby grant to the Securities Insurer
the right to act as the holder of 100% of the outstanding Notes for the purpose
of exercising the rights of the Holders of the Notes hereunder, including the
voting rights of such Holders, but excluding those rights requiring the consent
of all such Holders under Section 9.2 and any rights of such Holders to
distributions under Section 8.2 hereof; provided that the preceding grant of
rights to the Securities Insurer by the Noteholders shall be subject to Section
11.21 hereof. The rights of the Securities Insurer to direct certain actions
and consent to certain actions of the Noteholders hereunder will terminate at
such time as the Class Principal Balances of all Classes of Notes have been
reduced to zero and the Securities Insurer has been reimbursed for all
Guaranteed Payments and any other amounts owed under the Guaranty Policy and
the Insurance Agreement and the Securities Insurer has no further obligation
under the Guaranty Policy.
SECTION 11.20 Third Party Beneficiary. The parties hereto acknowledge
that the Securities Insurer is an express third party beneficiary hereof
entitled to enforce any rights reserved to it hereunder as if it were actually
a party hereto.
SECTION 11.21 Suspension and Termination of Securities Insurer's
Rights.
(a) During the continuation of a Securities Insurer Default, rights
granted or reserved to the Securities Insurer hereunder shall vest instead in
the Noteholders; provided that the Securities Insurer shall be entitled to any
distributions in reimbursement of the Securities Insurer Reimbursement Amount,
and the Securities Insurer shall retain those rights under Section 9.2 hereof
to consent to any supplement to this Indenture.
(b) At such time as either (i) the Class Principal Balances of each
Class of Notes have been reduced to zero or (ii) the Guaranty Policy has been
terminated following a Securities Insurer Default, and in either case of (i) or
(ii) the Securities Insurer has been reimbursed for all Guaranteed Payments and
any other amounts owed under the Guaranty Policy and the Insurance Agreement
(and the Securities Insurer no longer has any obligation under the Guaranty
Policy, except for breach thereof by the Securities Insurer), then the rights
and benefits granted or reserved to the Securities
INDENTURE (SERIES 1997-1) -- PAGE 74
<PAGE> 81
Insurer hereunder (including the rights to direct certain actions and receive
certain notices) shall terminate and the Noteholders shall be entitled to the
exercise of such rights and to receive such benefits of the Securities Insurer
following such termination to the extent that such rights and benefits are
applicable to the Noteholders.
INDENTURE (SERIES 1997-1) -- PAGE 75
<PAGE> 82
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused
this Indenture to be duly executed by their respective officers, thereunto duly
authorized and duly attested, all as of the day and year first above written.
FIRSTPLUS HOME LOAN OWNER TRUST 1997-1
By: Wilmington Trust Company
not in its individual capacity but
solely as Owner Trustee
By:
--------------------------------
Name:
Title:
FIRST BANK NATIONAL ASSOCIATION,
as Indenture Trustee
By:
-----------------------------------------
Name: Sheri Christopherson
Title: Vice President
INDENTURE (SERIES 1997-1) -- PAGE 76
<PAGE> 83
STATE OF NEW YORK
COUNTY OF NEW YORK
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared Bruce L. Bissen, known to me
to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of the said
WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as Owner
Trustee on behalf of FIRSTPLUS HOME LOAN OWNER TRUST 1997-1, a Delaware
business trust, and that such person executed the same as the act of said
business trust for the purpose and consideration therein expressed, and in the
capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 27th day of February,
1997.
-----------------------------------------------
Notary Public in and for the State of New York
(Seal)
My commission expires:
- --------------------------
INDENTURE (SERIES 1997-1) -- PAGE 77
<PAGE> 84
STATE OF NEW YORK
COUNTY OF NEW YORK
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared Sheri Christopherson, known
to me to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of FIRST BANK
NATIONAL ASSOCIATION, a national banking association, and that such person
executed the same as the act of said corporation for the purpose and
consideration therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 27th day of February,
1997.
-----------------------------------------------
Notary Public in and for the State of New York
(Seal)
My commission expires:
- -----------------------------
INDENTURE (SERIES 1997-1) -- PAGE 78
<PAGE> 85
SCHEDULE A
(To be Provided at the Closing and Supplemented on each Subsequent
Transfer Date on which Subsequent Home Loans are transferred to the Trust)
Available Upon Request to the Indenture Trustee
INDENTURE (SERIES 1997-1) -- PAGE 1
<PAGE> 86
EXHIBIT A-1 - Form of Class A-1 Note
INDENTURE (SERIES 1997-1) -- PAGE 2
<PAGE> 87
EXHIBIT A-2 - Form of Class A-2 Note
INDENTURE (SERIES 1997-1) -- PAGE 3
<PAGE> 88
EXHIBIT A-3 - Form of Class A-3 Note
INDENTURE (SERIES 1997-1) -- PAGE 4
<PAGE> 89
EXHIBIT A-4 - Form of Class A-4 Note
INDENTURE (SERIES 1997-1) -- PAGE 5
<PAGE> 90
EXHIBIT A-5 - Form of Class A-5 Note
INDENTURE (SERIES 1997-1) -- PAGE 6
<PAGE> 91
EXHIBIT A-6 - Form of Class A-6 Note
INDENTURE (SERIES 1997-1) -- PAGE 7
<PAGE> 92
EXHIBIT A-7 - Form of Class A-7 Note
INDENTURE (SERIES 1997-1) -- PAGE 8
<PAGE> 93
EXHIBIT A-8 - Form of Class A-8 Note
INDENTURE (SERIES 1997-1) -- PAGE 9
<PAGE> 94
SEE TAB 10
FOR FORM OF CLASS NOTES
A-1 TO A-8
<PAGE> 1
EXHIBIT 4.2
TRUST AGREEMENT
among
FIRSTPLUS INVESTMENT CORPORATION,
as Depositor,
FIRSTPLUS RESIDUAL HOLDINGS, INC.,
as the Company,
WILMINGTON TRUST COMPANY,
as Owner Trustee
and
FIRST BANK NATIONAL ASSOCIATION,
as Co-Owner Trustee
Dated as of February 1, 1997
FIRSTPLUS HOME LOAN OWNER TRUST 1997-1
Asset Backed Securities, Series 1997-1
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
DEFINITIONS
<S> <C> <C>
SECTION 1.1 Capitalized Terms...................................................................1
SECTION 1.2 Other Definitional Provisions.......................................................6
ARTICLE II
ORGANIZATION
SECTION 2.1 Name................................................................................7
SECTION 2.2 Office..............................................................................7
SECTION 2.3 Purposes and Powers.................................................................7
SECTION 2.4 Appointment of Owner Trustee........................................................8
SECTION 2.5 Initial Capital Contribution of Owner Trust Estate..................................8
SECTION 2.6 Declaration of Trust................................................................8
SECTION 2.7 Liability of the Owners.............................................................8
SECTION 2.8 Title to Trust Property.............................................................9
SECTION 2.9 Situs of Trust......................................................................9
SECTION 2.10 Representations and Warranties of the Depositor and the
Company; Covenant of the Company....................................................9
SECTION 2.11 Maintenance of the Demand Note.....................................................12
SECTION 2.12 Federal Income Tax Allocations.....................................................12
ARTICLE III
TRUST CERTIFICATES AND TRANSFER OF INTERESTS
SECTION 3.1 Initial Ownership..................................................................12
SECTION 3.2 The Trust Certificates.............................................................12
SECTION 3.3 Execution, Authentication and Delivery of Trust Certificates.......................13
SECTION 3.4 Registration of Transfer and Exchange of Trust Certificates........................13
SECTION 3.5 Mutilated, Destroyed, Lost or Stolen Trust Certificates............................14
SECTION 3.6 Persons Deemed Owners..............................................................14
SECTION 3.7 Access to List of Owners' Names and Addresses......................................15
SECTION 3.8 Maintenance of Office or Agency....................................................15
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 3.9 Appointment of Paying Agent........................................................15
SECTION 3.10 Ownership by Company of the FRH Certificates.......................................16
SECTION 3.11 Book-Entry Certificates............................................................16
SECTION 3.12 Notices to Clearing Agency.........................................................17
SECTION 3.13 Definitive Certificates............................................................17
SECTION 3.14 Restrictions on Transfer of Residual Interest Instruments..........................17
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
SECTION 4.1 Prior Notice to Owners with Respect to Certain Matters.............................20
SECTION 4.2 Action by Owners with Respect to Certain Matters...................................22
SECTION 4.3 Action by Owners with Respect to Bankruptcy........................................22
SECTION 4.4 Restrictions on Owners' Power......................................................23
SECTION 4.5 Majority Control...................................................................23
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
SECTION 5.1 Establishment of Trust Account.....................................................23
SECTION 5.2 Application Of Trust Funds.........................................................24
SECTION 5.3 Method of Payment..................................................................24
SECTION 5.4 Segregation of Moneys; No Interest.................................................24
SECTION 5.5 Accounting and Reports to the Certificateholder, Owners, the
Internal Revenue Service and Others................................................25
SECTION 5.6 Signature on Returns; Tax Matters Partner..........................................25
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
SECTION 6.1 General Authority..................................................................25
SECTION 6.2 General Duties.....................................................................26
SECTION 6.3 Action upon Instruction............................................................26
SECTION 6.4 No Duties Except as Specified in this Agreement, the Basic
Documents or in Instructions.......................................................27
SECTION 6.5 No Action Except Under Specified Documents or Instructions.........................27
SECTION 6.6 Restrictions.......................................................................27
</TABLE>
ii
<PAGE> 4
<TABLE>
ARTICLE VII
CONCERNING THE OWNER TRUSTEE
<S> <C> <C>
SECTION 7.1 Acceptance of Trusts and Duties....................................................28
SECTION 7.2 Furnishing of Documents............................................................29
SECTION 7.3 Representations and Warranties.....................................................29
SECTION 7.4 Reliance; Advice of Counsel........................................................30
SECTION 7.5 Not Acting in Individual Capacity.................................................31
SECTION 7.6 Owner Trustee Not Liable for Trust Certificates or Home Loans......................31
SECTION 7.7 Owner Trustee May Own Trust Certificates and Notes.................................31
SECTION 7.8 Licenses...........................................................................31
ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE
SECTION 8.1 Owner Trustee's Fees and Expenses..................................................32
SECTION 8.2 Indemnification....................................................................32
SECTION 8.3 Payments to the Owner Trustee......................................................32
ARTICLE IX
TERMINATION OF TRUST AGREEMENT
SECTION 9.2 Dissolution Upon Bankruptcy of the Company.........................................34
ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
SECTION 10.1 Eligibility Requirements for Owner Trustee.........................................35
SECTION 10.2 Resignation or Removal of Owner Trustee............................................35
SECTION 10.3 Successor Owner Trustee............................................................36
SECTION 10.4 Merger or Consolidation of Owner Trustee...........................................36
SECTION 10.5 Appointment of Co-Trustee or Separate Trustee......................................37
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Supplements and Amendments.........................................................38
SECTION 11.2 No Legal Title to Owner Trust Estate in Owners.....................................40
SECTION 11.3 Limitations on Rights of Others....................................................40
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
SECTION 11.4 Notices............................................................................40
SECTION 11.5 Severability.......................................................................40
SECTION 11.6 Separate Counterparts..............................................................41
SECTION 11.7 Successors and Assigns.............................................................41
SECTION 11.8 Covenants of the Company...........................................................41
SECTION 11.9 No Petition........................................................................41
SECTION 11.10 No Recourse........................................................................41
SECTION 11.11 Headings...........................................................................41
SECTION 11.12 GOVERNING LAW......................................................................42
SECTION 11.13 Certificate and Residual Interest Transfer Restrictions............................42
SECTION 11.14 Grant of Certificateholder and Residual Interest Holder Rights to
Securities Insurer.................................................................42
SECTION 11.15 Third-Party Beneficiary............................................................43
SECTION 11.16 Suspension and Termination of Securities Insurer's Rights..........................43
EXHIBIT A Form of Certificate
EXHIBIT A-2 Form of Certificate issued to the Company
EXHIBIT B Form of Residual Interest
EXHIBIT B-2 Form of Residual Interest issued to the Company
EXHIBIT C Form of Certificate of Trust
EXHIBIT D Form of Demand Note
EXHIBIT E Form of Certificate Depository Agreement
EXHIBIT F1 Form of Investment Letter
EXHIBIT F2 Form of Investment Letter
</TABLE>
iv
<PAGE> 6
TRUST AGREEMENT, dated as of February 1, 1997, among FIRSTPLUS
INVESTMENT CORPORATION, a Nevada corporation, as Depositor (the "Depositor"),
FIRSTPLUS RESIDUAL HOLDINGS, INC., a Nevada corporation (the "Company"),
WILMINGTON TRUST COMPANY, a Delaware banking corporation, as Owner Trustee (the
"Owner Trustee") and First Bank National Association, as Co-Owner Trustee (the
"Co-Owner Trustee").
ARTICLE I
DEFINITIONS
SECTION 1.1 Capitalized Terms. For all purposes of this Agreement, the
following terms shall have the meanings set forth below:
"Agreement" shall mean this Trust Agreement, as the same may be
amended and supplemented from time to time.
"Administration Agreement" shall mean the Administration Agreement,
dated as of February 1, 1997 among the Issuer, FFI, and First Bank National
Association, as Administrator.
"Administrator" shall mean First Bank National Association, or any
successor in interest thereto, in its capacity as Administrator under the
Administration Agreement.
"Basic Documents" shall mean this Agreement, the Sale and Servicing
Agreement, the Indenture, the Administration Agreement, the Insurance
Agreement, the Custodial Agreement, the Note Depository Agreement, the
Certificate Depository Agreement and the other documents and certificates
delivered in connection therewith.
"Benefit Plan" shall have the meaning assigned to such term in Section
11.13.
"Book-Entry-Certificate" shall mean a beneficial interest in the
Certificates, ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section 3.11.
"Business Trust Statute" shall mean Chapter 38 of Title 12 of I the
Delaware Code, 12 Del. Code Section 3801 et seq., as the same may be amended
from time to time.
"Certificate" shall mean a certificate (other than a Residual Interest
Instrument) evidencing the beneficial interest of an Owner in the Trust,
substantially in the form attached hereto as Exhibit A.
"Certificate Depository Agreement" shall mean the agreement among the
Trust and the DTC, dated as of the Closing Date, substantially in the form
attached hereto as Exhibit E, relating to the Certificates, as the same may be
amended and supplemented from time to time.
-1-
<PAGE> 7
"Certificate Distribution Account" shall have the meaning assigned to
such term in Section 5.1.
"Certificate of Trust" shall mean the Certificate of Trust in the form
of Exhibit C to be filed for the Trust pursuant to Section 3810(a) of the
Business Trust Statute.
"Certificate Owner" shall mean, with respect to a Book-Entry
Certificate, the Person who is the beneficial owner of such Book-Entry
Certificate, as reflected on the books of the Clearing Agency, or on the books
of a Person maintaining an account with such Clearing Agency (directly as a
Clearing Agency Participant or as an indirect participant, in each case in
accordance with the rules of such Clearing Agency).
"Certificate Register" and "Certificate Registrar" shall mean the
register mentioned and the registrar appointed pursuant to Section 3.4.
"Certificateholder" or "Holder" shall mean a Person in whose name a
Certificate is registered.
"Clearing Agency" shall mean an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" shall mean a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with
the Clearing Agency.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
Treasury Regulations promulgated thereunder.
"Corporate Trust Office" shall mean, with respect to the Owner
Trustee, the principal corporate trust office of the Owner Trustee located at
Rodney Square North, 1100 North Market Street, Wilmington, DE 19890-0001; or at
such other address in the State of Delaware as the Owner Trustee may designate
by notice to the Owners and the Company, or the principal corporate trust
office of any successor Owner Trustee (the address (which shall be in the State
of Delaware) of which the successor owner trustee will notify the Owners and
the Company).
"Demand Note" means the Demand Note dated February 27, 1997, in the
amount of $5,327,000.00 from RAC to the Company in substantially the form
attached hereto as Exhibit D.
"Definitive Certificates" means a certificated form of security that
represents a Certificate pursuant to Section 3.13 or a Residual Interest
Instrument.
"DTC" shall mean the Depository Trust Company, as the initial Clearing
Agency.
"ERISA" shall have the meaning assigned thereto in Section 11.13.
-2-
<PAGE> 8
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Expenses" shall have the meaning assigned to such term in Section 8.2.
"FFI" shall mean FIRSTPLUS FINANCIAL, INC., a Texas corporation.
"FRH Certificates" shall mean (i) the Definitive Certificate in
substantially the form attached hereto as Exhibit A-2 representing 1%
Percentage Interest of the Initial Certificate Principal Balance of the
Certificates that the Company is receiving pursuant to Section 3.10 and (ii)
the Definitive Certificate in substantially the form attached hereto as Exhibit
B-2 representing a 1% Percentage Interest in the Residual Interest that the
Company is receiving pursuant to Section 3.10.
"Indenture" shall mean the Indenture, dated as of February 1, 1997, by
and between the Issuer and the Indenture Trustee.
"Indenture Trustee" means First Bank National Association, as Indenture
Trustee under the Indenture.
"Initial Certificate Principal Balance" shall mean $39,250,000.00.
"Insolvency Event" shall have occurred with respect to the Company if:
(i) a decree or order of a court or agency or supervisory
authority having jurisdiction for the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings, or for
the winding-up or liquidation of its affairs, shall have been entered
against the Company and such decree or order shall have remained in
force, undischarged or unstayed for a period of 60 days; or
(ii) the Company shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment
of debt, marshaling of assets and liabilities or similar proceedings
of or relating to the Company or of or relating to all or
substantially all of the Company's property;
(iii) the board of the directors of the Company shall
voluntarily dissolve the Company; or
(iv) the Company shall admit in writing its inability to pay
its debts 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.
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PROVIDED HOWEVER, that the substantive consolidation of the Company with an
entity in respect of which the events described in (i) - (iv) above have
occurred shall not constitute an Insolvency Event with respect to the Company.
"Insurance Agreement" shall mean the Insurance Agreement, dated as of
February 26, 1997, among the Transferor, the Seller, the Issuer, RAC Financial
Group, Inc., the Company, the Indenture Trustee and the Securities Insurer.
"Issuer" shall mean FIRSTPLUS HOME LOAN OWNER TRUST 1997-1, the
Delaware business trust created pursuant to this Agreement.
"Non-permitted Foreign Holder" shall have the meaning set forth in
Section 3.14.
"Non-U.S. Person" shall mean an individual, corporation, partnership
or other person other than a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, or an estate or
trust that is subject to U.S. federal income tax regardless of the source of
its income.
"Owner" shall mean each Holder of a Certificate and each holder of a
Residual Interest Instrument, as applicable.
"Owner Trust Estate" shall mean the Collateral (as defined in the
Indenture), including the contribution of $1 referred to in Section 2.5 hereof.
"Owner Trustee" shall mean Wilmington Trust Company, a Delaware
banking corporation, not in its individual capacity but solely as owner trustee
under this Agreement, and any successor owner trustee hereunder.
"Paying Agent" shall mean the Co-Owner Trustee or any successor in
interest thereto or any other paying agent or co-paying agent appointed
pursuant to Section 3.9 and authorized by the Issuer to make payments to and
distributions from the Certificate Distribution Account, including payment of
principal of or interest on the Certificates on behalf of the Issuer.
"Percentage Interest" shall mean with respect to any Certificate, the
portion of the Certificates as a whole evidenced by such single Certificate,
expressed as a percentage rounded to five decimal places, equivalent to a
fraction, the numerator of which is the denomination represented by such single
Certificate and the denominator of which is the Initial Certificate Principal
Balance. With respect to each Residual Interest Instrument, the percentage
portion of all of the Residual Interest evidenced thereby as stated on the face
of such Residual Interest Instrument.
"Prospective Owner" shall have the meaning set forth in Section
3.14(a).
"RAC" shall mean RAC Financial Corporation, a Nevada corporation.
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"Rating Agency Condition" means, with respect to any action to which a
Rating Agency Condition applies, that each Rating Agency shall have been given
10 days (or such shorter period as is acceptable to each Rating Agency) prior
notice thereof and that each of the Rating Agencies shall have notified the
Seller, the Servicer, the Securities Insurer, the Owner Trustee and the Issuer
in writing that such action will not result in a reduction or withdrawal of the
then current rating of the Notes and Certificates.
"Record Date" shall mean as to each Distribution Date the last
Business Day of the month immediately preceding the month in which such
Distribution Date occurs.
"Residual Interest" shall mean the right to receive distributions of
Excess Spread, if any, and certain other funds, if any, on each Distribution
Date, pursuant to Section 5.06 of the Sale and Servicing Agreement.
"Residual Interest Instrument" shall mean an instrument substantially
in the form attached as Exhibit B hereto and evidencing the Residual Interest.
"Residual Interestholders" shall mean, initially, FFI, as holder of
99% Percentage Interest of the Residual Interest, and the Company, as holder of
1% Percentage Interest of the Residual Interest.
"Sale and Servicing Agreement" shall mean the Sale and Servicing
Agreement dated as of the date hereof, among the Trust, as Issuer, the
Depositor, as Seller, the Indenture Trustee, as Indenture Trustee and Co-Owner
Trustee and FFI, as Transferor and Servicer.
"Secretary of State" shall mean the Secretary of State of the State of
Delaware.
"Securities Insurer" shall mean MBIA Insurance Corporation.
"Securities Insurer Default" shall mean the failure of the Securities
Insurer to make payments under the Guaranty Policy, if such failure has not
been remedied with ten (10) days of notice thereof, or the entry of an order or
decree with respect to the Securities Insurer in any insolvency or bankruptcy
proceedings which remain unstayed or undischarged for 90 days.
"Treasury Regulations" shall mean regulations, including proposed or
temporary regulations, promulgated under the Code. References herein to
specific provisions of proposed or temporary regulations shall include
analogous provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trust" shall mean the trust established by this Agreement.
"Trust Certificates" shall mean the Certificates and the Residual
Interest Instruments, collectively.
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"Underwriters" shall mean those underwriters named in and parties to
the Terms Agreement dated February 21, 1997 supplemental to the Underwriting
Agreement dated as of September 24, 1996 pursuant to which the Certificates
will be offered publicly.
SECTION 1.2 Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined
herein have the meanings assigned to them in the Sale and Servicing Agreement
or, if not defined therein, in the Indenture.
(b) All terms defined in this Agreement shall have the
defined meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Agreement or in any such certificate or other document, and
accounting terms partly defined in this Agreement or in any such certificate or
other document to the extent not defined, shall have the respective meanings
given to them under generally accepted accounting principles. To the extent
that the definitions of accounting terms in this Agreement or in any such
certificate or other document are inconsistent with the meanings of such terms
under generally accepted accounting principles, the definitions contained in
this Agreement or in any such certificate or other document shall control.
(d) The words "hereof", "herein", "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement; Section and
Exhibit references contained in this Agreement are references to Sections and
Exhibits in or to this Agreement unless otherwise specified; and the term
"including" shall mean "including without limitation".
(e) The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred
to herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or
instruments) references to all attachments thereto and instruments incorporated
therein; references to a Person are also to its permitted successors and
assigns.
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ARTICLE II
ORGANIZATION
SECTION 2.1 Name. The Trust created hereby shall be known as
"FIRSTPLUS HOME LOAN OWNER TRUST 1997-1", in which name the Owner Trustee may
conduct the business of the Trust, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued.
SECTION 2.2 Office. The office of the Trust shall be in care of the
Owner Trustee at the Corporate Trust Office or at such other address in
Delaware as the Owner Trustee may designate by written notice to the Owners,
the Securities Insurer, and the Company.
SECTION 2.3 Purposes and Powers. (a) The purpose of the Trust is to
engage in the following activities:
(i) to issue the Notes pursuant to the Indenture
and the Certificates pursuant to this Agreement and to sell such Notes
and such Certificates;
(ii) with the proceeds of the sale of the Notes
and the Certificates, to fund the Pre-Funding Account, the Capitalized
Interest Account and the Reserve Account and to pay the organizational,
start-up and transactional expenses of the Trust and to pay the balance
to the Depositor and the Company, as their interests may appear
pursuant to the Sale and Servicing Agreement;
(iii) to assign, grant, transfer, pledge, mortgage
and convey the Owner Trust Estate pursuant to the Indenture and to
hold, manage and distribute to the Owners pursuant to the terms of the
Sale and Servicing Agreement any portion of the Owner Trust Estate
released from the lien of, and remitted to the Trust pursuant to, the
Indenture;
(iv) to enter into and perform its obligations
under the Basic Documents to which it is to be a party;
(v) to engage in those activities, including
entering into agreements, that are necessary, suitable or convenient
to accomplish the foregoing or are incidental thereto or connected
therewith; and
(vi) subject to compliance with the Basic Documents,
to engage in such other activities as may be required in connection
with conservation of the Owner Trust Estate and the making of
distributions to the Owners and the Noteholders.
(vii) to issue the FRH Certificates and the Residual
Interest Instrument pursuant to this Agreement.
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The Trust is hereby authorized to engage in the foregoing activities. The Trust
shall not engage in any activity other than in connection with the foregoing or
other than as required or authorized by the terms of this Agreement or the
Basic Documents.
SECTION 2.4 Appointment of Owner Trustee. The Depositor hereby
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein.
SECTION 2.5 Initial Capital Contribution of Owner Trust Estate. The
Depositor hereby sells, assigns, transfers, conveys and sets over to the Owner
Trustee, as of the date hereof, the sum of $1. The Owner Trustee hereby
acknowledges receipt in trust from the Depositor, as of the date hereof, of the
foregoing contribution, which shall constitute the initial Owner Trust Estate
and shall be deposited in the Certificate Distribution Account. The Depositor
or the Company shall pay organizational expenses of the Trust as they may arise
or shall, upon the request of the Owner Trustee, promptly reimburse the Owner
Trustee for any such expenses paid by the Owner Trustee.
SECTION 2.6 Declaration of Trust. The Owner Trustee hereby declares
that it will hold the Owner Trust Estate in trust upon and subject to the
conditions set forth herein for the use and benefit of the Owners, subject to
the obligations of the Trust under the Basic Documents. It is the intention of
the parties hereto that the Trust constitute a business trust under the
Business Trust Statute and that this Agreement constitute the governing
instrument of such business trust. It is the intention of the parties hereto
that, solely for income and franchise tax purposes, the Trust shall be treated
as a partnership, with the assets of the partnership being the Home Loans and
other assets held by the Trust, the partners of the partnership being the
holders of the Trust Certificates and the Notes being non-recourse debt of the
partnership. The parties agree that, unless otherwise required by appropriate
tax authorities, the Trust will file or cause to be filed annual or other
necessary returns, reports and other forms consistent with the characterization
of the Trust as a partnership for such tax purposes. Effective as of the date
hereof, the Owner Trustee shall have all rights, powers and duties set forth
herein and in the Business Trust Statute with respect to accomplishing the
purposes of the Trust.
SECTION 2.7 Liability of the Owners.
(a) The Company, as holder of the FRH Certificates, shall be
liable directly to and will indemnify the injured party for all losses, claims,
damages, liabilities and expenses of the Trust (including Expenses, to the
extent not paid out of the Owner Trust Estate) to the extent that the Company
would be liable if the Trust were a partnership under the Delaware Revised
Uniform Limited Partnership Act in which the Company were a general partner;
provided, however, that the Company shall not be liable for any losses incurred
by an Owner in the capacity of an investor in the Trust Certificates or a
Noteholder in the capacity of an investor in the Notes. In addition, any third
party creditors of the Trust (other than in connection with the obligations
described in the preceding sentence for which the Company shall not be liable)
shall be deemed third party beneficiaries of this paragraph and paragraph (c)
below. The obligations of the Company under this
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paragraph and paragraph (c) below shall be evidenced by the FRH Certificates
the Company is receiving pursuant to Section 3.10.
(b) No Owner, other than to the extent set forth in
paragraphs (a) and (c), shall have any personal liability for any liability or
obligation of the Trust.
(c) The Company agrees to be liable directly to and will
indemnify the injured party for all losses, claim damages, liabilities and
expenses (other than those incurred by an Owner in the capacity of an investor
in the Trust Certificates or a Noteholder in the capacity of an investor in the
Notes) arising out of or based on the arrangements pursuant to which the
amounts distributed to the Residual Interestholders are held by the Company and
the FFI, respectively, as Residual Interestholders, as though such arrangements
were partnerships under the Delaware Revised Uniform Limited Partnership Act in
which the Company were a general partner.
SECTION 2.8 Title to Trust Property.
(a) Subject to the Indenture, legal title to all the Owner
Trust Estate shall be vested at all times in the Trust as a separate legal
entity except where applicable law in any jurisdiction requires title to any
part of the Owner Trust Estate to be vested in a trustee or trustees, in which
case title shall be deemed to be vested in the Owner Trustee, the Co-Owner
Trustee and/or a separate trustee, as the case may be.
(b) The Owners shall not have legal title to any part of the
Owner Trust Estate. No transfer by operation of law or otherwise of any
interest of the Owners shall operate to terminate this Agreement or the trusts
hereunder or entitle any transferee to an accounting or to the transfer to it
of any part of the Owner Trust Estate.
SECTION 2.9 Situs of Trust. The Trust will be located and administered
in the state of Delaware. All bank accounts maintained by the Owner Trustee on
behalf of the Trust shall be located in the State of Delaware or the State of
New York, except with respect to the Co-Owner Trustee. The Trust shall not have
any employees; provided, however, that nothing herein shall restrict or
prohibit the Owner Trustee from having employees within or without the State of
Delaware. Payments will be received by the Trust only in Delaware or New York,
and payments will be made by the Trust only from Delaware or New York, except
with respect to the Co-Owner Trustee. The only office of the Trust will be at
the Corporate Trust Office in Delaware.
SECTION 2.10 Representations and Warranties of the Depositor and the
Company; Covenant of the Company.
(a) The Depositor hereby represents and warrants to the
Owner Trustee and the Securities Insurer that:
(i) The Depositor is duly organized and validly
existing as a corporation in good standing under the laws of the State
of Nevada, with power and authority to own its
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properties and to conduct its business as such properties are
currently owned and such business is presently conducted.
(ii) The Depositor is duly qualified to do business
as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals in all jurisdictions in which the
ownership or lease of property or the conduct of its business shall
require such qualifications.
(iii) The Depositor has the power and authority to
execute and deliver this Agreement and to carry out its terms; the
Depositor has full power and authority to sell and assign the property
to be sold and assigned to and deposited with the Trust and the
Depositor has duly authorized such sale and assignment and deposit to
the Trust by all necessary corporate action; and the execution,
delivery and performance of this Agreement has been duly authorized by
the Depositor by all necessary corporate action.
(iv) The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof
do not conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time)
a default under, the articles of incorporation or by-laws of the
Depositor, or any indenture, agreement or other instrument to which
the Depositor is a party or by which it is bound; nor result in the
creation or imposition of any lien upon any of its properties pursuant
to the terms of any such indenture, agreement or other instrument
(other than pursuant to the Basic Documents); nor violate any law or,
to the best of the Depositor's knowledge, any order, rule or
regulation applicable to the Depositor of any court or of any Federal
or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Depositor or its
properties.
(v) There are no proceedings or investigations
pending or notice of which has been received in writing before any
court, regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Depositor or its
properties: (i) asserting the invalidity of this Agreement, (ii)
seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or (iii) seeking any determination or
ruling that might materially and adversely affect the performance by
the Depositor of its obligations under, or the validity or
enforceability of, this Agreement.
(vi) The representations and warranties of the
Depositor in Section 3.01 of the Sale and Servicing Agreement are true
and correct.
(b) The Company hereby represents and warrants to the
Owner Trustee and the Securities Insurer that:
(i) The Company is duly organized and validly
existing as a corporation in good standing under the laws of the State
of Nevada, with power and authority to own its
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properties and to conduct its business as such properties are
currently owned and such business is presently conducted.
(ii) The Company is duly qualified to do business as
a foreign corporation in good standing, and has obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or
lease of property or the conduct of its business shall require such
qualifications.
(iii) The Company has the power and authority to
execute and deliver this Agreement and to carry out its terms; and the
execution, delivery and performance of this Agreement has been duly
authorized by the Company by all necessary corporate action.
(iv) The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof
do not conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time)
a default under, the articles of incorporation or by-laws of the
Company, or any indenture, agreement or other instrument to which the
Company is a party or by which it is bound; nor result in the creation
or imposition of any lien upon any of its properties pursuant to the
terms of any such indenture, agreement or other instrument (other than
pursuant to the Basic Documents); nor violate any law or, to the best
of the Company's knowledge, any order, rule or regulation applicable
to the Company of any court or of any Federal or state regulatory
body, administrative agency or other governmental instrumentality
having jurisdiction over the Company or its properties.
(v) There are no proceedings or investigations
pending or, to the Company's best knowledge, threatened, before any
court, regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Company or its
properties: (i) asserting the invalidity of this Agreement, (ii)
seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or (iii) seeking any determination or
ruling that might materially and adversely affect the performance by
the Company of its obligations under, or the validity or
enforceability of, this Agreement.
(vi) From the date of its incorporation until the
date of this Agreement, except with respect to obtaining an Investing
Lender Approval from the Department of Housing and Urban Development,
the Company has not conducted any business or trade, has not entered
into any contracts, written or oral, has not had any employees, has no
liabilities or creditors, and no liens or encumbrances have existed or
exist with respect to the Company or its assets, except with respect
to this Trust Agreement and any similar trust agreement that relates
to a prior issuance of "FIRST PLUS Asset Backed Securities" insured by
the Securities Insurer.
(c) The Company covenants with the Owner Trustee and the
Securities Insurer that during the continuance of this Agreement it will comply
in all respects with the provisions of its Articles of Incorporation in effect
from time to time.
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SECTION 2.11 Maintenance of the Demand Note. To the fullest extent
permitted by applicable law, the Company agrees that it shall not sell, convey,
pledge, transfer or otherwise dispose of the Demand Note. Upon maturity of the
Demand Note, the Company shall take such action as is necessary to renew the
Demand Note and to maintain the Demand Note in effect until the expiration of
this Agreement.
SECTION 2.12 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 and deduction entering into the computation thereof), shall
be allocated:
(a) among the Certificates as of the first Record Date
following the end of such month, in proportion to their ownership of principal
amount of Trust Certificates on such date, an amount of net income up to the
sum of (i) the amount distributed in respect of interest to the
Certificateholders pursuant to Section 5.06(c) of the Sale and Servicing
Agreement for such month, and (ii) the portion of the market discount on the
Home Loans accrued during such month that is allocable to the excess, if any,
of the initial aggregate principal amount of the Certificates over their
initial aggregate issue price; and
(b) to the Residual Interestholders, pro rata, to the
extent of any remaining net income.
If the net income of the Trust for any month is insufficient for the
allocations described in clause (a) above, subsequent net income shall first be
allocated to make up such shortfall before being allocated as provided in the
preceding sentence. Net losses of the Trust, if any, for any month, as
determined for Federal income tax purposes (and each item of income, gain, loss
and deduction entering into the computation thereof), shall be allocated to the
Residual Interestholders to the extent the Residual Interestholders are
reasonably expected to bear the economic burden of such net losses, and any
remaining net losses shall be allocated among the Certificates as of the first
Record Date following the end of such month in proportion to their ownership of
principal amount of Trust certificates on such Record Date. Any indebtedness
allocated pursuant to Treasury Regulation ss. 1.752 - 3(a)(3) shall be
allocated to the Residual Interest.
ARTICLE III
TRUST CERTIFICATES AND TRANSFER OF INTERESTS
SECTION 3.1 Initial Ownership. Upon the formation of the Trust by the
contribution by the Depositor pursuant to Section 2.5 and until the issuance of
the Trust Certificates, the Depositor shall be the sole Owner of the Trust.
SECTION 3.2 The Trust Certificates. The Certificates (other than the
Residual Interest) shall be issued in minimum denominations of $100,000 and in
integral multiples of $500 in excess
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thereof; provided, however, the FRH Certificates issued to the Company pursuant
to Section 3.10 may be issued in a lesser denomination. Upon the issuance of
the Trust Certificates, the Company will be issued the FRH Certificates. The
Residual Interest shall not be issued with a principal amount. The Trust
Certificates shall be executed on behalf of the Trust by manual or facsimile
signature of a Trust Officer of the Owner Trustee. Trust Certificates bearing
the manual or facsimile signatures of individuals who were, at the time when
such signatures shall have been affixed, authorized to sign on behalf of the
Trust, shall be valid and binding obligations of the Trust, notwithstanding
that such individuals or any of them shall have ceased to be so authorized
prior to the authentication and delivery of such Trust Certificates or did not
hold such offices at the date of authentication and delivery of such Trust
Certificates.
A transferee of a Trust Certificate shall become an Owner, and shall
be entitled to the rights and subject to the obligations of an Owner hereunder
and under the Sale and Servicing Agreement, upon such transferee's acceptance
of a Trust Certificate duly registered in such transferee's name pursuant to
Section 3.4.
SECTION 3.3 Execution, Authentication and Delivery of Trust
Certificates. Concurrently with the initial sale of the Home Loans to the Trust
pursuant to the Sale and Servicing Agreement, the Owner Trustee shall cause the
Certificates, in an aggregate principal amount equal to the Initial Certificate
Principal Balance, and the Residual Interest Instruments representing 100% of
the Percentage Interests of the Residual Interest to be executed on behalf of
the Trust, authenticated and delivered to or upon the written order of the
Depositor, signed by its chairman of the board, its president or any vice
president, without further corporate action by the Depositor, in authorized
denominations. No Trust Certificate shall entitle its holder to any benefit
under this Agreement, or shall be valid for any purpose, unless there shall
appear on such Trust Certificate a certificate of authentication substantially
in the form set forth in Exhibit A and B, executed by the Owner Trustee or the
Administrator, as the Owner Trustee's authenticating agent, by manual or
facsimile signature; such authentication shall constitute conclusive evidence
that such Trust Certificate shall have been duly authenticated and delivered
hereunder. All Trust Certificates shall be dated the date of their
authentication.
SECTION 3.4 Registration of Transfer and Exchange of Trust
Certificates. The Certificate Registrar shall keep or cause to be kept, at the
office or agency maintained pursuant to Section 3.8, a Certificate Register in
which, subject to such reasonable regulations as it may prescribe, the Owner
Trustee shall provide for the registration of Trust Certificates and of
transfers and exchanges of Trust Certificates as herein provided. The
Administrator shall be the initial Certificate Registrar.
Upon surrender for registration of transfer of any Trust Certificate
at the office or agency maintained pursuant to Section 3.8, the Owner Trustee
shall execute, authenticate and deliver (or shall cause the Administrator as
its authenticating agent to authenticate and deliver), in the name of the
designated transferee or transferees, one or more new Trust Certificates in
authorized denominations of a like aggregate amount dated the date of
authentication by the Owner Trustee or any authenticating agent. At the option
of an Owner, Trust Certificates may be exchanged for other
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Trust Certificates of authorized denominations of a like aggregate amount upon
surrender of the Trust Certificates to be exchanged at the office or agency
maintained pursuant to Section 3.8.
Every Trust Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer
in form satisfactory to the Owner Trustee and the Certificate Registrar duly
executed by the Owner or his attorney duly authorized in writing. In addition,
each Residual Interest Instrument presented or surrendered for registration of
transfer and exchange must be accompanied by a letter from the Prospective
Owner certifying as to the representations set forth in Section 3.14(a) and
(b). Each Trust Certificate surrendered for registration of transfer or
exchange shall be canceled disposed of by the Owner Trustee in accordance with
its customary practice.
No service charge shall be made for any registration of transfer or
exchange of Trust Certificates, but the Owner Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Trust Certificates.
The preceding provisions of this Section notwithstanding, the Owner
Trustee shall not make and the Certificate Registrar shall not register
transfer or exchanges of Trust Certificates for a period of 15 days preceding
the due date for any payment with respect to the Trust Certificates.
SECTION 3.5 Mutilated, Destroyed, Lost or Stolen Trust Certificates.
If (a) any mutilated Trust Certificate shall be surrendered to the Certificate
Registrar, or if the Certificate Registrar shall receive evidence to its
satisfaction of the destruction, loss or theft of any Trust Certificate and (b)
there shall be delivered to the Certificate Registrar and the Owner Trustee
such security or indemnity as may be required by them to save each of them
harmless, then in the absence of notice that such Trust Certificate shall have
been acquired by a bona fide purchaser, the Owner Trustee on behalf of the
Trust shall execute and the Owner Trustee, or the Administrator as the Owner
Trustee's authenticating agent, shall authenticate and deliver, in exchange for
or in lieu of any such mutilated, destroyed, lost or stolen Trust Certificate,
a new Trust Certificate of like tenor and denomination. In connection with the
issuance of any new Trust Certificate under this Section, the Owner 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 connection
therewith. Any duplicate Trust Certificate issued pursuant to this Section
shall constitute conclusive evidence of ownership in the Trust, as if
originally issued, whether or not the lost, stolen or destroyed Trust
Certificate shall be found at any time.
SECTION 3.6 Persons Deemed Owners. Prior to due presentation of a
Trust Certificate for registration of transfer, the Owner Trustee or the
Certificate Registrar may treat the Person in whose name any Trust Certificate
shall be registered in the Certificate Register as the owner of such Trust
Certificate for the purpose of receiving distributions pursuant to Section 5.2
and for all other purposes whatsoever, and neither the owner Trustee nor the
Certificate Registrar shall be bound by any notice to the contrary.
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SECTION 3.7 Access to List of Owners' Names and Addresses. The Owner
Trustee shall furnish or cause to be furnished to the Servicer and the
Depositor, within 15 days after receipt by the Owner Trustee of a request
therefor from the Servicer, the Depositor or the Indenture Trustee in writing,
a list, in such form as the Servicer, the Depositor or the Indenture Trustee
may reasonably require, of the names and addresses of the Owners as of the most
recent Record Date. If three or more Certificateholders or one or more Holders
of Certificates together evidencing not less than 25% of the Certificate
Principal Balance apply in writing to the Owner Trustee, and such application
states that the applicants desire to communicate with other Certificateholders
with respect to their rights under this Agreement or under the Certificates and
such application is accompanied by a copy of the communication that such
applicants propose to transmit, then the Owner Trustee shall, within five
Business Days after the receipt of such application, afford such applicants
access during normal business hours to the current list of Certificateholders.
Each Owner, by receiving and holding a Trust Certificate, shall be deemed to
have agreed not to hold any of the Depositor, the Company, the Certificate
Registrar or the Owner Trustee accountable by reason of the disclosure of its
name and address, regardless of the source from which such information was
derived.
SECTION 3.8 Maintenance of Office or Agency. The Owner Trustee shall
maintain in the Borough of Manhattan, The City of New York, an office or
offices or agency or agencies where Trust Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Owner Trustee in respect of the Trust Certificates and the Basic Documents
may be served. The Owner Trustee initially designates the Administrator's
office in New York as its principal corporate trust office for such purposes.
The Owner Trustee shall give prompt written notice to the Company and to the
Certificateholders of any change in the location of the Certificate Register or
any such office or agency.
SECTION 3.9 Appointment of Paying Agent. The Owner Trustee hereby
appoints the Co- Owner Trustee as Paying Agent under this Agreement. The Paying
Agent shall make distributions to Certificateholders from the Certificate
Distribution Account pursuant to Section 5.2 hereof and Section 5.06 of the
Sale and Servicing Agreement and shall report the amounts of such distributions
to the Owner Trustee. The Paying Agent shall have the revocable power to
withdraw funds from the Certificate Distribution Account for the purpose of
making the distributions referred to above. In the event that the Co-Owner
Trustee shall no longer be the Paying Agent hereunder, the Owner Trustee shall
appoint a successor to act as Paying Agent (which shall be a bank or trust
company) acceptable to the Securities Insurer. The Owner Trustee shall cause
such successor Paying Agent or any additional Paying Agent appointed by the
Owner Trustee to execute and deliver to the Owner Trustee an instrument in
which such successor Paying Agent or additional Paying Agent shall agree with
the Owner Trustee that as Paying Agent, such successor Paying Agent or
additional Paying Agent will hold all sums, if any, held by it for payment to
the Owners in trust for the benefit of the Certificateholders entitled thereto
until such sums shall be paid to such Owners. The Paying Agent shall return all
unclaimed funds to the Owner Trustee, and upon removal of a Paying Agent, such
Paying Agent shall also return all funds in its possession to the Owner
Trustee. The provisions of Sections 7.1, 7.3, 7.4 and 8.1 shall apply to the
Co-Owner Trustee also in its role as Paying Agent, for so long as the Co-Owner
Trustee shall act as Paying Agent and, to the extent applicable, to any other
paying agent appointed hereunder. Any reference in this Agreement to the Paying
Agent shall
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include any co-paying agent unless the context requires otherwise.
Notwithstanding anything herein to the contrary, the Co-Owner Trustee and the
Paying Agent shall be the same entity as the Indenture Trustee under the
Indenture and the Sale and Servicing Agreement, unless a Securities Insurer
Default has occurred and is continuing. In such event, the Co-Owner Trustee and
the Paying Agent shall resign and the Owner Trustee shall assume the duties and
obligations of the Co-Owner Trustee and the Paying Agent hereunder and under
the Sale and Servicing Agreement. In addition, in such event, the Indenture
Trustee shall agree to continue to make claims under the Guaranty Policy on
behalf of the Owner Trustee for the benefit of the Certificateholders pursuant
to the Sale and Servicing Agreement.
SECTION 3.10 Ownership by Company of the FRH Certificates. On the
Closing Date, the Company shall receive from the Trust and thereafter shall
retain beneficial and record ownership of the FRH Certificates representing at
least a 1% Percentage Interest of the Initial Certificate Principal Balance and
at least a 1% Percentage Interest of the Residual Interest. The FRH
Certificates shall be non-transferable. Any attempted transfer of any FRH
Certificates shall be null and void. The Owner Trustee shall cause any FRH
Certificate issued to the Company to contain a legend substantially to such
effect.
SECTION 3.11 Book-Entry Certificates. The Certificates, upon original
issuance, will be issued in the form of a typewritten Certificate or
Certificates representing Book-Entry Certificates, to be delivered to The
Depository Trust Company, the initial Clearing Agency, by, or on behalf of, the
Trust; provided, however, that one Definitive Certificate (the Residual
Interest Instrument constituting one of the FRH Certificates) may be issued to
the Company pursuant to Section 3.10. Such Certificate or Certificates shall
initially be registered on the Certificate Register in the name of Cede & Co.,
the nominee of the initial Clearing Agency, and no Certificate Owner will
receive a definitive Certificate representing such Certificate Owners' interest
in such Certificate, except as provided in this Section 3.11 and in Section
3.13. Unless and until Definitive Certificates, fully registered, have been
issued to Certificate Owners pursuant to Section 3.13:
(i) the provisions of this Section shall be in
full force and effect;
(ii) the Certificate Registrar and the Owner
Trustee shall be entitled to deal with the Clearing Agency for all
purposes of this Agreement (including the payment of principal of and
interest on the Certificates and the giving of instructions or
directions hereunder) as the sole Holder of the Certificates and shall
have no obligation to the Certificate Owners;
(iii) to the extent that the provisions of this
Section conflict with any other provisions of this Agreement, the
provisions of this Section shall control;
(iv) the rights of Certificate Owners shall be
exercised only through the Clearing Agency and shall be limited to
those established by law and agreements between such Certificate
Owners and the Clearing Agency and/or the Clearing Agency
Participants. Pursuant to the Certificate Depository Agreement, unless
and until Definitive Certificates
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are issued pursuant to Section 3.13, the initial Clearing Agency will
make book-entry transfers among the Clearing Agency Participants and
receive and transmit payments of principal of and interest on the
Certificates to such Clearing Agency Participants; and
(v) whenever this Agreement requires or permits
actions to be taken based upon instructions or directions of Holders
of Certificates evidencing a specified percentage of the Certificate
Principal Balance, the Clearing Agency shall be deemed to represent
such percentage only to the extent that it has received instructions
to such effect from Certificate Owners and/or Clearing Agency
Participants owning or representing, respectively, such required
percentage of the beneficial interest in the Certificates and has
delivered such instructions to the Owner Trustee.
SECTION 3.12 Notices to Clearing Agency. Whenever a notice or other
communication to the Certificateholders is required under this Agreement,
unless and until Definitive Certificates shall have been issued to Certificate
Owners pursuant to Section 3.13, the Owner Trustee shall give all such notices
and communications specified herein to be given to Certificateholders to the
Clearing Agency, and shall have no obligations to the Certificate Owners.
SECTION 3.13 Definitive Certificates. If (i) the Administrator advises
the Owner Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities with respect to the
Certificates, and the Administrator is unable to locate a qualified successor,
(ii) the Administrator at its option advises the Owner Trustee in writing that
it elects to terminate the book-entry system through the Clearing Agency or
(iii) after the occurrence of an Event of Default, Certificate Owners
representing beneficial interests aggregating at least 50% of the Certificate
Principal Balance advise the Clearing Agency in writing that the continuation
of a book-entry system through the Clearing Agency is no longer in the best
interest of the Certificate Owners, then the Clearing Agency shall notify all
Certificate Owners, the Securities Insurer and the Owner Trustee of the
occurrence of any such event and of the availability of the Definitive
Certificates to Certificate Owners requesting the same. Upon surrender to the
Owner Trustee of the typewritten Certificate or Certificates representing the
Book-Entry Certificates by the Clearing Agency, accompanied by registration
instructions the Owner Trustee shall execute and authenticate the Definitive
Certificates in accordance with the instructions of the Clearing Agency.
Neither the Certificate Registrar nor the Owner 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, the Owner Trustee shall recognize the Holders of the Definitive
Certificates as Certificateholders. The Definitive Certificates shall be
printed, lithographed or engraved or may be produced in any other manner as is
reasonably acceptable to the Owner Trustee, as evidenced by its execution
thereof.
SECTION 3.14 Restrictions on Transfer of Residual Interest
Instruments.
(a) Each prospective purchaser and any subsequent
transferee of a Residual Interest Instrument (each, a "Prospective
Owner"), other than FFI or the Company, shall
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represent and warrant, in writing, to the Owner Trustee and the
Certificate Registrar and any of their respective successors that:
(i) Such Person is (A) a "qualified institutional
buyer" as defined in Rule 144A under the Securities Act of
1933, as amended (the "Securities Act"), and is aware that
the seller of the Residual Interest Instrument may be relying
on the exemption from the registration requirements of the
Securities Act provided by Rule 144A and is acquiring such
Residual Interest Instrument for its own account or for the
account of one or more qualified institutional buyers for
whom it is authorized to act, or (B) a Person involved in the
organization or operation of the Trust or an affiliate of
such Person within the meaning of Rule 3a-7 of the Investment
Company Act of 1940, as amended (including, but not limited
to, the Transferor or the Company).
(ii) Such Person understands that the Residual
Interest Instruments have not been and will not be registered
under the Securities Act and may be offered, sold, pledged or
otherwise transferred only to a person whom the seller
reasonably believes is (A) a qualified institutional buyer or
(B) a Person involved in the organization or operation of the
Trust or an affiliate of such Person, in a transaction
meeting the requirements of Rule 144A under the Securities
Act and in accordance with any applicable securities laws of
any state of the United States.
(iii) Such Person understands that the Residual
Interest Instruments bear a legend to the following effect:
"THE RESIDUAL INTEREST IN THE TRUST REPRESENTED BY
THIS RESIDUAL INTEREST INSTRUMENT HAS NOT BEEN AND
WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS. THIS RESIDUAL INTEREST MAY BE
DIRECTLY OR INDIRECTLY OFFERED OR SOLD OR
OTHERWISE DISPOSED OF (INCLUDING PLEDGED) BY THE
HOLDER HEREOF ONLY TO (I) A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER
THE ACT, IN A TRANSACTION THAT IS REGISTERED UNDER
THE ACT AND APPLICABLE STATE SECURITIES LAWS OR
THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS
OF THE ACT PURSUANT TO RULE 144A OR (II) A PERSON
INVOLVED IN THE ORGANIZATION OR OPERATION OF THE
TRUST OR AN AFFILIATE OF SUCH A PERSON WITHIN THE
MEANING OF RULE 3a-7 OF THE INVESTMENT COMPANY ACT
OF 1940, AS AMENDED (INCLUDING, BUT NOT LIMITED
TO, FIRSTPLUS
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RESIDUAL HOLDINGS, INC. AND FIRSTPLUS FINANCIAL,
INC. ) IN A TRANSACTION THAT IS REGISTERED UNDER
THE ACT AND APPLICABLE STATE SECURITIES LAWS
OR THAT IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND SUCH LAWS. NO
PERSON IS OBLIGATED TO REGISTER THIS RESIDUAL
INTEREST UNDER THE ACT OR ANY STATE SECURITIES
LAWS. "
(iv) Such Person shall comply with the provisions
of Section 3.14(b), as applicable, relating to the ERISA
restrictions with respect to the acceptance or acquisition of
such Residual Interest Instrument.
(b) Each Prospective Owner, other than FFI or the
Company, shall either:
(i) represent and warrant, in writing, to the
Owner Trustee and the Certificate Registrar and any of their
respective successors that (1) the Prospective Owner is not
an "employee benefit plan" within the meaning of Section 3(3)
of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or a "plan" within the meaning of Section
4975(e)(1) of the Code (any such plan or employee benefit
plan, a "Plan") and is not directly or indirectly purchasing
such Residual Interest Instrument on behalf of, as investment
manager of, as named fiduciary of, as trustee of, or with
assets of a Plan, or (2) either (I) the Prospective Owner is
acquiring such Residual Interest Instrument for its own
account and no part of the assets used to acquire such
Residual Interest Instrument constitute assets of a Plan, or
(II) the source of funds to be used to acquire such Residual
Interest Instrument is an "insurance company general
account," within the meaning of Prohibited Transaction Class
Exemption 95-60,60 Fed. Reg. 35925 (July 12, 1995) (the
"Exemption"), and there is no Plan with respect to which the
amount of such general account's reserves for the contract(s)
held by or on behalf of such Plan (determined under Section
807(d) of the Code), together with the amount of the reserves
of the contract(s) held by or on behalf of any other Plans
(determined under Section 807(d) of the Code) maintained by
the same employer (or an affiliate thereof as defined in
Section V(a)(1) of the Exemption) or by the same employee
organization, exceed 10% of the total of all liabilities of
such general account; or
(ii) furnish to the Owner Trustee and the
Certificate Registrar and any of their respective successors
an opinion of counsel acceptable to such persons that (A) the
proposed issuance or transfer of the Residual Interest
Instrument to such Prospective Owner will not cause any
assets of the Trust to be deemed assets of a Plan, or (B) the
proposed issuance or transfer of the Residual Interest
Instrument will not cause the Owner Trustee or the
Certificate Registrar or any of their respective successors
to be a fiduciary of a Plan within the meaning of Section
3(21) of ERISA and will not give rise to a transaction
described in Section 406 of ERISA or Section
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4975(c)(1) of the Code for which a statutory or administrative
exemption is unavailable.
(c) By its acceptance of a Residual Interest Instrument,
each Prospective Owner agrees and acknowledges that no legal or
beneficial interest in all or any portion of any Residual Interest
Instrument may be transferred directly or indirectly to (i) an entity
that holds residual securities as nominee to facilitate the clearance
and settlement of such securities through electronic book-entry
changes in accounts of participating organizations (a "Book-Entry
Nominee"), or (ii) an individual, corporation, partnership or other
person unless such transferee is not a Non-U.S. Person (any such
person being referred to herein as a "Non-permitted Foreign Holder"),
and any such purported transfer shall be void and have no effect.
(d) Subject to paragraph (f) below, the Trustee shall not
execute, and shall not countersign and deliver, a Residual Interest
Instrument in connection with any transfer thereof unless the
transferor shall have provided to the Trustee a certificate,
substantially in the form attached as Exhibit F1 to this Agreement,
signed by the transferee, a Book-Entry Nominee or a Non-permitted
Foreign Holder, which certificate shall contain the consent of the
transferee to any amendments of this Agreement as may be required to
effectuate further the foregoing restrictions on transfer of the
Residual Interest Instruments to Book-Entry Nominees or Non-permitted
Foreign Holders, and an agreement by the transferee that it will not
transfer a Residual Interest Instrument without providing to the
Trustee a certificate substantially in the from attached as Exhibit F1
to this Agreement.
(e) The Residual Interest Instruments shall bear an
additional legend referring to the restrictions contained in
paragraphs (b) and (c) above.
(f) Notwithstanding paragraph (d) above, in the event that
FIRSTPLUS FINANCIAL, INC. pledges, mortgages, assigns or otherwise
grants any security interest in the Residual Interest to any person
(each, a "Pledgee"), the Trustee may execute, countersign and deliver
a Residual Interest Instrument to such Pledgee, provided that such
Pledgee shall have delivered to the Trustee a Certificate signed on
behalf of the Pledgee substantially in the form attached as Exhibit F2
to this Agreement.
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
SECTION 4.1 Prior Notice to Owners with Respect to Certain Matters.
With respect to the following matters, the Owner Trustee shall not take action,
and the Owners shall not direct the Owner Trustee to take any action, unless at
least 30 days before the taking of such action, the Owner Trustee shall have
notified the Owners and the Securities Insurer in writing of the proposed
action and the Owners and/or the Securities Insurer shall not have notified the
Owner Trustee in writing prior to the 30th day after such notice is given that
such Owners and/or the Securities Insurer have withheld consent or the Owners
have provided alternative direction (any direction by the Owners shall require
the prior consent of the Securities Insurer):
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(a) the initiation of any claim or lawsuit by the Trust
(except claims or lawsuits brought in connection with the collection of the
Home Loans) and the compromise of any action, claim or lawsuit brought by or
against the Trust (except with respect to the aforementioned claims or lawsuits
for collection of the Home Loans);
(b) the election by the Trust to file an amendment to the
Certificate of Trust (unless such amendment is required to be filed under the
Business Trust Statute);
(c) the amendment or other change to this Agreement or
any Basic Document in circumstances where the consent of any Noteholder or the
Securities Insurer is required;
(d) the amendment or other change to this Agreement or
any Basic Document in circumstances where the consent of any Noteholder or the
Securities Insurer is not required and such amendment materially adversely
affects the interest of the Owners;
(e) the appointment pursuant to the Indenture of a
successor Note Registrar, Paying Agent or Indenture Trustee or pursuant to this
Agreement of a successor Certificate Registrar, or the consent to the
assignment by the Note Registrar, Paying Agent or Indenture Trustee or
Certificate Registrar of its obligations under the Indenture or this Agreement,
as applicable.
(f) the consent to the calling or waiver of any default
of any Basic Document;
(g) the consent to the assignment by the Indenture
Trustee or Servicer of their respective obligations under any Basic Document;
(h) except as provided in Article IX hereof, dissolve,
terminate or liquidate the Trust in whole or in part;
(i) merge or consolidate the Trust with or into any other
entity, or convey or transfer all or substantially all of the Trust's assets to
any other entity;
(j) cause the Trust to incur, assume or guaranty any
indebtedness other than as set forth in this Agreement;
(k) do any act that conflicts with any other Basic
Document;
(l) do any act which would make it impossible to carry on
the ordinary business of the Trust as described in Section 2.13 hereof;
(m) confess a judgment against the Trust;
(n) possess Trust assets, or assign the Trust's right to
property, for other than a Trust purpose;
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(o) cause the Trust to lend any funds to any entity; or
(p) change the Trust's purpose and powers from those set
forth in this Trust Agreement.
In addition the Trust shall not commingle its assets with those of any
other entity. The Trust shall maintain its financial and accounting books and
records separate from those of any other entity. Except as expressly set forth
herein, the Trust shall pay its indebtedness, operating expenses from its own
funds, and the Trust shall not pay the indebtedness, operating expenses and
liabilities of any other entity. The Trust shall maintain appropriate minutes
or other records of all appropriate actions and shall maintain its office
separate from the offices of the Company, the Depositor, FFI and RAC.
The Owner Trustee shall not have the power, except upon the direction
of the Owners with the consent of the Securities Insurer, and to the extent
otherwise consistent with the Transaction Documents, to (i) remove or replace
the Servicer or the Indenture Trustee, (ii) institute proceedings to have the
Trust declared or adjudicated a bankruptcy or insolvent, (iii) consent to the
institution of bankruptcy or insolvency proceedings against the Trust, (iv)
file a petition or consent to a petition seeking reorganization or relief on
behalf of the Trust under any applicable federal or state law relating to
bankruptcy, (v) consent to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or any similar official) of the Trust or a substantial
portion of the property of the Trust, (vi) make any assignment for the benefit
of the Trust's creditors, (vii) cause the Trust to admit in writing its
inability to pay its debts generally as they become due, (viii) take any
action, or cause the Trust to take any action, in furtherance of any of the
foregoing (any of the above, a "Bankruptcy Action"). So long as the Indenture
and the Insurance Agreement remain in effect and no Securities Insurer Default
exists, no Certificateholder shall have the power to take, and shall not take,
any Bankruptcy Action with respect to the Trust or the Company or direct the
Owner Trustee to take any Bankruptcy Action with respect to the Trust or the
Company.
SECTION 4.2 Action by Owners with Respect to Certain Matters. The
Owner Trustee shall not have the power, except upon the direction of the Owners
and the consent of the Securities Insurer, to (a) remove the Administrator
under the Administration Agreement pursuant to Section 8 thereof, (b) appoint a
successor Administrator pursuant to Section 8 of the Administration Agreement,
(c) remove the Servicer under the Sale and Servicing Agreement pursuant to
Section 10.01 thereof or (d) sell the Home Loans after the termination of the
Indenture. The Owner Trustee shall take the actions referred to in the
preceding sentence only upon written instructions signed by the Owners and only
after obtaining the consent of the Securities Insurer.
SECTION 4.3 Action by Owners with Respect to Bankruptcy. The Owner
Trustee shall not have the power to commence a voluntary proceeding in
bankruptcy relating to the Trust without the consent and approval of the
Securities Insurer, the unanimous prior approval of all Owners and the
Securities Insurer and the delivery to the Owner Trustee by each such Owner of
a certificate certifying that such Owner reasonably believes that the Trust is
insolvent.
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SECTION 4.4 Restrictions on Owners' Power. The Owners shall not direct
the Owner Trustee to take or refrain from taking any action if such action or
inaction would be contrary to any obligation of the Trust or the Owner Trustee
under this Agreement or any of the Basic Documents or would be contrary to
Section 2.3 nor shall the Owner Trustee be obligated to follow any such
direction, if given.
SECTION 4.5 Majority Control. Except as expressly provided herein, any
action that may be taken by the Owners under this Agreement may be taken by the
Holders of Certificates evidencing more than 50% of the Certificate Principal
Balance and holders of Residual Interest evidencing more than 50% of the
Percentage Interest in the Residual Interest. Except as expressly provided
herein, any written notice of the Owners delivered pursuant to this Agreement
shall be effective if signed by Holders of Certificates evidencing more than
50% of the Certificate Balance and holders of Residual Interest evidencing more
than 50% of the Percentage Interest in the Residual Interest at the time of the
delivery of such notice.
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
SECTION 5.1 Establishment of Trust Account. The Owner Trustee shall
cause the Servicer, for the benefit of the Owners, to establish and maintain
with First Bank National Association for the benefit of the Owner Trustee or
Co-Owner Trustee one or more Eligible Accounts which while the Co-Owner Trustee
holds such Trust Account shall be entitled "CERTIFICATE DISTRIBUTION ACCOUNT,
FIRST BANK NATIONAL ASSOCIATION, AS CO-OWNER TRUSTEE, IN TRUST FOR THE
FIRSTPLUS ASSET BACKED SECURITIES, SERIES 1997-1". Funds shall be deposited in
the Certificate Distribution Account as required by the Sale and Servicing
Agreement.
All of the right, title and interest of the Co-Owner Trustee or Owner
Trustee in all funds on deposit from time to time in the Certificate
Distribution Account and in all proceeds thereof shall be held for the benefit
of the Owners, the Securities Insurer and such other persons entitled to
distributions therefrom. Except as otherwise expressly provided herein or in
the Sale and Servicing Agreement, the Certificate Distribution Account shall be
under the sole dominion and control of the Owner Trustee or Co-Owner Trustee
for the benefit of the Owners, the Securities Insurer and the Servicer.
In addition to the foregoing, the Certificate Distribution Account is
a Trust Account under the Sale and Servicing Agreement and constitutes part of
the Trust Estate pledged by the Trust to the Indenture Trustee under the
Indenture. The Certificate Distribution Account shall be subject to and
established and maintained in accordance with the applicable provisions of the
Sale and Servicing Agreement and the Indenture, including, without limitation,
the provisions of Section 5.06(c) of the Sale and Servicing Agreement regarding
distributions from the Certificate Distribution Account.
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The Company by virtue of its acceptance of the FRH Certificates,
agrees to direct and shall have the sole authority to direct the Owner Trustee
or Co-Owner Trustee, or their successor in interest, as to the Permitted
Investments in which the funds on deposit in the Trust Accounts (as such term
is defined in the Sale and Servicing Agreement) may be invested.
SECTION 5.2 Application Of Trust Funds.
(a) On each Distribution Date, the Owner Trustee or Co-Owner
Trustee shall direct the Paying Agent to distribute to the Certificateholders,
the Securities Insurer, the Servicer and the Residual Certificateholders from
amounts on deposit in the Certificate Distribution Account the distributions as
provided in Section 5.06 of the Sale and Servicing Agreement with respect to
such Distribution Date.
(b) On each Distribution Date, the Owner Trustee shall cause
the Paying Agent to send to the DTC and each Residual Interestholder the
statement provided to the Owner Trustee by the Servicer pursuant to Section
6.01 of the Sale and Servicing Agreement with respect to such Distribution
Date.
(c) In the event that any withholding tax is imposed on the
Trust's payment (or allocations of income) to an owner, such tax shall reduce
the amount otherwise distributable to the Owner in accordance with this
Section. The Owner Trustee is hereby authorized and directed to retain from
amounts otherwise distributable to the Owners sufficient funds for the payment
of any tax that is legally owed by the Trust (but such authorization shall not
prevent the Owner Trustee from contesting any such tax in appropriate
proceedings, and withholding payment of such tax, if permitted by law, pending
the outcome of such proceedings). The amount of any withholding tax imposed
with respect to an Owner shall be treated as cash distributed to such Owner at
the time it is withheld by the Trust and remitted to the appropriate taxing
authority. If there is a possibility that withholding tax is payable with
respect to a distribution (such as a distribution to a non-U.S. Owner), the
Owner Trustee may in its sole discretion withhold such amounts in accordance
with this paragraph (c). In the event that an Owner wishes to apply for a
refund of any such withholding tax, the Owner Trustee shall reasonably
cooperate with such owner in making such claim so long as such Owner agrees to
reimburse the Owner Trustee for any out-of-pocket expenses incurred.
SECTION 5.3 Method of Payment. Subject to Section 3.11, distributions
required to be made to Owners on any Distribution Date shall be made to each
Owner of record on the preceding Record Date either by wire transfer, in
immediately available funds, to the account of such Holder at a bank or other
entity having appropriate facilities therefor, if such Owner shall have
provided to the Certificate Registrar appropriate written instructions at least
five Business Days prior to such Distribution Date and such Holder's
Certificates in the aggregate evidence a denomination of not less than
$1,000,000, or, if not, by check mailed to such Owner at the address of such
holder appearing in the Certificate Register.
SECTION 5.4 Segregation of Moneys; No Interest. Subject to Sections
4.1 and 5.2, moneys received by the Owner Trustee hereunder and deposited into
the Certificate Distribution Account
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will be segregated except to the extent required otherwise by law or the Sale
and Servicing Agreement and shall be invested in Permitted Investments at the
direction of the Company. The Owner Trustee shall not be liable for payment of
any interest in respect of such moneys.
SECTION 5.5 Accounting and Reports to the Certificateholder, Owners,
the Internal Revenue Service and Others. The Owner Trustee shall (a) maintain
(or cause to be maintained) the books of the Trust on a calendar year basis on
the accrual method of accounting, and such books shall be maintained separate
from those of any other entity and reflect the separate interest of the Trust,
(b) deliver to each Owner, as may be required by the Code and applicable
Treasury Regulations, such information as may be required (including Schedule
K-1) to enable each Owner to prepare its federal and state income tax returns,
(c) file such tax relating to the Trust (including a partnership information
return, IRS Form 1065), and make such elections as may from time to time be
required or appropriate under any applicable state or Federal statute or rule
or regulation thereunder so as to maintain the Trust's characterization as a
partnership for Federal income tax purposes, (d) cause such tax returns to be
signed in the manner required by law and (e) collect or cause to be collected
any withholding tax as described in and in accordance with Section 5.2(c) with
respect to income or distributions to Owners. The Owner Trustee shall elect
under Section 1278 of the Code to include in income currently any market
discount that accrues with respect to the Home Loans. The Owner Trustee shall
not make the election provided under Section 754 of the Code.
SECTION 5.6 Signature on Returns; Tax Matters Partner.
(a) The Owner Trustee shall sign on behalf of the Trust the
tax returns of the Trust, unless applicable law requires an Owner to sign such
documents, in which case such documents shall be signed by the Company.
(b) The Company shall be designated the "tax matters partner"
of the Trust pursuant to Section 6231(a)(7)(A) of the Code and applicable
Treasury Regulations.
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
SECTION 6.1 General Authority. The Owner Trustee is authorized and
directed to execute and deliver or cause to be executed and delivered the
Notes, the Trust Certificates and the Basic Documents to which the Trust is to
be a party and each certificate or other document attached as an exhibit to or
contemplated by the Basic Documents to which the Trust is to be a party and any
amendment or other agreement or instrument described in Article III, in each
case, in such form as the Company shall approve, as evidenced conclusively by
the Owner Trustee's execution thereof, and, on behalf of the Trust, to direct
the Indenture Trustee to authenticate and deliver Class A-1 Notes in the
aggregate principal amount of $139,980,000, Class A-2 Notes in the aggregate
principal amount of $64,680,000, Class A-3 Notes in the aggregate principal
amount of $65,160,000, Class A-4 Notes in the aggregate principal amount of
$49,750,000, Class A-5 Notes in the aggregate principal amount of $49,170,000,
Class A-6 Notes in the aggregate principal amount of $93,110,000,
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Class A-7 Notes in the aggregate principal amount of $61,330,000, Class A-8
Notes in the aggregate principal amount of $37,570,000 and Certificates in the
aggregate principal amount of $39,250,000. In addition to the foregoing, the
Owner Trustee is authorized, but shall not be obligated, to take all actions
required of the Trust, pursuant to the Basic Documents.
SECTION 6.2 General Duties. It shall be the duty of the Owner
Trustee:
(a) to discharge (or cause to be discharged) all of its
responsibilities pursuant to the terms of this Agreement and the Basic
Documents to which the Trust is a party and to administer the Trust in the
interest of the Owners, subject to the Basic Documents and in accordance with
the provisions of this Agreement. Notwithstanding the foregoing, the Owner
Trustee shall be deemed to have discharged its duties and responsibilities
hereunder and under the Basic Documents to the extent the Administrator or the
Co-Owner Trustee has agreed in the Administration Agreement or this Agreement,
respectively, to perform any act or to discharge any duty of the Owner Trustee
or the Trust hereunder or under any Basic Document, and the Owner Trustee shall
not be held liable for the default or failure of the Administrator or the
Co-Owner Trustee to carry out its obligations under the Administration
Agreement or this Agreement, respectively; and
(b) to obtain and preserve, the Issuer's qualification to
do business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of the Indenture, the
Notes, the Collateral and each other instrument and agreement included in the
Trust Estate.
SECTION 6.3 Action upon Instruction.
(a) Subject to Article IV and in accordance with the terms
of the Basic Documents, the Owners may by written instruction direct the Owner
Trustee in the management of the Trust but only to the extent consistent with
the limited purpose of the Trust. Such direction may be exercised at any-time
by written instruction of the Owners pursuant to Article IV.
(b) The Owner Trustee shall not be required to take any
action hereunder or under any Basic Document if the Owner Trustee shall have
reasonably determined, or shall have been advised by counsel, that such action
is likely to result in liability on the part of the Owner Trustee or is
contrary to the terms hereof or of any Basic Document or is otherwise contrary
to law.
(c) Whenever the Owner Trustee is unable to decide between
alternative courses of action permitted or required by the terms of this
Agreement or under any Basic Document, the Owner Trustee shall promptly give
notice (in such form as shall be appropriate under the circumstances) to the
Owners and the Securities Insurer requesting instruction from the Owners as to
the course of action to be adopted, and to the extent the Owner Trustee acts in
good faith in accordance with any written instruction of the Owners received,
the Owner Trustee shall not be liable on account of such action to any Person.
If the Owner Trustee shall not have received appropriate instruction within 10
days of such notice (or within such shorter period of time as reasonably may be
specified in such notice or may be necessary under the circumstances) it may,
but
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shall be under no duty to, take or refrain from taking such action, not
inconsistent with this Agreement or the Basic Documents, as it shall deem to be
in the best interests of the Owners, and shall have no liability to any Person
for such action or inaction.
(d) In the event that the Owner Trustee is unsure as to the
application of any provision of this Agreement or any Basic Document or any
such provision is ambiguous as to its application, or is, or appears to be, in
conflict with any other applicable provision, or in the event that this
Agreement permits any determination by the Owner Trustee or is silent or is
incomplete as to the course of action that the Owner Trustee is required to
take with respect to a particular set of facts, the Owner Trustee may give
notice (in such form as shall be appropriate under the circumstances) to the
Owners requesting instruction and, to the extent that the Owner Trustee acts or
refrains from acting in good faith in accordance with any such instruction
received, the Owner Trustee shall not be liable, on account of such action or
inaction, to any Person. If the Owner Trustee shall not have received
appropriate instruction within 10 days of such notice (or within such shorter
period of time as reasonably may be specified in such notice or may be
necessary under the circumstances) it may, but shall be under no duty to, take
or refrain from taking such action, not inconsistent with this Agreement or the
Basic Documents, as it shall deem to be in the best interests of the Owners,
and shall have no liability to any Person for such action or inaction.
SECTION 6.4 No Duties Except as Specified in this Agreement, the Basic
Documents or in Instructions. The Owner Trustee shall not have any duty or
obligation to manage, make any payment with respect to, register, record, sell,
dispose of, or otherwise deal with the Owner Trust Estate, or to otherwise take
or refrain from taking any action under, or in connection with, any document
contemplated hereby to which the Owner Trustee is a party, except as expressly
provided by the terms of this Agreement, any Basic Document or in any document
or written instruction received by the Owner Trustee pursuant to Section 6.3;
and no implied duties or obligations shall be read into this Agreement or any
Basic Document against the Owner Trustee. The Owner 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 or to prepare or file any
Securities and Exchange Commission filing for the Trust or to record this
Agreement or any Basic Document. The Owner Trustee nevertheless agrees that it
will, at its own cost and expense, promptly take all action as may be necessary
to discharge any liens on any part of the Owner Trust Estate that result from
actions by, or claims against, the Owner Trustee that are not related to the
ownership or the administration of the Owner Trust Estate.
SECTION 6.5 No Action Except Under Specified Documents or
Instructions. The Owner Trustee shall not manage, control, use, sell, dispose
of or otherwise deal with any part of the Owner Trust Estate except (i) in
accordance with the powers granted to and the authority conferred upon the
Owner Trustee pursuant to this Agreement, (ii) in accordance with the Basic
Documents and (iii) in accordance with any document or instruction delivered to
the owner Trustee pursuant to Section 6.3.
SECTION 6.6 Restrictions. The Owner Trustee shall not take any action
(a) that is inconsistent with the purposes of the Trust set forth in Section
2.3 or (b) that, to the actual
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knowledge of the Owner Trustee, would result in the Trust's becoming taxable as
a corporation for Federal income tax purposes. The Owners shall not direct the
Owner Trustee to take action that would violate the provisions of this Section.
ARTICLE VII
CONCERNING THE OWNER TRUSTEE
SECTION 7.1 Acceptance of Trusts and Duties. The Owner Trustee accepts
the trusts hereby created and agrees to perform its duties hereunder with
respect to such trusts but only upon the terms of this Agreement and the Basic
Documents. The Owner Trustee also agrees to disburse all moneys actually
received by it constituting part of the Owner Trust Estate upon the terms of
the Basic Documents and this Agreement. The Owner Trustee shall not be
answerable or accountable hereunder or under any Basic Document under any
circumstances, except (i) for its own willful misconduct or gross negligence or
(ii) in the case of the inaccuracy of any representation or warranty contained
in Section 7.3 expressly made by the Owner Trustee. In particular, but not by
way of limitation (and subject to the exceptions set forth in the preceding
sentence):
(a) the Owner Trustee shall not be liable for any error
of judgment made by a responsible officer of the Owner Trustee;
(b) the Owner Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in accordance with the
instructions of the Administrator or the Owners;
(c) no provision of this Agreement or any Basic Document
shall require the Owner Trustee to expend or risk funds or otherwise incur any
financial liability in the performance of any of its rights or powers hereunder
or under any Basic Document if the Owner Trustee shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured or provided to it;
(d) under no circumstances shall the Owner Trustee be
liable for indebtedness evidenced by or arising under any of the Basic
Documents, including the principal of and interest on the Notes;
(e) the Owner Trustee shall not be responsible for or in
respect of the validity or sufficiency of this Agreement or for the due
execution hereof by the Depositor or the Company or for the form, character,
genuineness, sufficiency, value or validity of any of the Owner Trust Estate or
for or in respect of the validity or sufficiency of the Basic Documents, other
than the certificate of authentication on the Trust Certificates, and the Owner
Trustee shall in no event assume or incur any liability, duty, or obligation to
any Noteholder or to any Owner, other than as expressly provided for herein and
in the Basic Documents;
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(f) the Owner Trustee shall not be liable for the default or
misconduct of the Administrator, the Seller, the Company, the Indenture Trustee
or the Servicer under any of the Basic Documents or otherwise and the Owner
Trustee shall have no obligation or liability to perform the obligations of the
Trust under this Agreement or the Basic Documents that are required to be
performed by the Administrator under the Administration Agreement, the
Indenture Trustee under the Indenture or the Servicer under the Sale and
Servicing Agreement; and
(g) the Owner Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Agreement, or to
institute, conduct or defend any litigation under this Agreement or otherwise
or in relation to this Agreement or any Basic Document, at the request, order
or direction of any of the Owners, unless such Owners have offered to the Owner
Trustee security or indemnity satisfactory to it against the costs, expenses
and liabilities that may be incurred by the Owner Trustee therein or thereby.
The right of the Owner Trustee to perform any discretionary act enumerated in
this Agreement or in any Basic Document shall not be construed as a duty, and
the Owner Trustee shall not be answerable for other than its gross negligence
or willful misconduct in the performance of any such act provided, that the
Owner Trustee shall be liable for its negligence or willful misconduct in the
event that it assumes the duties and obligations of the Co- Owner Trustee under
the Sale and Servicing Agreement pursuant to Section 10.5 hereof.
SECTION 7.2 Furnishing of Documents. The Owner Trustee shall furnish
(a) to the Owners promptly upon receipt of a written request therefor,
duplicates or copies of all reports, notices, requests, demands, certificates,
financial statements and any other instruments furnished to the Owner Trustee
under the Basic Documents and (b) to Noteholders promptly upon written request
therefor, copies of the Sale and Servicing Agreement, the Administration
Agreement and the Trust Agreement.
SECTION 7.3 Representations and Warranties.
(a) The Owner Trustee hereby represents and warrants to
the Depositor and the Company, for the benefit of the Owners, that:
(i) It is a banking corporation duly organized and
validly existing in good standing under the laws of the State of
Delaware. It has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement.
(ii) It has taken all corporate action necessary to
authorize the execution and delivery by it of this Agreement, and this
Agreement will be executed and delivered by one of its officers who is
duly authorized to execute and deliver this Agreement on its behalf.
(iii) Neither the execution nor the delivery by it
of this Agreement nor the consummation by it of the transactions
contemplated hereby nor compliance by it with any of the terms or
provisions hereof will contravene any Federal or Delaware law,
governmental rule or regulation governing the banking or trust powers
of the owner Trustee or any judgment or order binding on it, or
constitute any default under its charter documents or by-
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laws or any indenture, mortgage, contract, agreement or instrument to
which it is a party or by which any of its properties may be bound.
(b) The Co-Owner Trustee hereby represents and warrants to
the Depositor and the Company and the Securities Insurer, for the benefit of
the Owners, that:
(i) It is a banking corporation duly organized and
validly existing in good standing under the laws of the State of
Minnesota. It has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement.
(ii) It has taken all corporate action necessary to
authorize the execution and delivery by it of this Agreement, and this
Agreement will be executed and delivered by one of its officers who is
duly authorized to execute and deliver this Agreement on its behalf.
(iii) Neither the execution nor the delivery by it
of this Agreement nor the consummation by it of the transactions
contemplated hereby nor compliance by it with any of the terms or
provisions hereof will contravene any Federal or Minnesota law,
governmental rule or regulation governing the banking or trust powers
of the owner Trustee or any judgment or order binding on it, or
constitute any default under its charter documents or by-laws or any
indenture, mortgage, contract, agreement or instrument to which it is
a party or by which any of its properties may be bound.
SECTION 7.4 Reliance; Advice of Counsel.
(a) The Owner Trustee shall incur no liability to anyone in
acting upon any signature, instrument, notice, resolution, request, consent,
order, certificate, report, opinion, bond, or other document or paper believed
by it to be genuine and believed by it to be signed by the proper party or
parties. The Owner Trustee may accept a certified copy of a resolution of the
board of directors or other governing body of any corporate party as conclusive
evidence that such resolution has been duly adopted by such body and that the
same is in full force and effect. As to any fact or matter the method of the
determination of which is not specifically prescribed herein, the Owner Trustee
may for all purposes hereof rely on a certificate, signed by the president or
any vice president or by the treasurer or other authorized officers of the
relevant party, as to such fact or matter and such certificate shall constitute
full protection to the Owner Trustee for any action taken or omitted to be
taken by it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder
and in the performance of its duties and obligations under this Agreement or
the Basic Documents, the Owner Trustee (i) may act directly or through its
agents or attorneys pursuant to agreements entered into with any of them, and
the Owner Trustee shall not be liable for the conduct or misconduct of such
agents or attorneys if such agents or attorneys shall have been selected by the
Owner Trustee with reasonable care, and (ii) may consult with counsel,
accountants and other skilled persons to be selected with reasonable care and
employed by it. The Owner Trustee shall not be liable for anything done,
suffered or omitted in good faith by it in accordance with the written opinion
or
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advice of any such counsel, accountants or other such persons and not contrary
to this Agreement or any Basic Document.
SECTION 7.5 Not Acting in Individual Capacity. Except as provided in
this Article VII, in accepting the trusts hereby created Wilmington Trust
Company acts solely as Owner Trustee hereunder and not in its individual
capacity and all Persons having any claim against the Owner Trustee by reason
of the transactions contemplated by this Agreement or any Basic Document shall
look only to the Owner Trust Estate for payment or satisfaction thereof.
SECTION 7.6 Owner Trustee Not Liable for Trust Certificates or Home
Loans. The recitals contained herein and in the Trust Certificates (other than
the signature and countersignature of the Owner Trustee on the Trust
Certificates) shall be taken as the statements of the Depositor and the
Company, and the Owner Trustee assumes no responsibility for the correctness
thereof. The Owner Trustee makes no representations as to the validity or
sufficiency of this Agreement, of any Basic Document or of the Trust
Certificates (other than the signature and countersignature of the Owner
Trustee on the Trust Certificates and as specified in Section 7.3) or the
Notes, or of any Home Loans or related documents. The Owner Trustee shall at no
time have any responsibility or liability for or with respect to the legality,
validity and enforceability of any Home Loan, or the perfection and priority of
any security interest created by any Home Loan or the maintenance of any such
perfection and priority, or for or with respect to the sufficiency of the Owner
Trust Estate or its ability to generate the payments to be distributed to
Owners under this Agreement or the Noteholders under the Indenture, including,
without limitation: the existence, condition and ownership of any Mortgaged
Property; the existence and enforceability of any insurance thereon; the
existence and contents of any Home Loan on any computer or other record
thereof; the validity of the assignment of any Home Loan to the Trust or of any
intervening assignment; the completeness of any Home Loan; the performance or
enforcement of any Home Loan; the compliance by the Depositor, the Company or
the Servicer with any warranty or representation made under any Basic Document
or in any related document or the accuracy of any such warranty or
representation or any action of the Administrator, the Indenture Trustee or the
Servicer or any subservicer taken in the name of the Owner Trustee.
SECTION 7.7 Owner Trustee May Own Trust Certificates and Notes. The
Owner Trustee in its individual or any other capacity may become the owner or
pledgee of Trust Certificates or Notes and may deal with the Depositor, the
Company, the Administrator, the Indenture Trustee and the Servicer in banking
transactions with the same rights as it would have if it were not Owner
Trustee.
SECTION 7.8 Licenses. The Owner Trustee shall cause the Trust to use
its best efforts to obtain and maintain the effectiveness of any licenses
required in connection with this Agreement and the Basic Documents and the
transactions contemplated hereby and thereby until such time as the Trust shall
terminate in accordance with the terms hereof.
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ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE
SECTION 8.1 Owner Trustee's Fees and Expenses. The Owner Trustee shall
receive as compensation for its services hereunder such fees as have been
separately agreed upon before the date hereof between the Company and the Owner
Trustee, and the Owner Trustee shall be entitled to be reimbursed by the
Company for its other reasonable expenses hereunder, including the reasonable
compensation, expenses and disbursements of such agents, representatives,
experts and counsel as the Owner Trustee may employ in connection with the
exercise and performance of its rights and its duties hereunder.
SECTION 8.2 Indemnification. The Depositor shall be liable as primary
obligor, and the Servicer as secondary obligor pursuant to the Administration
Agreement, for, and shall indemnify the Owner Trustee and its successors,
assigns, agents and servants (collectively, the "Indemnified Parties") from and
against, any and all liabilities, obligations, losses, damages, taxes, claims,
actions and suits, and any and all reasonable costs, expenses and disbursements
(including reasonable legal fees and expenses) of any kind and nature
whatsoever (collectively, "Expenses") which may at any time be imposed on,
incurred by, or asserted against the Owner Trustee or any Indemnified Party in
any way relating to or arising out of this Agreement, the Basic Documents, the
Owner Trust Estate, the administration of the Owner Trust Estate or the action
or inaction of the Owner Trustee hereunder, except only that the Depositor
shall not be liable for or required to indemnify an Indemnified Party from and
against Expenses arising or resulting from any of the matters described in the
third sentence of Section 7.01. The indemnities contained in this Section shall
survive the resignation or termination of the Owner Trustee or the termination
of this Agreement. In any event of any claim, action or proceeding for which
indemnity will be sought pursuant to this Section, the Owner Trustee's choice
of legal counsel shall be subject to the approval of the Depositor, which
approval shall not be unreasonably withheld.
SECTION 8.3 Payments to the Owner Trustee. Any amounts paid to the
Owner Trustee pursuant to this Article VIII shall be deemed not to be a part of
the Owner Trust Estate immediately after such payment.
ARTICLE IX
TERMINATION OF TRUST AGREEMENT
SECTION 9.1 Termination of Trust Agreement.
(a) This Agreement (other than Article VIII) and the Trust
shall terminate and be of no further force or effect on the earlier of: (i) the
satisfaction and discharge of the Indenture pursuant to Section 4.1 of the
Indenture and the termination of the Sale and Servicing Agreement; (ii) at the
time provided in Section 9.2.; and (iii) the expiration of 21 years from the
death of the last survivor of the descendants of Joseph P. Kennedy (the late
ambassador of the United States to the
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Court of St. James's). The bankruptcy, liquidation, dissolution, death or
incapacity of any Owner, other than the Company as described in Section 9.2,
shall not (x) operate to terminate this Agreement or the Trust, nor (y) entitle
such Owner's legal representatives or heirs to claim an accounting or to take
any action or proceeding in any court for a partition or winding up of all or
any part of the Trust or Owner Trust Estate nor (z) otherwise affect the
rights, obligations and liabilities of the parties hereto.
(b) The Certificates shall be subject to an early redemption
or termination at the option of the Company, and in certain instances the
Securities Insurer, in the manner and subject to the provisions of Section
11.02 of the Sale and Servicing Agreement.
(c) Except as provided in Sections 9.1(a) and (b) above, none
of the Depositor, the Company, the Securities Insurer nor any Owner shall be
entitled to revoke or terminate the Trust.
(d) Notice of any termination of the Trust, specifying the
Distribution Date upon which the Certificateholders shall surrender their
Certificates to the Paying Agent for payment of the final distributions and
cancellation, shall be given by the Owner Trustee to the Certificateholders,
the Securities Insurer and the Rating Agencies mailed within five Business Days
of receipt by the Owner Trustee of notice of such termination pursuant to
Section 9.1(a) or (b) above, which notice given by the Owner Trustee shall
state (i) the Distribution Date upon or with respect to which final payment of
the Certificates shall be made upon presentation and surrender of the
Certificates at the office of the Paying Agent therein designated, (ii) the
amount of any such final payment and (iii) that the Record Date otherwise
applicable to such Distribution Date is not applicable, payments being made
only upon presentation and surrender of the Trust Certificates at the office of
the Paying Agent therein specified. The Owner Trustee shall give such notice to
the Certificate Registrar (if other than the Owner Trustee) and the Paying
Agent at the time such notice is given to Certificateholders. Upon presentation
and surrender of the Certificates, the Paying Agent shall cause to be
distributed to Certificateholders amounts distributable on such Distribution
Date pursuant to Section 5.06 of the Sale and Servicing Agreement.
In the event that all of the Certificateholders shall not
surrender their Trust Certificates for cancellation within six months after the
date specified in the above mentioned written notice, the Owner Trustee shall
give a second written notice to the remaining Certificateholders to surrender
their Trust Certificates for cancellation and receive the final distribution
with respect thereto. If within one year after the second notice all the Trust
Certificates shall not have been surrendered for cancellation, the Owner
Trustee may take appropriate steps, or may appoint an agent to take appropriate
steps, to contact the remaining Certificateholders concerning surrender of
their Trust Certificates, and the cost thereof shall be paid out of the funds
and other assets that shall remain subject to this Agreement. Any funds
remaining in the Trust after exhaustion of such remedies shall be distributed
by the Owner Trustee to the Residual Interestholders on a pro rata basis.
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(e) Upon the winding up of the Trust and its termination, the
Owner Trustee shall cause the Certificate of Trust to be canceled by filing a
certificate of cancellation with the Secretary of State in accordance with the
provisions of Section 3820 of the Business Trust Statute.
SECTION 9.2 Dissolution Upon Bankruptcy of the Company. (i) In the
event that an Insolvency Event shall occur with respect to the Company when
there is a Securities Insurer Default subsisting, this Agreement shall be
terminated in accordance with Section 9.1 90 days after the date of such
Insolvency Event, unless, before the end of such 90-day period, the Owner
Trustee shall have received written instructions from (a) each of the Owners
(other than the Company) representing more than 50% of the Certificate
Principal Balance and more than 50% of the Percentage Interest of the Residual
Interest (not including the Certificate Principal Balance of the Certificates
held by the Company), and (b) an Opinion of Counsel described in Section
9.2(ii). Promptly after the occurrence of any Insolvency Event with respect to
the Company, (A) the Company shall give the Indenture Trustee and the Owner
Trustee written notice of such Insolvency Event, (B) the Owner Trustee shall,
upon the receipt of such written notice from the Company, give prompt written
notice to the Owners (other than the Company) and the Indenture Trustee, of the
occurrence of such event, and (C) the Indenture Trustee shall, upon receipt of
written notice of such Insolvency Event from the Owner Trustee or the Company,
give prompt written notice to the Noteholders and Securities Insurer of the
occurrence of such event; provided, however, that any failure to give a notice
required by this sentence shall not prevent or delay, in any manner, a
termination of the Trust pursuant to the first sentence of this Section 9.2.
Upon a termination pursuant to this Section, the Owner Trustee shall direct the
Indenture Trustee promptly to sell the assets of the Trust (other than the
Trust Accounts and the Certificate Distribution Account) in a commercially
reasonable manner and on commercially reasonable terms. The proceeds of such a
sale of the assets of the Trust shall be treated as collections under the Sale
and Servicing Agreement.
(ii) If an Insolvency Event occurs when the Insurance Agreement shall
be in effect and there is no Securities Insurer Default existing, then the
Owner Trustee shall retain for the benefit of the Certificateholders and the
Securities Insurer, all remedies available at law or under this Agreement and
none of the liens or security interests granted by the Trust shall be
extinguished, released, terminated or impaired by such Insolvency Event; but
rather, such liens and security interests shall continue to encumber the Owner
Trust Estate until all principal and interest on the Certificates is paid in
full and any other amounts required to be distributed by the Trust under this
Agreement have been so distributed. In any case however, subject to the
following, upon the occurrence of an Insolvency Event, the Owner Trust Estate
held under this Agreement shall be sold within 90 days of the occurrence of
such event and the proceeds of such sale distributed in accordance with the
provisions of Article 5 of this Agreement. Notwithstanding anything in this
Agreement to the contrary, this Agreement shall not terminate and the assets
shall not be sold upon the occurrence of an Insolvency Event, if within ninety
(90) days of such Insolvency Event the holders of a majority in Percentage
Interest of the Certificates and a majority in Percentage Interest of the
Residual Interest (in each case exclusive of the FRH Certificates) and the
Securities Insurer agree that this Agreement shall not so terminate and the
Owner Trustee and the Securities Insurer shall receive an opinion of counsel to
the Trust from counsel acceptable to the Securities Insurer, to the effect that
the entity created or reconstituted under this Agreement, if any, would not be
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characterized as an association taxable as a corporation for federal and state
income tax purposes. If authorization to continue this Agreement is not
received and the Insurance Agreement is still in effect, and provided that the
Owner Trustee and the Securities Insurer shall have received an opinion of
counsel to the Trust from counsel acceptable to the Securities Insurer to the
effect that the actions described in this sentence, if consummated, shall not
cause the Trust to be characterized as an association taxable as a corporation
for federal and state income tax purposes, the assets shall not be sold, but
the Owner Trustee shall adopt a plan of dissolution, acceptable to the
Securities Insurer, to make collections on the Owner Trust Estate for
distribution in accordance with the terms and priority of payment which would
apply under the provisions of the Basic Documents. Any party hereto who has
actual knowledge of the occurrence of an Insolvency Event shall immediately
notify the Securities Insurer of such occurrence.
ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
SECTION 10.1 Eligibility Requirements for Owner Trustee. The Owner
Trustee shall at all times be a corporation satisfying the provisions of
Section 3807(a) of the Business Trust Statute; authorized to exercise corporate
powers; having a combined capital and surplus of at least $50,000,000 and
subject to supervision or examination by Federal or state authorities; and
having (or having a parent which has) a rating of at least "Baa3" by Moody's
and "A-1" by Standard & Poor's and being acceptable to the Securities Insurer.
If such corporation shall publish reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purpose of this Section, the combined capital
and surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Owner Trustee shall cease to be eligible in accordance
with the provisions of this Section, the Owner Trustee shall resign immediately
in the manner and with the effect specified in Section 10.2.
SECTION 10.2 Resignation or Removal of Owner Trustee. The Owner
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to the Administrator, the Indenture Trustee
and the Securities Insurer. Upon receiving such notice of resignation, the
Administrator shall promptly appoint a successor Owner Trustee (acceptable to
the Securities Insurer) by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning Owner Trustee and one copy to
the successor Owner Trustee. If no successor Owner Trustee shall have been so
appointed and have accepted appointment within 30 days after the giving of such
notice of resignation, the resigning Owner Trustee or the Securities Insurer
may petition any court of competent jurisdiction for the appointment of a
successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 10.1 and shall fail to resign after
written request therefor by the Administrator, or if at any time the Owner
Trustee shall be legally unable to act, or shall be adjudged bankrupt or
insolvent, or
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a receiver of the Owner Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Owner Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Securities Insurer, or the Administrator with the consent
of the Securities Insurer, may remove the Owner Trustee. If the Administrator
or the Securities Insurer shall remove the Owner Trustee under the authority of
the immediately preceding sentence, the Securities Insurer, or the
Administrator with the consent of the Securities Insurer, shall promptly
appoint a successor Owner Trustee by written instrument in duplicate, one copy
of which instrument shall be delivered to the outgoing Owner Trustee so removed
and one copy to the successor Owner Trustee and payment of all fees owed to the
outgoing Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor Owner
Trustee pursuant to Section 10.3 written approval by the Securities Insurer and
payment of all fees and expenses owed to the outgoing Owner Trustee. The
Administrator shall provide notice of such resignation or removal of the Owner
Trustee to each of the Rating Agencies and the Securities Insurer.
SECTION 10.3 Successor Owner Trustee. Any successor Owner Trustee
appointed pursuant to Section 10.2 shall execute, acknowledge and deliver to
the Administrator, the Securities Insurer and to its predecessor Owner Trustee
an instrument accepting such appointment under this Agreement, and thereupon
the resignation or removal of the predecessor Owner Trustee shall become
effective and such successor Owner Trustee (if acceptable to the Securities
Insurer), without any further act, deed or conveyance, shall become fully
vested with all the rights, powers, duties, and obligations of its predecessor
under this Agreement, with like effect as if originally named as Owner Trustee.
The predecessor Owner Trustee shall upon payment of its fees and expenses
deliver to the successor Owner Trustee all documents and statements and monies
held by it under this Agreement; and the Administrator and the predecessor
Owner Trustee shall execute and deliver such instruments and do such other
things as may reasonably be required for fully and certainly vesting and
confirming in the successor Owner Trustee all such rights, powers, duties, and
obligations.
No successor Owner Trustee shall accept appointment as provided in
this Section unless at the time of such acceptance such successor Owner Trustee
shall be eligible pursuant to Section 10.1.
Upon acceptance of appointment by a successor Owner Trustee pursuant
to this Section, the Administrator shall mail notice of the successor of such
Owner Trustee to all Owners, the Indenture Trustee, the Noteholders, the
Securities Insurer and the Rating Agencies. If the Administrator fails to mail
such notice within 10 days after acceptance of appointment by the successor
Owner Trustee, the successor Owner Trustee shall cause such notice to be mailed
at the expense of the Administrator.
SECTION 10.4 Merger or Consolidation of Owner Trustee. Any corporation
into which the Owner Trustee may be merged or converted or with which it may be
consolidated or any corporation resulting from any merger, conversion or
consolidation to which the Owner Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Owner
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<PAGE> 42
Trustee, shall be the successor of the Owner Trustee hereunder, provided such
corporation shall be eligible pursuant to Section 10.1, without the execution
or filing of any instrument or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding; provided
further that the Owner Trustee shall mail notice of such merger or
consolidation to the Rating Agencies.
SECTION 10.5 Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Owner Trust Estate or any Mortgaged Property may at the time be located,
and for the purpose of performing certain duties and obligations of the Owner
Trustee with respect to the Trust and the Certificates under the Sale and
Servicing Agreement, the Administrator and the Owner Trustee acting jointly
shall have the power and shall execute and deliver all instruments to appoint
one or more Persons approved by the Owner Trustee and acceptable to the
Securities Insurer to act as co-trustee, jointly with the Owner Trustee, or
separate trustee or separate trustees, of all or any part of the Owner Trust
Estate, and to vest in such Person, in such capacity, such title to the Trust,
or any part thereof, and, subject to the other provisions of this Section, such
powers, duties, obligations, rights and trusts as the Administrator, the
Securities Insurer and the Owner Trustee may consider necessary or desirable.
If the Administrator shall not have joined in such appointment within 25 days
after the receipt by it of a request so to do, the Owner Trustee (with the
consent of the Securities Insurer) shall have the power to make such
appointment. No co-trustee or separate trustee under this Agreement shall be
required to meet the terms of eligibility as a successor trustee pursuant to
Section 10.1 and no notice of the appointment of any co-trustee or separate
trustee shall be required pursuant to Section 10.3.
The Owner Trustee hereby appoints the Indenture Trustee as Co-Owner
Trustee for the purpose of establishing and maintaining the Certificate
Distribution Account and making the distributions therefrom to the Persons
entitled thereto pursuant to Section 5.06 of the Sale and Servicing Agreement.
The Owner Trustee and the Co-Owner Trustee each agree that upon the occurrence
and continuation of a Securities Insurer Default, the Co-Owner Trustee shall
resign and the Owner Trustee shall assume the duties and obligations of the
Co-Owner Trustee under the Sale and Servicing Agreement and this Agreement,
including without limitation, the obligations of the Co-Owner Trustee as Paying
Agent pursuant to Section 3.9 hereof.
Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provision and conditions:
(i) all rights, powers, duties and obligations
conferred or imposed upon the Owner Trustee shall be conferred upon
and exercised or performed by the Owner Trustee and such separate
trustee or co-trustee jointly (it being understood that such separate
trustee or co-trustee is not authorized to act separately without the
Owner Trustee joining in such act), except to the extent that under
any law of any jurisdiction in which any particular act or acts are to
be performed, the Owner Trustee shall be incompetent or unqualified to
perform such act or acts, in which event such rights, powers, duties,
and obligations (including the holding of title to the Trust or any
portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but solely at
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<PAGE> 43
the direction of the Owner Trustee; provided that Co-Owner Trustee, in
performing its duties and obligations under the Sale and Servicing
Agreement, may act separately in its capacity as Co-Owner Trustee
without the Owner Trustee joining in such Acts.
(ii) no trustee under this Agreement shall be
personally liable by reason of any act or omission of any other
trustee under this Agreement; and
(iii) the Administrator and the Owner Trustee acting
jointly may at any time accept the resignation of or remove any
separate trustee or co-trustee.
Any notice, request or other writing given to the Owner Trustee shall
be deemed to have been given to the separate trustees and co-trustees, as if
given to each of them. Every instrument appointing any separate trustee or
co-trustee, other than this Agreement, shall refer to this Agreement and to the
conditions of this Article. Each separate trustee and co-trustee, upon its
acceptance of appointment, shall be vested with the estates specified in its
instrument of appointment, either jointly with the Owner Trustee or separately,
as may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the
conduct of, affecting the liability of, or affording protection to, the Owner
Trustee. Each such instrument shall be filed with the Owner Trustee and a copy
thereof given to the Administrator.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee as 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 Owner Trustee, to the extent permitted by law, without the appointment
of a new or successor trustee.
The Co-Owner Trustee, in its capacity as Co-Owner Trustee, shall not
have any rights, duties or obligations except as expressly provided in this
Agreement and the Sale and Servicing Agreement.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Supplements and Amendments. This Agreement may be amended
by the Depositor, the Company and the Owner Trustee, with the prior consent of
the Securities Insurer, and with prior written notice to the Rating Agencies
and the Securities Insurer, but without the consent of any of the Noteholders
or the Owners or the Indenture Trustee, to cure any ambiguity, to correct or
supplement any provisions in this Agreement or for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions in
this Agreement or of modifying in any manner the rights of the Noteholders or
the Owners provided, however, that such action shall not adversely affect in
any material respect the interests of any Noteholder or Owner or the rights of
the Securities Insurer. An amendment described above shall be deemed not to
adversely affect
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<PAGE> 44
in any material respect the interests of any Noteholder or Owner if (i) an
opinion of counsel is obtained to such effect, and (ii) the party requesting
the amendment satisfies the Rating Agency Condition with respect to such
amendment.
This Agreement may also be amended from time to time by the Depositor,
the Company and the Owner Trustee, with the prior written consent of the Rating
Agencies and with the prior written consent of the Indenture Trustee, the
Securities Insurer, the Holders (as defined in the Indenture) of Notes
evidencing more than 50% of the Outstanding Amount of the Notes, the Holders of
Certificates evidencing more than 50% of the Certificate Principal Balance and
holders of Residual Interest Instruments evidencing more than 50% of the
Percentage Interests of the Residual Interest, 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 Noteholders or
the Owners; provided, however, that no such amendment shall (a) increase or
reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on the Home Loans or distributions that shall be
required to be made for the benefit of the Noteholders or the
Certificateholders or the Securities Insurer (b) reduce the aforesaid
percentage of the Outstanding Amount of the Notes and the Certificate Principal
Balance or the Percentage Interests required to consent to any such amendment,
in either case of clause (a) or (b) without the consent of the holders of all
the outstanding Notes and Certificates and the Securities Insurer, and in the
case of clause (b) without the consent of the holders of all the outstanding
Residual Interest Instruments.
Promptly after the execution of any such amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder, the Indenture Trustee, the
Securities Insurer and each of the Rating Agencies.
It shall not be necessary for the consent of Owners, the Noteholders
or the Indenture Trustee pursuant to 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 any other consents of Owners provided for in this Agreement or in
any other Basic Document) and of evidencing the authorization of the execution
thereof by Certificateholders shall be subject to such reasonable requirements
as the Owner Trustee may prescribe.
Promptly after the execution of any amendment to the Certificate of
Trust, the Owner Trustee shall cause the filing of such amendment with the
Secretary of State.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement. The Owner Trustee may, but shall not
be obligated to, enter into any such amendment which affects the Owner
Trustee's own rights, duties or immunities under this Agreement or otherwise.
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<PAGE> 45
SECTION 11.2 No Legal Title to Owner Trust Estate in Owners. The
Owners shall not have legal title to any part of the Owner Trust Estate. The
Owners shall be entitled to receive distributions with respect to their
undivided ownership interest therein only in accordance with Articles V and IX.
No transfer, by operation of law or otherwise, of any right, title, or interest
of the Owners to and in their ownership interest in the Owner Trust Estate
shall operate to terminate this Agreement or the trusts hereunder or entitle
any transferee to an accounting or to the transfer to it of legal title to any
part of the Owner Trust Estate.
SECTION 11.3 Limitations on Rights of Others. Except for Section 2.7,
the provisions of this Agreement are solely for the benefit of the Owner
Trustee, the Depositor, the Company, the Owners, the Administrator, the
Securities Insurer and, to the extent expressly provided herein, the Indenture
Trustee and the Noteholders, and nothing in this Agreement (other than Section
2.7), whether express or implied, shall be construed to give to any other
Person any legal or equitable right, remedy or claim in the Owner Trust Estate
or under or in respect of this Agreement or any covenants, conditions or
provisions contained herein.
SECTION 11.4 Notices. (a) Unless otherwise expressly specified or
permitted by the terms hereof, all notices shall be in writing and shall be
deemed given upon receipt by the intended recipient or three Business Days
after mailing if mailed by certified mail, postage prepaid (except that notice
to the Owner Trustee shall be deemed given only upon actual receipt by the
Owner Trustee), at the following addresses: (i) if to the Owner Trustee, its
Corporate Trust Office; (ii) if to the Depositor, FIRSTPLUS INVESTMENT
CORPORATION, 3773 Howard Hughes Parkway, Suite 300N, Las Vegas, Nevada 89109,
Attention: James P. Lawler; (iii) if to the Company, FIRSTPLUS RESIDUAL
HOLDINGS, INC., 3773 Howard Hughes Parkway, Suite 300N, Las Vegas, Nevada
89109, Attention: James P. Lawler; (iv) if to the Securities Insurer, MBIA
Insurance Corporation, 113 King Street, Armonk, New York 10504, Attention:
IPM-SF FIRSTPLUS 1997-1, telephone: 914-765-3810, confirmation: 914-765-3781;
(v) if to the Co-Owner Trustee, First Bank National Association, 180 East Fifth
Street, St. Paul, Minnesota 55101, Attention: Corporate Trust Department; or,
as to each such party, at such other address as shall be designated by such
party in a written notice to each other party.
(b) Any notice required or permitted to be given to an Owner shall be
given by first-class mail, postage prepaid, at the address of such Owner as
shown in the Certificate Register. Any notice so mailed within the time
prescribed in this Agreement shall be conclusively presumed to have been duly
given, whether or not the Owner receives such notice.
SECTION 11.5 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
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<PAGE> 46
SECTION 11.6 Separate Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 11.7 Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, the
Depositor, the Company, the Securities Insurer, the Owner Trustee and its
successors and each owner and its successors and permitted assigns, all as
herein provided. Any request, notice, direction, consent, waiver or other
instrument or action by an Owner shall bind the successors and assigns of such
Owner.
SECTION 11.8 Covenants of the Company. In the event that (a) the
Certificate Principal Balance shall be reduced by Realized Losses and (b) any
litigation with claims in excess of $1,000,000 to which the Company is a party
which shall be reasonably likely to result in a material judgment against the
Company that the Company will not be able to satisfy shall be commenced by an
Owner, during the period beginning nine months following the commencement of
such litigation and continuing until such litigation is dismissed or otherwise
terminated (and, if such litigation has resulted in a final judgment against
the Company, such judgment has been satisfied), the Company shall not pay any
dividend to RAC, or make any distribution on or in respect of its capital stock
to RAC, or repay the principal amount of any indebtedness of the Company held
by RAC, unless (i) after giving effect to such payment, distribution or
repayment, the Company's liquid assets shall not be less than the amount of
actual damages claimed in such litigation or (ii) the Rating Agency Condition
shall have been satisfied with respect to any such payment, distribution or
repayment and the Securities Insurer consents to such payment. The Company will
not at any time institute against the Trust any bankruptcy proceedings under
any United States Federal or state bankruptcy or similar law in connection with
any obligations relating to the Trust Certificates, the Notes, the Trust
Agreement or any of the Basic Documents.
SECTION 11.9 No Petition. The Owner Trustee, by entering into this
Agreement, each Owner, by accepting a Trust Certificate, and the Indenture
Trustee and each Noteholder by accepting the benefits of this Agreement, hereby
covenant and agree that they will not at any time institute against the
Company, the Depositor or the Trust, or join in any institution against the
Company or the Trust of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any United
States Federal or state bankruptcy or law in connection with any obligations
relating to the Trust Certificates, the Notes, this Agreement or any of the
Basic Documents.
SECTION 11.10 No Recourse. Each Owner by accepting a Trust Certificate
acknowledges that such Owner's Trust Certificate represents a beneficial
interest in the Trust only and does not represent an interest in or an
obligation of the Seller, the Servicer, the Company, the Administrator, the
Owner Trustee, the Co-Owner Trustee or any Affiliate thereof and no recourse
may be had against such parties or their assets, except as may be expressly set
forth or contemplated in this Agreement, the Trust Certificates or the Basic
Documents.
SECTION 11.11 Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
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<PAGE> 47
SECTION 11.12 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.13 Certificate and Residual Interest Transfer Restrictions.
Neither the Certificates nor the Residual Interest may be acquired, by or for
the account of (i) an employee benefit plan (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) that is
subject to the provisions of Title I of ERISA, (ii) a plan described in Section
4975(e)(1) of the Internal Revenue Code of 1986, as amended, or (iii) any
entity, including an insurance company separate account or general account,
whose underlying assets include plan assets by reason of a plan's investment in
the entity (each, a "Benefit Plan"). By accepting and holding a Trust
Certificate, the Owner thereof shall be deemed to have represented and
warranted that it is not a Benefit Plan.
SECTION 11.14 Grant of Certificateholder and Residual Interest
Holder Rights to Securities Insurer.
(a) In consideration for the guarantee of the Certificates by
the Securities Insurer pursuant to the Guaranty Policy, the Certificateholders
hereby grant to the Securities Insurer the right to act as the Holder of 100%
of the outstanding Certificates for the purpose of exercising the rights of the
Certificateholders under this Agreement without the consent of the
Certificateholders, including the voting rights of such holders hereunder, but
excluding those rights requiring the consent of all such Holders under Section
11.1 and any rights of such Holders to distributions under Section 5.06 of the
Sale and Servicing Agreement; provided that the preceding grant of rights to
the Securities Insurer by the Certificateholders shall be subject to Section
11.16.
(b) In consideration for the issuance of the Residual
Interest and for the guarantee of the Certificates by the Securities Insurer
pursuant to the Guaranty Policy, the holders of the Residual Interest hereby
grant to the Securities Insurer the right to act as the holder of 100% of the
Residual Interest for the purpose of exercising the rights of the holders of
the Residual Interest under this Agreement, including the voting rights of such
holders hereunder, but excluding those rights requiring the consent of all such
holders under Section 11.1 and any rights of such holders to Distributions
under Section 5.06 of the Sale and Servicing Agreement; provided that the
preceding grant of rights to the Securities Insurer by the holders of the
Residual Interest shall be subject to Section 11.16.
(c) The rights of the Securities Insurer to direct certain
actions and consent to certain actions of the Certificateholders hereunder will
terminate at such time as the Certificate Principal Balance of the Certificates
has been reduced to zero and the Securities Insurer has been reimbursed for all
Guaranteed Payments and any other amounts owed under the Guaranty Policy and
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<PAGE> 48
the Insurance Agreement and the Securities Insurer has no further obligation
under the Guaranty Policy.
SECTION 11.15 Third-Party Beneficiary. The parties hereto acknowledge
that the Securities Insurer is an express third party beneficiary hereof
entitled to enforce any rights reserved to it hereunder as if it were actually
a party hereto.
SECTION 11.16 Suspension and Termination of Securities Insurer's
Rights.
(a) During the continuation of a Securities Insurer Default,
rights granted or reserved to the Securities Insurer hereunder shall vest
instead in the Owners; provided that the Securities Insurer shall be entitled
to any distributions in reimbursement of the Securities Insurer Reimbursement
Amount, and the Securities Insurer shall retain those rights under Section 11.1
to consent to any amendment of this Agreement.
At such time as either (i) the Certificate Principal Balance
has been reduced to zero or (ii) the Guaranty Policy has been terminated and in
either case of (i) or (ii) the Securities Insurer has been reimbursed for all
Guaranteed Payments and any other amounts owed under the Guaranty Policy and
the Insurance Agreement (and the Securities Insurer no longer has any
obligation under the Guaranty Policy, except for breach thereof by the
Securities Insurer), then the rights and benefits granted or reserved to the
Securities Insurer hereunder (including the rights to direct certain actions
and receive certain notices) shall terminate and the Owner shall be entitled to
the exercise of such rights and to receive such benefits of the Securities
Insurer following such termination to the extent that such rights and benefits
are applicable to the Owners.
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<PAGE> 49
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed by their respective officers hereunto duly
authorized, as of the day and year first above written.
FIRSTPLUS INVESTMENT CORPORATION,
Depositor
By:
------------------------------------------
Name: Christopher J. Gramlich
Title: Senior Vice President
FIRSTPLUS RESIDUAL HOLDINGS, INC.
By:
------------------------------------------
Name: Christopher J. Gramlich
Title: Senior Vice President
WILMINGTON TRUST COMPANY, in its
individual capacity and as Owner Trustee
By:
------------------------------------------
Name:
Title:
FIRST BANK NATIONAL ASSOCIATION, not in its
individual capacity but solely as Co-Owner
Trustee and Paying Agent
By:
------------------------------------------
Name: Sheri Christopherson
Title: Vice President
<PAGE> 50
EXHIBIT A-1
TO THE TRUST AGREEMENT
(FORM OF CERTIFICATE)
<PAGE> 51
EXHIBIT A-2
TO THE TRUST AGREEMENT
(FORM OF CERTIFICATE ISSUED TO THE COMPANY)
<PAGE> 52
EXHIBIT B-1
TO THE TRUST AGREEMENT
(FORM OF RESIDUAL INTEREST INSTRUMENT]
<PAGE> 53
EXHIBIT B-2
TO THE TRUST AGREEMENT
(FORM OF RESIDUAL INTEREST ISSUED TO THE COMPANY)
<PAGE> 54
EXHIBIT C
TO THE TRUST AGREEMENT
CERTIFICATE OF TRUST OF
FIRSTPLUS HOME LOAN OWNER TRUST 1997-1
THIS Certificate of Trust of FIRSTPLUS HOME LOAN OWNER TRUST 1997-1
(the "Trust"), dated as of February __, 1997, is being duly executed and filed
by Wilmington Trust Company, a Delaware banking corporation, as trustee, to
form a business trust under the Delaware Business Trust Act (12 Del. Code,
Section 3801 et seq.).
1. Name. The name of the business trust formed hereby is
FIRSTPLUS HOME LOAN OWNER TRUST 1997-1.
2. Delaware Trustee. The name and business address of the
trustee of the Trust in the State of Delaware is Wilmington Trust Company of
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890.
Attention:___________.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.
Wilmington Trust Company not in
its individual capacity but
solely as Owner Trustee under a
Trust Agreement dated as of
February 1, 1997.
By:
--------------------------------
Name:
Title:
<PAGE> 55
EXHIBIT D
TO THE TRUST AGREEMENT
(Form of Demand Note)
<PAGE> 56
EXHIBIT E
TO THE TRUST AGREEMENT
(Form of Certificate Depository Agreement)
SEE TAB NUMBER 9
<PAGE> 57
EXHIBIT F-1
FORM OF INVESTMENT LETTER
<PAGE> 58
EXHIBIT F-2
FORM OF INVESTMENT LETTER
<PAGE> 1
EXHIBIT 10.1
LOAN SALE AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
This LOAN SALE AGREEMENT dated as of February 27, 1997 (the
"Agreement"), is made and entered into by and between FIRSTPLUS INVESTMENT
CORPORATION, as purchaser (together with its successors and assigns, being
referred to herein as "Purchaser"), and FIRSTPLUS FINANCIAL, INC., as seller
(together with its successors and assigns, being referred to herein as "FFI").
W I T N E S S E T H:
WHEREAS, FFI is engaged in the business of underwriting, originating
or acquiring property improvement and debt consolidation loans secured by
mortgages on residential property;
WHEREAS, FFI desires to sell to Purchaser and Purchaser desires to
purchase from FFI on a whole loan basis the Initial Home Loans and all monies
due and to become due thereunder after January 31, 1997;
WHEREAS, FFI desires to sell to Purchaser and Purchaser desires to
purchase from FFI on a whole loan basis the Subsequent Home Loans and all
monies due and to become due thereunder after the related Cut-Off Date;
WHEREAS, Purchaser intends to transfer the Home Loans to FIRSTPLUS
Home Loan Owner Trust 1997-1 (the "Trust") in order to facilitate the issuance
by the Trust of a series of asset backed notes and certificates (the "Asset
Backed Securities");
NOW, THEREFORE, in consideration of these premises and of the mutual
agreements herein set forth, Purchaser and FFI each agree as follows:
SECTION 1. Representations and Warranties.
FFI hereby represents and warrants to the Purchaser and the Issuer,
with respect to each Subsequent Home Loan, as of the applicable Subsequent
Transfer Date; and with respect to each Initial Home Loan, as of the date
hereof (each, a "Closing Date") and with respect to itself, as follows:
A. Home Loan Information. The information with respect to each Home
Loan set forth in the Home Loan Schedule is true and correct in all material
respects as of the applicable Cut-Off Date.
B. Delivery of Home Loan Documents. All of the original or certified
documentation required to be delivered to the Indenture Trustee or to the
Custodian on or prior to the Closing Date
<PAGE> 2
or the Subsequent Transfer Date, as applicable, or as otherwise provided in
this Agreement has or will be so delivered.
C. Payments Current. As of the applicable Cut-off Date, no more than
0.15% (by aggregate Cut-off Date Principal Balance) of the Initial Home Loans
are more than 30 days but not more than 60 days delinquent, based on the terms
under which the related Mortgages and Debt Instruments have been made and none
of the Home Loans are more than 60 days delinquent. FFI has not advanced funds,
or induced, solicited or knowingly received any advance of funds from a party
other than the related Obligor, directly or indirectly, for the payment of any
amount required by any Home Loan.
D. No Waiver or Modification. The terms of each Debt Instrument and
Mortgage, have not been impaired, waived, altered or modified in any respect,
except by written instruments reflected in the Indenture Trustee's Home Loan
File and no provision of any Mortgage or Debt Instrument has been "whited out"
or erased unless such modification has been initialed by each of the parties to
the related Home Loan. No instrument of waiver, alteration, modification or
assumption has been executed except for the instruments that are part of the
Indenture Trustee's Home Loan File and the terms of which are reflected in the
Indenture Trustee's Home Loan File.
E. No Defenses. No Debt Instrument or Mortgage is subject to any
set-off, counterclaim or defense, including the defense of usury, nor will the
operation of any of the terms of any Debt Instrument or Mortgage or the
exercise of any right thereunder, render such Debt Instrument or Mortgage
unenforceable, in whole or in part, or subject to any right of rescission,
set-off, counterclaim or defense, including the defense of usury, and no such
right of rescission, set-off, counterclaim or defense has been asserted in any
proceeding or was asserted in any state or federal bankruptcy or insolvency
proceeding at the time the related Home Loan was originated.
F. Compliance with Laws. Any and all requirements of any federal,
state or local law applicable to each Home Loan have been complied with
including, without limitation, all consumer, usury, truth-in-lending, consumer
credit protection, equal credit opportunity or disclosure laws applicable to
each Home Loan; each Home Loan was originated in compliance with all applicable
laws and no fraud or misrepresentation was committed by any Person in
connection therewith.
G. No Satisfaction or Release of Lien. No Mortgage has been satisfied,
canceled, subordinated or rescinded, in whole or in part. No Mortgaged Property
has been released from the lien of the related Mortgage in whole or in part,
nor has any instrument been executed that would effect any such release,
cancellation, subordination or rescission, other than the subordination of the
lien of such Mortgage securing a Home Loan with respect to which a related
Superior Lien was released in connection with the refinancing of the mortgage
loan relating to such Superior Lien.
H. Valid Lien. With respect to each Debt Instrument, the related
Mortgage is or creates a valid, subsisting and enforceable lien on the related
Mortgaged Property, including, in the case of a Mortgage securing a Home
Improvement Loan, the land and all buildings on the related Mortgaged Property.
- 2 -
<PAGE> 3
I. Validity of Home Loan Documents. Each Debt Instrument and each
Mortgage is genuine and each is the legal, valid and binding obligation of the
Obligor thereof, enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
or other similar laws affecting creditors' rights in general and by general
principles of equity. All parties to each Debt Instrument and each Mortgage had
legal capacity at the time to enter into the related Home Loan and to execute
and deliver such Debt Instrument and Mortgage, and such Debt Instrument and
Mortgage have been duly and properly executed by such parties.
J. Full Disbursement of Proceeds. As of the applicable Cut-Off Date,
the proceeds of each Home Loan have been fully disbursed and there is no
requirement for future advances thereunder, all costs, fees and expenses
incurred in making or closing each Home Loan and the recording of the Mortgage
were disbursed, the Obligor is not entitled to any refund of any amounts paid
or due under the Debt Instrument or any related Mortgage and any and all
requirements set forth in the related Home Loan documents have been complied
with.
K. Ownership. Immediately prior to the conveyance thereof to the
Seller, FFI had good and marketable title to each Home Loan, Debt Instrument
and Mortgage was the sole owner thereof and had full right to sell each Home
Loan, Debt Instrument and Mortgage to the Seller and upon the conveyance
thereof by FFI to the Seller, the Seller became the sole owner of each Home
Loan, Debt Instrument and Mortgage free and clear of any encumbrance, equity,
lien, pledge, charge, claim or security interest.
L. Ownership of Mortgaged Property. With respect to each Home Loan,
the related Servicer's Home Loan File contains a title document reflecting that
title to the related Mortgaged Property is held at least 50% by the Obligor
under such Home Loan.
M. No Defaults. Except with respect to any delinquent scheduled
payment set forth in subsection (c) above, there is no default, breach,
violation or event of acceleration existing under any Mortgage or any Debt
Instrument and, to the best of FFI's knowledge, there is no event which, with
the passage of time or with notice and/or the expiration of any grace or cure
period, would constitute such a default, breach, violation or event of
acceleration and neither FFI nor its predecessors have waived any such default,
breach, violation or event of acceleration, except as set forth in an
instrument of waiver, alteration, modification or assumption that is included
in the Indenture Trustee's Home Loan File.
N. No Condemnation or Damage. To the best of FFI's knowledge, the
physical condition of each Mortgaged Property has not deteriorated since the
date of origination of the related Home Loan (normal wear and tear excepted)
and there is no proceeding pending for the total or partial condemnation of any
Mortgaged Property.
O. Mortgage Remedies Adequate. Each Mortgage contains customary and
enforceable provisions such as to render the rights and remedies of the holder
thereof adequate for the realization against the related Mortgaged Property of
the benefits of the security provided thereby, including, (i) in the case of a
Mortgage designated as a deed of trust, by trustee's sale, and (ii) otherwise,
by judicial foreclosure.
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<PAGE> 4
P. Underwriting of Home Loans. Each Home Loan has been underwritten by
the originator thereof in accordance with such originator's then current
underwriting guidelines.
Q. Terms of Home Loans. Each Home Loan is a fixed rate loan; each Debt
Instrument has an original term to maturity of not less than 24 months nor more
than 25 years and three months from the date of origination; each Debt
Instrument is payable in monthly installments of principal and interest, with
interest payable in arrears, and requires a monthly payment which is sufficient
to amortize the original principal balance over the original term and to pay
interest at the related Home Loan Interest Rate; and no Debt Instrument
provides for any extension of the original term.
R. Security. No Debt Instrument is, or has been, secured by any
collateral except the lien of the related Mortgage.
S. Deed of Trust. If a Mortgage for a Home Loan constitutes a deed of
trust, a trustee, duly qualified under applicable law to serve as such, has
been properly designated and currently so serves as such and is named in such
Mortgage, or a valid substitution of trustee has been recorded or may be
recorded and no extraordinary fees or expenses are, or will become, payable by
FFI to the trustee under the deed of trust, except in connection with default
proceedings and a trustee's sale after default by the related Obligor.
T. Types of Home Loans. Each Home Loan is either (i) a Home
Improvement Loan, (ii) a Debt Consolidation Loan, (iii) a Combination Loan, or
(iv) a first or junior lien purchase money loan. No Home Loan was originated
for the express purpose of purchasing a manufactured home.
U. Completion of Improvements. With respect to all Home Improvement
Loans and Combination Loans that have been originated through a home
improvement contractor, all improvements to be made to each Mortgaged Property
with the proceeds of the related Home Loan have been completed. All obligations
of a seller under all Debt Consolidation Loans, Purchase or Refinance Loans and
Combination Loans have been completed in accordance with the terms of the Debt
Consolidation Loan as of the Closing Date, and no additional goods or services
will be, or are required to be provided by such seller after the Closing Date.
V. Origination Practices. The origination practices used by each
originator of the Home Loans and the servicing and collection practices used by
FFI with respect to each Home Loan have been in all material respects legal,
proper, prudent and customary with respect to the loan origination and
servicing business as applicable to the respective loan type.
W. Servicing Practices. Each Home Loan has been serviced in accordance
with all applicable laws and, to the best of FFI's knowledge, no fraud or
misrepresentation was committed by any Person in connection therewith.
X. No Bulk Transfer. The sale, transfer, assignment, conveyance and
grant of the Debt Instruments and the Mortgages by FFI to the Seller were not
subject to the bulk transfer laws or any similar statutory provisions in effect
in any applicable jurisdiction.
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<PAGE> 5
Y. Relief Act Matters. No Obligor has notified FFI, and no relief has
been requested by or allowed to an Obligor under the Soldiers' and Sailors'
Civil Relief Act of 1940.
Z. Selection Criteria. The Home Loans were not selected by FFI for
sale to the Seller or the Issuer on any basis intended to adversely affect the
Seller or the Issuer.
AA. Superior Lien Delinquencies. No obligation secured by a Superior
Lien was more than 30 days past due at the time of origination of the related
Home Loan.
BB. Treasury Regulation ss.301.7701. On the Closing Date and on each
Subsequent Transfer Date, 55% or more (by aggregate principal balance) of the
Home Loans do not constitute "real estate mortgages" for the purpose of
Treasury Regulation ss.301.7701 under the Code. For this purpose a Home Loan
does not constitute a "real estate mortgage" if:
(a) The Home Loan is not secured by an interest in real
property, or
(b) The Home Loan is not an "obligation principally secured
by an interest in real property." For this purpose an obligation is
"principally secured by an interest in real property" if it satisfies
either the test set out in paragraph (1) or the test set out in
paragraph (2) below.
(1) The 80-percent test. An obligation is principally
secured by an interest in real property if the fair
market value of the interest in real property
securing the obligation
(a) was at least equal to 80 percent of the
adjusted issue price of the obligation at
the time the obligation was originated (or,
if later, the time the obligation was
significantly modified); or
(b) is at least equal to 80 percent of the
adjusted issue price of the obligation on
the Closing Date or Subsequent Transfer
Date, as applicable.
For purposes of this paragraph (1), the fair market
value of the real property interest must be first
reduced by the amount of any lien on the real
property interest that is senior to the obligation
being tested, and must be further reduced by a
proportionate amount of any lien that is in parity
with the obligation being tested, in each case
before the percentages set forth in (1)(A) and
(1)(B) are determined. The adjusted issue price of
an obligation is its issue price plus the amount of
accrued original issue discount, if any, as of the
date of determination.
(2) Alternative test. An obligation is principally
secured by an interest in real property if
substantially all of the proceeds of the obligation
were used to acquire or to improve or protect an
interest in real property that, at the origination
date, is the only security for the obligation. For
purposes of this
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<PAGE> 6
test, loan guarantees made by the United States or
any state (or any political subdivision, agency, or
instrumentality of the United States or of any
state), or other third party credit enhancement are
not viewed as additional security for a loan. An
obligation is not considered to be secured by
property other than real property solely because the
obligor is personally liable on the obligation. For
this purpose only substantially all of the proceeds
of the obligation means more than 66-2/3% of the
gross proceeds.
CC. Good Repair. To the best of FFI's knowledge, the related Mortgaged
Property described in each Mortgage is free of damage and in good repair or
will be free of damage and in good repair following the completion of any
improvements or repairs to be financed by the related Home Loan.
DD. Home Loan Interest Method. Interest for each Home Loan is
calculated at a rate of interest computed by the simple interest method or the
actuarial method.
EE. Retail Installment Contracts. Some of the Homes Loans are retail
installment contracts for goods or services, and some of the Home Loans are
home improvement loans for goods or services, which are either "consumer credit
contracts" or "purchase money loans" as such terms are defined in 16 C.F.R.
Part 433.1.
FF. Inspections to Improvements; and No Encroachment. To the best of
FFI's knowledge, all required inspections, licenses and certificates with
respect to the improvements and the use and occupancy of all occupied portions
of all Mortgaged Property have been made, obtained or issued as applicable. To
the best of FFI's knowledge, all improvements which were considered in
determining the appraised value of the Mortgaged Property lay wholly within the
boundaries and building restrictions lines of the related property and no
improvements on adjoining properties encroach upon such property and no
improvement located on or being a part of such property is in violation of any
applicable zoning laws or regulation.
GG. Remedies Against Originators. In the event that any Home Loan was
originated by an entity (such entity, the "Originator") other than FFI and to
the extent that FFI has failed to fulfill or is not capable of fulfilling its
obligations to cure, substitute or repurchase such Home Loan as required
hereunder, then the Securities Insurer or the Indenture Trustee on behalf of
the Securityholders may enforce any remedies for breach of representations and
warranties made by the Originator with respect to such Home Loan.
HH. Consent of Superior Lienholder. With respect to each Home Loan
that is not a first mortgage loan, either (i) no consent for the Home Loan is
required by the holder of the related prior lien or (ii) such consent has been
obtained and has been delivered to the Indenture Trustee.
II. Flood Insurance. If required by federal or state law, each
Mortgaged Property is covered by flood insurance with a standard mortgagee
clause and extended coverage in an amount which is not less than the value of
such Mortgaged Property. All such insurance policies meet the requirements of
the current guidelines of the Federal Insurance Administration, conform to the
requirements of the FNMA Sellers' Guide and the FNMA Servicers' Guide, and are
of standard type
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<PAGE> 7
and quality for the locale where the related Mortgaged Property is located. All
acts required to be performed to preserve the rights and remedies of the
Indenture Trustee in any such insurance policies have been performed including,
without limitation, any necessary notifications of insurers and assignments of
policies or interests therein.
JJ. No Fraudulent Conveyance. The Home Loans are not being transferred
with any intent to hinder, delay or defraud any creditors.
KK. Value and Marketability. To the best of FFI's knowledge, there do
not exist any circumstances, conditions or information with respect to the Home
Loan, the related Mortgaged Property the Obligor or the Obligor's credit
standing that reasonably can be expected to cause private institutional
investors investing in same type of home loan to regard such Home Loan as an
unacceptable investment, to increase the likelihood that such Home Loan will
become delinquent, or adversely affect the value or marketability of such Home
Loan.
LL. Environmental Compliance. To the best of FFI's knowledge, the
Mortgaged Property is free from any and all toxic or hazardous substances and
there exists no violation of any local, state or federal environmental law,
rule or regulation.
MM. Description Conforms to Prospectus Supplement. Each Initial Home
Loan conforms, and all Initial Home Loans in the aggregate conform, in all
material respects, to the description thereof set forth in the Prospectus
Supplement.
NN. No Buydown, GPM or Shared Appreciation Loans. No Home Loan
contains any provisions pursuant to which principal and interest payments are
paid or partially paid with funds deposited in any separate account established
by FFI, the Obligor or anyone else on behalf of the Obligor, or paid by any
source other than the Obligor. No Home Loan contains any other similar
provision which may constitute a "buydown" provision. No Home Loan is a
graduated payment mortgage loan. No Home Loan has a shared appreciation or
other contingent interest feature.
OO. No Chattel Paper. Each Debt Instrument is comprised of one
original promissory note and each such promissory note constitutes an
"instrument" for purposes of Section 9-105(1)(i) of the UCC. No Debt Instrument
constitutes or is comprised of "chattel paper" as such term is defined in
Section 9-105(1)(b) of the UCC. Each Debt Instrument has been delivered to the
Indenture Trustee.
PP. Entire Agreement. The Debt Instrument and the Mortgage contain the
entire agreement between the related Obligor and the lender and all obligations
of the lender under the related Home Loan, and no other agreement defines,
modifies, or expands the obligations of the lender under the Home Loan.
In light of FFI's underwriting guidelines, FFI has reviewed all of the
documents constituting each Servicer's Home Loan File and each Indenture
Trustee's Home Loan File and has made such inquiries as it deems reasonable
under the circumstances to make and confirm the accuracy of the representations
set forth herein.
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<PAGE> 8
SECTION 2. Purchase and Delivery.
In consideration for the sale and transfer of the Home Loans to
Purchaser by FFI, and upon transfer of such Home Loans to Purchaser or
Purchaser's designee from FFI on the date hereof with respect to the Initial
Home Loans, and on the applicable Subsequent Transfer Date with respect to the
Subsequent Home Loans, the Purchaser shall pay or cause to be paid to FFI good
and valuable consideration, (the "Purchase Price") including (without
limitation) (a) the net proceeds of the sale of the Asset Backed Securities and
(b) certain residual classes of securities subordinate to the Asset Backed
Securities . The transfer of funds from Purchaser to FFI for the Purchase Price
for all Home Loans purchased shall be made by wire transfer of immediately
available funds to the bank account designated by FFI.
On the date hereof with respect to the Initial Home Loans, and on the
Subsequent Transfer Date with respect to the Subsequent Home Loans, FFI shall
transfer, assign and convey to Purchaser all of FFI's right, title and interest
in and to each Home Loan and the related Home Loan File, free and clear of any
adverse claims, rights or interests therein. FFI shall, or shall cause its
agent to, deliver to Purchaser or Purchaser's designee the related Home Loan
File.
On the date hereof with respect to the Initial Home Loans, and on the
Subsequent Transfer Date with respect to the Subsequent Home Loans, FFI shall
promptly transfer to Purchaser or its designee good title to the related
Mortgage, if applicable, pursuant to an Assignment of Mortgage and legal title
to the related Debt Instrument pursuant to the endorsement thereof in the name
of the Purchaser or its designee; provided that such Assignment of Mortgage, if
applicable, and endorsement of such Debt Instrument shall be prepared and
executed in the manner as specified in writing by the Purchaser. FFI shall
provide to Purchaser, at FFI's cost, a duly executed Assignment of Mortgage, if
applicable, and a blank endorsement of the related Debt Instrument. Purchaser
shall bear the cost and expense of completing and recording such Assignment of
Mortgage, if applicable, and completing the endorsement of such Debt Instrument
to the Purchaser or its designee.
SECTION 3. Sale Treatment.
It is the express intent of the parties hereto that the conveyance of
the Home Loans by FFI to the Purchaser, as contemplated by this Agreement be
and be treated as an absolute transfer and conveyance of all of FFI's right,
title, ownership and other interest in the Home Loans. In the event that,
notwithstanding the intent of the parties, the Home Loans are held by a court
to be the property of FFI, then (i) this Agreement shall be deemed to be a
security agreement within the meaning of Articles 8 and 9 of the applicable
Uniform Commercial Code; (ii) the transfer of the Home Loans provided for
herein shall be deemed to be a grant by FFI to the Purchaser of a security
interest (and/or an assignment of any security interest that FFI may hold) in
all of the FFI's right, title, ownership and other interest in and to the Home
Loans and all amounts payable to the holders of the Home Loans in accordance
with the terms thereof and all proceeds of the conversion, voluntary or
involuntary, of the foregoing into cash, instruments, securities or other
property, to the extent the Purchaser would otherwise be entitled to own such
Home Loans and proceeds thereof; (iii) the possession by the Purchaser or the
Indenture Trustee of the Debt Instruments and such other items of property as
constitute instruments, money, negotiable documents or chattel paper shall be
deemed to be "possession by the secured party" for purposes of perfecting the
security interest pursuant to
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<PAGE> 9
Section 9-305 (or comparable provision) of the applicable Uniform Commercial
Code; and (iv) notifications to persons holding such property, and
acknowledgments, receipts or confirmations from persons holding such property,
shall be deemed notifications to, or acknowledgments, receipts or confirmations
from, financial intermediaries, bailees or agents (as applicable) of the
Purchaser for the purpose of perfecting such security interest under applicable
law. Any assignment of the interest of the Purchaser pursuant to any provision
hereof or pursuant to the Sale and Servicing Agreement shall also be deemed to
be an assignment of any security interest created hereby. FFI and the Purchaser
shall, to the extent consistent with this Agreement, take such actions as may
be reasonably necessary to ensure that, if this Agreement were deemed to create
a security interest in the Home Loans, such security interest would be deemed
to be a perfected first priority security interest under applicable law and
will be maintained as such throughout the term of the Sale and Servicing
Agreement.
SECTION 4. Binding Effect.
This Loan Sale Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the Purchaser and FFI.
SECTION 5. Governing Law.
This Loan Sale Agreement shall be governed by and construed under the
laws of the State of New York.
SECTION 6. Capitalized Terms.
Capitalized terms used and not otherwise defined herein have the
meanings assigned to them in the Sale and Servicing Agreement, dated as of
February 1, 1997, by and between FFI, as Transferor and Servicer, the
Purchaser, as Seller, FIRSTPLUS HOME LOAN TRUST 1997-1, as Issuer and First
Bank National Association, as Indenture Trustee and Co-Owner Trustee.
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<PAGE> 10
IN WITNESS WHEREOF, the undersigned Purchaser and FFI have executed
this Loan Sale Agreement as of the 27th day of February, 1997.
FIRSTPLUS FINANCIAL, INC., as Seller
By:
------------------------------------
Christopher J. Gramlich
Senior Vice President
FIRSTPLUS INVESTMENT CORPORATION,
as Purchaser
By:
------------------------------------
Christopher J. Gramlich
Senior Vice President
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<PAGE> 1
EXHIBIT 10.2
================================================================================
SALE AND SERVICING AGREEMENT
Dated as of February 1, 1997
among
FIRSTPLUS HOME LOAN OWNER TRUST 1997-1
(Issuer)
FIRSTPLUS INVESTMENT CORPORATION
(Seller)
FIRSTPLUS FINANCIAL, INC.
(Transferor and Servicer)
and
FIRST BANK NATIONAL ASSOCIATION
(Indenture Trustee and Co-Owner Trustee)
FIRSTPLUS HOME LOAN OWNER TRUST 1997-1
FIRSTPLUS ASSET BACKED SECURITIES
SERIES 1997-1
================================================================================
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS
Section 1.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Addition Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Affiliated Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Assignment of Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Assumed Pool Principal Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Available Collection Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Available Distribution Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Capitalized Interest Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Capitalized Interest Account Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Capitalized Interest Account Requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Capitalized Interest Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Capitalized Interest Excess . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Certificate(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Certificate Distribution Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Certificateholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Certificateholders' Distributable Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Certificateholders' Interest Carry-Forward Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Certificateholders' Interest Distributable Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Certificateholders' Monthly Interest Distributable Amount . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Certificateholders' Monthly Principal Distributable Amount . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Certificateholders' Principal Distributable Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Certificateholders' Principal Carry-Forward Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Certificate Principal Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Class A-1 Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Class A-2 Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Class A-3 Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Class A-4 Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Class A-5 Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Class A-6 Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Class A-7 Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Class A-8 Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Class Pool Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Class Principal Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Collection Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Completion Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Combination Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
</TABLE>
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<TABLE>
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Credit Support Reduction Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Custodial Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Cut-Off Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Debt Consolidation Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Defaulted Home Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Defective Home Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Deficiency Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Deleted Home Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Determination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Distribution Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
DTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Due Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Due Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Eligible Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Eligible Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Excess Overcollateralization Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Excess Reserve Account Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Excess Spread . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Expected Loan Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
FHLMC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
FICO Score . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Fidelity Bond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
FNMA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Foreclosure Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Funding Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Guaranteed Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Guaranty Insurance Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Guaranty Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
HUD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Home Improvement Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Home Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Home Loan File . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Home Loan Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Home Loan Pool . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Home Loan Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Indenture Trustee Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Indenture Trustee's Home Loan File . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Initial Overcollateralization Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Initial Home Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Initial Pool Principal Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Insurance Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Insured Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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Interest Distribution Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Interest Shortfall . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Interest Shortfall Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Liquidated Home Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Liquidation Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Loan Sale Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Majority Securityholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Monthly Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Moody's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Mortgaged Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Mortgaged Property States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Net Liquidation Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Net Loan Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Note(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Note Distribution Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Noteholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Noteholders' Distributable Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Noteholders' Interest Carry-Forward Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Noteholders' Interest Distributable Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Noteholders' Monthly Interest Distributable Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Noteholders' Monthly Principal Distributable Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Noteholders' Principal Distributable Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Noteholders' Principal Carry-Forward Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Note Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Obligor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Original Certificate Principal Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Original Class Principal Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Overcollateralization Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Overcollateralization Reduction Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Overcollateralization Stepdown Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Ownership Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Owner Trustee Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Pass-Through Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Percentage Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Permitted Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Physical Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Pool Principal Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Post Liquidation Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Preference Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Pre-Funded Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Pre-Funding Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Pre-Funding Account Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Pre-Funding Account Weighted Average Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Pre-Funding Termination Distribution Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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Principal Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Principal Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Projected Interest Shortfall . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Prospectus Supplement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Purchase or Refinance Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Qualified Substitute Home Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Rating Agency or Rating Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Regular Principal Distribution Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Released Mortgaged Property Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Required Credit Support Multiple . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Required Overcollateralization Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Reserve Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Reserve Account Initial Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Reserve Account Requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Reserve Account Subsequent Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Residual Interest: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Reserve Account Withdrawal Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Responsible Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Security or Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Securities Insurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Securities Insurer Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Securities Insurer Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Securities Insurer Reimbursement Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Securityholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Series or Series 1997-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Servicer's Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Servicer's Home Loan Files . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Servicer's Monthly Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Servicing Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Servicing Advance Reimbursement Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Servicing Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Servicing Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Standard & Poor's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Subsequent Home Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Subsequent Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Subsequent Transfer Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Subsequent Transfer Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Subservicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Subservicing Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Subservicing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Substitution Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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Superior Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Termination Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Transferor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Trust Account Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Trust Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Trust Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Trust Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Weighted Average Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 1.02 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE II
CONVEYANCE OF THE HOME LOANS
Section 2.01 Conveyance of the Initial Home Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 2.02 Conveyance of the Subsequent Home Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 2.03 Ownership and Possession of Home Loan Files . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 2.04 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 2.05 Delivery of Home Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 2.06 Acceptance by Indenture Trustee of the Home Loans; Certain Substitutions;
Initial Certification by Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Seller . . . . . . . . . . . . . . . . . . . . . . . 37
Section 3.02 Representations, Warranties and Covenants of the Servicer and Transferor . . . . . . . . . 39
Section 3.03 Individual Home Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 3.04 Subsequent Home Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 3.05 Purchase and Substitution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE IV
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 4.01 Duties of the Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 4.02 Liquidation of Home Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 4.03 Fidelity Bond; Errors and Omission Insurance . . . . . . . . . . . . . . . . . . . . . . . 53
Section 4.04 Title, Management and Disposition of Foreclosure Property . . . . . . . . . . . . . . . . . 53
Section 4.05 Access to Certain Documentation and Information Regarding the Home Loans . . . . . . . . . 54
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Section 4.06 Superior Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 4.07 Subservicing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 4.08 Successor Servicers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE V
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01 Collection Account and Note Distribution Account . . . . . . . . . . . . . . . . . . . . . 56
Section 5.02 Claims Under Guaranty Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 5.03 Pre-Funding Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 5.04 Capitalized Interest Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 5.05 [Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 5.06 Certificate Distribution Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 5.07 Reserve Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 5.08 Trust Accounts; Trust Account Property . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 5.09 Allocation of Losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
ARTICLE VI
STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS
Section 6.01 Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 6.02 Reports of Foreclosure and Abandonment of Mortgaged Property . . . . . . . . . . . . . . . 73
Section 6.03 Specification of Certain Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
ARTICLE VII
GENERAL SERVICING PROCEDURE
Section 7.01 Assumption Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 7.02 Satisfaction of Mortgages and Release of Home Loan Files . . . . . . . . . . . . . . . . . 75
Section 7.03 Servicing Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 7.04 Quarterly Statements as to Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Section 7.05 Annual Independent Public Accountants' Servicing Report . . . . . . . . . . . . . . . . . . 77
Section 7.06 Right to Examine Servicer Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 7.07 Reports to the Indenture Trustee; Collection Account Statements . . . . . . . . . . . . . . 78
ARTICLE VIII
REPORTS TO BE PROVIDED BY SERVICER
Section 8.01 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
</TABLE>
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<TABLE>
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ARTICLE IX
THE SERVICER
Section 9.01 Indemnification; Third Party Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Section 9.02 Merger or Consolidation of the Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Section 9.03 Limitation on Liability of the Servicer and Others . . . . . . . . . . . . . . . . . . . . 80
Section 9.04 Servicer Not to Resign; Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 9.05 Relationship of Servicer to Issuer and the Indenture Trustee . . . . . . . . . . . . . . . 81
ARTICLE X
DEFAULT
Section 10.01 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Section 10.02 Indenture Trustee to Act; Appointment of Successor . . . . . . . . . . . . . . . . . . . . 84
Section 10.03 Waiver of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 10.04 Accounting Upon Termination of Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . 85
ARTICLE XI
TERMINATION
Section 11.01 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 11.02 Optional Termination by Affiliated Holder or the Securities Insurer . . . . . . . . . . . . 86
Section 11.03 Notice of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01 Acts of Securityholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Section 12.02 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Section 12.03 Recordation of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Section 12.04 Duration of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Section 12.05 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Section 12.06 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Section 12.07 Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Section 12.08 No Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Section 12.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Section 12.10 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Section 12.11 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Section 12.12 Actions of Securityholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Section 12.13 Reports to Rating Agencies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Section 12.14 Grant of Securityholder Rights to Securities Insurer . . . . . . . . . . . . . . . . . . . 92
Section 12.15 Third Party Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Section 12.16 Suspension and Termination of Securities Insurer's Rights . . . . . . . . . . . . . . . . . 92
</TABLE>
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Section 12.17 Holders of the Residual Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
</TABLE>
EXHIBITS
EXHIBIT A Home Loan Schedule
EXHIBIT B Form of Subsequent Transfer Agreement
EXHIBIT C Form of Subsequent Transfer Opinion
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This Sale and Servicing Agreement is entered into effective as of
February 1, 1997, among FIRSTPLUS Home Loan Owner Trust 1997-1, a Delaware
business trust (the "Issuer" or the "Trust"), FIRSTPLUS INVESTMENT CORPORATION,
a Nevada corporation, as Seller (the "Seller"), FIRSTPLUS FINANCIAL, INC., a
Texas corporation ("FFI"), as Transferor (in such capacity, the "Transferor")
and Servicer (in such capacity, the "Servicer") and First Bank National
Association, a national banking association, as Indenture Trustee on behalf of
the Noteholders (in such capacity, the "Indenture Trustee") and as Co-Owner
Trustee on behalf of the Certificateholders (in such capacity, the "Co-Owner
Trustee").
PRELIMINARY STATEMENT
WHEREAS, the Issuer desires to purchase a pool of Home Loans which
were originated or purchased by the Transferor and sold to the Seller in the
ordinary course of business of the Transferor;
WHEREAS, the Seller is willing to sell such Home Loans to the Issuer;
and
WHEREAS, the Servicer is willing to service such Home Loans in
accordance with the terms of this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto hereby 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.
Addition Notice: With respect to the transfer of Subsequent Home
Loans to the Trust pursuant to Section 2.02 of this Agreement, notice of the
Seller's designation of Subsequent Home Loans to be sold to the Issuer and the
aggregate Principal Balance of such Subsequent Home Loans as of the related
Cut-Off Date, which shall be given to the Indenture Trustee and to the
Securities Insurer not later than three Business Days prior to the related
Subsequent Transfer Date.
Affiliated Holder: FIRSTPLUS RESIDUAL HOLDINGS, INC., a Nevada
corporation, as the holder of approximately 1% of the Percentage Interest of
the Residual Interest and approximately 1% of the Original Certificate
Principal Balance of the Certificates.
Agreement: This Sale and Servicing Agreement and all amendments
hereof and supplements hereto.
Assignment of Mortgage: With respect to each Home Loan, an
assignment, notice of transfer or equivalent instrument sufficient under the
laws of the jurisdiction wherein the related Mortgaged
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 1
<PAGE> 11
Property is located to reflect of record the sale of the related Home Loan to
the Issuer for the benefit of the Securityholders and the Securities Insurer.
Assumed Pool Principal Balance: On the Closing Date, the amount equal
to the sum of the Initial Pool Principal Balance, plus the Pre-Funding Account
Deposit, which amount is $600,000,000.
Available Collection Amount: An amount equal to the sum of: (i) all
amounts received on the Home Loans or required to be paid by the Servicer, the
Transferor or the Seller during the related Due Period (exclusive of amounts
not required to be deposited in the Collection Account and amounts permitted to
be withdrawn by the Indenture Trustee from the Collection Account pursuant to
Section 5.01(d) of this Agreement) as reduced by any portion thereof that may
not be withdrawn therefrom pursuant to an order of a United States bankruptcy
court of competent jurisdiction imposing a stay pursuant to Section 362 of the
United States Bankruptcy Code; (ii) in the case of a Distribution Date relating
to a Due Period that occurs prior to the end of the Funding Period, an amount
from the Capitalized Interest Account sufficient to fund any shortfall in the
Interest Distribution Amount attributable to the amounts in the Pre-Funding
Account; (iii) in the case of the Pre-Funding Termination Distribution Date,
amounts, if any, remaining in the Pre- Funding Account at the end of the
Funding Period (net of reinvestment income, which shall be transferred to the
Capitalized Interest Account); (iv) with respect to the final Distribution Date
or an early redemption or termination of the Securities pursuant to Section
11.02, the Termination Price, and (v) any and all income or gain from
investments in the Collection Account.
Available Distribution Amount: The amount deposited in the Note
Distribution Account pursuant to Section 5.01(b)(2).
Business Day: Any day other than (i) a Saturday or Sunday, or (ii) a
day on which the Securities Insurer and banking institutions in New York City
or in the city in which the corporate trust office of the Indenture Trustee is
located are authorized or obligated by law or executive order to be closed.
Capitalized Interest Account: The account established pursuant to
Section 5.04, which account shall contain the Capitalized Interest Amount.
Capitalized Interest Account Deposit: An amount equal to $3,030,025.
Capitalized Interest Account Requirement: On the Closing Date, the
Capitalized Interest Account Requirement will equal the Capitalized Interest
Account Deposit. Thereafter, as determined by the Servicer pursuant to Section
5.04 on any Business Day prior to May 27, 1997, the Capitalized Interest
Account Requirement will equal the Projected Interest Shortfall.
Capitalized Interest Amount: The amount on deposit in the Capitalized
Interest Account as of any date of determination, after giving effect to (i)
amounts to be transferred to the Note Distribution Account for distribution on
the next Distribution Date pursuant to Section 5.04(a), (ii) amounts released
to the holders of Residual Interest pursuant to Section 5.04(d), and (iii) any
income and gain,
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 2
<PAGE> 12
if any, on funds held in the Capitalized Interest Account and any income and
gain, if any, transferred to the Capitalized Interest Account from funds held
in the Pre-Funding Account pursuant to Section 5.03.
Capitalized Interest Excess: As determined by the Servicer pursuant to
Section 5.04, the amount of excess funds on deposit in the Capitalized Interest
Account; on any Business Day occurring prior to May 27, 1997, the Capitalized
Interest Excess shall equal the greater of (i) zero and (ii) the Capitalized
Interest Amount less the Capitalized Interest Account Requirement.
Certificate(s): Any one or more Certificate(s) issued pursuant to the
Trust Agreement.
Certificate Distribution Account: The Account established and
maintained pursuant to Section 5.06.
Certificateholder: A holder of any Certificate.
Certificateholders' Distributable Amount: With respect to any
Distribution Date, the sum of the Certificateholders' Principal Distributable
Amount and the Certificateholders' Interest Distributable Amount.
Certificateholders' Interest Carry-Forward Amount: With respect to
any Distribution Date, the excess of the Certificateholders' Monthly Interest
Distributable Amount for the immediately preceding Distribution Date and any
outstanding Certificateholders' Interest Carry-Forward Amount on such preceding
Distribution Date, over the amount in respect of interest that is actually
deposited in the Certificate Distribution Account on such preceding
Distribution Date.
Certificateholders' Interest Distributable Amount: With respect to
any Distribution Date, the sum of the Certificateholders' Monthly Interest
Distributable Amount for such Distribution Date and the Certificateholders'
Interest Carry-Forward Amount for such Distribution Date.
Certificateholders' Monthly Interest Distributable Amount: With
respect to any Distribution Date and the Certificates, thirty (30) days'
accrued interest at the Pass Through Rate on the Certificate Principal Balance
immediately preceding such Distribution Date (or, in the case of the first
Distribution Date, on the Closing Date), after giving effect to all payments
allocable to the reduction of the Certificate Principal Balance made on or
prior to the immediately preceding Distribution Date.
Certificateholders' Monthly Principal Distributable Amount: With
respect to any Distribution Date prior to the Distribution Date on which the
Notes are paid in full, zero; and with respect to any Distribution Date
commencing on the Distribution Date on which the Notes are paid in full, the
sum of (i) the Regular Principal Distribution Amount (less, on the Distribution
Date on which the Notes are paid in full, any portion thereof payable on the
Notes), plus (ii) for each Distribution Date for which the related Due Period
occurred during the Funding Period and for each Distribution Date thereafter if
the Overcollateralization Amount is less than the Required
Overcollateralization Amount, the Excess Spread, if any.
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 3
<PAGE> 13
Certificateholders' Principal Distributable Amount: With respect to
any Distribution Date, the sum of the Certificateholders' Monthly Principal
Distributable Amount for such Distribution Date and the Certificateholders'
Principal Carry-Forward Amount as of the close of the preceding Distribution
Date; provided, however, that the Certificateholders' Principal Distributable
Amount shall not exceed the Certificate Principal Balance. In addition, on the
Final Scheduled Distribution Date, the principal required to be distributed to
Certificateholders shall not be less than the amount that is necessary (after
giving effect to the other amounts to be deposited in the Certificate
Distribution Account on such Distribution Date and allocable to principal) to
reduce the Certificate Principal Balance to zero.
Certificateholders' Principal Carry-Forward Amount: As of the close
of any Distribution Date, the excess of the (A) Certificateholders' Monthly
Principal Distributable Amount for such Distribution Date and any outstanding
Certificateholders' Principal Carry-Forward Amount from the immediately
preceding Distribution Date, over (B) the amount in respect of principal that
is actually deposited in the Certificate Distribution Account.
Certificate Principal Balance: As of any date of determination, the
Original Certificate Principal Balance of the Certificates reduced by all
amounts previously distributed to the Certificateholders in reduction of the
Certificate Principal Balance of the Certificates on all previous Distribution
Dates pursuant Section 5.06 hereof.
Class: With respect to the Notes, all Notes bearing the same class
designation, and with respect to the Certificates, the Certificates.
Class A-1 Note: Any Class A-1 Note in the form attached to the
Indenture as Exhibit A-1.
Class A-2 Note: Any Class A-2 Note in the form attached to the
Indenture as Exhibit A-2.
Class A-3 Note: Any Class A-3 Note in the form attached to the
Indenture as Exhibit A-3.
Class A-4 Note: Any Class A-4 Note in the form attached to the
Indenture as Exhibit A-4.
Class A-5 Note: Any Class A-5 Note in the form attached to the
Indenture as Exhibit A-5.
Class A-6 Note: Any Class A-6 Note in the form attached to the
Indenture as Exhibit A-6.
Class A-7 Note: Any Class A-7 Note in the form attached to the
Indenture as Exhibit A-7.
Class A-8 Note: Any Class A-8 Note in the form attached to the
Indenture as Exhibit A-8.
Class Pool Factor: With respect to each Class of Notes and as of any
Determination Date, the Class Principal Balance of the respective Class of
Notes divided by the Original Class Principal Balance of such Class. With
respect to the Certificates and as of any Determination Date, the Certificate
Principal Balance of the respective Certificates divided by the Original
Certificate Principal Balance of the Certificates.
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 4
<PAGE> 14
Class Principal Balance: With respect to each Class of Notes and as
of any date of determination, the Original Class Principal Balance of each such
Class reduced by all amounts previously distributed to Noteholders of such
Class in reduction of the principal balance of such Class on all previous
Distribution Dates pursuant to the applicable provisions of Section 8.2(c), of
the Indenture providing for the distribution of principal to the Noteholders.
Closing Date: February 27, 1997.
Code: The Internal Revenue Code of 1986, as amended from time to
time, and Treasury Regulations promulgated thereunder.
Collection Account: The account established and maintained by the
Servicer in accordance with Section 5.01.
Completion Certificate: With respect to certain Home Improvement
Loans, a certificate executed by the related Obligor wherein such Obligor
states the related contractor or seller of the property improvement has
completed to such Obligor's satisfaction the improvements for which the related
Home Loan was obtained.
Combination Loan: A loan, the proceeds of which were used by the
Obligor in combination to finance property improvements and for debt
consolidation or other purposes, and which are marketed by the Transferor as
"BusterPlus(TM) Loans."
Co-Owner Trustee: First Bank National Association, a national banking
association, in its capacity as the Co- Owner Trustee under the Trust Agreement
acting on behalf of the Certificateholders, or any successor co-owner trustee
under the Trust Agreement.
Credit Support Reduction Date: The Distribution Date occurring on the
later of: (i) the thirty-sixth (36th) Distribution Date; or (ii) the
Distribution Date on which the Pool Principal Balance is equal to or less than
fifty percent (50%) of the aggregate Principal Balances as of the applicable
Cut-Off Dates of all the Home Loans.
Custodial Agreement: The custodial agreement dated February 1, 1997
by and among the Seller, FFI, as the Transferor and the Servicer, the Indenture
Trustee, and Bank One, Texas, National Association, as the Custodian, and any
subsequent custodial agreement, in similar form and substance, providing for
the retention of the Home Loan Files by the Custodian on behalf of the
Indenture Trustee.
Custodian: Any custodian acceptable to the Securities Insurer and
appointed by the Indenture Trustee pursuant to the Custodial Agreement, which
shall not be affiliated with the Servicer, the Transferor, any Subservicer, or
the Seller. Bank One, Texas, National Association, shall be the initial
Custodian pursuant to the terms of the Custodial Agreement.
Cut-Off Date: With respect to the Initial Home Loans, the close of
business on January 31, 1997 and with respect to each Subsequent Home Loan,
the close of business on the date specified as such in the applicable
Subsequent Transfer Agreement.
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 5
<PAGE> 15
Debt Consolidation Loan: A loan, the proceeds of which were primarily
used by the related Obligor for debt consolidation purposes or purposes other
than to finance property improvements and which are marketed by the Transferor
as "DebtBuster Loans".
Debt Instrument: The note or other evidence of indebtedness
evidencing the indebtedness of an Obligor under a Home Loan.
Defaulted Home Loan: With respect to the calculation of the Required
Credit Support Multiple, or the waiver or modification of a Home Loan pursuant
to Section 4.01(c), during a Due Period, any Home Loan, including without
limitation any Liquidated Home Loan, with respect to which any of the following
occurs: (a) foreclosure or similar proceedings have been commenced; (b) any
portion of a Monthly Payment becomes 180 days past due by the related Obligor;
or (c) the Servicer or any Subservicer has determined in good faith and in
accordance with customary servicing practices that such Home Loan is
uncollectible; provided, further, that with respect to a Defaulted Home Loan
that is repurchased or substituted pursuant to Section 3.05 or a Defaulted Home
Loan that is modified, waived or varied pursuant to Section 4.01(c), such
Defaulted Home Loan shall continue to be included in the calculation of the
Required Credit Support Multiple.
Defective Home Loan: As defined in Section 3.05 hereof.
Deficiency Amount: As of any Distribution Date, the amount by which
the sum of the Interest Distribution Amount for the Notes and the Certificates
and the Regular Principal Distribution Amount payable on the related Security
on such Distribution Date exceeds the Available Collection Amount (less the
Trust Fees and Expenses), plus all amounts on deposit in the Reserve Account in
respect of the Securities.
Delivery: When used with respect to Trust Account Property means:
(a) with respect to bankers' acceptances, commercial
paper, negotiable certificates of deposit and other obligations that
constitute "instruments" within the meaning of Section 9-105(1)(i) of
the UCC and are susceptible of physical delivery, transfer thereof to
the Indenture Trustee or its nominee or custodian by physical delivery
to the Indenture Trustee or its nominee or custodian endorsed to, or
registered in the name of, the Indenture Trustee or its nominee or
custodian or endorsed in blank, and, with respect to a certificated
security (as defined in Section 8-102 of the UCC) transfer thereof (i)
by delivery of such certificated security endorsed to, or registered
in the name of, the Indenture Trustee or its nominee or custodian or
endorsed in blank to a financial intermediary (as defined in Section
8-313 of the UCC) and the making by such financial intermediary of
entries on its books and records identifying such certificated
securities as belonging to the Indenture Trustee or its nominee or
custodian and the sending by such financial intermediary of a
confirmation of the purchase of such certificated security by the
Indenture Trustee or its nominee or custodian, or (ii) by delivery
thereof to a "clearing corporation" (as defined in Section 8-102(3) of
the UCC) and the making by such clearing corporation of appropriate
entries on its books reducing the appropriate securities account of
the transferor and increasing the appropriate securities account of a
financial intermediary by the amount of such certificated security,
the identification by the clearing corporation of the certificated
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 6
<PAGE> 16
securities for the sole and exclusive account of the financial
intermediary, the maintenance of such certificated securities by such
clearing corporation or a "custodian bank" (as defined in Section
8-102(4) of the UCC) or the nominee of either subject to the clearing
corporation's exclusive control, the sending of a confirmation by the
financial intermediary of the purchase by the Indenture Trustee or its
nominee or custodian of such securities and the making by such
financial intermediary of entries on its books and records identifying
such certificated securities as belonging to the Indenture Trustee or
its nominee or custodian (all of the foregoing, "Physical Property"),
and, in any event, any such Physical Property in registered form shall
be in the name of the Indenture Trustee or its nominee or custodian;
and such additional or alternative procedures as may hereafter become
appropriate to effect the complete transfer of ownership of any such
Trust Account Property (as defined herein) to the Indenture Trustee or
its nominee or custodian, consistent with changes in applicable law or
regulations or the interpretation thereof;
(b) with respect to any securities issued by the U.S.
Treasury, the Federal Home Loan Mortgage Corporation or by the Federal
National Mortgage Association that is a book-entry security held
through the Federal Reserve System pursuant to federal book-entry
regulations, the following procedures, all in accordance with
applicable law, including applicable federal regulations and Articles
8 and 9 of the UCC: book-entry registration of such Trust Account
Property to an appropriate book-entry account maintained with a
Federal Reserve Bank by a financial intermediary that is also a
"depository" pursuant to applicable federal regulations and issuance
by such financial intermediary of a deposit advice or other written
confirmation of such book-entry registration to the Indenture Trustee
or its nominee or custodian of the purchase by the Indenture Trustee
or its nominee or custodian of such book-entry securities; the making
by such financial intermediary of entries in its books and records
identifying such book-entry security held through the Federal Reserve
System pursuant to federal book-entry regulations as belonging to the
Indenture Trustee or its nominee or custodian and indicating that such
custodian holds such Trust Account Property solely as agent for the
Indenture Trustee or its nominee or custodian; and such additional or
alternative procedures as may hereafter become appropriate to effect
complete transfer of ownership of any such Trust Account Property to
the Indenture Trustee or its nominee or custodian, consistent with
changes in applicable law or regulations or the interpretation
thereof; and
(c) with respect to any item of Trust Account Property
that is an uncertificated security under Article 8 of the UCC and that
is not governed by clause (b) above, registration on the books and
records of the issuer thereof in the name of the financial
intermediary, the sending of a confirmation by the financial
intermediary of the purchase by the Indenture Trustee or its nominee
or custodian of such uncertificated security, the making by such
financial intermediary of entries on its books and records identifying
such uncertificated certificates as belonging to the Indenture Trustee
or its nominee or custodian.
Deleted Home Loan: A Home Loan replaced by or to be replaced by a
Qualified Substitute Home Loan pursuant to Section 3.05 or 2.06(c) hereof.
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 7
<PAGE> 17
Determination Date: The day of each month which is four (4) Business
Days prior to the related Distribution Date.
Distribution Date: The 10th day of any month or if such 10th day is
not a Business Day, the first Business Day immediately following such day,
commencing in March 1997.
DTC: The Depository Trust Company.
Due Date: The day of the month on which the Monthly Payment is due
from the Obligor on a Home Loan.
Due Period: With respect to each Distribution Date, the calendar
month immediately preceding the month in which such Distribution Date occurs
with the first Due Period commencing on February 1, 1997.
Eligible Account: At any time, an account which is any of the
following: (i) an account maintained with a depository institution (A) the
long-term debt obligations of which are at such time rated by each Rating
Agency in one of their two highest long-term rating categories, or (B) the
short-term debt obligations of which are then rated by each Rating Agency in
their highest short-term rating category; (ii) an account or accounts the
deposits in which are fully insured by either the Bank Insurance Fund or the
Savings Association Insurance Fund of the FDIC; (iii) a trust account (which
shall be a "segregated trust account") maintained with the corporate trust
department of a federal or state chartered depository institution or trust
company with trust powers and acting in its fiduciary capacity for the benefit
of the Indenture Trustee and the Issuer, which depository institution or trust
company shall have capital and surplus of not less than $50,000,000; or (iv) an
account that will not cause any Rating Agency to downgrade or withdraw its
then-current rating(s) assigned to the Notes or the Certificates, as evidenced
in writing by such Rating Agency. (Each reference in this definition of
"Eligible Account" to the Rating Agency shall be construed as a reference to
Standard & Poor's and Moody's.)
Eligible Servicer: A Person who is qualified to act as Servicer of
the Home Loans under applicable federal and state laws and regulations and who
satisfies the criteria of Section 9.04(b) hereof.
Event of Default: As described in Section 10.01 hereof.
Excess Overcollateralization Amount: As calculated with respect to
any Distribution Date occurring after the Funding Period ends, the excess of,
if any, (x) the Overcollateralization Amount on such Distribution Date over (y)
the Required Overcollateralization Amount on such Distribution Date (after all
distributions for such Distribution Date have been made but excluding any
distributions of the Overcollateralization Reduction Amounts for such
Distribution Date).
Excess Reserve Account Amount: As defined in Section 5.07(c).
Excess Spread: With respect to any Distribution Date, as determined
in accordance with Section 5.01(c) an amount equal to the portion, if any, of
the Available Collection Amount for such
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 8
<PAGE> 18
Distribution Date that remains after payment of (a) the Trust Fees and
Expenses; (b) the Noteholders' Interest Distributable Amount; (c) the Regular
Principal Distribution Amount; (d) the Certificateholders' Interest
Distributable Amount; (e) the Securities Insurer Reimbursement Amount; and (f)
the Servicing Advance Reimbursement Amount.
Expected Loan Losses: As defined in Section 10.01(a)(vii).
FDIC: The Federal Deposit Insurance Corporation and any successor
thereto.
FHLMC: The Federal Home Loan Mortgage Corporation and any successor
thereto.
FICO Score: The credit evaluation scoring methodology developed by
Fair, Issac and Company.
Fidelity Bond: As described in Section 4.03 hereof.
FNMA: The Federal National Mortgage Association and any successor
thereto.
Foreclosure Property: Any real property or personal property securing
a Home Loan that has been acquired by the Servicer through foreclosure, deed in
lieu of foreclosure or similar proceedings in respect of the related Home Loan.
Funding Period: The period beginning on the Closing Date and ending on
the earlier of (a) the date on which the amount on deposit in the Pre-Funding
Account is reduced to $25,000 or less and the Transferor directs that the
Funding Period end, (b) the close of business on May 27, 1997 provided,
however, that the Funding Period shall end upon the occurrence of an Event of
Default hereunder.
Guaranteed Payment: With respect to the Guaranty Policy, the sum of
(i) as of any Distribution Date, any Deficiency Amount and (ii) any unpaid
Preference Amount.
Guaranty Insurance Premium: The premium, payable monthly, that is
specified in the Commitment Letter issued by the Securities Insurer with
respect to the Notes and the Certificates.
Guaranty Policy. That certain guaranty insurance policy for the
Securities, number 23232 dated February 27, 1997, and issued by the Securities
Insurer to the Indenture Trustee and guaranteeing payment of any Guaranteed
Payment.
HUD: The United States Department of Housing and Urban Development
and any successor thereto.
Home Improvement Loan: A loan, the net proceeds of which were or will
be used by the Obligor to finance property improvements.
Home Loan: A Home Improvement Loan, Debt Consolidation Loan,
Combination Loan, Purchase or Refinance Loan that is included in the Home Loan
Pool. As applicable, a Home Loan
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 9
<PAGE> 19
shall be deemed to refer to the related Debt Instrument, Mortgage, and any
related Foreclosure Property.
Home Loan File: As defined in Section 2.05.
Home Loan Interest Rate: The fixed annual rate of interest borne by a
Debt Instrument, as shown on the related Home Loan Schedule as the same may be
modified by the Servicer in accordance with Section 4.01(c) hereof.
Home Loan Pool: The pool of Initial Home Loans and Subsequent Home
Loans.
Home Loan Schedule: The schedule of Initial Home Loans attached
hereto as Exhibit A, as amended or supplemented from time to time, including
any schedules of Subsequent Home Loans attached as exhibits to any Subsequent
Transfer Agreement, such schedules identifying each Home Loan by address of the
related Mortgaged Property, if any, and the name(s) of each Obligor and setting
forth as to each Home Loan the following information: (i) the Principal
Balance as of the applicable Cut-Off Date, (ii) the account number, (iii) the
original principal amount, (iv) the Due Date, (v) the Home Loan Interest Rate,
(vi) the first date on which a Monthly Payment is due under the related Note,
(vii) the Monthly Payment, (viii) the maturity date of the related Debt
Instrument, and (ix) the remaining number of months to maturity as of the
applicable Cut-Off Date.
Indenture: The Indenture, dated as of February 1, 1997, between the
Issuer and the Indenture Trustee.
Indenture Trustee: First Bank National Association, a national
banking association, as Indenture Trustee under the Indenture and this
Agreement acting on behalf of the Noteholders, or any successor indenture
trustee under the Indenture or this Agreement.
Indenture Trustee Fee: The annual fee payable to the Indenture
Trustee, calculated and payable monthly on each Distribution Date, equal to the
per annum percentage (as set forth in the Indenture Trustee Fee Agreement) the
Pool Principal Balance as of the immediately preceding Determination Date,
except with respect to the first Distribution Date such monthly amount shall be
pro rated for the first Due Period.
Indenture Trustee's Home Loan File: As defined in Section 2.05(d).
Initial Overcollateralization Amount: Zero.
Initial Home Loan: An individual Home Loan that is conveyed to the
Issuer pursuant to this Agreement on the Closing Date, together with the rights
and obligations of a holder thereof and payments thereon and proceeds therefrom
received after the January 31, 1997 Cut-off Date, the Initial Home Loans
subject to this Agreement being identified on the Home Loan Schedule annexed
hereto as Exhibit A.
Initial Pool Principal Balance: $400,550,747.62, which is the Pool
Principal Balance as of the January 31, 1997 Cut-Off Date.
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 10
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Insurance Agreement: The Insurance and Indemnification Agreement,
dated as of February 27, 1997, among the Securities Insurer, as Securities
Insurer, the Transferor, as Servicer and Transferor, the Seller, as Seller, the
Issuer, as Trust, the Affiliated Holder, as Affiliated Holder, RAC Financial
Group, Inc., as Guarantor, and the Indenture Trustee, as Indenture Trustee and
Co-Owner Trustee.
Insurance Proceeds: With respect to any Home Loan, the proceeds paid
to the Servicer by any insurer pursuant to any insurance policy covering a Home
Loan, Mortgaged Property or Foreclosure Property or any other insurance policy
that relates to a Home Loan, net of any expenses which are incurred by the
Servicer in connection with the collection of such proceeds and not otherwise
reimbursed to the Servicer, other than Guaranteed Payments and proceeds of any
insurance policy that are to be applied to the restoration or repair of the
Mortgaged Property or released to the Obligor in accordance with customary
mortgage loan servicing procedures applicable to the respective loan type,
including Home Improvement Loans, Debt Consolidation Loans and Combination
Loans.
Insured Securities: Each of the Class A-1 Notes, the Class A-2 Notes,
the Class A-3 Notes, the Class A-4 Notes, the Class A-5 Notes, the Class A-6
Notes, the Class A-7 Notes, the Class A-8 Notes and the Certificates.
Interest Distribution Amount: On any Distribution Date, the sum of
the Noteholders' Interest Distributable Amount for each Class of Notes and the
Certificateholders' Interest Distributable Amount for such Distribution Date.
Interest Shortfall: As to any Distribution Date prior to the end of
the Funding Period, the amount of the shortfall in interest on the Securities
arising as a result of the utilization of the Pre-Funding Account for the
purchase by the Issuer of Subsequent Home Loans after the Closing Date. With
respect to the March 1997 Distribution Date, the Interest Shortfall is equal to
thirty (30) days' interest on the Pre-Funding Account Deposit computed at a per
annum rate equal to the Weighted Average Interest Rate on the Closing Date.
With respect to the April 1997 and May 1997 Distribution Dates, the Interest
Shortfall will be equal to 30 days' interest on the average daily balance in
the Pre- Funding Account (net of interest and investment earnings) during the
related Due Period, computed at a per annum rate equal to the Weighted Average
Interest Rate as of the immediately preceding Distribution Date (after
distributions), provided that the use of the average daily balance is subject
to the applicable Cut-Off Date being prior to the beginning of the related Due
Period and with respect to the Subsequent Home Loans delivered during such
related Due Period, the next Monthly Payment occurring during such related Due
Period.
Interest Shortfall Rate: The per annum rate equal to 4.1544%.
Interim Required Overcollateralization: means an amount equal to 4.0%
of the aggregate Principal Balances as of the applicable Cut-Off Dates of the
Home Loans.
Liquidated Home Loan: Any Home Loan or Foreclosure Property in
respect of a Home Loan on which a Monthly Payment is in excess of 30 days past
due and as to which the Servicer has determined that all amounts which it
reasonably and in good faith expects to collect have been
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 11
<PAGE> 21
recovered from or on account of such defaulted Home Loan or the related
Foreclosure Property; provided that, in any event, such defaulted Home Loan or
the related Foreclosure Property shall be deemed uncollectible and therefore
deemed a Liquidated Home Loan upon the earlier of: (a) the liquidation of the
related Foreclosure Property, (b) the determination by the Servicer in
accordance with customary servicing practices that no further amounts are
collectible from the Home Loan and any related Mortgaged Property, or (c) the
date on which any portion of a Monthly Payment on any Home Loan is in excess of
300 days past due.
Liquidation Proceeds: With respect to a Liquidated Home Loan, any cash
amounts received in connection with the liquidation of such Liquidated Home
Loan, whether through trustee's sale, foreclosure sale or other disposition,
and any other amounts required to be deposited in the Collection Account
pursuant to Section 4.02 or 4.04, in each case other than Insurance Proceeds
and Released Mortgaged Property Proceeds.
Loan Sale Agreement: Individually or collectively, as the context in
which this term is used may require, any or all of the following: (i) the loan
sale agreement between the Transferor, as seller, and the Seller, as purchaser,
pursuant to which the Seller has acquired any of the Home Loans; and (ii) each
loan sale agreement entered into by the Transferor, as purchaser, pursuant to
which the Transferor has acquired any of the Home Loans and which shall include
all of the rights and benefits of the Transferor thereunder with respect to
such Home Loans, subject to any limitations thereunder regarding assignment by
the Transferor.
Majority Securityholders: Subject to Section 12.14, (i) until such
time as the sum of the Class Principal Balances of all Classes of Notes has
been reduced to zero, the holder or holders of in excess of 50% of the Class
Principal Balance of all Classes of Notes (accordingly, the holders of the
Certificates shall be excluded from any rights or actions of the Majority
Securityholders during such period); and (ii) thereafter, the holder or holders
of in excess of 50% of the Certificate Principal Balance of the Certificates.
Monthly Payment: The scheduled monthly payment of principal and/or
interest required to be made by an Obligor on the related Home Loan, as set
forth in the related Debt Instrument.
Moody's: Moody's Investors Service, Inc. or any successor thereto.
Mortgage: The mortgage, deed of trust or other security instrument
creating a lien in accordance with applicable law on a Mortgaged Property to
secure the Debt Instrument which evidences a Home Loan.
Mortgaged Property: The property (real, personal or mixed) encumbered
by the Mortgage which secures the Debt Instrument evidencing a Home Loan.
Mortgaged Property States: Each state in which any Mortgaged Property
securing an Initial Home Loan is located as set forth in the Home Loan
Schedule, and any other state wherein a Mortgaged Property securing any
Subsequent Home Loan may be located as set forth in the applicable Home Loan
Schedule.
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 12
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Net Liquidation Proceeds: Liquidation Proceeds net of any
reimbursements to the Servicer made therefrom for any unreimbursed Servicing
Advances made and any other fees and expenses paid in connection with the
foreclosure, conservation and liquidation of the related Home Loan or
Foreclosure Property pursuant to Sections 4.02 and 4.04 hereof.
Net Loan Losses: On each Distribution Date, the sum of (A) with
respect to the Home Loans that become Liquidated Home Loans during the
immediately preceding Due Period, an amount (but not less than zero) determined
as of the related Determination Date equal to:
(i) the aggregate uncollected Principal Balances of such
Liquidated Home Loans as of the last day of such Due Period
and without the application of any amounts included in clause
(ii) below, minus
(ii) the aggregate amount of any recoveries attributable to
principal from whatever source received during any Due Period,
with respect to such Liquidated Home Loans, including any
subsequent Due Period, and including without limitation any
Net Liquidation Proceeds, any Insurance Proceeds, any Released
Mortgaged Property Proceeds, any payments from the related
Obligor and any payments made pursuant to Section 3.05 less
the amount of any expenses incurred in connection with such
recoveries; and
(B) with respect to any Defaulted Home Loan that is subject to a
modification by the Servicer, an amount equal to the portion of the Principal
Balance, if any, released in connection with such modification provided,
however, that for purposes of determining the Required Credit Support Multiple,
all of the preceding references to "Liquidated Home Loans" shall be replaced
with "Defaulted Home Loans".
Note(s): One or more of the Class A-1 Notes, the Class A-2 Notes, the
Class A-3 Notes, the Class A-4 Notes, the Class A-5 Notes, the Class A-6 Notes,
the Class A-7 Notes or the Class A-8 Notes.
Note Distribution Account: The account established and maintained
pursuant to Section 5.01(a)(2).
Noteholder: A holder of a Note.
Noteholders' Distributable Amount: With respect to any Distribution
Date, the sum of the Noteholders' Principal Distributable Amount for such
Distribution Date and the Noteholders' Interest Distributable Amount for such
Distribution Date.
Noteholders' Interest Carry-Forward Amount: With respect to any
Distribution Date, the excess of (A) the Noteholders' Monthly Interest
Distributable Amount for the preceding Distribution Date and any outstanding
Noteholders' Interest Carry-Forward Amount on such preceding Distribution Date,
over (B) the amount in respect of interest that is actually deposited in the
Note Distribution Account on such preceding Distribution Date.
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 13
<PAGE> 23
Noteholders' Interest Distributable Amount: With respect to any
Distribution Date, the sum of the Noteholders' Monthly Interest Distributable
Amount for such Distribution Date and the Noteholders' Interest Carry-Forward
Amount for such Distribution Date.
Noteholders' Monthly Interest Distributable Amount: With respect to
each Distribution Date and each Class of Notes, the aggregate amount of thirty
(30) days' accrued interest at the respective Interest Rate for such Class of
Notes on the Class Principal Balance of such Class immediately preceding such
Distribution Date (or, in the case of the first Distribution Date, on the
Closing Date) after giving effect to all payments of principal to the
Noteholders of such Class on or prior to the immediately preceding Distribution
Date.
Noteholders' Monthly Principal Distributable Amount: With respect to
each Distribution Date, the sum of (i) the Regular Principal Distribution
Amount, plus (ii) for each Distribution Date for which the related Due Period
ended during the Funding Period and for each Distribution Date thereafter if
the Overcollateralization Amount is less than the Required
Overcollateralization Amount, the Excess Spread, if any, plus (iii) if no event
of default has occurred under the Indenture and the remaining amount in the
Pre-Funding Account at the end of the Funding Period is less than or equal to
$50,000, then such remaining amount.
Noteholders' Principal Distributable Amount: With respect to any
Distribution Date, the sum of the Noteholders' Monthly Principal Distributable
Amount for such Distribution Date and the Noteholders' Principal Carry- Forward
Amount as of the close of the preceding Distribution Date; provided, however,
that the Noteholders' Principal Distributable Amount shall not exceed the
outstanding principal balance of the Notes; and provided, further, that (i) the
Noteholders' Principal Distributable Amount on the Class A-1 Final Scheduled
Distribution Date shall not be less than the Amount that is necessary (after
giving effect to other amounts to be deposited in the Note Distribution Account
on such Distribution Date and allocable to principal) to reduce the outstanding
Class Principal Balance of the Class A-1 Notes to zero; (ii) the Noteholders'
Principal Distributable Amount on the Class A-2 Final Scheduled Distribution
Date shall not be less than the amount that is necessary (after giving effect
to other amounts to be deposited in the Note Distribution Account on such
Distribution Date and allocable to principal) to reduce the outstanding Class
Principal Balance of the Class A-2 Notes to zero; (iii) the Noteholders'
Principal Distributable Amount on the Class A-3 Final Scheduled Distribution
Date shall not be less than the amount that is necessary (after giving effect
to other amounts to be deposited in the Note Distribution Account on such
Distribution Date and allocable to principal) to reduce the outstanding Class
Principal Balance of the Class A-3 Notes to zero; (iv) the Noteholders'
Principal Distributable Amount on the Class A-4 Final Scheduled Distribution
Date shall not be less than the amount that is necessary (after giving effect
to other amounts to be deposited in the Note Distribution Account on such
Distribution Date and allocable to principal) to reduce the outstanding Class
Principal Balance of the Class A-4 Notes to zero; (v) the Noteholders'
Principal Distributable Amount on the Class A-5 Final Scheduled Distribution
Date shall not be less than the amount that is necessary (after giving effect
to other amounts to be deposited in the Note Distribution Account on such
Distribution Date and allocable to principal) to reduce the outstanding Class
Principal Balance of the Class A-5 Notes to zero; (vi) the Noteholders'
Principal Distribution Amount on the Class A-6 Final Scheduled Distribution
Date shall not be less than the amount that is necessary (after giving effect
to other amounts to be deposited in the Note Distribution Account on such
Distribution Date and allocable to principal) to
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 14
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reduce the outstanding Class Principal Balance of the Class A-6 Notes to zero;
(vii) the Noteholders' Principal Distributable Amount on the Class A-7 Final
Scheduled Distribution Date shall not be less than the amount that is necessary
(after giving effect to other amounts to be deposited in the Note Distribution
Account on such Distribution Date and allocable to principal) to reduce the
outstanding Class Principal Balance of the Class A-7 Notes to zero; and (viii)
the Noteholders' Principal Distributable Amount on the Class A-8 Final
Scheduled Distribution Date shall not be less than the amount that is necessary
(after giving effect to other amounts to be deposited in the Note Distribution
Account on such Distribution Date and allocable to principal) to reduce the
outstanding Class Principal Balance of the Class A-8 Notes to zero.
Noteholders' Principal Carry-Forward Amount: As of the close of any
Distribution Date, the excess of (A) the Noteholders' Monthly Principal
Distributable Amount and any outstanding Noteholders' Principal Carry-Forward
Amount from the preceding Distribution Date, over (B) the amount in respect of
principal that is actually deposited in the Note Distribution Account.
Note Interest Rate: With respect to each Class of Notes, the per
annum rate of interest payable to the holders of such Class of Notes. The Note
Interest Rate with respect to the Class A-1 Notes is equal to 6.05%; the Note
Interest Rate with respect to the Class A-2 Notes is equal to 6.28%; the Note
Interest Rate with respect to the Class A-3 Notes is equal to 6.45%; the Note
Interest Rate with respect to the Class A-4 Notes is equal to 6.60%; the Note
Interest Rate with respect to the Class A-5 Notes is equal to 6.70%; the Note
Interest Rate with respect to the Class A-6 Notes is equal to 6.95%; the Note
Interest Rate with respect to the Class A-7 Notes is equal to 7.16%; and the
Note Interest Rate with respect to the Class A-8 Notes is equal to 7.33%.
Obligor: Each obligor on a Debt Instrument.
Officer's Certificate: A certificate delivered to the Indenture
Trustee or the Issuer signed by the President or a Vice President or an
Assistant Vice President of the Seller, the Servicer or the Transferor, in each
case, as required by this Agreement.
Original Certificate Principal Balance: $39,250,000.
Original Class Principal Balance: In the case of the Class A-1 Notes,
$139,980,000; in the case of the Class A-2 Notes, $64,680,000; in the case of
the Class A-3 Notes, $65,160,000; in the case of the Class A-4 Notes,
$49,750,000; in the case of the Class A-5 Notes, $49,170,000; in the case of
the Class A-6 Notes, $93,110,000; in the case of the Class A-7 Notes,
$61,330,000; and in the case of the Class A-8 Notes, $37,570,000.
Overcollateralization Amount: As of each Determination Date after the
Funding Period ends, the amount (exclusive of any distributions of
Overcollateralization Reduction Amounts) equal to the excess of (A) the Pool
Principal Balance over (B) the sum of the Class Principal Balances of the Notes
and the Certificate Principal Balance of the Certificates.
Overcollateralization Reduction Amount: With respect to any
Distribution Date which is not an Overcollateralization Stepdown Date, zero;
with respect to any Distribution Date which is an Overcollateralization
Stepdown Date, the lesser of (x) the Excess Overcollateralization Amount on
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<PAGE> 25
such Distribution Date (after giving effect to all other distributions on such
Distribution Date) and (y) the Regular Principal Distribution Amount (as
determined without the deduction of the Overcollateralization Reduction Amount
therefrom) on such Distribution Date.
Overcollateralization Stepdown Date: Any Distribution Date with
respect to which the Required Overcollateralization Amount is reduced.
Ownership Interest: As to any Security, any ownership or security
interest in such Security, including any interest in such Security as the
holder thereof and any other interest therein, whether direct or indirect,
legal or beneficial, as owner or as pledgee.
Owner Trustee: Wilmington Trust Company, as owner trustee under the
Trust Agreement, and any successor owner trustee under the Trust Agreement.
Owner Trustee Fee: The annual fee of $2,500.00 payable to the Owner
Trustee on the Distribution Date occurring in February each year during the
term of this Agreement commencing in February 1997; provided that the initial
Owner Trustee fee shall be paid on the Closing Date.
Pass-Through Rate: The per annum rate of 7.64%.
Percentage Interest: As defined in the Trust Agreement.
Permitted Investments: Each of the following:
(1) obligations of, or guaranteed as to principal and
interest by, the United States or any agency or instrumentality
thereof when such obligations are backed by the full faith and credit
of the United States;
(2) a repurchase agreement that satisfies the following
criteria and is acceptable to the Securities Insurer: (1) must be
between the Indenture Trustee and either (a) primary dealers on the
Federal Reserve reporting dealer list which are rated in one of the
two highest categories for long-term unsecured debt obligations by
each Rating Agency, or (b) banks rated in one of the two highest
categories for long-term unsecured debt obligations by each Rating
Agency; and (2) the written repurchase agreement must include the
following: (a) securities which are acceptable for the transfer and
are either (I) direct U.S. governments obligations, or (II)
obligations of a Federal agency that are backed by the full faith and
credit of the U.S. government, or FNMA or FHLMC; (b) a term no
greater than 60 days for any repurchase transaction; (c) the
collateral must be delivered to the Indenture Trustee or a third party
custodian acting as agent for the Indenture Trustee by appropriate
book entries and confirmation statements, with a copy to the
Securities Insurer, and must have been delivered before or
simultaneous with payment (i.e., perfection by possession of
certificated securities); and (d) the securities sold thereunder must
be valued weekly, marked-to-market at current market price plus
accrued interest and the value of the collateral must be equal to at
least 104% of the amount of cash transferred by the Indenture Trustee
under the repurchase agreement and if the value of the securities held
as collateral declines to an amount below 104% of the cash transferred
by the Indenture Trustee plus accrued interest
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 16
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(i.e. a margin call), then additional cash and/or acceptable
securities must be transferred to the Indenture Trustee to satisfy
such margin call; provided, however, that if the securities used as
collateral are obligations of FNMA or FHLMC, then the value of the
securities held as collateral must equal at least 105% of the cash
transferred by the Indenture Trustee under such repurchase agreement;
(3) certificates of deposit, time deposits and bankers
acceptances of any United States depository institution or trust
company incorporated under the laws of the United States or any state,
including the Indenture Trustee; provided that the debt obligations of
such depository institution or trust company at the date of the
acquisition thereof have been rated by each Rating Agency in one of
its two highest long-term rating categories;
(4) deposits, including deposits with the Indenture
Trustee, which are fully insured by the Bank Insurance Fund or the
Savings Association Insurance Fund of the FDIC, as the case may be;
(5) commercial paper of any corporation incorporated
under the laws of the United States or any state thereof, including
corporate affiliates of the Indenture Trustee, which at the date of
acquisition is rated by each Rating Agency in its highest short-term
rating category and which has an original maturity of not more than
365 days;
(6) debt obligations rated by each Rating Agency at the
time at which the investment is made in its highest long-term rating
category (or those investments specified in (iii) above with
depository institutions which have debt obligations rated by each
Rating Agency in one of its two highest long-term rating categories);
(7) money market funds which are rated by each Rating
Agency at the time at which the investment is made in its highest
long-term rating category, any such money market funds which provide
for demand withdrawals being conclusively deemed to satisfy any
maturity requirements for Permitted Investments set forth in this
Agreement; or
(8) any other demand, money market or time deposit
obligation, security or investment as may be acceptable to each Rating
Agency and the Securities Insurer at the time at which the investment
is made;
provided that no instrument described in the foregoing subparagraphs 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 where the interest
and principal payments with respect to such instrument 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 in
the foregoing subparagraphs 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 stated maturity.
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 17
<PAGE> 27
Each reference in this definition of "Permitted Investments" to the
Rating Agency shall be construed, in the case of each subparagraph above
referring to each Rating Agency, as a reference to Standard & Poor's and
Moody's.
Person: Any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust, national
banking association, unincorporated organization or government or any agency or
political subdivision thereof.
Physical Property: As defined in the definition of "Delivery" above.
Pool Principal Balance: The aggregate Principal Balances of the Home
Loans (as applicable) as of any Determination Date or as of the applicable
Cut-off Date.
Post Liquidation Proceeds: As defined in Section 4.02(b).
Preference Amount: Any amount previously distributed to the holder of
an Insured Security that is recoverable and sought to be recovered as a
voidable preference by a trustee in bankruptcy pursuant to the United States
Bankruptcy Code (11 U.S.C.), as amended from time to time, in accordance with a
final, non-appealable order of a court having competent jurisdiction.
Pre-Funded Amount: With respect to any Distribution Date, the amount
then on deposit in the Pre-Funding Account as of the end of the related Due
Period.
Pre-Funding Account: The account established and maintained pursuant
to Section 5.03.
Pre-Funding Account Deposit: An amount equal to $199,449,252.38.
Pre-Funding Account Weighted Average Balance: For purposes of
computing the Projected Interest Shortfall, on any date of determination, with
respect to the calculation of the weighted average balance of the amount on
deposit on a daily basis in the Pre-Funding Account for the Due Period in which
such date of determination occurs, (x) the total of (A) the sum of the actual
amount on deposit in the Pre-Funding Account on each day in such Due Period
prior to such date of determination plus (B) the product of (i) the amount on
deposit in the Pre-Funding Account on such date of determination and (ii) the
number of days remaining in such Due Period including the date of determination
(but assuming a 30 day month), divided by (y) thirty (30) days.
Pre-Funding Termination Distribution Date: The first Distribution Date
following the Due Period in which the Funding Period ends.
Principal Balance: With respect to any Home Loan or related
Foreclosure Property, (i) at the applicable Cut- Off Date, the outstanding
unpaid principal balance of the Home Loan as of such Cut-Off Date and (ii) with
respect to any Due Period after such Cut-Off Date, the outstanding unpaid
principal balance of the Home Loan as of the last day of such Due Period (after
giving effect to all payments received thereon and the allocation of any Net
Loan Losses with respect thereto for a Liquidated Home Loan or a Defaulted Home
Loan which relates to such Due Period), without giving
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 18
<PAGE> 28
effect to amounts received in respect of such Home Loan or related Foreclosure
Property after such day. Any Liquidated Home Loan shall have a Principal
Balance of zero.
Principal Prepayment: With respect to any Home Loan and with respect
to any Due Period, any principal amount received on a Home Loan in excess of
the scheduled principal amount included in the Monthly Payment due on the Due
Date in such Due Period.
Projected Interest Shortfall: In connection with the calculation of
the Capitalized Interest Account Requirement pursuant to Section 5.04 as
determined by the Servicer on any Business Day prior to May 27, 1997, the
Projected Interest Shortfall shall be the amount equal to the sum of (A) with
respect to the Due Period in which such date of determination occurs the
Interest Shortfall Rate, multiplied by the Pre-Funding Account Weighted Average
Balance, multiplied by the number of days in such Due Period, and divided by
360 days, plus (B) with respect to any Due Period thereafter ending on or
before May 27, 1997, the Interest Shortfall Rate, multiplied by the balance in
the Pre- Funding Account as of such date of determination, multiplied by the
number of days in such Due Period thereafter ending on or before May 27, 1997,
and divided by 360 days; assuming in the case of each Due Period other than the
first Due Period, a 360-day year consisting of twelve 30-day months.
Prospectus: The final Prospectus, dated as of February 21, 1997, as
supplemented by the Prospectus Supplement.
Prospectus Supplement: The Prospectus Supplement dated as of February
21, 1997, prepared by the Transferor and the Seller in connection with the
issuance and sale of the Securities.
Purchase or Refinance Loan: A loan, the net proceeds of which were
used by the related Obligor to purchase or refinance single family residential
property.
Purchase Price: As defined in Section 3.05 herein.
Qualified Substitute Home Loan: A home loan or home loans substituted
for a Deleted Home Loan pursuant to Section 2.06 or 3.05, which (i) has or have
an interest rate or rates of not less than one percentage point and not more
than one percentage point than the Home Loan Interest Rate for the Deleted Home
Loan, (ii) matures or mature not more than one year later than and not more
than one year earlier than the Deleted Home Loan, (iii) has or have a principal
balance or principal balances (after application of all payments received on or
prior to the date of substitution) equal to or less than the Principal Balance
of the Deleted Home Loan as of such date, (iv) has or have a lien priority no
lower than the Deleted Home Loan, (v) has a borrower with a comparable credit
grade classification to the credit grade classification of the borrower with
respect to the Deleted Mortgage Loans, including a FICO Score that is no more
than 10 points below that of such Deleted Home Loan; and (vi) complies or
comply as of the date of substitution with each representation and warranty set
forth in Section 3.03 and is not more than 29 days delinquent as of the date of
substitution for such loan; and (vii) the related borrower has a FICO score at
origination of not less than 677. For purposes of determining whether multiple
mortgage loans proposed to be substituted for one or more Deleted Home Loans
pursuant to Section 2.06 or 3.05 are in fact "Qualified Substitute Home Loans"
as provided above, the criteria specified in clauses (i), (ii) and (iii) above
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 19
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may be considered on an aggregate or weighted average basis, rather than on a
loan -by-loan basis (e.g., so long as the weighted average Home Loan Interest
Rate of any loans proposed to be substituted is not less than nor more than one
percentage point different from the Home Loan Interest Rate for the designated
Deleted Home Loan or Home Loans and the weighted average FICO score of any
Qualified Substitute Home Loans cumulatively substituted is not less than 677,
the requirements of clause (i) above would be deemed satisfied).
Rating Agency or Rating Agencies: Either or both of (i) Standard &
Poor's, or (ii) Moody's, provided that when the terms Rating Agency or Rating
Agencies are used in reference to the Insured Securities, such terms shall mean
one or both of Standard & Poor's or Moody's. If no such organization or
successor is any longer in existence, "Rating Agency" shall be a nationally
recognized statistical rating organization or other comparable person
designated by the Issuer and approved by the Securities Insurer, notice of
which designation shall have been given to the Indenture Trustee, the
Securities Insurer, the Issuer and the Servicer.
Ratings: The ratings initially assigned to the Notes and the
Certificates by the Rating Agencies, as evidenced by letters from the Rating
Agencies.
Record Date: With respect to each Distribution Date, the close of
business on the last Business Day of the month immediately preceding the month
in which such Distribution Date occurs.
Regular Principal Distribution Amount: On each Distribution Date, an
amount equal to the lesser of:
(A) the sum of the aggregate Class Principal Balance of the Notes
and the Certificate Principal Balance of the Certificates immediately prior to
such Distribution Date; and
(B) the greater of (1) the sum of (i) each scheduled payment of
principal collected by the Servicer in the related Due Period, (ii) all partial
and full principal prepayments applied by the Servicer during such related Due
Period, (iii) the principal portion of all Net Liquidation Proceeds, Insurance
Proceeds and Released Mortgaged Property Proceeds received during the related
Due Period, (iv) (a) that portion of the purchase price of any repurchased Home
Loan which represents principal and (b) the principal portion of any
Substitution Adjustments required to be deposited in the Collection Account as
of the related Determination Date, (v) the amount of any Net Loan Losses for
the preceding Due Period equal to the amount on deposit in the Reserve Account
until such amount is reduced to zero, and (vi) if the Overcollateralization
Amount is zero, the amount of any Net Loan Losses for the preceding Due Period
minus the sum of (a) the amount included in clause (v) above for such
Distribution Date and (b) the amount of Net Loan Losses for the preceding Due
Period allocated to reduce the Overcollateralization Amount to zero on such
Distribution Date pursuant to Section 5.09, and (2) the amount by which (i) the
aggregate principal balance of the Securities as of the preceding Distribution
Date (after giving effect to all payments of principal on such preceding
Distribution Date) exceeds (ii) the Pool Principal Balance plus funds on
deposit in the Pre-Funding Account, each as of the immediately preceding
Determination Date; provided, however, that if such Distribution Date is an
Overcollateralization Stepdown Date, then with respect to the distribution of
principal to the Noteholders and Certificateholders the foregoing amount in
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 20
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each case, will be reduced (but not less than zero) by the
Overcollateralization Reduction Amount, if any, for such Distribution Date.
Released Mortgaged Property Proceeds: Proceeds received by the
Servicer in connection with (i) a taking of an entire Mortgaged Property by
exercise of the power of eminent domain or condemnation or (ii) any release of
part of the Mortgaged Property from the lien of the related Mortgage, whether
by partial condemnation, sale or otherwise; which in either case are not
released to the Obligor in accordance with applicable law, customary second
mortgage servicing procedures and this Agreement.
Required Credit Support Multiple: On each Distribution Date, as of the
related Determination Date the amount calculated as follows: [ (i) if less than
8.0% (by Principal Balance) of the Home Loans are more than 30 days delinquent,
and if less than 5.5% (by Principal Balance) of the Home Loans are more than 60
days delinquent, and if less than 4.0% (by Principal Balance) of the Home Loans
have become Defaulted Home Loans, then such amount will be 1.0; (ii) if less
than 9.0% (by Principal Balance) of the Home Loans are more than 30 days
delinquent, and if less than 6.5% (by Principal Balance) of the Home Loans are
more than 60 days delinquent, and if less than 5.0% (by Principal Balance) of
the Home Loans have become Defaulted Home Loans, then such amount will be 1.25;
(iii) if less than 12.0% (by Principal Balance) of the Home Loans are more than
30 days delinquent, and if less than 7.5% (by Principal Balance) of the Home
Loans are more than 60 days delinquent, and if less than 6.0% (by Principal
Balance) of the Home Loans have become Defaulted Home Loan, then such amount
will be 1.5; (iv) if 12.0% or more (by Principal Balance) of the Home Loans
are more than 30 days delinquent, or if 7.5% or more (by Principal Balance) of
the Home Loans are more than 60 days delinquent, or if 6.0% or more (by
Principal Balance) of the Home Loans have become Defaulted Home Loans then such
amount will be 2.5; or (v) if 2.0% or more (based on Net Loan Losses) of the
Home Loans have become Defaulted Home Loans on a cumulative basis on or prior
to the first anniversary of the January 31, 1997 Cut-Off Date, or if 5.0% or
more (based on Net Loan Losses) of the Home Loans have become Defaulted Home
Loans on a cumulative basis on or prior to the second anniversary of the
January 31, 1997 Cut-Off Date, or if 7.5% or more (based on Net Loan Losses) of
the Home Loans have become Defaulted Home Loans on a cumulative basis on or
prior to the third anniversary of the January 31, 1997 Cut-Off Date, or if
10.0% or more (based on Net Loan Losses) of the Home Loans have become
Defaulted Home Loans on a cumulative basis on or prior to the fourth
anniversary of the January 31, 1997 Cut-Off Date or if 12.0% or more (based on
Net Loan Losses) of the Home Loans have become Defaulted Home Loans on a
cumulative basis on or prior to the fifth anniversary of the January 31, 1997
Cut-off Date and thereafter if 13.0% or more (based on Net Loan Losses) become
Defaulted Home Loans on a cumulative basis, then such amount will be 2.5;
provided, however, that such 2.5 multiple in clause (v) shall be reduced to an
amount equal to 1.25, if the Home Loans (based on Net Loan Losses) that have
become Defaulted Home Loans on a cumulative basis are determined to be less
than the foregoing percentages of 2.0%, 5.0%, 7.5%, 10.0%, 12.0% and 13.0%
during the relevant time periods in such clause (v) and if the rolling three
month delinquency and default multiple in clauses (i) through (iv) results in
an amount of either 1.0 or 1.25. Except with respect to the calculations on a
cumulative basis in clause (v) and the proviso clause of the preceding
sentence, the above delinquency percentages for clauses (i) through (iv) will
be calculated as the average of the ratios for the immediately preceding three
Due Periods based on the outstanding aggregate Principal Balances for all Home
Loans which are 30 or 60 days or more delinquent, respectively, over the
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 21
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outstanding aggregate Principal Balance for all Home Loans, and such default
percentages will be calculated on an annualized basis as the average of the
ratios for the immediately preceding three Due Periods where such ratio equals
the quotient of (A) 12 times the aggregate Net Loan Losses for such Home Loans
that became Defaulted Home Loans, over (B) the aggregate outstanding Principal
Balance of such Home Loans as of the ending of the related Due Period. The
cumulative default percentages for clause (v) and the proviso clause above
shall be calculated after giving effect to any recovery of proceeds received by
the Servicer with respect to such Defaulted Home Loans in accordance with the
definition of Net Loan Losses; however, the calculations of the Principal
Balance of the Defaulted Home Loans in clauses (i) through (iv) shall not give
effect to any recovery of proceeds received by the Servicer with respect to
such Defaulted Home Loans. Notwithstanding the preceding, the Securities
Insurer, in its sole discretion and without the requirement of an amendment of
this Agreement, may modify the preceding definition, upon written notice to
each of the other parties hereto and the Rating Agencies, if: (1) subject to a
sixty (60) day period after the last day of the Due Period in which the Funding
Period ends, the Subsequent Home Loans violate or fail to conform or comply in
all material respects with the conditions and requirements for delivery thereof
as set forth herein and in the Securities Insurer Commitment; or (2) the
Securities Insurer otherwise determines to adjust the preceding delinquency and
default percentages in a manner that will result in a reduction of the Required
Credit Support Multiple.
Required Distribution Amount: As of any Distribution Date, the sum of
the Interest Distribution Amount, the Regular Principal Distribution Amount,
the Noteholders' Principal Carry-Forward Amount and Certificateholders'
Principal Carry-Forward Amount, in each case, for such Distribution Date.
Required Overcollateralization Amount: On each Distribution Date
after the Funding Period ends, as of the related Determination Date the amount
equal to the greater of (1) 1.0% of the sum of the aggregate Principal
Balances as of the applicable Cut-Off Dates of the Home Loans (the "Required OC
Floor"), and (2) the product of (x) the Required Credit Support Multiple and
(y) 7.50% of the aggregate Principal Balances as of the applicable Cut-Off
Dates of the Home Loans; provided, however, that on each Distribution Date on
or after the Credit Support Reduction Date on which the rolling three month
delinquency and default multiple set forth in clause (i) of the definition of
the Required Credit Support Multiple is equal to 1.0, as of the related
Determination Date, the amount equal to the greater of (1) the Required OC
Floor, and (2) the product of (x) the Required Credit Support Multiple and (y)
the lesser of (A) 7.50% of the aggregate Principal Balances as of the
applicable Cut-Off Dates of the Home Loans and (B) 15.00% of the aggregate
outstanding Principal Balances of the Home Loans; provided further, however,
that the Required Overcollateralization Amount shall not be reduced pursuant to
the preceding proviso clause if the rolling three month delinquency and six
month default multiple in clauses (i) through (iv) of the definition of
Required Credit Support Multiple results in an amount greater than 1.0 and the
cumulative default multiple in clause (v) and the proviso of such definition
results in an amount greater than 1.25. Notwithstanding the preceding, the
Securities Insurer, in its sole discretion and without the requirement of an
amendment of this Agreement, may modify the preceding definition, upon written
notice to each of the other parties hereto and the Rating Agencies, if: (1)
subject to a sixty (60) day period after the last day of the Due Period in
which the Funding Period ends, the Subsequent Home Loans violate or fail to
conform or comply in all material respects with the conditions and requirements
for delivery thereof as set forth herein and in the Securities Insurer
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 22
<PAGE> 32
Commitment; or (2) the Securities Insurer otherwise determines to modify the
definitions relating to the Required Overcollateralization Amount in a manner
that will result in a reduction of the Required Overcollateralization Amount.
Reserve Account: The account established and maintained by the
Indenture Trustee pursuant to Section 5.07 hereof.
Reserve Account Initial Deposit: On the Closing Date, an amount equal
to 3.5% of the Initial Pool Principal Balance, which is $14,019,276.
Reserve Account Requirement: On the Closing Date, the Reserve Account
Initial Deposit, as subsequently adjusted for: (A) increases on Subsequent
Transfer Dates pursuant to Section 5.07(b)(i); and (B) reductions on any
Distribution Date occurring after the Funding Period ends if the
Overcollateralization Amount exceeds the Interim Required Overcollateralization
pursuant to Section 5.07(d).
Reserve Account Subsequent Deposit: With respect to each Subsequent
Transfer Date, an amount equal to 3.5% of the aggregate of the principal
balances of the Subsequent Home Loans conveyed to the Trust on such Subsequent
Transfer Date.
Residual Interest: The interest which represents the right to the
amount remaining, if any, after all prior distributions have been made under
this Agreement, the Indenture and the Trust Agreement on each Distribution Date
and certain other rights to receive amounts hereunder and under the Trust
Agreement.
Reserve Account Withdrawal Amount: With respect to any Distribution
Date, an amount equal to the lesser of (i) the total amount on deposit in the
Reserve Account or (if any) available for call or drawdown under the limited
guaranty or letter of credit referred to in Section 5.07, and (ii) the excess
of (A) the sum of the Trust Fees and Expenses and the Required Distribution
Amount over (B) the Available Collection Amount.
Responsible Officer: When used with respect to the Indenture Trustee,
any officer within the Corporate Trust Office of the Indenture Trustee,
including any Vice President, Assistant Vice President, Secretary, Assistant
Secretary or any other officer of the Indenture Trustee customarily performing
functions similar to those performed by any of the above designated officers
and also, with respect to a particular matter, any other officer to whom such
matter is referred because of such officer's knowledge of and familiarity with
the particular subject. When used with respect to the Issuer, any officer in
the Corporate Trust Administration Department of the Owner Trustee with direct
responsibility for the administration of the Trust Agreement and this Agreement
on behalf of the Issuer. When used with respect to the Seller, the Transferor,
the Servicer, or the Custodian, the President or any Vice President, Assistant
Vice President, or any Secretary or Assistant Secretary.
Security or Securities: Any Notes or any Certificates, as applicable.
Securities Insurer: MBIA Insurance Corporation, as issuer of the
Guaranty Policy, and its successors and assigns.
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 23
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Securities Insurer Commitment: As defined in Section 3.04(a) hereof.
Securities Insurer Default: The failure of the Securities Insurer to
make payments under the Guaranty Policy, if such failure has not been remedied
with ten (10) days of notice thereof, or the entry of an order or decree with
respect to the Securities Insurer in any insolvency or bankruptcy proceedings
which remain unstayed or undischarged for 90 days.
Securities Insurer Reimbursement Amount: At any time, an amount owed
to the Securities Insurer for any unreimbursed Guaranteed Payments made under
the Guaranty Policy, together with interest thereon at the rate specified in
the Insurance Agreement and any other amounts then owing to the Securities
Insurer under the Insurance Agreement, which have not previously been
reimbursed.
Securityholder: A holder of a Note or Certificate, as applicable;
provided that the exercise of any rights by such holder shall be subject to
Section 12.14.
Seller: FIRSTPLUS INVESTMENT CORPORATION, a Nevada corporation, and
any successor thereto.
Series or Series 1997-1: FIRSTPLUS Asset Backed Securities, Series
1997-1.
Servicer: FFI, in its capacity as the servicer hereunder, or any
successor appointed as herein provided.
Servicer's Fiscal Year: October 1st through September 30th of each
year.
Servicer's Home Loan Files: In respect of each Home Loan, all
documents customarily included in the servicer's loan file for the related type
of Home Loan in accordance with the servicing standard set forth in Section
4.01.
Servicer's Monthly Statement: As defined in Section 6.01.
Servicing Advances: Subject to Section 4.01(b), all reasonable,
customary and necessary "out of pocket" costs and expenses advanced or paid by
the Servicer with respect to the Home Loans in accordance with the performance
by the Servicer of its servicing obligations hereunder, including, but not
limited to, the costs and expenses for (i) the preservation, restoration and
protection of the Mortgaged Property, including without limitation advances in
respect of real estate taxes and assessments, (ii) any collection, enforcement
or judicial proceedings, including without limitation foreclosures, collections
and liquidations pursuant to Section 4.02, (iii) the conservation, management
and sale or other disposition of an Foreclosure Property pursuant to Section
4.04, (iv) the preservation of the security for a Home Loan if any lienholder
under a Superior Lien has accelerated or intends to accelerate the obligations
secured by such Superior Lien pursuant to Section 4.06; provided that such
Servicing Advances are reimbursable to the Servicer to the extent provided in
Section 5.06(c)(vi) or deducted or retained in calculating Net Liquidation
Proceeds hereunder.
Servicing Advance Reimbursement Amount: As defined in Section
5.01(c).
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Servicing Compensation: The Servicing Fee and other amounts to which
the Servicer is entitled pursuant to Sections 7.01 and 7.03.
Servicing Fee: As to each Home Loan (including any Home Loan that has
been foreclosed and has become a Foreclosure Property, but excluding any
Liquidated Home Loan), the fee payable monthly to the Servicer on each
Distribution Date, which shall be the product of 0.75% (75 basis points) times
the Principal Balance of such Home Loan as of the beginning of the immediately
preceding Due Period, divided by 12. The Servicing Fee includes any servicing
fees owed or payable to any Subservicer and any custodial fees owed or payable
to the Custodian which fees shall be paid from the Servicing Fee.
Servicing Officer: Any officer of the Servicer or Subservicer
involved in, or responsible for, the administration and servicing of the Home
Loans whose name and specimen signature appears on a list of servicing officers
annexed to an Officer's Certificate furnished by the Servicer or the
Subservicer, respectively, to the Issuer and the Indenture Trustee, on behalf
of the Securityholders and the Securities Insurer, as such list may from time
to time be amended.
Standard & Poor's: Standard & Poor's Ratings Group, a division of The
McGraw-Hill Companies, Inc., or any successor thereto.
Subsequent Home Loan: An individual Home Loan that is conveyed to the
Issuer and pledged to the Indenture Trustee on a Subsequent Transfer Date,
pursuant to a Subsequent Transfer Agreement, together with the rights and
obligations of a holder thereof and payments thereon and proceeds therefrom,
the Subsequent Home Loans subject to this Agreement will be identified on a
schedule attached as an exhibit to the related Subsequent Transfer Agreement.
Subsequent Purchase Price: With respect to each Subsequent Transfer
Date, as of the applicable Cut-Off Date, the Principal Balance of any
Subsequent Home Loans to be conveyed to the Trust on such Subsequent Transfer
Date.
Subsequent Transfer Agreement: With respect to any Subsequent Home
Loan, the agreement pursuant to which Subsequent Home Loans are transferred to
the Trust by the Seller, substantially in the form of Exhibit C hereto.
Subsequent Transfer Date: The date specified in each Subsequent
Transfer Agreement, but no later than May 27, 1997.
Subservicer: Any Person with whom the Servicer has entered into a
Subservicing Agreement and who is an Eligible Servicer and who satisfies any
requirements set forth in Section 4.07(a) in respect of the qualifications of a
Subservicer.
Subservicing Account: An account established by a Subservicer
pursuant to a Subservicing Agreement, which account must be an Eligible
Account.
Subservicing Agreement: Any agreement between the Servicer and any
Subservicer relating to subservicing and/or administration of any or all Home
Loans as provided in Section 4.07(a),
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 25
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copies of which shall be made available, along with any modifications thereto,
to the Issuer, the Indenture Trustee and to the Securities Insurer.
Substitution Adjustment: As to any date on which a substitution
occurs pursuant to Sections 2.06 or 3.05, the amount, if any, by which (a) the
sum of the aggregate principal balance (after application of principal payments
received on or before the date of substitution) of any Qualified Substitute
Home Loans as of the date of substitution plus any accrued interest and unpaid
thereon that is scheduled to be paid after the date of substitution and during
the Due Period in which such substitution occurs, is less than (b) the sum of
the aggregate of the Principal Balances, together with accrued and unpaid
interest thereon to the date of substitution, of the related Deleted Home
Loans.
Superior Lien: With respect to any Home Loan which is secured by
other than a first priority lien, the mortgage(s) relating to the corresponding
Mortgaged Property having a superior priority lien.
Termination Price: As of any date of determination, an amount without
duplication equal to the sum of (i) the aggregate Class Principal Balance of
the Notes as of such date, (ii) the sum of any outstanding Noteholders'
Interest Carry-Forward Amount and accrued and unpaid interest on the aggregate
Class Principal Balance of the Notes as of such date, computed at the
respective Note Interest Rates of the Notes then outstanding; (iii) the
Certificate Principal Balance of the Certificates as of such date; (iv) the sum
of any outstanding Certificateholders' Interest Carry-Forward Amount and
accrued and unpaid interest on the Certificate Principal Balance of the
Certificates as of such date, computed at the Pass-Through Rate of the
Certificates; (v) any Securities Insurer Reimbursement Amount and (vi) any
Trust Fees and Expenses owing as of such date.
Transferor: FFI, in its capacity as the transferor hereunder.
Trust: The Issuer.
Trust Account Property: The Trust Accounts, all amounts and
investments held from time to time in any Trust Account and all proceeds of the
foregoing.
Trust Accounts: The Note Distribution Account, the Certificate
Distribution Account, the Collection Account, the Reserve Account, the
Pre-Funding Account and the Capitalized Interest Account.
Trust Agreement: The Trust Agreement dated as of February 1, 1997,
among the Seller as Depositor, the Affiliated Holder, as the Company, the
Co-Owner Trustee and the Owner Trustee.
Trust Estate: The assets subject to this Agreement, the Trust
Agreement and the Indenture and assigned to the Trust, which assets consist of:
(i) such Home Loans as from time to time are subject to this Agreement,
including both the Initial Home Loans and any Subsequent Home Loans conveyed to
the Trust Estate during the Funding Period as listed in the Home Loan Schedule,
as the same may be amended or supplemented from time to time including the
removal of Deleted Home Loans and the addition of Qualified Substitute Home
Loans, together with the Servicer's Home
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 26
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Loan Files and the Trustee's Home Loan Files relating thereto and all proceeds
thereof, (ii) all payments received on or with respect to the Home Loans after
the applicable Cut-off Dates, (iii) such assets as from time to time are
identified as Foreclosure Property, (iv) such assets and funds as are from time
to time deposited in the Collection Account, the Note Distribution Account, the
Certificate Distribution Account, the Pre-Funding Account, the Capitalized
Interest Account and the Reserve Account, including amounts on deposit in such
accounts which are invested in Permitted Investments, (v) the Issuer's rights
under all insurance policies with respect to the Home Loans and any Insurance
Proceeds, (vi) Net Liquidation Proceeds and Released Mortgaged Property
Proceeds, (vii) all right, title and interest of the Transferor in and to the
obligations of any seller pursuant to each Loan Sale Agreement in which the
Transferor acquired any Home Loans, (viii) all right, title and interest of the
Seller in and to the obligations of the Transferor under that certain Loan Sale
Agreement in which the Seller acquired any Home Loans from the Transferor, (ix)
all right, title and interest of the Issuer, as purchaser, under each
Subsequent Transfer Agreement, and (x) all right, title and interest of the
Servicer and the Transferor in and to the rights and obligations of any
Subservicer, pursuant to any Subservicing Agreement.
Trust Fees and Expenses: As of each Distribution Date, an amount
equal to the Servicing Compensation, Guaranty Insurance Premium, the Indenture
Trustee Fee, and the Owner Trustee Fee.
Weighted Average Interest Rate: As of any particular date of
determination, the sum (expressed as a percentage) of:
(a) the product of (A) the Class Principal Balance of the
Class A-1 Notes divided by the sum of (x) the aggregate Class
Principal Balances of the Notes plus (y) the Certificate Principal
Balance of the Certificates, and (B) the Note Interest Rate for such
Class A-1 Notes;
(b) the product of (A) the Class Principal Balance of the
Class A-2 Notes divided by the sum of (x) the aggregate Class
Principal Balances of the Notes plus (y) the Certificate Principal
Balance of the Certificates, and (B) the Note Interest Rate for such
Class A-2 Notes;
(c) the product of (A) the Class Principal Balance of the
Class A-3 Notes divided by the sum of (x) the aggregate Class
Principal Balances of the Notes plus (y) the Certificate Principal
Balance of the Certificates, and (B) the Note Interest Rate for such
Class A-3 Notes;
(d) the product of (A) the Class Principal Balance of the
Class A-4 Notes divided by the sum of (x) the aggregate Class
Principal Balances of the Notes plus (y) the Certificate Principal
Balance of the Certificates, and (B) the Note Interest Rate for such
Class A-4 Notes;
(e) the product of (A) the Class Principal Balance of the
Class A-5 Notes divided by the sum of (x) the aggregate Class
Principal Balances of the Notes plus (y) the Certificate Principal
Balance of the Certificates, and (B) the Note Interest Rate for such
Class A-5 Notes;
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(f) the product of (A) the Class Principal Balance of the
Class A-6 Notes divided by the sum of (x) the aggregate Class
Principal Balances of the Notes plus (y) the Certificate Principal
Balance of the Certificates, and (B) the Note Interest Rate for such
Class A-6 Notes;
(g) the product of (A) the Class Principal Balance of the
Class A-7 Notes divided by the sum of (x) the aggregate Class
Principal Balances of the Notes plus (y) the Certificate Principal
Balance of the Certificates, and (B) the Note Interest Rate for such
Class A-7 Notes.
(h) the product of (A) the Class Principal Balance of the
Class A-8 Notes divided by the sum of (x) the aggregate Class
Principal Balances of the Notes plus (y) the Certificate Principal
Balance of the Certificates, and (B) the Note Interest Rate for such
Class A-8 Notes.
(i) the product of (A) the Certificate Principal Balance
of the Certificates divided by the sum of (x) the aggregate Class
Principal Balances of the Notes and (y) the Certificate Principal
Balance of the Certificates, and (B) the Pass-Through Rate for the
Certificates;
Section 1.02 Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined herein
have the meanings assigned to them in the Indenture and the Trust Agreement.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Agreement or in any such certificate or other document, and
accounting terms partly defined in this Agreement or in any such certificate or
other document to the extent not defined, shall have the respective meanings
given to them under generally accepted accounting principles. To the extent
that the definitions of accounting terms in this Agreement or in any such
certificate or other document are inconsistent with the meanings of such terms
under generally accepted accounting principles, the definitions contained in
this Agreement or in any such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; Article, Section, Schedule
and Exhibit references contained in this Agreement are references to Articles,
Sections, Schedules and Exhibits in or to this Agreement unless otherwise
specified; and the term "including" shall mean "including without limitation."
(e) The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms.
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 28
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(f) Any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or
instruments) references to all attachments thereto and instruments incorporated
therein; references to a Person are also to its permitted successors and
assigns.
ARTICLE II
CONVEYANCE OF THE HOME LOANS
Section 2.01 Conveyance of the Initial Home Loans.
(a) As of the Closing Date, in consideration of the Issuer's
delivery of the Notes, Certificates and Residual Interest Instruments to the
Seller or its designee, upon the order of the Seller, the Seller, as of the
Closing Date and concurrently with the execution and delivery hereof, does
hereby sell, transfer, assign, set over and otherwise convey to the Issuer,
without recourse, but subject to the other terms and provisions of this
Agreement, all of the right, title and interest of the Seller in and to the
Trust Estate. The foregoing sale, transfer, assignment, set over and
conveyance does not and is not intended to result in a creation or an
assumption by the Issuer of any obligation of the Seller, the Transferor or any
other person in connection with the Trust Estate or under any agreement or
instrument relating thereto except as specifically set forth herein.
(b) As of the Closing Date, the Issuer acknowledges the conveyance
to it of the Trust Estate, including from the Seller all right, title and
interest of the Seller in and to the Trust Estate, receipt of which is hereby
acknowledged by the Issuer. Concurrently with such delivery and in exchange
therefor, the Issuer has pledged to the Indenture Trustee the Trust Estate and
the Indenture Trustee, pursuant to the written instructions of the Issuer, has
executed and caused to be authenticated and delivered the Notes to the Seller
or its designee, upon the order of the Issuer. In addition, concurrently with
such delivery and in exchange therefor, the Owner Trustee, pursuant to the
instructions of the Seller, has executed (not in its individual capacity, but
solely as Owner Trustee on behalf of the Issuer) and caused to be authenticated
and delivered the Certificates and the Residual Interest to the Seller or its
designee, upon the order of the Seller.
Section 2.02 Conveyance of the Subsequent Home Loans.
(a) On or before the last day of the Funding Period, the Seller
shall convey to the Issuer, and the Issuer shall purchase pursuant to this
Section 2.02 the lesser of (calculated by aggregate principal balance): (i)
the Home Loans then in the possession of the Seller that satisfy the
requirements of this Section 2.02 and (ii) the maximum number of Home Loans
that satisfy the requirements of this Section 2.02, with respect to which the
aggregate Subsequent Purchase Price does not exceed the Pre-Funding Account
Deposit. Subject to the conditions set forth in this Section 2.02, in
consideration of the Issuer's delivery on the related Subsequent Transfer Dates
to the Seller or its designee, or upon the order of the Seller, of the
Subsequent Purchase Price of the related Subsequent Home Loans from amounts on
deposit in the Pre-Funding Account, the Seller shall, from time to time, on any
Subsequent Transfer Date sell, transfer, assign, set over and otherwise convey
to the Issuer, without recourse, but subject to the other terms and provisions
of this
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Agreement, all of the right, title and interest of the Seller in and to each
Subsequent Home Loan (including all interest and principal thereon received
after the related Cut-Off Date) identified on the Home Loan Schedule attached
to the related Subsequent Transfer Agreement and delivered by the Seller on
such Subsequent Transfer Date and all items in the related Indenture Trustee's
Home Loan File. The sale, transfer, assignment, set over and conveyance by the
Seller of the Subsequent Home Loans to the Issuer does not and is not intended
to result in a creation or an assumption by the Issuer of any obligation of the
Seller, the Transferor or any other person in connection with the Subsequent
Home Loans or under any agreement or instrument relating thereto except as
specifically set forth herein.
(b) If the Subsequent Purchase Price for the Subsequent Home Loans
to be conveyed to the Trust on any Subsequent Transfer Date is less than the
amount required to obtain the release of the interest of any third party
(including any lienholder therein), then the Transferor or the Seller shall
cause the delivery of immediately available funds equal to such insufficiency
to the Issuer in escrow (which funds shall not be property of the Trust) and
the Issuer, in turn, shall remit such immediately available funds, together
with funds from the Pre-Funding Account equal to the Subsequent Purchase Price,
to the third party designated by the Transferor or the Seller that is releasing
its interest in such Subsequent Home Loans.
On the related Subsequent Transfer Date, the Seller shall transfer to
the Issuer the Subsequent Home Loans and the other property and rights related
thereto described in (a) above only upon the satisfaction of each of the
following conditions on or prior to the related Subsequent Transfer Date:
(i) (a) the Subsequent Home Loans to be conveyed on a
given Subsequent Transfer Date must have an aggregate Principal
Balance as of the related Cut-Off Date of not less than $5,000,000,
except in the case of the final Subsequent Transfer Date when no
minimum Principal Balance requirement shall be applicable and (b) no
Subsequent Home Loan shall be more than 29 days delinquent as of the
related Cut-off Date;
(ii) the Transferor and/or Seller shall provide the
Issuer, the Indenture Trustee and the Securities Insurer with an
Addition Notice and shall provide any information reasonably requested
by the Issuer, the Indenture Trustee or the Securities Insurer with
respect to the Subsequent Home Loans;
(iii) the Seller shall deliver to the Issuer, the Indenture
Trustee and the Securities Insurer a duly executed Subsequent Transfer
Agreement, including all exhibits listed therein;
(iv) the Servicer shall deposit in the Collection Account
all collections in respect of the Subsequent Home Loans received on or
after the related Cut-Off Date;
(v) the Transferor and the Seller shall certify to the
Securities Insurer, the Indenture Trustee and the Issuer that, as of
the Subsequent Transfer Date, the Transferor and the Seller,
respectively, were not insolvent nor were they made insolvent by such
transfer nor were they aware of any such pending insolvency;
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(vi) the Transferor and the Seller shall certify that such
addition of Subsequent Home Loans will not result in a material
adverse tax consequence to the Issuer or the Securityholders;
(vii) the Funding Period shall not have terminated; and
(viii) as at the related Subsequent Transfer Date the
Transferor shall make the representations and warranties set forth in
Section 3.02 and Section 3.04(a) hereof and shall reconfirm the
accuracy of the representations and warranties set forth in Section
3.03 hereof, including with respect to all Subsequent Home Loans.
(ix) as of the related Subsequent Transfer Date, the funds
on deposit in the Prefunding Account equal or exceed the applicable
Subsequent Transfer Price.
(c) In addition, the Transferor and/or Seller will provide the
Securities Insurer, the Indenture Trustee and the Issuer with data regarding
all Subsequent Home Loans transferred to the Issuer on the related Subsequent
Transfer Date, which data shall be delivered at least three Business Days prior
to such Subsequent Transfer Date. No later than the end of the Funding Period,
the following obligations shall have been satisfied with respect to all
Subsequent Home Loans transferred to the Issuer on any Subsequent Transfer
Date:
(i) the Transferor and Seller shall have delivered to the
Issuer, the Indenture Trustee and the Securities Insurer an Officer's
Certificate confirming the satisfaction of each condition precedent
specified in this Section 2.02 and in the related Subsequent Transfer
Agreements;
(ii) the Transferor and/or Seller shall have delivered to
the Securities Insurer and the Indenture Trustee an opinion of counsel
substantially in the form of Exhibit D hereto;
(iii) the Issuer shall pledge the Subsequent Mortgage Loans
to the Indenture Trustee under the Indenture;
(iv) the Transferor and Seller shall make the
representations and warranties set forth in Section 3.04(b) hereof;
and
(v) the Securities Insurer shall deliver to the Seller,
the Indenture Trustee and the Issuer a written notice confirming the
Securities Insurer's consent and approval to the addition of all
Subsequent Home Loans purchased by the Issuer on any Subsequent
Transfer Date.
(d) [Reserved]
Section 2.03 Ownership and Possession of Home Loan Files. Upon
the issuance of the Securities, with respect to the Initial Home Loans, and
upon payment of the related Subsequent Purchase Price, with respect to the
Subsequent Home Loans, the ownership of each Debt Instrument, the related
Mortgage and the contents of the related Servicer's Home Loan File and the
Indenture
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Trustee's Home Loan File shall be vested in the Indenture Trustee for the
benefit of the Securityholders and the Securities Insurer, although possession
of the Servicer's Home Loan Files (other than items required to be maintained
in the Indenture Trustee's Home Loan Files) on behalf of and for the benefit of
the Securityholders and the Securities Insurer shall remain with the Servicer,
and the Custodian shall take possession of the Indenture Trustee's Home Loan
Files as contemplated in Section 2.06.
Section 2.04 Books and Records. The sale of each Home Loan shall
be reflected on the Seller's balance sheets and other financial statements as a
sale of assets by the Seller under generally accepted accounting principles
("GAAP"). The Servicer shall be responsible for maintaining, and shall
maintain, a complete set of books and records for each Home Loan which shall be
clearly marked to reflect the ownership of each Home Loan by the Indenture
Trustee for the benefit of the Securityholders and the Securities Insurer.
Section 2.05 Delivery of Home Loan Documents.
(a) With respect to each Initial Home Loan, on the Closing Date
the Transferor and the Seller have delivered or caused to be delivered, and
with respect to each Subsequent Home Loan, on the related Subsequent Transfer
Dates, the Transferor and the Seller will deliver or will cause to be
delivered, to the Custodian as the designated agent of the Indenture Trustee
each of the following documents (collectively, the "Home Loan Files"):
(i) The original Debt Instrument, endorsed "PAY TO THE
ORDER OF FIRST BANK NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE FOR THE
FIRSTPLUS ASSET BACKED SECURITIES, SERIES 1997-1, WITHOUT RECOURSE"
and signed, by facsimile or manual signature, in the name of the
Seller by a Responsible Officer thereof, together with all intervening
endorsements that evidence a complete chain of title from the
originator thereof to the Transferor; provided that any of the
foregoing endorsements may be contained on an allonge which shall be
firmly affixed to such Debt Instrument;
(ii) With respect to each Debt Instrument, either: (A)
the original Mortgage, with evidence of recording thereon, (B) a copy
of the Mortgage certified as a true copy by a Responsible Officer of
the Transferor or by the closing attorney, if the original has been
transmitted for recording but has not, at the time of delivery of this
Agreement, been returned or (C) a copy of the Mortgage certified by
the public recording office in those instances where the original
recorded Mortgage has been lost or has been retained by the public
recording office;
(iii) With respect to each Debt Instrument, either (A) the
original Assignment of Mortgage assigned to "FIRST BANK NATIONAL
ASSOCIATION, AS INDENTURE TRUSTEE FOR THE FIRSTPLUS ASSET BACKED
SECURITIES, SERIES 1997-1" and signed in the name of the Transferor by
a Responsible Officer with evidence of recording thereon, (B) a copy
of the Assignment of Mortgage, certified as a true copy by a
Responsible Officer of the Transferor where the original has been
transmitted for recording but has not, at the time of delivery of this
Agreement, been returned or (C) a copy of the Assignment of Mortgage
certified by the public recording office in those instances where the
original recorded Assignment of Mortgage has been lost or has been
retained by the public recording office (provided, however, that where
the original Assignment of
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Mortgage is not being delivered to the Custodian, such Responsible
Officer may complete one or more blanket certificates attaching copies
of one or more Assignments of Mortgage relating thereto); provided
that any such Assignments of Mortgage may be made by blanket
assignments for Home Loans secured by Mortgaged Properties located in
the same county, if permitted by applicable law; provided, however,
that the recordation of such Assignment of Mortgage shall not be
required in the States (i) in which a legal opinion is delivered to
the Indenture Trustee and the Securities Insurer in accordance with
subsection (c) below and (ii) that are approved by the Rating
Agencies.
(iv) With respect to each Debt Instrument, either: (A)
originals of all intervening assignments of the Mortgage, with
evidence of recording thereon, (B) if the original intervening
assignments have not yet been returned from the recording office, a
copy of the originals of such intervening assignments together with a
certificate of a Responsible Officer of the Transferor or the closing
attorney certifying that the copy is a true copy of the original of
such intervening assignments or (C) a copy of the intervening
assignment certified by the public recording office in those instances
where the original recorded intervening assignment has been lost or
has been retained by the public recording office; provided that the
chain of intervening recorded assignments shall not be required to
match the chain of intervening endorsements of the Debt Instrument, so
long as the chain of intervening recorded assignments, if applicable,
evidences one or more assignments of the Mortgage from the original
mortgage ultimately to the person who has executed the Assignment of
Mortgage referred to in clause (iii) above; and
(v) Originals of all assumption and modification
agreements, if any, or a copy certified as a true copy by a
Responsible Officer of the Transferor if the original has been
transmitted for recording until such time as the original is returned
by the public recording office.
(b) The Seller agrees to deliver or cause to be delivered on or
before the applicable Subsequent Transfer Date to the Custodian each of the
documents identified in paragraphs (i) through (v) of subsection (a) above with
respect to any Subsequent Home Loans.
(c) With respect to each Home Loan, the Transferor shall, within
five Business Days after the receipt thereof, and in any event, within nine (9)
months of the Closing Date (in the case of the Initial Home Loans) or the
related Subsequent Transfer Date (in the case of the Subsequent Home Loans),
deliver or cause to be delivered to the Custodian: (i) the original recorded
Mortgage in those instances where a copy thereof certified by the Transferor
was delivered to the Custodian; (ii) the original recorded Assignment of
Mortgage, except in the States in which a legal opinion is delivered to the
Indenture Trustee and Securities Insurer as provided below and that are
approved by the Rating Agencies; (iii) any original recorded intervening
assignments of Mortgage in those instances where copies thereof certified by
the Transferor were delivered to the Custodian; and (iv) the original recorded
assumption and modification agreement in those instances in which a copy was
delivered. Notwithstanding anything to the contrary contained in this Section
2.05, in those instances where the public recording office retains the original
Mortgage or, if applicable, the Assignment of
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Mortgage, the intervening assignments of the Mortgage or the original recorded
assumption and modification agreement after it has been recorded, or where any
such original has been lost or destroyed, the Seller and Transferor shall be
deemed to have satisfied their respective obligations hereunder upon delivery
to the Custodian of a copy, as certified by the public recording office to be a
true copy of the recorded original of such Mortgage or, if applicable, the
Assignment of Mortgage, intervening assignments of Mortgage or assumption and
modification agreement, respectively.
With respect to each Home Loan in respect of which the Mortgaged
Property is located in the States of Arizona, California, Colorado, Florida,
Georgia, Maryland, Minnesota, Nevada, North Carolina, Ohio, South Carolina,
Texas, Utah, Virginia or Washington the Transferor and the Seller shall have
the right to deliver to the Indenture Trustee and the Securities Insurer a
legal opinion for each State providing that the recordation of the Assignment
of Mortgage in such State is not necessary to transfer the related Home Loans
in respect of which the Mortgaged Property is located in such State, provided
such legal opinion is in a form that is reasonably acceptable to the Indenture
Trustee and the Securities Insurer and such legal opinion is delivered on or
before March 31, 1997. Upon the delivery and acceptance by the Indenture
Trustee and the Securities Insurer of the foregoing legal opinion for each such
State and the approval of the Rating Agencies, the Transferor and the Seller
shall not be required to record Assignments of Mortgages for the related Home
Loans in respect of which the relevant Mortgaged Properties are located in such
State and the delivery of the Assignments of Mortgages for such State to the
Custodian in recordable form on the Closing Date or Subsequent Transfer Date,
as applicable, shall constitute full compliance with subsection (a)(iii) above
and the Transferor, in its capacity as Servicer, shall retain record title to
such Mortgages on behalf of the Indenture Trustee and the holders of the
Securities. If the foregoing legal opinion is not delivered and accepted by
the Indenture Trustee and Securities Insurer and the Rating Agencies for any of
the foregoing States, then the Assignments of Mortgage relating to any such
State shall be recorded in accordance with the first sentence of this
subsection (c). Notwithstanding the preceding provisions allowing for the
non-recordation of Assignments of Mortgage in certain States, if an Event of
Default occurs pursuant to clause (a)(vii) of Section 10.01 or the Transferor,
as the Servicer, is terminated hereunder, then the Transferor, in its capacity
as the Servicer or predecessor Servicer, shall be required in to record all
Assignments of Mortgage in those States in which the Transferor had previously
been allowed not to record such Assignments of Mortgage.
(d) All Home Loan documents held by the Custodian on behalf of the
Indenture Trustee are referred to herein as the "Indenture Trustee's Home Loan
File." All recordings required pursuant to this Section 2.05 shall be
accomplished by and at the expense of the Transferor.
Section 2.06 Acceptance by Indenture Trustee of the Home Loans;
Certain Substitutions; Initial Certification by
Custodian.
(a) The Indenture Trustee agrees to cause the Custodian to
execute and deliver on the Closing Date an acknowledgment of receipt of the
Indenture Trustee's Home Loan File for each Initial Home Loan, and the Indenture
Trustee agrees to cause the Custodian to execute and deliver on any Subsequent
Transfer Date an acknowledgment of receipt of the Indenture Trustee's Home Loan
File for each Subsequent Home Loan. The Indenture Trustee declares that it will
cause the Custodian to hold such documents and any amendments, replacements or
supplements thereto, as well as any other assets included in the Trust Estate
and delivered to the Custodian in trust, upon and
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subject to the conditions set forth herein for the benefit of the
Securityholders and the Securities Insurer. The Indenture Trustee agrees, for
the benefit of the Securityholders and the Securities Insurer, to cause the
Custodian to review each Indenture Trustee's Home Loan File within 45 days
after the Closing Date (or, with respect to any Qualified Substitute Home Loan
or Subsequent Home Loan, within 45 days after the conveyance of the related
Home Loan to the Trust) and to cause the Custodian to deliver to the
Transferor, the Seller, the Indenture Trustee, the Issuer, the Securities
Insurer and the Servicer a certification to the effect that, as to each Home
Loan listed in the Home Loan Schedule and as to each Subsequent Home Loan
Listed in a Subsequent Home Loan Schedule (other than any Home Loan paid in
full or any Home Loan specifically identified in such certification as not
covered by such certification), (i) all documents required to be delivered to
the Indenture Trustee pursuant to this Agreement are in its possession or in
the possession of the Custodian on its behalf (other than as expressly
permitted by Section 2.05(a)(ii) or 2.05(c)), (ii) all documents delivered by
the Seller and the Transferor to the Custodian pursuant to Section 2.05 have
been reviewed by the Custodian and have not been mutilated or damaged and
appear regular on their face (handwritten additions, changes or corrections
shall not constitute irregularities if initialed by the Obligor) and relate to
such Home Loan, (iii) based on the examination of the Custodian on behalf of
the Indenture Trustee, and only as to the foregoing documents, the information
set forth on the Home Loan Schedule accurately reflects the information set
forth in the Indenture Trustee's Home Loan File and (iv) each Debt Instrument
has been endorsed as provided in Section 2.05. Neither the Issuer nor the
Custodian shall be under any duty or obligation (i) to inspect, review or
examine any such documents, instruments, certificates or other papers to
determine that they are genuine, enforceable, or appropriate for the
represented purpose or that they are other than what they purport to be on
their face or (ii) to determine whether any Indenture Trustee's Home Loan File
should include any of the documents specified in Section 2.05(a)(v).
(b) If the Custodian, during the process of reviewing the
Indenture Trustee's Home Loan Files, finds any document constituting a part of
a Indenture Trustee's Home Loan File which is not executed, has not been
received, is unrelated to any Home Loan identified in the Home Loan Schedule,
does not conform to the requirements of Section 2.05 or does not conform, in
all material respects, to the description thereof as set forth in the Home Loan
Schedule, then the Custodian shall promptly so notify the Transferor, the
Servicer, the Indenture Trustee, the Issuer, the Securities Insurer and the
Seller. In performing any such review, the Custodian may conclusively rely on
the Seller and the Transferor as to the purported genuineness of any such
document and any signature thereon. It is understood that the scope of the
Custodian's review of the Indenture Trustee's Home Loan Files is limited solely
to confirming that the documents listed in Section 2.05 have been received and
further confirming that any and all documents delivered pursuant to Section
2.05 have been executed and relate to the Home Loans identified in the Home
Loan Schedule and to the Subsequent Home Loans listed in the Subsequent Home
Loan Schedule. Neither the Issuer nor the Custodian shall have any
responsibility for determining whether any document is valid and binding,
whether the text of any assignment or endorsement is in proper or recordable
form, 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. If a material defect in a document
constituting part of a Indenture Trustee's Home Loan File is discovered, then
the Seller and Transferor shall comply with the cure, substitution and
repurchase provisions of Section 3.05 hereof.
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(c) (1) Subject to (3) below, each of the Seller and the
Transferor shall have the option during the first 90 days after the Closing
Date, exercisable in its sole discretion, to remove a Home Loan (including a
Home Loan for which the current Monthly Payment is not more than 30 days
delinquent, but excluding a Home Loan which is a Defective Home Loan, a
Defaulted Home Loan or a Home Loan for which the current Monthly Payment is more
than 30 days past due) from the Trust and substitute therefor a Qualified
Substitute Home Loan in the manner and subject to the conditions set forth in
Section 3.05 applicable to substitutions made by the Transferor, and subject to
the conditions that the Seller and/or the Transferor (i) may only effect
substitutions under this Section 2.06(c) (1) which, in the aggregate, amount to
not more than 10% (as measured by the aggregate Principal Balance of the Deleted
Home Loans) of the aggregate Cut-Off Date Principal Balances of the Home Loans;
and in any event (ii) may only effect substitutions under this Section 2.06 (c)
(1) which exceed 5% of the aggregate Cut-Off Date Principal Balances of the Home
Loans with Securities Insurer approval.
(2) Subject to (3) below, each of the Seller and the
Transferor shall have the option following the expiration of 90 days from the
Closing Date, exercisable in its sole discretion, to remove a Home Loan
(including a Home Loan for which the current Monthly Payment is not more than 30
days delinquent, but excluding a Home Loan which is a Defective Home Loan, a
Defaulted Home Loan or a Home Loan for which the current Monthly Payment is more
than 30 days past due) from the Trust and substitute therefor a Qualified
Substitute Home Loan in the manner and subject to the conditions set forth in
Section 3.05 applicable to substitutions made by the Transferor and subject to
the condition that the Seller and/or the Transferor may only effect
substitutions under this Section 2.06(c) (1) which, in the aggregate, amount to
(i) not more than 1.0% (as measured by the aggregate Principal Balance of the
Deleted Home Loans) of the aggregate Cut-Off Date Principal Balances of the Home
Loans without Securities Insurer approval, and (ii) more than 1.0% but not more
than 10.0% (as measured by the aggregate Principal Balance of the Deleted Home
Loans) of the aggregate Cut-Off Date Principal Balance of the Deleted Home
Loans with Securities Insurer approval .
(3) No substitution referred to in (1) and (2) above
shall be undertaken unless and until the Issuer and the Indenture Trustee shall
have received written assurances from each Rating Agency that such substitution
once effected would not result in the ratings assigned to any Class of the
Securities being downgraded and an Officer's Certificate from the Transferor or
the Seller, as applicable, stating that each Qualified Substitute Home Loan
complies with the definition thereof and the substitution is not being effected
for the primary purpose of recognizing gains or decreasing losses resulting
from market value changes in the Deleted Home Loans and Qualified Substitute
Home Loans included in such substitution; provided that with respect to any
substitution under this Section 2.06(c) which, in the aggregate, amount exceeds
5.0% or more of the aggregate Cut-Off Date Principal Balances of the Home
Loans, the Issuer, the Indenture Trustee and the Securities Insurer shall have
received an opinion of counsel, which opinion of counsel shall be acceptable to
the Securities Insurer and the Indenture Trustee, that such substitution once
effected would not cause the Trust to become an "investment company" as defined
under the Investment Company Act of 1940.
(d) Upon receipt by the Issuer of a certification of a Servicing
Officer to the effect that such substitution has occurred and that the
Substitution Adjustment (if any) has been credited to the
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Collection Account pursuant to Section 3.05 and remitted to the Indenture
Trustee for deposit into the Note Distribution Account or the Certificate
Distribution Account, as applicable, the Issuer shall (i) release (or cause the
Custodian to release) to the Servicer for release to the Seller or the
Transferor, as the case may be, the related Indenture Trustee's Home Loan File
for each Deleted Home Loan and (ii) execute, without recourse, representation
or warranty, and deliver such instruments of transfer presented to it by the
Servicer as shall be necessary to transfer such Deleted Home Loan to the Seller
or the Transferor, as the case may be.
(e) On the Distribution Date in December of each year commencing
in 1997, the Issuer shall deliver (or cause the Custodian to deliver) to the
Seller, the Securities Insurer, the Indenture Trustee and the Servicer a
certification listing all Indenture Trustee's Home Loan Files held by the
Custodian on behalf of the Issuer on such Distribution Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01 Representations and Warranties of the Seller.
The Seller hereby represents, warrants and covenants with and to the
Issuer, the Indenture Trustee, the Servicer, the Securities Insurer and the
Securityholders as of the Closing Date:
(a) The Seller is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Nevada and has all licenses
necessary to carry on its business as now being conducted and is licensed,
qualified and in good standing in each Mortgaged Property State if the laws of
such state require licensing or qualification in order to conduct business of
the type conducted by the Seller and perform its obligations as Seller
hereunder; the Seller has the power and authority to execute and deliver this
Agreement and to perform in accordance herewith; the execution, delivery and
performance of this Agreement (including all instruments of transfer to be
delivered pursuant to this Agreement) by the Seller and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary action of the Seller; this Agreement evidences the valid, binding and
enforceable obligation of the Seller; and all requisite action has been taken
by the Seller to make this Agreement valid, binding and enforceable upon the
Seller in accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium and other, similar laws relating to or
affecting creditors' rights generally or the application of equitable
principles in any proceeding, whether at law or in equity;
(b) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and licenses
required to be taken, given or obtained, as the case may be, by or from any
federal, state or other governmental authority or agency (other than any such
actions, approvals, etc. under any state securities laws, real estate
syndication or "Blue Sky" statutes, as to which the Seller makes no such
representation or warranty) that are necessary in connection with the purchase
and sale of the Securities and the execution and delivery by the Seller of this
Agreement and the other related documents to which it is a party, have been
duly taken, given or obtained, as the case may be, are in full force and
effect, are not subject to any pending proceedings or appeals (administrative,
judicial or otherwise) and either the time within which any appeal
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therefrom may be taken or review thereof may be obtained has expired or no
review thereof may be obtained or appeal therefrom taken, and are adequate to
authorize the consummation of the transactions contemplated by this Agreement
and such other documents on the part of the Seller and the performance by the
Seller of its obligations as Seller under this Agreement and such other
documents to which it is a party;
(c) The consummation of the transactions contemplated by this
Agreement will not result in (i) the breach of any terms or provisions of the
Articles of Incorporation or Bylaws of the Seller, (ii) the breach of any term
or provision of, or conflict with or constitute a default under or result in
the acceleration of any obligation under, any material agreement, indenture or
loan or credit agreement or other material instrument to which the Seller, or
its property is subject, or (iii) the violation of any law, rule, regulation,
order, judgment or decree to which the Seller or its respective property is
subject;
(d) Neither this Agreement nor the Prospectus nor any statement,
report or other document prepared by the Seller and furnished or to be
furnished pursuant to this Agreement or in connection with the transactions
contemplated hereby contains any untrue statement of material fact or omits to
state a material fact necessary to make the statements contained herein or
therein not misleading;
(e) There is no action, suit, proceeding or investigation pending
or, to the best of the Seller's knowledge, threatened against the Seller which,
either in any one instance or in the aggregate, may result in any material
adverse change in the business, operations, financial condition, properties or
assets of the Seller or in any material impairment of the right or ability of
the Seller to carry on its business substantially as now conducted, or in any
material liability on the part of the Seller or which would draw into question
the validity of this Agreement or the Home Loans or of any action taken or to
be taken in connection with the obligations of the Seller contemplated herein,
or which would be likely to impair materially the ability of the Seller to
perform under the terms of this Agreement;
(f) The Seller is not in default with respect to any order or
decree of any court or any order, regulation or demand of any federal, state,
municipal or other governmental agency, which default might have consequences
that would materially and adversely affect the condition (financial or
otherwise) or operations of the Seller or its properties or might have
consequences that would materially and adversely affect its performance
hereunder;
(g) As of the Closing Date, the Issuer will have good and
marketable title to each Initial Home Loan and such other items comprising the
corpus of the Trust free and clear of any lien, mortgage, pledge, charge,
security interest or other encumbrance;
(h) As of any Subsequent Transfer Date, the Issuer will have good
and marketable title to each Subsequent Home Loan transferred on such date and
such other items comprising the corpus of the Trust free and clear of any lien,
mortgage, pledge, charge, security interest or other encumbrance; and
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(i) The transfer, assignment and conveyance of the Home Loans, the
Debt Instruments and the Mortgages by the Seller pursuant to this Agreement or
any Subsequent Transfer Agreement are not subject to the bulk transfer laws or
any similar statutory provisions in effect in any applicable jurisdiction.
(j) The Seller shall provide each Rating Agency and the Securities
Insurer with notice and a copy of any amendment to the Articles of
Incorporation of the Seller promptly after the filing thereof.
3.02 Representations, Warranties and Covenants of the Servicer and
Transferor
The Servicer as such and in its capacity as the Transferor
hereby represents, warrants and covenants with and to the Seller, the Issuer,
the Indenture Trustee, the Securities Insurer and the Securityholders as of the
Closing Date:
(a) The Servicer is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Texas and has all
licenses necessary to carry on its business as now being conducted and is
licensed, qualified and in good standing in each Mortgaged Property State if
the laws of such state require licensing or qualification in order to conduct
business of the type conducted by the Servicer and perform its obligations as
Servicer hereunder; the Servicer has the power and authority to execute and
deliver this Agreement and to perform in accordance herewith; the execution,
delivery and performance of this Agreement (including all instruments of
transfer to be delivered pursuant to this Agreement) by the Servicer and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary action of the Servicer; this Agreement evidences
the valid, binding and enforceable obligation of the Servicer; and all
requisite action has been taken by the Servicer to make this Agreement valid,
binding and enforceable upon the Servicer in accordance with its terms, subject
to the effect of bankruptcy, insolvency, reorganization, moratorium and other,
similar laws relating to or affecting creditors' rights generally or the
application of equitable principles in any proceeding, whether at law or in
equity;
(b) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and licenses
required to be taken, given or obtained, as the case may be, by or from any
federal, state or other governmental authority or agency (other than any such
actions, approvals, etc. under any state securities laws, real estate
syndication or "Blue Sky" statutes, as to which the Servicer makes no such
representation or warranty) that are necessary in connection with the execution
and delivery by the Servicer of this Agreement and the other related documents
to which it is a party, have been duly taken, given or obtained, as the case
may be, are in full force and effect, are not subject to any pending
proceedings or appeals (administrative, judicial or otherwise) and either the
time within which any appeal therefrom may be taken or review thereof may be
obtained has expired or no review thereof may be obtained or appeal therefrom
taken, and are adequate to authorize the consummation of the transactions
contemplated by this Agreement and such other documents on the part of the
Servicer and the performance by the Servicer of its obligations as Servicer
under this Agreement and such other documents to which it is a party;
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(c) The consummation of the transactions contemplated by this
Agreement will not result in (i) the breach of any terms or provisions of the
charter or by-laws of the Servicer, (ii) the breach of any term or provision
of, or conflict with or constitute a default under or result in the
acceleration of any obligation under, any material agreement, indenture or loan
or credit agreement or other material instrument to which the Servicer or its
property is subject, or (iii) the violation of any law, rule, regulation,
order, judgment or decree to which the Servicer or its property is subject;
(d) Neither this Agreement nor the Prospectus nor any statement,
report or other document prepared by the Servicer and furnished or to be
furnished pursuant to this Agreement or in connection with the transactions
contemplated hereby contains any untrue statement of material fact or omits to
state a material fact necessary to make the statements contained herein or
therein not misleading;
(e) There is no action, suit, proceeding or investigation pending
or, to the best of the Servicer's knowledge, threatened against the Servicer
which, either in any one instance or in the aggregate, may result in any
material adverse change in the business, operations, financial condition,
properties or assets of the Servicer or in any material impairment of the right
or ability of the Servicer to carry on its business substantially as now
conducted, or in any material liability on the part of the Servicer or which
would draw into question the validity of this Agreement or the Home Loans or of
any action taken or to be taken in connection with the obligations of the
Servicer contemplated herein, or which would be likely to impair materially the
ability of the Servicer to perform under the terms of this Agreement;
(f) The Servicer is not in default with respect to any order or
decree of any court or any order, regulation or demand of any federal, state,
municipal or other governmental agency, which default might have consequences
that would materially and adversely affect the condition (financial or
otherwise) or operations of the Servicer or its properties or might have
consequences that would materially and adversely affect its performance
hereunder;
(g) So long as FFI is the Servicer of the Home Loans hereunder,
the Servicer's Home Loan Files will be maintained at 1250 Mockingbird Lane,
Dallas, Texas 75247-4902, or, if FFI is no longer the Servicer hereunder or if
FFI changes the location of the Servicer's Home Loan Files, the Servicer's Home
Loan Files shall be maintained at such address as may be indicated on an
Officer's Certificate executed by a Servicing Officer and delivered to the
Issuer, the Indenture Trustee, the Securities Insurer and the Seller;
(h) The Servicer shall not solicit any refinancing of any of the
Home Loans; provided, that this covenant shall not prevent or restrict either
(1) the Servicer from making general solicitations, by mail, advertisement or
otherwise of the general public or persons on a targeted list, so long as the
list was not generated from the Home Loan Schedule or (2) any refinancing in
connection with an Obligor's unsolicited request for refinancing; and
(i) The Servicer shall not sell, transfer, assign or otherwise
dispose of a customer or similar list comprised of the names of the Obligors
under the Home Loans to any third party.
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Section 3.03 Individual Home Loans. The Transferor hereby
represents and warrants to the Seller, the Issuer, the Indenture Trustee, the
Securities Insurer and the Securityholders, with respect to each Initial Home
Loan, as of the Closing Date and, with respect to each Subsequent Home Loan, as
of the related Subsequent Transfer Date:
(a) Home Loan Information. The information with respect to each
Home Loan set forth in the Home Loan Schedule is true and correct in all
material respects as of the applicable Cut-Off Date.
(b) Delivery of Home Loan Documents. All of the original or
certified documentation required to be delivered to the Indenture Trustee or to
the Custodian on or prior to the Closing Date or the Subsequent Transfer Date,
as applicable, or as otherwise provided in this Agreement has or will be so
delivered.
(c) Payments Current. As of the applicable Cut-off Date, no more
than 0.15% (by aggregate Cut-off Date Principal Balance) of the Initial Home
Loans are more than 30 days but not more than 60 days delinquent, based on the
terms under which the related Mortgages and Debt Instruments have been made and
none of the Home Loans are more than 60 days delinquent. The Transferor has
not advanced funds, or induced, solicited or knowingly received any advance of
funds from a party other than the related Obligor, directly or indirectly, for
the payment of any amount required by any Home Loan.
(d) No Waiver or Modification. The terms of each Debt Instrument
and Mortgage, have not been impaired, waived, altered or modified in any
respect, except by written instruments reflected in the Indenture Trustee's
Home Loan File and no provision of any Mortgage or Debt Instrument has been
"whited out" or erased unless such modification has been initialed by each of
the parties to the related Home Loan. No instrument of waiver, alteration,
modification or assumption has been executed except for the instruments that
are part of the Indenture Trustee's Home Loan File and the terms of which are
reflected in the Indenture Trustee's Home Loan File.
(e) No Defenses. No Debt Instrument or Mortgage is subject to any
claim, set-off, counterclaim or defense, including the defense of usury, nor
will the operation of any of the terms of any Debt Instrument or Mortgage or
the exercise of any right thereunder, render such Debt Instrument or Mortgage
unenforceable, in whole or in part, or subject to any claim, right of
rescission, set-off, counterclaim or defense, including the defense of usury,
and no such right of rescission, set-off, counterclaim or defense has been
asserted in any proceeding or was asserted in any state or federal bankruptcy
or insolvency proceeding at the time the related Home Loan was originated.
(f) Compliance with Laws; Relief Act Matters. Any and all
requirements of any federal, state or local law applicable to each Home Loan
have been complied with including, without limitation, all licensing, real
estate settlement procedures act, consumer, usury, truth-in-lending, consumer
credit protection, equal credit opportunity or disclosure laws applicable to
each Home Loan; each Home Loan was originated in compliance with all applicable
laws and no fraud or misrepresentation was committed by any Person in
connection therewith. No Obligor has notified
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the Transferor, and no relief has been requested or allowed to an Obligor under
the Soldiers' and Sailors' Civil Relief Act of 1940.
(g) No Satisfaction or Release of Lien. No Mortgage has been
satisfied, canceled, subordinated or rescinded, in whole or in part. No
Mortgaged Property has been released from the lien of the related Mortgage in
whole or in part, nor has any instrument been executed that would effect any
such release, cancellation, subordination or rescission, other than the
subordination of the lien of such Mortgage securing a Home Loan with respect to
a Superior Lien on such Mortgaged Property in connection with the refinancing
of the mortgage loan relating to such Superior Lien.
(h) Valid Lien. With respect to each Debt Instrument, the related
Mortgage is or creates a valid, subsisting and enforceable lien on the related
Mortgaged Property, including, in the case of a Mortgage securing a Home
Improvement Loan, the land and all buildings on the related Mortgaged Property.
(i) Validity of Home Loan Documents; Entire Agreement. Each Debt
Instrument and each Mortgage is genuine and each is the legal, valid and
binding obligation of the Obligor thereof, enforceable in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting creditors' rights in
general and by general principles of equity. All parties to each Debt
Instrument and each Mortgage had legal capacity at the time to enter into the
related Home Loan and to execute and deliver such Debt Instrument and Mortgage,
and such Debt Instrument and Mortgage have been duly and properly executed by
such parties. The Debt Instrument and the Mortgage contain the entire
agreement between the related Obligor and the lender and all obligations of the
lender under the related Home Loan, and no other agreement defines, modifies,
or expands the obligations of the lender under the Home Loan, except for any
assumptions or modifications included in the Indenture Trustee's Home Loan File
pursuant to Section 2.05(a)(v) or referred to in Section 3.03(m).
(j) Full Disbursement of Proceeds. As of the applicable Cut-Off
Date, the proceeds of each Home Loan have been fully disbursed and there is no
requirement for future advances thereunder, all costs, fees and expenses
incurred in making or closing each Home Loan and the recording of the Mortgage
were disbursed, the Obligor is not entitled to any refund of any amounts paid
or due under the Debt Instrument or any related Mortgage and any and all
requirements set forth in the related Home Loan documents have been complied
with.
(k) Ownership. Immediately prior to the conveyance thereof to the
Seller, the Transferor had good and marketable title to each Home Loan, Debt
Instrument and Mortgage, the Transferor was the sole owner thereof and had
full right to sell each Home Loan, Debt Instrument and Mortgage to the Seller;
and upon the conveyance thereof by the Transferor to the Seller, the Seller
became the sole owner of each Home Loan, Debt Instrument and Mortgage free and
clear of any encumbrance, equity, lien, pledge, charge, claim or security
interest.
(l) Ownership of Mortgaged Property. With respect to each Home
Loan, the related Servicer's Home Loan File contains a title document
reflecting that title to the related Mortgaged Property is held at least 50% by
the Obligor under such Home Loan.
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(m) No Defaults. Except with respect to any delinquent scheduled
payment set forth in subsection (c) above, there is no default, breach,
violation or event of acceleration existing under any Mortgage or any Debt
Instrument and, to the best of the Transferor's knowledge, there is no event
which, with the passage of time or with notice and/or the expiration of any
grace or cure period, would constitute such a default, breach, violation or
event of acceleration and neither the Transferor nor its predecessors have
waived any such default, breach, violation or event of acceleration, except as
set forth in an instrument of waiver, alteration, modification or assumption
that is included in the Indenture Trustee's Home Loan File.
(n) Consent and Delinquency of Superior Lien. No obligation
secured by a Superior Lien was more than 30 days past due at the time of
origination of the related Home Loan. With respect to each Home Loan that is
not a first mortgage loan, either (i) no consent for the Home Loan is required
by the holder of the related prior lien or (ii) such consent has been obtained
and has been delivered to the Indenture Trustee.
(o) No Condemnation or Damage; Good Repair. To the best of the
Transferor's knowledge, the physical condition of each Mortgaged Property has
not deteriorated since the date of origination of the related Home Loan (normal
wear and tear excepted) and there is no proceeding pending for the total or
partial condemnation of any Mortgaged Property. To the best of the
Transferor's knowledge, the related Mortgaged Property described in each
Mortgage is free of damage and in good repair or will be free of damage and in
good repair following the completion of any improvements or repairs to be
financed by the related Home Loan.
(p) Environmental Compliance. To the best of the Transferor's
knowledge, the Mortgaged Property is free from any and all toxic or hazardous
substances and there exists no violation of any local, state or federal
environmental law, rule or regulation.
(q) Mortgage Remedies Adequate. Each Mortgage contains customary
and enforceable provisions such as to render the rights and remedies of the
holder thereof adequate for the realization against the related Mortgaged
Property of the benefits of the security provided thereby, including, (i) in
the case of a Mortgage designated as a deed of trust, by trustee's sale, and
(ii) otherwise, by judicial foreclosure.
(r) Remedies Against Originators. In the event that any Home Loan
was originated by an entity (such entity, the "Originator") other than the
Transferor and to the extent that the Transferor has failed to fulfill or is
not capable of fulfilling its obligations to cure, substitute or repurchase
such Home Loan as required hereunder, then the Securities Insurer or the
Indenture Trustee on behalf of the Securityholders may enforce any remedies for
breach of representations and warranties made by the Originator with respect to
such Home Loan.
(s) Security. No Debt Instrument is, or has been, secured by any
collateral except the lien of the related Mortgage.
(t) Deed of Trust. If a Mortgage for a Home Loan constitutes a
deed of trust, a trustee, duly qualified under applicable law to serve as such,
has been properly designated and currently so serves as such and is named in
such Mortgage, or a valid substitution of trustee has been recorded
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or may be recorded and no extraordinary fees or expenses are, or will become,
payable by the Transferor to the trustee under the deed of trust, except in
connection with default proceedings and a trustee's sale after default by the
related Obligor.
(u) Completion of Improvements. With respect to all Home
Improvement Loans and Combination Loans that have been originated through a
home improvement contractor, all improvements to be made to each Mortgaged
Property with the proceeds of the related Home Loan have been completed. All
obligations of a seller or contractor under all Debt Consolidation Loans,
Purchase or Refinance Loans and Combination Loans have been completed in
accordance with the terms thereof as of the Closing Date, and no additional
goods or services will be, or are required to be provided by such seller or
contractor after the Closing Date.
(v) Inspections of Improvements; and No Encroachment. To the best
of the Transferor's knowledge, all required inspections, licenses and
certificates with respect to the improvements and the use and occupancy of all
occupied portions of all Mortgaged Property have been made, obtained or issued
as applicable. To the best of the Transferor's knowledge, all improvements
which were considered in determining the appraised value of the Mortgaged
Property lay wholly within the boundaries and building restrictions lines of
the related property and no improvements on adjoining properties encroach upon
such property and no improvement located on or being a part of such property is
in violation of any applicable zoning laws or regulation.
(w) Flood Insurance. If required by federal or state law, each
Mortgaged Property is covered by flood insurance with a standard mortgagee
clause and extended coverage in an amount which is not less than the value of
such Mortgaged Property. All such insurance policies meet the requirements of
the current guidelines of the Federal Insurance Administration, conform to the
requirements of the FNMA Sellers' Guide and the FNMA Servicers' Guide, and are
of standard type and quality for the locale where the related Mortgaged
Property is located. All acts required to be performed to preserve the rights
and remedies of the Indenture Trustee in any such insurance policies have been
performed including, without limitation, any necessary notifications of
insurers and assignments of policies or interests therein.
(x) Underwriting Origination and Servicing Practices. Each Home
Loan has been underwritten by the originator thereof in accordance with such
originator's then current underwriting guidelines. The origination practices
used by each originator of the Home Loans and the servicing and collection
practices used by the Transferor with respect to each Home Loan have been in
all material respects legal, proper, prudent and customary with respect to the
loan origination and servicing business as applicable to the respective loan
type. To the best of the Transferor's knowledge, no fraud or misrepresentation
was committed by any Person in connection with the origination or servicing of
each Home Loan.
(y) Selection Criteria; No Bulk Transfer. The Home Loans were not
selected by the Transferor for sale to the Seller or the Issuer on any basis
intended to adversely affect the Seller or the Issuer. The sale, transfer,
assignment, conveyance and grant of the Debt Instruments and the Mortgages by
the Transferor to the Seller were not subject to the bulk transfer laws or any
similar statutory provisions in effect in any applicable jurisdiction.
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(z) Treasury Regulation Section 301.7701. On the Closing Date and
on each Subsequent Transfer Date, 55% or more (by aggregate principal balance)
of the Home Loans do not constitute "real estate mortgages" for the purpose of
Treasury Regulation Section 301.7701 under the Code. For this purpose a Home
Loan does not constitute a "real estate mortgage" if:
(i) The Home Loan is not secured by an interest in real
property, or
(ii) The Home Loan is not an "obligation principally
secured by an interest in real property." For this purpose an
obligation is "principally secured by an interest in real property" if
it satisfies either the test set out in paragraph (1) or the test set
out in paragraph (2) below.
(1) The 80-percent test. An obligation is principally
secured by an interest in real property if the fair
market value of the interest in real property
securing the obligation
(A) was at least equal to 80 percent of the
adjusted issue price of the obligation at
the time the obligation was originated (or,
if later, the time the obligation was
significantly modified); or
(B) is at least equal to 80 percent of the
adjusted issue price of the obligation on the
Closing Date or Subsequent Transfer Date, as
applicable.
For purposes of this paragraph (1), the fair market
value of the real property interest must be first
reduced by the amount of any lien on the real
property interest that is senior to the obligation
being tested, and must be further reduced by a
proportionate amount of any lien that is in parity
with the obligation being tested, in each case before
the percentages set forth in (1)(A) and (1)(B) are
determined. The adjusted issue price of an
obligation is its issue price plus the amount of
accrued original issue discount, if any, as of the
date of determination.
(2) Alternative test. An obligation is principally
secured by an interest in real property if
substantially all of the proceeds of the obligation
were used to acquire or to improve or protect an
interest in real property that, at the origination
date, is the only security for the obligation. For
purposes of this test, loan guarantees made by the
United States or any state (or any political
subdivision, agency, or instrumentality of the United
States or of any state), or other third party credit
enhancement are not viewed as additional security for
a loan. An obligation is not considered to be
secured by property other than real property solely
because the obligor is personally liable on the
obligation. For this purpose only substantially all
of the proceeds of the obligation means more than
66-2/3% of the gross proceeds.
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(aa) No Fraudulent Conveyance. The Home Loans are not being
transferred with any intent to hinder, delay or defraud any creditors.
(bb) Value and Marketability. To the best of the Transferor's
knowledge, there do not exist any circumstances, conditions or information with
respect to the Home Loan, the related Mortgaged Property, the Obligor or the
Obligor's credit standing that reasonably can be expected to cause private
institutional investors investing in same type of home loan to regard such Home
Loan as an unacceptable investment, to increase the likelihood that such Home
Loan will become delinquent, or adversely affect the value or marketability of
such Home Loan.
(cc) Terms of Home Loans and Interest Method. Each Home Loan is a
fixed rate loan; each Debt Instrument has an original term to maturity of not
less than 24 months nor more than 25 years and three months from the date of
origination; each Debt Instrument is payable in monthly installments of
principal and interest, with interest payable in arrears, and requires a
monthly payment which is sufficient to amortize the original principal balance
over the original term and to pay interest at the related Home Loan Interest
Rate; and no Debt Instrument provides for any extension of the original term.
Interest for each Home Loan is calculated at a rate of interest computed by the
simple interest method or the actuarial method.
(dd) Types of Home Loans; Retail Installment Contracts. Each Home
Loan is either (i) a Home Improvement Loan, (ii) a Debt Consolidation Loan,
(iii) a Combination Loan, or (iv) a first or junior lien purchase money loan.
No Home Loan was originated for the express purpose of purchasing a
manufactured home. Some of the Home Loans are retail installment contracts for
goods or services, and some of the Home Loans are home improvement loans for
goods or services, which are either "consumer credit contracts" or "purchase
money loans" as such terms are defined in 16 C.F.R. Part 433.1.
(ee) No Buydown, GPM or Shared Appreciation Loans. No Home Loan
contains any provisions pursuant to which principal and interest payments are
paid or partially paid with funds deposited in any separate account established
by the Transferor, the Obligor or anyone else on behalf of the Obligor, or paid
by any source other than the Obligor. No Home Loan contains any other similar
provision which may constitute a "buydown" provision. No Home Loan is a
graduated payment mortgage loan. No Home Loan has a shared appreciation or
other contingent interest feature.
(ff) No Chattel Paper. Each Debt Instrument is comprised of one
original promissory note and each such promissory note constitutes an
"instrument" for purposes of Section 9-105(1)(i) of the UCC. No Debt
Instrument constitutes or is comprised of "chattel paper" as such term is
defined in Section 9-105(1)(b) of the UCC. Each Debt Instrument has been
delivered to the Indenture Trustee.
(gg) Description Conforms to Prospectus Supplement. Each Initial
Home Loan conforms, and all Initial Home Loans in the aggregate conform, in all
material respects to the description thereof set forth in the Prospectus
Supplement.
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(hh) Review by Transferor. In light of the Transferor's
underwriting guidelines, the Transferor has reviewed all of the documents
constituting each Servicer's Home Loan File and each Indenture Trustee's Home
Loan File and has made such inquiries as it deems reasonable under the
circumstances to make and confirm the accuracy of the representations set forth
herein.
Section 3.04 Subsequent Home Loans.
(a) The Transferor shall represent and warrant to the Seller, the
Issuer, the Indenture Trustee, the Securities Insurer and the Securityholders
that as of each Subsequent Transfer Date:
(i) No Subsequent Home Loan has a Cut-Off Date or a
Subsequent Transfer Date later than May 27, 1997;
(ii) No Subsequent Home Loan has a scheduled maturity date
later than June 30, 2022;
(iii) To the best of the Transferor's knowledge, the
acquisition of the Subsequent Home Loans as of such Subsequent
Transfer Date will not result in a downgrading in any rating of the
Securities;
(iv) The Subsequent Home Loans have not been acquired by
the Issuer for the primary purpose of recognizing gains or decreasing
losses resulting from market value changes in such Subsequent Home
Loans;
(v) Each of the representations and warranties set forth
in Section 3.03 is true and correct with respect to each of the
Subsequent Home Loans being transferred to the Issuer; and
(vi) To the extent applicable to each Subsequent Home Loan
being transferred to the Issuer, the quantitative criteria set forth
in paragraphs 22 and 23 of that certain Commitment to Issue a
Financial Guaranty Insurance Policy (Application No. 97-02-1246 dated
as of February 26, 1997) (the "Securities Insurer Commitment") issued
by the Securities Insurer have been satisfied.
(b) The Transferor shall represent and warrant to the Seller, the
Issuer, the Indenture Trustee, the Securities Insurer and the Securityholders
that as of the end of the Funding Period, the Home Loans have satisfied all of
the criteria set forth in paragraphs 22 and 23 of the Securities Insurer
Commitment (as defined in (a)(vii) above).
Section 3.05 Purchase and Substitution.
(a) It is understood and agreed that the representations and
warranties set forth in Sections 3.03 and 3.04, shall survive the conveyance of
the Home Loans to the Issuer, the Grant of the Home Loans to the Indenture
Trustee and the delivery of the Securities to the Securityholders. Upon
discovery by the Seller, the Servicer, the Transferor, the Custodian, the
Issuer, the Indenture Trustee, the Securities Insurer or any Securityholder of
a breach of any of such representations and
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warranties which materially and adversely affects the value of the Home Loans
or the interest of the Securityholders or the Securities Insurer, or which
materially and adversely affects the interests of the Securityholders or the
Securities Insurer in the related Home Loan in the case of a representation and
warranty relating to a particular Home Loan (notwithstanding that such
representation and warranty was made to the Transferor's best knowledge), the
party discovering such breach shall give prompt written notice to the others.
The Transferor shall within 60 days of the earlier of its discovery or its
receipt of notice of any breach of a representation or warranty, promptly cure
such breach in all material respects unless such requirement is waived by the
Securities Insurer. If, however, within 60 days after the notice of such
breach to the Transferor such breach has not been remedied by the Transferor or
waived by the Securities Insurer and such breach materially and adversely
affects the interests of the Securityholders or the Securities Insurer
generally or in the related Home Loan (the "Defective Home Loan"), the Seller
shall cause the Transferor on or before the Determination Date next succeeding
the end of such 60 day period either (i) to remove such Defective Home Loan
from the Owner Trust Estate (in which case it shall become a Deleted Home Loan)
and substitute one or more Qualified Substitute Home Loans in the manner and
subject to the conditions set forth in this Section 3.05 or (ii) to purchase
such Defective Home Loan at a purchase price equal to the Purchase Price (as
defined below) by depositing such Purchase Price in the Collection Account. In
addition, the Transferor shall indemnify the Trust and the Securities Insurer
for any losses incurred in excess of the proceeds received from the repurchase
or substitution of any such Defective Home Loan. In the event the Seller or
the Transferor is notified that any Mortgaged Property is not free of damage or
not in good repair, regardless of the Transferor's knowledge, the Seller shall
cause the Transferor to (x) substitute or purchase the related Home Loan in
accordance with clauses (i) and (ii), respectively, above or (y) repair any
such Mortgaged Property such that such Mortgaged Property is free of damage and
in good repair. The Transferor shall provide the Servicer, the Securities
Insurer, the Indenture Trustee and the Issuer with a certification of a
Responsible Officer on the Determination Date next succeeding the end of such
60 day period indicating whether the Transferor is purchasing the Defective
Home Loan or substituting in lieu of such Defective Home Loan a Qualified
Substitute Home Loan. With respect to the purchase of a Defective Home Loan
pursuant to this Section, the "Purchase Price" shall be equal to the Principal
Balance of such Defective Home Loan as of the date of purchase, plus all
accrued and unpaid interest on such Defective Home Loan to but not including
the Due Date in the Due Period most recently ended prior to such Determination
Date computed at the applicable Home Loan Interest Rate, plus the amount of any
unreimbursed Servicing Advances made by the Servicer with respect to such
Defective Home Loan, which Purchase Price shall be deposited in the Collection
Account (after deducting therefrom any amounts received in respect of such
repurchased Defective Home Loan and being held in the Collection Account for
future distribution to the extent such amounts represent recoveries of
principal not yet applied to reduce the related Principal Balance or interest
(net of the Servicing Fee) for the period from and after the Due Date in the
Due Period most recently ended prior to such Determination Date).
Any substitution of Home Loans pursuant to this Section 3.05(a) and
Section 2.06(c) shall be accompanied by payment by the Transferor of the
Substitution Adjustment, if any, to be deposited in the Collection Account.
For purposes of calculating the Available Collection Amount for any
Distribution Date, amounts paid by the Transferor pursuant to this Section 3.05
in connection with the repurchase or substitution of any Defective Home Loan
that are on deposit in the Collection Account as of the Determination Date for
such Distribution Date shall be deemed to have been paid
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during the related Due Period and shall be transferred to the Note Distribution
Account to be retained therein or transferred to the Certificate Distribution
Account pursuant to Section 5.01(c).
As to any Home Loan for which the Transferor substitutes a Qualified
Substitute Home Loan or Loans, the Transferor shall effect such substitution by
delivering (i) to the Issuer a certification executed by a Responsible Officer
of the Transferor to the effect that the Substitution Adjustment has been
credited to the Collection Account to be remitted to the Indenture Trustee for
deposit into the Note Distribution Account and/or the Certificate Distribution
Account, and (ii) to the Custodian on behalf of the Indenture Trustee, the
documents constituting the Indenture Trustee's Loan File for such Qualified
Substitute Home Loan or Loans.
In addition to the preceding repurchase obligations, each of the
Transferor and Servicer shall have the option, exercisable in its sole
discretion at any time, to repurchase from the Issuer or to substitute one or
more Qualified Substitute Home Loans for any Home Loan that is in foreclosure
or default; provided that any repurchase or substitution pursuant to this
paragraph is conducted in the same manner as the repurchase or substitution,
respectively, of a Defective Home Loan pursuant to this Section 3.05.
(b) The Servicer shall deposit in the Collection Account all
payments received in connection with such Qualified Substitute Home Loan or
Loans after the date of such substitution. All payments received with respect
to Qualified Substitute Home Loans on or before the date of substitution will
be retained by the Transferor. The Issuer will be entitled to all payments
received on the Deleted Home Loan on or before the date of substitution, and
the Transferor shall thereafter be entitled to retain all amounts subsequently
received in respect of such Deleted Home Loan. The Transferor shall give
written notice to the Issuer, the Servicer (if the Transferor is not then
acting as such), the Indenture Trustee and the Securities Insurer that such
substitution has taken place and shall amend the Home Loan Schedule to reflect
(i) the removal of such Deleted Home Loan from the terms of this Agreement and
(ii) the substitution of the Qualified Substitute Home Loan. The Transferor
shall promptly deliver to the Issuer, the Servicer (if the Transferor is not
then acting as such), the Indenture Trustee and the Securities Insurer a copy
of the amended Home Loan Schedule. Upon such substitution, such Qualified
Substitute Home Loan or Loans shall be subject to the terms of this Agreement
in all respects, and the Transferor shall be deemed to have made with respect
to such Qualified Substitute Home Loan or Loans, as of the date of
substitution, the covenants, representations and warranties set forth in
Section 3.03. On the date of such substitution, the Transferor will deposit
into the Collection Account an amount equal to the related Substitution
Adjustment, if any. In addition, on the date of such substitution, the Issuer
shall cause the Indenture Trustee to release the Deleted Home Loan from the
lien of the Indenture and the Issuer will cause such Qualified Substitute Home
Loan to be pledged to the Indenture Trustee under the Indenture as part of the
Owner Trust Estate.
(c) It is understood and agreed that the obligations of the
Transferor set forth in this Section 3.05 to cure, purchase or substitute for a
Defective Home Loan (and to indemnify the Trust and the Securities Insurer for
losses in connection with a Defective Home Loan) constitute the sole remedies
of the Issuer, the Indenture Trustee, the Securityholders and the Securities
Insurer hereunder respecting a breach of the representations and warranties
contained in Sections 3.03 and 3.04. Any cause of action against the Seller
relating to or arising out of a defect in a Indenture
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Trustee's Home Loan File as contemplated by Section 2.06 or against the
Transferor relating to or arising out of a breach of any representations and
warranties made in Sections 3.03 or 3.04 shall accrue as to any Home Loan upon
(i) discovery of such defect or breach by any party and notice thereof to the
Seller or the Transferor, as applicable, or notice thereof by the Transferor or
the Seller, as applicable, to the Issuer and the Securities Insurer, (ii)
failure by the Transferor or the Seller, as applicable, to cure such defect or
breach or purchase or substitute such Home Loan as specified above, and (iii)
demand upon the Transferor or the Seller, as applicable, by the Issuer, the
Securities Insurer or the Majority Securityholders for all amounts payable in
respect of such Home Loan.
(d) Neither the Issuer nor the Indenture Trustee shall have any
duty to conduct any affirmative investigation other than as specifically set
forth in this Agreement as to the occurrence of any condition requiring the
repurchase or substitution of any Home Loan pursuant to this Section or the
eligibility of any Home Loan for purposes of this Agreement.
ARTICLE IV
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 4.01 Duties of the Servicer.
(a) Servicing Standard. The Servicer, as an independent
contractor, shall service and administer the Home Loans and shall have full
power and authority, acting alone, to do any and all things in connection with
such servicing and administration which the Servicer may deem necessary or
desirable and consistent with the terms of this Agreement. Notwithstanding
anything to the contrary contained herein, the Servicer, in servicing and
administering the Home Loans, shall employ or cause to be employed procedures
(including collection, foreclosure, liquidation and Foreclosure Property
management and liquidation procedures) and exercise the same care that it
customarily employs and exercises in servicing and administering loans of the
same type as the Home Loans for its own account, all in accordance with
accepted servicing practices of prudent lending institutions and servicers of
loans of the same type as the Home Loans and giving due consideration to the
Securityholders' and the Securities Insurer's reliance on the Servicer. The
Servicer has and shall maintain the facilities, procedures and experienced
personnel necessary to comply with the servicing standard set forth in this
subsection (a) and the duties of the Servicer set forth in this Agreement
relating to the servicing and administration of the Home Loans.
(b) Servicing Advances. In accordance with the preceding general
servicing standard, the Servicer, or any Subservicer on behalf of the Servicer,
shall make all Servicing Advances in connection with the servicing of each Home
Loan hereunder. Notwithstanding any provision to the contrary herein, neither
the Servicer, nor any Subservicer on behalf of the Servicer, shall have any
obligation to advance its own funds for any delinquent scheduled payments of
principal and interest on any Home Loan or to satisfy or keep current the
indebtedness secured by any Superior Liens on the related Mortgaged Property.
No costs incurred by the Servicer or any Subservicer in respect of Servicing
Advances shall, for the purposes of distributions to Securityholders, be added
to the amount owing under the related Home Loan. Notwithstanding any
obligation by the Servicer to make a Servicing Advance hereunder with respect
to a Home Loan, before making any Servicing Advance that is material in
relation to the outstanding principal balance thereof, the Servicer shall
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assess the reasonable likelihood of (i) recovering such Servicing Advance and
any prior Servicing Advances for such Home Loan, and (ii) recovering any
amounts attributable to outstanding interest and principal owing on such Home
Loan for the benefit of the Securityholders and the Securities Insurer in
excess of the costs, expenses and other deductions to obtain such recovery,
including without limitation any Servicing Advances therefor and, if
applicable, the outstanding indebtedness secured by all Superior Liens. The
Servicer shall only make a Servicing Advance with respect to a Home Loan to the
extent that the Servicer determines in its reasonable, good faith judgment that
such Servicing Advance would likely be recovered as aforesaid.
(c) Waivers, Modifications and Extensions. Consistent with the
terms of this Agreement, the Servicer may waive, modify or vary any provision
of any Home Loan or consent to the postponement of strict compliance with any
such provision or in any manner grant indulgence to any Obligor if in the
Servicer's reasonable determination such waiver, modification, postponement or
indulgence is not materially adverse to the interests of the Securityholders or
the Securities Insurer; provided, however, unless the Obligor is in default
with respect to the Home Loan, or such default is, in the judgment of the
Servicer, reasonably foreseeable, the Servicer may not permit any modification
with respect to any Home Loan that would change the Home Loan Interest Rate,
defer (subject to the following paragraph) or forgive the payment of any
principal or interest (unless in connection with the liquidation of the related
Home Loan) or extend the final maturity date on the Home Loan. The Servicer
may grant a waiver or enter into a subordination agreement with respect to the
refinancing of the indebtedness secured by a Superior Lien on the related
Mortgaged Property, provided that the Obligor is in a better financial or cash
flow position as a result of such refinancing, which may include a reduction in
the Obligor's scheduled monthly payment on the indebtedness secured by such
Superior Lien. The Servicer shall notify the Issuer, the Securities Insurer
and the Indenture Trustee of any modification, waiver or amendment of any
provision of any Home Loan and the date thereof, and shall deliver to the
Custodian for deposit in the related Indenture Trustee's Home Loan File, an
original counterpart of the agreement relating to such modification, waiver or
amendment promptly following the execution thereof. Notwithstanding the
preceding provisions of this subsection (c), (1) if the Home Loans that have
been waived, modified or varied, in the aggregate, equal or exceed two percent
(2%) of the aggregate Principal Balances of the Initial Home Loans as of the
related Cut-Off Date, then any waiver, modification or variance thereafter of
any Home Loan which is not a Defaulted Home Loan shall be subject to the prior
written consent of the Securities Insurer; and (2) the Servicer may modify,
vary or waive any Defaulted Home Loan in a manner that in the reasonable
judgment of the Servicer will be likely to maximize the net proceeds realizable
from such Defaulted Home Loan under the circumstances, including, without
limitation, the deferment or forgiveness of any principal or interest payments
due or to become due thereon; provided, however, that with respect to the
preceding clauses (1) and (2), no such modification, waiver or variation of a
Home Loan pursuant to this subsection (c) shall involve the execution by the
related Obligor of a new Debt Instrument or a new Mortgage.
The Servicer shall make reasonable efforts to collect all payments
called for under the terms and provisions of each Home Loan and the related
Debt Instrument and Mortgage. Consistent with the foregoing, the Servicer may
in its discretion waive or permit to be waived any late payment charge,
prepayment charge or assumption fee or any other fee or charge which the
Servicer would be entitled to retain hereunder as Servicing Compensation and
extend the due date for payments due on a Debt Instrument for a period.
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(d) Instruments of Satisfaction or Release. Without limiting the
generality of the foregoing, the Servicer is hereby authorized and empowered to
execute and deliver on behalf of the Issuer, the Indenture Trustee, each
Securityholder and the Securities Insurer, all instruments of satisfaction or
cancellation, or of partial or full release, discharge and all other comparable
instruments, with respect to the Home Loans and with respect to the related
Mortgaged Properties. If reasonably required by the Servicer, the Issuer and
the Indenture Trustee shall furnish the Servicer with any powers of attorney
and other documents necessary or appropriate to enable the Servicer to carry
out its servicing and administrative duties under this Agreement.
Section 4.02 Liquidation of Home Loans.
(a) In the event that any payment due under any Home Loan and not
postponed pursuant to Section 4.01(c) is not paid when the same becomes due and
payable, or in the event the Obligor fails to perform any other covenant or
obligation under the Home Loan and such failure continues beyond any applicable
grace period, the Servicer shall, in accordance with the standard of care
specified in Section 4.01(a), take such action as it shall deem to be in the
best interest of the Securityholders and the Securities Insurer to collect or
liquidate such Home Loan in default in a manner that in the reasonable judgment
of the Servicer will be likely to maximize the net proceeds realizable
therefrom under the circumstances (including, but without limitation, the
purchase or substitution of such Home Loan pursuant to Section 3.05, or, if no
Superior Liens exist on the related Mortgaged Property, foreclose or otherwise
comparably effect ownership in such Mortgaged Property in the name of the
Indenture Trustee for the benefit of Securityholders and the Securities
Insurer). In addition, the Servicer shall have the power and authority,
exercisable in its sole discretion at any time, to sell any Liquidated Home
Loan on behalf of the Indenture Trustee for the benefit of the Securityholders
and the Securities Insurer to one or more third party investors in a manner
that, in the reasonable judgment of the Servicer, will be likely to maximize
the net proceeds realizable therefrom. The Servicer shall promptly deposit the
Net Liquidation Proceeds or Post Liquidation Proceeds, as applicable, from the
sale of such Liquidated Home Loans into the Collection Account in accordance
with Section 5.01 of this Agreement. The Servicer shall give the Indenture
Trustee notice of the election of remedies made pursuant to this Section 4.02.
The Servicer shall not be required to satisfy the indebtedness secured by any
Superior Liens on the related Mortgaged Property or to advance funds to keep
the indebtedness secured by such Superior Liens current. In connection with
any collection or liquidation activities, the Servicer shall exercise
collection or liquidation procedures with the same degree of care and skill as
it would exercise or use under the circumstances in the conduct of its own
affairs.
(b) During any Due Period occurring after a Home Loan becomes a
Liquidated Home Loan, the Servicer shall deposit into the Collection Account
any proceeds received by it with respect to such Liquidated Home Loan or the
related Foreclosure Property ("Post Liquidation Proceeds").
(c) After a Home Loan has become a Liquidated Home Loan, the
Servicer shall promptly prepare and forward to the Issuer, the Indenture
Trustee, the Securities Insurer and, upon request of any Securityholder, to
such Securityholder a liquidation report detailing the following: (i) the Net
Liquidation Proceeds, Insurance Proceeds or Released Mortgaged Property
Proceeds received in respect of such Liquidated Home Loan; (ii) expenses
incurred with respect thereto; (iii) any Net Loan Losses incurred in connection
therewith; and (iv) any Post Liquidation Proceeds.
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Section 4.03 Fidelity Bond; Errors and Omission Insurance. The
Servicer shall maintain with a responsible company, and at its own expense, a
blanket fidelity bond and an errors and omissions insurance policy in such
amounts as required by, and satisfying any other requirements of, the FHA and
the FHLMC, with broad coverage on all officers, employees or other persons
acting in any capacity requiring such persons to handle funds, money, documents
or papers relating to the Home Loans ("Servicer Employees"). Any such fidelity
bond and errors and omissions insurance shall protect and insure the Servicer
against losses, including losses resulting from forgery, theft, embezzlement,
fraud, errors and omissions and negligent acts (including acts relating to the
origination and servicing of loans of the same type as the Home Loans) of such
Servicer Employees. Such fidelity bond shall also protect and insure the
Servicer against losses in connection with the release or satisfaction of a
Home Loan without having obtained payment in full of the indebtedness secured
thereby. In the event of any loss of principal or interest on a Home Loan for
which reimbursement is received from the Servicer's fidelity bond or errors and
omissions insurance, the proceeds from any such insurance will be deposited in
the Collection Account. No provision of this Section 4.03 requiring such
fidelity bond and errors and omissions insurance shall diminish or relieve the
Servicer from its duties and obligations as set forth in this Agreement. Upon
the request of the Issuer, the Indenture Trustee or the Securities Insurer, the
Servicer shall cause to be delivered to requesting party a certified true copy
of such fidelity bond and insurance policy. On the Closing Date, such fidelity
bond and insurance is maintained by the Servicer with Reliance Insurance
Company of Illinois.
Section 4.04 Title, Management and Disposition of Foreclosure
Property. The deed or certificate of sale in respect of each Foreclosure
Property shall be taken in the name of the Indenture Trustee for the benefit of
the Securityholders and the Securities Insurer.
The Servicer shall manage, conserve, protect and operate each
Foreclosure Property for the Indenture Trustee, the Securityholders and the
Securities Insurer solely for the purpose of its prudent and prompt disposition
and sale. The Servicer shall, either itself or through an agent selected by
the Servicer, manage, conserve, protect and operate the Foreclosure Property in
the same manner that it manages, conserves, protects and operates other
foreclosure property for its own account, and in the same manner that similar
property in the same locality as the Foreclosure Property is managed. The
Servicer shall attempt to sell the same (and may temporarily lease the same) on
such terms and conditions as the Servicer deems to be in the best interest of
the Securityholders and the Securities Insurer. The disposition of Foreclosure
Property shall be carried out by the Servicer at such price, and upon such
terms and conditions, as the Servicer deems to be in the best interest of the
Indenture Trustee, the Securityholders and the Securities Insurer and, as soon
as practicable thereafter, the expenses of such sale shall be paid. The Net
Liquidation Proceeds or Post Liquidation Proceeds, as applicable, from the
conservation, disposition and sale of the Foreclosure Property shall be
promptly deposited by the Servicer in the Collection Account in accordance with
Section 5.01 of this Agreement and the Indenture, which Net Liquidation
Proceeds or Post Liquidation Proceeds, as applicable, shall equal all cash
amounts received with respect thereto less the amounts retained and withdrawn
by the Servicer for any related unreimbursed Servicing Advances and any other
fees and expenses incurred in connection with such Foreclosure Property.
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Section 4.05 Access to Certain Documentation and Information
Regarding the Home Loans.
The Servicer shall provide to the Issuer, the Indenture Trustee, the
Securityholders, the Securities Insurer and the supervisory agents and
examiners of each of the foregoing access to the documentation regarding the
Home Loans required by applicable state and federal regulations, such access
being afforded without charge but only upon reasonable request and during
normal business hours at the offices of the Servicer designated by it.
Section 4.06 Superior Liens.
(a) The Servicer shall file (or cause to be filed) of record a
request for notice of any action by a lienholder under a Superior Lien for the
protection of the Indenture Trustee's interest, where permitted by local law
and whenever applicable state law does not require that a junior lienholder be
named as a party defendant in foreclosure proceedings in order to foreclose
such junior lienholder's equity of redemption.
(b) If the Servicer is notified that any lienholder under a
Superior Lien has accelerated or intends to accelerate the obligations secured
by such Superior Lien, or has declared or intends to declare a default under
the related mortgage or promissory note secured thereby, or has filed or
intends to file an election to have any Mortgaged Property sold or foreclosed,
the Servicer shall take, on behalf of the Issuer and the Indenture Trustee, all
reasonable actions that are necessary to protect the interests of the
Securityholders and the Securities Insurer, and/or to preserve the security of
the related Home Loan, including making any Servicing Advances that are
necessary to cure the default or reinstate the Superior Lien. The Servicer
shall immediately notify the Issuer and the Indenture Trustee of any such
action or circumstances. Any Servicing Advances by the Servicer pursuant to its
obligations in this Section 4.06 shall comply with requirements set forth in
Section 4.01(b) hereof.
Section 4.07 Subservicing.
(a) The Servicer may, with the prior written consent of the
Securities Insurer and the Indenture Trustee, enter into Subservicing
Agreements for any servicing and administration of Home Loans with any
institution which is in compliance with the laws of each state necessary to
enable it to perform its obligations under such Subservicing Agreement and is
an Eligible Servicer. The Servicer shall give prior written notice to the
Issuer, the Indenture Trustee and the Securities Insurer of the appointment of
any Subservicer. The Servicer shall be entitled to terminate any Subservicing
Agreement in accordance with the terms and conditions of such Subservicing
Agreement and to either directly service the related Home Loans or enter into a
Subservicing Agreement with a successor subservicer which qualifies hereunder.
(b) Notwithstanding any Subservicing Agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Servicer and a Subservicer or reference to actions taken through a Subservicer
or otherwise, the Servicer shall remain obligated and primarily liable to the
Issuer, the Indenture Trustee, the Securities Insurer and Securityholders for
the servicing and administering of the Home Loans in accordance with the
provisions of this
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Agreement without diminution of such obligation or liability by virtue of such
Subservicing Agreements or arrangements or by virtue of indemnification from
the Subservicer and to the same extent and under the same terms and conditions
as if the Servicer alone were servicing and administering the Home Loans. For
purposes of this Agreement, the Servicer shall be deemed to have received
payments on Home Loans when the Subservicer has actually received such payments
and, unless the context otherwise requires, references in this Agreement to
actions taken or to be taken by the Servicer in servicing the Home Loans
include actions taken or to be taken by a Subservicer on behalf of the
Servicer. The Servicer shall be entitled to enter into any agreement with a
Subservicer for indemnification of the Servicer by such Subservicer, and
nothing contained in this Agreement shall be deemed to limit or modify such
indemnification.
(c) In the event the Servicer shall for any reason no longer be
the Servicer (including by reason of an Event of Default), the successor
Servicer, on behalf of the Issuer, the Indenture Trustee, the Securities
Insurer and the Securityholders pursuant to Section 4.08, shall thereupon
assume all of the rights and obligations of the Servicer under each
Subservicing Agreement that the Servicer may have entered into, unless the
successor Servicer elects to terminate any Subservicing Agreement in accordance
with its terms. The successor Servicer shall be deemed to have assumed all of
the Servicer's interest therein and to have replaced the Servicer as a party to
each Subservicing Agreement to the same extent as if the Subservicing
Agreements had been assigned to the assuming party, except that the Servicer
shall not thereby be relieved of any liability or obligations under the
Subservicing Agreements. The Servicer at its expense and without right of
reimbursement therefor, shall, upon request of the successor Servicer, deliver
to the assuming party all documents and records relating to each Subservicing
Agreement and the Home Loans then being serviced and an accounting of amounts
collected and held by it and otherwise use its best efforts to effect the
orderly and efficient transfer of the Subservicing Agreements to the assuming
party.
(d) As part of its servicing activities hereunder, the Servicer,
for the benefit of the Issuer, the Indenture Trustee, the Securities Insurer
and the Securityholders, shall enforce the obligations of each Subservicer
under the related Subservicing Agreement. Such enforcement, including, without
limitation, the legal prosecution of claims and the pursuit of other
appropriate remedies, shall be in such form and carried out to such an extent
and at such time as the Servicer, in its good faith business judgment, would
require were it the owner of the related Home Loans. The Servicer shall pay
the costs of such enforcement at its own expense, and shall be reimbursed
therefor only (i) from a general recovery resulting from such enforcement to
the extent, if any, that such recovery exceeds all amounts due in respect of
the related Home Loan or (ii) from a specific recovery of costs, expenses or
attorneys fees against the party against whom such enforcement is directed.
(e) Any Subservicing Agreement that may be entered into and any
other transactions or services relating to the Home Loans involving a
Subservicer in its capacity as such and not as an originator shall be deemed to
be between the Subservicer and the Servicer alone and none of the Issuer, the
Indenture Trustee, the Securityholders or the Securities Insurer shall be
deemed parties thereto or shall have any claims, rights, obligations, duties or
liabilities with respect to the Subservicer in its capacity as such except as
set forth in Section 4.07(c) above.
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Section 4.08 Successor Servicers. In the event that the Servicer
is terminated pursuant to Section 10.01 hereof, or resigns pursuant to Section
9.04 hereof or otherwise becomes unable to perform its obligations under this
Agreement, the Indenture Trustee will become the successor Servicer or will
appoint a successor Servicer in accordance with the provisions of Section 10.02
hereof; provided that any successor Servicer, including the Indenture Trustee,
shall satisfy the requirements of an Eligible Servicer and shall be approved by
the Rating Agencies and the Securities Insurer.
ARTICLE V
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01 Collection Account and Note Distribution Account.
(a) (1) Establishment of Collection Account. The Servicer, for the
benefit of the Securityholders and the Securities Insurer, shall cause to be
established and maintained one or more Collection Accounts, which shall be
separate Eligible Accounts, which may be interest-bearing, entitled "COLLECTION
ACCOUNT, FIRST BANK NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, IN TRUST FOR
THE FIRSTPLUS ASSET BACKED SECURITIES, SERIES 1997-1". The Collection Account
may be maintained with the Indenture Trustee or any other depository
institution which satisfies the requirements set forth in the definition of
Eligible Account. The creation of any Collection Account other than one
maintained with the Indenture Trustee shall be evidenced by a letter agreement
between the Servicer and the depository institution acceptable to the
Securities Insurer. A copy of such letter agreement shall be furnished to the
Indenture Trustee, the Securities Insurer and, upon request of any
Securityholder, to such Securityholder. Funds in the Collection Account shall
be invested in accordance with Section 5.08.
As of the Closing Date, the Collection Account shall be established
with the Indenture Trustee, and thereafter upon written notice to the Issuer
and the Indenture Trustee, and upon the prior written consent of the Securities
Insurer, the Collection Account may be transferred by the Servicer to a
different depository institution so long as such transfer is to an Eligible
Account.
(a)(2) Establishment of Note Distribution Account. No later than the
Closing Date, the Servicer, for the benefit of the Securityholders, shall cause
to be established and maintained with the Indenture Trustee one or more Note
Distribution Accounts, which shall be separate Eligible Accounts, which may be
interest-bearing and which shall be entitled "NOTE DISTRIBUTION ACCOUNT, FIRST
BANK NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, IN TRUST FOR THE "FIRSTPLUS
ASSET BACKED SECURITIES, SERIES 1997-1". Funds in the Note Distribution
Account shall be invested in accordance with Section 5.08.
(b) (1) Deposits to Collection Account. The Servicer shall use its
best efforts to deposit or cause to be deposited (without duplication) within
one (1) Business Day, and shall in any event deposit within two (2) Business
Days, of receipt thereof in the Collection Account and retain therein in trust
for the benefit of the Securityholders and the Securities Insurer:
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(i) all payments on account of principal on the Home
Loans collected after the applicable Cut-Off Date;
(ii) all payments on account of interest on the Home Loans
collected after the applicable Cut-Off Date;
(iii) all Net Liquidation Proceeds and Post Liquidation
Proceeds pursuant to Sections 4.02 or 4.04;
(iv) all Insurance Proceeds;
(v) all Released Mortgaged Property Proceeds;
(vi) any amounts payable in connection with the repurchase
of any Home Loan and the amount of any Substitution Adjustment
pursuant to Sections 2.06 and 3.05;
(vii) any amount required to be deposited in the Collection
Account pursuant to the receipt of proceeds from any fidelity bond or
errors and omission insurance under Section 4.03 or the deposit of the
Termination Price under Section 11.02; and
(viii) interest and gains on funds held in the Collection
Account.
The Servicer shall be entitled to retain and not deposit into the
Collection Account any amounts received with respect to a Home Loan that
constitute additional servicing compensation pursuant to Section 7.03, and such
amounts retained by the Servicer during a Due Period shall be excluded from the
calculation of the Servicing Compensation that is distributable to the Servicer
from the Note Distribution Account on the next Distribution Date following such
Due Period.
(b)(2) Deposits to Note Distribution Account. On the third Business
Day prior to each Distribution Date, the Indenture Trustee (based on
information contained in the Servicer's Monthly Remittance Report for such
Distribution Date) shall make the following withdrawals from the Collection
Account, the Pre-Funding Account, the Capitalized Interest Account and the
Reserve Account, as applicable, and deposit into the Note Distribution Account
for such Distribution Date:
(i) the Available Collection Amount; and
(ii) the Reserve Account Withdrawal Amount, if any.
(c) Withdrawals from Note Distribution Account. No later than
11:00 a.m. (New York City time) on the second Business Day prior to each
Distribution Date, to the extent funds are available in the Note Distribution
Account, the Indenture Trustee (based on the information contained in the
Servicer's Monthly Remittance Report for such Distribution Date) shall either
(1) retain funds in the Note Distribution Account for distribution on such
Distribution Date or (2) make the following withdrawals from the Note
Distribution Account and deposits into the other Trust Accounts as indicated in
the following order of priority:
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(i) to retain in the Note Distribution Account for
distribution on such Distribution Date pursuant to the Indenture in
the following order, (a) to the Servicer, an amount equal to the
Servicing Compensation (net of any amounts retained prior to deposit
into the Collection Account pursuant to subsection (b)(1) above) and
all unpaid Servicing Compensation from prior Due Periods, (b) to the
Securities Insurer, an amount equal to the Guaranty Insurance Premium
and all unpaid Guaranty Insurance Premiums from prior Due Periods, (c)
to the Indenture Trustee, an amount equal to the Indenture Trustee Fee
and all unpaid Indenture Trustee Fees from prior Due Periods; and (d)
to the Owner Trustee, an amount equal to the Owner Trustee Fee and all
unpaid Owner Trustee Fees from prior Due Periods;
(ii) to retain in the Note Distribution Account for
distribution pursuant to the Indenture on such Distribution Date and
to deposit in the Certificate Distribution Account for distribution
pursuant to Section 5.06, pro rata, any amount remaining from the
Pre-Funding Account Deposit at the end of the Funding Period, which
will be distributed in reduction, on a pro rata basis, of the Class
Principal Balances of each Class of Notes and the Certificate
Principal Balance of the Certificates as provided in Section
8.2(c)(ii) of the Indenture and Section 5.06(c)(i) hereof; provided,
however, that if such remaining amount is less than or equal to
$50,000, such entire amount will be retained in the Note Distribution
Account and be included in the Noteholders' Monthly Principal
Distributable Amount; provided, however, that in any event if an event
of default has occurred under the Indenture, such remaining amount
will be retained in the Note Distribution Account and be distributed
in reduction on a pro rata basis, of the Class Principal Balances of
each Class of Notes;
(iii) to retain in the Note Distribution Account for
distribution pursuant to the Indenture on such Distribution Date, from
the Available Distribution Amount remaining after the application of
clauses (i) through (ii), the Noteholders' Interest Distributable
Amount;
(iv) to retain in the Note Distribution Account for
distribution pursuant to the Indenture on such Distribution Date, from
the Available Distribution Amount remaining after the application of
clauses (i) through (iii) above, the Noteholders' Principal
Distributable Amount;
(v) to deposit in the Certificate Distribution Account
for distribution pursuant to Section 5.06 on such Distribution Date,
from the Available Distribution Amount remaining after the application
of clauses (i) through (iv) above, the Certificateholders' Interest
Distributable Amount;
(vi) to deposit in the Certificate Distribution Account
for distribution pursuant to Section 5.06 on such Distribution Date,
from the Available Distribution Amount remaining after the application
of clauses (i) through (v) above, the Certificateholders' Principal
Distributable Amount;
(vii) to deposit in the Certificate Distribution Account,
for distribution pursuant to Section 5.06 on such Distribution Date to
the Securities Insurer, from the Available
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Distribution Amount remaining after application of clauses (i) through
(vi) above, the Securities Insurer Reimbursement Amount;
(viii) if such Distribution Date is an Overcollateralization
Stepdown Date, to deposit in the Certificate Distribution Account,
for distribution pursuant to Section 5.06 on such Distribution Date to
the holders of the Residual Interest from the Available Distribution
Amount remaining after application of clauses (i) through (vii) above,
the Overcollateralization Reduction Amount;
(ix) to deposit in the Certificate Distribution Account,
for distribution pursuant to Section 5.06 on such Distribution Date to
the Servicer, from the Available Distribution Amount remaining after
application of clauses (i) through (viii) above an amount equal to any
Servicing Advances previously made by the Servicer and not previously
reimbursed (the "Servicing Advance Reimbursement Amount"); and
(x) if the Excess Overcollateralization Amount equals or
exceeds zero, to deposit in the Certificate Distribution Account, for
distribution on such Distribution Date to the holders of the Residual
Interest from any remaining Available Distribution Amount after
application of clauses (i) through (ix) above, the Excess Spread, if
any.
Notwithstanding that the Notes have been paid in full, the Indenture
Trustee and the Servicer shall continue to maintain the Collection Account and
the Note Distribution Account hereunder until the Certificate Principal Balance
is reduced to zero.
(d) Additional Withdrawals from Collection Account. The Indenture
Trustee, at the direction of the Servicer shall also make the following
withdrawals from the Collection Account, in no particular order of priority:
(i) to withdraw any amount not required to be deposited
in the Collection Account or deposited therein in error; and
(ii) to clear and terminate the Collection Account in
connection with the termination of this Agreement.
The Servicer shall not retain any cash or investment in the Collection
Account for a period in excess of 12 months and cash therein shall be
considered transferred to the Note Distribution Account on a first-in,
first-out basis.
Section 5.02 Claims Under Guaranty Policy.
(a) The Notes and the Certificates will be insured by the Guaranty
Policy pursuant to the terms set forth therein, notwithstanding any provisions
to the contrary contained in the Indenture or this Agreement. All amounts
received under the Guaranty Policy shall be used solely for the payment to
Securityholders of principal and interest on the Notes and the Certificates.
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(b)(i) If for any Distribution Date a Deficiency Amount exists, the
Indenture Trustee shall complete a notice in the form set forth as Exhibit A to
the Guaranty Policy (the "Notice") and shall submit such Notice to the Fiscal
Agent no later than 12:00 noon, New York time, on the second Business Day
preceding such Distribution Date. The Notice shall constitute a claim for a
Guaranteed Payments pursuant to the Guaranty Policy for an amount equal to such
Deficiency Amount. Upon receipt of the Guaranteed Payments, at or prior to the
latest time payments of the Guaranteed Payments are to be made by the
Securities Insurer pursuant to the Guaranty Policy, on behalf of the
Noteholders and Certificateholders, the Indenture Trustee shall distribute such
Guaranteed Payments as part of the Noteholders' Distributable Amount under the
Indenture to the extent such Guaranteed Payments relate to the Notes and as
part of the Certificateholders' Distributable Amount under this Agreement to
the extent such Guaranteed Payments relate to the Certificates.
(b)(ii) In addition, if the Indenture Trustee has notice that any of
the Securityholders have been required to disgorge payments of interest or
principal on the related Notes or the related Certificates pursuant to a final
judgment by a court of competent jurisdiction that such payment constitutes a
voidable preference to such Securityholders within the meaning of any
applicable bankruptcy laws, then the Indenture Trustee shall notify the
Securities Insurer as set forth in the Guaranty Policy for making a claim for a
Preference Amount. Such payment for a Preference Amount shall be disbursed to
the receiver or trustee in bankruptcy named in the final order of the court
exercising jurisdiction on behalf of the Securityholder and not to any
Securityholder directly unless such Securityholder has returned principal or
interest paid on the Securities to such receiver or trustee in bankruptcy, in
which case such payment shall be disbursed to such Securityholder.
(c) The Securities Insurer is entitled to the benefit of the
following provisions in the event that a Guaranteed Payment has been made.
Notwithstanding any other provision hereof:
(i) The Indenture Trustee shall immediately apply all
moneys constituting a Guaranteed Payment to the payment to
Securityholders of principal and interest on the Notes and
Certificates, as applicable, by depositing such amounts in the Note
Distribution Account for Guaranteed Payments payable on the related
Class of Notes or in the Certificate Distribution Account for
Guaranteed Payments payable on the related Certificates. All amounts
received under the Guaranty Policy shall be used solely for the
payment to Securityholders of principal and interest on Notes and the
Certificates, as applicable. The Securities Insurer's obligations
under the Guaranty Policy with respect to a particular Guaranteed
Payment shall be discharged to the extent funds equal to the
applicable Guaranteed Payment are received by the Indenture Trustee,
whether or not such funds are properly applied by the Indenture
Trustee, the Owner Trustee or Co-Owner Trustee. The parties hereto
recognize that the making of the Guaranteed Payment does not relieve
any of the parties hereto of any obligation hereunder or any of the
Basic Documents.
(ii) The parties hereto recognize that, to the extent that
the Securities Insurer makes payments, directly or indirectly, on
account of principal of or interest on the Notes and the Certificates,
as applicable, the Securities Insurer shall be subrogated to the
rights of the Securityholders to receive distributions of principal
and interest in accordance with the terms hereof.
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(iii) To the extent the Securities Insurer is owed any
Securities Insurer Reimbursement Amount (including without limitation
any unreimbursed Guaranteed Payments made under the Guaranty Policy
plus interest accrued thereon as provided in the Insurance Agreement),
the Securities Insurer shall be entitled to distributions pursuant to
Section 5.06(c), and the Indenture Trustee and Co-Owner Trustee shall
otherwise treat the Securities Insurer as the owner of such rights to
distributions of any Securities Insurer Reimbursement Amount.
(iv) The Securities Insurer shall have the right to
institute any suit, action or proceeding at law or in equity under the
same terms as a Securityholder may institute any action.
(d) The Indenture Trustee, as the holder of the Guaranty Policy
providing for the guaranty of the Notes and Certificates, hereby agrees that
with respect to the Certificates the Indenture Trustee shall make claims under
the Guaranty Policy at the direction or upon the request of the Owner Trustee
or Co-Owner Trustee to receive Guaranteed Payments distributable to the
Certificateholders as part of Certificateholders' Distributable Amount under
this Agreement.
Section 5.03 Pre-Funding Account.
(a) Establishment and Withdrawals. No later than the Closing
Date, the Servicer, for the benefit of the Securityholders, shall establish
and maintain with the Indenture Trustee one or more separate Eligible Accounts
entitled "PRE-FUNDING ACCOUNT, FIRST BANK NATIONAL ASSOCIATION, AS INDENTURE
TRUSTEE, IN TRUST FOR THE FIRSTPLUS ASSET BACKED SECURITIES, SERIES 1997-1".
On the Closing Date, the Pre-Funding Account Deposit shall be deposited into
the Pre- Funding Account from the proceeds of the sale of the Securities. On
any Subsequent Transfer Date, the Servicer shall instruct the Indenture Trustee
to: (i) withdraw from the Pre-Funding Account the Reserve Account Subsequent
Deposit and to deposit such amount in the Reserve Account; (ii) withdraw from
the Pre-Funding Account an amount equal to the Subsequent Purchase Price for
the Subsequent Home Loans sold to the Issuer on such Subsequent Transfer Date
pursuant to a Subsequent Transfer Agreement, less the amount of the Reserve
Account Subsequent Deposit deposited in the Reserve Account on such date; and
(iii) pay such withdrawn amount to or upon the order of the Seller upon
satisfaction of the conditions set forth in Section 2.02 of this Agreement with
respect to such transfer. Funds in the Pre-Funding Account shall be invested
in accordance with Section 5.08. On or before each Distribution Date, all
interest and any other investment earnings on funds held in the Pre-Funding
Account shall be deposited into the Capitalized Interest Account.
(b) [Reserved]
(c) Remaining Balance. If the Pre-Funding Account has not been
reduced to zero by the close of business on the date on which the Funding
Period ends, the Servicer shall direct the Indenture Trustee to deposit any
amounts remaining in the Pre-Funding Account (net of reinvestment earnings
which shall be transferred to the Capitalized Interest Account) (as
appropriate) into the Note Distribution Account and the Certificate
Distribution Account on the third Business Day immediately preceding the
Pre-Funding Termination Distribution Date for distribution as follows:
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(i) if no event of default has occurred and is continuing
under Section 5.1 of the Indenture, to the Securityholders in
reduction of the Class Principal Balance of the Notes and the Class
Principal Balance of the Certificates pro rata based on the aggregate
Class Principal Balance of the Notes and the Certificate Principal
Balance of the Certificates; and
(ii) if an event of default has occurred and is continuing
under Section 5.1 of the Indenture, to the Noteholders in reduction of
the Class Principal Balance of each Class of Notes, pro rata based on
the Class Principal Balance of each Class;
provided always that in the event that such amounts remaining in the
Pre-Funding Account are less than or are equal to $50,000, all such amounts
shall be deemed to form part of the Noteholder's Monthly Principal
Distributable Amount and shall be transferred to the Note Distribution Account
to be distributed sequentially to each Class of Notes in ascending order of
their respective Class designations in reduction of the respective Class
Principal Balances thereof.
Section 5.04 Capitalized Interest Account.
(a) Establishment and Withdrawal. No later than the Closing Date,
the Servicer, for the benefit of the Securityholders and the Securities
Insurer, shall cause to be established and maintained with the Indenture
Trustee one or more separate Eligible Accounts entitled "CAPITALIZED INTEREST
ACCOUNT, FIRST BANK NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, IN TRUST FOR
FIRSTPLUS ASSET BACKED SECURITIES, SERIES 1997-1". On the Closing Date, the
Capitalized Interest Account Deposit shall be deposited into the Capitalized
Interest Account from the proceeds of the sale of the Securities. The
Indenture Trustee shall hold the Capitalized Interest Account Deposit for the
benefit of the Securityholders and the Securities Insurer. On the third
Business Day preceding each Distribution Date during the Funding Period and on
the first Distribution Date occurring after the Due Period in which the Funding
Period ends, the Servicer shall instruct the Indenture Trustee to withdraw from
the Capitalized Interest Account and deposit into the Note Distribution Account
and/or the Certificate Distribution Account the Interest Shortfall, if any,
with respect to such Distribution Date. Funds in the Capitalized Interest
Account shall be invested in accordance with Section 5.08.
(b) [Reserved]
(c) [Reserved]
(d) Excess to Residual Interest. On any Business Day occurring
prior to the last Business Day of each Due Period that occurs prior to May 27,
1997, the Transferor and the Seller may request the Servicer to calculate the
amount, if any, of the Capitalized Interest Excess. If the Capitalized
Interest Excess is greater than zero on any such Business Day prior to May 27,
1997, such Capitalized Interest Excess will be released to the holder of the
Residual Interest on the following Distribution Date. On the Distribution Date
following the Due Period in which the Funding Period ends, the Servicer shall
instruct the Indenture Trustee to release and distribute to the holders of the
Residual Interest the Capitalized Interest Amount, if any, that remains after
the distribution of any Interest Shortfall on such Distribution Date.
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Section 5.05 [Reserved]
Section 5.06 Certificate Distribution Account.
(a) Establishment. No later than the Closing Date, the Servicer,
for the benefit of the Securityholders and the Securities Insurer, will
establish and maintain with First Bank National Association for the benefit of
the Owner Trustee or Co-Owner Trustee on behalf of the Certificateholders and
the Securities Insurer one or more separate Eligible Accounts, which while the
Co-Owner Trustee holds such Trust Account shall be entitled "CERTIFICATE
DISTRIBUTION ACCOUNT, FIRST BANK NATIONAL ASSOCIATION, AS CO-OWNER TRUSTEE, IN
TRUST FOR THE FIRSTPLUS ASSET BACKED SECURITIES, SERIES 1997-1". Funds in the
Certificate Distribution Account shall be invested in accordance with Section
5.08.
(b) [Reserved]
(c) Distributions. No later than the second Business Day before
each Distribution Date, the Indenture Trustee shall withdraw from the Note
Distribution Account all amounts required to be deposited in the Certificate
Distribution Account with respect to the preceding Due Period pursuant to
Section 5.01(c) and will remit such amount to the Owner Trustee or the Co-Owner
Trustee for deposit into the Certificate Distribution Account. On each
Distribution Date, the Owner Trustee or the Co-Owner Trustee shall distribute
all amounts on deposit in the Certificate Distribution Account to
Certificateholders in respect of the Certificates to the extent of amounts due
and unpaid on the Certificates for principal and interest and to the other
parties specified below in the amounts and in the following order of priority:
(i) only to the extent of funds withdrawn from the
Pre-Funding Account attributable to the remaining amount therein and
deposited in the Certificate Distribution Account by the Indenture
Trustee pursuant to Section 5.01(c), pro rata, to the
Certificateholders;
(ii) to the Certificateholders, the Certificateholders'
Interest Distributable Amount; provided, that if there are not
sufficient funds in the Certificate Distribution Account to pay the
entire amount of accrued and unpaid interest then due on the
Certificates, the amount in the Certificate Distribution Account shall
be applied to the payment of such interest on the Certificates pro
rata on the basis of the total such interest due on the Certificates;
(iii) to the Certificateholders, on or after the
Distribution Date on which the Class Principal Balance of the Class
A-8 Notes has been reduced to zero, the Certificateholders' Principal
Distributable Amount until the Certificate Principal Balance thereof
is reduced to zero;
(iv) to the Securities Insurer, from any remaining amounts
in the Certificate Distribution Account after the distributions
pursuant to items (i) through (iii) above, the Securities Insurer
Reimbursement Amount;
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(v) on an Overcollateralization Stepdown Date, to the
holders of the Residual Interest, from any remaining amounts in the
Certificate Distribution Account after the distributions pursuant to
items (i) through (iv) above, the Overcollateralization Reduction
Amount;
(vi) to the Servicer, from any remaining amounts in the
Certificate Distribution Account after the distributions pursuant to
items (i) through (v) above, an amount equal to the Servicing Advance
Reimbursement Amount; and
(vii) if the Excess Overcollateralization Amount equals or
exceeds zero, to the holders of the Residual Interest, from any
remaining amounts in the Certificate Distribution Account after the
distributions pursuant to items (i) through (vi) above, the Excess
Spread, if any.
(d) All distributions made on the Certificates on each
Distribution Date will be made on a pro rata basis among the Certificateholders
of record on the next preceding Record Date based on the Percentage Interest
represented by their respective Certificates, and except as otherwise provided
in the next succeeding sentence, shall be made by wire transfer of immediately
available funds to the account of such Certificateholder, if such
Certificateholder shall own of record Certificates which have original
denominations aggregating at least $250,000 and shall have so notified the
Owner Trustee or Co-Owner Trustee, and otherwise by check mailed to the address
of such Certificateholder appearing in the Certificate Register. The final
distribution on each Certificate will be made in like manner, but only upon
presentment and surrender of such Certificate at the location specified in the
notice to Certificateholders of such final distribution.
(e) All distributions made on the Residual Interest on each
Distribution Date will be made on a pro rata basis among the Residual Interest
holders of record on the next preceding Record Date based on the Percentage
Interest represented by their respective Residual Interest Instruments, and
except as otherwise provided in the next succeeding sentence, shall be made by
wire transfer of immediately available funds to the account of such Residual
Interest holder, if such Residual Interest Holder shall own of record Residual
Interest which have original denominations aggregating at least $250,000 and
shall have so notified the Owner Trustee or Co-Owner Trustee, and otherwise by
check mailed to the address of such Residual Interest Holder appearing in the
Certificate Register. The final distribution on each Residual Interest
Instrument will be made in like manner, but only upon presentment and surrender
of such Residual Interest Instrument at the location specified in the notice
to Residual Interest Holders of such final distribution.
Section 5.07 Reserve Account.
(a) Establishment. No later than the Closing Date, the Servicer,
for the benefit of the Securityholders and the Securities Insurer, shall cause
to be established and maintained with the Indenture Trustee one or more
separate Eligible Accounts entitled "RESERVE ACCOUNT, FIRST BANK NATIONAL
ASSOCIATION, AS INDENTURE TRUSTEE, IN TRUST FOR THE FIRSTPLUS ASSET BACKED
SECURITIES, SERIES 1997-1". On the Closing Date, the Issuer will deposit the
Reserve Account Initial Deposit into the Reserve Account from the net proceeds
of the sale of the Notes and the Certificates. Funds in the Reserve Account
shall be invested in accordance with Section 5.08.
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(b) Increase of Requirement and Substitution.
(i) On each Subsequent Transfer Date, the Reserve Account
Requirement shall be increased by the amount of the Reserve Account
Subsequent Deposit, to be deposited in the Reserve Account by the
Indenture Trustee pursuant to Section 5.03.
(ii) On any Business Day occurring after the Closing Date,
the majority of the holders of Residual Interest may deposit with the
Indenture Trustee a limited guaranty or a letter of credit in an
amount not to exceed 50% of the Reserve Account Requirement as of any
Determination Date occurring prior to such Business Day, provided that
such limited guaranty or such letter of credit is in a form approved
by the Securities Insurer and the Rating Agencies prior to deposit in
the Reserve Account. The Indenture Trustee shall notify the
Securities Insurer of the receipt of any such limited guaranty or
letter of credit and on the date of receipt shall release from the
Reserve Account to the holders of the Residual Interest cash in the
amount of such limited guaranty or available under such limited
guaranty or letter of credit.
(c) Release of Excess. If the amount on deposit in the Reserve
Account and/or available under the limited guaranty or letter of credit, if
any, on any Distribution Date (after giving effect to all deposits thereto or
withdrawals therefrom on such Distribution Date) is greater than the Reserve
Account Requirement for such Distribution Date (such amount "the Excess
Reserve Account Amount"), the Servicer shall first instruct the Indenture
Trustee to cause a reduction in the amount available under the limited guaranty
or letter of credit, if any, until (A) the Excess Reserve Account Amount is
reduced to zero or (B) the amount available under the limited guaranty or
letter of credit is reduced to zero. After any limited guaranty or letter of
credit has been reduced to zero, the Servicer shall instruct the Indenture
Trustee to distribute any Excess Reserve Account Amount to the holders of the
Residual Interest until the Excess Reserve Account Amount is reduced to zero.
(d) Reduction of Requirement. After the Overcollateralization
Amount reaches the Interim Required Overcollateralization, the Reserve Account
Requirement shall be reduced incrementally (i.e., dollar-for-dollar) each time
the Overcollateralization Amount is increased as a result of the application of
Excess Spread to the principal amount of the Securities until the
Overcollateralization Amount equals the Required Overcollateralization Amount
and the Reserve Account Requirement is reduced to zero. On each occasion that
the Reserve Account Requirement is reduced, the Servicer shall direct the
Indenture Trustee to distribute to the holders of the Residual Interest any
amounts in the Reserve Account in excess of the reduced Reserve Account
Requirement. Once the Reserve Account Requirement is reduced to zero, the
Servicer shall direct the Indenture Trustee to distribute any amounts remaining
in the Reserve Account to the holders of the Residual Interest.
(e) Final Distribution. Following the payment in full of the
aggregate outstanding Principal Balance of the Notes and the Certificates and
of all other amounts owing or to be distributed hereunder or under the
Indenture or the Trust Agreement to the Securityholders and the termination of
the Trust, any amount remaining on deposit in the Reserve Account shall be
distributed to the holders of the Residual Interest and any Permitted
Investments in the Reserve Account shall be transferred to the holders of the
Residual Interest.
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(f) [Reserved]
(g) Withdrawals. Subject to the total amount (i) available for
call or draw-down under the limited guaranty or letter of credit referred to in
Section 5.07(c) and (ii) on deposit in the Reserve Account with respect to each
Distribution Date, the Indenture Trustee shall withdraw funds from the Reserve
Account and (if necessary) make calls or draw down under limited guaranty or
letter of credit and deposit in the Note Distribution Account an amount equal
to the Reserve Account Withdrawal Amount. In the event that the Indenture
Trustee is required to make such a deposit in the Note Distribution Account, it
shall first withdraw funds on deposit in the Reserve Account until the amount
of such funds is reduced to zero, and then (if necessary) make calls or draw
down under the limited guaranty or letter of credit.
Section 5.08 Trust Accounts; Trust Account Property.
(a) Control of Trust Accounts. Each of the Trust Accounts
established hereunder has been pledged by the Issuer to the Indenture Trustee
under the Indenture and shall be subject to the lien of the Indenture. In
addition to the provisions hereunder, each of the Trust Accounts shall also be
established and maintained pursuant to the Indenture. Amounts distributed from
each Trust Account in accordance with the Indenture and this Agreement shall be
released from the lien of the Indenture upon such distribution thereunder or
hereunder. The Indenture Trustee shall possess all right, title and interest
in all funds on deposit from time to time in the Trust Accounts (other than the
Certificate Distribution Account) and in all proceeds thereof (including all
income thereon) and all such funds, investments, proceeds and income shall be
part of the Trust Account Property and the Trust Estate. If, at any time, any
Trust Account ceases to be an Eligible Account, the Indenture Trustee (or the
Servicer on its behalf) shall within 10 Business Days (or such longer period,
not to exceed 30 calendar days, as to which each Rating Agency may consent) (i)
establish a new Trust Account as an Eligible Account, (ii) terminate the
ineligible Trust Account, and (iii) transfer any cash and investments from such
ineligible Trust Account to such new Trust Account.
With respect to the Trust Accounts (other than the Certificate
Distribution Account), the Indenture Trustee agrees, by its acceptance hereof,
that each such Trust Account shall be subject to the sole and exclusive custody
and control of the Indenture Trustee for the benefit of the Securityholders,
the Securities Insurer and the Issuer, as the case may be, and the Indenture
Trustee shall have sole signature and withdrawal authority with respect
thereto.
In addition to this Agreement and the Indenture, the Certificate
Distribution Account established hereunder also shall be subject to and
established and maintained in accordance with the Trust Agreement. Subject to
rights of the Indenture Trustee hereunder and under the Indenture, the Owner
Trustee or Co-Owner Trustee shall possess all right, title and interest for the
benefit of the Certificateholders and the Securities Insurer in all funds on
deposit from time to time in the Certificate Distribution Account and in all
proceeds thereof (including all income thereon) and all such funds,
investments, proceeds and income shall be part of the Trust Account Property
and the Trust Estate. Subject to the rights of the Indenture Trustee, the
Owner Trustee and Co-Owner Trustee agree, by their acceptance hereof, that such
Certificate Distribution Account shall be subject to the sole and exclusive
custody and control of the Owner Trustee and Co-Owner Trustee for the benefit
of the Issuer and the parties entitled to distributions therefrom, including
without limitation,
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the Certificateholders and Securities Insurer, and the Owner Trustee and the
Co-Owner Trustee shall have sole signature and withdrawal authority with
respect to the Certificate Distribution Account. Notwithstanding the
preceding, the distribution of amounts from the Certificate Distribution
Account in accordance with Section 5.06(c) also shall be made for the benefit
of the Indenture Trustee (including without limitation as the named insured
under the Guaranty Policy on behalf of all Securityholders, and with respect to
its duties under the Indenture and this Agreement relating to the Trust
Estate), and the Indenture Trustee (in its capacity as Indenture Trustee) shall
have the right, but not the obligation, to take custody and control of the
Certificate Distribution Account and to cause the distribution of amounts
therefrom in the event that the Owner Trustee fails to distribute such amounts
in accordance with Section 5.06(c).
The Servicer shall have the power, revocable by the Indenture Trustee
or by the Owner Trustee or Co-Owner Trustee with the consent of the Indenture
Trustee, to instruct the Indenture Trustee or Owner Trustee or Co-Owner Trustee
to make withdrawals and payments from the Trust Accounts for the purpose of
permitting the Servicer to carry out its respective duties hereunder or
permitting the Indenture Trustee or Owner Trustee or Co-Owner Trustee to carry
out its duties herein or under the Indenture or the Trust Agreement, as
applicable.
(b)(1) Investment of Funds. So long as no Event of Default shall
have occurred and be continuing, the funds held in any Trust Account may be
invested (to the extent practicable and consistent with any requirements of the
Code) in Permitted Investments, as directed by the Affiliated Holder in writing
or by telephone or facsimile transmission confirmed in writing by the Servicer
or the Affiliated Holder. In any case, funds in any Trust Account must be
available for withdrawal without penalty, and any Permitted Investments must
mature or otherwise be available for withdrawal, not later than three (3)
Business Days (except with respect to the Note Distribution Account,
Pre-Funding Account and Certificate Distribution Account, which shall be
invested on a one (1) Business Day basis) immediately preceding the
Distribution Date next following the date of such investment and shall not be
sold or disposed of prior to its maturity subject to Section 5.08(b)(2) below.
All interest and any other investment earnings on amounts or investments held
in any Trust Account shall be deposited into such Trust Account immediately
upon receipt by the Indenture Trustee, or in the case of the Certificate
Distribution Account, the Owner Trustee or Co-Owner Trustee, as applicable.
All Permitted Investments in which funds in any Trust Account (other than the
Certificate Distribution Account) are invested must be held by or registered in
the name of "FIRST BANK NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, IN TRUST
FOR THE FIRSTPLUS ASSET BACKED SECURITIES, SERIES 1997-1". While the Co-Owner
Trustee holds the Certificate Distribution Account, all Permitted Investments
in which funds in the Certificate Distribution Account are invested shall be
held by or registered in the name of "FIRST BANK NATIONAL ASSOCIATION, AS
CO-OWNER TRUSTEE, IN TRUST FOR THE FIRSTPLUS ASSET BACKED SECURITIES, SERIES
1997-1".
(b)(2) Insufficiency and Losses in Trust Accounts. If any amounts
are needed for disbursement from any Trust Account held by or on behalf of the
Indenture Trustee and sufficient uninvested funds are not available to make
such disbursement, the Indenture Trustee, or Owner Trustee or Co-Owner Trustee
in the case of the Certificate Distribution Account, shall cause to be sold or
otherwise converted to cash a sufficient amount of the investments in such
Trust Account. The Indenture Trustee, or Owner Trustee or Co-Owner Trustee in
the case of the Certificate
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Distribution Account, shall not be liable for any investment loss or other
charge resulting therefrom, unless such loss or charge is caused by the failure
of the Indenture Trustee or Owner Trustee or Co-Owner Trustee, respectively, to
perform in accordance with this Section 5.08.
If any losses are realized in connection with any investment
in any Trust Account pursuant to this Agreement and the Indenture, then the
Affiliated Holder shall deposit the amount of such losses (to the extent not
offset by income from other investments in such Trust Account) in such Trust
Account immediately upon the realization of such loss or, to the extent that
the Affiliated Holder fails to deposit any portion of such amount, the Servicer
shall deposit any insufficiency from such failure in such Trust Account. All
interest and any other investment earnings on amounts held in any Trust Account
shall be taxed to the Issuer and for federal and state income tax purposes the
Issuer shall be deemed to be the owner of each Trust Account.
(c) Subject to Section 6.1 of the Indenture, the Indenture Trustee
shall not in any way be held liable by reason of any insufficiency in any Trust
Account held by the Indenture Trustee resulting from any investment loss on any
Permitted Investment included therein (except to the extent that the Indenture
Trustee is the obligor and has defaulted thereon).
(d) With respect to the Trust Account Property, the Indenture
Trustee acknowledges and agrees that:
(1) any Trust Account Property that is held in
deposit accounts shall be held solely in the Eligible
Accounts, subject to the last sentence of Section 5.08(a); and
each such Eligible Account shall be subject to the exclusive
custody and control of the Indenture Trustee, and the
Indenture Trustee shall have sole signature authority with
respect thereto;
(2) any Trust Account Property that constitutes
Physical Property shall be delivered to the Indenture Trustee
in accordance with paragraph (a) of the definition of
"Delivery" and shall be held, pending maturity or disposition,
solely by the Indenture Trustee or a financial intermediary
(as such term is defined in Section 8-313(4) of the UCC)
acting solely for the Indenture Trustee;
(3) any Trust Account Property that is a
book-entry security held through the Federal Reserve System
pursuant to federal book-entry regulations shall be delivered
in accordance with paragraph (b) of the definition of
"Delivery" and shall be maintained by the Indenture Trustee,
pending maturity or disposition, through continued book-entry
registration of such Trust Account Property as described in
such paragraph; and
(4) any Trust Account Property that is an
"uncertificated security" under Article VIII of the UCC and
that is not governed by clause (C) above shall be delivered to
the Indenture Trustee in accordance with paragraph (c) of the
definition of "Delivery" and shall be maintained by the
Indenture Trustee, pending maturity or disposition, through
continued registration of the Indenture Trustee's (or its
nominee's) ownership of such security.
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(e) The Servicer shall have the power, revocable by the Indenture
Trustee or by the Issuer with the consent of the Indenture Trustee, to instruct
the Indenture Trustee to make withdrawals and payments from the Trust Accounts
for the purpose of permitting the Servicer or the Issuer to carry out its
respective duties hereunder or permitting the Indenture Trustee to carry out
its duties under the Indenture.
Section 5.09 Allocation of Losses.
(a) In the event that Net Liquidation Proceeds, Insurance Proceeds
or Released Mortgaged Property Proceeds on a Liquidated Mortgage Loan are less
than the related Principal Balance plus accrued interest thereon, or any
Obligor makes a partial payment of any Monthly Payment due on a Mortgage Loan,
such Net Liquidation Proceeds, Insurance Proceeds, Released Mortgaged Property
Proceeds or partial payment shall be applied to payment of the related Debt
Instrument, first to interest accrued at the Home Loan Interest Rate and then
to principal.
(b) On any Distribution Date, any Net Loan Losses attributable to
any Home Loans which became Liquidated Mortgage Loans during the immediately
preceding Due Period shall be allocated as follows: (1) until the Reserve
Account is reduced to zero, such Net Loan Losses will be included in the
calculation of the Regular Principal Distribution Amount (but only to the
extent of amounts on deposit in the Reserve Account); (2) after the Reserve
Account is reduced to zero, and until the Overcollateralization Amount is
reduced to zero, such Net Loan Losses (minus any amount allocated pursuant to
clause (1) to reduce the Reserve Account to zero on such Distribution Date)
will be allocated to the principal attributable to the holders of the Residual
Interest to reduce the Overcollateralization Amount, and (3) thereafter, such
Net Loan Losses will be included in the calculation of the Regular Principal
Distribution Amount in an amount equal to such Net Loan Losses minus any
amounts allocated pursuant to clauses (1) and (2) on such Distribution Date.
ARTICLE VI
STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS
Section 6.01 Statements.
(a) No later than each Determination Date, the Servicer shall
deliver to the Indenture Trustee and the Securities Insurer a magnetic tape or
computer disk providing such information regarding the Servicer's activities in
servicing the Home Loans during the related Due Period as the Indenture Trustee
and the Securities Insurer may reasonably require.
(b) (1) Subject to the modification of the Servicer's Monthly
Statement by the Servicer with the prior written consent of the Securities
Insurer and the Indenture Trustee, no later than three (3) Business Days before
each Distribution Date, the Servicer shall prepare and the Indenture Trustee
shall distribute a monthly statement (the "Servicer's Monthly Statement") to
the Seller, the Securityholders, the Securities Insurer and the Rating
Agencies, stating the date of original issuance of the Securities (day, month
and year), the name of the Issuer (i.e. "FIRSTPLUS
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Home Loan Owner Trust 1997-1"), the series designation of the Notes and
Certificates (i.e. "Series 1997-1"), the date of this Agreement and the
following information:
(i) the Available Collection Amount and Required
Distribution Amount for the related Distribution Date;
(ii) the amount, if any, on deposit in the Pre-Funding
Account and the Capitalized Interest Account on such Distribution
Date;
(iii) the Class Principal Balance of each Class of Notes,
the Certificate Principal Balance of the Certificates, and the Pool
Principal Balance (including, until the Funding Period ends, the
amount remaining in the Pre-Funding Account and the Capitalized
Interest Account as of such Distribution Date) as of the first day of
the related Due Period and after giving effect to distributions made
to the holders of such Securities on such Distribution Date;
(iv) the Class Pool Factor with respect to each Class of
Notes then outstanding and the Certificate Pool Factor with respect to
the Certificates then outstanding;
(v) the amount of principal and interest received on the
Home Loans during the related Due Period;
(vi) the Noteholders' Distributable Amount and the
Certificateholders' Distributable Amount;
(vii) the amount, if any, of the Excess
Overcollateralization Amount and, if applicable, the
Overcollateralization Reduction Amount or any other amount to be
distributed to the Securityholders or the holders of the Residual
Interest on such Distribution Date;
(viii) the Servicing Compensation, the Indenture Trustee
Fee, the Owner Trustee Fee and the Guaranty Insurance Premium for such
Distribution Date;
(ix) the Overcollateralization Amount on such Distribution
Date, the Required Overcollateralization Amount as of such
Distribution Date, the Net Loan Losses incurred during the related Due
Period and the cumulative Net Loan Losses as of such Distribution
Date;
(x) the Reserve Account Requirement and the amount
remaining on deposit in the Reserve Account on such Distribution Date
after giving effect to the distributions made to Securityholders on
such Distribution Date;
(xi) the weighted average maturity of the Home Loans and
the weighted average Home Loan Interest Rate of the Home Loans;
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(xii) certain performance information, including
delinquency and foreclosure information with respect to the Home
Loans, as set forth in the Servicer's Monthly Remittance Report;
(xiii) the amount of any Guaranteed Payment included in the
amounts distributed to the Noteholders and/or Certificateholders on
such Distribution Date;
(xiv) as identified with respect to the each Insured
Security, the amount of any Securities Insurer Reimbursement Amount to
be distributed to the Securities Insurer on such Distribution Date and
the amount of any Securities Insurer Reimbursement Amount remaining
unsatisfied following such distribution;
(xv) the number of and aggregate Principal Balance of all
Home Loans in foreclosure proceedings (other than any Home Loans
described in clause (xvi)) and the percent of the aggregate Principal
Balances of such Home Loans to the aggregate Principal Balances of all
Home Loans, all as of the close of business on the first day of the
related Due Period;
(xvi) the number of and the aggregate Principal Balance of
the Home Loans in bankruptcy proceedings (other than any Home Loans
described in clause (xvii)) and the percent of the aggregate Principal
Balances of such Home Loans to the aggregate Principal Balances of all
Home Loans, all as of the close of business on the first day of the
related Due Period;
(xvii) the number of Foreclosure Properties, the aggregate
Principal Balance of the related Home Loans, the book value of such
Foreclosure Properties and the percent of the aggregate Principal
Balances of such Home Loans to the aggregate Principal Balances of all
Home Loans, all as of the close of business on the first day of the
related Due Period;
(xviii) during the related Due Period, the aggregate
Principal Balance of Home Loans for each of the following: (A) that
became Defaulted Home Loans, (B) that became Liquidated Home Loans,
(C) that became Deleted Home Loans pursuant to Section 3.05(c) as a
result of such Deleted Home Loans being Defective Home Loans, and (D)
that became Deleted Home Loans pursuant to Section 3.05(c) as a result
of such Deleted Home Loans being Defaulted Home Loans or a Home Loan
in default or imminent default, including the foregoing amounts by
loan type (i.e. Combination Loans, Debt Consolidation Loans, Home
Improvement Loans, and Purchase or Refinance Loans);
(xix) from the Closing Date through the most current Due
Period, the cumulative aggregate Principal Balance of Home Loans for
each of the following: (A) that became Defaulted Home Loans, (B) that
became Liquidated Home Loans, (C) that became Deleted Home Loans
pursuant to Section 3.05(c) as a result of such Deleted Home loans
being Defective Home Loans, and (D) that became Deleted Home Loans
pursuant to Section 3.05(c) as a result of such Deleted Home Loans
being Defaulted Home Loans or a Home Loan in default or imminent
default, including the foregoing amounts by loan type
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(i.e. Combination Loans, Debt Consolidation Loans, Home Improvement
Loans, and Purchase or Refinance Loans);
(xx) the scheduled principal payments and the principal
prepayments received with respect to the Home Loans during the related
Due Period;
(xxi) the number of and aggregate principal balance of all
Home Loans (both during the related Due Period and in aggregate since
the Closing Date) repurchased or substituted pursuant to Sections
2.06, 3.05 or 4.02; and
(xxii) such other information as may be reasonably
requested by the Indenture Trustee or Securities Insurer.
(2) No later than seven days following a repurchase or
substitution pursuant to Sections 2.06, 3.05 or 4.02, the Servicer shall notify
the Rating Agencies and the Securities Insurer of the aggregate principal
balances of the Home Loans repurchased or substituted and (if applicable) the
relevant Substitution Adjustment.
All reports prepared by the Servicer of the withdrawals from and
deposits in the Collection Account will be based in whole or in part upon the
information provided to the Indenture Trustee by the Servicer, and the
Indenture Trustee may fully rely upon and shall have no liability with respect
to such information provided by the Servicer.
(c) Within a reasonable period of time after the end of each
calendar year, the Servicer shall prepare and direct the Indenture Trustee to
distribute to each Person who at any time during the calendar year was a
Securityholder, such information as is reasonably necessary to provide to such
Person a statement containing the information set forth in subclauses (b)(iv)
and (v) above, aggregated for such calendar year or applicable portion thereof
during which such Person was a Securityholder. Such obligation of the
Indenture Trustee shall be deemed to have been satisfied to the extent that
substantially comparable information shall be provided by the Servicer to the
Securityholders pursuant to any requirements of the Code as are in force from
time to time.
(d) On each Distribution Date, the Indenture Trustee shall forward
to the holders of the Residual Interest a copy of the Servicer's Monthly
Statement in respect of such Distribution Date and a statement setting forth
the amounts actually distributed to such holders of the Residual Interest on
such Distribution Date, together with such other information as the Indenture
Trustee deems necessary or appropriate.
(e) Within a reasonable period of time after the end of each
calendar year, the Servicer shall prepare and direct the Indenture Trustee to
distribute to each Person who at any time during the calendar year was a holder
of Residual Interest, if requested in writing by such Person, such information
as is reasonably necessary to provide to such Person a statement containing the
information provided pursuant to the previous paragraph aggregated for such
calendar year or applicable portion thereof during which such Person was a
holder of Residual Interest. Such obligation of the Indenture Trustee shall be
deemed to have been satisfied to the extent that
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substantially comparable information shall be provided by the Servicer to the
holder of Residual Interest pursuant to any requirements of the Code as are in
force from time to time.
(f) Upon reasonable advance notice in writing, the Servicer will
provide to each Securityholder which is a savings and loan association, bank or
insurance company access to information and documentation regarding the Home
Loans sufficient to permit such Securityholder to comply with applicable
regulations of the FDIC or other regulatory authorities with respect to
investment in such Securities.
(g) The Servicer or its agent shall furnish to the Indenture
Trustee, who in turn shall forward to each Securityholder and the holder of
Residual Interest, during the term of this Agreement, such periodic, special,
or other reports, including information tax returns or reports required with
respect to the Securities and the Residual Interest, including Internal Revenue
Service Forms 1099 and (if instructed in writing by the Seller on the basis of
the advice of legal counsel) Form 1066, Schedule Q and other similar reports
that are required to be filed by the Servicer or its agent and the holder of
Residual Interest, whether or not provided for herein, as shall be necessary,
reasonable, or appropriate with respect to the Securityholders or the holders
of the Residual Interest, or otherwise with respect to the purposes of this
Agreement, all such reports or information to be provided by and in accordance
with such applicable instructions and directions as the Securityholders or the
holders of the Residual Interest may reasonably require.
(h) Reports and computer tapes furnished by the Servicer and the
Indenture Trustee pursuant to this Agreement shall be deemed confidential and
of proprietary nature, and shall not be copied or distributed except in
connection with the purposes and requirements of this Agreement. No Person
entitled to receive copies of such reports or tapes shall use the information
therein for the purpose of soliciting the customers of the Seller or the
Servicer or for any other purpose except as set forth in this Agreement.
Section 6.02 Reports of Foreclosure and Abandonment of Mortgaged
Property. Each year beginning in 1997 the Servicer, at its expense, shall make
the reports of foreclosures and abandonments of any Mortgaged Property required
by Section 6050J of the Code. The reports from the Servicer shall be in form
and substance sufficient to meet the reporting requirements imposed by such
Section 6050J of the Code.
Section 6.03 Specification of Certain Tax Matters. Each
Securityholder shall provide the Indenture Trustee with a completed and
executed Form W-9 prior to purchasing a Security. The Indenture Trustee shall
comply with all requirements of the Code, and applicable state and local law,
with respect to the withholding from any distributions made to any
Securityholder of any applicable withholding taxes imposed thereon and with
respect to any applicable reporting requirements in connection therewith.
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ARTICLE VII
GENERAL SERVICING PROCEDURE
Section 7.01 Assumption Agreements.
When a Mortgaged Property has been or is about to be conveyed by the
Obligor, the Servicer shall, to the extent it has knowledge of such conveyance
or prospective conveyance, exercise its rights to accelerate the maturity of
the related Home Loan under any "due-on-sale" clause contained in the related
Mortgage or Debt Instrument; provided, however, that the Servicer shall not
exercise any such right if the "due-on-sale" clause, in the reasonable belief
of the Servicer, is not enforceable under applicable law. In such event or in
the event the related Mortgage and Debt Instrument do not contain a
"due-on-sale" clause, the Servicer shall enter into an assumption and
modification agreement with the person to whom such property has been or is
about to be conveyed, pursuant to which such person becomes liable under the
Debt Instrument and, unless prohibited by applicable law or the Home Loan
documents, the Obligor remains liable thereon. The Servicer is also authorized
to enter into a substitution of liability agreement with such person, pursuant
to which the original Obligor is released from liability and such person is
substituted as Obligor and becomes liable under the Debt Instrument. The
Servicer shall notify the Custodian that any such substitution or assumption
agreement has been completed by forwarding to the Custodian the original of
such substitution or assumption agreement, which original shall be added by the
Custodian to the related Indenture Trustee's Home Loan File and shall, for all
purposes, be considered a part of such Indenture Trustee's Home Loan File to
the same extent as all other documents and instruments constituting a part
thereof. In connection with any assumption or substitution agreement entered
into pursuant to this Section 7.01, the Servicer shall not change the Home Loan
Interest Rate or the Monthly Payment, defer or forgive the payment of principal
or interest, reduce the outstanding principal amount or extend the final
maturity date on such Home Loan. Any fee collected by the Servicer for
consenting to any such conveyance or entering into an assumption or
substitution agreement shall be retained by or paid to the Servicer as
additional Servicing Compensation.
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Home Loan by operation of law or any assumption which the Servicer may be
restricted by law from preventing, for any reason whatsoever.
Section 7.02 Satisfaction of Mortgages and Release of Home Loan
Files.
Subject to the provisions of s 4.01 and 4.02, the Servicer shall not
grant a satisfaction or release of a Mortgage without having obtained payment
in full of the indebtedness secured by the Mortgage or otherwise prejudice any
right the Securityholders or the Securities Insurer may have under the mortgage
instruments. The Servicer shall maintain the fidelity bond and errors and
omissions insurance as provided for in Section 4.03 insuring the Servicer
against any loss it may sustain with respect to any Home Loan not satisfied in
accordance with the procedures set forth herein.
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Upon the payment in full of any Home Loan, or the receipt by the
Servicer of a notification that payment in full will be escrowed in a manner
customary for such purposes, the Servicer will immediately notify the Custodian
by an Officers' Certificate (which certificate shall include a statement to the
effect that all amounts received or to be received in connection with such
payment which are required to be deposited in the Collection Account pursuant
to Section 5.01(b) have been or will be so deposited) of a Servicing Officer
and shall request delivery to it of the Indenture Trustee's Home Loan File.
Upon receipt of such certification and request and in accordance with Section
2.9 of the Indenture, the Custodian shall promptly release the related
Indenture Trustee's Home Loan File to the Servicer. Expenses incurred in
connection with any instrument of satisfaction or deed of reconveyance shall be
payable only from and to the extent of Servicing Compensation and shall not be
chargeable to the Collection Account, the Note Distribution Account, or the
Certificate Distribution Account. Upon receipt by the Custodian of the
certification of a Servicing Officer with respect to the release of the
Indenture Trustee's Home Loan File for any Home Loan or any documents included
therein, the Custodian shall release to the Servicer such Indenture Trustee's
Home Loan File and shall deliver such instruments of transfer presented to it
by the Servicer as shall be necessary or appropriate for the release of such
Indenture Trustee's Home Loan File in accordance with such certification of the
Servicing Officer. The release to the Servicer of an Indenture Trustee's Home
Loan File pursuant to such certification shall not require or be subject to the
prior approval of the Indenture Trustee in the case of a release in connection
with the following: (1) the satisfaction or release of a Mortgage upon the
payment in full of the Home Loan or upon such Home Loan becoming a Liquidated
Home Loan; (2) a Home Loan in default for which the Servicer is or will be
pursuing foreclosure or another method of liquidation pursuant to Section 4.02;
or (3) the correction of documentation in the Indenture Trustee's Home Loan
File for errors and ambiguities, provided that such corrections shall be
performed and returned to the Custodian in a prompt manner, and provided
further that no more than 100 Indenture Trustee's Home Loan Files shall be
released and held by the Servicer at any one time. In the case of a release of
the related Indenture Trustee's Home Loan File to the Servicer in connection
with a substitution or repurchase of any Home Loan pursuant to Section 2.06(c)
and (d), Section 3.05 or Section 11.02 or a release for other servicing
reasons, such release of the Indenture Trustee's Home Loan File by the
Custodian shall be subject to the prior approval of the Indenture Trustee.
The Indenture Trustee shall execute and deliver to the Servicer any
court pleadings, requests for trustee's sale or other documents necessary to
the foreclosure or trustee's sale in respect of a Mortgaged Property or to any
legal action brought to obtain judgment against any Obligor on the Debt
Instrument or Mortgage or to obtain a deficiency judgment, or to enforce any
other remedies or rights provided by the Debt Instrument or Mortgage or
otherwise available at law or in equity. Together with such documents or
pleadings, the Servicer shall deliver to the Indenture Trustee a certificate of
a Servicing Officer requesting that such pleadings or documents be executed by
the Indenture Trustee and certifying as to the reason such documents or
pleadings are required and that the execution and delivery thereof by the
Indenture Trustee will not invalidate or otherwise affect the lien of the
Mortgage, except for the termination of such a lien upon completion of the
foreclosure or trustee's sale. The Indenture Trustee shall, upon receipt of a
written request from a Servicing Officer, execute any document provided to the
Indenture Trustee by the Servicer or take any other action requested in such
request that is, in the opinion of the Servicer as evidenced by such request,
required by any state or other jurisdiction to discharge the lien of a Mortgage
upon the satisfaction thereof and the Indenture Trustee will sign and post, but
will not guarantee receipt of, any such
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documents to the Servicer, or such other party as the Servicer may direct,
within five Business Days, or more promptly if needed, of the Indenture
Trustee's receipt of such certificate or documents. Such certificate or
documents shall establish to the Indenture Trustee's satisfaction that the
related Home Loan has been paid in full by or on behalf of the Obligor and that
such payment has been deposited in the Collection Account.
Subject to any other applicable terms and conditions of this
Agreement, the Indenture Trustee and Servicer shall be entitled to approve an
assignment in lieu of satisfaction with respect to any Home Loan, provided the
obligee with respect to such Home Loan following such proposed assignment
provides the Indenture Trustee and Servicer with a "Certification for
Assignment of Home Loan" in form and substance satisfactory to the Indenture
Trustee and Servicer, providing the following: (i) that the Home Loan is
secured by Mortgaged Property located in a jurisdiction in which an assignment
in lieu of satisfaction is required to preserve lien priority, minimize or
avoid mortgage recording taxes or otherwise comply with or facilitate a
refinancing under the laws of such jurisdiction; (ii) that the substance of the
assignment is, and is intended to be, a refinancing of such Home Loan and that
the form of the transaction is solely to comply with or facilitate the
transaction under such local laws; (iii) that the Home Loan following the
proposed assignment will have a rate of interest at least 0.25 percent below or
above the rate of interest on such Home Loan prior to such proposed assignment;
and (iv) that such assignment is at the request of the borrower under the
related Home Loan. Upon approval of an assignment in lieu of satisfaction with
respect to any Home Loan, the Servicer shall receive cash in an amount equal to
the unpaid principal balance of and accrued interest on such Home Loan and the
Servicer shall treat such amount as a Principal Prepayment with respect to such
Home Loan for all purposes hereof.
Section 7.03 Servicing Compensation.
As compensation for its services hereunder, the Servicer shall be
entitled to receive from the Collection Account, the Servicing Fee out of which
the Servicer shall pay any servicing fees owed or payable to any Subservicer
and any custodial fees owed or payable to the Custodian. Additional servicing
compensation in the form of assumption and other administrative fees, amounts
remitted pursuant to Section 7.01 and late payment charges shall be part of the
Servicing Compensation payable to the Servicer hereunder and shall be paid
either by the Servicer retaining such additional servicing compensation prior
to deposit in the Collection Account pursuant to Section 5.01(b)(1) or if
deposited into the Collection Account as part of the Servicing Compensation
withdrawn from the Note Distribution Account pursuant to Section 8.2(c) of the
Indenture.
The Servicer shall be required to pay all expenses incurred by it in
connection with its servicing activities hereunder and shall not be entitled to
reimbursement therefor except as specifically provided for herein. The
Servicer also agrees to pay (i) all reasonable costs and expenses incurred by
the Indenture Trustee, the Owner Trustee or the Seller in investigating the
Servicer's activities hereunder when, in the reasonable opinion of the
Indenture Trustee, the Owner Trustee or the Seller, such investigation is
warranted on the basis of adverse information about the Servicer obtained from
a reasonably reliable source, (ii) all reasonable costs and expenses incurred
by any successor servicer or the Indenture Trustee in replacing the Servicer in
the event of a default by the Servicer in the performance of its duties under
the terms and conditions of this Agreement, and (iii) the annual Rating Agency
monitoring fees.
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Section 7.04 Quarterly Statements as to Compliance.
Not later than the last day of the second month following the end of
each quarter of the Servicer's Fiscal Year, beginning in May, 1997, the
Servicer will deliver to the Indenture Trustee, the Issuer, the Securities
Insurer and to each Securityholder, an Officer's Certificate stating that (i)
the Servicer has fully complied with the provisions of Articles V and VII, (ii)
a review of the activities of the Servicer during the preceding quarter and of
performance under this Agreement has been made under such officer's
supervision, and (iii) to the best of such officers' knowledge, based on such
review, the Servicer has fulfilled all its obligations under this Agreement
throughout such quarter, 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 and the action being taken by the Servicer to cure
such default.
Section 7.05 Annual Independent Public Accountants' Servicing
Report.
On or before 120 days after the end of each of the Servicer's fiscal
years elapsing during the term of its appointment under this Agreement,
beginning with the first fiscal year ending after the Closing Date, the
Servicer, at its expense, shall furnish to the Seller, the Indenture Trustee,
the Issuer, the Securityholders, the Securities Insurer and the Rating Agencies
(i) an opinion by a firm of independent certified public accountants on the
financial position of the Servicer at the end of the relevant fiscal year and
the results of operations and changes in financial position of the Servicer for
such year then ended on the basis of an examination conducted in accordance
with generally accepted auditing standards, and (ii) if the Servicer is then
servicing any Home Loans, a statement from such independent certified public
accountants to the effect that based on an examination of certain specified
documents and records relating to the servicing of the Servicer's loan
portfolio conducted substantially in compliance with the audit program for
mortgages serviced for the United States Department of Housing and Urban
Development Mortgage Audit Standards, or the Uniform Single Attestation Program
for Mortgage Bankers (the "Applicable Accounting Standards"), such firm is of
the opinion that such servicing has been conducted in compliance with the
Applicable Accounting Standards except for (a) such exceptions as such firm
shall believe to be immaterial and (b) such other exceptions as shall be set
forth in such statement.
Section 7.06 Right to Examine Servicer Records.
Each Securityholder, the Indenture Trustee, the Issuer, the Securities
Insurer and each of their respective agents shall have the right upon
reasonable prior notice, during normal business hours and as often as
reasonably required, to examine, audit and copy, at the expense of the Person
making such examination, any and all of the books, records or other information
of the Servicer (including without limitation any Subservicer to the extent
provided in the related Subservicing Agreement) whether held by the Servicer or
by another on behalf of the Servicer, which may be relevant to the performance
or observance by the Servicer of the terms, covenants or conditions of this
Agreement. Each Securityholder, the Indenture Trustee, the Issuer and the
Securities Insurer agree that any information obtained pursuant to the terms of
this Agreement shall be held confidential.
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Section 7.07 Reports to the Indenture Trustee; Collection Account
Statements.
If the Collection Account is not maintained with the Indenture
Trustee, then not later than 25 days after each Record Date, the Servicer shall
forward to the Indenture Trustee and the Securities Insurer a statement,
certified by a Servicing Officer, setting forth the status of the Collection
Account as of the close of business on the preceding Record Date and showing,
for the period covered by such statement, the aggregate of deposits into the
Collection Account for each category of deposit specified in Section 5.01(b),
the aggregate of withdrawals from the Collection Account for each category of
withdrawal specified in Section 5.01(b)(2) and (d) and the aggregate amount of
permitted withdrawals not made in the related Due Period in each case, for the
related Due Period.
ARTICLE VIII
REPORTS TO BE PROVIDED BY SERVICER
Section 8.01 Financial Statements.
The Servicer understands that, in connection with the transfer of the
Securities, Securityholders may request that the Servicer make available to the
Securityholders, to prospective Securityholders and the Securities Insurer
annual audited financial statements of the Servicer for one or more of the most
recently completed five fiscal years for which such statements are available,
which request shall not be unreasonably denied.
The Servicer also agrees to make available on a reasonable basis to
the Securityholders, any prospective Securityholder and the Securities Insurer
a knowledgeable financial or accounting officer for the purpose of answering
reasonable questions respecting recent developments affecting the Servicer or
the financial statements of the Servicer and to permit the Securityholders, any
prospective Securityholder and the Securities Insurer to inspect the Servicer's
servicing facilities during normal business hours for the purpose of satisfying
the Securityholders and such prospective Securityholder and the Securities
Insurer that the Servicer has the ability to service the Home Loans in
accordance with this Agreement.
ARTICLE IX
THE SERVICER
Section 9.01 Indemnification; Third Party Claims.
(a) The Servicer agrees to indemnify and hold the Indenture
Trustee, the Co-Owner Trustee, the Issuer, the Seller, the Securities Insurer
and each Securityholder harmless from and against any and all claims, losses,
penalties, fines, forfeitures, legal fees and related costs, judgments, and any
other costs, fees and expenses that the Indenture Trustee, the Issuer, the
Seller, the Securities Insurer or any Securityholder may sustain directly
resulting from the negligence or willful misconduct of the Servicer in the
performance of its duties hereunder or in the servicing of the Home Loans in
compliance with the terms of this Agreement. IT IS THE EXPRESS INTENTION OF
THE PARTIES TO THIS AGREEMENT THAT THE INDEMNIFICATION AND HOLD
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HARMLESS OBLIGATIONS OF THE SERVICER SET FORTH IN THE PRECEDING SENTENCE SHALL
APPLY FULLY TO CLAIMS, LOSSES, ETC. RESULTING FROM ACTS OR OMISSIONS THAT MAY
CONSTITUTE ORDINARY NEGLIGENCE ON THE PART OF THE SERVICER. The Servicer shall
not be liable or responsible for any of the representations, covenants,
warranties, responsibilities, duties or liabilities of any prior Servicer. The
Servicer shall immediately notify the Indenture Trustee, the Issuer, the
Seller, the Securities Insurer and each Securityholder if a claim is made by a
third party with respect to this Agreement, and the Servicer shall assume (with
the consent of the Indenture Trustee and the Issuer) the defense of any such
claim and advance all expenses in connection therewith, including reasonable
counsel fees, and promptly advance funds to pay, discharge and satisfy any
judgment or decree which may be entered against the Servicer, the Indenture
Trustee, the Issuer, the Seller, the Securities Insurer and/or any
Securityholder in respect of such claim.
(b) The Seller agrees to indemnify and hold the Indenture Trustee,
the Issuer, the Servicer, the Securities Insurer and each Securityholder
harmless from and against any and all claims, losses, penalties, fines,
forfeitures, legal fees and related costs, judgments, and any other costs, fees
and expenses that the Indenture Trustee, the Issuer, the Servicer, the
Securities Insurer or any Securityholder may sustain directly resulting from
the negligence or willful misconduct of the Seller in the performance of its
duties hereunder or in compliance with the terms of this Agreement. IT IS THE
EXPRESS INTENTION OF THE PARTIES TO THIS AGREEMENT THAT THE INDEMNIFICATION AND
HOLD HARMLESS OBLIGATIONS OF THE SELLER SET FORTH IN THE PRECEDING SENTENCE
SHALL APPLY FULLY TO CLAIMS, LOSSES, ETC. RESULTING FROM ACTS OR OMISSIONS THAT
MAY CONSTITUTE ORDINARY NEGLIGENCE ON THE PART OF THE SELLER. The Seller shall
immediately notify the Indenture Trustee, the Issuer, the Servicer, the
Securities Insurer and each Securityholder if a claim is made by a third party
with respect to this Agreement, and the Seller shall assume (with the consent
of the Indenture Trustee and the Issuer) the defense of any such claim and
advance all expenses in connection therewith, including reasonable counsel
fees, and promptly advance funds to pay, discharge and satisfy any judgment or
decree which may be entered against the Seller, the Servicer, the Indenture
Trustee, the Issuer, the Securities Insurer and/or any Securityholder in
respect of such claim.
(c) The Transferor agrees to indemnify and hold the Indenture
Trustee, the Issuer, the Servicer, the Securities Insurer and each
Securityholder harmless from and against any and all claims, losses, penalties,
fines, forfeitures, legal fees and related costs, judgments, and any other
costs, fees and expenses that the Indenture Trustee, the Issuer, the Servicer,
the Securities Insurer or any Securityholder may sustain directly resulting
from the negligence or willful misconduct of the Transferor in the performance
of its duties hereunder or in compliance with the terms of this Agreement. IT
IS THE EXPRESS INTENTION OF THE PARTIES TO THIS AGREEMENT THAT THE
INDEMNIFICATION AND HOLD HARMLESS OBLIGATIONS OF THE TRANSFEROR SET FORTH IN
THE PRECEDING SENTENCE SHALL APPLY FULLY TO CLAIMS, LOSSES, ETC. RESULTING
FROM ACTS OR OMISSIONS THAT MAY CONSTITUTE ORDINARY NEGLIGENCE ON THE PART OF
THE TRANSFEROR. The Transferor shall immediately notify the Indenture Trustee,
the Issuer, the Servicer, the Securities Insurer and each Securityholder if a
claim is made by a third party with respect to this Agreement, and the
Transferor shall assume (with the consent of the Indenture Trustee and the
Issuer) the
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defense of any such claim and advance all expenses in connection therewith,
including reasonable counsel fees, and promptly advance funds to pay, discharge
and satisfy any judgment or decree which may be entered against the Transferor,
the Servicer, the Indenture Trustee, the Issuer, the Securities Insurer and/or
any Securityholder in respect of such claim.
(d) The obligations of the Servicer, the Seller and the Transferor
under this Section 9.01 shall survive the termination of this Agreement.
Section 9.02 Merger or Consolidation of the Servicer.
The Servicer shall keep in full effect its existence, rights and
franchises as a corporation, and will obtain and preserve its qualification to
do business as a foreign corporation and maintain such other licenses and
permits, in each jurisdiction necessary to protect the validity and
enforceability of this Agreement or any of the Home Loans and to perform its
duties under this Agreement.
Any Person into which the Servicer may be merged or consolidated, or
any corporation resulting from any merger, conversion or consolidation to which
the Servicer shall be a party, or any Person succeeding to the business of the
Servicer, shall be an Eligible Servicer and shall be the successor of the
Servicer, as applicable hereunder, without the execution or filing of any paper
or any further act on the part of any of the parties hereto, anything herein to
the contrary notwithstanding. The Servicer shall send notice of any such
merger, conversion, consolidation or succession to the Indenture Trustee, the
Issuer and the Securities Insurer.
Section 9.03 Limitation on Liability of the Servicer and Others.
The Servicer and any director, officer, employee or agent of the
Servicer may rely on any document of any kind which it in good faith reasonably
believes to be genuine and to have been adopted or signed by the proper
authorities respecting any matters arising hereunder. Subject to the terms of
Section 9.01 herein, the Servicer shall have no obligation to appear with
respect to, prosecute or defend any legal action which is not incidental to the
Servicer's duty to service the Home Loans in accordance with this Agreement.
Section 9.04 Servicer Not to Resign; Assignment.
(a) The Servicer shall not resign from the obligations and duties
hereby imposed on it except by mutual consent of the Servicer, the Seller, the
Indenture Trustee, the Issuer, the Securities Insurer and the Majority
Securityholders, or upon the determination that the Servicer's duties hereunder
are no longer permissible under applicable law and such incapacity cannot be
cured by the Servicer. Any such determination permitting the resignation of
the Servicer shall be evidenced by a written opinion of counsel (who may be an
employee of the Servicer) to such effect delivered to the Indenture Trustee,
the Issuer, the Securities Insurer and the Seller, which opinion of counsel
shall be in form and substance acceptable to the Indenture Trustee, the Issuer
and the Securities Insurer. No such resignation shall become effective until
the Indenture Trustee or a successor servicer has assumed the Servicer's
responsibilities and obligations hereunder in accordance with Section 10.02.
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(b) The Servicer shall not assign this Agreement or any of its
obligations, rights and duties hereunder without the prior written consent the
Seller, the Indenture Trustee, the Issuer, the Securities Insurer and the
Majority Securityholders; provided, however, the Servicer may assign this
Agreement without the prior written consent of the Seller, the Indenture
Trustee and the Issuer, but with the prior written consent of the Securities
Insurer and the Majority Securityholders to (i) the Indenture Trustee or (ii)
any Person that (A) is satisfactory to the Indenture Trustee, the Issuer, the
Securities Insurer and the Majority Securityholders, (B) services not less than
$25,000,000 in aggregate outstanding principal amount of loans similar in type
to the Home Loans, (C) has a net worth of not less than $2,500,000, (D) has a
blanket fidelity bond and errors and omissions insurance coverage satisfying
the requirements set forth in Section 4.03 and (E) will not cause any rating of
any Class of the Securities in effect immediately prior to such assignment to
be qualified, downgraded or withdrawn, as evidenced by a letter from each
Rating Agency to such effect. Any such assignment to a successor servicer
(other than the Indenture Trustee) shall be effective only upon delivery to the
Indenture Trustee, the Issuer and the Securities Insurer of an agreement, duly
executed by the Servicer and such successor servicer in a form reasonably
satisfactory to the Indenture Trustee and the Issuer, in which such successor
servicer shall assume the due and punctual performance of each covenant and
condition to be performed or observed by the Servicer hereunder.
Section 9.05 Relationship of Servicer to Issuer and the Indenture
Trustee.
The relationship of the Servicer (and of any successor to the Servicer
as servicer under this Agreement) to the Issuer and the Indenture Trustee under
this Agreement is intended by the parties hereto to be that of an independent
contractor and not of a joint venturer, agent or partner of the Issuer or the
Indenture Trustee.
ARTICLE X
DEFAULT
Section 10.01 Events of Default.
(a) In case one or more of the following Events of Default by the
Servicer shall occur and be continuing, that is to say:
(i) any failure by the Servicer to deposit in the
Collection Account in accordance with Section 5.01(b)any payments in
respect of the Home Loans received by the Servicer no later than the
second Business Day following the day on which such payments were
received; or
(ii) failure by the Servicer duly to observe or perform,
in any material respect, any other covenants, obligations or
agreements of the Servicer as set forth in this Agreement, which
failure continues unremedied for a period of 60 days after the date on
which written notice of such failure, requiring the same to be
remedied and stating that such notice is a "Notice of Default"
hereunder, shall have been given (a) to the Servicer by the Indenture
Trustee or the Issuer, or (b) to the Servicer, the Indenture Trustee
or the Issuer by any Securityholder or the Securities Insurer; or
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(iii) a decree or order of a court or agency or supervisory
authority having jurisdiction for the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings, or for
the winding-up or liquidation of its affairs, shall have been entered
against the Servicer and such decree or order shall have remained in
force, undischarged or unstayed for a period of 60 days; or
(iv) the Servicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment
of debt, marshaling of assets and liabilities or similar proceedings
of or relating to the Servicer or of or relating to all or
substantially all of the Servicer's property; or
(v) the Servicer shall admit in writing its inability to
pay its debts 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; or
(vi) the Majority Securityholders or the Securities
Insurer (A) shall receive notice from the Servicer that the Servicer
is no longer able to discharge its duties under this Agreement or (B)
shall determine, in their reasonable judgment and based upon published
reports (including wire services), which they reasonably believe in
good faith to be reliable, that the Servicer
a) has experienced a material adverse change in
its business, assets, liabilities,
operations, condition (financial or
otherwise) or prospects,
b) has defaulted on any of its material
obligations, or
c) has ceased to conduct its business in the
ordinary course; or
(vii) as of any Determination Date, the total Expected Loan
Losses (as defined below) exceed (1) commencing in March 1997 up to
the fifth (5th) anniversary of the January 31, 1997 Cut-Off Date, 12%
of the sum of the Initial Pool Principal Balance and the aggregate
Principal Balance as of the applicable Cut-Off Dates of all Subsequent
Home Loans conveyed to the Issuer, or (2) thereafter up to the tenth
(10th) anniversary of the January 31, 1997 Cut-Off Date, 18% of the
sum of the Initial Pool Principal Balance and the aggregate Principal
Balance as of the applicable Cut-Off Dates of all Subsequent Home
Loans conveyed to the Issuer (where the "Expected Loan Losses" shall
be the sum of (A) the cumulative Net Loan Losses, plus (B) the
cumulative accrued and uncollected interest on the Liquidated Home
Loans, plus (C) 25% of the aggregate Principal Balance of the Home
Loans which are then more than 30 but less than 60 days delinquent,
plus (D) 50% of the aggregate Principal Balance of the Home Loans
which are then more than 60 but less than 90 days delinquent, plus (E)
100% of the aggregate Principal Balance of the Home Loans which are
then more than 90 days delinquent).
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(b) then, and in each and every such case, so long as an Event of
Default shall not have been remedied, the Majority Securityholders, the
Securities Insurer, the Indenture Trustee or the Issuer by notice in writing to
the Servicer may, in addition to whatever rights such Person may have at law or
equity to damages, including injunctive relief and specific performance, and
with the consent of the Securities Insurer (which consent shall not be
unreasonably withheld), terminate all the rights and obligations of the
Servicer under this Agreement and in and to the Home Loans and the proceeds
thereof, as servicer under this Agreement. Upon receipt by the Servicer of
such written notice, all authority and power of the Servicer under this
Agreement, whether with respect to the Home Loans or otherwise, shall, subject
to Section 10.02, pass to and be vested in a successor servicer acceptable to
the Securities Insurer, or the Indenture Trustee if a successor servicer cannot
be retained in a timely manner, and the successor servicer, or Indenture
Trustee, as applicable, is hereby authorized and empowered to execute and
deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, any and
all documents and other instruments and do or cause to be done all other acts
or things necessary or appropriate to effect the purposes of such notice of
termination, including, but not limited to, the transfer and endorsement or
assignment of the Home Loans and related documents. The Servicer agrees to
cooperate with the successor servicer in effecting the termination of the
Servicer's responsibilities and rights hereunder, including, without
limitation, the transfer to the successor servicer for administration by it of
all amounts which shall at the time be credited by the Servicer to each
Collection Account or thereafter received with respect to the Home Loans.
Section 10.02 Indenture Trustee to Act; Appointment of Successor.
On and after the date the Servicer receives a notice of termination
pursuant to Section 10.01, or the Indenture Trustee receives the resignation of
the Servicer evidenced by an opinion of counsel or accompanied by the consents
required by Section 9.04, or the Servicer is removed as servicer pursuant to
this Article X, then, subject to Section 4.08, the Indenture Trustee shall
appoint a successor servicer acceptable to the Securities Insurer to be the
successor in all respects to the Servicer in its capacity as servicer under
this Agreement and the transactions set forth or provided for herein and shall
be subject to all the responsibilities, duties and liabilities relating thereto
placed on the Servicer by the terms and provisions hereof; provided, however,
that the successor servicer shall not be liable for any actions of any servicer
prior to it; provided further, however, that if a successor servicer cannot be
retained in a timely manner, the Indenture Trustee shall act as successor
servicer. In the event the Indenture Trustee assumes the responsibilities of
the Servicer pursuant to this Section 10.02, the Indenture Trustee will make
reasonable efforts consistent with applicable law to become licensed, qualified
and in good standing in each Mortgaged Property State the laws of which require
licensing or qualification, in order to perform its obligations as Servicer
hereunder or, alternatively, shall retain an agent who is so licensed,
qualified and in good standing in any such Mortgaged Property State. The
successor servicer shall be obligated to make Servicing Advances hereunder. As
compensation therefor, the successor servicer appointed pursuant to the
following paragraph, shall be entitled to all funds relating to the Home Loans
which the Servicer would have been entitled to receive from the Collection
Account pursuant to Section 5.01(c) as if the Servicer had continued to act as
servicer hereunder, together with other servicing compensation in the form of
assumption fees, late payment charges or otherwise as provided in Sections 7.01
and 7.03. The Servicer shall not be entitled to any termination fee if it is
terminated pursuant to Section 10.01, but shall be entitled to any accrued and
unpaid Servicing Fee to the date of termination.
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Any collections received by the Servicer after removal or resignation
shall be endorsed by it to the Indenture Trustee and remitted directly to the
Indenture Trustee or, at the direction of the Indenture Trustee, to the
successor servicer. The compensation of any successor servicer (including,
without limitation, the Indenture Trustee) so appointed shall be the Servicing
Fee, together with other Servicing Compensation provided for herein. In the
event the Indenture Trustee is required to solicit bids to appoint a successor
servicer, the Indenture Trustee shall solicit, by public announcement, bids
from housing and home finance institutions, banks and mortgage servicing
institutions meeting the qualifications set forth in Section 9.04(b)(ii) above.
Such public announcement shall specify that the successor servicer shall be
entitled to the full amount of the Servicing Fee and Servicing Compensation
provided for herein. Within thirty days after any such public announcement,
the Indenture Trustee shall negotiate and effect the sale, transfer and
assignment of the servicing rights and responsibilities hereunder to the
qualified party submitting the highest qualifying bid. The Indenture Trustee
shall deduct from any sum received by the Indenture Trustee from the successor
to the Servicer in respect of such sale, transfer and assignment all costs and
expenses of any public announcement and of any sale, transfer and assignment of
the servicing rights and responsibilities hereunder and the amount of any
unreimbursed Servicing Advances made by the Indenture Trustee. After such
deductions, the remainder of such sum shall be paid by the Indenture Trustee to
the Servicer at the time of such sale, transfer and assignment to the successor
servicer. The Indenture Trustee, the Issuer, any Custodian, the Servicer and
any such successor servicer shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession. The
Servicer agrees to cooperate with the Indenture Trustee and any successor
servicer in effecting the termination of the Servicer's servicing
responsibilities and rights hereunder and shall promptly provide the Indenture
Trustee or such successor servicer, as applicable, all documents and records
reasonably requested by it to enable it to assume the Servicer's functions
hereunder and shall promptly also transfer to the Indenture Trustee or such
successor servicer, as applicable, all amounts which then have been or should
have been deposited in the Collection Account by the Servicer or which are
thereafter received with respect to the Home Loans. Neither the Indenture
Trustee nor any other successor servicer shall be held liable by reason of any
failure to make, or any delay in making, any distribution hereunder or any
portion thereof caused by (i) the failure of the Servicer to deliver, or any
delay in delivering, cash, documents or records to it, or (ii) restrictions
imposed by any regulatory authority having jurisdiction over the Servicer
hereunder. No appointment of a successor to the Servicer hereunder shall be
effective until written notice of such proposed appointment shall have been
provided by the Indenture Trustee to each Securityholder, the Issuer, the
Seller and the Securities Insurer and, except in the case of the appointment of
the Indenture Trustee as successor to the Servicer (when no consent shall be
required), the Seller, the Majority Securityholders, the Issuer and the
Securities Insurer shall have consented thereto.
Pending appointment of a successor to the Servicer hereunder, the
Indenture Trustee shall act as servicer hereunder as hereinabove provided. In
connection with such appointment and assumption, the Indenture Trustee may make
such arrangements for the compensation of such successor servicer out of
payments on the Home Loans as it and such successor servicer shall agree;
provided, however, that no such compensation shall be in excess of that
permitted the Servicer pursuant to Section 7.03, together with other Servicing
Compensation in the form of assumption fees, late payment charges or otherwise
as provided in this Agreement.
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Section 10.03 Waiver of Defaults.
The Majority Securityholders may with the prior consent of the
Securities Insurer, on behalf of all Securityholders, waive any events
permitting removal of the Servicer as servicer pursuant to this Article X,
provided, however, that the Majority Securityholders may not waive a default in
making a required distribution on a Security or Residual Interest without the
consent of the related Securityholder or holders of the Residual Interest.
Upon any waiver of a past default, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been remedied for
every purpose of this Agreement. No such waiver shall extend to any subsequent
or other default or impair any right consequent thereto except to the extent
expressly so waived.
Section 10.04 Accounting Upon Termination of Servicer.
Upon termination of the Servicer under this Article X, the Servicer
shall, at its own expense:
(a) deliver to its successor or, if none shall yet have been
appointed, to the Indenture Trustee, the funds in any Collection Account;
(b) deliver to its successor or, if none shall yet have been
appointed, to the Indenture Trustee, all servicer's Home Loan Files and related
documents and statements held by it hereunder and a Home Loan portfolio
computer tape;
(c) deliver to its successor or, if none shall yet have been
appointed, to the Indenture Trustee, the Issuer, the Securities Insurer and the
Securityholders a full accounting of all funds, including a statement showing
the Monthly Payments collected by it and a statement of monies held in trust by
it for payments or charges with respect to the Home Loans; and
(d) execute and deliver such instruments and perform all acts
reasonably requested in order to effect the orderly and efficient transfer of
servicing of the Home Loans to its successor and to more fully and definitively
vest in such successor all rights, powers, duties, responsibilities,
obligations and liabilities of the Servicer under this Agreement.
ARTICLE XI
TERMINATION
Section 11.01 Termination.
This Agreement shall terminate upon notice to the Indenture Trustee of
either: (a) the later of (i) the satisfaction and discharge of the Indenture
pursuant to Section 4.1 of the Indenture or (ii) the disposition of all funds
with respect to the last Home Loan and the remittance of all funds due
hereunder and the payment of all amounts due and payable to the Indenture
Trustee, the Owner Trustee, the Co-Owner Trustee, the Issuer, the Custodian and
the Securities Insurer; or (b) the mutual consent of the Servicer, the Seller,
the Transferor, the Securities Insurer and all Securityholders in writing.
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Section 11.02 Optional Termination by Affiliated Holder or the
Securities Insurer
(a) The Affiliated Holder may, at its option, effect an early
redemption or termination of the Securities on or after any Distribution Date
on which the Pool Principal Balance declines to 15% or less of the Pool
Principal Balance of the Initial Home Loans and Subsequent Home Loans conveyed
to the Trust as of the respective Cut-Off Dates. The Affiliated Holder shall
effect such early redemption or termination by providing notice thereof to the
Indenture Trustee, Owner Trustee and Securities Insurer and by directing the
Indenture Trustee to sell all of the Home Loans to a person that is not
affiliated with the Affiliated Holder, the Seller, or the Servicer at a price
not less than the Termination Price.
(b) In addition, the Affiliated Holder may, at its option, effect
an early redemption or termination of the Securities on or after any
Distribution Date on which the Pool Principal Balance declines to 10% or less
of the Pool Principal Balance of the Initial Home Loans and Subsequent Home
Loans conveyed to the Trust as of the respective Cut-Off Dates. The Affiliated
Holder shall effect such early redemption or termination by providing notice
thereof to the Indenture Trustee, Owner Trustee and Securities Insurer and by
paying into the Collection Account in the manner described below an amount
equal to the Termination Price.
In addition, subject to Section 12.16, on any date on or after which
(i) 17.5% or more (based on Net Loan Losses) of the Home Loans have become
Defaulted Home Loans on a cumulative basis and (ii) the Overcollateralization
Amount has been reduced to zero or an amount less than zero, then the
Securities Insurer may, at its option, effect an early redemption of the
Securities and termination of this Agreement by providing notice thereof to the
Indenture Trustee, Owner Trustee and Servicer and by purchasing, on the next
succeeding Distribution Date, all of the outstanding Home Loans at a price
equal to the Termination Price (provided that the Securities Insurer
Reimbursement Amount shall not be included in the calculation of such
Termination Price).
Any such early redemption and termination by the Affiliated Holder or
the Securities Insurer, as applicable, shall be accomplished by depositing into
the Collection Account on the Determination Date immediately preceding the
Distribution Date on which the purchase is to occur the amount of the
Termination Price to be paid. The Termination Price and any amounts then on
deposit in the Collection Account (other than any amounts not required to have
been deposited therein pursuant to Section 5.01(b)(i) and any amounts
withdrawable therefrom by the Indenture Trustee pursuant to Section 5.01(d))
shall be transferred to the Note Distribution Account pursuant to Section
5.01(b)(2) for distribution to Securityholders and the Securities Insurer on
the Final Distribution Date; and any amounts received with respect to the Home
Loans and Foreclosure Properties subsequent to the Due Period immediately
preceding such Final Distribution Date shall belong to the purchaser thereof,
if under Section 11.02(a), or the Affiliated Holder or the Securities Insurer,
as applicable. For purposes of calculating the Required Distribution Amount
for the Final Distribution Date, amounts transferred to the Note Distribution
Account immediately preceding such final Distribution Date shall in all cases
be deemed to have been received during the related Due Period, and amounts so
transferred shall be applied pursuant to Section 5.01(c).
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Section 11.03 Notice of Termination.
Notice of termination of this Agreement or of early redemption and
termination of the Securities shall be sent (i) by the Indenture Trustee to the
Noteholders and the Securities Insurer in accordance with Section 2.6(b) of the
Indenture and (ii) by the Owner Trustee to the Certificateholders and the
Securities Insurer in accordance with Section 9.1(d) of the Trust Agreement.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01 Acts of Securityholders.
Except as otherwise specifically provided herein, whenever
Securityholder action, consent or approval is required under this Agreement,
such action, consent or approval shall be deemed to have been taken or given on
behalf of, and shall be binding upon, all Securityholders if the Majority
Securityholders agree to take such action or give such consent or approval.
Section 12.02 Amendment.
(a) This Agreement may be amended from time to time by the Seller,
the Servicer, the Transferor and the Issuer by written agreement with notice
thereof to the Securityholders, without the consent of any of the
Securityholders, but with the consent of the Securities Insurer, to cure any
error or ambiguity, to correct or supplement any provisions hereof which may be
defective or inconsistent with any other provisions hereof, to add any other
provisions with respect to matters or questions arising under this Agreement or
to provide for the substitution of a limited guaranty and/or letter of credit
into the Reserve Account by the majority holders of the Residual Interest
pursuant to Section 5.07; provided, however, that such action will not
adversely affect in any material respect the interests of the Securityholders.
An amendment described above shall be deemed not to adversely affect in any
material respect the interests of the Securityholders if either (i) an opinion
of counsel is obtained to such effect, and (ii) the party requesting the
amendment obtains a letter from each of the Rating Agencies confirming that the
amendment, if made, would not result in the downgrading or withdrawal of the
rating then assigned by the respective Rating Agency to any Class of Securities
then outstanding. Notwithstanding the preceding, the Securities Insurer, in
its sole discretion and without the requirement of an amendment to this
Agreement, shall have the right to modify the definitions relating to the
calculation of the Required Overcollateralization Amount and to adjust the
delinquency and default percentages in the definition of the Required Credit
Support Multiple if: (1) subject to a sixty (60) day period after the last day
of the Due Period in which the Funding Period ends, the Subsequent Home Loans
violate or fail to conform or comply in all material respects with the
conditions and requirements for delivery thereof as set forth herein and in the
Securities Insurer Commitment; or (2) the Securities Insurer otherwise
determines to modify the definitions relating to the calculation of the
Required Overcollateralization Amount or to adjust the delinquency and default
percentages in such definitions, as the case may be, in a manner that will
result in a reduction of the Required Credit Support Multiple; provided,
however, such modification
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 87
<PAGE> 97
or adjustment, as the case may be, would not result in the downgrading or
withdrawal of the rating then assigned by each of the respective Rating
Agencies to any Class of Securities then outstanding.
(b) This Agreement may also be amended from time to time by the
Seller, the Servicer, the Transferor and the Issuer by written agreement, with
the prior written consent of the Majority Securityholders and the Securities
Insurer, 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 Securityholders; 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 Loans or distributions which are required to be
made on any Security, without the consent of the holders of 100% of each Class
of Notes or the Certificates affected thereby and the Securities Insurer, (ii)
adversely affect in any material respect the interests of the holders of any
Class of Notes or Certificates or the Securities Insurer in any manner other
than as described in (i), without the consent of the holders of 100% of such
Class of Notes or the Certificates or the Securities Insurer, respectively, or
(iii) reduce the percentage of any Class of Notes or the Certificates, the
holders of which are required to consent to any such amendment, without the
consent of the holders of 100% of such Class of Notes or the Certificates and
the Securities Insurer.
(c) It shall not be necessary for the consent of Securityholders
under this Section to approve the particular form of any proposed amendment,
but it shall be sufficient if such consent shall approve the substance thereof.
Prior to the execution of any amendment to this Agreement, the Issuer
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 Issuer may, but shall not be obligated to, enter into any such amendment
which affects the Issuer's own rights, duties or immunities under this
Agreement.
Section 12.03 Recordation of Agreement.
To the extent permitted by applicable law, this Agreement, or a
memorandum thereof if permitted under applicable law, is subject to recordation
in all appropriate public offices for real property records in all of 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 Servicer at the
Securityholders' expense on direction of the Majority Securityholders or the
Securities Insurer, but only when accompanied by an opinion of counsel to the
effect that such recordation materially and beneficially affects the interests
of the Securityholders or is necessary for the administration or servicing of
the Home Loans.
Section 12.04 Duration of Agreement.
This Agreement shall continue in existence and effect until terminated
as herein provided.
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 88
<PAGE> 98
Section 12.05 Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
Section 12.06 Notices.
All demands, notices and communications hereunder shall be in writing
and shall be deemed to have been duly given if personally delivered at or
mailed by overnight mail, certified mail or registered mail, postage prepaid,
to: (i) in the case of the Seller, FIRSTPLUS INVESTMENT CORPORATION, 3773
Howard Hughes Parkway, Suite 300N, Las Vegas, Nevada 89109, Attention: James
Lawler, or such other addresses as may hereafter be furnished to the
Securityholders and the other parties hereto in writing by the Seller, (ii) in
the case of the Issuer, FIRSTPLUS Home Loan Owner Trust 1997-1, c/o Wilmington
Trust Company, Rodney Square North, 1100 North Market Street, Wilmington,
Delaware 19890, Attention: Emmett R. Harmon, or such other address as may
hereafter be furnished to the Securityholders and the other parties hereto,
(iii) in the case of the Transferor and the Servicer, FIRSTPLUS FINANCIAL,
INC., 1250 Mockingbird Lane, Dallas, Texas 75247-4902, Attention: Christopher
Gramlich, or such other address as may hereafter be furnished to the
Securityholders and the other parties hereto in writing by the Servicer or the
Transferor, (iv) in the case of a claim under the Guaranty Policy, State Street
Bank and Trust Company, as Fiscal Agent, 61 Broadway, 15th Floor, New York, New
York, 10006, Attention: Municipal Registrar, or such other address as may be
furnished to the Securityholders and the other parties hereto in writing by
such Fiscal Agent or the Securities Insurer, (v) in the case of the Securities
Insurer, MBIA Insurance Corporation, 113 King Street, Armonk, New York 10504,
Attention: Insured Portfolio Management - Structured Finance (IPM-SF), (vii) in
the case of the Indenture Trustee or Co-Owner Trustee, First Bank National
Association, 180 East Fifth Street, St. Paul, Minnesota 55101, Attention:
Corporate Trust Department, and (viii) in the case of the Securityholders, as
set forth in the applicable Note Register and Certificate Register. Any such
notices shall be deemed to be effective with respect to any party hereto upon
the receipt of such notice by such party, provided, however, that a facsimile
or other form of electronic transmission shall be deemed to be received by the
parties referred to in (i) to (vii) above when transmitted so long as the
transmitting machine has provided an electronic confirmation of such
transmission and such facsimile or other form of electronic is confirmed with a
printed paper copy thereof by mail or overnight courier service; and provided,
further, that any delivery of computer readable format hereunder shall be
accompanied or confirmed by the delivery of a printed paper copy thereof.
Notices to the Securityholders shall be effective upon mailing or personal
delivery. Each party may, by notice, designate any further or different
address to which subsequent notices, certificates or other communications to
such party shall be sent.
Section 12.07 Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms
of this Agreement shall be held invalid for any reason whatsoever, then such
covenants, agreements, provisions or terms
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 89
<PAGE> 99
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 covenants, agreements, provisions or terms of this
Agreement.
Section 12.08 No Partnership.
Nothing herein contained shall be deemed or construed to create any
partnership or joint venture between the parties hereto and the services of the
Servicer shall be rendered as an independent contractor.
Section 12.09 Counterparts.
This Agreement may be executed in one or more counterparts and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same Agreement.
Section 12.10 Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
Servicer, the Transferor, the Seller, the Issuer and the Securityholders and
their respective successors and permitted assigns.
Section 12.11 Headings.
The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be part
of this Agreement.
Section 12.12 Actions of Securityholders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Agreement to be given or taken
by Securityholders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Securityholders in person or by
agent duly appointed in writing; and except as herein otherwise expressly
provided, such action shall become effective when such instrument or
instruments are delivered to the Seller, the Servicer or the Issuer. 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 Seller, the Servicer and the Issuer if made in the manner provided in
this Section.
(b) The fact and date of the execution by any Securityholder of
any such instrument or writing may be proved in any reasonable manner which the
Seller, the Servicer or the Issuer deems sufficient.
(c) Any request, demand, authorization, direction, notice,
consent, waiver or other act by a Securityholder shall bind every holder of
every Security 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 Seller, the Servicer, the Issuer or the Securities Insurer in
reliance thereon, whether or not notation of such action is made upon such
Security.
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 90
<PAGE> 100
(d) The Seller, the Servicer or the Issuer may require additional
proof of any matter referred to in this Section 12.12 as it shall deem
necessary.
Section 12.13 Reports to Rating Agencies.
(a) The Servicer shall provide to each Rating Agency copies of
statements, reports and notices, to the extent received or prepared by the
Servicer hereunder, as follows:
(i) copies of amendments to this Agreement;
(ii) notice of any substitution or repurchase of any Home
Loans;
(iii) notice of any termination, replacement, succession,
merger or consolidation of either the Servicer, any Custodian or the
Issuer;
(iv) notice of final payment on the Notes and the
Certificates;
(v) notice of any Event of Default;
(vi) copies of the annual independent auditor's report
delivered pursuant to Section 7.05, and copies of any compliance
reports delivered by the Servicer hereunder including Section 7.04;
and
(vii) copies of any Servicer's Monthly Statement pursuant
to Section 6.02(b); and
(b) With respect to the requirement of the Servicer to provide
statements, reports and notices to the Rating Agencies such statements, reports
and notices shall be delivered to the Rating Agencies at the following
addresses: (i) if to Standard & Poor's, 26 Broadway, 15th Floor, New York, New
York 10004-1064, Attention: Asset- Backed Monitoring Department, and (ii) if
to Moody's, 99 Church Street, Corporate Department - 4th Floor, New York, New
York 10007, Attention: Residential Mortgage Monitoring Department.
Section 12.14 Grant of Securityholder Rights to Securities Insurer.
In consideration for the guarantee of the Securities by the Securities Insurer
pursuant to the Guaranty Policy, the Securityholders hereby grant to the
Securities Insurer the right to act as the holder of 100% of the outstanding
Insured Securities for the purpose of exercising the rights of the holders of
the Insured Securities under this Agreement without the consent of any
Securityholders, including the voting rights of such holders, but excluding
those rights requiring the consent of all such holders under Section 12.02(b),
and any rights of such holders to distributions under Section 8.2 of the
Indenture with respect to the Notes and Section 5.06 hereof with respect to the
Certificates; provided that the preceding grant of rights to the Securities
Insurer by the Securityholders shall be subject to Section 12.16. The rights
of the Securities Insurer to direct certain actions and consent to certain
actions of the Majority Securityholders hereunder will terminate at such time
as the Class Principal Balances of all Classes of Notes and the Certificate
Principal Balance of the Certificates have been reduced to zero and the
Securities Insurer has been reimbursed for all Guaranteed Payments and any
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 91
<PAGE> 101
other amounts owed under the Guaranty Policy and Insurance Agreement and the
Securities Insurer has no further obligation under the Guaranty Policy.
Section 12.15 Third Party Beneficiary. The parties hereto
acknowledge that the Securities Insurer is an express third party beneficiary
hereof entitled to enforce any rights reserved to it hereunder as if it were
actually a party hereto.
Section 12.16 Suspension and Termination of Securities Insurer's
Rights.
(a) During the continuation of a Securities Insurer Default,
rights granted or reserved to the Securities Insurer hereunder shall vest
instead in the Majority Certificateholders; provided that the Securities
Insurer shall be entitled to any distributions in reimbursement of the
Securities Insurer Reimbursement Amount, and the Securities Insurer shall
retain those rights under Section 11.01 to consent to the termination of this
Agreement and Section 12.02 to consent to any amendment of this Agreement.
(b) At such time as either (i) the Class Principal Balances of
each Class of Notes and the Certificate Principal Balance of the Certificates
have been reduced to zero or (ii) the Guaranty Policy has been terminated, and
in either case of (i) or (ii) the Securities Insurer has been reimbursed for
all Guaranteed Payments and any other amounts owed under the Guaranty Policy
and the Insurance Agreement (and the Securities Insurer no longer has any
obligation under the Guaranty Policy, except for breach thereof by the
Securities Insurer), then the rights and benefits granted or reserved to the
Securities Insurer hereunder (including the rights to direct certain actions
and receive certain notices) shall terminate and the Securityholders (including
in certain instances the Majority Securityholders) shall be entitled to the
exercise of such rights and to receive such benefits of the Securities Insurer
following such termination to the extent that such rights and benefits are
applicable to the Securityholders (including the Majority Securityholders).
Section 12.17 Holders of the Residual Interest.
(a) Any sums to be distributed or otherwise paid hereunder or
under the Trust Agreement to the holders of the Residual Interest shall be paid
to such holders pro rata based on their percentage holdings in the Residual
Interest.
(b) Where any act or event hereunder is expressed to be subject to
the consent or approval of the holders of the Residual Interest, such consent
or approval shall be capable of being given by the holder or holders of not
less than 51% of the Residual Interest in aggregate.
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 92
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IN WITNESS WHEREOF, the Servicer, the Transferor, the Issuer and the
Seller have caused their names to be signed by their respective officers
thereunto duly authorized, as of the day and year first above written, to this
SALE AND SERVICING AGREEMENT .
FIRSTPLUS HOME LOAN OWNER TRUST 1997-1,
By: Wilmington Trust Company, as Owner Trustee
By:
------------------------------------------
Name:
Title:
FIRSTPLUS INVESTMENT CORPORATION, as Seller
By:
------------------------------------------
Name: Christopher J. Gramlich
Title: Senior Vice President
FIRSTPLUS FINANCIAL, INC., as Transferor and
Servicer
By:
------------------------------------------
Name: Christopher J. Gramlich
Title: Senior Vice President
FIRST BANK NATIONAL ASSOCIATION, as Indenture
Trustee and Co-Owner
Trustee
By:
------------------------------------------
Name: Sheri Christopherson
Title: Vice President
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 93
<PAGE> 103
THE STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared James P. Lawler, known to me to be a person and officer
whose name is subscribed to the foregoing instrument and acknowledged to me
that the same was the act of the said WILMINGTON TRUST COMPANY, NOT IN ITS
INDIVIDUAL CAPACITY BUT IN ITS CAPACITY AS OWNER TRUSTEE OF FIRSTPLUS HOME LOAN
OWNER TRUST 1997-1, as Issuer, and that he executed the same as the act of such
corporation for the purpose and consideration therein expressed, and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ____ day of February,
1997.
________________________________________
Notary Public, State of New York
THE STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared Christopher J. Gramlich, known to me to be a person and
officer whose name is subscribed to the foregoing instrument and acknowledged
to me that the same was the act of the said FIRSTPLUS INVESTMENT CORPORATION,
as the Seller, and that he executed the same as the act of such corporation for
the purpose and consideration therein expressed, and in the capacity therein
stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ____ day of February,
1997.
________________________________________
Notary Public, State of New York
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 94
<PAGE> 104
THE STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared Christopher J. Gramlich, known to me to be the person and
officer whose name is subscribed to the foregoing instrument and acknowledged
to me that the same was the act of the said FIRSTPLUS FINANCIAL, INC., a Texas
corporation, as the Transferor and Servicer, and that he executed the same as
the act of such corporation for the purposes and consideration therein
expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ____ day of February,
1997.
________________________________________
Notary Public, State of New York
THE STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared Sheri Christopherson, known to me to be the person and
officer whose name is subscribed to the foregoing instrument and acknowledged
to me that the same was the act of the said FIRST BANK NATIONAL ASSOCIATION, a
national banking association, as the Indenture Trustee, and that she executed
the same as the act of such entity for the purposes and consideration therein
expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ____ day of February,
1997.
________________________________________
Notary Public, State of New York
SALE AND SERVICING AGREEMENT (Series 1997-1) - Page 95
<PAGE> 105
EXHIBIT A
Home Loan Schedule
[Available on request from Trustee]
<PAGE> 106
EXHIBIT B
Form of Subsequent Transfer Agreement
<PAGE> 107
EXHIBIT C
Form of Opinion on Subsequent Transfer
